Throughout his distinguished career as a judge of the Supreme Court, Justice Rohinton Fali Nariman has delivered various judgments on arbitration law which have immensely contributed towards the growth of the field in India.
As he retires today, I would like to show my deepest gratitude for the enormous contribution made by Justice Nariman as a judge of the Supreme Court.
Solving the conundrum of Venue and Seat of Arbitration
1. BGS SGS Soma JV v. NHPC Ltd [Judgment dated December 10, 2019]
The Court held that designation of a seat confers exclusive jurisdiction on courts of the said seat. 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. Interestingly, the Court declared the judgment in Hardy Exploration and Production (India) as incorrect.
2. M/S Inox Renewables Ltd v. Jayesh Electricals Ltd [Judgment dated April 13, 2021]
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.
Party Autonomy: Turning myth into reality
3. PASL Wind Solutions Private Limited v. GE Power Conversion India Private Limited [Judgment dated April 20, 2021]
The Supreme Court held that 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, it held that there is nothing that stands in the way of party autonomy in designating a seat of arbitration outside India, even when both parties happen to be Indian nationals.
4. Union of India v. Reliance Industries Limited & Ors. [Judgment dated September 22, 2015]
The Supreme Court held that Part I of the Act will be excluded by necessary implication "if the juridical seat is outside India or where law other than Indian law governs the arbitration agreement." The Court also observed that it is only those cases in which agreements stipulate that the seat of the arbitration is in India or on whose facts a judgment cannot be reached on the seat of the arbitration as being outside India, that would continue to be governed by the Bhatia principle.
Enforcing emergency arbitrator’s order
5. Amazon.com NV Investment Holdings LLC v. Future Retail Private Limited & Ors [Judgment dated August 6, 2021]
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) of the Arbitration and Conciliation Act, 1996, and enforceable as an order of the Court under Section 17(2) of the Act.
Power to modify an award under Section 34: Crossing the Lakshman Rekha
6. Project Director, National Highways v. M. Hakeem [Judgment dated July 20, 2021]
The Supreme Court held that a court, under Section 34 of the Arbitration and Conciliation Act, cannot modify an award. It was observed that "If one were to include the power to modify an award in Section 34, one would be crossing the Lakshman Rekha."
The Court also held that given the limited judicial interference on extremely limited grounds not dealing with the merits of an award, the ‘limited remedy’ under Section 34 is co-terminus with the ‘limited right,’ namely, either to set aside an award or remand the matter under the circumstances mentioned in Section 34 of the Arbitration Act.
Public Policy: Dealing with the unruly horse
7. Ssangyong Engineering & Construction Co. Ltd. v. National Highways Authority of India [Judgment dated May 8, 2019]
The Supreme Court noted that after the 2015 amendments to the Act, the interpretation of the term 'public policy' has been narrowed down. The Court clarified that under no circumstance can any court interfere with an arbitral award on the ground that justice has not been done in the opinion of that court. This would be an entry into the merits of the dispute, which is contrary to the ethos of Section 34 of the 1996 Act.
8. Associate Builders v. Delhi Development Authority [Judgment dated November 25, 2014]
The Court held that under Section 34, the courts should not set aside the arbitral award merely because they do not agree with interpretations of the agreement given by the arbitrator. Instead the courts have to show that the tribunal’s decision was based on no evidence or irrelevant evidence.
Also in this case, the Court laid down the grounds of ‘public policy’ as ‘Fundamental policy of India,’ which will include (a) to take no notice of the orders of the superior courts (b) judicial approach (c) principles of natural justice (d) choice of arbitrator cannot be unreasonable to the extent that no sensible individual would arrive at a similar resolution.
9. PSA Sical Terminals Pvt. Ltd. v. The Board Of Trustees of V.O. Chidambranar Port Trust Tuticorin And Others [Judgment dated July 28, 2021]
The Supreme Court observed that an arbitration award which ignores vital evidence in arriving at its decision or one that rewrites a contract is liable to be set aside under Section 34 of the Arbitration Act on the ground of patent illegality.
