Arbitration Weekly Round Up: 4th March to 11th March 2024
Rajesh Kumar
13 March 2024 11:45 AM IST
Delhi High Court Section 42 A&C | Delhi High Court Terminates Arbitrator's Mandate Who Disclosed Award Prematurely To Party During Proceedings Case Title: Kamladityya Construction Pvt Ltd Vs Union Of India Citation: 2024 LiveLaw (Del) 259 The Delhi High Court single bench of Justice Jasmeet Singh terminated mandate of an arbitrator who disclosed the award prematurely...
Delhi High Court
Case Title: Kamladityya Construction Pvt Ltd Vs Union Of India
Citation: 2024 LiveLaw (Del) 259
The Delhi High Court single bench of Justice Jasmeet Singh terminated mandate of an arbitrator who disclosed the award prematurely and revealed details about several claims during the hearing of the arbitral proceedings to the party. The bench held that Section 42 of the Arbitration and Conciliation Act, 1996 mandates for strictest confidentiality in arbitration proceedings and the Award itself.
After considering the report submitted by DIAC, the High Court noted that during the hearing, the Arbitrator was dictating the Award in the hearing room. This dictation was being typed by the P.A. on a desktop computer, which was mirrored on a large display in the room, as per general practice. Upon the arrival of the parties and their counsel, the Arbitrator initiated discussions about the mandate of the Tribunal. Simultaneously, the P.A. minimized the computer screen on which the Award was being typed, ensuring that the parties were not able to see the ongoing process. The DIAC, however, clarified that due to the enclosed space and confidentiality reasons, staff beyond the barest minimum required were not present in the room. The High Court noted that the Centre could not comment on any formal or informal discussions between the parties and the Arbitrator during that time.
Case Title: Sterlite Technologies Ltd. Vs Bharat Sanchar Nigam Limited
Citation: 2024 LiveLaw (Del) 260
The Delhi High Court single bench of Justice Prathiba M Singh held that multiple arbitrations before different Arbitral Tribunals in respect of the same contract is counterproductive and ought to be avoided.
The bench held that it is incumbent on the parties to disclose such information to the court when approaching for appointment of arbitrator under Section 11(6) of the Arbitration & Conciliation Act, 1996.
The High Court referred to the case of Gammon India Ltd. & Anr. v. NHAI, 2020:DHC:2144, and noted that it an important to avert the potential pitfalls associated with multiple arbitrations before distinct Arbitral Tribunals concerning the same contract. The High Court emphasized the counterproductivity of such a scenario and stressed the importance of avoiding conflicting and irreconcilable findings.
Case Title: M/S. Fiberfill Engineers Through Its Partner Mr. Rishabh Kishore Vs M/S. Indian Oil Corporation Limited Through Dy. General Manager (Engg.)
Citation: 2024 LiveLaw (Del) 261
The Delhi High Court single bench of Justice Prateek Jalan set aside an arbitral award noting that the Indian Oil Corporation Limited failed to present evidence before the Arbitrator, thereby, making it impossible to adjudicate the contention raised regarding payment of dues. The bench imposed a substantial costs of Rs.1 lakh on the Indian Oil for taking unjustifiable contrary stands at various points in the proceedings.
The High Court noted a contradiction in the Respondent's stance before the Arbitrator. Despite claiming that No Due Certificates were signed by the Petitioner, it noted that the Respondent failed to produce those certificates. Regarding the inconsistency of documents presented in arbitration proceedings, it highlighted the Respondent's inability to correlate certificates with specific work orders or match them with payments. It noted that the No Due Certificates were made prior to any payment by the Respondent. It held that there were no certificates issued after payment.
Case Title: Union Of India Vs NCC Limited
Citation: 2024 LiveLaw (Del) 262
The Delhi High Court single bench of Justice Prateek Jalan held that non filing of the arbitral award along with the Petition under Section 34 of the Arbitration and Conciliation Act, 1996 is a fatal defect, making such filing as non-est.
The bench held that the absence of a copy of the award renders it impossible to appreciate the grounds for seeking to set aside the award.
The High Court referred to the decision of its Division Bench, particularly the case of Oil & Natural Gas Corporation Ltd. v. Joint Venture of M/s Sai Rama Engineering Enterprises (SREE) & Ors. [FAO(OS)(COMM) 324/2019, dated 09.01.2023]. In this case, it was explicitly stated that non-filing of the award constitutes a fatal defect. The High Court emphasized the necessity for an application under Section 34 of the Arbitration Act, to be accompanied by a copy of the challenged award, without which the grounds for setting aside the award cannot be appreciated.
Case Title: M/S. Breakthrough Concepts Vs M/S. Atrix Group Of Restaurants & Anr.
