Landlords Can Increase Rent only in Accordance with Section 6 & 8A of the Delhi Rent Control Act

Justice R.S. Endlaw
Delhi High Court

We had earlier discussed the observations / guidelines issued by the Hon'ble Supreme Court of India to reduce landlord tenant litigation by suggesting, inter alia, the increase in the rentals at the prevalent rates. However, the Division Bench of the Hon'ble Delhi High Court in Santosh Vaid & Anr. v. Uttam Chand has recently held that such increase in rental can only be made as per the mechanism provided in the Delhi Rent Control Act and not otherwise. While distinguishing the dicta laid down in Mohammed Ahmed v Atma Ram Chauhan, the Delhi High Court observed that the facts therein related to the UP Rent Act and its ratio has no application to Delhi. The relevant extracts from the judgment of the Division Bench of the Delhi High Court are as under;

10. The appellant in RSA 116/2011 has again pegged his case on Pearey Lal and has argued that depriving a landlord from rent equivalent in value to the rent at the time of letting amounts to violation of rights of the landlord. The counsel for the appellant during the hearing has also referred to Milap Chandra Jain v. State of UP 2001 (2) RCR (Civil) 686 (Allahabad), judgment dated 12 th March, 2010 of the same Learned Single Judge of this Court who has pronounced the judgment in Pearey Lal, in CM (M) 539/2009 titled Smt. Leena Joseph v. Mohd. Fazil and on Mohd. Ahmad v. Atma Ram Chauhan AIR 2011 SC 1940.

11. In the aforesaid backdrop the legal question for adjudication can be framed as under:-

Whether in the case of premises fetching rent of less than `3,500/- per month, the owner / landlord can claim increase in rent other than as provided under Sections 6A & 8 of the Act or have the rent increased in proportion to the rate of inflation or devaluation of money and if so on what basis and/or to what extent?

12. The Delhi Rent Act was enacted to provide for the control of rents and evictions in the Union Territory of Delhi. The same, as originally enacted, applied to all premises in Delhi save premises belonging to the Government; Section 4 thereof disentitled the landlord from claiming any rent in excess of standard rent of the premises as defined and to be fixed under Sections 6 & 9 of the Act; Section 7 permitted increase in rent only in the event of the landlord incurring any expenditure on improvement, addition or alteration in the premises and that too with the approval of the Rent Controller; Section 14 prohibited the landlords from, notwithstanding anything to the contrary contained in any other law or contract, recovering possession from the tenant save on the grounds mentioned therein and after satisfying the Rent Controller (constituted under the Act and as distinct from Civil Courts) that such grounds existed; Section 50 barred the Civil Court from entertaining any suit in so far as it related to the fixation of standard rent in relation to premises to which the Act applied and/or to any other matter which the Rent Controller was empowered by or under the said Act to decide.

13. The position thus was that even if the premises were let out for say five years and the said time had expired, the landlord could not evict the tenant unless one of the grounds of eviction (viz. non payment of rent, subletting, misuser, non-use, self requirement etc.) specified under the Act was available. There was no provision in the Act for increase in rent also, save if the landlord carried out any improvement in the premises. On the contrary, the tenant if had agreed to pay the rent of say `5,000/- per month could within two years from taking the premises on rent apply to the Rent Controller for fixation of standard rent of the premises and which generally was much lower than the agreed / market rent. Even if the tenant continued in the premises after the term of letting had expired, the landlord had no way to have the rent increased.

14. An amendment to the Delhi Rent Act was made w.e.f. 1st December, 1988. The premises, monthly rent whereof exceeded `3,500/- were taken out of the purview of the Act; Section 6A was incorporated enabling the landlord to have the rent increased by 10% every three years by issuing a notice under Section 8 intimating to the tenant of his desire to so have the rent increased and the increased rent became due and recoverable after expiry of 30 days from the date on which the notice was given.

15. A Division Bench of this Court in Raghunandan Saran Ashok Saran held that Sections 4,6 & 9 of the Delhi Rent Act relating to standard rent had not taken into account the huge difference between the cost of living in the past and the present time and did not pass the test of reasonableness and had become obsolete and archaic and accordingly struck down the same. However the only effect of the said judgment is that a tenant could not apply to have the standard rent thereof determined and thus could not avoid paying agreed rent, as he was able to before this judgment. Undoubtedly the Division Bench, while so striking down the said provisions, did observe that the said provisions dealing with the standard rent did not take into account the rise in the consumer price index and the huge costs required for maintaining the tenanted premises and there was no justification for not updating the frozen rents but all this was in the context of striking down Sections 4,6&9 only. Thus the said judgment cannot be said to be a judgment on the proposition that landlords are entitled to have the rent increased as per the consumer price index or rate of inflation.

16. In Pearey Lal, doubts as to the correctness of the view wherein have led to this reference, the premises were let out in the year 1956 at a rent of `400/- p.m. and the rent had remained the same. In the year 2008 the landlord filed a suit in the Court of Civil Judge for recovery of possession of the premises from the tenant and for mesne profits. The said suit was valued for the relief of possession for purposes of court fee and jurisdiction at `4800/- i.e. on the basis of annual rent. The tenant applied under Order 7 Rule 11 CPC contending the suit to be barred by Section 50 of the Delhi Rent Act. The landlord in reply contended that the premises were outside the purview of the Delhi Rent Act since the tenant had sublet the premises and the rent paid by the subtenant for the premises, though to the tenant, was in excess of `3500/- p.m. The Civil Judge dismissed the application under Order 7 Rule 11 CPC holding that the question whether the premises were outside the purview of the Delhi Rent Act or not was subject matter of evidence. In challenge to the said order by the tenant before this Court, the said finding of the Civil Judge was affirmed. (We may notice that this Court in P.S. Jain Co. Ltd. v. Atma Ram Properties (P) Ltd 65 (1997) DLT 308 and Atma Ram Properties Pvt. Ltd v. Pal Properties (India) Pvt. Ltd 91 (2001) DLT 438 had already held that in the event rent payable by the subtenant to the tenant is more than `3500/- p.m. the premises would be outside the scope of Delhi Rent Act even if the rent payable by the tenant to the principal landlord was less than `3500/- p.m.) While doing so some observations were made to the effect that there was no justification for keeping the rents frozen and not allowing the landlords to reap present value of the rent originally agreed. However, the said observations were also in the context of the tenants while paying old rents subletting the tenancy premises at much higher market rents. It would thus be seen that the said judgment cannot be said to be laying down that a landlord is entitled to have the rent increased to keep pace with inflation or devaluation. Rather, when it was urged that the landlord ought to value the suit and pay court fees as per market rent, the learned Judge observed "If the Court cannot tell a tenant to pay rent at the present day market value of the property or taking into account the present value of rent of ` 400/- fixed in 1956, the Court cannot tell the landlord to pay the court fee on the present day market value in order to get the premises vacated".

17. It would thus be seen that Pearey Lal cannot be said to be an authority in favour of the right of a landlord to have the rent increased to bring it at par with the consumer price index or to account for the rate of inflation. It is the settled position in law (See Jitendra Kumar Singh v. State of U.P. (2010) 3 SCC 119) that a judgment is a precedent on what it decides and not on other things. Though certain observations of wide sweep were certainly made in the said judgment but that judgment also towards the end accepts that the Court cannot tell a tenant to pay the rent at the present day market value.

18. In that view of the matter, we feel that the reference to the Larger Bench was not really called for. Be that as it may, since we are seized of the matter it is deemed appropriate to deal with the issue.

