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.

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”.

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 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.

Guest Post: The Supreme Court’s IBC Judgment and the Continuing Problems with “Manifest Arbitrariness”

[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 Dhruva Gandhi and Sahil Raveen, advocates at the Bombay and Delhi High Courts respectively.]


Last month, the Supreme Court delivered a much-awaited opinion in Committee of Creditors of Essar Steel v Satish Kumar Gupta (“Essar”). While clarifying the law on several aspects of the Insolvency & Bankruptcy Code, 2016 (“Code”), the Supreme Court held that a mandatory time-period of 330 days as fixed under the Code for completion of the Corporate Insolvency Resolution Process (“CIRP”) was manifestly arbitrary. While the decision on this point may be welcomed by several practitioners frequenting the National Company Law Tribunals, it serves as a prime example of an instance where there was little basis to take recourse to constitutional doctrine. It is also a case that makes us wonder about the unchartered territory that ‘manifest arbitrariness’ as a doctrine may lead us into and about the need to circumscribe its application.

Structure of the Code

The Code was enacted by Parliament to provide a consolidated scheme for the resolution of insolvency of corporate persons, partnerships and individuals (See: Statement of Objects & Reasons).

Under the Code, an application for the initiation of proceedings of insolvency resolution can be filed by a financial creditor (Section 7), an operational creditor (Section 9) or by the indebted company itself (Section 10). Once the Adjudicating Authority satisfies itself that a debt is owed by the corporate entity; the Adjudicating Authority admits the application and declares a moratorium on the ‘Corporate Debtor’. Thereafter, a Resolution Professional (“RP”) is appointed who takes over the management of Corporate Debtor and keep it as a going concern. The RP also constitutes a Committee of Creditors (“COC”), made up of the financial creditors of the Corporate Debtor.

Subsequently, the RP invites resolution plans (“plans”) from interested resolution applicants who may want to revive, restructure or simply take over the Corporate Debtor. In view of the fact that creditors now have debts to the tune of hundreds of crores lined up and that resolution applicants would want the process to be efficacious for it to make commercial sense, the Code and the appended Regulations provide detailed timelines for each step of the process.

On the receipt of various plans, the COC votes on each one of them and the plan receiving more than 66% of the votes of the financial creditors is accepted. The accepted plan is then placed by the RP before the Adjudicating Authority (“AA”), which is tasked with a confined mandate of ensuring that no provision of the Code has been breached and that the plan is not motivated by extraneous or mala fide considerations. In absence of any breach, the AA approves the resolution plan and lifts the moratorium, allowing the successful resolution applicant to revive the corporate debtor. As per the Code, the CIRP) is to be completed within a period of 180 days with an outer limit of 330 days. It is this timeline that has been held by Nariman J. to be manifestly arbitrary.

However, in our view, there was no need though for him to take recourse to this constitutional doctrine at all. The concerns about the strictness of the timeline could have been addressed by the ordinary tools of statutory interpretation.

Directory v Mandatory

Section 12 of the Code that speaks about the timeline of the CIRP says,

“(1) Subject to sub-section (2), the corporate insolvency resolution process shall be completed within a period of one hundred and eighty days from the date of admission of the application to initiate such process.

(2) The resolution professional shall file an application to the Adjudicating Authority to extend the period of the corporate insolvency resolution process beyond one hundred and eighty days, if instructed to do so by a resolution passed at a meeting of the committee of creditors by a vote of [sixty-six] per cent. of the voting shares.

(3) On receipt of an application under sub-section (2), if the Adjudicating Authority is satisfied that the subject matter of the case is such that corporate insolvency resolution process cannot be completed within one hundred and eighty days, it may by order extend the duration of such process beyond one hundred and eighty days by such further period as it thinks fit, but not exceeding ninety days:

Provided that any extension of the period of corporate insolvency resolution process under this section shall not be granted more than once:

Provided further that the corporate insolvency resolution process shall mandatorily be completed within a period of three hundred and thirty days from the insolvency commencement date, including any extension of the period of corporate insolvency resolution process granted under this section and the time taken in legal proceedings in relation to such resolution process of the corporate debtor:”

While there is no definition of CIRP, the structure of the Code makes it seem that the process logically comes to an end on the approval of the successful plan by the AA. However, nowhere in the Code do we find any mention of the consequences of the non-approval of the Resolution Plan by the Adjudicating Authority within the time-frame of 330 days. In the absence of any consequences for the violation of a mandatory clause, the Supreme Court could have simply read the clause to be directory in nature. It is now a well settled proposition of law that a clause which is mandatorily worded is in fact mandatory only if there are certain consequences listed for the breach of that clause. Therefore, this issue could have been resolved simply by resorting to a rule of statutory interpretation.

Harmonious Construction of Provisions

It could also have been resolved by a harmonious construction of Section 12 with Section 33 of the Code. Section 33 lists out the instances when the liquidation of a corporate entity may be initiated. It says,

“(1) Where the Adjudicating Authority, –

(a) before the expiry of the insolvency resolution process period or the maximum period permitted for completion of the corporate insolvency resolution process under section 12 or the fast track corporate insolvency resolution process under section 56, as the case may be, does not receive a resolution plan under sub-section (6) of section 30; or

(b) rejects the resolution plan under section 31 for the non-compliance of the requirements specified therein, it shall –

(i) pass an order requiring the corporate debtor to be liquidated in the manner as laid down in this Chapter;

(ii) issue a public announcement stating that the corporate debtor is in liquidation; and

(iii) require such order to be sent to the authority with which the corporate debtor is registered.” (emphasis supplied)

A worry with the non-approval of a Resolution Plan within 330 days has been that the corporate entity is then sent into liquidation, a consequence that may not lead to a maximisation of the assets of that entity and may even truncate what the financial creditors and workers would receive. It is definitely a consequence that the AA would want to avoid unless absolutely necessary. However, Section 33 makes it clear that liquidation would not automatically ensue on a mere non-approval of the plan within the 330 days’ time period. Liquidation is the outcome only when either (i) no plan whatsoever is received by the Adjudicating Authority or (ii) the plan received is rejected.

In fact, the joint reading of the second proviso of Section 12 and Section 33(1)(a) suggests that it is only mandatory for the RP to submit a Resolution Plan to the Adjudicating Authority within 330 days. It is not mandatory for the AA to also approve the plan within 330 days.

While the pendency of a plan before the AA could have its own set of commercial consequences, the Legislature seems to have made it quite clear what the scheme ought to be. Based on this construction of Sections 12 and 33 too then, Nariman J. could have resolved the issue. There seems to have been little need to resort to Article 14 of the Constitution.

Little Basis to Say ‘Manifestly Arbitrary’

Leaving aside the fact that this issue could have otherwise been addressed, the use of the doctrine of ‘manifest arbitrariness’ itself is worrisome. To say that the word ‘mandatorily’ in Section 12 shall be read down, Nariman J says (Para 79),

“Given the fact that the time taken in legal proceedings cannot possibly harm a litigant if the Tribunal itself cannot take up the litigant’s case within the requisite period for no fault of the litigant, a provision which mandatorily requires the CIRP to end by a certain date – without any exception thereto – may well be an excessive interference with a litigant’s fundamental right to non-arbitrary treatment under Article 14 and an excessive, arbitrary and therefore unreasonable restriction on a litigant’s fundamental right to carry onbusiness under Article 19(1)(g) of the Constitution of India. This being the case, we would ordinarily have struck down the provision in its entirety. However, that would then throw the baby out with the bathwater, inasmuch as the time taken in legal proceedings is certainly an important factor which causes delay, and which has made previous statutory experiments fail as we have seen from Madras Petrochem (supra). Thus, while leaving the provision otherwise intact, we strike down the word “mandatorily” as being manifestly arbitrary under Article 14 of the Constitution of India and as being an excessive and unreasonable restriction on the litigant’s right to carry on business under Article 19(1)(g) of the Constitution.” (emphasis supplied)

What this means is that in the one-off case where the AA is unable to either approve or reject the resolution plan within the stipulated time period, the corporate debtor shall head into insolvency and this will adversely affect the rights of the litigants and stakeholders. As has already been spelled out, the statutory scheme does not say that a corporate debtor must head into liquidation and therefore, it was unwarranted to use a constitutional doctrine to account for a mechanism not contemplated by statute..

