Top
Begin typing your search above and press return to search.
Know the Law

Arbitration Court Reckoner : April & May 2021

Kanika Singh
20 Jun 2021 6:25 AM GMT
Arbitration Court Reckoner : April & May 2021
x

By way of the present column, an attempt is made to briefly review the salutary judgments pronounced by the Courts in the month of April & May 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....

Your free access to Live Law has expired
To read the article, get a premium account.
    Your Subscription Supports Independent Journalism
Subscription starts from
599+GST
(For 6 Months)
Premium account gives you:
  • Unlimited access to Live Law Archives, Weekly/Monthly Digest, Exclusive Notifications, Comments.
  • Reading experience of Ad Free Version, Petition Copies, Judgement/Order Copies.
Already a subscriber?
By way of the present column, an attempt is made to briefly review the salutary judgments pronounced by the Courts in the month of April & May 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.

Section 2(4)

  • S. 2(4) would not offer protection against rigors of limitation if the relevant statutory enactment has introduced a period of limitation

In Satish K. Narang & Co. v Jamnadas Morarje Secs. Ltd.[1]¸High Court of Bombay held that in view of S. 2(4) of the Act, period of limitation for arbitration was not applicable to the transactions entered into between the appellant and the respondent, being an arbitration under a different enactment, prior to 29th August, 1998 when the provisions of Limitation Act, 1963 were extended to the arbitral proceedings under the Stock Exchange Bye-laws. However, it rejected appellant's contention that even after applicability of the provisions of the Limitation Act, appellant would be continued to be governed by no period of limitation in view of S. 2(4). The Court held that since the period of limitation was prescribed by amendment to Bye-laws on 29th August, 1998, the appellant ought to have filed arbitral proceedings within three years from the date of amendment of the Bye-laws framed by the Stock Exchange, Mumbai which are statutory bye-laws. Held, alleged rights, if any, in favour of the appellant in view of S. 2(4) of the Act to file claim without period of limitation stood abrogated in view of the amendment to Bye-law 252(2). Court held that even though cause of action arose before the said amendment but as no arbitration had been instituted, the provisions of amendment would apply with respect to limitation.

Section 7

  • Doctrine of estoppel, implied consent & alter ego pressed into service to bind non-signatory to arbitration

In Shapoorji Pallonji and Co. Pvt. Ltd. v Rattan India Power Ltd. and Ors.[2] High Court of Delhi examined the evolution of the jurisprudence by which non-signatories to arbitration agreement could be made parties to arbitration under certain circumstances. In the facts of the case before it, the Court found that the non-signatory had fully participated in contract formation and had in fact invited tenders and bank guarantees were issued in its favour; the non-signatory was the direct beneficiary of the contract and the signatory was an alter ego of the non-signatory. The Court further found that even doctrine of estoppel would apply to make the non-signatory a party to arbitration in as much as the non-signatory had not objected to certain amendments in the contract that made reference to it and in fact even final bills under the contract were submitted to non-signatory. The Court observed that estoppel principles have frequently been applied by Courts in the United States of America to hold that a party is bound by the arbitration clause associated with the substantive contractual agreement. Thus, applying the alter ego, implied consent and estoppel principles, the Court held the non-signatory bound by the arbitration agreement.

Section 8

  • Appeal from an order referring parties to arbitration u/s 8 – distinction drawn between scope of interference in an order of Arbitrator and that of a Civil Court

In Sagar Ratna Restaurants Pvt. Ltd. v D S Foods & Ors.[3], High Court of Delhi was dealing with a petition under Article 227 against the order of the District Court allowing the application u/s 8. The Court took note of the fact that the Respondent/applicant itself had stated that the disputes were not arbitrable which had constrained the Petitioner to withdraw arbitration proceedings and institute a suit. The Court held arbitration is an Alternate Dispute Resolution mechanism which is resorted to by the parties with their consent. It observed that the respondents have, in the earlier instance, clearly envisaged an intent not to be bound by the Arbitration Agreement stating claim is not arbitrable and the petitioner has now accepted that opposition and has invoked the ordinary jurisdiction of a Civil Court seeking enforcement of its rights in the trademark. It held that where both the parties have become ad idem that the dispute raised by the petitioner is not arbitrable in nature, the parties could not have been referred to arbitration. The Court further made distinction between scope of interference in an order of Arbitrator and that of a Civil Court, noting that while in the former limited judicial interference is called for but in case where the order is passed by Civil Court referring parties to arbitration, without taking into account the inconsistent stand of the Respondent, interference is merited.

