Arbitration Weekly Round-Up: 4th December To 10th December
Ausaf Ayyub
13 Dec 2023 12:17 PM GMT
Supreme Court Principle Of 'Alter Ego' Or 'Piercing Corporate Veil' Not The Basis For 'Group Of Companies' Doctrine: Supreme Court Case: Cox and Kings Ltd v. SAP India Pvt Ltd | ARBIT. PETITION No. 38/2020 Citation: 2023 LiveLaw (SC) 1042 While approving the 'group of companies' doctrine in the arbitration law jurisprudence, the Supreme Court clarified that the principle...
Supreme Court
Case: Cox and Kings Ltd v. SAP India Pvt Ltd | ARBIT. PETITION No. 38/2020
Citation: 2023 LiveLaw (SC) 1042
While approving the 'group of companies' doctrine in the arbitration law jurisprudence, the Supreme Court clarified that the principle of "alter ego" or "piercing the corporate veil" cannot be the basis for applying this doctrine.
The Constitution Bench comprising Chief Justice of India DY Chandrachud, Justice Hrishikesh Roy, PS Narasimha, JB Pardiwala and Manoj Misra was answering a reference which doubted the "group of companies" doctrine which allows non-signatory companies to be bound by arbitration agreement.
The judgment, authored by CJI Chandrachud, explained that the "group of companies" doctrine does not dilute the separate corporate identity of different companies; its application is based on the conduct of non-signatories, which indicate an intention to be bound by the arbitration agreement.
Arbitration Agreement Can Bind Non-Signatories: Supreme Court Upholds 'Group Of Companies' Doctrine
Case: Cox and Kings Ltd v. SAP India Pvt Ltd | ARBIT. PETITION No. 38/2020
Citation: 2023 LiveLaw (SC) 1042
A Constitution Bench of the Supreme Court on Wednesday (December 6) held that an arbitration agreement can bind non-signatories as per the "group of companies" doctrine.
"The 'group of companies' doctrine must be retained in the Indian arbitration jurisprudence considering its utility in determining the intention of the parties in the context of complex transactions involving multiple parties and multiple agreements," the Court observed.
Allahabad High Court
Allahabad High Court Holds That Improper Notice Invalidates Ex-Parte Arbitral Award
Case Title: Bharat Pumps and Compressors Limited v. Chopra Fabricators & Manufacturers Pvt Ltd, Appeal U/S 37 of the A&C Act No. 146 of 2022
Neutral Citation: 2023:AHC:228958
The Allahabad High Court has held that improper notice of arbitration invalidates an arbitration award passed ex-parte.
The bench of Justice Rohit Ranjan Agarwal held that Section 14(2) of the Arbitration Act, 1940 requires that notice be given to the parties after the arbitrators or umpire have signed the award. Without proper notice, the court held that the proceedings leading to the judgment making the award rule of the court would be flawed.
Case Title: Amit Agarwal v. Atul Gupta, Matters under Article 227 No. 11263 of 2023
The Allahabad High Court has upheld the termination of the Arbitrator's mandate, citing an unjustified eight-year delay in proceedings.
The bench of Justice Rohit Ranjan Agarwal observed that the arbitrator sat over the arbitral proceedings for 8 long years without any progress and passed the award in haste after the application seeking its removal was made. Ergo, the Court held that the arbitrator acted in breach of Section 14 and its mandate stands terminated under the said provision.
Bombay High Court
Case Title: Madgavkar Salvage v. Bergen Offshore Logistics Pvt Ltd, Comm. Arbitration Petitioner No. 13 of 2015.
The High Court of Bombay has held that under Section 37 of the A&C Act, the challenge must be related to the impugned order passed under Section 34 of the Act and not merely to the arbitral award. It held that it is incumbent upon a party to point out errors in the order under Section 34 to make out a case in appeal under Section 37.
The bench of Chief Justice Devendra Kumar Upadhyaya and Justice Arif. S. Doctor held that the Court while exercising powers under Section 37 of the A&C Act cannot take an independent assessment of the arbitral award, therefore, the challenge must be premised on the errors in the impugned order under Section 34. It held that it is not permissible for a party to challenge an arbitral award de hors any challenge to the impugned order.
