Arbitration Cases Monthly Round-Up: June 2023
Ausaf Ayyub
5 July 2023 12:30 PM GMT
High Courts Allahabad High Court: Facilitation Council Which Was The Conciliator Under MSMED Act, Can Arbitrate The Dispute; Bar Contained In S. 80 Of Arbitration Act Not Applicable: Allahabad High Court Case Title: Bata India Limited & Anr. vs U.P. State Micro and Small Enterprise Facilitation Council & Anr. The Allahabad High Court has ruled that the discretion given...
High Courts
Allahabad High Court:
Case Title: Bata India Limited & Anr. vs U.P. State Micro and Small Enterprise Facilitation Council & Anr.
The Allahabad High Court has ruled that the discretion given to Facilitation Council under Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) in respect of selection of forum for arbitration between the parties, is absolute and has overriding effect over any other law. In exercise of the said discretion, the provisions of the Arbitration and Conciliation Act, 1996 (A&C Act), including the prohibition contained in Section 80, will have no application, the court has ruled. Therefore, the court held that in the event the conciliation proceedings carried out by the Council under Section 18(2) of theMSMED Act fail, the Council can itself proceed to arbitrate the dispute between the parties.
Bombay High Court:
Case Title: Kavis Fashions Private Limited vs Dimple Enterprises and others
The Bombay High Court has ruled that the opposite party is entitled to oppose the application for amendment of Statement of Claims on all available grounds. The bench of Justice Manish Pitale rejected the contention that under Section 23(3) of the Arbitration and Conciliation Act, 1996 (A&C Act), a party opposing the amendment application can oppose the same only on the ground of delay in making the amendment.
The court remarked that Section 23(3) uses the words ‘having regard to the delay in making it’ in contradistinction to the words ‘having regard only to’. Thus, the opposite party is entitled to oppose the application for amendment on all available grounds, including the ground of delay, the bench said.
Case Title: M/s Sunflag Iron & Steel Co. Ltd vs M/s. J. Poonamchand & Sons
The Bombay High Court has ruled that mere filing of an application under Section 7(1) of the Insolvency and Bankruptcy Code, 2016 (IBC) is not enough to invoke the bar of Section 238 of the Code. Thus, the same would not bar the court from entertaining an application under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (A&C Act) for appointment of Arbitrator, the court said.
The bench of Justice Avinash G. Gharote held that there is no inconsistency between the provisions of the A&C Act and the IBC, since the provisions of Section 238 of the IBC would come into play only after an order has been passed by the Adjudicating Authority under Section 7(5) of the Code.
Case Title: Arbaza Alimentos Ltda vs MAC Impex and others
The Bombay High Court has reiterated that a general reference to a standard form of contract would be enough for incorporation of an arbitration clause. The court was dealing with a petition seeking execution of a foreign arbitral award passed in the arbitral proceedings conducted under the ‘Grain and Feed Trade Association (GAFTA) Simple Disputes Arbitration Rules No.126.’
The bench of Justice Manish Pitale further dismissed the contention of the award-debtor that the arbitrator could not have pronounced upon its own jurisdiction since the ‘GAFTA Simple Disputes Arbitration Rules No.126’ do not provide a power to the arbitrator to decide his own jurisdiction. The bench said that a specific clause under the said Rules would not be necessary for deciding the challenge made to the jurisdiction of the arbitrator, as the said issue goes to the very root of the matter. It added that a decision on the said issue is necessary before proceeding to consider the claims / counter-claims raised by the parties, on merits.
Calcutta High Court:
Case Title: Blue Star Limited vs Rahul Saraf
The High Court of Calcutta has held that a clause in an agreement that merely provides for a possibility of arbitration is not a binding arbitration agreement.
The bench of Justice Shekhar B. Saraf held that a clause which provides for resolution of dispute either by way of litigation or arbitration cannot be held to be a binding arbitration agreement as the clause makes arbitration a possibility which may unravel itself, if and only if the parties choose to opt for it, post occurrence of disputes.
The Court also reiterated that nomenclature of a clause is irrelevant and mere use of words like ‘arbitration’ would not make any clause a valid arbitration agreement.
Case Title: Homevista Décor & Furnishing Pvt Ltd. vs Connect Residuary Pvt Ltd.
The High Court of Calcutta has held that the venue would not become the seat of the arbitration when the agreement confers exclusive jurisdiction on the Court in a different place.