19. A Coordinate Bench in Model Press Pvt. Ltd. (supra) has already held that for landlords who are receiving rent of less than `3,500/- per month there is no provision available to unilaterally increase the rent to bring it at par with market rent. Though Pearey Lal was not noticed but it was observed that notwithstanding the decision in Raghunandan Saran, the legislature had not filled up the vacuum created in law with Sections 4,6 & 9 of the Rent Act being held ultra vires and had not put any mechanism for increase in rent in place thereof. Unfortunately the provision for increase in rent as introduced by amendment to the Act w.e.f. 1 st December, 1988 with insertion of Section 6A was not noticed by the said Division Bench.

20. A Single Judge of this Court in the order dated 5 th December, 2005 in CM (M) 948/2004 titled Kamlesh Bagga v. Mahinder Kaur held: 

"Counsel for the respondent submits that although in the plaint the rent has been admitted to be `715/- per month but by legal notice dated 22.04.2003 increase of `20,000/- per month based on the judgment of the High Court in Raghunandan Saran Ashok Saran Vs. UOI 2002 RCR 149 where the High court has struck down Section 4, 6 and 9 of the Delhi Rent Control Act. He also submits that the Court has held that a triable issue has been raised whether Section 50 of the Delhi Rent Control Act is a bar which can only be deciding (sic decided) after adducing evidence.

Heard counsel for the parties and have carefully gone through the submissions made by the parties and perused the orders under challenge. To my mind, contractual rent below `3,500/- (Rupees Three Thousand Five Hundred) attracts the provisions of the Delhi Rent Control Act. Any contractual rent below the aforesaid figure would be governed under the Delhi Rent Control Act. In that event, a contractual rent of `715/- would squarely bring the case under the Delhi Rent Control Act. Increase of rent from the contractual rent under the Delhi Rent Control Act can only be done by recourse to Section 6A thereof. A unilateral notice increasing rent beyond ten percent is not permissible under Section 6A of the Delhi Rent Control Act and cannot be acted upon to take the case out of the purview of the Delhi Rent Control Act.

In that view of the matter, the plaint itself reads that the contractual rent is `715/- which has been raised by a notice dated 02.04.2003 to `20,000/- taking the case out of the purview of the Delhi Rent Control Act is not tenable.

The reference made by learned counsel for the respondent of the Delhi High Court judgment does not support the proposition that Section 6A has also been rendered ultra vires."

We find SLP(Civil) No. 11536/2006 preferred thereagainst to have been dismissed in limine on 14th July, 2006.

21. Another Single Judge of this Court in Tilak Raj Narula v. M.L. Sethi 164 (2009) DLT 39 was also faced with a claim of a landlord, of the rent fixed at `141.75p per month in the year 1962, having stood increased in the year 2006 to `25,000/- per month owing to inflation. It was again held that the landlord, the rent of whose premises was less than `3,500/- per month, could claim increase of rent only in accordance with Sections 6A & 8 of the Act and not otherwise.

22. We put our imprimatur on the judgments of the Single Judges of this Court in Kamlesh Bagga and Tilak Raj Narula (supra). The same have correctly interpreted the provisions of the Delhi Rent Act.

23. In so far as the reliance by the counsel for the appellant in RSA 116/2011 on other judgments supra is concerned:-

i. Milap Chandra Jain (supra) struck down the provisions in the U.P. Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972 pertaining to standard rent. Again though certain observations anti allowing rent to remain frozen were made but again the said judgment cannot be said to be laying down that a landlord is entitled to unilaterally increase the rent in accordance with the consumer price index and/or the rate of inflation;

ii. Abdul Jalil was a case where the Allahabad High Court in exercise of powers under Article 226 of the Constitution of India increased the rent, however that was in the context of UP Rent Act (supra). As far as Delhi is concerned, as aforesaid, w.e.f. 1st December, 1988 a provision for increase in rent does exist. Once the legislature has provided for something to be done in a particular manner, then it has to be done in that manner and not in any other manner (See Chandra Kishore Jha v. Mahavir Prasad (1999) 8 SCC 266). The legislature having provided for increase in rent by 10% only and after three years, is deemed to have prohibited increase of more than 10% and before three years.

iii. Mohd. Ahmed (supra) was also a case where the Supreme Court gave certain suggestions/laid guidelines to minimize landlord-tenant litigation. The same were again in the context of UP Rent Act. The same also have no application to the position as prevailing in Delhi.

iv. In Smt. Leena Joseph (supra) a Single Judge of this Court exercising powers under Article 227 of the Constitution of India, as a matter of fact, found the rent agreed to be `4,000/- per month. The same can also not be read as a precedent for the landlords in Delhi being entitled to so unilaterally increase the rent.

24. The counsel for the appellant in RSA 116/2011 in the list of judgments filed has also referred to :-

(i) M/s Nopany Investments Pvt. Ltd. v. Santokh Singh AIR 2008 SC 673 but we are unable to find any relevance thereto in the present context. The same merely lays down that the landlord can in accordance with Section 6A (supra) raise rent by 10% every three years but has to serve a notice of increase of rent under Section 8 to be entitled to such increase. 

ii. Aboobacker v. Vasu (2004) 1 RCJ 129 where a Division Bench of Kerala High Court held a suit under Section 9 of the CPC for determination of fair rent to be maintainable. However the same was in the context of the Kerala Buildings (Lease and Rent Control) Act, 1965 which did not contain any provision for increase in rent as in Section 6A of the Delhi Act.

25. The views taken by the Allahabad and by the Kerala High Courts cannot be accepted in Delhi in the face of the legislature in its wisdom having already made a provision for increase in rent and in the face of the bar contained in Section 50 of the Delhi Rent Act.

26. Rate of rent is a matter of contract and can be varied in accordance with agreement only and not unilaterally. The Rent Control Legislations enacted in the pre-independence and immediately after independence era to prevent exploitation of tenants provided a statutory mechanism enabling a tenant to, notwithstanding having entered the premises with a promise to pay rent at a certain rate, apply to the Rent Controller/Court for fixation of standard rent which as aforesaid was generally lower than the prevalent market rent. However, with the passage of time, several Courts have found such provisions in the State Rent Legislations entitling tenants to wriggle out of the agreed rent to be archaic and struck down the same. Else the rent agreed between the landlord and the tenant binds both of them and neither is entitled to unilaterally vary the same during the period for which it has been agreed. On the expiry of the said period, if unable to agree on extension / renewal of the lease at a mutually agreed rate, the remedy of the landlord is only to evict a tenant and to for the period of unauthorized occupation recover mesne profits defined in Section 2(12) of the CPC as profits which the person in wrongful possession actually received or might with ordinary diligence have received. A landlord cannot be heard to while not wanting to evict the tenant, as per his own calculation claim increased rent. However, if the premises are within the purview of the Rent Act which prohibits the landlord from evicting the tenant for the reason of expiry of the term for which the premises were let out, the landlord cannot while being so prohibited be permitted to claim mesne profits or increase in rent unless permitted under the Rent Act. If the eviction is prohibited, the possession cannot be said to be unauthorized and the question of mesne profits does not arise. If it were to be held that though owing to the prohibition against eviction contained in the Rent Control Legislations, the landlord is not entitled to evict the tenant but is nevertheless entitled to recover mesne profits for the period after the expiry of the period for which the premises were let out, the same would result in reducing the Rent Control Legislation to a dead letter and defeating its purpose. The same cannot be permitted. Thus, in the absence of a provision in the statute it cannot be held that a landlord is entitled to market rent from a protected tenant.

