Do Judges have “Skin in the Game”?

Recently, I read Nassim Nicholas Taleb’s Book, “SKIN IN THE GAME”.  It made me think about the applicability of the commonsensical  “skin in the game” principle to the Indian judiciary. The “skin in the game” principle literally means that one should bear the consequences of one’s action/advise. In the words of Taleb,

If you have the rewards, you must also get some of the risks, not let others pay the price of your mistakes. If you inflict risk on others, and they are harmed, you need to pay some price for it.

In the Indian legal system, the clients obviously have skin in the game as their life/property is at stake and the lawyers also have their skin in the game as the client may retain or fire them depending on their performance. The only stakeholders without skin in the game in the Indian system are the judges with guaranteed tenures/salaries and complete lack of accountability.

An issue of incentivising average performance:

The Indian Judiciary is a giant bureaucracy and as Taleb points out bureaucracies are “a construction by which a person is conveniently separated from the consequences of his of her actions.”  While the judgement delivered by a Judge affects the parties and their lawyers, it has no direct effect on the career prospects of a judge. Even if a judgement is found to be erroneous and later overturned by the higher judiciary, a judge passing an incorrect judgement faces no consequences. While there are some extremely honest and hardworking judges, the system on the whole encourages average performance as there are no incentives to work hard since everyone is paid a fixed salary. Also, the promotions in the lower judiciary or even from the High Courts to Supreme Court are based on either seniority or other socio-political considerations. Thus, without any skin in the game, the judges have become thick skinned and oblivious to the tribulations of the clients/lawyers.

In stark contrast, the same judges when appointed as arbitrators show a different level of interest in the dispute and perform well in a time bound manner. This is due to the fact that arbitrators have skin in the game as their fee is paid by the clients and they are appointed on the advice of lawyers. Thus, not only is there some accountability built in the system but they also need to perform well if they have to be appointed by clients/ lawyers in other arbitrations.

Applying the “SKIN IN THE GAME” principle to the Indian judiciary:

In the book, Taleb gives an example of skin in the game in the legal context as follows:

“Some might well ask: law is great, but what do you do with corrupt or incompetent judge? He could make mistakes with impunity. He could be the weak link. Not quite, or at least not historically. A friend once showed me a Dutch painting representing the judgement of Cambyses. The scene is from the story reported by Herodotus, concerning the corrupt Persian judge Sisamnes. He was flayed alive on the order of King Cambyses as a punishment for violating the rules of justice. The scene of the paining is Sisamnes’ son dispensing justice from his father’s chair, upholstered with the flayed skin as a reminder that justice comes with, literally, skin in the game.”

The judgement of Cambyses

Fortunately, we don’t have to go to the extreme/barbaric act of flaying our judges. On the other hand, with the use of artificial intelligence/big data, a great deal of accountability and incentivisation can be brought into the system.

A little tweaking of the current ecourt software can help in measuring the quantity and quality of the output of each judge and then they can be incentivised appropriately on the said data. For instance, we can track the number of judgements passed by a judge (quantity) and also, the number of judgements which are overturned/upheld by the higher judiciary(quality) of each judge. Thus, based on the quantity and quality of judgements passed by each judge, salaries/incentives and promotions should be awarded. Further, the judges’ performance should be made public on a quarterly or annual basis so that judges know their standing and can strive to improve themselves.

Conclusion:

This is obviously not applicable to the highest judiciary i.e. the Supreme Court as there is no forum to authoritatively judge the qualitative output of the the Supreme Court judges. Further, the risk of incentivising faster disposal is that it may result in qualitatively poor judgements but this can still be countered to some extent by tracking the number of judgements which are modified/overturned/upheld of each judge. Lastly, some may also make the proverbial argument of such system affecting judicial independence but we have conveniently made the same argument to justify lack of accountability and poor performance for too long. Nevertheless, with necessary legal safeguards and changes in the regulatory framework, we need to ensure that the judicial independence does not come in the way of judicial accountability and performance.

Non -implementation of Resolution Plan: remedies available to the Creditors

Most Creditors heave a sigh of relief once the National Company Law Tribunal approves the Resolution Plan (“Plan”). However, the actual trouble for the creditors begin after approval of the Plan. It is increasingly seen that most Resolution Plans are not complied with resulting in loss of time/resources for the creditors and consequent liquidation of the corporate debtor. In such cases, a creditor has the option of seeking for liquidation of the corporate debtor under Section 33(3) of the IBC.

To liquidate or not to liquidate:

In most cases, the Creditors stand to gain more than the liquidation value when the Resolution Plan is implemented making the option of seeking liquidation of the corporate debtor impractical. Thus, the other options available to a creditor are:

  1. Invocation of performance security. 
  2. Seeking Directions from the NCLT.
  3. Contempt Petition. 
  4. Punishment under Section 74(3) of IBC

1. Invocation of performance security:

In order to avoid a situation where the corporate debtor is liquidated, Regulation 36B (4A) of Insolvency Resolution Process for Corporate Persons Regulations, 2016 (“Regulations”) was introduced on 24.01.2019.  Regulation 36B (4A) stipulates that on approval of the resolution plan, the Resolution Applicant shall provide a performance security. Further, if the Resolution Applicant fails to implement the plan, the performance security can be invoked by the COC. Thus, the threat of invocation of the performance security ensures that Resolution Plan is not contravened by the Resolution Applicant. 

However, the ground reality is different as most Resolution professionals/COC in a bid to get the resolution plan approved at the earliest do not insist on a performance guarantee from the Applicants only to realize their folly when the Plan is not implemented. Moreover, the Resolution Applicants are also hesitant to provide performance security as it involves a huge investment in the initial stage of the CIRP. 

2. Seeking Directions from the NCLT:

In the absence of performance security, the Secured Creditor can seek for directions from the NCLT under Regulation 39(9) which stipulates that any creditor aggrieved by the non – implementation of the Resolution Plan can also approach the NCLT for directions. In cases where the Resolution Applicant is refusing to implement the plan due to some dispute with the creditors or for any other reason, the Creditors can approach the NCLT and seek appropriate direction from the NCLT for implementation of the plan.  

3.  Contempt Petition:

Another aggressive measure available to the creditors is to initiate contempt proceedings as the NCLT has the powers to punish for contempt of its orders under Section 425 of the Companies Act 2013. Thus, the aggrieved creditors can initiate contempt proceedings for violation of the Order of the NCLT by which the Resolution plan was approved and held to be binding on all the creditors.

