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Arbitration Court Reckoner : November & December 2020

Kanika Singh
24 Jan 2021 6:00 AM GMT
Arbitration Court Reckoner : November & December 2020
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By way of the present column, an attempt is made to briefly review the salutary judgments pronounced by the Courts in the month of November & December 2020 under the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the 'Act'). That while as many judgments as possible are sought to be reviewed, owing to the limited column space, some judgments would invariably be...

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By way of the present column, an attempt is made to briefly review the salutary judgments pronounced by the Courts in the month of November & December 2020 under the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the 'Act'). 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 2(1)(d) & Section 2(2)

(i) Concept of emergency arbitration is not outside the scope or contrary to Part-1 of the Act

In Future Retail Ltd. v Amazon.com Investment Holdings LLC & Ors.[1], High Court of Delhi was dealing with a case where the international commercial arbitration was seated in India but was to be conducted in accordance with SIAC Rules and the question arose as to whether the provisions of Emergency Arbitration in the SIAC rules, are in any manner contrary to/repugnant with the public policy of India, or with the mandatory requirements of the procedural law under the Act. The Court held the Indian law of arbitration allows the parties to choose a procedural law different from the proper law, and there is nothing in the Act that prohibits the contracting parties from obtaining emergency relief from an emergency arbitrator. Further held, parties having deliberately left it open to themselves to seek interim relief from an emergency arbitrator, or the Court in terms of Rule 30.3 of SIAC Rules, the authority of the said emergency arbitrator cannot be invalidated merely because it does not strictly fall within the definition under Section 2(1)(d). Inasmuch as S. 9 of the Act along with S. 27, 37(1)(a) and 37(2) are derogable by virtue of the proviso to S. 2(2) in an International arbitration seated in India upon an agreement between the parties, it cannot be held that provision of Emergency Arbitration under the SIAC rules are, per se, contrary to any mandatory provisions of the A&C Act.

Section 2(3) & 5

(ii) S. 2(3) of the Act craves out an exception to S. 5 of the Act, thus provides for judicial intervention in relation to disputes which may not be submitted to arbitration.

In Dr Bina Modi v. Lalit Kumar Modi and Others[2], High Court of Delhi held that issues under the Trusts Act cannot be the subject matter of arbitration. The Court further held that the decision in Kvaerner Cementation India Ltd. v Bajranglal Agarwal[3] did not deal with the exceptions carved out of S. 5 of the Act by the provision of S. 2(3) thereof, which provides for judicial intervention in matters, in relation to disputes which may not be submitted to arbitration, on account of any other law for the time being in force and thus civil courts have jurisdiction to pronounce upon arbitrability or non-arbitrability of the disputes and are not denuded of their jurisdiction to entertain anti-arbitration suits to consider whether the disputes are arbitrable or not. The Court further held that the principles of autonomy of arbitration and kompetenz-kompetenz did not prima facie arise in the present case, since the disputes themselves are not be capable of being submitted to arbitration. The Court thus set aside the decision of the Ld. Single Judge dismissing the anti-arbitration suit.

Section 7

(iii) Clause providing the parties may opt for arbitration is a valid arbitration agreement if option is exercised by a party

In Royal Orchid Associated Hotels P. Ltd v Kesho Lal Goyal[4], High Court of Delhi held a clause in the agreement which stipulated that in case of any dispute, the parties can approach Courts at Delhi or alternatively, they may opt to go for arbitration to be a valid arbitration agreement. The Court held that such a clause empowered the parties either to get the disputes / claims adjudicated through the jurisdiction of the Court or by way of arbitration and the petitioner having chosen the option of arbitration, the S. 9 petition filed by it was maintainable. However, on merits it refused to grant the relief, in the nature of specific performance of the agreement/relief against dispossession post termination of agreement, inter alia holding the grant of the said relief to be barred as a contract which is in its nature determinable cannot be specifically enforced.

(iv) Reserving one's right to arbitrate under the Act is not an unequivocal commitment to arbitration, nor does it demonstrate the existence of an arbitration agreement.

In Viren Umedial Mehta v Royal Food & Hospitality & Ors.[5] High Court of Bombay held that merely 'reserving' a right to refer the disputes to arbitration does not in itself indicate the existence of an arbitration agreement. It held that an arbitration agreement cannot be an option at the discretion of one or the other party and a valid arbitration agreement demonstrating consensus necessarily has to say that the parties shall refer any disputes to arbitration.

