Arbitration Cases Monthly Round-Up: February 2023
Ausaf Ayyub
3 March 2023 4:11 AM GMT
High Courts Bombay High Court: Court Not Powerless To Appoint Appropriate Arbitral Tribunal, Even If Party Forfeits Its Right Under Arbitration Clause: Bombay High Court Case Title: PSP Projects Limited versus Bhiwandi Nizampur City Municipal Corp The Bombay High Court has ruled that even if a party’s right to appoint its nominee in the Arbitral Tribunal as per the...
High Courts
Bombay High Court:
Case Title: PSP Projects Limited versus Bhiwandi Nizampur City Municipal Corp
The Bombay High Court has ruled that even if a party’s right to appoint its nominee in the Arbitral Tribunal as per the arbitration clause, is forfeited because it failed to exercise its right within the statutory period after receiving the notice invoking arbitration, it would not render the Court powerless to appoint an appropriate Arbitral Tribunal, after considering the nature of the disputes.
SPA Which Gives Option To Resell Shares To Vendor, Not A ‘Forward Contract’: Bombay High Court
Case Title: Percept Finserve Pvt Ltd & Anr. versus Edelweiss Financial Services Ltd
The Bombay High Court has ruled that a Share Purchase Agreement (SPA), which gives an option to the purchaser to require the seller/vendor to repurchase the shares on the occurrence of a contingency, does not constitute a ‘forward contract’ and thus, the same is enforceable.
Upholding the order of the Single Judge where it had set aside the arbitral award, the Division Bench held that merely because the contract contains a “put option” in respect of securities, the contract cannot be termed as a trade or contract in derivatives. Thus, the Court held that the option contemplated under the SPA was not prohibited in law.
Case Title: BST Textile Mills Pvt Ltd versus The Cotton Corporation of India Ltd
The Bombay High Court has ruled that the arbitrator cannot be said to have committed a jurisdictional error by allowing a consolidated Statement of Claims (SoC), without the consent of the opposite party/ award debtor, in view of the fact that specific claims pertaining to each of the nine contracts were placed distinctly in the Statement of Claims and the award debtor also chose to file a consolidated counter claim pertaining to all the nine contracts.
Case Title: Quess Corp versus Netcore Cloud Pvt Ltd
The Bombay High Court has ruled that there is no clash of interest involved where the Arbitrator had acted as a counsel and represented the Advocate representing the opposite party, in another unrelated matter for some other client.
The bench of Justice Bharati Dangre concluded that the disqualification connection, contemplated under Item 3 of Schedule VII of the Arbitration and Conciliation Act, 1996 (A&C Act), must be between the Arbitrator and the litigant. Thus, where the Arbitrator had accepted a brief from the respondent’s counsel for some other client, the same will not amount to per se disqualification or ineligibility, the Court ruled.
Case Title: Kalpesh Shantikumar Mehta & Ors. versus NKGSB Co-op. Bank Ltd & Anr.
The Bombay High Court has ruled that reference of more than two arbitrations to the same arbitrator under Section 84 of the Multi-State Cooperative Societies Act, 2002 (MSCS Act), involving the same Co-operative Bank, would not fall foul of clause 22 of Schedule V of the Arbitration and Conciliation Act, 1996 (A&C Act).
Noting that in the statutory arbitration contemplated under the MSCS Act, the arbitrator is appointed by the Central Registrar/Commissioner of Cooperative Societies under Section 84 (4) of the MSCS Act, the bench of Justice Bharati Dangre held that the embargo created under clause 22 comes into picture only when the Arbitrator is appointed by one of the parties or an affiliate of one of the parties.
Calcutta High court:
Case Title: Jhajjar K.T. Transco Pvt Ltd versus Oriental Insurance Company
The High Court of Calcutta has held that the jurisdiction of the Court under Section 11 of the A&C Act is limited to examination of the existence of the arbitration clause and determination of an arbitrable dispute.
The bench of Justice Shekhar B. Saraf relied on the judgment in Mayavati Trading v. Pradyvat Deb Burman (2019) to hold that a Court exercising powers under Section 11 of the A&C Act cannot determine the question of ‘accord and satisfaction’ in view of Section 11(6A) of the Act.
