Supreme Court’s landmark judgment on the disqualification of convicted representatives in India

 The Supreme Court’s landmark judgment on the disqualification of convicted representatives in India came in the 2013 case of Lily Thomas v. Union of India. This ruling fundamentally changed the legal landscape regarding when and how Members of Parliament (MPs), Members of the Legislative Assembly (MLAs), and Members of Legislative Councils (MLCs) lose their seats upon conviction for criminal offenses.

Key Points from the Supreme Court Judgment (Lily Thomas Case, 2013):

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Whether 𝐚𝐧 𝐀𝐫𝐛𝐢𝐭𝐫𝐚𝐭𝐨𝐫 𝐚𝐩𝐩𝐨𝐢𝐧𝐭𝐞𝐝 𝐛𝐞𝐟𝐨𝐫𝐞 𝐭𝐡𝐞 2015 𝐚𝐦𝐞𝐧𝐝𝐦𝐞𝐧𝐭 𝐀𝐜𝐭, 𝐛𝐞 𝐫𝐞𝐦𝐨𝐯𝐞𝐝 𝐛𝐲 𝐂𝐨𝐮𝐫𝐭 𝐢𝐧𝐭𝐞𝐫𝐯𝐞𝐧𝐭𝐢𝐨𝐧 𝐝𝐮𝐞 𝐭𝐨 𝐚 𝐬𝐮𝐛𝐬𝐞𝐪𝐮𝐞𝐧𝐭 𝐃𝐢𝐬𝐪𝐮𝐚𝐥𝐢𝐟𝐢𝐜𝐚𝐭𝐢𝐨𝐧 𝐮𝐧𝐝𝐞𝐫 𝐒𝐞𝐜𝐭𝐢𝐨𝐧 12(5)?

Ellora had filed Application under Section 14 read with Sections 11 and 15 of the Arbitration & Conciliation Act, 1996 seeking termination of mandate of the then constituted Arbitral Tribunal (AT) & to appoint a new arbitration, before the High Court of Madhya Pradesh. 

The said Application had been dismissed by the MP High Court, against which Ellora had preferred an Appeal before the Supreme Court. 

The main contention raised by Ellora was that the AT, being officers of the Respondent, had lost their mandate in view of Section 12(5) read with Seventh Schedule of the A&C Act.

The Court observed as below:

1. The AT was constituted in 2001, when the AT constituted of employees of Respondent. The employees have since retired also. However, since 2001 no other steps were taken in arbitration, and as such it can’t be said the proceedings had commenced. 

2. As such after the 2015 Amendment Act, with the effect of Section 12(5) read with Seventh Schedule, all of the members of the constituted AT become ineligible to continue as arbitrators. (Reliance placed on Jaipur Zila Dugdh Utpadak Sahkari Sangh Limited )

3. It cannot be said that merely because Ellora had participated in the arbitration proceedings before the AT, he could not have approached the High Court for fresh appointment of arbitrator. This is because the waiver of the disqualification under Section 12(5) has to be “expressly” and in writing, and cannot be implied by mere participation. (Reliance placed on Bharat Broadband Network Limited v. United Telecoms Limited, (2019) 5 SCC 755.

In view of the above, it was declared by the Supreme Court that the already constituted AT were ineligible to act as arbitrators, and accordingly, a fresh arbitrator was appointed to adjudicate the disputes between the parties. 

 In the Supreme Court of India

(Before M.R. Shah and B.V. Nagarathna, JJ.)

Ellora Paper Mills Limited Vs State of Madhya Pradesh 

Civil Appeal No. 7697 of 2021

Decided on January 4, 2022

Citation: 2022 SCC OnLine SC 8

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Whether arbitrator advising one of the parties on unconnected matter would lead to his disqualification?

