Arbitration Monthly Round-Up: October 2023
Ausaf Ayyub
3 Nov 2023 6:00 AM GMT
Supreme Court Arbitration | Awarding Claim For Loss Of Profit Without Substantial Evidence Is In Conflict With Public Policy Of India: Supreme Court Case Title: M/S UNIBROS v. ALL INDIA RADIO, ARISING OUT OF SLP (CIVIL) NO. 8791/2020 Citation: 2023 LiveLaw (SC) 918 Recently, the Supreme Court, while rendering an arbitral award as patently illegal and being in conflict with...
Supreme Court
Case Title: M/S UNIBROS v. ALL INDIA RADIO, ARISING OUT OF SLP (CIVIL) NO. 8791/2020
Citation: 2023 LiveLaw (SC) 918
Recently, the Supreme Court, while rendering an arbitral award as patently illegal and being in conflict with the “public policy of India”, held that a claim for damages cannot as a matter of course result in an arbitral award without proof of the claimant having suffered injury. The present decision emphasised the importance of substantial evidence in awarding claims for loss of profit.
“A claim for damages, whether general or special, cannot as a matter of course result in an award without proof of the claimant having suffered injury. The arbitral award in question, in our opinion, is patently illegal in that it is based on no evidence and is, thus, outrightly perverse; therefore, again, it is in conflict with the “public policy of India” as contemplated by section 34(2)(b) of the Act.,” Justices S. Ravindra Bhat and Dipankar Datta.
Case Title: M/S CHENNAI METRO RAIL LIMITED vs. M/S TRANSTONNELSTROY AFCONS JV, C.A. No. 4591/2023
Citation : 2023 LiveLaw (SC) 909
In a notable judgment, the Supreme Court has held that unilateral revision of fee by an arbitral tribunal, though not permissible, will not terminate its mandate on the ground of ineligibility as per Section 12 of the Arbitration and Conciliation Act 1996.
Although the Supreme Court has held in Oil and Natural Gas Corporation Ltd. vs Afcons Gunanusa JV 2022 LiveLaw (SC) 723 that the arbitrators should revise the fee only in consultation with the parties and should not do it unilaterally, a bench comprising Justices S Ravindra Bhat and Aravind Kumar held in the present case that a breach of the rule laid down in ONGC will not render the arbitrator ineligible.
The bench categorically held that only the grounds specified in the Fifth and Seventh Schedule of the Arbitration and Conciliation Act can be considered to determine the ineligibility of an arbitrator. The ineligibility of the arbitrator must be something "going to the root of the jurisdiction, divesting the authority of the tribunal, thus terminating the mandate of the arbitrator", the judgment authored by Justice Bhat said.
High Courts
Allahabad High Court
Case Title: Madhyanchal Vidyut Vitran Nigam Ltd v. Shashi Cable, Matters under Article 227 No. 3384 of 2023
The High Court of Allahabad has held that a petition for the execution of the arbitral award can be enforced anywhere in the country, where the assets of the award debtor are located.
The bench of Justice Pankaj Bhatia held that Section 42 of the A&C Act which bars any petition in any Court other than the Court where the first petition in relation to arbitration agreement was filed does not apply to petitions for the enforcement of the arbitration award. It relied on the judgment of the Supreme Court in Sundaram Finance and Cheran Properties to arrive at the above conclusion.
Case Title: Bharat Petroleum Corporation Ltd v. Anoop Kumar Modi, Matters under Article 227 No. 2704 of 2023
Neutral Citation: 2023:AHC-LKO: 68875
The Allahabad High Court has held that it is the choice of the award holder to file an execution petition at the place of its choice and it need not necessarily approach the Court where the award was passed.
The bench of Justice Pankaj Bhatia also held that merely because Section 16 of the Commercial Courts Act which provides for amendment to CPC does not include Order 21 within the amended provisions, it would not mean that the Commercial Court would not have the inherent jurisdiction to execute an arbitral award. It held that words ‘applications’ under Section 10(3) of the Commercial Courts Act would include the application for execution of the arbitral award in terms of Section 36 of the A&C Act.
