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Arbitration: Court Reckoner [June 2020]

Kanika Singh
18 July 2020 1:52 PM GMT
Arbitration: Court Reckoner [June 2020]

By way of the present column, an attempt is made to briefly review the salutary judgments pronounced by the Courts in the month of June 2020 under the Arbitration & Conciliation Act, 1996. That while as many judgments as possible are sought to be reviewed, owing to the limited column space, some judgments would invariably be left out. That also 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. That 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 (1)(e)

In Golden Edge Engineering P. Ltd. v Bharat Heavy Electricals Ltd.[1] , the High Court of Calcutta was considering a clause in the contract which provided that "the seat of arbitration shall be Kolkatta (the place from where the contract is issued)". The Court held that the seat would have to be determined taking into account the bracketed portion and the tender being issued from Salt Lake and not Kolkatta (albeit electronically but the Court relied on S. 13(3) of the Information Technology Act), the High Court of Calcutta would not be the competent court for entertaining an application under S. 9 of the Act.

SECTION 2(2)

In Goodwill Non-woven P. Ltd. v XCoal Energy & Resources LLC[2] High Court of Delhi rejected the contention that in case of an international commercial arbitration, the jurisdiction vested in an Indian Court under proviso to S. 2(2) of the Act for entertaining an application under S. 9 is an asset based jurisdiction, which can be exercised only when the asset(s) of the counter party against which, the order is sought to be enforced are situated in India. It held that the word used in S. 9 is 'a party' which denotes any party can file an application and further held that for the purpose of passing an order/interim measure, the availability of asset in India is irrelevant and sub-sections (a), (b) & (c) of S. 9 contemplate passing of orders for interim measure of protection which do not pre-suppose the existence of asset(s) of a foreign party in India. However, on the facts of the case, the Court declined to pass an interim measure of protection holding that no prima facie case was made out and it is not an exceptional case where there is adequate material on record leading to a definite conclusion that the respondent is likely to render the entire arbitration proceedings infructuous by frittering away the properties or funds.

SECTION 7

In Quick heal Technologies Ltd. v NCS Computech P. Ltd.[3] High Court of Bombay held that the use of the word 'may' in the arbitration clause shows that there was no consensus between the parties with regard to arbitration and they only agreed to provide fresh consent (by use of the word "may") in order to proceed with the arbitration and as no fresh consent to proceed with any arbitration has been provided by any of the Respondents, there is no valid arbitration clause under which any Arbitrator can be appointed.

SECTION 9

In Bhubaneshwar Expressways P. Ltd. v National Highways Authority of India[4] , the short question before the High Court of Delhi was that could a bank guarantee, which had been directed by the Court to be submitted by the petitioner to secure the claim in arbitration, be furnished by a third party on the Petitioner's behalf, which third party had no connection with the contract with the parties. The Court answered the said question in the affirmative and held that a bank guarantee being a contract between the bankers and the beneficiaries, the Respondent for the purpose of the bank guarantee has to deal with the guarantor, namely, the bankers and not the party, at the instance of whom, the bank guarantee has been given.

In Suzlon Energy Ltd. v Zemira Renewable Energy Ltd. & Anr.[5], the High Court of Delhi reiterated the position of law that merely because invocation of bank guarantee would cause financial distress to the Petitioner therein, who was stated to be undergoing Corporate Debt Restructuring Process, cannot be a ground to invoke the exception of irretrievable injury to be entitled for a stay on invocation/encashment of bank guarantee nor could any serious disputes on the merits of respective claims be urged as grounds to seek injunction against invocation.

In Overnite Express Limited v Delhi Metro Rail Corporation [6] High Court of Delhi was considering a petition filed under Section 9, inter alia, seeking restraint against taking of coercive steps under a License Agreement and raising of invoices for license fees. The Court, upon consideration of the terms of the license agreements, held that the same are by their nature very determinable and thus no injunction against termination of the agreements can be granted as sought by petitioner as the same would be statutorily barred in view of Section 14(1)(c) r/w S. 41(e) of the Specific Relief Act, 1963 and similarly no injunction against raising of invoices can be granted as that would also indirectly amount to enforcement of the agreements and thus also statutorily prohibited. It further held that the contentions of parties touching upon the merits of the claims including alleged breaches and invoices towards License Fee, as well as the interpretation of the Term 'as is where is basis' will be decided by the Arbitral Tribunal as and when constituted.

