30 Important Judgments on Arbitration by Indian Courts (July-December 2023)

In this article, the author highlights thirty pivotal decisions that have shaped and refined the legal framework surrounding arbitration in India. Explore the diverse range of cases, legal nuances, and impactful insights provided by the judiciary during this period, offering practitioners and enthusiasts a valuable snapshot of the evolving arbitration jurisprudence.

Whether the Court, in exercising powers under Sections 8 and 11 of the Arbitration and Conciliation Act,1996 (“A&C Act”) can examine the issue of non-stamping or its insufficiency on the arbitration agreement?

1. In Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899 [Judgment dated December 13, 2023 in Curative Petition (C) No. 44 of 2023 in Review Petition (C) No. 704 of 2021 in Civil Appeal No. 1599 of 2020]

The Supreme Court ruled that unstamped or inadequately stamped arbitration agreements are valid but inadmissible in evidence, overturning the earlier decision in M/s. N.N. Global Mercantile Pvt. Ltd. v. M/s. Indo Unique Flame Ltd. The Court clarified that insufficiency of stamping does not void or make the agreement unenforceable. It emphasized the distinction between voidness and admissibility. It held that non-stamped or insufficiently stamped agreements can be rectified following the “Stamp Act” procedure under the Indian Stamp Act, 1899.

The Court held that the issue of non-stamping or insufficiency thereof, cannot be examined by the Court under Section 8 or 11 of the A&C Act. It held that such an issue falls squarely within the jurisdiction of the arbitral tribunal.

Whether the arbitration agreement can bind non-signatories?

2. Cox and Kings Ltd v. SAP India Pvt Ltd [Judgment dated 06.12.2023 in SLP(C) No. 8607 of 2022]

The Supreme Court's Constitution Bench upheld the applicability of the "group of companies" doctrine, asserting that an arbitration agreement has the capacity to bind non-signatories. Emphasizing its utility in deciphering intentions within intricate transactions involving various parties and agreements, the Court affirmed that non-signatories, connected through relationships and commercial involvement, are not considered strangers to the arbitration agreement.

Whether the Court exercising powers under Section 11 of the A&C Act can test the arbitration clause on the anvil of Article 14 of the Constitution of India (“The Constitution”)?

3. Lombardi Engineering Ltd v. State of Uttarakhand [Judgment dated June 11, 2023, in Arbitration Petition No. 43 of 2022]

The Supreme Court, in a landmark ruling, declared that arbitration clauses must not be inconsistent with the Constitution. It asserted the Court’s authority to assess whether such clauses violate Article 14 of the Constitution when appointing an arbitrator. It held that for an arbitration clause to be legally binding, it must align with the Constitution, as the same is a fundamental aspect of the rule of law.

The Court dismissed the argument that initial consent to a pre-deposit clause prohibits challenging its arbitrariness under Article 14 of the Constitution in application under Section 11(6) of A&C Act, emphasizing that consent cannot override the law or waive fundamental rights.

Whether a party can appoint the 2/3rd members of the arbitral tribunal?

4. Sri Ganesh Engineering Works v. Northern Railways [Judgment dated November 29, 2023 in ARB.P. 609 of 2023]

The High Court of Delhi has ruled that an arbitration clause granting a party the authority to nominate 2/3rd of the arbitral tribunal flouts the principles of 'counter-balancing,' as articulated by the Supreme Court in the pivotal Perkins Eastman Architects DPC vs. HSCC (India) Ltd. judgment.

The Court emphasized that bestowing a party with the prerogative to nominate the majority of the arbitral tribunal raises concerns about the neutrality and impartiality of the said tribunal.

Whether a separate application under Section 8 of the A&C Act is required when the objection regarding existence of an arbitration clause is duly raised in the written statement?

5. Madhu Sudan Sharma v. Omaxe Ltd [Judgment dated November 6, 2023 in RFA 823 of 2019]

The Delhi High Court ruled that raising jurisdiction objections in the written statement, citing the arbitration clause, fulfills the requirements under Section 8 of the A&C Act. It emphasized that extracting the arbitration clause in the objection is sufficient; a separate request for arbitration is not necessary.

Whether the arbitral tribunal can create security over a property on which a third-party charge has been created?

6. Assests Reconstruction Company Ltd v. ATS Infrastructure Limited [Judgment dated November 20, 2023 in Arb. A. (COMM) 7 of 2022]

The Delhi High Court has ruled that an arbitral tribunal lacks jurisdiction to establish security on a property over which a charge has already been created in favor of a third party.

Furthermore, the Court highlighted the significance of the registration of a charge, emphasizing that it confers upon the charge holder, the status of a secured creditor. This registration not only establishes the charge holder as a secured party but also grants it a preferential position in comparison to all other unsecured creditors. Therefore, once a charge is created on an item in respect of a third-party, no further security can be created over it.