Section 9

  • Arbitration Act not subject to provisions of Companies Act- NCLAT cannot pass orders restraining proceedings before Court or even Arbitrator under Arbitration Act

In Bay Capital Advisors Pvt. Ltd. v IL & FS Financial Services Ltd. and Ors.[4], High Court of Bombay rejected the Respondent's objection to maintainability of the S. 9 petition premised on the order of the NCLAT passed u/s 241 and 242 of Companies Act staying the continuation or institution of suits/proceedings by any person against IL & FS in any court of law/tribunal/arbitration/arbitration authority. The Court held that the NCLAT can have no jurisdiction over the High Court and indeed not even over arbitral tribunals and no provision of the Arbitration Act is made subject to the provisions of Companies Act. On merits, however, the Court rejected the S. 9 petition as it sought to restrain the Respondent from enforcing its contractual obligations against Petitioner. The Court held S. 9 is not meant to aid parties clearly in breach of their contracts. It held that everything in the Arbitration Act is founded on a contract; and this necessarily means that to claim an equitable and discretionary relief, a S. 9 petition is not to be handled like a regular civil suit invoking a non-contractual civil remedy. The Respondent must be shown to be in wrongful conduct/in violation of the contract. A respondent seeking to enforce its contractual rights will suffer no injunction unless it is shown that the Respondent itself is in breach or has acted contrary to the contract. Once a breach by the Petitioner is not only demonstrated but is accepted, equity will not operate in its favour. Conversely, where there is a demonstration of a breach by the Respondent, the Petitioner may be entitled to seek an equitable relief in the court's discretion. The Court further held that while S. 28(2) does not constrain or limit the power of a S.9 Court but it must certainly inform the nature of the relief that the S. 9 Court moulds and the relief must be one that the arbitral tribunal can legitimately confirm if and when called upon to do so.

  • Claim admitted in balance sheets liable to be secured in view of Respondent's poor financial health

In Savita Jain Sole Proprietor Of M S Navkar Sales v M/s Krishna Packaging[5], High Court of Delhi held that discretion under S. 9 of Act should be exercised in exceptional cases when there is adequate material on record leading to a definite conclusion that the respondent is likely to render the entire arbitration proceedings infructuous or where there is an admitted liability. Held, that though exercise of such powers is premised on the underlying principles of Orders XXXVIII and XXXIX of the C.P.C, yet it is settled law that the Court is not unduly bound by the text of these provisions. The Court set aside the order of the Trial Court refusing injunction u/s 9 to secure claimed amount on the ground of perversity as it found that the appellant's case is a case of admitted liability as reflected in respondent's own balance sheets and statement of accounts without any caveat/explanation and thus its claim was to be secured especially as the same balance sheets reflected that the Respondent's financial health was poor. The Court further rejected the Respondent's plea of counter claim and held that the balance sheets and statement of accounts of a company are in law supposed to reflect the true and correct state of affairs. Consequently, if the respondent had any tenable counter-claim, as contended by the respondent and as believed by the Trial Court, it would not have unequivocally shown the appellant/petitioner in its statement of accounts as its Sundry Creditor. The Court accordingly directed the Respondent to furnish a bank guarantee of the admitted amount, which was to be kept alive till the award of the arbitrator and subject to the said award.

  • Gant of ad-interim measure u/s 9 enforcing the negative covenant in the agreement upheld as confidential information involved

In Arnav Enterprises v IOSIS Spa & Wellness Private Limited[6] Division Bench of High Court of Bombay upheld the grant of ad-interim measure u/s 9 enforcing the negative covenant in the agreement between the parties subject to final outcome of principal proceedings and dismissed the appeal against the same. The Court accepted the contention of the Respondent (original S. 9 Petitioner) that as the Respondent had shared with the Appellant various sensitive and confidential documents and information including the list of their customers, the negative covenant in the contract would not be a restraint of trade u/s 27 of Indian Contract Act and could be enforced.

