Arbitration Review: 40 Recent Judgments [Part 2]
In Part 2 of our series on recent decisions delivered by Indian Courts on Arbitration Law, we take a look at the 20 remaining verdicts.
Whether a Clause in an Agreement for Settlement of Disputes can be construed as an Arbitration Clause?
- Food Corporation of India vs. National Collateral Management Services Limited [Judgment dated 04.11.2019 in Civil Appeal No. 8338 of 2017]
The Supreme Court held that a clause that merely refers disputes between the parties to the Chairman and Managing Director for settlement cannot be construed as an Arbitration clause.
Whether an Arbitration Clause of an Earlier Contract can be Incorporated by Reference in a Subsequent Contract?
2. Glencore International AG v. M/S Shree Ganesh Metals & Anr. [Judgment dated 14.11.2019 in FAO (OS) (COMM) 195/2017]
The Court held that a standard form of contract is a ‘take it or leave it’ contract which does not leave scope for any negotiation with respect to its terms and conditions. The subsequent contract was not a standard form of contract since the parties negotiated the terms of the contract and the arbitration clause contained in the subsequent contract was at variance with the arbitration clause of the earlier contract. The court also took note of the fact that in the subsequent contract there was no categorical mention of the arbitration clause contained in the earlier contract and there was nothing on record to show that Respondent gave its acceptance to enter into a subsequent contract as per terms and conditions of the earlier contract. For the foregoing reasons, it was held that the arbitration clause of the earlier agreement would not apply to disputes which have arisen between the parties under the subsequent agreement.
Whether the Arbitration Clause Perished after the Original Contract was substituted by a new Agreement?
The Court held that the parties having expressly agreed that all previous agreements stand nullified, the parties intended not to be bound by anything contained in the earlier agreement including the arbitration clause.
Whether a person not a party to an Arbitration Agreement can seek Protection under Section 9 of the Arbitration and Conciliation Act, 1996?
4. APM Air Cargo Terminal Services & Anr. v. Celebi Delhi Cargo Terminal Management India Pvt Limited & Anr. [Judgment dated 13.09.2019 in O.M.P. (I) (COMM) 204/2019]
The court held that the qualification which the person, invoking jurisdiction of the Court under Section 9, must possess is of being “party” to an arbitration agreement and a person not party to an arbitration agreement cannot enter the Court seeking protection under Section 9 of the Arbitration and Conciliation Act, 1996. The Court rejected the petition under Section 9 of Arbitration and Conciliation Act, 1996 as not maintainable since no arbitration agreement could be demonstrated to be in existence between the parties.
Whether a party can invoke Arbitration after Fully and Finally accepting the amount offered?
5. The Oriental Insurance Co. Ltd. & Anr. v. Dicitex Furnishing Ltd. [Judgment dated 13.11.2019 in Civil Appeal No. 8550 of 2015]
The Supreme Court held that if a party which has executed the discharge agreement or discharge voucher, alleges that the execution of such document was on account of fraud/coercion/undue influence practiced by the other party, and if that party establishes the same, then such discharge voucher or agreement is rendered void and cannot be acted upon and consequently, any dispute raised by such party would be arbitrable. Further, it was held that the court which is required to ensure that an arbitrable dispute exists, has to be prima facie convinced about the genuineness or credibility of the plea of coercion; it cannot be too particular about the nature of the plea, which necessarily has to be made and established in the substantive proceeding. It was observed that if the court were to take a contrary approach and minutely examine the plea and judge its credibility or reasonableness, there would be a danger of its denying a forum to the applicant altogether, because rejection of the application would render the finding final, thus, precluding the applicant of its right even to approach a civil court.
Whether the Arbitration Clause can be invoked after full and final settlement of Dispute?
6. M/S MAKRO V. THE NEW INDIA ASSURANCE CO. LTD. & ANR. [Judgment dated 24.09.2019 in ARB. P. 416/2019]
The court reiterated all that needs to be seen at the time of deciding an application under Section 11(6) of the Act is the existence of the Arbitration Agreement. Further, it was held that the defence of full and final settlement of a claim will not be considered by the Court while examining the petition under Section 11(6) of the Act.
Whether the amendment of Agreement has the effect of Undoing and Abrogating the Arbitration Clause predicated in the Contract?
7. Wapcos Ltd. v. Salma Dam Joint Venture & ANR. [Judgment dated 14.11.2019 arising out of SLP C No. 7979 of 2019]
The Supreme Court held that in a commercial world it is not unknown that the parties amend the original contract and even give up their claims under the subsisting agreement. Further, it was held that where the parties consciously and with full understanding executed AoA whereby the contractor gave up all his claims and consented to the new arrangement specified in AoA including that there will be no arbitration for the settlement of any claims by the contractor in future. After adopting that path, it will not be open to the contractor to now take recourse to the arbitration process or to resurrect the claim which has been resolved in terms of the amended agreement.
Whether Section 18 of MSMED ACT, 2006 overrides the Arbitration Clause in the Agreement between the Parties?
The Court reiterated that Section 18 of the Micro, Small & Medium Enterprises Development Act, 2006 would override the arbitration clause in the agreement between the parties.
Whether a party can file a Reference under Section 18 of the MSMED ACT, 2006 without complying with the mechanism stipulated under the terms of the Contract?
9. The Chief General Manager, (CONTRACTS), M/S Neyvelli Lignite Corporation Ltd. v. Driplex Water Engineering Ltd. & ANR. [Judgment dated 02.09.2019 in W.P. (C) 9670/2016]
The court held that Section 24 of the MSMED Act, 2006 contains a non-obstante provision, which expressly provides that the provisions of Section 15 to 23 of the MSMED Act would have an overriding effect, notwithstanding anything inconsistent in any other law for the time being in force. Thus, the reference could not be rejected on the ground that the mechanism stipulated under the terms of the contract was not complied with prior to making such reference.