Even if we were to assume for a moment that liquidation did ensue, the use of this doctrine does not meet the very standards prescribed for it either. When enunciating the doctrine in Sharaya Bano v Union of India (“Sharaya Bano”), Nariman J. said that a provision of law would be manifestly arbitrary if it lacked a clear determinative principle or encapsulated a capricious or irrational measure (Para 55). It was this very standard that was followed in Navtej Johar v Union of India (“Navtej”) as well by him (Para 82), by Misra and Khanwilkar JJ.(Paras 238-39) and by Malhotra J (Para 14.9).

On this metric, it can hardly be said that Section 12 of the Code is manifestly arbitrary. A strict time-period was prescribed precisely to avoid the unpleasant situation that creditors found themselves in under previous statutes such as the Sick Industrial Companies (Special Provisions) Act, 1985. Those systems were found to be inefficient and tardy and were hardly of any assistance in pulling the economy out of quagmire of non-performing and stressed assets that it found itself in.

In fact, the Supreme Court itself in various judgements including Arcelor Mittal (India) (P) Ltd. v. Satish Kumar Gupta, Innoventive Industries Ltd. v. ICICI Bank, and Swiss Ribbons (P) Ltd. v. Union of India (“Swiss Ribbons”), has noted the importance of a time bound resolution of corporate debtors to maximize the assets for the stakeholders. In Swiss Ribbons, the court observed,

“27. As is discernible, the Preamble gives an insight into what is sought to be achieved by the Code. The Code is first and foremost, a Code for reorganisation and insolvency resolution of corporate debtors. Unless such reorganisation is effected in a time-bound manner, the value of the assets of such persons will deplete.Therefore, maximisation of value of the assets of such persons so that they are efficiently run as going concerns is another very important objective of the Code.

….

Timely resolution of a corporate debtor who is in the red, by an effective legal framework, would go a long way to support the development of credit markets. Since more investment can be made with funds that have come back into the economy, business then eases up, which leads, overall, to higher economic growth and development of the Indian economy. What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern.

…..

28.

…..

The timelines within which the resolution process is to take place again protects the corporate debtor’s assets from further dilution, and also protects all its creditors and workers by seeing that the resolution process goes through as fast as possible so that another management can, through its entrepreneurial skills, resuscitate the corporate debtor to achieve all these ends.” (emphasis supplied)

Therefore, even without looking at the legislative history or parliamentary debates surrounding the Code and its amendments, the very observations of the Supreme Court suffice to suggest that a clear and determinative principle undercuts Section 12 of the Code. Section 12 can hardly be said to be lacking a determinative principle the way Section 377 of the Indian Penal Code did. It is not capricious or irrational by any means either.

Just because the application of a principle leads to some hardship in a one-off situation, it does not make the entire section manifestly arbitrary. The hardship could well have been accounted for by the Legislature and in some cases, could have been the only feasible option available to it. To cure such hardships that follow from statutory structures using the doctrine of arbitrariness only opens a gateway to substitute legislative choices with judicial wisdom.

In Sharaya Bano, Nariman J. sidelined this criticism by simply saying that our jurisprudence is replete with instances where courts have sat in decision over legislative wisdom {Para 44(3)}. However, this case for one is a good example to show how this criticism could have more depth than what Sharaya Bano attributed to it. The threat of liquidation and the associated minimization in the assets of the corporate debtor could have specifically been devised by Parliament to compel the AA to approve the plan in a time-bound manner.

While he substitution of judicial wisdom for legislative wisdom may be warranted and even welcome in some scenarios where say, fundamental rights, are at stake, doing so without a degree of circumspection may definitely dent the legitimacy of the doctrine in times to come. In fact, this may happen in the present instance itself. Even before the decision in Essar, there have been case where the AA has not approved a plan even after a year of its submission. While Nariman J. says that the time period should only be extended beyond 330 days where the AA has not been able to approve the plan because of its own failings, there is no outer cap on how long this extension can be or what counts as a justifiable basis for the AA. In fact, the Supreme Court would not be able prescribe this either because doing so would effectively add a third proviso to Section 12.

The outcome of Essar has only been that the AAs now have a precedent to fall back on when taking their own sweet time to approve resolution plans. Financial creditors continue to struggle to recover their dues and there are now instances where resolution applicants even want to withdraw their plans because of the tardiness of the system. There is also plenty of data being now emerging which suggests that the Code has not led to the revival of stressed assets in the manner envisaged. In these circumstances, there is plenty to say for the decision of Nariman J. and not the Code resulting in manifestly arbitrary outcomes. ‘Manifest arbitrariness’ is a powerful tool and one that may lead the Judiciary into unchartered territory. Circumspection in its use thus is better exercised sooner rather than later.

Guest Post: Licensing of Internet Broadcasts under the Copyright Act: Key Constitutional Issues

(This is a guest post by Shuchita Goel.)


The statutory licensing scheme provided under Section 31D of the Copyright Act, 1957 (“the Act”) has recently faced a constitutional challenge in the Supreme Court in M/s Lahari Recording Company v Union of India (W.P. (C) 667/2018), as well as the Calcutta High Court in Eskay Video Pvt. Ltd. v Union of India (W.P. 14979 (W)/2016). A similar challenge was previously rejected by the Madras High Court in South Indian Music Companies v Union of India, on certain limited grounds.

Section 31D was introduced into the Act through Section 18 of the Copyright (Amendment) Act, 2012, that came into force on 21 June 2012. It is supplemented by Rules 29 – 31 of the Copyright Rules, 1958 (“the Rules”). The Scheme essentially grants broadcasting organisations the right to communicate to the public, by way of broadcast or performance, a previously published literary or musical work and sound recording, after giving notice of its intent to do so, and upon payment of royalties, to the owner. This notice is given after the process of determining the rate of royalty is completed by the Intellectual Property Appellate Board (“Appellate Board”):

Section 31D: Statutory licence for broadcasting of literary and musical works and sound recording

(1) Any broadcasting organisation desirous of communicating to the public by way of a broadcast or by way of performance of a literary or musical work and sound recording which has already been published may do so subject to the provisions of this section.

(2) The broadcasting organisation shall give prior notice, in such manner as may be prescribed, of its intention to broadcast the work stating the duration and territorial coverage of the broadcast, and shall pay to the owner of rights in each work royalties in the manner and at the rate fixed by the Appellate Board.

(3) The rates of royalty for radio broadcasting shall be different from television broadcasting and the Appellate Board shall fix separate rates for radio broadcasting and television broadcasting.

The Section has been challenged for being ultra vires Articles 14, 19(1)(g), 21, and 300A on the ground that it does not allow for a reciprocal understanding between copyright owners and their licensees. Rather, it allows any broadcasting organisation to unilaterally publish copyright owners’ works without allowing them any say in the matter, thus taking away their incentive to create original works and bear the fruit of their intellect by collecting their ‘IP reward’.

What the challenges seem to have neglected, however, is an associated issue of the constitutionality of an Office Memorandum (“Memorandum”) issued under Section 31D by the Department of Industrial Policy and Promotion (“DIPP”). In this piece, I will be arguing that this Memorandum is issued outside the competence of the DIPP and violates Articles 14 and 19(1)(g) of the Constitution.

The scope of Section 31D seemed to be limited to two modes of broadcasting i.e. radio and television, as they are the only modes of communication mentioned in both the Act and the Rules. However, the DIPP’s Memorandum issued on 5 September 2016 clarifies that “internet broadcasting” and “internet broadcasters” fall within the ambit of Section 31D, as it does not contain a prohibition on either the modes of broadcasting, or classes of broadcasters.

Arrogation of Legislative and Judicial Powers

raptor

The constitutional competence of the DIPP in issuing such a memorandum is questionable. While there is no strict separation of powers doctrine followed in India, it has been held previously to be part of the basic structure of the Constitution in Kesavananda Bharati v State of Kerala. Under Articles 73 and 162 of the Constitution, the Union and state executive authorities, too, may exercise limited functions of legislative interpretation or clarification if the statute enacted by the legislature permits them to make such determinations. Shamnad Basheer has discussed the argument of how an executive agency can give limited statutory interpretations which are necessary for rendering its own functions, and only as provided by the statute. However, the DIPP has neither been granted such authority, nor is such an interpretation necessary to its functioning. The issuance of the Memorandum is quite clearly an act of arrogation of unauthorised legislative power by the DIPP.

