By way of the present column, an attempt is made to briefly review the salutary judgments pronounced by the Courts in the months of June & July 2021 under the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the 'Act'). While as many judgments as possible are sought to be reviewed, owing to the limited column space, some judgments would invariably be left out. Further, while an attempt is made to include and review some judgments of various other High Courts, the emphasis is essentially on the judgments of the High Court of Delhi and Supreme Court of India. The judgments have been compiled for review with reference to the Section of the Act that they are primarily dealing with and a detailed analysis has been forgone in favour of succinctness.
- Agreement to fall within proviso to S. 2(2) must be specific
In Aapico Investment Pte. Limited and Ors. v Manickam Mahalingam, High Court of Madras was considering the argument that when the Contract is governed by the Laws of England and Wales and when the parties have agreed that the SIAC Rules would apply to arbitration and the venue is at Singapore, the curial law is the laws of Singapore, then the same would constitute an implied agreement to contrary to fall within the proviso to S. 2(2). The Court rejected the said argument. The Court took note of the fact that in S. 2(2) an agreement to the contrary is contemplated only with reference to the applicability of the provisions of S. 9, 27, 37(1)(a) and 37(3) of the Act. It held, that considering the same, the agreement to the contrary should be specific and general terms regarding the laws governing the contract or the arbitration agreement or the seat/venue cannot be construed as an "agreement to the contrary" as contemplated under the Proviso to Sec. 2(2) of the Act.
- Participation in arbitral proceedings without raising an objection with regards to invocation constitutes waiver of the same
In C. Mugilan v IndusInd Bank Ltd. and Ors., High Court of Madras rejected the challenge to the award premised on alleged ground that no notice of invocation of arbitration had been served on the Petitioner (respondent before the arbitrator). The Court took note of the fact that Petitioner had participated in arbitral proceedings but never raised the said objection either u/s. 13 or 16 and held that assuming that any provision has been violated, despite the same, when the party participated in the proceedings, without any objection with regard to such violation, the conduct shall be taken as a waiver of any such violation as per S. 4 of the Act.
- Non-filing of any reply/objection despite service of notice of S. 11 petition would constitute acceptance of existence of arbitration agreement
In Swastik Pipe Ltd. v Shri Ram Autotech P. Ltd. High Court of Delhi held that while the Respondent has not signed the invoice containing the arbitration clause but observed that the existence of the arbitration agreement can also be inferred from the stand taken by the parties in the pleadings in S. 11 proceedings. The Court noted that despite service, the Respondents have not filed a reply to deny the assertion of arbitration agreement, both in response to the legal notice invoking arbitration, as well as to the present petition. The Court held that consequence of such non-appearance is that assertion of existence of the arbitration agreement is unrebutted and thus prima facie, it can be inferred that the arbitration agreement exists between the parties.
- No reference to arbitration if arbitration agreement is only a "contract to contract"
In Ashwani Kumar v Scraft Products Pvt. Ltd., High Court of Delhi held that in case before it, the arbitration clause only exhibits a vague possibility and not a conclusive decision of the parties to arbitrate in the future, i.e. to say in other words, if the arbitration agreement is only a "contract to contract" and will require a fresh, unequivocal consent to the dispute resolution mechanism of arbitration, then, it is not a valid agreement. It held that although, use of the expression "may" is not always decisive and in some cases, the Courts have indeed construed the word "may" to mean as "shall", however, such an interpretation is permissible only if that is the true intention of the parties – as decipherable from other sources. In the facts of the case at hand, it held , that the use of the word "may" shows that the parties wanted to make arbitration optional. The Court rejected the contention of the Petitioner that the issue be left open for the arbitrator to decide and held that the existence (which includes the validity and lawfulness) of an arbitration agreement can be examined by the Court u/s 11 itself and a clause that does not withstand the statutory requirements or essential elements under Section 2(b) r/w Section 7 of the Act is no arbitration agreement.
