Arbitration Monthly Round-Up: January 2024
Rajesh Kumar
9 Feb 2024 9:00 AM IST
Supreme Court Arbitral Awards Cannot Be Modified Under Sections 34 & 37 Of Arbitration & Conciliation Act : Supreme Court Case Title: S.V. Samudram v. State of Karnataka Citation: 2024 LiveLaw (SC) 14 The Supreme Court has reiterated the settled position of law that any attempt to “modify an award” while adjudicating Sections 34 and 37 petitions is not...
Supreme Court
Case Title: S.V. Samudram v. State of Karnataka
Citation: 2024 LiveLaw (SC) 14
The Supreme Court has reiterated the settled position of law that any attempt to “modify an award” while adjudicating Sections 34 and 37 petitions is not permissible under the Arbitration and Conciliation Act, 1996.
The Division Bench of Supreme Court comprising Justices Abhay S. Oka and Sanjay Karol while deciding a Civil Appeal filed by the Appellant against the judgment and order passed by the High Court of Karnataka under Section 37 (1) of the Arbitration and Conciliation Act, 1996, framed a question of law that:
“Whether the High Court was justified in confirming the order dated 22nd April, 2010 under Section 34 of the Arbitration & Conciliation Act, 1996 passed by the Senior Civil Judge, Sirsi, in Civil Misc. No. 08/2003, whereby the award passed by the learned Arbitrator was modified and the amount awarded was reduced.”
Supreme Court Issues Notice On Plea Challenging Validity Of Section 3G Of National Highways Act
Case Title: B.D. Vivek v. Union of India, Writ Petition Civil No. 1364 of 2023
The Supreme Court Bench of Justices B.V. Nagrathna and Ujjal Bhuyan has issued notice on a writ petition challenging the Constitutional Validity of Section 3G of the National Highways Act, 1956.
The writ petition questions the legality of Section 3G(5) of the Act. This section mandates arbitration to resolve disputes over the compensation amount payable to landowners when their land is acquired. The arbitration is to be conducted by an arbitrator appointed by the Central Government.
The petitioner argues that Section 3G(5) violates Article 14 of the Indian Constitution. The contention is that imposing mandatory arbitration, with an arbitrator selected solely by the Central Government, unfairly biases the process against the landowners.
Delhi High Court
Case Title: MBL Infrastructure Ltd v. DMRC, OMP(COMM) 311 of 2021.
The High Court of Delhi has held that the Arbitral tribunal can award monetary compensation as damages for the delay attributable to employer even when the agreement provides for the extension of time as the only remedy to the contractor.
The bench of Justice Chandra Dhari Singh held that the tribunal cannot deny damages on the ground that the agreement provides only for extension of time, especially when the agreement has already been terminated by the employer and there is no occasion for the contractor to seek extension. It held that the tribunal, in such a situation, has to necessarily compensate the contractor in terms of unliquidated damages.
Case Title: MBL Infrastructure Ltd v. DMRC, OMP(COMM) 311 of 2021.
The High Court of Delhi has held that an Arbitral Tribunal can transgress the boundaries of the contract to grant relief to aggrieved party when the contract illegally restricts or does not provide for sufficient remedies.
The bench of Justice Chandra Dhari Singh held that in a situation which is not anticipated in the agreement, the tribunal can transgress the boundaries of the agreement and grant relief to the aggrieved party which it is rightfully entitled to. It held that the tribunal cannot withhold a relief merely because of the explicit provision for such a relief in the agreement.
Case Title: Union of India v. M/s Panacea Biotec Limited, FAO(OS)(COMM) 81 of 2020
The High Court of Delhi has held that non-mentioning of prayer renders the petition under Section 34 of the A&C Act as invalid.
The bench of Justices Suresh Kumar Kait and Neena Bansal Krishna held that without a prayer to set aside the impugned award, a petition cannot be considered valid as such petitions would merely amount to empty submissions without a relief.
The Court held that without a prayer, the Court cannot decipher the relief that a party is seeking on the basis of the averments made in the petition and without seeking relief, the petition is not maintainable rendering it non-est.