  • No powers are vested with the Registrar of Cooperative Societies to pass any interim orders while exercising powers under Section 84 of the MSCS Act

In National Federation of Fishermen Co-operative Ltd. v Union of India and Ors.[7] High Court of Delhi set aside the order of Central Registrar of Co-operative Societies, who had passed certain interim orders, while referring the parties to arbitration u/s 84 of Multi States Cooperative Societies Act, 2002 (MSCS Act). The Court held that while S. 84 empowers the Registrar to refer certain disputes to arbitration, the same section also provides that the provisions of A & C Act shall apply to arbitration under the MSCS Act. It further held that under the A & C Act, the powers to grant interim orders or protection are either available with the Court under S. 9 of the Act or with the Arbitrator under S. 17 of the Act and it is clear that no powers are vested with the Registrar to pass any interim orders while exercising its powers under S. 84 of the MSCS Act to refer the disputes to Arbitration.

Section 11

  • Detailed examination of plea of novation of contract cannot be done by Court at S. 11 stage

In Sanjiv Prakash v Seema Kukreja and Ors.[8] Supreme Court held that issue of a novation of a contract requires a detailed consideration of the clauses of the two Agreements, together with the surrounding circumstances in which these Agreements were entered into, and a full consideration of the law on the subject. It held that such exercise cannot be done given the limited jurisdiction of a court u/s 11 of the Act Further held, detailed arguments on whether an agreement which contains an arbitration Clause has or has not been novated cannot possibly be decided in exercise of a limited prima facie review as to whether an arbitration agreement exists between the parties. On the contrary, a Section 11 court would refer the matter when contentions relating to non-arbitrability are plainly arguable, or when facts are contested. Held, the court cannot, at this stage, enter into a mini trial or elaborate review of the facts and law which would usurp the jurisdiction of the arbitral tribunal.

  • Decision of Central Organisation for Railway Electrification v. M/s. ECI-SPIC-SMO-MCML continues to be a good law despite being referred to larger bench

In IWorld Business Solutions Private Ltd. v Delhi Metro Rail Corporation Limited[9], High Court of Delhi held that mere fact that the judgment of Supreme Court in Central Organisation for Railway Electrification v. M/s. ECI-SPIC-SMO-MCML has been referred to a larger bench by order dated 11.01.2021 passed in Union of India v. M/s. Tantia Constructions Limited[10], would not mean that the judgment in CORE (supra) ceases to be good law. The Court held that until a larger bench answers the reference made to it one way or the other, the decision of the three-judge bench in CORE (supra) will continue to be operative. The Court thus upheld the arbitration clause providing from appointment from a panel and dismissed the S. 11 petition filed by the Petitioner.

  • Execution of Settlement agreement is not novation of contract

In SPML Infra Ltd. v NTPC Limited[11], High Court of Delhi rejected the contention of the Respondent that the arbitration clause in the contract between the parties came to an end by execution of a settlement agreement which amounted to novation of the agreement.. The Court held that only question to be examined was whether the Petitioner had been compelled to enter into the Settlement Agreement by economic coercion and undue influence. The Court held that a Court at the S. 11 stage is not required to give a conclusive finding as to the existence of an arbitration agreement between the parties. It held that in one sense, the Court would require to take a negative view if it finds that ex facie there is no Arbitration Agreement between the parties, and accordingly, the Court would reject the application under S. 11 of the Act but in all other cases where an arguable case is made out by the applicant, the parties are required to be referred to arbitration. Court held that once it is apparent that the parties had entered into an agreement to refer the disputes to arbitration, the dispute whether the same has been discharged by a settlement is required to be liberally construed in favour of relegating the parties to arbitration. Unless the Court comes to the conclusion that the dispute raised by the claimant with regard to the validity of the settlement is bereft of any merit; is not bona fide; or is a frivolous one, the Court must relegate the parties to resolve the disputes in arbitration.

