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Better to buy than compete?

Whether de-merger is the right solution or resorting to other remedies like compulsory licencing would be viable remains to be seen. However, in this process, one thing the authorities need to keep in mind is that the solution must cure the problem without compromising or disincentivising the innovation.

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INTRODUCTION

In the past 15 years, the social networking industry has certainly been one of the fastest-growing industries in the world. A recent study estimated that the global market for mobile social networking stood at 3.2 billion users in the year 2020 and is projected to reach a revised size of 4.9 billion users by 2027, growing at an annual growth rate of 6.5% over next seven years. The numbers depict how deeply personal social networking has penetrated our lives and hence the conduct of these booming service providers has also become more relevant than ever. Other than a host of data privacy concerns raised against these service providers, there have also been recent complaints of antitrust violations being flagged up against them.

Recently, two lawsuits have been filed by the US Federal Trade Commission (“FTC”) & governments of 48 US states and territories, accusing Facebook of eliminating competition by acquiring its competitors and resorting to anticompetitive trade practices. The lawsuit has once again brought the conduct and the present structure of the giant social media company under the scanner. Ian Conner, director of FTC’s Bureau of Competition, has remarked that “Facebook’s actions to entrench and maintain its monopoly deny consumers the benefits of competition. Our aim is to roll back Facebook’s anticompetitive conduct and restore competition so that innovation and free competition can thrive,” This complaint and the statement is particularly interesting as it suggests a significant shift in the United States’ antitrust policy. FTC, which generally follows a non-interventionist approach – unlike the CCI in India and the CMA in the UK, through this complaint seems to have heralded a new era where even the FTC wants to intervene and review the business practices in the digital world.

The FTC’s complaint also resembles very closely to the recent Competition and Markets Authority’s (“CMA”) report on Facebook. Both – the complaint and the report, highlights noteworthy anti-competitive practices adopted by Facebook.

FACEBOOK’S BUSINESS MODEL IN A NUTSHELL

Facebook, formed in February 2004, was one of the first personal social networks to gain significant popularity. In contrast to the limited functionalities of email and messaging, Facebook’s personal social network gained immediate popularity by providing a distinct and richer way for people to maintain personal connections. Generally, personal social networking providers e.g. Twitter, Facebook, Google+, have introduced a unique business model where on one side of the market – the social networking services, there is no monetory price for the services, but on the other side – the digital advertisement, the advertisers are charged heavily and are faced with take it or leave it situation. Facebook too monetizes its businesses by selling advertising that is displayed to users based on the personal data about their lives that Facebook collects. This business model has been highly profitable for Facebook, both in the market of social networking as well as in the display advertising. Advertisers pay billions – nearly $70 billion in 2019 – to display their “specific ads” to “specific audiences”, which is facilitated by Facebook using proprietary algorithms that analyse the vast quantity of user data it collects from its users.

FTC’S LAWSUIT

FTC has filed a lawsuit before the District Court of Columbia alleging that Facebook has maintained its monopoly position by buying up companies that present competitive threats and by imposing restrictive policies that unjustifiably hinder actual or potential rivals that Facebook does not or cannot acquire. Facebook’s 2012 acquisition of Instagram for $1 billion and the 2014 acquisition of WhatsApp for $19 billion have been cited as attempts to illegally eliminate competition. Furthermore, the complaint highlights the exclusionary trade conditions imposed by Facebook on third-party applications for using its Application Programming Interfaces (APIs). The case has been filed under S. 2 of the Sherman Act, 15 U.S.C. §2, which the F.T.C imposes through S. 5 of the FTC Act. Section 2 of the Sherman Act penalizes companies for using anti-competitive means to acquire or maintain a monopoly. The suit has been petitioned for a permanent injunction to restrain Facebook from imposing anticompetitive conditions on access to APIs and data, along with a prayer for divestitures of assets, including Instagram and WhatsApp.

DEFINING RELEVANT MARKET

Under every antitrust regime, abuse of dominance investigation begins with defining the relevant market. The relevant market is essentially a tool to identify and define the boundaries of competition between firms. In the instant suit, the personal social networking service is defined as the relevant product market along with the United States as the relevant geographical market. Interestingly, an attempt has been made to define the relevant product market as narrowly as possible. Three key elements have been highlighted that make personal social networking services market distinct from the market for other forms of online services:

That the personal social networking services are built on a ‘social graph’ that maps the connections between users and their friends, family, and other personal connections. This social graph forms the foundation upon which users connect and communicate with their connections. Personal social networking providers use this social graph to inform what content they display to users in the shared social space and when.

That the personal social networking services include features that many users regularly employ to interact with personal connections and share their personal experiences in a shared social space, including in a one-tomany “broadcast” format.

That the personal social networking services include features that allow users to find and connect with other users, to make it easier for each user to build and expand their set of personal connections.

