Arbitration Weekly Round Up: 19th February To 25th February 2024
Rajesh Kumar
26 Feb 2024 10:00 AM IST
Supreme Court Whether Courts Can Modify Arbitral Award U/S 34 or 37 of Arbitration Act? Supreme Court Refers To Larger Bench The Supreme Court has referred to the larger bench the question of whether the courts have the power to modify the arbitral award under Sections 34 or 37 of the Arbitration and Conciliation Act, 1996. “Whether or not the Courts in exercise of power...
Supreme Court
The Supreme Court has referred to the larger bench the question of whether the courts have the power to modify the arbitral award under Sections 34 or 37 of the Arbitration and Conciliation Act, 1996.
“Whether or not the Courts in exercise of power under sections 34 or 37 of the Arbitration and Conciliation Act, 1996 are empowered to modify an arbitral award is a question which frequently arises in proceedings not only before this Court but also before the High Courts and the District Courts.”, the Supreme Court frames the question.
Delhi High Court
Case Title: Surya Alloy Industries Ltd Vs Union Of India And Anr.
The Delhi High Court single bench of Justice Sachin Datta held that once a party has agreed to constituting an arbitral tribunal, it is precluded from subsequently opposing the appointment of an arbitrator based on the alleged non-fulfillment of pre-arbitral steps.
The High Court noted that the Respondents agreed to constitute the arbitral tribunal in a letter. It noted that Respondents' request for waiver of clause 12(5) of the Arbitration Act and after the Petitioner's refusal do so, the Respondents were obligated, as per the arbitration agreement, to send a panel of arbitrators to the Petitioner within 60 days from the demand for arbitration. The High Court held that this crucial step was not been taken by the Respondents.
Case Title: M/S S.K Agencies vs M/S DFM Foods
The Delhi High Court single bench of Justice Sachin Datta dismissed the notion that the arbitration clause would cease to exist with the termination of the contract. The bench emphasized that the arbitration clause, as part of the contract, should be treated as an independent agreement.
he High Court noted that the arbitral tribunal holds the primary authority to determine questions of non-arbitrability. It held that unless a dispute is manifestly or ex facie non-arbitrable, the general rule is to refer the dispute to arbitration, echoing the maxim "When in doubt, do refer".
The High Court highlighted that the dispute centered around the interpretation of clause 3 in the agreement, The Petitioner asserted that, based on contractual provisions and the conduct of the parties, there was no automatic termination of the agreements. Conversely, the Respondent contended that the agreement dated 22.12.2018 automatically expired on 24.07.2019 by virtue of clause 3, rendering the petitioner's subsequent claims outside the scope of the arbitration agreement. The High Court held that this should be adjudicated by a duly constituted arbitral tribunal, emphasizing that it was beyond the court's purview to interpret contractual provisions or delve into aspects influencing the merits of the parties' respective cases.
Case Title: M/S Axalta Coating Systems India Pvt. Ltd. Vs M/S Madhuban Motors Pvt. Ltd.
The Delhi High Court single bench of Justice Anup Jairam Bhambhani held that mere expression of "place of arbitration" does not automatically indicate the seat and the determination of the seat should be inferred from other clauses in the agreement and the conduct of the parties. The bench held that the seat was in Delhi as the contract clause specified that the venue for arbitral proceedings would be in New Delhi, and it vested exclusive jurisdiction in the courts of law in Delhi for all disputes arising from the Supply Agreement.
The High Court referred to the decision of the Supreme Court in Ravi Ranjan Developers Pvt. Ltd. vs Aditya Kumar Chatterjee and noted that mere mention of a place in an arbitration clause does not inherently result in that place becoming the seat of arbitration. Secondly, parties, while having the discretion to refer disputes to a specific court to the exclusion of others, must do so in accordance with sections 11(6) and 20(1) of the Arbitration Act.
Case Title: Swashbuckler Hospitality Pvt. Ltd. vs Avdesh Mittal & Anr.
The Delhi High Court single bench of Justice Dinesh Kumar Sharma rejected an argument that a letter of intent was a non-binding agreement and noted that the arbitration agreement contained in the letter of intent should be treated as an independent and binding agreement. Further, it held that the referral court at Section 11 stage should not examine or impound an unstamped instrument and should leave it for determination by the arbitral tribunal.
