Arbitration Cases Monthly Round-Up: November 2022

Update: 2022-12-02 04:00 GMT

Supreme Court:

Issue Of Arbitrability Should Be Left To Arbitrator Unless On The Face It Is Found That Dispute Is Non- Arbitrable: Supreme Court

Case Title: VGP Marine Kingdom Pvt Ltd versus Kay Ellen Arnold

The Supreme Court reiterated that while considering application under Section 11(6) of the Arbitration and Conciliation Act, the dispute with respect to the arbitrability should be left to the arbitrator, unless on the face it is found that the dispute is not arbitrable.

High Courts:

Andhra Pradesh High Court:

Once Registered As MSME, The Nature Of Activity Cannot Be A Bar To Any Relief Under The Act: Andhra Pradesh High Court

Case Title: Dalapathi Constructions versus The State of Andhra Pradesh & Ors.

The Andhra Pradesh High Court has held that once an enterprise is registered with the local MSME Council, it is entitled to all the benefits of the Act and the nature of activity between the parties cannot stand as a bar to any relief provided under the act.

The bench of Justice R. Ragunandan Rao held that MSME Council cannot dismiss an application under Section 18 of the Act on the ground that the activity between the parties was merely a 'trading activity', thus, not covered by the provisions of the act.

Bombay High Court:

Arbitration, Invoked Without Authority, The Defect Can't Be Ratified With Fresh Board Resolution: Bombay High Court

Case Title: Sushma Arya and Ors. versus Palmview Overseas Ltd. and Ors.

The Bombay High Court has ruled that the order passed by the arbitral tribunal, granting a choice to the claimant to prove the board resolution passed by it, appointing its authorized representative, or to pass a fresh board resolution, is an interim award which is amenable to challenge under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act).

The Single Bench of Justice C.V. Bhadang held that once the arbitral tribunal had ruled that the specified person had no authority to invoke arbitration and depose on behalf of the claimant, in view of the fact that the alleged board resolution was not proved by it as valid, the tribunal could not have ruled that the said defect was rectifiable. The Court added that ratification can only be of an act which is otherwise valid.

Arbitration Clause In An Agreement Can't Be Invoked For Another Agreement, Operating Independently: Bombay High Court

Case Title: JSW Steel Limited versus Bellary Oxygen Company Private Limited & Anr.

The Bombay High Court has ruled that mere reference to an Agreement containing an arbitration clause, in a subsequent Agreement, will not bring about a consequence envisaged under Section 7(5) of the Arbitration & Conciliation Act, 1996 (A&C Act), to the effect that the arbitration agreement would be incorporated into the subsequent Agreement.

The Court added that the reference contemplated under Section 7(5) of the A&C Act, should be such so as to make the arbitration clause part of the contract.

Calcutta High Court:

Arbitrator Cannot Apply 'Trade Usages' Against The Express Understanding Of The Parties: Calcutta High Court

Case Title: M/s. Universal Seaport Private Limited versus The Chairman, Board Of Trustees For The Port Of Kolkata

The Calcutta High Court has held that the arbitrator cannot, while adjudicating the dispute between the parties, apply trade usages against the express intention of the terms of the agreement between the parties.

The bench of Justice Shekhar B. Saraf held that by virtue of Section 28(3) of the A&C Act, an arbitrator can apply trade usages to determine the dispute between the parties, however, the same cannot be applied to the contravention of the contract but only when the latter is silent or ambiguous on some aspect. It held that the jurisprudence on arbitration bows down to party autonomy.

Delhi High Court:

Arbitrator Gets Jurisdiction Only With Respect To 'Notified' Claims; Delay/ Failure to Certify Claim as 'Notified', Does Not Operate As Waiver: Delhi High Court

Case Title: L&T Hydrocarbon Engineering Limited versus Indian Oil Corporation Limited

The Delhi High Court has ruled that an arbitrator gets the jurisdiction only with respect to the claims which are 'notified' by the specified authority, as provided in the arbitration clause, and that if the claims are not notified, they will not form the subject matter of arbitration.

The Single Bench of Justice V. Kameswar Rao held that the procedure of forwarding a panel of names to the other contracting party, to choose its nominee arbitrator from amongst them, is no longer a valid procedure.

