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Arbitration Court Reckoner: September 2020


Kanika Singh 24 Oct 2020 1:55 AM

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By way of the present column, an attempt is made to brie y review the salutary judgments

pronounced by the Courts in the month of September 2020 under the Arbitration & Conciliation Act,

1996 (hereinafter referred to as the 'Act'). That while as many judgments as possible are sought to

be reviewed, owing to the limited column space, some judgments would invariably be left out. That

also while an attempt is made to include and review some judgments of various other High Courts,

the emphasis is essentially on the judgments of the High Court of Delhi and Supreme Court of

India. That judgments have been compiled for review with reference to the Section of the Act that

they are primarily dealing with and a detailed analysis has been forgone in favour of succinctness.

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Section 7

(i) Non-signing of agreement containing arbitration clause by one party not a ground to hold that

there was no binding arbitration clause

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In M/s. Chaitanya Construction Company v Delhi Jal Board[1] High Court of Delhi took note of the

fact that S. 7(4) of the Act itself provides that the arbitration agreement need not be in any concrete

or particular form and held that the mere fact that the Respondent therein, who had invited tenders

for the work in question, had not signed the agreement containing the arbitration clause was not a

ground to hold that there was no arbitration clause. The Court took note of the fact that the

petitioner signed the agreement containing the arbitration clause, as provided by the respondent,

and that the respondent had issued the work orders based on this contract, and thus it cannot be

said that the parties were not ad idem on the applicability of the arbitration clause, even though the

Respondent had not eventually signed the agreement.

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Section 8

(ii) Averment in Written Statement that it is being led "Without Prejudice to the Arbitration

agreement" does not constitute an application u/s 8

Power of the Court to stay Arbitration must be impliedly read into the 1996 Act

In Lindsay International P. Ltd. & Ors. v Laxmi Niwas Mittal & Ors.[2] High Court of Calcutta took

note of the fact that the Defendant before it had led a comprehensive Written Statement of

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Defence taking objections and addressing on merits each of the claims in the plaint individually and

speci cally and it was not until the expiry of three full years that the said Defendant has moved for

Request For Arbitration. It, thus held, that it could therefore safely be said that the Defendant has

waived the Arbitration agreement and has submitted to the jurisdiction of the Court for all intents

and purposes and the Arbitration agreement has been rendered inoperative by waiver. Further, held

that an averment in the Written Statement of defense that it is being led "Without Prejudice to the

Arbitration agreement" does not constitute an application under S. 8 of the Act and a clear, speci c

and overt Act in the form of an independent, stand alone application is required to be made which

the Defendant had not done. It held that while the Defendant has referred to the Arbitration

agreement in his written statement but has not prayed or pleaded that it seeks reference of the

disputes to arbitration. The Court further held that the power of the Court to stay arbitration must

be impliedly read into the 1996 Act and to allow an arbitration to proceed even after the Defendant

has waived the arbitration agreement, or that the same is null and void or inoperative would be a

travesty of justice and thus accordingly restrained the Defendant from proceeding with the Request

for Arbitration.

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Case?

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Section 9

(iii) Copyright disputes pertain to rights in rem and thus not arbitrable

In Sanjay Lalwani v Jyostar Enterprises & Ors.[3] High Court of Madras held the S. 9 petition led by

the petitioner therein not maintainable as dispute were arising from Copyright Assignment, and

thus pertained to right in rem and as such, were not arbitrable.

(iv) In absence of manifest intention to arbitrate, Court would be reluctant to pass interim

measures

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Bail In POCSO Cases? Delhi HC Discusses In Detail[Read Judgment]

In H. Thiagaraj & Ors. v Maryammal & Ors.[4], High Court of Madras set aside the injunction granted

by the District Judge in a S. 9 petition inter alia on the ground that though the dispute was raised by

the applicant in the year 2009 and the Court had directed the parties to go for arbitration as early as

02.03.2011, no steps whatsoever was taken out by the applicant or some other party to refer the

matter to arbitration. Only in the year 2014, the application u/s 9 of the Act has been led. It held

that the above conduct of parties makes it clear that manifest intention to arbitrate the dispute is

absent on the part of the applicants, who were the parties to the earlier proceedings. Therefore, it

held, that in view of absence of manifest intention shown by the petitioners, who seek interim

measure u/s 9 of the Act, the Court normally would be reluctant to pass interim measures and set

aside the order of the District Court.

