Arbitration Weekly Round Up: 3nd February to 11th February 2024

Delhi High Court Dismisses Writ Petition, Permits Petitioner To Avail Remedy Under S. 37 Of Arbitration Act

Case Title: Shri Balaji Enterprises & Ors vs Reserve Bank Of India & Anr. Citation: 2024 LiveLaw (Del) 134

The Delhi High Court bench comprising Justice Subramonium Prasad held that the aggrieved party should avail the alternate remedy available under the Arbitration and Conciliation Act, 1996 before approaching the court under Article 226 unless there are extraordinary or exceptional circumstances. Further, the bench held that the remedy available to a party under Article 226 is not absolute and is at the discretion of the High Court.

6. It is well settled that High Courts do not entertain writs in cases where an equally efficacious alternate remedy is available to the aggrieved party and the aggrieved person has approached the High Court without availing of the said remedy.

Claims Related To Company Are Arbitrable Even Though It Is Non-Signatory To Arbitration Agreement, Delhi High Court Reinforces GOC Doctrine

Case Title: M/s Opuskart Enterprises & Ors vs Kaushal Kishore Tyagi

The Delhi High Court bench comprising Justice Pratibha M. Singh held that the disagreements related to the partners' business activities, whether conducted through the firm or the company, fall within the scope of arbitrable matters. The bench rejected the argument that the firm or the company cannot be brought forth in the arbitration proceedings since neither the firm nor the company are signatories to the arbitration agreement. It referred to the Supreme Court decision in Cox and Kings Ltd. v. SAP India Pvt. Ltd. and held that common business ventures of the partners, whether conducted through the firm or the Company, fell within the purview of the arbitration clause.

Striking Off Co's Name By ROC Post-Commencement Of Arbitration Not A Ground To Set Aside Award, Delhi H.C. Dismisses S. 34 Application

Case Title: M/s Exotic Buildcon Pvt. Ltd. vs M/s Medors Biotech Pvt. Ltd.

The Delhi High Court bench comprising of Justice Vibhu Bakhru and Justice Tara Vitasta Ganju dismissed a Section 34 application filed by Exotic Buildcon Pvt. Ltd. against M/s Medors Biotech Pvt. Ltd. The bench held that an arbitral award cannot be set aside merely because the respondent company's name was struck off from the Register of Companies post-commencement of arbitral proceedings. It upheld the principle that the cancellation of a company's incorporation doesn't affect the realization of amounts due to the company or the discharge of its obligations.

Need For Broad Panel To Choose From To Ensure Arbitrator's Independence As Per Clause 64 of GCC: Delhi High Court

Case Title: The Braithwaite Burn and Jessop Construction Co Ltd vs Northern Railway

The Delhi High Court bench comprising Justice Sachin Datta allowed an application made under Section 14 of the Arbitration and Conciliation Act, regarding the termination of an arbitrator's mandate under his former employment with the respondent, Northern Railway. The bench held that a broad-based panel should have been provided to the complainant and 4 was very less a number, coupled with the fact that each arbitrator in the panel was a former employee of Northern Railway. The bench concluded that this was against the principles enshrined in Clause 64 of the General Conditions of Contract (GCC) and the decisions given by the Supreme Court. The bench also acknowledged the unjustified exclusion of four claims raised by the Petitioner and held it invalid as per the GCC.

Section 11 Petition Can Be Filed Only After Failure Of Parties To Appoint Arbitrator Within 30 Days Of Notice, Limitation Act Applies: Delhi High Court

Case Title: Information TV Private Limited vs Jitendra Dahyabhai Patel

The Delhi High Court bench, comprising Justice Prathiba M. Singh, held that a petition under Section 11 of the Arbitration and Conciliation Act, 1996 can only be filed after a notice of arbitration has been issued and there has been a failure to make the appointment of an arbitrator within 30 days. The bench held that the limitation period arises upon the failure to make the appointment of the arbitrator within 30 days from the issuance of the notice invoking arbitration.

Limitation Period U/s 34(3) Absolute; Condonation Of Delay Impermissible Unless Party Shows Diligence And Bona Fide Reasons: Delhi High Court

Case Title: National Research Development Corporation & Anr vs Chromous Biotech Pvt Ltd.

The Delhi High Court bench comprising Justice Pratibha M Singh held that the time limit for limitation under Section 34(3) of the Arbitration and Conciliation Act, 1996 is absolute in nature and it is impermissible to condone the delay in challenging an arbitral award under Section 34 unless the party demonstrates diligence and bona fide reasons beyond its control for the delay.