Circumstances Mentioned Under Schedule V Do Not Per Se Render The Arbitrator Ineligible: Delhi High Court

Case Title: Bharat Foundry and Engineering Works versus Intec Capital Limited

The High Court of Delhi has held that unlike Schedule VII, the circumstances mentioned under the Vth Schedule do not per se render an arbitrator ineligible to be appointed as arbitrator unless it is established that the arbitrator's neutrality was indeed compromised.

The bench of Justice Manoj Kumar Ohri held that merely because an Arbitrator has been appointed in more than two arbitral proceedings between the parties/their affiliates, the Award cannot be set aside, until a concrete foundation is laid down for doubting the independence and impartiality of the Arbitrator.

When Financial Institution Is A 'Borrower' It Can't Invoke Arbitration Under Section 11 Of SARFAESI Act: Delhi High Court

Case Title: Bell Finvest India Ltd. versus A U Small Finance Bank Limited

The High Court of Delhi has held that a borrower which also happens to be a financial institution cannot resort to arbitration provided under Section 11 of SARFAESI Act.

The bench of Justice Anup Jairam Bhambhani held that Section 11 of SARFAESI Act provides for remedy by way of arbitration only in cases of inter se dispute between the financial institution but does not cover a simple lender-borrower dispute, even if the borrower is a financial institution.

Rights Under An Agreement Are Superseded By A Subsequent One? Arbitrator To Decide: Delhi High Court

Case Title: PVR Limited versus Imperia Wishfield Private Limited

The Delhi High Court has ruled that the arbitration clause relates to the resolution of disputes between the parties and not the performance of the contract and thus, the arbitration agreement survives even if the contract comes to an end.

The single bench of Justice Mini Pushkarna held that the issue whether the rights of parties under an agreement are superseded by a subsequent agreement or not, is itself an arbitrable issue which can be examined by the arbitrator.

Amazon - Future Group Arbitration- Delhi High Court Dismisses Future's Application Being Interlocutory

Case Title: Future Coupons Private Limited & Ors. versus AMAZON.COM NV Investment Holdings LLC & Anr.

The Delhi High Court has dismissed the petition filed by Future Coupons Pvt. Ltd., challenging the order passed by the Arbitral Tribunal allowing Amazon's application for amendment of Claims, seeking repudiatory damages for breach of Agreements executed with Future Coupons. The Court ruled that the said order was interlocutory in nature, and thus, it is not amenable to challenge under Article 227 of the Constitution of India.

The single bench of Justice C. Hari Shankar reiterated that interlocutory arbitral orders are amenable to challenge under Article 227 of the Constitution only in cases where the order is assailed on the ground of want of good faith, or where the party is otherwise remediless.

Challenge Under Section 17 Of The SARFAESI Act Against Action Taken By Secured Creditor, Would Not Bar Arbitration Proceedings: Delhi High Court

Case Title: Hero Fincorp. Limited versus Techno Trexim (I) Pvt. Ltd. & Ors.

The Delhi High Court has reiterated that arbitration proceedings and proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002 (SARFAESI Act) can go hand in hand.

The single bench of Justice V. Kameswar Rao held that even if a party intended to take action under Section 17 of the SARFAESI Act by filing a petition before the Debt Recovery Tribunal (DRT), to challenge the action taken by the secured creditor under Section 13 (4) of the SARFAESI, that would not bar the initiation of arbitration proceedings by the secured creditor.

Acceptance Of Goods Does Not Constitute Acceptance To Arbitration Clause, Unilaterally Included In Delivery Challan: Delhi High Court

Case Title: M/s Hetampuria Tax Fab versus M/s Daksh Enterprises

The Delhi High Court has ruled that unilaterally including a clause in the Delivery Challan would not constitute an arbitration agreement between the parties merely because the opposite party had accepted the delivery of goods and had signed the Delivery Challan certifying the acceptance of goods.

The bench of Justices Vibhu Bakhru and Amit Mahajan held that in order to constitute an arbitration agreement, there must be a consensus between the parties. Therefore, the Court ruled that an arbitration agreement cannot come into existence by a party unilaterally issuing a Delivery Challan and the opposite party accepting delivery of the goods.

Non-Participation Of Defendant Is Good For Compliance Of Sec 12-A Of The Commercial Courts Act: Delhi High Court

Case Title: Kapil Goel versus Ram Dulare Yadav

The High Court of Delhi has held that the failure of the defendant to participate in the Pre-Institution Mediation suffice the requirement of Section 12-A of the Commercial Courts Act, 2015.

The bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad held that the consent of the plaintiff for instituting the pre-suit meditation would be irrelevant if the defendant refuses to participate to take part in the proceedings.

Extension Of Limitation For Section 34 Application, Is Not Contingent On Merits Of Section 33 Application: Delhi High Court

Case Title: Vidhur Bhardwaj versus Horizon Crest India Real Estate & Ors.

The Delhi High Court has ruled that the benefit of extension of limitation for filing an application under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act), by virtue of an application filed under Section 33, for correction and interpretation of award, would not apply solely to the parties making the request under Section 33.

The single bench of Justice Vibhu Bakhru held that the issue whether the limitation for filing a Section 34 application would run from the date of disposal of the application under Section 33 or from the date of receipt of the award, is not contingent upon the arbitral tribunal's decision on the application filed under Section 33.

Use Of Word 'Mediation' In Arbitration Clause Is Immaterial, Clause Does Not Lose Its Character: Delhi High Court

Case Title: Consolidated Construction Consortium Limited versus SDMC

The Delhi High Court has held that nomenclature of an arbitration clause is immaterial when all the elements are present. The bench of Justice Prateek Jalan held that an arbitration clause would not lose its character merely because the word 'mediation' has been used as its nomenclature.

It held that, in construction of a contractual clause, the Court should be guided by the substance of the agreement between the parties rather than by the nomenclature employed. The Court expounded on the essential elements of an arbitration clause.

A Party Cannot Be Made To Nominate Its Arbitrator From A Narrow Panel Of 4 Arbitrators Consisting Of Retired Officers Of The Other Party: Delhi High Court

Case Title: Gangotri Enterprises Ltd. versus General Manager Northern Railways

The High Court of Delhi has held that a panel of arbitrator with only four names to choose from does not satisfy the concept of neutrality of arbitrators. It held that a narrow panel comprising of retired employees of a party creates a reasonable apprehension of bias and partiality.

The bench of Justice Mini Pushkarna held that the contractor cannot be made to choose its nominee arbitrator from a panel of only four names and that too when the final choice of appointing its nominee arbitrator is vested on the Employer.

Invalidity Of The Appointment Procedure Would Not Render The Entire Arbitration Clause Invalid: Delhi High Court

Case Title: Ram Kripal Singh Construction Pvt. Ltd. versus NTPC

The High Court of Delhi has held that merely because the procedure for the appointment of the arbitrator has become invalid due to 2015 amendment act, the same would not render the entire arbitration clause invalid.

The bench of Justice Anup Jairam Bhambhani held that there are several elements present in an arbitration clause such as procedure for appointment of arbitrator, law of arbitration, law of contract, seat and venue, etc., however, the core element remains the consent of the parties to refer the dispute to arbitration. Therefore, merely because one element has become invalid, it would not make the entire clause ineffective and that the invalid clause can be easily severed.

Section 12(5) Of A&C Act Applies To Proceedings Commenced Before Or After The 2015 Amendment: Delhi High Court

Case Title: Ram Kripal Singh Construction Pvt. Ltd. versus NTPC

The High Court of Delhi has held that Section 12(5) of the Arbitration and Conciliation Act, 1996 (A&C Act) that provides for grounds of ineligibility of arbitrator would apply regardless whether the notice of arbitration was given before or after the 2015 amendment came into force provided that the appointment was made on a date Section 12(5) was in force.

The bench of Justice Anup Jairam Bhambhani held that in view of Section 12, independence and impartiality of arbitrator is a continuing requirement and any ineligible person acting as the arbitrator cannot continue merely because the arbitral proceedings began before Section 12(5) came into force.

Doctrine Of Group Of Companies, Can't Implead Third Party To Arbitration: Delhi High Court

Case Title: Sandeep Singh versus Simran Sodhi & Ors

The Delhi High Court has ruled that the Doctrine of Group of Companies cannot be applied to implead a non-signatory third party to arbitration, in a dispute arising between partners relating to the partnership business. The Court held that partnership in its very nature cannot be equated with a company to invoke the Doctrine of Group of Companies.

