Allowed

V Santhosh v. Ministry of Law and Justice

Karnataka HC19 Dec 2023WP/10033/2020

Case brief

AI extract

What is this about?

Writ petition by Junior Clerks of ICADR seeking salary from Feb 2020 after ICADR undertaking vested in IIAC via Section 7 and 10 NDIAC Act 2019. Court allowed, directing C.G. to pay till 22.02.2023 and IIAC thereafter to continue service and salaries.

What did the court decide?

Central Government to pay salaries from Feb 2020 till 22.02.2023; IIAC to continue salaries and services thereafter with arrears paid within one month.

V Santhosh Vs Ministry of Law and Justice — Company and Corporate | Karnataka HC (2023)

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NC: 2023:KHC:46372 WP No. 10033 of 2020

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 19^TH DAY OF DECEMBER, 2023

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BEFORE

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THE HON’BLE MR JUSTICE N S SANJAY GOWDA

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WRIT PETITION No. 10033 OF 2020 (S-RES)

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BETWEEN:

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V.SANTHOSH, AGED ABOUT 30 YEARS, S/O MR.VENKATESH MURTHY.D., RESIDING AT No.18,

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SREE MAHALAKSHMINAGARA, NEAR GOPALVIDYA KENDRA SCHOOL, SOLADEVANAHALLI, CHIKKABANAVARA, BENGALURU-560 090. & JUNIOR CLERK, ICADR, REGIONAL CENTRE CRESCENT ROAD, BENGALURU.

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D.K.ROHINI JAMDAGNI

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Digitally signed by KIRAN KUMAR R Location: HIGH COURT OF KARNATAKA

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AGED ABOUT 52 YEARS, W/O MR.G.SHIVAPRAKASH, RESIDING AT No.388, ANUGRAHA, 11^TH CROSS, SHABARINAGAR LAYOUT,

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HEGDENAGAR, BENGALURU-560 078. & SENIOR CLERK, ICADR, REGIONAL CENTRE, CRESCENT ROAD, BENGALURU.

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…PETITIONERS

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(BY SRI.MANOHAR, ADVOCATE)

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AND:

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MINISTRY OF LAW & JUSTICE, THROUGH ITS SECRETARY, GOVERNMENT OF INDIA,

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SHASTRIBHAWAN, NEW DELHI.

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JOINT SECRETARY & LEGAL ADVISOR DEPARTMENT OF LEGAL AFFAIRS, MINISTRY OF LAW & JUSTICE,(CUSTODIAN) SHASTRI BHAWAN, NEW DELHI.

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HONORARY SECRETARY GENERAL, THE INTERNATIONAL CENTRE FOR ALTERNATIVE DISPUTE RESOLUTION (ICADR) PLOT No.6, VASANT KUNJ INSTITUTIONAL AREA, PHASE-II, NEW DELHI-110 070.

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C.R.SUNDARESH, SECRETARY, THE INTERNATIONAL CENTRE FOR ALTERNATIVE DISPUTE RESOLUTION (ICADR) REGIONAL CENTRE, HAVING OFFICE AT No.738, 13^TH CROSS, 7^TH BLOCK WEST, JAYANAGAR, BANGALORE-560 078.

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…RESPONDENTS

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(BY SRI.KUMAR M.N., CGC FOR R-1 & R-2; SRI.K.VENUGOPAL, ADVOCATE FOR R-4)

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THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA, PRAYING TO DIRECT THE R-4 AND 5 TO RELEASE THE SALARY FROM THE MONTH OF FEBRUARY 2020 AND SUBSEQUENT MONTHS HEREAFTER TILL THE COMPLETION OF THEIR SERVICE IN ACCORDANCE WITH LAW, ETC.

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THIS PETITION HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 12.12.2023, COMING ON FOR PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING

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ORDER

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The petitioners herein had been appointed as Junior Clerks in the Regional Office of the International Centre for Alternative Dispute Resolution (for brevity, referred to as “ the ICADR” ) at Bengaluru. The Regional Office of the ICADR was, in fact, housed in the Karnataka Judicial Academy and was headed by the Secretary.