Section 8

(v) A party to arbitration agreement must apply u/s 8 in writing for referring parties to arbitration and a verbal plea in this regard is not sufficient.

In Alok Kumar Lodha v Asian Hotels (North) Ltd.,[6] High Court of Delhi held that it is only the defendant who can apply under S. 8(1) and further held that invocation of S. 8 has to be by an application in writing and the provisions of law in this regard, besides in the Arbitration Act, also in the CPC, Commercial Courts Act and the Delhi High Court (Original Side) Rules, 2018, cannot be thrown to the wind and invocation permitted verbally.

Section 9

(vi) Power to Grant of relief u/s 9 or 17 to secure the amount in dispute in the arbitration, is to be administered with additional caution, as grant of any relief, would be justified only if it is by way of interim protection.

In Pearl Hospitality & Events P. Ltd. v Oyo Hotels & Homes P. Ltd. [7] High Court of Delhi held that before exercising jurisdiction under S. 9, the Court has to satisfy itself that there exists (i) an arbitration agreement, (ii) an arbitral dispute and (iii) manifest intention, on the part of the petitioner, to initiate arbitral proceedings (iv) the existence of circumstances which require grant of interim protection and urgent necessity. Court further held that issuance of a notice invoking arbitration is, however, not a sine qua non, for manifest intention to initiate arbitral proceedings to be said to exist. The Court held that all that the Court is required to determine, while examining a prayer relatable to S. 9(1)(ii)(b), is whether a case, for securing the amount in dispute in the arbitration, is, or is not, made out. Once the Court determines that the petitioner has an arguable case, and that the interests of justice requires securing of the amount, so as to render the award, if finally passed in favour of the petitioner, meaningful and capable of enforcement, the Court is not only empowered, but is also obligated, to secure the amount. It was further held that the opinion of the Court, in such a case, has to be understood as expressly limited to determining the issue of whether the amount is required to be secured or not, in the context of S. 9, and is not to be regarded as an expression of opinion on merits, regarding the entitlement of the petitioner to the said amount. In the facts of the case, the Court allowed the Petitioner's prayer for deposit of the amount of liquidated damages being the amount of rent payable during the lock in period, prima facie holding that termination was not valid, and directed the Respondent to deposit the said amount in Court.

(vii) S. 9 petitions cannot be disposed of ex-parte, without giving notice to the Respondent therein, especially when coercive orders are being passed

In New Morning Star Travels v Volkswagen Finance P. Ltd.[8] High Court of Delhi allowed petitions under Article 227 of Constitution of India, filed against the orders of the Trial Court by which S. 9 petitions had been disposed off on the very first day of hearing, without issuing notice in the petitions to the Petitioners (who were the Respondents before the Trial Court) and by passing coercive orders permitting the Respondents to take possession of the vehicles of the Petitioner. The Court held that S. 9 petitions cannot be disposed of ex-parte, without giving notice to the respondent therein, especially when coercive orders are being passed. The Court held that while power to pass ad-interim orders under S. 9 of the Act exists, however, disposal of the petitions, without issuing notice and hearing the respondent as well as directing coercive orders of possession would be violative of the principles of natural justice. The Court further held that the appointment of Receivers at the ex-parte stage in matters such as vehicle loans ought to satisfy the test of imminent threat and the Court also ought to come to a conclusion that there was a deliberate intention not to repay the loan. The Court held that guidelines set out in Cholamandalam DBS Finance Ltd. v. Sudhees Kumar[9] may be followed in case of S. 9 petitions relating to vehicle loans.

(viii) Non-signatory Respondents functioning as single economic entity with signatory Respondents are bound to arbitration clause and restraint orders can be passed against them u/s 9

In KKR India Private Financial Services Ltd. & Anr v Williamson Magor & Co. Ltd. & Ors. [10] High Court of Delhi held the non-signatory Respondents bound to the arbitration agreement by invoking the Group of Companies doctrine and holding that non-signatory Respondents and the signatory Respondents form part of a tight group structure with strong organizational and financial links, and function as a single economic entity and thus restraint orders u/s 9 of the Act can be passed against the non-signatory Respondents. The Court further held that perusal of the communications between the parties bring to light the various negotiations being initiated by non-signatories, as well as the mutual intention to bind the non-signatories to the Agreement.