27. The Apex Court in Chander Kali Bai v. Jagdish Singh Thakur AIR 1977 SC 2262 held that the occupation of a tenant in a premises governed by the Rent Control Legislation becomes unauthorized and wrongful only after an order of eviction under the said legislation is passed against him and mesne profits can be recovered for the period thereafter only and not from the date of determination of tenancy since such a tenant continues to be a tenant (statutory tenant) till order of eviction under the Rent Control Legislation is passed. A Division Bench of this Court in Hindustan Steel Pvt. Ltd. v. Usha Rani Gupta AIR 1969 Delhi 59 held that in case of property of which rent is controlled by the Rent Control Act the landlord cannot complain of having suffered any loss by being deprived of possession of the property, beyond the rent for which the property is let out to the tenant holding over except to the extent of any permissible increase of rent under the Rent Control Act itself.

28. Even though the 10% increase in rent every three years provided for under the Delhi Rent Act may be perceived by some as inadequate but that is no reason for this Court to provide for a higher or more frequent increase. The same falls in legislative domain. This Court cannot step into the shoes of legislature (see Union of India v. Deoki Nandan Aggarwal 1992 Supp(1) SCC 323). It may be noted that Section 6A (supra) was inserted in the Delhi Rent Act with effect from 1st December, 1988 to quell the criticism thereof of being unevenly balanced against the landlord. The Legislature in its wisdom having considered increase in rent as provided in Section 6A as appropriate to balance the rights of the landlord and the tenant governed by the provisions of the Delhi Rent Act, it is not for this Court to delve into the validity thereof particularly in exercise of appellate/revisionary jurisdiction.

29. We accordingly answer the question framed by us herein above as under:-

A landlord of a premises governed by the Delhi Rent Control Act, 1958 is entitled to have increase(s) in rent only in accordance with Section 6A and 8 thereof and not otherwise; such a landlord cannot approach the Civil Court contending that the rent stands increased or should be increased in accordance with the inflation or cost price index; the jurisdiction of the Civil Court in this regard is barred by Section 50 of the Delhi Rent Act.

Death Sentence and Principles Governing its Conversion to Life Imprisonment

Justice Swatanter Kumar
Supreme Court of India

The Supreme Court in Ramnaresh Vs. State of Chhattisgarh has examined the principles governing the conversion of death sentence in life imprisonment. While dealing with various judicial pronouncements on capital punishment, the Supreme Court has reiterated the principle of awarding death sentence in the 'rarest of rare cases'. The relevant extracts from the judgment are reproduced hereinbelow;

The death sentence and principles governing its conversion to life imprisonment 

25. Despite the transformation of approach and radical changes in principles of sentencing across the world, it has not been possible to put to rest the conflicting views on sentencing policy. The sentencing policy being a significant and inseparable facet of criminal jurisprudence, has been inviting the attention of the Courts for providing certainty and greater clarity to it. Capital punishment has been a subject matter of great social and judicial discussion and castacism. From whatever point of view it is examined, one undisputable statement of law follows that it is neither possible nor prudent to state any universal formula which would be applicable to all the cases of criminology where capital punishment has been prescribed. It shall always depend upon the facts and circumstances of a given case. This Court has stated various legal principles which would be precepts on exercise of judicial discretion in cases where the issue is whether the capital punishment should or should not be awarded. 

26. The law requires the Court to record special reasons for awarding such sentence. The Court, therefore, has to consider matters like nature of the offence, how and under what circumstances it was committed, the extent of brutality with which the offence was committed, the motive for the offence, any provocative or aggravating circumstances at the time of commission of the crime, the possibility of the convict being reformed or rehabilitated, adequacy of the sentence of life imprisonment and other attendant circumstances. These factors cannot be similar or identical in any two given cases. Thus, it is imperative for the Court to examine each case on its own facts, in light of the enunciated principles. It is only upon application of these principles to the facts of a given case that the Court can arrive at a final conclusion whether the case in hand is one of the `rarest of rare' cases and imposition of death penalty alone shall serve the ends of justice. Further, the Court would also keep in mind that if such a punishment alone would serve the purpose of the judgment, in its being sufficiently punitive and purposefully preventive. 

27. In order to examine this aspect in some greater depth and with objectivity, it is necessary for us to reiterate the various guiding factors. Suffices it to make reference to a recent judgment of this Court in the case of State of Maharashtra v. Goraksha Ambaji Adsul [(2011) 7 SCC 437], wherein this Court discussed the law in some detail and enunciated the principles as follows : 

"30. The principles governing the sentencing policy in our criminal jurisprudence have more or less been consistent, right from the pronouncement of the Constitution Bench judgment of this Court in Bachan Singh v. State of Punjab. Awarding punishment is certainly an onerous function in the dispensation of criminal justice. The court is expected to keep in mind the facts and circumstances of a case, the principles of law governing award of sentence, the legislative intent of special or general statute raised in the case and the impact of awarding punishment. These are the nuances which need to be examined by the court with discernment and in depth. 

31. The legislative intent behind enacting Section 354(3) CrPC clearly demonstrates the concern of the legislature for taking away a human life and imposing death penalty upon the accused. Concern for the dignity of the human life postulates resistance to taking a life through law's instrumentalities and that ought not to be done, save in the rarest of rare cases, unless the alternative option is unquestionably foreclosed. In exercise of its discretion, the court would also take into consideration the mitigating circumstances and their resultant effects. 

32. The language of Section 354(3) demonstrates the legislative concern and the conditions which need to be satisfied prior to imposition of death penalty. The words, "in the case of sentence of death, the special reasons for such sentence" unambiguously demonstrate the command of the legislature that such reasons have to be recorded for imposing the punishment of death sentence. This is how the concept of the rarest of rare cases has emerged in law. Viewed from that angle, both the legislative provisions and judicial pronouncements are at ad idem in law. The death penalty should be imposed in the rarest of rare cases and that too for special reasons to be recorded. To put it simply, a death sentence is not a rule but an exception. Even the exception must satisfy the prerequisites contemplated under Section 354(3) CrPC in light of the dictum of the Court in Bachan Singh. 

33. The Constitution Bench judgment of this Court in Bachan Singh has been summarised in para 38 in Machhi Singh v. State of Punjab and the following guidelines have been stated while considering the possibility of awarding sentence of death: (Machhi Singh case, SCC p. 489) 

"(i) The extreme penalty of death need not be inflicted except in gravest cases of extreme culpability. 

(ii) Before opting for the death penalty the circumstances of the `offender' also requires to be taken into consideration along with the circumstances of the `crime'. 

(iii) Life imprisonment is the rule and death sentence is an exception. ... death sentence must be imposed only when life imprisonment appears to be an altogether inadequate punishment having regard to the relevant circumstances of the crime, and provided, and only provided the option to impose sentence of imprisonment for life cannot be conscientiously exercised having regard to the nature and circumstances of the crime and all the relevant circumstances. 

(iv) A balance sheet of aggravating and mitigating circumstances has to be drawn up and in doing so the mitigating circumstances have to be accorded full weightage and a just balance has to be struck between the aggravating and the mitigating circumstances before the option is exercised." 

(emphasis supplied) 

34. The judgment in Bachan Singh, did not only state the above guidelines in some elaboration, but also specified the mitigating circumstances which could be considered by the Court while determining such serious issues and they are as follows: (SCC p. 750, para 206) 

"206. ... `Mitigating circumstances.--In the exercise of its discretion in the above cases, the court shall take into account the following circumstances: 

(1) That the offence was committed under the influence of extreme mental or emotional disturbance. 

