The year 2019 has seen some important legislative and case law developments in arbitration law in India. The year ended with the following landmark judgments by the Supreme Court:
Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd. [Arbitration Application No. 32 of 2019 decided on 26.11.2019]: A person who has an interest in the outcome or decision of the disputes must not have the power to appoint a sole arbitrator.
Hindustan Construction Company Ltd. v. Union of India, [2019 SCC OnLine SC 1520, decided on 27.11.2019] Section 87 of the Arbitration Act struck down as being manifestly arbitrary.
Bgs Sgs Soma Jv vs Nhpc Ltd. [Civil Appeal No. 9307 of 2019 decided on 10.12.2019] The designation of a seat confers exclusive jurisdiction on the courts of said seat; and a place of arbitration, regardless of its designation as a seat, venue or place, is the juridical seat of arbitration unless there is an indication to the contrary. SC declared the judgment in Hardy Exploration and Production (India) as incorrect.
Highlights of the 25 important decisions delivered by the Indian Courts on Arbitration law in 2020 are as follows.
Whether there can be a valid arbitration clause providing for arbitration of claims of one of the party and providing for the remedy of the Court or any other forum for claims of the other party?
1.Shri Chand Construction and Apartments Pvt. Ltd. v. Tata Capital Housing Finance Ltd. [Judgment dated March 4, 2020 in CS(OS) 179/2019]
The Court held that the use of words “all or certain disputes” in Section 7 of the Act permit classification of disputes but do not permit classification of claims. It was further held that once the time for filing written statement has been extended then the time for filing the application under section 8 of the Arbitration Act also stands extended.
Whether the limitation for filing of written statement as prescribed in the CPC, 1908 as well as Commercial Courts Act, 2015 would be applicable for filing of an application under Section 8 of the Arbitration and Conciliation Act?
2. SSIPL Lifestyle Pvt. Ltd. v. Vama Apparels (India) Private Limited & Anr. [Judgment dated February 19, 2020 in CS (COMM) 735/2018]
The court held that arbitration clause can be waived by a party under dual circumstances- one by filing a statement of defence or submitting to jurisdiction and secondly, by unduly delaying the filing of the application under Section 8 by not filing the same till the date by which the statement of defence could have been filed. In the background of the amendments in the CPC including recent amendments in the context of Commercial Courts Act, 2015 and the amendments in the Arbitration Act, the court concluded that the amendment to Section 8 is a conscious step towards prescribing a limitation period for filing the Section 8 application. Thus, the limitation period for filing of written statement as prescribed in the CPC, 1908 as well as Commercial Courts Act, 2015 would be applicable for filing of an application under Section 8.
Whether the Court under Section 9 can secure the entire amount awarded under the Award?
3. Power Mech Projects Ltd. v. Sepco Electric Power Construction Corporation [Judgment dated February 17, 2020 in OMP (I) (COMM) 523/2017]
Relying on the recent judgments of the Supreme Court and considering the facts of the case, the Court directed deposit of 100% of the awarded amount with the Registry of the High Court.
Whether an injunction under Section 9 of the Arbitration Act could be granted to revive or restore a contract which is specifically determinable in nature and has been duly terminated?
4. Inter Ads Exhibition Private Limited v. Busworld International Cooperative Vennootschap Met Beperkte Anasprakelijkheid [Judgment dated January 13, 2020 in O.M.P(I) (COMM.) 273/2019]
The Court reiterated that an injunction under Section 9 of the Arbitration Act could not be granted to revive or restore a contract which is specifically determinable in nature, and has been duly terminated by one party to the contract.
Whether a lease deed which was not sufficiently stamped, could be acted upon to enforce arbitration clause contained therein?
5. M/s Dharmaratnakara Rai Bahadur v. M/s Bhaskar Raju & Brothers [Judgment dated February 14, 2020 in Civil Appeal No. 1599/2020]
The Court held that when a lease deed or any other instrument is relied upon as containing the arbitration agreement, the Court is required to consider at the outset, whether the document is properly stamped or not. If the instrument is not properly stamped, it should be impounded and the Court cannot act upon such a document or the arbitration clause therein.