  • Arbitration agreement to be inferred from surrounding circumstances and correspondence

In The Waterbase Limited v Rising Tide and Ors.[12] the High Court of Madras held that court can decide the existence of an arbitration agreement by taking into consideration the surrounding circumstances including the conduct of the parties and the evidence such as exchange of correspondence between the parties. In the facts of that case, the Court found out that the correspondence exchanged between the parties through e-mails would prima facie show that the respondents have executed the impugned dealership agreement which contained arbitration agreement. The Court thereafter, dealing with Respondent's contention that there was some dispute as to signatures on the agreement, held that once the existence of agreement is made from emails, merely because the signatures found in the aforesaid documents are stated to be dis-similar to the Respondents signatures on other documents, the Court cannot jump to the conclusion that the respondents have not signed in the dealership agreement. The Court noted that the Respondents may have purposely signed in the said documents by changing the pattern of their signatures or they may have subsequently changed the pattern of their signatures and that however, it is open to the Arbitral Tribunal to decide the said issue also.

An arbitrator cannot be appointed to enforce a void agreement.

In Banga Electronics Pvt. Ltd. v Jagmohan Singh[13], High Court of Delhi dismissed the petition for appointment of arbitrator as it found that agreement for sale of immoveable property executed between the parties, which contained the arbitration clause, was in contravention of a stay order qua the said property passed before execution of said agreement. The Court held that an agreement enforceable by law is a contract defined in S. 2(h) of Indian Contract Act whereas an agreement not enforceable in law is void as per S. 2(g) of the Indian Contract Act. The Court held that the agreement for sale is in violation of stay order, and is therefore, not enforceable and is void in terms of S. 2(g) of the Contract Act. The Court held that u/s 11 the Court has to consider existence and validity of the arbitration agreement and was of the view that an arbitrator cannot be appointed to enforce a void agreement.

  • To attract bar to arbitration as provided in contract, there should be express denial or repudiation of liability

In Geo Chem Laboratories Pvt. Ltd. v United India Insurance Co. Ltd.[14] High Court of Delhi was seized with a petition for appointment of arbitrator where the arbitration clause in the insurance policy stipulated that no difference or dispute shall be referred to arbitration if company (Respondent) has disputed or not accepted liability under or in respect of the policy. It was the case of the Respondent that petition was premature as the Respondent had not admitted any liability yet where as the Petitioner sought to contend it was a case of deemed admission and as a matter of fact there had not been any rejection/denial. The Court held that for limited purpose of determining arbitrability under the limited scope of S. 11 , it is found that bar contained in the arbitration clause is not attracted Respondent has neither denied nor disputed the liability till date and the Petitioner cannot be left remediless while the Respondent delays the decision and proceeded to appoint the arbitrator. However, it sought to protect the Respondent's rights under the contractual clause by recording Petitioner's concession that in the event Respondent ultimately repudiates the claim of Petitioner, the consequences in law, as per the bar contained in arbitration clause as upheld in judgment in United India Insurance Company Ltd. & Anr v v. Hyundai Engineering and Construction Company Ltd.[15], and other judgments, would follow.

Section 17

  • Clause (e) of S. 17(1)(ii) of the Act is of a wide import

In Supertech Ltd. v B.E. Billimoria and Co. Ltd. and Ors.[16] High Court of Delhi upholding the order passed by the Arbitral Tribunal u/s 17 rejected the Appellant's contention that mandatory injunction cannot be granted except to maintain status quo. The Court held that it is apparent from the plain language of Clause (e) of S. 17(1)(ii) of the Act that it is of a wide import. The said provision enables the Arbitral Tribunal to pass such orders as may be passed by the Court for the purposes of and in relation to the proceedings before it and S. 17(1)(ii)(e) cannot be read in a restricted manner. The Court upheld the interm order of the AT allowing the respondents to remove its plant and machinery from site but modified it to the extent that Respondents would not sell, transfer or in any manner encumber its subject machinery till the conclusion of the arbitral proceedings, thus balancing equities in view of the Appellant's contention that it had lien over the same in case it was to succeed in its claims.

Section 33

  • Delay in preferring the application under S. 33(1) would not be condonable

In Tantia Construction Limited v Ircon International Ltd[17], High Court of Delhi held that unlike S. 34, S. 33(1) does not contain any provision permitting condonation of the period of limitation stipulated therein. The Court held that it cannot read into S. 33(1), a power of condonation of delay, where none exists. Further held, the fact that delay cannot be automatically condoned by the Arbitral Tribunal, in the case of application under S. 33(1), also stands underscored by the stipulation contained by the words "unless another period of time has been agreed upon by the parties" in S. 33(1). It held, clearly, the intent of the legislature is that, the period of 30 days, stipulation in S. 33(1), is relaxable only if, ad idem, the parties agree to another period for filing the application thereunder and de hors any such mutual agreement between the parties, therefore, the period of 30 days in S. 33(1) is sacrosanct and is not relaxable.

