This article highlights 50 note-worthy judgments passed by the Indian courts on arbitration between January and May 2022.
Whether the existence of Statutory Arbitration under the Indian Telegraph Act would oust the jurisdiction of the Consumer Forum?
The Supreme Court held that the existence of statutory arbitration under the Indian Telegraph Act will not oust the jurisdiction of a consumer forum. The Court held that there is no compulsion for the consumer to necessarily file a complaint with the consumer forum. However, it would be open for him to file a complaint with the consumer forum notwithstanding the availability of the arbitration under the Indian Telegraph Act.
Whether the Stamp Duty is payable on an award passed under the National Highways Act, 1956?
The Karnataka High Court held that stamp duty is not payable on an award of compensation passed under the provisions of the National Highways Authority of India Act. The Court held that an award made under the NHAI Act cannot be equated with an award passed in terms of Section 11 of the Karnataka Stamp Act, 1957.
Whether the order of the MSME Council on its jurisdiction is an order under Section 16 of the Arbitration Act or an interim award?
The Calcutta High Court held that an order of the Micro, Small and Medium Enterprises (MSME) Council by which it dismissed the objections to its jurisdiction would be an order under Section 16 of the Arbitration Act and cannot be termed as an interim award. Therefore, a Section 34 petition would not be maintainable against such an order at an interim stage.
Whether a judicial officer subordinate to the rank of a District Judge is conferred with the jurisdiction to decide arbitration matters under the Commercial Courts Act?
The Orissa High Court held that the state government has the power under Section 3 of the Commercial Courts Act to confer jurisdiction to decide all commercial disputes, including arbitration matters on a court subordinate to the rank of Principal Civil Court and there is no arbitrariness in the notification issued by the state government for the said purpose. Further, the Court observed that the Arbitration & Conciliation Act must yield to the Commercial Courts Act (CC Act) and not vice versa, as the objective of both enactments is speedy disposal of cases and the Commercial Courts Act was enacted later. Also, the CC Act providing for Commercial Appellate Division at the District Judge level is not inconsistent with Section 37 of the Arbitration Act.
Whether a subsequent agreement that only extends the validity of the original agreement requires an express arbitration clause?
The Calcutta High Court held that if the subsequent agreement has a specific reference to the original agreement and only extends the validity of the original agreement, it need not have a separate arbitration clause and the clause contained in the original agreement can be invoked.
Whether the view taken by the three-judge bench in Chloro Controls India Private Limited Vs. Severn Trent Water Purification Inc. & Anr is correct position of law?
The Supreme Court referred the matter to the Chief Justice of India for constituting a bench of five judges to decide the correctness of the decision given by the three-judge bench in Chloro Controls.
Whether the plaintiff is entitled to a refund of court fees when the respondent’s application under Section 8 is allowed?
The Delhi High Court held that the plaintiff would not be entitled to the refund of court fees when the Section 8 application of the respondent is allowed by the Court. The Court held that court fees is refundable when the parties are referred for settlement under Section 89 of the Code of Civil Procedure (CPC) and not when the parties are referred to arbitration under Section 8 of the Arbitration Act.
Whether the Court exercising power under Section 9 of the Act can direct the specific performance of a determinable contract?
The Bombay High Court held that the court exercising powers under Section 9 of the Act cannot direct the specific performance of a determinable contract. Further, the principles contained in Section 14(d) r/w Section 41(e) of the Specific Relief Act are applicable even when a court is considering an application u/s 9 of the Arbitration Act, 1996.
Whether the proceedings under the SARFAESI Act would be maintainable when the application under Section 9 of the Act is already filed?
The Rajasthan High Court held that the presence of an arbitration agreement between the parties or filing of an application u/s 9 is not a bar to the institution of proceedings under the SARFAESI Act.
Whether a party can claim post-award interim relief that is beyond the final relief granted in the arbitration award?
The High Court of Delhi held that a party cannot claim post-award interim relief beyond what has been granted in the award. Further, under Section 9 of the 1996 Act, the Court cannot revisit either the findings or the conclusions given in the award.
Supreme Court directs High Courts to decide all applications for appointment of arbitrator(s) at the earliest.
The Supreme Court requested all the High Courts to decide and dispose of applications under Sections 11(5) and 11(6) of the Arbitration Act which are pending for more than one year from the date of filing, within six months.
