India: Dispute Resolution & Arbitration Monthly Update | October 2022

DISPUTE RESOLUTION AND ARBITRATION UPDATE

Moreshar Yadaorao Mahajan v. Vyankatesh Sitaram Bhedi (D) Thr Lrs & Ors

Supreme Court of India | Civil Appeal Nos. 5755-5756 of 2011

Background facts

• The Appellant is a doctor who was working in a Government Hospital and also had his private practice. In order to start his private practice, he took on rent a part of the house of the Respondent.
• The Respondent was in financial need for his agricultural cultivation and household expenses and therefore, he suggested to the Appellant that he should purchase the aforesaid part of the house which the Appellant was occupying, together with an added portion.
• The Appellant accepted the said suggestion and an agreement to sell was entered into on July 24, 1984. As per the terms of the said agreement to sell, the Respondent agreed to sell and the Appellant agreed to purchase the suit property for INR 50,000. The Appellant paid an amount of INR 24,000 on the date of the agreement and the Respondent executed an earnest note in favor of the Appellant.
• As per the terms of the agreement to sell, the sale deed was to be executed before March 31, 1985. Respondent again requested for money and on such request, the Appellant paid him an amount of INR 6,000.
• The Appellant was always ready and willing to perform his part of the agreement and therefore, he informed the Respondent by registered letter that he was willing to complete his part of the transaction before March 31, 1985. However, the Respondent replied to the said notice by alleging that the transaction was of money lending and denied the execution of the sale deed.
• Hence the Appellant filed a suit for specific performance before the Trial Court.
• Trial Court, upon hearing the parties, decreed in favor of the Appellant by an order dated March 28, 1990. Respondent preferred an Appeal which was dismissed by an order dated June 13, 1996.
• Respondent preferred a Second Appeal which denied the specific performance and directed the Respondent to refund the amount of INR 30,000 at 9% per annum by an order dated July 3, 2008. The High Court observed that the suit property belonged to the joint family of the Respondent (wife and three sons), but they have not been made a party to the proceeding.
• The Appellant challenged the order passed in Second Appeal before the Supreme Court.

Issue at hand?

• Can an effective decree be passed in favor of the Appellant if the joint owners of the suit property are not made party to the proceeding?

Decision of the Court

• The Apex Court relied on the judgments of the Supreme Court in the matters of Mumbai International Airport Pvt Ltd v. Regency Convention Centre & Hotels Pvt Ltd & Ors¹ and Poonam v. State of Uttar Pradesh & Ors² in order to reach the conclusion
• The Court observed that the Appellant himself has admitted that the suit property was owned by the Respondent, his wife and three sons. In view of the aforesaid admission, the Appellant ought to have made all the owners of the suit property, as necessary parties for adjudicating the proceeding. It was also observed that a specific objection was also taken by the Respondent in his written statement with regard to nonjoinder of necessary parties.
• The Court observed that since the suit property was jointly owned by the Respondent along with his wife and three sons, an effective decree could not have been passed affecting the rights of the Respondent's wife and three sons without impleading them. In spite of the Respondent taking an objection in that regard, the Appellant has chosen not to implead the Respondent's wife and three sons.
• It was further observed that two tests are to be satisfied for determining the question who is a necessary party:
  • There must be a right to some relief against such party in respect of the controversies involved in the proceedings
  • No effective decree can be passed in the absence of such party
• The Appeal was dismissed with no costs.

National Highway Authority of India v. MEP Chennai Bypass Toll Road Pvt Ltd & Anr

Delhi High Court | OMP (T) (COMM) 48/2022, IAs 6739/2022, 6740/2022, 6741/2022 and 6742/2022