It is also an accepted tenet of our constitutional scheme that the power of interpreting statutory instruments lies solely with judicial or quasi-judicial authorities. The power to interpret the provisions of the Copyright Act, 1957 had been given to the Copyright Board, which was held to be a judicial body exercising predominantly judicial functions by the Madras High Court in Shamnad Basheer v. Union of India. It was later merged with the Appellate Board, which has also been held to be a judicial body exercising judicial functions in the same case. Interpreting the Act is therefore, a function of the Appellate Board as a quasi-judicial entity, and any act of interpretation made by the DIPP that extends, not clarifies, the scope of Section 31D is impermissible for want of Constitutional authority.

Arbitrary Executive Action

The arbitrariness doctrine is a well-accepted tenet of determining the scope of Article 14, where it provides a guarantee against arbitrary State action, whether exercised under authority of law or in exercise of executive power without making of law. The Supreme Court, in Om Kumar and Ors. v Union of India, has laid down the grounds to be followed to challenge an administrative action as arbitrary, where the order of the administrator needs to be examined to see if it is ‘rational’ or ‘reasonable’. The basis of inquiry is “whether the administrator has done well in his primary role, whether he has acted illegally or has omitted relevant factors from consideration or has taken irrelevant factors into consideration or whether his view is one which no reasonable person could have taken.”

Section 31D opens with the words “any broadcasting organisation desirous of communicating to the public…” The Memorandum reads “internet broadcasting” into Section 31D by virtue of the definition of “communication to the public” in Section 2(ff) of the Act. Section 2ff includes within its ambit any work or performance being made available to the public by any means of “display or diffusion”, and even goes onto clarify that communication through satellite or cable or other means of simultaneous communication to more than one household or place of residence is included within such definition. The DIPP has taken this language to mean that such communication ought to not be restricted to only television or radio broadcasting, and also includes internet broadcasting.

The opening words of the Section reflect the breadth of view taken by the legislature when it comes to the classes of broadcasters and does not refer to any class in particular. The DIPP, however, stands on shaky ground when it assumes that Section 31D allows for including different modes of broadcasting, and not only the different classes of broadcasters.

The legislature has specifically restricted the scope of Section 31D to radio and television broadcasting given the specific text of the provisions in Section 31D(3), and Rules 29(3), 29(4)(b), 29(4)(g), 29(4)(h) 30, 31(1), 31(5), and 31(6) of the Copyright Rules, 1957 where “radio” and “television” broadcasting are the only modes mentioned specifically with no indications that the language may be broadened to include “internet broadcasting” as well.

Further, if we look at Rules 29(4)(j) and 31(7)(a), the scheme seems to have been made applicable only to programmes that are scheduled to appear “on air” with pre-specified time slots. It is a fact that radio and television broadcasting are media where the time at which particular programs occur depict their relative importance to the channel, and the viewership it brings in. Internet broadcasting does not have the same drawbacks that require viewers to adhere to schedule because they may choose to consume any content at any point of time as per their wishes.

From this, it is apparent that the legislature seems to only have envisaged radio and television broadcasting as the modes of broadcasting that were to qualify for statutory licensing in India. The effect of the Memorandum is to extend the scope of Section 31D to a mode of broadcasting over the internet, when the same is neither reflected expressly in the text of Section 31D, nor supported by any judicial decisions favouring such an interpretation.

The DIPP is also mistaken when it assumes that the modes of broadcasting all have the same rules applicable to them. The Act and the Rules create a clear distinction between different modes of broadcasting (and not classes of broadcasters), reflected in their insistence on delivery of separate notices, fixation of separate royalty rates, and maintenance of separate records and books of accounts for television and radio broadcasting. The arguments of the DIPP assume that all internet broadcasters are bound by a single royalty rate, irrespective of whether they choose to broadcast over the internet, or television, or radio. This would defeat the purpose of the law because a single organisation may be both, for example, a television and an internet broadcaster. It would then be able to follow a lower rate by election, regardless of which mode it broadcasts content over. Considering all this, it is evident that the Memorandum violates Article 14 because it is arbitrary, and does not confine itself to the purview of the law laid down by the legislature.

An Unreasonable Restriction on Article 19(1)(g)

belongtous

Finally, we come to the issue of the rights of content owners under Article 19(1)(g) which includes the right to contract freely while carrying out that business or trade. However, this right may be curtailed under Article 19(6) by reasonable restrictions in public interest. The reasonableness standard has come to be equated with a proportionality analysis by the Supreme Court in Modern Dental College and Research Centre and Ors. v State of Madhya Pradesh, affirmed in Binoy Viswam v. Union of India (popularly referred to as the AADHAR/PAN judgement). The test itself consists of a conjunctive four-part analysis which begins with an enquiry into whether the purpose of imposing that limitation is legitimate. Secondly, it must be established that the measures are rationally connected to fulfilling that purpose. Thirdly, no alternative measures must be available that fulfil the same purpose with a lesser degree of limitation, and finally, the relative importance of achieving the end sought to be fulfilled by the measure ought to be adjudged vis-à-vis the social importance of preventing limitations on Article 19(1)(g).

The Memorandum, being clarificatory of an existing legal position, merely reads the language of 31D in a broad sense, without placing the inclusion of internet broadcasting within the larger objective of the Section itself. To determine if the Memorandum serves a proper purpose, we need to examine the purpose with which Section 31D was enacted as well. The Madras High Court in South Indian Music Companies (supra) discusses this, and justifies it as a limitation on Article 19(1)(g) on the following reasoning:

[Section 31D] provides for a mechanism to deal with the public interest vis-a-vis the private interest. It has been introduced by way of a public policy… It was meant to support the development and growth of private radio broadcasting. The object is also to strike at the monopoly to the detriment of the general public. [Emphasis supplied]

 

The Court thus states that Section 31D was enacted in public interest, with the intent of supporting the growth of private radio and television broadcasting. Radio broadcasting was slowly dying, where copyright owners had no incentive to license their content at low rates, and radio companies did not have the listenership that brought in high advertising revenues to pay adequate royalties to copyright owners. Thus, it was intended to allow radio broadcasters access to a mechanism where they would pay royalty at fair rates set by the IPAB (and not copyright owners) for use of their content.

The logic for television broadcasting is similar. It is pertinent to notice at this point that Section 31D does not include all forms of television broadcasting. It is very limited in scope, permitting only literary, musical and sound recording works to be broadcasted over television. This necessarily excludes visual and cinematic content. The idea was to protect a form of television broadcasting that was dying as well – synchronisation works, where music is played behind a static visual background unrelated to the music itself, and not all forms of television broadcasting. Finally, if we look at the drafting history of Section 31D as well, it was initially introduced in Parliament in 2010 with the intent of protecting only radio broadcasting. However, the final version of the amendment had included limited forms of television broadcasting as well in support of this idea.

Coming back to the Memorandum – is internet broadcasting a medium that requires protection in the public interest such that its inclusion in Section 31D acquires a legitimate purpose? Internet broadcasting is an industry on the ascendant. Out of 1.32 billion people in India, the internet has reached over 500 million in such a short period of time. Internet users are now switching from television to digital streaming services due to ease of access and diversity content they can access on demand at any time they wish. All of this means that copyright owners will retain the incentive to license their work at fairer (or even lower) royalty rates to be put up on internet broadcasting platforms because a wider audience will not only bring in increased royalties, but also wider recognition of their work, something that radio and limited television broadcasting simply cannot achieve. The argument used by the Madras High Court of striking at the copyright monopoly for radio and television broadcasting will not stand when it comes to internet broadcasting.

There, then, seems to be no prima facie public interest involved in protecting internet broadcasting as an industry which is a mode of broadcasting that is both currently flourishing, and is likely to continue doing so, keeping in mind its inherent advantages of ease and convenience of access, lower cost, and choice-based viewership capabilities. The Memorandum ought to fail the first test of proportionality and is an unreasonable restriction on the rights granted in Article 19(1)(g).