4. Punishment under Section 74(3) of IBC

Section 74(3) provides punishment for contravention of the Resolution Plan i.e. imprisonment of 1-5 years with a fine of Rs.1 Lakh to Rs. 1 crore in the event that a corporate debtor or any of its officers are held to have deliberately contravened the Resolution Plan.

However, the NCLAT in COC of Amtek Auto Ltd., vs Mr. Dinkar T.Venkatasubramanian & Ors has held that such punishment can be awarded only by a special court and that too on an application either by IBBI or the Central Government. Thus, the aggrieved creditor can only make application under Section 74(3) and Section 213 r/w. Section 447 of the Companies Act,2013 to the NCLT and the NCLT can then decided if the matter has to be reffered to IBBI/Central government for further action on the contravention of the Plan.

Conclusion:

While the aim of IBC is resolution, without appropriate legal framework to hold the Resolution Applicant accountable, most companies end up being liquidated even after approval of the Resolution plan as the aforementioned measures are merely arm twisting tactics which do not guarantee  the implementation of the resolution plan.

Notes from Seth Godin’s “Linchpin”

The message that Seth Godin tries to deliver in this piece of “art” is that the time of being a cog in the wheel in an assembly line is over. To thrive in today’s world, you need to be an artist/a linchpin/indispensable at work. 

The important lessons from the Book are:

1. Emotional Labour: 

As the world of assembly line and mass production comes to an end by automation, people need to develop and build emotional bonds. The ability to invest emotionally in anything that you do, gives you a competitive advantage over others especially in service industries.

2. The Art of Giving:

Another aspect of being a linchpin is to stand outside the transactional cycle of giving and taking. To be an artist, to be indispensable you need to give unconditionally and more than what is demanded. You need to build a tribe of givers and like minded people. 

3. Shipping:

It is important to complete what you start. It is not enough to work on a product, you also need to ship it. Being a closet artist will not make you a linchpin

4. Platform:

It is not enough to merely be an artist/author/inventor. You need to create the medium/platform for your art to reach the largest number of people it can. Again, if you’re a closeted artist it does not work but even simply shipping your “art” also does not work if you do not have a platform/medium through which it can reach the people. 

My Notes from the Book:

