Supreme Court Annual Digest 2023 On Arbitration

12 months' time limit under Section 29A Arbitration Act not applicable to international commercial arbitration. TATA Sons Pvt. Ltd. v. Siva Industries and Holdings Ltd., 2023 LiveLaw (SC) 39 : 2023 INSC 13 : (2023) 5 SCC 421

2015 Arbitration Amendment not applicable though S.11 application was filed after it, if arbitration notice was issued pre-amendment. Shree Vishnu Constructions v. Engineer in Chief Military Engineering Service, 2023 LiveLaw (SC) 417 : 2023 INSC 508: AIR 2023 SC 3554 : (2023) 8 SCC 329

Arbitration agreement can bind non-signatories: Supreme Court upholds 'group of companies' doctrine. Cox and Kings Ltd. v. SAP India Pvt. Ltd., 2023 LiveLaw (SC) 1042 : 2023 INSC 1051

Arbitration agreement in unstamped contract which is exigible to stamp duty not enforceable: Supreme Court holds by 3:2 majority. N.N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd., 2023 LiveLaw (SC) 343 : (2023) 7 SCC 1 : 2023 INSC 423 (Overruled in In Re Interplay Between Arbitration Agreements, 2023 LiveLaw (SC) 1049 : 2023 INSC 1066 (7 Bench)

Arbitration award cannot be set aside on mere possibility of an alternative view of facts of interpretation of contract. Konkan Railway Corporation Ltd. v. Chenab Bridge Project Undertaking, 2023 LiveLaw (SC) 668 : 2023 INSC 742: AIR 2023 SC 4049 : (2023) 9 SCC 85

Arbitrator won't become ineligible by unilaterally revising fee; mandate can't be terminated on grounds not mentioned in schedule. Chennai Metro Rail Ltd. v. Transtonnelstroy Afcons JV, 2023 LiveLaw (SC) 909 : 2023 INSC 932

Award can be said to be suffering from 'patent illegality' only if it is an illegality apparent on the face of it. Reliance Infrastructure Ltd. v. State of Goa, 2023 LiveLaw (SC) 416 : AIR 2023 SC 2280 : 2023 INSC 514

Awarding a claim for loss of profit without substantial evidence is in conflict with public policy of India. Unibros v. All India Radio, 2023 LiveLaw (SC) 918 : 2023 INSC 931 : AIR 2023 SC 5231

Cancellation of deed is action in personam, not in rem; it is arbitrable. Sushma Shivkumar Daga v. Madhurkumar Ramkrishnaji Bajaj, 2023 LiveLaw (SC) 984 : 2023 INSC 1081

Court can examine if the arbitration clause is arbitrary and violates Article 14 while considering Section 11(6) application. Lombardi Engineering Ltd v. State of Uttarakhand, 2023 LiveLaw (SC) 958 : 2023 INSC 976

Court cannot, after setting aside the arbitration award, proceed to grant further relief by modifying the award. Indian Oil Corporation v. Sathyanarayana Service Station, 2023 LiveLaw (SC) 415 : 2023 INSC 507

Dissenting opinion of an arbitrator cannot be treated as an award if the majority award is set aside. Hindustan Construction Company Ltd. v. National Highways Authority of India, 2023 LiveLaw (SC) 704 : 2023 INSC 768

Is an Arbitration Clause in an unstamped agreement enforceable? Supreme Court Refers N.N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd; 2023 LiveLaw (SC) 343 to a Seven-Judge Bench. Bhaskar Raju and Brothers v. Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram and Other Charities, 2023 LiveLaw (SC) 828

Limitation period for arbitration - cause of action to appoint arbitrator commences from the “breaking point” between parties. B and T AG v. Ministry of Defence, 2023 LiveLaw (SC) 466 : AIR 2023 SC 2731 : 2023 INSC 549

Limitation period for arbitration - mere negotiations between parties will not postpone the cause of action. B and T AG v. Ministry of Defence, 2023 LiveLaw (SC) 466 : AIR 2023 SC 2731 : 2023 INSC 549

Limited scrutiny of court under Section 11 of Arbitration Act through the “eye of the needle”, is necessary and compelling. NTPC Ltd v. SPML Infra Ltd; 2023 LiveLaw (SC) 287 : AIR 2023 SC 1974 : 2023 INSC 334 :(2023) 2 SCR 846

Principle of 'alter ego' or 'piercing corporate veil' not the basis for 'group of companies' doctrine. Cox and Kings Ltd. v. SAP India Pvt. Ltd., 2023 LiveLaw (SC) 1042 : 2023 INSC 1051

Section 34 application must be filed within 90 days limitation to claim exclusion of period when court remain closed. Bhimashankar Sahakari Sakkare Karkhane Niyamita v Walchandnagar Industries Ltd; 2023 LiveLaw (SC) 288 : AIR 2023 SC 1990 : 2023 INSC 335

