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Arbitration Cases Weekly Round-Up: 6th November - 12th November
Ausaf Ayyub
16 Nov 2023 4:40 AM GMT
Supreme CourtCourt Can Examine If Arbitration Clause Is Arbitrary & Violates Article 14 While Considering S.11(6) Application: Supreme CourtCase Title: Lombardi Engineering Ltd v. State of UttarakhandCitation: 2023 LiveLaw (SC) 958In a significant judgment, the Supreme Court held that a clause in an arbitration agreement which is not in consonance with the Constitution cannot be enforced....
Supreme Court
Case Title: Lombardi Engineering Ltd v. State of Uttarakhand
Citation: 2023 LiveLaw (SC) 958
In a significant judgment, the Supreme Court held that a clause in an arbitration agreement which is not in consonance with the Constitution cannot be enforced. The Court further held that it can examine if the arbitration clauses are manifestly arbitrary and violative of Article 14 of the Constitution while considering an application for appointment of arbitrator.
A bench comprising Chief Justice of India DY Chandrachud, Justices JB Pardiwala and Manoj Misra was deciding an application filed by Lombardi Engineering Ltd., a Swiss company, under Section 11(6) of the Arbitration and Conciliation Act 1996 seeking appointment of arbitrator in a dispute with the State of Uttarakhand.
The company filed the application before the Supreme Court taking objection to two clauses in the arbitration agreement - one, the condition that 7% of the total claim must be pre-deposited for invoking the arbitration clause; two, the discretion vested with the Principal Secretary/Secretary (Irrigation) to appoint a sole arbitrator.
Case Title: Rohan Builders (India) Pvt Ltd v. Berger Paints India Limited, SLP(C) No. 23320 of 2023
The Supreme Court is set to examine an important issue related to the arbitration law that whether the mandate of the tribunal terminates upon the expiry of the time provided under Section 29A unless extended during its subsistence.
The bench of Justices Sanjiv Khanna and S.V.N. Bhatti has issued notice in an SLP filed against the order of the Calcutta High Court wherein the High Court held that the mandate of the arbitrator terminates upon the expiry of the time period provided under Section 29A unless it is extended during its subsistence.
Allahabad High Court
Case Title: National Highway Authority Of India, Through Its Project Director v. Smt. Sampata Devi And 2 Others [Appeal Under Section 37 Of Arbitration And Conciliation Act 1996 Defective No. - 53 of 2023]
The Allahabad High Court has held that no special concession can be granted to government bodies for condoning delay under Commercial Courts Act, 2015 if sufficient cause is not shown in application for delay condonation.
Following the judgement of the Supreme Court in Government of Maharashtra vs. M/s Borse Brothers Engineers and Contractors, Justice Om Prakash Shukla held that appeal under Section 37 of the Arbitration and Conciliation Act, 1996 should be filed within 60 days from date of order under Section 13(1A) of the Commercial Courts Act, 2015. The Court held that in rare cases, where the specified value is less than Rs. 3 lakhs, the limitation period under Articles 116 and 117 of the Limitation Act would be applicable to the appeals, as the case may be.
The Court further held that Section 5 of the Limitation Act would apply to arbitration appeals under Section 37 of the Act of 1996. However, even ‘sufficient cause’ made out under Section 5 of the Limitation Act is “not elastic enough to cover long delays” as there is no right to have delays condoned. The Court held that only short delays by way of exception can be condoned, and that too when the party has acted in a bona fide manner and not negligently.
Bombay High Court
Case Title: Swashray Co-op. Housing Society Ltd v. Shanti Enterprises, Commercial Arbitration Petition (L) No. 10432 of 2023
The High Court of Bombay has held that a Court exercising powers under Section 9 of the A&C Act can grant mandatory injunction at an interim stage when the builder is found to be in multiple breaches which results in the co-operative society losing its confidence in the builder.
The bench of Justice Manish Pitale held that the relief of mandatory injunction at an interim stage is an extraordinary relief which ought not be granted in every case, however, the Court would not withhold such a relief it withholding such an injunction would be unjust and unconscionable.
Calcutta High Court
Case: Damodar Valley Corporation v BLA Projects Pvt Ltd
Citation: 2023 LiveLaw (Cal) 325
The Calcutta High Court has held that the venue for arbitration, as decided by the parties under their contractual agreement would automatically be the seat for arbitration, in the absence of any ‘contra-indicia.’
In rejecting jurisdictional objections on its competence to entertain an application under Section 34 of the Arbitration & Conciliation Act, 1996 (“A & C Act”) upon noting that Clause 16 of the Contract between the parties had designated Kolkata to be the venue of arbitration and the Court in the City of Kolkata to have exclusive jurisdiction a single-bench of Justice Moushumi Bhattacharya held:
The parties accepted this agreement to be the final agreement. The fact that venue would be construed as the juridical seat of the arbitration has also been judicially settled where the seat is not specified. There is hence no contra indicia to un-seat the arbitration from the Court in the city of Kolkata which is the High Court at Calcutta. The respondent has not presented any contrary indicia to show that the cause of action has arisen elsewhere and would consequently divest this Court of jurisdiction.”
