Guest Post: Analysing the Constitutionality of the Reverse Onus Clause in the UP “Love Jihad” Law

[This is a guest post by Shamik Datta and Ishika Garg, and first appeared on the Proof of Guilt blog. It is cross-posted here with permission.]


In February, 2021, the Uttar Pradesh Prohibition of Unlawful Conversion of Religion Act, 2021(Hereinafter “the Law” or “the Uttar Pradesh Law”) was passed by the Uttar Pradesh State Assembly. Section 3 of the Uttar Pradesh Law lays down the offence punishable under the legislation, and reads as: 

“No person shall convert or attempt to convert, either directly or otherwise, any person from one religion to another by use or practice of misrepresentation, force, undue influence, coercion, allurement or by any fraudulent means or by marriage nor shall any person abet, convince or conspire such a conversion”

In relation to this offence, the contentious Section 12 of the Law crafts a reverse onus clause. The clause reads as follows: 

“The burden of proof as to whether a religious conversion was not effected through misrepresentation, force, undue influence, coercion, allurement, or by any fraudulent means or by marriage, lies on the person who has caused the conversion and, where such conversion has been facilitated by any person, on such person.”

A reverse onus clause can be understood as one that places the burden of proof upon the accused once the prosecution establishes certain foundational facts. In the absence of such a clause, the onus would be on the prosecution to show that the conversion was coercive. However, in the present case, this clause would require the accused to prove that the conversion was consensual, as long as the prosecution establishes the basic foundational fact of the occurrence of the act of conversion. In this post, the authors shall analyse the constitutionality of this clause by subjecting it to the four-fold test laid down by Justice Gupte in his separate opinion, in the case of Shaikh Zahid Mukhtar v. State of Maharashtra  [(2017) 2 AIR Bom R 140]. In doing so, the authors shall rely on various judgements that have upheld the constitutionality of reverse onus clauses in other statutes. 


An analysis of the clause, through Justice Gupte’s four-fold test.

Justice Gupte laid down the four-fold test to scrutinise the constitutionality of reverse onus clauses, on the anvil of the fundamental rights of equality and liberty enshrined under Article 14 and 21 of our Constitution (Paragraph 213, Pages 231-232). The four conditions stressed upon were as follows –

  1. Is the State required to prove enough basic or essential facts constituting a crime so as to raise a presumption of balance of facts (considering the probative connection between these basic facts and the presumed facts) to bring home the guilt of the accused, and to disprove which the burden is cast on the accused?
  2. Does the proof of these balance of facts involve a burden to prove a negative fact?
  3. Are these facts within the special knowledge of the accused?
  4. Does this burden, considering the aspect of relative ease for the accused to discharge it or the State to prove otherwise, subject the accused to any hardship or oppression?

We shall now examine the clause through each prong of this test. 

The first condition of the test requires the prosecution to establish certain basic foundational facts which must have a rational connection with the presumed facts, in a way that makes the latter highly probable. This presumption of ‘balance of facts’ (considering the probative connection between the basic facts and the presumed facts) is a prerequisite for presuming the guilt of the accused. In the landmark case of Noor Aga Khan v. State of Punjab [(2008) 16 SCC 417], the Supreme Court upheld the constitutionality of Sections 34 and 54 of the Narcotics Drugs and Psychotropic Substances Act, 1985. The presumption of guilt only arises, when the prosecution proves certain foundational facts, which would shift the burden on the accused to rebut this presumption. 

This crucial requirement of proving foundational facts was reiterated in Dharampal Singh v. State of Punjab [(2010) 9 SCC 608] and Bhola Singh v. State of Punjab [(2011) 11 SCC 653]. The evidence presented by the prosecution must have probative value, which essentially means that it must sufficiently point towards the conclusion that the accused committed the crime. Only when the prosecution satisfies this standard can it be considered just for the accused to displace such presumption of guilt. In the context of NDPS, this standard of proving initial facts would be satisfied once the prosecution established that firstly, there was contraband and secondly, that the same was in the conscious possession of the accused. Similarly, in the recent case of Justin @ Renjith v. Union of India, the Kerala High Court stressed on the importance of necessitating the prosecution to prove certain foundational facts such as the age of the victim, and the occurrence of the alleged incident, in order to uphold the constitutionality of the reverse onus clause in the Protection of Children from Sexual Offences Act, 2012

Contrary to this requirement of establishing basic facts, the Uttar Pradesh Law presumes the guilt of the accused without the establishment of a probative connection between the basic facts and the criminalised act of religious conversion. This is because the only foundational fact to be established in the present case is that of there having been a conversion. In our view, this fact alone is not sufficient to establish a probative connection in this regard. To better understand the problem associated with shifting the burden of proof under the Law without the establishment of a probative connection, we must turn our attention towards the numerous instances where the Law has been misused. From these instances, it becomes clear that even in cases where the conversion took place with the consent of the ‘victim’, the accused has had to face an FIR lodged by the family members of the converted person, or a third party. When such is the ground reality, one must question the absence of proving the non-consensual aspect of conversion from the ambit of the basic foundational facts. The mere fact of there having been a conversion, without establishing the non-consensual nature, cannot suffice to establish the probative connection between the facts and the criminalised act under the Law. Therefore, the Law does not rationalise the connection between the basic and presumed facts and hence, does not fulfil the first condition laid out in the four-fold test.

In P.N. Krishna Lal v. Govt. Of Kerala [1995 Supp (2) SCC 187], the Supreme Court recognised that the casting of burden of proof on the accused cannot be allowed when such presumption is raised in relation to the proof of negative facts. Building on this, the second condition of Justice Gupte’s test enquires whether the aforementioned ‘balance of facts’ involves a burden to prove negative facts. The Uttar Pradesh Law criminalises conversion via ‘misrepresentation, force, undue influence, coercion, allurement, or by any fraudulent means or by marriage’. Section 2(a) of the Law defines ‘allurement’ as:

Allurement means and includes offer of any temptation – (i) any gift, gratification, easy money or material benefit either in cash or kind. (ii) employment, free education in reputed school run by any religious body; or (iii) better lifestyle, divine displeasure or otherwise.

In the present case, the negative fact to be proved by the accused is that no allurement occurred due to their actions. Broad terms like ‘allurement’ and ‘any temptation’, once alleged by the prosecution, require an analysis of the mind of the victim at the time of the commission of the offence, on the basis of whether the party actually felt ‘tempted’ by the actions of the accused. Even if the test of preponderance of probabilities is applied, it is unthinkable how the accused can reasonably or fairly be expected to disprove this subjective feeling of temptation, once alleged by the prosecution. Such a burden imposes an unreasonable standard of proving negative facts on the accused. 

On this account, the Uttar Pradesh Law also fails the third condition of the test which requires the balance of facts to fall within the special knowledge of the accused. As argued by the authors, the proving of negative facts does not lie within the special knowledge of the accused in the kind of situations dealt with by the Law. As emphasised in Justin @ Renjith v. Union of India, Parliament is justified in reversing the burden of proof in context of aspects which lie exclusively within the domain of the accused’s knowledge. This case is distinguishable in the present discussion, as it deals with sexual offences committed under the Protection of Children from Sexual Offences Act, 2012. The rationale for such justification was based on the fact that there may not be any eye witness to the incident committed. However, this rationale cannot be deemed to apply in a fool-proof manner in the context of religious conversions, and the authors argue that no other comparable justification is present either. 

It is undisputed that the reversal of burden of proof can only be allowed in those cases where it is evident that there exist certain special facts within the knowledge of the accused, which he can prove or disprove easily. Knowledge, or mens rea, is imputed to the accused in cases such as those of possession of firearms, where mere possession leads to presumption of a harmful purpose [Shaikh Zahid Mukhtar v. State of Maharashtra, (2017) 2 AIR Bom R 140]. However, merely proving the basic foundational fact that a religious conversion took place, cannot be deemed to be in furtherance of a harmful purpose. This is because in multiple cases of religious conversion, it has been noted that the accused had the consent of the converted person, which is not an offence punishable under the Uttar Pradesh Law. The mere proof of conversion does not lead to a presumption that the act was in furtherance of an unlawful, let alone a harmful purpose. Thus, the standard for imputing knowledge to the accused is not satisfied in the present case. With this in mind, the Uttar Pradesh Law fails to fulfill the third condition of the test. 

This leads us to the fourth condition of the test, which enquires whether the burden of proving innocence will subject the accused to any hardship or oppression. In addition to the distress mentioned above, there is also a psychosocial aspect to be considered. In India, religious conversions are widely associated with social stigma and seen as ‘immoral’. This leads to the viewing of the accused as a ‘wrong-doer’, even when the conversion is performed with the consent of the converted person. This situation is further exacerbated when the Law is misused extensively by the prosecution. The justification of reverse onus clauses in light of ‘easier convictions’ cannot be accepted as a higher conviction rate could only increase the possibility of wrongful convictions. A conviction under a reverse onus clause does not necessarily signify guilt, and may just be the undesired result of the accused not being able to satisfy the high standard of proof he is burdened with. An example of the possibility of such wrongful convictions is found in a recent case, where the government explicitly admitted that it did not possess the requisite evidence to prosecute two Muslim men accused of converting a Hindu woman. The woman supported the men, stating that her husband had wrongfully tried to frame them because they supported her when she faced domestic violence from her husband. In all such cases, the hardship faced by the accused is evident and it is clear that the Law does not meet the fourth condition of the test. 

Conclusion

When assessing the validity of Section 12 of the Law, ignoring the inextricable link between constitutional and criminal law would be a grave mistake. The above analysis of the reverse onus clause under the Law, leads to the conclusion that the Law fails to meet the criteria of the four-fold test. Moreover, the rationale behind the law of curbing ‘unlawful conversions’, cannot be justified when analysed in comparison to reverse onus clauses in other statutes, whose constitutionality has been previously upheld by the court. In light of these considerations, the authors believe that the reverse burden of proof clause needs to be reconsidered. 

Guest Post: Government Contracts and Constitutional Remedies – A Critique of the Unitech Decision

[This is a guest post by Sholab Arora.]


This article analyses the recent judgment of the Supreme Court in Unitech v. TSIIC [2021 SCC OnLine SC 99], delivered by a bench comprising of Justices D.Y. Chandrachud and M.R. Shah, from the jurisprudential vantage point of the settled principles of law concerning the following two issues:

i) Whether a writ petition is maintainable in cases wherein issues arise purely within the private law domain of contracts even though such contracts have been entered into by a governmental authority; and

ii) Whether in a writ petition, a relief seeking refund of money simpliciter from governmental authorities can be granted.

This article disagrees with, and critiques, the judgment. But before analyzing the ruling in Unitech, it is imperative to have a conceptual understanding of the principles of law governing the aforementioned issues.

Case Law on Writ Jurisdiction and Governmental Contracts: A Conspectus

The issue whether a writ petition is maintainable in cases concerning governmental contracts has had a seemingly chequered history and a perusal of the relevant judgments of the Supreme Court, at a facile level, would reveal that somewhat contradictory and ambiguous positions have been taken therein. However, a uniform and consistent jurisprudential thread can be discerned from the case law, whose inception can be traced to the Constitution Bench judgment in K.N. Guruswamy v. State of Mysore [AIR 1954 SC 592] and appears to be maintained until the Three Judge Bench judgment in State of U.P. v. Sudhir Kumar Singh [2020 SCC OnLine SC 847]. I argue that the ruling in Unitech substantially departs from the settled jurisprudential thread, while purporting to maintain consistency.