In Blue Coast Infrastructure Development P. Ltd. v Blue Coast Hotels Ltd. & Anr.[7], High Court of Delhi held that a Court in a Section 9 petition, unlike an Arbitrator under S 17 petition, can pass interim measure against non-parties to the arbitration including a third party who holds possession of a property for one of the parties to arbitration applying the principles of Order 38 Rule 6 CPC. However, on the facts of the case, it held, that no interim measures can be passed against the third party as the property in the form of monies that was being held by the said party was itself subject to certain other orders of the Court passed in a separate proceeding.

In Rashmi Cement Ltd. v World Metals & Alloys (FZC) & Anr.[8], High Court of Delhi while dealing with a S. 9 Petition seeking certain interim measures in the nature of mandatory injunction relying on the force majeure clause in the contract between parties, held that while ambit of interim protections that can be granted under S 9 is broad and would include mandatory injunctions, there is the three pronged test for grant of same, viz., prima facie case in its favour, balance of convenience in its favour and, most importantly, evidence of irretrievable injury that would be suffered in case protection is not granted. Applying the said test, it held, on the facts of the case, that the Petitioner has not been able to establish a prima facie case or balance of convenience in its favour, however clarified that the question whether the force majeure clause in the case stood attracted or not would have to be decided by the Arbitral Tribunal in the final analysis. The Court also observed that the government circulars on force majeure may not be binding on private parties governed by a private contract.

In Aakash Educational Services Ltd. v Sahib Sital Singh Bajwa & Ors.[9], High Court of Delhi refused to grant interim protection in the form of enforcement of a negative covenant contained in the agreement between the parties which prevented the Respondent, who had been a franchisee of the Petitioner, from running a similar coaching centre for a period of two years after termination of the franchise agreement. The High Court accepted the Respondent's contention that the negative covenant to restrict trade, busines or profession of the respondents after termination of the agreement would be hit by Section 27 of the Indian Contract Act, 1872.

SECTION 11

In DSC Venture P. Ltd. v Ministry of Road Transport and Highways, UOI[10], the High Court of Delhi was dealing with the question that whether the time period of 30 days provided in S. 11(6) would apply to appointment of a substitute arbitrator under S 15(2) and whether a party who did not appoint the substitute arbitrator within such period of 30 days and even till date of filing of petition under S. 11 by the other party, had lost the right to appoint a substitute arbitrator and appointment made post the said period of 30 days was void ab initio. The High Court held that appointment of a substitute arbitrator would have to be as per the rules that were applicable for appointment of the arbitrator sought to be substituted namely the arbitration clause between the parties providing for manner of appointment and as the clause in the case at hand did not provide any time period and on the contrary required the Petitioner to call upon Respondent to appoint its nominee arbitrator, then in the absence of such notice/demand, no time period for appointment of substitute arbitrator had starting running and the right of the Respondent appoint arbitrator did not get extinguished. The Court further held that there can be no deemed failure, on the part of either party, to comply with the procedure, stipulated in the contract, for appointment of arbitrator. It is only if the party defaults in doing so, in violation either of the arbitration clause, or of any mandatory statutory prescription – or proscription –that the autonomy, of the party, to appoint an arbitrator, becomes imperilled, and not otherwise.

In Afcons Infrastructure Limited v Konkan Railway Corporation Ltd.[11], High Court of Bombay held that as per Section 21 of the Act, the arbitration would be treated to have commenced on the date request for reference to arbitration is received and on the said basis held that the standing arbitral Tribunal constituted, for an earlier dispute between the same parties, and constituted prior to coming into force of the Amendment Act, 2015 certainly would not clear the test of law when the arbitration in case of the present dispute itself commenced after the Amendment Act, 2015 came into force and when the constitution of the said Standing Tribunal is hit by the provisions of the Amendment Act and the subsequent judicial pronouncements in Perkins Eastman Architects DPC & Anr. v HSCC (India) Ltd[12].

Section 14

In Reliance Infrastructure Ltd. v State of Haryana & Anr.[13], High Court of Punjab & Haryana, while dealing with an arbitration clause which empowered the State of Haryana to appoint the arbitrator in a dispute involving a government PSU and a contractor, held that admittedly the appointing authority was not a party to the contract and merely because of State of Haryana has some financial interest in setting up of the PSU or has a nominee in its Board would not ipso facto mean that it has any interest in the arbitral proceedings and held that if the same was to be treated as a disqualification from exercising power to appoint arbitrator, then in every dispute involving a State Board, Corporation , organization etc , the State Governments would not be in a position to appoint arbitrator and held the appointment so made was not against the ratio of the judgments of the Hon'ble Supreme Court in M/s. TRF Limited v Energo Engineering Project Ltd[14] and Perkins Eastman Architects DPC & Anr. v HSCC (India) Ltd. Further, while rejecting the Petitioner's objection that the State of Haryana has appointed the same arbitrator as suggested by the PSU in an internal noting, held that the same is not proof of the fact that the Government did not independently apply its mind before selecting the arbitrator or that the PSU had a role in the appointment.

