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Arbitration Cases Monthly Round-Up: September 2022
Ausaf Ayyub
1 Oct 2022 1:00 PM GMT
Supreme Court: Arbitration Clause Has To Be Given Effect Even If It Does Not Expressly State That Decision Of Arbitrator Is Final & Binding On Parties: Supreme Court Case Title: Babanrao Rajaram Pund versus Samarth Builders & Developers Citation: 2022 LiveLaw (SC) 747 The Supreme Court observed that an arbitration clause has to be given effect even if it does not...
Supreme Court:
Case Title: Babanrao Rajaram Pund versus Samarth Builders & Developers
Citation: 2022 LiveLaw (SC) 747
The Supreme Court observed that an arbitration clause has to be given effect even if it does not expressly state that the decision of the arbitrator will be final and binding on the parties.
The deficiency of words in agreement which otherwise fortifies the intention of the parties to arbitrate their disputes, cannot legitimise the annulment of arbitration clause, the bench comprising Justices Surya Kant and Abhay S. Oka observed.
Disputes Related To Tax Concessions Are Not Arbitrable:Supreme Court
Case Title: M/s Shree Enterprise Coal Sales Pvt Ltd. versus Union Of India
The Supreme Court has held that disputes related to tax concessions are not arbitrable.
The division bench of Justice Dhananjaya Y Chandrachud and Justice Hima Kohli has observed that the High Court was in error in holding that the terms of e-auction provided that any dispute was arbitrable. The Apex Court ruled that undoubtedly, a contractual dispute would be amenable to being resolved by arbitration, however, in the present case, the relief related to tax concessions was not of an arbitrable nature.
Case Title: Essar House Private Limited versus Arcellor Mittal Nippon Steel India Limited
The Supreme Court observed that a court exercising power under Section 9 of the Arbitration and Conciliation Act is not strictly bound by provisions of CPC and should not withhold relief on mere technicality. The Court ruled that proof of actual attempts to deal with, remove or dispose of the property with a view to defeat or delay the realisation of an impending Arbitral Award is not imperative for grant of relief under Section 9, and that a strong possibility of diminution of assets would suffice.
High Courts
Allahabad High Court:
Case Title: M/s. Zapdor-Ubc-Abnjv Delhi versus U.O.I.
The Allahabad High Court has ruled that where the parties have failed to specifically mention the seat of arbitration and have participated in the arbitral proceedings at a place without any protest, the parties shall be said to have determined, by their conduct, the said venue of arbitral proceedings as also the seat of arbitration. Hence, the courts at the said place would have exclusive jurisdiction to supervise the arbitral proceedings.
The Single Bench of Justice Sangeeta Chandra held that an order rejecting an application seeking return of the application filed under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) involves no adjudication under Section 34 and hence, the same is not appealable under Section 37 of the A&C Act; therefore, a petition under Article 227 of the Constitution of India is maintainable against the said order.
Bombay High Court:
Accepting Terms And Conditions on Website Containing Arbitration Agreement, Valid: Bombay High Court
Case Title: Ingram Micro India Pvt. Ltd. versus Mohit Raghuram Hegde, Proprietor Creative Infotech
The Bombay High Court has reiterated that reference of a dispute to arbitration can only be refused in cases of "serious allegations of fraud", which is made out when either of the tests propounded by the Apex Court in Avitel Post Studioz Limited & Ors. versus HSBC PI Holdings (Mauritius) Limited (2020), are satisfied.
The Single Bench of Justice G.S. Kulkarni ruled that a declaration made by a party in the KYC executed by it, accepting the terms and conditions provided on the opposite party's website, which included an arbitration agreement, was sufficient for incorporation of an arbitration clause between them.
Case Title: Uttam Energy Ltd. versus M/s. Shivratna Udyog Ltd.
The Bombay High Court has ruled that the jurisdiction and power of the High Court in relation to the appointment of an arbitral tribunal under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act), has not been divested by the Commercial Courts Act, 2015.
The Court added that the term "all applications or appeals arising out of such arbitration", as provided under Section 10 (3) of the Commercial Courts Act, does not take within its ambit the application which is required to be filed under Section 11 (6) of the A&C Act before the High Court for seeking appointment of arbitrator(s).
Case Title: M/s. Magnum Opus IT Consulting Private Limited versus M/s. Artcad Systems
Citation: 2022 LiveLaw (Bom) 354
The Bombay High Court has ruled that the provisions of Section 29A of the Arbitration & Conciliation Act, 1996 (A&C Act), which enables the Court to extend the mandate of the Arbitrator or substitute the Arbitrator, would be applicable to the reference made under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act).