The bench of Justice Shekhar B. Saraf held that presence of a clause which confers exclusive jurisdiction upon a Court in a place other than the venue of arbitration is a ‘Contrary Indicia’ that prevents the venue of arbitration from becoming the seat.
Case Title: Chandan Chatterjee and others vs Gita Sundararaman and others
The Calcutta High Court has recently held that application under Section 11 of the Arbitration and Conciliation Act, 1996 ought not to be dismissed on technical and/or procedural grounds. The court further observed that the requirement under the rules of procedure to file original arbitration agreement or certified copy thereof may be waived by the Court where the arbitration agreement is admitted. The court thus allowed the application under Section 11 and an Arbitrator was appointed.
Case Title: Blue Star Limited vs Rahul Saraf
While holding non-existence of an arbitration agreement between the parties, the Calcutta High Court recently held that an arbitration agreement may be couched in various modes and forms, however, mere mentioning of the term ‘arbitration’ or ‘arbitrator’ in a heading or existence of these terms in a scattered manner in clauses of agreements between parties do not aggregate to being an arbitration agreement.
Case Title: Nemai Chandra Roy Karmakar alias Nemai Roy vs Sarada Construction
The Calcutta High Court has ruled that it is the duty of the defendant to file the application under Section 8 of the Arbitration and Conciliation Act, 1996 seeking arbitral reference, before filing the first statement in a suit. However, the court remarked that filing of a Section 8 application along with the written statement cannot lead to any presumption that the defendant has waived its right of referring the dispute for arbitration.
The bench of Justice Bibhas Ranjan De further held that a document which is not duly stamped, or being compulsorily registerable is not registered, cannot be acted upon by the Court.
Case Title: M.D. Creations & Others vs Ashok Kumar Gupta
The Calcutta High Court has reiterated that the remedy under Article 227 of the Constitution of India against the order of the Arbitral Tribunal rejecting the challenge to its jurisdiction under Section 16 of the Arbitration and Conciliation Act, 1996 (A&C Act), can be invoked only on ground of the Arbitrator’s patent lack in inherent jurisdiction, or exceptional circumstances, or ‘bad faith’ on part of the other party.
Case Title: Orissa Metaliks Pvt. Ltd. vs SBW Electro Mechanics Import Export Corporation
The High Court of Calcutta has held that venue would be the seat of arbitration when the agreement between the parties contains no significant contrary indicia.
The bench of Justice Krishna Rao also held that merely because the arbitration agreement does not clearly provide for the law governing the arbitration, it would not make the agreement ambiguous, vague or uncertain so to allow refusal of reference to arbitration under Section 45 of the Act.
The Court held that judicial interference under Section 45 is not permitted, on grounds of agreement being null and void, inoperative or incapable of being performed arising out of objection regarding ambiguity as to the applicable law, as long as the intention of the parties to refer the dispute to arbitration is clear.
Delhi High Court:
Case Title: Kal Airways Pvt. Ltd vs M/s SpiceJet Ltd. & Anr.
The Delhi High Court has directed SpiceJet to pay the entire arbitral award of Rs. 380 crore to the airline’s former promotor, Kalanithi Maran, and his firm, Kal Airways Pvt. Ltd, in an execution petition filed by Maran seeking enforcement of a 2018 arbitral award passed in his favour.
The court has also directed the airline to file an Affidavit of its assets within the specified time frame.
The bench of Justice Yogesh Khanna passed the order after noting that the airline had failed to comply with the Supreme Court’s order dated 13.02.2023. The Apex Court in the said order had directed SpiceJet to pay an amount of Rs.75 crore to Maran within a period of three months, towards its interest liability, pending the disposal of the petition under Section 34 of the Arbitration and Conciliation Act, 1996. In the event of default in compliance with the said order, the top court had held that the entire arbitral award would be executable forthwith.
Case Title: Tomorrow Sales Agency (P) Ltd. vs SBS Holdings, Inc.
The Delhi High Court has ruled that a third-party funder, i.e., a non-signatory to arbitration agreement, who is not a party to the arbitral proceedings or the award, cannot be held liable for the awarded amount merely because it has funded a party in arbitral proceedings.
The court dismissed the contention that third-party funders must be held liable for funding impecunious persons who are unsuccessful in pursuing their claims in the arbitral proceedings. It held that permitting enforcement of an arbitral award against a non-party which has not accepted any such risk, is neither desirable nor permissible.
The court remarked that third-party funders play a vital role in ensuring access to justice. In absence of third-party funding, a person having a valid claim would be unable to pursue the same for recovery of amounts that may be legitimately due, the bench comprising Justices Vibhu Bakhru and Amit Mahajan observed.