- Reference in Addendum to all clauses of agreement would include arbitration clause unless specifically excluded
In Blue Star Ltd v Bhasin Infotech & Infrastructure Pvt Ltd & Anr, High Court of Delhi noted that though Respondent No. 2 in the said case had not been a signatory to the original agreement containing the arbitration clause, but was a signatory to a letter which was expressly made an addendum to the original agreement and which stated that clauses of the original agreement are binding on the parties and thus Respondent No. 2 was bound by the arbitration agreement. The Court held that it cannot be assumed that the parties agreed to be bound by all the clauses in the service agreement, as clearly stipulated, but not the arbitration clause and held that such a stipulation would have to be specifically made out in the Addendum.
- Assignment of trademark is by a contract and not by a statutory act and thus disputes pertaining to the same are arbitrable
In M/s. Golden Tobie Private Limited (Formerly Known As Golden Tobie Limited) v M/s. Golden Tobacco Limited, High Court of Delhi following the decision of a coordinate Bench in Hero Electric Vehicles Pvt. Ltd. & Anr. vs. Lectro E-Mobility Pvt. Ltd. & Anr., held that while grant/ issue of patents and registration of trademarks are exclusive matters falling within the sovereign and government function and are non-arbitrable but disputes arising from trademark license or assignment agreements are disputes under contract and do not involve exercise of any sovereign function and are thus arbitrable. The Court thus allowed the application u/s 8 and referred the disputes pertaining cancellation of assignment to arbitration.
- Once the LoA communicating the acceptance of the petitioner's tender was communicated to the petitioner, the contract between the parties came into existence – granted stay of blacklisting
In Anand & Co. v Union of India, High Court of Delhi granted stay of the Respondent's communication by which Respondent had rejected the petitioner's tender and blacklisted it for a period of one year from participating in any CPWD tenders. The Court rejected the Respondent's contention that in view of no formal agreement being executed between the parties, there was no agreement between the parties to refer the disputes to arbitration. The Court held that once the LoA communicating the acceptance of the petitioner's tender was communicated to the petitioner, the contract between the parties came into existence. The Court noted that as per terms of NIT, the petitioner was obliged to sign the specified contract documents and it was not open for the petitioner to avoid the said obligation and further noted that the agreement to arbitrate is a part of the terms and conditions of the contract accepted by the parties.
- "subject matter of the arbitration agreement", would have to abide by the covenants of the arbitration agreement itself.
independent rights, lawfully enuring in favour of third parties who are strangers to the arbitration agreement under consideration before the Court, cannot be injuncted u/s 9 unless such third parties claim said rights, or title, under or through one of the parties to the arbitration agreement
In Thar Camps Pvt. Ltd. v M/s. Indus River Cruises Pvt. Ltd. & Ors. High Court of Delhi held that "subject matter of the arbitration agreement", would have to abide by the covenants of the arbitration agreement itself. The Court, on the facts of the case, found that the agreement between parties was for providing services essentially with regards to certain ships/vessels and not for transfer of possession or title in ships/goods and thus "subject matter of the arbitration", in the present case, were not the vessels on which the petitioner was to provide services, but were, rather, the services provided by the petitioner on such vessels. The Court held that thus the prayer in S. 9 seeking restraint qua the vessels could not fall under S. 9 (1)(ii)(a) and at best could only be considered under S. 9(1)(ii)(b). On merits, the Court found that claim of lock in period charges premised on early termination of agreement between the parties, was in the nature of speculative damages and thus found that no case exists for securing the said claim. The Court further held that any order for security, or for interim protection in any other manner, can be passed only if firstly 2 considerations are met, namely, prima facie entitlement, of the petitioner, to the amount claimed, and of the permissibility, in law, of securing of the said amount in the manner sought by the petitioner. The Court further observed that while strangers to an arbitration agreement may not, for reason of being strangers alone, remain insulated from orders under S. 9Act but at the same time, independent rights, lawfully enuring in favour of third parties who are strangers to the arbitration agreement under consideration before the Court, cannot be injuncted under S. 9 unless such third parties claim said rights, or title, under or through one of the parties to the arbitration agreement.