Perversity' or 'patent illegality' not grounds to refuse enforcement of foreign award
10. Gemini Bay Transcription Pvt. Ltd. v. Integrated Sales Service Ltd [Judgment dated August 10, 2021]
The Supreme Court observed that perversity of an award is not a ground to refuse enforcement of a foreign award under Section 48 of the Arbitration Act, after the 2015 amendment. The Court held that the ground of "patent illegality" is only available to set aside domestic arbitration awards made under Part 1 of the Act and will not apply to international commercial awards.
The Court also held that a foreign award can be binding on non-signatories to the arbitration agreement and can be thus enforced against them. In this regard, the Court referred to Section 46 of the Act, which deals with the circumstances under which a foreign award is binding. The Court noted that the provision speaks of "persons as between whom it was made" and not parties to the agreement. "Persons" can include non-signatories to the agreement.
Court can’t remand the matter to the arbitrator for a fresh decision
11. Radha Chemicals v. Union of India [Judgment dated October 10, 2018]
The Supreme Court held that a court, while deciding a petition under Section 34 of the Act, has no jurisdiction to remand the matter to the arbitrator for a fresh decision.
Limit on fresh evidence for adjudicating challenge to arbitral award
12. M/s Emkay Global Financial Services Ltd v. Girdhar Sondhi [Judgment dated August 20, 2018]
The Court held that an application for setting aside an arbitral award will not ordinarily require anything beyond the record that was before the arbitrator. However, if there are matters not contained in such record, and are relevant to the determination of issues arising under Section 34(2)(a), they may be brought to the notice of the court by way of affidavits filed by both parties. Cross-examination of persons swearing to the affidavits should not be allowed unless absolutely necessary, as the truth will emerge on a reading of the affidavits filed by both the parties.
Examination of existence of an arbitration agreement
13. Pravin Electricals Pvt Ltd v. Galaxy Infra and Engineering Pvt Ltd [Judgment dated March 8, 2021]
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.
Arbitrability of fraud: Paving the way for arbitration
14. Avitel Post Studioz Limited & Ors v. HSBC PI Holdings (Mauritius) Limited [Judgment dated August, 19, 2020]
The Court held that serious allegations of fraud arise only in two situations:
a. if it can be clearly concluded that the arbitration clause or agreement itself does not exist
b. Cases in which allegations are made against the State or its instrumentalities of arbitrary, fraudulent, or malafide conduct, thus necessitating the hearing of the case by a writ court.
15. Rashid Raza v. Sadaf Akhtar [Judgment dated September, 4, 2019]
The Supreme Court held that "simple allegations" of fraud will not vitiate the effect of an arbitration agreement. The Bench, while relying on the earlier judgment of A Ayyasamy v. A Paramasivam and others, scrutinized the facts of the instant case on the following two tests:
a. Whether the plea permeates the entire contract and above all, the agreement of arbitration, rendering it void, or;
b. Whether the allegations of fraud touch upon the internal affairs of the parties inter se, having no implication in the public domain.
16. Deccan Paper Mills Co Ltd v. Regency Mahavir Properties & Ors [Judgment dated August, 19, 2020]
The determination of the apex court is in line with principle highlighted in Halsbury’s Laws of England to the effect that justiciable issues triable civilly are arbitrable and a fair test of this is whether the difference can be compromised lawfully by way of accord and satisfaction. Accordingly, no exception was required to be carved out to the categories of non-arbitrable cases as mentioned in the case of Booz Allen. Relying on Avitel Post Studioz, the Court held that merely because a particular transaction may have criminal overtones as well, does not mean that its subject matter becomes non-arbitrable.
