Arbitration Court Reckoner : March 2021

Section 2(1)(f)(i)

• Nature of transaction or business being conducted in India is not a criteria to exclude out applicability of S. 2(1)(f)(i)

In Amway India Enterprises Pvt. Ltd. v Ravindranath Rao Sindhia and Ors.^[1], Supreme Court rejected the contention that as the business that is to be conducted can be conducted only in India, S. 2(1)(f)(i) is not attracted. The Court held whatever be the transaction between the parties, if it happens to be entered into between persons, at least one of whom is either a foreign national, or habitually resident in, any country other than India; or by a body corporate which is incorporated in any country other than India; or by the Government of a foreign country, the arbitration becomes an international commercial arbitration notwithstanding the fact that the individual, body corporate, or government of a foreign country referred to in Section 2(1)(f) carries on business in India through a business office in India.

Section 8

• Dispute with regards to right to use the trademarks by assignment under certain agreements arbitrable, as it is not an issue of registration of trademarks

In Hero Electric Vehicles Private Limited & Anr. v Lectro E-Mobility Private Limited & Anr.^[2] High Court of Delhi held that, while examining the aspect of arbitrability of the dispute, or the existence of a valid arbitration agreement binding the parties, in exercise of its jurisdiction under S. 8, the Court has always to remain alive to the fact that it is exercising the very same jurisdiction which the Arbitral Tribunal is empowered to exercise and the Court should not, therefore, exercise jurisdiction, under S. 8 or S. 11, qua these aspects, in such a manner, as would completely erode or efface the authority of Arbitral Tribunal to rule thereon. The Court held in the facts of the case before it, that while the prayer clause, in the suit, superficially read, seeks remedies against alleged infringement by the defendants, the infringement is alleged, not on the ground that the defendants are using deceptively similar trademarks, but on the ground that the right to use the trademarks, was conferred on plaintiffs, by certain agreements which contained an arbitration clause and thus the dispute was a arising out of the said agreements and thus arbitrable. The Court rejected the contention of the plaintiff that being in the nature of a determination of intellectual property rights, which would operate in rem, an arbitrator could not decide the dispute. The Court held that what has been held to be non arbitrable is "grant and issue of patents and registration of trade marks", as "they are exclusive matters falling within the sovereign or government functions", having "erga omnes effect", resulting in conferment of "monopoly rights". However, it held, that the dispute in the case before it did not relate to grant, or registration, of trademarks but right to use the said marks by assignment under certain agreements. The Court held that this assignment is by contractual, not statutory, fiat and it does not involve any exercise of sovereign functions and thus the dispute cannot be said to be non-arbitrable. The Court also rejected the plaintiff's residual contention to treat the suit as a S. 9 application holding that in exceptional cases, no doubt, the Court may convert the suit into a petition under Section 9, but no such situation exists in the present case.

Section 9

• Member of a Cooperative Society bound by the arbitration clause contained in Development Agreement signed by Society with Developer, even though member is not a signatory to the same.

In Chirag Infra Projects Pvt. Ltd. v Vijay Jwala Coop. Hsg. Soc. Ltd. and Ors.^[3]High Court of Bombay was dealing with a S. 9 petition filed by a Developer against one member of Cooperative Society praying for direction to said member to hand over possession of his flat to Developer for re-development. In opposition to the said petition, it was sought to be contended on behalf of the individual member that the Development agreement was between the Society and Developer and he was not a signatory to the same and thus the arbitration clause contained in the said agreement would not be binding on him. The Court held that the law is a member of a society loses his individual identity upon becoming a member, and his identity is subsumed within the society of which he is a member and this is an incident of society membership controlled by the Cooperative Societies Act. The Court held that the member having not taken any steps to challenge the decision of the Society to go for re-development is bound by the Development agreement and the arbitration clause contained therein. The Court directed the member to handover possession and in case he fails to do so, a Receiver was also appointed to proceed to forcibly take possession from the member with the assistance of the police authorities.

• S. 9 is a discretionary and equitable remedy – grant of ad-interim mandatory injunction warranted when an exceptional strong prima face case made out.