The Court emphasized that condoning the delay in re-filing the petitions beyond the prescribed period of 3 months plus 30 days would entangle arbitrations in a web of prolonged delays. Such a situation, the Court reasoned, would undermine the very purpose of opting for arbitration, rendering it meaningless.
Case Title: Union of India v. M/s Panacea Biotec Limited, FAO(OS)(COMM) 81 of 2020
The High Court of Delhi has held that under Section 34(3) of the A&C Act, the limitation period of 3 months plus 30 days in inelastic and inflexible.
The bench of Justices Suresh Kumar Kait and Neena Bansal Krishna explained that the challenge petition must be filed within 3 months from the date of the receiving of the award, however, a grace period of 30 days is given in which the Court can exercise discretion to condone the delay in the filing of the application. However, the court is left with no discretion to condone a delay in filing after the period of 3 months plus 30 days grace is over.
Section 34 Petition Is Non-Est If Filed Without The Arbitral Award: Delhi High Court
Case Title: Union of India v. M/s Panacea Biotec Limited, FAO(OS)(COMM) 81 of 2020
The High Court of Delhi has held that non-filing of the arbitral award along with the petition under Section 34 of the A&C Act is a fatal defect which renders the filing as non-est.
The bench of Justices Suresh Kumar Kait and Neena Bansal Krishna held that filing of an award along with the challenge petition is not an empty procedural requirement as sans the award, the Court is left absolutely clueless to comprehend the grounds taken in the objection Petition and thereby unable to decide whether the Petition merits Notice to be issued or outright rejection.
Case Title: MBL Infrastructure Ltd v. DMRC, OMP(COMM) 311 of 2021.
The High Court of Delhi has held that the Arbitral tribunal can award monetary compensation as damages for the delay attributable to employer even when the agreement provides for the extension of time as the only remedy to the contractor.
The bench of Justice Chandra Dhari Singh held that the tribunal cannot deny damages on the ground that the agreement provides only for extension of time, especially when the agreement has already been terminated by the employer and there is no occasion for the contractor to seek extension. It held that the tribunal, in such a situation, has to necessarily compensate the contractor in terms of unliquidated damages.
Case Title: MBL Infrastructure Ltd v. DMRC, OMP(COMM) 311 of 2021.
The High Court of Delhi has held that a clause that restricts the right of the contractor to seek damages for delay attributable to the employer is against public policy in terms of Section 23 of the Indian Contract Act.
The bench of Justice Chandra Dhari Singh held a clause that restricts the right of the aggrieved party to claim damages is prohibitionary in nature and against the fundamental policy of Indian Law. It held that such a clause is no fetter on the power of the arbitral tribunal to compensate, by way of unliquidated damages, a party that has suffered loss due to the delay attributable to the other party.
The Court held that once the tribunal has ascertained that the employer is responsible for the delays in the execution of the project work, the tribunal must award damages to the contractor and it cannot deny the damages merely because the agreement prohibits or does not contain any provision for damages.
Court Under Section 34 Of The A&C Act Can Partially Set Aside The Award: Delhi High Court Reiterates
Case Title: MBL Infrastructure Ltd v. DMRC, OMP(COMM) 311 of 2021.
The High Court of Delhi has held that a Court exercising powers under Section 34 of the A&C Act can sever an offending portion of the arbitral award. It held that such exercise of power amounts to partial setting aside of the award and not a modification.
The bench of Justice Chandra Dhari Singh explained that modification would be when the court modifies/changes the damages awarded, modifies the interest rate, etc. But mere setting aside of unconnected/independent findings of the tribunal on different claims does not amount to modification of the award.
Case Title: Mr. Gajendra Mishra v. Pokhrama Foundation, ARB.P. 969/2023
Citation: 2024 LiveLaw (Del) 74
The High Court of Delhi has held that a party cannot insist on fulfilment of pre-arbitration conciliation once it has itself terminated the agreement. It held that pre-arbitration conciliation provided in the agreement falls with the termination of the agreement.
