9th UNIVERSITY MOOT COURT SELECTIONS, 2016

Team Code C1
BEFORE THE SUPREME COURT OF INASIA

SAT APPEAL NO. 8 of 2016

UNDER SECTION 15Z OF THE SECURITIES AND EXCHANGE BOARD OF INASIA
ACT, 1992
Securities and Exchange Board of Inasia (Appellant)
v.
Lannister Medilife Ltd. (Respondent)

ALONGWITH
SLP (C) 2141 of 2016
UNDER ARTICLE 136 OF THE CONSTITUTION
Dinklage Oil Co. Ltd. (Petitioner)
v.
Lannister Medilife Ltd.
Clegane Chemicals Ltd.
Mr. Charleston (Respondents)

ALONGWITH
W.P. (Criminal) No. _ of 2016
UNDER ARTICLE 32 OF THE CONSTITUTION
In the matter of Article 14 and 19 (1) (a) of Constitution of Inasia

Mr. John Snow (Petitioner)

v.
Chief Justice (Retd.) X (Respondent)
CONNECTED WITH
Court On Its Own Motion
v.
Mr. John Snow

Counsel on behalf of the Respondent

Memorial for the Respondent

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Table of Contents

Table of Contents

LIST OF ABBREVIATIONS ..................................................................................... 4

INDEX OF AUTHORITIES ....................................................................................... 5

STATEMENT OF JURISDICTION .......................................................................... 8

STATEMENT OF FACTS .......................................................................................... 9

ARGUMENTS PRESENTED................................................................................... 11

SUMMARY OF ARGUMENTS ............................................................................... 12

ARGUMENTS ADVANCED .................................................................................... 14

I. WHETHER THE ANNEXURE-I AGREEMENT GIVES TO LML CONTROL
OVER THE TARGET COMPANY, VIZ. CGL? ........................................................... 14
A. The definition of ‘control’, as given under SAST regulations, does not satisfy in the
present case ...................................................................................................................... 14
B. ‘COVENANTS’ under Clause 4.1 are temporary provisions not amounting to
control .............................................................................................................................. 15
C. Affirmative Vote does not amount to control ........................................................... 15
D. The Affirmative voting right are not related to the day to day management ........... 16
E. There is No intention on the part of LML to acquire CGL ....................................... 17
II. WHETHER, IN TERMS OF ANNEXURE-I AGREEMENT, CGL CAN BE
REGARDED AS AN ASSOCIATE COMPANY OF LML? ......................................... 17
A. The definition of ‘Associate Company’, as given under 2013 Act, does not apply to
CGL.................................................................................................................................. 18
B. LML does not participate in business decisions of CGL .......................................... 19
C. CGL is not a Joint Venture Company ....................................................................... 19
III. DOES SECTION 26 OF THE AMENDMENT ACT OPERATE
PROSPECTIVELY OR RETROSPECTIVELY? .......................................................... 19
A. The Language of Section 26 signifies its retrospective applicability w.r.t pending
arbitration related court proceedings ............................................................................... 20
B. Legislative intent signifies retrospective applicability of 2015 Amendment Act ..... 21
C. Since the Amendment Act deals with procedural aspects in the instant case, it can be
retrospective in its operation ............................................................................................ 22

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Table of Contents
IV. CAN THE COURT REFER THE PARTIES TO ARBITRATION UNDER
SECTION 8 OF THE ARBITRATION AND CONCILIATION ACT, 1996, WHEN
CLAIMS INVOLVE SERIOUS ALLEGATIONS OF FRAUD? ................................. 22
A. Existence of an arbitration clause makes reference to arbitration mandatory .......... 23
B. A Challenge to the validity of contract, and not to the arbitration clause itself, must
go to arbitration ................................................................................................................ 24
C. Judiciary should place importance to the method chosen by the parties .................. 25
D. Serious allegations of fraud must be established beyond reasonable ground ........... 25
V. CAN THERE BE SIMULTANEOUS PROCEEDINGS FOR CRIMINAL
DEFAMATION AND CRIMINAL CONTEMPT OF COURT? .................................. 26
A. The objective and nature of both these proceedings are entirely different in character
thus necessitating simultaneous proceedings ................................................................... 26
B. Section 499 of IPC does not oust the jurisdiction of Contempt of Court Act .......... 27
C. Courts have inherent special jurisdiction to punish Contempt of Court ................... 28
VI. IS SECTION 2 (c) (i) OF THE CONTEMPT OF COURTS ACT, 1971
CONSTITUTIONALLY VALID? ................................................................................... 29
A. Freedom of Speech and expression under art.19(1)(a) of the Indian Constitution is
not violated as art 19(2) provides for reasonable restrictions on fundamental rights. ..... 29
B. Section 2(c)(i) of this Act is not violative of Article 14 of Constitution .................. 30
C. Necessity to uphold the majesty of law and administration of justice. ..................... 31

PRAYER ..................................................................................................................... 32

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List of Abbreviations

LIST OF ABBREVIATIONS

1. AC Appeal cases
2. AIR All India Reporter
3. All Allahabad

4. All ER All England Law Reports

5. Anr. Another
6. BOMLR Bombay Law Reporter

7. CAL Calcutta
8. Ch Chapter
9. CriLJ Criminal Law Journal

10. Edn. Edition

11. i.e That is
12. ILR Indian Law Reporter

13. Ltd. Limited

14. Mad. Madras
15. S. Section
16. SC Supreme Court
17. SCC Supreme Court cases
18. SCL Sebi and Corporate laws
19. US United states
20. v Versus
21. Viz. Which is
22. w.r.t With respect to

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Index of Authorities

INDEX OF AUTHORITIES

Indian Cases
Abdul Kadir Shamsuddin Bubere vs Madhav Prabhakar Oak................................................. 23
Ambard v Attorney General..................................................................................................... 28
Ashwin K. Doshi & Ors. V. SEBI & Or .................................................................................. 15
Avitel Post Studioz Ltd & Ors v Hsbc Pi Holdings (Mauritius) Ltd ....................................... 26
Bathina Ramakrishna Reddy vs The State Of Madras............................................................. 27
Branch Manager, Magma Leasing and Finance Ltd. & Anr. v. Potluri Madhavilata & Anr .. 25
CIT v Madan Gopal Radhey Lal .............................................................................................. 17
Dr.D.C. Saxena vs Hon'Ble The Chief Justice Of India .......................................................... 29
E M Sankaran Namboodiripad v T Narayanan Nambiar ......................................................... 30
Electrosteel Castings Limited vs Reacon Engineers (India) Private Ltd. ................................ 21
Emperor v Jagannath Prasad Swadhin ..................................................................................... 27
Emperor v Murali Manohar Prasad.......................................................................................... 28
Faqir Chand Gulati v Uppal Agencies Pvt Ltd ........................................................................ 19
Hindustan Petroleum Corpn Ltd v Pinkcity Midway Petroleums ........................................... 23
Jumbo Bags v New India Assurance Ltd ................................................................................. 20
Kaulashi v. King Emperor ....................................................................................................... 28
Kvaerner vs. Bajranglal Agarwal ............................................................................................. 25
M/S Suvidhaa Info Serve Pvt Ltd vs Dhbvnl........................................................................... 23
Mahanagar Telephone Nigam Ltd v. M/S Srv Telecom Pvt. Ltd ............................................ 20
Meguin GMBH v Nandan Petrochem Ltd ............................................................................... 24
N. Radhakrishnan vs M/S. Mastero Engieers & Ors ............................................................... 23
National Insurance Co Ltd v Boghara Polyfab Pvt Ltd ........................................................... 24
New Tirupur Area Development Corporation Ltd. v. M/s Hindustan Construction Co. Ltd .. 21
Nitya Ranjan Jena v Tata Capital Financial Services Ltd ........................................................ 21
Noordeen Mohammad v A K Gopalan 1968 ........................................................................... 30
P Anand Gajapathi Raju & Ors v PVG Raju (Dead) & Ors .................................................... 22
Prodip Kumar Biswas v Subrata Das ....................................................................................... 28
R L Kapoor v State of Madras ................................................................................................. 28