Starting point of limitation u/section 34(3) Arbitration Act in cases of suo motu correction of award: Supreme Court explains. USS Alliance v. State of Uttar Pradesh, 2023 LiveLaw (SC) 20

Supreme Court deprecates practice of filing applications in disposed of SLPs to side-step arbitration process. Narsi Creation Pvt. Ltd. v. State of Uttar Pradesh, 2023 LiveLaw (SC) 325 : 2023 INSC 387

Supreme Court restores 1997 arbitral award passed under 1940 Act; criticises HC & Trial Court for "appellate review". S.D. Shinde v. Govt. of Maharashtra, 2023 LiveLaw (SC) 693 : 2023 INSC 751 : AIR 2023 SC 4174

Supreme Court upholds rejection of S. 8 application since cause of action went beyond transaction containing arbitration agreement. Gujarat Composite Ltd. v. A Infrastructure Ltd., 2023 LiveLaw (SC) 384 : 2023 INSC 470

The Court has no power to modify the award under Section 34 Arbitration and Conciliation Act. Larsen Air Conditioning and Refrigeration Company v. Union of India, 2023 LiveLaw (SC) 631 : 2023 INSC 708 : AIR 2023 SC 4452

The Referral Court has the duty to conclusively decide the issue of 'existence & validity of arbitration agreement' raised at pre-referral stage. Magic Eye Developers Pvt. Ltd. v. Green Edge Infrastructure Pvt. Ltd., 2023 LiveLaw (SC) 444 : AIR 2023 SC 2339 : 2023 INSC 528

The Supreme Court explains scope of judicial interference in arbitral awards. Batliboi Environmental Engineers v. Hindustan Petroleum Corporation, 2023 LiveLaw (SC) 817 : 2023 INSC 850

Arbitration Act, 1940

Arbitration Act, 1940; Sections 30 and 33 - Court's jurisdiction under Section 30/33 of the 1940 Act never extended beyond discerning whether the award discloses an “error apparent on the face of the award” or not. The ruling of the trial courts and the High Court is nothing short of intense appellate review, which is impermissible in law and beyond the courts' jurisdiction. S.D. Shinde v. Govt. of Maharashtra, 2023 LiveLaw (SC) 693 : 2023 INSC 751 : AIR 2023 SC 4174

Arbitration and Conciliation Act 1996

Arbitration and Conciliation Act 1996 - Pre-deposit condition in an arbitration clause is violative of Article 14 of the Constitution of India being arbitrary. Deterring a party to an arbitration from invoking the Alternative Dispute Resolution Process by pre-deposit of certain percentage would discourage arbitration. (Para 42) Lombardi Engineering Ltd v. State of Uttarakhand, 2023 LiveLaw (SC) 958 : 2023 INSC 976

Arbitration and Conciliation Act, 1996 - Award in question is patently illegal since it lacks reasoning in arriving at conclusions and calculation of amounts awarded. The High Court's order setting aside the award has been upheld. Appeal has been dismissed. (Para 45-46) Batliboi Environmental Engineers v. Hindustan Petroleum Corporation, 2023 LiveLaw (SC) 817 : 2023 INSC 850

Arbitration and Conciliation Act, 1996 - Concept of justice and morality - When an Award shocks the conscience of the court, for example where the claimant has restricted his claim but the arbitral tribunal has awarded a higher amount without any reasonable ground of justification, that would be against justice. However, morality would cover illegal and unenforceable agreements but interference would be only if warranted if something shocks the court's conscience. (Para 43) Batliboi Environmental Engineers v. Hindustan Petroleum Corporation, 2023 LiveLaw (SC) 817 : 2023 INSC 850

Arbitration and Conciliation Act, 1996 - Supreme Court has reiterated that the courts ought not to normally interfere with the arbitral proceedings, especially till the time an arbitral award is not passed - The top court has deprecated the practice of filing applications in disposed of Special Leave Petitions (SLPs) in order to side-step the arbitration process, adding that the said applications must not be entertained by the court. Narsi Creation Pvt. Ltd. v. State of Uttar Pradesh, 2023 LiveLaw (SC) 325 : 2023 INSC 387

Section 2(1)(h) - “Party”

Arbitration and Conciliation Act, 1996; Section 2(1)(h) r/w. 7 - The definition of “parties” includes both the signatory as well as non-signatory parties. Conduct of the non-signatory parties could be an indicator of their consent to be bound by the arbitration agreement. The requirement of a written arbitration agreement under Section 7 does not exclude the possibility of binding non-signatory parties. Under the Arbitration Act, the concept of a “party” is distinct and different from the concept of “persons claiming through or under” a party to the arbitration agreement. (Para 165) Cox and Kings Ltd. v. SAP India Pvt. Ltd., 2023 LiveLaw (SC) 1042 : 2023 INSC 1051