Further, the suit has specifically distinguished the market for personal social networking with; the market for specialized social networking services like LinkedIn as these services are designed for and are utilized by a narrow and specialized set of users primarily for sharing a narrow and highly specialized category of content;

the market for online video or audio consumptionfocused services such as YouTube, Spotify, Netflix as users employ these for passive consumption and posting of specific media content (e.g., videos or music) from and to a wide audience of often unknown users. These services are not used primarily to communicate with friends, family, and other personal connections.

the market for mobile messaging services as these do not feature a shared social space in which users can interact, and do not rely upon a social graph that supports users in making connections and sharing experiences with friends and family.

ASSESSING DOMINANCE

The second step in an ‘abuse of dominance’ investigation is to assess the market strength enjoyed by the enterprise. The strength of an enterprise is usually assessed through a variety of factors. The FTC’s complaint takes under consideration two important factors i.e. market share and entry barrier, to show that Facebook holds a dominant position in the relevant market. The suit alleges that Facebook has maintained a dominant share of more than 60% in the U.S. personal social networking market since the time of establishment, until the present day.

The suit also alleges that Facebook’s dominant position in the U.S. personal social networking market is resilient, due to significant entry barriers, like direct network effects and high switching costs. A strong network effect is a significant entry barrier because the personal social network is generally more valuable to a user when more of that user’s friends and family are already members, and hence a new entrant faces significant difficulties in attracting a sufficient user base to compete with Facebook. Therefore, even an entrant with a “better” product often cannot succeed against the overwhelming network effects enjoyed by a dominant personal social network.

Another significant entry barrier is in form of high switching costs, which means that the users are reluctant to shift to a new service provider because they have already built connections and develop a history of posts and shared experiences, which they would lose by switching to another personal social networking provider. Thus, significant entry barriers in the market facilitate Facebook’s continuing dominance.

ANTI-COMPETITIVE CONDUCT

FTC has accused Facebook of using its dominance and strength to deter, suppress and neutralise competition by either acquiring its competitors or by imposing anticompetitive conditions that automatically drive its competitors out of the market.

FTC has alleged that due to the strong network effect existing in the digital market, a competing product can only become relevant at moments of social transition, for instance, with the advent of smartphones, there was a significant transition in personal social networking because smartphones were portable and offered integrated digital cameras, making social networking with family and friends through taking, sharing, and commenting on photographs via a mobile app optimized for that activity increasingly popular. However, Facebook was struggling to provide a strong user experience for this kind of personal social activity. It was built and optimized for desktop use, not smartphones, and its performance with sharing photos on mobile devices was weak. Facebook feared that its personal social networking monopoly would be toppled by a mobilefirst, photo-based competitor emerging and gaining traction. It was soon clear that Instagram was just that competitor and thus Facebook decided to buy than to compete. In sum, Facebook’s acquisition and control of Instagram represent the neutralization of a significant threat to Facebook Blue’s personal social networking monopoly and the unlawful maintenance of that monopoly by means other than merits competition.

Similarly, FTC’s complaint throws light on another social transition that started around 2010 in consequence of the increased popularity of smartphones. Consumers shifted from using traditional shortmessage-service (“SMS”) to using text messaging via the internet through overthe-top mobile messaging apps (“OTT Mobile Messaging Services”). At that time, Whatsapp was emerging as an increasingly popular OTT mobile messaging app. As a result, Whatsapp posed a threat to make a move into the personal social networking market. Facebook’s leadership feared that Whatsapp would serve as a path for a serious competitive threat to enter the personal social networking market as a mobile messaging app as it had reached sufficient scale and just by adding additional features and functionalities, it could enter the personal social networking market at competitive scale and undermine or displace Facebook’s social networking monopoly. Therefore, Facebook neutralized yet another threat by acquiring Whatsapp.

This conduct of Facebook deprived users of the benefits of competition from an independent Instagram or Whatsapp, which had the potential to penetrate the U.S personal social networking market. Moreover, Whatsapp’s strong focus on the protection of user privacy and Instagram’s unique functionality could have provided an important form of product differentiation for them to be an independent competitive threat in personal social networking.

The third aspect of the FTC’s complaint stresses on the imposition of unfair trade conditions by Facebook on access to its valuable platform interconnections – APIs, that it makes available to third-party software applications. To communicate with Facebook ((i.e., send data to Facebook, or retrieve data from Facebook) third-party apps must use Facebook APIs. FTC has alleged that for many years, Facebook has made key APIs available to third-party apps only on the condition that they refrain from providing the same core functions that Facebook offers, including Facebook Blue and Facebook Messenger, and also refrain from connecting with or promoting other social networks. These conditions have helped Facebook maintain its monopoly in personal social networking, in two ways:

First, these restrictive conditions have deterred thirdparty apps that relied upon the Facebook ecosystem, from including features and functionalities that might compete with Facebook or from engaging with other firms that compete with Facebook. This deterrence, according to FTC, suppresses the emergence of threats to Facebook’s personal social networking monopoly.

Second, the enforcement of these conditions by terminating access to valuable APIs hinders and prevents promising apps from evolving into competitors that could threaten Facebook’s personal social networking monopoly.

