Tariq Khan
Tariq Khan
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35 recent judgments passed by Indian Courts on Arbitration

A review of some of the recent judgments relating to Arbitration.

Tariq Khan

Section 4 of Arbitration and Conciliation Act

1. When respondent waives right to raise a jurisdictional objection

Quippo Construction Equipment Limited v. Janardan Nirman Pvt. Limited [Judgment dated 29.04.2020]

The Supreme Court held that since the respondent failed to participate in the proceedings before the arbitrator and did not raise any jurisdictional objection, the respondent must be deemed to have waived all such objections.

Section 7

2. Whether fraud would vitiate the arbitration clause in the arbitration agreement?

Avitel Post Studioz Limited & Ors. Vs. HSBC PI Holdings (Mauritius) Limited [Judgment dated 19.08.2020 in Civil Appeal No. 5145 of 2016]

The Court held that serious allegations of fraud arise only in two situations 1) if it can be clearly conculded that the arbitration clause or agreement itself does not exist 2) 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. Further, it was held that paragraph 27(vi) of Afcons and paragraph 36(i) of Booz Allen, must now be read subject to the rider that the same set of facts may lead to civil and criminal proceedings and if it is clear that a civil dispute involves questions of fraud, misrepresentation, etc. which can be the subject matter of such proceeding under section 17 of the Contract Act, and/or the tort of deceit, the mere fact that criminal proceedings can or have been instituted in respect of the same subject matter would not lead to the conclusion that a dispute which is otherwise arbitrable, ceases to be so.

3. Deccan Paper Mills Co. Ltd. v. Regency Mahavir Properties & Ors. [Judgment dated 19.08.2020 in Civil Appeal No. 5147 of 2016]

Relying on Avitel Post Studioz Limited v HSBC 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.

4. Existence of a valid arbitration clause

Galaxy Infra and Engineering Pvt. Ltd v. Pravin Electricals Pvt. Ltd [Judgment dated 12.05.2020]

The Delhi High Court held that the draft agreement exchanged by email reflects the existence of an arbitration agreement between the parties and squarely falls within the ambit of Section 7(4)(b) of the Act.

5. Whether Section 19 of MSMED Act, 2006 would apply to an award published by an arbitrator not appointed under Section 18 of the MSMED Act?

Avr Enterprises v. Union Of India [Judgment dated 08.05.2020]

The Delhi High Court held that Section 19 of the MSMED Act would apply only to proceedings initiated under Section 18 of the MSMED Act and would not apply to an award published by an arbitrator appointed otherwise.

Section 9

6. What are the pre requisites for passing an Order u/s 9?

Avantha Holdings Limited v. Vistra ITCL India Limited [judgment dated 14.08.2020 in O.M.P.(I) (COMM.) 177/2020]

The Court observed that while passing orders under Section 9, the Court is required to satisfy itself that (i) the applicant, before it, manifestly intends to initiate arbitral proceedings, (ii) the criteria for grant of interim injunction, which apply to Order 39 of the CPC, stands satisfied, and (iii) circumstances also exist, which renders the requirement of ordering interim measures an emergent necessity, which cannot await a Section 17 proceeding, before the arbitrator, or arbitral tribunal.

7. Whether the Court under Section 9, at a pre-arbitration stage, can assume the jurisdiction of the arbitral tribunal?

Avantha Holdings Limited v. Vistra Itcl India Limited [Judgment dated 14.08.2020]

It was held that the court while exercising jurisdiction under Section 9, even at a pre-arbitration stage, cannot usurp the jurisdiction of the arbitral tribunal.

8. Whether under Section 9 of the Act, the principles of the Specific Relief Act, 1963 have to be applied or not?

Overnite Express Ltd. v. Delhi Metro Rail Corporation [Judgment dated 12.06.2020]

The Delhi High Court held that the relief of injunction from raising invoices would indirectly amount to enforcement of the agreements as well as grant of injunction, which cannot be granted under Section 9 in view of the statutory bar under the Specific Relief Act, 1963.