Case Title: Nikhil H. Malkan v. Standard Chartered Investment and Loans (India) Limited, Arbitration Petition (Lodging) No. 28255 of 2023
The High Court of Bombay has held that Section 29A permits the court to extend the mandate of the arbitral tribunal even when the application is made after the expiry of time limit provided therein.
The bench of Justice Manish Pitale clarified that Section 29A(4) allows the Court to extend the arbitrator's mandate either before or after the specified period's expiry, provided sufficient grounds are demonstrated. The purpose is to ensure the completion of arbitral proceedings, and a rigid time limit is not intended by the legislature.
Calcutta High Court
Case: Reliance Infrastructure Ltd. v DVC
Case No: AP 428 OF 2023
The Calcutta High Court has recently admitted appeals against an order which partially upheld an arbitral award in favour of Reliance Infrastructure Limited ("RIL") against Damodar Valley Corporation ("DVC").
A division bench of Justice IP Mukherji and Justice Biswaroop Chowdhury admitted appeals preferred by both DVC and RIL, against the judgement of a single judge which had partially upheld the validity of the impugned award, and had directed the DVC to furnish the same to RIL, in the matter of construction of thermal power plants in Raghunathpur.
Citation: 2023 LiveLaw (Cal) 341
Case: Manish Todi vs Pawan Agarwal
The Calcutta High Court has recently held that Section 43(4) of the Arbitration & Conciliation Act, 1996, (1996 Act) must defer to the provisions of the Limitation Act and that the period of limitation cannot be extended to create a new window after the expiry of the limitation.
In dismissing a plea for appointment of an arbitrator under Section 11 of the Act as time-barred, a single bench of Justice Moushumi Bhattacharya held:
“Section 43(4), simply put, excludes the time from commencement of arbitration to the date of setting aside of the arbitral award...the petitioner's recourse to section 43(4) of the 1996 Act, even if applied to the facts, does not come to the petitioner's rescue since the petitioner would lag behind the limitation period by 4 years 3 months. The question of limitation must also be decided on the underlying principles of the Limitation Act and discounting the existence of an arbitration clause.”
Delhi High Court
The High Court of Delhi has held that the Court exercising powers under Section 34 of the A&C Act cannot reduce the rate of the interest awarded by the arbitral tribunal as the same amounts to modification of the arbitral award.
The bench of Justices Yashwant Varma and Ravinder Dudeja held that the modulation of the terms of the award by reducing the rate of interest awarded by the arbitral tribunal is impermissible within the limited power conferred on the Court under Section 34 of the A&C Act.
The Court also held the judgment of Supreme Court in M. Hakeem would also apply to award and judgments passed before the date of the said judgment.
Case Title: S.K. Engineering & Construction Company India, ARB. P. 737 of 2023
Citation: 2023 LiveLaw (Del) 1215
The High Court of Delhi has held that the Court exercising powers under Section 11 of the A&C Act can sever an illegal/offending portion of the arbitration clause.
The bench of Justice Sachin Datta held that an arbitration clause does not become illegal by mere illegality of the appointment procedure provided therein, therefore, the Court u/s 11 can sever the illegal portion of the award and refer the dispute to arbitration.
Case Title: Iqbal Singh v. Naresh Kumar, OMP(MISC.) 15 of 2023
Citation: 2023 LiveLaw (Del) 1223
The High Court of Delhi has extended the time period for the completion of arbitral proceedings, despite observing that there was inordinate delay in the completion of arbitral proceedings, on the ground that the proceedings, though protracted, has reached advance stage.
The bench of Sachin Datta while dealing with an application under Section 29A(4) of the A&C Act, extended the mandate of the arbitral tribunal despite acknowledging the substantial delay and petitioner's laxity by absorbing that the proceedings were at advanced stage and if the mandate is not extended, the entire time consumed would be rendered futile.
Case Title: SAIL v Uniper Global Commodities, OMP(E)(COMM.)