FACEBOOK’S DEFENCE

Facebook has responded to these charges in an extensive post calling these lawsuits as revisionist history. Facebook’s defence can be divided into two parts:

On the acquisition of Instagram and Whatsapp, Facebook primarily contends that the FTC which had itself approved the mergers years ago, cannot now retroactively kill those mergers. Moreover, Facebook has pressed on the defence of ‘consumer benefit’. It argues that both the acquisitions have resulted in better products for consumers. Since the merger, Instagram has grown over a billion users worldwide due to improved features and better experiences. Meanwhile, Facebook has enabled Instagram to help millions of businesses engage their customers and grow. Similarly, Facebook made WhatsApp free worldwide, adding valuable new features like voice and video calling, and making it more secure by encrypting it end-to-end.

On the accusation about the imposition of anti-competitive conditions, Facebook maintains that it had created this platform for innovation on which millions of developers have created new apps, but there are certain thirdparty apps which unfairly duplicate services already being provided by Facebook. The objective behind the imposition of such conditions is to only avoid the use of Facebook’s platform to essentially replicate Facebook. Moreover, these restrictions are standard in the industry, where platforms give restricted access to other developers, while many do not provide access at all, but all of this is only to prevent duplication of core functions.

 REMEDYING THE DISTORTION OF COMPETITION BY A MERGER: WHAT DOES THE INDIAN REGIME HOLD?

The FTC’s lawsuit has attracted a lot of academic discussion on powers of antitrust authorities globally to kill mergers retroactively, which they once approved. Under the US Antitrust regime, the Hart-Scott-Rodino Act provides a mechanism for agency review of and preconsummation challenges to reported mergers through a challenge under S. 7 of the Clayton Act. Moreover, nothing in the statute prohibits the agencies from challenging a reported merger at some later stage, including after merger review, merger clearance, and merger consummation. In fact, Section 7(A)(i) of the Hart-Scott-Rodino Act states that any action under this section shall not bar any proceeding or any action with respect to such acquisition at any time under any other section of this Act or any other provision of law. Thus, by the express terms of Section 7(A)(i), the fact that the agencies reviewed and cleared a reported merger does not preclude the agencies from challenging the transaction at a later date.

This problem is more complex under the Indian competition regime as there is nothing like Section 7(A)(i) under the Indian Competition Act. Moreover, under the Indian merger control regime, the transaction which meet the jurisdictional threshold provided under Section 5 constitues a combination and requires the approval of the CCI, while the trasnations which do not neet the threshold limits of S. do not require prior approval. The Indian problem can be analysed in three parts; first, whether the CCI can hear an ex-post challenge to a previously approved combination; second, whether the CCI can hear an ex-post challenge to an unnotified transaction; and third, whether the CCI has the power to grant a structural remedy in terms of causing the breakup of the merged firm or divestiture of the assets of the enterprise. In cases of previously approved mergers, the statute gives a categorical power to the CCI to conduct an expost review of such a merger. Under S. 20(1), Commission can inquire into whether a notified combination under S. 5 has caused or is likely to cause an appreciable adverse effect on competition in India. However, the proviso restricts such review only up to one year of consummation. The question then arises is whether the commission can hear an ex-post challenge after a year of consummation? The answer may lie in S. 3(1) of the Act since the provision specifically includes an acquisition agreement. Therefore, even after a year of consummation, nothing precludes the CCI from conducting an ex-post facto analysis of the acquisition agreement under Section 3. Needless to say, it has to be shown that such trasncation has caused AAEC in the marketSimilarly, for unnotified mergers, since no provision restricts an ex-post review, the CCI has valid powers under S. 3(1) to check the anti-competitive effect of such agreement at any point of time. In India, the problem with the FacebookInstagram-Whatsapp acquisition was that it was never notified as it didn’t fall under the threshold limit and therefore the commission couldn’t even conduct an ex-ante review. However, looking at the wide powers under S. 3(1), the commission today may certainly look at the acquisition agreements in light of the factors under S. 19(3) and pass necessary orders.

On the question of powers of the commission to break up the enterprises, S. 27 and S. 28 of the Indian Competition Act gives the commission vide enforcement powers to remedy the distorted competition in the market. S. 28 empowers the commission to direct division of an enterprise enjoying a dominant position to ensure that such an enterprise doesn’t abuse its dominant position. Moreover, S. 27(g) empowers the commission to pass any order or issue any direction to remedy the abuse of dominance. Thus, by using these unequivocal powers given to it by the statute, CCI can impose structural remedies on already consummated mergers, causing the breakup of the merged firm or divestiture of some of the acquired assets.

