Arbitration Cases Monthly Round-Up: December 2022
Ausaf Ayyub
2 Jan 2023 8:00 AM GMT
High courts Allahabad High Court: Section 9 Application, Against Cashing Unconditional BG; Court To Consider Only Terms Of BG: Allahabad High CourtCase Title: U.P. Expressways Industrial Development Authority versus M/s. Sahakar Global Ltd.The Allahabad High Court has ruled that while dealing with an application under Section 9 of the Arbitration and Conciliation Act, 1996...
High courts
Allahabad High Court:
Section 9 Application, Against Cashing Unconditional BG; Court To Consider Only Terms Of BG: Allahabad High Court
Case Title: U.P. Expressways Industrial Development Authority versus M/s. Sahakar Global Ltd.
The Allahabad High Court has ruled that while dealing with an application under Section 9 of the Arbitration and Conciliation Act, 1996 (A&C Act), seeking to restrain the invocation or encashment of the Bank Guarantee, the Court is only required to consider the terms of the Bank Guarantee Agreement and not the conditions contained in the main Contract between the parties, in terms of which the guarantee was furnished.
The bench of Justices Attau Rahman Masoodi and Om Prakash Shukla held that while dealing with an application under Section 9, the Court is not required to interpret the contract and/or form a prima facie opinion as to whether the beneficiary of the Bank Guarantee has wrongfully invoked the Bank Guarantee. The Court ruled that such an exercise can only be done in a substantive proceeding before the Arbitral Tribunal.
Bombay High Court:
Case Title: Naresh Kanayalal Rajwani & Ors. versus Kotak Mahindra Bank Limited & Anr.
The Bombay High Court has ruled that merely because a party participated in the arbitration proceedings, it is not disentitled from challenging the arbitral award on the ground that the arbitration proceedings were vitiated due to the unilateral appointment of the Arbitrator by the opposite party, falling foul of Section 12(5) read with the Seventh Schedule of the Arbitration and Conciliation Act, 1996 (A&C Act).
The bench of Justice Manish Pitale held that Section 12(5) of the A&C Act can be waived only in terms of the proviso to Section 12(5).
Case Title: M/s. Mehra & Company versus State of Maharashtra
The Bombay High Court has ruled that the power of appointment of arbitrator by the High Court under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act), cannot be deemed to have a precedential value. However, the Court held that the same cannot be a reason to completely ignore the interpretation placed by the High Court in its previous decisions, in respect of the identical clauses contained in the agreement, while dealing with an application under Section 11.
The single bench of Justice Sandeep V. Marne ruled that where a clause merely provides for departmental remedies to a contractor for faster resolution of disputes, the same would not constitute an arbitration agreement.
Case Title: M/s Skoda Auto Volkswagen India Private Limited versus M/s Commercial Auto Products Private Limited
The Bombay High Court has ruled that where an arbitration agreement between the parties provided for the application of the Arbitration & Conciliation Act, 1996 (A&C Act), along with any statutory modification or re-enactment to the A&C Act existing at the time being in force, it constituted an agreement between the parties as contemplated under Section 26 of the A&C (Amendment) Act, 2015.
Thus, the bench of Justices Mangesh S. Patil and Abhay S. Waghwase held that the parties were bound by the 2015 Amendment Act, notwithstanding the fact that the arbitral proceedings commenced prior to the cut-off date, i.e., 23.10.2015.
Application Of Hudson's Formula For Computation Of Loss In Construction Contract, Not Unreasonable: Bombay High Court
Case Title: The State of Maharashtra & Ors. versus Bharat Constructions
The Bombay High Court has ruled that while deciding the petition under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act), the Court is not precluded from considering the findings and conclusions contained in the dissenting opinion of a minority member of the Arbitral Tribunal.
The bench of Justice Manish Pitale observed that the majority opinion in the arbitral award, while computing the compensation to be awarded to the claimant for the loss suffered by it, had referred to the Hudson’s formula. Referring to the Supreme Court’s decision in McDermott International Inc. versus Burn Standard Co. Ltd. & Ors. (2006), the High Court held that Hudson’s formula is widely accepted in construction contracts for computation of losses. Thus, the award passed by the majority members of the Arbitral Tribunal could not be said to be unreasonable so as to warrant interference under Section 34.
