Arbitration Cases Weekly Round-Up: April 9 To April 15, 2023

Limited Scrutiny of Court Under Section 11 Of Arbitration Act Through The “Eye Of The Needle”, Is Necessary And Compelling: Supreme Court

Case Title: NTPC Ltd vs M/s SPML Infra Ltd

The Supreme Court has ruled that the court while exercising jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996 (A&C Act) 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.

The bench comprising Chief Justice DY Chandrachud and Justice PS Narasimha remarked that the same is intertwined with the duty of the referral court to protect the parties from being forced to arbitrate when the matter is demonstrably non-arbitrable, adding that same is a legitimate interference by courts to refuse reference in order to prevent wastage of public and private resources.

Arbitration | Section 34 Application Must Be Filed Within 90 Days Limitation To Claim Exclusion Of Period When Court Remain Closed: Supreme Court

Case Title: Bhimashankar Sahakari Sakkare Karkhane Niyamita vs Walchandnagar Industries Ltd. (WIL)

The Supreme Court has held that an application under Section 34 of Arbitration and Conciliation Act, 1996 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.

High Courts:

Calcutta High Court:

Arbitration- Limitation Starts From Failure Of Settlement Talks: Calcutta High Court

Case Title: Zillon Infraprojects Pvt Ltd vs BHEL

The High Court of Calcutta has held that the period of limitation will only begin to run when the talks of amicable settlement between the parties fail.

The bench of Justice Shekhar B. Saraf held that the period of limitation for referring a dispute to arbitration would be calculated from the date of the breaking point i.e., the date of failure of settlement talks, when the parties were trying to amicably settle the dispute.

Award Passed By A Unilaterally Appointed Arbitrator Is A Nullity, Cannot Be Enforced Under Section 36 Of The A&C Act: Calcutta High Court

Case Title: SREI Equipment Finance vs Sadhan Mandal

The High Court of Calcutta has held that an arbitration award passed by an arbitrator who was unilaterally appointed by one of the parties cannot be executed under Section 36 of the A&C Act.

The bench of Justice Shekhar B. Saraf held that a unilaterally appointed award does not carry the privilege of existence in the eyes of the law and is regarded as a nullity, therefore, there is nothing to execute in an enforcement petition.

Section 12(5) Of The A&C Act Would Not Apply To An Arbitration That Commenced Before The 2015 Amendment: Calcutta High Court

Case Title: West Bengal Housing Board vs Abhisek Construction

The High Court of Calcutta has held that Section 12(5) of the A&C Act, which provides for ineligibility of a person to act as an arbitrator whose appointment falls under any categories mentioned under the Seventh Schedule to the Act, would not apply to an arbitration that commenced before the 2015 Amendment.

The bench of Justice Shekhar B. Saraf held that the 2015 Amendment that added Section 12(5) to the A&C Act would not retrospectively apply to arbitration proceedings that commenced before the Amendment became operative.

Once Civil Suit Has Been Disposed Of By Referring Parties To Arbitration Under S. 89 Of CPC, The Suit Can’t Be Revived: Calcutta High Court

Case Title: Bharat Vanijya Eastern Private Limited vs State of West Bengal

The Calcutta High Court has ruled that once the court has disposed of a civil suit and referred the parties to arbitration in an application filed by it under Section 89 of the Code of Civil Procedure, 1908 (CPC), and has appointed an arbitrator with the written consent of both the parties, the suit cannot be revived.

Delhi High Court:

Delhi High Court Lays Down Twin Test For Exercising Power Of Attachment Before Passing Arbitral Award

Case Title: M/s Promax Power Ltd vs M/s Tahal Consulting Engineers India Pvt Ltd

The Delhi High Court has ruled that though the power to pass an attachment order before an award is rendered by the Arbitral Tribunal may not have been specifically set out in Sections 9 and 17 of the Arbitration and Conciliation Act, 1996 (A&C Act), however, such an order could be made if the circumstances so warrant.

However, the bench of Justice Yashwant Varma remarked that the said power cannot be invoked merely because the claimant is found to have a just or valid claim upon a prima facie evaluation. It would also be obligatory upon the claimant to establish that the defendant before the Tribunal is indulging in activities aimed at dissipation of assets or is seeking to remove the assets with an intent to defeat the arbitral award that may be ultimately passed. The said twin test must be satisfied before such an attachment order is justifiably made, the Court said.

Gauhati High Court:

A Court Cannot Condone The Delay In Filing Of The Petition Under Section 34 Of The A&C Act Beyond 120 Days: Gauhati High Court Reiterates

Case Title: Union of India vs Jyoti Forge and Fabricators

The Gauhati High Court has held that a Court cannot condone the delay in the filing of the petition under Section 34 of the A&C Act beyond 120 days. The bench of Justice Malasri Nandi held that the Court cannot condone the delay beyond the period of limitation provided under Section 34(3) of the Act i.e., 3 months+ 30 days. It held that Section 5 of the Limitation Act does not apply to petition under Section 34(1) of the A&C Act.