Calcutta High Court
Case: Damodar Valley Corporation v Reliance Infrastructure Limited
Citation: 2023 LiveLaw (Cal) 306
In a landmark 255-page judgement, the Calcutta High Court has upheld an arbitral award in favor of Reliance Infrastructure (“RIL”), arising out of a deal struck with the Damodar Valley Corporation (“DVC”) for construction of thermal power plants in Raghunathpur.
In upholding the award passed by a panel of three arbitrators, a single-bench of Justice Shekhar B Saraf noted that India is in dire need of Arbitration reform due to increased judicial interference at every stage. It held:
“Arbitration has been envisaged as a mechanism of dispute resolution which is free from the clutches of redundancy, inefficiency, and delay that plague our litigation system. It seems that arbitration process in India itself is finding it hard to bear the weight of the increasing judicial interference at every stage of the process. This not only impacts the viability of arbitration as a dispute resolution mechanism, but further demotes India’s standing as a business friendly destination in a globalised world. There is dire need of arbitration reform in India. This reform must not only reflect in the legislation itself, but also in the mind-set of all the stakeholders.”
Case Title: Spectrum Infra Ventures v. WBSMEFC, WPA No. 11265 of 2023
The High Court of Calcutta has held that an arbitration award passed under MSMED Act cannot be challenged in a writ petition merely on the ground that the petitioner’s request for adjournment was refused by the arbitrator.
The bench of Sabyasachi Bhattacharyya held that a party aggrieved by an award passed under MSMED Act has to challenge it under Section 34 of the A&C Act r/w Section 19 of the MSMED Act and the remedy of writ petition to challenge such award would not be available unless it is shown that the award has resulted in the failure of justice.
The Court held that if a party was given a hearing by the arbitral tribunal and despite the opportunity the party chose not to put up a defence and sought adjournment which was refused by the arbitral tribunal then the consequent award cannot be challenged under Article 226 of the Constitution on the ground of suffering from vice of violation of natural justice.
It held that the party aggrieved by such an award can challenge it under Section 34(2)(a)(iii) on the ground that it was not given sufficient opportunity to prove its case, however, the limited scrutiny permissible under writ jurisdiction in view of availability of an alternative remedy does not permit the writ court to examine it unless it results in palpable violation of the law or patent arbitrariness.
Case: Prathyusha- AMR JV vs Orissa Steel Expressway Private Limited
Citation: 2023 LiveLaw (Cal) 304
The Calcutta High Court has recently allowed applications for appointment of arbitrator u/s 11 and for interim protection u/s 9(1) of the Arbitration & Conciliation Act, 1996 (“Act”) by Prathyusha- AMR, a Joint Venture.
In allowing the plea for appointment of an arbitrator u/s 11 of the Act, a single-bench of Justice Moushumi Bhattacharya noted that “a turning point” in negotiations between the parties may ‘re-vitalise’ limitation in order to sustain a ‘live claim.’
Case Title: Prathyusha – AMR JV v. Orissa Expressway Pvt Ltd, AP 863 of 2022
The High Court of Calcutta has held that the Court exercising powers under Section 9 of the A&C Act is not strictly bound by the provisions of interim relief contained under Code of Civil Procedure, 1908.
The bench of Justice Moushumi Bhattarcharya held that unlike O. XXXVIII R. 5 of CPC wherein the party seeking relief has to discharge the onus of showing that the other party seeks to obstruct or delay the execution of any decree by disposing of the entirety or part of the property or intends to remove the same from the local limits of the jurisdiction of the Court, Section 9 of the A&C Act does not require the petitioner to show that the opposite party will dissipate the subject matter of the arbitration.
Case Title: Power Mech Projects Limited v. BHEL, AP 444 of 2023
The High Court of Calcutta has held that if one letter with the necessary stamp is part of the correspondence forming the contract, the entire contract is deemed duly stamped.
The bench of Justice Moushumi Bhattacharya held that where a contract or agreement of any kind is effected by correspondence consisting of two or more letters and if any one of the letters is properly stamped the contract or agreement shall be deemed to be duly stamped in view of proviso (c) to Section 35 of the Indian Stamps Act.
The Court held that proviso (c) to Section 35 relieves a party from the statutory obligation of stamping each and every letter or document forming part of the correspondence where one of the letters is properly stamped.