In Guruswamy, the Court held that if the procedure of allotment of tender by a governmental authority is not open and transparent, a writ can be granted. In D.F.O., South Kheri v. Ram Sanehi Singh [(1971) 3 SCC 864], the Court, after referring to Guruswamy, held that a writ petition is maintainable if the action challenged is that of a public authority invested with statutory power even though the relief sought arises out of an alleged breach of contract. In Radhakrishna Agarwal v. State of Bihar [(1977) 3 SCC 457], the Court, after referring to Erusian Equipment and Chemicals Ltd. v. State of West Bengal [(1975) 1 SCC 70], held that only those actions of a governmental authority (within the contractual domain) can be analyzed under Article 226 on the touchstone of Article 14 which are at the threshold, or at the time of entering into a contract. After a contract has been entered into and the parties have fully entered the contractual field, a governmental authority is not encumbered with any constitutional obligation. However, even after a contract has been entered into, statutory obligations of a governmental authority can still be enforced.     

Not substantially departing from the principles laid down in the aforementioned judgments, the Court in D.F.O. v. Bishwanath Tea Co. Ltd. [(1981) 3 SCC 238] held that in case an issue complained of is purely breach of contract, even though by a governmental authority, the writ jurisdiction of a High Court cannot be invoked and the only remedy is institution of a suit. Thereafter, in Gujarat State Financial Corp. v. Lotus Hotels (P) Ltd. [(1983) 3 SCC 379], the Court held that a writ of mandamus can be granted against a governmental authority for enforcement of a contractual obligation, if essentially what the petitioner is seeking is enforcement of a statutory duty. In a similar vein, the Court in Bareilly Development Authority v. Ajai Pal Singh [(1989) 2 SCC 116] held that the writ jurisdiction cannot be invoked after a contract has been entered into unless statutory obligations are sought to be enforced, that is to say, a writ petition is maintainable in cases of statutory contracts but not in cases of non-statutory contracts. Pertinently, the Court further held that the actions of a governmental authority cannot be assessed on the touchstone of constitutional provisions after a contract has been entered into, which was even reiterated in Mahabir Auto Stores v. Indian Oil Corporation [(1990) 3 SCC 752].

One can see three jurisprudential principles emerging from the case law development until 1990: first, a writ is not maintainable if the issue complained of is breach of contract simpliciter or if the relief sought is simply for enforcement of contractual obligation; second, a writ is maintainable if the contractual obligations of a governmental authority are ensconced within a larger statutory framework and what the petitioner essentially seeks is enforcement of statutory obligations [statutory contract – non-statutory contract dichotomy]; and third, a writ is maintainable if the petitioner claims that the actions of a governmental authority at the time of entering or not entering into a contract (but not thereafter) are violative of Article 14 [pre-contract – post-contract dichotomy].

In effect, expanding on the last of the aforementioned three principles, the Court in Sterling Computers Ltd. v. M/s M&N Publications Ltd. [(1993) 1 SCC 445] and Tata Cellular v. Union of India [(1994) 6 SCC 651] held that judicial review, on the touchstone of Article 14, has to be restricted to the decision making process concerning entering or not entering into a contract or allotment of tender and the same cannot be extended to the merits of the decision itself (which dictum was reiterated in Michigan Rubber (India) Ltd. v. State of Karnataka [(2012) 8 SCC 216]). Clarifying the second of the aforementioned three principles, the Court in Kerala SEB v. Kurien E. Kalathil [(2000) 6 SCC 293] held that “a contract would not become statutory simply because it is for construction of a public utility and it has been awarded by a statutory body” and that in itself will not raise an “issue of public law”. Thereafter, in State of Bihar v. Jain Plastics and Chemicals Ltd. [(2002) 1 SCC 216] and NHAI v. Ganga Enterprises [(2003) 7 SCC 410], the Court reiterated the first of the aforementioned three principles i.e. “writ is not the remedy for enforcing contractual obligations” and “disputes relating to contracts cannot be agitated under Article 226 of the Constitution of India”.

Then came the judgment in ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd. [(2004) 3 SCC 553] which muddied the jurisprudential waters. This judgment misconstrued the rulings in Guruswamy, Ram Sanehi Singh and Lotus Hotels (P) Ltd.  The Court in ABL International Ltd. held that “once the State or an instrumentality of the State is a party of the contract, it has an obligation in law to act fairly, justly and reasonably which is the requirement of Article 14 of the Constitution” and “a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable”. This dictum flies in the teeth of the aforementioned three jurisprudential principles as this dismantles both the statutory contract – non-statutory contract dichotomy and the pre-contract – post-contract dichotomy. This departure from the settled principles of law was continued in Noble Resources v. State of Orissa [(2006) 10 SCC 236]. However, it was clarified in Noble Resources that judicial review will be restrictive in cases of breach of contract unlike matters which are at the threshold of a contract.

Realizing that the ruling in ABL International inverted the settled principles, the Court in Joshi Technologies v. Union of India [(2015) 7 SCC 728] clarified and re-emphasized the pre-ABL International position, although in a new fashion. The Court in Joshi Technologies held as follows:

…in pure contractual matters the extraordinary remedy of writ under Article 226 or Article 32 of the Constitution cannot be invoked. However, in a limited sphere where such remedies are available only when the non-Government contracting party is able to demonstrate that it is a public law remedy which such party seeks to invoke, in contradistinction to the private law remedy simipliciter under the contract…if the matter is governed by a contract, the writ petition is not maintainable since it is a public law remedy and is not available in private law field, for example, where the matter is governed by a non-statutory contract…The Court may not examine the issue unless the action has some public law character attached to it…where the matter falls purely in private field of contract, this Court has maintained the position that writ petition is not maintainable” [public – private dichotomy].

Pertinently, the Court revives the first of the three jurisprudential principles discussed hereinbefore, and subsumes the second principle i.e. the statutory contract – non-statutory contract dichotomy within the public – private dichotomy. However, the Court departs from the third principle i.e. the pre-contract – post-contract dichotomy. Hence, even if a public law issue is raised subsequent to the formation of a contract whereto a governmental authority is a party and its actions are sought to be challenged, the same can be entertained in a writ petition.

The question arises: When can it be said that a public law issue is raised? The answer is: first, when the concerned contract is a statutory contract; or second, when the petitioner claims violation of Article 14 within the contractual domain. And, violation of Article 14 can only be claimed when the procedural due process is not followed – which is the position floated in Guruswamy (although not in very clear terms) and followed and strengthened in Sterling Computers Ltd., Tata Cellular and Michigan Rubber (India) Ltd. It is important to understand that Joshi Technologies maintains the jurisprudential thread which undergirded the position of law before ABL International. It merely spreads the Article 14 – procedural due process principle throughout the contractual field instead of restricting the same to matters at the threshold of a contract. The position on violation of Article 14 vis-à-vis procedural due process becomes more evident in the Three Judge Bench Judgment of Sudhir Kumar Singh wherein the Court held that Article 14 stood violated because the tender was cancelled by the concerned governmental authority by breaching the audi alteram partem rule.

Case Law on Writ Jurisdiction and Refund of Money: A Conspectus

The case law development on whether in a writ petition, a relief seeking refund of money simpliciter from governmental authorities can be granted has not witnessed such a tumultuous evolution like the previous issue this article dealt with. Rather, the development has been quite certain and consistent. In Burmah Construction Co. v. State of Orissa [AIR 1962 SC 1320], the issue that arose before the Constitution Bench was whether refund of tax unlawfully collected by the State could be sought in a writ petition under Article 226. The Court held that a writ petition is maintainable if the petitioner is essentially enforcing a statutory obligation on the part of the State or an officer of the State to refund the tax illegally collected. If the obligation to refund the tax illegally collected cannot be traced to a statutory provision, then the only remedy left is to file a suit. In Suganmal v. State of M.P. [AIR 1965 SC 1740], the Constitution Bench held that a writ petition solely for refund of money is not maintainable, however, the same can be entertained when refund of money is sought as a consequential relief. For instance, when the petitioner challenges an assessment order and succeeds. In such a case, the Writ Court can grant refund of money as a consequential relief. This ruling was followed in Salonah Tea Co. Ltd. v. Suptd. of Taxes [(1988) 1 SCC 401], U.P. Pollution Control Board v. Kanoria Industrial Ltd. [(2001) 2 SCC 549] and Godavari Sugar Mills Ltd. v. State of Maharashtra [(2011) 2 SCC 439] wherein the Court reiterated the “distinction between those cases where a claimant approaches a High Court seeking relief of obtaining refund only and those where refund is sought as a consequential relief after striking down of the order of assessment etc.” Even ABL International reiterates this principle of law.

There is, however, one judgment manifesting a departure from this settled principle of law i.e. Popatrao Vyankatrao Patil v. State of Maharashtra [Civil Appeal No. 1600 / 2020 (SC), Judgment dt. 14.02.2020]. In Popatrao, the appellant was the highest bidder in a public auction concerning excavation of a sand block. In pursuance of the allotment of the tender, the appellant submitted a sum of money with the government treasury, despite which, he was not put in possession of the concerned sand block. After trying his luck with the governmental authorities, the appellant filed a writ petition before the High Court seeking refund of the money deposited. The High Court refused to entertain the writ petition and relegated the appellant to a suit. On appeal, the Supreme Court held that the action of the State smacked of arbitrariness and was violative of Article 14, and granted the relief of refund. There are two issues with this judgment: first, the Court fails to realize that violation of Article 14 only arises within the contractual field when the procedural due process is not followed. Mere non-refund of money will not give rise to the same; and second, the Court ignores the settled principle of law that refund of money can only be directed in a writ petition when the same is sought as a consequential relief. Popatrao can only be considered as an aberration which gives rise to another aberration viz. Unitech.

Unitech v. TSIIC: An Analysis

In Unitech, the facts were that Unitech Ltd. was awarded the tender to develop, design and construct an integrated township project / multi services aerospace park on a particular land of about 350 acres [“subject land”] by Andhra Pradesh Industrial Infrastructure Corporation [“APIIC”], the predecessor-in-interest of Telangana State Industrial Infrastructure Corporation [“TSIIC”]. In pursuance of the allotment of the tender, Unitech Ltd. paid a sum of Rs. 165 crores. After the allotment of the tender, in a different litigation, it was held that the title and ownership of the subject land did not vest in the Government of Andhra Pradesh. Hence, the very foundation of the contract between Unitech Ltd. and APIIC / TPIIC stood eroded and the contract stood frustrated. As a result, Unitech Ltd. sought refund of the aforementioned sum of money, along with interest, from APIIC and TPIIC but in vain.

Thereafter, Unitech Ltd. invoked Article 32 jurisdiction seeking refund of money [W.P. (C) 302 / 2017]. The Court ordered that it was “not inclined to entertain the writ petition under Article 32 of the Constitution. However, the petitioners, if so advised, may approach the High Court under Article 226 of the Constitution” [Order dt. 01.05.2017]. Unitech Ltd. preferred a writ petition under Article 226 before the High Court, and both the Single Judge and the Division Bench granted the relief of refund, although differing on the interest amount. The matter approached the Supreme Court. Strangely, the Judgment records, the State of Telangana and TSIIC did not raise any objection as to maintainability of the writ petition under Article 226 or the entitlement of Unitech Ltd. to seek refund of money under Article 226. Be that as it may, the Judgment conducts an academic analysis on the issue of maintainability. The Court relies on ABL International, Sudhir Kumar Singh and Popatrao to hold that the writ petition in the instant case was maintainable and the High Court had rightly granted the relief of refund of money under Article 226.