Citation: 2023 LiveLaw (Del) 1224
The High Court of Delhi has held that the Court exercising powers under Section 27 of the A&C Act cannot form an opinion on the relevancy or the admissibility of the evidence for which the assistance of the Court is sought.
The bench of Justice Sachin Datta held that the role of Court under Section 27 of the A&C Act is not adjudicatory, therefore, the Court would not examine the aspects of relevancy or admissibility of the evidence, rather, it is the duty of the tribunal to examine such aspects before permitting a party to approach the court for its assistance.
The Court also held that the tribunal while acting under Section 27 of the A&C Act cannot pass non-reasoned order, rather, the order should reflect application of mind by the tribunal to the necessity of such an evidence.
Case Title: SAIL v Uniper Global Commodities, OMP(E)(COMM.) 22 of 2023
In a recent ruling, the Delhi High Court emphasized that when an arbitral tribunal is presented with a party's application under Section 27 of the Arbitration and Conciliation Act (A&C Act), seeking permission to seek the court's assistance in obtaining evidence, it is imperative for the tribunal to form a prima facie view on the relevance and admissibility of the evidence.
Justice Sachin Datta, presiding over the case, highlighted that the tribunal, in the exercise of its jurisdiction under Section 27 of the Act, should avoid a mechanical approach. Instead, it is obligated to carefully scrutinize, even on a prima facie basis, the relevance of the intended witness before granting approval for such an application from any party.
The Court held that, while the Arbitral Tribunal isn't bound by the rules of the Code of Civil Procedure or the Evidence Act, it still has a duty to exercise discretion and form an opinion when permitting witnesses to be examined.
Case Title: Viceroy Engineering v. Smiths Detection Veecon Systems Pvt Ltd, OMP(COMM) 302 of 2019
Citation: 2023 LiveLaw (Del) 1262
The High Court of Delhi has held that technical deficiencies, including pagination and affidavit attestation, do not invalidate petitions under Section 34 of the A&C Act.
The bench of Justice Manoj Kumar Ohri held that every objection in the filing would not render a petition non-est and it is only the defects that goes to the root of the matter that would make the filing non-est.
Case Title: Umaxe Projects Pvt Ltd v. AIR Force Naval Housing Board, OMP(COMM) 469/2023
Citation: 2023 LiveLaw (Del) 1261
The High Court of Delhi has held that mere participation of a party in the arbitration proceeding cannot be deemed to be a waiver under Section 12(5) of the A&C Act.
The bench of Justice Manoj Kumar Ohri held that filing an application under Section 29(A) does not amount to an express waiver in writing of the right to challenge the arbitrator's ineligibility under Section 12(5). The decision clarified that mere participation in arbitral proceedings, without an overt act indicating awareness and conscious waiver of the right to object, does not suffice.
Case Title: J.S.R. Constructions v. NHAI, ARB.P. 753 of 2023
Citation: 2023 LiveLaw (Del) 1250
The High Court of Delhi has held that a party cannot unilaterally appoint the presiding arbitrator upon the failure of the nominee arbitrators to reach a consensus.
The bench of Justice Sachin Datta held that a procedure, allowing the Director General of a party to appoint the presiding arbitrator upon the failure of the nominee arbitrators to mutually appoint the presiding arbitrator, is invalid. It held that a person ineligible to act as an arbitrator should not have any role in appointing one. The procedure lacked effective counterbalancing, favouring one party in the constitution of the arbitral tribunal.
Telangana High Court
Case Title: V.B. Ramsagar v. Srijay Constructions, Commercial Court Appeal No. 08 of 2017
The High Court of Telangana has upheld an arbitral award passed by a sole arbitrator wherein the arbitrator directed the pulling down/demolition of the subject building after observing that it was no longer capable to have human habitation.
The bench of Chief Justice Alok Aradhe and Justice N. Tukaramji held that the tribunal rightly directed the pulling down of the subject property when the building was not constructed as per the agreement and the construction was stopped in the middle and structures raised are not sound and safe and the life of the constructed building would not be more than two decades. Moreover, no fresh construction licence would be issued on such condition.
