INDIA – REGULATIONS SPECIFYING DISTRIBUTION OF LEFTOVER NOT SERVED PORTIONS OF SAFE FOOD

Food and Safety Standards Authority of India, the autonomous body that regulates food safety and regulations in India, published the Food Safety and Standards (Recovery and Distribution of Surplus Food) Regulations, 2019 (“the Regulation). The Regulation streamlines and specifies the responsibilities of food donors, food banks and food distribution organizations that are engaged in distributing surplus food to any person free of cost. The parties have to comply with these regulations by 01.07.2020.

The Regulation defines surplus food as any leftover unused portions of safe food that have not been served to the customers. A food distribution organization has been defined as any person or any organization that collects surplus food from food donor(s) and distributes directly to any person free of cost without any profit.

Along with defining the roles, responsibilities of the food donor/food business operator, food distribution organization and labeling requirements amongst other requirements has also been elaborated. The food donor/food business operator shall be obligated not to distribute unsafe food and to handover the surplus food at a reasonable time so that the food doesn’t expire or go bad before it is distributed to any person. Further the food donor has to pack the food appropriately so as to avoid any contamination and store the same in hygienic conditions to ensure safety.

The food distribution organization has to ensure that the surplus food that is being procured by them is being procured from a reliable source having valid registration and license. The food distribution organization also requires having a proper storage, reheating and transporting facility in place.

Apart from the obvious responsibilities of the parties the Regulation also importantly provides requirements of labeling donated food. Requirements for labeling of donated food depend on whether the food is in its original package or has been prepared as meal. Donated pre-packed and prepared food name of the item or food, manufacturer information, source of food, list of ingredients, and date of expiry.

Lastly the Regulation provides for a monitoring committee constituted by the Commissioner of Food Safety of each state which shall monitor and make recommendations for improvement and will further hold training programmes in health and hygiene.

The adoption of these Regulations will streamline the structure to be followed by food banks and food donors which will benefit the consumer. This will further ensure that the parties involved, especially the food donor, maintains the quality of surplus food and the end user consumes nutritious and healthy food.

Even a perception of bias in an Arbitrator would not be fair to the parties: Supreme Court of India

“That apart when one is required to judge the case of another, justice should not only be done, but it should also seem   to   be   done   is   the   bottom   line”, explained the Supreme Court of India in the matter of Vinod Bhaiyalal Jain & Ors. Versus Wadhwani Parmeshwari Cold Storage Pvt. Ltd.. The Supreme Court in the mentioned matter has dealt with and cleared the air over objection to an arbitrator on the perception of bias.

The arbitration stems from a receipt for storage of goods issued by the Wadhwani Parmeshwari Cold Storage Pvt. Ltd. (“Respondent”) to Vinod Bhaiyalal Jain (“Appellant”). The receipt contained an arbitration clause, referring all disputes to one Mr. ST Mandani (“Arbitrator”).

Before the Arbitral Tribunal the Appellant disputed the arbitration clause and also objected to the appointment of the Arbitrator since he was the counsel for the respondent No. 1 and its partners in some other cases. Despite these objections the Arbitral Tribunal proceeded with the arbitration and passed an award dated 08.08.2006 (“award”) against the Appellants.

The Appellants challenged the award before the Principal District Judge, Nagpur under Section 34 of the Arbitration and Conciliation Act, 1996 (“Act”), raising objection to the award, more particularly with regard to   the   conduct   of   the   learned   Arbitrator. The Principal District Judge appreciating the   same was of the opinion that the learned Arbitrator had in fact acted as a counsel for Sri Suresh, a partner of Respondent No. 1, which fact was not disclosed in terms of Section 12 of the Act and also on taking note of Section 13 of the Act, found the objection justified and set aside the award.

The Respondent appealed to the High Court of Bombay under Section 37(1)(b) of the Act. The High Court of Bombay held   that   merely   because   the   learned Arbitrator had appeared as a lawyer in one mesne profits case for Respondent No. 1, it would not make a reasonable man believe that the Arbitrator was biased and there was a possibility that the Arbitrator would rule in favour of the Respondent No. 1. The High Court accordingly set aside the order passed in the proceedings under Sec. 34 of the Act, 1996 and restored the award   passed   by   the   learned   Arbitrator.

The Appellant thereafter appealed before the Supreme Court of India noticed   that issues arising herein for consideration at the threshold is with regard to   the existence or otherwise of the Arbitration clause governing the parties and more particularly with regard to the conduct of the Arbitrator.

