Important Supreme Court Judgments On Arbitration Passed Recently
Muneeb Rashid Malik
22 May 2021 5:04 PM IST
The Supreme Court of India has pronounced numerous judgments in the matters related to the Arbitration and Conciliation Act, 1996, from January, 2021 to May, 2021. In this write-up, the important pronouncements are briefly discussed. CHINTELS INDIA LTD. V. BHAYANA BUILDERS PVT. LTD., CIVIL APPEAL NO. 4028 OF 2020. AN APPEAL UNDER SECTION 37(1) (C) OF THE ARBITRATION ACT, 1996...
The Supreme Court of India has pronounced numerous judgments in the matters related to the Arbitration and Conciliation Act, 1996, from January, 2021 to May, 2021. In this write-up, the important pronouncements are briefly discussed.
CHINTELS INDIA LTD. V. BHAYANA BUILDERS PVT. LTD., CIVIL APPEAL NO. 4028 OF 2020.
AN APPEAL UNDER SECTION 37(1) (C) OF THE ARBITRATION ACT, 1996 WOULD BE MAINTAINABLE AGAINST AN ORDER REFUSING TO CONDONE DELAY IN FILING AN APPLICATION UNDER SECTION 34 OF THE ARBITRATION ACT, 1996 TO SET ASIDE AN AWARD.
A Bench of Justices R. F. Nariman, Navin Sinha and K.M. Joseph held that an appeal under section 37(1) (c) of the Arbitration Act, 1996 would be maintainable against an order refusing to condone delay in filing an application under section 34 of the Arbitration Act, 1996 to set aside an award. The Bench observed that it is important to note that the expression "setting aside or refusing to set aside an arbitral award" does not stand by itself. The expression has to be read with the expression that follows "under section 34". Section 34 is not limited to grounds being made out under section 34 (2) and a literal reading of the provision would show that a refusal to set aside an arbitral award as delay has not been condoned under sub-section (3) of section 34 would certainly fall within section 37(1)(c).
GOVERNMENT OF MAHARASHTRA (WATER RESOURCES DEPARTMENT) V. M/S BORSE BROTHERS ENGINEERS & CONTRACTORS PVT. LTD., CIVIL APPEAL NO. 995 OF 2021.
A DELAY BEYOND 90 DAYS, 30 DAYS OR 60 DAYS IS TO BE CONDONED BY WAY OF EXCEPTION AND NOT BY WAY OF RULE.
A Bench of Justices Rohinton Fali Nariman, B.R. Gavai and Hrishikesh Roy held that the object of speedy disposal sought to be achieved under the Arbitration Act and the Commercial Courts Act, for appeals filed under section 37 of the Arbitration Act that are governed by Articles 116 and 117 of the Limitation Act or section 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. 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. The Bench overruled the judgment in N.V. International v. State of Assam, (2020) 2 SCC 109 which held that a delay beyond 120 days for arbitration appeal under section 37 cannot be condoned.
AMWAY INDIA ENTERPRISES PVT. LTD. V. RAVINDRANATH RAO SINDHIA & ANR., CIVIL APPEAL NO. 810 OF 2021.
IF ONE OF THE PARTIES IS EITHER A FOREIGN NATIONAL, OR HABITUALLY RESIDENT IN ANY OTHER COUNTRY, THE ARBITRATION BECOMES AN INTERNATIONAL COMMERCIAL ARBITRATION.
A Bench of Justices Rohinton Fali Nariman and B.R. Gavai held that 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 carry on business in India through a business office in India.
PASL WIND SOLUTIONS PRIVATE LIMITED V. GE POWER CONVERSION INDIA PRIVATE LIMITED, CIVIL APPEAL NO. 1647 OF 2021.
THERE IS PARTY AUTONOMY IN DESIGNATING A SEAT OF ARBITRATION OUTSIDE INDIA EVEN WHEN BOTH PARTIES HAPPEN TO BE INDIAN NATIONALS.
