Arbitration Weekly Round Up: 12th February to 18th February 2024
Rajesh Kumar
19 Feb 2024 8:00 AM GMT
Delhi High Court Allegation of Bias Can't Be Raised After Award Has Been Passed Under S. 31, Delhi High Court Dismisses S. 34 Application Case Title: Allied-Dynamic Joint Venture vs Ircon International Ltd, Delhi The Delhi High Court bench comprising Justice Pratibha M. Singh held that objections regarding bias against an arbitrator, as outlined in Section 12(5) of the...
Delhi High Court
Case Title: Allied-Dynamic Joint Venture vs Ircon International Ltd, Delhi
The Delhi High Court bench comprising Justice Pratibha M. Singh held that objections regarding bias against an arbitrator, as outlined in Section 12(5) of the Arbitration and Conciliation Act, 1996, cannot be raised after the arbitrator has rendered a decision under Section 31. The single bench emphasized that once an award has been made, raising allegations of bias amounts to a waiver under Section 4 of the Arbitration Act.
The High Court noted that the Agreement itself, under clause 72.2.3, provided a safeguard against bias by stipulating that if an employee is appointed as an arbitrator, he/she must not be connected with the work in question. Despite the Petitioner's claim of raising the issue of bias through letters, the High Court held that there was no formal adjudication or request for a change of arbitrator on grounds of bias by the Petitioner. Given these circumstances, it held that it would impermissible for the Petitioner to wait for the award to be rendered and then approach the High Court with allegations of bias against the arbitrator.
Case Title: Nitin Kwatra vs Stadhawk Services Pvt. Ltd. & Ors.
The Delhi High Court single bench of Justice Sachin Datta held that even if the agreement specifies exclusive jurisdiction on a different court, courts having jurisdiction over the seat of arbitration retain supervisory authority over the arbitral process. Therefore, it held that the presence of a generic exclusive jurisdiction clause does not diminish Delhi courts' jurisdiction as the seat of arbitration.
The High Court held that the jurisdiction of the courts overseeing the arbitration process is tied to the designated seat of arbitration. Even if a contract includes a clause conferring exclusive jurisdiction on a different court, when the arbitration clause specifies a venue, it held that this effectively designates the venue as the seat of arbitration. Therefore, the High Court held that courts having jurisdiction over the seat of arbitration retain supervisory authority over the arbitral process. It noted that the clause in the Letter of Agreement (LOA) purporting to confer exclusive jurisdiction was generic and did not specifically refer to arbitration proceedings. Consequently, it allowed the application under Section 11(6) of the Arbitration Act and appointed Praveen Pahuja as the sole arbitrator to adjudicate the disputes between the Petitioner and Respondent No. 1.
Case Title: Sanjay Kumar Verma vs Planning And Infrastructural Development Consultants Pvt. Ltd.
The Delhi High Court bench comprising Justice Sanjeev Narula held that the intention of the parties to grant exclusive jurisdiction can be derived from the language of the arbitration clause even in the absence of the usage of the term “seat” in the arbitration clause. The bench held that if there is an agreement explicitly or impliedly stating a seat of arbitration, the exclusive jurisdiction is upon the court of the seat to appoint an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.
Upon analyzing the language of the arbitration clause, the High Court concluded that it signified a mutual agreement designating Patna as the place of arbitration. Despite the absence of the explicit term 'seat' in the clause, the parties' intent to establish Patna as the arbitration venue was clear. This interpretation aligned with the principle of party autonomy enshrined in Section 20 of the Arbitration Act, which mandates honouring the parties' consensus on such matters. Therefore, the High Court determined that Patna was indeed the designated seat of arbitration, depriving it of jurisdiction to adjudicate the petition.
Case Title: JKG Infratech Private Limited vs Larsen and Toubro Limited
The Delhi High Court bench comprising Justice Prateek Jalan held that registration under the MSME Act is a prerequisite for availing its benefits, and such benefits cannot be claimed retrospectively for contracts entered into before registration. The bench held that the Micro and Small Enterprises Facilitation Council doesn't have the power to entertain the dispute under Section 18 of the MSME Act for the claims which arose before registration. Therefore, the Council was not empowered to refer the parties to arbitration.
Case Title: State Trading Corporation Of India Ltd vs Micro And Small Enterprises Facilitation Council Delhi And Anr.
The Delhi High Court division bench of the Acting Chief Justice Manmohan and Justice Manmeet Pritam Singh Arora held that a party cannot file a writ petition under Article 226/227 challenging the arbitration award under Micro, Small, and Medium Enterprises Development Act, 2006 without taking recourse to a statutory remedy for challenging an award under Section 34 of the Arbitration and Conciliation Act, 1996. The bench noted that recourse is subjected to the requirement of pre-deposit of the award under Section 19 of the 2006 act.