(2) The age of the accused. If the accused is young or old, he shall not be sentenced to death. 

(3) The probability that the accused would not commit criminal acts of violence as would constitute a continuing threat to society. 

(4) The probability that the accused can be reformed and rehabilitated. The State shall by evidence prove that the accused does not satisfy Conditions (3) and (4) above. 

(5) That in the facts and circumstances of the case the accused believed that he was morally justified in committing the offence. 

(6) That the accused acted under the duress or domination of another person. 

(7) That the condition of the accused showed that he was mentally defective and that the said defect impaired his capacity to appreciate the criminality of his conduct." 

35. Now, we may examine certain illustrations arising from the judicial pronouncements of this Court. 

36. In D.K. Basu v. State of W.B. this Court took the view that custodial torture and consequential death in custody was an offence which fell in the category of the rarest of rare cases. While specifying the reasons in support of such decision, the Court awarded death penalty in that case. 

37. In Santosh Kumar Satishbhushan Bariyar v. State of Maharashtra this Court also spelt out in paras 56 to 58 that nature, motive, impact of a crime, culpability, quality of evidence, socio- economic circumstances, impossibility of rehabilitation are the factors which the court may take into consideration while dealing with such cases. In that case the friends of the victim had called him to see a movie and after seeing the movie, a ransom call was made, but with the fear of being caught, they murdered the victim. The Court felt that there was no evidence to show that the criminals were incapable of reforming themselves, that it was not a rarest of the rare case, and therefore, declined to award death sentence to the accused. 

38. Interpersonal circumstances prevailing between the deceased and the accused was also held to be a relevant consideration in Vashram Narshibhai Rajpara v. State of Gujarat where constant nagging by family was treated as the mitigating factor, if the accused is mentally unbalanced and as a result murders the family members. Similarly, the intensity of bitterness which prevailed and the escalation of simmering thoughts into a thirst for revenge and retaliation were also considered to be a relevant factor by this Court in different cases. 

39. This Court in Satishbhushan Bariyar also considered various doctrines, principles and factors which would be considered by the Courts while dealing with such cases. The Court discussed in some elaboration the applicability of the doctrine of rehabilitation and the doctrine of prudence. While considering the application of the doctrine of rehabilitation and the extent of weightage to be given to the mitigating circumstances, it noticed the nature of the evidence and the background of the accused. The conviction in that case was entirely based upon the statement of the approver and was a case purely of circumstantial evidence. Thus, applying the doctrine of prudence, it noticed the fact that the accused were unemployed, young men in search of job and they were not criminals. In execution of a plan proposed by the appellant and accepted by others, they kidnapped a friend of theirs. The kidnapping was done with the motive of procuring ransom from his family but later they murdered him because of the fear of getting caught, and later cut the body into pieces and disposed it off at different places. One of the accused had turned approver and as already noticed, the conviction was primarily based upon the statement of the approver. 

40. Basing its reasoning on the application of doctrine of prudence and the version put forward by the accused, the Court, while declining to award death penalty and only awarding life imprisonment, held as under: (Satishbhushan Bariyar case, SCC pp. 551 & 559-60, paras 135, 168-69 & 171-73) 

"135. Right to life, in its barest of connotation would imply right to mere survival. In this form, right to life is the most fundamental of all rights. 

Consequently, a punishment which aims at taking away life is the gravest punishment. Capital punishment imposes a limitation on the essential content of the fundamental right to life, eliminating it irretrievably. We realise the absolute nature of this right, in the sense that it is a source of all other rights. Other rights may be limited, and may even be withdrawn and then granted again, but their ultimate limit is to be found in the preservation of the right to life. Right to life is the essential content of all rights under the Constitution. If life is taken away, all other rights cease to exist. 

*** 

168. We must, however, add that in a case of this nature where the entire prosecution case revolves round the statement of an approver or is dependant upon the circumstantial evidence, the prudence doctrine should be invoked. For the aforementioned purpose, at the stage of sentencing evaluation of evidence would not be permissible, the courts not only have to solely depend upon the findings arrived at for the purpose of recording a judgment of conviction, but also consider the matter keeping in view the evidences which have been brought on record on behalf of the parties and in particular the accused for imposition of a lesser punishment. A statement of approver in regard to the manner in which crime has been committed vis-`-vis the role played by the accused, on the one hand, and that of the approver, on the other, must be tested on the touchstone of the prudence doctrine. 

169. The accused persons were not criminals. They were friends. The deceased was said to have been selected because his father was rich. The motive, if any, was to collect some money. They were not professional killers. They have no criminal history. All were unemployed and were searching for jobs. Further, if age of the accused was a relevant factor for the High Court for not imposing death penalty on Accused 2 and 3, the same standard should have been applied to the case of the appellant also who was only two years older and still a young man in age. Accused 2 and 3 were as much a part of the crime as the appellant. Though it is true, that it was he who allegedly proposed the idea of kidnapping, but at the same time it must not be forgotten that the said plan was only executed when all the persons involved gave their consent thereto. 

*** 

171. Section 354(3) of the Code of Criminal Procedure requires that when the conviction is for an offence punishable with death or in the alternative with imprisonment for life or imprisonment for a term of years, the judgment shall state the reasons for the sentence awarded, and in the case of sentence of death, the special reasons thereof. We do not think that the reasons assigned by the courts below disclose any special reason to uphold the death penalty. The discretion granted to the courts must be exercised very cautiously especially because of the irrevocable character of death penalty. Requirements of law to assign special reasons should not be construed to be an empty formality. 

172. We have previously noted that the judicial principles for imposition of death penalty are far from being uniform. Without going into the merits and demerits of such discretion and subjectivity, we must nevertheless reiterate the basic principle, stated repeatedly by this Court, that life imprisonment is the rule and death penalty an exception. Each case must therefore be analysed and the appropriateness of punishment determined on a case-by-case basis with death sentence not to be awarded save in the `rarest of the rare' case where reform is not possible. Keeping in mind at least this principle we do not think that any of the factors in the present case discussed above warrants the award of the death penalty. There are no special reasons to record the death penalty and the mitigating factors in the present case, discussed previously, are, in our opinion, sufficient to place it out of the `rarest of rare' category. 

173. For the reasons aforementioned, we are of the opinion that this is not a case where death penalty should be imposed. The appellant, therefore, instead of being awarded death penalty, is sentenced to undergo rigorous imprisonment for life. Subject to the modification in the sentence of the appellant (A-1) mentioned hereinbefore, both the appeals of the appellant as also that of the State are dismissed." 

(emphasis in original) 

41. The above principle, as supported by case illustrations, clearly depicts the various precepts which would govern the exercise of judicial discretion by the courts within the parameters spelt out under Section 354(3) CrPC. Awarding of death sentence amounts to taking away the life of an individual, which is the most valuable right available, whether viewed from the constitutional point of view or from the human rights point of view. The condition of providing special reasons for awarding death penalty is not to be construed linguistically but it is to satisfy the basic features of a reasoning supporting and making award of death penalty unquestionable. The circumstances and the manner of committing the crime should be such that it pricks the judicial conscience of the court to the extent that the only and inevitable conclusion should be awarding of death penalty." 

