Arbitration Cases Monthly Round-Up: July 2023
ausaf ayyub
5 Aug 2023 2:00 PM IST
Supreme Court Can Ineligible Person Appoint Arbitrator? Supreme Court Defers Hearing As Centre Is Considering Reforms To Arbitration & Conciliation Act Case Title: Central Organisation for Railway Electrification vs. M/s ECI SPIC SMO MCML (JV) A Constitution Bench of the Supreme Court on Wednesday decided to defer for two months the hearing of a reference which raises...
Supreme Court
Case Title: Central Organisation for Railway Electrification vs. M/s ECI SPIC SMO MCML (JV)
A Constitution Bench of the Supreme Court on Wednesday decided to defer for two months the hearing of a reference which raises the issue whether a person, who is ineligible to be appointed as an arbitrator, can appoint an arbitrator. The matter was listed before a bench comprising Chief Justice of India DY Chandrachud, Justice Hrishikesh Roy, Justice PS Narasimha, Justice Pankaj Mithal, and Justice Manoj Misra.
High Courts
Calcutta High Court:
Case Title: Omkar Tradecomm LLP vs Mayank Agarwal
The High Court of Calcutta has held that a party approaching the Court for relief must do so with clean hands and is under an obligation to disclose all material facts that have bearing on the adjudication of the issues in the case.
The bench of Justice Shekhar B. Saraf held that the doors of justice would be closed for litigants approaching the court with a case built on falsehood, fraudulent concealment or suppression of material facts. The Court recalled its earlier order wherein it had granted interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 to a party that concealed material facts of the dispute from the Court at the time of seeking such relief. The Court imposed cost of Rs. 50 thousand on each of the petitioners.
Case Title: Jaldhi Overseas PTE Ltd vs Steer Overseas Pvt Ltd
The High Court of Calcutta has held that the Courts, while exercising powers under Section 48 of the A&C Act, cannot re-appreciate the evidence or substitute its view with that of the arbitral tribunal. It reiterated that the scope of judicial interference at the stage of enforcement of foreign award is limited to the grounds mentioned under Section 48 and the court is only required to make a preliminary determination.
Case Title: Srei Equipment Finance Limited vs Seirra Infraventure Private Limited
The Calcutta High Court has recently held that when a party forfeits its right to appoint an arbitrator in accordance with Section 11 of the Arbitration & Conciliation Act, 1996 (“Arbitration act”), then it cannot subsequently “trace back its steps” to revive such a right, for the substitution of a fresh panel of arbitrators, when the existing arbitrator becomes de jure/de facto unable to discharge their duties.
Case Title: Jaya Industries vs Mother Dairy Calcutta & Anr.
The Calcutta High Court has recently held that that the power of a Court to continue hearing an application for interim relief under Section 9(1) of the Arbitration and Conciliation Act, 1996, (“1996 Act”) would not be “fettered” under Section 9(3) after the constitution of an arbitral tribunal, if the court has already entertained the application. A single-judge bench of Justice Moushumi Bhattacharya held, that while Section 9(3) barred the Court from taking up any interim application after the due constitution of the arbitral tribunal, the same could not fetter the power of a Court to continue hearing an application, which it had already entertained prior to constitution of such a tribunal.
Case Title: Gopaldas Bagri vs C&E Ltd
The High Court of Calcutta has held that an arbitration award is liable to be set aside for violation of Sections 12(1), 12(2) and 12(5) of the Arbitration and Conciliation Act, 1996 when the arbitrator appeared in court for an ‘affiliate company’ of the claimant during the pendency of the arbitration without disclosing such an engagement to the respondent.
The bench of Justice Rajshekhar Mantha held that Section 12(2) of the A&C Act cast a continuous duty on the arbitrator to remain neutral and continue to disclose to the parties any acts or omissions that are likely to fall foul of the mandate under Section 12, in the course of the Arbitration.
Case Title: The State of West Bengal & Ors. vs M/s. BBM Enterprise
The Calcutta High Court has recently allowed an application filed by the State of West Bengal, as an award-holder under the Arbitration and Conciliation Act, 1996 (“1996 Act”) to withdraw a security of Rs 9 crore furnished by BBM Enterprises (“award debtor”) in lieu of the arbitral award, during the pendency of the setting aside proceedings on the impugned award, initiated by the award-debtor.