The bench of Justice Pratibha M. Singh held that once a party has itself proceeded to terminate the agreement without approaching the Project Manager for conciliation, it cannot object to the maintainability of the petition seeking appointment of the arbitrator on the ground of non-fulfilment of pre-arbitral steps.
The Court held that once the agreement has been terminated, no resolution or settlement or conciliation through Project Manager would be possible as designated authority would cease to exist upon the termination of the agreement.
Case Title: Jatinder Kaur & Ors v. Late Jagjit Singh & Ors, ARB.P. 1167 of 2022
Citation: 2024 LiveLaw (Del) 72
The High Court of Delhi has held that the limitation period for the appointment of the substitute arbitrator is 3 years from the date when the right to apply for such appointment accrues.
The bench of Justice Pratibha M. Singh held that since the act does not provide for any explicit period for the appointment of a substitute arbitrator, the limitation shall be governed by the residual provision found in Article 137 of the Limitation Act which provides a period of 3 years as the limitation period from the date when the right to apply accrues.
Case Title: Vivek Aggarwal v. Hemant Aggarwal, OMP(MISC)(COMM) 29 of 2023
Citation: 2024 LiveLaw (Del) 71
The High Court of Delhi has held that an issue related to the bias of an arbitrator in conducting the arbitral proceedings cannot be determined by a Court while dealing with the application under Section 29A of the A&C Act.
The bench of Justice Pratibha M. Singh reiterated that the scope of Court's power under Section 29A is limited to the examination of whether the extension should be granted or not. It held that the grievance of a party with the conduct of arbitral proceedings or any other substantive challenge cannot be decided by the Court under Section 29A.
Case Title: Allied-Dynamic JV v. Ircon International Ltd
Citation: 2024 LiveLaw (Del) 62
The High Court of Delhi has held that an arbitral award cannot be challenged on the ground of bias of arbitrator if no challenge to bias was made during the pendency of arbitral proceedings.
The bench of Justice Pratibha M. Singh held that a party that has fully participated in the arbitral proceedings without raising any challenge to the jurisdiction of the tribunal on ground of bias, cannot challenge the award directly under Section 34 of the A&C Act.
The Court held that in an arbitration that has commenced before the 2015 amendment, such a conduct by a party would constitute a waiver under Section 4 of the A&C Act.
Case Title: Simentech India Pvt Ltd v. BHEL, OMP(COMM) 348 of 2022
Citation: 2024 LiveLaw (Del) 63
The High Court of Delhi has held that to determine the pecuniary jurisdiction of the Court to deal with a challenge petition under Section 34 of the A&C Act, the value of the pendente lite and future interest cannot be included in the aggregate value of the claims and counter-claims to determine the 'Specified Value' as provided under Section 12 of the Commercial Courts Act, 2015 (CCA).
The bench of Justice Sanjeev Narula held that Section 12(2) of the CCA stipulates that the 'aggregate value' of the claim and any counterclaim in a commercial dispute arbitration forms the basis for determining the pecuniary jurisdiction of the Court.
The Court held that in cases where the SoC includes a component of interest, it is necessary to consider the portion of interest accrued up to the date of invocation of arbitration as part of the 'aggregate value', in accordance with Section 12(2) of CCA. However, this provision cannot be interpreted as requiring the computation of interest up to the commencement of proceedings under Section 34 of the Act. The intent is to consider interest only until the arbitration is invoked, thereby establishing a definitive cut-off for calculating the 'aggregate value' for jurisdictional purposes.
Th Court held that the interest component which is to be considered a part of the claim of arbitration can only be till the date of the invocation of arbitration and not the interest that accrues afterwards i.e., pendente lite and future interest.
Delhi High Court Halts PCA Arbitration Over Arbitrator Appointment Breach
Case Title: Techfab International Pvt Ltd v. MIDIMA Holdings Limited, CS(COMM) 50 of 2024
The High Court of Delhi has stayed a PCA Arbitration between an African and an Indian Entity due to the constitution of the tribunal in violation of the arbitration agreement.