The Supreme Court rejected the contention as regards the existence of an Arbitration clause because the Appellant being unsatisfied with the learned Arbitrator had filed a petition under Section 11 of the Act for appointment of the Arbitrator hence the existence of Arbitration clause is undisputed.

It further observed that the learned Arbitrator, on multiple occasions, had been informed about the fact that he had been a counsel for the Respondent in one another case and in that circumstance it is also not a case where the learned Arbitrator had proceeded in the matter by oversight or without having knowledge of such conflict of interest. When the claim was lodged before the learned Arbitrator both the events of, he being appointed as an Arbitrator and also as a counsel in another case had existed, which was well within the   knowledge   of   the learned Arbitrator   and   in   that circumstance, it was the appropriate stage when he ought to have disclosed the same and refrained from entertaining the claim.

The Supreme Court rightly noted, “…in the above background, what is to be seen is that there has been a reasonable basis for   the   appellants   to   make   a   claim   that   in   the   present circumstance the learned Arbitrator would not be fair to them   even   if   not   biased.     It   could   no   doubt   be   only   a perception of the appellants herein.   Be it so, no room should be given for even such a feeling more particularly when in the matter of arbitration the very basis is that the parties get the opportunity of nominating a judge of their choice in whom they have trust and faith unlike in a normal course of litigation where they do not have such choice” and accordingly set aside the award and restored the order passed by the Principal District Judge.

Independence and impartiality of Arbitrators are the hallmarks of arbitration and through this judgment the Supreme Court has made it clear that there is no room for even perception of bias in an Arbitrator.

Initiation of Corporate Insolvency Resolution Process by a Foreign Creditor against an Indian Corporate Guarantor

Every financial institutions want someone to stand guarantee to the loan they are about to provide. One of such common ways is that a subsidiary company stands as a guarantor for the parent company against the loan obtained by the latter. The question now arises is whether a Foreign Creditor can initiate Corporate Insolvency Resolution Process against Indian Corporate Guarantor?

Before delving into the question it is imperative to speak about the position of a Corporate Guarantor under the Insolvency & Bankruptcy Code, 2016 (“I&B Code”). The NCLAT vide its judgment in Dr. Vishnu Kumar Agarwal vs M/s Piramal Enterprises Ltd. cleared two legal positions. Firstly, it cleared, that a Financial Creditor can initiate Corporate Insolvency Resolution Process against the Corporate Guarantor, under I&B Code, even before proceeding against the corporate debtor. Secondly, the bench also noted that counter-indemnity obligation in respect of a guarantee comes within the meaning of ‘financial debt’, as per clause (h) of Section 5 (8) of the I&B Code. The NCLAT thus cleared the air on the position of Corporate Guarantor under I&B Code.

For a better understanding of the topic a recent judgment of the NCLT, Chennai Bench being M/s Stanbic Bank Ghana Ltd. vs M/s Rajkumar Impex Pvt. Ltd. (CP/670/IB/2017) is discussed herein below.

Background

The Financial Creditor (M/s Stanbic Bank Ghana Ltd.) entered into Loan Agreements with M/s Rajkumar Impex Ghana Ltd. which was the principle borrower and the wholly owned subsidiary of the Respondent Company. Pursuant to the Loan Agreements the Financial Creditor entered into a deed of guarantee with the Respondent Company. The guarantee was an “on demand” guarantee which was inviolable on demand. The deed also contained an indemnity issued by the Respondent to the Financial Creditor. Upon default from the borrower proceedings were initiated against the Respondent in the courts in England, in terms of the deed, and the court of England passed an order after analyzing the merits despite which the Respondent failed to make payment to the Financial Creditor hence the Creditor initiated the Corporate Insolvency Resolution Process.

Submissions of the Respondent

The Respondent submitted that the petition was not maintainable since (a) the Creditor was not an Indian Company registered under the Companies Act, 2013; (b) a constituted attorney on behalf of the Creditor cannot institute an application under I&B Code, the rules only entitle an authorized representative to verify the pleadings; (c) Principle borrower is an independent company and not a subsidiary of the Respondent Company; (d) having failed to recover money from the principle borrower the Creditor cannot enforce the claim against the Guarantor; (e) the order made by the courts in England is not conclusive and has not been given on merit; (f) lastly the Foreign Exchange Management (Guarantee) Regulations, 2000 (FEMA Regulations) permission to be obtained from Reserve Bank of India before singing of the guarantee.

