Arbitration Cases Weekly Round-Up: 22nd May To 28th May, 2022

Arbitration Act - Dispose Sec 11(5) & 11(6) Applications Pending For Over 1 Year Within 6 Months : Supreme Court To High Courts

Case Title: M/s Shree Vishnu Constructions versus The Engineer in Chief Military Engineering Service And Ors.

Citation: 2022 LiveLaw (SC) 523

The Supreme Court of India has made strong observations emphasising the need for High Courts to decide applications for appointments of Arbitrators at the earliest.

A Bench comprising Justice MR Shah and Justice BV Nagarathna has observed that if the arbitrators are not appointed at the earliest and the applications under Sections 11(5) and 11(6) of the Arbitration Act for appointment of arbitrators are kept pending for a number of years, it will defeat the object and purpose of the enactment of the Act and it may lose the significance of an effective Alternative Dispute Resolution Mechanism.

High Courts:

Calcutta High Court:

The Objection Regarding The Non-Applicability Of The MSMED Act To 'Works Contract' Is To Be Decided In Arbitration By The MSME Council:Calcutta High Court

Case Title: NBCC (India) Ltd. versus The State of West Bengal and Ors.

Citation: 2022 LiveLaw (Cal) 214

The Calcutta High Court held that objections regarding the non-applicability of the MSMED Act to works contract can be decided in arbitration by MSME Council.

The Division Bench of Chief Justice Prakash Shrivastava and Justice Rajarshi Bharadwaj upheld the order of the Single Bench whereby the petitioner was referred to arbitration before the MSME Council with a direction that his objection regarding the non-applicability of the MSMED Act as the contract was a works contract would be decided by the Arbitral Tribunal.

S.11Arbitration Act | Interested Party Cannot Appoint An Arbitrator To Decide Disputes Between Parties: Calcutta High Court

Case Title: New Eureka Travels Club versus South Bengal State Transport Corporation

Citation: 2022 LiveLaw (Cal) 200

The Calcutta High Court, while adjudicating upon an application under Section 11 of the Arbitration and Conciliation Act, 1996 (Act), has held that it is a settled law that neither an interested party can be appointed as an arbitrator nor can the said interested party appoint an arbitrator to decide the disputes between the parties.

The Single Bench of Justice Shekhar B. Saraf observed that where a sole arbitrator is required to be appointed as per the parties, it is the Court that is to decide the sole arbitrator.

Delhi High Court:

A Party Cannot Dispute The Jurisdiction On Account Of Non-Existence Of The Arbitration Agreement After Submitting To The Jurisdiction Of The Arbitrator: Delhi High Court

Case Title: Amrish Gupta versus Gurchait Singh Chima

The High Court of Delhi held that a party cannot dispute the jurisdiction on account of non-existence of the arbitration agreement after submitting to the jurisdiction of the arbitrator.

The Single Bench of Justice Vibhu Bakhru held that generally, the arbitration clause contained in the main agreement would also fall when the validity of the main agreement is challenged and the dispute would be non-arbitrable.

Plaintiff Is Not Entitled To Return Of Court Fees When The Parties Are Referred To Arbitration Under Section 8 Of The A&C Act: Delhi High Court

Case Title: A-One Realtors Pvt. Ltd. versus Energy Efficiency Services Ltd.

Citation: 2022 LiveLaw (Del) 502

The High Court of Delhi has held that the plaintiff is not entitled to return of Court Fess when the parties are referred to arbitration under Section 8 of the A&C Act.

The Single Bench of Justice Amit Bansal held that the benefit of Section 16 of the Court Fees Act would only be available to the plaintiff when the parties are referred to arbitration for settlement in terms of Section 89 of the CPC and not under Section 8 of the A&C Act.

Waiver Under Section 12(5) Of A&C Act Has To Be By An Express Agreement In Writing: Delhi High Court

Case Title: AK Builders versus Delhi State Industrial Infrastructure Development Corporation Ltd

Citation: 2022 LiveLaw (Del) 490

The Delhi High Court has ruled that any right under Section 12(5) of the Arbitration and Conciliation Act, 1996 (A&C Act), that deals with the ineligibility of certain persons to be appointed as an arbitrator, can be waived of only by an express Agreement in writing entered into after the disputes had arisen between the parties.

The Single Bench of Justice Vibhu Bakhru dismissed the contention that since the petitioner had participated in the arbitral proceedings it was precluded from raising any objections towards the appointment of the Arbitrator. The Court reiterated that a person who is ineligible to act as an arbitrator would also be ineligible to appoint an arbitrator.

