Arbitration Cases Weekly Round-Up: 14 To 20 May, 2023

Referral Court Has Duty To Conclusively Decide Issue Of ‘Existence & Validity Of Arbitration Agreement’ Raised At Pre-Referral Stage: Supreme Court

Case Title: Magic Eye Developers Pvt. Ltd. vs M/s. Green Edge Infrastructure Pvt. Ltd. & Ors.

The Supreme Court has held that under Section 11(6) of the Arbitration and Conciliation Act, 1996, when the issue of ‘existence and validity of an arbitration agreement’ is raised at pre-referral stage, then the Court is duty bound to conclusively decide the issue. If the issue regarding ‘existence and validity of an arbitration agreement’ is left to the Arbitral Tribunal, then it will be contrary to Section 11(6A) of the Arbitration Act. This is to protect the parties from being forced to arbitrate in absence of a valid arbitration agreement.

The Bench comprising of Justice M.R. Shah and Justice C.T. Ravikumar has observed that the ‘pre-referral’ jurisdiction of Court under Section 11(6) of Arbitration and Conciliation Act, 1996 consists of two inquiries, (i) existence and validity of arbitration agreement; and (ii) non-arbitrability of dispute.

High Courts:

Calcutta High Court:

Arbitration: Calcutta High Court Allows S. 11 Application Being Consolidated Claim Under Different Purchase Orders Linked To A Single Main Contract

Case Title: Godrej & Boyce Mfg. Co. Ltd vs Shapoorji Pallonji and Company Pvt Ltd

The Calcutta High Court has ruled that a single composite invocation of arbitration under Section 21 of the Arbitration and Conciliation Act, 1996 (A&C Act), pertaining to a consolidated claim arising out of three different Purchase Orders, containing separate arbitration clauses, cannot be labelled as invalid or unlawful.

The court made the observation while noting that all the Purchase Orders, though issued at different times, were a sub-set of the respondent’s performance of a single Main Contract. Further, the relevant clauses of the Purchase Order established a link between the liabilities arising out of the Purchase Orders and the Main Contract, and contained identically worded arbitration clauses.

Delhi High Court:

Arbitral Award Passed After Inordinate, Unexplained Delay Is Contrary To Justice and Public Policy: Delhi High Court

Case Title: Department of Transport, GNCTD vs Star Bus Services Pvt Ltd

The Delhi High Court has ruled that an arbitral award passed after an inordinate, substantial and unexplained delay would be “contrary to justice and would defeat justice”. Consequently, the same would also be in conflict with the public policy of India.

The bench of Justice Chandra Dhari Singh said that a substantial delay in making the award cannot be a regular phenomenon and that the Arbitrator must use reasonable despatch in conducting the proceedings and making an award. He further observed that the question whether the delay in pronouncement of the arbitral award places it in conflict with the public policy of India, must be construed in the facts of each case.

Issues Falling Within The Exclusive Jurisdiction Of Estate Officer Under The Public Premises Act, Are Non-Arbitrable: Delhi High Court

Case Title: S.S. Con-Build Pvt Ltd vs Delhi Development Authority

The Delhi High Court has ruled that the disputes relating to determination of a lease or the arrears of rent payable in respect of public premises, are questions statutorily mandated to be determined exclusively by the Estate Officer under the Public Premises (Eviction of Unauthorised Occupants) Act, 1971 (PP Act). Thus, the same are non-arbitrable.

The bench of Justice Yashwant Varma observed that the PP Act was enacted for the purpose of setting up a speedy machinery for eviction of persons found to be in unauthorized occupation of public premises. Further, Section 15 of the PP Act ousts the jurisdiction of courts in respect of eviction of persons from public premises and in relation to other connected aspects.

The court remarked that though the Estate Officer under the PP Act is not entitled to go into questions of competing ownership, all other issues of determination which relate to the occupation of public premises and questions incidental to it, would clearly fall within the exclusive jurisdiction of the Estate Officer. Thus, the same are non-arbitrable.

Issue Of Full And Final Settlement Of Dispute Is A Question Of Fact Which Has To Be Decided By The Arbitrator: Delhi High Court

Case Title: Radnik Exports vs Supertech Realtors Pvt Ltd

The Delhi High Court has held that an issue of full and final settlement of dispute between the parties will be a question of fact which has to be decided by the arbitrator.

The bench of Justice Navin Chawla held that the Court while exercising powers under Section 11 of the Arbitration and Conciliation Act, 1996 cannot determine a disputed question of fact as its jurisdiction is confined to a prima facie conclusion of the existence of the arbitration agreement.

Orissa High Court:

Orissa High Court Allows Writ Petition Against Arbitrator’s Order Directing Evaluation Of Assets, Being Expansion Of Scope Of Reference

Case Title: Santosh Kumr Acharya vs Ratinakar Swain

The Orissa High Court has set aside the order passed by the Arbitral Tribunal under Section 26 of the Arbitration and Conciliation Act, 1996 (A&C Act), where the Tribunal had directed the appointment of an expert evaluator for evaluating the assets of the counter-claimant in the arbitral proceedings involving money claims.

While noting that the claims and counter claims raised by the parties were simply money claims, the bench of Justice Arindam Sinha held that expanding the scope of the arbitral reference by including evaluation of assets, would expose the petitioner to the risk of an award being passed beyond the four corners of the reference.

The court said that in the event there is an expansion of the scope of reference by the Arbitral Tribunal, there is no provision in Section 26 of the A&C Act to add the same as a ground of challenge under Section 34; thus, rendering the party remediless.