  • Stop settling for what’s good enough and start creating art that matters. 
  • Stop asking what’s in it for you and start giving gifts that change people It comes from two places: 1. You have been brainwashed by school and by the system into believing that your job is to do your job and follow instructions. It’s not, not anymore. 2. Everyone has a little voice inside of their head that’s angry and afraid. That voice is the resistance—your lizard brain—and it wants you to be average (and safe).
  • Every organization needs a linchpin, the one person who can bring it together and make a difference. Some organizations haven’t realized this yet, or haven’t articulated it, but we need artists. Artists are people with a genius for finding a new answer, a new connection, or a new way of getting things done 
  • The business model should be such that the employees needed possess the lowest possible level of skill necessary to fulfill the functions for which each is intended. A legal firm ought to have lawyers and a medical firm should hire doctors. But you don’t need brilliant lawyers or doctors. What you need is to create the best system through which good lawyers and doctors can be leveraged to produce excellent results. 
  • Consumers are not loyal to cheap commodities. They crave the unique, the remarkable, and the human. Sure, you can always succeed for a while with the cheapest, but you earn your place in the market with humanity and leadership 
  • The Internet has turned white-collar work into something akin to building a pyramid in Egypt. No one could build the entire thing, but anyone can haul one brick into place 
  • Leaders don’t get a map or a set of rules. Living life without a map requires a different attitude. It requires you to be a linchpin Abstract macroeconomic theories are irrelevant to the people making a million tiny microeconomic decisions every day in a hypercompetitive world. And those decisions repeatedly favor fast and cheap over slow and expensive 
  • Karl Marx and Friedrich Engels wrote, “By producing their means of subsistence men are indirectly producing their actual material life.” They went on to argue that what we do all day, the way money is made, drives our schooling, our politics, and our community
  • Thornton May correctly points out that we have reached the end of what he calls attendance-based compensation (ABC). There are fewer and fewer good jobs where you can get paid merely for showing up. Instead, successful organizations are paying for people who make a difference and are shedding everyone else 
  •  Or, consider for a second: would you be more successful if your employees were more artistic, motivated, connected, aware, passionate, and genuine? They do more than they’re paid to, on their own, because they value quality for its own sake, and they want to do good work. They need to do good work. Anything less feels intellectually dishonest, and like a waste of time. In exchange, you’re giving them freedom, responsibility, and respect, which are priceless 
  • So now, having learned from machines, organizations are applying the same logic to people. Letting people in the organization use their best judgment turns out to be faster and cheaper—but only if you hire the right people and reward them for having the right attitude. Which is the attitude of a linchpin 
  • We teach people to take initiative and become remarkable artists, to question the status quo, and to interact with transparency. And our graduates understand that consumption is not the answer to social problems.” 
  • Linchpins are able to embrace the lack of structure and find a new path, one that works. 
  • Emotional labor is available to all of us, but is rarely exploited as a competitive advantage. We spend our time and energy trying to perfect our craft, but we don’t focus on the skills and interactions that will allow us to stand out and become indispensable to our organization. Emotional labor was originally seen as a bad thing, a drain on the psyche of the stewardesses studied by Hochschild for her book. The mistake in her analysis was failing to consider the alternative. The alternative is working in a coal mine. The alternative is working in a sweatshop. It’s called work because it’s difficult, and emotional labor is the work most of us are best suited to do. It may be exhausting, but it’s valuable. 
  • Groucho Marx famously said, “I don’t care to belong to any club that would have me as a member.” The linchpin says, “I don’t want a job that a non-linchpin could get.” 
  • Wikipedia and the shared knowledge of the Internet make domain knowledge on its own worth significantly less than it used to be. Today, if all you have to offer is that you know a lot of reference book information, you lose, because the Internet knows more than you do. 
  • Depth of knowledge combined with diagnostic skills or nuanced insight is worth a lot, too. Knowledge alone, though, I’d rather get faster and cheaper from an expert I find online. If I need a great direct mail letter, it’s far cheaper and faster to hire a great direct mail writer to write me a letter than it is to hire someone and have him on staff for the one letter I need every month, right? 
  • Personal interactions don’t have asymptotes. Innovative solutions to new problems don’t get old. Seek out achievements where there is no limit. 
  • The problem is simple: Art is never defect-free. Things that are remarkable never meet spec, because that would make them standardized, not worth talking about. 
  • But the most visceral art is direct. One to one, mano a mano, the artist and the viewer. It’s the art of interaction. It’s what you do. The art of running a meeting, counseling a student, conducting an interview, and calming an angry customer. The art of raising capital, buying a carpet at a souk, or managing a designer 
  • When a day’s work does not equal a day’s pay, that means that at the end of the day, a bond is built. A gift is given and received, and people are drawn closer, not insulated from each other. Passion 
  • It’s impossible to make art for everyone. There are too many conflicting goals and there’s far too much noise. Art for everyone is mediocre, bland, and ineffective. If you don’t 
  • It’s not an effort contest, it’s an art contest. As customers, we care about ourselves, about how we feel, about whether a product or service or play or interaction changed us for the better. Where it’s made or how it’s made or how difficult it was to make is sort of irrelevant. That’s why emotional labor is so much more valuable than physical labor. Emotional labor changes the recipient, and we care about that 
  • Can the time you spend at work be the place you give gifts, create connections, invent, and find joy? What has to change for that to be true—does something external need to change, or is it an internal decision 
  • The opportunity doesn’t necessarily feel like an opportunity. Volunteering to do emotional labor—even when you don’t feel like it, and especially when you’re not paid extra for it—is a difficult choice. My first argument, though, is that you are paid for it. In fact, in most jobs that involve a customer, that’s all you are getting paid for 
  • If art is a human connection that causes someone to change his mind, then you are an artist 
  • The alternative is to treasure what it means to do a day’s work. It’s our one and only chance to do something productive today, and it’s certainly not available to someone merely because he is the high bidder 
  • A day’s work is your chance to do art, to create a gift, to do something that matters. As your work gets better and your art becomes more important, competition for your gifts will increase and you’ll discover that you can be choosier about whom you give them 
  • Being open is art. Making a connection when it’s not part of your job is a gift. You can say your lines and get away with it, or you can touch someone and make a difference in their lives forever.
  • My fundamental argument here is simple: In everything you do, it’s possible to be an artist, at least a little bit. Not on demand, not in the same way each time, and not for everyone. But if you’re willing to suspend your selfish impulses, you can give a gift to your customer or boss or coworker or a passerby. And the gift is as much for you as it is for the recipient. 
  • The easier it is to quantify, the less it’s worth 
  • And if the ideas don’t spread, if no gift is received, then there is no art, only effort. When an artist stops work before his art is received, his work is unfulfilled. 
  • Successful people are successful for one simple reason: they think about failure differently. Successful people learn from failure, but the lesson they learn is a different one. They don’t learn that they shouldn’t have tried in the first place, and they don’t learn that they are always right and the world is wrong and they don’t learn that they are losers. They learn that the tactics they used didn’t work or that the person they used them on didn’t respond. 
  • So we churn out very good second violinists and very competent timpani players. We have a surplus of them, in fact, and that’s why it’s a dicey way to make a living, with only a few talented (and lucky) musicians making good money or holding steady jobs. Often guest conductors don’t even know the names of the people who make up the bulk of the orchestra. 
  • In Iconoclast, Gregory Berns uses his experience running a neuroscience research lab to explain the biological underpinnings of the resistance. In fact, public speaking is the perfect petri dish for exposing what makes us tick. It turns out that the three biological factors that drive job performance and innovation are social intelligence, fear response, and perception. Public speaking brings all three together. Speaking to a group requires social intelligence. We need to be able to make an emotional connection with people, talk about what they are interested in, and persuade them. That’s difficult, and we’re not wired for this as well as we are wired to, say, eat fried foods. Public speaking also triggers huge fear responses. We’re surrounded by strangers or people of power, all of whom might harm us. Attention is focused on us, and attention (according to our biology) equals danger. Last, and more subtly, speaking involves perception. It exposes how we see things, both the thing we are talking about and the response of the people in the room. Exposing that perception is frightening. In a contest between the rational desire to spread an idea by giving a speech and the biological phobia against it[…] 
  • The resistance would like you to curl up in a corner, avoid all threats, take no risks, and hide. It feels safe, after all. The paradox is that the more you hide, the riskier it is. The less commotion you cause, the more likely you are to fail, to be ignored, to expose yourself to failure. We tried to set up an economy where you could hide your big ideas, go through the motions, and get what you needed. 
  • Your work is to create art that changes things, to expose your insight and humanity in such a way that you are truly indispensable. Your work is to do the work, not to do your job. Your job is about following instructions; the work is about making a difference. Your work is to ship. Ship things that make change. 
  • When you first adopt the discipline of shipping, your work will appear to suffer. There’s no doubt that another hour, day, or week would have added some needed polish. But over time—rather quickly, actually—you’ll see that shipping becomes part of the art and shipping makes it work.
  • Shipping something out the door, doing it regularly, without hassle, emergency, or fear—this is a rare skill, something that makes you indispensable 
  • Attempt to create only one significant work a year. Break that into smaller projects, and every day, find three tasks to accomplish that will help you complete a project. And do only that during your working hours. I’m talking about an hour a day to complete a mammoth work of art, whatever sort of art you have in mind. That hour a day might not be fun, but it’s probably a lot more productive than the ten hours you spend now. 
  • I’m trying to sell you on the idea of building a platform before you have your next idea, to view the platform building as a separate project from spreading your art. You can work on the platform every day, do it without facing the resistance. As the platform gets bigger and stronger, you get to launch each idea a little farther uphill
  • A valuable platform is an asset, one that isn’t handed to you. It takes preparation and effort to set the world up so that your ideas are more likely to ship. But that’s effort that the resistance won’t be so eager to sabotage. By separating the hard work of preparation from the scary work of insight, you can build an environment in which you’re more likely to ship. 
  • Other people might need to consider the economic benefits first. These are people who were brainwashed by the last five hundred years of history, people who want to know what’s in it for them, people who believe there ain’t no such thing as a free lunch and every man for himself. These people have no art in their life because they’re unable to give a true gift. They want something in return. They want security or cash or both. The hardheaded selfish capitalists among us will enjoy the next sentence: Artists are indispensable linchpins .
  • As I wrote in my previous book, Tribes, the new form of marketing is leadership, and leadership is about building and connecting tribes of like-minded people. Keller’s generosity to his tribe doesn’t only connect him to them; it connects the tribe members to one another. One fan is automatically the friend of the next, if for no other reason than to share the effects of Williams’s generosity.
  • If money circulates freely within the tribe, the tribe will grow prosperous more quickly. I give you some money to buy seeds, your farm flourishes, and now we both have money to give to someone else to invest. The faster the money circulates, the better the tribe does. The alternative is a tribe of hoarders, with most people struggling to find enough resources to improve productivity. 
  • Obviously, there’s another force at work here. When I make an interest-free loan to you, I’m trusting you and giving you a gift at the same time. This interaction increases the quality of our bond and strengthens the community. Just as you wouldn’t charge your husband interest on a loan, you don’t charge a tribe member. 
  • You don’t want to take initiative or responsibility, so you check your incoming mail, your Twitter stream, and your blog comments. Surely, there’s something to play off of, something to get angry about, some meeting to go to. I know someone who goes to forty conferences a year and never seems to actually produce anything 
  • Instead, success lies in being generous or understanding someone or seeing a route that others don’t see. You’ve done this already, done it brilliantly 
  • Genuine gifts, given with the right intent and a respectful posture, meet our sniff test. All our senses are on alert, and the giver passes the test.
  • What happens when the conversation doesn’t happen, the product doesn’t sell, the consumer is not delighted, your boss is not happy, and the people aren’t moved? Make more art. It’s the only choice, isn’t it? Give more gifts. Learn from what you did and then do more. The only alternative is to give up and to become an old-school cog. Which means failing. Trying and failing is better than merely failing, because trying makes you an artist and gives you the right to try again. 