In Rajawadi Arunodaya Co-op. HSG Soc. Ltd. and Ors. v Value Projects Pvt. Ltd. & Ors.^[4], High Court of Bombay was dealing with two competing S. 9 petitions arising out of a Development Agreement, one filed by the Society seeking mandatory injunction against the Developer for delivery of possession of project site and appointment of receiver and the other filed by Developer for stay on termination of Development Agreement and furnishing of bank guarantee to secure its claim for damages. The Court held that S. 9 is a discretionary and equitable remedy, and the consideration of equity is often determinative. It further held that an ad-interim mandatory injunction is not to be granted lightly or for the asking; but it is also not forbidden and an exceptionally strong prima facie case has to be made out. The Court if satisfied that withholding such an injunction would be unjust and unconscionable, resulting in a perpetuation of injustice, then a court of equity will indeed grant it. The Court granted ad-interim mandatory injunction in favour of Society directing delivery of possession and appointment of receiver and dismissing the Developer's petition.

• Manifest urgency/ real danger of frustration of claim is necessary for grant of protection u/s 9.

In Indiabulls Housing Finance Limited v Ambience Projects And Infrastructure Private Limited & Ors^[5], High Court of Delhi held that in the case of a pure money claim, it is not enough for the S. 9 applicant to say: "The respondent owes me money. The dispute is arbitrable. Please secure the amount or grant other protective interim directions.", rather, he would have to say: "The respondent owes me money. In case interim protection is not granted, my claim would stand frustrated, even before I could obtain relief under Section 17, from the Arbitral Tribunal. Interim protection is, therefore, necessary, so that the arbitral proceedings are not rendered futile." The Court further held that in a given case, S. 9 may be invoked even on a mere apprehension, that apprehension has to be real and substantial. It held the importance of the use of the word "protection", in S. 9, cannot be undermined and the intent of the provision is to protect the party to the arbitration agreement, who intends to invoke the agreement, from frustration of its claim, even before the arbitral Tribunal is able to address itself to it. Where, therefore, no case, manifesting such urgency, as would require the Court to step in at any incipient stage, even before the arbitral process is set in motion, is made out, no relief can be provided to the Section 9 applicant. The Court rejecting the prayer for grant of an injunction that Respondent not be allowed to make any payment to anyone, including its group companies and other creditors before it liquidates the debt due to the Petitioner, held that law does not recognise any such concept of "priority of debts", where the creditors are private parties and there is no principle in law that can compel Respondent to liquidate Petitioner's debt before others and secondly as on date the Petitioner only has a claim against Respondent which cannot be equated with debt.

• Where order u/s 9 directed that Respondent shall not alienate property, mortgage was held not to be covered by the same.

In S. Thiagarajan and Ors. v V.S. Suresh^[6] High Court of Madras was considering the question as to whether in a case where the Respondent been directed u/s 9 not to alienate the subject property, the Respondent's action of mortgaging the property would amount to contempt or not. The Court considered that the entire gamut of the case revolves on the word "alienate" and its interpretation. The Court held that the Oxford dictionary defines Alienate as "Transfer of ownership of (property) to another person" whereas mortgage, on the other hand, is a conveyance of property given as security and in which case there is no transfer of ownership. It held that for a case of alienation there must be a transfer of ownership from one to another and as the petitioners, in case before it, have only created a memorandum of deposit of title deeds (equitable mortgage), that would not come in the definition of alienate and that there was no contempt.

Section 11

• Parliament may need to have a re-look at S. 11(7) and S. 37 so that orders made under S. 8 and 11 are brought on par qua appealability as well.

In Pravin Electricals Pvt. Ltd. v Galaxy Infra and Engineering Pvt. Ltd.^[7], Supreme Court while dealing with an appeal from a petition u/s S/ 11(6) observed that by a process of judicial interpretation, this Court in Vidya Drolia v Durga Trading Corporation^[8] has now read the "prima facie test" into S. 11(6A) so as to bring the provisions of S. 8(1) and 11(6) r/w 11(6A) on par but whereas in cases decided under S. 8, a refusal to refer parties to arbitration is appealable under S. 37(1)(a), a similar refusal to refer parties to arbitration under S. 11(6) read with S. 6(A) and 7 is not appealable. The Court, thus, observed that in the light of what has been decided in Vidya Drolia (supra), Parliament may need to have a re-look at S. 11(7) and S. 37 so that orders made under S. 8 and 11 are brought on par qua appealability as well. On facts of the case the court held that there were enough facts which cast a doubt on the existence of arbitration agreement and would require further examination by an arbitrator upon leading of evidence and thus upheld the order appointing arbitrator but set aside the findings of the High Court upholding existence of arbitration agreement.

