Weekly Digest Of Arbitration Cases: April 17 - April 23, 2022

1. Arbitrators Must Say Upfront Their Fees For The Number Of Sittings, Opines Supreme Court During Hearing

Case Title: Oil and Natural Gas Corporation Ltd. versus Afcons Gunanusa

The Supreme Court, while hearing on the issue of fixation of standards for fees for arbitrators, has emphasized on "upfront" fixation of arbitrator's fee.

The Bench of Justices D.Y. Chandrachud, Sanjiv Khanna and Surya Kant was considering the issue regarding the mandatory nature of the 'model' fee scale for arbitrators prescribed under the Fourth Schedule of the Arbitration and Conciliation Act 1996.

2. Arbitral Tribunal Can't Direct Interim Deposit Of Amount In Dispute When Liability To Pay Is Seriously Disputed: Supreme Court

Case Title: Evergreen Land Mark Pvt. Ltd. versus John Tinson and Company Pvt. Ltd. and Anr.

Citation: 2022 LiveLaw (SC) 389

The Supreme Court has held that the Arbitral Tribunal cannot pass an order by way of interim measure under Section 17 of the Arbitration and Conciliation Act, 1996 to deposit the amount involved in the dispute, in a case where the liability to pay such an amount is seriously disputed and the same is yet to be adjudicated upon by the Tribunal.

A Bench comprising of Justices M.R. Shah and B.V. Nagarathna partly allowed an appeal assailing the order of the Delhi High Court, which affirmed the order passed by the Arbitral Tribunal under Section 17 directing the appellant to deposit the entire rental amount even when the liability of the said amount was yet to be considered by it.

High Courts

Allahabad High Court

1. Application For Extension Of Time For Passing The Award Lies Only Before The High Court Which Appointed The Arbitrator: Allahabad High Court

Case Title: Indian Farmers Fertilizers Cooperative Ltd. versus Manish Engineering Enterprises

The Allahabad High Court has held that the Court for the purpose of an application under S. 29A of the A&C Act would only be the High Court that appointed the arbitrator.

The Single Bench of Justice Rohit Ranjan Agarwal held that the Principal Civil Court does not have the jurisdiction to entertain an application for an extension of time. The Court held that Sub-section 6 of Section 29A allows the Court to substitute the arbitrator(s) and conferring this power on the Principal Civil Court would lead to an inconceivable situation where the mandate of an arbitrator appointed by the High Court could be substituted by an inferior Court.

2. Electricity Act Will Not Apply When Contract Is For Supply Of Materials Simpliciter, Court Can Appoint Arbitrator: Allahabad High Court

Case Title: CG Power and Industrial Solutions Ltd. versus U.P. Power Transmission Corporation Ltd.

Citation: 2022 LiveLaw (All) 191

The Allahabad High Court has held that the embargo under S.86 of the Electricity Act which provides that only the Regulatory Commission can appoint an arbitrator does not apply when the agreement is for supply simpliciter and does not have an element of transmission, distribution, and trading of electricity, and that the Court can appoint an arbitrator in such cases.

The Single Bench of Justice Sangeeta Chandra held that a party that has supplied some material for the construction of an electricity sub-station would not fall within the meaning of a licensee or supplier under the Electricity Act, and when the contract is purely commercial arising out of a contract for supply and does not involve an element of trade in electricity, the provisions of Electricity Act are not attracted.

Bombay High Court

1. Court Lacking Jurisdiction To Appoint An Arbitrator, Cannot Do So Based On No Objection By The Opposite Party: Bombay High Court

Case Title: Purushottam s/o Tulsiram Badwaik and Ors. versus Anil s/o Hariram Malewar and Ors

Citation: 2022 LiveLaw (Bom) 146

The Bombay High Court has ruled that a Court cannot appoint an Arbitrator when the only proceeding before it is an application for grant of interim measures under Section 9 of the Arbitration and Conciliation Act, 1996 (A&C Act), solely on the ground that the opposite party has not objected to the appointment of an Arbitrator.

The Single Bench of Justice Manish Pitale held that even if an arbitration clause exists, appointment of an Arbitrator can only take place in accordance with the law. The Court added that merely because no objection is endorsed by the opposite party, a Court will not be foisted with the jurisdiction to appoint an Arbitrator.

2. Court Can't Grant Interim Relief Under Section 9 Of A&C Act, If The Contract Is Determinable: Bombay High Court

Case Title: Chetan Iron LLP versus NRC Ltd.

The Bombay High Court has held that an application for interim relief in the form of specific performance of the contract would not be maintainable when the nature of the contract is determinable.