CONCLUSION

It is one thing to see if the antitrust authorities theoretically possess the power to divest assets of a firm, and totally another thing to see if the antitrust authorities would use such power to demerge an enterprise. Despite the antitrust authorities’ ability to challenge reviewed and cleared mergers after the fact and the pro-competitive benefits of such ex-post challenges, the cases of such demergers are extremely rare. That’s the reason why the Competition and Markets Authority (“CMA”), even after finding tech giants abusing their dominance, didn’t take the responsibility of breaking them up. Technical experts have also vehemently argued against breaking up these tech giants as demergers might be counter-productive. Facebook has spent years integrating Instagram and WhatsApp: weaving their ad systems, user profiles, databases and other technology with Facebook. What to the public appear as distinct products are one giant social network on the back end. Therefore, the problem might not be solved only at the grant of prayer for demerger, the Courts would have to play a pivotal role in facilitating such de-merger, keeping in mind the importance of the tech-giant for the US economy. A famous line by an economist is worth keeping in mind, “it is dangerous to apply twentiethcentury economic intuitions to twenty-first-century economic problems”. Whether de-merger is the right solution or resorting to other remedies like compulsory licencing would be viable remains to be seen. However, in this process, one thing the authorities need to keep in mind is that the solution must cure the problem without compromising or disincentivising the innovation. It would be interesting to see how the court goes about developing the remedy package if it holds Facebook abusive of its dominant position.

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Legally Speaking

Former AAP Minister Moves Delhi High Court, Seeks Removal Of Kejriwal From CM’s Post

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In the case Sandeep Kumar v. Arvind Kejriwal and Others, the Delhi High Court observed a petition filed by Aam Aadmi Party MLA Sandeep Kumar seeking the removal of Arvind Kejriwal from the post of Chief Minister of Delhi. Arvind Kejriwal is presently in judicial custody related to an Enforcement Directorate (ED) case concerning the excise policy. This is the third petition seeking such a prayer, with the previous two pleas being rejected by the Division bench headed by Acting Chief Justice Manmohan.

Sandeep Kumar approached the court as a Court of first instance in writ jurisdiction, not as a Public Interest Litigation (PIL), in his individual capacity. He, being a lawyer by profession, claims to be a founding member of the Aam Aadmi Party and a social worker.

The plea filed seeks the issuance of a writ of quo warranto against Kejriwal, calling upon him to show by what authority, qualification, and title he is holding the office of the Chief Minister of Delhi. Additionally, the plea prays for an inquiry to dislodge Kejriwal from the office of the Chief Minister, with or without retrospective effect.

Kumar claims that as a voter of the Delhi Assembly Election, he is personally aggrieved for having a Chief Minister for his Union Territory who has incurred an ‘incapacity to hold the post’ and ‘who can never function as the Chief Minister from custody or prison’ as envisaged by the Constitution of India.

The petitioner argues that Kejriwal has incurred an incapacity to carry out his functions as the Chief Minister of Delhi under the Constitution and therefore, he cannot hold the post. The plea emphasizes that the right to have a government in accordance with the Constitution is a Constitutional Right of every citizen and voter.

Arvind Kejriwal was arrested on the night of March 21 and subsequently remanded to judicial custody until April 15. However, the court refused to entertain a Public Interest Litigation (PIL) seeking Kejriwal’s removal from the post of Chief Minister, observing that there is no scope for judicial interference in the matter, and it is for other organs of the State to examine the issue.

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Delhi High Court Reserved Verdict On Arvind Kejriwal’s Plea Challenging ED Arrest In Liquor Policy Case

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The Delhi High Court in the case Arvind Kejriwal v. Directorate Of Enforcement observed and has reserved verdict on the plea moved by Chief Minister Arvind Kejriwal challenging his arrest by the Enforcement Directorate, ED in the money laundering case related to the alleged liquor policy scam case.

The bench headed by Justice Sharma in the case observed and has denied any interim relief to Kejriwal and only issued notice on his plea challenging the arrest, as well as his interim application seeking immediate release.

In the present case, Kejriwal is currently in judicial custody. Kejriwal was being arrested on the night of March 21.

The Trial Court in the case remanded him to six days of ED custody, which was extended by further four days. On April 01, he was remanded to judicial custody till April 15.

It has been stated by the Enforcement Directorate, ED that Kejriwal is the kingpin and the key conspirator of the excise scam and there were reasons to believe on the basis of material in its possession that he was guilty of the offence of money laundering.

It has also been alleged that the Aam Aadmi party was the ‘major beneficiary’ of the proceeds of the crime and has committed the offence through Kejriwal.

The response stated that, the Aam Aadmi Party, AAP is the major beneficiary of the proceeds of crime generated in the Delhi Liquor Scam. The Sh Arvind Kejriwal was and is not only the brain behind the AAP but also controls its major activities, he was also one of the founding members and was also involved in the decision making of the policy as evident from the statements of the witnesses.

Arguments:

The counsel, Additional Solicitor General SV Raju told the Court that investigation qua the sitting CM is at a nascent stage. Thus, he also pointed that Kejriwal has not challenged the latest order remanding him to 15 days judicial custody. He has also challenged the first remand order. Please look at the remand order of 26 March. Today we are on April 3. The second remand order is passed on March 28. That has not been challenged. Thus, the third remand order of judicial custody has not been challenged. So today his custody isn’t pursuant to arrest or first remand order, it’s pursuant to April 1 order which has not been challenged. Therefore, Raju also wondered if Kejriwal can challenge his remand since he did not oppose it. ‘He voluntarily accepts please remand me further. Can he challenge the remand order? Or is it barred by waiver? They are blowing hot and cold at the same time. You cant challenge the remand order and say please pass the order and accept it. They have not challenged the latest orders pursuant to which he is in custody. Thus, custody can’t be said to be illegal.”

