4 Jan 2017

Parliament can condemn citizens without giving them opportunity to defend: Supreme Court



Can the Parliament pass a resolution condemning a former judge of the Supreme Court? Can the Parliament condemn a person without offering an opportunity to such a person to defend its views for which he is condemned? Can the Parliament discuss the conduct of a ‘stranger’ which is not relevant for its functioning and pass a resolution on such conduct? These and many other interesting questions touching various aspects of Parliamentary functioning came up for determination before the Supreme Court recently.

Considering the writ petition filed by its former judge, the Supreme Court has in its recent judgment in Justice (Retd.) Markanday Katju versus Lok Labha and Another [Writ Petition(Civil) No. 504/2015, decision dated 16.12.2016] answered all the above questions in the affirmative. Opining that the ambit of Parliamentary activity is very wide and the members of the Parliament collectively enjoy the constitutional protection of “freedom of speech in parliament”, the Supreme Court has considered its earlier decisions on the subject of parliamentary privileges to reiterate the scope of Parliamentary powers under the Constitution. The impugned conduct of the former judge, on which the entire chain of events arose, was noted in the judgment in the following terms;

“2. On 10.03.2015, the petitioner, a former Judge of this Court published a post on his Facebook Page in respect of Mahatma Gandhi, Father of the Nation. The post was entitled “Gandhi – A British Agent” and stated that Mahatma Gandhi did great harm to India. On the same date, another post was published by the petitioner on his Facebook Page in respect of Netaji Subhash Chandra Bose referring to him as an agent of Japanese fascism.”

This led both the houses of the Indian Parliament to pass separate resolutions condemning the former judge who viewed such resolutions as incorrect as being passed “without giving him any opportunity of hearing and that rules of Natural Justice required that he should have been given an opportunity of hearing”. This led to the filing of the petition in the Supreme Court wherein it was stated “that it does not seek any relief against any Member of Parliament individually but the Resolutions in question do not fulfill jurisdictional requirement, and that whether the statements are deplorable or condemnable can be judged only by bodies performing judicial function and cannot be decided by Rajya Sabha or Lok Sabha.”

The Supreme Court examined the constitutional provisions relating to parliamentary functioning and the ambit of its privileges the conclude upon the legal position on the subject in the following terms;

21. The observations of this Court in the aforesaid cases make it clear that “freedom of speech in Parliament” is absolute and unfettered; that the freedom of speech so conferred is subject only to such of the provisions of the Constitution which relate to regulation of procedure in Parliament; that this is recognition of the fact that Members need to be free of all constraints of what they say in Parliament; that clause (2) of Article 105 puts negatively what clause (1) states affirmatively; that both clauses must be read together to determine their content; that a vote, whether cast by voice or gesture is an extension of speech or a substitute for speech; that what has protection under these sub-Articles is what has been said and a vote that has been cast; that the protection is broad, being “in respect of”; that if the impugned speech amounts to libel or becomes actionable or indictable under any provision of law, immunity has been conferred from any action in any Court; and that the Constitution makers attached so much importance to the absolute freedom in debates that they thought it necessary to confer complete immunity on the legislators from any action in any Court in respect of their speeches


24. In so far as debates or discussion in the Houses of Parliament are concerned, the only substantive restriction found in the Constitution is in Article 121 of the Constitution which specifically mandates that no discussion shall take place in Parliament in respect of the conduct of any Judge of the Supreme Court or of a High Court in the discharge of his duties. Barring such provision under Article 121, the Constitution has placed no restriction on what can be debated or discussed in Parliament. It is completely left to the wisdom or discretion of the individual Houses and the presiding authorities in terms of the Rules of Procedure of each House. It is for this reason that this Court in Keshav Singh’s case (supra) observed that the “freedom of speech in Parliament” is subject only to such provisions of the Constitution and to the rules and standing orders regulating the procedure of Parliament. Substantively, apart from Article 121, the Constitution itself places no restriction on the subject matter of discussion or debate.

