Arbitration Weekly Round Up: 26th February to 3rd March 2024
Rajesh Kumar
5 March 2024 11:15 AM IST
Supreme Court Court May Refuse To Appoint Arbitral Tribunal If S.11(6) Petition Is Barred By Limitation Or Claim Is Ex-Facie Time Barred : Supreme Court Case Title: M/s Arif Azim Co. Ltd. Versus M/s Aptech Ltd., ARBITRATION PETITION NO. 29 OF 2023 In a recent ruling, the Supreme Court held that the Limitation Act, 1963 is applicable to proceedings for appointment of...
Supreme Court
Case Title: M/s Arif Azim Co. Ltd. Versus M/s Aptech Ltd., ARBITRATION PETITION NO. 29 OF 2023
In a recent ruling, the Supreme Court held that the Limitation Act, 1963 is applicable to proceedings for appointment of arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 ("A&C Act"), and a Court may refuse to make a reference if the claims, on the date of commencement of arbitration proceedings, are ex-facie barred.
"...there is no doubt as to the applicability of the Limitation Act, 1963 to arbitration proceedings in general and that of Article 137 of the Limitation Act, 1963 to a petition under Section 11(6) of the Act, 1996 in particular", said the Bench of CJI DY Chandrachud and Justices JB Pardiwala, Manoj Misra.
Case Details: M/S Arif Azim Co Ltd v. M/S Aptech Ltd. Arbitration Petition No. 29 of 2023
In a recent verdict, the Supreme Court delved into the crucial question of whether the Limitation Act, 1963 is applicable to applications for the appointment of arbitrators under Section 11(6) of the Arbitration and Conciliation Act, 1996. The court highlighted the absence of a statutory prescription regarding the time limit for such applications and expressed concerns about the unduly long three-year period allowed for filing under Article 137 of the Limitation Act. While recognizing the legislative vacuum, the court urged Parliament to consider amending the Act to prescribe a specific limitation period for filing applications under Section 11(6). The decision emphasized the need for expeditious resolution of commercial disputes and addressed the potential impact of the absence of a time-bound framework.
In its concluding part, the Court observed :
“ 94. … this Court while dealing with similar issues in many other matters has observed that the applicability of Section 137 to applications under Section 11(6) of the Act, 1996 is a result of legislative vacuum as there is no statutory prescription regarding the time limit. We would again like to reiterate that the period of three years is an unduly long period for filing an application under Section 11 of the Act, 1996 and goes against the very spirit of the Act, 1996 which provides for expeditious resolution of commercial disputes within a time-bound manner. Various amendments to the Act, 1996 have been made over the years so as to ensure that arbitration proceedings are conducted and concluded expeditiously. We are of the considered opinion that the Parliament should consider bringing an amendment to the Act, 1996 prescribing a specific period of limitation within which a party may move the court for making an application for appointment of arbitrators under Section 11 of the Act, 1996…” Opined Justice Pardiwala.
Delhi High Court
Case Title: Steel Authority Of India Ltd vs Uniper Global Commodities.
The Delhi High Court single bench of Justice Sachin Datta held that the court under Section 27 of the Arbitration and Conciliation Act, 1996 cannot determine the admissibility, relevancy, materiality, and weight of any evidence, as doing so would amount to impermissible interference with the Tribunal's proceedings.
The High Court held that the orders of an Arbitral Tribunal are not ordinarily disturbed in Section 27 petition, emphasizing that the court, in exercising powers under Section 27, is not hearing an appeal over the Tribunal's decision. It Court highlighted that while the Arbitral Tribunal is not bound by the rules of procedure like the Code of Civil Procedure and the Evidence Act, it is still obligated to form an opinion and exercise discretion in permitting the examination of a witness.
Case Title: Devender Kumar Kashyap vs Chander Muni.
The Delhi High Court single bench of Justice Rekha Palli held that when a party provides its incorrect address in proceedings cannot be permitted to urge that the invocation notice of arbitration under Section 21 of the Arbitration and Conciliation Act, 1996 was not served at the correct address.
The High Court favored the Petitioner's contention that the Respondent, having provided his address in the previous petition filed in December 2021, is not in a position to argue that the invocation notice was improperly served. Moreover, it held that the purpose of the invocation notice is to inform the opposing party about the dispute and provide an opportunity for mutual agreement on the appointment of an arbitrator. Given that the Respondent was well aware of the Petitioner's intent for arbitration, the High Court held rejected Respondent's argument.
