Arbitration Monthly Round-Up: November 2023
ausaf ayyub
5 Dec 2023 4:00 PM GMT
International Judgments Hong Kong Court Refuses To Enforce A Mainland Arbitration Award For Failure Of Arbitrator To Meaningfully Engage With Arbitral Proceedings Case Title: SONG LIHUA v. LEE CHEE HON, CONSTRUCTION AND ARBITRATION PROCEEDINGS NO. 111 OF 2022 Citation: [2023] HKCFI 2540 The Hong Kong Court of First Instance has refused enforcement of a Mainland (China) award...
International Judgments
Case Title: SONG LIHUA v. LEE CHEE HON, CONSTRUCTION AND ARBITRATION PROCEEDINGS NO. 111 OF 2022
Citation: [2023] HKCFI 2540
The Hong Kong Court of First Instance has refused enforcement of a Mainland (China) award on the ground that one of the members of the arbitral tribunal failed to meaningfully engage with the arbitral proceedings.
The bench of Judge Mimmie Chan found that enforcing a Mainland award with a tribunal member absent during significant proceedings would violate Hong Kong's 'Public Policy' and principles of natural justice, as seen from an objective standpoint.
The Court also reiterated that mere confirmation of the award by the Mainland Court (Seat Court) would not preclude the Court where the award is sought to be enforced to deny its enforcement on the ground that it results in the violation of the public policy of the enforcing Court. It held that the public policy of the seat Court and the enforcing Court could be different.
Supreme Court
The Supreme Court is set to examine an important issue related to the arbitration law that whether the mandate of the tribunal terminates upon the expiry of the time provided under Section 29A unless extended during its subsistence.
The bench of Justices Sanjiv Khanna and S.V.N. Bhatti has issued notice in an SLP filed against the order of the Calcutta High Court wherein the High Court held that the mandate of the arbitrator terminates upon the expiry of the time period provided under Section 29A unless it is extended during its subsistence.
The High Court had held that in terms of Section 29-A(1) and an award shall be made by the arbitral tribunal within a period of 12 months from the date of completion of pleadings, further under sub-section (3), the parties may, by consent, extend the period by another 6 months. It held that in terms of Section 29(A)(4), the mandate of the tribunal stands terminated if it fails to make an award within the specified time period and any application seeking extension of time must be made during that period only and not afterwards.
Case Title: Lombardi Engineering Ltd v. State of Uttarakhand
Citation: 2023 LiveLaw (SC) 958
In a significant judgment, the Supreme Court held that a clause in an arbitration agreement which is not in consonance with the Constitution cannot be enforced. The Court further held that it can examine if the arbitration clauses are manifestly arbitrary and violative of Article 14 of the Constitution while considering an application for appointment of arbitrator.
A bench comprising Chief Justice of India DY Chandrachud, Justices JB Pardiwala and Manoj Misra was deciding an application filed by Lombardi Engineering Ltd., a Swiss company, under Section 11(6) of the Arbitration and Conciliation Act 1996 seeking appointment of arbitrator in a dispute with the State of Uttarakhand.
The company filed the application before the Supreme Court taking objection to two clauses in the arbitration agreement - one, the condition that 7% of the total claim must be pre-deposited for invoking the arbitration clause; two, the discretion vested with the Principal Secretary/Secretary (Irrigation) to appoint a sole arbitrator.
Case Title: Rohan Builders (India) Pvt Ltd v. Berger Paints India Limited, SLP(C) No. 23320 of 2023
The Supreme Court is set to examine an important issue related to the arbitration law that whether the mandate of the tribunal terminates upon the expiry of the time provided under Section 29A unless extended during its subsistence.
The bench of Justices Sanjiv Khanna and S.V.N. Bhatti has issued notice in an SLP filed against the order of the Calcutta High Court wherein the High Court held that the mandate of the arbitrator terminates upon the expiry of the time period provided under Section 29A unless it is extended during its subsistence.