The High Court referred to the decision of the Supreme Court in Union of India v. Popular Construction [(2001) 8 SCC 470], and noted the absolute nature of the time limit prescribed under Section 34 of the Act. The High Court noted that the use of the phrase 'but not thereafter' in the proviso to sub-section (3) of Section 34 serves as an express exclusion within the meaning of Section 29(2) of the Limitation Act, rendering any extension beyond the specified period impermissible. This interpretation is further supported by the historical context and the scheme of the Arbitration Act, which emphasizes minimizing the supervisory role of courts in the arbitral process.

Delhi High Court Modifies Interim Relief Of Stay Of Award, Allows Air India To Pay 50% Amount In Form Of Bank Guarantee

Case Title: Air India Limited vs All India Aircraft Engineers Association & Anr.

The Delhi High Court bench comprising Acting Chief Justice Manmohan and Justice Tushar Rao Gedela modified its earlier order which restrained the execution of an arbitral award involving Air India as a party. Air India claimed that instead of granting an unconditional stay as requested, the High Court initially restrained the execution of the award by employing a contingency on Air India to pay the whole decretal amount. The High Court modified this order and allowed Air India to deposit 50% of decretal amount as an FDR and the remaining 50% as a Bank Guarantee.

The arbitral tribunal directed Air India to pay Rs 57.92 crore along with interest and the cost of arbitration proceedings to the All India Aircraft Engineers' Association, which represents 480 members serving as engineers for either Air India or Indian Airlines. Additionally, the arbitral tribunal instructed Air India to calculate and pay wage arrears with interest to the Indian Aircraft Technicians Association.

Party Failing To File Written Submission Within Time Frame, Forfeits Right To File Sec. 8 Petition Under A&C Act: Delhi High Court

Case Title: Ranjana Bhasin vs Surender Singh Sethi & Ors.

The Delhi High Court bench comprising Justice Vibhu Bakhru and Justice Tara Vitasta Ganju held that a party forfeits its right to file an application under Section 8 of the Arbitration and Conciliation Act, 1996 once it has filed the written statement in a civil suit.

The High Court referred to its decision in SPML Infra Ltd Vs. M/s Trisquare Switchgears Pvt Ltd and held that if a party neglects to submit an application under Section 8(1) within the timeframe allotted for filing the initial statement addressing the substance of the dispute, which typically includes a written statement in the context of a lawsuit, that party would relinquish its entitlement to apply under Section 8(1) the Arbitration Act.

Bombay High Court

'Finality Of Decision And Non-Arbitrability' Clause In GCC Does Not Imply An Arbitration Agreement: Bombay High Court

Cause Title: Kalpataru Projects International Ltd. v. Municipal Corporation of Greater Mumbai and Anr.

The Bombay High Court has rejected a construction company's claim that the dispute resolution clause in the General Conditions of Contract with Mumbai Municipal Corporation constituted a valid arbitration agreement due to a lack of mutual intention to arbitrate.s

The court pointed out that the title "Finality of Decision and Non-Arbitrability" of the clause clearly indicates the parties did not intend for it to serve as an arbitration agreement. The bench of Justice Firdosh P. Pooniwalla further opined that mere declaration of the adjudication committee's decision as "final and binding" did not inherently indicate an intention to arbitrate.

The court added that the clause does not even make any reference to arbitration or appointment of an arbitrator, therefore, this dispute resolution clause did not constitute a valid arbitration agreement.

Exclusive Supervisory Jurisdiction Granted To Court Receiving First Application Under Arbitration Act, Bombay HC Limits Territorial Jurisdiction

Case Title: Hyundai Construction Equipment India Pvt. Ltd vs Saumya Mining Limited and Another

The Bombay High Court bench comprising Justice Neela Gokhale held that in cases where an application has been made in a court concerning an arbitration agreement, that court alone possesses jurisdiction over an application for appointment of arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996. Further, the bench held that even in agreements where no specific seat is mentioned, multiple courts may potentially have jurisdiction, depending on where a part of the cause of action arises.

Individual/Minority Members Of Housing Society Can't Invoke Arbitration Clause In Development Agreement: Bombay High Court

Case Title: Ketan Champaklal Divecha vs DGS Township Pvt. Ltd. & another

The Bombay High Court bench comprising Justice Manish Pitale held that individual and minority members of a society cannot invoke arbitration clauses in development agreements against the developer. The bench held that when a society and its members enter into a development agreement with the developer, the society speaks for its members and the members would lose their independent rights qua the society.

