Limited power of Courts to decide on the question of non-arbitrability at the reference stage under Section 8 and 11 of the Arbitration Act

By Karan Parihar, Advocate Rajasthan High Court

Supreme Court in Vidya Drolia and Ors. Vs. Durga Trading Corporation (2021) 2 SCC 1, while dealing the issue of non-arbitrability, especially when the subject matter of the dispute is not capable of being resolved through arbitration; and issue with respect of the power to decide the question of non-arbitrability at the reference stage, that who decide the question of non-arbitrability at the reference stage whether it would be court or the arbitral tribunal in the arbitration proceedings.

While discussing the above legal issues, Court held that-

a. Sections 8 and 11 of the Arbitration and Conciliation Act, 1996 (for short, the ‘Arbitration Act’). have the same ambit with respect to judicial interference.

b. Usually, subject matter arbitrability cannot be decided at the stage of Sections 8 or 11 of the Act, unless it’s a clear case of deadwood.

c. The Court, Under Sections 8 and 11, has to refer a matter to arbitration or to appoint an arbitrator, as the case may be, unless a party has established a prima facie (summary findings) case of non-existence of valid arbitration agreement, by summarily portraying a strong case that he is entitled to such a finding.

d. The Court should refer a matter if the validity of the arbitration agreement cannot be determined on a prima facie basis, as laid down above, i.e., ‘when in doubt, do refer’.

e. The scope of the Court to examine the prima facie validity of an arbitration agreement includes only:

i. Whether the arbitration agreement was in writing? or

ii. Whether the arbitration agreement was contained in exchange of letters, telecommunication etc?

iii. Whether the core contractual ingredients qua the arbitration agreement were fulfilled?

iv. On rare occasions, whether the subject-matter of dispute is arbitrable?

Thus Supreme Court in this case, clarified the scope of interference by the courts while deciding the application under Section 8 and 11 of the Arbitration Act which is a welcome move. Thus it limits the scope of interference by the court.  SC took into consideration legislative intent behind introduction of Section 11 (6A) of the Act which aims at limiting the interference of the courts and furthering the object of making India as arbitration friendly country.


By Rajeev Dadhich, Student-Institute of Law, Nirma University, Batch of 2018-23

The term dividends means a sum of money paid at regular interval by a company to its shareholders out of its profits. And the term repatriated means converting any foreign currency into one’s local currency. Repatriation often turns out essential in a business transactions, foreign investments, or international travel.


Under the previous regime, Dividends were freely repatriated without any restrictions as long as taxes are paid, notably the Dividend Distribution Tax (DDT). Tax credit and/or tax relief is not applicable for the DDT or for repatriation of dividends. Companies do not require permission from the RBI, but the remittance must be made through an authorized dealer. Further, there is a limited list of 22 consumer goods industries where repatriation of dividends is subjected to certain requirements including the manufacturing of food products, coffee, and soft drinks among others.

Dividends can be repatriated in the middle of the year with interim dividends after the DDT is paid. However, if using interim dividends, the company must have enough book profits to pay the dividend and enough money to pay taxes in India. If at the end of the year that turns out not to be possible, the directors may be made personally liable and be penalized, as a mistake on their part to declare interim dividends on the wrong judgment. Profit can also be repatriated along with capital through buyback of shares as long as a buyback tax of 20 percent is paid on profits distributed by companies to shareholders. Additionally Dividend distribution tax is charged at the rate of 15 per cent on gross basis plus applicable surcharge and cess (effective tax rate of 20.56%).

New Regime

The finance minister in the finance bill, 2020, amongst the different direct tax proposal inscribed in the Finance Bill, 2020 (‘Finance Bill’) a key corporate tax amendment proposed to be brought in by current Finance Bill relates to escape the incidence of taxation on dividend income in the hands of investor by abolishing the concept of Dividend Distribution Tax (‘DDT’). In the deriving paragraphs, an attempt is made to elucidate these proposals undertake an impact analysis of the abolishment of DDT on various stakeholders.