Whether the Court can direct furnishing of bank guarantee to secure the claims in absence of a plea regarding frustration of award?

7. Skypower Solar India Pvt Ltd v. Sterling and Wilson International FZE [Judgment dated November 10, 2023 in FAO(OS)(COMM) 29 of 2022]

The Delhi High Court ruled that under Section 9 of the A&C Act, the Court would not require a Bank Guarantee (BG) to protect a party's claims in arbitration unless there's evidence of the opposing party jeopardizing assets or impeding the arbitral award enforcement. The Court likened an order under Section 9 of the A&C Act for a bank guarantee to an attachment order before judgment in the Civil Procedure Code,1908 (“CPC”) but noted Section 9 of the A&C Act is not strictly bound by CPC. It stressed the need to assess the petitioner's prima facie case, balance of convenience, and evaluate if the respondent's actions might hinder the award realization before passing an order securing the claims in arbitration.

8. Dr. Vivek Jain v. PrepLadder Pvt Ltd [Judgment dated October 9, 2023 in OMP(I)(COMM) 397 of 2022]

The High Court of Delhi held that under Section 9 of the A&C Act, the Court would not pass an order securing the disputed sum without proper pleading and allegations of the respondent trying to undermine a potentially favorable Award. The Court stated it would not provide such relief unless the petitioner broadly satisfies the pre-conditions under Order XXXVIII of CPC.

9. Prathyusha-AMR JV v. Orissa Expressway [Judgment dated September 19, 2023 in AP 863 of 2022]

The Calcutta High Court clarified that when exercising powers under Section 9 of the A&C Act, the Court is not strictly confined by the interim relief provisions of CPC. The Court highlighted the distinction from Order XXXVIII Rule 5 of CPC, stating that Section 9 of A&C Act does not mandate the petitioner to prove the opposing party's intention to dissipate the subject matter of arbitration, unlike the stringent requirements in CPC.

Whether the instruments executed by the government are exempted from the payment of stamp duty?

10. M/s SVK Infrastructure v. DTTDC [Judgment dated October 12, 2023 in Arb. P. 668 of 2023]

The Delhi High Court ruled that no stamp duty is applicable to instruments executed by or for the government. It held that Section 3 of the Stamp Act exempts government instruments from stamp duty, making the government-executed agreement exempt from payment.

Whether the arbitrator would become ineligible due to unilateral revision of its fee?

11. M/s Chennai Metro Rail Limited v. M/s TRanstonnelstroy Afcons JV [Judgment dated October 19, 2023 in SLP(C) No. 8553 of 2022]

The Supreme Court has affirmed that the arbitral tribunal's unilateral fee revision, while impermissible, does not lead to the termination of its mandate under Section 12 of A&C Act. The Court clarified that this ground does not align with the criteria outlined in Schedules V and VII of the Act.

Whether the place of arbitration amounts to the seat when the agreement confers exclusive jurisdiction on a Court in different place?

12. InstaKart Services v. Megastone Logiparks [Judgment dated October 13, 2023 in Petition under Arbitration Act no. 159 of 2022]

The Gujarat High Court ruled that in the presence of a conflicting exclusive jurisdiction clause, the place of arbitration is merely the venue of arbitration and not the seat. It held that the presence of a conflicting exclusive jurisdiction clause acts a contrary-indicia.

13. Aseem Watts v. Union of India [Judgment dated September 2, 2023 in S.B. Arbitration Application No. 14 of 2021]

The Rajasthan High Court clarified that when exclusive jurisdiction is granted to the courts of another place, designating a location as the 'venue' does not elevate it to the seat of arbitration.

Whether the arbitral tribunal can allow an application under Section 27 of the A&C Act without forming an opinion on the relevancy/ admissibility of the evidence?

14. SAIL v. Uniper Global Commodities [Judgment dated December 1, 2023 in OMP(E)(COMM) 22 of 2023]

The Delhi High Court held that the tribunal, exercising its jurisdiction under Section 27 of the A&C Act, should not act in a mechanical manner and allow every application. Instead, it is mandated to meticulously scrutinize, even on a prima facie basis, the relevance of the intended witness before granting approval for such an application from any party.

The Court clarified that while the arbitral tribunal is not bound by the procedural rules of the CPC or the Evidence Act,1872, it bears the responsibility to exercise discretion and form an informed opinion when deciding to permit an application seeking Court’s assistance to examine a witness.

Whether the request for the extension of the time limit for making award can be made after the expiry of the original period?

