Recent Important Judgments On Arbitration

Garg Builders v. Bharat Heavy Electricals Limited, Civil Appeal No. 6216 of 2021 (Decided on 04/10/2021).

A Bench of Justices S. Abdul Nazeer and Krishna Murari held that if the contract contains a specific clause that expressly bars payment of interest, then it is not open for the arbitrator to grant pendente lite interest. The Bench observed that the provisions of the Arbitration and Conciliation Act, 1996 give paramount importance to the contract entered into between the parties and categorically restricts the power of an arbitrator to award pre-reference and pendente lite interest when the parties themselves have agreed to the contrary.

S.P. Singla Constructions Private Limited v. Construction and Design Services, Uttar Pradesh Jal Nigam, ARB. P. 450/2021 (Decided on 23/09/2021).

A Single Judge Bench of Justice Suresh Kumar Kait of the High Court of Delhi reiterated that the choice of venue is also a choice of the seat of arbitration. In this case, the parties had agreed that the venue of arbitration shall be Lucknow and therefore, the Court held that the courts at Lucknow shall have the exclusive jurisdiction to entertain the disputes arising out of the Agreement in question. The Agreement also stipulated that the arbitration shall be held in accordance with the Rules of ICADR but soon thereafter it followed the condition that the venue of arbitration shall be Lucknow. Hence, the Court held that the role of ICADR Rules shall come into play with regard to the procedure to be followed, only after the arbitration commences before the appropriate jurisdiction of law, which in this case was Lucknow.

DLF Home Developers Limited v. Rajapura Homes Private Limited & Anr., Arbitration Petition (Civil) No. 17 of 2020 (Decided on 22/09/2021).

A Bench comprising the Chief Justice N.V. Ramana and Justice Surya Kant held that the Supreme Court or the High Courts are not expected to act mechanically merely to deliver a purported dispute raised by an applicant at the doors of the chosen Arbitrator. On the contrary, the Court(s) are obliged to apply their mind to the core preliminary issues, albeit, within the framework of Section 11(6-A) of the Arbitration Act. Such a review is not intended to usurp the jurisdiction of the Arbitral Tribunal but is aimed at streamlining the process of arbitration. The Bench further held that even when an arbitration agreement exists, it would not prevent the Court to decline a prayer for reference if the dispute in question does not correlate to the said agreement.

M/s Laxmi Continental Construction Co. v. State of U.P. & Anr., Civil Appeal No. 6797 of 2008 (Decided on 20/09/2021).

A Bench of Justices M. R. Shah and A.S. Bopanna held that in this case, the only qualification for appointment as an arbitrator is that he should be the officer of the rank of the Superintending Engineer or higher. Once such an officer is appointed as an Arbitrator, he continues to be the Sole Arbitrator till the arbitration proceedings are concluded unless he incurs the disqualification under the provisions of the Arbitration Act. Even after his retirement, the arbitration proceedings have to be continued by the same Arbitrator. The Agreement, in the present matter does not provide at all that on the retirement of such an officer, who is appointed as a Sole Arbitrator, he shall not continue as a Sole Arbitrator and/or the mandate to continue with the arbitration proceedings will come to an end. The Bench further held that it cannot be said that his mandate to continue with the arbitration proceedings would come to an end on his retirement.

Arcelor Mittal Nippon Steel India Ltd. v. Essar Bulk Terminal Ltd., Civil Appeal No. 5700 of 2021 (Decided on 14/09/2021).

A Bench of Justices Indira Banerjee and J.K. Maheshwari held that even if an application under Section 9 of the Arbitration and Conciliation Act, 1996 had been entertained before the constitution of the Tribunal, the Court always has the discretion to direct the parties to approach the Arbitral Tribunal, if necessary by passing a limited order of interim protection, particularly when there has been a long time gap between hearings and the application has for all practical purposes, to be heard afresh, or the hearing has just commenced and is likely to consume a lot of time. The Bench observed that on a combined reading of Section 9 with Section 17 of the Arbitration Act, once an Arbitral Tribunal is constituted, the Court would not entertain or take up for consideration and apply its mind to an application for interim measure, unless the remedy under Section 17 is inefficacious, even though the application may have been filed before the constitution of the Arbitral Tribunal. The bar of Section 9(3) would not operate, once an application has been entertained and taken up for consideration, where hearing has been concluded and judgment has been reserved.

Delhi Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail Corporation Ltd., Civil Appeal No. 5627 of 2021 (Decided on 09/09/2021).

A Bench of Justices L. Nageswara Rao and S. Ravindra Bhat held that there is a disturbing tendency of courts setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs intervention and thereafter, dubbing the award to be vitiated by either perversity or patent illegality, apart from the other grounds available for annulment of the award. The Court observed that such an approach would lead to corrosion of the object of the Arbitration Act and the endeavours made to preserve this object, which is minimal judicial interference with arbitral awards. The Bench opined that several judicial pronouncements of the Supreme Court would become a dead letter if arbitral awards are set aside by categorising them as perverse or patently illegal without appreciating the contours of the said expression. It was held that patent illegality should be the illegality that goes to the root of the matter. In other words, every error of law committed by the Arbitral Tribunal would not fall within the expression 'patent illegality'. Likewise, erroneous application of law cannot be categorised as patent illegality.

