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Arbitration Cases Monthly Round-Up: October 2022
Ausaf Ayyub
3 Nov 2022 3:00 AM GMT
Supreme Court: Arbitral Tribunal Must Give Reasons For Fixing Interest Rate; Award Holder Not Entitled To Interest For Delay Caused By It : Supreme Court Case Title: Executive Engineer (R and B) versus Gokul Chandra Kanungo The Supreme Court recently held that a case where the award holder was responsible for delaying the proceedings which led to a huge lapse of time would be a...
Supreme Court:
Case Title: Executive Engineer (R and B) versus Gokul Chandra Kanungo
The Supreme Court recently held that a case where the award holder was responsible for delaying the proceedings which led to a huge lapse of time would be a fit case of exercising power under Article 142 to reduce the rate of interest on the sum of award.
The Court further held that the Arbitration and Conciliation Act casts a duty upon the arbitral tribunal to give reasons as to how it deems the rate of interest to be reasonable. The bench of Justices B.R. Gavai and B.V. Nagarathna held that no interest would be payable for the period on which there were lapses on the part of the award holder.
Case Title: Emaar India Ltd. versus Tarun Aggarwal Projects LLP
The Supreme Court has held that the High Courts while appointing the arbitrator can launch a preliminary inquiry to decide the issue of 'Excepted Matters' when an objection to that effect is taken by the respondent.
The bench of Justices M.R. Shah and Krishna Murari held that if any dispute falls within the 'excepted' category provided in the contract between the parties, then it falls outside the scope of arbitration, therefore, no arbitration can happen with respect to those matters.
High Courts
Andra Pradesh High Court:
Case Title: Nagireddy Srinivasa Rao versus Chinnari Suryanarayana & Ors.
The Andhra Pradesh High Court has held that review of an order/judgment passed under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act) is not permissible.
The Bench of Justice R. Raghunandan Rao held that power of review is the creature of a statute and in absence of any such provision in a statute, an order/judgment cannot be reviewed on its merit unless it is for some procedural irregularity.
Bombay High Court:
Case Title: Kalpataru Limited versus Middle Class Friends Co-operative Housing Society Limited
The Bombay High Court has ruled that where reference to a future contract is made in the tender documents and in the Letter of Intent (LoI) issued to a successful bidder, in such terms which shows that the parties do not intend to be bound until the said contract is signed between them, there is no concluded contract between them which can be specifically enforced.
The Division Bench of Justices R.D. Dhanuka and Kamal Khata added that the terms and conditions of the contract, which were not agreed by and between the parties, cannot be drafted by the Court or the arbitrator for incorporating them in the agreement. The Court ruled that it cannot re-write a contract or suggest any conditions of a contract to be incorporated, by passing an order against the parties.
Calcutta High Court:
Case Title: Md. Wasim & Anr. versus M/s. Bengal Refrigeration and Company & Ors.
The Calcutta High Court, while hearing an application filed under Section 11 of the Arbitration and Conciliation Act, 1996 ('Arbitration Act') for appointment of an arbitrator to resolve the dispute between the parties, held that the bar for instituting a suit or any other proceeding under Section 69 of the Indian Partnership Act, 1932 shall not be applicable to arbitral proceedings under Section 11 of the Arbitration Act.
Case Title: Usha Martin Limited versus Eastern Gases Limited
The Calcutta High Court has held that the arbitrator can indeed take assistance from a third party, including a Chartered Accountant, however, it cannot completely delegate the important function of quantifying the amount of award to any third party.
The Bench of Justice Shekhar B. Saraf held that an arbitral award wherein the arbitrator failed to determine the amount of award and delegated that function to a third party cannot be sustained in the eyes of law. The Court remarked that an arbitrator cannot shun away from its duty and delegate an important function to a third party.
Delhi High Court:
Case Title: Consulting Engineers Group Limited versus National Highways Authority of India (NHAI)
The Delhi High Court has ruled that where an agreement is entered into by the parties by forming a consortium / Joint Venture, one of the members of the consortium cannot separately invoke the arbitration agreement in their individual capacity.