25. The history of parliamentary privileges as found by this Court in the aforementioned cases shows that the privileges have been defined as the sum of the fundamental rights of the House and of its individual Members inter alia, as against the prerogatives of the Crown and the authority of the ordinary courts of law, that the term privilege denotes certain fundamental rights of each House which are generally accepted as necessary for the exercise of its constitutional functions, and that the privileges of Parliament are rights which are absolutely necessary for the due execution of its powers. The privileges are enjoyed by individual Members, because the House cannot perform its functions without unimpeded use of the services of its Members, and by each House for the protection of its Members and the vindication of its own authority and dignity. The expression “...… there shall be freedom of speech in Parliament…….” occurring in first clause of Article 105, is general in nature; not confined to individual members and is applicable to all discussions and debates in Parliament. Secondly, the fact that this privilege is available to strangers who publish under the authority of either House of Parliament under sub-Article (2) and to those who have a right to speak in, and otherwise take part in the proceedings of a House of Parliament or any Committee thereof, is sufficient to refute the argument that it is only an individual privilege of a member of the House. All privileges belong to the House, though some of them may also protect and shield individual members composing the house.”

Having concluded such, the Supreme Court thereafter dwelled upon the factual dimensions relating to the petition to opine that the cause therein was unsustainable in the following terms;

“32. The submission of the petitioner however is, when Parliament is claiming a privilege what is to be considered is whether the act in respect of which privilege is claimed, is fundamental to the functioning to the Parliament. It is submitted by the petitioner that the power available with the Houses to deal with a stranger is only in relation to such act of that stranger which interferes with the functioning of the House and since the remarks of the petitioner did not in any way impede or interfere with the proceedings of Parliament, it was not within the jurisdiction of any of the Houses to take notice of such remarks and pass the Resolutions in question.


34. If any action is sought to be initiated against any citizen, whether Member or Non-Member, either in exercise of contempt or breach of privilege, the law that has developed is that the action of such citizen must have interfered with fundamental functioning of the House so as to enable the House to initiate any proceedings against the citizen. The petitioner is right that in cases concerning breach of privilege or contempt such aspect whether the actions of the citizen had interfered with the functioning of the Houses, is crucial and fundamental. But in the present case no action for either breach of privilege or contempt was initiated or exercised. Chapter 20 of Lok Sabha Rules entitled Privileges and Rules 222 to 228 thereof deal with matters of privileges. Similarly Rules 187 to 203 of Rajya Sabha Rules deal with issues concerning privileges. If an action for breach of privilege was initiated, the enquiry would certainly be on the lines submitted by the petitioner, in that whether his remarks had in any way impeded or interfered with the functioning of the Houses.

35. We are however concerned in the present case with exercise of power in terms of Sub-clause (1) of Article 105 which guarantees ‘freedom of speech in Parliament’ as against the cases of the first kind mentioned in the present case is one under Article 105 (1) and (2) of the Constitution, without there being any layer of breach of privilege. The question therefore is whether while exercising such power under Article 105(1), is there any restriction on the scope and debate or discussion in Parliament and whether acts of a citizen, whether Member or Non-Member, could not be noticed or debated. As mentioned hereinabove, the only restriction in the Constitution as regards subject matter of any debate or discussion is to be found in Article 121 of the Constitution. It is axiomatic for the free functioning of Houses of Parliament or Legislatures of State that the representatives of people must be free to discuss and debate any issues or questions concerning general public interest. It is entirely left to the discretion of the Presiding Officer to permit discussion so long as it is within the confines of Rules of Procedure.

36. We now deal with the concerned Rules and the Resolutions in question. Rule 156 of Rajya Sabha Rules quoted hereinabove shows that a resolution could relate to a matter of general public interest and under Rule 155 a resolution could be in the form of a declaration of opinion by Rajya Sabha. Under Rule 157 certain conditions are specified, inter alia that the resolution shall not refer to the conduct or character of persons except in their official or public capacity. Rules 171, 172 and 173 of Lok Sabha Rules are also on similar lines. Resolution dated 11th March, 2015 passed by Rajya Sabha expressed “unequivocal condemnation of the recent remarks” of the petitioner against Mahatma Gandhi and Netaji Subhash Chandra Bose. Similarly resolution dated 12th March, 2015 passed by Lok Sabha condemns the statement of the petitioner relating to Mahatma Gandhi and Netaji Subhash Chandra Bose. The condemnation by both the Houses was of the opinion and remarks and did not refer to the conduct or character of the petitioner. These resolutions were purely in the form of declaration of opinion. Both the resolutions made reference to the offices held by the petitioner as a Judge of this Court and Chairman of the Press Council and show that both Houses were conscious of the fact that the remarks about Mahatma Gandhi and Netaji Subhash Chandra Bose were made not by an ordinary person but by one who had occupied high public office. In the context of such remarks from a person of the stature of the petitioner, which were put in public domain, if both Houses thought it fit to pass resolutions in the form of a declaration, it was certainly within their competence. The nature of remarks regarding Mahatma Gandhi and Netaji Subhash Chandra Bose pertain to general public interest and as such the Houses were certainly within their jurisdiction to pass resolutions.