Whether a party forfeits the right to appoint an arbitrator after a Section 11 application is filed?
The Supreme Court held that the settled position of law is that a party forfeits its right to appoint an arbitrator as per the clause if it does not make an appointment before the filing of an application under Section 11(6).
Whether the exclusive jurisdiction clause would override the arbitration clause?
The High Court of Delhi held that the exclusive jurisdiction clause would override the seat specified in the arbitration agreement. The Court observed that generally, the seat clause would mean that exclusive jurisdiction is conferred on the seat court. However, when the agreement also has a clause conferring exclusive jurisdiction over some other court, the seat court would not have the jurisdiction to deal with matters arising out of the arbitration agreement.
Whether an objection pertaining to maintainability and the jurisdictional issues ought to be raised before the Tribunal constituted by the facilitation council under Section 18 of MSMED Act, 2006?
The High Court of Calcutta held that the petitioner shall participate in arbitration and the Tribunal shall decide on its own jurisdiction.
Whether an application for appointment of the arbitrator could be moved in a Court that inherently lacks jurisdiction when there is no designation of the seat of arbitration?
The Supreme Court set aside an order of the Calcutta High Court allowing an application for the appointment of an arbitrator. The Court held that the High Court lacked inherent jurisdiction as the parties only agreed that the sittings of the Tribunal would be in Kolkata. Thus, it cannot be equated with the seat of arbitration or place of arbitration, which has a different connotation.
Whether the pendency of an insolvency petition is a bar to an application under Section 11 of the Act?
The Bombay High Court held that mere pendency of an insolvency petition is not a bar to the application under Section 11 of the Act. The Court held that it is only when the insolvency petition is admitted by the National Company Law Tribunal (NCLT) that the embargo would apply.
Whether Section 86(1)(F) of the Electricity Act 2003 will be applicable where the agreement is for the supply of material simpliciter and does not involve any element of transmission, distribution, or trading in electricity?
The Allahabad High Court held that the Electricity Act, 2003 would not apply to a contract that is simply for the supply of material and does not involve any element of transmission, distribution, or trading in electricity. Accordingly, the application under Section 11 of the Arbitration Act would be maintainable.
Whether trademark disputes raising purely contractual disputes can be referred to arbitration?
The High Court of Delhi held that trademark disputes that purely arise in respect of contractual rights and obligations of the parties can be referred to arbitration.
Whether the time spent in meditation would be excluded from the period of limitation to invoke arbitration?
The Delhi High Court held that the time spent by the parties in mediation would be excluded from the period of limitation for the purpose of invocation of arbitration as well as the substantive claims.
Whether the High Court, exercising power under Section 11, can terminate the mandate of the arbitrator on the ground that his mandate stood terminated in view of Section 14(1)(a) of the Act?
The Supreme Court held that the High Court, exercising power under Section 11, cannot terminate the mandate of the arbitrator on the ground that his mandate stood terminated given Section 14(1)(a) of the Act.
Whether the Court can remove an arbitrator whose appointment is hit by Section 12(5) while exercising powers under Section 11 of the Act?
The Madhya Pradesh High Court held that an arbitrator whose appointment is hit by Section 12(5) of the Act can be removed by the Court while exercising powers under Section 11 of the Act.
Whether the claims that arose after the Insolvency commencement date can be referred to arbitration?
The Delhi High Court held that whether the liability sought to be enforced against the respondent stands extinguished is a contentious issue and the Court u/s 11 is not required to examine and adjudicate any contentious issue. Therefore, the parties were relegated to arbitration.
Whether all the existing claims should be decided in the same arbitration?
The High Court of Delhi held that multiple arbitrations are permissible if the cause of action arises after the constitution of a tribunal. However, to avoid the constitution of separate arbitral tribunals for separate claims in respect of the same contract, it would be appropriate to raise the claims before the tribunal where proceedings are in progress.
Whether a party can directly invoke the arbitration clause without fulfilling the pre-arbitral steps?
The High Court of Madhya Pradesh held that if the conditions precedent to seeking arbitration have not been complied with, then the appointment of the arbitrator can be rejected.
Whether the Court can consider the issue of inadequacy of stamp duty while exercising powers under Section 11 of the Act?
The Supreme Court held that once a party has paid the stamp duty, any objection regarding its sufficiency cannot be decided by a court exercising powers under Section 11 of the Act.
Whether Section 12(5) would apply where an arbitral tribunal was constituted before the 2015 Amendment Act?