• Arbitration clause between a principal employer and contractor would not bind sub-contractors.

In Laxmi Civil Engineering Services Ltd. & ORS v GAIL (India) Limited^[9], High Court of Delhi held that an arbitration clause between a principal employer and contractor would not bind sub-contractors engaged by the contractor and the employer could not be compelled to arbitrate with the said sub-contractors. The Court held that the contractor having entered into separate contracts with the sub-Contractors for execution of certain works on a principal-to-principal basis, cannot aver that the said sub-contractors are its 'assigns'. The Court rejected the contention that the contracts must be construed as a single composite transaction between the principal employer and the contractors and sub-contractors and held that the Employer is not a party to the respective contracts entered into between contractor and the sub-Contractors and mere grant of approval by the Employer towards engagement of the sub-contractors would not be a ground to claim any privity of contract.

• Clause which says no other person should act as arbitrator, in case such person is ineligible, must be considered as rendered inoperative rather than as a term that invalidates the arbitration agreement.

In M/s T.K. Engineering Consortium Pvt. Ltd. v The Director (Projects) Rites Ltd. & Anr^[10], High Court of Delhi held that once it is held that the Appointing Authority is ineligible to appoint an arbitrator, the adjunct to that clause that no other person should act as an arbitrator and the arbitration must not be held without such person acting as an arbitrator, must also be held to be invalid. It held that a condition imposed that disputes cannot be referred to arbitration except on the condition that only one party retains the authority to determine the mandate of the arbitral tribunal, would militate against the said fundamental premise that arbitration is an alternate mechanism for a just and fair adjudication of disputes. It further held that it is to be borne in mind that the legislative policy is to encourage arbitration, thus, any interpretation that would nullify an arbitration clause must be avoided and thus it held that the parties could still be referred to arbitration by severing the inoperative portion of clause.

• Period of Limitation for filing application u/s 11 would be covered by Article 137 and would begin to run from date of failure to appoint.

In case of ex-facie time barred claims, reference u/s 11 can be refused.

In Bharat Sanchar Nigam Ltd. and Anr. v. M/s. Nortel Networks India Pvt. Ltd.^[11], Supreme Court held that period of limitation for filing an application under S. 11 would be governed by Article 137 of the First Schedule of the Limitation Act, 1963. The Court held period of limitation will begin to run from the date when there is failure to appoint the arbitrator. The Court made a distinction between jurisdictional issues (such as issues with respect to the existence, scope and validity of the arbitration agreement) and admissibility issues which relate to procedural requirements ( such as a breach of pre-arbitration requirements, for instance, a mandatory requirement for mediation before the commencement of arbitration, or a challenge to a claim or a part of the claim being either time-barred, or prohibited, until some pre-condition has been fulfilled). It further held that limitation is an admissibility issue and in rare and exceptional cases, where the claims are ex facie time-barred, and it is manifest that there is no subsisting dispute, the Court may refuse to make the reference u/s 11.

• Period of Limitation for filing application u/s 11 would begin to run from the elapse of 30 days from the date demand for arbitration is made and not date of rejection which may several years later.

In Secunderabad Cantonment Board v B. Ramachandraiah & Sons^[12]¸Supreme Court reiterated that period of limitation of 3 years for filing a S. 11 application starts running from the elapse of 30 days from the date demand for arbitration is made and cannot be reckoned from the date the said demand is eventually rejected years later. In the said case demand for arbitration was made on 13.01.2007, and the Court thus held that, on and from 12.02.2007, when no arbitrator was appointed, the cause of action for appointment of an arbitrator accrued to the Respondent and time began running from that day. The Court further held that once time has started running, any final rejection by the Appellant by its letter dated 10.11.2010 would not give any fresh start to a limitation period which has already begun running, following the mandate of S. 9 of the Limitation Act.

• Test u/s 11 is whether there is an arbitrable dispute and not whether there is a bonafide dispute.

In M/s Oriental Structural Engineers Pvt Ltd v M/s Seven Hills Project Private Limited^[13] High Court of Delhi rejected the Respondent's contention that there existed no bonafide disputes between the parties capable of being referred to arbitration as the Petitioner had despite receiving all payment arbitrarily sought to raise the bogey of disputes in order to circumvent the proceedings under the IBC. The Court held that the test is whether there is existence of an arbitrable dispute, and not whether the dispute is bona fide or germane and thus proceeded to appoint the arbitrator.