37. It is not as if any action was deliberately undertaken or sanction was issued against the petitioner. The petitioner in exercise of his right under Article 19(a) made certain statements concerning two famous personalities. We are not for a moment suggesting that he could not or sought not to have made those statements. He is entitled to his views and put those views in public domain for consumption of public in general. The response by both Houses of Parliament was also natural in that the Resolutions in question dealt with his statements in public domain. All that the resolutions did was to condemn his remarks and did not refer to the conduct or character of the petitioner. As stated earlier, the remarks made by the petitioner regarding Mahatama Gandhi and Netaji Subhas Chandra Bose, which were in public domain, were touching subject of general public interest and as such could well be discussed in the Houses. The learned Attorney General is right in submitting that the resolutions had no civil consequences in so far as the conduct and character of the petitioner is concerned. Unlike all the cases referred to herein above which visited upon the concerned individual certain civil consequences, the present resolutions do not inflict any penalty or visit the petitioner with any civil consequences.


39. According to the petitioner, a stranger who makes a speech outside the House, not connected with the functioning of the Parliament and not derogatory to Parliament, could not be taken notice of by Parliament to punish him. The power to punish a stranger, if his acts in any way impede or interfere with functioning of Parliament, will certainly entitle Parliament to initiate action for breach of privilege or in contempt. Such limitation is definitely read into the exercise of power for breach of privilege or contempt. However, such limitation or restriction cannot be read in every debate. A pure and simple discussion or debate may touch upon or deal with a stranger.

As stated above, freedom of speech in Parliament is subject only to such of the provisions of the Constitution which relate to regulation of procedure in Parliament. No separate law is required to confer jurisdiction to deal with the opinions expressed by individuals and citizens during debates. If the nature of opinions expressed by such citizens or individuals pertain to matters of general public interest, it would certainly be within the powers of the House to have a discussion or debate concerning such opinions. So long as the debate or discussion is within the confines of the Rules, it will be expressly within the powers of the House to disapprove such opinions.

No restriction is placed by the Constitution or the Rules of Procedure and none can be read in any of the provisions. It is true that a citizen or an individual may find himself in a situation where he has no way to reply to the discussion or a resolution passed by the concerned House. The concerned individual or citizen may also find himself in a position where the resolution is passed without giving him any opportunity of hearing. This definitely is a matter of concern and has engaged attention of the concerned in some countries.”

18 Dec 2016

Legal challenge to Demonetization - Supreme Court Constitution Bench to decide

Recently we had updated our readers with the decision of the Delhi High Court holding that restrictions on cash-withdrawal under demonetization policy were not illegal. A challenge to this decision and other legal points were before the Supreme Court last week. Opining that these were important constitutional issues and were required to be addressed by a Constitution Bench of the Supreme Court, these challenges have been referred to such bench.

It is noteworthy that Article 145 of the Constitution of India postulates that the "minimum number of Judges who are to sit for the purpose of deciding any case involving a substantial question of law as to the interpretation of this Constitution" shall be five. Accordingly such questions cannot be decided by benches of lesser judge composition. In its order in Vivek Narayan Sharma v. Union of India [Writ Petition (Civil) No. 906/2016, order dated 16.12.2016], a bench of three-judges of the Supreme Court has formulated nine questions which in its view are such substantial questions to be decided by the constitution bench. These are as under;
(i) Whether the notification dated 8th November 2016 is ultra vires Section 26(2) and Sections 7,17,23,24,29 and 42 of the Reserve Bank of India Act, 1934;
(ii) Does the notification contravene the provisions of Article 300(A) of the Constitution;
(iii) Assuming that the notification has been validly issued under the Reserve Bank of India Act, 1934 whether it is ultra vires Articles 14 and 19 of the Constitution;
(iv) Whether the limit on withdrawal of cash from the funds deposited in bank accounts has no basis in law and violates Articles 14,19 and 21;
(v) Whether the implementation of the impugned notification(s) suffers from procedural and/or substantive unreasonableness and thereby violates Articles 14 and 19 and, if so, to what effect?
(vi) In the event that Section 26(2) is held to permit demonetization, does it suffer from excessive delegation of legislative power thereby rendering it ultra vires the Constitution;
(vii) What is the scope of judicial review in matters relating to fiscal and economic policy of the Government; 
(viii) Whether a petition by a political party on the issues raised is maintainable under Article 32; and
(ix) Whether District Co-operative Banks have been discriminated against by excluding them from accepting deposits and exchanging demonetized notes.
These questions have been referred as in view of these three judges these questions are of "general public importance" and there are "far reaching implications which the answers to the questions may have".