- A&C Act does not envisage adjudication in two stages, i.e., summary adjudication by the Court under Section 9 and a final adjudication by the Arbitral Tribunal under Section 6
In Navayuga Bengalooru Tollway Pvt Ltd v National Highways Authority Of India High Court of Delhi while dealing with a S. 9 petition seeking deposit/release of debt due as contractual termination payment, held that it is evident that directing a party to pay up/deposit an amount finding the opposite party to be so entitled to it on an interpretation of the Clauses of the Contract without a determination of the same by an Arbitral Tribunal would tantamount to usurping the latter's jurisdiction. The Court held that the power to issue directions in the nature of interim measures of protection under S. 9 of the Act can only be exercised, if it does not involve a final adjudication and at best, is on a prima facie view of the matter and does not require interpretation of the terms of a contract and enforcement thereof. Even if a party were to offer to secure deposits directed to be mandatorily made, by furnishing a Bank Guarantee, the Court would still go beyond its domain were it to decide substantive claims and direct payments while disposing of a petition under S. 9 of the Act. Court held grant of such a relief as prayed for in the present petition, would be one directing mandatory payment, which would also go against the principles of grant of interim mandatory injunction.
- allegations of misrepresentation or suppression of material facts not fraud to merit stay of invocation of bank guarantee
In Atindra Construction Private Limited v GAIL India Limited v Ors. High Court of Delhi held that allegations of misrepresentation or suppression of material facts, cannot be placed on the same footing as an allegation of egregious fraud on the basis of which a bank guarantee could be interdicted. It rejected the S. 9 petition seeking to restrain on invocation of bank guarantee on the ground that the agreement had been procured on the basis of mis-representation with regards to the soil condition.
- Order fixing fees passed by Arbitrator could not be challenged by relying on S. 9(ii)(e)
In Cement Corporation of India v Promac Engineering Industries Limited High Court of Delhi observed that sub-clause (e) of S. 9(1)(ii) of the Act, is, in substance, residuary clause which allows the court to issue such other interim directions, that are not covered by sub-clauses (a) to (d). It held that, however, such residuary clause would not cover the impugned orders passed by the Tribunal concerning the calculation of fee that is based on the interpretation of the provisions of the IV Schedule of the Act and thus the petitioner could not maintain a S. 9 application against the same.
- Counter claim of buyer maintainable in arbitration proceedings under MSMED Act
Registration under MSMED Act will be prospective and applies for supply of goods and services subsequent to registration but cannot operate retrospectively
Provisions of Limitation Act will apply to the arbitrations under MSMED Act
In Silpi Industries and Ors. v Kerala State Road Transport Corporation and Ors., Supreme Court of India was considering the issue as to whether a counter claim of the buyer is maintainable in the arbitration proceedings initiated as per Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006 ('the MSMED Act'). The Court held that while it is true that recovery amount u/s 17 of the MSMED Act is only with reference to the amounts claimed by the supplier u/s 16 of the said Act but the words used in S. 18 of the said Act, are, 'any party to a dispute' and further noted that if counter claims were held not maintainable it would lead to parallel proceedings before various fora which might result in contradictory findings. Court held that on a harmonious construction of S. 18(3) of the MSMED Act and S. 7(1) and S. 23(2A) of the A & C Act, counter-claim is maintainable before the statutory authorities under MSMED Act. Court also held that to seek the benefit of provisions under MSMED Act, the seller should have registered under the provisions of the Act, as on the date of entering into the contract and a seller cannot become micro or small enterprise or supplier, to claim the benefits within the meaning of MSMED Act 2006, by submitting a memorandum to obtain registration subsequent to entering into the contract and supply of goods and services. The Court also held that the provisions of Limitation Act, 1963 will apply to the arbitrations covered by Section 18(3) of the MSMED Act.
