Arbitration: Court Reckoner - July 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 July 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 In Dharamvir Khosla v Asian Hotels (North) Ltd.[1], High Court of Delhi held that filing of a formal application under Section 8 is not needed if plea for seeking reference of parties to arbitration has been raised by Defendant before, either orally as was the case in hand or in the written statement. The Court further held that scope of consideration by the Court under Section 8 is much wider than Section 11 and in an application under Section 8 of the Act the Court is required to go into the issue whether the dispute between the parties is an arbitrable dispute or not and if the dispute falls in "excepted matters" or relates to specific or special remedies, than there can be no reference to the arbitration and the civil suit has to be proceeded and this continues to be the position even post the amendment to Section 8. It held that amendment to Section 8 of the Act, cannot be given an expansive meaning and intent so as to inundate entire regime of special legislations where such disputes were held to be not arbitrable. It eventually held that prima facie the plaintiffs have a right in their favour and interest in land which is more than that of a lessee or at least that of an irrevocable licensee but held that the said interest can be decided in arbitration and was not non-arbitrable. It held that if the arbitrator can direct creation of an interest in a property, the arbitrator can also award declaration of the interest of the parties in the property and that there is nothing in the Transfer of Property Act or the Specific Relief Act which forbids the rights of the parties being decided by arbitration. The rights of the plaintiffs therein at best governed by the Transfer of Property Act or the Specific Relief Act, or that of an irrevocable licensee under the Easements Act can still be decided in arbitration and held the suits to be not maintainable and parties may avail the remedy of arbitration. Section 9 In Jayneer Infra Power & Multiventures P. Ltd. & Ors. V Hero Fincorp Ltd.[2] High Court of Delhi applied the business efficacy test for interpreting terms of a multi- clause commercial contract to hold that the Court, while interpreting the terms of agreement, has to ensure its interpretation lends business efficacy to transactions between the parties and prevents any absurdity. It held that while doing so, it must be seen that the interpretation neither burdens the parties with nor emancipates them from obligations beyond those which were originally contemplated by them at the time of signing the contract. It held that meaning of contract ought to be gathered from the intent of the parties by adopting a common sense approach and not a pedantic one. On applying the said principles, the Court held that the Petitioner therein was entitled to interim protection against proposed sale of pledged shares. The Court further held balance of convenience in the Petitioner's favour by accepting the Petitioner's contention that sale of pledged shares in a market adversely impacted by pandemic would cause irreparable harm to the Petitioner. In Khoobsurat Infra P. Ltd. v IDBI Trusteeship Services Ltd. & Anr.[3] High Court of Delhi while refusing to grant restraint on sale of pledged shares, noted that the petitioner has not disputed the rights of the Respondent as a pawnee under Section 176 of the Indian Contract Act which confer absolute discretion on the pawnee to sell the shares when it likes and as it likes it and thus the Court cannot substitute that discretion with its own discretion. Repelling the argument that the Petitioner would be prejudiced by the sale of the shares in the emergency pandemic situation where market forces have been upended, the Court noted that the downward trend in the pledged shares' price pre-dated the pandemic and in fact there had been some minor increase in share price post pandemic. Further the Court held that reliance placed on the circulars issued by the RBI and SEBI to show that moratorium has been declared on all loans becoming due during COVID-19 and granted relaxation credit rating during COVID-19, would also not come to the aid of the Petitioner as there is no...

Arbitration: Court Reckoner - July 2020

Kanika Singh

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