All Excerpts are from 

Godin, Seth. “Linchpin.” Penguin USA, Inc., 2011-10-22T00:55:46+00:00. Apple Books. 

Supreme Court overrules United India Insurance Co v. Antique Art Exports Pvt. Ltd.

In my earlier post, I had pointed out that the Supreme Court in United India Insurance Co. v. Antique Art Exports Pvt Ltd., had almost overruled the interpretation of Section 11(6A) adopted by a coordinate Bench in  Duro Felguera S.A. Vs. Gangavaram Port Limited . The Bench in Duro Felguera had held that a court under Section 11(6A) cannot look into any other issue except the existence of an arbitration agreement.

On the other hand, in United India Insurance, the SC had held that courts perform a “judicial function” under Section 11(6A) and not merely an “administrative function”. Further, it characterised the SC’s judgement in Duro Felguera as a “general observation” and therefore, an obiter dictum which is not binding on it despite the Division Bench in Duro Felguera, delivering two separate judgments unequivocally holding Section 11(6A) to be limiting the jurisdiction of the Court to mere examination of the existence of an arbitration agreement.

M/s. Mayavathi Trading Pvt Ltd v. Pradyuat Deb Burman

To harmonise the seemingly contradictory position taken by co-ordinate Benches of the same court, a 3 judge bench was set up. The 3 judge Bench after considering the law commission report and other judgements on the issue came to the conclusion that the judgement of the Court in United India Insurance was incorrect. The 3 Judge Bench held:

“This being the position, it is clear that the law prior to the 2015 Amendment that has been laid down by this Court, which would have included going into whether accord and satisfaction has taken place, has now been legislatively overruled. This being the position, it is difficult to agree with the reasoning contained in the aforesaid judgment as Section 11(6A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid down in the judgment Duro Felguera, S.A. (supra) – see paras 48 & 59.”

Thus, the 3 Judge Bench has overruled United India Insurance and upheld the reasoning given by the Court in  Duro Felguera S.A.

Omission of Section 11(6A):

It was pointed out to the Court that Section 11(6A) has been omitted by the 2019 Amendment to the Arbitration and Conciliation Act, 1996. However, the Court proceeded to consider the aforementioned issue as the omission clause was not yet notified by the Parliament and Section 11(6A) was in force.

Conclusion:

Irrespective of whether Section 11(6A) is omitted or not, the incorrect interpretation adopted in United India Insurance had to be rectified. Inspite of the legislature trying hard to curtail judicial intervention in appointment of arbitrators, the SC somehow finds a way to frustrate this legislative intent by adopting “interpretations” which are not only contrary to the plain language of the statute but also, the purpose behind such enactments.

Arbitrability of claims after issuing a No Claim Certificate in Construction Contracts

In the construction industry, especially where contracts are awarded by the Public Sector Utilities in India (“PSUs”), it is a prevalent practice to insist for a No-claim certificate (“NOC”) and/or No due Certificate from the Contractors before clearing the final bill/payment. The Contractors, who are rarely in a bargaining position and always in urgent need of money, succumb to the pressure and issue a NOC to get the final Bill cleared.

In most cases, the contractors approach the courts/arbitral tribunals after the settlement of the final bill claiming either damages for the loss suffered by them or compensation for the additional work carried out by them. The moment any such dispute is raised, the PSU’s promptly rely on the NOC issued by the Contractor itself and contend that all claims have been settled and the contract stands discharged. Thus, effectively barring even submission of the claims to arbitration.

The Supreme Court (“SC”) has taken judicial note of such practice and strongly deprecated it in Chairman & M.D., N.T.P.C. Ltd vs M/S. Reshmi Constructions and National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd amongst others. The SC in Reshmi Constrictions taking note of the prevalent practice held,

“…….where a contractor has made huge investment, he cannot afford not to take from the employer the amount under the bills, for various reasons which may include discharge of his liability towards the banks, financial institutions and other persons. In such a situation, the public sector undertakings would have an upper hand. They would not ordinarily release the money unless a ‘No Demand Certificate’ is signed. Each case, therefore, is required to be considered on its own facts.”

VALIDITY OF NO-OBJECTION CERTIFICATE:

In all such cases where the NOC was issued before the settlement of final bills, the contractors take a standard defence that it was issued under economic duress/coercion/fraud/undue influence and hence, not valid. 

