Highlights of 25 important decisions delivered by the Indian courts on Arbitration law from January 2021 to May 2021 follow.
1. Whether an ‘Emergency Arbitrator’ is an arbitrator within the meaning of Section 2(1)(d) of the Arbitration & Conciliation Act?
Amazon.Com NV Investment Holdings LLC v. Future Coupons Private Limited & Ors (Judgment dated March 18)
The Court held that the concept of emergency arbitrator is based upon party autonomy as the law gives complete freedom to the parties to choose an arbitrator or an arbitral institution. Further, the emergency arbitrator is an arbitrator for all purposes. The order of the emergency arbitrator is binding upon the parties but not on the subsequently constituted arbitral tribunal which has the power to reconsider, modify, terminate or annul the order/award of the emergency arbitrator. Lastly, it was held that the order passed by the emergency arbitrator is an order under Section 17(1) and enforceable as an order of the Court under Section 17(2) of the Act.
2. Whether an arbitration agreement would be unenforceable if the underlying contract was not stamped?
M/S NN Global Mercantile Pvt Ltd v. M/S Indo Unique Flame Ltd & Others (Judgment dated January 11)
The Supreme Court held that the arbitration agreement is an independent agreement between the parties, and is not chargeable to payment of stamp duty. The non-payment of stamp duty on the commercial contract would not invalidate the arbitration clause since it has an independent existence of its own. Further, the Court observed that the finding in SMS Tea Estates and Garware that the non-payment of stamp duty on the commercial contract would invalidate even the arbitration agreement, is not the correct position in law, and referred the issue to a larger bench.
3. What is the scope of Court’s jurisdiction while examining an application under Section 8 of the Act?
Hero Electric Vehicles Private Limited & Anr V Lectro E-Mobility Private Limited & Anr (Judgment dated March 2)
The Court held that while dealing with cases under Section 8 of the Act, the Court has to make sure that it is exercising the very same jurisdiction which the arbitral tribunal is empowered to exercise while determining the aspect of arbitrability of the dispute, or the existence of a valid arbitration agreement.
4. Whether any application filed under Section 8 of the Arbitration Act, 1996 will be maintainable if a petition under Section 7 of the Insolvency & Bankruptcy Code is pending?
Indus Biotech Private Limited v. Kotak India Venture (Offshore) Fund & Ors (Judgment dated March 26)
The Supreme Court held that if a petition under Section 7 of IBC is admitted, any application u/s 8 of the Arbitration Act made thereafter, will not be maintainable. However, if petition u/s 7 of IBC is yet to be admitted and, if an application under Section 8 of the Act is filed, the adjudicating authority must first decide the application u/s 7 of the IBC by recording a satisfaction as to whether there is default or not, even if the application under Section 8 of Act is kept along for consideration.
5. Whether two Indian parties can choose a foreign seat of arbitration?
PASL Wind Solutions Private Limited V GE Power Conversion India Private Limited (Judgment dated April 20)
The Supreme Court held that the parties to an arbitration agreement have the autonomy to decide not only on the procedural law to be followed but also the substantive law. Therefore, two Indian parties can choose a foreign seat of arbitration.
6. Whether the Division Bench can dispose of in entirety the proceedings under Section 9 of the Act which were pending before the Single Judge?
Panipat Jalandhar NH-1 Tollway Pvt Ltd vs National Highways Authority of India (Judgment dated April 27)
The Supreme Court held that it was inappropriate for the Division Bench to dispose of an application under Section 9 which was pending before the Single Judge. The application u/s 9 of the Act was restored to enable the applicant place his submissions before the Single Judge.
7. Whether the dispute relating to novation of Contract is required to be examined by the Arbitral Tribunal or by the Court u/s 11?
SPML Infra Ltd v. NTPC Limited (Judgment dated April 8)
The Court held that once it is established that the parties had entered into an arbitration agreement, the courts must relegate the parties to arbitration to adjudicate the dispute.