Case Title: Jagrati Trade Services Pvt Ltd versus Deepak Bhargava & Ors.
The Calcutta High Court has ruled that, post the Amendment Act of 2015, the powers of the Arbitrator to grant interim measures under Section 17 of the Arbitration and Conciliation Act, 1996 (A&C Act), is pari passu with the powers of the Court under Section 9 of the Act.
The bench of Justice Shekhar B. Saraf remarked that the test applicable for granting interim protection under Section 9 would also apply to test the validity of an order passed by the Arbitrator under Section 17.
Case Title: McLeod Russel India Limited versus Aditya Birla Finance Limited
The High Court of Calcutta has held that filing of pleadings before the arbitral tribunal and agreeing to the jurisdiction of the tribunal therein satisfies the requirement of ‘express agreement’ given under the proviso to Section 12(5) of the Act.
The bench of Justice Moushumi Bhattacharya held that if a party, which was aware of the position of law qua the invalidity of the unilateral appointment of arbitrator, participates in the arbitral proceedings for a considerable period of time and obtains the benefit of the order of the tribunal, it cannot later turn around and challenge the appointment of the arbitrator.
Case Title: McLeod Russel India Limited versus Aditya Birla Finance Limited
The High Court of Calcutta has held that all unilateral appointments of arbitrator are not invalid per se unless the arbitrator’s relationship falls within the Seventh Schedule to the A&C Act.
The bench of Justice Moushumi Bhattacharya distinguished between an arbitration clause that permits unilateral appointment of arbitrator and a clause that provides for arbitration before some person in charge of one of the parties or right of that person to delegate his function to a third party. The Court held that only in the latter scenario the persona designata would not just himself be ineligible to act as an arbitrator but would also be precluded from appointing someone else on its behalf.
Case Title: Sarada Construction versus Bhupendra Pramanik
The High Court of Calcutta that the A&C Act is a complete code in itself and it does not contain any provision for the review of an order passed under Section 11 of the Act.
The Bench of Justice Shekhar B. Saraf held that power of review is a creature of statute and unlike the Supreme Court which has inherent power of review under Article 137 of the Constitution of India, no such power is conferred on the High Courts by the Constitution, therefore, it cannot review its order passed under Section 11 of the Act.
Delhi High Court:
Delhi High Court Upholds Use Of Rule Of Contra Proferentem By Arbitrator While Interpreting Contract
Case Title: Flowmore Ltd versus Skipper Ltd
The Delhi High Court has ruled that, if the arbitrator uses a contract executed between the parties to determine a dispute, the clauses of the contract should, in principle, be construed contra proferentem, i.e., the clauses should be interpreted against the party that drafted it.
The bench of Justice Chandra Dhari Singh remarked that the rule of contra proferentem can be regarded as a ‘general canon’ of interpretation that exists independently of national legal systems.
ONGC V. Afcons By SC Will Not Affect Fee Already Fixed By Arbitration Tribunal: Delhi High Court
Case Title: NHAI versus IJM Gayatri JV
The Supreme Court in ONGC v. Afcons, 2022 LiveLaw (SC) 723 has held that maximum fees that an arbitrator can charge on a claim is Rs. 30 Lakhs.
The High Court of Delhi was considering a situation wherein the fees was fixed in terms of the earlier law. The petitioner challenged the fees so fixed as violative of the Supreme Court order.
The bench of Justice Neena Bansal Krishna held that the maximum amount that an arbitrator could charge was Rs. 49, 87, 500/- in terms of the judgment of the Delhi High Court in Rail Vikas Nigam Ltd. v. Simplex Infrastructure Ltd (2020) before the Supreme Court reduced this amount to Rs. 30 Lakhs in its judgement in ONGC, however, the Supreme Court had not stayed the judgement in Rail Vikas, therefore, it was the prevailing law before the judgment in ONGC was delivered.