 Shri Divan has pressed before us that since on a legal issue between GAIL and Anr. public sector undertaking an opinion had been given by Justice Lahoti to GAIL in the year 2014, which had no concern with respect to the present matter, he would stand disqualified under Item 1 of the Seventh Schedule. Items 8 and 15 were also faintly argued as interdicting Justice Lahoti's appointment. Item 8 would have no application as it is nobody's case that Justice Lahoti "regularly" advises the Respondent. And Item 15 cannot apply as no legal opinion qua the dispute at hand was ever given. On reading Item 1 of the Seventh Schedule, it is clear that the item deals with "business relationships". The words "any other" show that the first part of Item 1 also confines "advisor" to a "business relationship". The arbitrator must, therefore, be an "advisor" insofar as it concerns the business of a party. Howsoever widely construed, it is very difficult to state that a professional relationship is equal to a business relationship, as, in its widest sense, it would include commercial relationships of all kinds, but would not include legal advice given. This becomes clear if it is read along with Items 2, 8, 14 and 15, the last item specifically dealing with "legal advice". Under Items 2, 8 and 14, advice given need not be advice relating to business but can be advice of any kind. The importance of contrasting Item 1 with Items 2, 8 and 14 is that the arbitrator should be a regular advisor under items 2, 8 and 14 to one of the parties or the appointing party or an affiliate thereof, as the case may be. Though the word "regularly" is missing from Items 1 and 2, it is clear that the arbitrator, if he is an "advisor", in the sense of being a person who has a business relationship in Item 1, or is a person who "currently" advises a party or his affiliates in Item 2, connotes some degree of regularity in both items. The advice given under any of these items cannot possibly be one opinion given by a retired Judge on a professional basis at arm's length. Something more is required, which is the element of being connected in an advisory capacity with a party. Since Justice Lahoti has only given a professional opinion to GAIL, which has no concern with the present dispute, he is clearly not disqualified under Item 1.

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 11126 of 2017 

Decided On: 31.08.2017

HRD Corporation Vs.  GAIL (India) Limited

Hon'ble Judges/Coram:

Rohinton Fali Nariman and Sanjay Kishan Kaul, JJ.

Citation: (2018) 12 SCC 471

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Whether disqualified arbitrator can nominate another arbitrator?

The aforesaid authorities have been commended to us to establish the proposition that if the nomination of an arbitrator by an ineligible arbitrator is allowed, it would tantamount to carrying on the proceeding of arbitration by himself. According to learned Counsel for the Appellant, ineligibility strikes at the root of his power to arbitrate or get it arbitrated upon by a nominee.

57. In such a context, the fulcrum of the controversy would be, can an ineligible arbitrator, like the Managing Director, nominate an arbitrator, who may be otherwise eligible and a respectable person. As stated earlier, we are neither concerned with the objectivity nor the individual respectability. We are only concerned with the authority or the power of the Managing Director. By our analysis, we are obligated to arrive at the conclusion that once the arbitrator has become ineligible by operation of law, he cannot nominate another as an arbitrator. The arbitrator becomes ineligible as per prescription contained in Section 12(5) of the Act. It is inconceivable in law that person who is statutorily ineligible can nominate a person. Needless to say, once the infrastructure collapses, the superstructure is bound to collapse. One cannot have a building without the plinth. Or to put it differently, once the identity of the Managing Director as the sole arbitrator is lost, the power to nominate someone else as an arbitrator is obliterated. Therefore, the view expressed by the High Court is not sustainable and we say so.
IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 5306 of 2017 (Arising out of S.L.P. (C) No. 22912 of 2016), 

Decided On: 03.07.2017

TRF Ltd. Vs. Energo Engineering Projects Ltd.

Hon'ble Judges/Coram:
Dipak Misra, A.M. Khanwilkar and Mohan M. Shantanagoudar, JJ.
Citation: AIR 2017 SC 3889

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Whether councillor can be disqualified on ground that he has done unauthorized construction in his earlier tenure?

 The   Commissioner,   in   our   view,   wrongly   held   that   the
Petitioner has carried out unauthorized construction, considering the
Scheme   of   Sections   10(1D),   11   and   12   of   the   MMC   Act.     It   is
necessary for the Commissioner to come to the conclusion that as to
whether   the   Petitioner,   being   the   Councillor,   has   carried   out
unauthorized   construction   during   his   present   tenure.     Admittedly,
there is no such  case that such construction is carried out during his
present tenure.   No such action was taken in the Petitioner's earlier
tenure.  The conclusion so arrived at by the Commissioner is without
any discussion on the interpretation of Section 10(1D) and whether
such construction activities were carried out during the Petitioner's
earlier tenure cannot be countenanced and cannot be the foundation
to dislodge a sitting Councillor.  The Commissioner has no authority
and   jurisdiction   even   to   take   such   decision,   without   deciding   the

issues/disputes for want of specific provisions, is another factor.  The
drastic   action   of   disqualification,   based   upon   such   unauthorized
construction, which is not during the present tenure, is therefore, bad
in law.   Respondent No.1 cannot be permitted to add more reasons
through an affidavit in reply, in the Writ Petition, in this regard. 
11 The fact that the construction is still in existence, in our
view, cannot be the reason to dislodge the elected Councillor without
following   due   procedure   of   law   and   by   not   referring   the
matter/proposal to the General Body of the Corporation for making a
reference to the Judge.  
IN THE  HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION 
WRIT PETITION NO. 3707 OF 2016
Shri Mallesh Shivan Shetty

Vs.
The Commissioner,
Kalyan Dombivali Municipal
Corporation Kalyan. 