A Bench of Justices Rohinton Fali Nariman, B.R. Gavai and Hrishikesh Roy held that there is nothing that stands in the way of party autonomy in designating a seat of arbitration outside India even when both parties happen to be Indian nationals. The Bench observed that section 10(1) of the Commercial Courts Act applies to international commercial arbitrations, and applications or appeals arising therefrom, under both Parts I and II of the Arbitration Act. When applications or appeals arise out of such arbitrations under Part I, where the place of arbitration is in India, the definition of "international commercial arbitration" in section 2(1)(f) of the Arbitration will govern. When applied to Part II, "international commercial arbitration" has reference to a place of arbitration which is international in the sense of the arbitration taking place outside India. There is no clash at all between section 10 of the Commercial Courts Act and the explanation to section 47 of the Arbitration Act, as an arbitration resulting in a foreign award, as defined under section 44 of the Arbitration Act, will be enforceable only in a High Court under section 10(1) of the Commercial Courts Act, and not in a district court under section 10(2) or section 10(3).
M/S. INOX RENEWABLES LTD. V. JAYESH ELECTRICALS LTD., CIVIL APPEAL NO. 1556 OF 2021.
THE NEW VENUE BECOMES THE SEAT OF THE ARBITRATION WHEN PARTIES CHANGE THE VENUE OF ARBITRATION BY MUTUAL AGREEMENT.
A Bench of Justices Rohinton Fali Nariman and Hrishikesh Roy reiterated that whenever there is the designation of a place of arbitration in an arbitration clause as being the venue of the arbitration proceedings, the expression arbitration proceedings would make it clear that the venue is really the seat of the arbitral proceedings. The Bench held that when parties change the venue of arbitration by mutual agreement, the new venue becomes the seat of the arbitration and the Courts at the changed venue have jurisdiction over the matter.
BHARAT SANCHAR NIGAM LTD. & ANR. V. M/S NORTEL NETWORKS INDIA PVT. LTD., CIVIL APPEAL NOS. 843-844 OF 2021
THE PERIOD OF LIMITATION FOR FILING AN APPLICATION UNDER SECTION 11 OF THE ARBITRATION AND CONCILIATION ACT WOULD BE GOVERNED BY ARTICLE 137 OF THE FIRST SCHEDULE OF THE LIMITATION ACT, 1963.
A Bench of Justices Indu Malhotra and Ajay Rastogi held that the period of limitation for filing an application under Section 11 of the Arbitration and Conciliation Act would be governed by Article 137 of the First Schedule of the Limitation Act, 1963. The period of limitation will begin to run from the date when there is failure to appoint the arbitrator. The Bench also suggested that the Parliament may consider amending Section 11 of the 1996 Act to provide a period of limitation for filing an application under this provision, which is in consonance with the object of expeditious disposal of arbitration proceedings. 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.
DAKSHIN HARYANA BIJLI VITRAN NIGAM LTD. V. M/S NAVIGANT TECHNOLOGIES PVT. LTD., CIVIL APPEAL NO. 791 OF 2021.
THE PERIOD OF LIMITATION FOR FILING OBJECTIONS STARTS TICKING FROM THE DATE ON WHICH A SIGNED COPY OF THE FINAL AWARD IS RECEIVED BY THE PARTIES.
A Bench of Justices Indu Malhotra and Ajay Rastogi held that there is only one date recognised by law i.e., the date on which a signed copy of the final award is received by the parties, from which the period of limitation for filing objections would start ticking. The Bench observed that there can be no finality in the award, except after it is signed, because signing of the award gives legal effect and finality to the award. The date on which the signed award is provided to the parties is a crucial date in arbitration proceedings under the Indian Arbitration and Conciliation Act, 1996. It is from this date that the period of 30 days for filing an application under Section 33 for correction and interpretation of the award, or additional award may be filed; the arbitral proceedings would terminate as provided by Section 32(1) of the Act; and the period of limitation for filing objections to the award under Section 34 commences.
BHAVEN CONSTRUCTION V. EXECUTIVE ENGINEER SARDAR SAROVAR NARMADA NIGAM LTD. & ANR., CIVIL APPEAL NO. 14665 OF 2015.