• A defect of jurisdiction cannot be cured even by the consent of the parties.

In Chief General Manager (IPC), M.P. Power Trading Co. Ltd. and Ors. v Narmada Equipments P. Ltd.^[14] Supreme Court set aside the order of the High Court appointing arbitrator on the ground that in view of the provisions of Section 86(1)(f) of the Electricity Act 2003, it was the State Electricity Commission which was vested with the exclusive jurisdiction to adjudicate upon disputes between licensees and generating companies. The Court rejected the contention of the Respondent that as the Appellant had not objected to the appointment of arbitrators initially and even participated before the arbitral tribunal till its recusal, it could not now contend that arbitrator could not be appointed. The Court reiterated a defect of jurisdiction cannot be cured even by the consent of the parties.

• IB Code proceeding considered in rem only upon admission of application and before admission, parties can be referred to arbitration if there is no conclusive evidence of default/debt.

In Indus Biotech Private Limited v Kotak India Venture (Offshore) Fund and Ors.^[15] Supreme Court held that a dispute will be non-arbitrable when a proceeding is in rem and a IB Code proceeding is to be considered in rem only after it is admitted. The Court held that to consider a proceeding in rem, it is necessary that the Adjudicating Authority ought to have applied its mind, recorded a finding of default and admitted the petition and it is on admission, that third party right is created in all the creditors of the corporate debtors and will have erga omnes effect. Further held, mere filing of the petition and its pendency before admission, therefore, cannot be construed as the triggering of a proceeding in rem. In the facts of the said case, the IB Code proceeding had not been admitted and thus the Court upheld the decision of the NCLT to refer the parties to arbitration u/s 8 at the said stage. The Court further held that even if an application u/s 8 is filed, the Adjudicating Authority has a duty to advert to contentions put forth on the application filed u/s 7 of IB Code and examine the material placed before it by the financial creditor and record a satisfaction as to whether there is default or not and while doing so the contention put forth by the corporate debtor shall also be noted to determine as to whether there is substance in the defence and to arrive at the conclusion whether there is default. It held that if the irresistible conclusion by the Adjudicating Authority is that there is default and the debt is payable, the bogey of arbitration to delay the process would not arise despite the position that the agreement between the parties indisputably contains an arbitration clause.

Section 14

• Scope and ambit of objections under S. 12 (1) read with S. 13 is distinct from objections under S. 12(5) read with S. 14.

In Raksha Vigyan Karamchari Sahkari Awas Samiti Ltd v proto developers and technologies pvt. Ltd.^[16], High Court of Delhi held the objections made by the Petitioner under S. 13 before the Arbitrator do not hinder the Petitioner in invoking the jurisdiction of this Court to seek termination of the mandate of the Arbitrator, on the ground of his appointment is conflicting with S. 12. It held that it cannot be said that by not filing objections before the Arbitral Tribunal under S. 13 of the Act, the Petitioner has waived its objections under S. 12(5) of the Act. The Court also rejected the curious request of the counsel for the Petitioner that the court may not proceed to appoint a substitute Arbitrator and let the matter rest with the termination of the mandate. The Court held that the provision of S. 14 is unequivocal towards the appointment of a substitute Arbitrator once the mandate of an Arbitral Tribunal has been terminated by this Court under the said provision.

Section 16

• Summary dismissal of claims can be there u/s 16, no requirement to provide opportunity to lead evidence if claims are ex-facie barred.

In C & C Constructions Ltd. v Ircon International Ltd.^[17], the contention of the appellant before the High Court of Delhi was that the arbitrator should not have dismissed the claims of the appellant u/s 16 holding them to be barred by a clause of the contract without giving the appellant an opportunity to lead evidence and the summary dismissal of claims is a violation of principles of natural justice. The Court held that there is no absolute component of the principles of natural justice, that an opportunity to lead evidence will be granted, if it is otherwise evident from the pleadings and the documents that the claim is barred, and the Arbitral Tribunal is not bound by the procedure prescribed in the Code of Civil Procedure, 1908 (CPC) or the Indian Evidence Act, 1872. The Court also reiterated scope of interference with the arbitral award, u/s 37, is much narrower and more limited than even u/s 34 of the Act and this Court is not to hear and adjudicate as in second appeal under the CPC, to see whether any substantial question of law arises.