Allahabad High Court
Case Title: National Highway Authority Of India, Through Its Project Director v. Smt. Sampata Devi And 2 Others [Appeal Under Section 37 Of Arbitration And Conciliation Act 1996 Defective No. - 53 of 2023]
The Allahabad High Court has held that no special concession can be granted to government bodies for condoning delay under Commercial Courts Act, 2015 if sufficient cause is not shown in application for delay condonation.
Following the judgement of the Supreme Court in Government of Maharashtra vs. M/s Borse Brothers Engineers and Contractors, Justice Om Prakash Shukla held that appeal under Section 37 of the Arbitration and Conciliation Act, 1996 should be filed within 60 days from date of order under Section 13(1A) of the Commercial Courts Act, 2015. The Court held that in rare cases, where the specified value is less than Rs. 3 lakhs, the limitation period under Articles 116 and 117 of the Limitation Act would be applicable to the appeals, as the case may be.
The Court further held that Section 5 of the Limitation Act would apply to arbitration appeals under Section 37 of the Act of 1996. However, even ‘sufficient cause’ made out under Section 5 of the Limitation Act is “not elastic enough to cover long delays” as there is no right to have delays condoned. The Court held that only short delays by way of exception can be condoned, and that too when the party has acted in a bona fide manner and not negligently.
Case Title: Chandra Kishori v. Union Of India Thru. Chairman Of National Highway Authority Of India And 2 Others [Appeal Under Section 37 Of Arbitration And Conciliation Act 1996 No. - 55 of 2022]
The Allahabad High Court held that the Court adjudicating upon arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996 has the power to recalculate compensation awarded under the National Highway Authority of India Act, 1956.
The bench comprising of Justice Jaspreet Singh held that if the calculation of compensation is patently illegal and the award is against the public policy of India, the Court under Section 34 ought to interfere and set aside the award.
Bombay High Court
Case Title: L&T Finance Limited v. Diamond Projects Limited, Commercial Arbitration Petition No. 1430 of 2019
The High Court of Bombay has held that the judgment of the Constitution Bench in N.N. Global does not affect the power of Court to grant interim measures under Section 9 of the A&C Act despite the non-payment or insufficiency of payment of stamp duty on the arbitration agreement or the main agreement containing the arbitration clause.
The bench of Justice Bharati Dangre held that unlike Section 11 or 8 of the A&C Act, the Court exercising powers under Section 9 of the Act is not required to make a determination on the existence and validity of the arbitration agreement rather the Court would have to grant interim relief on the parameters of three-fold test of (a) prima facie case (b) balance of convenience and (c) irreparable injury.
The Court held that an inadequately/insufficiently stamped instrument/document/agreement shall not preclude the party from seeking interim measures as contemplated under Section 9 of the A&C Act.
Case Title: Abhishek Pictures v. Abhishek Agarwal Arts LLP, Arbitration Petition (Lodging) No. 18905 of 2023
The High Court of Bombay has held that a party cannot be allowed to take advantage of inartistic or poor drafting of an arbitration clause as long as the clause contains the necessary ingredients and the intention to arbitrate is clear.
The bench of Justice Manish Pitale also held that a Court exercising power under Section 9 of the A&C Act would be within its power to scrutinize and decide as to whether the arbitration clause is valid in law.
The Court also held that while interpreting terms of an agreement, the Court has to adopt a view that supports all the covenants of the agreement and not one that renders one or more clauses nugatory.
Case Title: Swashray Co-op. Housing Society Ltd v. Shanti Enterprises, Commercial Arbitration Petition (L) No. 10432 of 2023
The High Court of Bombay has held that a Court exercising powers under Section 9 of the A&C Act can grant mandatory injunction at an interim stage when the builder is found to be in multiple breaches which results in the co-operative society losing its confidence in the builder.
The bench of Justice Manish Pitale held that the relief of mandatory injunction at an interim stage is an extraordinary relief which ought not be granted in every case, however, the Court would not withhold such a relief it withholding such an injunction would be unjust and unconscionable.
