Arbitration Weekly Round Up: 22nd January to 28th January 2024

Reduction Of Interest Is Nothing But Modification Of Original Arbitration Award: Allahabad High Court Quashes Section 34 Order

Case Title: Sushil Kumar Mishra vs. State Of U.P. And Another 2024 LiveLaw (AB) 44

The Allahabad High Court has held that the District Judge exercising jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996 does not have the power to modify an award. The Court held that though parts of an award can be severed and set aside, provided such severance does not affect the remaining award.

“Reduction of interest is nothing but a modification of the original arbitration award, and accordingly, the same is illegal and against the principles established by the Supreme Court,” held Justice Shekhar B. Saraf relying on the decision of Supreme Court in on Larsen Air Conditioning and Refrigeration Company Vs. Union of India and others.

Quashing the order of the District Judge reducing the rate of interest awarded by the Arbitrator, the Court held:

“It is trite law, settled by a catena of Supreme Court judgements that the Court does not have the power under Section 34 of Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") to modify an award. The Court under Section 34(2) of the Act has the power to sever parts of the award and set aside the same in toto, if the severance does not impact the remaining award that is upheld under Section 34 of the Act.”

Delhi High Court

Delhi High Court Halts PCA Arbitration Over Arbitrator Appointment Breach

Case Title: Techfab International Pvt Ltd v. MIDIMA Holdings Limited, CS(COMM) 50 of 2024

The High Court of Delhi has stayed a PCA Arbitration between an African and an Indian Entity due to the constitution of the tribunal in violation of the arbitration agreement.

The bench of Justice Anup J. Bhambhani, dealing with a suit seeking anti-arbitration injunction and an application seeking ad-interim injunction, restrained the defendant from proceeding further with the arbitral proceedings in PCA Case No. AA773.

The Court held that consent of the parties is one of the cardinal principles of arbitration, therefore, the agreed procedure for the appointment of the arbitrator must be scrupulously followed.

Mere Reference Of Dispute To Arbitration Does Not Preclude The High Court From Examining Issue Of Stamp Duty In A Writ Petition: Delhi High Court

Case Title: Mrs. Vinnu Goel v. Deputy Commissioner of Stamp Registration & Ors, WP(C) 9291 of 2023

The High Court of Delhi has allowed a writ petition enabling the petitioner to approach the Chief Controlling Revenue Authority to adjudicate/decide on the amount payable on the instrument despite the reference of the dispute arising out of the instrument to arbitration under Section 8 of the A&C Act.

The bench of Justice Subramonium Prasad held that merely because the arbitral tribunal is empowered to carry out the same exercise, it cannot deprive the High Court from entertaining a writ petition to determine if the state has been deprived of the revenue or not.

Group Of Companies Doctrine Cannot Be Applied To Directors Of A Company To Make Them A Party To Arbitration: Delhi High Court

Case Title: Vingro Developments Pvt Ltd v. Nitya Shree Developers Pvt Ltd, Arb.P. 667/2023

The High Court of Delhi has held that directors of a company cannot be made parties to arbitration through 'Group of Companies' doctrine. It held that the relationship between the company and its director(s) is that of the 'Principal' and 'Agent' as defined under Section 182 of the Indian Contract Act.

The bench of Justice Dinesh Kumar Sharma held that in terms of Section 230 of the Indian Contract Act, the agent cannot be made personally liable for acts carried out on behalf of the principal.

A Party Cannot Challenge An Arbitral Award After Receiving Amount Payable Under It: Delhi High Court

Case Title: M/s K.S. Jain Builders v. Indian Railway Welfare Organisation, OMP(COMM) 456 of 2022

The High Court of Delhi has held that a party that has received payment in terms of an arbitral award cannot challenge the award with respect to the disallowed claims.

The bench of Justice Sanjeev Narula held that acceptance of payments under the award would estop a party from challenging the award. It held that party after receiving payment cannot repudiate part award detrimental to it.

Award Cannot Be Challenged On Ground Of Unilateral Appointment Of Arbitrator If Appointment Was Not Contested Earlier: Delhi High Court

Case Title: Arjun Mall Retail Holdings Pvt Ltd v. Gunocen Inc, FAO(COMM) 31 of 2021

The High Court of Delhi has held that a party cannot challenge an arbitral award on the ground of the unilateral appointment of the arbitrator if it did not challenge the appointment at an earlier stage.

The bench of Justices Suresh Kumar Kait and Neena Bansal Krishna upheld an arbitral award passed by a unilaterally appointed arbitrator by observing that aggrieved party did not challenge the award at an earlier stage either by filing an application under Section 11(6) or an application under Sections 13&14 of the A&C Act.

Madhya Pradesh High Court

Order Of Arbitrator Rejecting Application U/S 16 Of The A&C Act Cannot Be Challenged In A Writ Petition: Madhya Pradesh High Court

Case Title: Suncity Dhoot Colonizers v. Ram Chandra, W.P. No. 28151 of 2023

The High Court of Madhya Pradesh held that an order of the arbitral tribunal rejecting a challenge to its jurisdiction under Section 16 of the A&C Act is not challengeable in a writ petition.

The bench of Justice Sushrut Arvind Dharmadhikari held that a party aggrieved by the rejection of its application under Section 16 of the AC& Act has to wait till the passing of the final award and then challenge the award under Section 34 of the Act including the ground of lack of jurisdiction of the arbitral tribunal.