9. Whether an applicant has to demonstrate intention to refer the matter to arbitration before Section 9 petition can be entertained?

Jindal Steel & Power Limited v. State Tradings Corporation of India Limited & Ors. [Judgment dated 29.04.2020]

Relying on Minochar v. Deenyar Sheiar Jehani, the Delhi High Court held that interim relief is an aid to final relief and an applicant must demonstrate its intention to refer the matter to arbitration by raising a dispute before a Section 9 petition could be entertained.

10. Whether the court under Section 9 can issue interim directions against a third party?

Blue Coast Infrastructure Development Pvt. Ltd. v. Blue Coast Hotels Ltd. & Anr. [Judgment dated 10.06.2020]

The Delhi High Court held that the scope of power of a court under Section 9 of the Act is not limited to parties to an arbitration agreement, and the court can issue interim directions even against a third party.

Section 11

11. Whether the Court can appoint a Sole Arbitrator where the Parties fail to provide an odd number of Arbitrators?

Jmc Projects (India) Limited vs South Delhi Municipal [Judgment dated 13.08.2020 in ARB. P. 632/2017]

Relying on M.M.T.C. Limited v. Sterlite Industries (India) Limited the Court held that validity of an Arbitration Agreement does not depend on the number of Arbitrators and the Arbitration Agreement specifying an even number of Arbitrators cannot be a ground to render the Agreement invalid under the 1996 Act. Thus,Court can appoint a Sole Arbitrator where the Parties fail to provide an odd number of Arbitrators under Section 10(1).

12. Whether retired employees who have worked in the Railways are ineligible to act as arbitrators?

Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML [Judgment dated 17.12.2019]

The Supreme Court Court held that merely because the panel of the arbitrators are the retired employees who have worked in the Railways, it does not make them ineligible to act as the arbitrators.

13. Whether the court can determine its jurisdiction in the absence of seat and venue?

Mrs. Madhu Devi Fatehpuria v. M/S. Jugal Kishore Shyam Prakash & Co. [Judgment dated 13.03.2020]

The Court held that in the absence of the seat or the venue having been agreed upon between the parties, the registration of the firm at Delhi would be a factor to determine the jurisdiction of the court.

Section 12

14. Whether the fees chargeable by the arbitrator is subject to the statutory limits stipulated in the Fourth Schedule to the Act?

The Court held that till date, no rules have been framed under Section 11(14) of the Act by the court as per which fees of arbitrators directly appointed by the court could be governed. Thus, the rates of fees fixed in the Fourth Schedule to the 1996 Act, were not necessarily binding on the arbitrator.

SECTION 14

15. Whether “express agreement in writing” is mandatory for waiver of Section 12(5) of the 1996 Act?

JMC Projects India Ltd. v. Indure Pvt. Ltd. [Judgment dated 20.08.2020 in O.M.P. (T) (COMM.) 33/2020]

Section 15

16. Whether the respondent will waive its right to appoint a substitute arbitrator if no notice was ever issued by the petitioner to appoint one?

DSC Ventures Pvt Ltd. v. Ministry of Road Transport and Highways, UOI [Judgment dated 29.06.2020]

The Court held that the contract specifically required issuance of a notice, by petitioner to the respondent for appointment of an arbitrator and the same procedure would be applicable for appointment of substitute arbitrator. Since no notice was issued by the petitioner, it cannot be said that the respondent waived its right to appoint a substitute arbitrator.

Section 17

17. Whether a petition under Section 9 would be maintainable if the arbitral tribunal is in place?

Nandini Bhatia v. Navil Ratish Kadwadkar [Judgment dated 18.06.2020]

The Court held that a section 9 petition will not be maintainable in view of the bar contained in Section 9 (3) of the 1996 Act if the arbitral tribunal has agreed to consider the application under Section 17.