The SC in National Insurance has held that in such circumstances, the Courts must look into the validity of the NOC i.e. the Court must look into whether a contractor has issued the NOC voluntarily and not under fraud, undue influence or coercion. Thus, the Chief Justice/his designate in each case has to examine the averments made in the Petition and also the evidence available on record before referring the claims to arbitration.  The SC went on to give illustrations of cases where the claims can/cannot be referred to arbitration and the relevant illustrations are as follows:

“……….(ii) A claimant makes several claims. The admitted or undisputed claims are paid. Thereafter negotiations are held for settlement of the disputed claims resulting in an agreement in writing settling all the pending claims and disputes. On such settlement, the amount agreed is paid and the contractor also issues a discharge voucher/noclaim certificate/full and final receipt. After the contract is discharged by such accord and satisfaction, neither the contract nor any dispute survives for consideration. There cannot be any reference of any dispute to arbitration thereafter.

(iii) A contractor executes the work and claims payment of say rupees ten lakhs as due in terms of the contract. The employer admits the claim only for rupees six lakhs and informs the contractor either in writing or orally that unless the contractor gives a discharge voucher in the prescribed format acknowledging receipt of rupees six lakhs in full and final satisfaction of the contract, payment of the admitted amount will not be released. The contractor who is hardpressed for funds and keen to get the admitted amount released, signs on the dotted line either in a printed form or otherwise, stating that the amount is received in full and final settlement. In such a case, the discharge is under economic duress on account of coercion employed by the employer. Obviously, the discharge voucher cannot be considered to be voluntary or as having resulted in discharge of the contract by accord and satisfaction. It will not be a bar to arbitration.

…………(v) A claimant makes a claim for a huge sum, by way of damages. The respondent disputes the claim. The claimant who is keen to have a settlement and avoid litigation, voluntarily reduces the claim and requests for settlement. The respondent agrees and settles the claim and obtains a full and final discharge voucher. Here even if the claimant might have agreed for settlement due to financial compulsions and commercial pressure or economic duress, the decision was his free choice. There was no threat, coercion or compulsion by the respondent. Therefore, the accord and satisfaction is binding and valid and there cannot be any subsequent claim or reference to arbitration.

Thus, from the aforementioned decision, it is clear that if a Contractor contends that he had issued the NOC under duress/ undue influence, the same has to be pleaded and proved before the Court in a Petition under Section 11(6) and only if the Court concludes that the NOC was issued under duress/undue influence, can it refer the dispute to arbitration.Further, the SC, in Union of India v. Parmar Constructions relying on National Insurance has gone to that extent of holding that,

A rebutable presumption could be drawn that when a no claim has been furnished in the prescribed format at the time of final bills being raised with unilateral deductions made even that acceptable amount will not be released, unless no claim certificate is being attached to the final bills.

However, these judgements were either given before the 2015 Amendment or in the context of the pre-amended law. Hence, an analysis of the position post 2015 Amendment is taken up to examine if the same parameters set by National Insurance continues to hold the field.

POSITION POST 2015 AMENDMENT:

The 2015 Amendment to the Arbitration and Conciliation Act, 1996 (“The Act“) introduced Section 11(6A), which restricts the Court’s jurisdiction, notwithstanding any previous judgement/decree/order to merely examining the existence of an arbitration agreement”. Thus, barring the Court’s foray into issues of arbitrability, limitation or any other concomitant issues.

While interpreting the amended Section 11(6A), the SC in Duro Felguera S.A. Vs. Gangavaram Port Limited held that post amendment, the Court’s jurisdiction is limited only to examining the existence of an arbitration agreement. Further, Justice Kurian Joseph delivering a concurring judgement observed,

“From a reading of Section 11(6A), the intention of the legislature is crystal clear i.e. the Court should and need only look into one aspect- the existence of an arbitration agreement. What are the factors for deciding as to whether there is an arbitration agreement is the next question. The resolution to that is simple – it needs to be seen if the agreement contains a clause which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement.”

Therefore, it can be argued that post amendment to Section 11, the Court/s cannot look into the validity of the NOC or any other issues relating to arbitrability of the dispute. On finding a valid arbitration agreement between the parties, the dispute has to be referred to arbitration and only the arbitrator has the jurisdiction to decide on all such issues.

However, the effect of Section 11(6A) and the SC’s judgement in Duro Felguera has been diluted by the Supreme Court in United India Insurance Co v. Antique Art Exports Pvt. Ltd.

NULLIFYING THE EFFECT OF SECTION 11(6A):

In United India Insurance Co., the SC rejected the argument that after introduction of Section 11(6A) and in view of Duro Felguera, a court under Section 11(6A) cannot look into any other issue except the existence of an arbitration agreement. The SC held that courts perform a “judicial function” under Section 11(6A) and not merely an “administrative function”. Further, it characterised the SC’s judgement in Duro Felguera as a “general observation” and therefore, an obiter dictum which is not binding on it despite the Division Bench in Duro Felguera, as stated hereinabove, delivering two separate judgments categorically holding Section 11(6A) to be limiting the jurisdiction of the Court to mere examination of the existence of an arbitration agreement. The SC has once again undone what the legislature intended to do by the amendment and has reverted back to the pre-amendment position of SBP & Co v. Patel Engineering. Thus, the abysmal situation of arbitration law & practice in the country is partly due to the fact that whatever the legislature proposes (by an amendment), the Supreme Court dismisses (by a judgement).

CONCLUSION:

In view of the fact that SC in United India Insurance has not explicitly overruled Duro Felguero and that both the judgements are given by a bench of the same strength, though far fetched, it can still be argued that post amendment, the SC cannot look into the validity of the NOC and has to merely refer the matter to arbitration where the arbitration clause has been invoked after the 2015 Amendment to the Act.

Is the Supreme Court in Ssangyong, wrong?

“Equity thus depending, essentially, upon the particular circumstances of each individual case, there can be no established rules and fixed precepts of equity laid down, without destroying its very essence, and reducing it to a positive law. And, on the other hand, the liberty of considering all cases in an equitable light must not be indulged too far, lest thereby we destroy all law, and leave the decision of every question entirely in the breast of the judge. And law, without equity, tho’hard and disagreeable is much more desirable for the public good, than equity without laws; which would make every judge a legislator, and introduce most infinite confusion; as there would then be almost as many different rules of action laid down in our courts, as there are differences of capacity and sentiment in the human mind.”