Case Title: Umaxe Projects Private Limited vs Air Force Naval Housing Board
The Delhi High Court single bench of Justice Manoj Kumar Ohri held that filing of the Section 29(A) application by a party did not amount to a waiver of its right to challenge the arbitrator's ineligibility under Section 12(5) of the Arbitration and Conciliation Act, 1996. The bench held that filing an application under Section 29A of the Arbitration Act for an extension of the mandate did not amount to an express waiver in writing under Section 12(5).
The High Court noted that the arbitrator was unilaterally appointed by the Respondent, in accordance with Clause 18.2 of the General Conditions of Contract (GCC) forming part of the Agreement and Clause 22 of the Agreement. These clauses did not afford the Petitioner any say in the appointment process.
The High Court held that the chairman-cum-managing director of a party ineligible himself was also not eligible to appoint another arbitrator. Further, it held that participation in arbitral proceedings without objecting to the arbitrator's appointment did not constitute a waiver of the right under Section 12(5) of the Arbitration Act.
Case Title: Aakash Educational Services Ltd Vs M/S Lotus Education & Ors.
The Delhi High Court single bench of Justice Dinesh Kumar Sharma held that mere invalidation or unenforceability of the arbitrator appointment process does not render the entire arbitration clause void. The bench held that even if an arbitration award is set aside due to unilateral appointment and non-compliance with Section 12 of the Arbitration Act, fundamental agreement between the parties to submit their disputes to arbitration remains intact. Therefore, the parties can file a fresh application under Section 11 of the Arbitration Act for arbitrator appointment.
The primary objection raised by the Respondent was that if an arbitration award is set aside due to unilateral appointment and non-compliance with Section 12 of the Arbitration Act, the Petitioner cannot file a fresh application under section 11 of the Arbitration Act for arbitrator appointment.
The High Court rejected the Respondent's contention that exhaustion of remedies under the arbitration clause prevents seeking re-appointment of the arbitrator. It held that as long as disputes covered by the arbitration agreement remain unresolved, parties are free to invoke arbitration again after an award is set aside. It held that setting aside an award doesn't preclude parties from re-agitating their claims before another arbitral tribunal.
Case Title: Indian Highways Management Company Ltd. vs Prakash Asphaltings and Toll Highways (India) Pvt. Ltd.
The Delhi High Court single bench of Justice Prateek Jalan held that the MSME Facilitation Council does not have the jurisdiction to arbitrate matters pertaining to individual service providers who do not fall under the definition of 'supplier' under the MSME Act. The same would be violative of Section 34 of the Arbitration and Conciliation Act, 1996.
The High Court held that even with the Respondent's expansive interpretation of Section 2(n)(iii) of the MSME Act, the Respondent does not fulfil the definition of a 'supplier.' It held that the Agreement in question didn't entail the sale of any goods from the Respondent to the Petitioner. The services provided by the Respondent to the Petitioner were carried out by the Respondent itself, not by a micro or small enterprise. The Agreement assigned the Respondent the responsibility of procuring and installing equipment at the Petitioner's toll plazas and maintaining it for five years, along with other contracted services.
Case Title: The Executive Engineer & Ors Vs M/S Bholasingh Jaiprakash Construction Ltd & Anr.
The Delhi High Court single bench of Justice Subramonium Prasad held that Article 226 of the Constitution of India is an extraordinary remedy and cannot be invoked where a party has failed to invoke other remedies available to it under law. It held that if a party fails to challenge the arbitration award under Section 34 of the Arbitration and Conciliation Act, 1996, cannot approach the High Court by filing a Writ Petition under Article 226 of the Constitution of India.
The High Court noted that the Arbitral Tribunal proceedings were initiated on 16.08.2022, with repeated reminders sent to the Petitioner urging its participation. However, the Petitioner consistently refused to engage in the proceedings. Despite being aware of the ongoing arbitration, the Petitioner did not challenge the award within the prescribed time under the Arbitration Act, opting instead to approach the court through a Writ Petition under Article 226 of the Constitution of India.