In holding that an award-holder required no statutory sanction or a separate application in the stay proceedings for withdrawing the secured amount, a single bench of Justice Moushumi Bhattacharya directed the State to furnish a bank guarantee of an equivalent amount to the Registrar, Original Side, Calcutta High Court, before withdrawing the amount, and opined that withdrawal of the amount would not prejudice the rights of the award-debtor, during the pendency of the setting-aside proceedings.
Delhi High Court:
Case Title: Microsoft Corporation vs Zoai Founder
The Delhi High Court has ruled that the inclusion of the arbitrator’s name in the “Hall of Fame” of a website created by him, based upon the fact that he had denied the maximum number of complaints under the “.IN Domain Name Dispute Resolution Policy” (INDRP), gives rise to a justifiable apprehension as to his neutrality.
The court was dealing with a petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act), challenging the arbitral award passed by the Arbitrator under INDRP while adjudicating the claim for transfer of a disputed domain name.
Case Title: M/s Abhijeet Angul Sambhalpur Toll Road Limited vs NHAI
The High Court of Delhi has held that an order of the arbitral tribunal refusing to entertain additionalcounter-claims filed without making any application under Section 23 of the Act is not an ‘interimaward’, therefore, it cannot be challenged under Section 34 of the Act.
The bench of Justices Najmi Waziri and Sudhir Kumar Jain held that order of the tribunal refusing toentertain additional counter-claims filed without requisite permission/authority of the tribunal is notan interim award as it neither conclusively settles any issue between the parties so to have the resjudicate effect nor forecloses the right of the aggrieved party to refile the counter-claims by seeking“authority” or permission on an application under section 23 of the Act.
Case Title: M/s Wave Geo-Services Pvt Ltd vs M/s Devi Engineering and Construction Pvt Ltd
The Delhi High Court has ruled that the plea that the claimant’s claim cannot stand in the absence of a third entity in the arbitral proceedings, is an aspect touching upon the maintainability of the claim(s) sought to be raised before the Arbitral Tribunal. The court said that the said plea can be urged before a duly constituted Arbitration Tribunal and the same cannot preclude the claimant from seeking or invoking Arbitration in terms of the arbitration agreement executed between the parties.
Case Title: Margo Networks Pvt Ltd & Anr vs. Railtel Corporation of India Ltd
The Delhi High Court has ruled that where a party is required to appoint an arbitrator from a panel made by the other contracting parties, it is mandatory for the panel to be sufficiently broad based, in conformity with the principle laid down by the top court in Voestalpine Schienen Gmbh vs. Delhi Metro Rail Corporation Ltd, (2017) 4 SCC 665.
The bench remarked that the “counter balancing”, as contemplated in Perkins Eastman Architects DPC & Anr. vs. HSCC (India) Ltd, 2019 SCC Online SC 1517, cannot be said to be achieved in a situation where one of the parties has a right to choose one arbitrator from a panel whereas 2/3rd of the members of the arbitral tribunal are appointed by the other party.
Case Title: Anay Kumar Gupta vs. Jagmeet Singh Bhatia
The High Court of Delhi has held that the Court exercising power under Section 29A of the A&C Act, which provides for extension of time to conclude arbitral proceedings, is only concerned with the issue as to whether the arbitrator has acted with expedition in the matter and would not consider any issue regarding the conduct of the arbitration or the fees of the arbitral tribunal as they are not relevant for the purpose of the said Section.
The bench of Justice Sachin Datta reaffirmed that the only ground for removal of the arbitrator under Section 29A is that the arbitrator failed to proceed expeditiously in the adjudication process and the same cannot be extended to removal of the arbitrator on the ground of any issue with the arbitrator qua the fees fixed by him.
Case Title: GLS foils products Pvt. Ltd vs. FWS Turnit Logistic Park LLP
The High Court of Delhi has held that the Court under Section 37 of the A&C Act should not interfere with a reasoned order of the tribunal granting interim relief based on thorough examination of the matter.
The bench of Justice Sachin Datta reiterated that as long as the arbitral tribunal has granted the interim relief to protect and preserve the subject matter of arbitration and balances the equities between the parties on consideration of prima facie case, balance of convenience and irreparable damage, the Court should not interfere with such orders as Section 37 is not strictly like an appeal process. It held that the interference would only be permissible when the order is palpably arbitrary or unconscionable.
Case Title: National Highways Authority of India vs GVK Jaipur Expressway Private Limited
The Delhi High Court has ruled that non-consideration of a clause of the Agreement executed between the parties, cannot be said to be an error made by the arbitral tribunal which is opposed to the fundamental policy of Indian law. The court added that the same also cannot render the arbitral award patently illegal if the view of the Arbitrator is a plausible one. The bench comprising Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad was dealing with an arbitral award which was challenged on the ground that the Arbitrator had ignored the relevant clause of the Concession Agreement while passing the award.