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It is the grievance of the petitioners that after the ICADR was taken over under the provisions of the New Delhi International Arbitration Centre Act, 2019 (for brevity, referred to as “ the 2019 Act” ), they automatically became employees of the New Delhi International Arbitration Centre (for brevity, referred to as “ the NDIAC ”) and were entitled to be paid their salaries, as their employment was deemed to have been continued under The NDIAC. They contended that despite this position, their salaries have been stopped and they were, therefore, before this Court seeking a direction to respondents 3 and 4 (the Secretary General and the

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Secretary of the ICADR, respectively) to release their salary from the month of February, 2020 and for a further direction to the NDIAC to continue to pay their salaries till the completion of their service. They have also sought a direction to restrain the respondents from taking any steps pursuant to the 2019 Act, in respect of employment of the petitioners, without due process of law.

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The following facts are not in dispute:

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The ICADR was set up in the year 1995 under the aegis of the Central Government. The ICADR was registered under the Societies Registration Act, 1860 with the objective of promoting alternative dispute resolution mechanism and providing facilities for the same.

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The ICADR received land and funding by way of grants and other benefits from the Central Government for its running. The Central Government constituted a High Level Committee regarding the running of the ICADR and a report was submitted that it had failed to address the

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growing needs of the institutional arbitration and it was, therefore, felt expedient to take over the undertakings of the ICADR.

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The Central Government, thereafter, proceeded to promulgate an Ordinance called “ the New Delhi International Arbitration Ordinance ” (“ the Ordinance ”, for short), whereby it has provided for incorporation of the NDIAC for the purpose of creating an independent and autonomous regime for institution based arbitration. The said Ordinance also provided for acquisition and transfer of the undertakings of the ICADR and to vest such undertakings in the NDIAC for better management of arbitration, with the objective of making it a hub for institutional arbitration. The Ordinance also sought to declare the NDIAC to be an institution of national importance.

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The said Ordinance has, thereafter, been replaced by the New Delhi International Arbitration Centre Act, 2019. This Act received the assent of the President on

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26.07.2019 and was also published on the same day in the Gazette. The 2019 Act was, however, deemed to have come into existence on 02.03.2019 i.e., the day on which the Ordinance had been promulgated. The NDIAC was established by issuance of a notification by the Central Government on 13.06.2022, in exercise of its powers conferred under Sub-section (1) of Section 3 of the 2019 Act.

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The statement of objects and reasons behind the 2019 Act is as follows:

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“The dispute resolution process has a huge impact on the economy and doing business in our country. The rapidly changing economic activity demands expeditious settlement of disputes, creation and establishment of mechanism such as institutional arbitration. This is necessary to inspire confidence and credibility among the litigants of commercial disputes. The huge pendency of cases in courts further underlines the need for strengthening the Alternative Dispute Resolution mechanism.

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With a view to promote institutional arbitration and to make India a hub of international arbitration,

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a High Level Committee headed by Mr. Justice B. N. Srikrishna former Judge, Supreme Court of India was constituted, inter alia, to identify the roadblocks in the development of institutional arbitration, examine specific issues affecting the Indian arbitration landscape and prepare a roadmap for making India a robust centre for international and domestic arbitration.

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The Committee, inter alia, recommended that the International Centre for Alternative Dispute Resolution, which was set up in the year, 1995, with the Government funds to promote alternative dispute resolution mechanism has however not been able to achieve the objectives for which it had been set up. The Committee further recommended that International Centre for Alternative Dispute Resolution should be taken over with complete revamp of its governance structure to include only experts of repute who can lend credibility and respectability to the institution and be re-branded as a centre of national importance to highlight its character as a flagship arbitral institution.

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In view of the above, it has been decided to establish a new institution to be called the New Delhi International Arbitration Centre for better management of arbitration in the country and to declare it as an institution of national importance.

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Further, the undertakings of the International Centre for Alternative Dispute Resolution needs to be taken over without interfering with its activities and without adversely affecting the character of it as a Society, so that the existing infrastructure and other facilities which have been set up by the public funds provided by the Government may be appropriately utilised by the NDIAC (New Delhi International Arbitration Centre) for the overall development of institutional arbitration.”