Oriental Insurance Co. Ltd. v. Diamond Product Ltd., FAO(OS) (COMM) 94/2021 & CM No. 21232/2021 (Decided on 09/09/2021).

A Bench of Justices Rajiv Shakdher and Talwant Singh of the High Court of Delhi held that domestic awards can be challenged on the ground of patent illegality only if it is one, which appears, on the face of the award, and is such, which goes to the root of the matter. The Bench also held that mere erroneous application of the law, or appreciation of evidence, does not call for interference of the award on the ground of patent illegality and the Court cannot set aside the award by reappreciating the evidence, which is taken into consideration, by an Arbitral Tribunal.

Jaipur Zila Dugdh Utpadak Sahkari Sangh Limited v. M/s Ajay Sales & Suppliers, Special Leave Petition (Civil) No. 13520 of 2021 (Decided on 09/09/2021).

A Bench of Justices M. R. Shah and Aniruddha Bose held that in the present case, the Chairman who is elected member/Director of the Sangh, can certainly be said to be ineligible to become an arbitrator as per sub-section (5) of Section 12 of the Arbitration Act read with Seventh Schedule to the Act. Sub-section (5) of Section 12 read with Seventh Schedule of the Arbitration Act has been inserted bearing in mind the impartiality and independence of the arbitrators. It has been inserted with the purpose of neutrality of arbitrators. The independence and impartiality of the arbitrators are the hallmarks of any arbitration proceedings as observed. Rule against bias is one of the fundamental principles of natural justice which apply to all judicial proceedings and quasi-judicial proceedings and it is for this reason that despite the contractually agreed upon, the persons mentioned in Sub­section (5) of Section 12 read with Seventh Schedule to the Act would render himself ineligible to conduct.

Gemini Bay Transcription Pvt. Ltd. v. Integrated Sales Service Ltd., Civil Appeal No. 8343-8344 of 2018 (Decided on 10/08/2021).

A Bench of Justices R.F. Nariman and B.R. Gavai held that there are six ingredients to an award being a foreign award under Section 44 of the Arbitration Act. First, it must be an arbitral award on differences between persons arising out of legal relationships. Second, these differences may be in contract or outside of contract, for example, in tort. Third, the legal relationship so spoken of ought to be considered "commercial" under the law in India. Fourth, the award must be made on or after the 11th day of October 1960. Fifth, the award must be a New York Convention award - in short it must be in pursuance of an agreement in writing to which the New York Convention applies and be in one of such territories. And Sixth, it must be made in one of such territories which the Central Government by notification declares to be territories to which the New York Convention applies. The Court held that Section 47(1)(c) being procedural in nature does not go to the extent of requiring substantive evidence to prove that a non-signatory to an arbitration agreement can be bound by a foreign award and Section 47(1)(c) speaks of only evidence as may be necessary to prove that the award is a foreign award. The Court further held that the foreign arbitral award can be enforced against non-signatories to an arbitration agreement.

Amazon.com NV Investment Holdings LLC v. Future Retail Limited & Ors., Civil Appeal No. 4492-4493 of 2021 (Decided on 06/08/2021).

A Bench of Justices R.F. Nariman and B.R. Gavai held that no appeal lies under Section 37 of the Arbitration Act against an order of enforcement of an Emergency Arbitrator's order made under Section 17(2) of the Act. It was observed that Section 37 is a complete code so far as appeals from orders and awards made under the Arbitration Act are concerned, which has further been strengthened by the addition of the non-obstante clause by the Arbitration and Conciliation (Amendment) Act, 2019.

The Project Director, National Highways No. 45 E and 220, National Highways Authority of India v. M. Hakeem & Anr., Civil Appeal No. 2797 of 2021 (Decided on 20/07/2021).

A Bench of Justices R.F. Nariman and B.R. Gavai held that Section 34 of the Arbitration Act, 1996 cannot be held to include within it a power to modify an award. The Bench observed that if one were to include the power to modify an award in Section 34 of the Arbitration and Conciliation Act, 1996, one would be crossing the Lakshman Rekha and doing what, according to the justice of a case, ought to be done. In interpreting a statutory provision, a Judge must put himself in the shoes of Parliament and then ask whether Parliament intended this result. Parliament very clearly intended that no power of modification of an award exists in Section 34 of the Arbitration Act, 1996. It is only for Parliament to amend the aforesaid provision in the light of the experience of the courts in the working of the Arbitration Act, 1996, and bring it in line with other legislations the world over.

About the Author: Muneeb Rashid Malik is an Advocate and can be reached at muneebrashidmalik@gmail.com. He tweets @muneebmalikrash.