The Single Bench of Justice Anuja Prabhudessa held that since there is no provision under the MSMED Act to extend the mandate of the arbitrator or substitute the arbitrator, hence, if the provisions of Section 29A of the A&C Act are made inapplicable to the reference made under the MSMED Act, it would render the arbitral scheme under the MSMED Act otiose.
Case Title: M/s. TCI Infrastructure Limited & Anr. versus M/s. Kirby Building Systems (Uttaranchal) Private Limited & Anr.
The Bombay High Court has ruled that in an agreement executed by both the parties which contains independent terms and conditions, a mere reference to a proposal containing an arbitration clause which was unilaterally signed by one party, would not amount to an arbitration agreement coming into existence between the parties.
The Single Bench of Justice Manish Pitale held that for an arbitration agreement to come into existence, there must be a document incorporating an arbitration clause or agreement which is executed by both the parties, showing a consensus ad-idem between them.
Reliance On Evidence Filed After Conclusion Of Hearing; Award Is Patently Illegal: Bombay High Court
Case Title: Secretary to the Government of India, Ministry of Shipping, Road Transport and Highways & Anr. versus The Additional Commissioner, Nagpur & Ors.
Citation: 2022 LiveLaw (Bom) 364
The Bombay High Court has ruled that where the only documentary material relied upon by the claimant in the arbitral proceedings, is introduced on record surreptitiously and after the conclusion of hearing, the arbitral award is vitiated on account of patent illegality.
The Single Bench of Justice Rohit B. Deo held that the power of the court under Section 34 (4) of the Arbitration and Conciliation Act, 1996 (A&C Act) to remand the matter back to the arbitrator is discretionary, which must be exercised judiciously and only in appropriate cases. The Court added that where the integrity of the arbitral proceedings was compromised, and crucial evidence was introduced on record after conclusion of hearing, it was not an appropriate case to exercise discretion under Section 34 (4).
Calcutta High Court:
Case Title: Sri Ganesh Chandra and Ors. versus The State of West Bengal and Ors.
The Calcutta High Court has held that an award passed by the statutory arbitrator under the National Highways Act, 1956 where neither the notice of arbitration was served nor the copy of the award was given to the appellants is violative of principles of natural justice.
The Bench of Justices Arijit Banerjee and Kausik Chanda held the availability of an alternative efficacious remedy under Section 34 of the A&C Act cannot be a bar to the maintainability of the writ petition against an award passed violating the principles of natural justice.
Chhattisgarh High Court:
Case Title: M/s. S. Narinder Singh & Company, Engineers & Government Contractor versus South Eastern Coalfields Ltd. and Ors.
The Chhattisgarh High Court recently, while dealing with a matter pertaining an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, held that court can't entertain application for appointment of arbitrator where parties fail to raise dispute in time or avoid in-house dispute resolution mechanism.
Case Title: Union of India versus Bhola Prasad Agrawal & Anr.
The Chhattisgarh High Court has ruled that though the delivery of signed copy of the arbitral award to each of the parties to the arbitral proceedings is sine qua non, however, if the award debtor had already become aware of the award, enabling him to file an application to set aside the award, mere non-delivery of the signed copy cannot be said to cause any prejudice to him.
The Single Bench of Justice Arvind Singh Chandel was dealing with an appeal filed by the applicant under Section 37 of the Arbitration and Conciliation Act, 1996 (A&C Act), against the order of the District Court dismissing the applicant's application to set aside the arbitral award on the ground of limitation.
The Court held that despite the fact that the applicant had not received the signed copy of the award, as required under Section 31(5) of the A&C Act, the applicant had filed an application against the award after a lapse of one year after becoming aware of the award and hence, the lower court had rightly dismissed the application on ground of limitation.
Delhi High Court:
Case Title: Drooshba Fabricators versus Indue Private Limited
The High Court of Delhi has held that non-payment or insufficiency of stamp duty on the underlying agreement cannot render the arbitration clause invalid.
The Bench of Justice Anup Jairam Bhambhani held that the court while exercising jurisdiction under Section 11 of the A&C should impound the unstamped/inadequately stamped agreement and direct the parties to cure the defect before the arbitrator could adjudicate upon such an agreement.
Would Subsequent Agreement Cover Past Transactions?Arbitrator To Decide: Delhi High Court
Case Title: OYO Hotels and Homes Pvt. Ltd. versus Agarwal Packers and Movers Ltd.
The High Court of Delhi has held that while exercising jurisdiction under Section 11 of the A&C Act, the High Court cannot examine an issue as to whether the arbitration clause in a subsequent agreement would govern past transactions of similar nature as it requires detailed consideration of clauses and surrounding circumstances.