Applicability of Arbitration Amendment Act of 2015: Unravelling the dilemma
17. Board of Control for Cricket in India v. Kochi Cricket Pvt Ltd [Judgment dated March 15, 2018]
The Supreme Court clarified the applicability of the Arbitration and Conciliation (Amendment) Act, 2015 to pending arbitration and court proceedings commenced under the Arbitration and Conciliation Act, 1996. The Court held the following:
a. Subject to party autonomy, the amendments would not apply to “arbitral proceedings” that had commenced before the commencement of the Amendment Act.
b. The amendments would apply to court proceedings which have commenced, “in relation to arbitration proceedings”, on or after the commencement of the Amendment Act.
Striking down of Section 87 of Arbitration Act
18. Hindustan Construction Company Ltd v. Union of India, [Judgment dated November 27, 2019]
The Supreme Court struck down Section 87 of the Arbitration Act as being manifestly arbitrary. The provision stated that amendments made to the 1996 Act by the 2015 amendment will not apply to court proceedings arising out of or in relation to such arbitral proceedings, irrespective of whether such court proceedings are commenced prior to or after the commencement of the 2015 amendment.
Appointment of arbitrator by an ineligible person: Referring the issue to a larger bench
19. Union of India v. M/s Tantia Constructions Limited [Order dated January 1, 2021]
The apex court disagreed with the decision in Central Organization for Railway Electrification vs. M/s ECI-SPIC-SMO-MCML (JV) and referred the issue to a larger bench.
Delay in filing appeal under Section 34 of Arbitration Act
20. Chintels India Ltd v. Bhayana Builders Pvt Ltd [Judgment dated February 11, 2021]
The Supreme Court held that an order refusing to condone the delay in filing an appeal under Section 34 of the Arbitration Act, 1996 is appealable under Section 37 of the Act.
21. Government of Maharashtra (Water Resources Department) v. M/S Borse Brothers Engineers & Contractors Pvt Ltd [Judgment dated March 19, 2021]
The Supreme Court observed that delay in filing an appeal u/s 37 of the Act can be condoned only in exceptional cases where a party has acted bona fide and not in a negligent manner. The apex court overruled its 2019 verdict in the case M/s NV International v. State of Assam (which Justice Nariman had authored himself), which had strictly held that a delay of more than 120 days in filing of appeals under Section 37 of the Act cannot be condoned.
When the proprietor is a habitual resident of a foreign country
22. Amway India v. Ravindranath Rao and another [Judgment dated March 4, 2021]
The Court held that a sole proprietorship will fall under international commercial arbitration if the proprietor is a habitual resident of a foreign country, notwithstanding the fact that the proprietary concern is carrying out business in India.
Stamp duty not payable on a Foreign Award: A step in the right direction
23. M/S Shriram EPC Limited v. Rioglass Solar SA [Judgment dated September 13, 2018]
The Supreme Court held that the mere fact that a foreign award has not borne stamp duty, would not make such foreign award unenforceable. It can be enforced as a decree of a civil court in India and such enforcement would not be contrary to the fundamental policy of India.
Period of limitation for filing application u/s 11
24. Secunderabad Cantonment Board v. B Ramachandraiah & Sons [Judgment dated March 15, 2021]
The Supreme Court reiterated that the limitation period of 3 years for filing a Section 11 application starts running from the lapse of 30 days from the date the demand for arbitration is made and cannot be reckoned from the date the said demand is eventually rejected years later.
25. P Mohanraj & Ors v M/s Shah Brothers Ispat Pvt Ltd [Judgment dated March 1, 2021]
The Supreme Court held that a Section 34 proceeding is a proceeding against the corporate debtor in a court of law pertaining to a challenge to an arbitral award and would be covered just as an appellate proceeding in a decree from a suit. Such a proceeding may result in an arbitral award against the corporate debtor being upheld, as a result of which monies would then be payable by the corporate debtor.
We look forward to continuing to benefit from Justice Nariman’s exceptional contribution to the law.
The author is a Delhi-based advocate. He can be reached at firstname.lastname@example.org.
The author would like to thank Aanya Kameshwar for her assistance.