The High Court emphasized that Article 226 is an extraordinary remedy and cannot be invoked when other remedies available under the law have not been pursued. It acknowledged the objectives of the MSMED Act, which was designed to alleviate the regulatory burden on such enterprises. It noted that once a matter is referred to arbitration and an award is passed, it can be challenged under Section 34 of the Arbitration Act or Section 19 of the MSMED Act.
Section 29A Not Applicable To Arbitration Proceedings Commenced Before 2015: Delhi High Court
Case Title: Zillion Infraprojecs Pvt. Ltd Through Anant Saxena Vs Fab-Tach Works & Constructons Pvt. Ltd.
The Delhi High Court single bench Justice Manoj Kumar Ohri held that Section 29A of the Arbitration and Conciliation Act, 1996 which prescribes a time limit for issuance of arbitral award is not applicable to arbitration proceedings commenced before 2015 Amendment Act. It held that arbitral proceedings commence on the date when the Respondent receives the request for reference to arbitration. Section 29A mandates for the tribunal to make the award within a period of twelve months from the date of completion of pleadings.
The High Court noted that the Section 26 of the Amendment Act explicitly stated that the amendments would not apply to ongoing arbitral proceedings that had commenced in accordance with Section 21 of the Arbitration Act before the commencement of the Amendment Act, unless the parties agreed otherwise. In essence, the applicability of the Amendment Act was made prospective unless there was mutual agreement for retrospective application. The pivotal question before the High Court was whether Section 29A and its prescribed time limits would be applicable to arbitral proceedings initiated before the enactment of the Amendment Act.
Case Title: Govt. Of NCT of Delhi vs M/s R.S Sharma Contractors Pvt. Ltd
The Delhi High Court single bench of Justice Dinesh Kumar Sharma held that arbitral proceedings before the arbitrator are not required to be technical in nature and the arbitrator is within its power to decide the same on the basis of material on record. The bench held that the arbitrator is the sole judge of the quality and quantity of evidence, and the court's role is not to reassess the material or correct the arbitrator's errors under Section 34 of the Arbitration and Conciliation Act, 1996.
The High Court held that the legislative mandate is to ensure an expeditious and binding dispute resolution process with minimal court intervention. The proceedings under Section 34 are summary, reflecting the legislative intent for minimal interference and prompt dispute resolution. It clarified that the scope of inquiry under Section 34 is confined to assessing whether the grounds specified in Section 34(2), 13(5), or 16(6) justify setting aside the award. It reiterated that the arbitrator is the sole judge of the quality and quantity of evidence, and the court's role is not to reassess the material or correct the arbitrator's errors.
Case Title: M/s NHPC Ltd v. M/s Jaiprakash Associates Ltd, OMP(ENF.)(COMM) 184 of 2023
The High Court of Delhi has held that the counterclaims allowed by the arbitral tribunal can be enforced under Section 36 of the A&C Act when the portion of the award granting larger sums to the judgment-debtor (claimant in the arbitration) is set aside.
The bench of Justice Jasmeet Singh reiterated that partial setting aside of an award is permissible under the Act, therefore, when the award qua the claims allowed is set aside, the award regarding the counterclaims remains valid and enforceable.
The Court held that the counterclaims allowed by the arbitral tribunal can be enforced under Section 36 of the A&C Act when the portion of the award granting larger sums to the judgment-debtor (claimant in the arbitration) is set aside.
The Court reiterated that partial setting aside of an award is permissible under the Act, therefore, when the award qua the claims allowed is set aside, the award regarding the counterclaims remains valid and enforceable.
Calcutta High Court
Case Title: RKD Niraj JV vs The Union Of India.
The Calcutta High Court single bench of Justice Moushumi Bhattacharya held that the clause in General Conditions of Contract stipulating appointment of a panel of three gazetted railway officers for arbitration violated Section 12(5) of the Arbitration and Conciliation Act, 1996, read with the Fifth and Seventh Schedules of the Act.
The High Court noted that the Clause 64(3)(a)(ii) of the GCC mandated an agreement to arbitration under three gazetted railway officers, subject to a specified rank. The High Court noted that Section 12(5) of the Arbitration Act, in conjunction with the Fifth and Seventh Schedules, guards against the appointment of arbitrators with potential conflicts of interest. It highlighted Entry-1 of the Seventh Schedule, which specifically bars arbitrators with relationships or conflicts with the parties, counsel, or if the arbitrator has a business relationship with a party.