Citation: 2024 LiveLaw (Del) 264
The Delhi High Court single bench comprising held that 'negotiation' necessitates communication between the involved parties, asserting that a party failing to respond to legal notices from another cannot be considered actively participating in the negotiation process. Consequently, Justice Sharma referred the matter to arbitral tribunal.
The High Court held that the Petitioner diligently pursued resolution by consistently dispatching demand notices to the Respondents, all of which went unanswered. It held that this showed the Petitioner's earnest attempt to seek a resolution before resorting to court intervention. In interpreting the term 'negotiation,' the High Court held that it is imperative to understand it in a pragmatic context. Negotiation necessitates communication between the involved parties, and for it to be effective, it must be a reciprocal exchange.
Case Title: National Skill Development Corporation Vs Best First Step Education Private Limited & Ors.
Citation: 2024 LiveLaw (Del) 265
The Delhi High Court single bench of Justice Prateek Jalan held that a petition under Section 29A of the Arbitration and Conciliation Act, 1996 is maintainable when filed before the award is delivered during the ongoing petition, but becomes non-maintainable if filed after the award is delivered and proceedings for setting aside have commenced.
The High Court referred to the case of Harkirat Singh Sodhi v. Oram Foods (P) Ltd. [2023 LiveLaw (Del) 538], involved a situation similar to the case, where the award was rendered during the pendency of the Section 29A petition, and the mandate was extended until the award date. Another Coordinate Bench, in Powergrid Corpn. of India Ltd. v. SPML Infra Ltd., considered the question of whether an award could be validated if made after the Tribunal's mandate had expired and no prior application for extension was submitted. The court concluded that such a petition is not maintainable.
Case Title: Tata Motor Limited vs Delhi Transport Corporation
Citation: 2024 LiveLaw (Del) 273
The Delhi High Court bench comprising Justice Manoj Kumar Ohri held that the Section 9 application under Arbitration and Conciliation Act, 1996 cannot act as res judicata for Section 17 application when the withdrawal of Section 9 application is conditional between the parties. The bench dismissed the reliance on Kanchan Kapoor v. Swaran Kumar noting that the principles of res judicata applied in that case due to the appellant's unconditional withdrawal of an appeal against a civil court judgment, where there was a finding against the appellant.
Section 17 provides the arbitral tribunal power to give interim measures to the parties.
The High Court expressed concern over DTC's failure to provide reasons for refraining from challenging the previous orders and questioned the rationale behind making an exception for challenging the present order.
Case Title: M/s Sabsons Agencies Private Limited Vs M/s Harihar Polymers & Anr.
Case Number: CS(COMM) 899/2023 & I.As. 25472-25473/2023, 4893/2024.
The Delhi High Court bench comprising Justice Prateek Jalan held that the requirement of pre-litigation meditation under Section 12-A of the Commercial Courts Act, 2015 is mandatory in nature.
Section 12-A of the Act outlines the mandatory requirement for pre-institution mediation before filing a suit, provided urgent interim relief is not sought. The Central Government may authorize Legal Services Authorities for this purpose, with a three-month mediation timeframe extendable by two months with parties' consent. Settlements reached hold the same status as arbitral awards under the Arbitration and Conciliation Act, 1996 (“Arbitration Act”).
The High Court noted that the circumstances in this case was distinguishable from the precedent in Amit Walia v. Shweta Sharma. In that case, the judgment was rendered based on mediation conducted under the Delhi High Court Mediation and Conciliation Centre, which the Court deemed sufficient compliance with Section 12-A, despite not occurring before the District Legal Services Authority as stipulated by the Commercial Courts Act.
Case Title: Godavari Projects (J.V) Vs Union of India.
Case Number: ARB.P. 1342/2022.
The Delhi High Court single bench of Justice Sachin Datta held that proceedings contemplated in Section 14 of the Insolvency and Bankruptcy Code (IBC) do not expressly exclude the jurisdiction of the court or authorities to entertain applications under Section 11(6) of the Arbitration Act or other proceedings initiated by the corporate debtor against another party. It held that even if a Joint Venture is undergoing insolvency, the bench held that preclude the corporate debtor from filing an application under Section 11.
The High Court emphasized that the question of whether the Petitioner had the authority to terminate the contract by relying on the Government of India's Office Memorandum must be addressed within the arbitral proceedings.
