Arbitration Cases Weekly Round-Up: May 07 To May 13, 2023

Award Can Be Said To Be Suffering From 'Patent Illegality' Only If It Is An Illegality Apparent On The Face Of It : Supreme Court

Case Title: Reliance Infrastructure Ltd. vs State of Goa

The Supreme Court has observed that an award could be said to be suffering from “patent illegality” only if it is an illegality apparent on the face of the award and the award is not to be searched out by way of re-appreciation of evidence.

The narrow scope of “patent illegality” cannot be breached by mere use of different expressions which nevertheless refer only to “error” and not to “patent illegality”, the bench of Justices Dinesh Maheshwari and Sanjay Kumar observed while allowing appeals filed by Reliance Infrastructure Ltd.

2015 Arbitration Amendment Not Applicable Though S.11 Application Was Filed After It, If Arbitration Notice Was Issued Pre-Amendment: Supreme Court

Case Title: M/s. Shree Vishnu Constructions vs The Engineer in Chief Military Engineering Service & Ors.

The Supreme Court has ruled that where the notice invoking arbitration is issued prior to the coming into force of the Arbitration and Conciliation (Amendment) Act, 2015, i.e., prior to 23.10.2015, and the application under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act), seeking appointment of an arbitrator, is made post the enforcement of the Amendment Act, the 2015 Amendment Act shall not be applicable.

"It is observed and held that in a case where the notice invoking arbitration is issued prior to the Amendment Act, 2015 and the application under Section 11 for appointment of an arbitrator is made post Amendment Act, 2015, the provisions of pre-Amendment Act, 2015 shall be applicable and not the Amendment Act, 2015", the Court held.

Court Cannot, After Setting Aside Arbitration Award, Proceed To Grant Further Relief By Modifying Award : Supreme Court

Case Title: Indian Oil Corporation vs Sathyanarayana Service Station

The Supreme Court has observed that, in arbitration cases, a Court cannot, after setting aside the award, proceed to grant further relief by modifying the award.

High Courts:

Bombay High Court:

Illegality Of The Appointment Procedure Does Not Render The Entire Arbitration Agreement Invalid: Bombay High Court

Case Title: Sunil Kumar Jindal vs Union of India

The Bombay High Court has held that illegality of the appointment procedure does not render the entire arbitration agreement invalid.

The bench of Justice Avinash G. Gharote held that merely because the procedure for the appointment of the arbitrator under the arbitration agreement is rendered invalid on account of the insertion of Section 12(5) and the Supreme Court judgment in Perkins Eastman, the same would not make the entire arbitration agreement unworkable.

The Court held that the choice of getting the dispute resolved through arbitration is one thing and the choice of a specific arbitrator is another thing and both are severable and different from each other. It held that the Courts while dealing with an arbitration clause that has partially become invalid can sever the illegal part and retain the remaining portion when the intention to arbitration is evident.

Delhi High Court:

Delhi High Court Upholds Arbitral Award In Favour Of Reliance; Dismisses GOI’s Challenge Alleging Fraud And ‘Unjust Enrichment’ In Relation To Gas Extraction

Case Title: Union of India vs Reliance Industries Limited & Ors.

The Delhi High Court bench comprising Justice Anup Jairam Bhambhani has upheld the 2018 arbitral award passed in favour of Reliance Industries Limited (RIL) in an international commercial arbitration arising from a dispute between the conglomerate and the Ministry of Petroleum & Natural Gas, Government of India, under a ‘Production Sharing Contract’ (PSC) executed in 2000, involving the exploration and extraction of natural gas in the Krishna-Godavari Basin.

The High Court upheld the majority arbitral award passed by a three-member Arbitral Tribunal, which had ruled that Reliance was permitted to extract the migrated gas under the PSC and that the “Public Trust Doctrine” was not contravened.

Uttarakhand High Court:

Uttarakhand High Court Directs Facilitation Council Under MSMED Act To Educate Its Officers About Arbitration Law, To Avoid Flagrant Violation Of Arbitration Act

Case Title: M/s B.S. Polypack vs M/s Uttaranchal Agro Food Ruler Mills & Anr.

The Uttarakhand High Court has directed the Micro, Small and Medium Enterprises Facilitation Council to organize workshops and seminars to educate its officers, who undertake arbitration proceedings, to equip themselves with the law of Arbitration.

The court passed the said direction while hearing an appeal against the decision of the Commercial Court who had set aside the arbitral award passed by the Facilitation Council in the arbitration proceedings conducted under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act). Upholding the decision of the Commercial Court, the court ruled that the arbitral award was passed in breach of Section 23 and Section 18 of the A&C Act, which provides for grant of equal and full opportunity to each party to present the case.