In Entertainment City Ltd. v Aspek Media P. Ltd.[15], High Court of Delhi was considering a petition for termination of mandate of the Arbitrator on the ground that the fees sought to be charged by the Arbitrator was in violation of S. 11(14) and the Fourth Schedule of the Arbitration & Conciliation Act and the same would be covered under S. 12(4) of the Act as being a ground for challenging the appointment of the arbitrator or in the alternative by S. 14(1)(a). The Court held that S. 12(4) cannot be read as a standalone provision and has to be read in conjunction with S. 12(3). On the alternative argument, the Court held that while there is no doubt that if the fees charged by the arbitrator were in contravention of the provisions of the Act, then the same may be regarded as de jure inability to attract the provisions of S. 14(1), however, held, that on facts of the case there was no such violation as no rules have been framed under S. 11(14) of the Act by the High Court of Delhi, whereby fees of Arbitrators, directly appointed by the court, could be governed and thus no ground for termination of mandate of Arbitrator is made out.

SECTION 34

In M/s Chintels India Ltd. v M/S. Bhayana Builders P. Ltd.[16] High Court of Delhi held that engagement of a new counsel or clarification in case number of a connected award are not grounds that would constitute 'sufficient cause' to merit condonation of delay in filing under Section 34 (3) of the Act and refused to condone delay of 28 days in filing the petition.

In Indira Gandhi National Open University v M/s. Sharat Das & Associates P. Ltd.[17] High Court of Delhi reiterated the legal position that when a petition is filed under Section 34(3) of the Act, it must not be a mere bunch of papers but must fulfil vital parameters, to qualify as valid filing. The Court held that filing of Vakalatnama, Statement of Truth and signing of the petition are vital for any petition to be termed as proper filing and a petition filed without them would be a non est filing and it is the date when the defects are cured in such a case which will be treated as the date of fresh filing and not re-filing. Since in the present case, the said date goes beyond the 120th day, petition would be treated as having been initially filed beyond the limitation period and the extended period of 30 days. It further held that the CPC and its Amendments would apply to petitions under Section 34 of the Act being heard by the Commercial Division of this Court. The Court further rejected the contention that the defects in Vakalatnama /Statement of Truth, being curable, under Rule 15A can be can be permitted to be cured after the period of limitation or the extended period of 30 days under Section 34(3) of the Act expires. The Court held that if the Court was to hold that non-filing of Vakalatnama, Statement of Truth is a curable defect and it is open to an Objector to file a petition, lacking the vital documents and then cure the defects at his will, it would clearly be against the principles laid down in several judgments which mandate the filing of these vital documents within the period of limitation and this is in keeping with the strict timelines under Section 34(3) of the Act, so that the purpose of expeditious disposal under a special dispute resolution mechanism, is not defeated.

In Sharma Kalypso P. Ltd. v Engineers India Ltd.[18] High Court of Delhi rejected the contention that filing of a defective vakalatnama at the time of initial filing of the objection petition would make the said filing non est and the date of re-filing would have to be considered as date of fresh filing. The Court held that once a Vakalatnama was initially filed, though with certain defects, a filing of a fresh Vakalatnama, without any defect, cannot be treated as a deficiency of a threshold which could lead to dismissal of a petition as 'non-est'. It further held that once the initial filing is within the 3 months limitation period or the extended 30 days, and is a valid filing, then refilling has to be looked at with a liberal approach and secondly, even if the re-filing is beyond the period specified under Section 34(3) of the Act, it can be condoned.

In NHPC Limited v BHS-SGS Soma JV[19] High Court of Delhi held that the question whether petition upon filing in correct forum/court after being returned ought to be treated as an entirely fresh petition and not a re-presentation of the original petition as returned, is not a consideration to deprive the petitioner of the benefit of Section 14 of the Limitation Act. The Court further held that assessing whether an action of filing a petition in a wrong forum/court was carried out in good faith and was with due diligence, cannot be carried out in abstract and would depend on a careful and thorough analysis of the facts of each case and on the facts of the case held that Petitioner satisfied both the tests to be entitled to get benefit under S. 14 of the Limitation Act. It further held that while a party cannot seek exclusion of period before initiation of proceedings before a wrong forum, however once proceedings are initiated time spent in taking preparatory steps for filing the appeal ought to be excluded.