28. In Machhi Singh & Ors. v. State of Rajasthan [(1983) 3 SCC 470], this Court stated certain relevant considerations like the manner of commission of murder, motive for commission of murder, anti-social or socially abhorrent nature of the crime, magnitude of crime and the personality of the victim of murder. These considerations further demonstrate that the matter has to be examined with reference to a particular case, for instance, murder of an innocent child who could not have or has not provided even an excuse, much less a provocation for murder. Similarly, murder of a helpless woman who might be relying on a person because of her age or infirmity, if murdered by that person, would be an indicator of breach of relationship or trust as the case may be. It would neither be proper nor probably permissible that the judicial approach of the court in such matters treat one of the stated considerations or factors as determinative. The court should examine all or majority of the relevant considerations to spell comprehensively the special reasons to be recorded in the order, as contemplated under Section 354(3) of the Cr.P.C. 29. In the case of Dhananjoy Chatterjee @ Dhana v. State of West Bengal [(1994) 2 SCC 220] while affirming the award of death sentence by the High Court, this Court noticed that `in recent years, the rising crime rate-particularly violent crime against women has made the criminal sentencing by the courts a subject of concern'. The Court reiterated the principle that it is not possible to lay down any cut and dry formula relating to imposition of sentence but the object of sentencing should be to see that the crime does not go unpunished and the victim of crime, as also the society, has the satisfaction that justice has been done to it. The Court held as follows:- 

"15. In our opinion, the measure of punishment in a given case must depend upon the atrocity of the crime; the conduct of the criminal and the defenceless and unprotected state of the victim. Imposition of appropriate punishment is the manner in which the courts respond to the society's cry for justice against the criminals. Justice demands that courts should impose punishment befitting the crime so that the courts reflect public abhorrence of the crime. The courts must not only keep in view the rights of the criminal but also the rights of the victim of crime and the society at large while considering imposition of appropriate punishment." 

30. In this case, the Court was concerned with the case of a security guard who had been transferred at the complaint of a lady living in the flats with regard to teasing of her young girl child. The security guard went up to the flat of the lady, committed rape on her daughter and then murdered her brutally. The Court found it to be a fit case for imposition of capital punishment. 

31. Again, in the case of Surja Ram v. State of Rajasthan [(1996) 6 SCC 271], this Court affirmed the death sentence awarded by the High Court primarily taking into consideration that there was no provocation and the manner in which the crime was committed was brutal. Noticing that the Court has to award a punishment which is just and fair by administering justice tempered with such mercy not only as the criminal may justly deserve but also to the rights of the victims of the crime to have the assailant appropriately punished and the society's reasonable expectation from the court for the appropriate deterrent punishment conforming to the gravity of the offence and consistent with the public abhorrence for the heinous crime committed by the accused. The Court further held as under:- 

"18. After giving our anxious consideration to the facts and circumstances of the case, it appears to us that for deciding just and appropriate sentence to be awarded for an offence, the aggravating and mitigating factors and circumstances in which a crime has been committed are to be delicately balanced in a dispassionate manner. Such act of balancing is indeed a difficult task. It has been very aptly indicated in Dennis Councle McGautha v. State of California that no formula of a foolproof nature is possible that would provide a reasonable criterion in determining a just and appropriate punishment in the infinite variety of circumstances that may affect the gravity of the crime of murder. In the absence of any foolproof formula which may provide any basis for reasonable criteria to correctly assess various circumstances germane to the consideration of gravity of crime of murder, the discretionary judgment in the facts of each case, is the only way in which such judgment may be equitably distinguished." 

32. This Court in Prajeet Kumar Singh v. State of Bihar [(2008) 4 SCC 434], B.A. Umesh v. Registrar General, High Court of Karnataka [(2011) 3 SCC 85], State of Rajasthan v. Kashi Ram [(2006) 12 SCC 254] and Atbir v. Government of NCT of Delhi [(2010) 9 SCC 1] had confirmed the death sentence awarded by the High Courts for different reasons after applying the principles enunciated in one or more afore-referred judgments. 33. Now, we may notice the cases which were relied upon by the learned counsel appearing for the appellants and wherein this Court had declined to confirm the imposition of capital punishment treating them not to be the rarest of rare cases. 

34. In Ronny @ Ronald James Alwaris Etc. v. State of Maharashtra [(1998) 3 SCC 625], the Court while relying upon the judgment of this Court in the case of Allauddin Mian & Ors. v. State of Bihar [(1989) 3 SCC 5], held that the choice of the death sentence has to be made only in the `rarest of rare' cases and that where culpability of the accused has assumed depravity or where the accused is found to be an ardent criminal and menace to the society. The Court also noticed the above-stated principle that the Court should ordinarily impose a lesser punishment and not the extreme punishment of death which should be reserved for exceptional cases only. The Court, while considering the cumulative effect of all the factors such as the offences not committed under the influence of extreme mental or emotional disturbance and the fact that the accused were young and the possibility of their reformation and rehabilitation could not be ruled out, converted death sentence into life imprisonment. 

35. Similarly, in the case of Bantu @ Naresh Giri v. State of M.P. [(2001) 9 SCC 615] while dealing with the case of rape and murder of a six year old girl, this Court found that the case was not one of the `rarest of rare' cases. The Court noticed that, accused was less than 22 years at the time of commission of the offence, there were no injuries on the body of the deceased and the death probably occurred as a result of gagging of the nostril by the accused. Thus, the Court while noticing that the crime was heinous, commuted the sentence of death to one of life imprisonment. 

36. The above judgments provide us with the dicta of the Court relating to imposition of death penalty. Merely because a crime is heinous per se may not be a sufficient reason for the imposition of death penalty without reference to the other factors and attendant circumstances. 

37. Most of the heinous crimes under the IPC are punishable by death penalty or life imprisonment. That by itself does not suggest that in all such offences, penalty of death alone should be awarded. We must notice, even at the cost of repetition, that in such cases awarding of life imprisonment would be a rule, while `death' would be the exception. The term `rarest of rare' case which is the consistent determinative rule declared by this Court, itself suggests that it has to be an exceptional case. The life of a particular individual cannot be taken away except according to the procedure established by law and that is the constitutional mandate. The law contemplates recording of special reasons and, therefore, the expression `special' has to be given a definite meaning and connotation. `Special reasons' in contra-distinction to `reasons' simplicitor conveys the legislative mandate of putting a restriction on exercise of judicial discretion by placing the requirement of special reasons. 

38. Since, the later judgments of this Court have added to the principles stated by this Court in the case of Bachan Singh (supra) and Machhi Singh (supra), it will be useful to re-state the stated principles while also bringing them in consonance, with the recent judgments. 

39. The law enunciated by this Court in its recent judgments, as already noticed, adds and elaborates the principles that were stated in the case of Bachan Singh (supra) and thereafter, in the case of Machhi Singh (supra). The aforesaid judgments, primarily dissect these principles into two different compartments - one being the `aggravating circumstances' while the other being the `mitigating circumstances'. The Court would consider the cumulative effect of both these aspects and normally, it may not be very appropriate for the Court to decide the most significant aspect of sentencing policy with reference to one of the classes under any of the following heads while completely ignoring other classes under other heads. To balance the two is the primary duty of the Court. It will be appropriate for the Court to come to a final conclusion upon balancing the exercise that would help to administer the criminal justice system better and provide an effective and meaningful reasoning by the Court as contemplated under Section 354(3) Cr.P.C. Aggravating Circumstances : 

(1) The offences relating to the commission of heinous crimes like murder, rape, armed dacoity, kidnapping etc. by the accused with a prior record of conviction for capital felony or offences committed by the person having a substantial history of serious assaults and criminal convictions. 

(2) The offence was committed while the offender was engaged in the commission of another serious offence. 

(3) The offence was committed with the intention to create a fear psychosis in the public at large and was committed in a public place by a weapon or device which clearly could be hazardous to the life of more than one person. 