Court Empowered To Grant Money Claim Under Section 9 Of A&C Act On Basis Of Admitted Claim: Bombay High Court
Case Title: J P Parekh & Son & Anr. versus Naseem Qureshi & Ors.
The Bombay High Court has reiterated that the power of the Court under Section 9 of the Arbitration and Conciliation Act, 1996 (A&C Act) to grant interim measures of protection, is
wider than the power under the provisions of the Code of Civil Procedure, 1908 (CPC).
The bench of Justice Bharati Dangre concluded that the Court is empowered to pass an order under Section 9 of A&C Act granting the applicant's money claim, on the basis of an admitted claim or acknowledged liability.
Correspondence Between Parties Cannot Overrule Clear Intention Under Agreement Providing For Optional Arbitration: Bombay High Court
Case Title: GTL Infrastructure Ltd. versus Vodafone India Ltd. (VIL)
The Bombay High Court has ruled that where a clause stipulated that the parties ‘may’ be referred to arbitration, the said clause does not constitute an arbitration agreement, despite the fact that the clause conferred a binding nature upon the decision of the Arbitrator. The Court added that the said clause merely contemplated a future possibility and a choice to refer the disputes to arbitration.
The bench of Justice Bharati Dangre held that the correspondence exchanged between the parties cannot overrule or surpass the clear intention of the parties as manifest under the terms of the agreement.
Arbitration Can Be Invoked Against Party Deleted From Section 9 Application:Bombay High Court
Case Title: Deccan Paper Mills Co. Ltd. versus M/s. Regency Mahavir Properties & Ors.
The Bombay High Court has ruled that once an application is filed under Section 9 of the Arbitration and Conciliation Act, 1996 (A&C Act), merely because the applicant choses to subsequently delete a party from the proceedings under Section 9, it cannot be held that the arbitral proceedings can never be invoked against such a party.
The bench of Justice Manish Pitale held that a party applying for interim measures under Section 9 may wish to delete certain parties, if it finds that the interim measures sought in the facts and circumstances of the case are limited to only a few of the parties to the proceedings.
Reference Limited To Quantum Of Compensation; Dispute Non-Arbitrable If Insurer Disputes Liability: Bombay High Court
Case Title: M/s. Mallak Specialities Pvt Ltd. versus The New India Assurance Co. Ltd.
The Bombay High Court has ruled that where the arbitration clause only provided for reference of dispute relating to quantum of compensation payable under the insurance policy, the plea taken by the insurance company, disputing its liability under the policy, would make the dispute non-arbitrable.
The bench of Justice Bharati Dangre reiterated that an arbitration clause has to be interpreted strictly.
Calcutta High Court:
Case Title: Chemex Oil Private Limited versus Seastarr International Pvt. Ltd.
The High Court of Calcutta has held that Section 9 of the A&C Act that provides for interim relief by the Court, applies to foreign seated arbitration as well.
The bench of Justice Shekhar B. Saraf held that Section 9 is a provision that is in aid of the arbitration proceedings in contrast to other provisions of Part-I of the A&C Act that relate to the conduct of the arbitration proceedings, and that it has been mandated to apply to foreign seated arbitrations as well.
Not Awarding LD- Finding Of Fact By Arbitrator, Need Not To Be Interfered: Calcutta High Court
Case Title: M/s. S.B.I.W. Steels (Private) Limited versus Steel Authority of India Limied (SAIL)
The Calcutta High Court has reiterated that damage or loss is sine qua non for the applicability of Section 74 of the Indian Contract Act, 1872 and thus, in the absence of loss, penalty/liquidated damages cannot be claimed on breach of contract.
The bench of Justices I. P. Mukerji and Md. Nizamuddin ruled that the finding arrived at by the Arbitrator, to the effect that the party was unable to prove any loss so as to claim liquidated damages/penalty under the Contract, was a finding of fact, and that it was a reasonable inference drawn from non-production of evidence before the Arbitrator.