 With DDT being abolished, cash repatriation is made far more tax effective because now the concept of double taxation will not applied to repatriate the dividend. Now the dividend will only be subjected to the tax treaties. The rate of tax on dividends in India prescribed in most of the tax treaties is 10%, and there are a few treaties with an even lower 5% rate. Hence, foreign companies can now pay taxes on dividend at this reduced rate and claim the credit of the same in the country of residence. This will attract more investors in the Indian market because of the margin of profit and security provided by the new laws.

The Union Budget 2020 has laid all speculations to rest by removing the DDT all together. Section 115-O of the Income Tax Act, 1961, is proposed to be amended to provide that dividend declared, distributed or paid after March 31, 2020, will not be subject to DDT. Related amendments have also been proposed in other sections which relate to tax deduction at source from such dividend (Section 195), withdrawal of exemption of dividend income (Section 10(34)), removing cascading tax effect of dividend distribution (Section 80M), etc.

Under schedule III of Foreign Exchange Management (mode of payment and reporting of non- debt instruments) Regulation, 2019 investment by NRI or OCI on repatriation basis is enacted. Wherein, it is mentioned that the amount of consideration shall be paid as inward remittances from abroad through banking channels or out of funds held in NRE in accordance with Foreign Exchange Management (deposit) Regulation, 2016.

Foreign Exchange Management (Deposit) Regulation, 2016, under section 4, i.e. exemption, clearly states that the funds in the account may be repatriated outside India without the approval of Reserve Bank. This regulation is amended up to 13th November, 2019 and after that no further amendments have been made to this provision even after the abolishment of DDT.

Hence, abolishment of DDT has not amended the threshold for the dividends to be repatriated. Wherein  this abolishment has created the Indian market an point of attraction for investment because not the concept of double taxation will not be there which will increase the profit margin.   


Therefore, in the summary the scenario pre- Dividend distribution tax abolishment was such that no approval was required from any of the authorities for dividends to be repatriated. The Hon’ble Finance Minister, in her budget speech has indicated the increased cost of equity due to the tax costs on repatriation. It is needless to say that abolishment of DDT is a positive move to attract foreign investments. The cash repatriations in the past have proven to be costly. With DDT being abolished, cash repatriation is made far more tax effective and the criteria of approval from authorities for dividends be repatriated outside India remains same post- DDT abolishment.

Introduction to the Sabkavakil

Hello People,
This is to inform all the concerned and respected citizens of India that our idea of providing basic and technical legal help for all, has taken a shape of the website now,

Basically, We have created this website to reach out to the people who are in need and are not aware about their legal rights or are into any legal problem where they don’t know how to proceed and to whom to approach.

Here is that one stop for all your problems where this website provides the innovative and easy to go online legal solutions with an aim to serve customised needs and simplify the jargonised legal world for all the people in legal need. Adding further, it serves all the vast purposes i.e., from basic legal help required in day to day life to the professional technical legal help required in the corporate world.

We feel more than happy to announce that we are here, just to serve people with their day to day problems by providing free legal help and we do not intend to earn any kind of profit from this website. Our Motto is to reach out all the people from every corner of this nation and give them the proper legal advice which is very costly and unaffordable to all else way.

No matter, your issues are big or small, we are here to help you in recognising your own rights and getting your problems solved in a cost effective way by saving your time, money and energy. We can even provide you all with a basic understanding of your rights and can help in finding the appropriate solution to the problem. For example- Generally, people don’t aware of the laws and rules of Motor Vehicle and end up paying more than the given in the provision (mostly through bribe). Moreover, people are very fearful about Police and Government officers and end up agreeing to all their unreasonable terms which include giving bribes to them. Thus we are here to solve these queries and will guide you for the future course of action. Along with it, we also aim to provide the technical help related to other areas of law as well, which includes Corporate Law, Intellectual Property Rights, Litigation and much more.

We are further planning to launch a mobile Application as well in the future to make it even more easy for you all. Kindly take out sometime for yourself and get along with us on this journey to make our nation peaceful and problem free.

Happy Sharing!


