Tariq Khan
The malaise of the Indian Courts articulated in Guru Nanak Foundation v. Rattan Singh and Sons, is as true today as it was so many years ago. In that case, Justice DA Desai succinctly stated:
“Interminable, time consuming, complex and expensive Court procedures impelled jurists to search for an alternative Forum, less formal, more effective and speedy for resolution of disputes, avoiding procedural claptrap and this led them to Arbitration Act, 1940.
However, the way in which the proceedings under the Act are conducted and without exception challenged in Courts, has made Lawyers laugh and legal philosophers weep…Informal Forum chosen by the parties for expeditious disposal of their disputes has by the decisions of the Court been clothed with ‘legalese’ of unforeseeable complexity.”
The UNCITRAL Model Law, on which the Arbitration Act is based, also aims to, “protect the arbitral process from unpredictable or disruptive court interference” as this is, “essential to parties who choose arbitration (in particular foreign parties)”.
Arbitration in India is often criticized due to unruly court interference. However, recent judicial pronouncements indicate that Indian courts are taking an increasingly pro-arbitration stance.
Following are the 50 landmark decisions delivered by the Indian Courts on Arbitration law in 2018-2019.
SECTION 7
Whether Arbitration Agreement can be binding on Non-Signatory to the Agreement?
1. Cheran Properties Ltd. v. Kasturi and Sons Ltd. & Ors. Civil Appeal 10025/2017
While observing the principle enunciated in Chloro Controls that a non-signatory may also be bound by an arbitration agreement in certain cases, the Court held that the group of companies doctrine is essentially intended to facilitate the fulfillment of a mutually held intent between the parties, where the circumstances indicate that the intent was to bind both signatories and non signatories.
The effort is to find the true essence of the business arrangement and to unravel from a layered structure of commercial arrangements, an intent to bind someone who is not formally a signatory, but has assumed the obligation to be bound by the actions of a signatory.
2. R.V. Solutions Pvt. Ltd. v. Ajay Kumar Dixit & Ors. 2019 SCC Online Del 6531 CS Comm 745/2017
The Delhi High Court held that a non-signatory or third party could be subjected to Arbitration without its consent, only in exceptional cases. There needs to be either a direct relationship to the signatory party of the Arbitration Agreement, or commonality of the subject matter, or composite transactions in the agreement between the parties.
[Also See: Ameet Lal Chand v. Rishabh Enterprises SLP (c) 16798/2017]
Incorrect reference regarding the applicability of the Indian Arbitration Act, 1940 would not render the entire Arbitration Agreement invalid
3. Purushottam S/o Tulsiram Badwaik v. Anil & Ors. Civil Appeal No.4664 of 2018
The Bench of Justice Arun Mishra and Justice UU Lalit of the Supreme Court observed that even if an arbitration agreement entered into after the 1996 Act had come into force were to make a reference to the applicable provisions of those under Indian Arbitration Act or 1940 Act, such stipulation would be of no consequence and the matter must be governed under the provisions of 1996 Act. Further, the Court held that an incorrect reference or recital regarding the applicability of the 1940 Act would not render the entire arbitration agreement invalid.
4. Mother Boon Foods Pvt Ltd v. Mindscape One Marketing Pvt Ltd O.M.P. (COMM) 136/2017
The Court held that an arbitration agreement, as per the 1996 Act, has to be in writing. Since the arbitration clause -which is a part of the contract – was in writing, the same could not have been superseded by any oral demand or agreement.
[Also See: Shyam Sunder Agarwal v. P. Narotham Rao And Ors. Civil Appeal No. 6872 of 2018 and Varinder Pal Singh & Anr Versus BPTP Ltd ARB.P. 350/2017]
SECTION 8
Whether Arbitration Clause can oust the jurisdiction of consumer forums?
5. M/S Emaar MGF Land Limited & Anr. v. Aftab Singh, 2018 SCC Online SC 2771
The Supreme Court upheld the NCDRC’s decision whereby it ruled that an Arbitration Clause in a Buyer’s Agreement cannot circumscribe the jurisdiction of a Consumer Fora, notwithstanding the amendments made to Section 8 of the Arbitration Act.
Referring Parties to Arbitration has serious civil consequences
6. Kerala State Electricity Board and Anr. v. Kurien E. Kathilal- Civil Appeal Nos.3164-3165 of 2017
Referring the parties to arbitration has serious civil consequences procedurally and substantively. When there was no arbitration agreement between the parties, without a joint memo or a joint application of the parties, the High Court ought not to have referred the parties to arbitration, the Supreme Court held in this case.