(v)Interim measure/Relief in the nature of restraining person from carrying on trade or business

cannot be granted

In Shraddha Entertainment v Kondaduvam Entertainment & Ors.[5] High Court of Madras was

seized of a matter where the petitioner/appellant therein had led both appeals against the order of

the arbitrator refusing to grant certain injunctions as also led petitions u/s 9 seeking similar reliefs

before Court. The Court rstly held that when the arbitrator has already rejected such a relief, which

was challenged before the Court in the appeal, again seeking similar prayer by way of interlocutory
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applications cannot be maintainable. The Court further took note of the fact that Petitioner had

sought 2 injunctions - One is injunction restraining the Respondent from opening or operating any

bank account either in their individual or joint names and/or in the names of any entity in which any

or all of them are in control and the other is to direct Respondents to disclose the names and

details of all banks where they hold any account whatsoever operated by them either individually or

jointly. The Court held that rst relief sought by the appellant is in the nature of restraining the

person from carrying on trade and business and such relief cannot be granted in the name of

interim measure. Qua the second relief, Court held that the arbitrator had rightly negativated the

same as to give any such relief the provision under Order 38 Rule 5 of CPC had to be satis ed

which had not been done.

(vi) Execution of orders passed in S. 9

In Cupino Ltd. v Shree Ahuja Properties & Realtors P. Ltd. & Ors.[6], High Court of Bombay rejected

the contention of the Respondent therein that the order passed u/s 9 is not a nal order/decree and

there is no occasion to execute the order under Order XXI, CPC. The Court held Section 36 of the

Code makes available all remedies for execution of decrees to be employed for execution of Orders

as well. Further, held, the once an order under Section 9 has become nal order of payment of that

amount into court, even though arbitration is pending, Order XXI can certainly be resorted to for

executing the said Order of the Court.

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(vii) Mere claim, which is yet to be adjudicated, does not constitute special equities to entitle

injunction against invocation of bank guarantee

In CRSC Research And Design Institute Group Co. Ltd v. Dedicated Freight Corridor Corporation Of

India Limited & Ors.[7] High Court of Delhi reiterated the criteria, which are required to be satis ed,
before interim protection can be granted u/s 9 namely (a) the existence of an arbitration clause,

and manifest intent, of the S. 9 petitioner, to invoke the said clause, and initiate arbitral proceedings,

(b) the existence of a prima facie case, balance of convenience and irreparable loss, justifying such

grant of interim relief to the applicant, and (c) the existence of emergent necessity. The Court

rejected the argument of special equities premised on the ground, that the claim of the Petitioner

therein against Respondent, is far in excess of the amounts of the bank guarantees and invocation

must be stayed. The Court held that a mere claim, of the petitioner, against the respondent – the

sustainability of which is yet to be adjudicated – cannot constitute "special equities", so as to

justify injuncting the invocation of unconditional bank guarantees, even if such a claim is in excess

of the amount covered by the bank guarantees. Further held that in case of an irrevocable and

unconditional bank guarantee the condition, in the agreement between the parties, under which the

bank guarantees could be enforced, cannot be cited as a ground to stay the invocation and

encashment thereof.

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Section 11

(viii) How to harmonise or reconcile two different arbitration clauses in two related agreements

between the same parties and same transaction

In Balasore Alloys Ltd. v Medima LLC[8] , Supreme Court of India held in order to harmonise or

reconcile two different arbitration clauses in two related agreements between the same parties and

to arrive at a conclusion as to which of the clauses would be relevant in the given facts; it would be

necessary to refer to the manner in which the arbitration Clause was invoked and the nature of the

dispute that was sought by the parties to be resolved through arbitration. On such consideration, in

the facts of the case, the Court held that the nature of dispute raised by the parties indicate that

those aspects are to be determined in terms of the provisions contained in the Main Agreement

and thus disputes would have to be decided as per arbitration clause in the Main agreement and

the same would be the relevant arbitration clause and not the arbitration clauses contained in

various purchase orders.