The Provisions For The Quantum Of Damages Under Land Acquisition Act, 2013 Would Apply To Arbitrations Under The Resettlement Of Displaced Persons (Land Acquisition) Act, 1948: Delhi High Court

Case Title: Rajinder Kumar Agarwal versus Union of India

The High Court of Delhi has held that the provisions for the quantum of damages under Land Acquisition Act, 2013 (LARR Act) would apply to arbitrations under the Resettlement of Displaced Persons (Land Acquisition) Act, 1948.

The Single Bench of Justice Navin Chawla has held that the provisions of the LARR Act being beneficial in nature would also apply to all the pending arbitrations under the Resettlement of Displaced Persons (Land Acquisition) Act.

Arbitral Award Passed In Disregard To Judicial Decisions Conflicts With The Public Policy : Delhi High Court

Case Title: Sanjay Roy versus Sandeep Soni & Ors.

The Delhi High Court has held that an arbitral award that is not in consonance with the judicial decisions and principles laid down by the courts of India would be in violation of the fundamental policy of Indian law and thus in conflict with the public policy of India under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act).

The Bench, consisting of Justices Mukta Gupta and Neena Bansal Krishna, upheld the order of the Single Judge setting aside the arbitral award under Section 34 on the ground that the Arbitrator had failed to apply the basic fundamental law as contained in the Limitation Act, 1963 and the Transfer of Property Act, 1882.

Arbitrator Cannot Rewrite Terms Of The Agreement Merely Because It Flouts Business Common Sense: Delhi High Court

Case Title: Union of India, Ministry of Railways, Railway Board & Anr. versus M/s Jindal Rail Infrastructure Limited

The High Court of Delhi held that the arbitrator cannot re-write the terms of the agreement between the parties merely because they flout business common sense.

The Single Bench of Justice Vibhu Bakhru has held that an award wherein the arbitrator re-works a bargain between the parties merely because it is commercially difficult for one party to perform the same would be against the fundamental policy of Indian Law and would be vitiated by patent illegality.

The Arbitrator Cannot Allow Forfeiture Of A Substantial Amount Of Consideration Without Proof Of Actual Loss Solely On The Ground That It Was Earnest Money: Delhi High Court

Case Title: Rajesh Gupta versus Ram Avtar

Citation: 2022 LiveLaw (Del) 482

The High Court of Delhi has held that the arbitrator cannot allow forfeiture of a substantial amount of consideration without the proof of actual loss solely on the ground that it was referred to as Earnest Money under the contract.

The Single Bench of Justice Vibhu Bakhru partly set aside an award on the ground that the arbitrator wrongly allowed the forfeiture of Earnest Money which formed a substantial portion of the total consideration without the respondent proving actual loss suffered by it.

Jharkhand High Court:

Registrar Of The Jharkhand Cooperative Society, Who Also Is The Ex-Officio Director Of The Respondent, Jharkhand High Court Says Appointment As Arbitrator Not Barred As Parties Had Agreed Earlier

Case Title: National Club Cooperative Society Ltd versus The Managing Director, Jharkhand State Adivasi Cooperative Marketing Federation Ltd

Citation: 2022 LiveLaw (Jha) 57

The Jharkhand High Court has ruled that just because registration was granted to a party by a State Cooperative Society, presumption against the independence and impartiality of the Registrar of the said State Cooperative Society to act as an Arbitrator cannot arise.

The Single Bench of Justice Sujit Narayan Prasad held that by merely raising apprehension regarding the independence and impartiality of the person specified to act as an Arbitrator in the arbitration clause, a party cannot file an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (A&C Act) for appointment of an Arbitrator.

Karnataka High Court:

No Stamp Duty Leviable On Award Of Compensation Passed By An Arbitrator Under Section 3G(5) Of The National Highways Act: Karnataka High Court

Case Title: Shalini and Anr. versus National Highways Authority of India and Ors.

The Karnataka High Court has ruled that an award of compensation passed by an Arbitrator under Section 3G(5) of the National Highways Act, 1956 does not attract stamp duty.

The Single Bench of Justice Suraj Govindaraj held that an award of compensation passed by the Land Acquisition Officer under the Land Acquisition Act or under any other similarly situated enactment, including the National Highways Act (NHA), is not amenable to payment of any stamp duty. The Court added that merely because the said award of compensation is passed by an Arbitrator under Section 3G(5) of NHA, the same would not attract stamp duty.

Telangana High Court:

Arbitral Award Must Be In Accordance With The Terms Of The Contract: Reiterates Telangana High Court

Case Title: C. Srimannarayana versus Hindustan Petroleum Corporation Limited, SECBAD and Another

The Telangana High Court has reiterated that an arbitral award must be in accordance with the terms of the contract.

The Bench, consisting of Justice P. Naveen Rao and Dr. Justice G. Radha Rani, quashed an arbitral award on the ground that the clauses of the contract were not properly construed by the Arbitrator and that it was a non-speaking order which was rendered without discussing the contentions raised by the claimant.