By Anand Pandey, Advocate at Bihar High Court on May 19, 2019

In 2015 Arbitration and Conciliation Act has been amended to make the process feasible and attract international commercial arbitrations. Some of the salient features of the act are mentioned below:-
1. Definition of Court: The definition of court has been amended and now it demarcates a clear difference between a domestic and international commercial arbitration. Now, only High Court will have jurisdiction to deal with matter related to international commercial arbitration and not District court as was the case before amendment.
2. Removed barriers created by Balco vs. Kaiser: – In the amendment the effect of Balco vs Kaiser has been removed which said that Part-1 of the act will only apply to the domestic arbitration. Now, after the amendment one can ask for interim measures, taking of evidence and for filling appeal against granting or refusing to grant any interim measures even in case of International commercial arbitration. This move will attract foreigners to choose India as venue for conducting arbitration.
3. Amendment in Interim measure relief:- If a party has applied to court for passing interim measure before commencement of arbitration, then arbitration proceeding needs to commence within 90 days from the date of such order.
4. Impartiality and independence of arbitrator:- Two schedules namely schedule 5 and schedule 7 have been inserted in the act to ensure that the arbitrator who is appointed is independent and impartial. Grounds mentioned in schedule 5 will give rise to justifiable doubt to independence and impartiality of arbitrator while if any arbitrator falls under the grounds mentioned under schedule 7 then he is ineligible to act as arbitrator but parties may agree to make him arbitrator.
5. Power of Arbitral Tribunal to pass interim measures:- the amendment has clarified that the arbitral tribunal has same power as that of court available under section 9 and any order passed by the arbitral tribunal will be enforceable as an order of court.
6. Time bound arbitration:- The amendment has made provision according to which an arbitration has to be completed within 1 year. If it is not completed within 1 year, it can be extended by 6 month by court and after that period court may order reduction of fees of arbitrator by 5% for each month if delay is attributed to arbitrator. Also the amendment has introduced fast tract procedure to complete the process of arbitration with a period of 6 months in which the award will be passed on the basis of written pleadings, documents and submissions filed by the parties.
7. Limiting the scope of Public Policy:- Amendment has limited the scope of Public policy. An award can be set aside on the ground of public policy if:- award is obtained by fraud or corruption, award is in contravention with fundamental policy of Indian law or award is in conflict with basic notion of morality and justice.
8. Patent illegality:- Now, an award passed in international commercial arbitration cannot be challenged on the ground of patent illegality. Only domestic arbitration can be challenged on the ground of patent illegality.
9. Stay of enforcement of award:- if any award has been passed and any application has been made to set aside the award, then the award will not automatically be stayed. Party need to apply specifically for staying the execution of the award.
10. Appeal:- In amendment an appeal has been carved out against the order of judicial authority who refuses to refer the parties to the arbitration under section 8.

In all, the amendment focuses on making the act parties friendly, attract international commercial arbitration by removing barriers and by making the process time bound so as to make the process effective and less time consuming.

Interesting talks about disinvestment strategies of Government and its impact:-

By Karan Parihar, Advocate at Rajasthan High Court, on August 4, 2019

Finance Minister in tis First Budget Speech set target of Rs. 1, 05,000 crore of disinvestment receipts for the FY 2019-20. Government is considering to go below 51% of the shareholding to an appropriate level, in case where the Undertaking is still to be retained in Government control, decide on case to case basis. Government has also decided to modify present policy of retaining 51% Government stake to retaining 51% stake inclusive of the stake of Government controlled institutions.

Government also to reinitiate the process of strategic disinvestment of Air India, and to offer more CPSEs for strategic participation by the private sector. Government to undertake strategic sale of PSUs and continue to consolidate PSUs in the non-financial space.

The disinvestment strategy by government is an attempt to encourage capitalism in the country, diverting by the path of socialism. The PSUs contributes good amount of profit to the government. Government gets the leverage while taking up any developmental activity. Government should consider to revive and restructure the PSUs rather to sale them. PSU is the people’s property wherein it gives the employment opportunities to millions of people. PSU works in furtherance to the agenda of the Government.

Selling PSU would give leverage to private companies to misuse their position in the market. Also it amounts to losing control by the Government in the Market, thereafter Private players can exploit the consumers and in country like India where huge amount of income disparity exists. These private company will not look after the needs of middle class and poor.

Thus, Government should rethink of selling its stake in PSU like ONCG, Air India, BSNL etc. Government should also not consider privatizing the Indian Railway, which it is aiming at.

Note- This is the personal opinion of the author in case of any query; you can reply to it or send an E-Mail from contact section of the website.

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