Case Title: Ozone Research & Applications (I) Pvt Ltd versus Ahluwalia Contracts (India) Ltd
The Delhi High Court has ruled that the ‘Seat’ of arbitration would be the place where the Facilitation Council under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) has conducted the arbitral proceedings as per the provisions of Section 18(4) of the MSMED Act.
The bench of Justice Prateek Jalan remarked that since there was no arbitration agreement between the parties containing a jurisdiction clause, and since the Facilitation Council under the MSMED Act had assumed jurisdiction and rendered the arbitral award in Nagpur where the supplier was located, in view of Section 18(4), therefore, the seat of arbitration was in Nagpur.
Case Title: M/s Raj Chawla and Co. Stock & Share Brokers versus M/s Nine Media & Information Services Ltd. & Anr.
The Delhi High Court has reiterated that since the the amended provisions of Section 29A (1) of the Arbitration and Conciliation Act, 1996 (A&C Act) are essentially procedural in character, they would apply even to arbitrations pending on the date the amended provision was brought into force.
The bench of Justice Yashwant Varma remarked that talks of settlement between the parties once the Arbitrator enters upon reference, would not stop the limitation period prescribed under Section 29A for passing an arbitral award.
Case Title: GMR Pochanpalli Expressways Limited versus NHAI
The High Court of Delhi has held that the Court cannot grant a relief which is final in nature in an application under Section 9 of the A&C Act.
The bench of Justice Chandra Dhari Singh held that relief contemplated under Section 9 of the Act is only interim in nature i.e., ‘in the intervening time’ or ‘provisional’ and it has to be in aid of the enforcement of the award and subject to the final relief given in the award. The Court refused to injunct the respondent from withholding the payment on account of alleged delay as the Court observed that the relief claimed by the petitioner was final in nature as it was neither subject to any award or in aid of any enforcement.
The Court further reiterated that the court cannot either enforce an award, in the garb of interim relief, under Section 9 of the Act or grant an interim relief which is beyond the reliefs granted under the award.
Case Title: Pink City Expressways Pvt Ltd versus Aaron Security & Services Pvt Ltd
The Delhi High Court has upheld the arbitral reference made to a common Sole Arbitrator as well as a common State of Claims filed before the Arbitral Tribunal, with respect to a dispute arising under two separate agreements, considering the fact that the agreements were closely interlinked and contained identical Arbitration Clauses, stipulating same conditions.
The bench of Justice Prathiba M. Singh remarked that the services the respondent/claimant was providing under the two agreements, were connected services. Considering the ‘allied nature’ of the two contracts and the common conditions of the Arbitration Clauses, the filing of a common claim petition before the Arbitral Tribunal cannot be faulted with, the Court said.
Case Title: Delhi State Industrial and Infrastructure Development Corporation versus Sukumar Chand Jain
The High Court of Delhi has held that a no-claim certificate is given under coercion if it was in a pre-printed form and a pre-condition to the release of payment under the final bill.
The bench of Justices Vibhu Bakhru and Amit Mahajan held that the dispute between the parties cannot be said to be settled by accord and satisfaction on account of no-claim certificate given by the contractor, if the employer, as a matter of practice, requires all the contractors to furnish a pre-printed no-claim certificate as a pre-condition to release of payment under the final bill
Agreement To Explore Conciliation Before Arbitration, Only Directory In Nature: Delhi High Court
Case Title: M/s Oasis Projects Ltd versus Managing Director, National Highway and Infrastructure Development Corporation Ltd (NHIDCL)
The Delhi High Court has ruled that the agreement between the parties to explore conciliation before resorting to arbitration, is not mandatory in nature. The Court took note that as per Section 77 of the Arbitration and Conciliation Act, 1996 (A&C Act), in cases of urgency, arbitral proceedings can be initiated even when conciliation proceedings are pending for preserving the party’s rights.
The bench of Justice Navin Chawla concluded that, in terms of Section 77, the petitioner was justified in initiating arbitration for preserving its rights, without going through conciliation, despite the fact that the arbitration clause provided for prior conciliation.