The Expression “Any” Member of Arbitral Tribunal Cannot Be Read As “All Members”: Delhi High Court
Case Title: Shapoorji Pallonji and Company Private Limited vs Union of India
The Delhi High Court has ruled that the expression “any member” contained in a clause that lays down a mandatory qualification to be appointed as arbitrator, cannot be read as “all members” of the Arbitral Tribunal. The court said that the phrase “any member” must be interpreted in the context in which it is used.
The bench of Justice Yashwant Varma was dealing with an Arbitration Clause that required that “any member” of the Arbitration Tribunal shall be a “Graduate Engineer with experience in handling public works engineering contracts” at a level “not lower than Chief Engineer (Joint Secretary level of Government of India)”. The said Clause provided that the same was “a mandatory qualification to be appointed as arbitrator”.
Case Title: DAG Private Limited vs Ravi Shankar Institute for Music and Performing Arts
The High Court of Delhi has upheld an arbitral award wherein the arbitrator held that the ‘Balance Rent’ during the lock-in period is a genuine pre-estimate of loss which requires no further proof of loss.
The bench of Justice V. Kameshwar Rao held that when the contract provides for payment of entire balance rent for the lock-in period if the deed is terminated before the expiry of the lock-in period, it would be a genuine pre-estimate of the losses that the lessor would bear for the early termination of the contract/deed. It held that lock-in period acts an assurance for the lessee that his possession would not be disturbed and it also guarantees the lessor a certain sum of money for a definite period and any breach involves consequences for both the parties.
Case Title: M/s Mahesh Construction vs Municipal Corporation of Delhi & Anr.
The Delhi High Court has ruled that a clause in a contract that prohibits payment of interest on delayed payments, does not prohibit the arbitrator from granting interest under Section 31(7) of the Arbitration and Conciliation Act, 1996 (A&C Act). The bench of Justice Manoj Kumar Ohri held that the said stipulation only puts a restriction on the contracting party to claim interest on delayed payments. Since interest is compensatory in nature, the arbitrator’s powers are not curtailed by such narrow clauses in the contract.
The bench concluded that the arbitrator is empowered under Section 31(7) of the A&C Act to grant interest for all the three periods namely, pre-reference, pendente-lite and post award periods, unless the contract prohibits the arbitrator from granting interest under Section 31(7).
Case Title: Shivalaya Construction Co. Pvt Ltd. vs National Insurance Company Ltd
The High Court of Delhi has held that ordinarily the dispute under insurance policy claims would not be referred to arbitration when the reference is limited to quantum of compensation and the insurer disputes liability.
The bench of Justice Prateek Jalan distinguished between a situation wherein the insurer denied the entire liability and where the entire liability is not disputed but only claims under one of the heads is disputed as being outside the scope of reference.
The Court held that there cannot be any arbitration in the first scenario, however, the second issue would not put the dispute beyond the ambit of the arbitration clause and it would be proper for the respondent to raise such objections before the arbitrator.
Case Title: Najmus Sehar vs M/s Bombay Marcantile Coop Bank & Ors.
The Delhi High Court has ruled that the limitation period for reference of money dispute between the cooperative society and its defaulting member to arbitration, would be determined as per the provisions of Section 85(1)(a) of the Multi State Co-operative Societies Act, 2002 (MSCS Act), and not as per the Limitation Act, 1963.
The bench of Justices Rajiv Shakdher and Girish Kathpalia observed that Section 85(1)(a) of the MSCS Act clearly provides that in such disputes, the limitation period for referral to arbitration would be computed from the date on which the member dies or ceases to be a member of the society. Further, the same is notwithstanding anything contained in the Limitation Act.
Case Title: Man Industries (India) Limited vs Indian Oil Corporation Limited
The Delhi High Court has ruled that the plea that the Arbitrator is de jure ineligible to act as an Arbitrator is a plea of lack of jurisdiction. This plea can be allowed to be raised as an additional ground in a petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act), by way of an amendment and even without the same, the court has held.
The bench of Justice Navin Chawla made the observation while allowing the amendment application seeking to add an additional ground to challenge the arbitral award, even though the said application was filed much beyond the limitation period prescribed in Section 34(3) of the A&C Act. In its amendment application, the petitioner sought to raise the additional ground that the Arbitrator was de jure ineligible to act as such in view of Section 12(5) of the A&C Act.