Upon reviewing the Letter of Intent, which included the arbitration clause in clause 24, the High Court noted that the document was unstamped. It noted that the primary focus of the court, while considering applications under Section 11(6-A) of the Arbitration Act, was confined to examining the existence of an arbitration agreement. It held that the non-existence of an arbitration agreement is the only valid reason for a court's refusal to refer a matter to arbitration. The amended Section 8(1) of the arbitration agreement limited the judicial authority's intervention to the question of whether the parties have a valid arbitration agreement.
Case Title: Gorkha Security Services vs Govt. Of Nct Of Delhi.
The Delhi High Court single bench of Justice Mohan Kumar Ohri held that an arbitral award lacking adequate reasoning suffers from the inherent flaw of patent illegality. It emphasized that a reasoned order should be proper, intelligible, and adequate, and failure to adhere to these standards can lead to challenges under Section 34 of the Arbitration and Conciliation Act, 1996.
The High Court noted that the agreement does not prohibit either party from claiming interest, as it remains silent on the aspect of interest. Notably, it held the award lacked specificity in explaining the rationale behind the denial of pre-award interest, despite the explicit request made for such interest during the proceedings. It recognized that the Arbitrator possesses discretion to award interest, a discretion that must be reasonably exercised.
Case Title: Morgan Securities & Credits Pvt Ltd. vs Samtel Display Systems Ltd.
The Delhi High Court single bench comprising Justice Sachin Datta held that an award suffering from internal contradictions is considered perverse and patently illegal under Section 34 of the Arbitration and Conciliation Act, 1996.
The High Court, while exercising jurisdiction under Section 34 of the Arbitration Act, acknowledged the limited scope of interference with arbitral awards. It emphasized that an arbitrator is the final arbiter on factual issues, and the interpretation of contract terms lies within the arbitrator's domain. It held that interference is only allowed if the award is palpably perverse, where no reasonable person could arrive at the arbitrator's conclusion.
Calcutta High Court
The Calcutta High Court single bench of Justice Prasenjit Biswas held that consumer forum cannot assume jurisdiction when a special statue prescribes for arbitration and designates a forum for adjudication of disputes. It held that a special law takes precedence over a general law.
The High Court, referred to Section 84 of the Multi-State Co-operative Societies Act, 2002, and held that the dispute between the Petitioner co-operative society and Complainant should have been referred to arbitration as per the specific provision of the Act. The High Court observed that both the District Forum and State Commission failed to take into account the statutory provisions, specifically overlooking the jurisdictional limitations imposed by the Multi-State Co-operative Societies Act.
Gauhati High Court
Case Title: M.S. Oil India Limited vs M.S. Badri Rai And Company
The Gauhati High Court single bench of Justice Sanjay Kumar Medhi held that the commencement under Section 21 of the Arbitration and Conciliation Act, 1996 does not arise unless an Arbitration Tribunal is constituted. It held that the arbitration does not automatically commence when the other party gives receipt of the claim.
The High Court held that there is a presumption that there is consent from the nominee arbitrators of both parties for the appointment of the Presiding Arbitrator. It emphasized that the Presiding Arbitrator cannot assume jurisdiction to adjudicate the dispute and issue a declaration under Section 12 of the Arbitration Act without such consent.
Case Title: M/s Atw (India) Pvt. Ltd. vs Union Of India And Anr
The Gauhati High Court single Judge Justice Michael Zothankhuma has rejected the notion that it is a mere post office under Section 11(6) of the Arbitration and Conciliation Act, 1996, obligated to appoint an arbitrator without considering obvious legal infirmities.
The single-judge held that the court under Section 11(6) of the Arbitration Act decides the arbitrability of the dispute by prima facie analysis.
The High Court noted that Clause 63 & 64(1)(i) of the GCC clearly mandated the resolution of disputes through arbitration. However, it noted the introduction of a limitation in Clause 10.1, stating that when the claim or dispute value exceeds 20% of the contract work value, the provisions of Clause 63 & 64 of the GCC would not be attracted. The Petitioner a claim amounting to Rs. 1,86,23,336.78, which constituted approximately 36.6% of the total contract value as per the contract agreement.
Telangana High Court
Case Title: K. Venkateswara Rao vs Union Of India.
The Telangana High Court single bench of Justice M.G. Priyadarsini held that as long as the composition of the arbitral tribunal or the arbitral procedure aligns with the agreement between the parties, Section 34 of the Arbitration and Conciliation Act, 1996, does not allow a challenge to an award solely on the basis that the composition of the arbitral tribunal conflicts with the provisions of Part I of the Act.