This quote from Blackstone’s Laws of England, seems almost prescient and a word of caution to all Courts across the world. However, the Indian courts do not seem to have paid any heed to this advice from Blackstone as they have indulged too far in considering cases in an equitable light and thereby have destroyed the law. The definition of “Public Policy” under Section 34 of the Arbitration and Conciliation Act, 1996 (“The Act”) is a case study of how the Indian Courts have indulged too far and destroyed the law. I will be first dealing with the evolving definition of Public Policy as without understanding the same, the Supreme Court’s judgement in Ssangyong cannot be understood.

Evolving definition of Public Policy:

If an award is in conflict with the public policy of India, the same can be set aside under Section 34. However, the 1996 Act, prior to the 2015 Amendment, had omitted to define the term, “public policy” leaving it to the wisdom of the judiciary to interpret the term appropriately. The  definition has seen numerous additions and a few deletions since the 23 years it has been in existence.

The first instance when the Supreme Court (“SC”) interpreted “public policy” was in the case of Renusagar Power Co. Ltd., v. General Electronic Co., 1994 Supp (1) SCC 644. It held “public policy” to include:

  1. Fundamental policy of Indian law.
  2. Interest of India
  3. Justice or morality.

However, the SC in Renusagar was interpreting “Public Policy” in the context of foreign awards. Public Policy as defined under Section 34 was interpreted by the SC in ONGC v. Saw Pipes 2003 (5) SCC 705, wherein an additional ground of “patent illegality” was added to Renusagar’s definition.

The definition laid down in ONGC v. Saw Pipes was followed consistently albeit with minor additions by the SC till the judgement of ONGC v. Wester Geco International Ltd., 2014 (9) SCC 263 wherein the SC enlarged the scope of “Public Policy” by adding three sub-grounds to Fundamental policy of Indian law. Thus, under the ground of fundamental policy of Indian law the following additions were made to include:

  1. Duty to adopt a judicial approach
  2. Principles of natural justice/application of mind
  3. Perverse or irrational award /Wednesbury principles of reasonableness.

As is evident, the SC has been widening the scope of review available to the Courts under Section 34 making a mockery of the intent with which the 1996 Act was enacted. In fact, the additions made by the SC has allowed Courts to sit in appeal over the awards of the arbitrators. It is pertinent to mention here that the jurisdiction envisaged under Section 34 was supervisory but the SC by indiscriminately adding one ground after the other has granted Appellate jurisdiction to courts under Section 34 and thereby, has allowed Courts to sit in appeal over arbitral awards contrary to the intent of the Parliament.

Law Commission’s Supplementary Report, 2015:

The judgement of the SC in Western Geco was the final nail in the coffin compelling the Law Commission and the Parliament to rein in this abrasive tendency of the SC to endlessly expand the ambit of review under Section 34. The Supplementary Report specifically observed that the expansion made by Western Geco was not only contrary to the object of the Act but also, to arbitration practices in vogue internationally.  Hence, the 2015 Amendment incorporated changes suggested in the Report restoring the law as stated in ONGC v. Saw Pipes with an additional caveat that review of an award under the ground of public policy of India will not include “review on the merits of the dispute”. The Amendment rectified and clarified the incorrect interpretation adopted by the SC in  Western Geco. Thus, the applicability of the amendment to awards challenged before the Amendment would immensely benefit the “Award holders” as the scope of review is substantially narrowed after the Amendment. Hence, the question of the Amendment being applicable to awards challenged before the Amendment was introduced was a fiercely contested issue in the courts until it was put to rest by the Apex Court in Ssangyong.

Ssangyong Engineering & Construction Co. Ltd v.  National Highways Authority of India

As pointed out in my previous post, the SC had refused to consider the issue of 2015 Amendment being applicable to Section 34 proceedings initiated before the amendment was enacted. While the SC held the Amendment to be prospective in BCCI v. Kochi Cricket, it nevertheless made the amended Section 36 applicable to proceedings initiated before the amendment was enacted on the ground that the Amendment was procedural in nature and did not affect any vested right.

In stark contrast, the Supreme Court in Ssangyong held the amendments to Section 34 to be substantive in nature as it did away with the “expansions” made by the Supreme Court in Western Geco. It further held that even though a part of the amendment is clarificatory and procedural, the same could not be made retrospective as it had changed the earlier law substantively.

ON RETROSPECTIVE OPERATION OF STATUTES:

Now before analyzing the reasoning of the SC, some cannons of statutory interpretation has to be discussed. It is a settled position of law that all statutes have to be prima facie construed prospectively unless it is expressly/impliedly stipulated to be retrospective. However, one of the exceptions to this canon of statutory interpretation is that declaratory statutes can be made retrospective as they are remedial in nature and are generally passed to set aside “judicial errors”. The Supreme Court while discussing declaratory statutes in Central Bank of India v. Their Workmen (AIR 1960 SC 12) quoted with approval the following observation from Craies on Statute Law, Fifth. edition:

” For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation of statutes.”

Thus, there are a plethora of judgements which have relied upon the aforementioned principle and held a declaratory statute to be retrospective. However, the Supreme Court in Ssangyong has not at all taken into consideration the aforementioned principle. It has completely ignored the fact that the Parliament, as recommended by the Law Commission, was trying to remedy the error that had crept into the definition of Section 34 by judicial interpretation post Western Geco. Instead of admitting its judicial errors, the Supreme Court has deemed the parliament’s attempt to rectify the error as making substantial changes to the law. Thus, the SC has grossly erred in making the amendments to Section 34 inapplicable to pending court proceedings.

P.S: Apart from what has been discussed hereinabove, there are other glaring inconsistencies in the judgement including the factual aspects of the case necessitating a separate and detailed analysis which will be attempted in the next blog post titled, ‘Part-II’ .

The Conundrum: Whether the Amendment to Arbitration and Conciliation act, 1996 is prospective or retrospective?


                The Arbitration and Conciliation Act, 1996 (“Act”) was amended on 31.12.2015 (“the Amendment”) with the laudable objective of making the arbitration process “more user-friendly, cost effective and lead to expeditious disposal of cases.” However, the Amendment has raised several red flags. The primary issue plaguing the litigants and Courts is the applicability of the Amendment Act, 2015 to pending proceedings initiated under Section 34 of the Act.