Arbitration and Conciliation Act, 1996; Section 2(1)(h) r/w. 7 - Group of Companies Doctrine - The underlying basis for the application of the group of companies doctrine rests on maintaining the corporate separateness of the group companies while determining the common intention of the parties to bind the non-signatory party to the arbitration agreement. The principle of alter ego or piercing the corporate veil cannot be the basis for the application of the group of companies doctrine. The group of companies doctrine has an independent existence as a principle of law which stems from a harmonious reading of Section 2(1)(h) along with Section 7 of the Arbitration Act. To apply the group of companies doctrine, the courts or tribunals, as the case may be, have to consider all the cumulative factors laid down in ONGC v. Discovery Enterprises Pvt Ltd (2022) 8 SCC 42 [2022 INSC 483]. (Para 165) Cox and Kings Ltd. v. SAP India Pvt. Ltd., 2023 LiveLaw (SC) 1042 : 2023 INSC 1051

Arbitration and Conciliation Act, 1996; Section 2(1)(h) r/w. 7 - Group of Companies Doctrine - the principle of single economic unit cannot be the sole basis for invoking the group of companies doctrine. The persons “claiming through or under” can only assert a right in a derivative capacity. The approach of this Court in Chloro Controls India (P) Ltd v. Severn Trent Water Purification Inc; (2013) 1 SCC 641 to the extent that it traced the group of companies doctrine to the phrase “claiming through or under” is erroneous and against the well-established principles of contract law and corporate law. The group of companies doctrine should 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. In the course of this judgment, any authoritative determination given by this Court pertaining to the group of companies doctrine should not be interpreted to exclude the application of other doctrines and principles for binding non-signatories to the arbitration agreement. (Para 165) Cox and Kings Ltd. v. SAP India Pvt. Ltd., 2023 LiveLaw (SC) 1042 : 2023 INSC 1051

Arbitration and Conciliation Act, 1996; Section 2(1)(h) r/w. 7 - At the referral stage, the referral court should leave it for the arbitral tribunal to decide whether the non-signatory is bound by the arbitration agreement. (Para 165) Cox and Kings Ltd. v. SAP India Pvt. Ltd., 2023 LiveLaw (SC) 1042 : 2023 INSC 1051

Section 7 - Arbitration Agreement

Arbitration and Conciliation Act, 1996; Section 7 - An arbitration agreement within the meaning of Section 7 of the Act attracts stamp duty and which is not stamped or insufficiently stamped cannot be acted upon in view of Section 35 of the Stamp Act unless following impounding and paying requisite duty. The provisions of Section 33 and the bar under Section 35 of the Stamp Act would render the arbitration agreement contained in such instrument as being non-existent in law until the instrument is validated under the Stamp Act. N.N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd., 2023 LiveLaw (SC) 343 : (2023) 7 SCC 1 : 2023 INSC 423 (Overruled in In Re Interplay Between Arbitration Agreements, 2023 LiveLaw (SC) 1049 : 2023 INSC 1066 (7 Bench)

Arbitration and Conciliation Act, 1996; Section 7 - Whether the arbitration clause in a contract, which is required to be registered and stamped, but is not registered and stamped, is valid and enforceable? Held, an instrument which is exigible to stamp duty may contain an arbitration clause and which is not stamped cannot be said to be a contract enforceable in law within the meaning of S. 2(h) of the Contract Act and is not enforceable under S 2(g) of the Contract Act. N.N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd., 2023 LiveLaw (SC) 343 : (2023) 7 SCC 1 : 2023 INSC 423 (Overruled in In Re Interplay Between Arbitration Agreements, 2023 LiveLaw (SC) 1049 : 2023 INSC 1066 (7 Bench)

Section 8 - Power to refer parties to arbitration where there is an arbitration agreement

Arbitration and Conciliation Act 1996; Sections 8 and 11 - Agreements which are not stamped or are inadequately stamped are inadmissible in evidence under Section 35 of the Stamp Act. Such agreements are not rendered void or void ab initio or unenforceable. Non-stamping or inadequate stamping is a curable defect. An objection as to stamping does not fall for determination under Sections 8 or 11 of the Arbitration Act. The concerned court must examine whether the arbitration agreement prima facie exists. Any objections in relation to the stamping of the agreement fall within the ambit of the arbitral tribunal. (Para 224, Overruled: N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2023) 7 SCC 1, SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd; (2011) 14 SCC 66 and Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209 (Para 22 and 29) In Re Interplay Between Arbitration Agreements, 2023 LiveLaw (SC) 1049 : 2023 INSC 1066 (7 Bench)

Arbitration and Conciliation Act, 1996; Section 8 - the reliefs claimed in the suit fell outside the arbitration clause contained in the agreement executed between the parties. The court reckoned that the issue raised in the civil suit involved multiple transactions, involving different contracting parties and different agreements, all of which, except for one, did not contain an arbitration clause. Gujarat Composite Ltd. v. A Infrastructure Ltd., 2023 LiveLaw (SC) 384 : 2023 INSC 470