To create a semblance of compliance with the public – private dichotomy, the Court’s purported justification is that there is a violation of Article 14 as the action of the State is arbitrary / unfair since “TSIIC, a state instrumentality, has not just reneged on its contractual obligation, but hoarded the refund of the principal and interest…” As we have seen, Article 14 violation has been restricted to cases where procedural due process was not followed by a governmental authority within the contractual domain. The same was the case in Sudhir Kumar Singh. The Court’s reliance on ABL International is misplaced as the pre-ABL International substantially stood revived in Joshi Technologies. Moreover, Popatrao is a mere aberration. If there was no allegation of non-compliance of procedural due process and the contract concerned was not a statutory contract, it is difficult to comprehend why the writ petition was held to be maintainable. Even if the Judgment is considered justifiable in expanding the scope of Article 14 violation in contractual matters, it clearly flies in the teeth of the settled principle of law that refund of money can only be claimed as a consequential relief in a writ petition, which was clearly not the case in Unitech. Therefore, it is humbly submitted that Unitech does not state the correct position of law and relies on the aberrational judgments, and as a consequence, muddies the jurisprudence on the subject.  

Guest Post: On the Dangers of Reading Disparate Impact into Manifest Arbitrariness – a Response to Dhruva Gandhi

[This is a guest post by Shreyas A.R.]


Previously on this blog, Dhruva Gandhi had suggested that the Court in Navtej Johar attempted to read disparate impact analysis into the manifest arbitrariness test. In this piece, I will respond to Dhruva’s arguments by arguing why such a formulation is unnecessary, especially considering that the impacts analysis has been read into the reasonable classification test in Navtej itself, making the arbitrariness doctrine quite irrelevant for this purpose.

A brief recap is in order.

Reasonable classification and manifest arbitrariness are the two grounds which the Courts use to determine the constitutional validity of a measure when faced with an Article 14 challenge. Under the former test, a law will be held violative of Article 14 if it (a) classifies people without an intelligible differentia, and (b) the object sought to be achieved through the law has no rational nexus with the classification made. The manifest arbitrariness test, on the other hand, is well, arbitrary – in the sense that the Supreme Court itself has been unable to determine what the test really requires them to do. Indirect discrimination happens when a policy or a measure which appears neutral on the face of it puts members of a protected group at a disproportionate advantage as compared with the members of a cognate group. Disparate impacts analysis is the name given to the test to determine whether indirect discrimination has occurred.

For the purposes of this post, I will restrict myself to a specific question: does the test of manifest arbitrariness support a finding of indirect discrimination?

There are two reasons why it should not:

I. As Prof. Khaitan points out, indirect discrimination is structurally comparative, insofar as it disadvantages certain groups of people in relation to a cognate group. The arbitrariness test, on the other hand is a “test of unreasonableness of measures which do not entail comparison.” Take Nariman, J.’s framing of “manifest arbitrariness”, as laid down in Shayara Bano:

Manifest arbitrariness, therefore, must be something done capriciously, irrationally and/or without determining principle. Also, when something is done which is excessive and disproportionate, such legislation would be manifestly arbitrary.

None of the underlined words in the definition above seem to suggest that a comparative analysis could be possible under the test, which explains why manifest arbitrariness is also termed ‘non-comparative unreasonableness’. Seervai shares this suspicion, when he notes that the test “hangs in the air, because it propounds a theory of equality without reference to the language of Article 14”. Also note that when Navtej struck down Section 377 as being manifestly arbitrary, no equality analysis is done. Dhruva recognizes this objection, and argues that:

The words ‘excessive and disproportionate’ appear to refer to the impact of a measure and to that extent cover the disproportionate, adverse effect which constitutes disparate impact. The absence of an ‘adequate determinative principle’ is the absence of a justification necessary to sustain a measure of indirect discrimination. Therefore, it is possible for judges in Navtej to apply this doctrine to arrive at a finding of disparate impact.

What it means is this: in order to support a finding of indirect discrimination, the Courts will ask whether there is a reasonable justification, or an ‘adequate determinative principle’ for upholding the differentia, i.e. the disadvantaged and the cognate group. In Navtej of course, the Court does not ask what the differentia is while determining the arbitrariness – it does so when it is testing Section 377 under the classification test itself.

In my opinion, Dhruva’s interpretation of manifest arbitrariness resembles the rational nexus prong of the traditional reasonable classification doctrine, much less an entirely separate ground of review. Recall that under the rational nexus prong, the Courts will ask whether there exists a reasonable connection between the objectives sought by the impugned measure and the differentia. In the absence of a rational nexus, or an ‘adequate determinative principle’, the Court will strike down the law as being violative of Article 14.

II. Another objection I take to the manifest arbitrariness test is that it prescribes no thresholds for the test to be activated. This could possibly be attributed to Bhagwati, J.’s framing of equality as being antithetical to arbitrariness in Royappa:

Where an act is arbitrary it is implicit in it that it is unequal both according to political logic and constitutional law and is therefore violative of Article 14…

My point is this: What capricious/ irrational/ without determining principle/ excessive/ disproportionate could possibly mean for the purposes of Article 14 has not been clarified by the Courts as yet. Why? By Royappa’s logic, the Court is not required to do so – the inequality is implicit in the arbitrariness of the measure itself. But even for the sake of playing the devil’s advocate, how do we determine what the implicit inequality is? There is no answer to this, and the Courts do not know either. This possibly explains why the Courts do not do much in terms of equality analysis while applying the manifest arbitrariness test. This enables individual judges to impose their own standards of morality to legislative review, which often results in the legislature’s wisdom being replaced by that of the judge, thus allowing the Court to enter into policy making under the garb of rights protection.

While this could occasionally have positive effects, such as Navtej where the Court applied constitutional morality to strike down a colonial law, it could easily go the other way as well. This objection is best exemplified by the Court’s judgement in the Bar Dancers case, where the Court chose to apply, and uphold the same colonial morality it had struck down in Navtej. (A detailed analysis by Anup Surendranath of all that was wrong with Bar Dancers is available here). This arbitrariness in application of the arbitrariness test does not bode well for equality jurisprudence, and can leave it at the mercy of the caprices of the judges who happen to be hearing the case.

Why does this matter?

Cases of indirect discrimination, and civil rights in general often involve inquiries into deeper questions on the moral goodness of a law, and what it means to be equal. On the other hand, the arbitrariness test divorces the content of equality from the inquiry. By characterizing discrimination as the mere result of an arbitrary state action, the Court loses an opportunity to afford judicial recognition to the various forms of structural inequality as they currently exist, (and as I will argue in the next section) update its jurisprudence accordingly, and possibly redeem itself. Navtej is transformative constitutionalism at its best– using constitutional morality to advance a notion of equality that could contribute in altering popular morality.

Having demonstrated the dangers of the arbitrariness test, I will now show that the reasonable classification test was used to make a disparate impact analysis in Navtej.

Typically, under the disparate impact test, when it is shown that a measure has led to disproportionate harm being caused to a group as against the cognate group, the Courts will hold that the right to equality has been prima facie infringed. It will then shift the burden to the defendant, and ask whether the measure nevertheless achieves its intended goals. In some jurisdictions, even if the defendant shows that there exists a legitimate justification for the practice, the plaintiff will prevail if it is demonstrated that there exists a better, alternate measure which can achieve the same goal without the disproportionate harm. On similar lines, Prof. Khaitan argues that the scope of inquiry under the nexus prong of the classification test could be expanded by asking the following questions:

Is the measure necessary to achieve the objective? Can the same objective be achieved using means that do not restrict fundamental rights?

I would suggest that Misra, C.J.’s reasons for finding Section 377 unconstitutional under the classification test employed the same analysis as well:

A perusal of Section 377 IPC reveals that it classifies and penalizes persons who indulge in carnal intercourse with the object to protect women and children from being subjected to carnal intercourse. That being so, now it is to be ascertained whether this classification has a reasonable nexus with the object sought to be achieved. The answer is in the negative as the non-consensual acts which have been criminalized by virtue of Section 377 IPC have already been designated as penal offences under Section 375 IPC and under the POCSO Act.

Per contra, the presence of this Section in its present form has resulted in a distasteful and objectionable collateral effect whereby even consensual acts, which are neither harmful to children nor women and are performed by a certain class of people (LGBTs) owning to some inherent characteristics defined by their identity and individuality, have been woefully targeted. [paragraph 237]

Misra, C.J.’s reasoning here is quite simple: not only is the objective of protecting women and children from carnal intercourse already achieved by other laws (thereby making Section 377 unnecessary for that purpose), the measure also has the effect of excluding the LGBT peoples, thereby violating their fundamental rights. Therefore, it is my opinion that Misra C.J. read in a crude disparate impact analysis into the classification test, albeit without using the same words. Elsewhere on this blog, Gautam has analyzed how Chandrachud J.’s critique of the classification test recognized indirect discrimination for the first time in Indian equality jurisprudence. Navtej has been celebrated for several reasons – expanding our understanding of equality and its jurisprudence should be one of them.

To CAP or not to CAP: The Bombay High Court on Equality and Access to Education

In an interesting judgment delivered yesterday (Yash Pramesh Rana vs State of Maharashtra), a Full Bench of the Bombay High Court struck down Government Resolution [“GR”] dated 27.2.2013. This Government Resolution had restricted the application of a fee-reimbursement scheme only to those SC/ST/OBC students who had taken college admission through the government-run Common Admissions Procedure [“CAP”].

The facts were straightforward. To enter an engineering college in the state of Maharashtra, a student had to undertake the Common Entrance Test [“CET”]. On the basis of ranks obtained in the CET, students could then participate in the CAP, and gain admission into any of the colleges that were part of the CAP. However, not all colleges – including some minority colleges (the case itself concerned a Gujarati-language linguistic minority college) – were part of the CAP. Certain colleges had their own admissions process, that was approved by the Pravesh Niyantran Committee. The impugned GR – as indicated above – provided for a fee-reimbursement scheme to SC/ST/OBC students, but limited it only to the former category (i.e., those who took part in the CAP).

In a judgment authored by Dama Seshadari Naidu J., the Bombay High Court found that the impugned G.R. was entirely arbitrary, and violated Article 14 of the Constitution. The judgment is noteworthy, because it was decided almost entirely on the basis of a textbook application of burdens and evidentiary standards under Article 14. The Court observed that as the impugned G.R. created a classification, and disadvantaged one set of people (the category of students that was not granted fee reimbursement), a prima facie case of discrimination was made out. This, then, shifted the burden of justification onto the State. The State essentially produced two arguments: first, that extending the free-reimbursement scheme to all SC/ST/OBC students would be financially prohibitive, and secondly, that students who had gone through the CAP and those who had not constituted two separate “classes”, as the CAP was a transparent, well-documented, well-regulated, and non-discriminatory process of allocation.

On the first count, the Court held that mere financial difficulties, without something more, could not be a ground for discriminatory treatment. In other words, in a class of similarly situated people, the State could not refuse to one set of people a benefit that it was granting to another, on the basis that it did not have the financial capacity. This is self-evidently correct and logical. On the second count, the Court held that the State had failed to bring any evidence on record to show that the non-CAP process was any less rigorous and transparent than the CAP process, in any sense that justified withholding of identical benefits. Indeed, the Pravesh Niyantran Committee was also run by the government. Consequently, as the State had produced no evidence to justify its claim, the impugned G.R. was arbitrary and unconstitutional. As the Court correctly noted, following the US Supreme Court, the presumption of constitutionality would not stretch so far as to imagine the existence of an “undisclosed and unknown reason for subjecting certain individuals or corporations to hostile and discriminatory legislation.”

