Arbitration Court Reckoner : January 2021

By way of the present column, an attempt is made to briefly review the salutary judgments pronounced by the Courts in the month of January 2021 under the Arbitration & Conciliation Act, 1996. That while as many judgments as possible are sought to be reviewed, owing to the limited column space, some judgments would invariably be left out. That also while an attempt is made to include and review some judgments of various other High Courts, the emphasis is essentially on the judgments of the High Court of Delhi and Supreme Court of India. That judgments have been compiled for review with reference to the Section of the Act that they are primarily dealing with and a detailed analysis has been forgone in favour of succinctness. Section 8 Arbitration agreement would not be rendered invalid/un-enforceable even if the substantive contract is not admissible in evidence, or cannot be acted upon on account of non-payment of Stamp Duty – however question referred to Constitution Bench In M/s. N.N. Global Mercantile Pvt. Ltd v M/s. Indo Unique Flame Ltd. & Others[1], Supreme Court held that that since the arbitration agreement is an independent agreement between the parties, and is not chargeable to payment of stamp duty, the non-payment of stamp duty on the underlying commercial contract, would not invalidate the arbitration clause, or render it un-enforceable, since it has an independent existence of its own and held that the law laid down in SMS Tea Estates Pvt. Ltd. v. M/s. Chandmari Tea Co. Pvt. Ltd.[2] was not the correct law. However, the Court held, that the adjudication of the rights and obligations under the Work Order or the substantive commercial contract would however not proceed before complying with the mandatory provisions of the Stamp Act. The Court referred the findings in paras 22 and 29 of Garware Wall Ropes Limited v. Coastal Marine Constructions and Engineering Limited[3], which has been affirmed in paragraph 92 of Vidya Drolia & Ors. v. Durga Trading Corporation[4], to a Constitution Bench of five judges. The Court further laid down how the arbitrator or the court u/s 8 or 11 would impound the substantive contract which is either unstamped or inadequately stamped, and direct the parties to cure the defect before the arbitrator / tribunal can adjudicate upon the contract. In case of a S. 9 application, if the substantive contract is not duly stamped, the Court would grant ad-interim relief to safeguard the subject-matter of the arbitration. However, the substantive contract would then be impounded, and the concerned party be directed to take the necessary steps for payment of the requisite stamp duty in accordance with the provisions of the relevant Stamp Act, within a time-bound period. Section 9 an order under Section 9(1)(ii)(b) is essentially an order in the nature of attachment before judgement and therefore, the principles as applicable under Order XXXVIII Rule 5 of the CPC would guide grant of such relief In Beigh Construction Company P. Ltd. v Vahara Infra Ltd.[5] High Court of Delhi held that where the petitioner essentially seeks an order under Section 9(1)(ii)(b) of the Act to secure the amounts, which it asserts are owed to it, it essentially seeks an order in the nature of attachment before judgement and therefore, the principles as applicable under Order XXXVIII Rule 5 of the CPC would guide the grant of such relief. Thus viewed, it held that the petitioner must satisfy twin conditions , one, must establish a strong prima facie case; and second, prima facie satisfy the court that the defendant is acting in a manner so as to defeat the realisation of the decree that may be passed. The Court refused grant the order S. 9(1)(ii)(b) as it found that the petition did not contain any averments to the effect that the respondent is acting in the manner so as to frustrate an award that may be made by made in favour of the petitioner. Merely because the Section 9 proceedings entails disputed facts does not lead to dismissal of a Section 9 application/petition In Luxe Passion Private Limited v Freedom Roost[6], High Court of Delhi held that mere fact that S. 9 proceedings entail disputed facts would be no ground to reject the S. 9 petition as in the Section 9 proceedings, there are bound to be disputed facts which are to be adjudicated in arbitration, by the Arbitral Tribunal agreed upon by the parties. The Court, in a Section 9 proceeding, is merely required to consider the grant/non-grant of interim measures claimed, applying the same principles as applicable to disposal of applications under Order XXXIX Rules 1&2 of the Code of Civil Procedure, 1908 (CPC). The Court further held that it is not as if in exercise of powers under Section 9, no mandatory relief can be granted. Incorporation by reference can only be established by material evidencing, unequivocally, intent to so incorporate In SMS ...

Arbitration Court Reckoner : January 2021

Kanika Singh

Tags