(ix) Covid pandemic and the resultant restrictions, lockdowns and advisories issued by the Central and State Governments and Authorities qualify as 'force Majeure' condition

In Mumbai International Airport Limited v Airports Authority of India[11] High Court of Delhi reiterated that the S. 9 court is concerned more with the necessity to preserve the status quo, so as to facilitate the arbitral process, to be initiated by the parties and held that for this reason, it is also open to the S. 9 court to, while passing pre-arbitral interim measures of protection under S. 9, condition such grant by requiring the parties benefiting therefrom, to institute arbitral proceedings within a specified timeframe. In the facts of the case and the force majeure clause contained in the agreement between the parties, the Court held that the Covid pandemic and the resultant restrictions, lockdowns and advisories issued by the Central and State Governments and Authorities qualify as 'force Majeure' condition. The Court further found a prima facie case in favour of the Petitioner, and accepted its contention that it was unable to render the performance of its obligation to pay Monthly Annual Fees, as claimed by Respondent, as a result of the said Force Majeure condition. The Court further held that Respondent could not have arbitrarily fixed terminus ad quem of the force majeure especially in view of the clause between the parties which provided that time for performance, by the party affected by force majeure, of its obligations under the OMDA, contractually stands extended till the pre-force majeure level of activity of the party is restored.

(x) Court is empowered to tailor the relief to the facts and grant interim protection even when there is no danger to arbitral proceedings/subject matter of arbitration

In AST Enterprises Inc. v Mewa Mishra Enterprises P. Ltd.[12], High Court of Delhi held that though there is no quarrel with the proposition that in a disputed claim, interim protection, by way of securing the amount in dispute, at a pre-arbitral stage, would be justified only where there is a danger of the arbitral proceedings but held that the Court is empowered to tailor the relief to the facts which appear before it. Thus even in the absence of any plea/evidence to the fact arbitral proceedings will be frustrated, the Court directed the deposit of the amount in dispute, given the extreme nature of the circumstances in the case, and the prima facie, unconscionable manner in which the respondent had acted.

(xi) Grant of relief under principles analogous to O 39 R 10

In Brace Iron & Steel P. Ltd. v Tata Steel BSL Ltd.[13] High Court of Delhi directed the Respondent to pay arrears of lease rent as per agreement rate even though the Respondent sought to raise a dispute with regards to the said rate and which dispute was yet to be decided by the arbitrator. While doing so, the High Court rejected the contention of the Respondent that grant of such interim relief would be in the nature of grant of final relief and clarified that such payment would be subject to the outcome of the proposed arbitral proceedings.

Section 11

(xi) Where contract stipulates time period for a party to appoint arbitrator, right to appoint stands forfeited after elapse of said period

In M/s. Larsen & Toubro Ltd. v NHAI[14] High Court of Delhi was dealing with a case where the arbitration clause provided that each party would nominate a nominee arbitrator and in case of failure to appoint by a party within 30 days, the nominee arbitrator would be appointed by Indian Roads Congress. The issue which arose for consideration before the Court was whether the Respondent could have appointed its nominee arbitrator after lapse of 30 days when Petitioner had approached IRC but before the petitioner had filed the S. 11 petition . The Court held that the Respondent could not appoint an arbitrator as its right stood forfeited in view of the specific contractual stipulation with regards to time period for nominating the arbitrator.

(xii) An Exclusive Jurisdiction clause conferring specific jurisdiction for appointment of arbitrator would take precedence over seat of arbitration clause

In Cars24Services P. Ltd. v Cyber Approach Workspace LLP[15], High Court of Delhi was confronted with an arbitration clause which conferred the jurisdiction to appoint the arbitrator, i.e. S. 11 jurisdiction, on courts in Haryana but at the same time stipulated that seat of arbitration would be at New Delhi. The Court held that the view that the "seat of arbitration clause" has to be treated as akin to an exclusive jurisdiction clause, has been expressed, by the Supreme Court, in cases in which there is no separate exclusive jurisdiction clause, conferring exclusive jurisdiction on courts located elsewhere. The Court further held that where such a separate exclusive jurisdiction clause, conferring exclusive jurisdiction on courts other than the court having jurisdiction over the contractual seat of arbitration, exists, it may not be proper, to grant pride of place, to the seat of arbitration clause, over the exclusive jurisdiction clause specifically when the exclusive jurisdiction clause specifically provides for appointment of arbitrator and thus held that the Courts in Haryana alone would have jurisdiction to entertain a petition for appointment of arbitrator.

