Arbitration Cases Weekly Round-Up: April 23 To April 29, 2023
Parina Katyal
30 April 2023 3:00 PM IST
Supreme Court: Arbitration Agreement In Unstamped Contract Which Is Exigible To Stamp Duty Not Enforceable: Supreme Court Holds By 3:2 Majority Case Title: M/s. N.N. Global Mercantile Pvt Ltd vs M/s. Indo Unique Flame Ltd & Ors A Constitution Bench of the Supreme Court, on Tuesday, answered the reference, which pertains to the issue - whether the arbitration clause in a...
Supreme Court:
Case Title: M/s. N.N. Global Mercantile Pvt Ltd vs M/s. Indo Unique Flame Ltd & Ors
A Constitution Bench of the Supreme Court, on Tuesday, answered the reference, which pertains to the issue - whether the arbitration clause in a contract, which is required to be registered and stamped, but is not registered and stamped, is valid and enforceable.
A 5-Judge Bench, comprising Justice K.M. Joseph, Justice Ajay Rastogi, Justice Aniruddha Bose, Justice Hrishikesh Roy and Justice C.T. Ravikumar decided the issue by 3:2 majority.
Justice Joseph in concurrence with Justice Bose and Justice Ravikumar decided that "an instrument which is exigible to stamp duty may contain an arbitration clause and which is not stamped cannot be said to be a contract enforceable in law within the meaning of S. 2(h) of the Contract Act and is not enforceable under S 2(g) of the Contract Act”.
High Courts:
Bombay High Court:
Case Title: HSBC PI Holdings (Mauritius) Limited vs Avitel Post Studioz Limited and Ors.
The Bombay High Court, while dealing with a petition seeking enforcement of a foreign arbitral award, has observed that the “pro-enforcement bias” in the New York Convention has been specifically adopted in Section 48 of the Arbitration and Conciliation Act, 1996 (A&C Act).
The bench of Justice Manish Pitale was considering the guidelines issued by the International Bar Association (IBA) on ‘Conflicts of Interest in International Arbitration’ (IBA Guidelines), while considering the objection raised by the award debtor alleging bias attributable to the Chairman of the Arbitral Tribunal.
The bench observed that the IBA Guidelines have been adopted in the Vth and VIIth Schedules to the A&C Act. While perusing the ‘red’, ‘orange’, and ‘green’ list appended to the IBA guidelines, which set out specific situations warranting (or in the case of the green list, not warranting) disclosure, the court remarked that if the situation is not covered under any of the lists, the court would have to apply the test of a reasonable third person, and not the subjective test, as claimed by the award debtor.
Calcutta High Court:
Case Title: Essar Oil and Gas Exploration and Production Ltd vs Gargi Travels Pvt Ltd
The Calcutta High Court has held that a prior reference to the Facilitation Council under Section 18(1) of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), which is still at the stage of conciliation, does not debar the Court from passing an order under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act) for appointment of arbitrator on the basis of an independent arbitration clause between the parties.
The court ruled that the bar contemplated under Section 24 of the MSMED Act only comes into operation if and when there is anything inconsistent between Sections 15 to 23 of the MSMED Act and any other law for the time being in force. The bench of Justice Sabyasachi Bhattacharyya remarked that there is no inconsistency per se between Section 11 of the A&C Act and the reference to conciliation under Section 18(1) and (2) of the MSMED Act, to attract the rigour of Section 24.
Delhi High Court:
Case Title: Tehri Hydro Development Corporation India Limited vs M/s C. E. C. Limited
The Delhi High Court has reiterated that the agreement between the parties has primacy over the powers of the Arbitral Tribunal to grant pre-award interest under Section 31(7)(a) of the Arbitration and Conciliation Act, 1996 (A&C Act). The bench of Justice Chandra Dhari Singh held that since the Agreement between the parties specifically provided that no interest shall be granted on the accrued amount under the contract, the same took away the power of the Arbitrator to deviate and grant his own rate of interest.
Noting that the Arbitral Tribunal is a creature of a contract, the court remarked that since the Agreement between the parties was the “birth-giver”, it should be held at a higher stature when it concerns an issue that has been pre-decided and mutually agreed between the parties.
Case Title: Daiichi Sankyo Company Limited vs Malvinder Mohan Singh and Ors.
The Delhi High Court has allowed Daiichi Sankyo to withdraw over Rs. 20.5 crores lying with the Registrar General of the High Court, which was transmitted pursuant to the Supreme Court’s 2022 order in the contempt proceedings initiated against the directors of Indiabulls Housing Finance Limited (IHFL) and Indiabulls Ventures Limited (IVL) for flouting the Supreme Court’s restraint orders in relation to the shareholding of Fortis Healthcare Holdings Private Limited (FHHPL) in Fortis Healthcare Limited (FHL).
The contempt proceedings had arisen out of the application filed by Daiichi in the execution petition pertaining to a 2016 foreign arbitral award passed in its favour in the arbitral proceedings initiated against the respondents, including the former promoters of FHL- Malvinder and Shivinder Mohan Singh. The award debtors were jointly and severally held liable to pay to Daiichi a sum aggregating to more than Rs. 4000 crores.
Case Title: Sanjay Mehra vs Sharad Mehra & Ors.
The Delhi High Court has ruled that once there is an arbitration agreement governing the parties, the matter must be referred for arbitration unless there is a “chalk and cheese” case of non-arbitrability.
The bench of Justice Jyoti Singh rejected the contention that since the Sale Deed executed subsequent to the Memorandum of Family Settlement (MOFS) exclusively conferred jurisdiction to courts, the parties cannot be referred to arbitration. The court ruled that since the Sale Deed was executed in furtherance of the MOFS, the two agreements were linked and inseparable. Thus, arbitration was the intended and consciously chosen forum for dispute resolution between the parties, with respect to the alleged breach of the terms of the MOFS.
Madras High Court:
Case Title: P. Cheran vs M/s Gemini Industries & Imaging Limited
The Madras High Court has ruled that a party is entitled to challenge the appointment of the Arbitrator at any stage, if there is any violation of the provisions of the Arbitration and Conciliation Act, 1996 (A&C Act).
The court remarked that even if the award debtor had participated in the arbitral proceedings or, after having knowledge of the appointment of the sole Arbitrator, had failed to challenge the said appointment in terms of Section 13, the same would not deprive him of the right to challenge the said appointment under Section 34 for violation of the provisions of Section 12(5) of the A&C Act.
The bench of Justice Krishnan Ramasamy held that when the very appointment of the Arbitrator unilaterally, is improper and impermissible by virtue of Section 12(5), the arbitration proceedings are liable to be vitiated from the stage of the appointment of the Arbitrator. Further, a decision by an authority having no jurisdiction is non est in law and its invalidity can be set up whenever it is sought to be acted upon.
