Arbitration Cases Weekly Round-Up: 24 July To 30 July 2023

Arbitrator Appeared As Counsel For An ‘Affiliate Company’ Of The Claimant, Award Liable To Be Set Aside : Calcutta HC

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.

Court May Permit Award-Holder To Withdraw Security Deposited By Award-Debtor Pending Challenge To Arbitral Award U/S 34: Calcutta High Court

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:

Insufficiently Stamped Agreement Is Only Against Stamp Act, Can’t Be A Ground To Set Aside Award: Delhi High Court

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.

Arbitration: Review Of Section 11 Petition Order Can’t Be Sought On Subsequent Decision Of Supreme Court In N.N. Global: Delhi High Court

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.

Jharkhand High Court:

Objections U/S 36 Of The A&C Act Permissible Only On Issues Relating To Patent Or Inherent Lack Of Jurisdiction Of The Tribunal: 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.