Whether a party can insist on appointment of Gazetted Officer of Railways as the Arbitrator?
6. M/s Arvind Kumar Jain v. Union of India [Judgment dated February 4, 2020 in Arb. P 779/2019]
Relying on Perkins Eastman Architects DPC v HSCC (India) Limited, the Court rejected the contention of the Respondent for appointment of Gazetted Railway Officer. It was further held that a party cannot be compelled to furnish a waiver from the applicability of Section 12(5) of the Act.
Whether the judgment in Perkins Eastman Architects DPC. v. HSCC (India) Limited would also apply to ongoing arbitrations?
7. Proddatur Cable TV Digi Services v. Siti Cable Network Limited [Judgment dated January 20, 2020 in O.M.P. (T) (COMM.) 109/2019]
The Court held that the prohibition against the appointment of a sole arbitrator by one of the parties to the agreement as articulated in Perkins Eastman Architects DPC. v. HSCC (India) Limited would also apply to ongoing arbitrations which were being conducted under the Arbitration Act as amended by the Arbitration and Conciliation (Amendment) Act, 2015.
Whether the Gujarat Public works Contract Disputes Arbitration Tribunal constituted under section 3 of the Gujarat Public Works Contracts Disputes Arbitration Tribunal Act, 1992 has jurisdiction to make interim order in terms of Section 17 of the Act?
8. State of Gujarat… v. Amber Builders [Judgment dated January 8, 2020 in Civil Appeal No. 8307 of 2019]
The Court held that on a conjoint reading of the Acts together, it is clear that the powers vested in the Tribunal in terms of Section 17 of the A&C Act are concerned, such powers can be exercised by Arbitral Tribunal constituted under the Gujarat Act because there is no inconsistency in these two Acts as far as the grant of interim relief is concerned. The court opined that the judgment rendered in Gangotri Enterprises Limited v Union of India is per incuriam as it relies upon Raman Iron Foundry which has been specifically overruled by three judges bench in the case of H.M. Kamaluddin Ansari.
Whether there is a bar in law for a tribunal to pass an Order in a subsequent Section 17 Application in variation of an Order passed in the original Section 17 Application?
9. Sona Corporation India Private Limited v. Ingram Micro India Private Limited [Judgment dated 20.01.2020 in ARB. A. (COMM.) 4/2019]
The Court held that there was no bar in law for an arbitral tribunal to pass an order in a subsequent application filed before it under Section 17 of the Arbitration Act, in variation of an order passed in the original Section 17 application, if it could be demonstrated that material subsequent developments had occurred in the interregnum.
Dr. Bina Modi v. Lalit Modi
Whether the procedure being followed by ICC is repugnant to Arbitration Act and whether the principles pertaining to anti suit injunction are attracted to anti arbitration injunction suits?
10. Dr. Bina Modi v. Lalit Modi & Ors. [Judgment dated March 3, 2020 in CS (OS) 84/2020]
The Court held that the Arbitration Act is governed by the principle of freedom of parties and Section 19 thereof expressly provides that the parties are free to agree on the procedure to be followed by the Arbitral Tribunal in conducting the proceedings. The Court observed that considering the status of the parties, who belong to business family and are well alive to litigations and arbitrations of all kinds, it cannot be said that they were not aware of the procedure of ICC. Thus, the ground of haste makes waste, cannot be invoked. It was further held that the amendment to section 8 does not change the bar to the jurisdiction of the court vide section 5 of the Act. Further, no window has been opened to permit a judicial authority to intervene, if finds no valid arbitration agreement existing, to injunct arbitration. It is only when a substantive action is brought before the Court and a plea of Section 8 is taken, that the Legislature has permitted the Court to go into the question of existence of a valid arbitration agreement, before referring the parties to arbitration. It was clarified that principles pertaining to anti suit injunction suits, are not attracted to anti arbitration injunction suits, for the reason of the Arbitration Act being a complete code in itself and the 1996 Act empowers the Arbitral Tribunal to rule on its own jurisdiction.
Whether the interim order passed by the Court for deposit of 20% of the awarded amount can be modified if there has been no change of circumstances?