It is also interesting to note that Naidu J. framed the dispute within the backdrop of historical inequalities concerning access to education in India (going back to the 1850s), and the use of affirmative action as tool of corrective justice. This was relevant to the case, as one of the arguments raised by the State was that fee-reimbursement was simply a benefit it was conferring upon certain students; as there was no antecedent right to claim fee-reimbursement, a person who had been deprived of it had no locus to move the Court. Now at one level, of course, the Court correctly answered this by stating that any State action – including “largesse” – had to conform to constitutional principles. However, the Court also noted that – within the backdrop of structural inequality in India – fee-reimbursement for SC/ST/OBC students had to be understood as “a facet of affirmative action.” This immediately took it from the domain of largesse/benefits and into the domain of constitutional obligation, thus making it even more incumbent upon the State to frame a non-discriminatory policy of access.

Now, an interesting corollary of the Court’s observation is that if indeed fee-reimbursement is a form of affirmative action, then – as a non-reservation based form of affirmative action – it falls within Article 16(1) of the Constitution (guarantee of equality of opportunity). This raises a host of fascinating questions for the future, including whether specific claims of fee-reimbursement can be made against the State by socially disadvantaged communities (as 16(1) is framed as a right), the fact that such schemes can go beyond SC/ST/OBC communities (as 16(1) affirmative action measures are not limited to 16(4) beneficiaries), and so on. Of course, none of these questions were before the Court; however, it will be interesting to see whether future judgments will carry forward the logic of fee-reimbursement being a form of affirmative action, and what that might mean in practical terms.

Guest Post: Rethinking “Manifest Arbitrariness” in Article 14: Part II – Disparate Impact and Indirect Discrimination

[This essay, a Guest Post by Dhruva Gandhi, is the second in a four-part series excavating the role of the doctrine of arbitrariness in Indian constitutional litigation. The first part of the series is available here.]


Previously, along with Sahil Raveen (here and here) I have critiqued the use of manifest arbitrariness by Nariman J. in Hindustan Construction and Essar, stating how the use of the doctrine meant that the Supreme Court effectively usurped the mandate of Parliament and showing how the decision-making of the court itself was arbitrary. Commenting on the same doctrine, Naniwadekar seems to suggest that the scope of the doctrine should be confined to administrative law and we adopt a deeper understanding of the classification test. The doctrine ought not to be used to strike down statutes. However, the point remains that the doctrine of manifest arbitrariness is now a part of positive law and can be used to strike down statutes as well. Therefore, it is imperative that we find a way to make the doctrine workable that does not see the Supreme Court make policy decisions. With that objective, I look at Navtej Johar and show how the adoption of the doctrine of manifest arbitrariness by the Constitution Bench was actually an application of the concept of disparate impact or indirect discrimination. While I am not saying that ‘manifest arbitrariness’ must be equated with ‘disparate impact’, it could help us provide some meaning to the doctrine and limit its scope.

The Concept of Indirect Discrimination

‘Indirect Discrimination’ or ‘Disparate Impact’ has been adopted in different forms in various jurisdictions the world over. In the United States, the concept of indirect discrimination was initially spelled out in Griggs v Duke Power Co. as:

The Act proscribes not only overt discrimination but also practices that are fair in form, but discriminatory in operation. The touchstone is business necessity. If an employment practice which operates to exclude Negroes cannot be shown to be related to job performance, the practice is prohibited. (emphasis supplied)

Cutting across the Atlantic, several decades later the Equality Act, 2010 in the United Kingdom defined indirect discrimination as,

A person (A) discriminates against another (B) if A applies to B a provision, criterion or practice which is discriminatory in relation to a relevant protected characteristic of B’s.

(2)For the purposes of subsection (1), a provision, criterion or practice is discriminatory in relation to a relevant protected characteristic of B’s if—

(a)A applies, or would apply, it to persons with whom B does not share the characteristic,

(b)it puts, or would put, persons with whom B shares the characteristic at a particular disadvantage when compared with persons with whom B does not share it,

(c)it puts, or would put, B at that disadvantage, and

(d)A cannot show it to be a proportionate means of achieving a legitimate aim.

Definitions such as these can be multiplied and there do appear to be certain nuances that differentiate them. For the moment, I do not wish to delve into those. A common understanding of these definitions seems to be that when a facially neutral measure has or may have a disproportionately adverse impact on persons who belong to certain protected/vulnerable groups, the measure would be indirectly discriminatory or disparate in its impact.

History of Disparate Impact in India

While there has not been much of a discussion of indirect discrimination in India, there have been a few instances when this concept has been applied. For instance, when examining the constitutional validity of a section in the Hindu Marriage Act, 1955 that provided for a decree of restitution of conjugal rights, the Andhra Pradesh High Court said that such a section irretrievably alters the life of a wife while not having any such impact on the husband. It is the wife who has to beget a child and the practical consequences of such a decree would cripple her future plans. More recently, the Delhi High Court examined the validity of a practice in the Northern Railways where medical insurance was denied to those family members of an employee whose names had been struck off by that employee. The court said that even a facially neutral decision can have a disproportionate impact on a constitutionally protected class. In this case, the disproportionate impact was on women and children. Barring these and a few other instances though, there has been no explicit recognition of ‘disparate impact’ in India by the Supreme Court. Bhatia argues that Anuj Garg v Hotel Association of India could be a precedent to say that the effect of a measure must be observed to see its discriminatory nature, but as he himself concedes this case involved a directly discriminatory provision.

‘Manifest Arbitrariness’: A Finding of Disparate Impact.

With this background of indirect discrimination and its application in India, I now wish to turn to the case which adopted the doctrine of manifest arbitrariness as a doctrine that can be used to strike down a statute- Navtej Johar v Union of India. While it was first discussed by Nariman J. in Sharaya Bano v Union of India, there appears to be a lack of clarity on whether his opinion on that point was supported by a majority. Instead, writing previously on this blog, Abhinav Chandrachud has shown how the judges in Navtej adopted this doctrine as a tool that can be used to invalidate statutes.

The provision in contention in Navtej– Section 377 of the Indian Penal Code, 1860 was a facially neutral provision. It did not directly discriminate on the basis of sexual orientation. Instead, it potentially covered within its ambit, consensual and non-consensual homosexual intercourse, consensual and non-consensual heterosexual intercourse other than penal-vaginal intercourse and sexual intercourse with animals. Therefore, Section 377 was discriminatory in its operation. It had a disproportionate adverse impact on a vulnerable group- consenting homosexual adults. It is in this context that the four opinions in this case need to be studied.

The Opinion of Misra J: Parallels with Ladele

Misra C.J. (speaking for himself and Khanwilkar J.) said,

237. Per contra, the presence of this Section in its present form has resulted in a distasteful and objectionable collateral effect whereby even ‘consensual acts’, which are neither harmful to children nor women and are performed by a certain class of people (LGBTs) owing to some inherent characteristics defined by their identity and individuality, have been woefully targeted. This discrimination and unequal treatment meter out to the LGBT community as a separate class of citizens is unconstitutional for being violative of Article 14 of the Constitution…

.. 239. In view of the law laid down in Shayara Bano (supra) and given the fact that Section 377 criminalises even consensual sexual acts between adults, it fails to make a distinction between consensual and non-consensual sexual acts between competent adults. Further, Section 377 IPC fails to take into account that consensual sexual acts between adults in private spaces are neither harmful nor contagious to the society. On the contrary, Section 377 trenches a discordant note in respect of the liberty of persons belonging to the LGBT community by subjecting them to societal pariah and dereliction. Needless to say, the Section also interferes with consensual acts of competent adults in private space. Sexual acts cannot be viewed from the lens of social morality or that of traditional precepts wherein sexual acts were considered only for the purpose of procreation. This being the case, Section 377 IPC, so long as it criminalises consensual sexual acts of whatever nature between competent adults, is manifestly arbitrary.

The opinion of Misra CJ. on the point of manifest arbitrariness was not merely an instance of the court commenting on the policy decision of the legislature and disagreeing with it. Instead, the opinion first notes how the effect of the provision is important because it covers consensual sexual activity. Second, this effect was on a vulnerable group of individuals who shared a common immutable characteristic. Third, this effect had a disproportionately adverse impact- it subjected homosexual individuals to social stigma and even interfered with their privacy. Lastly, the opinion shows how the discriminatory effect came to be- by treating alike those who ought to have been differently. Therefore, it is the disparate impact (see the words, ‘this being the case’) of a neutral measure that made it manifestly arbitrary.

Misra J.’s reasoning is similar to that of English Court of Appeal in Ladele v Islington BC. Ladele, the applicant in that case was a marriage registrar employed by the Islington Borough Council who refused to perform civil partnership proceedings because she believed they were contrary to the will of God. She was then subjected to disciplinary proceedings where she pleaded indirect discrimination on the grounds of religion. While the proceedings were held to be justified, the claim of indirect discrimination was accepted in the following terms,

There is no doubt but that Islington’s policy decisions to designate all the registrars civil partnership registrars, and then to require all registrars to perform civil partnerships, put a person such as Ms Ladel, who believed that civil partnerships were contrary to the will of God, ‘at a particular disadvantage when compared to other persons’, namely those who did not have that belief.

Therefore, it was the failure to distinguish between civil registrars who had a religious belief and those who did not that lead to indirect discrimination as per Neuberger LJ, much like Misra J.

Opinion of Chandrachud J.: Parallels with Mandla v Lee

Similarly, consider the opinion of Chandrachud J.,

Section 377 is based upon a moral notion that intercourse which is lustful is to be frowned upon. It finds the sole purpose of intercourse in procreation. In doing so, it imposes criminal sanctions upon basic human urges, by targeting some of them as against the order of nature….It would have human beings accept a way of life in which sexual conduct without procreation is an aberration and worse still, penal. It would ask of a section of our citizens that while love, they may, the physical manifestation of their love is criminal. This is manifest arbitrariness writ large….

Even behaviour that may be considered wrong or unnatural cannot be criminalised without sufficient justification given that the penal consequences that follow. Section 377 becomes a blanket offence that covers supposedly all types of non-procreative ‘natural’ sexual activity without any consideration given to the notions of consent and harm.

In Chandrachud J.s’ opinion too, it is the ‘discriminatory effect’ of Section 377 that is tied to a finding of manifest arbitrariness. The words ‘section of our citizens’ in this paragraph are important. When seen in light of the definition that the Equality Act, 2010 in the United Kingdom offers for instance, they show how persons sharing a protected characteristic- ‘homosexuality’ as their sexual orientation- are disadvantaged as compared to those who do not. Chandrachud J.’s reasoning is also similar to the approach adopted by the Andhra Pradesh High Court where the effect on women was observed.

A parallel instance in the United Kingdom furthers this point. In Mandla v Lee, the House of Lords held that a school had unlawfully discriminated against a Sikh student by excluding him from school when he refused to take off his turban. The school had a rule which required boys to come bare-headed to school. While the rule was apparently neutral and applied equally to all students, it was recognised as wanting conformity to a Christian way of dressing and thus, creating barriers for other religions. Chandrachud J. similarly culls out the barriers created to homosexual intercourse by necessitating conformity to a notion that finds the sole purpose of intercourse in procreation.