In Union of India v Great Eastern Energy Corporation Limited[20] High Court of Delhi held that an order of Arbitral Tribunal directing payment of costs to the opposite party, on account of delay in placing on record expert evidence, during pending of arbitral proceedings is not an interim award and to qualify as an interim award amenable to challenge under S. 34, the subject matter of arbitration and rights of the parties in respect thereof have to be finally decided.

In NTPC Ltd. v Sri Avantika Contractors (I) (Ltd.)[21]High Court of Delhi, while refusing to interfere with an arbitral award on the ground that the Arbitral Tribunal has exceeded its jurisdiction by adjudicating on excepted matters, held that the Tribunal has arrived at a finding as to how the claim before it was not an excepted matter, based on the interpretation of the contractual clauses as well as the technical interpretation and it is not open to the Court at the stage of S. 34 petition to substitute the said findings, more particularly, when as per settled law, the Arbitrator is the master of quality and quantity of evidence before it. The Court further held that Manner and methodology of calculation, application of formulas and interpretation of contractual clauses is purely the domain of the Tribunal and must pass muster. The Court, however, set aside the award with regards to loss of profit on the ground that the same was without any actual proof.

In Slum Rehabilitation Authority v M.M. Project Consultants Private Limited[22]High Court of Bombay while setting aside the arbitral award, inter alia, held that reasoning given by the Tribunal would amount to observing something contrary to clause of the contract or putting the parties in a position contrary to the relevant contractual condition and the said reasoning was thus a perversity. It held that although it would be in the domain of the arbitral tribunal to interpret contractual clauses and appreciate evidence, it has to be a reasonable and prudent interpretation and appreciation of evidence and not something which is impossible to be conceived by any reasonable standards leading to an absurdity. The Court also held that a claim for damages cannot be made by a party to have any unjust enrichment or it should not confer a windfall on the claimant and cannot exceed the loss actually suffered or likely to be suffered and the damages awarded have to be compensatory and not punitive or retributory.

In Gammon India Ltd & Anr. v NHAI[23] High Court of Delhi held that while a perusal of S. 7(1),8(3) & 21 of the Act makes it clear that multiple references and arbitrations are permissible at multiple stages of a contract/project but multiplicity should be avoided to prevent misuse of remedy of arbitration and the Court laid down the following principles to be followed in such cases (i) for a particular contract/series of contracts, endeavour always ought to be to make one reference to one Arbitral Tribunal (ii) party invoking arbitration ought to raise all claims that have already arisen on the date of invocation for reference to arbitration. A claim arisen on the date of invocation and is not mentioned, either in the invocation letter or in the terms of reference, such claim ought to be held as being barred/waived, unless permitted to be raised by Arbitral Tribunal for any legally justifiable/sustainable reasons (iii) in case an Arbitral Tribunal stands constituted, future reference should ordinarily be made to same Arbitral Tribunal to avoid contradictory findings and if same is not possible at least challenges to the Awards ought to be heard together (iv) while filing S. 11 or 34 petitions, party to disclose the number of arbitration references, Arbitral Tribunals or court proceedings pending or adjudicated in respect of the same contract and if so, the stage of the said proceedings.

In Prakash Industries Limited v Bengal Energy Ltd & Anr.[24] High Court of Calcutta rejected the application for amendment of S. 34 petition holding that while amplification or elaboration of existing grounds may be permitted by way of amendment but bringing on record new grounds, which do not have foundational basis in the existing petition, was not permissible and the test to be applied is whether the proposed grounds would necessitate the filing of a fresh application for seeking setting aside of the award.

SECTION 36

In Steel Authority of India Ltd., India v Tata Projects Ltd., India & Anr[25] High Court of Delhi while dealing the plea of the Petitioner that in light of the economic impact of Covid 19 Pandemic, deposit of awarded amount as pre-condition of stay of execution be waived in lieu of furnishing bank guarantee. The High Court held that economic impact of Covid 19 cannot be ignored but the same would have impacted both parties and Respondent can also not be deprived of the money in the prevailing situation and thus directed 50% of the awarded amount to be deposited in Court and bank guarantee be furnished of the balance 50%.

In Starcon India Ltd & Anr. v Prasar Bharti[26] High Court of Delhi recognised and applied the principle of severability and allowed enforcement of the part of the arbitral award which had not been set aside in S. 34 proceedings.