Section 21

18. Whether a petition u/s 11 will be maintainable if the notice invoking arbitration was sent at an incorrect address?

Active Media v.Divisional Commercial Manager [Judgment dated 04.03.2020]

The Court held that the petition under Section 11 was not maintainable as the petitioner failed to send a notice invoking arbitration at the correct address.

Section 29A

19. Whether there is a requirement of issuing notice of Section 29A(5) application to the respondent who has been proceeded ex parte?

M/s. B. N. Enterprises v. M/s. Blendz Foods Private Limited [Judgment dated 03.03.2020]

The Court held that since the respondent was proceeded against ex-parte in arbitration, there was no requirement of issuing notice of the application to the respondent.

20. Whether the provisions of amended Section 29A (1) will be applicable to all pending arbitrations seated in India?

Ongc Petro Additions Limited vs Fernas Construction Co. Inc [Judgment dated 21.07.2020]

The Court held that the provisions of Section 29A(1) shall be applicable to all pending arbitrations seated in India as on August 30, 2019 and commenced after October 23, 2015.

Section 31

21. Whether grant of interest by the arbitrator @ 14% per annum is against the public policy?

Steel Authority of India v. Primetals Technologies India Pvt. Ltd. [Judgment dated 12.03.2020]

Reducing the rate of interest from 14% per annum to 10% per annum, the Court held that award of interest by the learned arbitrator is not only unreasoned, but virtually in the nature of a penal interest in the light of the prevailing rates. It was held that the grant of such a rate of interest in today’s scenario is against public policy.

22. Whether a party can claim pendente lite interest if the claim is in the nature of damages?

Guru Gobind Singh Indraprastha University v. Engineers India Limited [Judgment dated 13.03.2020]

The Court held that a claim for interest cannot be rejected on the mere ground that the claim was in the shape of damages.

Section 34

23. Whether the award was “patently illegal”?

Patel Engineering Ltd. v. NEEPCO [Judgment dated 22.05.2020]

Relying on the decision in Associated Builders and Ssangyong Engineering, the Supreme Court upheld the judgment passed by the High Court that an arbitral award can be set aside under Section 34 if it is patently illegal or perverse. The Court observed that the ground of patent illegality is available for setting aside a domestic award, if the decision of the arbitrator is found to be perverse, or, so irrational that no reasonable person would have arrived at the same; or, the construction of the contract is such that no fair or reasonable person would take; or, that the view of the arbitrator is not even a possible view.

24. Whether it is permissible for a party to rely on the findings of an award to argue that another Award ought to be set aside?

Gammon India Ltd. & Anr v. NHAI [Judgment dated 23.06.2020]

Relying on Vijay Karia’s case the Court held that in proceedings u/s 34 of the Act, it would be inappropriate to hold that a finding in a subsequent award would render the previous award illegal or contrary to law. The Court held that an award would have to be tested as on the date when it was pronounced, on its own merits, and not on the basis of subsequent findings which may have been rendered by a later Arbitral Tribunal.

25. Whether a petitioner is required to file the arbitral award along with the Section 34 petition?

Union Of India vs Bharat Biotech International Ltd [Judgment dated 24.02.2020]

The Court held that filing a copy of the award would be a sine qua non in every petition challenging the award.

26. Whether the interpretation of the terms of the contract by the Arbitral Tribunal is erroneous and against the public policy of India?

South East Asia Marine Engineering and Constructions Ltd. v. Oil India Limited [Judgment dated 11.05.2020 in Civil Appeal No. 673 of 2012]

The Supreme Court held that the interpretation of Clause 23 of the contract by the Arbitral Tribunal, to provide a wide interpretation cannot be accepted, as the thumb rule of interpretation is that the document forming a written contract should be read as a whole and as far as possible, as mutually explanatory. Since the evidence on record does not suggest that the parties had agreed to a broad interpretation to the clause in question, interpretation of the clause, as suggested by the Arbitral Tribunal was perverse.