SECTION 9
Section 9 of the Arbitration Act cannot bypass Section 41 of the Specific Relief Act
7. Parsoli Motor Works (P) Ltd. v. BMW India P Ltd. 2018 SCC Online Del 6556
The Delhi High Court held that injunctions that cannot be granted under Section 41 of the Specific Relief Act, cannot be granted under Section 9 of Arbitration Act, 1996 either.
SECTION 11
Arbitral Clause to be strictly construed
8. Oriental Insurance Company Limited v. M/s Narbheram Power and Steel Pvt. Ltd. Civil Appeal No. 2268 of 2018
The Supreme Court held that an arbitration clause is required to be strictly construed. Any expression in the clause must unequivocally express the intent of arbitration.
[Also See: United India Insurance Co. Ltd. & Anr. v. Hyundai Engineering and Construction Co. Ltd. & Ors 2018 SCC Online SC 1045]
Appointment of Arbitrator cannot be challenged under Section 11 (6) of the Arbitration and Conciliation Act, 1996
9. Sp Singla Constructions Pvt. Ltd. v State of Himachal Pradesh & Anr. 2018 SCC Online SC 2673
Issuance of notice of request under Section 11 is mandatory for filing an application therein
10. Golden Chariot Recreations Pvt Ltd. v Mukesh Panika & Anr. 2018 SCC online del 10050
Whether an agreement which is not adequately stamped would disable the Court from acting upon the Arbitration clause incorporated in the Agreement
11.Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engineering Ltd. Civil Appeal No.3631/2019
The Court held that the High Court must impound the instrument which has not borne stamp duty and hand it over to the Authority who will then decide issues qua payment of stamp duty and penalty (if any) as expeditiously as possible, and preferably within a period of 45 days from the date on which the authority receives the instrument. As soon as the stamp duty is paid on the instrument, any of the parties can bring the instrument to the notice of the high court which will then proceed to expeditiously hear and dispose of the Section 11 application. “
Jurisdiction of Court
12. BHEL v. Uttar Pradesh Rajya Vidhyut Utpadan Nigam Limited Arb. P 78/2019]
Relying on AAA Landmark Pvt. Ltd. vs. AKME Projects Ltd. & Ors, the Supreme Court held that where the parties agree not to insist upon the exclusive jurisdiction clause in an Agreement or raise such objection, and by their conduct, waive such condition/submit themselves to another Court’s jurisdiction, it cannot be said that the Court other than the one in which exclusive jurisdiction has been vested, would be without jurisdiction.
Fees prescribed in the Fourth Schedule of the Act is only suggestive
13. Paschimanchal Vidyut Vitran Nigam Limited v. M/S IL & FS Engineering & Construction Company Limited O.M.P.(MISC.)(COMM.) 164/2018
The question before the Delhi High Court was whether the provisions of the Fourth Schedule of the Act pertaining to the fee to be paid to the arbitrators would apply to domestic ad hoc arbitrations where parties have not approached the Court for the constitution of an Arbitral Tribunal.
It was held that the provision with regard to fees contained in Section 11(14) of the Act is only an enabling provision. The concerned High Court has been given the leeway to frame rules, if it chooses to do so. Since the parties did not approach the Court for the constitution of the Arbitral Tribunal, the Court would have no role to play in fixing the fees of the Arbitral Tribunal as no such power is vested in the Court. Further, provisions of sub-section (14) of Section 11 clearly indicate that the fee prescribed in the Fourth Schedule of the Act is only suggestive.
14. NCC Limited v Indian Oil Corporation Limited 2019 SCC online Del 6964
The Court observed that the insertion of Section 11(6A) by the Amendment Act, 2015 has considerably narrowed down the scope of examination by the Court. It is confined only to the existence of an Arbitration Agreement, relatable to the dispute at hand.
Court can appoint independent arbitrator only after resorting to the procedure in the Arbitration Agreement
15. Union of India v. Parmar Construction Company Civil Appeal No (s). 3303 of 2019
SECTION 12 AND 13
Whether disclosing only the major requirement of Schedule VI of the Arbitration Act, 1996 and leaving other relevant aspects of the said Schedule would amount to improper disclosure?