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Index of Authorities
Rajaram Waman Masurkar v Lokmanya Shikshan Prasarak ................................................... 28
Re: Arundhati Roy vs Unknown .............................................................................................. 27
Reva Electric Car Company Private Ltd. v. Green Mobil ....................................................... 24
Rhodia S.A v SEBI .................................................................................................................. 16
S Sher Singh v Raghu Pati Kapur & Anr ................................................................................. 28
Sandeep Save v. The Chairman, SEBI..................................................................................... 17
Subramaniam Swamy v Union of India ................................................................................... 27
Sukhdev Singh v. Hon'ble C.J.S. Teja Singh and others ......................................................... 28
Surendra Nath Banerjee v The Chief Justice and Judges of the High Court ........................... 27
Swiss Timing Limited v Commonwealth Games 2010 Organising Committee ..................... 23
Thyssen Stahlunion Gmbh Etc vs Steel Authority Of India Ltd ............................................. 20
Tufan Chatterjee vs Rangan Dhar ............................................................................................ 21
Unissi (India) Pvt Ltd v Post Graduate Institute of Medical Education and Research ............ 24
World Sports Group (Mauritius) Ltd v MSM Satellite (Singapore) Pte Ltd ........................... 24

Foreign Cases
Abbott v. The Minister for Lands ............................................................................................ 22
Blyth v Blyth ............................................................................................................................ 22
Buckeye Check Cashing, Inc. v. John Cardegna et al ............................................................. 25
Pennekamp v Florida ............................................................................................................... 27
Premium Nafta Products Ltd. v. Fili Shipping Company Ltd. & Ors ..................................... 25
Russell v. Russell ..................................................................................................................... 23
United Energy Distribution (P) Ltd v Alinta Asset ................................................................. 19

Statutes
1996 Arbitration Act ................................................................................................................ 20
2015 Amendment Ordinance ................................................................................................... 21
Arbitration Acts 1950 .............................................................................................................. 23
Code of Criminal Procedure .................................................................................................... 28
Companies Act 2013 ................................................................................................................ 17
Contempt of Courts Act, 1971 ................................................................................................. 26
Indian Penal Code, 1860. ......................................................................................................... 26
THE ARBITRATION AND CONCILIATION (AMENDMENT) ACT, 2015 ...................... 20
The English Arbitration Act, 1996........................................................................................... 24
UNCITRAL Model Law .......................................................................................................... 24

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Index of Authorities
Books
Black’s Law Dictionary ........................................................................................................... 15
Generally Accepted Accounting Principles ............................................................................. 16
Halsbury's Laws of England .................................................................................................... 29
Law and Practice of Arbitration ............................................................................................... 25
Law of Contempt of Court in India.......................................................................................... 26
The UNCITRAL Arbitration Rules: A Commentary .............................................................. 24

Regulations
SAST 1997 regulation.............................................................................................................. 15
Substantial Acquisition Of Shares And Takeovers Regulations 2011..................................... 14

Reports
246th Report of Law Commission of India .............................................................................. 21
Report of the Takeover Regulations Advisory Committee, 2010............................................ 14

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Statement of Jurisdiction

STATEMENT OF JURISDICTION

Before The Supreme Court of Inasia

The Supreme Court exercises its jurisdiction conferred on it by the virtue of Section 15Z of
the SEBI Act, 1992 wherein if a person is aggrieved by any decision or order of the
Securities Appellate Tribunal (SAT) may file an appeal to the SC on any question of law
arising out of such order.

The SC also exercises its jurisdiction in the matter concerned to grant special leave to appeal
from any judgement, decree, determination, sentence or order in any cause or matter passed
or made by any court or tribunal in the territory of India under Article 136 of the
Constitution.

The Hon’ble Supreme Court of Inasia also has the jurisdiction in the matter of writ petition
under Article 32 of the Constitution, which reads as follows:

“32. Remedies for enforcement of rights conferred by this Part-

(1) The right to move the Supreme Court by appropriate proceedings for the enforcement of
the rights conferred by this Part is guaranteed
(2) The Supreme Court shall have power to issue directions or orders or writs, including
writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari,
whichever may be appropriate, for the enforcement of any of the rights conferred by this
Part.”

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Statement of Facts

STATEMENT OF FACTS

Lannister Medilife Ltd. (LML) and Clegane Chemicals Ltd. (CGL) are two chemical
companies. However, by 2011, CGL’s hold on the market began to gradually decrease and its
management wanted to revive its prospects so they entered into talks with LML. Following
extensive consultations it was decided that LML will make substantial investments in CGL.
On 4th July, 2013, LML was allotted shares representing 18.21% of the post preferential issue
of equity capital and on the same day, a Share Subscription and Shareholders Agreement was
executed between LML, the Bolton Group and CGL (‘The Agreement’). In September 2013,
following complaints by certain shareholders that LML’s acquisition has effectively
transferred control, SEBI ordered an inquiry. SEBI held that an open offer was mandated as
per Regulation 4 of the SAST Regulations and LML challenged this decision in the Securities
Apellate Tribunal, wherein it was held that “the said provisions are for the protection of the
interests of the acquirer. None of them demonstrate transfer of control in favour of the
appellant.” Aggrieved by the decision of SAT, SEBI appealed to the Supreme Court under
Section 15 Z of the SEBI Act, 1992.

While this decision was pending, LML appointed Mr. Mormont Harris as an independent
director. In June 2016, Market Players published a detailed professional and personal profile
of Mr. Harris and it was revealed that Mr. Edmond Marvin, promoter of CGL, was the son-
in-law of Mr. Harris. Complaints arose on his functioning as an independent director as his
relative was the promoter of CGL, which is an associate company of LML. LML requested
the court to consider the question whether CGL can be regarded as an associate company of
LML or not. The SC agreed to consider the said issue along with the SAT appeal.

While so, LML expressed a view in the meeting of Board of Directors of CGL that the
Supply Agreement may be reconsidered. According to LML, the ethylene supplied by DOCL
was of poor quality and with such performance of DOCL, there can be no assurance of
continuous supply of ethylene. At a Review Meeting of CGL regarding the Supply
Agreement, LML’s directors suggested entering into an agreement with Stark Oil & Gas Co.
as the Supply Agreement does not bar CGL entering into a similar deal with other companies.
This request was accepted and CGL entered into a Supply Agreement with Stark Oil & Gas

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Statement of Facts
Co. with effect from December 2014. Highly aggrieved by these developments, DOCL
threatened to initiate legal action against LML and CGL. Following discussions between the
three parties, a tripartite MOU was entered on March 30, 2015 and it had a similar arbitration
clause as the earlier Supply Agreement. Mr. Charleston, CFO of DOCL, signed this MOU.
When disputes arose, the genuineness of the MOU was questioned by DOCL alleging that
Mr. Charleston, who signed the MOU, had no authority to do so and also filed a civil suit
before the High Court seeking a declaration that the MOU is void.

The arbitration clause in the MOU was pointed out and requested the court to direct the
parties to arbitration in terms of the MOU in accordance with Section 8 of the Arbitration and
Conciliation Act, 1996. The plaintiff opposed Section 8 application on the ground that claims
involving serious allegations of fraud cannot be referred to arbitration. This suit was listed for
hearing on October 19, 2015 but got postponed to 4th November 2015. In between the two
dates, the Arbitration and Conciliation (Amendment) Ordinance, 21015 was passed on 23rd
October, 2015. In the judgement dated 26th November, the Court allowed the Section 8
application and referred the parties to arbitration. DOCL challenged the Court’s reasoning
that the Amendment Ordinance applied retrospectively in SLP.

