Important Supreme Court Judgments On Arbitration Passed In 2020
Muneeb Rashid Malik
31 Dec 2020 6:32 AM GMT
The Supreme Court of India has pronounced numerous judgments in the matters related to the Arbitration and Conciliation Act, in the year 2020. In this write-up, the important pronouncements are briefly discussed. State of Gujarat (through Chief Secretary) and Another v. Amber Builders, Civil Appeal No. 8307 of 2019 (Decided on 08/01/2020). THE GUJARAT PUBLIC WORKS CONTRACT...
The Supreme Court of India has pronounced numerous judgments in the matters related to the Arbitration and Conciliation Act, in the year 2020. In this write-up, the important pronouncements are briefly discussed.
THE GUJARAT PUBLIC WORKS CONTRACT DISPUTES ARBITRATION TRIBUNAL HAS THE POWER TO GRANT INTERIM RELIEF IN CASES OF STATUTORY ARBITRATIONS UNDER THE GUJARAT ACT, 1992.
A Bench of Justices Deepak Gupta and Aniruddha Bose held that on a conjoint reading and a careful analysis of the Arbitration Act and the Gujarat Act, the powers vested in the Arbitral Tribunal in terms of Section 17 of the Arbitration and Conciliation Act, can be exercised by the Tribunal constituted under the Gujarat Act because there is no inconsistency in these two Acts as far as the grant of interim relief is concerned. This power is already vested in the Tribunal under the Gujarat Act and Section 17 of the Arbitration and Conciliation Act complements these powers and therefore it cannot be said that the provisions of Section 17 of the Arbitration and Conciliation Act are inconsistent with the Gujarat Act.
MINIMAL INTERFERENCE BY COURTS IN TERMS OF SECTION 48 OF THE ARBITRATION ACT IN ENFORCEMENT OF FOREIGN AWARDS.
A Bench of Justices R.F. Nariman, Aniruddha Bose and V. Ramasubramanian held that that the Appellants are indulging in a speculative litigation with the fond hope that by flinging mud on a foreign arbitral award, some of the mud so flung would stick. All the pleas taken by the Appellants are, in reality, pleas going to the unfairness of the conclusions reached by the award, which is plainly a foray into the merits of the matter, and which is plainly proscribed by Section 48 of the Arbitration Act read with the New York Convention. The Bench held that a good working test for determining whether a party has been unable to present his case is to see whether factors outside the party's control have combined to deny the party a fair hearing. Where no opportunity was given to deal with an argument which goes to the root of the case or findings based on evidence which go behind the back of the party and which results in a denial of justice to the prejudice of the party or additional or new evidence is taken which forms the basis of the award on which a party has been given no opportunity of rebuttal would on the facts of a given case, render a foreign award liable to be set aside on the ground that a party has been unable to present his case. This must be with the caveat that such breach be clearly made out on the facts of a given case, and that awards must always be read supportively with an inclination to uphold rather than destroy, given the minimal interference possible with foreign awards under Section 48.
THE COURT CANNOT ACT UPON A DOCUMENT OR THE ARBITRATION CLAUSE WHICH IS NOT PROPERLY STAMPED.
A Bench comprising the Chief Justice SA Bobde, Justices B.R Gavai and Surya Kant held that when a lease deed or any other instrument is relied upon as containing the arbitration agreement, the Court is required to consider at the outset, whether the document is properly stamped or not. If the instrument is not properly stamped, it should be impounded and dealt with, in the manner specified in Section 38 of the Stamp Act, 1899. It has also been held, that the Court cannot act upon such a document or the arbitration clause therein.
MERE EXPRESSION "PLACE OF ARBITRATION" CANNOT BE THE BASIS TO DETERMINE THE INTENTION OF THE PARTIES THAT THEY HAVE INTENDED THAT PLACE AS THE "SEAT" OF ARBITRATION.
A Bench of Justices R. Banumathi, A.S. Bopanna and Hrishikesh Roy held that the seat of arbitration is a vital aspect of any arbitration proceedings and its location will determine the courts that will have exclusive jurisdiction to oversee the arbitration proceedings. It was further held that the Seat normally carries with it the choice of that country's arbitration/curial law and it is well-settled that "seat of arbitration" and "venue of arbitration" cannot be used inter-changeably. Mere expression "place of arbitration" cannot be the basis to determine the intention of the parties that they have intended that place as the "seat" of arbitration. The intention of the parties as to the "seat" should be determined from other clauses in the agreement and the conduct of the parties.
