Arbitration Cases Weekly Round-Up: 9th October- 15th October

Whether Enforcement Of Foreign Arbitration Award Can Be Denied Due To Non-Stamping Of Arbitration Agreement? Delhi High Court To Examine

Case Title: SIMPLOT INDIA LLC v. HIMALAYA FOOD INTERNATIONAL LIMITED

Citation: 2023 LiveLaw (Del) 938

The Delhi High Court is set to examine whether the enforcement of a foreign arbitration award can be denied due to the non-stamping of the arbitration agreement.

The bench of Justice Manoj Kumar Ohri has issued notice on a plea seeking to raise objection to the enforcement of the Singapore seated foreign arbitration award under Section 48 of the A&C Act.

The award debtor raised objections to the enforcement of the foreign seated arbitration award on the ground of non-stamping of the arbitration agreement. It contended that the underlying arbitration agreement, being unstamped, is not considered "valid" under Indian law, which governs the agreement. It relied upon the recent judgment of the Constitution bench of the Supreme Court in N.N. Global, wherein the Court held that an unstamped arbitration agreement is deemed "unenforceable," "invalid," "bereft of life," "non-est," and cannot be "acted upon" by a Court at the stage of referring disputes under Section 11 of the Arbitration Act, to contend that the findings regarding the invalidity of an unstamped agreement should also apply to proceedings for the enforcement of foreign awards under Part – II of the Arbitration Act.

Prolongation Compensation Can't Be Granted If The Contractor Didn't Reserve Claim For Compensation At The Time Of The EOT: Delhi High Court

Case Title: IRCON INTERNATIONAL LIMITED V. DMRC

Citation: 2023 LiveLaw (Del) 943

The Delhi High Court has held that no compensation can be awarded for the prolongation of the contract if the contractor did not reserve its right to such compensation at the time of the seeking Extension of Time (EOT).

Justice Manoj Kumar Ohri's bench upheld the Arbitral Tribunal's interpretation. They ruled that the Tribunal's decision, which denied the prolongation cost due to the Contractor's failure to reserve this right during the EOT request, and because the EOT was granted without financial implications, is a plausible view which does not warrant intervention by the Court using its powers under Section 34 of the A&C Act.

No Stamp Duty Is Payable On An Instrument Executed By, Or On Behalf Of, Or In Favour Of The Government, N.N. Global Not Applicable To Such Instruments: Delhi High Court

Case Title: M/s SVK Infrastructures v. Delhi Tourism and Transportation Development Corporation Ltd

Citation: 2023 LiveLaw (Del) 968

The Delhi High Court has held that no stamp duty is payable on an instrument which is executed by, or on behalf of or in favour the government.

The bench of Justice Rekha Palli held that the recent judgment by the Constitution Bench of the Supreme Court in N.N. Global would have no application to an agreement executed by or on behalf or in favour of the government. It held that the Court exercising powers under Section 11 of the A&C Act would not refuse to appoint arbitrator once it ascertained that instrument falls within the exception created by the stamps act for government.

The Court also held that once the entity which had executed the agreement containing arbitration clause has been acquired by another entity, the acquiring party would step in the shoes of the executing party, therefore, it can invoke the arbitration clause.

Arbitration Clause Allowing One Party To Appoint 2/3rd Of Arbitral Tribunal Is Not Enforceable: Delhi High Court

Case Title: Taleda Square Pvt Ltd v. Rail Land Development Authority

Citation: 2023 LiveLaw (Del) 967

The Delhi High Court has held that an arbitration clause wherein one of the contracting party has the power to appoint the 2/3^rd members of the arbitral tribunal and compels the other party to choose its nominee arbitrator from a narrow panel of only 5 names is not enforceable in law.

The bench of Justice Rekha Palli held that a narrow panel of 5 arbitrator with a further power to the party which has drawn the panel to nominee 2/3^rd members of the arbitral tribunal is against the principles of ‘counter-balancing’ as envisaged by the Apex Court in the case of Voestalpine Schienen.

Court Exercising Powers Under Section 9 Of The A&C Act For Securing Amount In Dispute Draws Sustenance Broadly From The Principles Of Order XXXVIII Rule 5 Of CPC: Delhi High Court

Case Title: Dr. Vivek Jain v. PrepLadder Pvt Ltd

Citation: 2023 LiveLaw (Del) 964

The Delhi High Court has held that a Court exercising powers under Section 9 of the A&C Act to secure the amount in dispute or for ordering attachment before award draws sustenance broadly from the principles of Order XXXVIII Rule 5 of CPC.

The bench of Justice Yashvant Varma has held that the under Section 9 of the A&C Act, the Court would not order securing the sum in dispute in absence of necessary pleading and allegations that the respondent is making an attempt to defeat any Award that may be ultimately rendered in favour of the petitioner. It held that the Court would not grant such a relief unless the pre-conditions for grant of relief under Order XXXVIII of CPC are broadly satisfied by the petitioner.

An Award Which Blatantly Misapplies The Provisions Of The Contract Law Resulting In A Perverse Interpretation Of The Law, Is Liable To Be Set Aside: Delhi High Court

Case Title: Zakir Hussain v. Sunshine Agrisystem Pvt Ltd, OMP (COMM) 249 of 2021

The High Court of Delhi has held that an award which blatantly misapplies the provisions of the Contract Law resulting in a perverse interpretation of the law, is liable to be set aside.

The bench of Justice Neena Bansal Krishna set aside an arbitral award wherein the arbitrator has misconstrued the law of reciprocal promises and bailment under the Indian Contract Act. It held that misapplication of the substantive law goes to the root of the matter and leads to a miscarriage of justice.