Under the earlier regime, an Award would be automatically stayed upon filing of an Application under Section 34 but the Amendment has taken away the right to an “automatic stay” of the Award and enabled the Courts to impose conditions at the time of staying the award. Thus, leading to the question, whether a separate application for stay has to be filed even in Section 34 Petitions filed prior to the introduction of the Amendment?

APPLICABLE LAW

To answer the question, Section 26 of the Amendment Act has to be considered which stipulates:

  1. Nothing contained in this Act shall apply to the arbitration proceedings commenced in accordance with the provisions of Section 21 of the principal Act before the commencement of the Act unless the parties otherwise agree.
  2. This Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act.

At first blush, there seems to be no ambiguity in the Parliament’s intent to make the Amendment prospective. However, the words, “arbitration proceedings” in the first part and “in relation to” in the second part have led to a lot of ambiguity in the minds of the Court.  

DIVERGENT VIEWS OF HIGH COURTS

The Calcutta High Court in Electrosteel Castings Limited v. Reacon Engineers has held the amendment to be prospective and inapplicable to proceedings that were pending as on the date of introduction of the Amendment. However, a subsequent judgement of the division bench of the Calcutta High Court in Sri Tufan Chatterjee vs Sri Rangan Dhar has held the amendment to be retrospectively applicable to pending proceedings u/s. 34. Similarly, the Bombay High Court in Rendezous Sports World and Ors v. The Board of Control for Cricket in India and ORS (MANU/MH/2637/2016) has held that amendment to be prospective yet applicable to pending court proceedings u/s. 34.  The judgement of the Bombay High Court will be discussed in depth in this piece apart from the Apex Court’s judgement in BCCI as the Bombay High Court has considerd the issue in depth.

RENDEZVOUS SPORTS WORLD & ORS

In Rendezvous Sports, the Bombay High Court has held the Amendment to be prospective and yet applicable to pending court proceedings. The reasoning of the Bombay High Court is that the Amendment does not affect the right of appeal or the right to avail interim relief of the Applicant but only removes the disability faced by the award holder in getting the award executed. The High Court has taken great pains to point out that application of amended Section 36 to pending court proceedings would not amount to giving retrospective effect to the Amendment. The High Court has relied on the observation made by Bukley L.J. in West v. Gwynee to buttress its conclusion that the applicability of the amendment to pending court proceedings makes it prospective. The High Court observed:

“It is said that, retrospective operation is one matter and interference with existing rights is another. If an Act provides that as a past date the law shall be taken to have that which it is not, the Act would be retrospective. In that case, it is effective on a date prior to the date on which the Act is made applicable. When it is applied to the existing matters, it’s effect is necessarily prospective.”

Further, the Hon’ble Court also held that the Amendment does not even interfere with the ‘Right of Appeal’ but merely removes the ‘shadow over the right of the award-holder’ permitting the Judgement Debtor to seek any interim order/stay.

BEFORE THE SUPREME COURT

The judgement of the Bombay High Court is instructive and necessary to understand the conclusion reached by the Supreme Court in BCCI v. Kochi Cricket which adjudicated the same question on appeals from various High Courts including the Bombay High Court. Even though the conclusion arrived at by the Supreme Court is the same as that of the Bombay High Court, the reasoning is not as lucid and coherent.  

The first issue considered by the Supreme Court was interpretation of Section 26 of the Amendment Act. It interpreted ‘arbitration proceedings’ to mean proceedings before the arbitrator and ‘in relation to arbitration proceedings’ to mean only Court proceedings in contrast to earlier judgements of the Supreme Court which had interpreted the words, ‘in relation to’ to be all encompassing so as to include within its fold both arbitration and court proceedings. Nevertheless, the diversion from the precedent is justifiable in view of the peculiar drafting of Section 26 and object of the Act.

However, the reasoning of the Supreme Court falters when it considers the question of this ‘Prospective Amendment’ being applicable to pending court proceedings. The Supreme Court gave the following reasons for holding the “Prospective Amendment” to be applicable to pending court proceedings:

  1. Execution of Decree pertains to realm of procedure.
  2. There is no accrued right to resist execution.
  3. Hence, the Amendment being procedural in nature is applicable to pending proceedings.
  4. Alternatively, being a procedural provision, in the context of Section 36, the expression “has been” would refer to Section 34 petitions filed before the Amendment was introduced.

Thus, after discussing a slew of judgements, the Hon’ble Court held that:

“……execution of a decree pertains to the realm of procedure and that there is no substantive vested right in a judgement debtor to resist execution, Section 36, as substituted, would apply even to pending Section 34 application on the date of commencement of the Amendment Act.”

A CRITIQUE OF APEX COURT’S REASONING:

The question of looking into whether an amendment is procedural or substantive arises only when the amendment has to be applied retrospectively. Further, the discussion with respect to ‘accrued right/s’ being taken away also has to be considered only if the Amendment is being held to be retrospective or if Section 6 of the General Clauses Act is applicable. Perplexingly, the Supreme Court has held the Amendment to be prospective and Section 6 to be inapplicable and yet justifies the applicability of the Amendment to pending court proceedings on the ground that the Amendment is procedural in nature and that the Amendment does not affect any accrued right/s of Appellant. If the Amendment is only affecting ‘existing right’ as held by the Bombay High Court, there was no reason for the Supreme Court to decide if it takes away any accrued right or is procedural in nature. In fact, even the Bombay High Court has committed the same error in its reasoning.

Further, the Supreme Court has interpreted “has been” in Section 36 to mean Applications filed under Section 34 before the Amendment was enacted which interpretation renders Section 26 otiose. As Section 26 clearly stipulates the Amendment to be prospective and the Supreme Court having interpreted it to be so cannot turn around and interpret “has been” in Section 36 to mean Application filed before the commencement of the Amendment merely because it is a “procedural provision”.

Most importantly and unlike the Bombay High Court, the Supreme Court does not consider the question, if applying the Amendment to pending court proceedings would render it prospective or retrospective? The Bombay High Court has considered this question in detail and the Supreme Court in not addressing this question has skirted an important question.

THE END OR JUST THE BEGINNING?