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As could be seen from the statement of objects and reasons, the Committee headed by Hon’ble Mr.Justice B.N.Srikrishna had recommended that the ICADR, which has been set up in the year 1995 with the Government funds, had been unable to achieve the objectives and it, therefore, recommended that the ICADR should be taken over with complete revamp of its governance structure to include only experts who could lend credibility and respectability to the institution and also be re-branded as a center of national importance.

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The preamble of the Act indicates that the 2019 Act has been enacted for establishment and incorporation of

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the NDIAC and also for the purpose of acquiring and transferring the undertakings of the ICADR, and to vest such undertakings of the ICADR in its entirety.

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Section 2(k) of the 2019 Act defines “Society” to

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mean the ICADR , which had been registered under the Societies Registration Act, 1960.

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Section 2(m) of the 2019 Act defines “ undertakings ” to mean the undertakings of the Society which vests with the Central Government under Section 7.

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Section 7 of the 2019 Act reads as under:

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“7. Transfer and vesting – On and from the specified date, so much of the undertakings of the Society as form part of, or are relatable to the Society, and the right, title and interest of the Society in relation to such undertakings, shall, by virtue of this Act, stand transferred to, and vest in, the Central Government.”

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As could be seen from the above, the undertakings of

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the Society, which were relatable to the Society and more importantly, the right, title and interest of the Society in

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relation to such undertakings stood transferred to and vested in the Central Government. On a plain reading of this provision, it is clear that the entire undertaking of the ICADR, including the right, title and interest that the ICADR had in relation to its undertakings, stood transferred and vested in the Central Government by operation of law. The wordings of the section leave no room for doubt that the entire undertaking which constituted the ICADR, stood transferred and vested in the Central Government. It would, therefore, necessarily follow that the employees of the Society would also stand transferred as the employees of the Central Government. To put it differently, by virtue of transfer and vesting of the entire undertakings of the ICADR, the Central Government became the employer of the employees of the ICADR i.e., the Society.

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Section 8 of the 2019 Act, which elaborates on the general effect of vesting that had occurred under Section 7, reads as follows:

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“ 8. General effect of vesting: (1) The undertakings vested under section 7 shall be deemed to include all assets, rights, leaseholds, powers, authorities and privileges, and all property (movable and immovable), including lands, buildings, works, projects, instruments, automobiles and other vehicles, cash balances, funds, including reserve funds, investments and book debts of the Society as form part of, or are relatable to, the Society and all other rights and interest arising out of such properties as were immediately before the commencement of the New Delhi International Arbitration Centre Ordinance, 2019 in the ownership, possession, power or control of the Society, and all books of account, registers and all other documents of whatever nature relating thereto.

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(2) All properties and assets as aforesaid which have vested in the Central Government under section 7 shall, by force of such vesting, be freed and discharged from any trust, obligation, mortgage, charge, lien and all other encumbrances affecting them or of any attachment, injunction, decree or order of any court or other authority restricting the use of such properties or assets in any manner or appointing any receiver in respect of the whole or any part of such properties or assets shall be deemed to have been withdrawn.

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(3) Any licence or other instrument granted to the Society in relation to any undertaking which has vested in the Central Government under section 7 at any time before the specified date and in force immediately before the specified date, shall continue to be in force on and after such day in accordance with its tenor in relation to and for the purpose of such undertaking or where the undertaking is directed under section 10, to vest in the Centre, the Centre shall be deemed to be substituted in such licence or other instrument as if such licence or other instrument had been granted to the Centre and the Centre shall hold it for the remainder of the period which the Society would have held it under the terms thereof.

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(4) If, on the specified date, any suit, appeal or other proceeding, of whatever nature, in relation to any property or asset which has vested in the Central Government under section 7, instituted or preferred by or against the Society is pending, the same shall not abate, be discontinued or be, in any way, prejudicially affected by reason of the transfer of the undertaking of the Society of anything contained in this Act, but the suit, appeal or other proceeding may be continued, prosecuted or enforced by or against the Central Government or where the undertakings of the Society are directed under

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section 10, to vest in the Centre, by or against the Centre.”