Whether the levy of liquidated damages by the Superintending Engineer is an “Excepted Matter” not falling within the jurisdiction of the Arbitrator?
10. M/S Mitra Guha Builders (INDIA) Company vs. Oil and Natural Gas Corporation Limited [Judgment dated 08.11.2019 in Civil Appeal No 5511 of 2012]
The court held that once the parties have decided that certain matters are to be decided by the Superintending Engineer and his decision would be final, the same cannot be the subject matter of the arbitration.
Whether the Period of Limitation to invoke Arbitration can be extended in case of Fraud?
11. Surendra Pal & ANR. v. True Zone Buildwell Pvt. Ltd. [Judgment dated 07/08/2019 in O.M.P. 11/2018]
The Court held that as per Section 17 of the Limitation Act, 1963, the period of limitation would begin to run on the discovery of the fraud and the aggrieved party is required to invoke arbitration within a period of 3 years from the discovery of the fraud. The court held that intervening events would not extend the period of limitation.
Whether a party raising a counterclaim is required to issue a formal notice invoking arbitration in respect of the said Counterclaim?
12. Oil Industry Development Board v. Godrej & Boyce Mfg. Co. Ltd. [Judgment dated 16.09.2019 in O.M.P. 601/2012]
The Court held that it is not mandatory for a party raising a counterclaim to put the other party on notice of the same prior to the arbitration proceedings or to issue a formal notice invoking arbitration in respect of the said counterclaim.
Whether the decree-holder is entitled to future interest @18% p.a. if the Award is silent on the future rate of interest?
13. NCERT V. SKYWING [Judgment dated 18.09.2019 in C.R.P. 233/2018]
The Court interpreted the un-amended Section 31(7) (b) of the Arbitration and Conciliation Act, 1996 and held that the arbitral tribunal had not awarded any post-award interest, the petitioners were liable to pay interest at the rate of 18% for the period post-award till payment.
Whether a subsequent filing before a wrong forum can extend the period of limitation prescribed under Section 34(3) of the Arbitration Act when the initial filing was itself outside the outer limit stipulated under the Act?
14. Union of India v. M/S. JCB India Ltd. [Judgment dated 27.09.2019 in FAO (OS) (COMM) 44/2019]
The Court held that the time period for filing a challenge to an award under Section 34(3) of the Arbitration Act, will not get extended by a subsequent filing before a wrong forum when the initial filing was itself beyond the prescribed period of limitation. Further, it was held that Section 14 of the Limitation Act, 1963 would not come to the rescue of that party in such a case.
Whether the Arbitral Tribunal can invoke the Principle of Estoppel by Conduct?
15. UOI v. G.L. Litmus Events Pvt. Ltd. [Judgment dated 30.9.2019 in O.M.P. (COMM) 390/2018]
The Court held that the arbitral tribunal can invoke the principle of estoppel by conduct which is a rule of evidence while the waiver is based on a contract.
Whether delay can be condoned in filing/re-filing a petition under Section 34 of the Arbitration Act, 1996?
16. Haji Banda Hasan v. Gupta & Gupta Pvt. Ltd. [Judgment dated 12.09.2019 in O.M.P. (COMM) 237/2019]
The Court held that a huge delay in re-filing a petition under Section 34 of the Arbitration Act cannot be condoned as it would indirectly defeat the objective of providing for a strict outer-limit under Section 34(3) for challenging an Arbitral Award.
Whether the executing Court has the jurisdiction to hear an application for Restitution of any amount?
17. Delhi Development Authority v. Ashok Kumar & Co. [Judgment dated 05.08.2019 in C.M. (M) 264/2017]
The Court held that once the executing court had been moved for execution of an award by treating it as a decree in terms of Section 36 of the Arbitration Act, then it is the said court which would have the jurisdiction to hear an application for restitution of any amount under Section 144 of the Code of Civil Procedure, 1908.
Whether a plea not specifically taken before the Court under Section 34 can be permitted to be raised during the appeal under Section 37 of the Arbitration Act?
18. Hindustan Construction Co. Ltd. v. IPEX Infrastructure Pvt. Ltd. PVT. LTD., [Judgment dated 30.08.2019, in FAO (OS) (COMM) 207/2019]
The Court held that if a plea was not specifically urged during the course of oral hearing of a petition under Section 34, then such a plea cannot be permitted to be taken in an appeal under Section 37 of the Arbitration Act for the first time.
Whether the arbitration can interpret the terms of the Agreement by the subsequent conduct of the parties?
The court held that if the terms of the agreement do not present an ambiguous circumstance then one would have to decipher the intent of the parties by examining the plain terms of the agreement, however, where there is ambiguity, then there is no better interpretative tool to ascertain the intent of the parties than the subsequent conduct of the parties.
Whether or not Adjournments are to be granted and the Conditions that are to be stipulated for the grant of Adjournment can be the reason for impeding the enforcement of a Foreign Award under the provisions of the 1996 Act?
20. SBS Logistics Singapore Pvt. Ltd. v. SBS Transpole Logistics Private Limited [Judgment dated 16.09.2019 in O.M.P. (EFA) (COMM.) 4/2018]
The Court held that the manner of granting of adjournments and the conditions imposed in relation thereto, unless completely outrageous and unconscionable, cannot be a ground for refusing enforcement of a foreign award under Section 47 of the Arbitration Act. Further, it was observed that a clause in the agreement providing for seeking recourse to negotiations to resolve the dispute amicably before proceeding for arbitration could not be used as a weapon to delay the arbitration proceedings.
The author is a Senior Associate at Advani and Co.