Case Title: Indian Railway Catering & Tourism Corp. Ltd. vs M/s Goel & Goel
The High Court of Delhi has held that IRCTC is a State under Article 12 of the Constitution of India and is bound by its affidavit before any court of law and it cannot file contrary affidavit before the arbitral tribunal to defeat a claim of the other party in arbitration.
Arbitration Clause In A Contract Perishes With Its Novation: Delhi High Court
Case Title: B.L. Kashyap and Sons Ltd vs MIST Avenue Pvt Ltd
The High Court of Delhi has held that an arbitration clause contained in an agreement would perish with its novation if the novated agreement does not contain any arbitration clause.
Case Title: Unique Décor (India) Pvt Ltd. vs Synchronized Supply Systems Ltd.
The High Court of Delhi has held that if the parties have, by written communications, extended the period of agreement, the arbitration clause that was a part of the agreement continues to be operative.
The bench of Justices Vibhu Bakhru and Amit Mahajan has distinguished between the situations wherein an arbitration clause expires with the novation of the main agreement and when the arbitration clause continues to be operative when the original agreement is not superseded by any other agreement but extended by the parties through written communications.
A Consent Foreign Award Is Enforceable Under The New York Convention: Delhi High Court
Case Title: Nuovopignone International SRL vs Cargo Motors Private Limited & Anr.
The High Court of Delhi has held that a consent foreign award is enforceable under the New York Convention/Part II of the A&C Act, 1996.
The bench of Justice Yashwant Varma rejected the argument that consent arbitration award do not fall within the rubric of New York Convention. The Court rejected the argument that an award to be recognized under the Convention must be one based on adjudication as arbitration presupposes adjudication by the tribunal and any award incorporating the settlement agreement entered into by the parties during the pendency of the proceedings would not amount to an award.
Case Title: NHAI vs Suresh Chandra
The Delhi High Court has held that ‘partial reduction in traffic’ due to a remote event of flood is not a force majeure event.
The bench of Justice Manoj Kumar Ohri held that force majeure event contemplates a complete blockade of the road due to the floods and not mere reduction of the traffic on a particular road.
Case Title: MMTC Limited vs Aust Grain Exports Pty. Ltd
The Delhi High Court has reiterated that procedural irregularity cannot be a ground to set aside the Arbitral Award unless such irregularity goes to the root of the matter and shocks the conscience of the Court, thus making the Award illegal.
The bench of Justice Chandra Dhari Singh made the observation while dismissing a petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act), challenging the majority Arbitral Award passed against the petitioner, MMTC Ltd.
Gujarat High Court:
Case Title: Gujarat Mineral Development Corporation Limited vs Morris Samuel Christian
The Gujarat High Court recently allowed the writ petition filed by Gujarat Mineral Development Corporation Limited praying for quashing and setting aside the mandate, constitution and authority of Morris Samuel Christian (respondent no.1) in relation to an Arbitration Case, with a further request to quash and set aside the ‘Final Awarding’ passed by the respondent.
Himachal Pradesh High Court:
Case Title: M/s Sterkem Pharma Private Limited vs Symbiosis Pharmaceuticals Private Limited and Ors.
The Himachal Pradesh High Court has ruled that it is the bounden duty of the Arbitrator appointed by the Facilitation Council under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) to issue signed copies of the arbitral award to the parties irrespective of the fact whether the parties have contested the proceedings or were proceeded ex-parte.
The court has deprecated the practice of the Facilitation Council supplying a copy of the award certified by the Council itself to the concerned parties. The court said that the same is not in consonance with the procedure mandated under Section 31(5) of the Arbitration and Conciliation Act, 1996 (A&C Act) as well as the MSMED Act. It added that the arbitral award is to be made available to the parties by the Arbitrator himself in accordance with the provisions of Section 31(5) of the A&C Act.
Case Title: M/s Pratap Industries Products vs M/s Hindustan Construction Company Ltd
The Himachal Pradesh High Court has directed the District Court, which stayed the execution of an arbitral award in exercise of its power under Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act), to first determine whether Section 19 of the Act was complied with. The provision requires the party challenging the award to make a pre-deposit to the tune of 75% of the award. Justice Joytsna Rewal Dua said the District Court must see whether the pre-deposit amount is actually deposited.
Jammu and Kashmir and Ladakh High Court:
Case Title: Mahant Subash Shah vs Kabir Singh & Anr.
The Jammu and Kashmir and Ladakh High Court has held that no appeal or revision would lie against an order allowing an application for condonation of delay accompanying an application filed under section 34 of the Arbitration and Conciliation Act for setting aside arbitral award.