Case Title: Kidde India Ltd versus National Thermal Power Corporation Ltd
The Delhi High Court has ruled that the limitation period within which a party is required to approach the court for seeking constitution of the arbitral tribunal, cannot be conflated with the limitation period for invoking the arbitration agreement. Thus, any delay by the party in taking further steps for constitution of an arbitral tribunal, will not render the party’s substantive claims as barred by limitation.
Sec 34 Petition Is Not Non-Est, Even If Award Is Not Filed In A Separate Folder: Delhi High Court
Case Title: Ambrosia Corner House Pvt Ltd versus Hangro S Foods
The Delhi High Court has ruled that the error committed by the petitioner/award debtor in not filing the documents, including the copy of the Arbitral Award challenged by it, in a separate e-folder, as prescribed in the Delhi High Court (Original Side) Rules, 2018, would not render the petition filed by it under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) as non-est.
The bench of Justice Navin Chawla remarked that a more liberal approach must be adopted by the Court while considering whether the filing should be treated as ‘non-est.’
Case Title: HP Cotton Textile Mills Ltd versus Oriental Insurance Company Ltd
The Delhi High Court has ruled that appeal against the order of the High Court, passed under Section 36 of the Arbitration and Conciliation Act, 1996 (A&C Act), is not maintainable under Section 13(1A) of the Commercial Courts Act, 2015, since it is not one of the orders enumerated under Order XLIII of the Code of Civil Procedure, 1908 (CPC), from which an appeal would lie.
Case Title: University of Delhi versus M/s Kalra Electricals
The Delhi High Court has ruled that information and clarification sought by the Arbitral Tribunal on matters and dispute arising under other contracts, which do not form a part of the arbitral reference, will not alone make them the subject of arbitral proceedings.
The bench of Justice Anup Jairam Bhambhani remarked that the letter issued by the Arbitrator, seeking information and clarification as to whether payments were released to the claimant under other contracts, which were not inter-related with the contract under consideration, was neither a direction nor an order made by the Arbitrator, and it was merely an effort to seek clarification on certain matters.
Case Title: Delhi Airport Metro Express Private Limited versus Delhi Metro Rail Corporation Ltd
The Delhi High Court on Friday issued notice to the Union of India and Delhi Government in the ongoing case concerning payment of unpaid dues of arbitral award to Reliance Infrastructure-promoted Delhi Airport Metro Express Private Ltd (DAMEPL) by Delhi Metro Rail Corporation (DMRC).
Justice Yashwant Varma impleaded Union of India through Ministry of Housing and Urban Affairs and Delhi Government through its Chief Secretary in DAMEPL’s petition seeking enforcement of the arbitration award dated May 11, 2017.
Case Title: Bharat Heavy Electricals Ltd versus M/s Zillion Infraprojects Pvt Ltd
The Delhi High Court has ruled that the Arbitral Tribunal has the power under Section 31(6) of the Arbitration and Conciliation Act, 1996 (A&C Act) to pass an interim Award on the basis of the admissions made by a party before the Interim Resolution Professional (IRP) in the CIRP proceedings initiated under the Insolvency and Bankruptcy Code, 2016 (IBC) against the opposite party.
Dismissing the argument of the appellant that the admissions made before the IRP cannot be treated as an admission in the arbitral proceedings, the bench of Justices Suresh Kumar Kait and Neena Bansal Krishna remarked that Order XII Rule 6 of the Code of Civil Procedure, 1908 (CPC) is couched in the widest terms and the same permits considering the admissions made in the pleadings before the Court or “otherwise”.
Case Title: M/s. Indiabulls Housing Finance Ltd & Anr. versus Shipra Estate Ltd
The Delhi High Court has ruled that the Arbitrator has no jurisdiction to set aside the sale notice issued by the secured creditor under Section 13(4) of the SARFAESI Act, 2002, seeking to enforce its “security interest”.
The bench of Justice Anup Jairam Bhambhani remarked that the matter of a notice issued under Section 13(4) of the SARFAESI Act is not arbitrable at all, and thus, the Arbitrator does not have the option to exercise any discretion under Section 17 of the Arbitration and Conciliation Act, 1996 (A&C Act) in relation to the said matter.
