Arbitration Cases Weekly Round-Up: March 5 To March 11, 2023

Arbitration Clause Can Be Invoked By Assignee Of Rights Under Contract: Bombay High Court

Case Title: M/s. Siemens Factoring Pvt Ltd vs. Future Enterprises Pvt Ltd

The Bombay High Court has ruled that an arbitration agreement is assignable, just as any other contract, and where the obligations and rights under an Agreement, containing an arbitration clause, are assigned in favour of an assignee, the remedy of arbitration would also stand assigned in its favour.

The bench of Justice Bharati Dangre held that there was no need of separate execution of an arbitration agreement between the parties in view of the fact that all the rights in favour of the original party to the arbitration agreement (assignor) had been assigned in favour of the assignee/ claimant, and the said assignment was specifically acknowledged by the opposite party.

Delhi High Court:

Former CJI Justice N.V. Ramana Appointed As Arbitrator In Dispute Between DMRC And Arvind Techno Globe

Case Title: Arvind Techno Globe JV vs. Delhi Metro Rail Corporation Ltd

The Delhi High Court has referred the disputes between the Delhi Metro Rail Corporation Ltd (DMRC) and M/s Arvind Techno Globe (JV) in relation to a construction contract to arbitration, appointing Justice N.V. Ramana, former Chief Justice of India, as the Sole Arbitrator to adjudicate the disputes between the parties.

The bench of Justice Chandra Dhari Singh was dealing with a petition filed under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act) by the petitioner, Arvind Techno Globe, seeking appointment of an independent sole arbitrator. The petitioner argued that the DMRC, by asking the petitioner to choose an arbitrator from a panel of 5 names outlined by it, failed to appoint an independent arbitral tribunal in accordance with Section 12(5) of the A&C Act.

Noting that the dispute before it was limited to the extent of appointment of an independent arbitrator, the Court appointed Justice N.V. Ramana as the Sole Arbitrator and referred the parties to arbitration.

Delhi High Court Refers Claims Against Essel Group Companies under ‘Letters Of Comfort’ To Arbitration

Case Title: Aditya Birla Finance Limited vs. Siti Networks Limited & Ors.

The Delhi High Court has ruled that the statements made by a party in a ‘Letter of Comfort’, assuring the creditor that it shall ensure that the debtor repays the loan on the relevant due dates, are promissory in character and thus enforceable, even if they do not meet the requirement of Section 126 of the Indian Contract Act, 1872 which deals with the Contract of Guarantee.

The bench of Justice V. Kameswar Rao thus referred the claim raised by the petitioner/ claimant, Aditya Birla Finance Ltd, seeking compliance with the ‘Letters of Comfort’ issued by Zee Entertainment Enterprises Ltd and Essel Corporate LLP, in relation to a loan availed by their group company, Siti Networks Ltd, to arbitration.

The Court invoked the doctrine of ‘Group of Companies’ to refer the parties to arbitration, noting that Siti Networks, Zee Entertainment and Essel Corporate are part of the Essel Group of companies and are related parties.

Delhi High Court Restrains Invocation of Bank Guarantee Since Party Had Arbitral Awards In Its Favour Under Contract

Case Title: Hindustan Construction Co. Ltd. vs. National Hydro Electric Power Corporation Ltd

The Delhi High Court has ruled that the existence of any dispute between the parties to the contract is not a ground for issuing an injunction to restrain the enforcement of an unconditional bank guarantee. The Court was dealing with a petition under Section 9 of the Arbitration and Conciliation Act, 1996 (A&C Act) seeking to restrain the opposite party from invoking/ encashing the Performance Bank Guarantee.

The bench of Justice Chandra Dhari Singh held that since the petitioner had arbitral awards with respect to the Construction Project in its favour, where the counter-claims of the opposite party-who sought to invoke the bank guarantee-had been dismissed, there were special equities in petitioner’s favour, which is an exception to the rule that a bank must always honour the terms of an unconditional and irrevocable bank guarantee.