The High Court disapproved of the stand taken by some High Courts that any order passed by the arbitral tribunal can be corrected by the High Court under Article 226 or 227. It advocated for minimizing judicial intervention during the arbitration process, stating that parties should generally wait until the award is pronounced, except in cases where a right of appeal is available under Section 37 under Arbitration Act. Consequently, it dismissed the appeal.
Case Title: Vedanta Limited vs Shreeji Shipping.
The Delhi High Court single bench of Justice Jasmeet Singh held that if an arbitration agreement stipulates multiple seats of arbitration, thereby, offering a choice to the parties is not void under Section 29 of the Indian Contract Act, 1872 declares agreements uncertain in meaning or incapable of being made certain as void.
The High Court referred to the decision of the Supreme Court in Indus Mobile Distribution (P) Ltd. v. Datawind Innovations (P) Ltd., [(2017) 7 SCC 678], and held that designating the seat of arbitration is akin to an exclusive jurisdiction clause. It clarified that once the seat is determined, it vests exclusive jurisdiction with the courts of that seat for regulating arbitral proceedings arising from the agreement between the parties. Hence, considering that the arbitration clause specified three potential seats, the High Court upheld its jurisdiction to entertain and decide the Section 11 petition.
Bombay High Court
Case Title: Nilesh Shejwal vs Agrowon Agrotech Industries Pvt. Ltd.
The Bombay High Court single bench comprising Justice Bharati Dangre held that due to an evolution in contemporary arbitration where there was a belief that fraud disputes were unsuitable for arbitration, today, arbitral tribunals routinely navigate through extensive material in various dispute types. Thus, it held that the previous notion of fraud being non-arbitrable due to complexity is archaic and no longer applicable in modern arbitration practices.
The High Court emphasized the distinction between rights in rem, which are adjudicated by courts or statutory tribunals as they pertain to rights exercisable against the world at large, and actions in personem, which determine the rights and interests of parties to the subject matter of disputes and are arbitrable. Contrary to past views that fraud disputes involving voluminous evidence were unfit for arbitration, the High Court noted that there is an evolution of contemporary arbitration practice, wherein arbitral tribunals routinely navigate through extensive material in various dispute types. Thus, it held that the previous notion of fraud being non-arbitrable due to complexity is archaic and no longer applicable in modern arbitration practices.
Gujarat High Court
Case Title: Poll Cont Associates vs Narmada Clean Tech Ltd.
The High Court of Gujarat single bench of Chief Justice Sunita Agarwal allowed a Section 11 application of the Arbitration and Conciliation Act seeking the appointment of an Arbitrator. It refuted the contention of the Respondent that the dispute had become non-arbitrable because the Petitioner had issued a 'No Claim Certificate' earlier, making the dispute 'stale' in nature.
The bench reiterated that it could only carry on a prima-facie assessment as a general rule of law and the decision on arbitrability lies primarily within the Arbitrator's ambit.
At the outset, the High Court refuted the Respondent's contention that the disputes are no more arbitrable because they've become 'stale'. In this regard, the High Court referred to the 'Eye of the Needle' principle propounded by the Supreme Court in NTPC Limited vs SPML Infra Limited, which means that the jurisdiction of the courts under Section 11(6) of the Arbitration Act is very narrow and warrants just two inquiries. The primary inquiry has to be whether an arbitration agreement existed between the parties (this includes the question of privity of contract) and the secondary inquiry has to be whether the dispute is arbitrable. The High Court further clarified that arbitrability of the dispute, as a general rule, also lay under the Arbitrator's ambit. However, the referral court may reject claims which are ex-facie and manifestly non-arbitrable.
Calcutta High Court
Case Title: Rolta Infrastructure and Technology Services Private Limited vs Department of Information Technology And Electronics, Government of West Bengal
The Calcutta High Court single bench of Justice Moushumi Bhattacharya held that there exists no conflict between the Arbitration and Conciliation Act, 1996, and the provisions of The West Bengal Public Land (Eviction of Unauthorised Occupants) Act, 1962. It held that both statutes operate within distinct domains and do not overlap in their scope or application.
Addressing potential conflicts with other statutes, the Court rejected arguments suggesting conflict between the Arbitration Act, and the West Bengal Public Land (Eviction of Unauthorised Occupants) Act, 1962. It asserted that both statutes operate independently, and the former does not override the latter. Moreover, the High Court disagreed with contentions regarding the exclusivity of the judicial authority under the 1962 Act, noting that there is no statutory prohibition on invoking arbitration clauses even when proceedings are initiated under the 1962 Act.