The counsel, Senior Advocate Abhishek Manu Singhvi appearing for Kejriwal argued before the court that the central probe agency did not comply with Section 50 PMLA which empowers it to issue summons, collect evidence, etc. thus, it being clear that section 50 involves an inquiry. Because it’s inquiry which enables ED to make up mind about arrest and prosecution. No attempt is made to record my section 50 even at my residence. While pointing out the remand application he added ED wants to “find out” the role of Chief Minister. ‘Surely that’s not a ground for today’s arrest… There has to be specific role of the petitioner, even for the company, which I’m denying.’

On the other hand, it has been argued by the ASG that the fact that a PMLA offence has taken place is clear and beyond any doubt. Because as far as first Police Custody and subsequent Police Custody is concerned, court has taken cognizance… Categorical finding that there is money laundering. Cognizance of the offence of money laundering. Nobody has challenged the order.

It has also been contended by the Singhvi that ED forced the approvers Raghav Magunta, Sarath Reddy and Magunta Reddy to make statements against Kejriwal. Further, it has been alleged that two approvers even have links with the ruling party. Adding to it, Singhvi stated that initial statements that did not implicate Kejriwal are not even put on record by the ED. ‘These statements are kept in unrelied. Why should the court not see it? Is it fair? What cannon of fairness are you carrying ED? Out of 13 statements by this Reddy. He says nothing in 11 statements. The judge will go by one statement?’

He also questioned the necessity of arrest amid upcoming general elections. The test is not can arrest. It is demonstrating the necessity to arrest. The should arrest test. The necessity to arrest immediately before elections… the only object is to insult, humiliate and disable… So that the petitioner is unable to participate in the election process and to try to demolish the party before the first vote is cast. The timing reeks of basic structure issue, free and fair election issue and democracy issue. What is this urgency or necessity?

Further, Singhvi stated that it said to be a flight risk, given his deep roots in the society. Responding to this ASG stated that, supposing a political person commits murder two days before elections. This means he can’t be arrested? Basic structure comes into play? Criminals are supposed to be arrested and put in jail. In such cases there is no infringement of basic structure.

Further, it has been argued by ASG that calculation was done as to why 5 percent profit was made 12 percent in the new policy. “Only inference is that it was done so that 7 percent of portion is used for giving kickbacks. The fact that there is a scam is beyond doubt. Howsoever hue and cry you make, its a fact that a scam was there… Finding of the actual proceeds of crime is irrelevant if we make out a case that you were involved in money laundering.

Facts of the Case:

Kejriwal had skipped nine summons issued to him by ED. The Aam Aadmi Party leaders Manish Sisodia and Sanjay Singh are also accused in the case and are presently in judicial custody. While following his arrest, Kejriwal had promptly moved an urgent petition before the Supreme Court challenging his arrest. However, the same was withdrawn later. Kejriwal has previously moved the Delhi High Court, the division bench wherein it challenged the summons issued to him by the central probe agency. He has also filed an application seeking interim protection. The matter is fixed for hearing on April 22. The Kejriwal has skipped the summons, claiming that they are illegal.

It has also been alleged by the ED that Arvind Kejriwal is the ‘kingpin’ of Delhi excise scam and is directly involved in the use of proceeds of crime accounting to over Rs. 100 crores. It being the case of ED’s that the excise policy was implemented as part of a conspiracy to give wholesale business profit of 12 percent to certain private companies, although such a stipulation was not mentioned in the minutes of meetings of Group of Ministers, GoM. Further, it has also been claimed by the Central agency that there was a conspiracy that was coordinated by Vijay Nair and other individuals along with South Group to give extraordinary profit margins to wholesalers. According to the agency, Nair was acting on behalf of Chief Minister Arvind Kejriwal and Manish Sisodia.

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Delhi High Court CM Arvind Kejriwal’s ED Custody extended By 4 Days Till April 1 In Liquor Policy Case

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The Delhi High Court in the case Surjit Singh Yadav v. Union Of India observed and has remanded the Chief Minister Arvind Kejriwal to Enforcement Directorate, ED custody till April 01 in the money laundering case which relates to the alleged liquor policy scam case. Arwind Kejriwal was being arrested on the night of March 21, 2024. The Special CBI judge Kaveri Baweja of the Rouse Avenue Courts passed the order after Kejriwal was produced in court on the expiry of his six days of Enforcement Directorate, ED custody.

The Delhi High Court in the case declined any interim relief to Kejriwal and only issued notice on his plea challenging the arrest and remand. The counsel, Additional Solicitor General SV Raju told the court that the sitting CM was giving “evasive replies” during interrogation and the agency needs to confront him with some individuals who have been summoned from Goa. Thus, ED sought 7 more days of custody. He doesn’t get exonerated if he is a CM. There is no different standards for a CM. Right to arrest a CM is no different from an ordinary man.”