Submission of the Financial Creditor

The Creditor countered the arguments by stating that (a) dispute with the principle borrower is irrelevant, because the guarantee was “on demand” and it is a settled law that the liability of the Guarantor is co-extensive  with that of the principle borrower; (b) the I&B Code does not prohibit a foreign creditor from filing a petition; (c)the order passed by the court of England, despite being ex-partee was on merits; (d) an authorized representative includes an authorized agent, the Board of Directors authorized the POA to file the petition (relying on Macquirie Bank Ltd. vs Shilpi Cables Technologies Ltd.); (e) dispute is irrelevant for the purpose of  determining an application under Section 7 of I&B Code (relying on M/s Innoventive Industries Ltd. vs. ICICI Bank and another) (f) finally, FEMA Regulations apply only if the principle borrower in an Indian.

Decision by NCLT, Chennai Bench

Relying upon the findings of the order passed by the courts of England the NCLT concluded that the Financial Creditor has made out a prima facie case under I&B Code. The findings of the court of England that were relied upon are that the Respondent in terms of the deed is liable as principle obligator and indemnifier and also that there is no compelling reason for trial and after analyzing evidence the court of England passed its order. The NCLT concluded that it has not power to enforce the foreign decree but it has the power to taking cognizance of the decree and accordingly initiated the Corporate Insolvency Resolution Process.

Conclusion

Having considered the above, the NCLT has rightly admitted the petition and imitated Corporate Insolvency Resolution Process and with that the NCLT has also clarified that a Foreign Creditor can file a petition for Corporate Insolvency Resolution Process under I&B Code against an Indian Corporate Guarantor.

Strict adherence to limitation in filing an application for setting aside of an arbitral award in India

The Arbitration and Conciliation Act, 1996 (“Act”) under Section 34(3) provides for a specific statutory limitation of filing an application for setting aside of an arbitral award. Section 34(3) provides that an application for setting aside an arbitral award may not be made after the lapse of three months (90 days) from the date of receipt of arbitral award. Further the proviso to Section 34(3) provides that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.

The Supreme Court of India in the matter of M/s Simplex Infrastructure Limited vs. Union of India (Civil Appeal No. 11866 of 2018) has, recently, enforced the strict adherence to the above mentioned timeline. The Supreme Court largely also dealt with the applicability of Section 5 and Section 14 of the Limitation Act, 1963 (“Limitation Act”) in an application for setting aside of arbitral award. For reference, the Limitation Act is an Act to consolidate and amend the law for the limitation of suits and other proceedings.

Facts of the matter

The Arbitrator pronounced an award dated 27.10.2014 in favor of the Appellant and directed the Respondent to pay a certain sum along with interest in favor of the Appellant. The Respondent received the copy of the award on 31.10.2014. The Respondent aggrieved by the award filed an application for setting aside of the award under Section 34 of the Act on 30.10.2015 before the District Judge, Port Blair. It is also pertinent to mention herein that during the pendency of the arbitration proceedings, the Appellant had filed an application under Section 9 of the Act before the High Court of Calcutta praying for an injunction on encashment of bank guarantee against the Respondent and the application was duly contested by the Respondent.

The District Judge, Port Blair on 12.02.2016 dismissed the application for setting aside the arbitral award on jurisdictional grounds holding that Section 42 of the Act bars it to entertain the application. The Respondent after much delay thereafter on 28.03.2016 filed an application for setting aside the arbitral award before the High Court of Calcutta, which had the correct jurisdiction to hear the application. The High Court of Calcutta on 27.04.2016 condoned the delay of 514 days in filing of the application for setting aside of the application. Accordingly, the Appellant filed an appeal against the judgment dated 27.04.2016 passed by the High Court of Calcutta.

Issues before the Supreme Court

The question that arose before the Supreme Court was whether the High Court of Calcutta was justified in condoning the delay of 514 days. In order to deal with this issue the Supreme Court had to also assess the applicability of Section 5 and Section 14 of the Limitation Act.

The judgment

Delving into the timeline provided in Section 34(3) of the Act, the Supreme Court discussed the intent of the legislature. It observed that the legislature is evinced by the use of the words “but not thereafter” in the proviso. The Supreme Court envisaged that words “but not thereafter” make it abundantly clear that as far as the limitation for filing an application for setting aside an arbitral award is concerned, the statutory period prescribed is three months which is extendable by another period of thirty days and no more, subject to the satisfaction of the court that sufficient reasons were provided for the delay.