Case Title: Ramona Pinto v. Deputy Commissioner of Income Tax, Income Tax Appeal No. 2610 of 2018
The High Court of Bombay has held that an amount of arbitration award received by a retiring partner for relinquishing its claim in the firm is not a taxable income.
The bench of Justices K.R. Shriram and Dr. Neela Gokhale held that the amount received by a partner under a consent arbitration award for relinquishing its stake in the firm cannot be treated as an ‘income from other sources’ within the meaning of Section 56(1) of the Income Tax Act, 1961 to bring it within the rubric of taxable income. It held that to bring an amount within the fold of Section 56(1), it has to be first shown as income, however, an amount received upon retirement from a firm is not an income. It also held that such an amount also does not fall within the scope of ‘capital gains’.
The Court also held that receipt of an amount in lieu of inheritance or pursuant to family arrangement cannot be charged with tax under the Act as arrangement is an agreement between the members of the same family for the benefit of the family either by compromising doubtful or disputed rights or by preserving the family peace, honour, security and property of the family by avoiding litigation and amounts so received or not exigible to tax.
Amount Received In Satisfaction Of The Inheritance Rights Is Not A Taxable Income: Bombay High Court
Case Title: Ramona Pinto v. Deputy Commissioner of Income Tax, Income Tax Appeal No. 2610 of 2018
The High Court of Bombay has held that an An amount received in satisfaction of the inheritance rights is not a taxable income.
The bench of Justices K.R. Shriram and Dr. Neela Gokhale held that receipt of an amount in lieu of inheritance or pursuant to family arrangement cannot be charged with tax under the Act as arrangement is an agreement between the members of the same family for the benefit of the family either by compromising doubtful or disputed rights or by preserving the family peace, honour, security and property of the family by avoiding litigation and amounts so received or not exigible to tax.
Calcutta High Court
Case: Damodar Valley Corporation v BLA Projects Pvt Ltd
Citation: 2023 LiveLaw (Cal) 325
The Calcutta High Court has held that the venue for arbitration, as decided by the parties under their contractual agreement would automatically be the seat for arbitration, in the absence of any ‘contra-indicia.’
In rejecting jurisdictional objections on its competence to entertain an application under Section 34 of the Arbitration & Conciliation Act, 1996 (“A & C Act”) upon noting that Clause 16 of the Contract between the parties had designated Kolkata to be the venue of arbitration and the Court in the City of Kolkata to have exclusive jurisdiction a single-bench of Justice Moushumi Bhattacharya held:
The parties accepted this agreement to be the final agreement. The fact that venue would be construed as the juridical seat of the arbitration has also been judicially settled where the seat is not specified. There is hence no contra indicia to un-seat the arbitration from the Court in the city of Kolkata which is the High Court at Calcutta. The respondent has not presented any contrary indicia to show that the cause of action has arisen elsewhere and would consequently divest this Court of jurisdiction.”
Case Title: R.P. Infosystems Pvt Ltd v. Redington (India) Limited, AP 626 of 2018
The High Court of Calcutta has held that an exclusive jurisdiction clause within the arbitration agreement would override a generic jurisdiction clause contained in another agreement between the parties.
The bench of Justice Shekhar B. Saraf held that the moment an arbitration clause confers exclusive jurisdiction on the Court at a particular place or the seat of arbitration is declared, it would mean that all other Courts would not have the jurisdiction to entertain any petition arising out of the arbitration agreement.
Case Title: ILEAD Foundation v. State of West Bengal, WPA No. 25102 of 2022
The High Court of Calcutta has held that a writ petition would not be maintainable due to an alternative remedy in the form of arbitration when the petition involves disputed questions of facts that requires detailed assessment.
The bench of Justice Sabyasachi Bhattacharya held that availability of alternative remedy is not always a bar to the maintainability of the writ petition, however, it would be beyond the domain of the writ court to embark upon a detailed assessment of material and evidences, therefore, the Court would refer the dispute to arbitration for proper adjudication.