Conclusion

It is clear, therefore, that while arguments of the competence of the DIPP in issuing this Memorandum exist, there also exist potential arguments challenging its content as well. The broader effect of this Memorandum until now has been to create massive confusion and multiple challenges to licenses granted for internet broadcasting as no royalty rates have, as yet, been set by the IPAB. While the constitutionality of this Memorandum specifically is not currently under challenge yet, it would be interesting to see it taken up were the Supreme Court to hold Section 31D itself as not being ultra vires the Constitution.

Guest Post: Navtej Johar v Union of India – Key Highlights

(This is a guest post by Dr. Abhinav Chandrachud.)

Much has already been written and said about the recent landmark decision of the Supreme Court in Navtej Singh Johar v. Union of India, where a bench of five judges of the Supreme Court partially struck down Section 377 of the Indian Penal Code (IPC), which made “carnal intercourse against the order of nature” a criminal offence. Four separate judgments were delivered by the court, by Chief Justice Misra (supported by Khanwilkar J), and Justices Nariman, Chandrachud and Malhotra. Though the conclusions arrived at were the same, some of the reasoning was different. For example, Justice Nariman held that there is no presumption of constitutionality for pre-Constitution laws [Nariman J, paragraph 90], Justice Chandrachud rejected [Chandrachud J, paragraph 36] the “sex plus” test laid down in Air India v. Nergesh Mirza, (1981) 4 SCC 335, while the other judges didn’t dwell much on these subjects. This post therefore focuses on some of the key highlights of the reasoning of the majority in the case. All paragraph number references are from the original judgments published on the website of the Supreme Court of India.

What is “natural”?

Section 377 of the IPC bears the heading “unnatural offences” and it penalizes carnal intercourse which is against the order of “nature”. Some of the judges therefore asked themselves what was meant by the word “natural”. Chief Justice Misra and Justice Malhotra held that a person’s sexual orientation itself is natural [Misra CJ, paragraphs 4, 109; Malhotra J, paragraph 13.1]. Relying on scholars like Zaid Al Baset and Shamnad Basheer, Justice Chandrachud wrote that there are shortcomings in the conceptual categories of “natural” and “unnatural”, that the idea of the “natural” was manufactured by a majoritarian suppression of the history of the prevalence of sexual minorities, that merely because something is natural does not mean that it is desirable (e.g., death), and just because something is unnatural (e.g., a heart transplant) doesn’t mean that it ought to be criminal [Chandrachud J, paragraphs 28-29].

Constitutional Morality:

One of the central themes of the court’s decision in Johar is that the aim of the Constitution is to transform society, not to entrench and preserve the pre-existing values of the majority. In other words, though a majority of people in India may be heterosexuals, though the prevalent “social morality” in India might even dictate sexual intercourse only between a man and a woman, it is “constitutional morality” which must prevail [See, Misra CJ, paragraphs 110, 119; Nariman J, paragraphs 80-81; Chandrachud J, paragraphs 3, 24, 141]. Ambedkar himself had said that “our people have yet to learn” the “sentiment” of “constitutional morality” [Chandrachud J, paragraph 141].

In West Virginia State Board of Education v. Barnette, 319 U.S. 624 (1943), Justice Jackson of the U.S. Supreme Court famously wrote, “Compulsory unification of opinion achieves only the unanimity of the graveyard.” In passages reminiscent of these words, the Johar court found: “Any attempt to push and shove a homogeneous, uniform, consistent and a standardised philosophy throughout the society would violate the principle of constitutional morality.” [Misra CJ, paragraph 116]; And: “Democratic as it is, our Constitution does not demand conformity. Nor does it contemplate the mainstreaming of culture. It nurtures dissent as the safety valve for societal conflict. Our ability to recognise others who are different is a sign of our own evolution.” [Chandrachud J, paragraph 5].

The Miniscule Minority:

In Suresh Kumar Koushal v. Naz Foundation, (2014) 1 SCC 1, the Supreme Court had previously upheld Section 377 of the IPC because only “a miniscule fraction of the country’s population”, according to the court, belonged to the LGBTQI community. This argument was rejected by the court in Johar [Misra CJ, paragraphs 115, 120, 169; Nariman J, paragraph 95; Chandrachud J, paragraph 55; Malhotra J, paragraph 19(ii)]. The number of people asserting a fundamental right, said Chief Justice Misra, is “meaningless; like zero on the left side of any number.”

Unreasonable Classification:

Section 377 of the IPC was partially struck down by the court on the ground that it violates the rights to equality, free speech, and life under Articles 14, 19(1)(a) and 21 of the Constitution. Two tests were applied to determine whether the provision fell foul of Article 14 – the old classification test, and the new manifest arbitrariness test.

Under the classification test, a law falls foul of Article 14 if it either classifies people into categories without applying an intelligible differentia, or if the object sought to be achieved by the law doesn’t bear any rational nexus with the intelligible differentia. Applying this test, Chief Justice Misra found that the object of Section 377 (“to protect women and children from being subjected to carnal intercourse”), did not bear a reasonable nexus with the classification of persons into those who have carnal intercourse against the order of nature and those who don’t [Misra CJ, paragraph 237]. Justice Chandrachud, on the other hand, held that it was “difficult to locate any intelligible differentia between indeterminate terms such as ‘natural’ and ‘unnatural’” [Chandrachud J, paragraph 29]. Justice Malhotra held that “Where a legislation discriminates on the basis of an intrinsic and core trait of an individual, it cannot form a reasonable classification based on an intelligible differentia.” [Malhotra J, paragraph 14.3]

Manifest Arbitrariness:

All the judges found that Section 377 was manifestly arbitrary [Misra CJ, paragraph 239, Nariman J, paragraph 82; Chandrachud J, paragraph 29; Malhotra J, paragraph 14.9]. The following were among the reasons given by the court in support of this conclusion: (i) Section 377 does not distinguish between consensual and non-consensual sexual intercourse among competent adults; (ii) it fails to recognize that such sexual intercourse is not harmful to society; (iii) it inflicts a stigma on members of the LGBTQI community; (iv) modern psychiatric studies have shown that members of the LGBTQI community are not persons suffering from mental disorders; (v) Section 377 inflicts life imprisonment, which is disproportionate; (vi) it is rooted in the belief that the sole aim of sexual intercourse is procreation; (vi) it discriminates on the basis of sexual orientation, over which a person has “little or no choice”; (vii) the phrase “carnal intercourse against the order of nature” is too open ended and vague to be in a penal provision; (viii) after the 2013 amendment to the IPC, some consensual sexual acts between heterosexual adults would no longer be considered rape under Section 375, though they would still fall foul of Section 377 [Misra CJ, paragraph 220; Nariman J, paragraph 94; Chandrachud J, paragraph 31 (at pp. 39-41)].

Articles 19(1)(a) and 21:

The court found that Section 377 violates the right of members of the LGBTQI community to dignity, identity, and privacy, all covered under Article 21 of the Constitution [Misra CJ, paragraphs 143, 229; Nariman J, paragraph 83; Chandrachud J, paragraphs 51 (at p. 66), 58; Malhotra J, paragraphs 13.1, 14.5, 16]. Two judges found that it violates the right to health, because the criminalization of homosexual intercourse makes members of the LGBTQI community hesitate to seek medical advice and that they are therefore more susceptible to sexually transmitted diseases [Chandrachud J, paragraphs 76, 83, 84, 87, 92; Malhotra J, paragraph 16.3]. The court also found that Section 377 violates the right to the freedom of expression under Article 19(1)(a) [Misra CJ, paragraphs 245, 247; Malhotra J, paragraph 17].

Partially Struck Down:

However, Section 377 of the IPC has not entirely been struck down. It still covers bestiality and non-consensual intercourse [See: Misra CJ, paragraphs 252, 253 (xvii), Nariman J, paragraph 97; Chandrachud J, paragraphs 7, 156(i)]. Since the court struck down the provision as far as it applies to consenting adults, the provision still presumably applies to consensual sexual intercourse among minors of the same gender. Under Section 375 of the IPC, as amended in 2013, even consensual sexual intercourse among heterosexual minors, if the girl is under 18 years of age, is considered to be rape.