Case Title: Sterlite Power Transmission Limited vs EPC Solutions LLP
The High Court of Delhi has held that the relevant date under the MSMED Act is the date of agreement and additionally the date on which the goods and services were supplied, therefore, a ‘medium’ enterprise can maintain a claim before MSEFC if it was either a micro or a small enterprise at the relevant time.
The bench of Justice Prathiba M. Singh held that any subsequent upgradation of enterprise from ‘micro or small’ to ‘medium’ would not be a bar to the maintenance of its claim before the MSEFC, if it fulfilled the criteria at the relevant time. The Court reiterated that MSMED Act, 2006 is a beneficial legislation for Micro, Small and Medium Enterprises and ought to be construed in a manner that is beneficial to such enterprises.
Case Title: NHAI vs IRB Pathankot Amritsar Toll Road Ltd
The High Court of Delhi has held that mere recommendation by Independent Engineer (IE) for Extension of Time (EOT) to the contractor does not necessarily mean the NHAI was responsible for the delays in the completion of the project work.
The division bench of Justices Vibhu Bakhru and Amit Mahajan held that when the agreement between the parties provides for compensation and extension of concession period in favour of the contractor only in the eventuality of a material breach by NHAI, the arbitrator cannot award damages or grant extension of concession period, without first determining the issue of material breach of the agreement by NHAI, simply for the reason that the IE has recommended EoT in favour of the Contractor.
Case Title: IDFC First Bank Limited vs Hitachi MGRM Net Limited
The High Court of Delhi has held that a writ petition against an order of arbitral tribunal rejecting an application under Section 16 of A&C Act is maintainable only in exceptional cases.
The bench of Justice Prathiba M. Singh held in view of the Supreme Court judgment in Vidya Drolia, the disputes falling under RDB Act, 1993 would be non-arbitrable as the DRT would have the exclusive jurisdiction to decide these matters, however, the Court would not interfere with the arbitral proceedings unless it is ex-facie clear that the dispute falls under the RBD Act.
Case Title: ARG Outlier Media Private Limited vs HT Media Limited
The Delhi High Court has ruled that though in terms of the judgment of the Supreme Court in M/s N.N. Global Mercantile Private Limited vs M/s Indo Unique Flame Ltd. & Ors., 2023 SCC OnLine SC 495, an Agreement containing an arbitration clause which is not properly stamped, cannot be admitted in evidence. However, once the Agreement has been admitted in evidence by the Arbitrator, who has passed an award by relying on the said Agreement, the award cannot be set aside on the ground that the Agreement was insufficiently/improperly stamped, the court said.
The bench of Justice Navin Chawla remarked that under Section 34 of the Arbitration and Conciliation Act, 1996, the court does not act as a court of appeal against the arbitral award and therefore, it may not even have the powers vested in Section 61 of the Indian Stamp Act, 1899.
Arbitrator Can’t Decide Claims On Mathematical Derivations In Absence Of Evidence: Delhi High Court
Case Title: Satluj Vidyut Nigam Ltd vs Jaiprakash Hyundai Consortium & Ors.
The High Court of Delhi has held that an arbitrator cannot decide the claims of a party based on mathematical calculation/derivations without any actual evidence supporting such claims by showing the actual amount incurred by the party claiming damages before the tribunal.
The bench of Justice Sachin Datta held that an arbitral award when it involves financial claims relying on novel mathematical derivations, lacking a solid basis in the pleadings and/or without substantial supporting evidence, can result in significant prejudice to the opposing party. Accordingly, the Court set aside the award as based on no-evidence at all.
Case Title: Ambience Developers and Infrastructure Pvt Ltd vs Zesty Foods
The Delhi High Court has ruled that a review of the court’s order allowing the petition under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act), cannot be sought on the basis of the subsequent decision of the Supreme Court in N.N. Global Mercantile (P) Ltd. vs Indo Unique Flame Ltd., 2023 SCC OnLine SC 495.
The bench of Justice Sachin Datta remarked that N.N. Global (2023) itself contemplates that in certain situations, the issue as to whether the stamping is insufficient, may be left to the arbitrator to determine, who would then take recourse to Section 33 of the Indian Stamp Act, 1899.
