This article highlights 30 notable judgments passed by the Indian Courts on arbitration law from June to December 2022.
Whether an arbitration agreement can exist in the form of terms and conditions (T&C) mentioned on the website?
The Bombay High Court held that the Respondent accepted the arbitration clause contained in “Sales terms and conditions” by executing a KYC form and thus, the same would be binding. Moreover, the parties acted upon the T&C for substantial time hence, it cannot be stated that an arbitration agreement did not exist between the parties.
Whether the Court exercising power under Section 9 of the A&C Act is bound by the provisions of CPC?
The Supreme Court held that while exercising its power under Section 9 of the Act, the Court cannot ignore the basic principles of the CPC, however, it is not bound by the provisions of CPC. The Court held that the power to grant interim relief under Section 9 is wider than the powers given to a court under the provisions of CPC.
Whether the High Court can review an order passed under Section 11 of the A&C Act?
The Andhra Pradesh High Court has observed that the Court does not possess the power to undertake review on merits of an earlier order passed u/s 11 of the Act. It held that the Supreme Court can review its order passed under Section 11 as it has inherent power of review under Article 137, however, no such power is vested in the High Courts.
Whether the High Court can recall an order passed under Section 11 of the A&C Act if it suffers from an evident factual mistake?
The High Court of Delhi held that the power exercised by the High Court under Section 11 of the A&C Act is not an administrative but a judicial function. Therefore, the High Court can review an order passed under Section 11 if it suffers from an evident factual error based on an incorrect statement made by the counsel.
Whether the issue of ‘excepted matters’ be decided at the stage of appointment of the arbitrator?
The Supreme Court held that the High Courts while appointing an arbitrator can undertake a preliminary inquiry to determine whether the dispute falls within the ‘excepted matters’ given under the agreement between the parties. It further stated that insertion of sub-section 11(6A) does not preclude the Court from doing a preliminary inquiry to decide the issue of non-arbitrability.
Whether the decision of the General Manager on ‘Notified Claims’ is mandatory for referring disputes for arbitration?
6. IOCL v. NCC
The Supreme Court held that if the agreement so provides that the decision of the General Manager on notified claims is a pre-requisite to arbitration, then unless there is a decision by the General Manager that the claim is a Notified Claim, the Arbitral Tribunal shall not have jurisdiction to entertain such a dispute.
Can a party nominate its arbitrator from a narrow panel of arbitrators maintained by the other party?
The High Court of Delhi held that a party cannot choose its arbitrator from a narrow panel of arbitrators maintained by the other party. The Court held that due to the restrictive nature of the panel, it limits the choice of the petitioner to choose one arbitrator from the five which amounts to unilateral appointment of an arbitrator. Hence, may create a doubt regarding the arbitrator being partial or biased.
Whether the dispute of an unregistered partnership firm can be referred to arbitration under Section 69 of the Indian Partnership Act, 1932?
The Calcutta High Court held that the bar under Section 69 of the Indian Partnership Act on the institution of proceedings by an unregistered firm shall not apply to proceedings under Section 11 of the A&C Act. It further stated that arbitration proceedings are not covered within the meaning of ‘other proceedings’ given under Section 69(3) of the Act.
Whether the Court can substitute an arbitrator under Section 11 on the ground of ‘collusion’?
The High Court of Telangana held that a party cannot seek appointment of a substitute arbitrator on mere allegations of collusion. Further, such allegations even if existing cannot be decided in an application filed under Section 11 of the Act, 1996 and such an issue has to be necessarily decided by the tribunal under Section 13 of the Act.
Whether Section 12(5) would also apply to an arbitration commenced before the 2015 amendment if the appointment was made after the amendment came into effect?
The High Court of Delhi held that independence and impartiality of the arbitrator is a continuing requirement. Further, Section 12(5) applies regardless of whether the arbitration proceedings commenced before or after the 2015 amendment.
Whether the appointment of an arbitrator whose brother is ‘Executive Director’ of the respondent company would fall within clause 9 of the 7th Schedule?
The High Court of Orissa held that the appointment of an arbitrator whose brother happens to be one among the many executive directors of the respondent company would not fall within clause 9 of the 7th Schedule. The Court held that clause 9 provides for two-fold requirement for arbitrator’s relationship in the case of a company i.e., the relative must not only be in the management of the company but in ‘control’ of the company. The brother of the Arbitrator ceased to be an Executive Director, thus there can be no apprehension that this would affect the impartiality of the Arbitrator in the substantive arbitral proceedings that are yet to commence.
Whether the mandate of the arbitrator can be terminated by the Court on the ground of bias?
The Delhi High Court held that an issue as to the bias of an arbitrator can be raised only before the tribunal under Section 13 of the Act. Further, u/s 14, the Court can decide on the mandate of the arbitrator only if it is challenged on any grounds under the 7th Schedule of the Act.
When does the period of limitation for the appointment of substitute arbitrator begin?
The High Court of Delhi held that the limitation period for the appointment of substitute arbitrator begins on the date of the recusal and not when this fact comes to the knowledge of the parties. The Court held that Article 137 of the Limitation Act governs the limitation under Section 15 of the A&C Act and is not based on the knowledge of the parties unlike other articles under the Limitation Act that give importance to the knowledge of the parties.
Whether the tribunal exercising power under Section 17 of the A&C Act is bound by the provisions of CPC?
The High Court of Calcutta relying on Essar House (Supra) in the context of Section 17 held that the court is not subjected to confine itself to the technicalities of CPC. The Court held that both the Sections are similar in scope and pari passu after the 2019 amendment.
Whether an order passed by the court or tribunal be modified under Section 17 of the A&C Act?