The Bench of Justice V. Kameswar Rao held that the limited scope of judicial scrutiny under Section 11 of the Act does not permit the High Court to examine issues that would require an interpretation of the contract, therefore, all such issues are to be referred to arbitrator.
Case Title: Canara Bank versus The State Trading Corporation of India Ltd. & Anr.
The Delhi High Court has ruled that though the claimant is entitled to pre-arbitration interest on the amount of counter-guarantee released in its favour, the Court, in view of the limited scope of judicial review under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act), cannot award interest to the claimant since it would amount to modification of the award.
The Division Bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad observed that though the Supreme Court, in certain cases, has awarded interest to the relevant parties by modifying the arbitral awards, however, the same was undertaken by the Apex Court in exercise of its discretionary powers under Article 142 of the Constitution of India.
Case Title: Geeta Poddar versus Satya Developers Pvt. Ltd.
The High Court of Delhi has held that an award passed by a unilaterally appointed arbitrator is non-est, therefore, it cannot be a bar to the maintainability of a petition under Section 11 of the A&C Act.
The bench of Justice Sanjeev Narula held that passing of an award would not give sanctity to the non-est proceedings and the mere fact that the petitioner did not challenge the unilateral appointment under Section 14 of the Act cannot deprive it of the right to approach the court for appointment of independent arbitrator.
Rejection Of Belated Application For Amendment Of Claim -Not An Interim Award: Delhi High Court
Case Title: Punita Bhardwaj versus Rashmi Juneja
The Delhi High Court has ruled that the order of the Arbitral Tribunal rejecting the application for amendment of statement of claims on the ground that it was filed at a belated stage, does not constitute an interim award and thus, it is not challengeable under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act).
While observing the distinction between the rejection of application for amendment of claims and counter claims on the ground of limitation vis-Ã -vis on the ground that the amendment was sought belatedly, the single bench of Justice Prateek Jalan held that Section 23 (3) of the A&C Act vests discretion in the arbitral tribunal to disallow a party to amend or supplement its pleadings on the ground that the application is filed belatedly.
Case Title: VRS Natarajan versus OYO Hotels and Homes Pvt. Ltd.
The Delhi High Court has reiterated that all interlocutory orders passed by the Arbitral Tribunal are not amenable to challenge under Articles 226 and 227 of the Constitution of India.
The Single Bench of Justice C. Hari Shankar held that there is no statutory or other legal bar under the Arbitration and Conciliation Act, 1996 (A&C Act), including under the proviso to Section 34 (2A) of the A&C Act, against raising the interlocutory order passed by the Arbitrator rejecting the application for amendment of Statement of Claims, as a ground for challenging the final award. Thus, the Court ruled that the said interlocutory order was not challengeable under Article 227.
Case Title: BOLT Technology OU versus Ujoy Technology Pvt. Ltd.
The High Court of Delhi has held that when the plaintiff makes an offer to the defendant to amicably settle the dispute and the defendant refuses the offer then in that circumstance, the requirement of pre-litigation meditation stands satisfied.
The Bench of Justice Prathiba M. Singh while reiterating that pre-litigation mediation as provided under Section 12-A of the CCA is a mandatory provision, held that the conduct of the defendant in refusing to amicably settle the dispute violates the spirit of Section 12A of CCA, therefore, he cannot turn around and object on the ground of non-compliance with the requirement.
Jammu and Kashmir and Ladakh High Court:
Case Title: M/s. Amira Engineers versus Telecommunications Consultants India & Ors.
Citation: 2022 LiveLaw (JKL) 145
The Jammu and Kashmir and Ladakh High Court recently ruled that writs under Article 226 are maintainable for asserting contractual rights against the State or its instrumentalities and the presence of Arbitration clause does not oust the jurisdiction under Article 226 in all cases though it still needs to be decided from case to case as to whether recourse to a public law remedy can justifiably be invoked.
Karnataka High Court:
Case Title: S.R. Ravi versus Karnataka State Tourism Development Corporation
The Karnataka High Court has held that the words "statements of claim and defence" under Section 7(4)(c) of the A&C Act are to be given wider interpretation and reply to a notice of arbitration falls within the section.
The Bench of Justice S.R. Krishna Kumar held in terms of Section 7(4)(c) an arbitration agreement is said to exist if the petitioner has asserted its existence in its notice of arbitration and the respondent has not denied its existence in its reply to the notice.
Case Title: Jaganmayi Builders and Developers Private Limited & Ors. versus Sumanth Reddy & Ors.