Case Title: Tarit Mitra and Anr. vs Sharad Goenka
The High Court of Calcutta bench comprising Justice Sugato Majumdar adjudicated on a matter involving a civil suit for possession of premises from the tenants and an application made under Section 8 of the Arbitration and Conciliation Act, 1996 by the tenants seeking to refer the dispute to arbitration based on the tenancy agreement which had expired a few years ago and was not novated or renewed. The High Court emphasized that while the tenancy may be established by conduct, arbitration cannot be inferred from the parties' conduct alone. Therefore, it was concluded that there existed no arbitration agreement within the meaning of Section 7 of the Act.
The High Court further noted that there was no explicit agreement showing that disputes related to tenancies should be resolved through arbitration. Additionally, the other two incidental agreements were not renewed, and there was no written indication that disputes between the parties should be referred to arbitration, as required by Section 7 of the Arbitration and Conciliation Act, 1996. It emphasized that while a tenancy may be established by conduct, arbitration cannot be inferred from the parties' conduct alone. The original agreement had a clause stating that disputes under the tenancy agreement should be referred to arbitration, but as the tenancy was renewed and novated, the parties were not in agreement regarding the applicability of the arbitration clause.
Telangana High Court
Case Title: Athelli Mallikarjun and others vs S.S.B Constructions, Registered Partnership Firm, Secunderabad and another.
The Telangana High Court single bench comprising Justice CV Bhaskar Reddy held that the mere exchange of communications or settlement discussions between the parties does not extend the period of limitation for issuing a notice of arbitration. The bench held that mere negotiations do not delay the cause of action for the purpose of limitation.
The High Court held that since the Arbitration Act does not specify the limitation period for filing an application under Section 11, recourse must be taken to the Limitation Act, 1963. The High Court noted that the notice invoking arbitration issued by the Applicants was over five years after the rejection of their claims by the Respondent. It noted that the period of limitation for such notices begins immediately after the rejection of final bills, pursuant to Article 55 of the Schedule of the Limitation Act. It highlighted the necessity for a clear notice invoking arbitration, setting out the particular dispute within three years from the rejection of a final bill.
Case Title: M/s Naolin Infrastructure Private Ltd. vs M/s Kalpana Industries
The Telangana High Court single bench of Justice Alok Aradhe held that the requirement under Section 8(1) of the Arbitration and Conciliation Act, 1996 to inform the court regarding the existence of an arbitration clause is fulfilled when a party files an application for rejection of plaint under Order VII Rule 11 of the Code of Civil Procedure, 1908 in a commercial court.
The High Court noted that the essence of Section 8(1) of the Arbitration Act is to bring to the notice of the court the existence of an arbitration agreement between the parties involved. Referencing the decision of the Supreme Court in the case of Sundaram Finance Ltd. vs Abdul Samad [AIR 2018 SC 965], the High Court held that once an application is made under Section 8 of the Arbitration Act, the approach of the civil court should not centre around jurisdiction but rather on whether its jurisdiction has been ousted. It stressed the importance of adhering to the procedures outlined in special statutes, stating that general law should yield to special law. Further, it held that failure to do so could delay dispute resolution and exacerbate the complexity of grievances.
Case Title: Sri Gourishetty Srinivas vs M/s Karvy Data Management Services
The Telangana High Court bench comprising Justice K Lakshman held that the court can refer a dispute to arbitration unless a party could establish a prima facie case of the non-existence of a valid arbitration agreement. The bench held that in cases where doubt arises regarding the validity of the arbitration agreement, the matter should be referred and decided by the arbitrator.
The High Court, after referring to the arbitration clause and the existence of a dispute regarding rent payment between the parties, observed that an arbitration clause was indeed present in the agreement. Referring to the decision of the Supreme Court in Vidya Drolia v. Durga Trading Corporation [(2021) 2 SCC 1], where the Supreme Court laid down principles for exercising power under Section 11 of the Arbitration and Conciliation Act, 1996. The High Court emphasised the court's role in referring matters to arbitration unless a party could establish a prima facie case of the non-existence of a valid arbitration agreement.