Arbitrator Failed To Consider Document Based On Procedural Defects, Delhi High Court Sets Aside Award

Case Title: Zakir Hussain v. Sunshine Agrisystem Pvt Ltd, OMP (COMM) 249 of 2021

The High Court of Delhi has held that an arbitrator should not refuse to take on record any additional material evidence merely on the ground of certain procedural ground such as non-payment of costs by the party tendering such evidence.

The bench of Justice Neena Bansal Krishna held that failure of the arbitrator to take on record important additional evidence merely on procedural grounds would be a ground to set aside the award. It held that such a decision would not just be violative of the principle of natural justice but also amounts to patent illegality. It also held that if a document is sought to be brought on record before the commencement of cross examination for that party, it would not result in any prejudice to the other party as it would have amble opportunity to address the documents in the rebuttal evidence.

The Court also explained the difference between ‘material facts’ and ‘material particulars’ to hold that it is only a material fact that must be present in the pleading and the absence of which would deny the party to lead an evidence on such a fact, however, a material particular, which is used to provide a material fact, need not be specifically mentioned in the pleading. It held when a material fact has been pleaded, an evidence in the form of a material particular cannot be refused on the ground of lack of pleading.

Provisions Of Uttar Pradesh Regulation Of Cold Storages Act, 1976 Do Not Exclude The Remedy Of Arbitration: Delhi High Court

Case Title: Zakir Hussain v. Sunshine Agrisystem Pvt Ltd

Citation: 2023 LiveLaw (Del) 956

The Delhi High Court has held that the provisions of Uttar Pradesh Regulation of Cold Storages Act, 1976 does not exclude the remedy of arbitration.

The bench of Justice Neena Bansal Krishna held that the bar to arbitration or civil jurisdiction by necessary implication would apply only when the alternative remedy is a Complete Code in itself or provides a special statutory right or protection that the civil court or arbitral tribunal may not be able to grant.

It held that the Act of 1976, upon a holistic reading, does not provide any special right, remedy or procedure that cannot be sought before a civil court or arbitral tribunal as it merely provides that an informal mechanism for settlement of disputes under the Act, 1976 and there is neither any explicit or implied ouster of arbitral jurisdiction.

Final Purchase Order Not Issued, Still Contractor Entitled For Cost Of Preparatory Work Done : Delhi High Court

Case Title: BSNL v. Vihaan Networks Limited

Citation: 2023 LiveLaw (Del) 955

The Delhi High Court has held that A party is liable to be compensated for the costs of preparatory work carried out at the instance of the employer even when the final purchase order is not issued in its favour.

The bench of Justice Sachin Datta upheld an arbitral award wherein the arbitral tribunal had awarded compensation to a party on the ground that it had carried out certain preparatory works upon the instructions of the employer, therefore, it is liable to be compensated when the employer decides to not issue the final purchase order. It held that in such a scenario, the aggrieved party would have the right under Section 70 of the Indian Contract Act to claim compensation and mere absence of a concluded contract between the parties would be inconsequential.

No Fresh Adjudication Can Take Place For Any Claim That Was Made Part Of Resolution Plan: Delhi HC

Case IOCL v. Arcelor Mittal Nippon Steel India Limited

Citation: 2023 LiveLaw (Del) 954

The Delhi High Court has held that once a resolution plan is approved by the CoC and the adjudicating authority, it results in the extinguishment of all the existing claims that any party may have against the corporate debtor and no fresh adjudication can take place for any claim that was made part of the resolution plan.

The bench of Justice Yashwant Varma held that IBC does not contemplate matters being left inchoate but presses one to accept the seal of finality and quietude which stands attached to the approval of a Resolution Plan.

Absence Of A Contract Would Not Deprive The Party From A Reasonable Remuneration For The Work Performed: Delhi High Court

Case Title: BSNL v. Vihaan Networks Limited

Citation: 2023 LiveLaw (Del) 953

The Delhi High Court has held that absence of a contract would not deprive the contractor from a reasonable remuneration for the work performed.

The bench of Justice Sachin Datta held that the principle of quantum meruit is enshrined under Section 70 of the Indian Contract Act which demands that a party which has done work and incurred expenses at the instance of another party must be reimbursed notwithstanding the lack of a contract between them.

Claims Settled Under Resolution Plan Becomes Non-Arbitrable, Reference Of Those Claims Would Amount To Reopening Of The Resolution Plan: Delhi High Court

Case IOCL v. Arcelor Mittal Nippon Steel India Limited

Citation: 2023 LiveLaw (Del) 951

The Delhi High Court has held that any claim that has been settled under the resolution plan, even though at a nominal value of Rs. 1 only, would become non-arbitrable once the resolution plan is approved by CoC and affirmed by the adjudicating authority under the IBC.

The bench of Justice Yashwant Varma held that the doctrine of clean slate demands that the successful resolution applicant begins on a clean slate and is only bound to meet the claims that formed part of the resolution plan and cannot be burdened with the duty to defend or oppose claims which are either not factored in the Resolution Plan nor can it be left to fend off actions that may be brought with respect to alleged or asserted dues of the corporate debtor which were not admitted.

Karnataka High Court:

Karnataka Stamp Act | Stamp Duty Not Attracted On Arbitral Awards For Damages If Unrelated To Movable/Immovable Property: High Court

Case Title: Karnataka State Highways Improvement Project AND M/s. KMC - VDB (JV)

Case No: WRIT PETITION NO. 29440 OF 2019

The Karnataka High Court has held that an arbitral award which does not deal with either movable property or immovable property, but awards damages payable to the award holder, does not attract stamp duty under the Karnataka Stamp Act, 1957.

Justice R Nataraj thus dismissed a petition challenging an order of the trial court rejecting its application seeking to impound the award of the arbitrator for non-payment of stamp duty by the respondent.