Arbitration and Conciliation Act, 1996; Section 8 - The Supreme Court has upheld the decision of the Gujarat High Court where it had upheld the rejection of an application filed under Section 8 of the Act in a commercial civil suit, noting that the cause of action of the suit went beyond the transaction containing the arbitration agreement. Gujarat Composite Ltd. v. A Infrastructure Ltd., 2023 LiveLaw (SC) 384 : 2023 INSC 470

Arbitration and Conciliation Act, 1996; Section 8 - While noting that the reliefs claimed in the suit involved subsequent purchasers of the suit property, which were not signatories to the arbitration agreement, held that, the case did not involve any “doubt” about the non-existence of arbitration agreement in relation to the dispute in question. Gujarat Composite Ltd. v. A Infrastructure Ltd., 2023 LiveLaw (SC) 384 : 2023 INSC 470

Arbitration and Conciliation Act, 1996; Section 8 and 11 - Arbitral Tribunal is competent to decide on its own competence. (Para 15) Sushma Shivkumar Daga v. Madhurkumar Ramkrishnaji Bajaj, 2023 LiveLaw (SC) 984 : 2023 INSC 1081

Arbitration and Conciliation Act, 1996; Section 8 and 11 - Plea of fraud must be serious in nature in order to oust the jurisdiction of an Arbitrator. (Para 20) Sushma Shivkumar Daga v. Madhurkumar Ramkrishnaji Bajaj, 2023 LiveLaw (SC) 984 : 2023 INSC 1081

Arbitration and Conciliation Act, 1996; Section 8 and 11- Cancellation of a deed is an action in personam, not in rem, and hence arbitrable. (Para 19) Sushma Shivkumar Daga v. Madhurkumar Ramkrishnaji Bajaj, 2023 LiveLaw (SC) 984 : 2023 INSC 1081

Section 11 - Appointment of Arbitrators

Arbitration and Conciliation Act 1996; Section 11(6) - A clause in an arbitration agreement which is not in consonance with the Constitution cannot be enforced. The Court can examine if the arbitration clauses are manifestly arbitrary and violative of Article 14 of the Constitution while considering an application for appointment of arbitrator. (Para 84) Lombardi Engineering Ltd v. State of Uttarakhand, 2023 LiveLaw (SC) 958 : 2023 INSC 976

Arbitration and Conciliation Act 1996; Section 11(6) - Persons interested in the outcome of the arbitration must not have the power to appoint arbitrators. (Para 87) Lombardi Engineering Ltd v. State of Uttarakhand, 2023 LiveLaw (SC) 958 : 2023 INSC 976

Arbitration and Conciliation Act 1996; Section 11(6) - The argument that the petitioner having consented to the pre-deposit clause at the time of execution of the agreement, cannot turn around and tell the court in a Section 11(6) petition that the same is arbitrary and falling foul of Article 14 of the Constitution is without any merit. (Para 84) Lombardi Engineering Ltd v. State of Uttarakhand, 2023 LiveLaw (SC) 958 : 2023 INSC 976

Arbitration and Conciliation Act, 1996; Section 11 - Certified copy can be produced at the Section 11 stage only if it clearly indicates the stamp duty paid. If the same is not mentioned, the Court should not act on the said certified copy. N.N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd., 2023 LiveLaw (SC) 343 : (2023) 7 SCC 1 : 2023 INSC 423 (Overruled in In Re Interplay Between Arbitration Agreements, 2023 LiveLaw (SC) 1049 : 2023 INSC 1066 (7 Bench)

Arbitration and Conciliation Act, 1996; Section 11 - The Apex Court has set aside the decision of the Delhi High Court where the Court had referred the parties to arbitration under Section 11(6) of the A&C Act, after the parties had entered into a Settlement Agreement which recorded that there were no subsisting issues pending between them. The Supreme Court held that the High Court should have exercised the prima facie test to screen and strike down the ex-facie meritless and dishonest litigation. Further, it ought to have examined the issue of the final settlement of disputes in context of the principles laid down in Vidya Drolia and Ors. vs. Durga Trading Corporation ((2021) 2 SCC 1 - The Supreme Court has ruled that while exercising jurisdiction under Section 11(6) of the A&C Act, the court is not expected to act mechanically, and that the limited scrutiny of the court at the pre-reference stage, through the “eye of the needle”, is necessary and compelling. NTPC Ltd v. SPML Infra Ltd; 2023 LiveLaw (SC) 287 : AIR 2023 SC 1974 : 2023 INSC 334 :(2023) 2 SCR 846

Arbitration and Conciliation Act, 1996; Section 11 - the Court at the Section 11 stage is bound to examine the instrument and if found to be unstamped or insufficiently stamped the instrument is to be impounded at this stage itself. N.N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd., 2023 LiveLaw (SC) 343 : (2023) 7 SCC 1 : 2023 INSC 423 (Overruled in In Re Interplay Between Arbitration Agreements, 2023 LiveLaw (SC) 1049 : 2023 INSC 1066 (7 Bench)