(xiii) where the arbitration agreement contemplates arbitration only of notified claims, claims, which are not notified in accordance with the procedure stipulated, cannot be referred

In Brilltech Engineers P. Ltd. v Darrameks Hotels Developers P. Ltd.[16] High Court of Delhi held that an arbitration clause which provided for remedy of arbitration only in respect of notified claims of the party had to be strictly interpreted. The Court held that as admittedly the claims had not been notified as per procedure provided in the contract, the fact that there had been a series of communications in connection with the claims would not suffice to constitute notification of the claims which had to be as procedure provided in the contract

(xiv) Equitable protection of nature provided in S. 114 of Transfer of Property Act does not mean that dispute relating to those aspects between the landlord and the tenant is not arbitrable, Arbitrator empowered to exercise same discretion

In Suresh Shah v Hipad Technology India P. Ltd.,[17] Hon'ble Supreme Court held that equitable protection of the nature provided in S. 114 of the Transfer of Property Act does not mean that the dispute relating to those aspects between the landlord and the tenant is not arbitrable and that only a Court is empowered to waive the forfeiture or not in the circumstance stated in the provision. The Court held that where in such disputes the parties have opted for arbitration, then in the arbitration proceedings where the landlord has sought for an award of ejectment on the ground that the lease has been forfeited since the tenant has failed to pay the rent and in such proceedings the tenant pays or tenders the rent to the lessor or remedies such other breach, it would be open for the Arbitrator to take note of Section 114, 114A of TP Act and pass appropriate award in the nature as a Court would have considered that aspect while exercising the discretion.

Section 12(5)

(xv) Amended S. 12(5) not applicable to arbitral proceedings which commenced prior to 23.10.2015 even if arbitration clause provided that provisions of 1996 Act with statutory modifications would be applicable

In ABB India Ltd. v Bharat Heavy Electricals Ltd.[18] High Court of Delhi rejected the argument that an arbitration clause which provided "the provisions of the Arbitration and Conciliation Act, 1996 (India) or statutory modifications or re-enactments thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceedings under this clause", would result in making Section 12(5) of the Act, as inserted by the 2015 Amendment Act, applicable to arbitral proceedings which had commenced prior to 23.10.2015. The Court held that such an interpretation would be contrary to the judgment of the Hon'ble Supreme Court in U.O.I. v. Parmar Construction Company[19] and thus held that S. 12(5) would not be applicable . The Court also observed that Section 26 of the 2015 Amendment Act is fundamentally different from Section 85(2)(a) of the 1996 Act, both structurally and conceptually, and requires, therefore, to be interpreted, keeping this distinction in mind.

Section 14

(xvi) Revision of Arbitral Fees by the Arbitrator contrary to terms of appointment is a de jure in-eligibility

In NTPC Ltd. v. Amar India Ltd.[20] High Court of Delhi held that the Arbitrator had become de jure unable to perform his functions as he wrongly sought to revise his fee from the agreed fee as mentioned in the appointment letter, which he had consented to, to the fees provided under Fourth Schedule to the Act and on the said ground terminated the mandate of the Arbitrator.

Section 29 A

(xvii) Where appointment of Arbitrator is by parties, then S. 29 A application for extension would lie before concerned principal civil court of original jurisdiction

In M/s. Ekk & Co. & Ors. v State of Kerala & Ors.,[21] High Court of Kerala held that where the initial appointment of an Arbitrator is by the High Court under S. 11 of the Act, then an application for extension u/s 29A would lie before the High Court but where the initial appointment was by the parties themselves without intervention of the Court, it is the principal civil court of original jurisdiction concerned that would have the power to extend the time for completion of the arbitration.

Section 33

(xviii) Application u/s 33 of the Act cannot be made after the statutorily stipulated period of 30 days

In Project Director, NHAI & Ors. v S.D.M.-cum-Land Acquisition Collector, Pathankot and Ors.[22], High Court of Punjab & Haryana held that once time period of 30 days provided in S. 33 of the Act for making an application under the said section is elapsed, a party cannot be permitted to file an application for rectification of any error as in terms of S. 32 of the Act, after the pronouncement of the final Award, the proceedings before the Arbitrator stand terminated and he is functus officio. The Court held that very object of the Act, which is the expeditious conclusion of disputes by the alternative mode, would be defeated if the strict time lines spelt out in S. 33 and 34 are not adhered to.