Yesterday, the Enforcement Directorate, ED summoned AAP’s Goa unit chief Amit Palekar and some other party leaders for questioning. Thus, they have been asked to appear at the agency’s Goa office on March 28, 2024. Further, the Kejriwal while appearing in person submitted before the court that he is not opposing remand. He claimed the entire case is a ‘political conspiracy’ and there is no such material against him. It has also been alleged by the Delhi CM that the central probe agency was collecting selective material and even the approver was forced to make a statement against him. Further, the central probe agency submitted before the court that Kejriwal has refused to share the password of his mobile phone.

Adding to it, Kejriwal responded that ED cannot force him to unlock his electronic gadgets. Delhi High Court Rejected PIL For Removal Of Arvind Kejriwal From Post Of Chief Minister The Delhi High Court rejected the Public Interest Litigation, PIL moved seeking removal of Arvind Kejriwal, who has been arrested by the Enforcement Directorate, ED in the liquor policy case, from the post of Chief Minister of Delhi. The Division bench comprising of Acting Chief Justice Manmohan and Justice Manmeet Pritam Singh Arora in the case observed and has stated that the petitioner failed to show any bar in the law which prohibits the arrested CM from holding office. The CJI orally stated that, ‘Show us, where is the prohibition. Show us any legal bar which you’re canvassing’.

Further, the bench stated that there is no scope for judicial interference in the matter and the executive is examining the issue. The court in the case observed that if there is a constitutional failure, President or Governor will act on it…Is there any scope for judicial interference in this? The LG is examining the issue. It will go to the President. It belongs to a different wing. There is no scope for judicial interference in this. In the present case, the petition is moved by one Surjit Singh Yadav, a Delhi resident claiming to be a farmer and social worker. It has been claimed by him before the court that a Chief Minister accused of a financial scandal should not be permitted to continue in public office. Kejriwal is presently in ED custody which ends on March 28, 2024. It has been submitted by Yadav in the PIL that Kejriwal’s continuation in the post would not only lead to obstruction of due process of law and disrupt the course of justice, but also would lead to a breakdown of the constitutional machinery in the State as Kejriwal does not satisfy most of the limbs of Article 163 and 164 of the Constitution of India owing to his incarceration.

Further, the plea stated that the Respondent No.4 has virtually forfeited his office as a Chief Minister of account of being arrested and as he is in the Custody he has disabled himself from performing the duties and responsibilities of being a public servant and as such he ought not to continue as a Chief Minister. Therefore, the AAP Ministers have been making statements in the media that Kejriwal will not resign from the post and if need be, he will run the government from inside the prison.

It has been submitted by Yadav that a jailed CM would be incapable of transacting any business that the law enjoins upon him and if he is allowed to do so, any material, irrespective of its secretive nature, would have to be scanned thoroughly by the prison authorities before it reaches Kejriwal’s hands and such an act would amount to direct breach of oath of secrecy administered to the CM under the Third Schedule of the Constitution. Further, the plea stated that the Transaction of Business of the Government of National Capital Territory of Delhi Rules, 1993 empowers a CM to call for files from any department of the Cabinet and if Kejriwal continues as CM, he would be well within his rights to demand for the investigation of files wherein he has been arraigned as an accused.

The plea states that, such a situation is against the ethos of Criminal Jurisprudence. Therefore, Yadav had prayed the Court to issue a writ in the nature of Quo Warranto, calling upon Kejriwal to answer under what authority he is holding the post of CM and consequently remove him. However, Yadav has also filed another PIL seeking to prevent Kejriwal from issuing directions or orders while in ED custody. About The Case: The Kejriwal had skipped nine summons which were issued to him by the Enforcement Directorate, ED.

The Aam Aadmi Party leaders Manish Sisodia and Sanjay Singh are also accused in the case and are presently in judicial custody. The Kejriwal while following the arrest of him had promptly moved an urgent petition before the Supreme Court challenging his arrest. Later, the same was withdrawn. Therefore, Kejriwal has previously moved the Delhi High Court (division bench) challenging the summons issued to him by the central probe agency. Further, the Kejriwal has also filed an application seeking interim protection.

The matter was fixed for hearing on April 22. It has been alleged by ED that two criminal complaints had been filed against Kejriwal in city’s Rouse Avenue Courts alleging non-compliance of the summons by him. Kejriwal has skipped the summons, claiming that they are illegal. It has been alleged by the ED that Arvind Kejriwal is the ‘kingpin’ of Delhi excise scam and is directly involved in the use of proceeds of crime accounting to over Rs. 100 crores.

It being the case of ED that the excise policy was implemented as part of a conspiracy to give wholesale business profit of 12 percent to certain private companies, although such a stipulation was not mentioned in the minutes of meetings of Group of Ministers, GoM. It has been claimed by the Central Agency that there was a conspiracy that was coordinated by Vijay Nair and other individuals along with South Group to give extraordinary profit margins to wholesalers.

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Supreme Court: Plea To Stay Citizenship Amendment Act

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The Supreme Court in the case was hearing the application filed to stay the Citizenship Amendment Act 2019 and the Citizenship Amendment Rules 2024.