(The writer is an advocate at the Bombay High Court)

“Something of freedom is yet to come”: The significance of the Delhi High Court’s decriminalisation of beggary

Yesterday, Abhinav Sekhri provided an excellent overview of the Delhi High Court’s landmark judgment striking down (most provisions of) the Anti-Beggary Act (Harsh Mander v Union of India). As Sekhri pointed out, the provisions of the Anti-Beggary Act (first enacted by the state of Bombay in 1958, and then extended to twenty states and two union territories) effectively criminalised status through an extraordinarily broad definition of “begging.” They also established a system of “Certified Institutions” that were little better than detention centres.

Sekhri correctly observes that the High Court’s judgment was facilitated by only token opposition from the Delhi government. Perhaps unfortunately, this also appears to have limited its scope. The decision is, ultimately, based on narrow grounds. But perhaps more troublingly, it is also based upon a distinction between “voluntary” and “involuntary” begging that obscures the vicious, colonial logic that underlay the entire family of laws that the Anti-Beggary Act was a late, post-colonial entrant into (such as the Criminal Tribes Act, and various vagrancy statutes). Nonetheless, that does not take away from how important this judgment is. It is, in its own way, as transformative as the first Naz Foundation judgment of the Delhi High Court, and I share Sekhri’s guarded optimism that it can be the starting point for a long-overdue reckoning with some of the worst and most enduring legacies of colonialism in our criminal legal system.

Article 14

The first ground employed by the Court for striking down the law was Article 14. Interestingly, this was based on a concession by the Government. The Government took the stand that the Act did not intent to criminalise involuntary begging (i.e., begging attributable to factors such as poverty). If that was the legislative purpose, however, then the provisions of the Act were irredeemably broad. The five-pronged definition of “begging”, for example, read as follows:

(i) “begging” means—

(a) soliciting or receiving alms in a public place, whether or not under any pretence such as singing, dancing, fortune-telling, performing or offering any article for sale

(b) entering on any private premises for the purpose of soliciting or receiving alms ;

(c) exposing or exhibiting, with the object of obtaining or extorting alms any sore, wound, injury, deformity or disease whether of a human being or animal ;

(d) having no visible means of subsistance and wandering about or remaining in any public place in such condition or manner, as makes it likely that the person doing so exists by soliciting or receiving alms ;

(e) allowing oneself to be used as an exhibit for the purpose of soliciting or receiving alms.

As the High Court correctly noted, the definitional clause made no distinction between “voluntary” and “involuntary” begging, and also brought in homelessness within its ambit (paragraphs 16 – 18). And it is well-settled that an unconstitutional statute cannot be rescued through a promise on the part of the State to implement it fairly. The law, therefore, clearly violated Article 14, and was accordingly struck down by the High Court on grounds of arbitrariness.

I am, however, slightly bemused about why the High Court chose to adopt the more contentious and unsettled “arbitrariness” test under Article 14, in a case where the traditional classification test was so clearly applicable. The over-inclusiveness of the definitional section in a case where the Government had itself conceded the legislative purpose was so patent, that even under the deferential rational review standard, the Act could not have stood.

Article 19(1)(a) 

Sekhri argues that the Court did not go into issues of Article 19(1)(a). That conclusion, however, might be a little too hasty. While there is no fleshed-out Article 19(1)(a) analysis, the Court did not – in paragraph 31 – that “criminalising them [i.e., persons accused of begging]denies them the basic fundamental right to communicate and seek to deal with their plight.” While this does not go as far as stating that criminalising begging is per se contrary to Article 19(1)(a) because it interferes with an expressive activity without justification, it does at least recognise the Article 19(1)(a) interests involved.

Article 21

The Court then found that the summary detention provisions of the Act violated Article 21’s due process guarantee. The Union of India argued that detaining individuals was necessary in order to find out whether they were begging voluntarily or involuntarily. This, as the Court correctly noted, entailed that the police “would be arresting persons who may be subsequently found to have not been begging, thereby, depriving such persons of their liberty without following any process of law.” (paragraph 20)

Furthermore, the Act – as a whole – contravened the more substantive guarantees under Article 21 as well. Criminalising begging – as the Court noted – effectively made individuals liable for the State’s failure to provide the basics of a dignified life (food, shelter, clothing, education) as envisioned by Article 21 (paragraphs 28 – 29). The Court observed:

A move to criminalize [persons accused of begging] will make them invisible without addressing the root cause of the problem. The root cause is poverty, which has many structural reasons: no access to education, social protection, discrimination based on caste and ethnicity, landlessness, physical and mental challenges, and isolation.

The Court concluded by noting that if the State wanted to bring in a law to penalise forced begging, it could do so after conducting appropriate empirical studies.

While the basis of the Court’s judgment was a distinction between compelled and voluntary begging (note that this was because the State itself had conceded that it was only concerned with criminalising “voluntary begging”), this final observation suggests that, ultimately, what the State can legitimately criminalise is a situation where individuals are coerced or forced into begging through organised or unorganised “rackets.” Sekhri correctly worries that the judgment does not go into the question of the limits of the State’s power to criminalise status; however, the concluding observations suggest, at the very least, that the conversation is heading in that direction.

The Unsaid 

This brings us to the silences in the judgment. The most glaring silence relates to the definitional section. Recall that S. 2(1)(a) defines begging as “soliciting or receiving alms in a public place, whether or not under any pretence such as singing, dancing, fortune-telling, performing or offering any article for sale.” S. 2(1)(e) defines it to include “having no visible means of subsistance and wandering about or remaining in any public place in such condition or manner, as makes it likely that the person doing so exists by soliciting or receiving alms.”

At one level, of course, these sub-clauses reveal the classist character of the legislation. The law envisions public places as exclusionary, closed off to those who look poor. It is a sanitised vision of the public sphere, built upon keeping out the undesirables, those who “are not like us.” Indeed, it is the legislative equivalent of shops putting up spikes outside their doors and windows to prevent rough sleeping.

There is, however, a deeper logic running through these provisions, which is specifically visible in the underlined parts. Notice that the definition of “begging” is (consciously made) so broad, that it covers not just an activity (say, “soliciting for alms”), but entire ways of life. What unites these ways of life (singing, dancing, fortune-telling, performing) is their itinerant character. 2(1)(e) makes it clear when it uses the bizarre phrase “wandering about.” This gets to the heart of the phobia driving these laws: the fear of shifting populations whose changing movements and patterns makes them “invisible” to the administrator, and therefore, harder to classify, categorise, control, and (yes) extract tax from.

The “taming” of such individuals, groups, and communities was central to the colonial project, both in India and elsewhere. By associating them with hereditary criminality, the British stigmatised and (virtually) enslaved entire nomadic communities by bringing them within the ambit of the vicious Criminal Tribes Act. The myth of “thuggee” (a word still found in the IPC) was employed to the same end. Through vagrancy laws, the British made it impossible for itinerant lifestyles to remain outside the net of punitive legislation. All of this was driven by the imperative to ensure a “settled” population that could be disciplined and taxed with ease.

It is trite to say that post-colonial legal logic has, more often than not, replicated this model. The laws of the colonial regime have been turned by post-colonial administrators upon their own people. The Criminal Tribes Act was repealed in the 1950s, but (as we have seen) other laws live on: from the Habitual Offenders Act to vagrancy statutes to the Anti-Beggary law to various sections of the IPC. It is this that makes the Delhi High Court judgment so important. Even though these issues are not addressed in the judgment itself (and for good reason, because the State itself abandoned that justification), the striking down of the Anti-Beggary Act is a powerful blow against the enduring shadow of colonialism in our legal regimes. It is now for other courts to take the logic forward.