The Supreme Court thereafter appreciated the application of the Limitation Act, 1963. Section 5 of the Limitation Act deals with the extension of the prescribed period for any appeal or application subject to the satisfaction of the court that the appellant or applicant had sufficient cause for not preferring the appeal or making the application within the prescribed period. The Supreme Court relying upon the judgment of Union of India vs. Popular Construction Company (Civil Appeal No. 6997 of 2001) ruled out the application of Section 5 of the Limitation Act. The Supreme Court in the above mentioned matter of Popular Construction Company had ruled that the time-limit prescribed under Section 34 of the Act to challenge an award is absolute and unextendible by Court under Section 5 of the Limitation Act. The Supreme Court in its judgment has observed that to hold that the Court could entertain an application to set aside the award beyond the extended period under the proviso would render the phrase “but not thereafter” wholly otiose. The Supreme Court accordingly ruled out the application of Section 5 of the Limitation Act in an application filed for setting aside of arbitral award.

Lastly the Supreme Court dealt with the application of Section 14 of the Limitation Act. Section 14 of the Limitation Act, 1963 deals with the “exclusion of time of proceeding bona fide” in a court without jurisdiction, subject to satisfaction of certain conditions. The Supreme Court relying upon its judgment Consolidated Engineering Enterprises vs. Principle Secretary, Irrigation Department (Civil Appeal No. 2461 of 2008), held that Section 14 of Limitation Act would apply to proceedings under Section 34 of the Act. In the above mentioned matter of Consolidated Engineering Enterprises the Supreme Court has held that Section 34 of the Act of 1996 would be unduly oppressive, if the provisions of Section 14 of the Limitation Act are not applicable to it, because cases are no doubt conceivable where an aggrieved party, despite exercise of due diligence and good faith, is unable to make an application within the prescribed timeline. The Supreme Court in the above mentioned matter also observed that Section 14 of the Limitation Act does not provide for a fresh period of limitation but only provides for the exclusion of a certain period wherein the application under Section 34 was filed before a court without jurisdiction to entertain the application, hence Section 14 of the Limitation Act would apply to application filed under Section 34 of the Act.

Applying the aforesaid observations the Supreme Court came to a conclusion that even after deducting 379 days (applying Section 14 of the Limitation Act) out of the 514 days delay in filing of the application under Section 34, there was still a delay of 131 days which is more than the period of limitation prescribed under Section 34(3) of the Act. The Supreme Court accordingly set aside the judgment of the High Court of Calcutta allowed the appeal.

Conclusion

The Supreme Court has through this judgment upheld the strict adherence to the timeline of three month extendable by another thirty days as provided under Section 34 of the Act. The judgment has reinforced the legislative intent of the thirty days extension provided by the Act. The judgment compels the award debtor to file an application for setting aside the award within the strict timeline provided and incidentally unburdens the Court from entertaining applications for setting aside award filed after the expiry of the timeline provided under Section 34 of the Act.

Limitation for challenging arbitral award begins from the time the signed copy of the award is delivered/received to/by the party

The Supreme Court in the matter of Anilkumar Jinabhai Patel (D) Thr. Lrs. vs. Pravinchandra Jinabhai Patel and Ors  by upholding the decision of the High Court of Judicature at Bombay Bench at Aurangabad has reaffirmed that the limitation to file an application for setting aside of an arbitral award begins from the date on which the signed copy of the award is acknowledged to have been received by the aggrieved party.

The Appellant and Respondent, who were brothers, together started a business of fertilizer manufacturing, chemical and real estate in Jalgaon. Since the children of Parties had grown up and in order to avoid any possible litigation, both the brothers and their family members decided to divide the assets of the family. The parties signed a Memorandum of Understanding dated 21.05.1996 (MoU) and appointed two arbitrators. The MoU was signed by all the members of the family i.e. the Appellants and Respondents.

In the interim and during the pendency of the arbitral proceedings Pravinchandra Patel and Anilkumar Patel decided to streamline the ongoing business of firms and companies by signing of an interim MOU on 29.06.1996 (IMOU). The covenants of the said IMOU covered the matters relating to bank accounts and withdrawal power etc. The said IMOU was signed by Pravinchandra Patel for himself and on behalf of his family members. Similarly, Anilkumar Patel also signed the IMOU for himself and also as a power of attorney holder for his wife, his all sons and daughter-in-law.

An award dated 07.07.1996 (with a mention of the IMOU) was passed and signed by the arbitrators. The copy of the award was handed over to Pravinchandra Patel and Anilkumar Patel by arbitrators in person which was duly acknowledged by them. The copy of the award bore signatures of both Pravinchandra Patel and Anilkumar Patel, respectively, with a recital that they and their family members will act as per the award and will give effect to the same. Further by another award dated 03.11.1996, the issues between Appellants and Respondents were finally decided taking note of earlier awards.

