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  • Paras Khetan

Strengthening The Dualist Structure Of India: The Supreme Court’s Decision In Assessing Officer V Nestle Sa.

This article is authored by Paras Khetan, a third year BA.LLB(H) student at the National Law School of India University, Bangalore.


Introduction

There are two major theories concerning the implementation of international law in the municipal sphere – monism and dualism. Dualism requires that international law must be imported into the municipal legal order through a separate “act of transformation” using regular domestic law-making processes. On the other hand, monism holds that international law is automatically “incorporated” into the municipal sphere without any specific domestic legislation to that effect. The Indian legal system is one that follows the dualist theory of implementation of international law. This is clear from Article 253 of the Constitution of India, as recognized by the Supreme Court in Bhavesh Jayanti Lakhani v. State of Maharashtra. However, the Indian judiciary has often abandoned the dualist structure of the Indian legal system and moved towards the monist doctrine of incorporation. This has led scholars to term India as practising “formal dualism, functional monism”.

In light of this background, this article analyses the recent Supreme Court decision in Assessing Officer v. Nestle SA which takes an important step back towards the dualist structure of the Indian legal system. The article first provides the historical trajectory of the Indian judiciary in the implementation of international law; second, analyses the decision in Nestle and how it goes back towards dualism; and third, highlights the positive implications of going back to the dualist structure before finally concluding the paper.

The Historical Trajectory of the Indian Judiciary

The initial decisions of the Supreme Court were in line with the dualist doctrine of transformation. In Maganbhai Ishwarbhai Patel v. Union of India, the Court held that:

But the obligations arising under the agreement or treaties are not by their own force binding upon Indian nationals. The power to legislate in respect of treaties lies with the Parliament under Entries 10 and 14 of List I of the Seventh Schedule. But making of law under that authority is necessary when the treaty or agreement operates to restrict the rights of citizens or others or modifies the laws of the State.”

Even though the Court’s formulation is one of monism, the practical implication of the last phrase, “modifies the laws of the state”, is that a legislative transformative act would always be necessary to implement international obligations as all international obligations would lead to some modification of the domestic laws of the state.

In Jolly George Varghese v. Bank of Cochin, the above position was elucidated in even stronger terms. The Court held that:

The remedy for breaches of International Law in general is not to be found in the law courts of the State because International Law per se or proprio vigore has not the force or authority of civil law, till under its inspirational impact actual legislation is undertaken.

The above two decisions show that the Supreme Court followed dualism and the theory of transformation for the implementation of international law. However, this position has been subsequently diluted by the Supreme Court in a host of other decisions.

In Gramophone Co. of India Ltd. v. Birendra Bahadur Pandey, the Court explicitly adopted the monist theory of incorporation and held that:

The doctrine of incorporation also recognises the position that the rules of international law are incorporated into national law and considered to be part of the national law, unless they are in conflict with Act of Parliament.”

This case substantially dilutes the earlier “modifies the laws of the states” formulation to “conflict with Act of Parliament”. This is a major turn towards the monist theory of incorporation and includes the possibility of international obligations being implemented into the municipal sphere without suitable legislative transformation. For example, an international law which adds to existing municipal law would not be in “conflict” with it but it would have “modified” the existing municipal law.

Similarly, in Vellore Citizens' Welfare Forum v. Union of India, the Court held that:

It is almost accepted proposition of law that the rule of Customary International Law which are not contrary to the municipal law shall be deemed to have been incorporated in the domestic law and shall be followed by the Courts of Law.

This has also been reiterated in Vishaka v. State of Rajasthan where the Court held that:

“Any International Convention not inconsistent with the fundamental rights and in harmony with its spirit must be read into these provisions to enlarge the meaning and content thereof, to promote the object of the constitutional guarantee”

All the above decisions use the terms “conflict”, “contrary”, and “inconsistent”. These terms are substantially narrower in their scope than the earlier term of “modify” being used. Thus, these decisions show the Supreme Court’s monist tendencies and its reliance on the doctrine of incorporation as opposed to the dualist doctrine of transformation.

However, recently, a shift in the Court’s reasoning back to the dualist formulation in Maganbhai can be observed. In Union of India v Agricas LLP, the Court reiterated the principles laid down in Maganbhai and held that:

“The ratio of these decisions primarily relates to and is confined to the requirement and mandate of the need for ‘act of transformation’ to be a part and parcel of domestic law, which confers a right to invocability.”

Similarly, the recent Supreme Court decision in Assessing Officer v. Nestle SA follows and furthers the same reasoning.

The SC Decision in Nestle

In Assessing Officer v. Nestle SA, the Supreme Court had to decide the interpretation of the Most Favoured Nation (MFN) clause in Double Tax Avoidance Agreements (DTAAs) entered into between India and other countries and whether it is to be given effect to automatically or only after a notification is issued regarding the same under Section 90 of the Income Tax Act, 1961 (IT Act).

The Court adopted the ratio of Maganbhai verbatim and went back to the “modifies the laws of the State” formulation. The Court further held that:

The structure and phraseology of Article 253 leaves one in no doubt, that it is when a treaty is enacted by law, or enabled through legislation, which assimilates it, that such provisions are enforceable in India.

While applying this principle to S.90 of the IT Act, the Court unequivocally held that:

The legal position discernible from the previous discussion, therefore is that upon India entering into a treaty or protocol does not result in its automatic enforceability in courts and tribunals; the provisions of such treaties and protocols do not therefore, confer rights upon parties, till such time, as appropriate notifications are issued, in terms of Section 90(1).

The above shows that the Supreme Court has now unequivocally accepted the dualist formulation of the need for legislative transformation to implement international law.

Implications of Moving Back to Dualism

The importance of moving back to the dualist structure of implementation of international law is immense. First, dualism brings in much-needed Parliamentary scrutiny over the Executive entering into treaties. Even though dualism doesn’t impact the Executive’s sole prerogative to enter into international treaties, dualism can curb Executive’s power by necessitating a Parliamentary law for implementing those international treaties. For example, even though authorised representatives formulate and sign the treaties in the name of the President (the Executive branch), the Parliament can curb the decision-making power of the President by enacting a law which only brings certain provisions of the international treaty to force.

Second, it would help in providing space for public scrutiny and debate on whether international legal obligations should be assumed. Additionally, it would allow different states to provide their opinions on the international obligations assumed by the central executive body. This would strengthen the federalist structure of the Indian legal system. Based on public and state consultation, the Parliament can choose to bring only certain provisions or parts of the international treaties entered into by the Executive.

Third, this would also be in consonance with the spirit of the Constitution of India. The Constitution of India envisages a dualist structure of legislative transformation for implementing international law. Further, the Constitution cherishes accountability of the Executive by the Parliament.  This is evident from the constituent assembly debates and the adoption of a parliamentary form of government wherein the Executive is accountable to the Legislature. Therefore, the movement back to dualism upholds the original intent of the framers of the Indian Constitution.

Conclusion

The recent Supreme Court decision in Nestle is an important step towards moving back to the dualist doctrine of transformation that was abandoned by the Indian judiciary. Even though the proposition laid down in Nestle still has monist undertones in formulation, the practical implication of such a formulation is that a legislative act is always necessary to make international law enforceable in India. This is also visible from the Court’s application of the principle laid down by it in the context of S.90 of the IT Act which makes it necessary to always pass an appropriate notification to enforce a DTAA. This ‘course correction’ by the Supreme Court is also important and necessary as it furthers executive accountability, stakeholder consultation, and the original intent of the Constitution.

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