Mr. John Snow, Senior Advocate and former Law Minister of Inasia, wrote an article on the
Inasian Judiciary and commented on the inefficiency of the bench. He also commented on the
impropriety of retired Chief Justice X and his landmark judgement. Chief Justice X filed a
criminal contempt case against Mr. Snow under Sections 499 and 500 of the IPC. On the
same day, the Supreme Court initiated suo motu contempt proceedings against him under
Section 2(c) of the Contempt of Courts Act, 1971. During the hearing, a question arose as to
whether there can be simultaneous proceedings for criminal defamation and criminal
contempt. Mr. Snow also challenged the validity of Section 2(c)(i) of the Contempt of Courts
Act, 1971 as violative of Articles 14 & 19(1)(a) of the Inasian Constitution.

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Arguments Presented

ARGUMENTS PRESENTED

BEFORE THE SUPREME COURT OF INASIA

1. Whether the Annexure-I agreement gives to LML control over the target company,
viz. CGL?
2. Whether, in terms of Annexure-I agreement, CGL can be regarded as an associate
company of LML?
3. Does Section 26 of the Amendment Act operate prospectively or retrospectively?
4. Irrespective of answer to previous issue, can the Court refer the parties to arbitration
under Section 8 of the Arbitration and Conciliation Act, 1996, when claims involve
serious allegations of fraud?
5. Can there be simultaneous proceedings for criminal defamation and criminal
contempt of court?
6. Is Section 2 (c) (i) of the Contempt of Courts Act, 1971 constitutionally valid?

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Summary of Arguments

SUMMARY OF ARGUMENTS

Before the Supreme Court of Inasia

1) Whether the Annexure-I agreement gives to LML control over the Target
Company, viz. CGL?
It is humbly submitted before the Hon’ble Supreme Court of Inasia that the provisions under
the agreement does not give to LML control over the target company, viz. CGL. The
provisions of agreement are of such a nature that they do not transfer control of management
or policy decisions of the Target Company neither they allow the investor to appoint majority
of directors in BOD. Hence, such rights can never come within the definition of ‘control’ as
given in the Takeover Code, 2011. In the event it is held that rights of such a nature can
amount to control, a condition that needs to be fulfilled before deeming such rights as
amounting to control is that the rights should relate to the day-to-day management of a
company. Further, there was no intention on LML’s behalf to acquire control of CGL.

2) Whether, in terms of Annexure-I agreement, CGL can be regarded as an

Associate Company of LML?
It is humbly submitted before the Hon’ble Supreme Court that CGL cannot be regarded as an
associate company of LML under the provisions of Annexure-I Agreement. The definition of
‘associate company’, as given under Section 2(6) of the Companies Act 2013, does not apply
to CGL. LML neither controls 20% of share capital nor the business decisions of CGL.
Moreover, it does not have the right to ‘effectively’ participate in business decisions of CGL.
Since LML does not have control, CGL cannot be regarded as a joint venture w.r.t LML and
hence, ultimately, not an associate company of LML.

3) Does Section 26 of the Amendment Act operate prospectively or retrospectively?

The language employed while framing Section 26 of the Amendment Act clearly signifies its
applicability on pending arbitration related court proceedings. Moreover, the non-inclusion of
Section 85A of Law Commission 246th report and corollary of Section 8 of Amendment
Ordinance indicates the legislative intent of retrospective application of the said section.

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Summary of Arguments
Also, since it deals with procedural law and not substantive law, it surely can have
retrospective effect.

4) Can the court refer the parties to arbitration under Section 8 of the Arbitration
and Conciliation Act, 1996, when claims involve serious allegations of fraud?
It is humbly submitted before the Hon’ble Supreme Court that the parties cannot be referred
to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996, when there are
serious fraudulent allegations. Since the instant case relates to substantial question of law,
allegations of fraud, collusion and serious malpractices on the part of the respondents, such a
situation can only be settled in court through furtherance of detailed evidence by either
parties and such a situation can not be properly gone into by the arbitrator since the arbitrator
need not be even a law-knowing person. Moreover there is nothing in the 1996 act, which
would place a ‘total’ embargo on the court to continue the proceedings before it only on the
mere existence of an arbitration clause.

5) Can there be simultaneous proceedings for criminal defamation and criminal

contempt of court?
The objective and character of both the offences, criminal defamation and criminal contempt,
are completely different. Contempt is wrong done to the public by weakening the authority of
the court whereas, criminal defamation deals with an individual’s dignity. Proceedings
initiated for one can never serve the purpose of other’s proceeding. Moreover, courts have
inherent special jurisdiction to proceed for contempt, which is not debarred by any procedural
law. Hence, simultaneous proceedings for both the offences can take place.

6) Is Section 2 (c) (i) of the Contempt of Courts Act, 1971 constitutionally valid?
Section 2(c)(1) of the Contempt of Court Act 1971, which defines scandalising the court, is
constitutionally valid because it does not violate any provision mentioned under the
Constitution. Though freedom of speech is enshrined in the Constitution, it is subject to
certain restrictions under Article 19 (2), which includes contempt of court also. Further,
courts have special power to summarily proceed in the interest of administration of justice
and these proceedings are thus ‘reasonable’ under Article 14 of the Constitution.

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Arguments Advanced

ARGUMENTS ADVANCED

Before the Supreme Court of Inasia

I. WHETHER THE ANNEXURE-I AGREEMENT GIVES TO LML CONTROL

OVER THE TARGET COMPANY, VIZ. CGL?
1. The counsel humbly submits that ‘change in control’ of a company maybe brought either
by conferring shareholding/voting rights (de jure) or by contractual agreements (de
facto)1. In the instant case, LML was allotted only 18.21% of the total equity shares of
CGL, hence negating the possibility of de jure control. Moreover, the provisions of
agreement are of such a nature that they do not transfer control of management or policy
decisions of the Target Company, thereby invalidating de facto control also. The
definition of ‘control’ given under Takeover Regulation 20112 is:
“control includes the right to appoint majority of the directors or to control the
management or policy decisions exercisable by a person or persons acting
individually or in concert, directly or indirectly, including by virtue of their
shareholding or management rights or shareholders agreements or voting agreements
or in any other manner”
2. The Agreement executed between LML and CGL provides various clauses and
provisions, which confer only ‘protective rights’ in the form of affirmative vote to LML,
having no controlling effect. These rights are granted only to enable the respondent,
which has made heavy investments in the target company, to remain in the know of
things of what is happening in the company and protect its interest in regard to the
protective provisions contained in clause 9 of the agreement.

A. The definition of ‘control’, as given under SAST regulations, does not satisfy in the
present case
3. Control, as given under SAST Regulation 2011, is inclusive of i) a right to appoint a
majority of the directors ii) a right to control the management or policy decisions of the

1
Advisory Committee, Report of the Takeover Regulations Advisory Committee (2010) 29.
2
Substantial Acquisition of Shares And Takeovers Regulations 2011, s 2(1)(e).

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Arguments Advanced
company.3 In the instant case, LML has the right to nominate only two directors out of a
total of twelve on the Board of Directors of CGL.4 This does not constitute as the right to
appoint majority of the directors. In Ashwin K. Doshi & Ors. V. SEBI & Ors.5, there were
15 members in BODs and one of the shareholder (Ambuja) had right to appoint 4
nominees under the agreement. SAT held:
“It cannot be said that the appointment of two or four directors of the Ambuja Group,
itself leads to acquisition of control by Ambujas over the target company as
contemplated by regulation 2(c) of SAST 1997 regulation.”
4. It is submitted that LML has not been given any right to control the management or
policy decision of CGL. The rights conferred to LML are only protective in nature and
does not grant the power to influence management or policy decisions of CGL as
discussed in subsequent headings.