The Supreme Court held that by operation of law and in view of sub-section (5) of Section 12 read with the Seventh Schedule, the earlier Arbitral Tribunal constituted prior to the amendment of 2015 has become ineligible and lost its mandate.
Whether a party could challenge the mandate of the arbitrator after participating in a few arbitration hearings?
The High Court of Delhi held that for waiver of any right under Section 12(5) of the Act, there has to be an agreement in writing, entered after the disputes had arisen. Further, a petition under Section 14 of the Act is maintainable if an arbitrator is ineligible under Section 12(5) of the Act.
Whether a party can file a Section 14 application to challenge the mandate of the arbitrator due to his improper disclosure under Section 12(1) of the Act?
The High Court of Delhi held that a challenge to the appointment of an arbitrator, on a ground other than that of ineligibility as specified under Section 12(5) of the Act, is to be made as per the procedure set out in Section 13 of the Act.
Whether the insufficiency of stamp duty on the arbitration agreement is a jurisdictional issue?
The High Court of Delhi held that the issue of sufficiency of stamp duty on the arbitration agreement is a jurisdictional issue falling within Section 16 of the Act, as it relates to the existence or validity of the arbitration agreement.
Whether Section 65-B of the Indian Evidence Act would apply to arbitral proceedings?
The High Court of Delhi held that as per Section 1 of the Evidence Act, Section 65-B of the Evidence Act would not apply to arbitral proceedings. The Court further held that an objection as to any defect in the certificate shall be raised at the earliest opportunity.
Whether conducting arbitration proceedings at a new place owing to the appointment of a new arbitrator would shift the ‘jurisdictional seat of the arbitration?
The Supreme Court held that merely because the newly appointed arbitrator has conducted arbitral proceedings at a different venue, the same would not become the jurisdictional seat of arbitration fixed by the arbitrator exercising powers under Section 20(2) of the Act. The Court held a change of venue does not result in a change of seat.
Whether the parties can waive off the requirement of Section 21 notice merely because the arbitration agreement provides the name of the arbitrator?
The Bombay High Court held that the requirement of Section 21 notice cannot be waived off merely because the arbitration agreement provides the name of the arbitrator.
Whether the Arbitral Tribunal has the power to recall the order of termination of arbitral proceedings under Section 25(a) of the Act?
The Delhi High Court held that on sufficient cause being shown, the arbitral tribunal has the power to recall the order passed by it under Section 25(a) of the Act, terminating the arbitral proceedings.
Whether the court exercising powers under Section 27 of the Act can scrutinize the order of the arbitral tribunal permitting the examination of a witness?
The High Court of Bombay held that the Court, while exercising powers under Section 27 of the Act, does not sit in an appeal and need not revisit the opinion of the arbitrator that a particular witness needs to be examined.
Whether an award passed by an arbitrator after the expiry of the time period prescribed in Section 29A of the Act will be a nullity and void ab initio?
The Telangana High Court refused the enforcement of an arbitral award that was passed beyond the time limit prescribed under Section 29A of the Act. The Court held the award to be void ab initio and a nullity in the eyes of law. It was also held that once the time limit prescribed under Section 29A expires, the arbitrator becomes functus officio, therefore, the award would be without jurisdiction.
Whether the principal civil court would have the jurisdiction to entertain an application under Section 29A of the Act?
The Allahabad High Court held that the application under Section 29A would only lie before the High Court that appointed the arbitrator and the principal civil court would have no jurisdiction over said application. The Court held that Section 29A also allows the court to terminate the mandate of the arbitrator and appoint the substitute arbitrator. Therefore, if the jurisdiction is conferred on the principal civil court, it would lead to an implausible situation where it would be able to remove the arbitrator appointed by the High Court.
Whether the term “sum in dispute”, provided in the Fourth Schedule to the Act, includes the aggregate value of claims and counter-claims?
The High Court of Delhi held that where the fees of the arbitrator(s) have been fixed by the Court in terms of the Fourth Schedule to the Act, the arbitrator cannot charge separate fees on both claims and counterclaims. Further, the term ‘sum in dispute’ would include the aggregate value of the claims and the counter-claims.
Whether a writ petition is maintainable against the order of an arbitral tribunal framing the issue qua a claim which is already decided by the interim award?