The bench comprising of CJI DY Chandrachud, Justice JB Pardiwala and Justice Manoj Misra was hearing the present matter. In the present case, the court was hearing the 237 writ petitions challenging the CAA, filed in 2019.

Therefore, these petition before the Court on October 31, 2022. The Union Government notified the Citizenship Amendment Rules 2024 to implement the CAA and notified the formation of committees at the State or UT levels to process the applications on March 11.

The petitioner are Political party Indian Union Muslim League (IUML, the lead petitioner in the case), Democratic Youth Front of India (DYFI, youth wing of the CPI(M)), All Assam Students Union, Assam opposition leaders Debrabata Saika and Abdul Khaleque, State of Kerala, AIMIM head Asaduddin Owaisi, Socialist Democratic Party of India etc.,

The Senior Advocate Kapil Sibal told the court that there was no question of a pause back then since the rules were not notified. Adding to it, Solicitor General Tushar Mehta then said that the fact that the rules were notified before the elections was irrelevant.

The party leader Jairam Ramesh has stated that, the pposition has slammed the Narendra Modi government over the timing of the law’s implementation – four years after it cleared the Parliament. The move is “evidently designed to polarise the elections, especially in West Bengal and Assam”.

Further, the Trinamool Congress chief and Bengal Chief Minister Mamata Banerjee stated that she doubts the legality of CAA and alleged a conspiracy to “snatch citizenship rights. The Bengal Chief Minister Mamata Banerjee says that, BJP leaders say CAA gives you rights. But the moment you apply for citizenship, you become illegal migrants and you will lose your rights. You will lose rights and be taken to detention camps. Please think before you apply. The Centre has trashed the Opposition’s allegations. Stressing that the CAA is not “unconstitutional”, Home Minister Amit Shah has accused the Opposition of resorting to the “politics of lies”.

Amit Shah stated that, On the timing of the law’s implementation, “BJP made it clear in its 2019 manifesto that it will bring CAA and provide Indian citizenship to refugees (from Pakistan, Bangladesh and Afghanistan). BJP has a clear agenda and under that promise, the Citizenship (Amendment) Bill was passed in both houses of Parliament in 2019. It got delayed due to Covid.” Further, Amit Shah stated that, minorities of the country “need not be afraid because CAA has no provision to take back the rights of any citizen”.

Court Hearing:

The bench passed an order appointing separate nodal counsels for petitions which relates t0o States of Assam and Tripure. The Adv Ankit Yadav appointed for the petitioners’ side and Adv Kanu Agarwal for the Petitioners.
Sibal: the moment something like this happens, give us liberty to move here.
CJI: We are here.
Jaising : Would your lordships be pleased to say that any citizenship granted will be subject to the outcome of the petitions.
SG : No, no.
CJI : They don’t have the infrastructure in place, the committee..
SG : This attempt was made outside the court four years back. Misleading people that you will be out of NRC. Same thing Mr. Pasha did. NRC is not an issue here. Grant of citizenship is. Please don’t do this. Nizam Pasha : Muslim members left out of NRC will be prejudiced.. 19 lakhs people left out of NRC, it applies to them.
SG : NRC is not an issue
CJI : They are not willing to make a statement, that is why we keep on April 9.
Sibal : If something happens, we will come..
CJI : What we will do is we will keep on April 9, 2024.
Jaising : In the meantime no citizenship.
SG : I am not making any statement.
SC : We direct the proceedings be listed on April 9, 2024.
Sibal : In meantime no citizenship be granted.
SG: Realistically speaking, I need 4 weeks.
CJI : You can file response in one case, opposing interim prayer.
SG : Many matters have different contentions.
Sibal : Then make a statement that no citizenship will be granted
CJI dictates order : On 22.01.2020 notice was issued. The rules have been
recently notified. This has given rise to applications for stay. SG submits that 4 weeks’ time be granted to file response. The request of 4 weeks’ time is opposed on the ground that in the meantime if citizenship is granted, it will be irreversible.
Sibal : There are serious issues of constitutionality.
Sr Adv Ranjit Kumar (for migrant) : From Balochistan, I came to India because I was persecuted. If I am given citizenship, how is it affecting them?
Jaising : They will get the right to vote!.

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Legally Speaking

Delhi High Court: ED summons cannot be quashed merely because documents required for confrontation or probe not specified in it

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The Delhi High Court in the case Mr Talib Hassan Darvesh v. The Directorate Of Enforcement observed and has said that the summons issued by Enforcement Directorate, ED cannot be quashed merely because relevant documents are required for investigation or confrontation with an accused who have not been specified in them.

The bench of Justice Anoop Kumar Mendiratta in the case observed and has stated that the summoning, in exercise of statutory powers, cannot be stalled merely on mere apprehension that the accused may be arrested and prosecuted on basis of summons issued after registration of ECIR in the proceedings which are initiated by the Enforcement Directorate, ED. The court in the case observed and has denied the interim relief to Talib Hassan Darvesh, the accused in the money laundering case.