(4) The offence of murder was committed for ransom or like offences to receive money or monetary benefits. 

(5) Hired killings. 

(6) The offence was committed outrageously for want only while involving inhumane treatment and torture to the victim. 

(7) The offence was committed by a person while in lawful custody. 

(8) The murder or the offence was committed to prevent a person lawfully carrying out his duty like arrest or custody in a place of lawful confinement of himself or another. For instance, murder is of a person who had acted in lawful discharge of his duty under Section 43 Cr.P.C. 

(9) When the crime is enormous in proportion like making an attempt of murder of the entire family or members of a particular community. 

(10) When the victim is innocent, helpless or a person relies upon the trust of relationship and social norms, like a child, helpless woman, a daughter or a niece staying with a father/uncle and is inflicted with the crime by such a trusted person. 

(11) When murder is committed for a motive which evidences total depravity and meanness. 

(12) When there is a cold blooded murder without provocation. 

(13) The crime is committed so brutally that it pricks or shocks not only the judicial conscience but even the conscience of the society. 

Mitigating Circumstances : 

(1) The manner and circumstances in and under which the offence was committed, for example, extreme mental or emotional disturbance or extreme provocation in contradistinction to all these situations in normal course. 

(2) The age of the accused is a relevant consideration but not a determinative factor by itself. 

(3) The chances of the accused of not indulging in commission of the crime again and the probability of the accused being reformed and rehabilitated. 

(4) The condition of the accused shows that he was mentally defective and the defect impaired his capacity to appreciate the circumstances of his criminal conduct. 

(5) The circumstances which, in normal course of life, would render such a behavior possible and could have the effect of giving rise to mental imbalance in that given situation like persistent harassment or, in fact, leading to such a peak of human behavior that, in the facts and circumstances of the case, the accused believed that he was morally justified in committing the offence. 

(6) Where the Court upon proper appreciation of evidence is of the view that the crime was not committed in a pre-ordained manner and that the death resulted in the course of commission of another crime and that there was a possibility of it being construed as consequences to the commission of the primary crime. 

(7) Where it is absolutely unsafe to rely upon the testimony of a sole eye-witness though prosecution has brought home the guilt of the accused. 

40. While determining the questions relateable to sentencing policy, the Court has to follow certain principles and those principles are the loadstar besides the above considerations in imposition or otherwise of the death sentence. 

Principles : 

(1) The Court has to apply the test to determine, if it was the `rarest of rare' case for imposition of a death sentence. 

(2) In the opinion of the Court, imposition of any other punishment, i.e., life imprisonment would be completely inadequate and would not meet the ends of justice. (3) Life imprisonment is the rule and death sentence is an exception. 

(4) The option to impose sentence of imprisonment for life cannot be cautiously exercised having regard to the nature and circumstances of the crime and all relevant considerations. 

(5) The method (planned or otherwise) and the manner (extent of brutality and inhumanity, etc.) in which the crime was committed and the circumstances leading to commission of such heinous crime. 

41. Stated broadly, these are the accepted indicators for the exercise of judicial discretion but it is always preferred not to fetter the judicial discretion by attempting to make the excessive enumeration, in one way or another. In other words, these are the considerations which may collectively or otherwise weigh in the mind of the Court, while exercising its jurisdiction. It is difficult to state it as an absolute rule. Every case has to be decided on its own merits. The judicial pronouncements, can only state the precepts that may govern the exercise of judicial discretion to a limited extent. Justice may be done on the facts of each case. These are the factors which the Court may consider in its endeavour to do complete justice between the parties. 

42. The Court then would draw a balance-sheet of aggravating and mitigating circumstances. Both aspects have to be given their respective weightage. The Court has to strike a balance between the two and see towards which side the scale/balance of justice tilts. The principle of proportion between the crime and the punishment is the principle of `just deserts' that serves as the foundation of every criminal sentence that is justifiable. In other words, the `doctrine of proportionality' has a valuable application to the sentencing policy under the Indian criminal jurisprudence. Thus, the court will not only have to examine what is just but also as to what the accused deserves keeping in view the impact on the society at large. 

43. Every punishment imposed is bound to have its effect not only on the accused alone, but also on the society as a whole. Thus, the Courts should consider retributive and deterrent aspect of punishment while imposing the extreme punishment of death. 

44. Wherever, the offence which is committed, manner in which it is committed, its attendant circumstances and the motive and status of the victim, undoubtedly brings the case within the ambit of `rarest of rare' cases and the Court finds that the imposition of life imprisonment would be inflicting of inadequate punishment, the Court may award death penalty. Wherever, the case falls in any of the exceptions to the `rarest of rare' cases, the Court may exercise its judicial discretion while imposing life imprisonment in place of death sentence.

Overriding Effect of SICA : The Law

Justice Swatanter Kumar
Supreme Court of India

The Supreme Court in Raheja Universal Limited Vs. NRC Limited has examined the legislative scheme of the Sick Industrial Companies (Special Provisions) Act, 1985 and its overriding effect on the Transfer of Property Act. While examining various case laws on the overriding effect of the Sick Industrial Companies (Special Provisions) Act, 1985 on other statutes, the Court held as under;

Legislative Scheme of the Act of 1985 : 

10. The framers of law felt that the existing institutional arrangements and procedure for revival and rehabilitation of potentially viable sick industrial companies are both inadequate and time consuming. Multiplicity of law and the regulatory agencies makes the adoption of a coordinated approach for dealing with sick industrial companies difficult. Thus, a need was felt to enact, in public interest, a legislation to provide for timely determination, by a body of experts, of the preventive, ameliorative, remedial and other measures that would be needed to be adopted with respect to such companies and for enforcement of the appropriate measures with utmost practicable despatch. The ill-effects of sickness in industrial companies, such as cessation of production, loss of employment, loss of revenue to the Central and State Governments and blocking up of investible funds of the banks and financial institutions, were of serious concern to the Government as well as the society at large. It had repercussions on the industrial growth of the country. With the passage of time the number of sick industrial units increased rapidly. Therefore, it was imperative to salvage the productive assets and release, to the extent possible, the amounts due to the banks and financial institutions from non- viable sick industrial debtor companies by liquidation of those companies or through formulation of rehabilitation schemes. With these objects, the Bill was introduced with the salient features inter alia of identification of sickness in the industrial companies, on the basis of symptomatic indices of cash losses for the specified periods. Wherever the Government or the Reserve Bank were satisfied that an industrial company has become sick, they were required to make a reference to the BIFR. The BIFR consists of experts, in various relevant fields, with powers to inquire into and determine the incidences of sickness in the industrial companies and devise suitable measures through appropriate schemes to revive them. An appeal lies from the order of BIFR to an appellate authority (the AAIFR) consisting of members selected from amongst Supreme Court or High Court Judges or Secretaries to the Government of India. With this background, objects and reasons, this Bill was passed by the Indian Parliament and it received the assent of the President of India on 8th January, 1986. Thus, it became an Act of the Parliament intended to revolutionize the mechanism of revival or liquidation of sick industrial units and channelization of the complete administrative-cum-quasi judicial process within the framework of the Act of 1985. 