The Single Bench of Justice G.S. Kulkarni has held that specific performance cannot be granted in respect of an agreement that can be terminated by either of the parties without assigning any reasons. It held that Section 14(1)(c) and Section 41(e) of the Specific Relief Act would be attracted when the interim relief for specific performance is prayed for in respect of an agreement that is in its nature determinable.

Calcutta High Court

 If Original Agreement Contains Arbitration Clause, Subsequent Agreement Extending Just Validity Need Not To Have A Separate Arbitration Clause: Calcutta High Court
Case Title: Sukumar Ray versus M/s Indo-Industrial Services and Ors.

The High Court of Calcutta has held that a subsequent agreement entered into between the parties need not contain a separate arbitration clause if it is made only to extend the validity of the original agreement that contained an arbitration clause.

The Single Bench of Justice Shekhar B. Saraf has held that if the new agreement provides for a specific reference to the terms of the earlier agreement and does not contain any clause other than the extension of the validity of the original agreement then there is no requirement to have an arbitration clause in the new agreement.

Chhattisgarh High Court

1. MSME Facilitation Council Acted As Conciliator Can Also Administer The Arbitration, Bar Under S.80 Of A&C Act Does Not Apply: Chhattisgarh High Court
Case Title: SEW Infrastructure Ltd. versus Micro & Small Enterprises Facilitation Council and Anr.

Citation: 2022 LiveLaw (Chh) 28

The High Court of Chhattisgarh has observed that the bar under S. 80 of the A&C Act which prevents the conciliator from acting as an arbitrator does not apply to the MSME Facilitation Council.

The Single Bench of Justice Rajendra Chandra Singh Samant has observed that provisions of S.80 of the A&C Act cannot override the provision of the MSMED Act to prevent the council from acting as an arbitrator. It has been held that the combined reading of Section 18 and 24 of the MSMED Act, 2006, show that there is an overriding effect over the provisions of Section 80 of the A&C Act, 1996.

2. If The Agreement Stipulates For Reference To Dispute Resolution Committee (DRC), The Claimant Must Exhaust That Remedy Before Seeking Arbitration: Chhattisgarh High Court

Case Title: Devanshi Construction versus CPWD and others

Citation: 2022 LiveLaw (Chh) 29

The High Court of Chhattisgarh has observed that a S. 11 application is not maintainable if the Petitioner before invoking the jurisdiction of the Court has not complied with the pre-condition of referring the dispute to the Dispute Resolution Committee as provided under the Agreement.

The Chief Justice Mr. Arup Kumar Goswami held that the remedy of arbitration would only come into the picture after the Petitioner has successfully exhausted the other dispute resolution remedy provided in the agreement. The Court ruled that failure of the Petitioner to comply with a contractual stipulation would render the application for appointment of an arbitrator as pre-mature.

Delhi High Court

1. Arbitral Tribunal Cannot Award Interest On Interest: Delhi High Court

Case Title: Delhi Development Authority versus Watcon Water Specialists Pvt. Ltd. and Anr.

Citation: 2022 LiveLaw (Del) 347

The High Court of Delhi has observed that the arbitral tribunal cannot award interest on the amount of interest already granted in the award. The Court held that pendente lite interest on the amount of awarded interest amounts to awarding of interest on interest.

The Single Bench of Justice Bakhru has held that when the arbitrator has awarded interest on a substantive claim, allowing interest on the awarded interest is not permissible under the law.

2. Right Of A Party To File Counter Claims Exists Independently Of Any Liberty Granted To It By The Arbitral Tribunal: Delhi High Court

Case Title: National Highways Authority of India versus M/S Abhijeet Angul Sambalpur Toll Road Limited

Citation: 2022 LiveLaw (Del) 351

The Delhi High Court has ruled that any matter on which the Arbitral Tribunal has the jurisdiction to pass a final award can also be the subject of an interim award made by it, and the same can be challenged before the Court under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act).

The Single Bench of Justice C. Hari Shankar held that the right of a party to file counter claims before the Arbitral Tribunal exists independently of any liberty granted to it by the Arbitral Tribunal.
3. S.14 of Arbitration Act Does Not Confer Power On Court To Expunge Any Part Of Arbitral Tribunal's Order: Delhi High Court

Case Title: Bhavanishankar H Sharma versus SRS Private Investment Powai Limited

Citation: 2022 LiveLaw (Del) 359

The Delhi High Court has observed that a petition filed under sec. 14 of the Arbitration and Conciliation Act, 1996 does not confer any power on the Court to expunge any part of the order of the Arbitral Tribunal.

Justice Sanjeev Sachdeva was dealing with a plea filed under sec. 14(2) read with sec. 15 of the Arbitration and Conciliation Act seeking termination of the mandate of the Arbitral Tribunal and also for expunging the adverse and prejudicial remarks contained in the order of the Arbitral Tribunal.