FOREIGN AWARD AGAINST PUBLIC POLICY NOT ENFORCEABLE IN INDIA.
A Bench of Justices Arun Mishra, M.R. Shah and B.R. Gavai held that the award in the present case could not be said to be enforceable, given the provisions contained in Section 7(1)(b)(ii) of the Foreign Awards Act. As per the test laid down in the Renusagar case, its enforcement would be against the fundamental policy of Indian Law and the basic concept of justice. The award is unenforceable, and the High Court erred in law in holding otherwise in a perfunctory manner. The Bench allowed the appeal filed by the NAFED and set aside the impugned judgment and order passed by the High Court.
ARBITRATION AWARD FIXING PRICE OF LAND CAN'T BE EXECUTED LIKE A DECREE FOR SPECIFIC PERFORMANCE OF SALE AGREEMENT.
A Bench of Justices Uday Umesh Lalit and Vineet Saran held that the award in the present case did not relate to right, title or interest in an immovable property and was only for determination of the price of land, yet if the execution court was to treat the same for execution of sale deed of land (immovable property), it ought to have considered the impact of nonÂregistration of such Award, which has not been done in the present case. The Bench also held that execution of an award can be only to the extent what has been awarded/decreed and not beyond the same. In the present case, the Arbitrator in its Award had only declared the price of land and nothing more. The question of execution of a sale deed of the land at the price so declared by the Arbitrator in its Award, could not be directed.
NON-PARTICIPATION IN ARBITRAL PROCEEDINGS RESULTS IN WAIVER OF RIGHT TO RAISE OBJECTIONS ON JURISDICTION AFTER AWARD.
A Bench of Justices Uday Umesh Lalit and Vineet Saran held that the respondent failed to participate in the proceedings before the Arbitrator and did not raise any submission that the Arbitrator did not have jurisdiction or that he was exceeding the scope of his authority, the respondent must be deemed to have waived all such objections. In the circumstances, the respondent is precluded from raising any submission or objection as to the venue of arbitration, the conclusion drawn by the Court at Alipore while dismissing the case was quite correct and did not call for any interference. The Bench held that a party who knows that any provision from which the parties may derogate or any requirement under the arbitration agreement has not been complied with and yet proceeds with the arbitration without stating his objection to such non-compliance without undue delay or if a time limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object.
USUALLY, COURT NOT REQUIRED TO EXAMINE MERITS OF INTERPRETATION PROVIDED IN AWARD BY ARBITRATOR IF SUCH INTERPRETATION WAS REASONABLY POSSIBLE.
A Bench of Justices N.V. Ramana, Mohan M. Shantanagoudar and Ajay Rastogi held that usually the Court is not required to examine the merits of the interpretation provided in the award by the arbitrator, if it comes to a conclusion that such an interpretation was reasonably possible. The Bench further held that we do not subscribe to either the reasons provided by the Arbitral Tribunal or the High Court. Although, the Arbitral Tribunal correctly held that a contract needs to be interpreted taking into consideration all the clauses of the contract, it failed to apply the same standard while interpreting a Clause of the Contract. It is a settled position that a Court can set aside the award only on the grounds as provided in the Arbitration Act and where two views are possible, the Court cannot interfere in the plausible view taken by the arbitrator supported by reasoning.
PATENT ILLEGALITY A GROUND AVAILABLE TO SET ASIDE DOMESTIC ARBITRAL AWARDS MADE AFTER 2015 AMENDMENT.
A Bench of Justices R. Banumathi, Indu Malhotra and Aniruddha Bose held that an arbitral award can be set aside under Section 34 of the Arbitration and Conciliation Act if it is patently illegal or perverse. The ground of patent illegality is a ground available under the statute for setting aside a domestic award made after the 2015 amendment to the Arbitration and Conciliation Act. The Bench held that an award can be termed as patently illegal if the decision of the arbitrator is found to be perverse, or, so irrational that no reasonable person would have arrived at the same; or, the construction of the contract is such that no fair or reasonable person would take; or, that the view of the arbitrator is not even a possible view
SUPREME COURT PAVED A WAY FOR THE EXECUTION OF A FOREIGN AWARD EMANATING FROM A TWO-TIER ARBITRATION MECHANISM.