16. Goel Construction Co. Pvt. Ltd. v. ICAI O.M.P. (T) (Comm.) 120/2018
The Court held that the Arbitrator was under a misconception that he need not disclose the other relevant aspects of the Sixth Schedule to the Act. Further, it was held that compliance with the major requirement of the said Schedule is not enough, and the Court directed the Arbitrator to give full disclosure in terms of the Sixth Schedule of the Act.
17. Manish Anand & Ors. v. Fiitjee Ltd., 2018 SCC Online Del 7587
The Court held that though the disclosure is not in terms of the Sixth Schedule of the Act, if it discloses the most vital aspect of the same, the mandate of the Arbitrator cannot be terminated.
Whether after the coming into force of the Arbitration and Conciliation (Amendment) Act, 2015 and in view of Section 12 (5) of the Act, the appointment of the arbitrator by the Managing Director is null and void.
18. Worlds Window Infrastructure & Logistics Pvt. Ltd. v. Central Warehousing Corporation [ARB.P. 437/2018] O.M.P. (T) (COMM.) 45/2018
The Delhi High Court held that that the amendment to the Act does not in any way take away the power vested in one of the parties to the Arbitration Agreement to appoint an Arbitrator. In such agreements, the burden of ensuring that the person so appointed shall not fall foul of any of the provisions of the Fifth or the Seventh Schedule of the Act will be even higher and open to greater scrutiny.
19. TRF Ltd v. Energo Engineering Projects Ltd Civil Appeal No. 5306 of 2017
Once the arbitrator has become ineligible by operation of law, he cannot nominate another as an arbitrator. It is inconceivable in law that a person who is statutorily ineligible can nominate a person. Needless to say, once the infrastructure collapses, the superstructure is bound to collapse.
SECTION 14 AND 15
20. National Highways Authority OF India v. Gammon Engineers and Contractor Pvt Ltd O.M.P. (T) (Comm.) 39/2018
The Court held that the Arbitral Tribunal cannot accept the appointment in part and rewrite the arbitration agreement between the parties.
SECTION 26
21. Precious Sapphires Ltd v. Amira Pure Foods Private Ltd. EX.P. 330/2015
It was held that the Arbitration and Conciliation Act, 1996, being a special statute, shall prevail over the Delhi High Court Act, which would be a general statute dealing with the jurisdiction and procedure of the High Court. Further, it was held that Section 26 of the Amending Act does not exclude the application of the amended Explanation to Section 47 of the Act to proceedings pending in the High Court on that date.
SECTION 29 A
22. Republic of India v. Agusta Westland International Ltd. 2019 SCC Online Del 6419
Section 29A of the Arbitration and Conciliation Act, 1996 is not applicable to proceedings already initiated in terms of Section 21 of the Principal Act i.e. prior to coming into force of the 2015 Amendment Act.
SECTION 31
Whether an Arbitral Award can be set aside on the ground that one of the members of the Arbitral Tribunal had withdrawn from the Arbitration proceedings prior to the pronouncement of the award?
23. CIMMCO LTD. versus Union of India O.M.P. (COMM) 297/2016
The Court held that if this question is answered in the affirmative, then any party which is unhappy with the manner in which the Arbitral Tribunal is proceeding in a given matter can inspire its nominee-Arbitrator on the Arbitral Tribunal to withdraw from the arbitration proceedings at the last hour.
Further, the Court relied on Section 31(2) of the 1996 Act to hold that where the Arbitral Tribunal comprises more than one arbitrator, the signatures of the majority of all members of the Arbitral Tribunal would be sufficient for framing an Award, so long as reasons are given for any omitted signature.
SECTION 33
24. M/s Chandok Machineries v. M/s S.N. Sunderson & Co. 2018 SCC Online Del 12782
In this case, the Arbitral Award was signed by the Third Arbitrator after the mandate of the Arbitral Tribunal had terminated. However, the reasons for the delay in signing the Award were set out in an order on an application under section 33(1)(a) filed by the respondent.
The challenge under Section 34 was raised on the ground that mandate of the Arbitral Tribunal had terminated prior to the signing of Award by the third Arbitrator. The Court observed that a procedural irregularity of this nature ought not to vitiate the entire decision-making process, particularly when it is capable of being cured. Since the reasons for the delay in the signing were stated in the Order of application under section 33, the lacuna of the Award was cured.
To be continued.
The author is a Senior Associate at Advani and Co.