During oral arguments in the recent Section 377 hearings, Justice Chandrachud made the observation that the Constitution is committed to the value of pluralism: that is, an affirmation that every individual has the right to self-determination when it comes to choosing ways of life, modes of faith and belief, and self-expression. I intend to address this point in a later post, but for now, I want to note that Chandrachud J.’s observation is perhaps more accurately understood as an aspiration for the future rather than an accurate account of our constitutional history. The colonial project was characterised by a homogenising drive that delegitimised plural forms of life, and established hierarchies between them. Our Constitutional era has not entirely transformed this reality. You see signs of it in the text of the Constitution itself, which assimilates Buddhists, Sikhs and Jains within the legal category of Hindus. You see further signs of it in the jurisprudence of the Supreme Court, which has repeatedly denied to dissenting traditions the status of independent religious. And of course, you see it in the web of criminal legislation (whether Section 377 or the anti-beggary laws) that is premised on stigmatising alternate ways of living.

The importance of the Delhi High Court’s judgment lies in how it can force us to reckon with this legacy, which is so deeply intertwined with our legal and constitutional system.

Conclusion

In conclusion, I think it’s important to note that the Delhi High Court elected not to go down the route of far too many constitutional challenges: uphold a clearly unconstitutional law, but issue unenforceable “guidelines” to soften the blow. The rise of PIL and the “good governance” Court has tended to make the judiciary often forget that its primary task is testing legislation for constitutional validity, and striking it down if it fails the test. In its administrative avatar, the Court has too often begun to act like administrators, focusing more on issues of implementation rather than constitutionality. Indeed, when the anti-Beggary Act was itself challenged before the Bombay High Court in 1993, the High Court established a “Committee” to look into the matter! Despite the Committee’s clear recommendation that the Act had to go, nothing happened. This is, of course, symptomatic of a wider issue, and it is truly refreshing to see that the Delhi High Court avoided falling into this trap.

A final observation. A couple of years ago, while inspecting a file in Patiala House, I came across a chargesheet that, while listing an individual’s particulars, listed “Residence: Vagabond.” The incongruity stuck in my mind, a reminder that the law is linguistically incapable of dealing with the range of issues in society, let alone addressing them in any meaningful way. Apart from all else, the High Court’s judgment is also an acknowledgment that you cannot “solve” poverty through arrests, detention centres, and courtrooms. It is a rare example of humility in a legal system that, too often, seems to lay claim to omnipotence.

Guest Post: Delhi HC Decriminalises Begging – An Outlier or the Start of Nationwide Reform?

(This is a guest post by Abhinav Sekhri, cross-posted from The Proof of Guilt blog.)


Within the first decade of India becoming a constitutional republic, the erstwhile State of Bombay passed the Bombay Prevention of Begging Act, 1959 [“anti-begging law”]. This was extended to the national capital in 1960 and has been operational since 1961. Nineteen other states and another Union Territory followed suit, either with their own versions of the law or by extending the Bombay Act as well. Yesterday, a Division Bench of the Delhi High Court decided a 2009 writ petition challenging the constitutionality of several parts of the anti-begging law [Harsh Mander & Anr. v. UOI & Ors., W.P. 10498/2009 decided on August 8, 2018. Hereafter, “Harsh Mander”]. Central to the petition was a challenge to several provisions of the law which criminalised begging. On her last day in office as Acting Chief Justice of the Delhi High Court, Justice Gita Mittal delivered a judgment holding that these 25 provisions criminalising begging were indeed, unconstitutional.

The Crime of Begging and its Punishment

Before going forward, let’s take note of what was being criminalised. Begging. The statute defined it as “having no means of subsistence and wandering about or remaining in any public place in such condition or manner as it makes likely that the person doing so exists by soliciting or receiving alms.” It also defined it as “soliciting or receiving alms in a public place, whether or not under any pretence such as singing, dancing, fortune-telling, performance or offering any article for sale.” [Section 2] What happened to those found begging? They were to be taken off the streets and the law required they be sent to detention centres. Section 6 of the Bombay Act declared that persons found begging for the first time be detained for at least one year in a Certified Institution, which could extend to three years. Second-time offenders faced a mandatory detention period of ten years, with a possible prison sentence.

The state saw the main problem being addressed through the law as one of organised crime – rackets being run by rich people who forced people to beg for a living. The anti-begging laws were driven by a deterrence logic to put an end to these rackets. But, a look at the definition makes it apparent that it covered a very wide category of persons. It did not even need any specific act to invite criminality; dire poverty that was visible and witnessed in public places was enough. Thus, people were made criminals not because of what they did, but for showing the rest of us who they were. No matter: this is where the rehabilitative logic of the anti-begging law came in. Those who were deprived and forced to beg would be helped by the Certified Institutions. These Institutions were not prisons, but places offering vocational training to help make persons capable of providing for themselves without begging.

As with most laws, the main problems with the anti-begging law came in enforcement. The state did not attempt any systematic approach at solving the problem. Instead, the law became a convenient tool at the hands of law enforcement to clean up city spaces of people who “looked” poor, as had recently happened in Delhi before the Commonwealth Games in 2010. The people most often caught and brought before courts were rarely part of criminal gangs, but people forced to beg out of extreme poverty and lack of employment opportunities. Courts justifiably refused to institutionalise them by exercising pardon powers conferred by the statute [Section 5]. The Certified Institutions themselves had come to be mired in controversy over time. Social activists and researchers complained that detention centres were no better than prisons and had no functional vocational training facilities. The state disagreed, and instead complained that courts did not send convicted beggars to Certified Institutions to facilitate rehabilitation. Ultimately, in 50 years of being on the statute books in Delhi, neither the deterrent nor rehabilitative potential of anti-begging laws had been realised.

The Constitutional Case

The Delhi High Court decision of 2018 was not the first serious discussion on anti-begging laws in India. In an earlier paper, Usha Ramanathan documents significant parts of the advocacy against such legislation. She notes that Delhi was the site of serious debates on the validity and usefulness of this law in the 1980s, based on pioneering work done by a team at the Law Faculty of Delhi University. The team studied the operation of anti-begging laws to point out various problems in enforcement, arguing that it was doing much to harm rather than help the poor. Subsequently, a writ petition was filed in the Bombay High Court in 1992, challenging the constitutionality of the anti-begging law. A Committee was setup in pursuance of that petition, which conducted studied the law to recommend it be radically re-shaped, as those forced to beg “ought not to be treated as offenders of the law. They need a healing touch of the protective law, not the deterrence of criminal sanction.”

In Delhi itself, in 2006 a single judge of the High Court mused about constitutional arguments while deciding a revision petition in Ram Lakhan [137 (2007) DLT 173]. Justice B.D. Ahmed came down heavily against the order of the lower court challenged before him where the Metropolitan Magistrate had described the beggar as “raising his front paws” rather than hands. Justice Ahmed also tempered the force of the anti-begging law but could not rule on its constitutionality in revision proceedings. This did not stop him from discussing the topic, though, and he noted how criminalisation of begging seemed contrary to the right to freedom of speech and expression guaranteed under Article 19(1), as well as a clear violation of the right to life safeguarded by Article 21.

The Division Bench decision in Harsh Mander v UOI builds on these cues. It held the provisions criminalising begging contrary to Article 14 and Article 21 of the Constitution. It notes that failure to distinguish between voluntary and involuntary begging renders the classification arbitrary, the wide definition of begging made the law over-inclusive in scope, all of which made the provisions “manifestly arbitrary” and contrary to Article 14 [Paragraphs 14-19]. The Court then moves on to Article 21: detention of persons to “ascertain the cause of poverty” is held contrary to Article 21 [Paragraph 20]. This is followed by a long exposition of the “contours” of that right [Paragraphs 21-26], possibly to make the claim that as the state is responsible for alleviating poverty, criminalising it is not the right answer [Paragraphs 27-31]. Finally, it reiterates that legislation penalising persons “compelled” to beg is in the “teeth of Article 21” [Paragraph 33]. The Court also claimed another reason for reading down these provisions – the wastage of public funds as Certified Institutions were lying unused [Paragraph 39].