- Ex-facie time barred claims do not merit appointment of Arbitrator
In M/s Golden Chariot Recreations Pvt. Ltd v Mukesh Panika & Anr, High Court of Delhi was dealing with a case where the Petitioner had filed a second petition u/s 11 after dismissal of the earlier petition on ground of limitation and had sought to submit the cause of action for the two S. 11 petitions were different as in the earlier case the cause of action was attempt to sell on part of Respondent and second case was actual sale. The Court held that distinction between the causes of action for the two petitions viz. the attempt to sell and the actual sale, is nothing but an attempt to creation an illusion of a fresh cause of action and this so-called 'fresh' cause of action would not extend the limitation period. The Court held that the cause of action for arbitration, being the flash point for the purpose of reckoning the period of limitation, has already accrued by way of the stand of Respondent denying the arbitration agreement in response to first invocation notice and limitation is to be calculated as three years from the expiry of thirty days from the date of service of the first invocation notice. The Court held that in the present lis, the third invocation notice based on the same partnership deed and arbitration agreement, but alleging subsequent actions of the Respondents, cannot infuse fresh life into a dead claim.
- Clause which provides that no person other than nominee arbitrator can act as arbitrator is severable from intention to arbitrate
In M/s Jyoti Sarup Mittal v The Executive Engineer-XX-III, South Delhi Municipal Corporation High Court of Delhi held that the fundamental agreement between the parties to refer disputes to arbitration would not perish even if it is no longer permissible to follow the mechanism of appointment of an arbitrator provided in the agreement. Court held that the clause holding that no person other than nominee arbitrator can act as arbitrator can, at best, be said to be ancillary to the agreement to refer the disputes to arbitration and the same may be considered severable. Thus, even though the mechanism for appointment of the arbitrator can no longer be followed, the agreement between the parties to refer the disputes to arbitration would still survive.
- When venue or the seat has not been agreed by the parties, the plea of forum conveniens cannot be ignored altogether.
In Tata Capital Financial Services Limited v. Focus Imaging & Research Centre Pvt. Ltd. and Ors., High Court of Madras was confronted with an arbitration clause which inter alia provided "that arbitration to be held in Mumbai/Delhi/Kolkatta/Chennai as may be decided by the Lender in accordance with the Arbitration and Conciliation Act, 1996" and the Lender, petitioner before the Court, had filed the petition for appointment of arbitrator. The Court held that when a specific seat is not agreed upon by the parties, seat of arbitration has to be fixed only in terms of the provisions of the Act. It took note of S. 18 of the Act which deals with equal treatment of the parties and the parties should be treated with equality and each party to be given an opportunity to present their case. The Court held that where specific seat is not provided, neutral convenience of seat can be fixed by the parties and fixing the venue or seat at the place where no cause of action arose and driving the parties to face inconvenience to go to an unknown place to present their case, in fact, will defeat the very object of the Act. The Court, on facts, found that the entire cause of action has taken place at Delhi and the applicant is having branch Office at Delhi and thus held parties would be at liberty to move before Delhi High Court.
- Once a party has preferred an application u/s 12 and 13 of the Act before the Arbitrator, it cannot maintain a S. 14 application
In Delhi Tourism And Transportation Development Corporation (DTTDC) v M/s Swadeshi Civil Infrastructure Pvt. Ltd. High Court of Delhi held that as per the scheme of S. 12 and 13 of the Act, once a party has preferred an application u/s 12 and 13 of the Act before the Arbitrator, it cannot maintain a S. 14 application on the said grounds and only recourse available to the party, who is unsuccessful in its challenge to the Arbitral Tribunal, is to challenge the arbitral award made under S. 34 of the Act. The Court held, that , save and except in conditions where an arbitrator is ineligible to act as such by virtue of S. 12(5) of the Act, a challenge under S. 14 of the Act would not be maintainable on the perceived doubts as to his independence and impartiality.