4. Whether A Party Is Entitled To Relief In Arbitral Proceedings In Absence Of Third Party, To Be Decided By The Arbitrator: Delhi High Court

Case Title: Vistrat Real Estates Private Limited versus Asian Hotels North Ltd

The Delhi High Court has ruled that once a valid arbitration agreement exists between the parties, the issue whether a party is entitled to any relief in the arbitral proceedings in the absence of a third party, who is not a party to an agreement, is covered by the Doctrine of Competence-Competence and must be decided by the Arbitrator.

The Single Bench of Justice Mukta Gupta held that whether a party who is not a signatory to an arbitration agreement is required to be impleaded in the arbitral proceedings or not is to be determined by the Arbitrator.

Kerala High Court

Res Judicata Not Applicable To Subsequent Arbitral Proceedings If First Award Was Set Aside Due To Incompetence Of Tribunal: Kerala High Court

Case Title: M/s Bativala and Karani versus K.I. Johny & Anr.

Citation: 2022 LiveLaw (Ker) 187

The Kerala High Court has held that there is no legal impediment for arbitrating parties to initiate fresh proceedings if the district court sets aside an award on any issue not yet concluded in that award. This implies that the principles of res judicata will have only a limited application in such proceedings under the Arbitration and Conciliation Act.

A Division Bench of Justice P.B. Suresh Kumar and Justice C.S Sudha observed that even if the earlier award was one set aside not on any ground affecting the competency of the Tribunal, the subsequent arbitral proceedings are not hit by the principles of res judicata.

Madhya Pradesh High Court

Arbitration Award Can't Be Challenged In Different Jurisdiction Stating That There Was No Arbitration Agreement: Madhya Pradesh High Court

Case Title: Parenteral Drugs (India) Limited versus Gati Kintetsu Express Pvt Ltd

The Madhya Pradesh High Court has ruled that even if a party disputes the existence of an arbitration agreement, an application under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) to set aside an arbitral award cannot be filed in a Court not having jurisdiction under the arbitration agreement, solely on the ground that cause of action arose within its jurisdiction.

The Single Bench of Justice Subodh Abhyankar held that the contention that since there was no arbitration agreement between the parties, therefore, the arbitral award could also be challenged wherever the cause of action arose between the parties, would defeat the provisions of Section 16 and Section 34 of the A&C Act and lead to a chaotic situation.

Madras High Court

Manifest Intention To Arbitrate Is A Sine Qua Non For Filing An Application Under S.9 Before The Commencement Of The Arbitration: Madras High Court

Case Title: M/s Cholamandalam Investment and Finance Company Ltd. versus Harkhabhai Amarshibhai Vaghadiya

The High Court of Madras has held that manifest intention to arbitrate is a sine qua non for filing an application under S. 9 before the commencement of the arbitration and no interim relief can be granted if the intention to arbitrate is missing.

The Single Bench of Justice M. Sundar held that manifest intention to arbitrate is a jurisdictional fact that must precede the application under S. 9 of the Act. It also held that the Court would only appoint the receiver when the applicant is successful in demonstrating that the property is in imminent danger of waste.

Telangana High Court

1. Execution Proceedings Not Maintainable Against Decision Of Court In A Petition Filed Under Section 34 Of The A&C Act: Telangana High Court

Case Title: Mrs. Ragya Bee (deceased) and Others versus M/s. P.S.R. Constructions

The Telangana High Court has held that a Civil Court does not have the power to modify an arbitral award in an application filed under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) to set aside an arbitral award.

The Bench, consisting of Justice P. Naveen Rao and Dr. Justice G. Radha Rani, ruled that execution proceedings are not maintainable with respect to the decision of a Civil Court in a petition filed under Section 34 of the A&C Act.

2. Invocation Of Writ Jurisdiction Against An Order Of Arbitral Tribunal Is Not Normally Permissible: Telangana High Court

Case Title: Union of India, Rep. by Ministry of Railways versus Krishnapatnam Railway Company Limited

The Telangana High Court has ruled that a writ petition under Article 226 of the Constitution of India cannot lie against an order passed by an Arbitral Tribunal in an application filed under Section 16 of the Arbitration and Conciliation Act, 1996 (A&C Act), challenging the jurisdiction of the Arbitral Tribunal, if the challenges raised by the party go into the merits of the claim raised by the claimant before the Arbitral Tribunal and not to the jurisdiction of the Arbitral Tribunal.

The Bench, consisting of Chief Justice Satish Chandra Sharma and Justice A. Rajasheker Reddy, held that a party cannot seek the High Court under Article 226 of the Constitution to traverse into the merits of the claims raised by the claimant in the arbitral proceedings.