Section 34

(xix) Seat of arbitration provided in agreement can be changed only by amendment in writing signed by parties

In Goyal MG Gases P. Ltd. v Steel Authority of India[23], High Court of Delhi was dealing with a case where the arbitration clause provided that arbitration would be held in Durgapur, West Bengal but the parties had consented to arbitration being held in New Delhi, as recorded in an order of the Arbitral Tribunal and the award was passed in New Delhi. The Court held that there could not be a change of seat of arbitration without an agreement/amendment in writing and the order of the Arbitral Tribunal recording the consent of the parties to hold arbitration in Delhi could not be construed as amendment in writing within the meaning of S. 7 of the Act, especially when the agreement between the parties stipulated that any amendment thereto had to be in writing and signed by the parties. The Court thus held that Delhi was only the venue in terms of S. 20(3) of the Act and Courts in Delhi would not have jurisdiction to entertain the S. 34 petition filed by the petitioner.

(xx) Pre-BALCO award cannot be challenged by way of S. 34 where seat of arbitration was outside India though contract stipulated that it would be governed by laws of India

In Noy Vallesina Engineering SpA, v Jindal Drugs Limited & Ors.[24], Hon'ble Court held that proceedings under S. 34 cannot be maintained against a foreign award where contract stipulated that arbitration shall be conducted in London under the rules of the International Chamber of Commerce, Paris, even though contract additionally stipulated that contract shall be governed by laws of India. The Court held that even though the award in question was rendered prior to the judgment in Bharat Aluminium Company vs Kaiser Aluminium Technical Services Inc[25], in view of the settled law with seat of arbitration (or the curial law) excluding applicability of Part I of the Act, and the unambiguous intention of the parties in the present case that the seat of arbitration was London, where the ICC arbitration proceedings were in fact held, and the awards rendered, S. 34 proceedings would not be maintainable.

(xxi) Order passed by the Arbitrator dismissing an application for amendment of pleading amounts to interim / partial award .

In Lt. Col. H.S. Bedi Retd & Anr. v STCI Finance Ltd[26]., High Court of Delhi held that with the rejection of the application for amendment of the SOD by the arbitrator, the claims raised by the Respondent had attained finality without considering the plea of equitable set off which was sought to be added by the petitioner by way of amendment and thus the said order was in the nature of the interim award and a petition u/s 34 would lie against the same. The Court further set aside the order of the Arbitrator and allowed the amendments to be brought on record as it found that there was not undue delay in making the amendment and evidence had not yet been recorded.

(xxii) When there are a number of documents exchanged between the parties in the performance of a contract, all of them must be read as a connected whole

In Anglo American Metallurgical Coal Pty Ltd. v MMTC Ltd.[27], Hon'ble Supreme Court held that while Indian Evidence Act does not apply to proceedings before an arbitrator but nevertheless proceeded to consider the application of S. 94 of the Evidence Act on the basis that the principle contained in S. 94 of the Evidence Act, as to extrinsic evidence being inadmissible in cases of "patent ambiguity", is fundamental to Indian jurisprudence. However, on such consideration the Court found that S. 94 had been wrongly applied by the High Court to set aside the Majority award. The Court held that when there are a number of documents exchanged between the parties in the performance of a contract, all of them must be read as a connected whole, relating each particular document to "existing facts", which include how particular words are used in a particular sense, given the entirety of correspondence between the parties. Thus, after the application of proviso (6) to section 92 of the Evidence Act, the adjudicating authority must be very careful when it applies provisions dealing with patent ambiguity, as it must first ascertain whether the plain language of a particular document applies accurately to existing facts. If, however, it is ambiguous or unmeaning in reference to existing facts, evidence may then be given to show that the words used in a particular document were used in a sense that would make the aforesaid words meaningful in the context of the entirety of the correspondence between the parties.

Section 36

(xxiii) In what situation could a Section 36 court grant an unconditional stay?