Further, noting that the interim order prayed by the parties i.e. to suspend the operation of the demonetization notifications, would amount to interfering with the executive policy of the Government, the Court declined to issue any interim directions. The Court, to arrive at this conclusion, duly noted the submission of the Government that "for the nature of decision taken by the Government - to unearth the black money or unaccounted money and to dry up the terror fund and defeat the attempt of circulation of large scale counterfeit currency, maintaining complete secrecy of such a decision was imperative."

The Supreme Court confined its observations to "commend to the Authorities to fulfill their commitment made in terms of the stated Notification permitting withdrawal of Rs.24,000/- per account holder of the Bank per week to the extent possible and review that decision periodically and take necessary corrective measures in that behalf."

The outcome of this challenge will be really interesting and can have, beyond the realm of these questions, far reaching implications on the flexibility and powers of the executive government to take action on issues affecting the society at large.

Security comes above prestige; High Court judges to be frisked at Airports: Supreme Court

Setting aside the directions issued by the High Court to the effect that the judges of the High Court cannot be personally frisked at the airport, the Supreme Court in its recent decision has observed that "matters of security are not issues of prestige" and "these are not matters of 'status'". The Supreme Court has also criticized the High Court for ignoring the self-imposed restraint which if "not maintained the court as an institution would invite a justifiable criticism of encroaching upon" the terrain of the executive wing. 
In its decision in Union of India v. Rajasthan High Court [Civil Appeal No. 717/2006, decision dated 14.12.2016] the Supreme Court was concerned with challenge to correctness of the decision of the Rajasthan High Court wherein directions were issued to the Central Government to include Chief Justice and other judges of the High Court in no-frisking list at all airports of the country. It was pointed out by the High Court that "the Chief Justice of the Rajasthan High Court travels often by air between Jodhpur and Jaipur in connection with his official duties and was being inconvenienced by not being exempted from pre-embarkation security checks". It was further observed by the High Court that "in view of the threat perception all VVIPs/VIPs should submit themselves to pre-embarkation security checks 'without exhibiting their egos' but if certain persons amongst them were to be exempted then all constitutional functionaries should be treated at par". 
Accordingly the High Court, holding that even High Court judges were constitutional functionaries, directed the Central Government to include them in the list of no-frisking list at airports. The Supreme Court, however, did not approve. Setting aside the decision of the High Court, the Supreme Court made the following observations;
9 The High Court has evidently transgressed the ‘wise and self-imposed’ restraints (as they are described) on the power of judicial review by entertaining the writ petition and issuing these directions. The cause for invoking its jurisdiction suo moto was a news report in regard to a breach of security at Sanganer airport. Matters of security ought to be determined by authorities of the government vested with the duty and obligation to do so. Gathering of intelligence information, formulation of policies of security, deciding on steps to be taken to meet threats originating both internally and externally are matters on which courts singularly lack expertise. The breach of security at Sanganer airport undoubtedly was an issue of serious concern and would have been carefully investigated both in terms of prosecuting the offender and by revisiting the reasons for and implications of a security lapse of this nature. This exercise was for the authorities to carry out. It was not for the Court in the exercise of its power of judicial review to suggest a policy which it considered fit. The formulation of suggestions by the High Court for framing a National Security Policy travelled far beyond the legitimate domain of judicial review. Formulation of such a policy is based on information and inputs which are not available to the court. The court is not an expert in such matters. Judicial review is concerned with the legality of executive action and the court can interfere only where there is a breach of law or a violation of the Constitution. 