SECTION 39

In M/s. Janapriya Engineerss Syndicate P. Ltd. v Union of India[27] High Court of Delhi held that an application under S. 39(2) will only be maintainable when the Award is made, but not delivered to the parties as a party has not paid the fees demanded by the arbitrator. The Court held that there is a purpose for delivery of the Award as the delivery of Award shall entitle a party to either challenge the Award or seek execution of the same. It is in such a situation a party can invoke the provision of S. 39(2) of the Act. In the facts of the case, the Court held that as the Award had not yet been made, the petition was premature and consequently not maintainable.

Section 47 & 48

In M/s. Centrotrade Minerals and Metals Inc. v Hindustan Copper Ltd.[28], Supreme Court of India held that the word "otherwise" occurring in S. 48 (1) (b) of the Act being susceptible to two meanings, the narrower meaning has been preferred, which is in consonance with the pro-enforcement bias with respect to awards. On the facts of the case, it was held that it was not a case where party has been unable to present its case before the Arbitrator and ample opportunity was given by the Arbitrator to the party to present its case.

In Glencore International AG v Hindustan Zinc Limited[29] High Court of Delhi while deciding which Court would have territorial jurisdiction to entertain a petition for enforcement of a foreign award, held that there is a distinction between subject matter of arbitration as envisaged in Section 2(1)(e) and subject matter of award as envisaged in Section 47. It held that a petition under Section 47 would be maintainable only where the properties/assets of the Judgment Debtor are located, which may or may not be the chosen place of the parties for subject matter of arbitration. On the facts of the case, it held that as the Judgment Debtor's administrative office, albeit stated to be on lease, as also Bank accounts and certain moveables are located in Delhi, the petition filed in High Court of Delhi is maintainable and the pendency of a composite petition under Section 34 and 48 before High Court of Rajasthan would not be a ground to hold that the High Court of Delhi does not have territorial jurisdiction to entertain the petition for enforcement.

In M/s. Angelique International Limited v Public Electricity Corporation & Ors.[30] Hon'ble High Court of Delhi allowed the petition for enforcement of part of a foreign award and accepted the Decree Holder's submission that though Judgment Debtor does not have any assets within the jurisdiction of the High Court, as the enforcement is only sought qua the bank guarantees which were issued on the basis of counter guarantees issued by the concerned bank in Delhi, the petition filed in High Court of Delhi would be maintainable.

(Kanika Singh is a Delhi-based lawyer, and may be reached at kanikasingh09@gmail.com)


[1] A.P. No. 191 /2020 decided on 18th June 2020

[2] OMP (I) (COMM) 120/2020 decided on 9th June 2020

[3] Arb P. 43/2018 decided on 5th June 2020

[4] OMP(I) (COMM.) 218/2019 decided on 03rd June 2020

[5] OMP(I) COMM No. 340/2019 decided on 4th June 2020

[6] OMP(I) (COMM )254/2019 decided on 12th June 2020

[7] OMP(I) (COMM) 35/2020 decided on 10th June 2020

[8] OMP(I)(COMM) 117/2020 decided on 18th June 2020

[9] OMP(I)(COMM) 121/2020 decided on 29th June 2020

[10] Arb P. 203/2020 decided on 29th June 2020

[11] Arb. P. 10/2019 decided on 2nd June 2020

[12] 2019SCCOnline SC1517

[13] Civil Revision No. 7191/2019 (O & M) decided on 3rd June 2020

[14] AIR2017SC3889

[15] OMP(T) (COMM.) 24/2020 decided on 03rd June 2020

[16] OMP(COMM) 444/2019 decided on 4th June 2020

[17] OMP(COMM) 26/2019 decided on 4th June 2020

[18] OMP(COMM) 363/2019 decided on 17th June 2020

[19] OMP(COMM) 23/2020 decided on 17th June 2020

[20] OMP(COMM) 430/2020 decided on12th June 2020

[21] OMP (COMM.) 370/2017 decided on 8th June 2020

[22] Commercial Arbitration Petition no. 557/2018 decided on 16th June 2020

[23] OMP 680/2011 (New No. O.M.P. (COMM)392/2020) decided on 23rd June 2020

[24] G.A. 394/2020 in A.P. 684/2017 – order dated 11th June 2020

[25] OMP(COMM) 418/2020 – order dated 01st June 2020

[26] OMP(ENF)(COMM) 232/2018 decided on 15th June 2020

[27] OMP (MISC.) (COMM.) 377/2019 decided on 05th June 2020

[28] Civil Appeal No. 2562/2006 decided on 02nd June 2020

[29] OMP(EFA)(COMM.) 9/2019 decided on 8th June 2020

[30] OMP(EFA)(COMM)8/2019 decided on 23rd June 2020

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