B. ‘COVENANTS’ under Clause 4.1 are temporary provisions not amounting to

control
5. It is submitted that these are conventional provisions negotiated with the object to ensure
that the target company (CGL) and its promoters do not change the basic contours of the
company between signing of the agreement and actual investment of funds into the
company. These provisions have limited purpose to ensure that the company or the
promoters do not deviate from the basis on which the investment was made. The
provision is only for a transitional period, i.e., it expires once the investment is made.
Since this clause ceases to operate from the date of allotment of shares to LML, it cannot
be regarded as conferring control to it.

C. Affirmative Vote does not amount to control

6. The affirmative rights LML has are of such a nature that they do not give LML control
over the management or policy decisions of CGL. In Subhkam Ventures6, relying upon
the definition of control as given in Black’s Law Dictionary7, the presiding officer held
that control implies a ‘proactive and not a reactive power’. It necessarily involves an
element of command and direction. The test for control that was laid down in Subhkam
Ventures, was whether the alleged controller is in the ‘driving seat’ or not. If the answer

3
ibid.
4
Factsheet, Annexure-I, Clause 3.2(c).
5
[2002] 40 SCL 545.
6
Subhkam Ventures v Securities and Exchange Board of India 2010 SCC OnLine SAT 35.
7
Bryan A Garner, Black’s Law Dictionary (8th edn) 353.

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Arguments Advanced
is in the affirmative, then that person is deemed to be controlling the affairs of the
company. It is submitted that in this case, LML is certainly not in the driving seat, as it
cannot initiate action on its own. For example: It is true that the affirmative vote of the
appellant is required for the appointment of any of these key officers 8 but even this
provision does not mean that the appellant can get its candidate appointed. Hence, mere
right to say ‘no’ does not in itself constitute ‘effective control’.

D. The Affirmative voting right are not related to the day to day management
7. In the event, it is held that affirmative voting rights can indeed qualify as a form of
control, it is submitted that an additional condition needs to be satisfied before such rights
can amount to control i.e., the rights should relate to the day to day management of a
company’s business9.
8. Accounting systems such as the US GAAP10 make a distinction between ‘participative’
and ‘protective’ rights. While ‘participative’ rights relate to the day-to-day management
of the company, ‘protective’ rights do not.
9. It is submitted that the affirmative rights as given in the Agreement amount to
‘protective’ and not ‘participative’ rights. The matters listed therein are intended to give a
certain amount of protection to LML’s investment in CGL.
10. Limiting LML’s affirmative voting rights by using words such as ‘outside the ordinary
course of business 11 ’ and by specifying financial limits with respect to certain
transactions 12 provides further evidence of the fact that these rights were meant to be
protective and were not related to the day to day management of CGL’s business.
11. Though it is conceded that in Rhodia S.A case 13, this requirement of the rights being
related to the day-to-day operations of the company was done away with14, the facts in
Rhodia S.A were substantially different. In that case, in addition to having affirmative
rights, the company in question also funded the parent company of the acquirer and
further controlled the bid placed by it on the target company. Therefore, it was held to be
in control of the acquirer. Hence, it is submitted that the holding in Rhodia S.A does not

8
Factsheet, Annexure-I, Clause 9 (n).
9
Subhkam Ventures v Securities and Exchange Board of India 2010 SCC OnLine SAT 35 [8].
10
Ernst & Young LLP, International GAAP 2013: Generally Accepted Accounting Principles (Wiley
Publications 2013).
11
Factsheet, Annexure-I, Clause 9 (e).
12
Factsheet, Annexure-I, Clause 9 (g) (l) (m).
13
Rhodia SA v SEBI [2001] SAT 30.
14
ibid [59].

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Arguments Advanced
apply to the case at hand and the condition requiring the rights to be related to the day-to-
day management of the company still holds.

E. There is No intention on the part of LML to acquire CGL

12. It is submitted that the objective of 2011 Takeover Regulations is to protect the interests
of investors in securities. Hence, the objectives or intention of the acquirer should be
taken into account. The requirement of "intention" is well built in to the definition, that
the words "agrees to acquire" in regulation 2 (1)(a) and "common objective or purpose" in
regulation 2(1)(q)(1) is the pointer in this regard. Intention is often determined by the
conduct of the concerned parties.15 Same principle has been firmly established in the case
of Sandeep Save v. The Chairman, SEBI.16
13. In the present case, LML has not negotiated any substantive right, which directly confers
it the power to control the Target Company. LML cannot create a situation by taking an
initiative under the said agreement. Moreover, when CGL did not agreed with the view
expressed by LML to reconsider the Supply agreement with DOCL, LML did not veto the
said decision to reject its request though it had the power to do the same. This clearly
indicates that LML had no intention of acquiring control of CGL. It has been held that
minority shareholders, in spite of having affirmative rights, hardly interfere in the
management of companies and if at all they do, they do so for the sole purpose of
protecting their investment.17
14. Therefore, LML adopted a standard practice of the trade to protect its investment in CGL
and it cannot be concluded that it did so in order to acquire control of CGL. Hence, it is
under no obligation to make an open offer under Regulation 4 of Takeover Code, 2011.

II. WHETHER, IN TERMS OF ANNEXURE-I AGREEMENT, CGL CAN BE

REGARDED AS AN ASSOCIATE COMPANY OF LML?
15. The counsel humbly submits that CGL cannot be regarded as an associate company of
LML by the terms of Annexure-I agreement under the relevant securities and corporate
laws for three reasons. Firstly, the definition of ‘Associate Company’, as given under
Companies Act 2013, does not apply to CGL [A]. Secondly, LML does not even
participate in business decisions of CGL. [B]. Thirdly, CGL is not a joint venture

15
CIT v Madan Gopal Radhey Lal (1968) Indlaw SC 276; CIT v Associated Industrial Development Co Ltd
(1971) Indlaw SC 364.
16
Sandeep Save v The Chairman, SEBI (2003) 41 SCL 47 SAT [13], [41].
17
ibid.

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company [C]. In the case at hand, none of these conditions are satisfied and therefore,
CGL cannot be treated as an Associate Company of LML.

A. The definition of ‘Associate Company’, as given under 2013 Act, does not apply to
CGL
16. The existence of significant influence is an important criteria while deciding whether a
company can be regarded as an “Associate Company” of some other company or not.
Section 2(6) of the Companies Act 2013, defines the same in the following manner:
“Associate Company”, in relation to another company, means a company in which that
other company has a significant influence, but which is not a subsidiary company of the
company having such influence and includes a joint venture company.
Explanation. —For the purposes of this clause, “significant influence” means control of
at least twenty per cent of total share capital, or of business decisions under an
agreement.
17. The ‘Explanation’ part given under Section 2(6) defines significant influence to include i)
control of at least 20% of total share capital and ii) control of business decisions. In this
case, LML has none of these controls.
18. Firstly, LML has been allotted only 18.21% of the total equity share capital of CGL. 18
This, by no stretch of reasoning, can confer a control of 20% or more of total share capital
of CGL.
19. Secondly, LML cannot control the business decisions of CGL under the executed
agreement. Since LML has the power to nominate only two nominee directors19 out of
twelve BODs, LML cannot be said to have control over business decisions because
control always involves an element of command and 16.66% cannot control the rest of
83.34% of the BODs. It has already been clarified above.20
20. Moreover, the veto power conferred to LML regarding vital management decision21 does
not confer it the power to initiate any course of action regarding management or financial
policies. It only gives it the right to negate and hence it cannot control the business
decisions by application of veto. Further, the affirmative voting right given to LML does
not give control of business decisions. LML can only either give his consent or can
disaffirm the request but can never implement anything on its own. All the rights

18
Factsheet, [2].
19
Factsheet, Annexure-I, Clause 3.2 (c).
20
Memorial for the respondent [6].
21
Factsheet, Annexure-I, Clause 4.1.

