Weekly Round-Up of Arbitration Cases : April 24 to April 30, 2022

Group Of Companies Doctrine Can Be Applied To Bind Non Signatory To An Arbitration Agreement: Supreme Court

Case Title: Oil and Natural Gas Corporation Ltd. versus Discovery Enterprises Pvt. Ltd

Citation: 2022 LiveLaw (SC) 416

The Supreme Court, in a judgment delivered on 27^th April 2022, explained the 'Group of companies' doctrine which postulates that an arbitration agreement entered into by a company within a group of companies, can bind its non-signatory affiliates or sister concerns if the circumstances demonstrate a mutual intention of the parties to bind both the signatory and affiliated, non-signatory parties.

The bench comprising Justices DY Chandrachud, Surya Kant and Vikram Nath observed that a non-signatory may be bound by the arbitration agreement where: (i) There exists a group of companies; and (ii) Parties have engaged in conduct or made statements indicating an intention to bind a non-signatory.

Supreme Court To Examine Conflicting Decisions On Retrospective Impact Of 2015 Amendment To Section 11(6)Arbitration Act

Case Title: M/s Shree Vishnu Constructions versus The Engineer in Chief Military Engineering Service

The Supreme Court has decided to examine whether Section 11(6) as amended by the Arbitration & Conciliation (Amendment Act), 2015 ("2015 Amendment Act") would be applicable to arbitral proceedings commenced before the Court prior to when the 2015 Amendment came into force on 23.10.2015, or the cases wherein notice was issued prior to 23.10.2015 or cases where notice invoking arbitration was issued prior to the amendments.

A Division Bench comprising Justices M.R. Shah and B.V. Nagarathna noted that there were divergent views on this issue.

Arbitral Tribunal Can Grant Post Award Interest On Interest Component Included In The Sum Of The Award: Supreme Court

Case Title: Indian Oil Corpn. Ltd versus U.B. Engineering Ltd and Anr.

Citation: 2022 LiveLaw (SC) 409

The Supreme Court has held that the arbitral tribunal can grant post-award interest on the sum of the award which also includes the interest component.

The Bench comprising Justice M.R. Shah and Justice B.V. Nagarathna reiterated that the word sum used under Section 31(7) of the A&C Act includes the interest awarded on the substantive claims, therefore, the post award interest would be on both the amount awarded in respect of the substantive claims and the interest awarded on such claims.

Arbitration Act : Supreme Court Asks High Courts To Submit Particulars of All Pending Section 11(6) Applications

Case Title: M/s Shree Vishnu Constructions versus The Engineer in Chief Military Engineering Service and Ors.

The Supreme Court has asked its Registry to seek particulars of the pending applications under Section 11(6) of the Arbitration and Conciliation Act, 1996 from all High Courts. It noted that the same shall reach the Apex Court by 06.05.2021.

A Bench comprising Justices M.R. Shah and B.V. Nagarathna was hearing a plea assailing an order passed by the Telangana High Court, which had decided to dismiss an application filed under Section 11(6) of the Arbitration Act for appointment of Arbitrator after 4 years.

High Courts

Bombay High Court

Agreement On The Name Of The Arbitrator Would Not Amount To A Waiver Of Notice Under Section 21 Of The A&C Act: Bombay High Court

Case Title: Malvika Rajnikant Mehta & Ors versus JESS Construction

The High Court of Bombay has held that simply because the arbitration agreement provides for the name of the arbitrator, the same would not amount to a waiver of notice under Section 21 of the A&C Act.

The Single Bench of Justice N.J. Jamadar has held that the use of the word "Unless otherwise agreed by the parties" in Section 21 means that the parties can dispense with the requirement of giving a notice of arbitration, however, the mere fact that the parties have named the Arbitrator would not imply that the parties have agreed to waive the requirement of the notice contemplated under Section 21 of the Act.

Merely Because An Application Under Section 7 Of IBC Is Filed, It Is Not An Embargo On The Court Exercising Jurisdiction Under Section11 Of The A&C Act : Bombay High Court

Case Title: Jasani Realty Pvt. Ltd. versus Vijay Corporation

Citation: 2022 LiveLaw (Bom) 162

The High Court of Bombay has held that merely because an application under S.7 of IBC is filed before the adjudicating authority which is pending consideration does not oust the jurisdiction of the High Court to entertain an application filed under S. 11 of the A&C Act.

The Single Bench of Justice G.S. Kulkarni has held that an application filed under S.7 of the IBC creates an erga omnes effect or involves third party rights only after it has been admitted by the adjudicating authority, however, before its admission, there is no embargo on the power of the court to decide on an application filed under S.11 of the A&C Act for the appointment of an arbitrator.

Delhi High Court

The Arbitral Tribunal Cannot Reduce The Liquidated Damages On 'Guess Work': Delhi High Court

Case Title: Haryana Vidyut Prasaran Nigam Ltd. versus M/s Cobra Instalaciones Y. Services S.A. & M/s Shyam Indus Power Solution Pvt. Ltd. (JV)

The High Court of Delhi has held that the arbitral tribunal cannot reduce the liquidated damages on 'guesswork' if it finds that it is a genuine pre-estimate of damages and it is not possible to quantify the damages.

The Single Bench of Justice Bakhru held that once the arbitrator finds that the employer has suffered substantial losses due to the fault of the contractor and the contract provides for liquidated damages which were a genuine pre-estimate of the loss as the quantification of the claim is not possible, then the arbitrator cannot reduce the amount of the damages on guesswork.