- In the realm of private law, the concept of substantial compliance with the contract has no role to play at all unless it is part of the contract
In Board of Control for Cricket in India v Deccan Chronicle Holdings Ltd. High Court of Bombay set aside the arbitral award inter alia holding that the view taken by the Arbitrator on interpretation of contract is not a possible view as it ignored the specific language of the terms of the contract and read into requirements into the contract, which were not there in the contract and renders the award patently illegal. Additionally, the Court found that the findings of the arbitrator ignored direct, cogent and vitally relevant evidence. The Court held that the award holder can only at best attempt to show that evidence was not vital and was therefore rightly ignored , which it has not been able to do, but he cannot add to the Award or cannot supply reasons. The Court further found that the award was erroneously premised the a priori assumption that, notwithstanding what a contract says, contract law contemplates that the terms of a contract need not be exactly complied; 'substantial' compliance is enough. The Court found that in realm of private law, the concept of substantial compliance has no role to play at all unless it is part of the contract. The Court further found that claim of losses have been awarded without any evidence or reasons/break-up. Court found that even a claim for loss of reputation cannot be awarded without evidence even if there is no accurate method to compute damages for loss of reputation, this does not mean that there can be a total disregard of the principles underlying S. 73 of the Contract Act.
- Restricted interference u/s 34 becomes narrower in an award passed in an International Commercial Arbitration
In Bridge Marine Ltd. v Indian Oil Corporation Limited High Court of Delhi reiterated that an award in International Commercial Arbitration is impervious to jural interference on the ground of 'patent illegality' in S. 34(2A) of the Act. The Court noted that any challenge to an award in respect of interpretation or construction of a contractual provision by an Arbitral Tribunal falls under 'patent illegality' and is thus no longer a ground to challenge an award arising out of an International Commercial Arbitration and thus inter alia rejected the challenge to the award in an international commercial arbitration which assailed the interpretation of the contract by the Arbitral Tribunal. It also observed that similarly grounds of perversity which includes findings based on no evidence or in ignorance of vital evidence would fall under the ground of 'patent illegality' and only domestic awards other than awards in International Commercial Arbitration can be assailed on this ground. The Court also rejected the plea that as certain documents were considered which were filed only with written submissions, after conclusion of hearing and thus there is violation of principles of natural justice. The Court took note of the fact that the Petitioner had in fact acknowledged the receipt of the written submissions with the said new documents and despite elapse of more than a month from date of filing of submissions till date of award, the Petitioner never raised any objection to the said documents.
- No illegality if the award has not be signed on each page
In M/s Pragya Electronics Pvt.Ltd. v M/S Cosmo Ferrites Ltd. & Anr, High Court of Delhi rejected the challenge to the arbitral award inter alia premised on the ground that the award was not signed by the Arbitrator on each page and was in 3 different fonts. The Court held that there is no provision requiring the Arbitrator to sign each page of award nor is there any bar to award being in different fonts.
- Finding on duress and coercion based on appreciation of documentary evidence, cannot be interfered with
In Gail (India) Limited v Bansal Infratech Synergies Limited High Court of Delhi held that there is no dispute that a bald assertion of coercion or duress without any material substantiating the same would be wholly insufficient to maintain such a claim. However, on examination of the facts of the case at hand, it found that the Arbitrator had on appreciation of the documentary evidence come to the conclusion that the Respondent was required to submit the said certificate in order to be paid the admitted amount due under the Final Bill and also that the language of the NCC was as dictated by petitioner and was a one-sided letter. The Court thus found that the view of the arbitrator was not one based on no evidence but was a plausible view on appreciation of evidence and held that the Court is not required to re-appreciate or re-evaluate the evidence to examine the Arbitral Tribunal's decision on merits as a first appellate court.
- Award of interest contrary to terms of contract liable to be set aside
In Cosmopolis Properties Private Limited v Loyal Credit and Investments Limited High Court of Madras set aside the award on the ground that there was no break up or calculation given of the awarded amount and that interest has been awarded contrary to the contract. The Court held that when the parties have entered into a contract particularly in respect of the interest, learned Arbitrator could not go beyond the scope of the agreement. The Court held that the award suffers from the perversity particularly when the huge amount has been accepted without any reasons and the interest has been awarded contrary to the contract, leading to unjust enrichment of the respondents herein.