11. Indian Oil Corporation Limited v Toyo Engineering Corporation [Judgment dated March 6, 2020 in OMP (COMM) 316/2019]
The Court held that there is no mandate of law that in every case the Court should direct 100% deposit of the awarded amount. This is purely in the discretion of the Court and discretion has to be exercised in the facts and circumstances of each case. Further, it was held that since the Court has exercised its discretion once and there has been no change of circumstances, the Order calls for no modification.
Whether a communication specifically claiming a disputed amount and narrating the background facts as also contemplating legal action in general, would qualify as a notice of request for arbitration?
12. Badri Singh Vinmay Private Limited v. MMTC Limited [Judgment dated 06.01.2020 in O.M.P. 225/2015]
The Court held that a communication specifically claiming a disputed amount and narrating the background facts as also contemplating legal action in general, as against initiation of arbitration proceedings in particular, would qualify as a notice of request for arbitration.
Whether the Arbitrator is bound by the terms of the Contract?
13. Mahanagar Telephone Nigam Limited v. M/s Haryana Telecom Ltd. [Judgment dated March 14, 2020 in OMP 1113/2012]
The Court held that as per Section 28 of the Arbitration Act, 1996 the Arbitrator is bound to decide as per the terms of the Contract.
Whether Sections 23(4) and 29(A) 1 of the Arbitration and Conciliation Act would apply to the pending arbitrations as on the date of the amendment?
14. MBL Infrastructures Ltd. v. Rites Limited [Judgment dated February 10, 2020 in OMP (Misc) (Comm.) 56/2020]
The Court held that it is clear from a bare perusal of the Arbitration & Conciliation (Amendment) Act, 2019 which was notified on 30.08.2019 that it does not have a retrospective effect and thus, amended Section 29(A) will not be applicable on pending arbitrations as on the date of the amendment.
15. Shapoorji Pallonji and Co. Pvt. Ltd. v. Jindal India Thermal Power Limited [Judgment dated January 23, 2020 OMP (Misc.) (Comm.) 512/2019]
The Court held that amended Sections 23(4) and 29(A) 1 of the Arbitration and Conciliation Act, being procedural law, would apply to pending arbitrations as on the date of the amendment.
Whether the post-award interest ought to have been granted on the principal sum plus the interest component, taken collectively?
16. M/s Morgan Securities & Credits Pvt. Ltd. v. Videocon Industries Ltd. [Judgment dated February 26, 2020 in FAO(OS) (COMM) 9/2020]
The Court held that it shall be assumed that the arbitrator has granted the post award interest only on the principal sum with full intent and while doing so, was mindful of the respective claims of the parties, the relevant merits/demerits of the please taken before him, the equities required to be balanced between the parties and all other relevant factors for granting the rate of interest as awarded. The Court further held that the view taken by the Arbitrator for granting interest cannot be treated as patently illegal or perverse so as to go to the root of the matter.
17. Parmeet Singh Chatwal & Ors. v. Ashwani Sahani [Judgment dated February 14, 2020 in OMP 1445/2014]
The Court held that the so called Arbitration Clause which was affixed on the invoice was reproduced in a small font at the bottom of the invoice. Thus, it is doubtful that the petitioner even noticed that he was signing a document which has an Arbitration Clause and it cannot be concluded that parties were ad idem.
Whether an Award can be set aside on the ground that the vital documents relevant to the controversy had not been taken into consideration by the arbitral tribunal?
18. First Global Stock Broking Private Limited v. Tarun Gupta [Judgment dated 14.01.2020 in FAO (OS) (COMM.) 50/2019]
The Court upheld the Order setting aside an arbitral award wherein the Court had found that various vital documents relevant to the controversy had not been taken into consideration by the arbitral tribunal.
Whether the Order by the Arbitrator that Section 16 application will be decided at the time of passing of the final award can be deemed as a ‘rejection’ of the objections and whether such an Order can be termed as an interim award?