10. A suo moto exercise of the nature embarked upon by the High Court encroaches upon the domain of the executive. In a democracy based on the rule of law, government is accountable to the legislature and, through it, to the people. The powers under Article 226 are wide – wide enough to reach out to injustice wherever it may originate. These powers have been construed liberally and have been applied expansively where human rights have been violated. But, the notion of injustice is relatable to justice under the law. Justice should not be made to depend upon the individual perception of a decision maker on where a balance or solution should lie. Judges are expected to apply standards which are objective and well defined by law and founded upon constitutional principle. When they do so, judges walk the path on a road well-travelled. When judicial creativity leads judges to roads less travelled, in search of justice, they have yet to remain firmly rooted in law and the Constitution. The distinction between what lies within and what lies outside the power of judicial review is necessary to preserve the sanctity of judicial power. Judicial power is respected and adhered to in a system based on the rule of law precisely for its nuanced and restrained exercise. If these restraints are not maintained the court as an institution would invite a justifiable criticism of encroaching upon a terrain on which it singularly lacks expertise and which is entrusted for governance to the legislative and executive arms of government. Judgments are enforced, above all, because of the belief which society and arms of governance of a democratic society hold in the sanctity of the judicial process. This sanctity is based on institutional prestige. Institutional authority is established over long years, by a steadfast commitment to a calibrated exercise of judicial power. Fear of consequences is one reason why citizens obey the law as well as judicial decisions. But there are far stronger reasons why they do so and the foundation for that must be carefully preserved. That is the rationale for the principle that judicial review is confined to cases where there is a breach of law or of the Constitution. The judgment of the Rajasthan High Court is an example of a matter where the court should not have entered.  
11 By the time that the Rajasthan High Court dealt with the case, the list of exemptions had been modified to include Chief Justices of High Courts in the list of persons exempted from pre-embarkation security. Even assuming that the intervention of the High Court in such a matter could have been invoked in the first place (though we believe it should not have been) the matter should have rested there. The cause for which the suo moto writ petition was registered was left behind and the episode which led to the invocation of the jurisdiction found no place in the ultimate directions. The direction to include judges of the High Court was unrelated to the very basis on which the jurisdiction under Article 226 was invoked. But that apart, there is a more fundamental reason why the case should not have been entertained and directions of this nature ought not to have been issued. Matters of security are not issues of prestige. They are not matters of ‘status’. The Union government has adopted the position that the issue as to whether pre-embarkation security exemptions should be granted does not depend only on the warrant of precedence. Among the factors which are borne in mind is that the person who is exempted from pre-embarkation security checks must, according to the government, be secured by such a level of government security on a 24x7 basis, which would virtually preclude the possibility of any prohibited or dangerous items being introduced on board an aircraft through his or her baggage. The security perception of the Union government is that no exemption can be granted to a dignitary if he/she is not under effective government security coverage on a 24x7 basis. Heads of foreign missions in India are exempted from pre-embarkation security checks on a reciprocal basis. We are not called upon to decide upon the legality or justification for the inclusion of the name of any particular individual in the list of exempted persons in these proceedings. What we have said above is to emphasise that the view of the Union government is based on a considered assessment of security perceptions and ought not to have been interfered with in the manner that the High Court did in the exercise of its jurisdiction under Article 226. 

State of Jammu & Kashmir does not have any distinct sovereignty; intergral part of India - Supreme Court

In what can be described as a seminal primer, the Supreme Court in a recent decision has expounded upon the Legislative relationship between State of Jammu & Kashmir and Union of India. The case concerned challenge against a decision of the High Court of Jammu & Kashmir which declared Parliament as incompetent to apply the provisions of the SARFAESI Act to the State of Jammu & Kashmir. According to the High Court the State retained legislative competence and superiority to the extent that it denuded the power of the Parliament. The Supreme Court, exploring the nature and status of the State of Jammu & Kashmir under the Constitutional precincts of India, has expounded upon the extent upto which the State enjoys preferential treatment compared to the other State of India. 
 