Gujarat High Court:
Case Title: TBEA Energy vs R K Engineering
The High Court of Gujarat has reiterated that the petition under Section 11 of the A&C Act for the appointment of the arbitrator by the Court would not be maintainable if the dispute is covered under the MSMED Act, 2006 and the provisions of the act are invoked. The bench of Justice Biren Vaishnav followed a line of earlier precents wherein the High Court has held that the provisions of MSMED Act prevail over the A&C Act and the resolution of dispute covered under the MSMED Act has to be in terms of Section 18 of the Act only and the procedure for the appointment of arbitrator under the A&C Act would have to give way to the special mechanism provided under the MSMED Act.
Jharkhand High Court:
Case Title: M/s ESL Steel Limited vs Ispat Carriers Pvt Ltd
The Jharkhand High Court has held that the objections under Section 36 of the A&C Act are permissible only on issues relating to patent or inherent lack of jurisdiction of the tribunal.
The Bench of Justice Anubha Rawat Choudhary held that challenge to an arbitral award can only be on the grounds enshrined under Section 34 of the Act, nevertheless, it is permissible to raise objections under Section 47 of the CPC at the stage of enforcement of the award under section 36 of the Act if those objections pertain to the lack of jurisdiction of the tribunal to pass an award or when the award is non-est or a nullity in the eyes of the law. However, such a defect in the award must be apparent on the face of the record and not require any factual determination.
Kerala High Court:
Case Title: Hiran Valiiyakkil Lal & Ors vs Vineeth M.V & Ors.
The Kerala High Court recently held that the mandate of an arbitrator can be extended under Section 29A(4) of the Arbitration and Conciliation Act, 1996, even if the parties have not extended the period by consent.
Madhya Pradesh High Court:
Case Title: Sarvesh Rajput vs State of Madhya Pradesh
The Madhya Pradesh High Court has held that the cause of action for referring the dispute to arbitrator under Section 3G(5) of the National Highways Act, 1956 arises on the date of the determination of the amount of compensation by the competent authority under Section 3G(1) of the Act. The bench of Justice Milind Ramesh Phadke held that though there is no period of limitation provided for referring the dispute to arbitrator under the said Section, however, it is governed by the residuary clause as contained under Article 137 of the Limitation Act wherein a period of 3 years is provided.
Case Title: Meinhardt Singapore Pte. Ltd vs Bhopal Municipal Corporation (BMC)
The Madhya Pradesh High Court has ruled that the court cannot appoint an Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act) when an overriding remedy is available to the party under the Madhya Pradesh Madhyastam Adhikaran Adhiniyam, 1983.
The bench of Justice Anand Pathak was dealing with an application filed under Section 11 of the A&C Act seeking appointment of Arbitrator to adjudicate the dispute between the parties in relation to a works contract.
The court held that since the contract awarded to the applicant by the Bhopal Municipal Corporation was a ‘Works Contract’, a remedy was available to the applicant to make a reference to the ‘Madhyasthan Tribunal’, i.e., the Madhya Pradesh Arbitration Tribunal, under Section 7 of the Adhiniyam, 1983.
Meghalaya High Court:
Case Title: M/s Hindustan Construction Co. Ltd. vs. North Eastern Electric Power Corporation Ltd. (NEEPCO)
The Meghalaya High Court has ruled that there is no specific provision in the Arbitration and Conciliation Act, 1996 (A&C Act) as regard execution or stay of an arbitral award. Therefore, the order passed by the Executing Court who stayed the execution of the award by resorting to Order XXI Rule 26 of the Code of Civil Procedure, 1908 (CPC), was within its jurisdiction, the court held.
The bench of Justice W. Diengdoh observed that the Executing Court had passed the order to enable the award debtor to approach the concerned court for seeking stay of the execution after its appeal under Section 37 of A&C Act was dismissed. The Executing Court thus found that sufficient cause, as per Order XXI Rule 26 CPC, had been shown.
Upholding the order of the Executing Court, the court remarked that the Executing Court committed no jurisdictional error in passing the said order.
Patna High Court:
Patna High Court Appoints Justice Mridula Mishra As Arbitrator In Educomp Solutions Vs BSEDC Dispute
Case Title: Educomp Solutions Ltd. vs Bihar State Electronics Development Corporation Limited and Ors.
The Patna High Court has appointed Justice Mridula Mishra, its former judge, as an independent arbitrator to resolve the ongoing dispute between Educomp Solutions Ltd and Bihar State Electronics Development Corporation Limited.