In Kishore Shah & Ors. v Urban Infrastructure Trustees Ltd & Ors.[28], High Court of Bombay held that while the general principle seems to be that courts should not readily-or at least too easily-deny to a successful litigant in arbitration the 'fruits of the arbitral award' but that does not mean that in every single case the Court is bound to order a deposit, or that it cannot, in a fit case, for good reason, order an unconditional stay. The Court held that, however mandatory the wording of Order 41 Rule 5 of the CPC may be, S. 36(3) clearly says that the court considering a stay of an arbitral award for money must have 'due regard to' the provisions of the CPC. The Court held that, thus, CPC provisions are a guidance, and that they are to be taken into consideration; but that does not mean that the S. 36 Court lacks all discretion to grant an unconditional stay if the circumstances otherwise so warrant. The Court held that, however, for grant of an unconditional stay, the applicant must make out a strong, exceptional and overwhelmingly compelling case, and the impugned award or decree must be shown without any great convolutions to be facially perverse and untenable and it is not enough to show that this or that finding presents discomfort to the losing party. On the facts of the case at hand, the Court held that an exceptional case for grant of unconditional stay was not made out.

Section 37

(xxiv) Rigours of every procedural provision in the Civil Procedure Code cannot be used to defeat grant of relief which would serve ends of justice by S. 9 Court or S. 17 Tribunal

In Vyomesh Shah v Phoenix ARC Pvt Ltd & Ors.

[29] High Court of Bombay held that while the principles analogous to Order 38 Rule 5 will apply to arbitrations and a Section 9 Court as also Section 17 tribunal will be guided by those but the law is equally settled that these provisions are not fetters on either the Court or the Arbitral Tribunal in making an equitable order to secure the ends of justice. The Court further held that the rigours of every procedural provision in the Civil Procedure Code cannot be used to defeat the grant of relief which would subserve the paramount interests of justice and in any case, the provisions of the CPC, as the Arbitration Act itself say, do not control arbitrations.

(xxv) S 37 Court not to independently assess the relative merits/ demerits of the award but only to assess whether the views expressed by the S. 34 Court fall within the parameters laid down under S 34 .

Wrong exercise of discretion, while dealing with a claim for specific performance, cannot be a reason under S. 34 of the Act for setting aside of an arbitral award

In Shon Randhawa v Ramesh Vangal & Ors.[30] High Court of Delhi reiterated that where there are concurrent findings of fact of law, first by the AT which are then confirmed by the Court while dealing with the objections under S. 34, in an appeal under S. 37, the appellate Court would be very cautious and reluctant to interfere in the findings returned in the award by the AT and confirmed by the Court under S. 34 and that interference under S. 37 of the Arbitration Act cannot travel beyond the restrictions laid down under S. 34. The Court held that wrong exercise of discretion, while dealing with a claim for specific performance, cannot be a reason under S. 34 of the Act for setting aside of an arbitral award. The test to be applied under S. 34 i.e. whether the arbitral award is in conflict with the public policy of India, is of the date of the making the award and cannot be of the changes if any in the public policy (by way of amendment in law for example )after the date of making of the award.

(xxvi) Appeal u/s 37 can be filed by a third party if the order of Arbitral Tribunal is to the prejudice of its interests

Directions of the Arbitral Tribunal can be modified, under S. 37

In Edelweiss Asset Reconstruction Company Limited, acting in its capacity as Trustee of the EARC Trusts SC-338,343,366 and 389 v GTL Infrastructure Limited And Anr.[31], High Court of Delhi held that an order of the Arbitral Tribunal directing payment of a certain sum to be made, as at that stage of the proceedings there was no denial by Respondent of its liability, was in the nature of an order u/s 17 and not an interim award as it did not determine the liability finally and thus did not pass the test of being "final award on the matters covered thereby, but made at an interim stage". The Court held that if the order of Arbitral Tribunal operates to the prejudice of interests of secured creditor, who is not party to arbitration, then such secured creditor can maintain an appeal u/s 37 against such order affecting its interests, even if it has independently filed a suit for similar relief. The Court reiterated that Arbitral Tribunal cannot pass an order, which affects the rights and remedies of third party secured creditors, while determining the disputes pending before it. The Court also held that Section 37, unlike Section 34, confers appellate power on the Court and as the power of an Appellate Court, classically, includes the power to modify the order appealed against, thus Court u/s 37 can modify the order of the Arbitral Tribunal.