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conferred to LML are only protective in nature, which protects its interest but does not
amount to control of business decisions.
21. Though it may be contended that approval of ‘annual business plan’ amounts to control of
business decisions, it is submitted that ‘annual business plan’ refers to the decisions of
strategy or tactics made by the key officials of the company. It does not mean operational
business decisions that a company needs to take everyday.

B. LML does not participate in business decisions of CGL

22. Participation in business decision means ‘effective’ participation in order to significantly
influence the business decision and not mere participation. The provisions incorporated in
the agreement do not give the right to participate in business decisions to LML. Common
sense suggests that in order to be able to significantly influence a company, one must be
in a position to contribute to decision making by that company to a substantial or material
degree22. The incorporated clauses do not allow the participation of LML to contribute to
a substantial or material degree. They are just protective in character and do not amount
to participation of LML in business decision.

C. CGL is not a Joint Venture Company

23. Joint control 23 is one of the most important preconditions to determine whether a
company is associate company or not. It is submitted that the very characteristic of joint
venture is “Joint Control”.24 As already explained, LML does not exercise ‘control’ on
CGL but is merely acquiring some shares and hence, CGL cannot be regarded as a joint
venture.
24. It is submitted that because of the reasons stated above, CGL cannot be regarded as an
associate company of LML and therefore, the appointment of Mr. Harris, by LML, as an
independent director is not bad in law25.

III. DOES SECTION 26 OF THE AMENDMENT ACT OPERATE

PROSPECTIVELY OR RETROSPECTIVELY?
25. The counsel humbly submits that Section 26 of The Arbitration And Conciliation
(Amendment) Act, 2015 read as:

22
United Energy Distribution (P) Ltd v Alinta Asset [2009] VSC 19.
23
Companies Act 2013, s 2(6).
24
Faqir Chand Gulati v Uppal Agencies Pvt Ltd (2008) 10 SCC 345.
25
Companies Act 2013, s 149.

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“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.”
Albeit a bare reading of this section gives an interpretation of its ‘prospective’
applicability w.r.t arbitration 26 , the instant case deals with arbitration related court
proceedings. Arbitral proceedings in front of an arbitrator have not yet started and
arbitration related court proceedings had started on 19 October 2015; the Amendment Act
was passed on 23 October 2015.
26. It is submitted that Section 26 of the Amendment Act does apply to the pending arbitral
court proceedings (proceedings prior to 23.10.2015) and hence operates retrospectively,
with respect to the present case, due to the following reasons:

A. The Language of Section 26 signifies its retrospective applicability w.r.t pending

arbitration related court proceedings
27. The distinction between an arbitral proceeding and arbitration related court proceedings
was observed in Mahanagar Telephone Nigam Ltd v. M/S Srv Telecom Pvt. Ltd27 wherein
the court held “The Court proceedings are different than the arbitral proceedings.” Also,
while interpreting Section 85(2)(a) of 1996 Arbitration Act in Thyssen Stahlunion Gmbh
Etc vs Steel Authority Of India Ltd28, the Supreme Court clarified the meaning of the
words ‘in relation to arbitral proceedings’ used in the act. The court held “The phrase ‘in
relation to arbitral proceedings’ cannot be given a narrow meaning to mean only
pendency of the arbitration proceedings before the Arbitrator. It would cover not only
proceedings pending before the Arbitrator but would also cover the proceedings before
the Court” Applying the aforesaid interpretation on Section 26 of the Amendment Act
2015, Madras High Court in New Tirupur Area Development Corporation Ltd. v. M/s
Hindustan Construction Co. Ltd29 held that since the first limb of Section 26, which bars
application of the Amending act to certain proceedings, did not use the term “in relation
to” with respect to arbitral proceedings, it indicates that though the act is not applicable to
pending ‘arbitral proceedings’, it certainly can apply to pending arbitration related Court

26
Jumbo Bags v New India Assurance Ltd (2016) Indlaw Mad 683.
27
Appeal No 79 of 2016 [12].
28
Thyssen Stahlunion Gmbh Etc v Steel Authority of India Ltd (1999) 9 SCC 334.
29
Application No 7674 of 2015 in OP No 931 of 2015.

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proceedings, that is to say, nothing in the Amending Act prohibits its application on
pending arbitration related Court proceedings.
28. The Calcutta HC in Tufan Chatterjee vs Rangan Dhar 30 has affirmed the above-
mentioned judgement by observing that, “The crucial difference is in the words 'in
relation to in Section 85(2)(a) of the 1996 Act which are not there in Section 26 of the
Amendment Act of 2015.”
29. Though it is conceded that the judgement delivered in Electrosteel Castings Limited vs
Reacon Engineers (India) Private Ltd. 31 stated that the 2015 Act is not applicable to
court-related arbitration proceedings initiated after 23.10.2015 relating to arbitral
proceedings commenced prior to 23.10.2015, there is nothing in the judgement which
barred the application of Amendment act to pending arbitration related court proceedings.
30. In light of above cited judgements, it is submitted that since the case at hand deals with
pending arbitral related court proceedings, Section 26 should be made retrospective in its
application.

B. Legislative intent signifies retrospective applicability of 2015 Amendment Act

31. It is humbly submitted before the Hon’ble Supreme Court of Inasia that the provision,
which clearly demonstrates retrospective applicability of Amendment Act 2015, is
contained in Section 8 (ii) of the 2015 Amendment Ordinance that amends Section 12 of
the parent act. It clearly mentions that the amendment to Section 12 of the Arbitration Act
shall apply prospectively, that is, only to cases where the arbitrator is appointed after the
commencement of the Ordinance. The absence of a provision such as this, in the rest of
the Ordinance, signifies that the Legislators intended the amendments to be made
applicable retrospectively.
32. Furthermore, non-inclusion of Section 85-A32 recommended by the 246th Report of Law
Commission of India, following which the amendments in 1996 Act has been brought
about in its present form, indicates the legislative intent of not applying the Amendment
Act prospectively. Section 85-A of the proposed report primarily dealt with ‘fresh
arbitrations’ and clearly provided for the prospective applicability of the Amendment Act.

30
Tufan Chatterjee v Rangan Dhar AIR 2016 Cal 213.
31
Appeal No 1710 of 2015 [14] ; Nitya Ranjan Jena v Tata Capital Financial Services Ltd Appeal no 15 of
2016.
32
Law Commission of India, Amendments to the Arbitration and Conciliation Act 1996 (Report 246th August
2014) <http://lawcommissionofindia.nic.in/reports/Report246.pdf> accessed 30 August 2016.