Arbitral Tribunals Exercising Power U/S 17 Not Strictly Bound By CPC: Calcutta High Court
Case Title: Gainwell Commosales Pvt Ltd. versus Minsol Limited
The Calcutta High Court has held that the arbitral tribunals while exercising power under Section 17 of the A&C Act are not strictly bound by the technicalities of CPC.
The bench of Justice Shekhar B. Saraf held that the ambit of power given to the tribunals for grant of interim relief is to be guided by the basic principles of CPC, however, the strict technicalities cannot prevent the tribunal from securing the ends of justice.
Criminal Proceedings Cannot Be Initiated For Recovery Of Amount Due Under The Arbitration Award: Calcutta High Court
Case Title: Oil India Limited versus Ashok Kumar Bajoria
The Calcutta High Court has held that criminal proceedings cannot be initiated for recovery of amount due under an arbitration award.
The bench of Justice Tirthankar Ghosh held that a party aggrieved by non-payment of amount due under a post award settlement agreement, should not resort to filing a criminal case by giving a civil dispute criminal colour, as the same is an abuse of the process of law. The Court held that the correct recourse for the party would be putting the award into execution.
Disclosure Of Impartiality By Arbitrator Appointed Under MSMED Act Not AgainstSpirit Of Section 24, Provisions Of A&C Act Shall Apply: Calcutta HC
Case Title: Security Hitech Graphics Private Limited versus LMI India Private Limited
The Calcutta High Court recently ruled that the overriding effect of Section 24 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) would not operate as an absolute bar upon an Arbitrator appointed under the special statute to disclose its independence and impartiality in accordance with the Arbitration and Conciliation Act, 1996.
Delhi High Court:
Case Title: Web Overseas Limited versus Universal Industrial Plants Manufacturing Company Private Limited
The Delhi High Court has ruled that in a suit filed by a party, the time spent by the opposite party in pursuing its application under Section 8 of the Arbitration and Conciliation Act, 1996 (A&C Act), cannot be excluded for the purpose of computation of the limitation period for filing the counterclaims by the opposite party before the Arbitral Tribunal.
The bench of Justices Vibhu Bakhru and Amit Mahajan held that the benefit of Section 14 (1) of the Limitation Act, 1963 is available only to the plaintiff who has been prosecuting civil proceedings against the defendant, and not to the defendant who is resisting a claim.
Case Title: Ram Kumar versus Shriram Transport Finance Co. Ltd.
The High Court of Delhi has held that disclosure by the arbitrator under Section 12 r/w 6th Schedule of the A&C Act is not a discretionary but a mandatory requirement. The Court held that the failure of the arbitrator to disclose a fact that might give rise to a justifiable doubt as to his impartiality vitiates the arbitral proceedings as well as the consequent award.
The bench of Justices Vibhu Bakhru and Amit Mahajan set aside an arbitral award passed without the arbitrator making the necessary disclosure. The Court held that disclosure is a necessary safeguard to ensure the integrity and efficacy of arbitration, therefore, the same cannot be an option but an obligation.
High Court Cannot Review The Order Passed Under Section 11 Of The A&C Act: Delhi High Court
Case Title: Kush Raj Bhatia versus M/S DLF Power & Services Ltd.
The High Court of Delhi has held that the High Courts cannot review an order passed under Section 11 of the A&C Act as the Act does not contain any provision for review.
The bench of Justice Neena Bansal Krishna held that power of review is not an inherent power but the creation of a statute, therefore, it cannot be exercised in absence of a provision. The Court held that unlike the Supreme Court, which by virtue of Article 137 enjoys the inherent power of review, there is no such power conferred on a High Court. Therefore, once an application for the appointment of the arbitrator has been heard and rejected, the same cannot be re-opened by an indirect method i.e., through a review petition.
Requirement Of Notice Of Arbitration Is Not A Mere Technicality: Delhi High Court
Case Title: Rahul Jain & Ors. versus Atul Jain & Ors.
The High Court of Delhi has held that a notice of arbitration is sine qua non for commencing arbitral proceedings, and that invalidity of invocation goes to the very root of the matter and hits the jurisdiction of the Court to entertain applications arising out of the arbitration proceedings.
