Arbitration Court Reckoner : August 2020

By way of the present column, an attempt is made to briefly review the salutary judgments pronounced by the Courts in the month of August 2020 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 Narrows scope of the fraud exception to make a dispute non-arbitrable In Avitel Post Studioz Ltd & Ors v HSBC PI Holdings (Mauritius) Limited[1], Supreme Court held ratio in N. Radhakrishnan v. Maestro Engineers, (2010) 1 SCC 72 would not be a good precedent for applying fraud exception in arbitration. It further held that fraud to make a dispute non-arbitrable must be of a very serious nature (twin test): must be of a nature so as to make the contract or arbitration clause not exist in a clear case in which the court finds that the party against whom breach is alleged cannot be said to have entered into the agreement relating to arbitration at all and secondly it must have a public law domain element - allegations made against the State or its instrumentalities of arbitrary, fraudulent, or malafide conduct. If the subject matter of an agreement between parties falls within section 17 of the Indian Contract Act, 1872, or involves fraud in the performance of the contract, which would amount to deceit, being a civil wrong, the subject matter of such agreement would certainly be arbitrable. Further, held that merely because a particular transaction may have criminal overtones as well, does not mean that its subject matter becomes non-arbitrable if separate civil action is maintainable. Relief of Cancellation of registered instruments arbitrable In Deccan Paper Mills v Regency Mahavir Properties & Ors.[2] Supreme Court firstly reiterated the law as laid down by it in Avitel Post Studioz (supra) with regards to "fraud exception" and held the dispute to be arbitrable. It further held that the cancellation of the instrument under S. 31 of the Specific Relief Act, 1963 is as between the parties to the action and their privies and not against all persons generally, as the instrument that is cancelled is to be delivered to the plaintiff in the cancellation suit and thus an action instituted under S. 31 of the Specific Relief Act, 1963 is not an action in rem to make the dispute non-arbitrable, irrespective of whether the instrument sough to be cancelled is registered or not and held that an action that is started under S. 31(1) cannot be said to be in personam when an unregistered instrument is cancelled and in rem when a registered instrument is cancelled. On the facts of the case, thus, held, that merely cause cancellation of certain registered instruments is sought the same was not an action in rem and the disputes would be arbitrable. Specific application or prayer under S.8 not needed In Huawei Telecommunication (India) Pvt. Ltd. and Ors. v Palathara Constructions[3], High Court of Madras was seized of the question that should the civil court, before which a suit is brought in a matter which is subject to an arbitration agreement, refer the parties to it to arbitration under the provisions of S. 8 of the Act, when the opposite side brings to its notice- through its first statement on the substance of the dispute- that there exists such a valid agreement, but without specifically seeking or applying for such reference. The question arose as while the defendant in the said case had pointed out the existence of arbitration agreement and stated that the suit was not maintainable but had not made a specific application or prayer for seeking reference S. 8(1) of the Act. The Court held that language, terminology and phasing used may be different, but when the defendant sufficiently and abundantly makes it clear that the Court obtains no jurisdiction to consider the suit on account of the existence of a valid arbitration agreement and that they do not accede to its jurisdiction with respect to the disputes, the statutory obligation of the Court, under S. 8(1) emanates and it then becomes imperatively enjoined to consider if the parties are to be referred to Arbitration, subject to all other legal criterion as are applicable. Issue of Reference under S. 8 must be seen by Court having territorial jurisdiction In Josephine Ancilda v HDFC Bank Ltd. & Ors.[4] High Court of Madras held that mere fact that the clause conferring exclusive jurisdiction on courts in Delhi was combined with the...

Arbitration Court Reckoner : August 2020

Kanika Singh

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