Arbitration Cases Weekly Round-Up: 11 December To 17 December, 2022

Application Of Hudson's Formula For Computation Of Loss In Construction Contract, Not Unreasonable: Bombay High Court

Case Title: The State of Maharashtra & Ors. versus Bharat Constructions

The Bombay High Court has ruled that while deciding the petition under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act), the Court is not precluded from considering the findings and conclusions contained in the dissenting opinion of a minority member of the Arbitral Tribunal.

The bench of Justice Manish Pitale observed that the majority opinion in the arbitral award, while computing the compensation to be awarded to the claimant for the loss suffered by it, had referred to the Hudson's formula. Referring to the Supreme Court's decision in McDermott International Inc. versus Burn Standard Co. Ltd. & Ors. (2006), the High Court held that Hudson's formula is widely accepted in construction contracts for computation of losses. Thus, the award passed by the majority members of the Arbitral Tribunal could not be said to be unreasonable so as to warrant interference under Section 34.

Calcutta High Court:

Not Awarding LD- Finding Of Fact By Arbitrator, Need Not To Be Interfered: Calcutta High Court

Case Title: M/s. S.B.I.W. Steels (Private) Limited versus Steel Authority of India Limited (SAIL)

The Calcutta High Court has reiterated that damage or loss is sine qua non for the applicability of Section 74 of the Indian Contract Act, 1872 and thus, in the absence of loss, penalty/liquidated damages cannot be claimed on breach of contract.

The bench of Justices I. P. Mukerji and Md. Nizamuddin ruled that the finding arrived at by the Arbitrator, to the effect that the party was unable to prove any loss so as to claim liquidated damages/penalty under the Contract, was a finding of fact, and that it was a reasonable inference drawn from non-production of evidence before the Arbitrator.

Delhi High Court:

MOU Terminating The Main Agreement Containing The Arbitration Clause Can Be Referred To Arbitration: Delhi High Court

Case Title: Super Blastech Solutions versus Rajasthan Explosives and Chemicals Limited

The High Court of Delhi has held that a dispute arising out of a Memorandum of Understanding (MoU) or a Memorandum of Settlement (MoS), wherein no arbitration clause is present, can be referred to arbitration if these agreements were directly linked to the main agreement.

The bench of Justice Mini Pushkarna held that dispute arising out of any subsequent agreement that arises out of the main agreement containing the arbitration clause, can be referred to arbitration.

Can Recall Section 11 A&C Act Order, If It Suffers From Patent And Manifest Error: Delhi High Court

Case Title: Always Remember Properties Private Limited versus Reliance Home Finance Limited & Anr.

The Delhi High Court has ruled that the power exercised by the High Court under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act) is not merely an administrative function but a judicial power, and that the Court does not cease to be a Court of Record while exercising power under Section 11.

Thus, the bench of Justice Yashwant Varma held that the High Court can recall the order passed by it under Section 11 of the A&C Act if it suffers from a patent and manifest error apparent on the face of the record.

Venue Restriction Provision Contained In Section 42 of A&C Act, Not Applicable To Proceedings Seeking Enforcement Of Award: Delhi High Court

Case Title: Ramacivil India Constructions Pvt Ltd versus Union of India

The Delhi High Court has reiterated that Section 42 of the Arbitration and Conciliation Act, 1996 (A&C Act) would have no application to proceedings seeking enforcement of arbitral award.

The bench of Justice Yashwant Varma noted that execution application is neither an "arbitral proceeding" within the meaning of Section 42 of the A&C Act, nor is it a subsequent application arising out of the arbitration agreement and thus, the venue restriction provision contained in Section 42 would have no application to enforcement proceedings.

Employer Cannot Retain Performance Bank Guarantee After Acknowledging Due Performance: Delhi High Court

Case Title: Union of India versus RCCIVL-LITL (JV)

The High Court of Delhi has held that the employer cannot withhold the performance bank guarantee after acknowledgement of the due performance of the contract by the contractor.

The bench of Justice V. Kameshwar Rao held that the employer cannot also withhold the performance bank guarantee merely for securing the amount of its counter-claims.

Challenge Relating To The Bias Of An Arbitrator Cannot Be Raised Under Section 14 Of The A&C Act: Delhi High Court

Case Title: Union of India versus Reliance Industries Limited

The High Court of Delhi has held that a challenge to the mandate of the arbitrator on the ground of bias and a justifiable doubt with respect to its independence and impartiality, cannot be raised under Section 14 of the A&C Act.

The bench of Justice Yashwant Varma held that Section 14 of the A&C Act confers the power on the Court to terminate the mandate of the arbitrator and appoint a substitute arbitrator only in circumstances that fall within the 7^th Schedule of the A&C Act that deals with de jure ineligibility of the arbitrator, however, ground of bias or justifiable ground as to its independence and impartiality falls within the 5^th Schedule read with Section 12(3) of the A&C Act, wherein only the tribunal can decide on the challenge.

Signing A Blank Discharge Voucher Indicates That A Party Was Acting Under Pressure And Compulsion: Delhi High Court

Case Title: New India Assurance Company Limited versus Khanna Paper Mills Limited

The High Court of Delhi has held that the fact that a party signed on a blank Discharge Voucher indicates that it was acting under pressure and compulsion and it did not sign the document out of free will.

The bench of Justice C. Hari Shankar held that a discharge voucher signed out of economic duress and compulsion would not extinguish the legitimate claims of a party and it would be open to the party to claim the remaining amount.

Madhya Pradesh High Court:

After Participating In The Arbitral Proceedings Without Any Protest, Can't Object To Jurisdiction Later : MP High Court

Case Title: State of Madhya Pradesh versus Nathuram Yadav

The Madhya Pradesh High Court has held that a party which has participated in the arbitration proceedings without any protest or challenge as to the jurisdiction of the tribunal cannot for the first time challenge the jurisdiction of the tribunal under Section 37 of the A&C Act.

The bench of Justice S.A. Dharmadhikari held that an issue as to the non-jurisdiction of the private arbitrator when the Madhyastham Adhikaran Adhiniyam, 1983 Act provides for statutory arbitration for 'works contract', cannot be raised for the first time in an appeal and that it has to be taken at the earliest possible opportunity.