The bench of Justice Prateek Jalan held that requirement of notice of arbitration is not a mere technicality and its non-compliance cannot be ignored merely because the instrument was a family settlement agreement.
Case Title: Spectrum Power Generation Limited versus GAIL (India) Limited
The High Court of Delhi has held that an issue that purely relates to the inter se liability of the parties regarding the burden of GST is not related to the taxing power of the State, therefore, the same is arbitrable.
The bench of Justice Yashwant Varma held that a dispute surmised on the Pricing Clause in an agreement wherein the inter se liabilities of the parties regarding the payment of taxes are given, can be referred to arbitration.
Case Title: Super Blastech Solutions versus Rajasthan Explosives and Chemicals Limited
The High Court of Delhi has held that a dispute arising out of a Memorandum of Understanding (MoU) or a Memorandum of Settlement (MoS), wherein no arbitration clause is present, can be referred to arbitration if these agreements were directly linked to the main agreement.
The bench of Justice Mini Pushkarna held that dispute arising out of any subsequent agreement that arises out of the main agreement containing the arbitration clause, can be referred to arbitration.
Can Recall Section 11 A&C Act Order, If It Suffers From Patent And Manifest Error: Delhi High Court
Case Title: Always Remember Properties Private Limited versus Reliance Home Finance Limited & Anr.
The Delhi High Court has ruled that the power exercised by the High Court under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act) is not merely an administrative function but a judicial power, and that the Court does not cease to be a Court of Record while exercising power under Section 11.
Thus, the bench of Justice Yashwant Varma held that the High Court can recall the order passed by it under Section 11 of the A&C Act if it suffers from a patent and manifest error apparent on the face of the record.
Case Title: Ramacivil India Constructions Pvt Ltd versus Union of India
The Delhi High Court has reiterated that Section 42 of the Arbitration and Conciliation Act, 1996 (A&C Act) would have no application to proceedings seeking enforcement of arbitral award.
The bench of Justice Yashwant Varma noted that execution application is neither an "arbitral proceeding" within the meaning of Section 42 of the A&C Act, nor is it a subsequent application arising out of the arbitration agreement and thus, the venue restriction provision contained in Section 42 would have no application to enforcement proceedings.
Case Title: Union of India versus RCCIVL-LITL (JV)
The High Court of Delhi has held that the employer cannot withhold the performance bank guarantee after acknowledgement of the due performance of the contract by the contractor.
The bench of Justice V. Kameshwar Rao held that the employer cannot also withhold the performance bank guarantee merely for securing the amount of its counter-claims.
Case Title: Union of India versus Reliance Industries Limited
The High Court of Delhi has held that a challenge to the mandate of the arbitrator on the ground of bias and a justifiable doubt with respect to its independence and impartiality, cannot be raised under Section 14 of the A&C Act.
The bench of Justice Yashwant Varma held that Section 14 of the A&C Act confers the power on the Court to terminate the mandate of the arbitrator and appoint a substitute arbitrator only in circumstances that fall within the 7th Schedule of the A&C Act that deals with de jure ineligibility of the arbitrator, however, ground of bias or justifiable ground as to its independence and impartiality falls within the 5th Schedule read with Section 12(3) of the A&C Act, wherein only the tribunal can decide on the challenge.
Case Title: New India Assurance Company Limited versus Khanna Paper Mills Limited
The High Court of Delhi has held that the fact that a party signed on a blank Discharge Voucher indicates that it was acting under pressure and compulsion and it did not sign the document out of free will.
The bench of Justice C. Hari Shankar held that a discharge voucher signed out of economic duress and compulsion would not extinguish the legitimate claims of a party and it would be open to the party to claim the remaining amount.
Case Title: National Highways Authority of India versus Lucknow Sitapur Expressway Ltd.
The High Court of Delhi has held that an order of the tribunal rejecting the application for impleading a party to arbitration is not an interim award but merely a procedural order, therefore, the same cannot be challenged under Section 34 of the Act.