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As could be seen from this Section, all the assets, including the properties, cash balances, funds, investments, etc., which were relatable to the Society stood vested in the Central Government. As per subsection (2), the properties and assets, which were vested in the Central Government stood freed and discharged from any encumbrances. As per sub-section (3), any license or other instruments granted to the Society in relation to its undertakings was statutorily continued to be in force and the NDIAC would be deemed to be substituted in such title or other instruments, as if the license or entrustment had been granted to the NDIAC.

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Sub-section 4 declares that any suit, appeal or other proceeding of whatever nature, which had been instituted in relation to any property or asset of the Society, would not discontinue or abate by reason of the transfer of undertaking, but the suit, appeal or other proceeding could

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be continued to be prosecuted or enforced by or against the Central Government, or in the event of a direction under Section 10, to vest in the NDIAC or where the undertakings of the Society are directed to tend to vest in the NDIAC shall continue by or against the NDIAC.

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If the entire assets of the ICADR stood vested in the NDIAC and any license or instruments granted to the ICADR stood continued as if it had been issued to the NDIAC and more importantly, if any suit, appeal or proceeding had been instituted in respect of a property or asset, the same was statutorily permitted to be continued against the NDIAC or on issuance of direction under Section 10 by or against the NDIAC, this basically indicates that the ICADR was taken over, to use a popular phrase – lock, stock and barrel , by the NDIAC.

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If the ICADR, registered under the Societies Registration Act, 1960, which had been established by the Central Government and which was being run on the basis of the grants given by the Central Government had been

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taken over under a statute with a clear declaration that the entire undertaking of the ICADR had been taken over to establish the NDIAC, it is obvious that the ICADR, for all practical purposes, got itself subsumed into the statutory entity i.e., the NDIAC, and ICADR did not really have any independent existence. In essence, the ICADR, was only a hollow shell with absolutely no assets and the NDIAC was established, statutorily, in its place.

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If every asset of the ICADR (including its funds and properties) is taken over statutorily, the question of the ICADR existing independently does not arise. If the ICADR and its assets stood vested in the Central Government, it necessarily follows that the Central Government becomes responsible for the persons who had been employed by the erstwhile ICADR, which it had itself established and basically funded during its existence.

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It may be noticed that at this stage that the NDIAC

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Act was amended by Act 23 of 2022 and the name of the

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Act was changed to the India International Arbitration

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Centre Act .

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The Central Government has also issued a notification in exercise of its powers under Section 10(1) of the 2019 Act on 22.02.2023. By this notification, the Central Government has directed that the undertakings and the right, title and interest of the ICADR in relation to such undertakings which had stood vested under the Central Government under Section 7 of the 2019 Act would stand vested in India International Arbitration Centre (for brevity, referred to as “ the IIAC ”) with effect from 22.02.2023 i.e., from the date of publication in the gazette.

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23. Section 11(1)(a) of the 2019 Act reads as follows:

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“ 11. Management, etc., of undertakings: (1) The general superintendence, direction, control and management of affairs of the undertakings, the right, the interest in relation to which have vested in the Central Government under section 7, shall–

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(a) where a direction has been made by the Central Government under sub-section (1) of section 10, vest in the Centre;”

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Since the undertaking i.e., the ICADR stood vested with the IIAC on the basis of the notification under Section 10(1) of 2019 Act, the general superintendence, direction, control and management of the affairs of the undertakings, and the right and interest in relation to the said undertakings would also vest in the IIAC. The use of the expression “ management of the affairs ” would necessarily mean that the IIAC, which has come into existence pursuant to the notification, would be responsible for the management of the affairs of the erstwhile ICADR and consequently, it would have to bear the responsibility of the employees who had been employed by the erstwhile ICADR.

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It is, therefore, clear that the liability of the employees of the ICADR would necessarily be fastened on to the Central Government initially i.e., until the notification under Section 10 of 2019 Act was issued and

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thereafter, on IIAC and the salaries of the employees would necessarily have to be paid and they would also have to be continued in service, unless, of course, their services are dispensed in the manner known to law.