Case Title: Power Mech Projects Limited v. BHEL, AP 444 of 2023
The High Court of Calcutta has held that absence of arbitration clause in the main agreement is immaterial when it specifically incorporates another agreement containing arbitration clause.
The bench of Justice Moushumi Bhattacharya held that Section 7(5) of the A&C Act allows incorporation of the arbitration agreement by reference and a case wherein the main agreement specifically incorporates the earlier agreements containing arbitration clause, the situation would squarely be covered by the said Section.
Delhi High Court
Case Title: SIMPLOT INDIA LLC v. HIMALAYA FOOD INTERNATIONAL LIMITED
Citation: 2023 LiveLaw (Del) 938
The Delhi High Court is set to examine whether the enforcement of a foreign arbitration award can be denied due to the non-stamping of the arbitration agreement.
The bench of Justice Manoj Kumar Ohri has issued notice on a plea seeking to raise objection to the enforcement of the Singapore seated foreign arbitration award under Section 48 of the A&C Act.
The award debtor raised objections to the enforcement of the foreign seated arbitration award on the ground of non-stamping of the arbitration agreement. It contended that the underlying arbitration agreement, being unstamped, is not considered "valid" under Indian law, which governs the agreement. It relied upon the recent judgment of the Constitution bench of the Supreme Court in N.N. Global, wherein the Court held that an unstamped arbitration agreement is deemed "unenforceable," "invalid," "bereft of life," "non-est," and cannot be "acted upon" by a Court at the stage of referring disputes under Section 11 of the Arbitration Act, to contend that the findings regarding the invalidity of an unstamped agreement should also apply to proceedings for the enforcement of foreign awards under Part – II of the Arbitration Act.
Case Title: IRCON INTERNATIONAL LIMITED V. DMRC
Citation: 2023 LiveLaw (Del) 943
The Delhi High Court has held that no compensation can be awarded for the prolongation of the contract if the contractor did not reserve its right to such compensation at the time of the seeking Extension of Time (EOT).
Justice Manoj Kumar Ohri's bench upheld the Arbitral Tribunal's interpretation. They ruled that the Tribunal's decision, which denied the prolongation cost due to the Contractor's failure to reserve this right during the EOT request, and because the EOT was granted without financial implications, is a plausible view which does not warrant intervention by the Court using its powers under Section 34 of the A&C Act.
Case Title: M/s SVK Infrastructures v. Delhi Tourism and Transportation Development Corporation Ltd
Citation: 2023 LiveLaw (Del) 968
The Delhi High Court has held that no stamp duty is payable on an instrument which is executed by, or on behalf of or in favour the government.
The bench of Justice Rekha Palli held that the recent judgment by the Constitution Bench of the Supreme Court in N.N. Global would have no application to an agreement executed by or on behalf or in favour of the government. It held that the Court exercising powers under Section 11 of the A&C Act would not refuse to appoint arbitrator once it ascertained that instrument falls within the exception created by the stamps act for government.
The Court also held that once the entity which had executed the agreement containing arbitration clause has been acquired by another entity, the acquiring party would step in the shoes of the executing party, therefore, it can invoke the arbitration clause.
Case Title: Taleda Square Pvt Ltd v. Rail Land Development Authority
Citation: 2023 LiveLaw (Del) 967
The Delhi High Court has held that an arbitration clause wherein one of the contracting party has the power to appoint the 2/3rd members of the arbitral tribunal and compels the other party to choose its nominee arbitrator from a narrow panel of only 5 names is not enforceable in law.
The bench of Justice Rekha Palli held that a narrow panel of 5 arbitrator with a further power to the party which has drawn the panel to nominee 2/3rd members of the arbitral tribunal is against the principles of ‘counter-balancing’ as envisaged by the Apex Court in the case of Voestalpine Schienen.
Case Title: Dr. Vivek Jain v. PrepLadder Pvt Ltd
Citation: 2023 LiveLaw (Del) 964
The Delhi High Court has held that a Court exercising powers under Section 9 of the A&C Act to secure the amount in dispute or for ordering attachment before award draws sustenance broadly from the principles of Order XXXVIII Rule 5 of CPC.