Even the concluding portions of paragraph extracted above might take a different colour in this light. A differentiating factor between direct and indirect discrimination in the United Kingdom, for one, is that indirect discrimination can be justified whereas direct discrimination cannot. Even in the United States, a measure with a disparate impact is proscribed under Title VII unless it is shown to have some business necessity. Similarly, Chandrachud J.’s opinion says that a provision cannot have a discriminatory impact unless there is a ‘sufficient justification’.

Admittedly, there is an alternate broader interpretation that can be conferred upon this opinion. It can be read to mean that the Supreme Court can sit in review over the merits of criminalisation and de-criminalise a measure unless sufficient justification comes forth. This broader interpretation though, strikes at the separation of powers between the judiciary and the legislature. Analysing the concluding portion of the excerpt in light of an understanding of disparate impact offers a narrower interpretation that is in conformity with the separation of powers. This interpretation is also buttressed by the fact that Chandrachud J. himself finds Section 377 to be an instance of indirect discrimination under Article 15 as well. It may seem odd that he finds the same statute to be an instance of indirect discrimination under Article 15, but I will comment on that a little later.

Malhotra J: Some semblance of Disparate Impact

Moving then to the opinion of Malhotra J.:

Section 377 insofar as it criminalises consensual sexual acts between adults in privates, is not based on any sound or rational principle, since the basis of criminalisation is the ‘sexual orientation’ of a person, over which one has ‘little or no choice’.

Further, the phrase ‘carnal intercourse against the order of nature’ in Section 377 as a determining principle in a penal provision, is too open-ended, giving way to the scope for misuse against members of the LGBT community.

Thus, apart from not satisfying the twin-test under Article 14, Section 377 is also manifestly arbitrary, and hence, violative of Article 14 of the Constitution.

At the outset, this opinion does not seem to link manifest arbitrariness with disparate impact as neatly as the opinions of Misra CJ. and Chandrachud J. did. However, Malhotra J. has identified that in its operation, Section 377 impacts a vulnerable group defined by an immutable personal characteristic and that this impact is adverse in nature (criminalisation of consensual sexual activity and harassment caused by misuse of criminal law). Therefore, this opinion too looks at the discriminatory operation of an otherwise neutral measure and this discriminatory operation is one reason for the provision to be manifestly arbitrary. To this extent, it shares a common denominator with the opinions of Misra CJ. and Chandrachud J. The second reason, namely, the absence of a sound and rational principle is not in common with those opinions.  However, the material fact is that four out of the five judges found Section 377 to be manifestly arbitrary because it had a disparate impact.

Nariman J. found the provision to be manifestly arbitrary because it was based on a capricious and irrational principle, namely, the fact that gay persons suffer from a mental disorder and ought to be penalised. To this extent, in my opinion, Nariman J. would be in the minority.

According to me, this reading of Navtej Johar seems to suggest that a statute is manifestly arbitrary when it has a disparate impact. Reading it in this way would have some direct, tangible benefits. First, it would militate against what Timothy Endicott terms arbitrary decision making by judges citing the doctrine of arbitrariness and to that extent, preserves the rule of law. Second, it might sanction the incorporation of the concept of disparate impact or indirect discrimination in India. While some have argued that Navtej was a precedent for indirect discrimination even otherwise (here and here), I disagree with these opinions. These opinions seem to rely on the observations made by Chandrachud J. in the context of Article 15(1). However, this was only the opinion of one judge and not the ratio. Therefore, there is some merit to unearthing the use of manifest arbitrariness.

Controversy

Nevertheless, this understanding of ‘manifest arbitrariness’ in Navtej unpacks a set of issues as well. The first is that the application of ‘manifest arbitrariness’ in Navtej is not in sync with its application in Joseph Shine, another Constitution Bench decision. This criticism is fairly true, but one could say that the different opinions in Joseph Shine only applied the test laid down by Nariman J in Sharaya Bano. None of them tried to find a common minimum denominator to Navtej’s application of manifest arbitrariness, the first decision which technically incorporated this doctrine.

A second objection could be that the judges in Navtej applied or at least cited the test quoted by Nariman J. in Sharaya Bano and that disparate impact does not appear to be the sequitur of that opinion. Nariman J., in Sharaya Bano collapsed legislation and delegated legislation for the purposes of Article 14 and said that the doctrine of manifest arbitrariness would apply to both. After that, he said:

Manifest arbitrariness, therefore, must be something done by the legislature capriciously, irrationally and/or without adequate determining principle. Also, when something is done which is excessive and disproportionate, such legislation would be manifestly arbitrary.

The words ‘excessive and disproportionate’ appear to refer to the impact of a measure and to that extent cover the disproportionate, adverse effect which constitutes disparate impact. The absence of an ‘adequate determinative principle’ is the absence of a justification necessary to sustain a measure of indirect discrimination. Therefore, it is possible for judges in Navtej to apply this doctrine to arrive at a finding of disparate impact.

In fact, even the Delhi High Court in Harsh Mander v Union of India did something similar. Delivered a month before Navtej and dealing with the constitutionality of the Bombay Prevention of Begging Act, 1949, the court applied manifest arbitrariness in the following manner:

It is our view that law does not make any distinction between types of begging i.e. voluntary or involuntary as has been urged by the petitioners. The absence of any such distinction exposes the statute to a judicial evaluation on the ground of being arbitrary.

On the contrary, the comprehensiveness of the definition of begging in Section 2(1) (i), appears to indicate a legislative intent to cover a broad area, including in its sweep, all types of begging. It has also been pointed out that the respondents are using homelessness and begging synonymously and are in fact detaining the homeless as if they were begging and implementing the penal provision of the act qua them.

This in our view is manifestly arbitrary.

… As a result of the detention of the bread earner of the family, the entire family may be reduced to financial deprivation and penury. Such can never be the object, spirit and intendment of a welfare state by way of what is touted as a social benefit legislation.

The first reason to find the law arbitrary was in response to a contention of the petitioner within the classification framework. It is the second reason that is more interesting. The petitioners contended that 74% of those arrested belonged to the informal labour sector and 45% of those arrested were homeless. It is in response to this contention that the court says that the State was treating homelessness and begging synonymously. What the court thus found was a disproportionate impact on a vulnerable group- the homeless. The disadvantage caused to them was that they were detained and even exposed to criminal sanction. Not to mention, their families were pushed into penury as a consequence. Therefore, the finding of manifest arbitrariness was contingent on a finding of disproportionate impact.

The disproportionate impact becomes clearer when we compare this to DH v Czech Republic, heard by the ECtHR, where a claim of indirect discrimination was upheld. This was a case where ‘psychology tests’ were administered to determine whether or not children should go to special schools, which were in practice undemanding and inferior. Statistics showed that these tests had a disproportionate impact on Roma students, who were over-represented in special schools. Similarly, before the Delhi High Court it was the homeless who were over-represented before the Beggars Court.

The third and more structural objection to this placement of ‘indirect discrimination’ in Navtej is that the court applies manifest arbitrariness in the context of Article 14. Chandrachud J. even says that discrimination under Article 15 could be indirect. This raises interesting questions about the nexus between Articles 14 and 15. Does Article 15(1) only cover direct discrimination? Would all cases of disparate impact only be covered by Article 14? Is one way to reconcile Chandrachud J.’s opinion that Article 14 covers indirect discrimination for markers other than the grounds covered by Article 15? However, what then is so unique about direct discrimination? Is it harm? Is it intention? Similarly, if we are to say that Article 15 covers direct and indirect discrimination for the grounds and Article 14 covers indirect discrimination for other grounds, what is the significance of Article 15(1)? Why do we even have grounds?

While I cannot deal with all these questions at present and may do so at a subsequent stage, my point remains that this reading of Navtej and Harsh Mander might help us add substance to the doctrine of ‘manifest arbitrariness’.

Rethinking “Manifest Arbitrariness” in Article 14: Part I – Introducing the Argument

[This is the first in a four-part series excavating the role of the doctrine of arbitrariness in Indian constitutional litigation.]


Writing in 2015, Prof. Tarunabh Khaitan argued that while the “old doctrine” of equality is too narrow, the solution ought not to be the “new doctrine” of arbitrariness. Instead, the old doctrine itself can be developed further. The old classification doctrine in a traditional sense enquires into the questions of (a) whether there is an intelligible differentia, and (b) whether there is a rational connection between the measure and the objective. Prof. Khaitan argues that theoretically, the classification doctrine itself can be developed by expanding the range of questions to look beyond just those two. Illustratively, the following are questions which a court could ask in this regard over and above the traditional two questions (for a fuller list, see Prof. Khaitan’s piece):

  • Does the rule have a disproportionate impact on different classes of persons?
  • Is the differentia presumptively impossible?
  • Is the apparent objective genuine?
  • Is the apparent objective legitimate?

Prof. Khaitan ultimately concludes:

The following conclusions emerge: (a) the ‘classification test’ (or the unreasonable comparison test) continues to be applied for testing the constitutionality of classificatory rules; (b) it is a limited and highly formalistic test applied deferentially; (c) the ‘arbitrariness test’ is really a test of unreasonableness of measures which do not entail comparison (hence labelled non-comparative unreasonableness); (d) its supposed connection with the right to equality is based on a conceptual misunderstanding of the requirements of the rule of law; and (e) courts are unlikely to apply it to legislative review (at least in the actor-sensitive sense). Article 14 has become a victim of the weak ‘old’ doctrine and the over-the-top ‘new’ doctrine. The former needs expansion and substantiation, the latter relegation to its rightful place as a standard of administrative review…

The Supreme Court has now confirmed in recent decisions that the “arbitrariness” doctrine is indeed part of Article 14, and that legislative measures can be challenged on the basis of “arbitrariness”; and point (e) above is seemingly no longer reflective of the current position. However, the question of what exactly amounts to a breach of the arbitrariness standard is still unclear.

Several posts on this blog have considered some of the recent judgments of the Supreme Court; but an enunciation of the actual standard remains elusive. This series of essays argues that although the recent cases are labelled as accepting an “arbitrariness” challenge to legislation, they ought not to be taken as referring to the ‘arbitrariness’ of administrative law. When one is thinking through the lens of administrative law, ‘arbitrariness’ is a ground for review of administrative actions. But when one speaks of ‘arbitrariness’ as a matter of constitutional law, one is not speaking of the same thing. ‘Arbitrariness’ in constitutional law is distinct from the ‘arbitrariness’ of administrative law. The constitutional law test is of ‘manifest arbitrariness’; and this series of essays will suggest that “manifest arbitrariness” is not simply “an extreme form of administrative law arbitrariness”: the difference is not merely of degree.

To arrive at a workable test for determining what the content of the Article 14 arbitrariness standard is, this series will examine the judgments of the Supreme Court upholding an arbitrariness challenge to legislation. This is because in cases dealing with challenges to legislation, whatever label the Court may apply, it is clear that the Court is necessarily dealing with Article 14 and not a general administrative law / common law principle. Before proceeding to analyse those cases, however, a brief introductory detour to Royappa (which although not a challenge to legislation is the case most associated with bringing ‘arbitrariness’ into the fold of Article 14) would be valuable. Accordingly, the present post takes a brief look at Royappa; and subsequent posts in this series will then proceed to analyse the other most relevant judgments on Article 14 arbitrariness.