Furthermore, the High Court delved into the concept of a joint venture, referencing the Supreme Court in New Horizons Limited v. Union of India (1995) 1 SCC 478. The High Court noted that a joint venture as a legal entity akin to a partnership, emphasizing the collaborative nature involving shared assets and risks. Even assuming the Petitioner JV is undergoing insolvency, the High Court clarified that it does not preclude the corporate debtor from filing an application under Section 11 of the Arbitration Act against another party. It highlighted that proceedings contemplated in Section 14 of the Insolvency and Bankruptcy Code (IBC) do not expressly exclude the jurisdiction of the court or authorities to entertain applications under Section 11(6) of the Arbitration Act or other proceedings initiated by the corporate debtor against another party.
Gujarat High Court
Case Title: M/S Sai Polyplast Vs Vikas Raj Chhajer
The Gujarat High Court single bench of Chief Justice Sunita Agarwal held that the High Court noted that allegations in criminal proceedings regarding fraud and misappropriation of funds, being inter se parties and having no public implications, do not make the dispute non-arbitrable.
The High Court referred to the case of World Sport Group (Mauritius) Limited vs. MSM Satellite (Singapore) Pte. Limited, (2014) 11 SCC 639, and noted that the arbitration agreement does not become “inoperative” or incapable of being performed merely because allegations of fraud are made. It emphasized that the dispute should not be refused arbitration under Section 45 of the Arbitration Act, solely on the grounds of fraud allegations. It clarified that the arbitration agreement can be declined only if it is found to be null and void, inoperative, or incapable of being performed, not based on the need to inquire into fraud allegations.
In the case of A. Ayyasamy vs. A. Paramasivam and others, (2016) 10 SCC 386, the trial Court rejected an application under Section 8 of the Arbitration Act, citing serious fraud allegations. The Supreme Court examined the correctness of this stand, noting that the Act does not categorize disputes as non-arbitrable. The Supreme Court affirmed that serious fraud allegations should not automatically render the dispute non-arbitrable.
Allahabad High Court
Case Title: Dr. Rajeev Sinha vs. Union Of India And 2 Others 2024 LiveLaw (AB) 136 [WRIT - C No. - 33840 of 2023]
Case citation: 2024 LiveLaw (AB) 136
The Allahabad High Court has held that existence of an alternate remedy is not a bar to exercising jurisdiction under Article 226 of the Constitution of India.
While exercising writ jurisdiction under Article 226 of the Constitution of India, the Court set aside an arbitral award passed by the District Magistrate/Collector, Jhansi acting as an Arbitrator under Section 3G(5) of the National Highways Act, 1965 for not following the directions given by the District Judge while allowing appeal under Section 34 of the Arbitration and Conciliation Act, 1996.
The bench comprising of Justice Manoj Kumar Gupta and Justice Kshitij Shailendra held
“This Court seriously deprecates the approach of the Arbitrator/Collector who is vested with statutory powers to determine lawful compensation as per the scheme of the Act of 1956 and, therefore, once the Court superior to him analyzed each and every aspect of the initial award dated 30.09.2010 as well as the arbitral award dated 15.09.2017 and set aside the same after recording findings on merits of the petitioner's claim as regards market value of the land on the date of notifications acquiring the land, the Arbitrator/Collector was bound to follow the quasi-judicial discipline and record finding on each of the parameters discussed by the learned District Judge”
Case Title: Gepdec Infratech Limited Thru Authorized Representative vs U.P. Power Transmission Corporation Ltd. Thru Superintending Engineer Lucknow.
The Allahabad High Court single bench of Justice Rajnish Kumar held that the allegation under Item No. 24 of the Fifth Schedule of the Arbitration and Conciliation Act, 1996 doesn't automatically disqualify the arbitrator without disclosing any specific relationship between the arbitrator and the party. Item No.24 of the Fifth Schedule states that doubts about an arbitrator's independence or impartiality can arise if they currently serve or have served as an arbitrator in another arbitration on a related issue involving one of the parties or an affiliate of one of the parties within the past three years.
The High Court noted that Section 11 delineates the procedure for arbitrator appointments, particularly Sub-sections (6) and (8), underscoring the High Court's role when parties fail to agree on an appointment. Sub-section (8) emphasizes the necessity for the arbitral institution, before appointing an arbitrator, to seek written disclosure from the prospective arbitrator in accordance with Section 12(1). The court is mandated to consider qualifications agreed upon by the parties, the contents of the disclosure, and other factors ensuring the appointment of an independent and impartial arbitrator.
Miscellaneous
The Expert Committee on Arbitration Law, formed on June 12, 2023, to assess the functionality of the Arbitration Law in the country and propose reforms to the Arbitration & Conciliation Act, 1996, has released its long-awaited report. Key highlights of the report include a comprehensive analysis of the current arbitration law, detailed recommendations for reform, and the presentation of a draft Bill designed to implement the proposed changes. Additionally, an Explanatory Memorandum is included in the report to elucidate the provisions of the Bill.