All the hopes of the Supreme Court conclusively answering the question of the Amendment being prospective or retrospective has been betrayed as the Supreme Court has still left other concurrent issues open for consideration. For instance, it can be argued that the amendment to certain provisions like Section 34 is only procedural & clarificatory and hence, applicable to pending proceedings. In fact, the same argument was made before the Supreme Court but the Hon’ble Court refused to look into such matters and opined that:

“We do not express any opinion on the aforesaid contention since the amendments made to Section 34 are not directly before us. It is enough to state that Section 26 of the Amendment Act makes it clear that the Amendment Act, as a whole, is prospective in nature. Thereafter, whether certain provisions are clarificatory, declaratory or procedural and, therefore, retrospective, is a separate and independent enquiry, which we are not required to undertake in the facts of the present cases, except to the extent indicated above, namely, the effect of the substituted Section 36 of the Amendment Act.

Thus, once again the Supreme Court has left open scope for re-agitating the same question of law in the context of other provisions of the Act.

Can the Consumer Forum refer consumer disputes to Arbitration?

Under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter, “the Arbitration Act”), a “judicial authority” before whom a dispute has been brought, has to refer the matter to arbitration if the said dispute is the subject matter of an arbitration agreement. Now, the question that arises for consideration is whether the Consumer Forum (hereinafter, “The Forum”) should refer consumer disputes to arbitration if such disputes are a subject matter of an arbitration agreement?

This question has been answered by the Supreme Court in various decisions like Fair Air Engineers v. N.K. Modi (AIR 1997 SC 533) and Virender Jain v. Alaknanda Coop. Group Housing Society Ltd., [(2013) 9 SCC 383] among others. The reasoning behind those decisions is that the remedy provided under the Consumer Protection Act (hereinafter, COPRA) is in addition to and not in derogation to other remedies. Moreover, the fact that COPRA is a welfare legislation has also tilted the scales in favor of allowing consumer forums to adjudicate disputes which are a subject matter of arbitration agreement. Thus, since the decision in N.K. Modi, it has been a settled position of law that invoking arbitration clause does not oust the jurisdiction of the Forum.

THE 2015 AMENDMENT TO THE ARBITRATION AND CONCILIATION ACT, 1996

This “settled position of law” was unsettled by the 2015 Amendment to the Arbitration Act, which modified Section 8 of the Arbitration Act, 1996 to further reduce the discretion given to courts as it stipulated that a judicial authority has to refer the matter to arbitration, “notwithstanding any judgment, decree or order of the Supreme Court or any Court.” The Amendment brought a ray of hope to habitual litigants like Builders and developers who had incorporated boilerplate arbitration clauses in their agreements/contracts/invoices etc., as the words, “notwithstanding any judgment, decree or order of the Supreme Court or any Court” could be interpreted to mean that all the Supreme Court judgements on the subject question would be null and void. Moreover, it could also be argued that the legislature was aware of the said judgments and intended even consumer disputes to be referred to arbitration.

On the other hand, even if the judgements of the Supreme Court are rendered nugatory, the Consumer can always rely on the proverbial, “Section 3” of COPRA and new judgements can be delivered reiterating the old position that Consumer Forums can adjudicate disputes irrespective of any amendment as “the remedy available under COPRA is only in addition to and not in derogation to any other remedy.”

EXPERIMENTS WITH THE 2015 AMENDMENT

Pinning our hopes on the 2015 Amendment, we filed a Section 8 Application before the Consumer Forum in a Builder-buyer dispute. However, the Forum rejected our Application without uttering a single word about the 2015 Amendment in the entire order. On the other hand, it discussed archaic provisions like Section 34, Arbitration Act, 1940 and related judgments which were rendered prior to the Amendment.

ABSURD INTERPRETATION BY THE STATE COMMISSION

In a similar dispute between the Builder and Flat buyers, the same issue came up before the Karnataka State Consumer Disputes Redressal Commission in Krishnan Parameswaran v. Sovereign Developers (unreported). Since the Agreement to Sell between the parties had an arbitration clause, the Builder had filed a Section 8 Application on the strength of the 2015 amendment. As is usual, the Commission rejected the application on the ground that all the requirements of Section 8 were not met apart from relying on Section 3, COPRA. However, instead of stopping there, the Commission unnecessarily took up the challenge of interpreting the amended Section 8. The Commission interpreted the words, “notwithstanding any judgment, decree or order of the Supreme Court or any Court” to mean judgments of the Supreme Court or any court in cases between the same parties, with respect to the same disputes. The Commission held,

“Thus, in cases where there is any dispute or litigation on the very same subject matter, earlier decided by the Supreme Court or any other court, even then if the matter is again before any other judicial authority…………… the said judicial authority may refer the matter to the Arbitration, if rest of the conditions in the said sections are fulfilled.”

FAULTY REASONING

  1. The interpretation adopted by the Commission defeats the whole purpose of amending Section 8 as the intent was to reduce the judicial discretion in referring matters to arbitration. The Consumer Forum stretched the words too far in assuming that a “subject matter” which has earlier been decided by the Supreme Court would come up once again before a judicial authority and the parties at that juncture would invoke the arbitration clause. Instead of performing such interpretational gymnastics, the Commission could have simply relied on Section 3, COPRA to dismiss the application.
  2. The Commission once again reiterated the reasoning that the remedy available under COPRA is in addition to and not in derogation to any other remedies. Hence, it held that the arbitration initiated by the builder could proceed simultaneously with the dispute before the Forum. However, the Commission has failed to take into consideration the fact that such an interpretation would lead to a multiplicity of litigation and possibly, result in the arbitrator and the Commission arriving at different conclusions. For instance, if the commission holds in favor of the consumer and the Arbitrator holds in favor of the Builder, then what is the option available before the parties? Should the compensation payable by the Builder be set off against the award of the arbitrator?

THE WAY FORWARD

The Consumer Forum, instead of resorting to a convoluted and far-fetched interpretation of statutory provisions, should look into the unconscionability of the contract as done by courts in other jurisdictions like the U.S.A, U.K., and  Australia. For instance, the Courts in the US have referred even Consumer Disputes to arbitration on finding that both the parties to the agreement had equal bargaining powers and that the contract was not unconscionable. Similarly, the Consumer Forum should look at the bargaining power of the parties and if the contract is not unconscionable, refer the matter to arbitration. For instance, a builder may have more bargaining power than a buyer but in the case of an individual interior designer and consumer, both the parties have equal bargaining power and if they have decided to resolve their disputes through arbitration, such intention must be honored. The Consumer Forum should thus, restrain itself from usurping jurisdiction where it has none on the pretext of the COPRA being a welfare legislation.