8. Whether a party can be compelled to arbitrate even though it is not a signatory to the contract?
Shapoorji Pallonji and Co Pvt Ltd v. Rattan India Power Ltd & Anr (Judgment dated April 7)
The Delhi High Court held that a non-signatory being directly involved in the contract can be compelled to arbitrate.
9. What is the time limit for filing an application under Section 11 of the Arbitration and Conciliation Act, 1996?
Bharat Sanchar Nigam Ltd & Anr v. M/S Nortel Networks India Pvt Ltd (Judgment dated March 10)
The Supreme Court held that the time limit for filing an application under Section 11 of the Arbitration and Conciliation Act, 1996 would be governed by Article 137 of Limitation Act i.e., three years from the date when the right to apply accrues.
10. Whether the scope of Section 11 is confined to the examination of the existence of an arbitration agreement?
Pravin Electricals Pvt Ltd v. Galaxy Infra And Engineering Pvt Ltd (Judgment dated March 8)
The Supreme Court observed that Section 11 proceedings are preliminary and summary and not a mini trial. Relying on Vidya Drolia v. Durga Trading Corporation, the Court held that when it appears that prima facie review would be inconclusive and requires detailed examination, the matter should be left for final determination by the arbitral tribunal. Further, the expression “existence of an arbitration agreement” in Section 11 of the Act would include aspect of validity of an arbitration agreement.
11. What is the scope of powers of the Court under Section 11 of the Arbitration Act, 1996?
Sanjiv Prakash v. Seema Kukreja And Ors (Judgment dated April 6)
The Supreme Court held that the court at Section 11 stage cannot enter into a mini trial or elaborate review of the facts and law which would usurp the jurisdiction of the arbitral tribunal.
12. Whether the decision in the case of Perkins Eastman Architects DPC & Anr. v. HSCC (India) Limited ought to be read in a restrictive manner?
City Lifeline Travels Private Limited v. Delhi Jal Board (Judgment dated January 27)
The Court held that the efficacy of arbitration as an alternate dispute resolution mechanism rests on the foundation that the disputes would be adjudicated by independent and impartial arbitrators. Therefore, the decision in Perkins Eastman Architects DPC & Anr. v. HSCC (India) must be read in an expansive manner, not in a restrictive way.
13. Whether a jurisdictional objection u/s 16 of the Act can be decided ‘while passing the award'?
Surender Kumar Singhal & Ors v. Arun Kumar Bhalotia & Ors (Judgment dated March 25)
The Delhi High Court observed that an arbitral tribunal ought to decide the objection u/s 16 of the Act as a preliminary issue, as soon as possible. It was held that the question of jurisdiction would have to be adjudicated first, prior to the passing of the final award.
14. Whether Rule 20 of the Delhi International Arbitration Centre (Arbitration Proceedings) Rules, 2018 can be equated with Section 16 of the Arbitration and Conciliation Act, 1996?
Jeph Bev Private Limited & Ors v. Delhi International Arbitration Centre & Ors (Judgment dated February 8)
The Delhi High Court held that Rule 20 of the Delhi International Arbitration Centre cannot be equated to Section 16 of the Act. The said Rule deals with competence of the DIAC to administer and not of the competence of the arbitral tribunal to adjudicate.
15. Whether there is concurrent jurisdiction of two courts u/s 2(1)(e) of the Act, namely, the court where the cause of action accrues and the court of the seat of arbitration?
Aniket SA Investments LLC v. Janapriya Engineers Syndicate Private Limited and Ors (Judgment dated January 29)
Relying on BGS SGS Soma v. NHPC, the Court held that there is no concurrent jurisdiction of two courts under Section 2(1)(e) of the Act. Further, it was held that paragraph 96 of BALCO and the judgment in Swastik Gases would have no application in a situation where the parties have chosen a seat of arbitration. A choice of seat is an expression of party autonomy and carries with it the effect of conferring exclusive jurisdiction on the courts of the seat.