- When agreement barred payment of interest, Arbitrator could not award the same.
In Steel Authority of India Ltd. and Ors. v K. Gauthaman and Ors. High Court of Madras noted that clause of contract provided that in case any delay has occurred in respect of payment of final bill or running bill, no interest will be payable. It thus held that when the parties have specifically agreed upon that aspect, awarding of interest for delayed payment is against the very contract, and S. 31(7) of the Act. It thus set aside the award qua award of interest.
- Whether power of a court Under S. 34 of the Act to "set aside" an award of an arbitrator would include the power to modify such an award.
In The Project Director, National Highways Nos. 45E and 220, National Highways Authority of India v M Hakeem Supreme Court of India conclusively held that S. 34 of the Act cannot be held to include within it a power to modify an award. It held that position under the Arbitration Act, 1940 was different but the 1996 Act was enacted based on UNCITRAL Model Law on International Commercial Arbitration, 1985 and it makes it clear that, given the limited judicial interference on extremely limited grounds not dealing with the merits of an award, the 'limited remedy' under S. 34 is co-terminus with the 'limited right', namely, either to set aside an award or remand the matter under the circumstances mentioned in S. 34 of the Act . However, while the Court set aside the High Court judgment on law, it did not interfere with the judgment on facts, as it found the justice of the case does not require interference under Article 136 of the Constitution of India.
- Same person acting as Conciliator and Arbitrator is a ground to set aside award
In Hatsun Agro Products Ltd. v Three C Visuals and Ors. High Court of Madras accepted the contention that in arbitration under the MSME Act the person who was the conciliator could not have acted as arbitrator. The Court held that S. 18(2) MSME Act makes it very clear that the provisions of the Arbitration and Conciliation Act shall apply to conciliation proceedings and S. 80 of the Act bars the Conciliator to act as Arbitrator in the same matter, unless otherwise agreed and further S 81 of the Act bars relying on any evidence and suggestions in conciliation proceedings. The Court held that thus conciliation proceedings being conducted only by the same person/Council and final award was also passed, would be in fact contrary to the provisions of both MSME and A & C Act as there would be real danger of using evidence unearthed in conciliation proceedings in arbitration. The Court additionally found the award to be unreasoned and rejected the Respondent's request that matter can be remitted back to same Arbitrator u/s 34(4) stating that when the Council has already passed an order directing the petitioner to pay the amount with interest, if the matter is remitted under S. 34(4) of the Act, the Council has no other option except to give some reasons to substantiate final verdict and such reasons will be result of bias and partiality.
- Prior consent of Central Government is not necessary under S. 86(3) of the Code of Civil Procedure to enforce an arbitral award against a Foreign State.
A Foreign State cannot claim a Sovereign Immunity against enforcement of an arbitral award arising out of a commercial transaction.
In KLA Const Technologies Pvt. Ltd. v The Embassy Of Islamic Republic Of Afghanistan High Court of Delhi held that S. 36 of the Act treats an arbitral award as a decree of a Court for the limited purpose of enforcement of an award under the Code of Civil Procedure (CPC) but it does not become a decree of the court and the said limited legal fiction cannot be read in a manner which would defeat the very underlying rationale of the Act namely, speedy, binding and legally enforceable resolution of disputes between the parties. The Court held that an arbitration agreement in a commercial contract between a party and a Foreign State is an implied waiver by the Foreign State as provided in S. 86 of CPC so as to preclude it from raising a defence against an enforcement action premised upon the principle of Sovereign Immunity. Further held, arbitration being a consensual and binding mechanism of dispute settlement, it cannot be contended by a Foreign State that its consent must be sought once again at the stage of enforcement of an arbitral award against it. Court also held that once a Foreign State opts to wear the hat of a commercial entity, it would be bound by the rules of the commercial legal ecosystem and cannot be permitted to seek any immunity, which is otherwise available to it only when it is acting in its sovereign capacity.