In a famous passage Royappa, Justice Bhagwati noted [para 85 of the SCC report in (1974) 4 SCC 3]:

Equality is a dynamic concept with many aspects and dimensions and it cannot be ‘cribbed, cabined and confined’ within traditional and doctrinaire limits. From a positivistic point of view, equality is antithetic to arbitrariness. In fact, equality and arbitrariness are sworn enemies… Where an act is arbitrary it is implicit in it that it is unequal both according to political logic and constitutional law and is therefore violative of Article 14…

This passage has seemingly attained a life of its own. A very quick scan on the SCC Online database for the phrase “in fact, equality and arbitrariness are sworn enemies” results in the following results: 36 judgments of the Supreme Court of India, 223 from the High Courts, and 8 foreign cases (from Bangladesh, Sri Lanka and South Africa). However, mere reproduction of this passage is not sufficient to understand what Royappa holds (and – as importantly – what it does not hold).

There were two judgments in Royappa – one by Ray CJ (for himself and Palekar J.), and another one by Bhagwati J (for himself, Chandrachud J. and Krishna Iyer J.). The two judgments concurred in the result, but there were some differences in the reasoning.

The petitioner in Royappa was a senior member of the Indian Administrative Service. He was appointed to act as the Chief Secretary of Tamil Nadu. In April 1971, he was appointed as Deputy Chairperson of the State Planning Commission. He did not contest this appointment, which he considered to be equivalent in status to that of a Chief Secretary. Thereafter, in June 1972, the Petitioner was appointed as an “Officer on Special Duty”. This post was a non-cadre post; and the Petitioner was aggrieved by this appointment. In a petition under Article 32 of the Constitution, he alleged that the transfer to a non-cadre post was illegal and unconstitutional, and further prayed for a direction to be re-posted as Chief Secretary.

Ray CJ’s concurring judgment found on a detailed evaluation of the facts that the post of “Officer on Special Duty” was not lower in status and dignity that the other posts held by the Petitioner, and that the appointment was not motivated by mala fides. The main difference between the judgments of Ray CJ and Bhagwati J relates to the burden of proof: while Ray CJ found as a fact that the two posts were indeed equivalent, Bhagwati J found that the Petitioner could not demonstrate that the posts were not equivalent.

In dealing with the contention regarding violation of Article 14 because of the transfer, Bhagwati J. framed the question in the following terms (para 86 of the SCC report):

… What was the operative reason for such transfer: was it the exigencies of public administration or extra administrative considerations having no relevance to the question of transfer? Was the transfer to the post of Deputy Chairman or Officer on Special Duty so irrational or unjust that it could not have been made by any reasonable administration except for collateral reasons?

This was answered by holding that the post of Officer on Special Duty was not demonstrably inferior in status and responsibility to that of Chief Secretary. Although prima facie the Court did have doubts about the equivalence of the posts, the materials on record did not enable the Court to reach a conclusive finding about the inferiority of the post.

What is interesting is that the Court also considered the contention that (whatever be the true position on equivalence of the two posts) the transfer was also illegal because the State Government did not apply its mind to the question of equivalence. The Court in fact agreed with this contention, but refused to give relief to the Petitioner. The Court found (para 84):

… the State Government did not apply its mind and objectively determine the equivalence of the post of Officer on Special Duty… There was thus no compliance with the requirement of Rule 9…

If that were so, one would have thought that the Court would then go on to hold that this non-application of mind to relevant materials is arbitrary. Yet, the Court held:

But we cannot in this petition under Article 32 give relief to the petitioner by sinking down his appointment to the post of Officer on Special Duty… mere violation of Rule 9… does not involve infringement of any fundamental right…

 

 It would seem, then, that the State Government was under a specific duty in terms of the relevant Rules to apply its mind and objectively determine the equivalence of the posts. The Court found that the State did not in fact apply its mind. Yet, this non-application of mind did not rise to the threshold of an Article 14 violation: that is why “in this petition under Article 32”, relief could not be granted to the Petitioner. Thus, non-application of mind – which may well amount to ‘arbitrariness’ in an administrative law sense – would not itself amount to a violation of ‘arbitrariness’ in the Article 14 sense.

The next essays in this series will consider the judgments of the Supreme Court applying the arbitrariness doctrine in adjudicating on the constitutional validity of legislation. It will be suggested that the best understanding of the doctrine is that “manifest arbitrariness” is simply shorthand to expand on the traditional two questions of the classification test. As Prof. Khaitan had argued, “Article 14 has become a victim of the weak ‘old’ doctrine and the over-the-top ‘new’ doctrine. The former needs expansion and substantiation, the latter relegation to its rightful place as a standard of administrative review…” That is indeed what has happened: “manifest arbitrariness” is just the label given to the “expansion and substantiation”.

Coronavirus and the Constitution – XXII: The State Disaster Risk Management Fund and the Principle of Equal Distribution – A Response [Guest Post]

[This is a Guest Post by Tejas Popat.]


In a previous post, Devesh argued that the recommendations of the 15th Finance Commission [‘Commission’] violate the principle of equality. This infraction, he states, occurs due to the use of an arbitrary formula and its results. Though Devesh does not make it explicit, the inevitable consequence would be declaring these recommendations unconstitutional or, in the alternative, redistributing funds to take care of the resulting inequality. In fact, he alludes to the latter while providing a different means of enforcing the same i.e. Article 282. I only seek to disagree with Devesh on the scope of judicial review he envisages. My thought on the issue are as follows.

Working of the Commission

The duties of the Commission have been outlined in Article 280(3). Sub-clause (d) is of relevance here. It states that the Commission shall also make recommendations on “any other matter referred to the Commission by the President in the interests of sound finance.” This enables the President to circumscribe the scope of the Commission’s recommendations through the Terms of Reference [‘ToR’]. Based on these ToR, the Commission prepares a report containing its recommendations which is then laid before the Parliament. Therefore, there arise two areas of challenge. First, the recommendations of the Commission i.e. the outcome and second, the ToR i.e. the process.

Judicial Review of Recommendations

Let us first consider the recommendations. It is highly unlikely for the recommendations themselves to be the subject matter of judicial review. This is primarily because, as Article 281 states, the recommendations are only that – recommendations. They are not binding. Therefore, the question of judicial review does not arise. However, an unreasonable application of these recommendations can invite judicial review. An order which resorts to those recommendations becomes the subject matter of challenge and not the recommendations themselves.

This is evident in the COVID – 19 crisis. As was reported, the allocation under SDRMF by the Ministry of Home Affairs [‘MHA’] was on the basis of the recommendations of the 15th Commission. The Commission prepared a Disaster Risk Index for each state devised on the basis of first, the risk of a hazard and second, the vulnerability of each state (¶1-5, Annex 6.2 of the Commission’s Report). The catch here is that the ratio was primarily based on only four hazards, i.e floods, draughts, cyclones and earthquakes (¶5, Annex 6.2). Significantly, the Commission admits that, “due to an absence of a disaster database at the national level, developing a risk index of greater complexity and accuracy has been found to be difficult.” The Commission itself sounded abundant caution before making these recommendations.

I do not question the methodology of the Commission or its approach. The problem, in my opinion, lies in order of the MHA comparing apples to oranges i.e. using a formula devised for completely different set of disasters (in nature and magnitude) and blindly transporting it to the to COVID – 19 pandemic. As is analysed here, the formula was simply a misfit for the current crisis.

In such a situation, the order of the MHA which provided for such devolution blindly following the Commission’s recommendations ought to be challenged. Such executive orders ought to follow the administrative law standard of Wednesbury unreasonableness. They ought to take into account relevant considerations and exclude irrelevant considerations. Therefore, the MHA order on fund devolution, if judicially reviewed may fail this test.

Significance of Terms of Reference and Judicial Review

ToRs in my opinion can be challenged on the ground that they are contrary to Article 280(3)(d). Before dwelling on how the ToR may violate Article 280, it is necessary to understand why the ToRs are significant and the impact that they may have. This can be usefully explained by the example Devesh takes i.e. the ToR of the 15th Commission. Among many which have been detailed by V Bhaskar in his piece, we will explore two of those fault lines in the ToR of the 15th Commission here (these fault lines are explored in legal terms, not in terms of policy).

Devesh states that Kerala could not benefit from the COVID-19 relief fund because of the ratio recommended was faulty (See this piece for the exact cause and effect). That is correct. However, as V Bhaskar and the Report of the 15th Commission 2020-21 itself suggest, the genesis of the problem lies in the ToRs of the 15th Commission. The ToR mandated the Commission to use the 2011 census data when, for over many years, the 1971 census was relied on. Some states complained that the ToR penalized them despite having succeeded in their efforts at population control. This was because comparatively, greater the population, greater is the fund devolution. Therefore, using new data where certain states lowered their population since 1971 would obviously create inequities. The Commission responded to this in its Report in ¶3.19 as follows:

Para 8 of this Commission’s ToR specifies that “the Commission shall use the population data of 2011 while making recommendations.” Our immediate predecessor, the FC-XIV, had expressed the view that though the use of dated population data is unfair, it is bound by its ToR. This Commission is of the view that fiscal equalisation being recommended by it is for the present needs of the States and this is best represented by the latest census data. Given the specific ToR to use 2011 population data, there is no further choice for this Commission.

This mandate to use the census from 2011 was the first fault-line. The second comes in the phrasing of the ToR. V Bhaskar notes that the ToRs of the 15th Commission disabled it from employing need-based assistance as a criterion in determining the ratio of devolution. He states:

Clause 3(b) of Article 280 of the Constitution is usually merged with part of Article 275 (1) and included in the ToR of a finance commission. The ToRs of the last 12 finance commissions over the past 60 sixty years did so. The words “[state] which are in need of assistance,” however, do not find place in the ToR of the XV-FC.

Again, the ToR handicapped the Commission from applying any mode of devolution, which included need-based devolution. Once the Commission is bound by the ToR, such mandates create severe difficulties in the functioning of the Commission. In any case, one conclusion is inescapable – the ToR has direct causal link with the recommendations of the Commission. This is primarily because the ToRs are binding and therefore, dictate the manner in which devolution takes place.

Judicial Review of ToR

 This brings me to the next aspect – the scope of judicial review of ToRs. Before turning to the scope of judicial review, it is necessary to understand the place of the Commission in the constitutional scheme.

The Commission is an independent body intended to advise the President, and through him the Parliament, on matters of fiscal policy. Article 280 does not allow any superintendence by the President in matters of the Commission. It merely allows the President to ask for recommendations on issues. This power, as Babasaheb Ambedkar recognized during the Constituent Assembly Debates, was enabling in nature. Without such references he said, the Commission could not function. Therefore, Article 280(3)(d) does not confer power on the President to define the manner of work of the Commission. It only allows him to define the scope of its work. Three other speakers (Shibban Lal Saxena, Hriday Nath Kunzru and Upendra Nath Barman) seemed to suggest that the Finance Commission would be independent in determining the principles on which fund allocation must take place. Such independence is a necessary ingredient for a Finance Commission to stay true to its constitutional intent.

Keeping this in mind, we will now proceed to define the scope of review. Speaking of ToRs in Nair Society’s Case, the Supreme Court remarked,

It is, furthermore, difficult for us to comprehend as to on what basis, while appointing Narendran Commission, in the terms of reference, the State of Kerala could say that the maximum benefit should be given to a particular section of people. In view of the decision of this Court in Rama Krishna Dalmia & Ors. vs. Shri Justice S.R. Tendolkar & Ors., it is no longer res integra that the terms of reference while appointing a commission may be subject to judicial review.