Case Title: R.P. Infosystems Pvt Ltd v. Redington (India) Limited, AP 626 of 2018
The High Court of Calcutta has held that an arbitration clause contained in a tax invoice would be binding on the parties when the terms and conditions contained therein were accepted and acted upon by the parties.
The bench of Justice Shekhar B. Saraf held that when a party accepts an invoice incorporating a clearly visible arbitration clause and subsequently acts in accordance with it, the said party cannot later argue the absence of a valid arbitration clause. It also laid down conditions which an arbitration clause contained in a tax invoice has to fulfil for it to be considered valid and binding.
The Court also held that an arbitration clause need not be in any particular form, however, the intention of the parties to arbitrate must be clear and absolute. It held that an arbitration clause can be in myriad shapes and forms and it will be deemed valid as long as the intention of the parties is present. Further, it held that the words used in a clause must be the words of ‘choice’ and not of mere ‘possiblity’.
Case Title: IOCL v. Union of India, WPO No. 1624 of 2023
The Calcutta High Court has held that MSMED Act does not prevent a party from seeking an interim relief under Section 9 of the A&C Act anytime before approaching the Facilitation Council.
The bench of Justice Sabyasachi Bhattacharyya held that the reference of dispute to facilitation council cannot be refused merely on the ground that before making such a reference under Section 18 of the MSMED Act, the seller had approached the Court under Section 9 of the A&C Act for certain interim measures.
The Court held that there is no inconsistency between Section 9 of the A&C Act and Section 18 of the MSMED Act, therefore, despite MSMED Act prevailing over the A&C Act, Section 9 remedy before approaching the Facilitation Council is not barred.
The Court also held that the doctrine of election would not come into play as there is no corresponding provision similar to Section 9 of the A&C Act under the MSMED Act.
Case: Concrete Developers LLP v Gaurav Churiwal and Ors.
Citation: 2023 LiveLaw (Cal) 335
The Calcutta High Court has recently held that a Court exercising powers under Section 37 of the Arbitration & Conciliation Act, 1996 (“1996 Act”) must be circumspect in its interference with interim orders of an arbitrator.
In refusing to interfere with the order passed under Section 17 of the 1996 Act, for preserving the share of a deceased LLP partner, amounting to approx. Rs 6 crores in a separate interest bearing account in name of the LLP, a single-bench of Justice Moushumi Bhattacharya held:
“There can be no jurisdictional objection to the impugned order as the Act of 1996 grants the arbitral tribunal plenary powers to pass such orders for preserving the dispute in the arbitration. The order also does not suffer from any factual or legal infirmity and is certainly not arbitrary or perverse. Taking into account the legal position, the case law on the subject and the particular facts in the present matter, the Court is accordingly of the view that the impugned order does not call for any interference.”
Delhi High Court
Delhi High Court Sets Aside Arbitration Award Passed In Defiance Of Supreme Court Order
Case Title: Unison Hotel v. Value Line Interiors
Citation: 2023 LiveLaw (Del) 1051
The High Court of Delhi has set aside an arbitral award for having been passed in defiance of the order of the Supreme Court. It held that such an award would be against the public policy and that if the arbitral tribunal is allowed to defy the order of the Supreme Court, it would violate principle of Judicial discipline.
The bench of Justices Sanjeev Sachdeva and Manoj Jain held that when the Supreme Court grants liberty to a party, to file an application before the arbitral tribunal to take its statement of defence and counter-claim on record within a specified time, the tribunal ought to wait till the expiry of the said period before passing the award without taking the statement of defence and counter-claim on record.
The Court held that if the arbitral tribunal without waiting for the expiry of the period granted by the Apex Court, the same would result in denying the party an opportunity to present its case and the award would fall foul of Section 34(2)(iii) of the A&C Act. It held that indeed the it would be the discretion of the tribunal to allow or disallow the application on its own merits, however, the tribunal cannot proceed before the period of liberty granted by the Supreme Court expires.