Section 34

  • Different view taken by same AT not enough ground to interfere with award

In Delhi State Industrial & Infrastructure Development Corporation v Mapsa Tapes Pvt. Ltd.[18] High Court of Delhi, while rejecting the petition as time barred due to inordinate delay in re-filing, also proceeded to consider challenge on merits and, inter alia, rejected the Petitioner's contention that the very same AT had taken a contrary view in another case and therefore, the impugned award is liable to be set aside. The Court held that said contention is unpersuasive in view of limited scope of examination under S. 34 of the Act and Court has to merely examine whether the Arbitral Award falls foul of the fundamental policy of Indian law or is patently illegal on the face of the record and not to review the decision of the Arbitral Tribunal on merits.

  • Change of place of arbitration does not require a written agreement unless so stipulated in agreement

In Inox Renewables Ltd. v Jayesh Electricals Ltd.[19] Supreme Court held that an order of the Arbitrator recording change of venue from the one provided in agreement constitutes change of place of arbitration and does not require a written agreement by the parties unless the agreement provided that it could only be amended by an instrument in writing signed by both the parties. The Court held that in the facts of the case shifting of venue is really a shifting of the venue/place of arbitration with reference to Section 20(1), and not with reference to Section 20(3). The Court held that once venue changes, the courts at the new venue would have exclusive jurisdiction even though the clause in agreement provided jurisdiction of the courts at the original venue.

  • Claim of overheads distinct from claim of loss of profits

In Delhi Metro Rail Corporation Ltd. v N.S. Publicity (i) Pvt. Ltd.[20], High Court of Delhi set aside the award to the extent it sought to limit the loss of profit claimed by the party to its gross profit as disclosed in its audited balance sheet for the relevant year which was not a part of the arbitral record. The Court held that the AT could have proceeded to reject or allow the claim to the extent it considered reasonable but it could not direct that it be calculated on the basis of accounts for the year, which were neither produced nor relied upon by parties. The Court further set aside the award rejecting the claim for overheads on the ground that it stood covered by loss of profits. The Court held that claim of overheads was over and above the claim for loss of profits and the decision of the Arbitral Tribunal that such overheads had been absorbed in profits is patently erroneous on the face of the record.

  • Arbitrator can accept electronic evidence without an affidavit u/s 65 B of Indian Evidence Act

In Megha Enterprises & Ors. v Haldiram Snacks P. Ltd.[21], High Court of Delhi rejected the Petitioner's contention that the Arbitrator could not have accepted electronic evidence in the form of email evidence without an affidavit under S. 65B of the Indian Evidence Act, 1872. It did so because of two reasons. First, in terms of S. 1 of the Indian Evidence Act 1872, the said Act is not applicable to proceedings before the arbitrator and second, no such objection was taken on behalf of the petitioners at the appropriate stage, that is, before the Arbitrator.

  • Omission to fill blank providing rate of interest in agreement is not active exclusion of payment of interest

In Oriental Structural Engineers Pvt. Ltd. v State of Kerala,[22] Supreme Court upheld the award passed by the Arbitrator and set aside the judgments of the District Court and High Court which had set aside the award. The Court held that once there was a specific term of the agreement executed between the parties which provided for payment of interest on delayed payment, mere fact that rate of interest was not specified or that blank space has been left where rate was to be provided cannot be construed as cancellation of the Clause providing for payment of interest of delayed release of funds. The Court held that that to come to such an inference, active exclusion of payment of interest under that head was necessary to have been incorporated in the agreement. The Court upheld the award granting interest on delayed payments but reduced the rate of interest awarded by the arbitrator.

  • Scope of S. 34(4) of the Act is limited and it cannot be resorted to enable the arbitrator to cure certain curable defects.