The Single Bench of Justice V. Kameswar Rao held that if allegations raised against a party contain a criminal aspect of fraud, forgery or fabrication, which would result in penal consequences and criminal sanctions, the same cannot be referred to arbitration. The Court added that the same would be adjudicated by a Court of law, since it may result in conviction which is in the realm of public law.

Period Of Limitation For The Appointment Of Substitute Arbitrator Begins On The Date Of His Recusal/Removal, Date Of Knowledge Is Irrelevant: Delhi High Court

Case Title: Tricolor Hotels Limited versus Dinesh Jain

The High Court of Delhi has held that the period of limitation for appointing a substitute arbitrator under Section 15(2) of the A&C Act commences on the date of recusal/removal of the arbitrator and the date on which the fact of his removal/recusal comes to the knowledge of a party is irrelevant for the purpose of limitation.

The bench of Justice Mini Pushkarna held that since Section 15 of the A&C Act does not contain any provision of limitation, therefore, the period of limitation would be 3 years as provided under Article 137 of the Limitation Act, 1963.

Arbitration Proceedings Against IRCTC; Delhi High Court Rejects Unilateral Appointment Of Arbitrator

Case Title: KMA Caterers versus Indian Railway Catering and Tourism Corporation (IRCTC)

The High Court of Delhi has held that the designation of Zonal Offices as the 'venue' of arbitration would not make it the 'seat' of arbitration when the meaningful dealings related to the contract happened at the Headquarters of a party.

The bench of Justice Mini Pushkarna held that venue would not become the seat when the tender documents, the process of award of tender, licence fees, signature and execution of the agreement and the jurisdiction of Court all happens to be on a place other than the venue.

Gujarat High Court:

Application For Appointment Of Arbitrator Can't Be Rejected Due To Vague Notice Invoking Arbitration: Gujarat High Court

Case Title: Hemlata Jain versus Padmavati Analkumar Mishra

The Gujarat High Court has ruled that the contention that the notice issued under Section 21 of the Arbitration and Conciliation Act, 1996 (A&C Act), invoking the arbitration clause, is vague or bereft of material particulars, cannot be a ground to reject the application under Section 11(6) of the A&C Act, seeking appointment of an arbitrator.

The Single Bench of Chief Justice Aravind Kumar held that the provisions of Section 21 of the A&C Act do not even remotely suggest that the nature of dispute has to be enumerated or explained in the notice invoking the arbitration clause.

Section 19 Of MSMED Act Applies To All Kinds Of Challenges: Gujarat High Court

Case Title: Spunpipe & Construction Company versus State of Gujarat

The High Court of Gujarat has held that Section 19 of the MSMED Act, which provides for deposit of 75% of the awarded amount as a pre-condition to challenging any order, award or decree passed in favour of the supplier, applies to all challenge applications regardless of whether the decree, award, order was passed by MSME Council, independent arbitration or the Court.

The bench of Justice Umesh A. Trivedi has held that if Section 19 of the Act is made applicable only to the award passed by the Council, then the use of the word 'decree' under Section 19 would be rendered nugatory as the Council cannot pass a decree; further, it would also frustrate the object of the Section that is to secure the interest of the small-scale industries i.e., supplier.

Kerala High Court:

Intention Of Parties As To Seat Of Arbitration Can Be Determined From Their Conduct: Kerala High Court

Case Title: M.A. Hakkim versus M/s Patanjali Agro India Pvt. Ltd.

Citation: 2022 LiveLaw (Ker) 616

The Kerala High Court recently reiterated that the intention of the parties to an agreement, as to the seat of arbitration, can be determined from their conduct.

Justice N. Nagaresh was dealing with a case where the Sale Contract between the parties prescribed Haridwar as the seat of arbitration but the subsequent High Sea Sale Agreement prescribed Kollam as the seat.

Madhya Pradesh High Court:

Section 34 Of The A&C Act Application Pending For 13 Years, MP HC Directs District Courts To Decide All Petitions Within 1 Year

Case Title: Dharamdas Tirthdas Constructions Pvt. Ltd. versus Union of India

The Madhya Pradesh High Court has expressed strong displeasure for keeping a petition under Section 34 of A&C Act pending for 13 years.

The bench of Justice Subodh Abhaynkar remarked that delay in deciding arbitration applications mocks at and frustrates the very object for which the Act was promulgated. The Court directed all the district Court to decide all the petitions under Section 34 of the Act as expeditiously as possible in accordance with Section 34(6) that provides for a maximum of one year period to dispose of the application.