A Bench of Justices R.F. Nariman, S. Ravindra Bhat and V. Ramasubramanian paved the way for the execution of a Foreign Arbitral Award in India arising out of a two-tier arbitration mechanism. The Bench gave a go-ahead for the execution of ICC Foreign Award passed in favour of Centrotrade. The matter related to the agreement between Centrotrade Minerals and Metals Inc, an American giant, and Hindustan Copper Limited, a Government of India enterprises, for the supply of Copper Concentrate. The arbitration clause in the agreement provided for a two-tier arbitration mechanism whereby any dispute was to be settled by a Sole Arbitrator under the aegis of the Indian Council of Arbitration (ICA).
ENFORCEMENT OF AN ARBITRAL AWARD MAY BE REFUSED ONLY IF IT VIOLATES THE ENFORCEMENT STATE'S MOST BASIC NOTIONS OF MORALITY AND JUSTICE.
A Bench of Justices S. Abdul Nazeer, Indu Malhotra and Aniruddha Bose, held that enforcement of an arbitral award may be refused only if it violates the enforcement State's most basic notions of morality and justice, which has been interpreted to mean that there should be great hesitation in refusing enforcement, unless it is obtained through corruption or fraud, or undue means. It was observed that the enforcement court would examine the challenge to the award in accordance with the law and merely because the Malaysian Courts have upheld the award, it would not be an impediment for the Indian courts to examine whether the award was opposed to the public policy of India under Section 48 of the Indian Arbitration Act, 1996. The enforcement court would not review the correctness of the judgment of the Seat Courts, while deciding the challenge to the award and the period of limitation for filing a petition for enforcement of a foreign award under Sections 47 and 49 of the Arbitration and Conciliation Act, would be governed by Article 137 of the Limitation Act, 1963 which prescribes a period of three years from when the right to apply accrues. The power to set aside a foreign award vests only with the court at the seat of arbitration, since the supervisory or primary jurisdiction is exercised by the curial courts at the seat of arbitration. The enforcement court may refuse enforcement of a foreign award, if the conditions contained in Section 48 are made out.
PROCEEDINGS UNDER SECTION 34 OF THE ARBITRATION & CONCILIATION ACT NOT MAINTAINABLE AGAINST PRE-BALCO FOREIGN AWARDS.
A Bench of Justices Indira Banerjee and S. Ravindra Bhat held that the proceedings under Section 34 of the Arbitration and Conciliation Act are not maintainable to challenge a pre-BALCO foreign award. The Bench held that Part I of the Arbitration Act, 1996 would have no application to international commercial arbitration held outside India. Therefore, such awards would only be subject to the jurisdiction of the Indian courts when the same are sought to be enforced in India in accordance with the provisions contained in Part II of the Arbitration Act, 1996. The provisions contained in the Arbitration Act, 1996 make it crystal clear that there can be no overlapping or intermingling of the provisions contained in Part I with the provisions contained in Part II of the Arbitration Act, 1996. Having regard to the precedential unanimity, about the manner of applicability of BALCO in respect of agreements entered into and awards rendered earlier, with respect to the law of the seat of arbitration (or the curial law) excluding applicability of Part I of the Act, and the unambiguous intention of the parties, that the seat of arbitration was London, where the ICC arbitration proceedings were in fact held, and the awards rendered, the impugned judgment cannot be sustained.
THE LEASE/TENANCY MATTERS WHICH ARE NOT GOVERNED UNDER THE SPECIAL STATUTES BUT UNDER THE TRANSFER OF PROPERTY ACT ARE ARBITRABLE.
A Bench comprising the Chief Justice SA Bobde, Justices A.S. Bopanna and V. Ramasubramanian held that if the special statutes do not apply to the premises/property and the lease/tenancy created as on the date when the cause of action arises to seek for eviction or such other relief and in such transaction if the parties are governed by an Arbitration Clause; the dispute between the parties is arbitrable and there shall be no impediment whatsoever to invoke the Arbitration Clause. The Bench also held that eviction or tenancy relating to matters governed by special statutes where the tenant enjoys statutory protection against eviction whereunder the Court/Forum is specified and conferred jurisdiction under the statute alone can adjudicate such matters and in such cases the dispute is nonÂarbitrable.
(Muneeb Rashid Malik can be reached at muneebrashidmalik@gmail.com and he tweets @muneebmalikrash).