The bench of Justice Yashwant Varma held that an arbitral tribunal, during the continuance of arbitral proceedings, passes many orders and for an order to fall within the rubric of interim award it has to necessarily have certain features. The Court held that for an order to be understood as an award, it has to be a decision on the merits of the dispute that conclusively determines a substantive claim, issue or question that exists between the parties.
Case Title: Welspun One Logistics Parks Fund I versus Mohit Verma & Ors.
The Delhi High Court has ruled that the dispute between the parties under an agreement titled as a "Non-Binding Term Sheet", can be referred to arbitration, holding that the Arbitration Clause contained in the said agreement was binding between the parties.
The bench of Justice Navin Chawla observed that though the nomenclature of the agreement was "Non-Binding Term Sheet", the Arbitration Clause contained in the agreement was specifically made binding on the parties. It held that whether the other covenants of the Term Sheet were non-enforceable, is not to be considered by the Court at the stage of considering an application under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act).
Moratorium Under Companies Act, 2013, Parties Cannot Be Referred To Arbitration: Delhi High Court
Case Title: DLF Ltd. versus IL&FS Engineering and Construction Company
The Delhi High Court has ruled that the moratorium granted by the National Company Law Appellate Tribunal (NCLAT), staying the institution of suits and proceedings against the Corporate Debtor, after the resolution process is initiated against it under Sections 241 and 242 of the Companies Act, 2013, is akin to an order of moratorium passed under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC). Thus, the bench of Justice V. Kameswar Rao held that in view of the moratorium issued by the NCLAT, the Corporate Debtor cannot be referred to arbitration.
The High Court dismissed the contentions raised by the applicant that since the resolution of IL&FS was initiated under Sections 241 and 242 of the Companies Act, 2013 and not under IBC, the rigours of Section 14 of the IBC were not attracted.
Case Title: Geo Chem Laboratories Pvt Ltd versus United India Insurance Co. Ltd.
The High Court of Delhi has held that when the scope of arbitration clause is limited to quantum of damages only in the eventuality that the liability to pay is admitted by the insurance company, there can be no arbitration if the liability is denied.
The bench of Justice V. Kameshwar Rao held that the suggestions given by the Surveyor in its report, though of substantial evidentiary value, are not binding on the insurance company.
Invoking CIRP Would Not Make The Dispute Non-Arbitrable: Delhi High Court
Case Title: Brilltech Engineers Pvt. Ltd. versus Shapoorji Pallonji and Co. Pvt Ltd.
The High Court of Delhi has held that the dispute would not become non-arbitrable merely because the petitioner, before filing the application for appointment of arbitrator, has filed a corporate insolvency application under Section 9 of the IBC.
The bench of Justice Neena Bansal Krishna held that it is settled position of law that jurisdiction of NCLT can be invoked only in respect of determined debts, however, merely because a petition has been filed by the petitioner asserting that a definite amount is payable by the respondent, would not imply that the claimed amount has been admitted.
Case Title: M/s. Osho G.S. & Company versus M/s. Wapcos Limited
The Delhi High Court has ruled that a unilateral request made by one of the parties for setting the appointment procedure in motion, as provided in the arbitration agreement, would not constitute an agreement falling under the proviso to Section 12(5) of the Arbitration and Conciliation Act, 1996 (A&C Act) to waive off the disqualification contemplated under Section 12(5).
The bench of Justice Yashwant Varma observed that the arbitration agreement conferred the power to appoint a Sole Arbitrator upon the CMD of the respondent Company, who was de jure disqualified from being appointed as an arbitrator by virtue of Section 12(5) and thus, incapable in law of appointing an arbitrator. The Court held that the arbitration notice issued by the claimant, calling upon the respondent Company to appoint an arbitrator in accordance with the arbitration agreement, cannot be construed as an express agreement between the parties to waive off the disqualification contemplated under Section 12(5)
Gauhati High Court:
Additional Work Without Consent Of The Employer; Arbitrator Can't Award Damages: Gauhati High Court
Case Title: Sports Authority of Assam versus Larsen and Turbo
The Gauhati High Court has held that the arbitrator cannot invoke Section 70 of the Indian Contract Act to award damages on quantum meruit for the additional work carried out without the prior consent of the employer when the agreement did not contemplate any additional work.