15. ATC Telecom Infrastructure v. BSNL [Judgment dated November 6, 2023 in OMP(MISC)(COMM) 466 of 2023]

In a ruling on Section 29A of the A&C Act, the Delhi High Court affirmed the Court’s authority to extend an arbitrator's mandate, even if the extension application is filed after the stipulated time for making the award. It was emphasized that Section 29A does not inhibit the Court from allowing a time extension when warranted, irrespective of filing a petition shortly after the specified deadline in Section 29A(1) or Section 29A(3) of the A&C Act.

16. Rohan Builders v. Berger Paints [Judgment dated September 6, 2023 in A.P. 328 of 2023]

The Calcutta High Court held that under Section 29A of the A&C Act, 1996, the mandate of an arbitral tribunal ceases unless extended during its term. It emphasized that making awards within statutory timelines is mandatory and if the tribunal proceeds after these deadlines, it results in a jurisdictional error due to the termination of the mandate by law, without provision for renewal.

The Court held that the request for an extension under Section 29(4) shall be made during the sustenance of the mandate and not afterwards.

17. Nikhil H. Malkhan v. Standard Chartered Investment & Loans [Judgment dated November 30, 2023 in Arbitration Petition (L) NO. 18255 of 2023]

The Bombay High Court affirmed that Section 29A allows the court to extend the arbitral tribunal's mandate even when the application is submitted after the specified time limit has lapsed. The Court clarified that Section 29A(4) permits extension both before and after the period's expiration.

Whether a scanned copy of the signed award sent through email constitutes a valid delivery of the award?

18. Ministry of Youth Affairs & Sports v. E&Y Pvt Ltd [Judgment dated August 23, 2023 in OMP(COMM) 377 of 2018]

The Delhi High Court affirmed that an email from the arbitral tribunal attaching the signed award's scanned copy constitutes valid delivery under Section 31(5) of the A&C Act. The Court clarified that the limitation period for challenging the arbitral award under Section 34 of the A&C Act starts from the date of the email, and the subsequent physical collection date is immaterial for limitation purposes.

Whether the Court under Section 34 of the A&C Act reduce the rate of interest awarded by the arbitral tribunal?

19. Anil Kumar Gupta v. MCD [Judgment dated November 30, 2023 in FAO(OS)(COMM) 315 of 2019]

The Delhi High Court has held the Court, in its exercise of powers under Section 34 of the A&C Act, lacks the jurisdiction to reduce the interest rate granted by the arbitral tribunal. It held that such an act is construed as a modification of the arbitral award.

The Court clarified that the modification of award terms by reducing the interest rate, as determined by the arbitral tribunal, is beyond the permissible purview of the Court's authority under Section 34 of the A&C Act.

Whether the Court can partially set aside an arbitral award?

20. Hindustan Steelworks Construction v. NOIDA [Judgment dated September 22, 2023 in Appeal under Section 37 of the A&C Act No. 219 of 2022]

The Allahabad High Court affirmed the application of the doctrine of severability to arbitral awards, allowing the separation of independent and unaffected portions. The Court clarified that the Act imposes no restrictions on the Court's power to apply severability under Section 34, emphasizing that the Court can set aside part of the award while preserving the rest, as long as it doesn't modify the tribunal's findings on any issues.

21. NHAI v. Trichy Thanjavur [Judgment dated August 21, 2023 in OMP(COMM) 95 of 2023]

The Delhi High Court held that the Court under Section 34 of the A&C Act can set aside a portion of an arbitration award while preserving the rest. The Court emphasized the explicit recognition of the doctrine of severability in Section 34(2)(a)(iv) of the Act, highlighting that different components of an arbitration award are independent, enabling the removal of an offending part without affecting the remaining components.

Whether insufficiency of stamp duty on the arbitration agreement is a ground to set aside an arbitral award?

22. ARG Outlier Media Pvt Ltd v. HT Media Limited [Judgment dated July 4, 2023 in OMP(COMM) 161 of 2023]

The Delhi High Court ruled that inadequate stamp duty on the arbitration agreement does not warrant setting aside an arbitral award. It held that in terms of Section 36 of the Stamp Act, once the instrument has been admitted in evidence, it cannot be challenged subsequently. It also held that Stamp Act is not linked to public policy. Therefore, a statutory violation of such an Act would not make out a ground for setting aside.

Whether the principle of ‘Forum Shopping’ applies to proceedings for enforcement of arbitral award?

23. Taqa India Power Ventures v. NCC Infrastructure Holdings [Judgment dated November 9, 2023 in OMP(EFA) (COMM) 1 of 2018]

The Delhi High Court has held that the concerns associated with forum shopping in substantive civil proceedings do not necessarily apply to proceedings for enforcement of arbitral award under Section 36 of the A&C Act.