Madras High Court:

Arbitration Survives Even If Arbitration Under MSMED Act Declared Non-Maintainable: Madras High Court

Case Title: M/s. Deetech Projects Pvt. Ltd. versus M/s. Batliboi Environmental Engineering Ltd.

The Madras High Court has ruled that once a dispute is referred to the Facilitation Council under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), if the Facilitation Council adjudicates the dispute on merits, such decision would operate as res judicata and would bar the institution of arbitral proceedings in respect of the same dispute.

However, the Court held that if the Facilitation Council declines to exercise jurisdiction on the ground that the petition was not maintainable before it, the arbitration clause contained in the agreement between the parties would survive.

The single bench of Justice Senthilkumar Ramamoorthy observed that by way of a legal fiction contained under Section 18(3) of the MSMED Act, an arbitration agreement in terms of the A&C Act is statutorily imported once the dispute is taken up for arbitration under the MSMED Act. The Court ruled that the said legal fiction does not have the effect of novating the agreement between the parties by deleting the arbitration clause contained in the said agreement.

Section 31 Of The Credit Information Companies (Regulation) Act, 2005 Does Not Bar Constitution Of An Arbitral Tribunal: Madras High Court

Case Title: Kirankumar Moolchand Jain versus TransUnion CIBIL Ltd.

The Madras High Court has ruled that the bar contained under Section 31 of the Credit Information Companies (Regulation) Act, 2005 (CIC Act) will not apply to proceedings for constitution of an arbitral tribunal, to resolve the disputes in the manner prescribed under the CIC Act.

The Single bench of Justice Senthilkumar Ramamoorthy held that the object and purpose of Section 31 of the CIC Act is to preclude the parties from seeking redressal of grievances in any manner other than that prescribed under the CIC Act. It added that since Section 18 of the CIC Act provides for dispute resolution through arbitration, the provisions of Section 31 would not bar the constitution of an arbitral tribunal.

Punjab and Haryana High Court:

Subsequent Consulting Agreements Prescribing Arbitration Do Not Bind Parties When MoU Forming Basis Of Claim Doesn't Contain Arbitration Clause: P&H High Court

Case Title: M/s Soben Contract and Commercial Ltd. versus M/s Qonquests Technical Solutions Pvt. Ltd. and Ors.

The Punjab and Haryana High Court recently held that where the claim of a party to an agreement is based upon a Memorandum of Understanding (MoU) which does not contain an arbitration clause, the Court is not required to refer the matter merely because the subsequent Consulting Agreements executed by the parties contemplate arbitration.

The bench comprising Justice Augustine George Masih and Justice Sandeep Moudgil in this case noted that there is no clause for arbitration under the MoU and the clause, if any, is in the Consulting Agreements which would not be applicable here since plaintiff's claim is based exclusively on the MoU.

Rajasthan High Court:

Death Of One Of The Arbitrators - But Decided To Pass Award Prior To Death - Not Contrary To Section 10 Of A&C Act: Rajasthan High Court

Case Title: M/s Shree Ram Junawa Industries versus M/s Rounak Steels

The Rajasthan High Court has ruled that if an Arbitral Tribunal had principally decided to pass the award on a day when all the members of the Arbitral Tribunal were present, merely because the detailed award was passed on the day when one of the members of the Arbitral Tribunal was not alive, and was thus signed by only two members, it cannot be said that the award was contrary to Section 10 of the Arbitration and Conciliation Act, 1996 (A&C Act).

The Single Bench of Justice Vijay Bishnoi held that the principles of res judicata also apply between two stages of the same litigation.

Uttarakhand High Court:

Court Cannot Partly Set Aside Award In Absence Of Manifest And Patent Error, And Without A Finding As To Its Severability: Uttarakhand High Court

Case Title: M/s Ravindra Kumar Gupta and Sons versus Union of India & Ors.

The Uttarakhand High Court has ruled that in the absence of a manifest and patent error in the arbitral award, the Court under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) cannot interfere with the award, by partly upholding it and by disallowing the rest of the claims of the claimant.

The Division Bench of Justices Sanjaya Kumar Mishra and Ramesh Chandra Khulbe observed that the lower court had not given any finding as to whether the claims set aside by it were vitiated by patent illegality and whether they formed a severable part of the award or not.

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