The Single Bench of Justice Mini Pushkarna reiterated that when there is an agreement with a consortium, it is never the intention of the parties that one of the members of the consortium can separately invoke the arbitration clause.
Limitation Period For Invoking Arbitration Cannot Be Extended By Consent: Delhi High Court
Case Title: Extramarks Education India Private Limited versus Shri Ram School & Anr.
The Delhi High Court has ruled that a statement made by the opposite party in the reply to the notice invoking the arbitration clause, giving consent for appointment of an arbitrator, would not extend the limitation period for invoking arbitration, if the claims raised by the claimant are ex-facie time-barred.
The Single Bench of Justice Anup Jairam Bhambhani held that the limitation period for invoking a legal remedy cannot be extended even by consent. The Court ruled that a party may concede a claim at any time, however, it cannot concede the availability of a legal remedy beyond the prescribed period of limitation.
Case Title: Welspun Enterprises Ltd. versus NCC Ltd.
The High Court of Delhi has held that the period of limitation for referring the dispute to arbitration would only commence after the internal dispute resolution mechanism fails.
The bench of Justices Vibhu Bakhru and Amit Mahajan held that if the agreement between the parties provides for a pre-arbitration dispute resolution mechanism, a party cannot be expected to invoke arbitration unless the said mechanism fails, therefore, the limitation period cannot start prior to that.
Case Title: M/s Janta Associates and Co. Ltd. versus Indian Oil Foundation & Anr.
The Delhi High Court has ruled that the dispute whether a claim raised by a party is a 'Notified Claim' under the Contract, which can be referred to arbitration as per the arbitration clause, falls outside the scope of arbitration.
The Single Bench of Justice Vibhu Bakhru observed that as per the arbitration clause contained in the General Conditions of Contract (GCC), only disputes arising out of 'Notified Claims', as included in the Final Bill issued by the claimant, could be referred to arbitration. The Court held that the dispute whether the claims raised by the claimant were 'Notified Claims', falling within the scope of arbitration clause, could not be referred to arbitration.
Case Title: Panasonic India Pvt. Ltd. versus Shah Aircon
The Delhi High Court has held that mere use of the word 'can' in an arbitration clause does not render it ineffective and the intention of the parties to go for arbitration is to be determined on a complete reading of the clause and relevant clauses.
The Bench of Justice Prateek Jalan reiterated that exclusive jurisdiction clause would override a venue clause, therefore, the court which has been conferred the exclusive jurisdiction will decide all arbitration applications arising out of the contract.
Case Title: Ansal Properties & Infrastructure Ltd. & Anr. versus Dowager Maharanis Residential Accommodation Welfare & Amenities Trust & Anr.
The Delhi High Court has ruled that a confirming party to a Contract, who is not bound by the terms of the Contract and on whom no liability is affixed under the Contract, can be referred to arbitration even if he is not a signatory to the arbitration clause contained in the Contract.
The Single Bench of Justice Neena Bansal Krishna held that the fact that the party had signed the Agreement containing an arbitration clause, implied that it had consented to refer all the disputes under the Agreement to arbitration and that the party's implied consent to the arbitration clause could be inferred.
Delhi High Court Delineates Circumstances To Invoke "Group Of Companies" Doctrine
Case Title: Esha Kedia versus Milan R. Parekh & Ors.
The Delhi High Court has ruled that the plea that signatures to the MoU containing an arbitration clause were obtained by threat and coercion, cannot be considered while considering an application under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act) for appointment of the Arbitrator.
The Single Bench of Justice Neena Bansal Krishna held that each Company is a separate legal entity which has separate legal rights and liabilities and hence, an agreement entered into by one of the Companies in a group, cannot be binding on the other members of the same group. However, the Court added that in certain exceptional circumstances, by invoking the concept of "Group of Companies", an arbitration agreement can be binding on the non-signatory Companies or a third party.