Delhi High Court
Case Title: ATC Telecom Infrastructure Pvt Ltd v. BSNL
Citation: 2023 LiveLaw (Del) 1099
The Delhi High Court has held that the Court exercising powers under Section 29A of the A&C Act is empowered to extend the mandate of the arbitrator even in cases where the application seeking extension of time is not made within the time limit fixed for the making of the award.
The bench of Justice Sachin Datta held that the purport of Section 29A of the A&C Act is clearly not to tie the hands of the parties or the court, and prevent extension of time even where warranted, simply because the petition under Section 29A(4) of the A&C Act came to be filed a few days after expiration of the deadline contemplated under Section 29A(1) or Section 29A(3) of the A&C Act.
Case Title: Bharti Airtel v. Jamshed Khan
Citation: 2023 LiveLaw (Del) 1113
The Delhi High Court has held that the Court exercising powers under Section 34 of the A&C Act cannot allow claims which were disallowed/rejected by the arbitral tribunal.
The bench of Justices Suresh Kumar Kait and Neena Bansal Krishna held that Section 34 of the A&C Act does not permit the Court to rewrite an arbitral award and the Court can either set aside or upheld the arbitral award.
The Court also observed that the Court would have the power to partially set aside an arbitral award upon a severable issue, however, it would not be competent to modify the arbitral award by allowing a claim that was disallowed by the arbitral tribunal.
Case Title: ANR International Pvt Ltd v. Mahavir Singhal
Citation: 2023 LiveLaw (Del) 1081
The Delhi High Court has held that Section 8 of the A&C Act is mandatory in nature meaning thereby that the Court is bound to refer the dispute to arbitration when there exists a valid arbitration agreement between the parties and the respondent makes an application for reference to arbitration before submitting its written statement before the Court.
The bench of Justices V. Kameshwar Rao and Mr. Anoop Kumar Mendiratta held that the Court cannot refuse to refer the dispute to arbitration merely on the ground that the defendant had initially, in reply to Section 21 notice, denied the existence of the arbitration agreement.
The Court held that the arbitration clause does not ceases to exist on mere denial by party and such a denial would not preclude that party from later making an application under Section 8 of the A&C Act for reference of the dispute to arbitration.
The Court held that the doctrine of approbation and reprobation cannot be invoked against the respondent to decline reference to arbitration when the plaintiff does not dispute the existence of the arbitration agreement.
Case Title: National Projects Constructions Corporation Ltd v. AAC India Pvt Ltd
Citation: 2023 LiveLaw (Del) 1083
The Delhi High Court has reiterated that the Court exercising powers under Section 34 of the A&C Act cannot modify an arbitral award. It held that the Court can either uphold the award or set aside any finding, however, the Court is powerless to modify the award by allowing a relief that was disallowed by the arbitral tribunal.
The bench of Justices Yashwant Varma and Dharmesh Sharma also held that where damage or loss is difficult or impossible to prove, the tribunal is empowered to award liquidated amount stipulated in the contract, if it is a genuine pre-estimate of damage or loss, or reasonable compensation for the said amount loss or damage. The claim for LD in such cases is well within the purview of Section 74 of the Indian Contract Act, 1872.
Case Title: Viridian Development Managers Pvt Ltd v. RPS Infrastructure Limited
Citation: 2023 LiveLaw (Del) 1090
The Delhi High Court has held that once the licence is revoked by the licensor, any use of the mark by the ex-licensee would amount to an infringement of the trademark and would deceive the public, inasmuch as the public would be led to believe that the ex-licensee is still connected with the licensor.
The bench of Justice Sachin Datta held that an ex-licensee cannot be allowed to use the mark after termination of license. Further, the licensor has a right and duty to ensure the consistency of the goods or services being sold and advertised under its mark and take action against any infringement of the mark.
The Court held that the Court exercising powers under Section 9 of the A&C Act cannot examine the legality of the termination of the license agreement as it would be the for the arbitral tribunal to decide and compensate the aggrieved party if the termination is found to be illegal.
Case Title: HDA Flavours Pvt Ltd v. Daddy’s Hospitality Pvt Ltd.
Citation: 2023 LiveLaw (Del) 1093
Justice Sachin Datta of the Delhi High Court recently granted relief to “34 Chowringhee Lane” acquirer-HDA Flavours Pvt. Ltd., ruling that the Arbitrator, while dealing with a Section 17 application, should not have interdicted it from creating new franchisees.
“A blanket embargo on the appellant from creating any new franchisee or entering into such business agreements as may be appropriate for the advancement of business, may result in denuding the value of the business on account of stagnation/depletion in market share.”
Jammu & Kashmir and Ladakh High Court
Case Title: A K Engineers and Contractors Pvt Ltd v. Union Territory of J&K
Citation: 2023 LiveLaw (JKL) 283
The Jammu & Kashmir and Ladakh High Court has held that the arbitration clause contained in the original contract would also govern any dispute arising out of an additional work carried out without execution of a formal agreement.
The bench of Chief Justice N. Kotiswas Singh held that when a contractor, initially tasked with constructing a single-lane bridge, is subsequently directed by the employer to expand the scope to build a two-lane bridge without formalizing a new agreement or amending the original contract, the terms of the initial contract, including the arbitration clause, extend to cover the additional work.