(ix) S. 5 of Limitation Act does not apply to application u/s. 11 of the Act
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In The Board of Trustees of the Port of Chennai v. X-press Container Line (UK) Ltd. & Ors.[9], High

Court of Madras held that Section 5 of Limitation Act cannot be applied to condone the delay in a

suit and extend the period of limitation and this logic will apply to an application led u/s 11 of the

Act also.

Section 14

(x)Once Managing Director of the Respondent is ineligible to appoint arbitrator, Company can also

not appoint

In M/s. Omcon Infrastructure P. Ltd. v Indiabulls Investment Advisors Ltd.[10], High Court of Delhi

allowed the petition for termination of mandate of the arbitrator appointed unilaterally by the

Respondent in view of the ratio of the judgment in Perkins Eastman Architects DPC & Anr. v HSCC

India Ltd.[11] While doing so, it rejected the narrow construction sought to be given by the arbitrator

to the judgment of Perkins (supra) on the purported ground that judgement in Perkins (supra) was

not applicable as the authority to nominate the arbitrator was vested in a Company (that being the

word used in the arbitration clause) and not an individual. The Court held that once the Managing

Director of the Respondent is ineligible to appoint arbitrator in view of Perkins (supra), the same

would also bar the Company itself from unilaterally appointing the arbitrator.

(xi) Voluntary recusal of Arbitrator in one arbitral proceeding not a ground for terminating

mandate of Arbitrator in a separate arbitral proceedings between same parties

In Himachal Pradesh Power Corporation Ltd. v Hindustan Construction Co. Ltd.[12], High Court of

Delhi held that that the voluntary recusal of the Presiding Arbitrator in another arbitration

proceeding is not a ground for terminating the mandate of a Presiding Arbitrator in a separate

arbitration proceedings, though between the same parties. It further held that Presiding Arbitrator's

brother (mentions Petitioner's brother in para 16 of judgment but the context reveals that the

reference is to the Presiding Arbitrator's brother) who appeared as a Senior Advocate on behalf of

the respondent before the Himachal Pradesh High Court in a separate unconnected matter is not

"close family member" as de ned in Category 10 of the Seventh Schedule and therefore, the

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Presiding O cer is not ineligible to act as an Presiding O cer under Section 12 (5) of the

Arbitration and Conciliation Act.

Section 17

(xii) Principles governing grant of injunctions, appointments of receiver etc are a part of

substantive law of country within ambit of S. 28(1)(a)

In Flywheel Logistics Solutions P. Ltd. v Hinduja Leyland Finance Ltd. & Ors.[13], High Court of

Madras was dealing with challenge to orders passed by the arbitrator u/s 17 of the Act to seize the

vehicles which had been purchased by way of loan agreement which was subject of arbitration. The

Court held that though S. 19 of the Act states that the Arbitral Tribunal is not bound by the Code of

Civil Procedure, 1908, this is primarily targeted at unshackling the Arbitral Tribunal from the

procedural wrangles of the Code. Further held that, on the other hand, principles governing the

grant of injunctions, appointments of receiver etc are a part of the substantive law of the country

and by virtue of S. 28(1)(a) of the Act the Tribunal shall be bound to decide in accordance with the

substantive law for the time being in force in India. While the nance company or Bank may have a

contractual right to repossess the asset upon commission of default by the borrower, it cannot be

gainsaid that in many cases mechanical seizure of vehicles, en masse, may lead to substantial

injustice. It held that in a number of cases the borrowers generate income by putting these vehicles

to use and therefore, it may be worthwhile for the Tribunal to balance equities, in appropriate cases,

by allowing the vehicles to operate while at the same time direct that some portion of the income

got from plying these vehicles be deposited to the credit of the nance company. Further held, that

the Tribunals are under no obligation to pass orders seizing vehicles mechanically and in a vast

majority of these cases, a common sense approach would not only ensure that the nance

company is able to realise some portion of the outstanding dues periodically while at the same

time enabling the borrower to retain the vehicle to generate income.