Arbitration and Conciliation Act, 1996; Section 11 (6) - Post amendment in 2015, the jurisdiction of the Court under Section 11(6) of the Arbitration Act is confined to examining whether an arbitration agreement exists between the parties – “nothing more, nothing less”. Under Section 11(6A) of the Arbitration Act, referral court is duty bound to consider the dispute/issue with respect to the existence of an Arbitration Agreement. (Para 5.2) Magic Eye Developers Pvt. Ltd. v. Green Edge Infrastructure Pvt. Ltd., 2023 LiveLaw (SC) 444 : AIR 2023 SC 2339 : 2023 INSC 528

Arbitration and Conciliation Act, 1996; Section 11 (6) - The 'pre-referral' jurisdiction of Court under Section 11 (6) consists of two inquiries, (i) existence and validity of arbitration agreement; and (ii) non-arbitrability of dispute. The primary inquiry is about the existence and the validity of an arbitration agreement, which also includes an inquiry as to the parties to the agreement and the applicant's privity to the said agreement. The said matter requires a thorough examination by the referral court. The Secondary inquiry that may arise at the reference stage itself is with respect to the non-arbitrability of the dispute. Both are different and distinct. So far as the first issue with respect to the existence and the validity of an arbitration agreement is concerned, as the same goes to the root of the matter, the same has to be to conclusively decided by the referral court at the referral stage itself. With respect to non-arbitrability of the dispute, the court at pre-referral stage may prima facie examine the arbitrability of claims. The review at the reference stage is done to sideline the cases where litigation must stop at the first stage. (Para 5.3) Magic Eye Developers Pvt. Ltd. v. Green Edge Infrastructure Pvt. Ltd., 2023 LiveLaw (SC) 444 : AIR 2023 SC 2339 : 2023 INSC 528

Arbitration and Conciliation Act, 1996; Section 11 (6) - 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. (Para 5.3) Magic Eye Developers Pvt. Ltd. v. Green Edge Infrastructure Pvt. Ltd., 2023 LiveLaw (SC) 444 : AIR 2023 SC 2339 : 2023 INSC 528

Arbitration and Conciliation Act, 1996; Section 11(6) - Appointment of Arbitrator - Limitation period for arbitration - the cause of action to appoint an arbitrator would commence from the “Breaking Point” at which any reasonable party would abandon efforts for at arriving at a settlement and contemplate referral of the dispute for arbitration. “Breaking Point” should be treated as the date at which the cause of action arose for the purpose of limitation. B and T AG v. Ministry of Defence, 2023 LiveLaw (SC) 466 : AIR 2023 SC 2731 : 2023 INSC 549

Arbitration and Conciliation Act, 1996; Section 11(6) - Appointment of Arbitrator - Limitation period for arbitration - Entire history of the negotiation between the parties must be specifically pleaded and placed on record, in order to facilitate the Court to find out what was the “Breaking Point” for the purpose of limitation computation. B and T AG v. Ministry of Defence, 2023 LiveLaw (SC) 466 : AIR 2023 SC 2731 : 2023 INSC 549

Arbitration and Conciliation Act, 1996; Section 11(6) - Appointment of Arbitrator - Limitation period for arbitration - “Cause of action” to mean material facts that are necessary to be proved by the plaintiff to succeed in a suit; and it plays a necessary role in computation of limitation period for bringing an action. If a party simply delays sending a notice seeking reference under the Act 1996 because they are unclear of when the cause of action arose, the claim can become time-barred even before the party realises the same. B and T AG v. Ministry of Defence, 2023 LiveLaw (SC) 466 : AIR 2023 SC 2731 : 2023 INSC 549

Arbitration and Conciliation Act, 1996; Section 11(6) - Appointment of Arbitrator - Limitation period for arbitration - Mere negotiations will not postpone the cause of action for the purpose of limitation - the limitation period of three years for filing such application would commence from the date when the cause of action arose. Subsequent negotiations between the parties, which take place after the cause of action has arisen, will not postpone the cause of action for the purpose of limitation computation. B and T AG v. Ministry of Defence, 2023 LiveLaw (SC) 466 : AIR 2023 SC 2731 : 2023 INSC 549

Arbitration and Conciliation Act, 1996; Section 11(6) - Appointment of Arbitrator - Limitation period for arbitration - Negotiations may continue even for a period of ten years or twenty years after the cause of action had arisen. Mere negotiations will not postpone the “cause of action” for the purpose of limitation. The Legislature has prescribed a limit of three years for the enforcement of a claim and this statutory time period cannot be defeated on the ground that the parties were negotiating. B and T AG v. Ministry of Defence, 2023 LiveLaw (SC) 466 : AIR 2023 SC 2731 : 2023 INSC 549