The Delhi High Court held that an order under Section 17 of the Act is an interim measure and injunctions passed by a court, tribunal or authority can always be modified, if the circumstances so warrant. The examination of such a plea cannot possibly be termed as an exercise of a power of review.
Whether the place of arbitration tantamount to seat of arbitration in a situation where the exclusive jurisdiction is conferred on a Court in a different place?
The Delhi High Court held that the place of arbitration would not tantamount to the seat of arbitration in a situation where the agreement confers exclusive jurisdiction on a court situated in a different place.
Whether the venue of arbitration would be the seat of arbitration when the exclusive jurisdiction is conferred on a Court in a different place?
The High Court of Delhi held that the mere designation of venue of arbitration would not make it the seat of arbitration when there is a contraindication in the agreement in the form exclusive jurisdiction on a court in a different place.
Whether an application under Section 11 of the Act can be rejected if material particulars of the dispute are not given under the notice of arbitration?
The High Court of Gujarat held that on a plain reading of Section 21 it is clear that there is no requirement that the nature of dispute or its particulars must be explained in the notice of arbitration.
Whether wrongly deciding the issue of limitation leaves an award hit by Section 34 (2)(b)(ii)?
The Madras High Court held that limitation is a facet of public policy and hence, an error in limitation would leave an award hit by Section 34(2)(b)(ii) read with Clause (ii) of Explanation 1 thereat.
When does the period of limitation for referring the dispute to arbitration commence when the agreement provides for a pre-arbitration mechanism?
The High Court of Delhi held that if the agreement between the parties provides for pre-arbitration internal dispute resolution mechanism, then the limitation period for referring a dispute to arbitration commences only when that mechanism fails.
Whether the arbitral tribunal can delegate the task of quantifying the sum of award to a third party?
The Calcutta High Court held that the arbitrator cannot delegate its task of quantifying the damages to a third party. It held that the arbitrator indeed can take assistance from an accountant to certify the claims. However, it cannot leave the entire part of calculation and ask the award holder to get it quantified from a chartered accountant and direct the debtor to pay such an amount.
Can the Supreme Court invoke power under Article 142 to reduce the rate of interest awarded in an arbitration award?
The Supreme Court held that in terms of Section 31(7)(a) of the A&C Act an arbitrator is required to assign reasons for awarding a particular rate of interest. Further, it held that the arbitrator cannot award interest to a party that itself was to be blamed for the delay. Therefore, the Court, by exercising power under Article 142, reduced the rate of interest on the ground of long lapse of time and latches on the part of the award holder.
What is the maximum amount that an arbitrator can charge as its fee from a party in view of the entry 6th to 4th Schedule?
The Supreme Court of India held that arbitrators cannot unilaterally issue binding and enforceable orders determining their own fees. Further, the ceiling amount of Rs. 30 Lakhs given under entry 6th to 4th schedule also includes the base amount of claim, therefore, the maximum fee that an arbitrator can charge a single party is Rs. 30 Lakhs. The Court further held that the arbitrator can charge similar separate fees on the counter claim.
Whether the repudiation of claim after commencement of arbitration can confine arbitrability to quantum of claim and not liability per se?
The Delhi High Court held that in view of the concession of the Petitioner, since the claim is repudiated then arbitrability can only be in relation to the quantum and not the liability per se.
Whether the arbitral tribunal can recall its order terminating the arbitral proceedings?
The High Court of Delhi held that an arbitral tribunal cannot recall its order terminating the arbitral proceedings. The Court held that once an order of termination on account of withdrawal of claim, under Section 32(2)(a) of the Act is passed by the tribunal, it by the virtue of Section 32(3) becomes functus officio. Therefore, it cannot pass any order recalling its earlier order.
Whether the arbitrator can apply fundamental rights to a contractual dispute merely because one party happens to be the State?
The High Court of Calcutta shed light on the power of the arbitrator to apply fundamental rights to a contractual dispute wherein one of the parties to the dispute is State. It held that the “arbitrator cannot apply the rights envisaged under the fundamental rights of the Constitution of India or equity while granting arbitral awards, and if they do, such awards must be set aside as being patently illegal under Section 34(2A) of the Act.”
Whether the Court exercising powers under Section 37 of the A&C Act can modify an interim order passed by the tribunal under Section 17 of the Act?
The High Court of Delhi held that the Court exercising power under Section 37 of the Act can modify the orders of the arbitral tribunal to protect the subject matter of the arbitration. Further, it held that the jurisdiction of the Court under Section 37 of the Act is substantially different from the scope of jurisdiction under Section 34 of the Act, which does not include the authority to modify the award passed by the arbitral tribunal.
Whether the power of the Court u/s 34 (4) is discretionary?
The High Court of Bombay held that use of the expression “where it is appropriate” in sub-section 4 of Section 34 makes it evident that the power is discretionary.
Whether the parties can invoke contractual arbitration after the MSEF Council dismiss the petition as non-maintainable?
The Madras High Court held that if the facilitation council had dismissed the petition on merits then its decision would operate as res judicata. However, if the petition is dismissed as non-maintainable then the parties can subsequently invoke the arbitration clause embedded in the contract.
Whether Section 19 of the MSMED Act would apply to an arbitration under the A&C Act?
The Gujarat High Court held that Section 19 of the MSMED Act would also apply to challenge an award passed in arbitration between the parties. The Court held that Section 19 is not limited to the award passed by the MSEF Council for the reason that if it is only applied to MSME awards then the word ‘decree’ used under the said section would be redundant as MSME Council cannot pass a decree.
Tariq Khan is the Registrar of the International Arbitration & Mediation Centre.