(xxvii) Interim orders passed during the pendency of an application under S. 9 are appealable under S. 37(1)(b) and not just the final order

In SEPCO Electric Power Construction Corporation v Power Mech Projects Limited[32], High Court of Delhi held that a direction, that the Bank Guarantee, to be furnished to secure awarded amount, be of a Scheduled Indian Bank only, would be covered within the meaning of an order granting "any" measure under S. 9, within the meaning of S. 37(1)(b) of the Act and within the meaning of "judgment or order" of a Commercial Division of a High Court within the meaning of S. 13(1A) of the Commercial Courts Act and appeal would lie against the same . The Court reiterated that it is not the final order on an application under S. 9 alone which has been made appealable under S. 37(1)(b) but even the interim orders during the pendency of an application under S. 9. The Court, however, dismissed the appeal on merits holding that the order in appeal being discretionary in nature, interference with the discretion exercised by the Court of first instance would be only when discretion is shown to have been exercised arbitrarily or capriciously or perversely or where the Court has ignored the settled principles of law regulating the grant or refusal of interim orders, which was not the case.

(xxviii) A party, who is eventually unsuccessful in obtaining a restraint on encashment of BG, must pay to beneficiary interest for period encashment of BGs and realization of monies thereunder remained stayed

In CRSC Research and Design Institute Group Co. Ltd. v Dedicated Freight Corridor Corporation of India Limited & Ors[33], High Court of Delhi dismissed the appeal u/s 37 against the judgment of the Single Judge dismissing the S. 9 petition seeking restraint on encashment of bank guarantee holding that neither of the 2 exceptions of fraud of egregious nature or irretrievable injustice is made out. While doing so the Court observed the appellant, by filing the Section 9 petition and thereafter by filing this appeal after dismissal thereof, has delayed the realization of the monies under the bank guarantee by the respondent and thus is liable to pay interest for the period the encashment of the BGs and realization of monies thereunder remained stayed. The Court, thus, directed the appellant to pay interest @ 11% per annum on the amount of the BGs, from the date of grant of ad-interim stay by the Commercial Division, till the date monies under the BGs are received by the respondent no.1 in addition to imposing cost of Rs. 5 lakhs on the appellant.

(xxix) Order dismissing S. 34 petition on ground of delay u/s 34(3) is not appealable u/s 37 in view of the law laid down by Supreme Court, however granted party leave to appeal

In Chintels India Ltd. v Bhayana Builders P. Ltd.[34], High Court of Delhi was confronted with the question as to whether an order refusing to set aside arbitral award not u/s 34(2) but u/s 34(3) i.e. on ground of delay, would be an order appealable u/s 37 of the Act or not and whether appeal therefrom would be maintainable or not in light of the judgment of the Hon'ble Supreme Court in BGS SGS Soma JV Vs. NHPC Ltd.[35] The Court, while dismissing the appeal as not maintainable, being bound by the dicta of the Supreme Court in BGS SGS Soma JV and in State of Maharashtra v Ramdas Construction Co.[36], granted certificate under Article 133 read with Article 134A of the Constitution of India to the appellant as it was of the view that S 37(1)(b) also, while providing for the appealable orders, refers to Section 34 in entirety and not only to Section 34(2) and thus would not be correct to confine remedy of S. 37 only to orders u/s 34(2).

Arbitration Act(1940)

(xxx) Clause providing for even number of arbitrators would not be invalidated under the scheme of the 194o Act

In Asian Hotels (North) Ltd. v Poonam Sood Menon & Anr.[37] High Court of Delhi held that an arbitration clause, which had been executed at the time 1940 Act was in force and which provided for even number of arbitrators would not be hit by S. 10 (1) of the 1996 Act and such a clause would be valid and subject to an implicit modification by a combined reading of S. 3 of the 1940 Act read with Clause 2 of First Schedule of the 1940 Act and the arbitrators appointed by the petitioner and the respondents would, by virtue of such modification, mandatorily have to appoint a third arbitrator as umpire. The Court held that this modification, which came into effect immediately on execution of the agreement between the parties, would continue to remain in operation despite the repeal of the 1940 Arbitration Act by the 1996 Act.

(xxxi) Nothing in the 1940 Act to suggest that the impugned award gets vitiated when enlargement of time beyond 4 months from the date of entering upon reference has not been sought for.