Arbitration and Conciliation Act, 1996; Section 11(6) - Limitation Act, 1963; Article 137 - the Arbitration Act does not prescribe any time period for filing an application under Section 11(6) for appointment of Arbitrator. Thus, the limitation of three years provided under Article 137 of the Limitation Act, 1963 would apply to such proceedings. The time limit of three years would commence from the period when the right to apply accrues. B and T AG v. Ministry of Defence, 2023 LiveLaw (SC) 466 : AIR 2023 SC 2731 : 2023 INSC 549

Arbitration and Conciliation Act, 1996; Section 11(6) – Limitation Act, 1963; Article 137 - If an infringement of a right happens at a particular time, the whole cause of action will be said to have arisen then and there. In such a case, it is not open to a party to sit tight and not to file an application for settlement of dispute of his right, which had been infringed, within the time provided by the Limitation Act, and, allow his right to be extinguished by lapse of time, and thereafter, to wait for another cause of action and then file an application under Section 11 of the Act 1996 for establishment of his right which was not then alive, and, which had been long extinguished because, in such a case, such an application would mean an application for revival of a right, which had long been extinguished under the Act 1963 and is, therefore, dead for all purposes. Such proceedings would not be maintainable and would obviously be met by the plea of limitation under Article 137 of the Act 1963. B and T AG v. Ministry of Defence, 2023 LiveLaw (SC) 466 : AIR 2023 SC 2731 : 2023 INSC 549

Arbitration and Conciliation Act, 1996; Section 11(6), 11 (6A), 21 - Arbitration and Conciliation (Amendment) Act, 2015 - Where the notice invoking arbitration is issued prior to the coming into force of the 2015 Amendment Act, i.e., prior to 23.10.2015, and the application under Section 11 of the Arbitration Act, seeking appointment of an arbitrator, is made post the enforcement of the Amendment Act, the 2015 Amendment Act shall not be applicable. In Parmar Construction (2019) and Pradeep Vinod Construction (2020), the Supreme Court had specifically held that where the request to refer the dispute to arbitration was made before the 2015 Amendment Act came into effect, the unamended A&C Act shall be applicable for appointment of arbitrator. In BCCI (2018), the Apex Court has ruled the 2015 Amendment Act, 2015 to be prospective in nature only so far as the proceedings under Sections 34 & 36 of the Act are concerned. Further, the application under Section 11(6) was not in issue before the court. Shree Vishnu Constructions v. Engineer in Chief Military Engineering Service, 2023 LiveLaw (SC) 417 : 2023 INSC 508 : AIR 2023 SC 3554 : (2023) 8 SCC 329

Arbitration and Conciliation Act, 1996; Sections 11(6) and 12(5) r/w Schedule VII - Application for appointment of arbitrator - A contract entered into in the name of the President of India, does not create an immunity against the application of any statutory prescription imposing conditions on parties to an agreement, when the Government chooses to enter into a contract. Glock Asia-Pacific Ltd. v. Union of India, 2023 LiveLaw (SC) 459 : AIR 2023 SC 2777 : 2023 INSC 568

Section 12 - Grounds for Challenge

Arbitration and Conciliation Act 1996; Section 12 - Unilateral revision of fee by an arbitral tribunal, though not permissible, will not terminate its mandate on the ground of ineligibility. (Para 34) Chennai Metro Rail Ltd. v. Transtonnelstroy Afcons JV, 2023 LiveLaw (SC) 909 : 2023 INSC 932

Arbitration and Conciliation Act, 1996; Section 12(5) r/w Schedule VII - the Arbitrator appointed by Union, who is an employee of the Union, is ineligible to be appointed as the Arbitrator as per Para 1 of Schedule VII read with Section 12(5) of the Arbitration Act. Glock Asia-Pacific Ltd. v. Union of India, 2023 LiveLaw (SC) 459 : AIR 2023 SC 2777 : 2023 INSC 568

Section 28 - Rules applicable to substance of dispute.

Arbitration and Conciliation Act, 1996; Section 28(3) - Scope of judicial interference in arbitral awards - While setting aside an arbitral award for being violative of Section 28(3) of the Act, it must be considered that the Arbitrator is empowered to interpret the contract terms reasonably. Arbitrator's interpretation cannot be a ground for setting aside an award, since the construction of contract's terms is finally for the arbitrator to decide. Under Section 28(3), award can only be set aside if the arbitrator interprets it in manner as no fair-minded reasonable person would do. Section 28(3) of the Act mandatorily obligates the arbitral tribunal to decide cases as per terms of the contract and by considering the usage of the trade applicable to the transaction. (Para 41-43) Batliboi Environmental Engineers v. Hindustan Petroleum Corporation, 2023 LiveLaw (SC) 817 : 2023 INSC 850