In the present case, the High Court observed that there was no material to demonstrate an error apparent on the face of the record or perversity in the award. Additionally, it noted that the Petitioner failed to establish any question of law in the case, as the grounds raised by it were based on questions of fact rather than legal issues.
Further, the High Court held that an arbitral award can be set aside only on specific grounds mentioned in Section 34 of the Arbitration Act. It emphasized that Section 34(2)(a)(v) does not apply if the composition of the arbitral tribunal is in accordance with the agreement of the parties. Moreover, it clarified that objections to the composition should have been raised at the initial stage, and the parties are deemed to have waived their right to object if not raised.
Andhra Pradesh High Court
Writ Petition Not A Remedy For Execution Of Arbitration Award: Andhra Pradesh High Court
Case Title: The Project Director, National Highways Authority of India vs M/s. Vijayanagaram Hatcheries Pvt. Ltd.
The Andhra Pradesh High Court division bench comprising Chief Justice Dhiraj Singh Thakur and Justice R. Raghunandan Rao held that that it lacks the authority in writ petition to enforce an award issued by an arbitrator when it is already challenged under Section 34 of the Arbitration and Conciliation Act, 1996.
The High Court referred to the decision of the Supreme Court in the case of National Highways Authority of India Vs. Sheetal Jaidev Vade & Others, [2022 LiveLaw (SC) 705] and highlighted the Supreme Court's disapproval of entertaining writ petitions under Article 226 of the Constitution of India for the execution of awards passed by arbitral tribunals or courts. The Supreme Court, in the cases, expressed its disapproval of a judgment and order passed under Article 226, directing the NHAI to deposit the entire compensation amount awarded by the arbitrator and allowing the original landowners to withdraw the said amount.
Punjab and Haryana High Court
Case Title: M/s A.G. Construction Co. vs The State of Punjab and Others
The High Court of Punjab and Haryana single-judge bench of Justice Suvir Sehgal adjudicated on a Section 11 petition filed by a Construction Company which was conducting work for the Department of Technical Education and Industrial Training, although the department itself wasn't a party to the petition. The single-judge bench determined that even though the work was intended for the Department, this department neither issued the allotment nor acted as the executing agency. As a result, the petition was allowed.
The High Court held that the objections raised by the respondents were invalid. The allotment letter was executed between the Petitioner and the Respondent. Although the work was intended for the Department of Technical Education and Industrial Training, this department neither issued the allotment nor is it the executing agency. Therefore, it was not considered a necessary party to the petition for the appointment of an arbitrator.
Allahabad High Court
Case Title: Sanjay Agarwal vs Rahul Agarwal And Ors.
The Allahabad High Court single bench of Justice Alok Mathur held that the objections under Section 47 of the CPC are not maintainable in execution proceedings for the enforcement of an arbitration award. It held that an arbitration award, not being issued by a "court," falls outside the definition of a decree as outlined in Section 2(2) of CPC. Moreover, once the award attains finality, any objections must be raised exclusively in proceedings under Section 34 of the Arbitration Act.
The High Court highlighted the nature and scope of revisional jurisdiction, emphasizing its role in correcting errors of jurisdiction committed by subordinate courts. It held that the revisional jurisdiction is confined to addressing questions of jurisdiction and is not intended for re-examining or reassessing evidence on record.
The High Court dismissed the revisionist's argument regarding the maintainability of objections under Section 47 of the CPC at the execution stage. It held that the revisionist should have challenged the award under Section 34 of the Arbitration Act and that objections under Section 47 of CPC were not maintainable at the execution stage.
Compliance Of Section 21 Of Arbitration & Conciliation Act, 1996 Is Mandatory: Allahabad High Court
Case Title: M/S Samyam Industries and Others v Shivalik Small Finance Bank Ltd.
The Allahabad High Court has held that the compliance of Section 21 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) is mandatory. Thus, arbitral proceedings would only commence once the notice invoking arbitration issued by the claimant is received by the respondent.
The Bench comprising Justice Manju Rani Chauhan was adjudicating a writ petition filed under Article 226 of the Constitution by borrowers, challenging the arbitration proceedings initiated against them by Shivalik Small Finance Bank Ltd. without serving a Notice Invoking Arbitration. The Bench has quashed the arbitration proceedings for not complying with the requirements of Section 21 of Arbitration Act.