Section 34

(xiii) Multi-tier arbitration

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In C.S. Sivanandan v Karvy Stock Broking Ltd. & Ors.[14]¸High Court of Madras held that arbitration

in the case at hand was governed by 'National Stock Exchange bye-laws' and Bye – law 19 provided

for a multi-tier arbitration. The Court took note of the fact that the petition had been led u/s 34 of

Act assailing the award made by the Arbitral Tribunal, which is the second tier of the three-

tiered/multi tiered arbitration mechanism provided for under Chapter XI of NSE Byelaws. It held

that, therefore, the third tier of arbitration mechanism has not been exhausted. In this scenario, the

Court was of the considered view that it would be appropriate to relegate the parties to Appellate

Arbitral Tribunal under Chapter XI (19) of NSE by-laws leaving open all questions, rights and

contentions of the parties and preserving the right of petitioner to seek exclusion of time spent in

the petition before Court.

(xiv) View of the Arbitrator plausible view and merits no interference

In NHAI v Sahakar Global Ltd.[15]¸ High Court of Delhi while dismissing the petition led assailing

the arbitral award held that not only was the scope of judicial interference in an arbitral award

limited if the view taken by the Arbitrator is a possible view but also further held that the arbitrator

has, after detailed analysis of the documents and pleadings, rightly come to the conclusion that

implementation of GST by the Government of India constitutes change of law having material

adverse affect on the obligations of parties and is thus a force majeure event as per the clause

between the parties.

(xv) Statutorily imperative to examine limitation even if not set up as a defence

In P. Kothai & Ors. v. Shriram Transport Finance Company Ltd. & Ors.[16] High Court of Madras held

that that the trigger notice invoking arbitration was clearly barred by limitation and therefore, the

impugned award therein is vitiated for entertaining arbitral proceedings which are barred by

limitation and not examining limitation though S. 3 of Limitation Act read with S. 43 of the Act

makes it statutorily imperative to do so even if it is not set up as a defence. The Court reiterated

that in case of loan, that the date of commission of default would be the cause of action for

purposes of limitation.

Section 36
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(xvi) Subsequent application led not hit by res judicate if execution petition had been disposed

off with liberty

In Kal Airways P. Ltd. v M/s. Spicejet Ltd. & Anr[17] High Court of Delhi held that when an

enforcement petition had been disposed off with the liberty to the Decree Holder to approach the

Court in the event of any subsequent development with respect to the 'status of the judgment

debtor', then ling of an application on the ground of material change in the nancial health of the

Judgment debtor would not be hit by res judicata or constructive res judicate and the change in

status need not be only limited to insolvency or bankruptcy proceedings but would include other

events that would show material changes in the nancial health of the Judgment Debtor including

auditor's reports. The Court further held that contentions with regards to award being erroneously

premised or the prospects of Judgment Debtor succeeding in their challenge under S. 34 of the Act

would have no bearing in an execution petition once the award is not stayed and the award would

have to be seen on the face of it.

Section 37

(xvii) Qualitative difference between the two challenges provided u/s 37(1) & 37(2) & even

between S. 37(2)(a) & 37(2)(b)

In Dinesh Gupta & Ors. v Anand Gupta & Ors.[18] High Court of Delhi held that principle that parties

have by express choice excluded court's jurisdiction by opting for arbitration would apply, with

equal force, to challenges to interlocutory orders of arbitral tribunals, u/s 37, as they would, to

challenges to the nal award, u/s 34. The Court held that there is, necessarily, a qualitative

difference between the two challenges provided u/s 37(1) & 37(2), though both would lie to the

High Court. The challenge u/s 37(1), which is directed against a nal award of the arbitrator/arbitral

tribunal, is akin to a second appeal. The challenge u/s 37(2), on the other hand, is directed against

the decision of the arbitral tribunal and therefore must necessarily to conform to the discipline

enforced by S. 5. The Court held it would, therefore, be improper for a Court to treat an appeal, u/s

37 (2) of the 1996 Act, as akin to an appeal under the CPC. An appeal against an order by an

arbitrator, or by an arbitral tribunal, is an appeal sui generis, and interference, by the Court, in such

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appeals, has to be necessarily cautious and circumspect. The Court further held that this position

would stand especially underscored where the order, under challenge, is discretionary in nature and

in such case, merits interference, under Section 37(2)(b), therefore, only where such exercise is

palpably arbitrary or unconscionable. If anything, therefore, the jurisdiction of the Court, under

Section 37(2)(b), is even more limited than the jurisdiction that it exercises under Section 37(2)(a)

or, for that matter, under Section 34. Further held, that while exercising jurisdiction under Section

17(1)(ii)(b), the arbitrator is not strictly bound by the con nes of Order XXXVIII Rule 5 of the CPC,

but is also proscribed from acting in a manner completely opposed thereto.