The bench of Justice Anup J. Bhambhani, dealing with a suit seeking anti-arbitration injunction and an application seeking ad-interim injunction, restrained the defendant from proceeding further with the arbitral proceedings in PCA Case No. AA773.
The Court held that consent of the parties is one of the cardinal principles of arbitration, therefore, the agreed procedure for the appointment of the arbitrator must be scrupulously followed.
Case Title: Mrs. Vinnu Goel v. Deputy Commissioner of Stamp Registration & Ors, WP(C) 9291 of 2023
The High Court of Delhi has allowed a writ petition enabling the petitioner to approach the Chief Controlling Revenue Authority to adjudicate/decide on the amount payable on the instrument despite the reference of the dispute arising out of the instrument to arbitration under Section 8 of the A&C Act.
The bench of Justice Subramonium Prasad held that merely because the arbitral tribunal is empowered to carry out the same exercise, it cannot deprive the High Court from entertaining a writ petition to determine if the state has been deprived of the revenue or not.
Case Title: Vingro Developments Pvt Ltd v. Nitya Shree Developers Pvt Ltd, Arb.P. 667/2023
The High Court of Delhi has held that directors of a company cannot be made parties to arbitration through 'Group of Companies' doctrine. It held that the relationship between the company and its director(s) is that of the 'Principal' and 'Agent' as defined under Section 182 of the Indian Contract Act.
The bench of Justice Dinesh Kumar Sharma held that in terms of Section 230 of the Indian Contract Act, the agent cannot be made personally liable for acts carried out on behalf of the principal.
A Party Cannot Challenge An Arbitral Award After Receiving Amount Payable Under It: Delhi High Court
Case Title: M/s K.S. Jain Builders v. Indian Railway Welfare Organisation, OMP(COMM) 456 of 2022
The High Court of Delhi has held that a party that has received payment in terms of an arbitral award cannot challenge the award with respect to the disallowed claims.
The bench of Justice Sanjeev Narula held that acceptance of payments under the award would estop a party from challenging the award. It held that party after receiving payment cannot repudiate part award detrimental to it.
Case Title: Arjun Mall Retail Holdings Pvt Ltd v. Gunocen Inc, FAO(COMM) 31 of 2021
The High Court of Delhi has held that a party cannot challenge an arbitral award on the ground of the unilateral appointment of the arbitrator if it did not challenge the appointment at an earlier stage.
The bench of Justices Suresh Kumar Kait and Neena Bansal Krishna upheld an arbitral award passed by a unilaterally appointed arbitrator by observing that aggrieved party did not challenge the award at an earlier stage either by filing an application under Section 11(6) or an application under Sections 13&14 of the A&C Act.
Madhya Pradesh High Court
Case Title: Suncity Dhoot Colonizers v. Ram Chandra, W.P. No. 28151 of 2023
The High Court of Madhya Pradesh held that an order of the arbitral tribunal rejecting a challenge to its jurisdiction under Section 16 of the A&C Act is not challengeable in a writ petition.
The bench of Justice Sushrut Arvind Dharmadhikari held that a party aggrieved by the rejection of its application under Section 16 of the AC& Act has to wait till the passing of the final award and then challenge the award under Section 34 of the Act including the ground of lack of jurisdiction of the arbitral tribunal.
Jharkhand High Court
Case Title: M/s Bharat Petroleum Corporation Limited v Anant Kumar Singh, Commercial Appeal No. 15 of 2020
The Jharkhand High Court while dismissing an appeal directed challenging the Commercial Court's dismissal of a Section 34 Petition against an arbitrator's award, has held that a mere contravention of substantive law by itself does not constitute a valid ground for setting aside an arbitral award subsequent to the 2015 amendment in the Arbitration and Conciliation Act, 1996 (Act).
The division bench headed by Acting Chief Justice Shree Chandrashekhar and Justice Anubha Rawat Choudhary observed, “As explained above, it has been held by the Hon'ble Supreme Court that post-2015 amendment a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award.”