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C. Since the Amendment Act deals with procedural aspects in the instant case, it can be
retrospective in its operation
33. As Lord Denning stated “The rule that an act of Parliament is not to be given
retrospective effect applies only to statutes which affect vested right. It does not apply to
statute which only alter the form of procedure or the admissibility of evidence, or the
effect which the court give to the evidence.”33
34. In the present case, DOCL challenged the applicability of amended Section 8 to the
pending court proceeding. It is submitted that amendment of Section 26 does not take
away any vested right of the party, since it only deals with the procedural aspect of any
arbitration in a court of law. DOCL had no any vested right in the previous statute that
has been impaired by the Amendment Act. In the case of Abbott v. The Minister for
Lands34, the Court said that "the mere right, existing at the date of a repealing statute, to
take advantage of provisions of the statute repealed is not a `right accrued' within the
meaning of the usual saving clause." Also, in Thyssen case, SC held that “Right to take
advantage of an enactment is not a vested right. One cannot have mere abstract right but
only accrued right. Until award is made no party has an accrued right.”35

IV. CAN THE COURT REFER THE PARTIES TO ARBITRATION UNDER

SECTION 8 OF THE ARBITRATION AND CONCILIATION ACT, 1996,
WHEN CLAIMS INVOLVE SERIOUS ALLEGATIONS OF FRAUD?
35. It is humbly submitted before the Supreme Court of Inasia that courts are under an
obligation of making reference to an arbitrator 36 , when prima facie there exists an
arbitration clause under an agreement, quiet apart from the fact that allegations of fraud
regarding the agreement has been made. Section 8 (1) of the Arbitration and Conciliation
Act 1996 emphasizes the same by stating:
A judicial authority, before which an action is brought in a matter which is the subject of
an arbitration agreement shall, if a party to the arbitration agreement or any person
claiming through or under him, so applies not later than the date of submitting his first
statement on the substance of the dispute, then, notwithstanding any judgment, decree or
order of the Supreme Court or any Court, refer the parties to arbitration unless it finds
that prima facie no valid arbitration agreement exists.

33
Blyth v Blyth [1996] 1 All ER 524, 535.
34
(1895) AC 425 PC.
35
Thyssen Stahlunion Gmbh Etc v Steel Authority of India Ltd (1999) 9 SCC 334.
36
P Anand Gajapathi Raju & Ors v PVG Raju (Dead) & Ors (2000) 4 SCC 539.

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Arguments Advanced
A. Existence of an arbitration clause makes reference to arbitration mandatory
36. If in an agreement between the parties before the civil court, there is a clause for
arbitration, it is mandatory for the civil court to refer the dispute to an arbitrator.37 The
shift of legislatures from more scope of judicial intervention to a narrowed one (as
reflected in amended Section 8) clearly indicates the legislative intent of excluding
judiciary from arbitration. The provisions of the Arbitration Acts 1950 and 1979
providing for stay of arbitral proceedings in case of allegations of fraud have been not
been carried into the Arbitration Act, 1996 and has almost vanished away in the amended
Arbitration Act, 1996.
37. Though it may be contended that the SC in N. Radhakrishnan vs M/S. Mastero Engieers
& Ors 38 did not referred claims involving allegations of fraud to the arbitrator due to
incompetency of arbitrators, it should be borne in mind that the court in the said case
apparently relied on Abdul Kadir Shamsuddin Bubere vs Madhav Prabhakar Oak 39 ,
wherein, it was held that “where serious allegations of fraud are made against a party
and the party who is charged with fraud desires that the matter should be tried in open
court, that would be a sufficient cause for the court not to order an arbitration agreement
to be filed and not to make the reference.” The court in N. radhakrishnan did not took
into account that the person on whom fraud allegation were made, was not interested in
having an open trial in court. And hence the reasoning given in N. radhakrishnan is per
incuriam.40 Similarly, in the present case, DOCL (appellant) has alleged fraud against the
respondent and thus it was for the respondents to make a request to the Court to decide on
the allegations of fraud instead of referring the same to the arbitrator, and the respondents
have made no such request.
38. Moreover, Abdul Kadir Shamsuddin Bubere case had in turn relied upon Russell v.
Russell41 and the rationale given in both these cases was that a party, against whom an
allegation of fraud is made in a public forum, has a right to defend himself in that public
forum. The decision was in no way concerned with the competence of arbitrators to
decide disputes concerning questions of fraud.
39. Furthermore, several mega-disputes between or involving two countries have been
decided by arbitral tribunals constituted under the aegis of the Permanent Court of
37
Hindustan Petroleum Corpn Ltd v Pinkcity Midway Petroleums (2003) 6 SCC 503.
38
(2010) 1 SCC 72 [7].
39
AIR 1962 SC 406.
40
M/S Suvidhaa Info Serve Pvt Ltd v Dhbvnl Arbitration Petition No 224 of 2014; Swiss Timing Limited v
Commonwealth Games 2010 Organising Committee (2014) 6 SCC 677.
41
[1880] 14 Ch D 471.

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Arguments Advanced
Arbitration or the International Centre for Settlement of Investment Disputes (ICSID).
Further, refusal to refer to arbitration disputes involving fraud, as reflected in Russell v.
Russell, has been abandoned even in England. The English Arbitration Act, 1996 contains
no provision whereby courts can refuse reference of a dispute regarding allegations of
fraud to arbitration. Even in India, there are various examples 42 of cases wherein the
courts ordered the dispute to be referred to arbitration despite the fact that it involved
allegations of fraud.
40. Notwithstanding those observations which ordered non-reference to arbitration, the
amended Section 8 of 1996 Act nullifies the precedental value by clearly stating that
“..notwithstanding any judgment, decree or order of the Supreme Court or any Court,
refer the parties to arbitration..”.43

B. A Challenge to the validity of contract, and not to the arbitration clause itself, must
go to arbitration
41. It is submitted that Article 16 of UNCITRAL Model Law on International Commercial
Arbitration and Section 16(1) (a) of the Arbitration and Conciliation Act 1996 adopts the
two important principles of "Kompetenz-Kompetenz" and of separability or autonomy of
the arbitration clause. It means, the arbitral tribunal may rule on its own jurisdiction,
including any objections with respect to the existence or validity of the arbitration
agreement. For that purpose, an arbitration clause shall be treated as an agreement
independent of the other terms of the contract, and a decision by the arbitral tribunal that
the contract is null and void shall not entail ipso jure the invalidity of the arbitration
clause.44 Indian courts, in National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd.45 and
Reva Electric Car Company Private Ltd. v. Green Mobil46, have recognized the principle
of “Kompetenz Kompetenz”.
42. In the case at hand, the arbitration clause itself was not assailed as vitiated by fraud or
misrepresentation since the genuineness of the MOU was seriously questioned by DOCL
and not the arbitration clause contained therein. The decision of the House of Lords in

42
Unissi (India) Pvt Ltd v Post Graduate Institute of Medical Education and Research (2009) 1 SCC 107;
National Insurance Co Ltd v Boghara Polyfab Pvt Ltd AIR 2009 SC 170; World Sports Group (Mauritius) Ltd v
MSM Satellite (Singapore) Pte Ltd Civil Appeal No 895 of 2014; Meguin GMBH v Nandan Petrochem Ltd 2007
(5) R A J 239 (SC).
43
The Arbitration and Conciliation (Amendment) Act 2015, s 8.
44
David D Caron, The UNCITRAL Arbitration Rules: A Commentary (Oxford University Press) 450.
45
(2009) 1 SCC 267.
46
(2012) 2 SCC 93.

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Arguments Advanced
Premium Nafta Products Ltd. v. Fili Shipping Company Ltd. & Ors.47; the decision of the
Supreme Court of United States in Buckeye Check Cashing, Inc. v. John Cardegna et al48
and the decision of Supreme Court of India in Branch Manager, Magma Leasing and
Finance Ltd. & Anr. v. Potluri Madhavilata & Anr49 affirms the application of the said
principle and the same is applicable in the present case.
43. Also, Section 5 of the Act reinforces this principle by a non-obstante clause that there
cannot be any judicial intervention. In Kvaerner vs. Bajranglal Agarwal50, it was held
that “in view of Section 5 of the Arbitration and Conciliation Act, 1996 read with Section
16 thereof since the arbitral Tribunal has the power and jurisdiction to make rule on its
own jurisdiction, the Civil Court would not pass any injunction against an arbitral
proceeding."