In Airports Authority of India v Bentwood Seating System (p) Ltd.,[23] High Court of Delhi set aside the award granting specific performance of the contract, on the ground that the Arbitral Tribunal had failed to return a finding on one of the principal issues i.e. whether the contract had been obtained by fraud. The Court held that if it was proved that contract was procured by fraud, specific performance of the said contract could not be granted notwithstanding that the same was not one of the reasons stated in the letter of termination. The Court rejected the contention of the Respondent that in absence of reasons on the aforesaid issue of fraud, the present proceedings are required to be adjourned to enable the parties to resume arbitration. The Court held that it is not a case where reasons for the conclusion are sketchy and require clarification but rather is a case where the Arbitral Tribunal has not decided one of the principal disputes between the parties and this defect cannot be cured by adjourning the present proceedings to enable the Arbitral Tribunal to issue any clarification/reasons. The Court set aside the award giving liberty to Respondent refer the disputes to arbitration and even clarifying that it would be open for the arbitral institution to appoint the same learned arbitrator to adjudicate the disputes.

  • Grant of compound interest per se not against fundamental policy of Indian law

In Steel Authority of India Limited v Jaldhi Overseas Pvt. Ltd.[24], High Court of Delhi rejected the contention that award of interest at the rate of 12 percent per annum compounded with quarterly rests falls foul of the fundamental policy of Indian law. The Court took note of the fact that there are several Indian legislations that provide for compound interest including the Micro, Small and Medium Development Act, 2006. Further observed that in cases, where the contract, common trade practice, or statute contemplates payment of interest on compound basis, the same is required to be paid. It, thus, held that per se, compound interest cannot be held to be falling foul of the fundamental policy of Indian law.

Section 37

  • S. 9 not maintainable to secure the entire awarded amount when S. 34 court had granted stay subject to deposit of 75% of awarded amount

In Avon Healthcare Private Limited v Trade International and Ors.,[25] the appellant was aggrieved by the vacation of the ad interim order passed post award in S. 9 proceedings by which there was a restraint order against the property of the Respondent. The interim order had been vacated and the S. 9 proceedings dismissed in view of the fact that execution of the award had been stayed subject to deposit of 75% of the Award amount and which had been deposited; in the petition under S. 34 of the Act preferred by the respondent. The Appellant filed appeal against the said dismissal on the ground unless said protection is granted, the appellant, even on succeeding in Section 34 proceedings, will not be able to recover the entire awarded amount and would be entitled to only recover 75% thereof, which has been deposited in the Court, especially as Respondent had already transferred the property to his son. The Court held that there was no infirmity in the order dismissing S. 9 as once the Court seized of the S. 34 proceedings with respect to the Arbitral Award has deemed it fit to grant stay of execution of the Arbitral Award subject to deposit only of 75% and not 100% of the Award Amount, if at the same time another Court, in Section 9 proceedings, comes to the conclusion that the entire Award Amount and not only 75% thereof, is required to be secured, the same would result in conflicting orders on the same matter and would not behave well for the principle of comity of different Benches of the same Court. With regards to fraudulent transfer by the Respondent, the Court held that such plea could only be examined in execution proceedings.

  • Award converting claim for damages under S. 73 of the Contract Act into the claim for liquidated damages under S, 74 of the Contract Act without any pleading rightly set aside

In Ratnam Sudesh Iyer v Jackie Kakubhai Shroff[26], Division Bench of High Court of Bombay upheld the judgment of the Ld. Single Judge setting aside the award u/s 34 holding that since the view of the learned arbitrator was not a possible view, Ld. single Judge was right in setting aside such interpretation of contract which disclosed patent illegality and impossible view and which overlooked the crucial and vital part of evidence. In the facts of this case also neither there was any provision for payment of any liquidated damages nor it was fixed as a genuine pre-estimate damages by both the parties and thus was required to be pleaded and proved by the claimant that the said amount claimed by him was in the nature of liquidated damages was a genuine pre- estimate of damage fixed by both the parties and such loss was suffered by him. Court held that arbitrator has converted the claim for damages under S. 73 of the Contract Act into the claim for liquidated damages under S. 74 of the Contract Act without any pleading on the part of the claimant or otherwise which is patently illegal.