A bench of Justice Javed Iqbal Wani said the legislature by using expression an appeal shall lie from the orders provided therein "and from no others" in Section 37 (Appealable orders) has taken away the right to appeal against all orders except specified in Section 37 (1) and (2).
Case Title: Union of India vs S.P. Singla Construction Pvt Ltd.
The High Court of Jammu & Kashmir and Ladakh has held that the requirement to refer the dispute to DAB, as per the GCC of FIDIC Contracts, is mandatory and the failure to comply with the provision results in making the dispute non-arbitrable.
The bench of Justice Vinod Chatterji Koul held that when the agreement between the parties provides for reference of claims to DAB as pre-arbitration requirement and also provides for the consequences for the non-compliance, the parties must necessarily follow the agreed procedure and failure would result in the claims becoming non-arbitrable.
Karnataka High Court:
Case Title: Jameela vs Sullia Afsa & Others
The Karnataka High Court has made it clear that in a partnership deed that provides for appointment of Arbitrator, the power of Arbitrator to resolve the dispute flows from the clauses of the partnership deed.
Case Title: Town Essentials Pvt Ltd. vs Daily Ninja Delivery Services Pvt Ltd
The Karnataka High Court has held that the non-signatory defendants cannot be exposed to arbitration under Section 8 of the A&C Act by allowing the dispute to be referred to arbitration.
The bench of Justice Sreenivas Harish Kumar held that when the cause of action against all the defendants is stated to be the same, it cannot be bifurcated so to allow arbitration proceedings against few of the defendants and continuation of the suit against the others as it would lead to multiplicity of proceedings and delay in adjudication. It would also increase the cost of litigation and harassment to the parties and on occasions there is possibility of conflicting judgments and orders by two different forums.
Meghalaya High Court:
Case Title: Public Works Department vs M/s BSC-CC & JV
The Meghalaya High Court while upholding an arbitral award has ordered the Public Works Department (National Highway) to pay a contractor Rs. 10 lakh over and above the award amount, saying that PWD put the contractor through unnecessary litigation.
The observations were made while hearing a challenge under Section 37 of the Arbitration and Conciliation Act, 1996 to an order dated May 17, 2023 passed by the Commercial Court, Shillong on a plea under Section 34 of the Act challenging an arbitral award rendered on July 27, 2021.
Tribunals and other jurisdictions:
National Company Law Appellate Tribunal (NCLAT):
IBC | Sec. 9 Petition For Implementation Of Arbitral Award Is Not Maintainable: NCLAT Chennai
Case Title: M/s KK Ropeways Limited vs M/s Billion Smiles Hospitality
The National Company Law Appellate Tribunal (“NCLAT”), Chennai Bench, comprising of Justice M. Venugopal (Chairperson) and Ms. Shreesha Merla (Technical Member), while adjudicating an appeal filed in M/s. KK Ropeways Limited v M/s. Billion Smiles Hospitality, has held that a petition filed under Section 9 of IBC for implementation of an Arbitral Award is not maintainable and not in tune with the objective of IBC. The Bench has further held that arbitration and IBC proceedings cannot go on together.
National Consumer Disputes Redressal Commission (NCDRC):
NCDRC Reiterates, Arbitration Clause Doesn't Bar Consumer Fora's Jurisdiction To Hear Complaints
Case: Army Welfare Housing Organisation vs Chief Administrator, Huda & Anr.
The New Delhi bench of the National Consumer Disputes Redressal Commission (NCDRC) bench comprising presiding members, C. Vishwanath and Subhash Chandra, recently held that the presence of an arbitration clause in an agreement does not prevent Consumer Fora from exercising their jurisdiction to entertain a Complaint. To emphasize the stance further, reference was made to Section 3 of the Consumer Protection Act, 1986 which clearly states that the Act's provisions are in addition to and not in derogation of any other prevailing law. The NCDRC also affirmed its jurisdiction in cases involving some questions of law and facts.
Other:
Union Government Constitutes Expert Committee For Reforms In Arbitration And Conciliation Act
The Ministry of Law & Justice has constituted a sixteen-member expert committee headed by Dr. T.K. Vishwanathan, Former Secretary of the Department of Legal Affairs, for examining the working of arbitration law in India and recommending reforms in the Arbitration and Conciliation Act, 1996.
The committee is expected to submit its recommendations within 30 days. The step is being taken to limit the requirement for parties to seek judicial intervention by approaching court.