Before the court, he also sought a stay on the summons which is issued to him by Enforcement Directorate, ED and to restrain the probe agency from taking any further coercive steps against him. Therefore, the Enforcement Directorate, ED opposed the petition which being on the ground that Darvesh cannot be insulated from any coercive action at the initial stage itself and no protective orders could be passed in his favour, ignoring the mandate of Section 45 of PMLA.

It has also been submitted before the court that the proceedings which are initiated by ED were an independent investigation into money laundering allegations based upon the ECIR and the benefit could not be granted which being merely on account of orders granting anticipatory bail to Darvesh in FIR registered by CBI.

The court stated while denying the relief that the summons issued by the Enforcement Directorate, ED cannot be quashed merely because the relevant documents required for purpose of investigation or confrontation to the petitioner, have not been specified in the summons. Adding to it, the court stated that since ECIR is an internal document which is being created before initiation of prosecution against persons involved with process or activity connected with proceeds of crime and it is not necessary to reveal the evidence collected by the Enforcement Directorate, ED at this stage in the summons forwarded to Darvesh.

Further, the court stated that the petitioner is yet to be absolved of scheduled offence by way of discharge, acquittal or quashing and as such protection orders cannot be issued in favour of petitioner ignoring the mandate as it is stated under Section 45 of PMLA, 2002 for grant of bail. Further, the court stated that summoning in exercise of statutory powers cannot be stalled merely on mere apprehension that petitioner may be arrested and prosecuted on basis of summons issued after registration of ECIR, in proceedings initiated by Enforcement Directorate, ED.

The court while considering the facts and circumstances of the case observed and found no grounds for interim relief to be made out at this stage, thus, the court disposed of the plea. Accordingly, the court the petition seeking to quash of the ECIR and summons for hearing on May 07.

The counsel, Advocates Mr. Siddharth Luthra and Mr. Siddharth Agarwal, Sr. Advs. with Mr. Ayush Agarwal, Mr. Udhav Sinha, Mr. Amar Gahlot, Ms. Srishty Jaura, Mr. Nalin Bajaj, Ms. Purvi Garg and Mr. Prashant Singh appeared for the Petitioner. The counsel, Advocates Mr. Zoheb Hossain, Special Counsel for E.D. with Mr. Vivek Gurnani, Mr. Kartik Sabharwal and Mr. Abhigiya represented the respondent.

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Legally Speaking

Delhi High Court ceases mandate of unilaterally appointed arbitrator under general conditions of contract

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The Delhi High Court, in the case Chabbras Associates vs M/s Hscc (India) Ltd and Anr., observed and rejected the contention presented by the Respondent that the unilateral appointment of the arbitrator made in accordance with the contract cannot be challenged, and the only option available to the petitioner is to challenge the mandate of the arbitrator.

The single bench of Justice Dinesh Kumar Sharma observed and emphasized that the unilateral appointment of an arbitrator as stipulated in Clause 25 of the GCC was inherently and blatantly unlawful.

Facts of the Case:

Therefore, the Petitioner approached the Delhi High Court, seeking arbitrator appointment but was directed to exhaust dispute resolution mechanisms in the work agreement or GCC. The Petitioner sought resolution from Respondent No.2, the appealing authority, who rejected the claims on June 14, 2023. The Petitioner, having exhausted all remedies, formally requested the appointment of a fair, neutral, and unbiased arbitrator as per Clause 25 of GCC.

On the other hand, Respondent no.2 unilaterally appointed a Sole Arbitrator without the Petitioner’s concurrence. Further, the Petitioner argued that this appointment violated principles of neutrality, independence, and impartiality.

The respondent argued before the court that the arbitrator’s appointment aligned with the arbitration agreement and since the Petitioner did not challenge the mandate, the petition should be dismissed.

Observations Made by High Court:

The High Court observed and held that it is a well-established legal principle that an arbitration agreement allowing only one party the exclusive right to appoint an arbitrator is inherently flawed and contrary to legislative intent.

The court also referred to the Supreme Court decision in the case Perkins Eastman Architect DPC and Anr. vs. HSCC, wherein the High Court held that the unilateral appointment of an arbitrator is invalid. It firmly held that the provision in Clause 25 of the GCC, empowering unilateral appointment, is vitiated.

The court, while rejecting the contentions of the respondent that the appointment aligned with the contract and challenging the arbitrator’s mandate was the only recourse, held that the unilateral appointment, as per Clause 25 of GCC, was legally flawed. The court stressed that allowing such illegality to persist merely because the petition was filed under Section 11 of the Arbitration Act, and not under Section 14 and Section 15, was not acceptable.

The High Court, considering the facts and circumstances of the case, held that the arbitrator’s mandate shall cease to operate. The court appointed Justice Vipin Sanghi, Former Chief Justice, Uttarakhand High Court, as the sole arbitrator to adjudicate the disputes between the parties.

Advocate Ms. Krishna Parkhani appeared for the Petitioner, while Advocates Mr. Harshit Agarwal, Mr. Kamal Kumar, and Mr. Baldev Singh represented the Respondent no.1 and respondent no.2.

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