In State Bank of India v. Santosh Gupta [Civil Appeal No. 12237/2016, decision dated 16.12.2016], the Supreme Court noted a number of contentions put forth to the effect regarding the restrictions on operation of Parliamentary law in the State of Jammu and Kashmir. Some of these are noted as under;
  • "since both the Constitution of India and the Constitution of Jammu & Kashmir are expressions of the sovereign will of the people, they have equal status and none is subordinate to the other." 
  • "subjects mentioned in the State List of the 7th Schedule under the Constitution of India were frozen and can never be delegated or conferred on Parliament so long as Article 370 remains and therefore any transference of a State List subject to the Concurrent List later cannot apply to the State of Jammu & Kashmir."
  • "it is not enough under Article 370 to confer power on Parliament by a Presidential Order, but that every time Parliament enacts a law under such power, before such law can operate in the State of Jammu & Kashmir, the State Government’s concurrence must be obtained." ... "an amendment made to the Constitution of India will not apply unless the State concurs in applying it to the State of Jammu & Kashmir, in which case only a Presidential Order applying such amendment would take effect."
  • SARFAESI Act "encroaches upon the property rights of permanent residents of the State of Jammu & Kashmir and must be read down so that it will not be permissible under this Section to sell property belonging to a permanent resident of the State to a person who is not a permanent resident of the State"
Considering these objections, the Supreme Court delineated the legal position on the special status of the State of Jammu & Kashmir inter alia in the following terms;
"10. ... Amendments that are made in the Constitution of India are made to apply to the State of Jammu & Kashmir only if the President, with the concurrence of the State Government, applies such amendments to the State of Jammu & Kashmir. The distribution of powers between the Union and the State of Jammu & Kashmir reflects that matters of national importance, in which a uniform policy is desirable, is retained with the Union of India, and matters of local concern remain with the State of Jammu & Kashmir. And, even though the Jammu & Kashmir Constitution sets up the District Courts and the High Court in the State, yet, the supreme authority of courts to interpret the Constitution of India and to invalidate action violative of the Constitution is found to be fully present. ... We may also add that permanent residents of the State of Jammu & Kashmir are citizens of India, and that there is no dual citizenship as is contemplated by some other federal Constitutions in other parts of the world. All this leads us to conclude that even qua the State of Jammu & Kashmir, the quasi federal structure of the Constitution of India continues, but with the aforesaid differences. It is therefore difficult to accept the argument of Shri Hansaria that the Constitution of India and that of Jammu & Kashmir have equal status. Article 1 of the Constitution of India and Section 3 of the Jammu & Kashmir Constitution make it clear that India shall be a Union of States, and that the State of Jammu & Kashmir is and shall be an integral part of the Union of India." 
"12. The first thing that is noticed in Article 370 is that the marginal note states that it is a temporary provision with respect to the State of Jammu & Kashmir. However, unlike Article 369, which is also a temporary provision limited in point of time to five years from the commencement of this Constitution, no such limit is to be found in Article 370. Despite the fact that it is, therefore, stated to be temporary in nature, sub-clause (3) of Article 370 makes it clear that this Article shall cease to be operative only from such date as the President may by public notification declare. And this cannot be done under the proviso to Article 370 (3) unless there is a recommendation of the Constituent Assembly of the State so to do. ..."
"13. ... The scheme of Article 370(1), therefore, is clear. Since the Instrument of Accession is an agreement between the erstwhile Ruler of Jammu & Kashmir and the Union of India, it must be respected, in which case if a matter is already provided for in it, it would become applicable straightaway without more, and only consultation with the Government of the State is necessary in order to work out the modalities of the extension of the provisions of the Government of India Act corresponding to the Constitution of India referred to in it. However, when it comes to applying the provisions of the Constitution of India which are not so reflected in the Instrument of Accession, they cannot be so applied without the concurrence of the Government of the State, meaning thereby that they can only be applied if the State Government accepts that they ought to be so applied. Under Article 370(2), the concurrence of the Government of the State, given before the Constituent Assembly is convened, can only be given effect to if ratified by the Constituent Assembly. This legislative scheme therefore illustrates that the State of Jammu & Kashmir is to be dealt with separately owing to the special conditions that existed at the time of the Instrument of Accession."
"15. It has been argued that Parliamentary legislation would also need the concurrence of the State Government before it can apply to the State of Jammu & Kashmir under Article 370. This is a complete misreading of Article 370 which makes it clear that once a matter in either the Union List or the Concurrent List is specified by a Presidential Order, no further concurrence is needed. Indeed, the argument is that a Constitutional amendment does not ipso facto apply to the State of Jammu & Kashmir under the proviso to Article 368 as applicable in the said State unless there is concurrence of the State Government and therefore, logically, it must follow that Parliamentary legislation would also require concurrence of the State Government before it can be said to apply in the State of Jammu & Kashmir. We fail to understand or appreciate such an argument. A constitutional amendment is different in quality from an ordinary law and, as has been held by us, it is clear that the language of Article 368 proviso and the language of Article 370 are different and have to be applied according to their terms."
 18. ... The argument that Article 370(1)(b) ‘limits’ the power of Parliament is answered by the fact that the entire Constitution of India, as it exists in 1964, has been made applicable by Presidential order to the State of Jammu & Kashmir, availing both Articles 370(1) (b) and (d) for this purpose. And the expression ‘limited to’ does not occur in Article 370(1)(d),under which it is open to adopt the entire Constitution of India subject to exceptions and modifications, as has been noted above.
21. What is important to note in this Constitution, which was drafted by a Constituent Assembly elected on the basis of adult franchise, is that the State of Jammu & Kashmir is stated to be an integral part of the Union of India, and that the executive and legislative power of the State extends to all matters except those with respect to which Parliament has power to make laws for the State under Article 370 of the Constitution of India. A combined reading, therefore, of Article 370 of the Constitution of India, the 1954 Presidential Order as amended from time to time, and the Constitution of Jammu & Kashmir, 1956 would lead to the following position insofar as the legislative competence of the Parliament of India vis-à-vis the State of Jammu & Kashmir is concerned:
1. All entries specified by the 1954 Order contained in List I of the 7th Schedule to the Constitution of India would clothe Parliament with exclusive jurisdiction to make laws in relation to the subject matters set out in those entries. 