• Arbitral tribunal is a tribunal against which a petition under Article 226/227 would be maintainable, but discretion to be exercised in exceptional circumstances.

Guidelines issued for deciding S. 16 applications.

In Surender Kumar Singhal & Ors. v Arun Kumar Bhalotia & Ors^[18] High Court of Delhi held that petitions under Article 227, Constitution of India would be maintainable against arbitrators order , but order should be interfered with only in exceptional circumstances and interference permissible only if order is completely perverse or if bad faith is shown. It held that the non obstante clause in S. 5 does not apply to exercise of powers under Article 226/227. The Court held that jurisdictional question i.e had to be decided at the earliest but would depend on facts of each case and the High Court identified certain factors to be borne in mind by Arbitrators while dealing with S. 16 application:

• If the issue of jurisdiction can be decided on the basis of admitted documents on record then the Tribunal ought to proceed to hear the matter/ objections u/s 16 at the inception itself;
• If the Tribunal is of the opinion that the objections u/s 16 cannot be decided at the inception and would require further enquiry into the matter, the Tribunal could consider framing a preliminary issue and deciding the same as soon as possible.
• If the Tribunal is of the opinion that objections u/s 16 would require evidence to be led then the Tribunal could direct limited evidence to be led on the said issue and adjudicate the same.
• If the Tribunal is of the opinion that detailed evidence needs to be led both written and oral, then after the evidence is concluded, the objections u/s 16 would have to be adjudicated first before proceeding to passing of the award.
  
  

In the case at hand Court directed that question of jurisdiction would have to be adjudicated first before passing the award and not while passing the award as had been directed by the Arbitrator.

Section 34

• S. 34 application covered by S. 14 IB Code.

In P. Mohanraj & Ors. v M/s. Shah brothers Ispat Pvt. Ltd.^[19], Supreme Court, inter alia, held that judgment in Power Grid Corporation of India Ltd. v. Jyoti Structures Ltd.^[20], which held that a S. 34 application will not be covered by Section 14 of the IBC, does not state the law correctly. The Supreme Court held that a Section 34 proceeding is a proceeding against the corporate debtor in a court of law pertaining to a challenge to an arbitral award and would be covered just as an appellate proceeding in a decree from a suit and such a proceeding may result in an arbitral award against the corporate debtor being upheld, as a result of which, monies would then be payable by the corporate debtor.

• S. 34(2)(a)(iii) not attracted when right to file statement of defence closed due to party's obstructionist conduct.

In Unison Hotels P. Ltd. v M/S Value Line Interiors Private Limited^[21], High Court of Delhi was dealing with a case where the award was sought to be challenged by the petitioner under S. 34(2)(a)(iii) of the Act alleging that they were prevented from presenting their case adequately. The Court held that on a consideration of the entire factual matrix and the conduct of the Petitioner before the arbitrator, its challenge to the award must fail as while its right to file statement of defence was closed but only due to its obstructive conduct before the arbitrator and the said conduct disentitled the petitioner to any relief. It further noted that that while the arbitrator had closed petitioner's defence but had not proceeded ex parte and had given full opportunity to petitioner to cross-examine the witness and also advance any arguments to contest the claim but it was the petitioner who had elected not to avail of this opportunity and had not appeared before the Arbitrator.

• For purpose of S. 34(3) the relevant date is the date when signed copy of award is provided and not a date when the award may have been pronounced but only circulated for pointing out computational/clerical errors.

Relevance of Dissenting Opinion explained.

In Dakshin Haryana Bijli Vitran Nigam Ltd. v Navigant Technologies Pvt. Ltd.^[22], Supreme Court held that in an arbitral tribunal comprising of a panel of three members, if one of the members gives a dissenting opinion, it must be delivered contemporaneously on the same date as the final award, and not on a subsequent date, as the tribunal becomes functus officio upon the passing of the final award. The period for rendering the award and dissenting opinion must be within the period prescribed by Section 29A of the Act. The Court held that at the stage of judicial scrutiny by the Court under S. 34, the Court is not precluded from considering the findings and conclusions of the dissenting opinion of the minority member of the tribunal. On the facts of the case, court held that award was pronounced on 27.04.2018 but only a copy of the award was provided to the parties to point out any computation error, any clerical or typographical error. The signed copy of the award was provided to the parties only on 19.05.2018 and Court held time u/s 34(3) would be reckoned from 19.05.2018 and 27.04.2018.