19. Meera Goyal v. Priti Saraf [Judgment dated February 26, 2020 in OMP 2/2020]
The court held that when there has been no determination by the Arbitrator on the objections raised by the petitioner, it cannot be said that any right of the parties was finally determined which is a pre-condition for an Order to be termed as an interim award under Section 31(6) of the Act.
What is the scope of interference by Court in proceedings under Section 37 of the Arbitration Act?
20. MMTC Limited v. Anglo American Metallurgical Coal Pty Ltd. [Judgment dated March 2, 2020 in FAO(OS) 532/2015]
The Court held that on general principles of Section 37, the court should forbear from interfering in conclusions of fact reached by the Tribunal however, if the Court finds that a conclusion of inference drawn by the Arbitral Tribunal, even if upheld in proceedings under Section 34, is not supported by a plain, objective and clear-eyed reading of documents, the Court would not flinch in interfering or correcting such conclusion especially if it goes to the root of the matter.
Whether the fact that the first application was made at the Faridabad Court would confer exclusive jurisdiction on Faridabad Court even if the seat of arbitration was at Delhi?
21. Hindustan Construction Company Ltd. v. NHPC Ltd. & Anr. [Judgment dated March 4, 2020 in Transfer Petition (C) No. 3053 of 2019]
Relying on BGS SGS Soma JV v. NHPC the court clarified that once the seat of arbitration is designated, such clause then becomes the exclusive jurisdiction clause as a result of which only the courts where there seat is located would then have jurisdiction to have the exclusion of all other courts. It was further held that even if an application was first made to the Faridabad Court that application would be made to a court without jurisdiction.
Whether in view of clause 17.2 of the MOU the parties have agreed that the seat of arbitration is at Hong Kong and whether the court in Delhi lacks jurisdiction to entertain the petition filed under Section 11 of the Act?
21. Mankastu Impex Private Limited v. Airvisual Limited [Judgment dated March 5, 2020 in Arbitration Petition No. 32 of 2018]
The Court held that since the arbitration is seated at Hong Kong, the petition filed by the petitioner under Section 11(6) of the Act will not be maintainable. The Court held that seat of arbitration is a vital aspect of any arbitration proceedings. Significance of seat of arbitration is that it determines the applicable law when deciding the arbitration proceedings and arbitration procedure as well as judicial review over the arbitration award.
Whether Article 136 or Article 137 of the Limitation Act would apply to enforcement petitions?
22. Cairn India Ltd. & Ors. v. Government of India [Judgment dated February 19, 2020 in OMP (EFA) (COMM) 15/2016]
The Court held that provisions of Article 136 of the Limitation Act would apply to an enforcement petition. Further, it was held that the arbitral tribunal, once vested with jurisdiction by the parties to adjudicate their inter se disputes has the right to make both right and wrong decisions as these are errors which fall within their jurisdiction. The Court observed that perusal of Section 48 of the 1996 Act shows that ground of objections available to a party against whom the foreign award is sought to be enforced does not pertain to the merits of the dispute.
Whether a Foreign Award that fails to determine a material issue can be set aside?
24. Vijay Karia v. Prysmian Cavi E Sistemi SRL & Ors. [Judgment dated February 13, 2020 in Civil Appeal No. 1544 of 2020]
The Court held that if a foreign award fails to determine a material issue which goes to the root of the matter, the award may shock the conscience of the Court and may be set aside. Further, it was held that a foreign award must be read as a whole, fairly and without nit-picking. If read as a whole, the Award addresses the basic issues raised by the parties and decides the claims and counter-claims then enforcement must follow.
Whether a supplier under the MSMED Act, 2006 that had not obtained registration within the period prescribed but had done so after entering into a contract with the buyer, would be entitled to benefits contained in the MSMED Act?
25. Chief General Manager (Contracts) Neyveli Lignite Corporation Limited v Driplex Water Engineering Limited [Judgment dated 29.01.2020 in L.P.A. 688/2019]
The Court held that a supplier that was already in existence at the time of the commencement of the MSMED Act and which had not obtained registration within the period prescribed but had done so after entering into a contract with the buyer, was entitled to seek recourse to the beneficial provision of statutory arbitration as contained in the MSMED Act.
Author is Principal Associate at .