2. Equally, under the residuary power contained in Entry 97 List I read with Article 248, the specified subject matters set out would indicate that the residuary power of Parliament to enact exclusive laws relating to the aforesaid subject matters would extend only to the aforesaid subject matters and no further. 

3. Parliament would have concurrent power with the State of Jammu & Kashmir with respect to the entries that are specified in the Presidential Order of 1954 under List III of the 7th Schedule of the Constitution of India. This would mean that all the decisions of this Court on principles of repugnancy applicable to Article 254 would apply in full force to laws made which are relatable to these subject matters. 

4. Every other subject matter which is not expressly referred to in either List I or List III of the 7th Schedule of the Constitution of India, as applicable in the State of Jammu & Kashmir, is within the legislative competence of the State Legislature of Jammu & Kashmir."
40. ... The High court judgment begins from the wrong end and therefore reaches the wrong conclusion. It states that in terms of Section 5 of the Constitution of Jammu & Kashmir, the State has absolute sovereign power to legislate in respect of laws touching the rights of its permanent residents qua their immovable properties. The State legislature having enacted Section 140 of the Jammu & Kashmir Transfer of Property Act, therefore, having clearly stated that the State’s subjects/citizens are by virtue of the said provision protected, SARFAESI cannot intrude and disturb such protection. The whole approach is erroneous. As has been stated hereinabove, Entries 45 and 95 of List I clothe Parliament with exclusive power to make laws with respect to banking, and the entirety of SARFAESI can be said to be referable to Entry 45 and 95 of List I, 7th Schedule to the Constitution of India. This being the case, Section 5 of the Jammu & Kashmir Constitution will only operate in areas in which Parliament has no power to make laws for the State Thus, it is clear that anything that comes in the way of SARFAESI by way of a Jammu & Kashmir law must necessarily give way to the said law by virtue of Article 246 of the Constitution of India as extended to the State of Jammu & Kashmir, read with Section 5 of the Constitution of Jammu & Kashmir. This being the case, it is clear that Sections 13(1) and (4) cannot be held to be beyond the legislative competence of Parliament as has wrongly been held by the High Court. 
41. It is rather disturbing to note that various parts of the judgment speak of the absolute sovereign power of the State of Jammu & Kashmir. It is necessary to reiterate that Section 3 of the Constitution of Jammu & Kashmir, which was framed by a Constituent Assembly elected on the basis of universal adult franchise, makes a ringing declaration that the State of Jammu & Kashmir is and shall be an integral part of the Union of India. And this provision is beyond the pale of amendment. ..."

...
43. It is thus clear that the State of Jammu & Kashmir has no vestige of sovereignty outside the Constitution of India and its own Constitution, which is subordinate to the Constitution of India. It is therefore wholly incorrect to describe it as being sovereign in the sense of its residents constituting a separate and distinct class in themselves. The residents of Jammu & Kashmir, we need to remind the High Court, are first and foremost citizens of India. ...
... 
We have been constrained to observe this because in at least three places the High Court has gone out of its way to refer to a sovereignty which does not exist."