Case Title: Asset Reconstruction Company India Ltd v. ATS Infrastructure Limited, ARB. A. (COMM) 7 of 2022
Citation: 2023 LiveLaw (Del) 1185
The High Court of Delhi has held that the arbitral tribunal has no jurisdiction to create security on a property over which a charge is created in favour of a third party.
The bench of Justice Yogesh Khanna modified an interim order of the arbitral tribunal passed under Section 17 of the A&C Act to the extent to which the order created security on the property on which a charge was already created in favour of a third party which was not present before the arbitral tribunal.
The Court also held that that registration of charge makes the charge holder a secured creditor and puts it in a preferential position as compared to all other unsecured creditors.
Case Title: H.P. Cotton Textile Mills Ltd v. The Oriental Insurance Company Limited, OMP (ENF.) (COMM.) 123/2019
Citation: 2023 LiveLaw (Del) 1188
While dismissing a second execution petition filed in respect of “unsatisfied” claims in an Arbitral Award, the Delhi High Court has held that a court cannot go behind the Award in execution proceedings and enable decree holder to fill gaps in producing evidence.
Considering that the cost statement in question was made subject to certification by the Arbitral Tribunal but no proof of payment was forthcoming from the decree holder, Justice Manoj Kumar Ohri observed,
“…the decree holder cannot, under the garb of this execution petition, seek a claim that was not quantified in the award due to failure of the parties to furnish proof”.
Case Title: Vasudev Garg v. Embassay Commercial Project
Citation: 2023 LiveLaw (Del) 1049
The High Court of Delhi has held that the venue of arbitration would actually be the seat of arbitration when the agreement does not contain any contrary indicia. It held that clause proving for venue of arbitration would have a superseding effect over a clause providing for exclusive jurisdiction on any other Court if the parties have expressly made the latter subject to the former.
The bench of Justice Yogesh Khanna held that if the agreement contains a venue clause as well as an exclusive jurisdiction clause, however, the clause providing for exclusive jurisdiction is made subject to the venue clause, then reference to courts of exclusive jurisdiction is reduced to the adjudication of disputes other than those covered by the arbitration/venue clause.
The Court also held that accrual of cause of action howsoever trivial or significant, would not be relevant for determining the jurisdiction of the Court when the agreement provides a specific seat of arbitration.
Case Title: ATC Telecom Infrastructure Pvt Ltd v. BSNL
Citation: 2023 LiveLaw (Del) 1099
The Delhi High Court has held that the Court exercising powers under Section 29A of the A&C Act is empowered to extend the mandate of the arbitrator even in cases where the application seeking extension of time is not made within the time limit fixed for the making of the award.
The bench of Justice Sachin Datta held that the purport of Section 29A of the A&C Act is clearly not to tie the hands of the parties or the court, and prevent extension of time even where warranted, simply because the petition under Section 29A(4) of the A&C Act came to be filed a few days after expiration of the deadline contemplated under Section 29A(1) or Section 29A(3) of the A&C Act.
Case Title: Bharti Airtel v. Jamshed Khan
Citation: 2023 LiveLaw (Del) 1113
The Delhi High Court has held that the Court exercising powers under Section 34 of the A&C Act cannot allow claims which were disallowed/rejected by the arbitral tribunal.
The bench of Justices Suresh Kumar Kait and Neena Bansal Krishna held that Section 34 of the A&C Act does not permit the Court to rewrite an arbitral award and the Court can either set aside or upheld the arbitral award.
The Court also observed that the Court would have the power to partially set aside an arbitral award upon a severable issue, however, it would not be competent to modify the arbitral award by allowing a claim that was disallowed by the arbitral tribunal.