The bench of Justice Yashvant Varma has held that the under Section 9 of the A&C Act, the Court would not order securing the sum in dispute in absence of necessary pleading and allegations that the respondent is making an attempt to defeat any Award that may be ultimately rendered in favour of the petitioner. It held that the Court would not grant such a relief unless the pre-conditions for grant of relief under Order XXXVIII of CPC are broadly satisfied by the petitioner.
Case Title: Zakir Hussain v. Sunshine Agrisystem Pvt Ltd, OMP (COMM) 249 of 2021
The High Court of Delhi has held that an award which blatantly misapplies the provisions of the Contract Law resulting in a perverse interpretation of the law, is liable to be set aside.
The bench of Justice Neena Bansal Krishna set aside an arbitral award wherein the arbitrator has misconstrued the law of reciprocal promises and bailment under the Indian Contract Act. It held that misapplication of the substantive law goes to the root of the matter and leads to a miscarriage of justice.
Case Title: Zakir Hussain v. Sunshine Agrisystem Pvt Ltd, OMP (COMM) 249 of 2021
The High Court of Delhi has held that an arbitrator should not refuse to take on record any additional material evidence merely on the ground of certain procedural ground such as non-payment of costs by the party tendering such evidence.
The bench of Justice Neena Bansal Krishna held that failure of the arbitrator to take on record important additional evidence merely on procedural grounds would be a ground to set aside the award. It held that such a decision would not just be violative of the principle of natural justice but also amounts to patent illegality. It also held that if a document is sought to be brought on record before the commencement of cross examination for that party, it would not result in any prejudice to the other party as it would have amble opportunity to address the documents in the rebuttal evidence.
The Court also explained the difference between ‘material facts’ and ‘material particulars’ to hold that it is only a material fact that must be present in the pleading and the absence of which would deny the party to lead an evidence on such a fact, however, a material particular, which is used to provide a material fact, need not be specifically mentioned in the pleading. It held when a material fact has been pleaded, an evidence in the form of a material particular cannot be refused on the ground of lack of pleading.
Case Title: Zakir Hussain v. Sunshine Agrisystem Pvt Ltd
Citation: 2023 LiveLaw (Del) 956
The Delhi High Court has held that the provisions of Uttar Pradesh Regulation of Cold Storages Act, 1976 does not exclude the remedy of arbitration.
The bench of Justice Neena Bansal Krishna held that the bar to arbitration or civil jurisdiction by necessary implication would apply only when the alternative remedy is a Complete Code in itself or provides a special statutory right or protection that the civil court or arbitral tribunal may not be able to grant.
It held that the Act of 1976, upon a holistic reading, does not provide any special right, remedy or procedure that cannot be sought before a civil court or arbitral tribunal as it merely provides that an informal mechanism for settlement of disputes under the Act, 1976 and there is neither any explicit or implied ouster of arbitral jurisdiction.
Case Title: BSNL v. Vihaan Networks Limited
Citation: 2023 LiveLaw (Del) 955
The Delhi High Court has held that A party is liable to be compensated for the costs of preparatory work carried out at the instance of the employer even when the final purchase order is not issued in its favour.
The bench of Justice Sachin Datta upheld an arbitral award wherein the arbitral tribunal had awarded compensation to a party on the ground that it had carried out certain preparatory works upon the instructions of the employer, therefore, it is liable to be compensated when the employer decides to not issue the final purchase order. It held that in such a scenario, the aggrieved party would have the right under Section 70 of the Indian Contract Act to claim compensation and mere absence of a concluded contract between the parties would be inconsequential.
No Fresh Adjudication Can Take Place For Any Claim That Was Made Part Of Resolution Plan: Delhi HC
Case IOCL v. Arcelor Mittal Nippon Steel India Limited
Citation: 2023 LiveLaw (Del) 954
The Delhi High Court has held that once a resolution plan is approved by the CoC and the adjudicating authority, it results in the extinguishment of all the existing claims that any party may have against the corporate debtor and no fresh adjudication can take place for any claim that was made part of the resolution plan.
The bench of Justice Yashwant Varma held that IBC does not contemplate matters being left inchoate but presses one to accept the seal of finality and quietude which stands attached to the approval of a Resolution Plan.
Case Title: BSNL v. Vihaan Networks Limited
Citation: 2023 LiveLaw (Del) 953
The Delhi High Court has held that absence of a contract would not deprive the contractor from a reasonable remuneration for the work performed.