- Order of Arbitrator refusing to implead a party not appealable u/s 37 (2)(b)
In Hindustan Prefab Ltd. v M/s. NCC Ltd. High Court of Delhi observed that it would be doubtful if an appeal from an order of the arbitral tribunal refusing to implead a party in the arbitral proceedings can be made a subject matter of an appeal under S. 37 of the Act. The Court held that an application for impleadment cannot be considered as an application for an interim measure of protection and would not fall within the scope of an application under S. 17 of the Act. Even on merits, the Court found no case was made out for impleadment of the third party who was not a signatory albiet who was the Principal Employer as the Court found that sub-contract executed between the petitioner and respondent was on a principal to principal basis and the petitioner was not acting as an agent of third party.
- Voluntary statement made by party before Court not to pursue execution, can always be sought to be modified by filing appropriate application
In Union of India v Panacea Biotec Ltd., High Court of Delhi allowed the application of the Respondent by which it sought to modify its undertaking given in S. 37 proceedings that it would not prosecute execution proceedings and sought release of the awarded amount in its favour. The Court rejected the Appellant's contention that appeal would be rendered infructuous if application for release is allowed and noted that if the appeal were to be allowed, the Respondent-Applicant would be liable to refund the entire amount received by it along with interest. The Court held the Respondent entitled to release of awarded amount subject to the condition that it obtains permission from the Appellant to manufacture Sputnik V vaccines in India, for whose manufacture the funds were allegedly needed by the Respondent.
- No appeal u/s 37 of the Act is maintainable from the order rejecting the application for amendment of grounds of S. 34
In Oil & Natural Gas Corporation Ltd. v A Consortium of Sime Darby Engineering and Ors. Division Bench of High Court of Bombay was considering the submission of the Appellant before it to the effect that the appeal against order refusing amendment of S. 34 petition would be maintainable by applying the 'Effect test' identified by the Supreme Court in Chintels India Ltd. v. Bhayana Builders Ltd. It was submitted that the effect of rejection of the amendment, which included grounds to challenge refusal of the counter claim, would amount foreclosure of such challenge and would in effect be a refusal to set aside the award u/s 37 (1)(c). The Court rejected the said contention and held that the effect of refusing to condone delay for filing a petition u/s/ 34, which was the case in Chintels(supra), is that there is a refusal to set aside the award in its entirety, and the position is entirely different in case rejection of amendment which is only a refusal to take a ground of challenge and thus would not be covered u/s 37(1)(c).
- Once an arbitral award has been confirmed in an application filed under Se. 34 of the Act, the Appellate Court must be extremely cautious in disturbing concurrent findings of the fact and law
In M/s Mangalwar Filling Station v Indian Oil Corporation Limited & Ors. Division Bench of High Court of Delhi reiterated that while exercising appellate jurisdiction under S. 37 of the Act, the Court has similar restrictions as prescribed under S. 34 of the Act i.e. the Court can only ascertain whether the exercise of power by the learned Judge under S. 34 of the Act was lawful or not. Also held, that it is settled law that the Appellate Court should generally not interfere unless it is apparent that the perversity of the arbitral award goes to the root of the case, without a possibility of alternative interpretation that might sustain the award.
- Arbitral Tribunal in the award cannot create a new contract for the parties by accepting the inilateral intention of one party against the intention of the other party
In PSA Sical Terminals Pvt. Ltd. v The Board of Trustees of V.O. Chidambranar Port Trust, Tuticorin & Ors. Supreme Court of India upheld the setting aside of the award by the High Court u/s 37 as it found that the finding of the Arbitral Tribunal, were wither based on 'no evidence' or without taking into consideration the relevant evidence, both of which would come in the realm of perversity. The Court further held that the arbitral tribunal was not justified in essentially substituting the mechanism for royalty payment under the agreement between the parties. It held A contract duly entered into between the parties cannot be substituted unilaterally without the consent of the parties. The Court held that rewriting a contract for the parties would be breach of fundamental principles of justice entitling a Court to interfere since such case would be one which shocks the conscience of the Court and as such, would fall in the exceptional category.
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