CORAM  :  ANOOP V. MOHTA AND
A.A. SAYED, JJ.
    DATE  :  6 APRIL 2016.
Citation: 2016 (5) ALLMR 432

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When disqualification to contest municipal election is removed?

 In view of the aforesaid position of law the disqualification
of the petitioner was removed by virtue of Section 12 of the Probation of
Offenders Act and such removal operated from 25.06.2007.   It cannot
therefore, be said that the petitioner was disqualified under Section 10 of
the Maharashtra Provincial Municipal Corporation Act, on the date of his
election i.e. on 16.04.2012 as a Member of the Municipal Corporation
from Prabhag No.21­B.  The trial Court has committed an error of law in
setting aside the election petition of the petitioner on such ground.  The
judgment   and   order   passed   by   the   trial   Court   cannot,   therefore,   be
sustained.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH, NAGPUR.
WRIT PETITION NO.782 OF 2015
Karimuddin @ Karimlala Kazi,

V 
 Deepak s/o Shankarlal Jaiswal,

­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­
CORAM:  R.K. DESHPANDE, J.
DATE:          26th   AUGUST, 2015.
Citation:2016(5) ALLMR 119

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What is distinction between personal bias and pecuniary bias?

The position in
law has been succinctly stated in
Halsbury’s Laws of England, Fourth Edition,
Volume 1, para 68, as follows:
Disqualification for financial interest.-
There is a presumption that any direct
financial interest, however small, in the
matter in dispute disqualifies a person
from adjudicating. Membership of a company,
association or other organisation which is
financially interested may operate as a bar

to adjudicating, as may a bare liability to
costs where the decision itself will
 involve no pecuniary loss.”
(Emphasis added)
18. Thus, what is held by the Apex Court in the aforesaid
decisions is that the presence of direct pecuniary interest
irrespective of its extent operates as a complete disqualification to
adjudicate a dispute. The complete disqualification operates
irrespective of the fact that the pecuniary interest may be very
small. In such a case, the issue of waiver of objection regarding
bias will not arise at all as the presence of pecuniary bias prevents
the Judge from taking up the case in which he has pecuniary
interest. Therefore, any direct financial interest operates as a
complete bar which prohibits a person exercising even quasi
judicial powers from participating in the process of adjudication.
Hence, the plea of waiver is not available in such cases. As stated
earlier, this is a case where the pecuniary and proximate interest inthe subject matter of the case is admitted by Shri Sodal. There is in
our view a distinction to be drawn between a personal bias, one
that may be waived, and a pecuniary bias which stands on a whollydifferent footing. In the first place, to be invoked waiver requires
that a disclosure be made of the possibly conflicting interest. It is
when that interest is made known that a party can waive it. But this
can only apply in the case of a personal bias such a relationship or
a friendship. A pecuniary bias stands on another footing altogether.
On the principles enunciated in Mohapatra’s case, a direct,
proximate and existing pecuniary bias can never be waived. It is to
be noted that in Mohapatra’s case, the Apex Court held that the

existence of a pecuniary interest was a disqualification and that this
disqualification did not depend on the amount of the pecuniary
interest. The Apex Court also rejected the invocation of the
doctrine of necessity in such a case by holding that nothing
prevented the government in that case from reconstituting the

committee in question.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 11426 OF 2015
Suresh Ramchandra Palande,

Versus
The Government of Maharashtra, 
CORAM: A. S. OKA & G.S. PATEL, JJ.
DATED: 3rd December 2015
Citation:2016(2) MHLJ918

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Principles of natural justice Vs Doctrine of necessity

 The second contention of
the learned senior counsel appearing for the 10th Respondent is
that the objection regarding personal bias cannot be entertained in
this Petition since the doctrine of necessity will immediately come
into play. He relied upon a decision of the Apex Court in the case
of State of Uttar Pradesh v. Sheo Shanker Lal Srivastava & Ors.(2006) 3 SCC 276
in support of this contention. He submitted that on the date on
which the cases were placed before the Regulatory Authority,
except Ms. Zutshi and Mr. Sodal, there was no one who could have
heard the cases and, therefore, the doctrine of necessity
automatically operates. His submission is that when the doctrine of
necessity is applicable, there is no requirement of the compliance
with the principles of natural justice.
Thus, what is held by the Apex Court in the aforesaid
decisions is that the presence of direct pecuniary interest
irrespective of its extent operates as a complete disqualification to
adjudicate a dispute. The complete disqualification operates
irrespective of the fact that the pecuniary interest may be very
small. In such a case, the issue of waiver of objection regarding
bias will not arise at all as the presence of pecuniary bias prevents
the Judge from taking up the case in which he has pecuniary
interest. Therefore, any direct financial interest operates as a
complete bar which prohibits a person exercising even quasi
judicial powers from participating in the process of adjudication.
Hence, the plea of waiver is not available in such cases. As stated
earlier, this is a case where the pecuniary and proximate interest in
the subject matter of the case is admitted by Shri Sodal. There is in
our view a distinction to be drawn between a personal bias, one
that may be waived, and a pecuniary bias which stands on a wholly
different footing. In the first place, to be invoked waiver requires
that a disclosure be made of the possibly conflicting interest. It is
when that interest is made known that a party can waive it. But this
can only apply in the case of a personal bias such a relationship or
a friendship. A pecuniary bias stands on another footing altogether.
On the principles enunciated in Mohapatra’s case, a direct,
proximate and existing pecuniary bias can never be waived. It is to
be noted that in Mohapatra’s case, the Apex Court held that the