Notably, in striking down the several portions of the anti-begging law, the High Court faced no real opposition from the government – both the erstwhile Congress regime and the current Aam Aadmi Party government agreed that the law was outdated and could go. Perhaps this is responsible for the paltry reasoning on display in the judgment which could have just been a consent decree. I highlight two problems. First, the decision does not discuss Article 19(1) claim even though it was made before the Court. In doing so, does the Court indirectly support the idea of begging itself not being protected speech? By refusing to discuss the argument altogether, we are left to wonder. Second, there is much to be considered on the aspect imposing constitutional limits on criminalisation of conduct per se, as the Supreme Court had been considering recently in petitions challenging the validity of Sections 377 and 497 of the Indian Penal Code, 1860. As was discussed in context of the adultery hearings, the legal challenge can be solely based on arbitrary classifications, or can be about whether the underlying conduct should be criminal, and courts must be clear in how they treat these separate issues. The High Court does not provide this clarity, and its lack of analysis is even more problematic in light of the remarks made by the Court at the end, where it stated that a well-crafted legislation criminalising “specific types of forced beggary” and for curbing the “racket of forced begging” might survive constitutional scrutiny [Paragraphs 36, 46].

Conclusions

Compare this decision in Harsh Mander to the 2009 decision in Naz Foundation, where contested claims helped the Delhi High Court to fully explore various arguments, in a decision which continues to be celebrated for its visionary approach. Perhaps because there was no real contest at the bar, and the speed with which the verdict was delivered (the judgment was reserved on August 7), the decision in Harsh Mander does not scale the heights of Naz Foundation, and I highlighted how the High Court failed to fully discuss the legal issues at the heart of the case. Even so, the decision in Harsh Mander does share the truly awesome transformative potential that Naz Foundation also had. Since criminalisation of begging is done in 20 states, and the underlying legal provisions are either identical or nearly-identical to all of them, the Delhi High Court’s decision in Harsh Mander is poised to either stand out like a sore thumb, or spark nationwide reform. I sincerely hope it is the second.

 

Guest Post: Bail Provisions of Section 45 PMLA Struck Down – Some Hits and Misses

(This is a guest post by Abhinav Sekhri, which first appeared on the Proof of Guilt blog)

Two days ago, a Two Judges’ Bench of the Indian Supreme Court decided a batch of writ petitions led by Writ Petition (Crl) No. 67 of 2017 titled Nikesh Tarachand Shah v. Union of India & Anr. [Nikesh Shah] in which it struck down the parts of Section 45 of the Prevention of Money Laundering Act 2002 [PMLA] which concerned the grant of bail. The Court held that these parts violated Articles 14 and 21 of the Constitution – guaranteeing a right to equality, and protection against deprivation of the right to life and personal liberty by a procedure not established by law. The effect of this judgment is that bail petitions earlier subject to a stringent standard under Section 45 PMLA will now be tested on the less taxing standards of Sections 439 and 437 of the Criminal Procedure Code 1973 [Cr.P.C.]. This post has four parts – (i) explaining how money laundering and the PMLA work (which I’d urge you to skim through even if you’re a lawyer, because at times the judgment reflects some lack of knowledge on the Court’s part), (ii) charting out how the Court did what it did, (iii) showing where the Court goes wrong, and finally (iv) what this judgment might mean for the many other statutes with similar clauses that have not been examined by the Court yet.

What is the PMLA, What are the Schedules, and What does Section 45 do?

The PMLA is India’s answer to its global commitment to tackle money laundering, which (at the cost of oversimplification) means representing assets obtained through illegal acts as untainted. In line with global standards, the PMLA covers all kinds of conduct connected with this process of representing black as white (doing, aiding, abetting, attempting etc), as long as one knowingly did so [Sections 3 and 4]. The PMLA not only makes this is an offence but also triggers connected civil actions of attaching and confiscating the tainted assets themselves [Sections 5-8].

Notice how the entire idea of money laundering is linked to some underlying illegal act which results in generating some proceeds – cash or kind. While some countries don’t require that illegal act to be a crime, India does, and the PMLA calls it a ‘Scheduled Offence’ [Section 2(y)] i.e. offences that are part of the Schedules to the PMLA. There are three Schedules – A, B, and C – and Schedule A contains the bulk of offences and Schedule C is basically the same thing applied in a transnational context. Schedule B contains only one offence – Section 132 of the Customs Act 1962 which criminalises making false declarations before customs officers. Importantly, when the underlying offence is one from Schedule B, the PMLA will only apply if the allegations involve a value of at least one crore rupees. There is no such minimum monetary limit for cases with Schedule A offences. It wasn’t always like this, and the history behind these Schedules became quite important in Nikesh Shah which requires me to discuss it here.

When the PMLA came into force in 2005, Schedule A only had two paragraphs carrying offences punishable under the Indian Penal Code 1860 [IPC] for waging war against India and nine offences from the Narcotics, Drugs and Psychotropic Substances Act 1985 [NDPS Act]. Schedule B contained the bulk of offences, along with a lower minimum threshold of thirty lakhs for the value of allegations. Then around 2010 India wanted to join the Financial Action Task Force [FATF] as a member. The FATF is a global body created by the G-8 for money laundering and membership is a big deal [India is the only South Asian member state till today]. When the FATF conducted its evaluation of Indian money laundering laws, it heavily criticised the monetary limit for the cases in Schedule B [paragraph 167 of the linked report]. The logic was that the limit would allow money laundering to escape under the radar as people would just deal in smaller tranches over a slightly elongated period of time. So the FATF recommended the limit be abolished [paragraph 175]. The government sought to do this by simply moving all Schedule B offences to Schedule A, which was done through the 2013 Amendment, leaving Schedule B empty for the time being.

In all this moving around offences, nobody thought fit to look at what impact it would have on the rest of the PMLA – specifically, on Section 45 which spoke about bail. Since the money laundering offence was tied to the Scheduled Offence, Section 45(1) looked at that underlying offence and this decided how difficult it would be to get bail. If it was a Schedule A offence with a sentence of more than three years, the law placed two additional conditions for getting bail: (i) the public prosecutor had to be given a chance to oppose bail, and if the prosecutor chose to oppose bail, then (ii) the court had to satisfy itself that the defendant was “not guilty of such offence” and was not likely to commit any offence on bail, and the burden fell on the defendant to satisfy the court. For all other Schedule A offences, and all Schedule B offences, the regular bail clauses from the Cr.P.C. continued to apply. You can see how the 2013 amendments to the Schedules completely changed the look of Section 45 – the exceptional process became the norm. This new normal was under challenge before the Supreme Court in Nikesh Shah.

SC on Section 45 – Violates Articles 14 and 21
Petitioners argued that the constitutional protections of Articles 14 and 21 were violated by Section 45 PMLA, and the Court agreed to both contentions. Rather than address arguments first and then move to the Court’s appreciation, I discuss both together for brevity.

Article 14
The Petitioners argued that linking the stringent bail clauses to offences in Schedule A that carried at least a three year maximum sentence was creating several irrational and arbitrary classifications which the Court encapsulated through examples [Paragraphs 24-27, and 35]. The Court found no basis to differentiate the harsh treatment meted out under Section 45 from the following hypothetical cases which according to the Court did not attract Section 45:

  • When there is only the PMLA charge as the trial for the Scheduled offence was complete;
  • When the PMLA allegation is based on a Schedule B offence;
  • When the PMLA allegation is based on a Schedule A offence carrying a maximum sentence below three years;
  • When a person is tried for a Part A offence with at least a three year term (versus a joint trial where the same person is tried together with the person with PMLA charges);
  • When the person is released on Anticipatory Bail under Section 438 Cr.P.C. for allegations of the Scheduled Offence, before the PMLA charge was brought in.

The Court was of the view that the seriousness of money laundering cases depended on the amount of money involved [Paragraphs 29-30]. Since Schedule A had no monetary limits, the Court concluded that the likelihood of being granted bail was being significantly affected under Section 45 by factors that had nothing to do with allegations of money laundering [Paragraphs 26-27]. When the Attorney General attempted to defend the scheme by painting the classification as a punishment-based one, the Court easily rebuffed his argument. First, the Court suggested there was no such scheme, but noted that even then, the idea should have something to do with the object of the PMLA. The Court showed how Schedule A had many offences that didn’t seem related to money laundering [taking particular objection in Paragraph 34 to offences under the National Biodiversity Act being there], leaving out others that might have more rational connections to money laundering such as counterfeiting currency [Paragraphs 29-30]. The Court also adversely commented on how Schedule A had lumped different NDPS offences together, at the cost of ignoring how the parent Act treated those offences differently [Paragraph 32-33].