Background facts

• The Petitioner National Highway Authority of India (Petitioner/NHAI) and the Respondent MEP Chennai Bypass Toll Road Pvt Ltd (Respondent) entered into a Concession Agreement dated January 14, 2013. After a dispute arose between the parties, an Arbitral Tribunal was constituted, and the dispute was referred for arbitration.
• The Arbitral Tribunal passed an order that it was not bound by ICADR Rules and thus determined the arbitral fees for the claims and the counterclaims separately, and passed an order suspending the claims and counter-claims of the respective parties on the ground that the parties had failed to clear arrears of arbitral fee.
• Thereafter, the Respondent paid arbitral fee and based on the same, the Tribunal restored the counterclaims. The Arbitral Tribunal, however, reiterated that NHAI's claims would remain suspended on account of its failure to clear the outstanding arbitral fee.
• NHAI filed an application before the Arbitral Tribunal to revise the arbitral fee in accordance with the Fourth Schedule of the Arbitration and Conciliation Act, 1996 (Act). The Arbitral Tribunal dismissed the application holding that it was not bound by the Fourth Schedule of the Act and that the arbitral fee was determined separately for the claims and the counterclaims keeping in mind the facts and complexity of the dispute between the parties. The Arbitral Tribunal held that the counterclaim(s) should be treated separately from the claims in view of Order 8 Rule 6A of the Code of Civil Procedure, 1908.
• Against the order passed by the Arbitral Tribunal, the Petitioner filed a petition under Section 14 and Section 15(2) of the Act to seek termination of the mandate of the Arbitral Tribunal on the ground that the Arbitral Tribunal had become de jure and de facto unable to perform its functions.
• Submissions of the Petitioners
  • The Arbitral Tribunal had fixed the arbitral fee contrary to the terms of the agreement between the parties.
  • As per the agreement entered into between the parties, the arbitral fee was payable to the Arbitral Tribunal as per the ICADR Rules. Thus, the arbitral fee was payable on the dispute, i.e., the claim and the counterclaim, cumulatively and not separately.
  • The Tribunal could not charge fees separately on claims and counterclaims or charge a fee higher than what was agreed upon between the parties, in light of the interpretations given by the Court to the expression 'amount in dispute', as found in the Fourth Schedule of the Act, which is pari materia to Schedule I of the ICADR Rules.
  • The Arbitral Tribunal by charging a higher fee than what was agreed between the parties, had not accepted the mandate, and was therefore de jure unable to perform its functions.
• Submissions of the Respondent
  • The entire petition is misconceived as the Arbitral tribunal is free to decide its own fees and it is clear that the Tribunal had agreed to charge fee on claims and counter claims separately and not commutatively at time of appointment of tribunal vide order dated May 14, 2019.

Issue at hand?

• Whether or not the Arbitral Tribunal is permitted to fix its fee if its appointment is made by way of an ad hoc agreement between the parties?

Decision of the Court

• The Court held that it is too late in the day for the Petitioner to now question the appointment of the Tribunal and argue that such appointment is contrary to the terms of the Agreement. Continuation of arbitral proceedings and periodical payments made by Petitioner, without any protest or reservation, signified that the Petitioner had agreed and accepted the fee decided to be charged by the Arbitral Tribunal.
• The Court ruled that the Arbitral Tribunal's observations that the arbitral fee was to be determined in terms of Fourth Schedule of the Act, does not mean that the fee has to be charged cumulatively on the claims and counterclaims.
• The Court held that continuation of the arbitral proceedings since 2019 indicated that Petitioner had explicitly accepted the terms of appointment of the Arbitral Tribunal and as there was substantial delay in approaching the Court, this was a good ground to refuse interference by the Court.
• The Court has ruled that the Arbitral Tribunal was permitted to fix its fee, since its appointment was made by way of an ad hoc agreement between the parties.

State of West Bengal v. Anindya Sundar Das & Ors

Supreme Court of India | Criminal Appeal No. 1497 of 2022

Background facts

• An order dated August 27, 2021 was passed by the Special Secretary to the Government of West Bengal re-appointing the incumbent Vice Chancellor (VC) of the Calcutta University in terms of the Section 8 of the Calcutta University Act, 1979 (Act) and invoking the Section 60 of the Act.
• The High Court of Calcutta allowed the Writ Petition seeking the issuance of a writ of quo warranto against the Vice Chancellor of Calcutta University and set aside the above-mentioned order stating that the VC had no authority to hold that office on the basis of the order of re-appointment by the State Government
• Submissions of the Appellant before the Supreme Court
  • The power of the Chancellor as per Section 8(5) to appoint a person to exercise the powers and perform the duties of the VC during the period of the temporary inability of an incumbent VC or pending the appointment of a VC applies only when the power of re-appointment has not been exercised under Section 8(2)(a).
  • Section 8(6) applies only when the power to re-appoint under Section 8(2)(a) of the Act has not been exercised.
  • Section 8(2)(a) of the Act clearly specifies that a VC shall be eligible for re-appointment for another term of four years subject to the satisfaction of the State Government and on the basis of their past academic excellence and administrative success during the term of office as a VC.
  • The unamended Section 8(2)(a) of the Act stipulated that a VC would be eligible for re-appointment for a period not exceeding four years following the provisions of sub-Section (1) of Section 8. However, in the amended provisions of Section 8(2)(a), the expression following the provisions of sub-Section (1) was conspicuously deleted as a result of which the procedure prescribed in Section 8(1) for the appointment of a VC does not apply to a re-appointment.
• Submissions of the Respondent before the Supreme Court
  • Section 8(2)(a) does not take away the power of the Chancellor to appoint a VC under Section 8(1)(b) of the Act.
  • In effecting the re-appointment of a VC, the procedure which is prescribed by Section 8(1) of constituting a Search Committee needs to be followed.
  • The UGC Regulations clearly stipulate that the appointment of a VC has to be made by the Chancellor.
  • Section 8(2)(a) provides for the satisfaction of the State Government as well as for eligibility of a VC for re-appointment. But this does not take away the power of the Chancellor to make the appointment.

Footnotes

1 (2010) 7 SCC 417

2 (2016) 2 SCC 779

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