Since a specific right is vested in a “secured creditor” to enforce a “security interest”, by issuance of a sale notice under Section 13(4) of the SARFAESI Act, that specific right cannot be ousted by an order made by an arbitral tribunal, the Court held.
Case Title: D Narasimha Rao & Ors versus Revanta Multi State CGHS Ltd & Anr.
The Delhi High Court has held that the Central Registrar is not divested of its authority and jurisdiction to appoint an Arbitral Tribunal in terms of Section 84 (4) of the Multi-State Cooperative Societies Act, 2002 (MSCS Act), when a dispute pertaining to a multi-state cooperative society is sought to be referred to arbitration under Section 84 of the Act.
The bench of Justice Yashwant Varma remarked that as per the direction issued by the Central Government under the Notification dated 24th February, 2003, the Registrar of Co-operative Societies of States is contemporaneously empowered to refer matters to arbitration, however, the same does not denude the jurisdiction of the Central Registrar.
Thus, the Court concluded that initiation of proceedings for constitution of an Arbitral Tribunal by the petitioner, by issuing a notice to the Central Registrar, did not suffer from a manifest illegality.
Case Title: Sunil Kumar Chandra versus M/s Spire Techpark Pvt Ltd
The Delhi High Court has reiterated that where there is any inconsistency between the two clauses of a same instrument/document, the former clause shall prevail over the latter one.
The bench of Justice Chandra Dhari Singh concluded that the former clause (arbitration clause), under which the parties agreed to resolve “any” dispute arising under the agreement through arbitration, shall have a prevailing effect over the latter clause, which was not clear as no clear and unambiguous meaning was given regarding what kind of disputes shall be referred to the courts in the specified jurisdiction.
Case Title: Asad Mueed & Anr versus Hammad Ahmed & Ors.
The Delhi High Court has ruled that the power of the Arbitral Tribunal to grant interim measures under Section 17 of the Arbitration and Conciliation Act, 1996 (A&C Act), is not inferior to the power of a court under Section 9.
The bench of Justice Yashwant Varma remarked that though Section 9(3) of the A&C Act is not an ouster clause, it still requires the court to consider whether its intervention is warranted after the Arbitral Tribunal has been constituted and is in seisin of the dispute.
Case Title: Shapoorji Pallonji and Company Private Limited versus Union of India
The Delhi High Court has reiterated that when a person has itself become ineligible by operation of law to act as an arbitrator, it cannot nominate another person to act as arbitrator.
The bench of Justice Yashwant Varma was dealing with an arbitration clause which exclusively empowered the Chief Project Manager to appoint the arbitrator from a panel which was itself maintained by it.
The Court observed that the arbitration clause did not bestow a right on any of the parties to the dispute to independently choose their nominee from the panel maintained by the Chief Project Manager. Further, the composition of the panel itself was left to the sole discretion of the Chief Project Manager.
The bench thus concluded that the constitution of the Arbitral Tribunal, as contemplated by the arbitration clause, was clearly tainted by fundamental illegality.
Case Title: New Delhi Municipal Council versus Decor India Pvt Ltd
The Delhi High Court has reiterated that though it is permissible to introduce an amendment in a petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act), however, new grounds of challenge containing new material/ facts cannot be introduced when the said grounds were neither raised in the original petition under Section 34 nor before the Arbitral Tribunal.
While dismissing the application seeking to raise additional grounds to challenge the arbitral award, the bench of Justice Yashwant Varma remarked that the proposed amendments sought to be made by the petitioner, NDMC, failed to meet the tests propounded by the Supreme Court in State of Maharashtra vs. Hindustan Construction Co. Ltd (2010), i.e., the amendments being warranted due to existence of very peculiar circumstances of the case and in the interest of justice.
Case Title: Tejpal Singh versus Surinder Kumar Dewan
The Delhi High Court has ruled that since the party had failed to challenge the termination of the Collaboration Agreement in the first round of arbitral proceedings, the demolition of the structure built by it under the said Collaboration Agreement would not give it a fresh cause of action.