• If delay is reasonable and not excessive and for bonafide grounds, the Court can condone it under proviso to S. 34(3).

In Delhi Development Authority v Varindera Construction Limited^[23], High Court of Delhi held that where even treating the S. 34 petition as initially filed as non-est, if the same is re-filed after removing of major defects within the period of 30 days provided in proviso to S. 34(3), then delay can be condoned on showing of sufficient cause. The Court held that in the facts of the case the delay is reasonable and not excessive and keeping that in view, ground of illness of the counsel as stated in the application for condonation of delay seems to be a good reason for the Court to condone the delay.

• Objection as to territorial jurisdiction can be waived.

In Naresh Kanayalal Rajwani and Ors. v Kotak Mahindra Bank Ltd. and Ors.^[24], High Court of Bombay held that in a case where the Respondent had in the first round of arbitration, where the award had been set aside, not raised any objection to territorial jurisdiction of the High Court of Bombay, despite seat of arbitration being Delhi, then it had, by its conduct, submitted to the territorial jurisdiction of this Court and waived its right to object to the same. The Court reiterated that an objection to territorial jurisdiction does not travel to the root of or to the inherent lack of jurisdiction of a court to entertain a petition and hence can be waived. The Court held that once it is held that objection as to territorial jurisdiction has been waived, then by application of S. 42, the S. 34 in second round of arbitration would also lie before the High Court of Bombay.

• No separate limitation period for challenging an alleged invalid award.

In Road Construction Department, Bihar v BLA-S &P (JV)^[25] High Court of Delhi rejected the contention of the Petitioner that as the impugned award was an alleged invalid award being in violation of S. 31, not having been signed by all the member of AT, the period of limitation would not start to run as limitation under S. 34(3) of the Act can commence only after passing of a valid Award signed by all the members of the Arbitral Tribunal. The Court held that plea of invalidity does not dilute the rigour of S. 34(3) of the Act and even if the Award is to be declared invalid on the grounds as urged, the Court has to first entertain the objections made under S. 34 of the Act. The Court held that a different period of limitation would not be applicable in cases wherein the Petitioner approaches the Court contending that the Award before the Court is an invalid Award on plea of non-compliance with S. 31 of the Act. The Court further found the alleged non-compliance not made out as it found that reasons for omission of signatures of one member were given to demonstrate compliance of S. 31(2) of the Act.

• Even where entitlement to claim is upheld, claim to be set aside where there is no basis for its quantification.

In Delhi Development Authority v M/s Eros Resorts And Hotels Ltd^[26]High Court of Delhi sustained the award to the extent it upheld the return of performance bank guarantee but set aside the consequential relief of award of bank charges on the said guarantees on the ground that while entitlement to the same may have stood proved, there was no reasoning or basis given for arriving at the quantification of said charges and thus the award to the said extent is in violation of S. 31(3) of the Act.

Section 36

• No TDS to be deducted on awarded amounts.

In Voith Hydro Ltd. & Ors. v NTPC Limited,^[27] High Court of Delhi reiterated that TDS could not be deducted by judgment debtor while making payment of judgment debts/awarded amounts. It was also reiterated that exchange rate applicable for determining the amounts payable in Indian currency in execution of an award made in foreign currencies would be determined with regard to the date on which the challenge to the arbitral award is finally rejected, and that would be the date for determining the foreign exchange applicable to an award made in foreign currency.

• S. 42 of the Act will have no application to the Execution Petition filed under S. 36.

In Kartike Enterprises v Delhi Jal Board^[28] High Court of Delhi held that an application under S. 36 of the Act is an application under the Code of Civil Procedures, 1908 and therefore, S. 42 of the Act will have no application to the same and the pendency of the application under S. 34 of the Act in one district court would not affect the maintainability of an execution petition in another district court.

Section 37

• If interpretation given by arbitrator not plausible but perverse, award can be set aside.

In Narinder Singh v V.V. Pankajakshan & Ors^[29], Division bench of High Court of Delhi reiterated that the court would interfere with an arbitral award which is founded upon an interpretation given by the learned Arbitrator, if the interpretation adopted is not a plausible one and if it is perverse, the award would be liable to be set aside. Upon consideration of the facts of the case and the relevant clause whose interpretation was in question, the Court held that the interpretation given by the Arbitrator and upheld by the Single Judge was not a reasonable or a plausible one and set aside the award as being wholly perverse. The Court relied on the decisions in ONGC Ltd. vs. Garware Shipping Corpn. Ltd^[30] and Oil and Natural Gas Corporation Ltd. Vs. Western Geco International Ltd^[31] to hold that the court can interfere with an award whose basis or conclusions are perverse.