The Karnataka High Court has ruled that the issue whether an agreement containing an arbitration clause stood novated with the execution of a second agreement and thus, the arbitration agreement between the parties was not subsisting, cannot be decided at the stage of reference to arbitration under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act), since it involves a detailed enquiry which must be decided by the Arbitrator himself under Section 16 of the A&C Act.
The Single Bench of Justice B. M. Shyam Prasad reiterated that where novation of the contract containing an arbitration clause is alleged, it is unsafe to conclude about the existence of an arbitration agreement at the stage of reference on a prima facie review of facts.
Kerala High Court:
Case Title: M/s. SVS Marketing Sanitary Pvt. Ltd. versus M/s. Bathtouch Metals Pvt. Ltd.
Citation: 2022 LiveLaw (Ker) 493
The Kerala High Court on Thursday reiterated that where a plea of fraud is raised in a dispute, the civil aspect of fraud is arbitrable, unless the very arbitration agreement is found to have been vitiated by fraud.
As to the forum to decide upon the arbitrability of the agreement, Justice Satish Ninan reiterated that the Courts would be bound to refer the parties for adjudication unless it was evident that there was no valid arbitration agreement, nor an arbitrable dispute.
Madras High Court:
Case Title: Innovators Facade Systems Ltd. versus Larsen & Toubro Limited
The Madras High Court has ruled that where the parties have agreed to give only supervisory powers to a third party with respect to the disputes arising between them, and a clause which does not disclose the intention of the parties to give any adjudicatory powers to the third party, does not qualify as an 'arbitration agreement', as defined under Section 2(1)(b) read with Section 7 of the Arbitration and Conciliation Act, 1996 (A&C Act).
The Single Bench of Justice M. Sundar held that the adjudicatory process is an essential feature of arbitration, in contra-distinction to mediation, and hence, when there is nothing to demonstrate that the contracting parties intended to put an adjudicatory mechanism in place, an arbitration agreement cannot be said to exist.
Case Title: Andal Dorairaj & Ors. versus M/s. Rithwik Infor Park Pvt. Ltd. & Ors.
The Madras High Court has ruled that the parties have got the liberty to deviate from the terms with respect to the jurisdiction, as contained in the Arbitration Clause; however, the number of such deviations is limited to only one.
The Single Bench of Justice R.N. Manjula held that waiver of the jurisdiction clause contained in the arbitration agreement can be presumed from the conduct of the parties. The Court added that if the parties have waived the earlier agreement on jurisdiction and have substituted a new jurisdiction by conduct, then, in view of Section 42 of the Arbitration and Conciliation Act, 1996 (A&C Act), the parties cannot make any further diversions with respect to the jurisdiction.
Case Title: M/s. Sunwin Papers versus M/s. Sivadarshini Papers Pvt. Ltd.
Citation: 2022 LiveLaw (Mad) 383
The Madras High Court has ruled that if an order passed by the Arbitral Tribunal under Section 16 of the Arbitration and Conciliation Act, 1996 (A&C Act), of ruling on its own jurisdiction, has the effect of concluding the arbitral proceedings, the same would be challengeable under Section 34 of the A&C Act.
The Single Bench of Justice M. Sundar held that since registration under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) is not compulsory, the order passed by the Arbitral Tribunal accepting the plea of lack of jurisdiction due to the non-registration of the claimant under the MSMED Act, is patently illegal and in conflict with the public policy of India.
Section8 Of A&C Act Falls Outside The Scope Of Section42: Madras High Court Reiterates
Case Title: K. Samad & Anr. versus Reliance Capital Limited
The Madras High Court has reiterated that Section 8 of the Arbitration and Conciliation Act, 1996 (A&C Act) is an exception to Section 42 of the A&C Act. The Court added that if Section 8 is also brought within the ambit of Section 42, it would defeat the sublime philosophy underlining arbitration i.e., party autonomy.
The Single Bench of Justice M. Sundar ruled that a party has no choice of jurisdiction while filing a Section 8 application, and that it is a Hobson's choice for it since it is constrained to file an application under Section 8 in the Civil Court where the civil suit has been filed by the opposite party.
Madhya Pradesh High Court
The Madhya Pradesh High Court recently reprimanded a Commercial court for rejecting a petition filed under section 34 of Arbitration and conciliation Act without assigning proper reasons for such dismissal.
The matter was being heard by Justice Sujoy Paul & Justice Prakash Chandra Gupta:
"Whether grounds so taken in the application filed under Section 34 do fulfill those conditions or not should have been considered by assigning justifiable reasons by the Court below. Para-16 of impugned order, in our opinion is too cryptic, too bald, too shallow and too sketchy. It is not expected from a judicial forum to reject the application without assigning any 'reason' and directly reach to a conclusion".