Case Title: ANR International Pvt Ltd v. Mahavir Singhal
Citation: 2023 LiveLaw (Del) 1081
The Delhi High Court has held that Section 8 of the A&C Act is mandatory in nature meaning thereby that the Court is bound to refer the dispute to arbitration when there exists a valid arbitration agreement between the parties and the respondent makes an application for reference to arbitration before submitting its written statement before the Court.
The bench of Justices V. Kameshwar Rao and Mr. Anoop Kumar Mendiratta held that the Court cannot refuse to refer the dispute to arbitration merely on the ground that the defendant had initially, in reply to Section 21 notice, denied the existence of the arbitration agreement.
The Court held that the arbitration clause does not ceases to exist on mere denial by party and such a denial would not preclude that party from later making an application under Section 8 of the A&C Act for reference of the dispute to arbitration.
The Court held that the doctrine of approbation and reprobation cannot be invoked against the respondent to decline reference to arbitration when the plaintiff does not dispute the existence of the arbitration agreement.
Case Title: National Projects Constructions Corporation Ltd v. AAC India Pvt Ltd
Citation: 2023 LiveLaw (Del) 1083
The Delhi High Court has reiterated that the Court exercising powers under Section 34 of the A&C Act cannot modify an arbitral award. It held that the Court can either uphold the award or set aside any finding, however, the Court is powerless to modify the award by allowing a relief that was disallowed by the arbitral tribunal.
The bench of Justices Yashwant Varma and Dharmesh Sharma also held that where damage or loss is difficult or impossible to prove, the tribunal is empowered to award liquidated amount stipulated in the contract, if it is a genuine pre-estimate of damage or loss, or reasonable compensation for the said amount loss or damage. The claim for LD in such cases is well within the purview of Section 74 of the Indian Contract Act, 1872.
Case Title: Viridian Development Managers Pvt Ltd v. RPS Infrastructure Limited
Citation: 2023 LiveLaw (Del) 1090
The Delhi High Court has held that once the licence is revoked by the licensor, any use of the mark by the ex-licensee would amount to an infringement of the trademark and would deceive the public, inasmuch as the public would be led to believe that the ex-licensee is still connected with the licensor.
The bench of Justice Sachin Datta held that an ex-licensee cannot be allowed to use the mark after termination of license. Further, the licensor has a right and duty to ensure the consistency of the goods or services being sold and advertised under its mark and take action against any infringement of the mark.
The Court held that the Court exercising powers under Section 9 of the A&C Act cannot examine the legality of the termination of the license agreement as it would be the for the arbitral tribunal to decide and compensate the aggrieved party if the termination is found to be illegal.
Case Title: HDA Flavours Pvt Ltd v. Daddy’s Hospitality Pvt Ltd.
Citation: 2023 LiveLaw (Del) 1093
Justice Sachin Datta of the Delhi High Court recently granted relief to “34 Chowringhee Lane” acquirer-HDA Flavours Pvt. Ltd., ruling that the Arbitrator, while dealing with a Section 17 application, should not have interdicted it from creating new franchisees.
“A blanket embargo on the appellant from creating any new franchisee or entering into such business agreements as may be appropriate for the advancement of business, may result in denuding the value of the business on account of stagnation/depletion in market share.”
Case Title: Madhu Sudan Sharma v. Omaxe Ltd, RFA 823/2019
The High Court of Delhi has held that once a party has duly taken objection to the jurisdiction of the Court to entertain the suit due to the presence of the arbitration clause between the parties in its written statement, it would be sufficient compliance of Section 8 of the A&C Act and there is no need for a separate application.
The bench of Justice C. Hari Shankar held that once an arbitration clause has been extracted by a party in its written submission to object to the jurisdiction of the Court, the mere fact that the party did not separately request that the dispute between the parties be referred to arbitration, would be of little consequence.
It held that once the arbitration clause had been extracted, it would be too hyper technical to hold that, for want of a separate request to refer the dispute between the parties to arbitration, there was no compliance with Section 8(1) of the 1996 Act.