Rewriting Commercial Contractual Terms Is Fatal To An Arbitral Award: Delhi High Court
Case Title: Calcom Cement India Ltd. versus Binod Kumar Bawri & Ors.
The Delhi High Court has ruled that where the parties agree to enter into a mutual consultation in the future, for making amendments to an original agreement, the same would only constitute an "agreement to agree", which is not enforceable in law.
The Single Bench of Justice C. Hari Shankar held that the finding of the arbitral tribunal that though the amendment contemplated by the "Amendment to the Share Holders Agreement" was not in fact carried out by the parties, however, the original Share Holders Agreement stood altered, extinguishing the liability of the party, was erroneous in law.
Case Title: Omega Finvest LLP versus Direct News Private Limited
The Delhi High Court has ruled that an arbitration clause contained in a rent agreement would continue to be binding upon the parties, despite the fact that after the expiry of the agreement the parties had entered into a 'Terms of Settlement' and an 'Addendum to Settlement', which did not contain an arbitration clause.
The Single Bench of Justice V. Kameswar Rao observed that the relationship between the parties came into existence on the execution of the rent agreement. Further, it noted that the 'Terms of Settlement' and the 'Addendum to Settlement' executed between the parties did not contain a stipulation that the arbitration clause between them stood rescinded. The Court held that the arbitration clause was binding on the parties and thus, the dispute between the parties arising on the breach of the terms of settlement must be referred to arbitration.
Case Title: Diamond Entertainment Technologies Pvt. Ltd. & Ors. versus Religare Finvest Limited
The Delhi High Court has ruled that the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) provides a remedy in addition to the adjudication under the Arbitration and Conciliation Act, 1996 (A&C Act) and hence, initiation of proceedings under the SARFAESI Act does not bar the arbitration of disputes.
The Single Bench of Justice Neena Bansal Krishna held that whether an arbitral award would operate as a res judicata, barring the second arbitration under the same agreement, must be decided by the Arbitrator since it involves mixed questions of fact and law.
Arbitral Tribunal Cannot Recall The Order Terminating The Arbitral Proceedings: Delhi High Court
Case Title: Vag Educational Services versus Aakash Educational Services Ltd.
The High Court of Delhi has held that once the arbitral tribunal terminates the arbitration proceedings on account of the claimant withdrawing its claims, it cannot recall the order of termination.
The bench of Justice C. Hari Shankar held that once the arbitral proceedings are terminated, the arbitral tribunal becomes Functus Officio and it cannot entertain an application recalling its earlier order by which it terminated the arbitral proceedings.
Case Title: Shriram Transport Finance Co. Ltd. versus Narender Singh
The Delhi High Court has ruled that a notice issued by a party, merely stating its right to initiate arbitral proceedings, which it would subsequently initiate if the payment was not made by the opposite party, is a unilateral communication which does not qualify as a notice under Section 21 of the Arbitration and Conciliation Act, 1996 (A&C Act).
The Division Bench of Justices Rajiv Shakdher and Tara Vitasta Ganju reiterated that the A&C Act does not contemplate unilateral appointment of an arbitrator by one of the parties and that there must be a consensus between the parties for appointment of the arbitrator. The Court added that commencement of arbitral proceedings is incumbent on the receipt of such request or notice, as provided under Section 21 of the A&C Act.
Case Title: Kush Raj Bhatia versus DLF Power and Services Limited
The High Court of Delhi held that place of arbitration would not become the seat of arbitration when the parties have conferred exclusive jurisdiction on a Court other than the seat Court.
The bench of Justice Neena Bansal Krishna held that conferring exclusive jurisdiction, over a Court different from the Court at the place of arbitration, would be a contrary indicia and the place of arbitration would merely be the venue, and only the Court at which exclusive jurisdiction is conferred shall have the jurisdiction to decide all applications arising out of the arbitration between the parties.