Arbitration and Conciliation Act, 1996; Section 28(3) - The meaning of patent illegality was interpreted to mean, (a) contravention of substantive law of India which goes to the root of matter and is not be trivial in nature; (b) when Arbitrator gives no reason in award in contravention with Section 31(3) of the Arbitration Act; and (c) contravention of Section 28(3) of Arbitration Act which mandatorily obligates the arbitral tribunal to decide cases as per terms of the contract and by considering the usage of the trade applicable to the transaction. (Para 43) Batliboi Environmental Engineers v. Hindustan Petroleum Corporation, 2023 LiveLaw (SC) 817 : 2023 INSC 850

Section 29A - Time limit for arbitral award

Arbitration and Conciliation Act, 1996; Section 29A - Post 2019 amendment, the time limit of twelve months as prescribed in Section 29A is applicable to only domestic arbitrations and the twelve-month period is only directory in nature for an international commercial arbitration - Arbitral tribunals in international commercial arbitrations are only expected to make an endeavor to complete the proceedings within twelve months from the date of competition of pleadings and are not bound to abide by the time limit prescribed for domestic arbitrations. (Para 25-29) TATA Sons Pvt. Ltd. v. Siva Industries and Holdings Ltd., 2023 LiveLaw (SC) 39 : 2023 INSC 13 : (2023) 5 SCC 421

Arbitration and Conciliation Act, 1996; Section 29A - Section 29A(1), as amended, is remedial in nature, it should be applicable to all pending arbitral proceedings as on the effective date i.e., 30 August 2019 - The amendment is remedial in that it carves out international commercial arbitrations from the rigour of the timeline of six months. (Para 34) TATA Sons Pvt. Ltd. v. Siva Industries and Holdings Ltd., 2023 LiveLaw (SC) 39 : 2023 INSC 13 : (2023) 5 SCC 421

Section 31 - Form and Contents of Arbitral Award

Arbitration and Conciliation Act, 1996; Section 31(7) - Unless there is a specific bar under the contract, it is always open for the arbitrator / Arbitral Tribunal to award pendente lite interest. (Para 7.5) Indian Railway Construction Company v. National Buildings Construction Corporation, 2023 LiveLaw (SC) 210 : 2023 INSC 248 : (2023) 2 SCR 713

Section 33 - Correction and interpretation of award; additional award.

Arbitration and Conciliation Act, 1996; Section 33(3) and 34(3) - The starting point for the limitation in case of suo moto correction of the award, would be the date on which the correction was made and the corrected award is received by the party - Once the arbitral award has been amended or corrected, it is the corrected award which has to be challenged and not the original award. The original award stands modified, and the corrected award must be challenged by filing objections. USS Alliance v. State of Uttar Pradesh, 2023 LiveLaw (SC) 20

Section 34 - Application for setting aside Arbitral Awards

Arbitration and Conciliation Act, 1996; Section 34 - A dissenting opinion cannot be treated as an award if the majority award is set aside. It might provide useful clues in case there is a procedural issue which becomes critical during the challenge hearings - When a majority award is challenged by the aggrieved party, the focus of the court and the aggrieved party is to point out the errors or illegalities in the majority award. The minority award (or dissenting opinion, as the learned authors point out) only embodies the views of the arbitrator disagreeing with the majority. There is no occasion for anyone- such as the party aggrieved by the majority award, or, more crucially, the party who succeeds in the majority award, to challenge the soundness, plausibility, illegality or perversity in the approach or conclusions in the dissenting opinion. That dissenting opinion would not receive the level and standard of scrutiny which the majority award (which is under challenge) is subjected to. (Para 27) Hindustan Construction Company Ltd. v. National Highways Authority of India, 2023 LiveLaw (SC) 704 : 2023 INSC 768

Arbitration and Conciliation Act, 1996; Section 34 - An application under Section 34 must be filed within “prescribed period” of limitation i.e. 90 days, for seeking benefit of exclusion of period during which the Court remained closed from computation of limitation period. If the application is filed by invoking proviso to Section 34(3) of Arbitration Act, which extends the limitation period to further 30 days on the Court's discretion, then benefit of such exclusion would not be available to the applicant. Bhimashankar Sahakari Sakkare Karkhane Niyamita v Walchandnagar Industries Ltd; 2023 LiveLaw (SC) 288 : AIR 2023 SC 1990 : 2023 INSC 335

Arbitration and Conciliation Act, 1996; Section 34 - Scope of judicial interference in arbitral awards - Arbitral Tribunal is ultimate master of quality and quantity of evidence. An Award cannot be regarded invalid merely for being passed upon little or no evidence. It is not imperative for every Arbitrator to be trained in law like a Judge. Even if decisions are passed over equity, being just and fair, such decisions cannot be set aside alleging arbitrariness. (Para 43) Batliboi Environmental Engineers v. Hindustan Petroleum Corporation, 2023 LiveLaw (SC) 817 : 2023 INSC 850