Nature and Scope of the Act of 1985 

11. Having dealt with the legislative history and object of the Act of 1985, we may now examine the very nature of this legislation. The Act of 1985 basically and predominantly is remedial and ameliorative in so far as it empowers the quasi- judicial body, the BIFR, to take appropriate measures for revival and rehabilitation of the potentially viable sick industrial companies and for liquidation of non-viable companies. It is regulatory only to a limited extent. The provisions of the Act of 1985 impose an obligation on the sick industrial companies and potentially sick industrial companies to make references to the BIFR within the time specified under the Act of 1985. Default thereof is punishable under the provisions of the Act of 1985. Largely, the proceedings before the BIFR are specific to rehabilitation or winding up of the sick company and the Act of 1985 hardly contemplates adversarial proceedings. The bodies constituted under the Act of 1985 would least exercise their jurisdiction to a lis between any party or upon the rival interests of the parties. With regard to the matters covered under the Act of 1985, the jurisdiction of the civil courts is ousted and the matters which are even allied to the formulation and sanction of the scheme would have to be decided by the BIFR itself. Even this aspect has been a matter of judicial divergence. In the case of Gram Panchayat & Anr. v. Shree Vallabh Glass Works Ltd. & Ors. [(1990) 2 SCC 440], this Court was concerned with a company which had been declared `sick' within the meaning and scope of clause (o) of Sub-section (1) of Section 3 of the Act of 1985. The Gram Panchayat had initiated coercive proceedings as per Section 129 of the Bombay Village Panchayat Act, 1959 to recover a sum of Rs.9,47,539/- stated to be the property tax and other amounts due from the company. This demand was challenged. The Bombay High Court quashed the demand and the recovery proceedings. This Court, while dealing with the scope of Section 22 read with Sections 16 and 17 of the Act of 1985, took the view that all proceedings for execution, distress or the like against the properties of the company would automatically be suspended and could not continue without the consent of the BIFR. This Court held as under: - 

"10. In the light of the steps taken by the Board under Sections 16 and 17 of the Act, no proceedings for execution, distress or the like proceedings against any of the properties of the company shall lie or be proceeded further except with the consent of the Board. Indeed, there would be automatic suspension of such proceedings against the company's properties. As soon as the inquiry under Section 16 is ordered by the Board, the various proceedings set out under sub-section (1) of Section 22 would be deemed to have been suspended. 

11. It may be against the principles of equity if the creditors are not allowed to recover their dues from the company, but such creditors may approach the Board for permission to proceed against the company for the recovery of their dues/outstandings/overdues or arrears by whatever name it is called. The Board at its discretion may accord its approval for proceeding against the company. If the approval is not granted, the remedy is not extinguished. It is only postponed. Sub- section (5) of Section 22 provides for exclusion of the period during which the remedy is suspended while computing the period of limitation for recovering the dues." 

12. This Court in the case of Deputy Commercial Tax Officer & Ors. v. Corromandal Pharamaceuticals & Ors. [(1997) 10 SCC 649] had taken a somewhat divergent view to the view taken in Shree Vallabh Glass Works (supra). In this case, this Court, while examining the language of Section 22 of the Act of 1985, came to the conclusion that it was certainly a wide provision. In the totality of the circumstances, the safeguards stated under Section 22 of the Act of 1985 are only against any impediment that is likely to be caused in the implementation of the scheme. If the matter falls outside the purview of the scheme and the dues are not reckoned or included in the sanctioned scheme of rehabilitation, recovery of sales tax dues would not be covered under this provision and as such the bar of Section 22(1) of the Act of 1985 would not operate. This Court held as under: - 

".....The language of Section 22 of the Act is certainly wide. But, in the totality of the circumstances, the safeguard is only against the impediment, that is likely to be caused in the implementation of the scheme. If that be so, only the liability or amounts covered by the scheme will be taken in, by Section 22 of the Act. So, we are of the view that though the language of Section 22 of the Act is of wide import regarding suspension of legal proceedings from the moment an inquiry is started, till after the implementation of the scheme or the disposal of an appeal under Section 25 of the Act, it will be reasonable to hold that the bar or embargo envisaged in Section 22(1) of the Act can apply only to such of those dues reckoned or included in the" sanctioned scheme. Such amounts like sales tax, etc. which the sick industrial company is enabled to collect after the date of the sanctioned scheme legitimately belonging to the Revenue, cannot be and could not have been intended to be covered within Section 22 of the Act. Any other construction will be unreasonable and unfair and will lead to a state of affairs enabling the sick industrial unit to collect amounts due to the Revenue and withhold it indefinitely and unreasonably. Such a construction which is unfair, unreasonable and against spirit of the statutes in a business sense, should be avoided." 

Definition of Arbitration Agreement : Supreme Court

Justice Swatanter Kumar
Supreme Court of India

The Supreme Court in Powertech World Wide Ltd. v. Delvin International General Trading LLC has examined the definition of an 'arbitration agreement' in the light of various judicial pronouncements. The question posed to the Court in this case was whether the clause in the  agreement between the parties constituted a valid and binding arbitration agreement or not? While answering the question in the affirmative, the Supreme Court held as under;

9. When the matter was being heard, a question had been raised as to whether the arbitration agreement as contained in the Purchase Contract and reproduced supra, was a binding arbitration agreement enforceable in terms of Section 11(6) of the Act?

10. The learned counsel appearing for the petitioner contended that from the language of the arbitration clause itself, it is unambiguously clear that there is a binding arbitration agreement between the parties. The respondent having failed to act despite notice, the petitioner is entitled to the relief prayed for. It is further the contention of the petitioner that the words `shall' and `or' appearing in the arbitration clause have to be given their true meaning. The expression `shall' has to be construed mandatorily while the expression `or' has to be read as disjunctive. Upon taking this as the correct approach, the arbitration agreement would be binding upon the parties as the expression `settled amicably between both the parties' cannot be construed as a condition precedent to the invocation of the arbitration agreement and the reference to arbitration being an alternative and agreed remedy, the petitioner may unequivocally be allowed to invoke the arbitration agreement.

11. The aforesaid contentions have been raised by the advocates for the petitioner in view of the judgment of this Court in the case of Jagdish Chander v. Ramesh Chander & Ors. [(2007) 5 SCC 719] wherein this Court had taken the view that such an arbitration clause would not have satisfied the pre-requisites of a valid arbitration reference. In that case, this Court was concerned with Clause 16 of the contract between the parties that read as under:

(16) If during the continuance of the partnership or at any time afterwards any dispute touching the partnership arises between the partners, the same shall be mutually decided by the partners or shall be referred for arbitration if the parties so determine. (emphasis supplied)

12. The Court felt that the main attribute of an arbitration agreement, namely, consensus ad idem to refer the disputes to arbitration, is missing in Clause 16 relating to settlement of disputes. Therefore, it is not an arbitration agreement as defined under Section 7 of the Act. In absence of an arbitration agreement, the question of exercising power under Section 11 of the Act to appoint an arbitrator does not arise.

13. A similar view was expressed by this Court in the case of Wellington Associates Ltd. v. Kirit Mehta [AIR 2000 SC 1379] though the arbitration clause in that case was different.

14. Now, I may refer to the pre-requisites of a valid and binding arbitration agreement leading to an appropriate reference under the Act. Section 2(1)(b) defines `arbitration agreement' to be an agreement referred to in Section 7. Section 7 of the Act states that an `arbitration agreement' is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. The arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement and shall be an agreement in writing. An arbitration agreement is in writing if it is contained in any of the clauses i.e. clauses (a) to (c) of Sub-section (4) of Section 7 of the Act. Once these ingredients are satisfied, there would be a binding arbitration agreement between the parties and the aggrieved party would be in a capacity to invoke the jurisdiction of this Court under Section 11(6) of the Act.