Case Title: Prasar Bharti versus National Brain Research Centre & Anr.
The Delhi High Court has ruled that the Administrative Mechanism for Resolution of Disputes (AMRD) is not a substitute for arbitration in cases where there is an arbitration agreement between the parties.
The Single Bench of Justice Anup Jairam Bhambhani observed that the party invoking the arbitration clause fell within the scope and ambit of the AMRD, under the Office Memorandum No. 334774/DoLA/AMRD/2019, dated 31.03.2020, issued by the Ministry of Law & Justice, Department of Legal Affairs. However, the Court held that the AMRD is only a mechanism for possible settlement of disputes between the governmental organizations and not a substitute for arbitration.
Case Title: M/s. Manraj Enterprises versus Union of India
The Delhi High Court has ruled that a claimant cannot support his claims on grounds that were not urged before the arbitral tribunal. However, the Court has held that if a question with respect to the jurisdiction of an arbitral tribunal to award any claim is raised, which does not involve deciding any question of fact, the party challenging the arbitral award is not prohibited from raising such grounds which were not raised before the arbitral tribunal.
The Bench of Justices Vibhu Bakhru and Amit Mahajan reiterated that a contractual clause, which bars payment of interest on Earnest Money Deposit, Security Deposit or on other amounts payable under the Contract, would also bar award of pendente lite interest by the arbitral tribunal.
Madras High Court:
Case Title: M/s. Macro Marvel Projects Ltd. versus J. Vengatesh & Ors.
The Madras High Court has ruled that an arbitral award directing specific performance of a contract, cannot be set aside on the ground that the nature of agreement between the parties was not capable of specific enforcement. The Court added that the said issue related to the construction of an agreement, which cannot be made a ground for interference of the arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act).
The Division Bench of Justices Paresh Upadhyay and D. Bharatha Chakravarthy held that an arbitral award cannot be interfered on the ground that it directed specific performance of a contract which was inequitable in nature and which gave an unfair advantage to a party.
Limitation Qua Counter-Claim Stops On The Date Of Notice Of Arbitration: Madras High Court
Case Title: Chennai Water Desalination Ltd. versus Chennai Metropolitan Water Supply and Sewerage Board
The High Court of Madras has held that the limitation period qua Counter-Claims would be arrested on the date on which the respondent issues the notice of arbitration and the date of filing of counter-claims would be irrelevant.
The bench of Justice M. Sundar further held that limitation is a facet of 'public policy' and an error in limitation clearly leaves an award hit by Section 34(2)(b)(ii) read with Clause (ii) of Explanation 1 thereat.
Case Title: The Union of India versus R.K. Constructions
The Madras High Court has held that the arbitral tribunal can award interest despite there being a contractual prohibition if no pleading as to the prohibition was made by the aggrieved party.
The bench of Justice Senthilkumar Ramamoorthy held that a party cannot rely on a Clause under GCC for challenging the arbitral award for awarding interest contrary to the said clause if it had not taken such an objection before the arbitral tribunal during the arbitral proceeding.
Orissa High Court
Case Title: Abhay Trading Pvt Ltd., Mumbai versus National Aluminum Company Ltd., NALCO, Bhubaneswar
The Orissa High Court has clarified that to make an arbitrator ineligible under Clause 9 of the Seventh Schedule read with Section 12(5) of the Arbitration and Conciliation Act, 1996, the arbitrator must have a close family relationship with a party and in case of companies, he must have a close relation with the person(s) in the management who should be "controlling the company".
Punjab and Haryana High Court:
Case Title: NHAI versus Yashpreet Singh
The Punjab and Haryana High Court has held that execution of an arbitral award passed under the National Highways Act, 1956 is to be filed at the Seat Court and not where the acquired land is situated.
The bench of Justice Raj Mohan Singh held that once the seat of arbitral proceeding is fixed then only the court within whose jurisdiction the seat is situated would have the jurisdiction to decide all the applications arising out of the arbitration.