  • Scope of Judicial Interference u/s 37(2) not wider than u/s 34

In Raghuvir Buildcon Pvt. Ltd. v Ircon International Limited[27] High Court of Delhi rejected the Appellant's contention that scope of judicial interference u/s 37(2) would be wider than that u/s 34. The Court held that on the contrary the scope of interference against interlocutory orders, classically, is far more circumscribed than the scope of interference against the final decision of the authority below. Furter, it noted that S. 37 like S. 34 was in Part I of the Act and thus subject to the discipline of S. 5, which proscribes judicial intervention. Consequently, the Court, while exercising jurisdiction under S.37(2)(a) over the impugned order of the Arbitrator, would only examine whether the order suffers from any patent illegality or perversity, or is otherwise unconscionable in law on facts. It held, Court does not, therefore, "re- arbitrate" the application decided by the learned Arbitrator. The Court upheld the order passed by the Arbitrator u/s 16 in which it had been held that only those disputes had been referred to the him which had already arisen on the date of reference by Court and not disputes which had arisen later in time and which fell within excepted matters.

  • Mere addition of documents/grounds not enough to make re-filing a fresh filing

Relief of final nature cannot be granted u/s S. 9 – S. 9 does not empower the Court to, even before the Arbitral Tribunal has had an occasion to adjudicate the claim, allow the claim.

In National Highways Authority of India v Bhubaneswar Expressway Private Limited[28] Division Bench of High Court of Delhi held that mere increase in number of pages or addition of grounds in S. 37 appeal, upon re-filing, will not make the re-filing a new filing if the original filing was otherwise substantially compliant. The Court held the test to be applied, is not quantitative i.e. of number of pages, but qualitative i.e. of what was originally filed. It held that though Appellant had added grounds to the memorandum of appeal as well as documents while re-filing but it cannot be said that what was originally filed was not sufficient to constitute an appeal or lacked essential ingredients of an appeal, to be totally ignored. Further held, that the Courts, even otherwise in appeals are known to adopt a liberal approach qua grounds of appeal and are not known to shut out an argument, otherwise borne out from the record, merely for the reason of having not been pleaded in the grounds of appeal and held that in fact, filing of copies of documents on the file of the Court of Original Jurisdiction, along with the appeal, is only a practice, evolved to expedite the hearing and to enable the Appellate Court to, on the very first date, if does not find any merit in the appeal, dismiss the same. On merits, the Court held that direction in the nature of directing Appellant to deposit amounts under termination payment clause of contract was not in the nature of interim relief but as an enforcement of contractual clause and was in the nature of final relief and could only be granted by Arbitral Tribunal and not court. Court held that in exercise of power under S. 9(1)(ii)(e), no relief of final nature can be granted, no monetary claim allowed, howsoever urgent the same may be and howsoever just and convenient it may be to grant the same and even if it were to be the contention of the applicant in a S. 9 application, that the opposite party has admitted the entitlement of the applicant to the final relief. The Court further held that merely because S. 9 Court had made release of money subject to furnishing a bank guarantee and subject to the award, would not change the nature of the relief granted. The Court distinguished the judgment in case of Jetpur Somnath Tollways Ltd. Vs. National Highways Authority of India[29] where similar claim had been allowed.

Section 43

  • Order of court referred in S. 43(4) refers to the final order setting aside an arbitral award or confirming such setting aside of the award, as the case may be

In Siddhivinayak Realties Pvt. Ltd. v V. Hotels Limited and Ors.[30] High Court of Bombay was called upon to decide 'order of the court' referred to in S. 43(4) of the Act, for purposes of exclusion of period for purposes of limitation, refers to the first order of the original or the appellate court, as the case may be, setting aside the arbitral award, or whether it refers to the final order in a challenge petition setting aside an arbitral award or confirming such setting aside of the award, as the case may be. The Court held it to be the latter and held that the principle of merger would most certainly operate for computing the exclusion period under S, 43(4) of the Act for reckoning the limitation period for a suit or arbitration proceeding in case of a dispute referred to arbitration where an award is set aside by the court. Court, thus held, "order of the court" referred to in S. 43(4) of the Act is the final order of the court-whether the first order setting aside the award, which is not subjected to further challenge or the order in appeal, if the original order setting aside the arbitral award is carried in appeal and affirmed.