C. Judiciary should place importance to the method chosen by the parties

44. The principle that the courts shall not interfere in arbitral proceedings is a fundamental
theme underlying the Act. The voluntary nature of an arbitration agreement should be
given the primary importance. It is wrong in principle for the courts to concern
themselves with disputes, which the parties have formally chosen to withdraw from them,
quite apart from the waste of time and expenses caused by judicial interference.51 The
ultimate aim of the judiciary should be not to re-try the case, but simply ensure that the
method of dispute resolution on which the parties agreed is what they have in the event
achieved. 52 The need for reduced role of judiciary in the arbitral process is clearly
reflected in Article 5 of the Model law53 and should be firmly established for the interest
of the parties.

D. Serious allegations of fraud must be established beyond reasonable ground

45. In matters where serious allegations of fraud have been made, it is imperative that there
must be some material and evidence to make good such allegation and mere pleadings are
not sufficient. Further, such allegations, even in a civil dispute, must be established
beyond reasonable doubt and not merely on basis of preponderance of probability.

47
2007 UKHL 40.
48
546 US 440 (2006).
49
(2009) 10 SCC 103.
50
(2001) 6 Supreme 265.
51
O P Malhotra, Law and Practice of Arbitration (1st edn, 2002, LexisNexis).
52
Law Commission of India, ‘Amendments to the Arbitration and Conciliation Act 1996’ (Report 246 August
2014) <http://lawcommissionofindia.nic.in/reports/Report246.pdf> accessed 30 August 2016.
53
UNCITRAL Model Law On International Commercial Arbitration 1985, art 5.

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Arguments Advanced
Judgments do not lay down any general or peremptory rule that allegations of fraud, in all
cases, are incapable of settlement by arbitration under the law of India. As a general rule,
it cannot be said that the moment allegations of fraud and misrepresentation are made in
the context of a contract, the subject matter of the dispute is rendered incapable of
resolution by arbitration.54
46. The burden of proof, in the present case, lies upon DOCL to prove that fraud was
committed but DOCL has only made allegations regarding genuineness of the MOU and
has not furnished any proof to make good such allegations.

V. CAN THERE BE SIMULTANEOUS PROCEEDINGS FOR CRIMINAL

DEFAMATION AND CRIMINAL CONTEMPT OF COURT?
48. It is humbly submitted before the Supreme Court of Inasia that proceedings for criminal
defamation and criminal contempt can take place simultaneously. Criminal Contempt is
defined under Section 2(c) of the Contempt of Courts Act, 1971 whereas Criminal
Defamation is defined under Section 499 of Indian Penal Code, 1860. Both of these
offences are of separate nature and serve different purposes. Simultaneous proceedings of
both of these offences can take place because of three reasons. Firstly, the objectives or
purpose served by both these proceedings are entirely different in character. Secondly,
Section 499 of IPC does not oust the jurisdiction of Contempt of Court Act. Thirdly, the
courts have inherent special jurisdiction to punish contemner quiet apart from other kind
of proceedings.

A. The objective and nature of both these proceedings are entirely different in
character thus necessitating simultaneous proceedings
49. It is submitted that both the offences, criminal defamation and criminal contempt of court,
are different offences of entirely different character serving entirely different purposes.
When the attack is made on the official act of the judge or his personal act, it is criminal
defamation, whereas, when it refers to his action in court or as to what he did judicially
out of it, it is Contempt of Court.55Although contempt may include defamation, yet an
offence of contempt is something more than mere defamation and is of a different
character.56 Similarly, the offence of defamation is made punishable by the Indian Penal

54
Avitel Post Studioz Ltd & Ors v Hsbc Pi Holdings (Mauritius) Ltd Appeal No 196 of 2014.
55
K Balasankaran Nair, Law of Contempt of Court in India (Atlantic 2004) 23.
56
Surendra Nath Banerjee v The Chief Justice and Judges of the High Court ILR 10 Cal 109.

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Arguments Advanced
Code not as an offence of Contempt of Court but as an offence of defamation. 57 A libel
attacking the integrity of a Judge may not in the circumstances of a particular case
amount to contempt at all, although it may be the subject matter of libel proceeding.
50. The objective behind contempt proceedings is to vindicate the dignity and honour of the
Courts and the institution of complaints by the judicial officers could not have served this
purpose.58 On the other hand, the sole purpose of criminal defamation is to protect the
reputation and dignity of the individual against scurrilous and vicious attacks. 59 The
power to punish for contempt of court is a safeguard not for Judges as persons but for the
function which they exercise60. In Re: Arundhati Roy vs Unknown61, it was held that, “It
has to be always kept in mind that the law of defamation under the Penal Code cannot be
equated with the law of contempt of court in general terms.”
51. It is, therefore, submitted that if an offence comes under the purview of both these
proceedings, dropping one in order to proceed with the other, will not serve the purpose
of the other proceeding and hence simultaneous proceedings for Criminal defamation and
Criminal Contempt of Court can surely take place.

B. Section 499 of IPC does not oust the jurisdiction of Contempt of Court Act
52. It is humbly submitted before the court that the application of IPC cannot bar the
jurisdiction of the said Act. It was held in case of Bathina Ramakrishna Reddy vs The
State Of Madras62 that a libellous reflection upon the conduct of a Judge in respect of his
judicial duties may certainly come under Section 499 of the Indian Penal Code and it may
be open to the judge to take steps against the libeller in the ordinary way for vindication
of his character and personal dignity as a judge; but such libel may or may not amount to
contempt of court. What is made punishable in the Indian Penal Code is the offence of
defamation as defamation and not as contempt of court. If the defamation of a court
amounts to Contempt of Court proceedings can certainly be taken under Section 2,
Contempt of Courts Act, quite apart from the fact that other remedy may be open to the
aggrieved officer under Section 499, Penal Code. 63 The fact that the defamation of a
Judge of a Court constitutes an offence under Section 499 of the Indian Penal Code does

57
Emperor v Jagannath Prasad Swadhin AIR 1938 All 358.
58
ibid [8].
59
Subramaniam Swamy v Union of India Writ Petition No (Criminal) 184 of 2014.
60
Pennekamp v Florida [1946] 90 Led 1295.
61
AIR 2002 SC 1375.
62
AIR 1952 SC 149.
63
Re Arundhati Roy v Unknown 2002 SC 1375; State v S N Dikshit (1973) CriLJ 1211.

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Arguments Advanced
not oust the jurisdiction of the High Court to take cognizance of the act as a contempt of
court.64
53. Furthermore, a clear demarcation between the applicability of both the legal provision to
the same offence was established by the Privy Council in its judgement of Kaulashi v.
King Emperor65 wherein the court held, “A single act may be both an offence under the
Penal Code and may also be a contempt of court and may be punishable in either or both
capacities.”

C. Courts have inherent special jurisdiction to punish Contempt of Court

54. Since courts have inherent special jurisdiction regarding contempt proceedings, they are
not guided by any other legal provision or procedure. The inherent summary powers of
the Courts to punish for contempt are affirmed by Patna High Court 66 and Privy
Council67. The courts have special jurisdiction while dealing with contempt proceedings
and this power to punish summarily is not created by statute but inherent in every court of
record.68 It is a peculiar type of an offence which is a class by itself and therefore, it has a
procedure for itself69. In Sukhdev Singh v. Hon'ble C.J.S. Teja Singh and others70, the SC
held that, “In our opinion, the power of a High Court to institute proceedings for
contempt and punish where necessary is a special jurisdiction which is inherent in all
courts of record”
55. It is submitted that Section 1(2) of the Criminal Procedure Code expressly excludes
special jurisdictions from its scope. Contempt is a special subject and the jurisdiction is
conferred 'by a special set of laws peculiar to courts of record’. 71 Also, it is a settled
principle of law that proceedings under the Contempt of Courts Act do not attract the
doctrine of double jeopardy.72 This special power is not within the purview of either the
Penal Code or the Code of Criminal Procedure73 and hence, both the criminal proceedings
can take place simultaneously without being affected by one another.