Case Title: Madhu Sudan Sharma v. Omaxe Ltd, RFA 823/2019
The High Court of Delhi has held that a party cannot be deemed to have waived off its right to arbitration merely because it continued to contest the suit when it had specifically raised objection to the maintainability of the suit due to the presence of the arbitration agreement.
The bench of Justice C. Hari Shankar held that when a party takes a specific objection predicated on Section 8 in the application under Order XXXVII Rule 3(5) seeking leave to defend the suit and that objection, thereafter, is reiterated in the written statement and arguments. It cannot be said that the party has waived the right to arbitration.
Case Title: Madhu Sudan Sharma v. Omaxe Ltd, RFA 823/2019
The High Court of Delhi has held that an objection regarding non-maintainability of the suit due to the presence of the arbitration agreement cannot be considered to be raised belatedly in terms of Section 8 of the A&C Act when it was taken in the application under Order XXXVII Rule 3(5) for grant of leave to defend the suit.
The bench of Justice C. Hari Shankar held that in terms of Section 8 of the A&C Act an application to refer the dispute to arbitration has to be made not later than submitting the first statement on the substance of the dispute. It held that the first statement on the substance of the dispute is the written statement, ergo, a Section 8 application can be made with or before the filing of the written submission.
The Court held that an application for leave to defend the suit is a step prior to the filing of the written submission, therefore, the objection taken under the said application cannot be considered to be belated.
Case Title: Skypower Solar India Pvt Ltd v. Sterling and Wilson International FZE, FAO(OS)(COMM) 29 of 2022
The High Court of Delhi has held that the Court exercising powers under Section 9 of the A&C Act would not order furnishing of Bank Guarantee (BG) to secure the claims of a party pending the arbitration proceedings, unless it shown that the order party is alienating its assets or acting in a manner that would frustrate the enforcement of the Arbitral Award.
The bench of Justices Vibhu Bakhru and Amit Mahajan held that an order under Section 9 directing furnishing bank guarantee to secure the claims is akin to an order of attachment before judgment as provided under Order XXXVIII Rule 5 of CPC. It held that the Court under Section 9 of the A&C Act is not unduly bound by texts of CPC, however, it cannot pass any order in disregard to the principles of CPC.
The Court held that a Court while ordering security for the amount in dispute in the arbitration, it has to ascertain that whether the petitioner has a prima facie case, balance of convenience, and if the respondent is acting in a manner that would defeat the realization of the award.
Case Title: Raghunath Builders Pvt. Ltd. v. Anant Raj Limited, FAO (OS) (COMM) 220/2017
A Division Bench of the Delhi High Court recently allowed restoration of an arbitral award, noting that it was not within the scope of the Single Judge u/s 34 of A&C Act to re-interpret the contract between the parties and substitute the finding of the Arbitrator’s despite it being plausible and well-reasoned.
The court referred to Ssangyong Engineering and Construction Co. Ltd. v. NHAI and said:
“…a change that has been brought in by the Amendment Act, 2015 is that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short that the arbitrator's view is not even a possible view to take”.
Applying the test laid down in Associate Builders v. DDA on the scope of interference u/s 34 on the ground of ‘public policy’, it was observed that the Arbitrator had given a plausible interpretation to the contract terms which was not against ‘public policy’ and did not shock the conscience of the court.
Case Title: Babu Lal and Anr. v. Cholamandalam Investment and Finance Company Ltd. and Anr., FAO (COMM) 135/2023
A Division Bench of the Delhi High Court has reiterated that a party interested in the dispute cannot unilaterally appoint an Arbitrator, and if any Award is passed as a result of such unilateral appointment, the same would be a nullity.
The Bench, comprising Justices Sanjeev Sachdeva and Manoj Jain, noted that the respondents’ nomination of the Arbitrator was without reference to the court in terms of Section 11 of A&C Act.
Moreover, the respondents had merely intimated the appellants about appointment of the Arbitrator, without concurring from them.