The bench of Justice Navin Chawla remarked that the cause of action for challenging the termination of the Collaboration Agreement and/or for claiming any relief under the said Collaboration Agreement, was available to the petitioner at the stage of the earlier arbitral proceedings.
Gujarat High Court:
Case Title: Pahal Engineers versus Gujarat Water Supply and Sewerage Board
The Gujarat High Court has ruled that failure to abide by the procedural laws would not be fatal to the arbitral proceedings and thus, the Arbitral Tribunal was not justified in dismissing the claim petition/ statement of claims solely on the ground that it was not verified as contemplated under Order VI Rule 15 of the Code of Civil Procedure, 1908 (CPC).
Case Title: Indian Bank (erstwhile Allahabad Bank) versus Morris Samuel Christian
The Gujarat High Court has ruled that merely because the borrower is an MSME, it would not be governed by the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), including the arbitral mechanism envisaged under the said Act.
The bench of Justice Biren Vaishnav observed that though, as per the mechanism provided under the MSMED Act, the dispute between the supplier and the buyer of goods or services may be adjudicated through arbitration in accordance with the Arbitration and Conciliation Act, 1996 (A&C Act), however, the same does not contemplate adjudication of disputes arising from a loan transaction, which is the subject matter of a special Act such as the SARFAESI Act.
Kerala High Court:
Case Title: Southern Railway versus M.R. Ramakrishnan
The Kerala High Court recently held that the Court situated within the territorial jurisdiction of the seat or place of arbitration alone will have the jurisdiction to entertain an application filed under Section 34 of the Arbitration and Conciliation Act, 1996.
A single bench of Justice K Babu observed that the term “subject-matter of arbitration” in the definition of “court” in Section 2(1)(e) of the Act, refers to the Court having supervisory control over the arbitration proceedings. This would mean the Court where the seat or place of arbitration is will have jurisdiction to entertain a challenge to the arbitral award under Section 34 of the Act.
Madras High Court:
Case Title: M/s. Transtonnelstroy – Afcons (JV) versus M/s.Chennai Metro Rail Ltd
While granting relief to the Chennai Metro Rail Limited (CMRL), the Madras High Court has noted that while an arbitral tribunal, which consists of experts in the field, is at liberty to apply its own knowledge and understanding to arrive at a conclusion, it should always allow the parties involved to present their case.
Case Title: Hina Suneet Sharma & Anr. versus M/s Nissan Renault Financial Services India Pvt Ltd
The Madras High Court has ruled that even if a party has failed to challenge the unilateral appointment of the Arbitrator under Section 13 of the Arbitration and Conciliation Act, 1996 (A&C Act) before the Arbitral Tribunal, it would not take away its right to challenge the award under Section 34 of the A&C Act on the ground that the Arbitrator was unilaterally appointed.
The bench of Justice Krishnan Ramasamy reiterated that if any award is passed in violation of the provisions of the A&C Act, the same would be against the public policy of India.
Telangana High Court:
Case Title: Ranganath Properties Pvt. Ltd. versus Phoenix Tech Zone Pvt. Ltd. Arbitration Application No. 72 of 2022
The High Court of Telangana has held that arbitration under Section 42 of the Special Economic Zones Act, 2005 would override a contractual arbitration clause entered into between the parties.
The bench of Chief Justice Ujjal Bhuyan held that Special Economic Zones Act, 2005 is a special legislation and Sections 42 and 51 of the Act gives it an overriding act over other acts and Section 42 of the Act provides for statutory arbitration wherein the arbitrator would be appointed by the Central Government, therefore, it would override the provisions of the Arbitration and Conciliation Act and application under Section 11 of the A&C Act for the appointment of the arbitrator would not be maintainable.
The Court held that when the special legislation provides for a mechanism for the appointment of the arbitrator, the same has to be followed and recourse to Section 11 would be a defect of jurisdiction that cannot be cured even by the consent of the parties, thus, the petition for the appointment of the arbitrator would not be maintainable merely because the parties had initially subjected themselves to the contractual arbitration clause.