existence of a pecuniary interest was a disqualification and that this
disqualification did not depend on the amount of the pecuniary
interest. The Apex Court also rejected the invocation of the
doctrine of necessity in such a case by holding that nothing
prevented the government in that case from reconstituting the
committee in question.
The second argument canvassed before the Court is that
principles of natural justice would not apply when there is a
necessity. The said submission is based on the decision of the Apex
Court in the case of State of Uttar Pradesh v. v. Sheo Shanker Lal
Srivastava & Ors. (supra). Paragraph 16 of the said decision deals
with doctrine of necessity.
“16. Referring to the doctrine of
necessity, Sir William Wade in his
Administrative Law stated:
‘ But there are many cases where no
substitution is possible, since no one else
is empowered to act. Natural justice then
has to give way to necessity; for otherwise
there is no means of deciding and them

machinery of justice or administration will
break down.’
It was further stated:
‘In administrative cases the same exigency
may arise. Where the statute empowers a
particular minister or official to act, he
will usually be the one and only person who
can do so. There is then no way of escaping
the responsibility, even if he is
personally interested. Transfer of
responsibility is, indeed, a recognised
type of ultra vires. In one case it was
unsuccessfully argued that the only
minister competent to confirm a compulsory
purchase order for land for an airport had
disqualified himself by showing bias and
that the local authority could only apply
for a local Act of Parliament.”
(Emphasis added)
22. In the present case, the specific stand of the State
Government is that two members out of the three could have
validly conducted the proceedings of the Regulatory Authority. We
may note here that though the Chairperson was not a part of the
adjudicatory procees while passing the impugned order dated 26th
October 2015, when the Review Petitions were heard, he was very
much a part of the adjudicatory process. The submission of the
learned Government Pleader is supported by the said Regulations
and in particular clause 3 of Regulation 9 which lays down that the
quorum of meetings of the Regulatory Authority shall be two-thirds
of the full strength of the Authority (the Chairperson and two
members). Therefore, even if Mr. S. V. Sodal had recused himself,
the cases could have been heard by the Chairperson and the other

member of the Regulatory Authority. Therefore, the doctrine of
necessity sought to be invoked will not apply in the present case.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 11426 OF 2015
Suresh Ramchandra Palande,

Versus
The Government of Maharashtra, 
CORAM: A. S. OKA & G.S. PATEL, JJ.
DATED: 3rd December 2015
Citation:2016(2) MHLJ918

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Whether Conviction Of Govt. Servant In Petty Offences should Be Treated As Disqualification For Entry and Retention in Govt. Service?

Before concluding this judgment we hereby draw attention of the Parliament to step in and perceive the large many cases which per law and public policy are tried summarily, involving thousands and thousands of people through out the country appearing before summary courts and paying small amounts of fine, more often than not, as a measure of plea-bargaining. Foremost along them being traffic, municipal and other petty offences under the India; Penal Code, mostly committed by the young and/or the inexperienced. The cruel result of a conviction of that kind and a fine of payment of a paltry sum on plea-bargaining is the end of the career, future or present, as the case may be, of that young and/or in experienced person, putting a blast to his life and his dreams. Life is too precious to be staked over a petty incident like this. Immediate remedial measures are therefore necessary in raising the toleration limits with regard to petty offences especially when tried summarily. Provision need be made that punishment of fine upto a certain limit, say upto Rs.2000/- or so, on a summary/ordinary conviction shall not be treated as conviction at all for any purpose and all the more for entry into and retention in government service.
Supreme Court of India

Pawan Kumar vs State Of Haryana And Anr on 7 May, 1996

Equivalent citations: 1996 SCC (4) 17, JT 1996 (5) 155

Bench: Punchhi

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