Referring to the Supreme Court’s decision in Perkins Eastman Architects DPC and Anr. v. HSCC (India) Ltd., the Bench opined that reference of an arbitral dispute must be to an independent person.
“…an award rendered by an ineligible Arbitrator would be a nullity as has been held by a Coordinate Bench of this Court in Kotak Mahindra Bank Ltd. vs. Narendra Kumar Prajapat”.
Case Title: ArcelorMittal Nippon Steel India Limited v. GAIL (India) Limited, O.M.P.(I) (COMM.) 353/2023
The Delhi High Court recently denied urgent interim relief to leading steel manufacturer-ArcelorMittal Nippon Steel (petitioner) in a claim against GAIL India Ltd., observing that the scope of enquiry u/s 9 of A&C Act was limited to prima facie examination of the issue, which was not established in the petitioner’s favour.
The petitioner had approached the court seeking stay over a Notice issued by GAIL, statedly to terminate the LNG Sale and Purchase Agreement (LSPA) entered by the two. It further sought directions for GAIL to deliver LNG in accordance with the LSPA.
Case Title: Aman Hospitality Pvt Ltd v. Orient Lites, FAO 222 of 2020
The High Court of Delhi has held that a party cannot challenge an arbitral award on the ground that the tribunal went beyond the scope of reference when it admittedly did not raise any objection when the alleged breach was first committed by the tribunal.
The bench of Justice Dharmesh Sharma held that the tribunal’s decision to include certain invoices in the claim cannot be challenged under Section 34 as being beyond the reference to arbitration when no such objection was raised before the arbitral tribunal.
The Court held that supplies made prior to the date of the agreement would be governed by the arbitration clause in the agreement if the parties made verbal and written modifications to the agreement to include those supplies to settle their running accounts.
Case Title: Italian Thai Development v. NTPC Ltd, OMP(COMM) 343 of 2022
The High Court of Delhi has held that the Court cannot grant unconditional stay on the award under Section 36(3) unless a prima facie case is made out that making of the award is marred by fraud.
The bench of Justice Manoj Kumar Ohri refused to grant a stay in favour of a foreign entity with no roots in India. The Court observed that it has no assets that can be offered as security for securing stay on enforcement of the arbitral award. Moreover, it was not willing to deposit even part of the arbitral award and insisted on an unconditional stay which was not permissible since a case of fraud was not made out.
Case Title: Metal Engineering and Forging Company v. Central Warehousing Corporation, FAO(COMM) 5 of 2023
The High Court of Delhi has held that it would be difficult for any party claiming loss of goodwill to prove or establish the same with any mathematical precision.
The bench of Justices Vibhu Bakhru and Justice Amit Mahajan upheld an arbitral award wherein the arbitrator allowed a party to retain certain amount as penalty, being the genuine pre-estimate of the loss of goodwill without any proof of quantum of actual loss suffered by it.
Jammu & Kashmir and Ladakh High Court
Case Title: A K Engineers and Contractors Pvt Ltd v. Union Territory of J&K
Citation: 2023 LiveLaw (JKL) 283
The Jammu & Kashmir and Ladakh High Court has held that the arbitration clause contained in the original contract would also govern any dispute arising out of an additional work carried out without execution of a formal agreement.
The bench of Chief Justice N. Kotiswas Singh held that when a contractor, initially tasked with constructing a single-lane bridge, is subsequently directed by the employer to expand the scope to build a two-lane bridge without formalizing a new agreement or amending the original contract, the terms of the initial contract, including the arbitration clause, extend to cover the additional work.
Telangana High Court
Case Title: Union of India v. B.R. Enterprises, CMA 1007/2008
The High Court of Telangana has set aside an order of the District Court passed under Section 34 of the A&C Act by which the Ld. Additional Chief Judge, City Civil Court, Hyderabad had modified an arbitral award.
The bench of Justice M.G. Priyadarsini held that the Ld. Court committed an irregularity in modifying the amount of compensation awarded by the arbitrator. It held that the Court went beyond the scope of Section 34.