The Court ruled that the award holder's prerogative to choose any court where the assets of the award debtor are situated, should not be deemed as forum shopping. The Court emphasized the distinction between substantive civil proceedings and enforcement actions, recognizing the unique nature of the latter, wherein the focus is on the effective realization of the awarded assets.

Whether the amount received by the retiring partner in the form of arbitration award for relinquishing its stakes in the firm is a taxable income?

24. Ramona Pinto v. Deputy Commissioner of Income Tax [Judgment dated November 8, 2023 in Income Tax Appeal No. 2610 of 2018]

Bombay High Court has ruled that the sum received by a departing partner, as part of an arbitration award for relinquishing their interest in a firm, is not subject to taxation. It stated that the amount obtained in such circumstances cannot be categorized as 'income from other sources' under Section 56(1) of the Income Tax Act, 1961, and hence, is not liable for taxation. The Court emphasized that for an amount to fall under Section 56(1), it must be established as income, but the sum received upon retirement from a firm does not qualify as income. Additionally, the Court clarified that such an amount does not fall under the purview of 'capital gains'.

Whether the moratorium under Section 14 of IBC impacts the Fees of Arbitrator?

25. EDAC Engineering v. Industrial Fans [Judgment dated August 31, 2023 in Application Nos. 2080 and 4609 of 2021]

The Madras High Court ruled that the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 (“IBC Act”) does not hinder payment of arbitrator fees for awards issued before the moratorium. It emphasized that initiating insolvency proceedings should not hinder the payment of rightful fees for arbitrators, considering that they are essential services protected by Section 14(2) of the IBC Act.

Whether a ‘Medium Enterprise’ can maintain a claim before the MSEF if it was a ‘Micro or Small’ enterprise at the relevant time?

26. Sterlite Power v. EPC Solutions [Judgment dated July 5, 2023 in WP(C) of 13758 of 2021]

The Delhi High Court clarified that a 'medium' enterprise can pursue a claim before MSEFC if it was a 'micro' or 'small' enterprise at the time when the agreement was entered into or the supplies were made. The Court ruled that subsequent upgradation from 'micro or small' to 'medium' does not prevent the enterprise to maintain a claim before the Council.

Whether the ‘Buyer’ can invoke the provisions of MSEF Council independently of a claim by the supplier?

27. Uniseven Engineering v. MSEF Council [Judgment dated July 5, 2023 in WP(C) No. 11233 of 2021]

The Delhi High Court ruled that the MSEF Council cannot entertain independent claims initiated by the buyer under the Micro, Small and Medium Enterprises Development Act (“MSMED Act”). It held that the Act does not permit buyers to approach the Facilitation Council independently for monetary recoveries from the seller. Only sellers can initiate claims, while buyers may raise counter-claims but cannot independently approach the Council.

Whether a party can approach the Court for interim reliefs under Section 9 of the A&C Act before approaching the MSEF Council under Section 18 of the MSMED Act?

28. IOCL v. Union of India [Judgment dated November 17, 2023 in WPO No. 1624 of 2023]

The Calcutta High Court has clarified that the MSMED Act does not preclude a party from seeking interim relief under Section 9 of the A&C Act at any time before resorting to the Facilitation Council.

The Court clarified that the doctrine of election is not applicable in this scenario, as there is no corresponding provision akin to Section 9 of the A&C Act under the MSMED Act.

Whether a writ petition is maintainable against the order of MSEF Council dismissing a reference under Section 18 of the MSMED Act without conducting the conciliation?

29. State Project Director v. National Printers [Judgment dated September 11, 2023 in LPA No. 505 of 2019]

The Jharkhand High Court ruled that an MSEF Council order dismissing a Section 18 reference under the MSMED Act, without conciliation or arbitration, is not an award challengeable under Section 34 of the A&C Act with Section 19 of the MSMED Act. It held that as an alternative remedy under Section 34 is unavailable, the aggrieved party can directly challenge the MSEF Council order through a writ petition.

Whether a writ petition is maintainable against the order of MSEF Council dismissing a reference under Section 18 of the MSMED Act without following due procedure?

30. Feedback Infra Pvt Ltd v. MSEF Council [Judgment dated September 29, 2023 in WP No. 25062 of 2023]

The Madras High Court emphasized that an MSEF Council order, issued without arbitration notice, opportunities for pleadings, and evidence recording as per the A&C Act, does not qualify as an award. It held that challenging such an order under Section 34 of the A&C Act with Section 19 of the MSMED Act would disrupt the balance by necessitating a 75 percent deposit. The Court affirmed the aggrieved party's ability to directly seek writ relief under Article 226 of the Constitution of India.

About the author: Tariq Khan is the Registrar of the International Arbitration & Mediation Centre.