Two - tier arbitration mechanism valid in Indian laws: Supreme Court

Resolving a long-pending controversy, a judge-bench of the Supreme Court in its recent decision has affirmed what is popularly known as two-tier arbitration mechanism where the arbitration award can be challenged before an appellate arbitration panel. On the issue of the validity of such two-tier procedure, two-judges of the Court had difference of opinion and consequently the issued was referred for a bench of larger composition. 

In Centrotrade Minerals & Metals Inc. v. Hindustan Copper Ltd. [Civil Appeal No. 2562/2006, decision dated 15.12.2016], the three-judges of the Supreme Court have unanimously upheld the mechanism declaring it to be an essential facet of 'party autonomy', a feature which lies at the foundation of arbitration mechanism. The Court has also ruled out the challenge that such mechanism cries foul of 'public policy of India'. In the view of the Court, there is no fundamental inconsistency in such mechanism vis-a-vis the Indian Arbitration law of 1996.

Some of the relevant excerpts of the decision are as under;
27. In our opinion, on a combined reading of sub-section (1) of Section 34 of the A&C Act and Section 35 thereof, an arbitral award would be final and binding on the parties unless it is set aside by a competent court on an application made by a party to the arbitral award. This does not exclude the autonomy of the parties to an arbitral award to mutually agree to a procedure whereby the arbitral award might be reconsidered by another arbitrator or panel of arbitrators by way of an appeal and the result of that appeal is accepted by the parties to be final and binding subject to a challenge provided for by the A&C Act. This is precisely what the parties have in fact agreed upon and we see no difficulty in honouring their mutual decision and accepting the validity of their agreement.
28. The fact that recourse to a court is available to a party for challenging an award does not ipso facto prohibit the parties from mutually agreeing to a second look at an award with the intention of an early settlement of disputes and differences. The intention of Section 34 of the A&C Act and of the international arbitration community is to avoid subjecting a party to an arbitration agreement to challenges to an award in multiple forums, say by way of proceedings in a civil court as well under the arbitration statute. The intention is not to throttle the autonomy of the parties or preclude them from adopting any other acceptable method of redressal such as an appellate arbitration.
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34. It is therefore quite clear that the “final and binding” clause in Section 35 of the A&C Act does not mean final for all intents and purposes. The finality is subject to any recourse that an aggrieved party might have under a statute or an agreement providing for arbitration in the second instance. The award is binding in a limited context.
35. Unless this interpretation is accepted, a second instance arbitration would be per se invalid in India. This would be going against the grain of a long line of decisions rendered by various courts in the country which have accepted the validity of a two-tier arbitration procedure under institutional rules and have not taken the view that a two-tier arbitration procedure is per se invalid. ...
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40. Be that as it may, the legal position as we understand it is that the parties to an arbitration agreement have the autonomy to decide not only on the procedural law to be followed but also the substantive law. The choice of jurisdiction is left to the contracting parties. In the present case, the parties have agreed on a two tier arbitration system through Clause 14 of the agreement and Clause 16 of the agreement provides for the construction of the contract as a contract made in accordance with the laws of India. We see nothing wrong in either of the two clauses mutually agreed upon by the parties.
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44. For the present we are concerned only with the fundamental or public policy of India. Even assuming the broad delineation of the fundamental policy of India as stated in Associate Builders we do not find anything fundamentally objectionable in the parties preferring and accepting the two-tier arbitration system. The parties to the contract have not by-passed any mandatory provision of the A&C Act and were aware, or at least ought to have been aware that they could have agreed upon the finality of an award given by the arbitration panel of the Indian Council of Arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration. Yet they voluntarily and deliberately chose to agree upon a second or appellate arbitration in London, UK in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce. There is nothing in the A&C Act that prohibits the contracting parties from agreeing upon a second instance or appellate arbitration – either explicitly or implicitly. No such prohibition or mandate can be read into the A&C Act except by an unreasonable and awkward misconstruction and by straining its language to a vanishing point. We are not concerned with the reason why the parties (including HCL) agreed to a second instance arbitration – the fact is that they did and are bound by the agreement entered into by them. HCL cannot wriggle out of a solemn commitment made by it voluntarily, deliberately and with eyes wide open.
45. We decline to read the A&C Act in the manner suggested by learned counsel for HCL and hold that the arbitration clause in the agreement between the parties does not violate the fundamental or public policy of India by the parties agreeing to a second instance arbitration. It follows from our discussion that the award which is required to be challenged by HCL is the award rendered on 29th September, 2001 by the arbitrator in London."