Kerala High Court
Case Title: Sabu George & Ors. v. James George & Ors.
Citation: 2024 LiveLaw (Ker) 25
The Kerala High Court recently held that an order passed by a Subordinate Judge's Court acting as a Commercial Court under a Government notification, would be appealable only before the concerned Commercial Appellate Court as per Section 13 of the Commercial Courts Act, and not before the High Court, as per the Arbitration & Conciliation Act, 1996 ('Act, 1996).
Patna High Court
Case Title: State of Bihar v. Bihar Rajya Vikas Bank Samiti, Miscellaneous Appeal No. 238 of 2021
The High Court of Patna has held that no dispute can be referred to arbitration by a Court exercising powers under Article 226 of the Indian Constitution when there is no agreement between the parties.
The bench of Justice Partha Sarthy held that the remedy of arbitration is the creature of a contract and the same cannot be utilised in absence of a written agreement between the parties as provided under Section 7 of the A&C Act.
Case Title: State of Bihar v. Bihar Rajya Vikas Bank Samiti, Miscellaneous Appeal No. 238 of 2021
The High Court of Patna has held that no dispute can be referred to arbitration by a Court exercising powers under Article 226 of the Indian Constitution when there is no agreement between the parties.
The bench of Justice Partha Sarthy held that the remedy of arbitration is the creature of a contract and the same cannot be utilised in absence of a written agreement between the parties as provided under Section 7 of the A&C Act.
Allahabad High Court
Case Title: Sushil Kumar Mishra vs. State Of U.P. And Another 2024 LiveLaw (AB) 44
The Allahabad High Court has held that the District Judge exercising jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996 does not have the power to modify an award. The Court held that though parts of an award can be severed and set aside, provided such severance does not affect the remaining award.
“Reduction of interest is nothing but a modification of the original arbitration award, and accordingly, the same is illegal and against the principles established by the Supreme Court,” held Justice Shekhar B. Saraf relying on the decision of Supreme Court in on Larsen Air Conditioning and Refrigeration Company Vs. Union of India and others.
Quashing the order of the District Judge reducing the rate of interest awarded by the Arbitrator, the Court held:
“It is trite law, settled by a catena of Supreme Court judgements that the Court does not have the power under Section 34 of Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") to modify an award. The Court under Section 34(2) of the Act has the power to sever parts of the award and set aside the same in toto, if the severance does not impact the remaining award that is upheld under Section 34 of the Act.”
Telangana High Court
Case Title: Atheli Mallikarjun v. S.S.B. Constructions, Arbitration Application No. 169 of 2022
The High Court of Telangana has held that mere negotiations between the parties related to the dispute would not delay the cause of action for the purpose of limitation for the appointment of the arbitrator.
The bench of Justice C.V. Bhaskar Reddy dismissed an application for the appointment of an arbitrator wherein the cause of action accrued more than 7 years before the date of the application.
National Company Law Tribunal
Case Title: Bank of India v McNally Bharat Engineering Company Limited
Case No.: CP (IB) No. 891/KB/2020
The National Company Law Tribunal (“NCLT”), Kolkata Bench, comprising of Shri Rohit Kapoor (Judicial Member) and Shri Balraj Joshi (Technical Member), has upheld the Resolution Professional's decision to admit claim arising out of an arbitral Award as contingent claim, since proceedings under Section 34 of Arbitration and Conciliation Act, 1996 are pending before the High Court against the Award.
The Bench opined that the Arbitral Award is yet to attain finality as proceedings under Section 34 of Arbitration Act are pending before the High Court. Further, the admittance of principal amount as contingent liability is merely for the accounting purpose following the principle of Complete Disclosure. Thus, making a reversible accounting entry of principal claim as a liability does not mean the acceptance of the claim.
The Bench held that it would be premature to make a confirmed entry towards the claim or reverse it while the Award is under challenge before the High Court. The Resolution Professional's decision to admit claim contingently has been upheld.