(xviii) Doctrine of Proportionality as part of special equities can only be applied if there is

crystallized liability

In Hindustan Construction Co. Ltd. v National Hydro Electric Power Corporation Ltd.[19] Division

Bench of High Court of Delhi upheld the refusal of the Single Judge to grant injunction against

encashment of bank guarantees and held that mere extension of the completion time can by no

stretch be reckoned as satisfaction, to prevent invocation of performance BGs either because the

contractor had failed to faithfully perform its obligations or it failed to commence work, or had

suspended the work or had failed to take effective steps for making good the defects etc. It further

held that while proportionality could be included in the exception of special equities, it can be

applied only where the crystallized liability is signi cantly lower than the value of the Bank

Guarantee furnished and the contract is a concluded one and held that the same did not apply in

the present case, where neither condition prevails and the contract is neither a concluded one nor

has it been terminated and thus the liabilities are not crystallized.

(xix) Court exercising jurisdiction u/s 37 must be extremely circumspect

In Bharat Sanchar Nigam Ltd. v Aksh Opti bre Ltd.[20] High Court of Delhi reiterated that when the

arbitral award has been upheld u/s 34 of the Act, the appellate court cannot, in exercise of

jurisdiction u/s 37 of the Act, proceed to independently assess the relative merits and demerits of

the case and while exercising jurisdiction u/s 37 of the Act, the court must be extremely

circumspect in interfering. The Court further noted that the appellant, therein, had, in fact, agreed

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that the Arbitral Tribunal can x the rate for the intercity bandwidth charges, payable by the

respondent. After agreeing to such a position, it was now not open to the appellant to state that the

view taken by the learned Sole Arbitrator was wrong since the rates were xed and agreed.

Section 45

(xx)Period of limitation for ling an enforcement/execution petition for a foreign award

In Government of India v Vedanta Limited and Others, Supreme Court of India held that the period

of limitation for enforcement of a foreign award in India would be governed by Indian law. It held

that Foreign awards are not decree of Indian Courts and upon grant of recognition and enforcement

u/s 48 of the Act, for the limited purpose of enforcement the foreign award is deemed to be a

decree of the Court that granted such enforcement. Accordingly, the Court held that the period of

limitation for enforcement of foreign award would be governed by Article 137 of the Limitation Act.

Further held that the bar contained in Section 5 of the Limitation Act would not extent to a

substantive application under the Act, consequently, delay may be condoned on an application

under Section 5 of the Limitation Act. It also held that the Courts at the seat of the arbitration have

"supervisory" or "primary" jurisdiction while the Courts at the place of enforcement have

"enforcement" or "secondary" jurisdiction. That as seat of the arbitration was in Malaysia, thereby

the curial law was Malaysian law and the curial law would determine the procedure of arbitration

including challenge to an award. Therefore, the Malaysian Courts were right in applying Malaysian

law for testing the Award on a challenge by the Petitioner. However, the Court further held that

merely because the Malaysian Courts have upheld the Award, that would not be an impediment on

the Indian enforcement Court to examine the Award for enforcement in light of S. 48 of the

Arbitration Act. If the Award is found to be against public policy of India, it would not be enforced by

Indian Courts. However, on consideration, Court held that the award is not against public policy of

India.

Article 227

(xxi)As no restriction either in the arbitration agreement or in the order of reference, counter

claims can be raised

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In Ved Prakash Mithal & Sons v Principal, Kirori Mal College & Ors[21], High Court of Delhi was

dealing with a petition impugning the order of the Arbitrator rejecting the Petitioner's application for

rejection of counter claims on the ground that there was no speci c reference of counter claim by

the Court while referring the parties to arbitration u/s 8 of the Act and thus arbitral tribunal is

precluded from entertaining the counter claim. The Court held that there is no restriction either in

the arbitration agreement or in the order of reference with regard to disputes that can be referred or

exclusion from reference of certain disputes and thus contention of Petitioner that that the

counterclaims could not have been entertained by the Arbitral Tribunal is not sustainable.