Orissa High Court:
Arbitrator Can Award Interest On Interest Under The A&C Act: Orrisa High Court
Case Title: Mahanadi Coalfields Ltd. versus B.S. Agarwal, Engineers and Contractors
The Orissa High Court has held that the arbitrator can award separate interest on claims which are in nature of interest for delayed payment.
The Bench of Justice Arindam Sinha held that bar under Section 3 of the Interest Act, 1978 does not apply to interest under the A&C Act. It held that under Section 31(7)(a) of the A&C Act there is no bar on the grant of interest on interest.
Case Title: M/s. Chemflo Industries Pvt. Ltd. versus M/s. KMC Construction Ltd. and Anr.
The Orissa High Court has ruled that the Court cannot entertain a writ petition against an order passed by the lower court admitting the application under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) to set aside the arbitral award, despite the fact that the award debtor had failed to deposit 75% of the awarded amount, as mandated by Section 19 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act).
The Single Bench of Justice Arindam Sinha held that rejection of the demurrer application, filed by the petitioner for violation of the provisions of Section 19 of the MSMED Act, can be taken as a ground of appeal under Section 37 of the A&C Act against the order passed in a Section 34 application. Hence, the Court ruled that it cannot be considered by the Court as a rarest of the rare case so as to exercise judicial review.
Case Title: M/s. Jhar Mining Infra Private Limited versus CMD, managing Coalfields Ltd. & Ors.
The Orissa High Court has ruled that where a tenderer/bidder is declared as a 'Preferred Bidder', the arbitration clause incorporated in the tender document can be invoked by the bidder, even if no tender is awarded to it and no formal contract is concluded between the parties.
The Court held that the arbitration clause contained in the tender document, which provided for referring the disputes which arose prior to the execution of the contract to arbitration, is an arbitration agreement in terms of Section 7 of the Arbitration and Conciliation Act, 1996 (A&C Act).
Patna High Court:
Case Title: The Bihar State Text Book Publishing Corporation Ltd. versus M/s Patna Offset Press
The Patna High Court has ruled that the order passed by the High Court in a writ petition, recording the consent of the parties to appoint a specified Arbitrator while referring them to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 (A&C Act), cannot be said to be an order appointing an Arbitrator.
The Single Bench of Chief Justice Sanjay Karol held that once the party has filed an application under Section 14 of the A&C Act, to decide on the termination of the mandate of the arbitrator, the only remedy available to the party was to assail the order passed on the said application and thus, the petition under Section 11(6) of the A&C Act seeking appointment of an arbitrator would be barred by res judicata.
Rajasthan High Court:
Case Title: Surya Wires Private Limited versus Rajasthan Skills and Livelihoods Development Corporation
The Rajasthan High Court has reiterated that any challenge against an arbitrator on the grounds contained in the Fifth Schedule of the Arbitration and Conciliation Act, 1996 (A&C Act), which give rise to justifiable doubts regarding his independence or impartiality, can be gone into by the Court only after the Arbitral Tribunal has given an award.
Telangana High Court:
Case Title: M/s Sawera Township India Private Limited versus Faisal Bin Tirif
The Telangana High Court has ruled that in an application filed under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act), the Court cannot, on the ground of collusion, refuse to appoint the arbitrator as specified in the arbitration clause and appoint a substitute arbitrator.
The Single Bench of Justice K. Lakshman held that the allegations regarding any collusion between the specified arbitrator and the opposite party cannot be decided in an application filed under Section 11 of the A&C Act. The Court added that a party cannot seek appointment of a substitute arbitrator on mere allegations of collusion.
Uttarakhand High Court:
Case Title: Yukti Construction Pvt. Ltd versus Mrs. Asha and Ors.
The Uttarakhand High Court recently observed that an arbitration agreement does not require registration under the Registration Act.
Relying on the Supreme Court's findings in SMS Tea Estates Private Limited v. Chandmari Tea Company Private Limited, (2011) 14 SCC 66, a bench comprising of Chief Justice Vipin Sanghi reiterated that having regard to the proviso to Section 49 of Registration Act read with Section 16(1)(a) of the Act, an arbitration agreement in an unregistered but compulsorily registrable document can be acted upon and enforced for the purpose of dispute resolution by arbitration.
The Single Bench of Justice Pankaj Bhandari ruled that where the arbitration clause provided for referring the disputes to the Empowered Committee of Ministry of Rural Development, the Empowered Committee cannot be said to be an interested party, ineligible to be constituted as an Arbitral Tribunal under Section 12(5) of the A&C Act, since it was not a party to the agreement between the Rajasthan Skills and Livelihoods Development Corporation and the applicant.
