Arbitration Cases Weekly Round-Up: 13 November To 19 November, 2022

Invalidity Of The Appointment Procedure Would Not Render The Entire Arbitration Clause Invalid: Delhi High Court

Case Title: Ram Kripal Singh Construction Pvt. Ltd. versus NTPC

The High Court of Delhi has held that merely because the procedure for the appointment of the arbitrator has become invalid due to 2015 amendment act, the same would not render the entire arbitration clause invalid.

The bench of Justice Anup Jairam Bhambhani held that there are several elements present in an arbitration clause such as procedure for appointment of arbitrator, law of arbitration, law of contract, seat and venue, etc., however, the core element remains the consent of the parties to refer the dispute to arbitration. Therefore, merely because one element has become invalid, it would not make the entire clause ineffective and that the invalid clause can be easily severed.

Section 12(5) Of A&C Act Applies To Proceedings Commenced Before Or After The 2015 Amendment: Delhi High Court

Case Title: Ram Kripal Singh Construction Pvt. Ltd. versus NTPC

The High Court of Delhi has held that Section 12(5) of the Arbitration and Conciliation Act, 1996 (A&C Act) that provides for grounds of ineligibility of arbitrator would apply regardless whether the notice of arbitration was given before or after the 2015 amendment came into force provided that the appointment was made on a date Section 12(5) was in force.

The bench of Justice Anup Jairam Bhambhani held that in view of Section 12, independence and impartiality of arbitrator is a continuing requirement and any ineligible person acting as the arbitrator cannot continue merely because the arbitral proceedings began before Section 12(5) came into force.

Doctrine Of Group Of Companies, Can't Implead Third Party To Arbitration: Delhi High Court

Case Title: Sandeep Singh versus Simran Sodhi & Ors

The Delhi High Court has ruled that the Doctrine of Group of Companies cannot be applied to implead a non-signatory third party to arbitration, in a dispute arising between partners relating to the partnership business. The Court held that partnership in its very nature cannot be equated with a company to invoke the Doctrine of Group of Companies.

The Single Bench of Justice V. Kameswar Rao held that if allegations raised against a party contain a criminal aspect of fraud, forgery or fabrication, which would result in penal consequences and criminal sanctions, the same cannot be referred to arbitration. The Court added that the same would be adjudicated by a Court of law, since it may result in conviction which is in the realm of public law.

Period Of Limitation For The Appointment Of Substitute Arbitrator Begins On The Date Of His Recusal/Removal, Date Of Knowledge Is Irrelevant: Delhi High Court

Case Title: Tricolor Hotels Limited versus Dinesh Jain

The High Court of Delhi has held that the period of limitation for appointing a substitute arbitrator under Section 15(2) of the A&C Act commences on the date of recusal/removal of the arbitrator and the date on which the fact of his removal/recusal comes to the knowledge of a party is irrelevant for the purpose of limitation.

The bench of Justice Mini Pushkarna held that since Section 15 of the A&C Act does not contain any provision of limitation, therefore, the period of limitation would be 3 years as provided under Article 137 of the Limitation Act, 1963.

Gujarat High Court:

Section 19 Of MSMED Act Applies To All Kinds Of Challenges: Gujarat High Court

Case Title: Spunpipe & Construction Company versus State of Gujarat

The High Court of Gujarat has held that Section 19 of the MSMED Act, which provides for deposit of 75% of the awarded amount as a pre-condition to challenging any order, award or decree passed in favour of the supplier, applies to all challenge applications regardless of whether the decree, award, order was passed by MSME Council, independent arbitration or the Court.

The bench of Justice Umesh A. Trivedi has held that if Section 19 of the Act is made applicable only to the award passed by the Council, then the use of the word 'decree' under Section 19 would be rendered nugatory as the Council cannot pass a decree; further, it would also frustrate the object of the Section that is to secure the interest of the small-scale industries i.e., supplier.

Madras High Court:

Arbitration Survives Even If Arbitration Under MSMED Act Declared Non-Maintainable: Madras High Court

Case Title: M/s. Deetech Projects Pvt. Ltd. versus M/s. Batliboi Environmental Engineering Ltd.

The Madras High Court has ruled that once a dispute is referred to the Facilitation Council under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), if the Facilitation Council adjudicates the dispute on merits, such decision would operate as res judicata and would bar the institution of arbitral proceedings in respect of the same dispute.

However, the Court held that if the Facilitation Council declines to exercise jurisdiction on the ground that the petition was not maintainable before it, the arbitration clause contained in the agreement between the parties would survive.

The single bench of Justice Senthilkumar Ramamoorthy observed that by way of a legal fiction contained under Section 18(3) of the MSMED Act, an arbitration agreement in terms of the A&C Act is statutorily imported once the dispute is taken up for arbitration under the MSMED Act. The Court ruled that the said legal fiction does not have the effect of novating the agreement between the parties by deleting the arbitration clause contained in the said agreement.

Section 31 Of The Credit Information Companies (Regulation) Act, 2005 Does Not Bar Constitution Of An Arbitral Tribunal: Madras High Court

Case Title: Kirankumar Moolchand Jain versus TransUnion CIBIL Ltd.

The Madras High Court has ruled that the bar contained under Section 31 of the Credit Information Companies (Regulation) Act, 2005 (CIC Act) will not apply to proceedings for constitution of an arbitral tribunal, to resolve the disputes in the manner prescribed under the CIC Act.

The Single bench of Justice Senthilkumar Ramamoorthy held that the object and purpose of Section 31 of the CIC Act is to preclude the parties from seeking redressal of grievances in any manner other than that prescribed under the CIC Act. It added that since Section 18 of the CIC Act provides for dispute resolution through arbitration, the provisions of Section 31 would not bar the constitution of an arbitral tribunal.

Punjab and Haryana High Court:

Subsequent Consulting Agreements Prescribing Arbitration Do Not Bind Parties When MoU Forming Basis Of Claim Doesn't Contain Arbitration Clause: P&H High Court

Case Title: M/s Soben Contract and Commercial Ltd. versus M/s Qonquests Technical Solutions Pvt. Ltd. and Ors.

The Punjab and Haryana High Court recently held that where the claim of a party to an agreement is based upon a Memorandum of Understanding (MoU) which does not contain an arbitration clause, the Court is not required to refer the matter merely because the subsequent Consulting Agreements executed by the parties contemplate arbitration.

The bench comprising Justice Augustine George Masih and Justice Sandeep Moudgil in this case noted that there is no clause for arbitration under the MoU and the clause, if any, is in the Consulting Agreements which would not be applicable here since plaintiff's claim is based exclusively on the MoU.