Case Title: Cholamandalam Investment and Finance Company Limited. Vs. Uma Earth Movers and Anr.
The Calcutta High Court single bench of Justice Moushumi Bhattacharya held that both Principal Civil Court and Commercial Division of the High Court has the jurisdiction to entertain Section 9 petition if the claim amount is between Rs. 10 lakhs to Rs. 1 crore. It rejected the contention that the City Civil Court doesn't have jurisdiction to receive or try the first application under Section 9.
The High Court held that Section 2(1)(e) of the Arbitration Act, meticulously defined the term "Court," designating the forum where a party is obligated to bring a subject matter related to arbitration for adjudication.
It referred to a Notification published on 20.3.2020 in the Kolkata Gazette Extraordinary by the Judicial Department, Government of West Bengal. This notification, executed under the authority granted by section 3(1-A) of The Commercial Courts Act, 2015, altered the landscape by delineating the pecuniary jurisdiction of both the City Civil Court and the Calcutta High Court. The notification specifies the pecuniary jurisdictions of these courts in relation to the value of commercial disputes, establishing concurrent jurisdiction for commercial disputes ranging from Rs. 10 lakhs to Rs. 1 crore. Notably, considering the Petitioner's claim of approximately Rs. 67.53 lakhs, the High Court held that both the City Civil Court and the Commercial Division of the Calcutta High Court would have concurrent jurisdiction.
Gujarat High Court
Case Title: Board Of Trustees Of Deendayal Port Through Executive Engineer (H) Vs M/S. Shantilal B. Patel & Anr.
The Gujarat High Court division bench of Chief Justice Sunita Agarwal and Justice Aniruddha P. Mayee held that Court cannot sit in appeal over the arbitral award and re-examine the merits. It held that it is not permissible for a court to reappreciate the evidence on record.
Further, it held that the arbitral award cannot be interfered with where on interpretation of any contract or document, two views are possible, and the Arbitrator has accepted one view.
The High Court held that it cannot sit in appeal over an arbitral award and re-examine the merits of the case. It emphasized that it is impermissible to re-appreciate the evidence on record in a Section 34 application. It highlighted the limited scope of interference under Sections 34 and 37 of the Arbitration Act. Further, it held that interference is not warranted when two possible views on the interpretation of a contract or document exist, and the arbitrator has accepted one view.
Allahabad High Court
Case Title: M/s Jaypee Infratech Limited V. M/s Ehbh Services Private Limited And Another [Civil Misc. Arbitration Application No.2 Of 2022]
The Allahabad High Court has referred the question whether application under Section 29A of the Arbitration and Conciliation Act, 1996 for time extension can only be heard by the Supreme Court or the High Court where the appointment of such arbitrator has been made by the Supreme Court or the High Court, as the case may be.
Further, the Court has raised a query regarding the powers of the 'Court' as defined under Section 2(1)(e) of the Act to adjudicate on an application under Section 29A of the Act.
Section 29A of the Arbitration and Conciliation Act, 1996 provides that award must be passed within 12 months from the date on which the arbitral tribunal enters reference. Sub-section (4) of Section 29A provides that mandate of the arbitral tribunal shall end within 12 months or at the expiry of the extended period provided the 'Court' extends the said period. Sub-section (6) of Section 29A empowers the 'Court' to substitute arbitrators while extending the said period.
International
The Court of Arbitration for Sport (CAS) has dismissed Russia's bid to reverse the International Olympic Committee's (IOC) decision to suspend its official status. The IOC took this action after Russia attempted to absorb Ukrainian sports organizations following the 2022 invasion of Ukraine. Established in 1984, the CAS is a global organization dedicated to resolving sports-related disputes through arbitration. CAS is headquartered in Lausanne, Switzerland, and operates courts in New York City, Sydney, and its primary location in Lausanne.
The CAS panel overseeing the appeal upheld the IOC's October 12 decision, stating that the Olympic organization did not violate the principles of legality, equality, predictability, or proportionality in suspending the ROC.
“The CAS Panel in charge of this matter dismissed the appeal and confirmed the Challenged Decision, finding that the IOC EB did not breach the principles of legality, equality, predictability or proportionality.”