The bench of Justice Sachin Datta held that the principle of quantum meruit is enshrined under Section 70 of the Indian Contract Act which demands that a party which has done work and incurred expenses at the instance of another party must be reimbursed notwithstanding the lack of a contract between them.
Case IOCL v. Arcelor Mittal Nippon Steel India Limited
Citation: 2023 LiveLaw (Del) 951
The Delhi High Court has held that any claim that has been settled under the resolution plan, even though at a nominal value of Rs. 1 only, would become non-arbitrable once the resolution plan is approved by CoC and affirmed by the adjudicating authority under the IBC.
The bench of Justice Yashwant Varma held that the doctrine of clean slate demands that the successful resolution applicant begins on a clean slate and is only bound to meet the claims that formed part of the resolution plan and cannot be burdened with the duty to defend or oppose claims which are either not factored in the Resolution Plan nor can it be left to fend off actions that may be brought with respect to alleged or asserted dues of the corporate debtor which were not admitted.
Award On Damages Cannot Be Sustained Just On Penalty Clause In Agreement: Delhi High Court
Case Title: Sudershan Kumar Bhayana (Deceased) v. Vinod Seth (Deceased)
Citation: 2023 LiveLaw (Del) 924
The Delhi High Court has held that an award of damages based on no evidence of loss cannot be sustained on the basis of a penalty clause in the agreement.
The bench of Justices Vibhu Bakhru and Amit Mahajan held that mere presence of a clause providing for liquidated damages does not dispense with the requirement of proof of loss from a party claiming damages.
The Court held that a party claiming damages for breach of contract has to plead and prove that as a consequence of such breach, it has suffered the damages and that mere presence of a penalty or liquidated damages clause would not entitle it to such damages unless the damages suffered are incapable of being proved.
Gujarat High Court
Case Title: InstaKart Services v. Megastone Logiparks Pvt Ltd, Petition under Arbitration Act no. 159 of 2022
LL Citation: 2023 LiveLaw (Guj) 168
The High Court of Gujarat has held that when wo agreements are co-terminus and their performance is interdependent, the arbitration clause in one agreement can be invoked for the other as well.
The bench of Chief Justice Sunita Agarwal held that when two agreements are integrally related to each other and the performance of one is dependent on the other, then the absence of an arbitration clause in one of such agreement would not be material as the arbitration clause contained in the other would govern both the agreements.
Case Title: InstaKart Services v. Megastone Logiparks Pvt Ltd, Petition under Arbitration Act no. 159 of 2022
LL Citation: 2023 LiveLaw (Guj) 168
The High Court of Gujarat has held that the place of arbitration is the venue and not the seat of arbitration when there is a contradictory exclusive jurisdiction clause.
The bench of Chief Justice Sunita Agarwal held that the place where the arbitration is stated to be conducted would be the venue of arbitration when the agreement contains an exclusive jurisdiction clause that confers exclusive jurisdiction on a court in a different place. It held that the presence of such an exclusive jurisdiction clause would be a contrary indicator which prevents the venue of being the seat of arbitration.
Gujarat High Court Invalidates Arbitral Awards Due To Unilateral Arbitrator Appointment By NBFCs
Case Title: M/S Rich And Royal Through Its Proprietor Mr. Ravindrabhai Rameshbhai Gamit Versus Authorised Officer , Hinduja Leyland Finance Ltd.
LL Citation: 2023 Livelaw (Guj) 171
In a pivotal ruling, the Gujarat High Court has quashed and nullified three arbitral awards where non-banking financial companies (NBFCs) unilaterally appointed sole arbitrators. The court's decision was in line with the Apex Court's stance on Section 12(5) of the Arbitration and Conciliation Act, 1996.
Justice Bhargav D Karia observed, “Thus, the Hon’ble Apex Court has held that a person having an interest in a dispute or in the outcome thereof is ineligible not only to act as an arbitrator but is also rendered ineligible to appoint anyone else as an arbitrator. It is an admitted position in each of the petition that the arbitration clause gave power and authority to the respondent NBFC unilaterally to appoint the sole arbitrator and accordingly the Sole Arbitrator was appointed unilaterally which is contrary to the decision of the Apex Court in the context of Section 12(5) of the Act read with Seventh Schedule thereof.”