Arbitrator Must Serve Sufficient Notice Before Proceeding Ex-Parte Against Party: Delhi High Court

Case Title: M/s Mittal Pigments Pvt Ltd vs. M/s GAIL Gas Ltd

The Delhi High Court has set aside an ex-parte Arbitral Award on the ground that the Arbitrator failed to issue proper communication to the party before proceeding ex-parte against it and that it failed to make adequate efforts to examine whether the absence of the party was with or without showing sufficient cause.

The bench of Justice Chandra Dhari Singh held that under the Arbitration and Conciliation Act, 1996 (A&C Act), it has always been preferred and encouraged that an Arbitrator provides a pre-emptory notice to any party against whom it is seeking to proceed ex-parte, even though the same has not been stipulated under the A&C Act in clear terms.

Section 34 Arbitration Petition Filed In Anticipation Of Approval By Authority Not Valid : Delhi High Court

Case Title: NHAI vs. Patel-KNR (JV)

The High Court of Delhi has held that a petition filed under Section 34 of the A&C Act is not a valid filing if it is filed without or in anticipation of the final approval. The bench of Justice Navin Chawla was dealing with a petition by National Highways Authority of India (NHAI) challenging an arbitration award passed against it, however, admittedly the petition was filed by its counsel in anticipation of its final approval. Moreover, the petition was not accompanied by a copy of the award and the date of the impugned award was also wrongly mentioned at certain places.

The Court thus held that a petition which is filed in anticipation of the final approval and without the copy of the award and vakalatnama, and with several other defects regarding the statement of truth, is a non-est filing.

All The Members Of A ‘Joint Venture’ Are Jointly And Severally Liable To Third Parties; No Need To Separately Make Individual Members A Party To Arbitration: Delhi High Court

Case Title: ITD Cementation India Limited vs. SSJV-ZVS Joint Venture

The High Court of Delhi has held that all the members of a ‘joint venture (JV)’ are jointly and severally liable to the third parties with which the JV enters into an agreement.

The bench of Justice Yashwant Varma held that a JV is a quasi-partnership wherein two or more entities may come together and jointly undertake a particular transaction or contract for mutual profit. It held the parties to a JV agreement may provide for different rights or obligations amongst themselves, however, this arrangement inter se parties would not have any effect on the right of a third party to proceed jointly or severally against any individual member of the JV.

The Court also held that when the JV is made a party before an arbitral tribunal, all its members are bound by the result of the arbitral award and there is no requirement to separately array individual members.

Issue Whether The Dispute Pertains To The Agreement Containing Arbitration Clause Or Not, To Be Decided By Arbitrator: Delhi High Court

Case Title: Newton Engineering and Chemicals Ltd vs. UEM India Pvt Ltd

The Delhi High Court has ruled that the issue whether the disputes between the parties have arisen under the Memorandum of Understanding (MoU) containing an arbitration clause, or the subsequent work orders issued to the party, which are devoid of any arbitration clause, or whether they are related to both, can be looked into by the Arbitrator who can rule on his own jurisdiction in terms of Section 16 of the Arbitration and Conciliation Act, 1996 (A&C Act).

Telangana High Court:

Once Decision Is Made In A S. 34 Application, Court Has No Power To Remit Matter To Arbitrator: Telangana High Court

Case Title: M/s. Sri Rama Constructions vs. M/s. Max Infra (I) Ltd

The Telangana High Court has ruled that once a decision is made in an application filed under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act), the Court has no power to remit the matter back to the Arbitrator under Section 34(4).

The bench of Justices P. Naveen Rao and J. Sreenivas Rao observed that since the Arbitrator had failed to frame an issue on the counter-claims made by the party and had failed to consider all the documents filed before him, the award was not sustainable and was set aside under Section 34. After the said decision was made in the Section 34 application, the issue of remitting the matter to the Arbitrator does not arise, the Court said.