Though in a different context, this absolute proposition is problematic. It makes the ToR as a whole subject to judicial review. In our situation, such an exercise would involve the judiciary adjudicating on matters of fiscal prudence in determining what ought or ought not to be part of the ToR. In my opinion however, what is judicially reviewable is not the terms themselves but, the nature of the terms involved. By this, what is impugned is the competence of the President acting under Article 280(3) to define the Commission’s working beyond “referring matters.” Therefore, when ToRs include mandatory terms limiting or expanding the manner of the Commission’s work, those terms by virtue of their nature, are ultra vires the power of the President under Article 280(3)(d). Conversely, only ToRs which ask for advice (of an inquiring character) or those which nudge the Commission to adopt a course of action (recommendatory character) ought to be constitutionally permissible.

This is necessary for two reasons. The first is to maintain the independence of the Finance Commission and not allow the enabling power in Article 280(3)(d) to be used as means of superintendence over the Commission’s manner of working. Second, is to ensure that the Commission can truly fulfil its constitutional role as a “Fourth Branch Institution”, because, the result (the recommendations) will only be as fair and true to the idea of federalism as the formula (the ToR).

Therefore, the scope of judicial review in case of a ToR of a Finance Commission ought to be limited to testing its vires vis-à-vis the powers vested to the President under Article 280(3)(d).

To illustrate, the change in the ToR of the 15th Commission excluding a need-based devolution as discussed above would be unconstitutional. This is on two counts. First, because Article 280(3)(d) does not allow the President to limit the Commission’s manner of working. Consequently, the ToR is ultra vires the power under Article 280(3)(d). Secondly, because the ToR impinges on the independence of the Commission which is guarded by the scheme of Article 280. The ToR disallows the Commission from referring to the principle of need-based devolution enshrined in Article 275(1). Therefore, it seeks to override the power of the Commission which would have otherwise allowed it to refer to the principle. Such a ToR, which circumscribes the independent functioning of the Commission, ought to be unconstitutional. This rule applies equally to the mandate of using census data. It ought to be left to the prudence of the experts whether the new data ought to be used and if yes, which census data should be employed. As is evident in the extract quoted above, the 14th Commission disagreed with the ToR but could not proceed to make independent recommendations. Therefore, if the Commission ought to be a truly independent body, the nature of ToRs need to be reassessed.

As Article 280(3)(d) states, the principles of sound finance and its contours are the expertise of the Commission. ToRs which attempt to invert this scheme to suggest the modes and manner of achieving sound finance are a severe infraction of the constitutional framework.


  • The author thanks Prof. Agnidipto Tarafder, Mahima Cholera, Rishabh Mohnot and Aryan Agarwal for their comments on this piece.

Guest Post: Hindustan Constructions – Another Instance of the Failings of Manifest Arbitrariness

[This is a Guest Post by Dhruva Gandhi and Sahil Raveen.]


Last year in Hindustan Construction Company Limited v Union of India (“Hindustan Construction”), the Supreme Court of India delivered a widely welcomed decision in so far as arbitral proceedings in India were concerned. Once an award is passed by an arbitral tribunal under the Arbitration and Conciliation Act, 1996 (“Act”), it can be challenged by any aggrieved party under Section 34 of the Act before a principal civil court having jurisdiction vis-à-vis the seat of arbitral proceedings. The award is executed as per Section 36 of the Act as if it were a decree of a court. For nearly two decades, there has been confusion prevailing with respect to whether the mere filing of an application under Section 34 amounts to an automatic stay of the execution proceedings.

In Hindustan Construction, the Supreme Court clarified this proposition. It said that there mere filing of a Section 34 application does not lead to a stay on execution. However, in the process, it struck down two statutory provisions using the doctrine of ‘manifest arbitrariness’. In this post, we critique the application of this doctrine. Last year, commenting on the IBC decision in Committee of Creditors in Essar v Satish Kumar Gupta, we had remarked how ‘manifest arbitrariness’ is a powerful tool and could lead the Judiciary into unchartered territory. In this post, we show how in Hindustan Construction, the Court has effectively substituted the Legislature’s preferences with its own under the garb of this doctrine.

Section 36 and the conundrum of automatic stay on enforcement of arbitral awards

Section 36 of the Act, prior to the Arbitration and Conciliation (Amendment) Act, 2015 (“2015 Amendment”) said,

36. Enforcement-Where the time for making an application to set aside the arbitral award under Section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were decree of the Court.

The Supreme Court in National Aluminum Company Ltd. (NALCO) v. Pressteel & Fabrications (P) Ltd. and Anr (“NALCO”) interpreted Section 36 to mean that the moment an application challenging an arbitral award is filed under Section 34 of the Act, there will be an automatic stay on the execution of the award. In Fiza Developers and Inter-trade Private Limited v. AMCI (India) Private Limited and Anr, (“Fiza Developers”), the Supreme Court reiterated this position. This position was undesirable for an award holder because an award debtor simply had to lodge an application to evade payment/compliance under the award. With the pendency in Indian legal system, it meant that an award debtor could hold up execution for at least a few years.

Subsequently, by the 2015 Amendment, the Legislature amended Section 36 of the Act to read,

36. (1) Where the time for making an application to set aside the arbitral award under section 34 has expired, then, subject to the provisions of sub-section (2), such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner as if it were a decree of the court.

(2) Where an application to set aside the arbitral award has been filed in the Court under section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of sub-section (3), on a separate application made for that purpose.

(3) Upon filing of an application under sub-section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing:

Provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908.

Therefore, the 2015 Amendment clarified in no uncertain terms that the mere filing of a Section 34 application would not lead to an automatic stay on execution.

What is crucial for our purposes though, is Section 26 of the 2015 Amendment. Section 26 said,

26. Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act.

While Section 36 was amended to usher in much needed clarity, Section 26 of the 2015 Amendment led to a confusion of its own. It was unclear whether or not Section 26 implied that the amended Section 36 would also apply to pending court proceedings that had arisen out of arbitrations initiated before 23.10.2015 (the date of enactment of the 2015 Amendment).

Different High Courts offered conflicting opinions. Finally, the Supreme Court in Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd. (“BCCI”) said that the amendments to Section 36 would apply to pending court proceedings, even if they arose out of arbitrations initiated before 23.10.2015. It said that Section 36 was procedural in nature and therefore, amendments made to it could be applied retrospectively. However, the rest of the 2015 Amendment would apply prospectively.

Notably, in our opinion, (even so far as Section 36 of the Act was concerned) Section 26 could equally fairly have been interpreted to apply only to arbitrations commenced after 23.10.2015 and court proceedings arising thereof. The text of the statute allowed for a literal interpretation of that nature.

Thereafter, the Legislature enacted the Arbitration and Conciliation (Amendment) Act, 2019 (“2019 Arbitration”) and further introduced Section 87 in the Act. Section 87 replaced Section 26 of the 2015 Amendment, which was also deleted. Section 87 said,

87. Unless the parties otherwise agree, the amendments made to this Act by the Arbitration and Conciliation (Amendment) Act, 2015 shall—

(a) not apply to––

(i) arbitral proceedings commenced before the commencement of the Arbitration and Conciliation (Amendment) Act, 2015;

(ii) court proceedings arising out of or in relation to such arbitral proceedings irrespective of whether such court proceedings are commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015;

(b) apply only to arbitral proceedings commenced on or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 and to court proceedings arising out of or in relation to such arbitral proceedings.

Evidently then, the Legislature differed with the view espoused in BCCI and sought to take away the basis for that decision.

Constitutional Challenge to Section 87 of the 2019 Amendment

In Hindustan Construction, the constitutionality of Section 87 was challenged. The Supreme Court in an opinion delivered by Nariman J. upheld the constitutionality of the section in so far as it took away the basis for a previous Apex Court decision. However, it struck down the provision for being manifestly arbitrary and thus, in breach of Article 14 of the Constitution of India.

What piques our interest in this post are the reasons offered by Nariman J. to hold Section 87 to be manifestly arbitrary. They were,

  • The 2019 Amendment was based on a Report by the Srikrishna Committee. This Committee had said that there were conflicting High Court decisions on Section 26 of the 2015 Amendment and there was a need to clarify the position. However, this Report was delivered in 2017 whereas the BCCI judgement was delivered in 2018. Therefore, according to Nariman J., the Legislature ought not to have relied on this Report once the Supreme Court had decided the issue.
  • The Report opined that to make provisions of the 2015 Amendment applicable retrospectively may create confusion and uncertainty in that parties may have to be heard afresh. According to Nariman J. there was little substance to this observation as fresh applications for lifting of stay could be decided forthwith.
  • The benefits of Order XLI, Rule 5 of the Civil Procedure Code were available in case of an appeal from a decree but not in case of a challenge to an arbitral award under Section 34 of the Act. Order XLI, Rule 5 says that there shall be no automatic stay on proceedings under a decree merely on filing of an appeal. Section 34 of the Act though, is not an appeal.
  • Section 87 does not consider implications under the Insolvency and Bankruptcy Code, 2016. Award holders unable to recover operational debts under an award may themselves have to bear the brunt of an insolvency application from creditors downstream. Therefore, an automatic stay on the execution of an arbitral award would create unwarranted economic hardship.

In our opinion, none of these reasons hold much merit and we shall deal with them in seriatim.

While the Statement of Objects and Reasons of the Arbitration and Conciliation (Amendment) Bill, 2019 does refer to the Srikrishna Committee Report, it primarily does so in the context of institutional arbitration. On Section 87, it simply says that the Legislature intends to clarify the manner in which Section 26 of the 2015 Amendment would apply. Moreover, the tools of statutory interpretation lead us to imply that the Legislature would be presumed to be aware of the BCCI judgement and simply wished to remove a prop of that decision.

Moving on, the observation of the Srikrishna Committee too was not entirely baseless. In some cases where the Section 34 application was at an advanced stage, the court would now have to consider whether or not to issue a stay on the award under Section 36. However, the decision which a court would actually make is whether or not to lift the stay already in place. Considerations that play on a judge’s mind when lifting a stay are quite different from the ones for the issuance of a stay. Even the mere pendency of a Section 34 application would be a consideration. Therefore, there was both a rational and a plausible basis for the Committee to say that retrospective operation of Section 36 of the Act could potentially lead to inconsistent outcomes.

With respect to the point that no automatic stay operates in case of civil decrees, the Legislature was entitled to create different regimes for arbitral awards as opposed to a decree of a court and then to change the regime with the 2015 Amendment. If at all, one could consider whether this met the twin tests of ‘intelligible differentia’ and ‘rational nexus’ under Article 14. These tests though find no mention in the Supreme Court’s deliberation.

Lastly, the implications under insolvency law that Nariman J. mentions are not unique. It is commonplace to see companies and individuals be rendered insolvent owing to forward payments not having been cleared. Courts expect debtors to factor such recoveries into their transactions. While this is also a point to be dealt with by insolvency law, there is no reasoning offered to show how a one-off economic hardship may lead to a violation of the ‘Right to Equality’ under Article 14 of the Constitution.

Therefore, in our opinion, none of the reasons offered to say that Section 87 is manifestly arbitrary really pass the muster.

The real reason to employ ‘Manifest Arbitrariness’

More than the reasons, what is noteworthy is the language employed by the Court. In our opinion, it is the language which seems to be indicative of the unspoken premise of the decision.

