Arbitration Weekly Round-Up: 15th January To 21st January 2024

Supreme Court Issues Notice On Plea Challenging Validity Of Section 3G Of National Highways Act

Case Title: B.D. Vivek v. Union of India, Writ Petition Civil No. 1364 of 2023

The Supreme Court Bench of Justices B.V. Nagrathna and Ujjal Bhuyan has issued notice on a writ petition challenging the Constitutional Validity of Section 3G of the National Highways Act, 1956.

The writ petition questions the legality of Section 3G(5) of the Act. This section mandates arbitration to resolve disputes over the compensation amount payable to landowners when their land is acquired. The arbitration is to be conducted by an arbitrator appointed by the Central Government.

The petitioner argues that Section 3G(5) violates Article 14 of the Indian Constitution. The contention is that imposing mandatory arbitration, with an arbitrator selected solely by the Central Government, unfairly biases the process against the landowners.

High Courts

Delhi High Court

A Party Cannot Insist On Fulfilment Of Pre-Arbitral Steps After Terminating The Contract: Delhi High Court

Case Title: Mr. Gajendra Mishra v. Pokhrama Foundation, ARB.P. 969/2023

Citation: 2024 LiveLaw (Del) 74

The High Court of Delhi has held that a party cannot insist on fulfilment of pre-arbitration conciliation once it has itself terminated the agreement. It held that pre-arbitration conciliation provided in the agreement falls with the termination of the agreement.

The bench of Justice Pratibha M. Singh held that once a party has itself proceeded to terminate the agreement without approaching the Project Manager for conciliation, it cannot object to the maintainability of the petition seeking appointment of the arbitrator on the ground of non-fulfilment of pre-arbitral steps.

The Court held that once the agreement has been terminated, no resolution or settlement or conciliation through Project Manager would be possible as designated authority would cease to exist upon the termination of the agreement.

Limitation Period For Appointment Of A Substitute Arbitrator Is 3 Years From The Date When The Right To Apply For Fresh Appointment Accrues: Delhi High Court

Case Title: Jatinder Kaur & Ors v. Late Jagjit Singh & Ors, ARB.P. 1167 of 2022

Citation: 2024 LiveLaw (Del) 72

The High Court of Delhi has held that the limitation period for the appointment of the substitute arbitrator is 3 years from the date when the right to apply for such appointment accrues.

The bench of Justice Pratibha M. Singh held that since the act does not provide for any explicit period for the appointment of a substitute arbitrator, the limitation shall be governed by the residual provision found in Article 137 of the Limitation Act which provides a period of 3 years as the limitation period from the date when the right to apply accrues.

Issues Related To Bias Of An Arbitrator And Conduct Of Arbitral Proceedings Cannot Be Determined Under Section 29A Of The A&C Act: Delhi High Court Reiterates

Case Title: Vivek Aggarwal v. Hemant Aggarwal, OMP(MISC)(COMM) 29 of 2023

Citation: 2024 LiveLaw (Del) 71

The High Court of Delhi has held that an issue related to the bias of an arbitrator in conducting the arbitral proceedings cannot be determined by a Court while dealing with the application under Section 29A of the A&C Act.

The bench of Justice Pratibha M. Singh reiterated that the scope of Court's power under Section 29A is limited to the examination of whether the extension should be granted or not. It held that the grievance of a party with the conduct of arbitral proceedings or any other substantive challenge cannot be decided by the Court under Section 29A.

Arbitral Award Can't Be Challenged On Ground Of Bias Of Arbitrator If No Challenge Was Made During Arbitral Proceedings: Delhi High Court

Case Title: Allied-Dynamic JV v. Ircon International Ltd

Citation: 2024 LiveLaw (Del) 62

The High Court of Delhi has held that an arbitral award cannot be challenged on the ground of bias of arbitrator if no challenge to bias was made during the pendency of arbitral proceedings.

The bench of Justice Pratibha M. Singh held that a party that has fully participated in the arbitral proceedings without raising any challenge to the jurisdiction of the tribunal on ground of bias, cannot challenge the award directly under Section 34 of the A&C Act.

The Court held that in an arbitration that has commenced before the 2015 amendment, such a conduct by a party would constitute a waiver under Section 4 of the A&C Act.

Pendente Lite And Future Interest Can't Be Included In The 'Aggregate Value Of Claim And Counterclaims' U/S 12 Of Commercial Courts Act: Delhi High Court

Case Title: Simentech India Pvt Ltd v. BHEL, OMP(COMM) 348 of 2022

Citation: 2024 LiveLaw (Del) 63

The High Court of Delhi has held that to determine the pecuniary jurisdiction of the Court to deal with a challenge petition under Section 34 of the A&C Act, the value of the pendente lite and future interest cannot be included in the aggregate value of the claims and counter-claims to determine the 'Specified Value' as provided under Section 12 of the Commercial Courts Act, 2015 (CCA).

The bench of Justice Sanjeev Narula held that Section 12(2) of the CCA stipulates that the 'aggregate value' of the claim and any counterclaim in a commercial dispute arbitration forms the basis for determining the pecuniary jurisdiction of the Court.

The Court held that in cases where the SoC includes a component of interest, it is necessary to consider the portion of interest accrued up to the date of invocation of arbitration as part of the 'aggregate value', in accordance with Section 12(2) of CCA. However, this provision cannot be interpreted as requiring the computation of interest up to the commencement of proceedings under Section 34 of the Act. The intent is to consider interest only until the arbitration is invoked, thereby establishing a definitive cut-off for calculating the 'aggregate value' for jurisdictional purposes.

Th Court held that the interest component which is to be considered a part of the claim of arbitration can only be till the date of the invocation of arbitration and not the interest that accrues afterwards i.e., pendente lite and future interest.

Jharkhand High Court

Arbitration and Conciliation Act | Mere Violation Of Substantive Law By Itself Not A Valid Reason To Set Aside Arbitral Award: Jharkhand High Court

Case Title: M/s Bharat Petroleum Corporation Limited v Anant Kumar Singh, Commercial Appeal No. 15 of 2020

The Jharkhand High Court while dismissing an appeal directed challenging the Commercial Court's dismissal of a Section 34 Petition against an arbitrator's award, has held that a mere contravention of substantive law by itself does not constitute a valid ground for setting aside an arbitral award subsequent to the 2015 amendment in the Arbitration and Conciliation Act, 1996 (Act).

The division bench headed by Acting Chief Justice Shree Chandrashekhar and Justice Anubha Rawat Choudhary observed, “As explained above, it has been held by the Hon'ble Supreme Court that post-2015 amendment a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award.”

Patna High Court

Dispute Can't Be Referred To Arbitration In Absence Of An Arbitration Agreement Under Article 226 Of Constitution: Patna High Court

Case Title: State of Bihar v. Bihar Rajya Vikas Bank Samiti, Miscellaneous Appeal No. 238 of 2021

The High Court of Patna has held that no dispute can be referred to arbitration by a Court exercising powers under Article 226 of the Indian Constitution when there is no agreement between the parties.

The bench of Justice Partha Sarthy held that the remedy of arbitration is the creature of a contract and the same cannot be utilised in absence of a written agreement between the parties as provided under Section 7 of the A&C Act.