In M/s. Waterbase Ltd. v M/s. KAP (India) Projects & Construction P. Ltd.[38] High Court of Madras firstly held that breach of Section 14(2) of the 1940 Act i..e failure to file award in Court, if at all it be so i.e., on a demurrer cannot be a ground for dislodging impugned award. The Court further held that there is no provision in the 1940 Act which would go to make the impugned award liable to be set aside or there is nothing in S. 28 of the 1940 Act to suggest that the impugned award gets vitiated when enlargement of time beyond four months from the date of entering upon reference has not been sought for. The Court held that unlike S. 29A of the amended 1996 Act there is nothing in the 1940 Act to suggest that the mandate of the AT would snap if the award is not made within four months.

Article 226

(xxxii) A writ would not be issued by the court to incorporate a new term in a contract, namely an arbitration clause, executed between the parties

In M/s. MEP RGSL Toll Bridge P. Ltd. v Maharashtra State Road Development Corporation Ltd. & Ors.[39] High Court of Bombay was seized with a petition seeking for issuance of writ of mandamus directing Respondent to provide for arbitration by way of additional condition to be read into the contract on the basis of a policy decision of the State Government to provide for institutional arbitration in all contracts entered by the State Government and its agencies. The High Court rejected the said prayer and held that the Government's notification itself provided that only with the consent of the parties to the contract/agreement, the existing agreement and / or contract can be suitably amended or altered to provide for arbitration. It further held that in fact no policy of the State Government could mandate compulsory imposition of an arbitration agreement, qua the existing contracts so as to automatically amend such contracts as entered between the parties, by any executive fiat without consent of parties.

(Kanika Singh is a Delhi-based lawyer, and may be reached at kanikasingh09@gmail.com)





[1] CS(COMM) 493/2020 decided on 21st December 2020

[2] RFA (OS) 21/2020 decided on 24th December 2020

[3] (2012) 5 SCC 214

[4] OMP(I)(COMM) 247/2020 decided on 3rd November 2020

[5] Arbitration Petition (L) No. 6804 of 2020 decided on 4th December 2020

[6] RFA(OS)(COMM) 13/2020 decided on 24th December 2020

[7] OMP(I) (COMM) 123/2020 decided on 3rd November 2020

[8] CM(M) 553/2020 decided on 9th November 2020

[9] 2010 (1) CTC 481

[10] (OMP)(I)(COMM) 459/2020 decided on 23rd November 2020

[11] OMP(I)(COMM) 174/2020 decided on 27th November 2020

[12] OMP(I)(COMM) 255/2020 decided on 1st December 2020

[13] OMP(I)(COMM) 285/2020 decided on 14th December 2020

[14] Arb. P. 208/2020 decided on 6th November 2020

[15] Arb P. 328/2020 decided on 17th November 2020

[16] Arb. P. 421/2020 decided on 20th November 2020

[17] ARBITRATION PETITION (CIVIL) NO(S). 08/2020 decided on 18th December 2020

[18] OMP(T)(COMM) 48/2020 decided on 2nd November 2020

[19] (2019) 15 SCC 682

[20] OMP(T)(COMM) 13/2020 decided on 3rd November 2020

[21] OP(ATE) No. 27/2020 decided on 9th November 2020

[22] LPA-2037-2019 decided on 9th December 2020

[23] OMP(COMM) 536/2020 decided on 18th November 2020

[24] Civil Appeal 8607/2010 decided on 26th November 2020

[25] 2012 (9) SCC 552

[26] OMP(COMM) 546/2020 decided on 7th December 2020

[27] C.A. 4083/2020 decided on 17th December 2020

[28] Interim Application (L) No. 6647 of 2020 in Comm. Arbitration Petition No. 1435 of 2019 decided on 14th December 2020

[29] Comm Arbitration Petition (L) No. 4893/2020 decided on 2nd November 2020

[30] FAO(OS)(COMM) 95/2020 decided on 5th November 2020

[31] Arb A (COMM) 13/2020 decided on 18th November 2020

[32] FAO(OS)(COMM) No. 136/2019 decided on 27th November 2020

[33] FAO(OS) (COMM) 123/2020 decided on 3rd December 2020

[34] FAO(OS)(COMM) No. 68/2020 decided on 4th December 2020

[35] (2020)4SCC234

[36] Civil Appeals No.5247-5248/2007

[37] Arb P. 246/2020 decided on 3rd November 2020

[38] O.P. 499/2020 decided on 18th November 2020

[39] W.P. No. 1699/2019 decided on 6th November 2020


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