To refer to the Srikrishna Committee Report (without at all referring to this Court’s judgement) even after the judgement has pointed out the pitfalls of following such provision, would render Section 87 and the deletion of Section 26 of the 2015 Amendment Act manifestly arbitration, having been enacted unreasonably without adequate determining principle and contrary to the public interest sought to be subserved by the Arbitration Act, 1996 and the 2015 Amendment Act….

 …. the anomaly, therefore, of Order XLI Rule 5 of the CPC applying in the case of full-blown appeals, and not being applicable by reason of Section 36 of the Arbitration Act, 1996…., is itself a circumstance which militates against the enactment of Section 87, placing the amendments made in the 2015 Amendment Act, in particular Section 36, on a backburner. For this reason also, Section 87 must be struck down as manifestly arbitrary under Article 14….

The retrospective resurrection of an automatic stay not only turns the clock backwards contrary to the object of the Arbitration Act, 1996 and the 2015 Amendment Act, but also results in payments already made under the amended Section 36 to award-holders in a situation of no-stay or conditional-stay now being reversed.” (emphasis supplied)

 

There is a distinct preference that comes to the fore in the language employed by the Court. The objects of the 2015 Amendment are worthy, those of the 2019 Amendment are not. The former must be prioritised and preferred over the latter. The 2019 Amendment to the extent that it militates against the 2015 Amendment must be reversed.

However, this cannot be the basis to strike down a provision of law as unconstitutional. A provision cannot be held unconstitutional only because it purportedly reversed the clock on an earlier amendment. During the evolution of the doctrine of ‘manifest arbitrariness’ one of the objections put forth before the Supreme Court was that it would simply result in a replacement of policy choices of the Legislature with those of the Judiciary. The decision in Hindustan Constructions is a prime example of these fears coming to life. With time, what may happen is that the outcome of a case may even boil down to the court in question. Some judges may agree with the policy preferences of the Legislatures, others may not. The doctrine of ‘manifest arbitrariness’ thus carries a lurking danger of being arbitrary. .

Conclusion

Like in Essar, in Hindustan Construction too, in our opinion, Nariman J. could have arrived at the same conclusion through alternate means.

In Hindustan Construction, Nariman J. held both NALCO and Fiza Developers to be per incuriam. It is now a settled position [(1988 2 SCC 602, Paras 40, 183] that once a decision has been held to be per incuriam, it loses precedent value. As a consequence, the interpretation proposed by NALCO and Fiza Developers was never the law. Therefore, Nariman J. could have stated that there has never been an automatic stay of execution proceedings on the filing of a Section 34 application in India. This has always been the law and there has been no change in the interpretation of Section 36. After that, the 2015 Amendment in so far as Section 36 was concerned would have become merely declaratory e- clarifying the position of law by means of abundant caution. Extending that logic, Section 87 would not have to be applied to Section 36 at all because there would be no question of its retrospective operation. Section 87 only clarified when and how the other amendments introduced by the 2015 Amendment ought to apply.

It is our opinion that laws must not be struck down as unconstitutional unhesitatingly, especially when there are alternatives available. Although slightly unconventional, Nariman J. could have explored this route of interpretation to arrive at the same conclusion and thereby, minimised the use of ‘manifest arbitrariness’, the increased usage of which is matter grave concern.

Guest Post: The Supreme Court’s IBC Judgment: A Rejoinder

[Editorial Note: Justice is an indivisible concept. We cannot, therefore, discuss contemporary Supreme Court judgments without also acknowledging the Court’s failure – at an institutional level – to do justice in the case involving sexual harassment allegations against a former Chief Justice. This editorial caveat will remain in place for all future posts on this blog dealing with the Supreme Court, until there is a material change in circumstances.]


[This post, by Dhruva Gandhi and Sahil Raveen, responds to Arti Gupta’s Reply, on the issue of the Supreme Court’s IBC judgment.]


In her response to our blog post, Arti makes a valid point that when considered together, the timelines under the Insolvency and Bankruptcy Code, 2016 (“the Code”) and the Competition Act, 2002 (“CA”) could lead to a situation where the time stipulated in Section 12 of the Code is construed as being ‘irrational’. In fact, the conundrum that she mentions was spoken of even at the time the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 was passed. (See here). [This conundrum though was not before the court in Essar. It does not feature in the discussion either].

However, the discourse around the time of the Amendment also suggested that this was an intentional and calculated move made by the Union Parliament. (See also: The Notes on Clauses to the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2018) It seems that Parliament consciously wanted the Resolution Professional acting under the Code and the Competition Commission of India to complete all the necessary formalities within a time frame of 330 days. Parliament’s decision can be said to have been motivated one of two considerations. One, could have been that most of the combinations under Sections 5 and 6 of the CA had till then not needed to enter Phase II at all. They had been either resolved or approved within thirty days of notification. Two, in light of the urgent need to revive stressed assets, Parliament wanted the Competition Commission to clear combinations emerging out of CIRPs on a ‘fast-track’ basis. (See here) If the 210 days provided to the Competition Commission under the CA were also excluded under the IBC, CIRP would become a two-year long cumbersome process. One can only wonder if the Code would have been less of a success then as compared to what it is now.

Further, Arti’s argument too does not make out a case for the need to invoke a constitutional doctrine. As mentioned by us previously as well, a potential economic hardship arising out of a one-off scenario ought not by itself to make the law manifestly arbitrary. If necessary, a combined reading of Section 31 of the CA and Section 12 of the Code could have been undertaken to read the timeline as being ‘non-mandatory’. Tools of statutory interpretation would have sufficed for the exercise. There was no need to resort to a constitutional doctrine. The use of the doctrine of ‘manifest arbitrariness’ was even less called for because this was not a situation where no rationale could be gleaned from the statute.

On the other hand, this intersection of the CA and the Code may only add to the critique that Nariman J. brushed aside in Sharaya Bano. The Legislature has made a conscious policy decision. To hold it unconstitutional because the interaction of two statutes leads to a possible hardship (and in this case, one that may well have been foreseen by Parliament) does entail substituting the legislative wisdom with a judicial one. Our point remains that there is a need to maintain a circumspect attitude when it comes to invoking ‘manifest arbitrariness’.

Guest Post: The Supreme Court’s IBC Judgment and a Comparative Approach to Justice

[Editorial Note: Justice is an indivisible concept. We cannot, therefore, discuss contemporary Supreme Court judgments without also acknowledging the Court’s failure – at an institutional level – to do justice in the case involving sexual harassment allegations against a former Chief Justice. This editorial caveat will remain in place for all future posts on this blog dealing with the Supreme Court, until there is a material change in circumstances.]


[This is a guest post by Arti Gupta.]


In a previous post, Dhruva Gandhi and Sahil Raveen analyzed the invocation of the doctrine of manifest arbitrariness with respect to Section 12 of the Insolvency and Bankruptcy Code, 2016 (‘IBC’) in the case of Committee of Creditors of Essar Steel v. Satish Kumar Gupta. Out of the three broad arguments put forward by Gandhi and Raveen, I shall be responding primarily to the third one which says that there was little basis for the court to read down ‘mandatorily’ from the proviso to S. 12 on grounds of it being ‘manifestly arbitrary’. The duo relies on some precedents to reiterate that a statutory provision would be manifestly arbitrary if it “lacked a clear determinative principle or encapsulated a capricious or irrational measure”.

S. 12, as rightly pointed out, has an underlying determinative principle, which is to ensure a time-bound resolution of a corporate debtor under IBC. However, a pertinent question I want to raise is whether the Section’s fixing of the time-limit to this specific number of three hundred and thirty days, mandatorily binding us to effect the resolution of a corporate debtor within it, would amount to an irrational measure. The answer might be in the affirmative when we look at corporate insolvency resolution process (‘CIRP’) not simply as an application of only IBC, but as an application of a matrix of different statutes. It is one such matrix, created by the intersection of IBC and Competition Act, 2002, which I am concerned with.

Role of the Competition Commission of India in CIRP

The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, inserted Section 31(4) in IBC, the proviso to which stipulates that if a resolution plan envisages a ‘combination’, as defined under Section 5 of Competition Act, approval of the committee of creditors (‘CoC’) has to be obtained after obtaining the approval of the Competition Commission of India (‘CCI’). Under Section 6 of the Competition Act, the obligation to notify the CCI of the potential combination is triggered when a ‘document’ is executed in favour of the combination. The dilemma, then, is over the meaning of the word ‘document’. In some earlier decisions, the Courts have interpreted the term to mean either of the two things- the submission of a resolution plan by a resolution application, or the grant of approval of the plan by CoC. With the addition of S. 31(4), the submission of the resolution plan has to be the ‘document’ in contemplation because approval by CoC has to come after CCI’s approval and, hence, cannot be the document triggering the CCI approval.

A combined reading of Sections 16 to 22 of IBC shows that even before the submission of resolution plans by resolution applicants, the CIRP can validly take up to fifty one days out of the stipulated period of three hundred and thirty days. Further, after the submission of the resolution plans under S. 6 of the Competition Act, the resolution applicants can take up to thirty days to give a notice to CCI. After receiving notice, the CCI, under S. 31 of Competition Act, can take up to two hundred and seventy days (when it recommends modifications) to grant approval to the potential combination transaction. Therefore, from the insolvency commencement date till the grant of approval by CCI, the CIRP can statutorily extend to beyond three hundred and thirty days. Under such a situation, by the end of the deadline of three hundred and thirty days, no resolution plan has been received by the Adjudicating Authority (‘AA’). And as Gandhi and Raveen’s harmonious construction of Sections 12 and 33 itself shows, automatic liquidation of the corporate debtor will ensue when AA receives no plan.

Comparative v. Transcendental

One anticipated counter to this line of reasoning is that what is being taken into account here is the maximum possible time that can be taken up till CCI grants its approval, and that it might be effected much before the deadline, leaving sufficient time for AA to approve of one resolution plan. Another response has been that retaining the word ‘mandatorily’ can have the effect of coercing CCI into granting a quick approval. However, as Ronald Dworkin would have argued, such counters overlook the primary distinction between what may happen and what will happen. If a right under Article 19(1)(g) can be abridged in the face of speculation or some speculative benefit, then it is equivalent to granting no right at all.

Enough opinions have also been expressed over amending S. 12- either by putting a revised outer cap (as suggested by Gandhi and Raveen), or by excluding the time consumed by CCI from the maximum permissible time for CIRP. Such an amendment, it is argued, would address the inconsistencies between the two statutes, prevent AA from taking its own sweet time and everybody would go home happy. Yet as Amartya Sen has said elsewhere, “…if we are trying to choose between a Picasso and a Dali, it is of no help to invoke a diagnosis (even if such a transcendental diagnosis could be made) that the ideal picture in the world is the Mona Lisa”. Drawing further on that analogy, if Nariman J. can only choose between retaining ‘mandatorily’ or striking it down (an amendment is a prerogative of the legislature), then he can only pick one of them even if both are imperfect solutions in themselves. This is where we take the comparative rather than the transcendental route, to ask how justice would be advanced instead of asking what a perfectly just course of action would be. So, here is the choice- between considering the time-period of three hundred and thirty days as an irrational measure, which fails to take into account the discrepancies between two statutes, and retaining the term ‘mandatorily’ on the speculation that the statutory authority might not utilize the whole of the statutorily permissible time. To say the least, I am glad we did not choose the latter.