Arbitration and Conciliation Act, 1996; Section 34 - Supreme Court sets aside the HC order which set aside an arbitral award - SC hold that HC exceeded in its jurisdiction under Section 34 of the Arbitration Act quashing and setting aside the well-reasoned award passed by the Arbitral Tribunal. Indian Railway Construction Company v. National Buildings Construction Corporation, 2023 LiveLaw (SC) 210 : 2023 INSC 248 : (2023) 2 SCR 713

Arbitration and Conciliation Act, 1996; Section 34 (2)(b)(ii) - A claim for damages, whether general or special, cannot as a matter of course result in an award without proof of the claimant having suffered injury. Awarding claim for loss of profit without substantial evidence is in conflict with public policy of India. (Para 20) Unibros v. All India Radio, 2023 LiveLaw (SC) 918 : 2023 INSC 931 : AIR 2023 SC 5231

Arbitration and Conciliation Act, 1996; Section 34(3) - Purpose and Object - To enable the parties to study, examine and understand the award, thereupon, if the party chooses and is advised, draft and file objections within the time specified. USS Alliance v. State of Uttar Pradesh, 2023 LiveLaw (SC) 20

Arbitration and Conciliation Act, 1996; Section 34(3) Proviso - Court has the power to condone the delay for further period of thirty days - Application for condonation of delay can be filed at any time till the proceedings are pending. Of course, exercise of discretion and whether or not the delay should be condoned is a different matter. USS Alliance v. State of Uttar Pradesh, 2023 LiveLaw (SC) 20

Arbitration and Conciliation Act, 1996; Section 34, 37 - An award could be said to be suffering from “patent illegality” only if it is an illegality apparent on the face of the award and not to be searched out by way of re-appreciation of evidence - The narrow scope of “patent illegality” cannot be breached by mere use of different expressions which nevertheless refer only to “error” and not to “patent illegality - if an Arbitrator construes the term of contract in a reasonable manner, the award cannot be set aside with reference to the deduction drawn from construction - The possibility of interference would arise only if the construction of the Arbitrator is such which could not be made by any fair minded and reasonable person. (Para 18, 25, 36) Reliance Infrastructure Ltd. v. State of Goa, 2023 LiveLaw (SC) 416 : AIR 2023 SC 2280 : 2023 INSC 514

Arbitration and Conciliation Act, 1996; Section 34, 37 - Awards which contain reasons, especially when they interpret contractual terms, ought not to be interfered with, lightly - Appellate review is unavailable when exercising jurisdiction under Section 34 of the Act - Courts cannot, through process of primary contract interpretation, thus, create pathways to the kind of review which is forbidden under Section 34. (Para 22 - 23) Hindustan Construction Company Ltd. v. National Highways Authority of India, 2023 LiveLaw (SC) 704 : 2023 INSC 768

Arbitration and Conciliation Act, 1996; Section 34, 37 - The court is powerless to modify the award and can only set aside partially, or wholly, an award on a finding that the conditions spelt out under Section 34 have been established - In appeal, Section 37 of the Act grants narrower scope to the appellate court to review the findings in an award, if it has been upheld, or substantially upheld under Section 34. (Para 13-16) Larsen Air Conditioning and Refrigeration Company v. Union of India, 2023 LiveLaw (SC) 631 : 2023 INSC 708 : AIR 2023 SC 4452

Arbitration and Conciliation Act, 1996; Section 34, 37 - The Court cannot, after setting aside the award, proceed to grant further relief by modifying the award. It must leave the parties to work out their remedies in a given case even where it justifiably interferes with the award. (Para 27) Indian Oil Corporation v. Sathyanarayana Service Station, 2023 LiveLaw (SC) 415 : 2023 INSC 507

Arbitration and Conciliation Act, 1996; Section 34, 37 - The scope of interference by a court in an appeal under Section 37 of the Act, in examining an order, setting aside or refusing to set aside an award, is restricted and subject to the same grounds as the challenge under Section 34 of the Act - This jurisdiction is not akin to normal appellate jurisdiction - The jurisdiction under Section 34 of the Act is exercised only to see if the Arbitral Tribunal's view is perverse or manifestly arbitrary. Accordingly, the question of reinterpreting the contract on an alternative view does not arise. (Para 14, 15, 20) Konkan Railway Corporation Ltd. v. Chenab Bridge Project Undertaking, 2023 LiveLaw (SC) 668 : 2023 INSC 742: AIR 2023 SC 4049 : (2023) 9 SCC 85

Arbitration and Conciliation Act, 1996; Section 34, 37 - View taken by the arbitrator in the facts, can be characterised as being perverse. It is undoubtedly a plausible view. It closes the door for the court to intervene. The finding of the arbitrator cannot be described as one betraying “a patent illegality". (Para 22) Indian Oil Corporation v. Sathyanarayana Service Station, 2023 LiveLaw (SC) 415 : 2023 INSC 507