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Learned Central Government Counsel, however, contended that under the 2019 Act, only the undertaking of the ICADR was taken over, but the Society i.e., the ICADR continued to exist. He sought to make a distinction between the undertaking and the Society, and argued that the Society would continue to exist, notwithstanding the transfer of the entire undertaking in favour of the Central Government and as a consequence, the employment of the petitioners under the Society would continue and the Society alone would be responsible for the terms of their employment, including payment of salaries. In other words, the main argument of the learned Central Government Counsel was that the ICADR has continued, and its existence did not come to an end by virtue of taking over all assets under the 2019 Act and therefore,

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the liability of the Society towards its employees would continue.

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In my view, this argument cannot be accepted at all. As already noticed above, an “ undertaking ”, as defined under the 2019 Act would mean the undertakings of the Society i.e., the ICADR. In Section 8 of the 2019 Act, the use of expression “ deemed to include all assets ” fundamentally declares that all the assets of the Society are deemed be vested in the NDIAC. The deeming provision basically declares that the Society i.e., the ICADR has been rendered into an empty shell and has not been left with an iota of assets.

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The further use of the expression “ right, title and interest of the Society in relation to such undertakings stood transferred to and vested in the Government ” also indicates that even an indirect interest that the Society possessed in respect of the undertakings also stood transferred and vested in the Government. If even the right, title and interest in the undertakings or relatable to

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the undertakings stood vested in the Central Government and thereafter, in favour of the NDIAC, it would be wrong on the part of the Central Government to disown its responsibilities and state that the Society would have to bear the responsibility of the employees that it had employed, and the NDIAC, which was established in its place, would have no obligation or responsibility in respect of the employees who had been recruited for the purpose of running the ICADR.

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It is also admitted in the counter that the ICADR was provided with land for establishing the centre and it had also been substantially funded by way of grants and other benefits from the Central Government. If the Central Government had established the ICADR and had provided substantial funding for its running, this funding obviously included the salary components of the employees of the Society. In light of this indisputable fact, the Central Government cannot now contend or even be permitted to

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contend that it is no longer responsible for the employees

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of the ICADR i.e., the Society.

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In my view, the Central Government, by virtue of the

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use of expressions such as “ deemed to include all assets”, “and all rights and interest arising out of the properties arising out of such properties”, “that the interfacings and the right, title and interest of the Society in relation to the such undertakings which had vested in the Central Government” and “management of affairs of the undertakings” used in Sections 7, 8, 10 and 11 of the 2019 Act, becomes entirely responsible for fulfilling the terms of employment of the petitioners. Subsequently, by the issuance of the notification which vested the undertaking in favour of the IIAC, it is the IIAC which has become responsible for fulfilling the terms of the employment of the petitioners.

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An argument was also advanced that the prayers made in the writ petition was essentially against the

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ICADR and no prayer was sought against the Union of India.

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It may be pertinent to state here that the Secretary General as well as the Secretary of the Regional Officer of the ICADR have, in fact, made an application to come on record as additional petitioners and support the cause of the petitioners.

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In my view, this hyper-technical plea put forth by the Central Government cannot be appreciated, especially in light of the fact that it has categorically admitted that the Central Government had established the ICADR and had provided it with necessary funding during its operation.

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For the reasons stated above, this writ petition is allowed .

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The Central Government is directed to pay the salaries of the petitioners from February, 2020, till the issuance of the notification under Section 10 of 2019 Act i.e., till 22.02.2023 and thereafter, the IIAC shall continue

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to pay them their salaries as per the terms of their employment. The IIAC shall not only be liable to pay the salaries to the petitioners, but would also be liable to continue their services. The arrears of salary for the above mentioned period shall be paid within a month from the date of receipt of a copy of this order.

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It is needless to state that it would be open for the IIAC to post the petitioners at the Head Office or in any of the branches that it had established or may establish.

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SD/JUDGE

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PKS

V Santhosh v. Ministry of Law and Justice

Case brief

What is this about?

What did the court decide?

V Santhosh v. Ministry of Law and Justice

Case brief

What is this about?

What did the court decide?

What the court decided

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