Madhya Pradesh High Court
Case Title: M/s Master Point and Anr. vs Smt. Sandhya Chouhan
The High Court of Madhya Pradesh bench comprising Justice Sushrut Arvind Dharmadhikari and Justice Devnarayan Mishra refused to exercise the writ jurisdiction of the High Court under Article 226/227 of the Indian Constitution for a matter involving dismissal of an application made to an Arbitrator under Section 16(3) of the Arbitration and Conciliation Act, 1996 by the Petitioner. The High Court held that a writ petition under Article 226/227 of the Indian Constitution is not maintainable against every order passed by an arbitral tribunal unless exceptional circumstances or 'bad faith' on the opposite party's part has been shown in the petition. The Petitioner was set at liberty to avail remedy after the pronouncement of the final award.
Jammu & Kashmir and Ladakh High Court
Case Title: Babu Ram vs Tata Project Ltd. Residential Manager and Ors.
The Jammu & Kashmir and Ladakh High Court bench comprising Chief Justice N. Kotiswar Singh affirmed that when parties specify a particular location as the venue for arbitration proceedings, that location effectively becomes the seat of arbitration. Consequently, only courts with jurisdiction over that designated venue possess the authority to hear and decide on matters pertaining to the arbitration agreement. Therefore, the bench dismissed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 for the appointment of an arbitrator noting that the arbitration clause specified Hyderabad is the seat of arbitration, thereby, excluding its jurisdiction to entertain the application.
The High Court referred to the decision of the Supreme Court in BGS SGS Soma JV v. NHPC, (2020) 4 SCC 234, and reinforced the interpretation of arbitration clauses with designated venues as indicating the "seat" of arbitration. The High Court noted that the term "venue" in arbitration clauses refers to the "seat" of arbitration, signifying not only the location for hearings but the overall conduct of the arbitration proceedings. This interpretation aligns with Section 20 of the Arbitration Act, wherein parties have the autonomy to select the place of arbitration.
Case Title: J.K. Sthapak vs Satish Kumar Saxena and Anr.
The High Court of Madhya Pradesh bench comprising Justice Achal Kumar Paliwal dismissed a revision petition seeking to invoke Section 8 of the Arbitration and Conciliation Act, 1996 based on a dispute related to the transfer of cheques under a partnership deed. The arbitration clause in the deed was about disputes arising between the parties, touching the firm's business or interpretation of any subsequent provisions relating to the firm and its business. The High Court noted there was no record suggesting that the mentioned amount was provided to the Petitioner concerning the partnership's business. As a result, the High Court concluded that Clause 22 of the partnership deed, which pertained to arbitration in business-related disputes, would not be applicable in this case.
The High Court observed that two cheques out of three were issued from the firm's account and one cheque was issued from the Respondent's account. The High Court further noted that even prima facie, there was no evidence to demonstrate that Rs. 22 Lakh was given to the Plaintiff from the firm's account. Consequently, there was no record suggesting that the mentioned amount was provided to the Petitioner concerning the partnership's business. As a result, the High Court concluded that Clause 22 of the partnership deed, which pertained to arbitration in business-related disputes, would not be applicable in this case.
Karnataka High Court
Case Title: H R Satyanarayana vs H C Suresha and Others.
The Karnataka High Court single bench comprising Justice MG Uma held that when a Civil Court refers the parties to arbitration and appoints an arbitrator without invoking Section 11 of the Arbitration and Conciliation Act, 1996, the award merges with the decree accepted by the court, therefore, doesn't warrant to be registered and drawn on a stamp paper.
The High Court reiterated that when a Civil Court passes a decree and the decree-holder seeks execution, the Executing Court cannot exceed its jurisdiction. Even if the award by the arbitrator is considered, it merges with the decree accepted by the Appellate Court, and the Executing Court's role is limited to executing the decree in accordance with procedural law. Therefore, the High Court found that the Executing Court erred in its finding that the decree was an arbitral award, and it exceeded its jurisdiction.
Case Title: M/s. ICDS Ltd vs Sri Bhaskaran Pillai and Others.
The Karnataka High Court single bench of Justice HP Sandesh held that even if an arbitration agreement erroneously refers to the 1940 Act after the enactment of the 1996 Act, it does not render the agreement invalid. It held that arbitral proceedings initiated under it before the enactment of the 1996 Act could continue under the old Act unless the parties agreed otherwise.
The High Court held that despite the repeal of the 1940 Act, arbitral proceedings initiated under it before the enactment of the 1996 Act could continue under the old Act unless the parties agreed otherwise. Conversely, proceedings initiated after the enactment of the 1996 Act would be governed by its provisions. The High Court noted that references to the 1940 Act in arbitration agreements made after the enactment of the 1996 Act would not render the agreements invalid. Even if such agreements erroneously referred to the provisions of the 1940 Act, they would still be governed by the 1996 Act.