The Meghalaya High Court held that an arbitrator cannot frame an issue regarding a claim that is already decided upon in the interim award. The Court further observed that considering the exceptional circumstances in the present case, power under Article 227 warrants interference.
Whether the arbitrator can re-write the terms of the agreement between the parties merely because they flout common business sense?
The High Court of Delhi held that the arbitrator cannot re-write the terms of the contract between the parties merely because they are not commercially viable. Further, it is not for the arbitrator to re-work a bargain reached between the parties simply because it flouts the business common sense. The Court also held that when the agreement provides one party with the right to make alterations in the quantity to be supplied in the contract, the court cannot interpret the clause contrary to its literal meaning merely because the price of the product has gone up.
Whether the court can remit the matter to the arbitrator when there is no finding given on a pertinent issue?
The Supreme Court held that a court cannot remit a matter to the arbitrator on an application under Section 34(4) when the arbitrator has not given any findings on an issue. The Court differentiated between ‘reasons’ and ‘finding’ and held that it is only to fill the gaps in the reasoning that the matter would be remitted to the arbitrator. When there are no findings on the given issue, the matter cannot be remitted as that in itself is a ground to set aside the award. It further held that the power under Section 34(4) is discretionary.
Whether the Court, after setting aside an award, can send the matter back to the same arbitrator for fresh arbitration with the consent of the parties involved?
The Supreme Court held that after setting aside an award, the court can remit the matter to the same arbitrator for a fresh decision, provided that the parties involved mutually agree to the same.
Whether a party that submitted to the jurisdiction of the arbitrator can later impeach the award on the ground that there was no arbitration agreement?
The Delhi High Court held that if a party did not raise any challenge to the arbitration clause throughout the arbitration proceedings and confined its challenge(s) to the principal agreement, it cannot challenge the award on account of the lack of jurisdiction of the arbitrator, as an arbitration agreement is a separate agreement even though it is contained in the principal agreement.
Whether a writ would be maintainable against the award of the MSME Council passed without giving a hearing to the petitioner on the objections?
The Orissa High Court held that a writ petition would be maintainable against an award rendered by the MSME Council whereby the aggrieved party was not given a hearing on its objections. The Court held that an alternative remedy under Section 34 would not be a bar to the writ petition where a party was not part of given the right of hearing.
Whether the arbitrator can allow a separate claim for interest on interest awarded on other claims?
The Delhi High Court set aside an award whereby the arbitrator allowed the claim of interest on the interest component awarded on the principal amount. The arbitrator further allowed pendente lite interest on all the claims including the interest awarded. Finally, the Court held that allowing a separate claim of interest on the interest component would amount to awarding interest on interest, and the same is impermissible in law.
Whether the principle of res judicata applies to subsequent arbitration when the first award was set aside due to improper constitution of the arbitral tribunal and not on merits?
The High Court of Kerala held that the principle of res judicata would not apply to subsequent arbitral proceedings when the first award was set aside by cause of improper constitution of the arbitral tribunal and not on merits.
Whether a party can dispute the jurisdiction of the arbitral tribunal for the first time under a Section 34 petition?
The High Court of Gujarat held that a party which that has failed to raise objections qua the jurisdiction of the arbitral tribunal at two possible opportunities cannot take such an objection for the first time under a Section 34 petition.
Whether the arbitrator can permit forfeiture of a substantial amount of consideration merely because it was earnest money?
The Delhi High Court held that it is impermissible for the arbitrator to allow the forfeiture of a substantial part of consideration without proof of actual loss, merely because it was deposited as earnest money.
Whether an arbitral award passed without giving any reasons would be against the Public Policy of India?
The Orissa High Court held that an arbitral award passed without assigning any reasons for the conclusion reached therein would be against the mandate of Section 31 of the Act and opposed to Indian public policy.
Whether the Court can apply Section 5 of the Limitation Act to condone a delay beyond the period provided under Section 34(3) of the A&C Act?
The Rajasthan High Court reiterated that Section 5 of the Limitation Act does not apply to applications under Section 34. As a result, the delay beyond the period provided under Section 34(3) cannot be condoned by taking aid of Section 5 of the Limitation Act.
Whether the amount of future interest should be included in the sum of the award for the purpose of determining the security for the stay on the award?
The High Court of Calcutta held that the total value of the future interest shall be included in the sum of the award for the purpose of determining the security for the stay on the award. It further held that future interest is not advisory, but a mandate under the Act.