64
Bathina Ramakrishna Reddy v The State of Madras AIR 1952 SC 149.
65
AIR 1933 Pat 142.
66
Emperor v Murali Manohar Prasad AIR 1929 Pat 72.
67
Ambard v Attorney General, Trinidad and Tobago AIR 1936 PC 141.
68
K Balasankaran Nair, Law of Contempt of Court in India (Atlantic 2004) 29; Prodip Kumar Biswas v Subrata
Das (2004) 4 SCC 573.
69
S Sher Singh v Raghu Pati Kapur & Anr AIR 1968 P&H 217 (FB).
70
AIR 1954 SC 454.
71
ibid.
72
Rajaram Waman Masurkar v Lokmanya Shikshan Prasarak 2008 (1) Bom CR 422.
73
R L Kapoor v State of Madras (1972) 1 SCC 651.

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VI. IS SECTION 2 (c) (i) OF THE CONTEMPT OF COURTS ACT, 1971
CONSTITUTIONALLY VALID?
56. It is humbly submitted before the Supreme Court of Inasia that Section 2(c)(1) of the
Contempt of Court Act 1971, which defines scandalising the court, is constitutionally
valid because it does not violate any provision mentioned under the Constitution.
Meaning of "Scandalising the Court" is defined under the Halsbury’s Laws of England as
the scurrilous abuse of a judge or court, or attacks on the personal character of a judge74.

A. Freedom of Speech and expression under art.19(1)(a) of the Indian Constitution is

not violated as art 19(2) provides for reasonable restrictions on fundamental rights.
57. Although article 19 (1)(a) of the Constitution gives right to Freedom of speech and
expression but it is not absolute and is subject to certain restrictions which is provided
under article 19(2) of the Constitution. Article 19(2) states:
“Nothing in sub-clause (a) of clause (1) shall affect the operation of any existing law
or prevent the State from making any law, in so far as such law imposes reasonable
restriction on the exercise of the right conferred by the sub-clause... in relation to
contempt of court, defamation or incitement to an offence.”
58. In E. M. Sankaran Namboodiripad vs T. Narayanan Nambiar75, it was held that “the
spirit underlying Article 19 (1)(a) must have due play but we cannot overlook the
provisions of the second clause of the article. While it is intended that there should be
freedom of speech and expression, it is also intended that in the exercise of the right,
contempt of court shall not be committed.” It clearly indicates the non-absolute character
of the enshrined right to Freedom of speech and that the law of Contempt of Court does
not come under the purview of exercisation of this right.
59. Furthermore, it is submitted that the restriction on Freedom of speech and expression is
reasonable if it is imposed to protect the dignity of court. It was held in Dr.D.C. Saxena
vs Hon'Ble The Chief Justice Of India 76 that “if maintenance of democracy is the
foundation of free speech, society equally is entitled to regulate freedom of speech or
expression by democratic action. Nobody has a right to denigrate others right of person
and reputation. Bonafide criticism of any system or institution including the judiciary
cannot be objected to as healthy and constructive criticism are tools to augment forensic

74
Halsbury's Laws of England (4th Edn, LexisNexis) vol 9, 21.
75
1971 SCR (1) 697.
76
(1996) 5 SCC 216.

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Arguments Advanced
tools for improving its function.” There is guarantee of the Constitution of India that there
will be freedom of speech and writing, but reasonable restrictions can be imposed.
60. Though it is conceded that Freedom of speech and expression is one of the fundamental
rights that are protected by the Constitution, it cannot disrespect any institution. It was
held that Freedom of expression is vital to the maintenance of free society. It is essential
to the rule of law and liberty of the citizens. The liberty of free expression is not to be
confounded or confused with license to make unfounded allegations against any
institution, much less the judiciary.77 The law of contempt of court as understood in India
is a valid law. Merely because there is an absence of statutory definition of contempt of
court, it cannot be said to be violative of Article 19(1)(a) of the Constitution in view of
Article 19 (2) and Article 21578.

B. Section 2(c)(i) of this Act is not violative of Article 14 of Constitution

61. It is submitted that under the Constitution, Articles 129 and 215 specially confers to
Supreme Court and the High Courts the power to punish for contempt of themselves
respectively. Article 129 states that:
"Even supreme Court shall be a Court of Record and shall have all the powers of
such a Court including the power to punish for contempt of itself.”
62. Such powers are conferred to the courts not by any ordinary statute or rule, but they are
inherited by the Constitution itself and hence, cannot be held unreasonable and, therefore,
are not violative of Article 14 of the Constitution.
63. It is also submitted that the classification made for this special power given to the courts
cannot be held unreasonable. In the case of S. Sher Singh vs Raghu Pati Kapur79, the
courtheld, “It is a peculiar type of an offence which is a class by itself and, therefore, it
has a procedure for itself. The classification is intelligible as also the classification has
rational relation to the object in that in the matter of contempt the punishment is awarded
summarily for that is done not with the object of providing protection to individual
Judges but in the Interest of administration of justice so that the public confidence in the
impartiality of the Judges be not shaken. It is this object with which the proceedings in
contempt of Court have been classified as proceedings of a class by themselves with a
procedure of their own.” Hence, the procedure provided for the summary trial of the
Contempt of Court is not violative of Article 14.

77
E M Sankaran Namboodiripad v T Narayanan Nambiar (1970) 2 SCC 325.
78
Noordeen Mohammad v A K Gopalan 1968 CriLJ 1424.
79
AIR 1968 P&H 217.

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Arguments Advanced
C. Necessity to uphold the majesty of law and administration of justice.
64. It is obvious that if an impression is created in the minds of the public that the judges in
the-highest court in the land ‘act on extraneous considerations in deciding cases, the
confidence of the whole community in the administration of justice is bound to be
undermined and no greater, mischief than that can possibly be imagined.80
65. If the judiciary is to perform its duties and functions effectively and remain true to the
spirit with which they are sacredly entrusted to it, the dignity and authority of the courts
have to be respected and protected at all costs. 81 When a case is finished, Courts are
subject to the criticism as other people, but the propriety and necessity of preventing
interference with the course of justice by premature statement, argument or intimidation
hardly can be denied.
66. Therefore, it is submitted that for the wider purpose of protecting public interest in the
legal framework of the nation, Section 2 (c)(1) under Contempt of Court Act is
constitutionally valid.

80
Re: The Editor, Printer v Arabinda Bose And Another 1953 SCR 215.
81
Re: Vinay Chandra Mishra (1995) 2 SCC 584.

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Prayer

PRAYER

In the light of arguments advanced and authorities cited, the Respondents humbly submit that
the Hon’ble Court may be pleased to adjudge and declare that:

1. LML does not have control over the target company, therefore LML does not trigger
Regulation 4 of SAST Regulations, 2011.

2. CGL cannot be regarded as an associate of LML, therefore appointment of Mr. Harris

as an independent director by LML is not bad in law.

3. Section 26 of the Amendment Act operates retrospectively and therefore the

Amendment Ordinance shall be applied in the instant case.

4. The court can refer parties to arbitration under Section 8 of the Arbitration and
Conciliation Act even if there are serious allegations of fraud is involved and
therefore the suit filed by DOCL shall be stayed and the parties shall be referred to
Arbitration.

5. There can be simultaneous proceedings for Criminal Defamation and Criminal

Contempt of Court.

6. The Section 2 (c) (i) of the Contempt of Courts Act, 1961 is constitutionally valid.

Any other order as it deems fit in the interest of equity, justice and good conscience.

Sd/-

(Counsel for the Respondents)

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Memorial for the Respondent