• Appeal from an order disposing off S. 34 petitions holding parties bound to a settlement is not an appealable order S. 37

In Bhiwandi Nizampur City Municipal Corporation v Antony Waste Handling Cell Pvt. Ltd.^[32], High Court of Bombay held that an appeal from an order disposing off S. 34 petitions pursuant to a settlement, which was sought to be challenged by the Appellant, was not an order appealable u/s 37 as it found that the S. 34 Court has considered the legality and validity of the Consent Terms and not the arbitral award (as it otherwise would have under Section 34 of the Act) and thus the order is not a order refusing or setting aside an award to make it appealable u/s 37.

• S. 5 of Limitation Act would apply to appeal filed under S. 37 but delay to be condoned by way of exception and not by way of rule.

In Government of Maharashtra (Water Resources Department) v Borse Brothers Engineers & Contractors Pvt. Ltd.^[33], Supreme Court held that S. 5 of Limitation Act would apply to appeal filed under S. 37 of the Act. However, the Court held that keeping in mind the object of speedy disposal sought to be achieved both under the Arbitration Act and the Commercial Courts Act, for appeals filed Under S. 37 of the Arbitration Act that are governed by Articles 116 and 117 of the Limitation Act or S. 13(1A) of the Commercial Courts Act, a delay beyond 90 days, 30 days or 60 days, respectively, is to be condoned by way of exception and not by way of rule. The Court held that in a fit case in which a party has otherwise acted bona fide and not in a negligent manner, a short delay beyond such period can, in the discretion of the court, be condoned, always bearing in mind that the other side of the picture is that the opposite party may have acquired both in equity and justice, what may now be lost by the first party's inaction, negligence or laches.

• Court u/s 37 allowed the claim for interest on counter claim rather than directing party to re-agitate.

In Guru Gobind Singh Indraprastha University v Engineering India Ltd.^[34], Division Bench of High Court of Delhi set aside the order of the Single Judge passed in S. 34 to the extent it directed the appellant to re-agitate the claim for interest on counter claim as per law. The Court held that rather than directing the Appellant to re-agitate the claim, the Single Judge should have awarded interest to the Appellant by applying the same yardstick as applied to Respondent with regards to award of rate of interest on its claim. The Court held that if the matter is remanded to an arbitrator for fresh adjudication with regard to rate of interest, it would promote and not curtail litigation—an end which the Arbitration and Conciliation Act, 1996 seeks to discourage.

S. 18(5) of MSME Act

(xxxi) Provisions of Sub-section (5) of Section 18 of the MSME Act must be held to be directory and not mandatory.

In Indian Highways Management Company Limited v Mukesh & Associates,^[35] High Court of Delhi held that the provisions of Sub-section (5) of S. 18 of the MSME Act must be read in the context of the scheme of S. 18 of the MSME Act. Sub-section (5) merely directs that the reference must be decided within ninety days. It does not expressly provide for the consequence of failure to decide the reference within the said period and thus must be read to be directory and not mandatory. Further, held, that Sub-section (5) of S. 18 would not apply to references made to institutions rendering alternate dispute resolution services either for conciliation or for arbitration. The Court said that even assuming the provisions were to apply to the said proceedings, it does not follow that the mandate of the Conciliator or the Arbitral Tribunal would stand terminated on expiry of a period of ninety days from the date of the said reference as firstly Sub-section (5) of S. 18 of the MSME Act does not specifically provide for any such termination and secondly, such termination would militate against Part III of the A&C Act insofar as conciliation is concerned and would also run expressly contrary to the provisions of S. 29-A of the A&C Act, insofar as arbitration is concerned. The Court held that whilst S. 24 of the MSME Act is a non-obstante provision which expressly provides that the provisions of S. 15 to 23 of the MSME Act would have effect notwithstanding anything contained in any other law for the time being in force; the same is not applicable as the provisions of Sub-section (5) of S. 18 of the MSME Act are not required to be interpreted to admit any repugnancy with any other statute.

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