Separate Arbitration Agreement Necessary Between Parties For Reference To Arbitration U/s 18(3) Of MSMED Act by Council: Bombay High Court

Case Title: M/s Bafna Udyog vs Micro & Small Enterprises, Facilitation Council and anr.

The Bombay High Court bench comprising Justice Neela Gokhle held that the parties should have a separate arbitration agreement between them for reference to arbitration under Micro, Small & Medium Enterprises Development Act, 2006 by Micro & Small Enterprises, Facilitation Council. The bench rejected the argument that Section 18(3) of the MSMED Act 2006 provides for a deemed arbitration agreement, thereby, eliminating the necessity for a separate arbitration agreement between the parties.

Arbitrators Can't Unilaterally Modify Fee, Needs Parties' Consent: Bombay High Court

Case Title: Shanklesha Construction and Others vs Ashok Mohanraj Chhajed

The Bombay High Court bench comprising Justice Manish Pitale held that any amendments, revisions, or modifications in fees of an arbitrator must only occur with the consent of the parties, as outlined in the tripartite agreement and per Schedule IV of the Arbitration and Conciliation Act, 1996. The High Court also held that the arbitrator is not bound by the strict rules of the CPC and the Evidence Act and can employ a reasonable approach while judging the proceedings, in light of the principles of natural justice. Any grievances related to the conduct of the proceedings can be raised by the aggrieved party under the grounds mentioned in Section 34 of the Arbitration and Conciliation Act, 1996.

The High Court referred to the decision of the Supreme Court in Oil and Natural Gas Corporation Limited (ONGC) Vs. Afcons Gunanusa JV where the Supreme Court issued guidelines on determination of arbitrator's fees, emphasizing the need for a tripartite agreement, setting out the fee components. The Supreme Court further elucidated in its judgment that the 'sum in dispute' encompasses the entire amount to be adjudicated upon, allowing the arbitrator or arbitral tribunal to compute and charge fees for both the claim and the counter-claim. The High Court held that any amendments, revisions, or modifications in fees must only occur with the consent of the parties, as outlined in the tripartite agreement.

Extension of Arbitrator's Mandate Lies Exclusively With Court Which Appointed Arbitrator: Bombay High Court

Case Title: K.I.P.L. Vistacore Infra Projects J.V vs Municipal Corporation of the city of Ichalkarnji

The Bombay High Court bench comprising Justice Bharati Dangre held that the power to extend the mandate of an arbitral tribunal or arbitrator under Section 29-A of the Arbitration and Conciliation Act, 1996 lies exclusively with the court that appointed the arbitrator(s). The bench held that the term 'Court' in Section 29A must be interpreted in a manner consistent with the Court's power to appoint arbitrators under Section 11.

The High Court referred to its decision in Cabra Instalaciones Y. Services vs. Maharashtra State Electricity Distribution Company Limited, where the arbitral tribunal was constituted by an order from the Supreme Court under Section 11(5) of the Act. The judgment specifically held that the High Court, exercising power under Section 29A, does not possess the authority to appoint a substitute arbitral tribunal or any member thereof. Further, it emphasized that in the context of international commercial arbitration, such powers exclusively belong to the Supreme Court. Furthermore, the judgment pointed out that the jurisdiction conferred upon the “Court” by Section 29A precludes other courts from exercising similar powers.

Calcutta High Court

Limited Judicial Intervention U/s 8 And 11 Of Arbitration Act, Presumption In Favor Of Arbitration: Calcutta High Court

Case Title: Suresh Dhanuka vs Shahnaz Husain

The Calcutta High Court bench comprising Justice Krishna Rao held that while interpreting the arbitration agreements, the courts should have a presumption in favour of arbitration of the dispute and the court could only interfere if the party shows prima facie non-existence of valid arbitration agreement. It held that Sections 8 and 11 of the Arbitration and Conciliation Act, 1986 give the arbitrator or the tribunal the primary authority to determine the questions of non-arbitrability of the disputes. Further, it held that Section 16 confers significant powers upon the tribunal to determine any objections concerning the existence or validity of the arbitration agreement.

Splitting Of An Arbitral Award For Publication Is Unnatural And Unsupported By Law, Calcutta High Court Allows Extension Of Arbitrator's Mandate

Case Title: R S Fuel Pvt Ltd vs Ankit Metal And Power Ltd

The Calcutta High Court bench comprising Justice Moushumi Bhattacharya held that neither the Arbitration and Conciliation Act, 1996 nor the Insolvency and Bankruptcy Code, 2016 allows a party's request to halt the publication of an arbitral award to the extent of its reliance on another party's counter-clam. The bench noted that the notion of splitting an arbitral award for this purpose is unnatural and unsupported by law.