Exclusive Jurisdiction Clause Overrides The Seat Clause In An Arbitration Agreement: Delhi High Court

Case Title: Hunch Circle Pvt. Ltd. versus Futuretimes Technology India Pvt. Ltd.

Citation: 2022 LiveLaw (Del) 379

The High Court of Delhi has given primacy to an exclusive jurisdiction clause over the seat clause in an arbitration agreement. The Court held that when a clause confers exclusive jurisdiction on a court other than the seat court, then only the court on which exclusive jurisdiction is conferred shall decide all the applications arising out of the arbitration agreement.

The Single Bench of Justice Hari Shankar held that despite the fixation of the seat of arbitration if the agreement also provides that the court at some other place has been conferred with the jurisdiction to deal with all the matters arising out of the arbitration agreement, then in such a situation the seat clause must surrender to the exclusive jurisdiction clause.

Insufficiency Of The Stamp Duty On The Arbitration Agreement Is A Jurisdictional Issue Under Section 16 Of The A&C Act: Delhi High Court

Case Title: Religare Finvest Ltd versus Asian Satellite Broadcast Pvt. Ltd.

Citation: 2022 LiveLaw (Del) 368

The High Court of Delhi has held that the sufficiency of the stamp duty on the arbitration agreement is a jurisdictional issue under Section 16 of the A&C Act.

The Single Bench of Justice Sanjeev Narula has held that an objection as to the deficiency in the stamp duty shall be decided as a preliminary issue since the inadequately stamped arbitration agreement can neither be taken in evidence nor can be acted upon, therefore, the tribunal should direct the parties to first get the agreement sufficiently stamped before adjudicating rights and obligations under the agreement.

Gujarat High Court

Second Section 9 Application, Relief Can't Be Granted As It Would Amount To Main Relief In Arbitration: Gujarat High Court

Case Title: Time Cinemas and Entertainment Pvt Ltd versus Venus Infrastructure and Developers Pvt Ltd

The Gujarat High Court has ruled that once an application under Section 9 of the Arbitration and Conciliation Act, 1996 (A&C Act) seeking interim measures has been disposed of, a subsequent similar application seeking similar reliefs, which were already dealt with in the earlier proceedings, is not maintainable.

The Bench, consisting of Justices N.V. Anjaria and Samir J. Dave, held that principal relief cannot be granted at the interim stage, and granting interim directions which are in the nature of main relief is not permissible in law.

Karnataka High Court

Arbitration Involving Third Parties And Leading To Other Proceedings - Not Arbitrable: Karnataka High Court

Case Title: South India Biblical Seminary versus Indraprastha Shelters Pvt Ltd and Anr.

The Karnataka High Court has ruled that reference of a dispute to arbitration cannot be allowed if it would lead to splitting up of the cause of action and cause determination on matters which were not contemplated for arbitration.

The Single Bench of Justice B. M. Shyam Prasad held that there cannot be a complete adjudication of the claimant's rights unless the third parties were also heard, therefore, the matter was demonstrably non-arbitrable.

Madras High Court

Arbitral Award Not Hit By Adequacy Facet If Reasons Given Are Not Laconic: Madras High Court

Case Title: The Chief Engineer / Metropolitan Transport Project (Railways), Southern Railway and Anr. versus M/s. Progressive-Aliens

Citation: 2022 LiveLaw (Mad) 189

The Madras High Court has ruled that an arbitral award cannot be set aside on the ground of non-adequacy of reasons as long as the reasons given are not laconic.

The Single Bench of Justice M. Sundar ruled that being 'tersely eloquent' is not alien to judgment writing.

Section 34 Proceedings Are Summary In Nature; Does Not Permit Additional Evidence To Be Filed Unless Absolutely Necessary: Madras High Court

Case Title: M/s. Color Home Developers Pvt. Ltd. versus M/s. Color Castle Owners Society

The High Court of Madras has held that the challenge proceedings under Section 34 of the A&C Act are summary in nature, therefore, the same shall be decided based on the record that was available with the arbitral tribunal and no additional document shall be permitted to be brought in at that stage unless absolutely warranted.

The Single Bench of Justice M. Sundar further held that the court would not allow any additional document under a Section 34 petition if there was nothing that prevented the petitioner from furnishing the same document before the arbitrator.

Arbitration Clause Survives The Termination Of The Underlying Agreement: Madras High Court Reiterates Legal Position

Case Title: Rajasthani Marbles and Anr. versus Na. K. Kumar

Citation: 2022 LiveLaw (Mad) 177

The High Court of Madras has held that the arbitration clause contained in a partnership deed survives the termination of the deed. The Court held that the clause is an independent agreement and outlives the main contract in which it is incorporated.

The Single Bench of Justice M. Sundar reiterated that all the issues related to the arbitrability of the claims shall be decided by the arbitral tribunal unless it is a clear case of deadwood. The Court ruled that Section 11 of A&C Act does not permit elaborate pleadings on the claims.

Telangana High Court

Parties Cannot Be Referred To Arbitration In Absence Of Privity Of Contract: Telangana High Court

Case Title: Gagiri Hari Krishna versus M/s Jasper Industries Pvt Ltd

The Telangana High Court has ruled that in the absence of a privity of contract parties cannot be referred to arbitration.

The Single Bench of Justice Ujjal Bhuyan held that the word 'party' under the Arbitration and Conciliation Act, 1996 (A&C Act) has been given a definite meaning with respect to an arbitration agreement. The Court added that only the disputes between the signatories to an arbitration agreement can be referred to arbitration and a third party cannot be roped into arbitration in the absence of privity of contract.