THE POWER OF THE HIGH COURTS UNDER ARTICLE 226 AND 227 OF THE CONSTITUTION OF INDIA TO INTERFERE WITH AN ARBITRATION PROCESS NEEDS TO BE EXERCISED IN EXCEPTIONAL RARITY.
A Bench of Justices N.V. Ramana, Surya Kant and Hrishikesh Roy observed that it is prudent for a Judge to not exercise discretion to allow judicial interference beyond the procedure established under an enactment. The Bench held that the power of the High Courts under Article 226 and 227 of the Constitution of India to interfere with an arbitration process needs to be exercised in exceptional rarity, wherein one party is left remediless under the statute or a clear bad faith is shown by one of the parties. The high standard set by the Court is in terms of the legislative intention to make the arbitration fair and efficient. The Bench also set aside the judgment of Gujarat High Court by allowing a writ petition challenging the jurisdiction of the arbitrator.
UNITECH LIMITED & ORS. V. TELANGANA STATE INDUSTRIAL INFRASTRUCTURE CORPORATION (TSIIC) & ORS., CIVIL APPEAL NO. 317 OF 2021.
PRESENCE OF AN ARBITRATION CLAUSE DOES OUST THE JURISDICTION UNDER ARTICLE 226 IN ALL CASES.
A Bench of Justices Dr Dhananjaya Y Chandrachud and MR Shah observed that while exercising jurisdiction under Article 226, the Court is entitled to enquire into whether the action of the State or its instrumentalities is arbitrary or unfair and in consequence, in violation of Article 14. The jurisdiction under Article 226 is a valuable constitutional safeguard against an arbitrary exercise of state power or a misuse of authority. The Bench also observed that in determining as to whether the jurisdiction should be exercised in a contractual dispute, the Court must, undoubtedly eschew, disputed questions of fact which would depend upon an evidentiary determination requiring a trial. The jurisdiction under Article 226 cannot be ousted only on the basis that the dispute pertains to the contractual arena. This is for the simple reason that the State and its instrumentalities are not exempt from the duty to act fairly merely because in their business dealings they have entered into the realm of contract. The Bench held that presence of an arbitration clause does oust the jurisdiction under Article 226 in all cases though, it still needs to be decided from case to case as to whether recourse to a public law remedy can justifiably be invoked.
M/s. N.N. GLOBAL MERCANTILE PVT. LTD., V. M/s. INDO UNIQUE FLAME LTD. & OTHERS, CIVIL APPEAL NOS. 3802 – 3803/2020.
THE NON-PAYMENT OF STAMP DUTY ON THE COMMERCIAL CONTRACT WOULD INVALIDATE EVEN THE ARBITRATION AGREEMENT, AND RENDER IT NON-EXISTENT IN LAW, AND UN-ENFORCEABLE, IS NOT THE CORRECT POSITION IN LAW.
https://www.livelaw.in/top-stories/non-payment-stamp-duty-arbitration-agreement-supreme-court-168265
A Bench of Justices Dr Dhananjaya Y Chandrachud, Indu Malhotra and Indira Banerjee held that the finding in SMS Tea Estates Pvt. Ltd. v. M/s. Chandmari Tea Co. Pvt. Ltd. and Garware Wall Ropes Limited v. Coastal Marine Constructions and Engineering Limited, that the non-payment of stamp duty on the commercial contract would invalidate even the arbitration agreement, and render it non-existent in law, and un-enforceable, is not the correct position in law. The Bench referred the issue as to whether the statutory bar contained in Section 35 of the Indian Stamp Act, 1899 applicable to instruments chargeable to Stamp Duty under Section 3 read with the Schedule to the Act, would also render the arbitration agreement contained in such an instrument, which is not chargeable to payment of stamp duty, as being non-existent, unenforceable, or invalid, pending payment of stamp duty on the substantive contract instrument, to be authoritatively settled by a Constitution bench of five judges of the Supreme Court.
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