The Court noted also that Section 45 of the PMLA was different from other laws that carried similar requirements such as Section 20(8) of the Terrorism and Disruptive Activities (Prevention) Act 1987 [TADA]. The ‘such offence’ in TADA required a court to be satisfied that the defendant was not guilty of the TADA offence in question before granting bail. But in the PMLA, ‘such’ offence referred to the Scheduled Offence instead of the PMLA offence. So, the restrictions imposed by Section 45 PMLA were held to have no connection to the objects of the PMLA itself and thus the rational classification, if any, violated Article 14 [Paragraph 28].

Article 21

The Petitioners argued that requiring defendants to satisfy the court that they were not guilty of ‘such’ offence violated Article 21 by reversing the presumption of innocence and required the defendant to disclose her defence at the outset of the case. In the judgment the Court doesn’t really address Article 21 independently – instead the Court suggest that because the provision violates Article 14 it cannot be ‘procedure established by law’ and therefore violated Article 21. Towards the end of the decision the Court begins discussing the argument though. It labels Section 45 a “drastic provision which turns on its head the presumption of innocence which is fundamental to a person accused of any offence.” [Paragraph 38]. In the same paragraph it goes on to observe that “before application of a section which makes drastic inroads into the fundamental right of personal liberty guaranteed by Article 21 of the Constitution of India, we must be doubly sure that such provision furthers a compelling state interest for tackling serious crime. Absent any such compelling state interest, the indiscriminate application of section 45 will certainly violate Article 21 of the Constitution. Provisions akin to section 45 have only been upheld on the ground that there is a compelling state interest in tackling crimes of an extremely heinous nature.”

Hits and Misses
There are two questions that were at stake here: (i) did any part of Section 45 offend the Constitution, and if so, (ii) did the Court have no other option but to repeal the provision. Reading the decision, it seems like the Court felt there was so much wrong in the PMLA scheme it decided to throw the kitchen sink at one point rather than explain the issues. The Court answered both affirmatively but never explained to us whether any argument dispositive, or does every case need this sort of broad argumentation to succeed.

Classification and Article 14 first. After reading the legislative history behind the 2013 amendments and the FATF argument, do you think that the Court is right in concluding that higher the monetary allegations, more serious the PMLA case? I’m not so sure. Nor do I think there is much to be gained by placing emphasis (like the Court does) on how Schedule B today has a higher limit than the initial thirty lakhs to suggest that this is in fact the case. It is far more plausible that the one crore limit was placed keeping in mind the underlying offence (false declarations to customs officials in an enquiry) and the concerns of the export industry, which is already subject to Schedule A through Section 135 of the Customs Act 1962 (evading customs duty). Rather than attempt at answering what might be the basis for such a classification for the PMLA (and indirectly giving hints to the government on what might pass muster), the Court would have done well by restricting itself to answering whether the present classification between (i) PMLA allegations based on a type of Schedule A offences versus (ii) all other PMLA cases was intelligible and connected to the objects of the PMLA. As there was enough to show that the original intent (if any) behind Section 45 had not kept apace with the subsequent amendments to the Schedules in 2013, the Court could strike down this classification. But did that require striking down the whole clause?

This brings us to the other part of what did that classification achieve. If it sought to serve as a filter for PMLA cases when it came to administering a strict bail clause, we are left with no filter. Does that mean no PMLA case is serious enough to warrant an application of the clause, or will the clause apply to every PMLA case? Deciding this would need the Court to decide whether clauses such as Section 45 that required a court to find defendants ‘not guilty’ at the bail stage were constitutional. Rather than directly address this, the Court turned to how the text of Section 45 was flawed, as it referred back to the Scheduled Offence on deciding bail petitions. Since the scheduled classification had been struck down, there was nothing to refer to, and so the clause had to go. While there is little to fault this approach, I remain unconvinced that the Court had no option but to strike down the clause because of the text. The Court has performed far greater feats of legislative reconstruction than being asked to read ‘such offence’ in Section 45 PMLA as referring to the PMLA allegations rather than only the Scheduled Offence. After all, it stands to reason that a bail provision in the PMLA would want a PMLA special court to consider the PMLA allegations. In fact, many High Court decisions show this is how they were doing it. Heck, this is how the Court itself was doing it in Rohit Tandon at the start of November [Paragraphs 21-23 of the link]. I think this course was adopted as it helped secure two objectives. Not only did this take care of the PMLA clause which this bench of the Court clearly did not like much, it also helped to protect other statutes with similar clauses which the Court held met a ‘compelling state interest’ test.

This brings me to one last bit about Article 21 and the Eighth Amendment of the U.S. Constitution. The Court cites a previous decision in Rajesh Kumar v. State (NCT) of Delhi [(2011) 13 SCC 706] for the proposition that Article 21 of the Indian Constitution has incorporated the Eighth Amendment and its protection against excessive bail [Paragraphs 13, 19 of Nikesh Shah]. The Court also cites two American decisions [Paragraph 37] on bail for good measure. This is, unfortunately, wrong. Rajesh Kumar cited previous precedent in Sunil Batra to suggest that even though India did not have the Eighth Amendment or the ‘Due Process’ clause, the consequences were the same to prevent cruel and unusual punishment. Not only did both those decisions not mention the excessive bail clause, the references to the cruel and unusual punishment clause itself are highly contentious as an earlier bench of the Supreme Court had held it couldn’t be pressed in India, and that decision continues to be cited.

Conclusion

The slapdash manner in which the PMLA Schedules were amended in 2013 to appease the FATF had already caused some High Courts to address this issue of Section 45. The closest it came to striking down the clause was the Punjab & Haryana High Court’s decision in Gorav Kathuria v. Union of India & Anr. where it held the bail provisions would not apply retrospectively to offences previously in Schedule B [Paragraphs 43-45 of Nikesh Shah]. When the Court declined to hear an appeal against the High Court order in Kathuria I thought that it had indirectly affirmed the validity of Section 45. The judgment in Nikesh Shah comes as a surprise, and marks the first occasion when the Court has looked at any part of the PMLA through a constitutional lens. There are other parts that are equally problematic – the asset forfeiture scheme and the compulsion on witnesses to make truthful declarations, for instance – that litigants may take to the Court being encouraged by this judgment.

As for the future impact of Nikesh Shah on other statutes that carry the same ‘drastic provision’, the stage is set for some litigation on that front as well. The Supreme Court has only approved of the TADA and the MCOCA provisions in the past, leaving the many others open to scrutiny on this new test of whether the provision furthers a ‘compelling state interest’. The Court never answered that for the PMLA context while deciding the petitions in Nikesh Shah. Do you think it might conclude that the PMLA does not meet the test? What about the other statutes? I’ve re-pasted my list of statutes containing the clauses below after accounting for the ones that are not relevant anymore. Comments, as always, are welcome.

  1. Section 437(1), Cr.P.C. (in cases of death and life imprisonment).
  2. Section 12AA (inserted in 1981), of the Essential Commodities Act, 1955.
  3. States of Punjab and Tripura inserted this provision as Section 439-A to the Cr.P.C. so applicable within their territory, in 1983 and 1993 respectively. This restricted bail to persons accused of certain offences, inter alia Section 121, 124-A IPC.
  4. Section 37 (amended in 1989) of the Narcotic Drugs and Psychotropic Substances Act 1985 [NDPS].
  5. Section 7A (inserted in 1994) of the Anti-Hijacking Act, 1982.
  6. Section 6A (inserted in 1994) of the Suppression of Unlawful Acts against Safety of Civil Aviation Act 1982.
  7. Section 8 of the Suppression of Unlawful Acts against Safety of Maritime Navigation and Fixed Platforms on Continental Shelf Act 2002.
  8. Section 51A (inserted in 2002) of the Wildlife Protection Act, 1972.
  9. Section 43D (inserted in 2008) of the Unlawful Activities Prevention Act, 1967 [UAPA] (nearly identical).
  10. Section 36AC (inserted in 2008) of the Drugs and Cosmetics Act, 1940.