The High Court noted that Section 14(1)(a) of the IBC applies to the institution or continuation of suits and proceedings against the corporate debtor, including arbitration proceedings. However, the High Court noted that the Respondent, who was also the claimant in the arbitration, cannot rely on Section 14(1)(a) to impede the publication of the arbitral award.

Telangana High Court

Arbitrator Taking A Different View Is Not A Ground To Set Aside Award: Telangana High Court

Case Title: M/S Nile Ltd. vs Sri Gurdip Singh and Another

The Telangana High Court bench comprising Justice M.G. Priyadarsini held that the scope of setting aside an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1986 is very limited and can only be set aside if there is an error apparent on the face of the record and there is perversity in the award. Further, it held that the courts should not interfere with the arbitral awards merely because a different view has been taken by the arbitrator based on the evidence and that it should be against public policy or public interest.

Regarding the scope of interfering with the arbitration award, the High Court noted that there is limited scope for interfering with an award under Section 34 of the Arbitration and Conciliation Act, 1986 (“Arbitration Act”). Further, it noted that the expression “public policy” in Section 34 has a wider amplitude and awards passed against the terms of the contract are not in public policy. It referred to the decision of the Supreme Court in NTPC Limited v. Deconar Services Private Limited [2021 SCC OnLine SC 498], where it was held that the courts should not interfere with arbitral awards merely because a different view could be taken based on the evidence. It emphasized that unless there is perversity in the award or an error of law, courts should refrain from intervening. The High Court clarified that showing another reasonable interpretation of the evidence is insufficient grounds for interference.

Limitation Period For Arbitration Decided By Arbitral Tribunals, Not By Courts: Telangana High Court Allows Section 11(6)(a) Application

Case Title: East Hyderabad Expressway Limited vs The Hyderabad Metropolitan Development Authority and another.

The Telangana High Court bench comprising Justice C.V. Bhaskar Reddy held that the question of whether a claim is barred by limitation time is to be decided by the Arbitral Tribunal/Arbitrator under Section 20 of the Arbitration and Conciliation Act, 1996. Further, the bench noted that the scope of Section 11(6) in conjunction with Section 11(9) is confined to the appointment of an arbitrator based on the existence of an arbitration agreement and not to examine the merits of the case.

Allahabad High Court

Arbitral Award Under MSMED Act Must Be Challenged Under S 19 Of MSME Act Read With S 34 Of Arbitration Act: Allahabad High Court

Case Title: M/S Sahbhav Engineering Ltd. Ahmadabad Thru. Authorised Representative Mr. Pramod Dave vs. U.P. State Micro Small And Medium Enterprises Facilitation Council Kanpur Thru. Chairman And Others 2024 LiveLaw (AB) 67 [WRIT - C No. - 3774 of 2023]

The Allahabad High Court has held that an arbitral award passed in a reference made under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 must be challenged as per provisions of Section 19 of the MSMED Act read with Section 34 of the Arbitration and Conciliation Act, 1996.

Section 19 of the MSMED Act provides that any application for setting aside any decree, award or other order made either by the Council itself or by any institution or centre providing alternate dispute resolution services to which a reference is made by the Council under the MSED Act shall not be entertained by any court unless the appellant (not the supplier) deposits 75% of the decretal amount.

Arbitration Act| Debatable Questions Of Fact Cannot Be Decided In Proceedings U/ S 11(6): Allahabad High Court

Case Title: M/S Neelkanth Construction vs. Union Of India And 3 Others 2024 LiveLaw (AB) 68

The Allahabad High Court has reiterated that the scope of judicial review in proceedings under Section 11(6) of the Arbitration and Conciliation Act, 1996 is very narrow. The Court held that debatable questions of fact cannot be gone into by the Court while adjudicating an application for appointment of arbitrator.

“The rival contentions regarding arbitrability, in my view, cannot be decided in the instant proceedings. Its adjudication requires appreciation of evidence. The scope of judicial review in deciding issue of arbitrability is very limited,” held Acting Chief Justice Manoj Kumar Gupta.

The Court relied on Vidya Drolia and Others vs. Gujarat Informatics Limited wherein the Supreme Court had held that the scope of adjudication under Section 11(6) is very narrow.

“In the said judgment, it has been observed that while deciding issue of arbitrability, the Court under Section 11(6) has a very limited power, confined to cases where there is not even a vestige of doubt that the claim is non-arbitrable.”