27. Whether an arbitrator can rely on internal guidelines/circulars to interpret the contract?

Mohan Steels Limited v. Steel Authority of India [Judgment dated 04.03.2020]

The Court held that the arbitrator committed a patent illegality by placing reliance on the circulars which were never a part of the tender conditions or the contract. Further, it was held that since the circulars were beyond the terms of the contract and were not within the knowledge of the parties, it cannot be relied upon for interpreting the clauses of the contract.

28. Whether a jurisdictional objection can be taken for the first time in proceedings under Section 34 of the Act?

Salar Jung Museum & Anr v. Design Team Consultants Pvt Ltd [Judgment dated 21.05.2020]

The Court held that where the jurisdictional objection is capable of waiver by the affected party, the failure to raise it before the arbitrator signifies consent to the arbitrator’s jurisdiction. It was held that a party after participating in the proceedings without any objection cannot then challenge the validity of the proceedings u/s 34.

Section 36

29. Whether non-quantification of amount by the Court while upholding a part of the award can be an impediment in the execution?

Starcon India Ltd & Anr. v. Prasar Bharti [Judgment dated 15.06.2020]

The Court held that merely because no quantification has been done by the learned judge while upholding a part of the award, it cannot be said that no amount is payable to the decree holder. The Court also discussed the well-settled principle of severability and partial validity of an award.

Section 37

30. Whether orders passed by the Arbitral Tribunal can be challenged under Articles 226 and 227 of the Constitution?

GTPL Hathway Ltd. v. Strategic Markering Pvt. Ltd [Judgment dated 20.04.2020]

The Gujarat High Court held that the orders passed by the Arbitral Tribunal cannot be challenged in writ jurisdiction as the Arbitration Act, 1996 is a special Act and a self­-contained code.

31. Whether an appeal under Section 37 is maintainable in absence of sanction of law?

Hindustan Zinc Limited v. Glencore international A.G. (GIAG) [Judgment dated 23.03.2020]

Relying on the BGS SGS Soma case, the Rajasthan High Court held that in the absence of sanction of law, an appeal under Section 37 of the Act is not maintainable. Further, it was held that since the appellant averred that the seat of arbitration was London, the same would expressly exclude applicability of Part 1 of the Act of 1996.

32. Whether admitted payments can be postponed till disputed amounts are adjudicated?

GTL Infrastucture Limited v. GTL Limited [Judgment dated 04.03.2020]

The Gujarat High Court held that once any part of the liability is admitted by a party, the same should be released to the opposite party at the earliest, without waiting for adjudication of the remaining disputes.

Section 48

33. Whether enforcement of the award is against the public policy of India?

National Agricultural Cooperative Marketing Federation of India v. Alimenta S.A. [Judgment dated 22.04.2020]

The Supreme Court allowed the appeal and held that the award would be unenforceable as the contract was rendered unenforceable under Section 32 of the Contract Act, due to which NAFED cannot be held liable to pay damages under foreign award. It was observed that export without permission of the government would have violated the law, thus, enforcement of such award would be violative of the public policy of India.

34. Whether an ex parte foreign award could be enforced?

Centrotrade Minerals and Metals Inc v. Hindustan Copper Limited [Judgment dated 02.06.2020]

The Court held that the respondent chose not to appear before the arbitrator, and thereafter chose to submit documents and legal submissions outside the timelines granted by the arbitrator. The foreign award was enforced.

35. Whether pendency of proceedings u/s 34 in Rajasthan High Court can come in the way of the enforcement of the award before Delhi High Court?

Glencore International AG v. Hindustan Zinc Limited [Judgment dated 08.06.2020]

The Court held that the proceedings before the Rajasthan High Court cannot come in the way of the Petitioners enforcing the Award before this Court. The Court observed that it is for the ward holder to locate the money of the JD and in case after filing the application it is unable to find money, it can file another application at another place and locate another property.

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