15. In the case of K.K. Modi v. K.N. Modi & Ors. [(1998) 3 SCC 573], this Court, while differentiating an `arbitration agreement' from a `reference to an expert' for decision, contained in an MOU recording a family settlement, enumerated the essential attributes of a valid arbitration agreement:

1. The arbitration agreement must contemplate that the decision of the tribunal will be binding on the parties to the agreement,

2. that the jurisdiction of the tribunal to decide the rights of parties must be derived either from the consent of the parties or from an order of the Court or from a statute, the terms of which make it clear that the process is to be an arbitration,

3. the agreement must contemplate that substantive rights of parties will be determined by the agreed tribunal,

4. that the tribunal will determine the rights of the parties in an impartial and judicial manner with the tribunal owing an equal obligation of fairness towards both sides,

5. that the agreement of the parties to refer their disputes to the decision of the tribunal must be intended to be enforceable in law and lastly,

6. the agreement must contemplate that the tribunal will make a decision upon a dispute which is already formulated at the time when a reference is made to the tribunal.

16. Also in the case of Smita Conductors Ltd. v. Euro Alloys Ltd. [(2001) 7 SCC 728], where no contract, letter or telegram confirming the contract containing the arbitration clause as such was there, but certain correspondences which indicated a reference to the contract containing arbitration clause for opening the letter of credit addressed to the bank, were there. There was also no correspondence between the parties disagreeing either with the terms of the contract or the arbitration clause. The two contracts also stood affirmed by reason of their conduct as indicated in the letters exchanged between the parties. This Court construed it to be an arbitration agreement in writing between the parties and referred to Article II Para 2 of the New York Convention, which is pari materia to Section 7 of the Act and observed as under: "what needs to be understood in this context is that the agreement to submit to arbitration must be in writing. What is an agreement in writing is explained by Para 2 of Article II. If we break down Para 2 into elementary parts, it consists of four aspects. It includes an arbitral Clause (1) in a contract containing an arbitration clause signed by the parties, (2) an arbitration agreement signed by the parties, (3) an arbitral clause in a contract contained in exchange of letters or telegrams, and (4) an arbitral agreement contained in exchange of letters or telegrams. If an arbitration clause falls in any one of these four categories, it must be treated as an agreement in writing.

17. This Court, in the case of Bihar State Mineral Development Corporation v. Encon Builders[(2003) 7 SCC 418] has also taken the view that the parties must agree in writing to be bound by the decision of such Tribunal and they must be ad idem.

18. The next question that falls for consideration is what should be the approach of the Court while construing a contract between the parties containing an arbitration agreement. In the case of Rickmers Verwaltung GMBH v. Indian Oil Corp. Ltd. [(1999) 1 SCC 1], this Court took the view that `it is the duty of the court to construe correspondence with a view to arrive at a conclusion whether there was any meeting of minds between the parties, which could create a binding contract between them. Unless from the correspondence, it can unequivocally and clearly emerge that the parties were ad idem to the terms, it cannot be said that an agreement had come into existence between them through correspondence.' Still in the case of Unissi (India) Pvt. Ltd. v. Post Graduate Institute of Medical Education and Research [(2009) 1 SCC 107], where the appellant had given his tender offer which was accepted by the respondent and the tender contained an arbitration clause, this Court, considering the facts of the case, the provisions of Section 7 of the Act and the principles laid down by it, took the view that though no formal agreement was executed but in view of the tender documents containing the arbitration clause, the reference to arbitration was proper. In the case of Shakti Bhog Foods Ltd. v. Kola Shipping Ltd. [(2009) 2 SCC 134], this Court held that from the provisions made under Section 7 of the Act, the existence of an arbitration agreement can be inferred from a document signed by the parties or exchange of e-mails, letters, telex, telegram or other means of telecommunication, which provide a record of the agreement.

19. In a recent judgment of this Court in the case of VISA International Ltd. v. Continental Resources (USA) Ltd. [(2009) 2 SCC 55], this Court was concerned with an arbitration clause contained in the memorandum of understanding that read as under:

Any dispute arising out of this agreement and which cannot be settled amicably shall be finally settled in accordance with the Arbitration and Conciliation Act, 1996.

20. The disputes having arisen between the parties, the respondent, instead of challenging the existence of a valid arbitration clause, took the stand that the arbitration would not be cost effective and will be pre-mature. In view of the facts, this Court held that there was an arbitration agreement between the parties and the petitioner was entitled to a reference under Section 11 of the Act and observed:

No party can be allowed to take advantage of inartistic drafting of arbitration clause in any agreement as long as clear intention of parties to go for arbitration in case of any future disputes is evident from the agreement and the material on record, including surrounding circumstances.

21. It is in light of these provisions, one has to construe whether the clause in the present case, reproduced above, in Para 1, constitutes a valid and binding agreement. It is clear from a reading of the said clause that the parties were ad idem to amicably settle their disputes or settle the disputes through an arbitrator in India/UAE. There was apparently some ambiguity caused by the language of the arbitration clause. If the clause was read by itself without reference to the correspondence between the parties and the attendant circumstances, may be the case would clearly fall within the judgment of this Court in the case of Jagdish Chander (supra). But once the correspondence between the parties and attendant circumstances are read conjointly with the petition of the petitioner and with particular reference to the purchase contract, it becomes evident that the parties had an agreement in writing and were ad idem in their intention to refer these matters to an arbitrator in accordance with the provisions of the Act. Vide their letter dated 30th March, 2008, the respondent had raised certain claims upon the petitioner and had also repelled the threat extended by the petitioner to take steps before the ECGC. This notice had been responded to by the petitioner vide letter dated 4th April, 2008 wherein it had raised its claims demanding payment of money within seven days and also stated that any default thereto would constrain it to take legal action. Finally, vide letter dated 30th May, 2008, the petitioner had invoked arbitration clause between the parties and, in fact, had even nominated an arbitrator calling upon the respondent to concur to the said appointment. Replying to this letter vide letter dated 27th June, 2008, the respondent had neither denied the existence nor the binding nature of the arbitration clause. On the contrary, it had requested the petitioner not to take any legal action for appointment of an arbitrator, as they wanted to suggest some other name as an arbitrator, that too, subject to consent of the petitioner. This letter conclusively proves that the respondent had admitted the existence of an arbitration agreement between the parties and consented to the idea of appointing a common/sole arbitrator to determine the disputes between the parties. However, thereafter there had been complete silence from its side, necessitating the filing of present petition under Section 11(6) of the Act by the petitioner. Thus, any ambiguity in the arbitration clause contained in the purchase contract stood extinct by the correspondence between the parties and the consensus ad idem in relation to the existence of an arbitration agreement and settlement of disputes through arbitration became crystal clear. The parties obviously had committed to settle their disputes by arbitration, which they could not settle, as claims and counter claims had been raised in the correspondence exchanged between them. In view of the above, even the pre- condition for invocation of an arbitration agreement stands satisfied. The arbitration agreement does not provide for any specific mode/methodology to be adopted while appointing an arbitrator. The learned counsel appearing for the petitioner contended that keeping in view the extent of claims, it will be highly expensive if an Arbitral Tribunal consisting of two arbitrators and a presiding arbitrator is constituted. He further contented that the parties in their correspondence have already agreed to the appointment of a sole arbitrator. He prayed for appointment of a sole arbitrator as both the parties in their respective letters had agreed to appoint an arbitrator with common concurrence. Thus, in the afore- mentioned circumstances, this petition is allowed and Mr. Justice D.R. Dhanuka (Retired) Judge, Bombay High Court, is appointed as Sole Arbitrator to adjudicate upon the disputes. The parties are at liberty to file claims/counter claims before the appointed Arbitrator, which shall be decided in accordance with law.