16. Whether the seat of arbitration can be changed by mutual consent of the parties?
M/S Inox Renewables Ltd v. Jayesh Electricals Ltd (Judgment dated April 13)
The Court held that once the seat of arbitration is replaced by mutual agreement of the parties, the courts at the new seat shall be vested with exclusive jurisdiction.
Sections 23 and 29
17. What is the period of limitation under Section 23(4) and 29(A) of the Arbitration and Conciliation Act,1996?
In Re: Cognizance For Extension Of Limitation (Judgment dated March 8)
The Supreme Court held that the period from March 15, 2020 to March 14, 2021 shall be excluded in computing the limitation period prescribed under Section 23(4) and 29(A) of the Arbitration and Conciliation Act,1996.
18. Whether the period of limitation for filing a petition u/s Section 34 would commence on date on which the draft award was circulated to parties or the date on which it was signed?
18. Dakshin Haryana Bijli Vitran Nigam Ltd v. M/S Navigant Technologies Pvt Ltd (Judgment dated March 2)
The Supreme Court held that the limitation period of 90 days for filing a petition under Section 34 of the Act for challenging an arbitral award commences from the date of receipt of the signed copy of the arbitral award by parties.
19. Whether a new arbitrator could be appointed after the award is set aside u/s 34?
Jagdish Kishinchand Valecha v. Srei Equipment Finance Ltd (Judgment dated April 12)
The Calcutta High Court observed that the Arbitration Act, 1996 ensures party autonomy at all levels and the freedom of the parties to decide on the next course of action must therefore be preserved. Accordingly, after setting aside the award, the Court appointed a new arbitrator with the consent of the parties to decide the disputes afresh.
20. What will be the relevant date for determining the foreign exchange rate applicable to an arbitral award?
Voith Hydro Ltda & Ors v. Ntpc Limited (Judgment dated March 19)
The Court held that the date on which the challenge to the arbitral award is finally rejected would be the date for determining the foreign exchange applicable to an award made in foreign currency.
21. Whether a court can interfere in an arbitral award on the ground that the tribunal erred in evaluating the evidence led by the parties?
Megha Enterprises And Ors v. Haldiram Snacks Pvt Ltd (Judgment dated March 1).
The Court held that it cannot interfere with the arbitral award merely on the ground that it does not concur with the inference drawn by the arbitral tribunal from the evidence led by the parties. Also, the court u/s 34 cannot re appreciate evidence.
22. Whether it is mandatory to pay stamp duty at the time of passing of the award?
Mohini Electricals Ltd v. Delhi Jal Board (Judgment dated January 22)
The Delhi High Court held that the arbitrator has no statutory power to direct that the stamp duty be paid within a specific period. Further, there is no obligation to pay stamp duty at the time of signing or pronouncement of the award.
23. Whether the High Court was justified in using its powers under Article 227 to interject the arbitral process?
Bhaven Construction v. Executive Engineer Sardar Sarovar Narmada Nigam Ltd & Anr (Judgment dated January 6)
The Supreme Court held that to invoke writ jurisdiction, a party has to show exceptional circumstance or ‘bad faith’ on the part of another party. The Court observed that the ambit of Article 227 is broad. However, the High Court erred in using it to interject the arbitral process.
24. Whether an order refusing to condone delay in filing a setting aside application is an appealable order under the 1996 Act?
Chintels India Ltd v. Bhayana Builders Pvt. Ltd. (Judgment dated February 11)
The Supreme Court observed that an appeal under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 can be filed against an order refusing to condone delay in filing an application under Section 34 of the 1996 Act.
25. Whether the delay in filing an appeal u/s 37 of the Act can be condoned?
The Supreme Court observed that delay in filing an appeal u/s 37 of the Act of 1996 can be condoned only in exceptional cases where a party has acted bona fide and not in a negligent manner.
Author would like to thank Anshita Khandelwal for her assistance.