(Kanika Singh is a Delhi-based lawyer, and may be reached at kanikasingh09@gmail.com)

Also by the same author :

Arbitration : Court Reckoners [August 2020]

Arbitration : Court Reckoner [May 2020]

Arbitration: Court Reckoner [June 2020]

Arbitration : Court Reckoner [July 2020]

[1] Arb. P. 795/2019 decided on 01st September 2020

[2] GA 820/2020 decided on 15th September 2020

[3] O.A. 1194/2018 decided on 3rd September 2020

[4] C.M.A Nos.2579, 14027 of 2019 decided on 4th September 2020

[5] C.M.P. No. 8322 and 8323 of 2020 decided On 04th September 2020

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[6] Interim Application No. 1 of 2020 in Commercial Execution Application (L) No. 528 of 2020

decided on 14th September 2020

[7] OMP(I)(COMM) 184/2020 decided on 30th September 2020

[8] Arb P. (Civil) No. 15/2020 decided on 16th September 2020

[9]O.P. No. 511/2009 decided on 17th September 2020

[10] OMP(T)(COMM)35/2020 decided on 01st September 2020

[11] 2019SCCOnlineSC1517

[12] OMP(T)(COMM) 65/2019 decided on 25th September 2020

[13] C.M.P. Nos. 271, 273, 275, 277, 289, 617 to 621 and 623 to 640 of 2020 decided On: 17.09.2020

[14] O.P. No. 594/2009 decided on 21st September 2020

[15] OMP(COMM) 486/2020 decided on 29th September 2020

[16] O.P. No. 758/2018 decided on 29th September 2020

[17] OMP(ENF.)(COMM)31/2019 order dated 02nd September 2020

[18] Arb A. 4/2020 decided on 17th September 2020

[19] FAO(OS) (COMM) 106/2020 decided on 22nd September 2020

[20] FA0(OS)(COMM) 103/2020 decided on 23rd September 2020

[21] CM(M) 452/2020 decided on 24th September 2020

TAGS ARBITRATION AND CONCILIATION ACT 1996  ARBITRATION AND CONCILIATION 

ARBITRATION COURT RECKONER 

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[Full Video] [Georgetown Law And SDR] Virtual Discussion On "Keeping The Executive In Check: The Role Of
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[Law On Reels] 'The Trial of The Chicago 7' : A Courtroom Drama Mirroring Present Day
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लाइव लॉ िहं दी + MORE

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िव मं ालय ने िव वष 2019-2020 के िलए आयकर रटन भरने के िलए तय तारीख आगे बढ़ाई

NBSA ने आजतक, ज़ी ूज़, ूज़ 24 और इं िडया टीवी को सुशांत िसंह राजपूत की मौत पर असंवेदनशील रपोिटग के
मामले म अपने आदे श का अनुपालन करने का िनदश िदया

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चुनाव आयोग ने म दे श के िफिजकल पोल कपेन पर रोक लगाने के आदे श को सु ीम कोट म चुनौती दी

ा उपभो ा फोरम िव िव ालयों और शै िणक सं थानों के खलाफ िशकायतों पर सुनवाई कर सकता है ? सु ीम कोट
करे गा जांच

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धानमं ी रा ीय राहत कोष (PMNRF) आरटीआई अिधिनयम के तहत 'लोक ािधकरण' नही ं: पीएमओ

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4 SCOTUS Upholds Denial Of Quali ed Immunity To Former County Clerk Who Refused To
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Draft EIA Noti cation 2020 Does Not Provide For Ex Post Facto Clearance To Violation
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JOB UPDATES

1. Law Clerk – Cum – Research Assistants Vacancy At High Court Of Karnataka

2. Legal O cer Vacancy At The Tata Institute Of Social Sciences

3. Research Fellow Vacancy At Centre For Trade And Investment Law

4. Senior Research Fellow Vacancy At Centre For Trade And Investment Law

5. Consultant (Legal) Vacancy At National Disaster Management Authority

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