Supreme Court Quarterly Digest 2024- ARBITRATION (Jan - Mar)

SUPREME COURT QUARTERLY DIGEST 2024

Arbitration and Conciliation Act, 1996

An award could be said to be against the public policy of India in, inter alia, the following circumstances: 1. When an award is, on its face, in patent violation of a statutory provision 2. When the arbitrator/Arbitral Tribunal has failed to adopt a judicial approach in deciding the dispute. 3. When an award is in violation of the principles of natural justice. 4. When an award is unreasonable or perverse. 5. When an award is patently illegal, which would include an award in patent contravention of any substantive law of India or in patent breach of the 1996 Act. 6. When an award is contrary to the interest of India, or against justice or morality, in the sense that it shocks the conscience of the Court. (Para 27) S.V. Samudram v. State of Karnataka, 2024 LiveLaw (SC) 14 : AIR 2024 SC 447 : (2024) 3 SCC 623

Sections 34 and 37 - Modification of Arbitral Award not allowed under Section 34. Court could have at best set aside the award and could not modify the same. (Para 32.8) S.V. Samudram v. State of Karnataka, 2024 LiveLaw (SC) 14 : AIR 2024 SC 447 : (2024) 3 SCC 623

Sections 34 or 37 - Whether the courts have the power to modify the arbitral award ? Referred to a larger Bench. Gayatri Balasamy v. Isg Novasoft Technologies Ltd; 2024 LiveLaw (SC) 149

Section 48 – Enforcement of foreign award in India challenged on grounds of arbitral bias – In India, courts must adopt an internationally recognized narrow standard of public policy, when dealing with the aspect of bias. Refusal of enforcement of foreign award should only be in a rare case where, non- adherence to International Standards is clearly demonstrable. Held, cannot infer bias or likelihood of bias of the Presiding Arbitrator, hence there is no violation of the public policy, which would render the foreign award unenforceable in India. The award debtors have failed to substantiate their allegation of bias, conflict of interest or the failure by the Presiding Arbitrator to render disclosure to the parties, as an objection to the enforcement of the award. Courts across the world have applied a higher threshold of bias to prevent enforcement of an Award than the standards set for ordinary judicial review. The award debtors have failed to meet the high threshold for refusal of enforcement of a foreign award under Section 48 of the Indian Arbitration Act. The decision given by the High Court for enforcement/execution of the foreign award stands approved. (Para 22, 25, 36, 42 & 43) Avitel Post Studioz Ltd. v. Hsbc Pi Holdings (Mauritius) Ltd., 2024 LiveLaw (SC) 267

Section 48 – Challenge of Arbitral bias raised at the enforcement stage – Held, challenge of arbitral bias is raised at the enforcement stage, must be discouraged by Courts to send out a clear message that Indian Courts would ensure enforcement of a foreign Award unless it is demonstrable that there is a clear violation of morality and justice. No setting aside challenge based on bias was raised before the Singapore Courts by the appellants within the limitation period. Since the objection of bias was not raised in appropriate proceedings it could not be raised at the post-award Stage. Held, the Award Debtors should have applied for setting aside of the Award before the Singapore Courts at the earliest point of time.  (Para 27, 29 & 42) Avitel Post Studioz Ltd. v. Hsbc Pi Holdings (Mauritius) Ltd., 2024 LiveLaw (SC) 267

Section 78(5) – Arbitration clause – Two-Contract Case – When the parties enter into a contract, making a general reference to another contract, such general reference would not have the effect of incorporating the arbitration clause from the referred document into the contract between the parties. The arbitration clause from another contract can be incorporated into the contract only by a specific reference to arbitration clause.  A reference to the document in the contract should be such that shows the intention to incorporate the arbitration clause from another document into the contract between the parties. The present case is a 'two-contract' case.  Clause 7.0 of the L.O.I. which also forms part of the agreement specifically provides that the redressal of the dispute between the NBCC and the respondent shall 'only' be through civil courts having jurisdiction of Delhi alone. When there is a reference in the second contract to the terms and conditions of the first contract, the arbitration clause would not ipso facto be applicable to the second contract unless there is a specific mention/reference thereto. The present case is not a case of 'incorporation' but a case of 'reference' and a general reference would not have the effect of incorporating the arbitration clause. The learned single judge of the Delhi High Court has erred in allowing the appointed the Sole Arbitrator to adjudicate the dispute between the parties. (Para 10, 12, 13, 21 & 23) Nbcc (India) Ltd. v. Zillion Infraprojects Pvt. Ltd., 2024 LiveLaw (SC) 246

The Limitation Act, 1963 is applicable to proceedings for appointment of arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 ("A&C Act"), and a Court may refuse to make a reference if the claims, on the date of commencement of arbitration proceedings, are ex-facie barred. (Para 50) Arif Azim Co. Ltd. v. Aptech Ltd., 2024 LiveLaw (SC) 180 : AIR 2024 SC 1347

The Parliament should consider bringing an amendment to the Act, 1996 prescribing a specific period of limitation within which a party may move the court for making an application for appointment of arbitrators under Section 11 of the Act, 1996. (Para 94) Arif Azim Co. Ltd. v. Aptech Ltd., 2024 LiveLaw (SC) 180 : AIR 2024 SC 1347