Anti-arbitration suit

  • Merely because arbitral institution provided in contract is established by a specific trade, would not lead to the conclusion that it is not a neutral institution

In ADM International Sarl A One Business Centre and Ors. v Sunraja Oil Industries Private Limited and Ors.,[31] High Court of Madras allowed the application filed by the Defendant seeking vacation of anti-arbitration injunction granted to the plaintiff and dismissed the anti-arbitration suit filed by the Plaintiff. The Court, inter alia, rejected the contention of the plaintiff that the arbitral institution nominated in the contract between the parties is not a neutral institution and is controlled by oil seed producers such as Defendant, and it does not qualify as a neutral arbitral institution. The Court held while "justifiable doubts of bias" may be a valid test when an arbitral tribunal is challenged either before such tribunal or before a jurisdictional court; a higher threshold should be satisfied for an anti-arbitration injunction because the plaintiff should justify the departure from the contractual dispute resolution mechanism. The Court further held that there are several arbitral institutions spread across the world which are established by organisations or entities that represent the interest of the specific trade and the rationale for the same is that expertise is necessary to effectively adjudicate such disputes and trade practice and the knowledge thereof is also significant. The Court held that the material on record does not support a conclusion that the arbitral institution is ex facie not neutral and it cannot be said to be biased merely because it is an organisation representing the interest of traders in oil seeds and fats. With regards to the plea of the plaintiff that even though arbitral institution does not permit a party to be represented by an advocate or practising lawyer, but Defendant was permitted to avail such assistance, the Court held that the law applicable to arbitration was English law and that provisions of English Arbitration Act providing for equal opportunity etc ensure the grounds of challenge raised before it by the Plaintiff could have been and may still be raised before the arbitral tribunal or the English courts and can be no ground to continue with anti arbitration injunction.




[1] Appeal No. 989 of 2005 in Arbitration Petition No. 36 of 2004 decided on 4th May 2021

[2] Arb. P. 716/2019 decided on 7th April 2021

[3] CM(M) 71/2021 decided on 22nd April 2021

[4] Arbitration Petition (L) No. 10089 of 2020 decided on 9th April 2021

[5] FAO (COMM) 62/2021 decided on 20th April 2021

[6] Arbitration Appeal (L) No. 7255 of 2020 decided on 20th April 2021

[7] O.M.P. (I) 4/2021 decided on 21st May 2021

[8] Civil Appeal Nos. 975 and 976 of 2021 decided on 6th April 2021

[9] O.M.P. (T) (COMM.) 30/2021 decided on 7th April 2021

[10] SLP(C) 12679/2020

[11] ARB. P. 477/2020 decided on 8th April 2021

[12] O.P. No. 441 of 2020 decided on 16th April 2021

[13] A.R.B. P. 1/2019 decided on 4th May 2021

[14] ARB. P. 479/2020 decided on 24th May 2021

[15] (2018) 17 SCC 607

[16] ARB. A. (COMM) 13/2021 decided on 23rd April 2021

[17] O.M.P. (COMM) 593/2020 decided on 13th April 2021

[18] O.M.P. (COMM.) 489/2019 decided on 8th April 2021

[19] Civil Appeal No. 1556 of 2021 decided on 13th April 2021

[20] O.M.P. (COMM) 513/2020 decided on 13th April 2021

[21] O.M.P. (COMM) 79/2021 decided on 15th April 2021

[22] Civil Appeal No. 3454 of 2011 decided on 22nd April 2021

[23] O.M.P. (COMM) 262/2019 decided on 27th May 2021

[24] O.M.P. (COMM.) 169/2021 decided on 31st May 2021

[25] FAO (OS) (COMM) 67/2021 decided on 19th April 2021

[26] Arbitration Appeal (L) No. 4901 of 2020 in Arbitration Petition No. 167/2015 decided on 20th April 2021

[27] Arb. A. (Comm.) 15/2021 decided on 18th May 2021

[28] FAO (OS) (COMM) 66/2020 decided on 11th May 2021

[29] 2017 SCC OnLine Del 9453

[30] Notice of Motion No. 119 of 2016 in Commercial Suit No. 133 of 2018 decided on 30th April 2021

[31] Application Nos. 5723 to 5730 of 2019, O.A. Nos. 644, 645 of 2019 in C.S. Nos. 406 and 407 of 2019 decided on 22nd April 2021


Next Story
Share it