The Appellants thereafter filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 (“Act”) challenging the award dated 07.07.1996. The Appellants amongst other contentions also contended that the they learnt about the arbitral award only on 11.08.2005 when they were served with the notice of execution petition filed by Pravinchandra Patel alongwith the xerox of the award dated 07.07.1996. Therefore, as per the appellant-Anilkumar Patel, period of limitation starts only from 11.08.2005, from the date of their receipt of copy of the award.

The District Judge vide order dated 14.02.2011 allowed the application under Section 34 of the Act and set aside the award dated 07.07.1996 holding that the holding that the period of limitation prescribed under Section 34(3) of the Act is to be computed from the point of time when the party concerned received the copy of the arbitral award and in the present factual matrix there is nothing to show that Anilkumar Patel was authorised by the other applicants to receive a copy of the award on their behalf and it cannot be said that the appellant Nos.1(a) to 1(d) and respondent No.10 had received the award in terms of Section 31(5) of the Act.

At this point it would be necessary to bring knowledge that Section 34(3) of the Act provides that an application for setting aside of an award shall be made within 3 months from the date on which the party has received the award. The sub-section further provides an extension of 30 days in filing the application only if the Court finds sufficient grounds for the delay. Section 31(5) of the Act provides that after an arbitral award is made a signed copy shall be delivered to the parties.

Being aggrieved by the order dated 14.02.2011, Pravinchandra Patel challenged the same before the Hon’ble High Court and the High Court set aside the order of the District Judge holding that the petition filed in the year 2005 under Section 34 of the Act was time barred. The High Court enumerated various circumstances to hold that Anilkumar Patel and his family members were well aware of the award dated 07.07.1996. The High Court also relied upon various correspondence between the parties, legal proceedings etc. to arrive at the conclusion that Anilkumar Patel had received the award dated 07.07.1996.

Upon perusal of the impugned judgment and materials placed on record, the following points arose for the Supreme Courts’ consideration:-

  • Whether Anilkumar Patel represented his family in the arbitration proceedings and whether respondents are right in contending that receipt of copy of award by Anilkumar Patel was for himself and on behalf of his family members?
  • Whether the High Court was right in holding that the application under Section 34 of the Arbitration and Conciliation Act, 1996 for setting aside the award was barred by limitation?

The Apex Court relying on State of Arunachal Pradesh v. Damini Construction Co. observed that the words ‘but not thereafter‘ in the proviso to Section 34 are of mandatory nature, and couched in the negative, and leave no room for doubt. Proviso to Section 34 gives discretion to the court to condone the delay for a sufficient cause, but that discretion cannot be extended beyond the period of thirty days, which is made exclusively clear by use of the words ‘but not thereafter‘.

In furtherance to the above the Apex Court also relied upon Union of India v. Tecco Trichy Engineers and Contractors further observed that the period of limitation would commence only after a valid delivery of an arbitral award takes place under Section 31(5) of the Act.

The Supreme Court also relied on State of Maharashtra and Ors. v. Ark Builders Pvt. Ltd. observed that the expression “…party making that application had received the arbitral award…” cannot be read in isolation and it must be understood that Section 31(5) of the Act requires a signed copy of the award to be delivered to each party.

The Supreme Court opined that cumulative reading of Section 34(3) and Section 31(5) of the Act makes it clear that the limitation period prescribed under Section 34(3) of the Act would commence only from the date on which the signed copy of the award is delivered to the party making the application for setting it aside.

Lastly the Supreme Court appreciated the other observations made by the High Court on the circumstances that were brought on record to clearly show that Anilkumar Patel was authorized by other Appellant Nos. 1(a) to 1(d) to receive copy of the award and act on their behalf.

Summing up their observation and appreciating the observation of the High Court that having accepted the award through Anilkumar Patel, being the head of the family, appellant Nos. 1(a) to 1(d) cannot turn round and contend that they had not receive the copy of the award and hence in terms of compliance of Section 31(5) and Section 34(3) of the Act the Appellants challenge to the award is barred by limitation.

By upholding the judgment passed by the High Court, the Supreme Court has yet again reinforced the stand of the Apex Court in the above mentioned case laws; a combined reading of Section 31(5) with Section 34(3) of the Act prescribes that the period of limitation would start ticking from the moment the signed copy of the award is delivered or received by the proper party.

SpicyIP

Advocate

Law and Other Things

A Blog About India's Laws and Legal System, its Courts, and its Constitution

SCC Blog

Bringing you the Best Analytical Legal News

the PRS Blog

The official blogsite of PRS Legislative Research