The bench of Justice Kalyan Rai Surana held that when the agreement, containing the arbitration clause, did not contemplate any additional work and the contractor carries out the additional work without the prior consent of the employer, then any dispute qua the additional work would fall outside the ambit of arbitration clause and any award delivered thereupon would be against the fundamental policy of Indian Law.
Gujarat High Court:
Case Title: M/s Karan Paper Mills versus M/s Shah Paper Pack Industries
The Gujarat High Court has ruled that the findings of the Arbitrator relating to the issue of limitation, arrived at while dealing with an application filed under Section 16 of the Arbitration and Conciliation Act, 1996 (A&C Act), challenging the jurisdiction of the Arbitrator on the ground that the claims raised by the claimant were barred by limitation, do not constitute an 'interim award'.
The bench of Justices Sonia Gokani and Nisha M. Thakore held that the Arbitrator's findings on limitation, while dealing with the Section 16 application, cannot be held as giving finality to the issue of limitation so as to permit its challenge under Section 34 of the A&C Act.
Jammu & Kashmir and Ladakh High Court:
Case Title: M/s Doon Caterers versus UOI & Ors.
The Jammu and Kashmir and Ladakh High Court has ruled that final relief cannot be granted under Section 9 of the Arbitration and Conciliation Act, 1996 as proceedings under the said provision are of interim measure and are not meant for enforcement of the conditions of the contract, which can be done only when the rights of the parties are finally adjudged or crystallized by the Arbitral Tribunal.
Jharkhand High Court:
Case Title: M/s. Central Coalfields Limited versus Eastern India Powertech Ltd.
The Jharkhand High Court has ruled that a party is not required to make a fresh request for appointment of substitute arbitrator by issuing a notice under Section 21 of the Arbitration and Conciliation Act, 1996 (A&C Act), if notice under Section 21 was issued for appointment of the arbitrator sought to be substituted.
The bench of Justice Sujit Narayan Prasad held that once an application under Section 11(6) is filed by the party before the High Court, seeking appointment of arbitrator, the jurisdiction of the parties to appoint the arbitrator as per the arbitration clause is seized.
Therefore, once the mandate of the arbitrator appointed by the High Court under Section 11(6) terminates, for appointment of a substitute arbitrator, the party is not required to again make a request by issuing a notice under Section 21. The applicant can directly file an application before the High Court under Section 11(6), seeking appointment of the substitute arbitrator.
Kerala High Court:
Case Title: A. Salim versus M/s Asianet Satellite Communication Ltd.
The Kerala High Court has held that arbitration under the Arbitration and Conciliation Act, 1996 is barred in respect of matters which are within the exclusive jurisdiction of Telecom Disputes Settlement and Appellate Tribunal (TDSAT) under the Telecom Regulatory Authority of India Act, 1997 (TRAI Act).
Madhya Pradesh High Court:
Case Title: State of Madhya Pradesh versus Nathuram Yadav
The Madhya Pradesh High Court has held that a party which has participated in the arbitration proceedings without any protest or challenge as to the jurisdiction of the tribunal cannot for the first time challenge the jurisdiction of the tribunal under Section 37 of the A&C Act.
The bench of Justice S.A. Dharmadhikari held that an issue as to the non-jurisdiction of the private arbitrator when the Madhyastham Adhikaran Adhiniyam, 1983 Act provides for statutory arbitration for 'works contract', cannot be raised for the first time in an appeal and that it has to be taken at the earliest possible opportunity.
Tripura High Court:
Execution Of Arbitration Awards; Section 47 Of CPC Not Applicable: Tripura High Court
Case Title: State of Tripura versus Ashes Deb
The High Court of Tripura has held that Section 47 of CPC which provides for certain questions to be determined by the executing Court, does not apply to execution of an arbitration award under the A&C Act.
The bench of Justice S.G. Chattopadhyay held that the executing court, exercising power under Section 36 of the Act, cannot entertain any objections against the award. The party can only challenge the award in terms of Section 34 of the A&C and no objection can be raised under Section 36 of the Act, the Court ruled.