Placing reliance on Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd., (2022) I SCC 75, the Court asserted that thus in the exceptional circumstances as emerging from the facts of these petitions, these petitions were entertained instead of relegating the petitioners to avail appropriate remedy under Section 34 of the Act.
Jammu & Kashmir and Ladakh High Court
Case Title: CRP FOOD IMPORT-EXPORT v. KASHMIR KESAR MART,
Citation: 2023 LiveLaw (JKL) 270
The High Court of Jammu & Kashmir High Court has held that filing of an English translated copy certified by an official or sworn translator satisfies the requirement of Section 47(2) of the A&C Act which provides that if an award is in a foreign language, a translated copy of the award is to be filed for the purpose of the enforcement of the foreign award and the same has to be certified by the Consular or Diplomatic agent of the award holder’s country.
The bench of Justice Rajnesh Oswal read the provision of Article V of the New York Convention into Article 47 of the A&C Act to hold that the English translated copy of the award certified as true by a sworn or an official translator of the Country in which the award is made would be sufficient compliance of Section 47 which ensures that no tempering with the award or any finding therein takes place while translating the same into English language.
The Court also held that part-II of the A&C Act, 1996 also applied to the erstwhile State of Jammu and Kashmir and that mere absence of Part-II from Section 1(2) of the A&C Act would not have the effect of excluding its applicability to erstwhile State of J&K.
Jharkhand High Court
Case Title: The State Project Director v. National Printers, LPA No. 505 of 2019
LL Citation: 2023 LiveLaw (Jha) 53
The Jharkhand High Court has held that an order passed by the MSEF Council dismissing a reference made under Section 18 of the MSMED Act as not maintainable, without conducting the conciliation or the consequent arbitral proceedings, is not an award which can be challenged under Section 34 of the A&C Act r/w Section 19 of the MSMED Act.
The bench of Justices Shree Chandrashekhar and Anubha Rawat Choudhary held that since the alternative remedy under Section 34 is not available in such a case, the aggrieved party can challenge the order of the MSEF Council directly in a writ petition.
The Court also held that an application under Section 18 of the MSMED Act can also be filed for the recovery of the interest amount only even if the principal amount has been paid, though belatedly. It held that once the liability to pay under the MSMED Act crystallizes, it is not erased by mere payment of the principal amount without the due interest, therefore, an application for the recovery of the interest only is maintainable.
Karnataka High Court:
Case Title: Karnataka State Highways Improvement Project AND M/s. KMC - VDB (JV)
Case No: WRIT PETITION NO. 29440 OF 2019
The Karnataka High Court has held that an arbitral award which does not deal with either movable property or immovable property, but awards damages payable to the award holder, does not attract stamp duty under the Karnataka Stamp Act, 1957.
Justice R Nataraj thus dismissed a petition challenging an order of the trial court rejecting its application seeking to impound the award of the arbitrator for non-payment of stamp duty by the respondent.
Case Title: Karnataka State Highways Improvement Project AND M/s. KMC - VDB (JV), W.P. No. 29440 of 2019
The Karnataka High Court has held that an arbitral award which does not deal with either movable property or immovable property, but awards damages payable to the award holder, does not attract stamp duty under the Karnataka Stamp Act, 1957.
Justice R Nataraj thus dismissed a petition challenging an order of the trial court rejecting its application seeking to impound the award of the arbitrator for non-payment of stamp duty by the respondent.
Madras High Court
MSEF Council’s Order Without Following Due Procedure Can’t Be Termed As Award: Madras High Court
Case Title: Feeback Infra Pvt Ltd v. MSEF Council, Chennai – W.P. No. 25062 of 2023
Citation: 2023 LiveLaw (Mad) 302
The High Court of Madras has held that an order passed by the MSEF Council without issuing notice of arbitration, opportunity to parties file their pleadings and recording evidence as per the provisions of A&C Act cannot be termed as award.
The bench of Justice S. Sounthar held that since such an order is not an award, it need not be challenged under Section 34 of the A&C Act r/w Section 19 of the MSMED Act as otherwise, the party aggrieved by such an order would have to deposit 75% of the awarded amount which would imbalance the equities.
