India: Indian Arbitration – Quarterly Roundup: 20 Important Judgments

India is progressing at a remarkable pace in its pursuit to find its place as an arbitration-friendly jurisdiction in the international picture. Indian courts are therefore rendering several noteworthy judgments in furtherance of this objective. Some of the significant judgments that we have come across in the first quarter of 2020, in matters involving arbitration law, have been summarised and captured hereinbelow:

State of Gujarat and Ors. v. Amber Builders

Civil Appeal No. 8307 of 2019; Citation – MANU/SC/0018/2020

Supreme Court of India

Decided on: 08.01.2020

Brief Facts: The dispute here is in relation to the Gujarat Public Works Contract Disputes Arbitration Tribunal constituted under S.3 of the Gujarat Public Works Contracts Disputes Arbitration Tribunal Act, 1992 ("Gujarat Act"), and whether it has the requisite jurisdiction to make interim orders in terms of S.17 of the Arbitration and Conciliation Act, 1996 ("Arbitration Act").

Held: The Court noted that the Gujarat Act was enacted to compulsorily refer all disputes arising out of any "works contract" entered into by the State government or public sector undertaking with any other person, for certain defined works under the Gujarat Act. In the present case, it is not disputed that the contract entered between the parties is a "works contract", and that the Gujarat Act is applicable to the parties.

Therefore, on a conjoint reading and careful analysis of the Arbitration Act and the Gujarat Act, the Court held that the powers vested in the arbitral tribunal under S.17 of the Arbitration Act can very well be exercised by an arbitral tribunal constituted under the Gujarat Act, because there is no inconsistency in the two statutes as far as the granting of interim relief is concerned.

The Court was further of the opinion that the decision in Gangotri Enterprises Limited v. Union of India¹ is per incuriam, since it relied on Union of India v. Raman Iron Foundry,² which has been specifically overruled by the three judges bench ruling in H.M. Kamaluddin Ansari & Co. v. Union of India.³

Larsen and Toubro Ltd. v. Public Works Department

High Court of Delhi

A.R.B.P. 529/2018, I.A. 9704/2018, O.M.P. (T) (COMM.) 58/2018 and I.A. 9723/2018

Citation: 266(2020)DLT403

Decided on: 09.01.2020

Brief Facts: Disputes arose between the parties in relation to a turnkey agreement entered between them. The petitioner asserted that the respondent ought to align the procedure for constituting an arbitral tribunal for resolution of the disputes between the parties with the newly incorporated S.12(5) of the Arbitration Act.⁴ The respondent disregarded this assertion and appointed Mr. Verma, Special Director General (Retd.) of the respondent, as the sole arbitrator.

The petitioner objected to this appointment, on apprehension of possible bias in the appointment and hence, the present dispute.

Held: On whether the provisions of S.12 read with 5th and 7th schedules incorporated in the Arbitration Act apply to the instant case, considering that the agreement between the parties predated the enforcement of the Arbitration and Conciliation (Amendment) Act, 2015 ("2015 Amendment"), the Court answered in the affirmative. The Court relied upon the decision of the Hon'ble Supreme Court in Central Organization for Railway Electrification v. ECI-SPIC-SMO-MCML (JV) A Joint Venture Company,⁵ wherein the Supreme Court refused to disregard applicability of the said provision merely on the ground that the agreement between the parties predated enforcement of the 2015 Amendment. Consequently, the Court allowed the petitioner's prayer under S.11(6) of the Arbitration Act and appointed an independent and impartial arbitrator to preside over resolution of disputes between the parties.

Inter Ads Exhibition Private Limited v. Busworld International Cooperative

High Court of Delhi

O.M.P(I) (COMM.) 273/2019

Decided on: 13.01.2020

Brief Facts: The parties entered into a contract for conduct of certain exhibitions of the respondent in India, whereby the petitioner was required to act as the local partner of the respondent. Due to material breach of the terms of contract by the petitioner, the respondent exercised its right under the termination clause of the contract and issued a notice of termination to the petitioner. The petitioner disputed the validity of the notice of termination issued by the respondent, alleging that it was improperly issued, and approached the High Court of Delhi under S.9 of the Arbitration Act to seek a two-fold remedy by way of interim measures: (i) quashing of the notice of termination issued by respondent; (ii) ex-parte ad interim order restraining the respondent from giving effect to the notice of termination.

Held: The Court upheld the well-established legal position that specific performance of a determinable contract cannot be enforced, due to the specific bar under S.14(d) of the Specific Relief Act, 1963. The remedies sought by the petitioner would in essence amount to specific enforcement of the contract between the parties, which is a determinable contract i.e., a contract which can be put to an end. Upon review of numerous judgments on the subject, as brought forth by the respondent, the Court concluded that it cannot exercise interference under S.9 of the Arbitration Act to grant an injunction against the operation of termination, or in the alternative, enforcement of the terminated agreement.

Proddatur Cable TV DIGI Services v. SITI Cable Network Limited

High Court of Delhi

Case No. - O.M.P. (T) (COMM.) 109/2019 and I.A. 17896/2019

Decided on: 20.01.2020

Brief Facts: The petitioner and the respondent in the instant case had entered into a distribution agreement ("Agreement") which provided for resolution of disputes by way of arbitration. Certain disputes arose amongst the parties, concerning the amount that the petitioner was to receive under the Agreement. The petitioner submitted that its efforts to resolve the dispute amicably failed and therefore, the petitioner invoked the arbitration clause of the Agreement.

When the petitioner nominated an arbitrator, the respondent disagreed to such nomination, relying on the Agreement to assert its right to unilaterally appoint an arbitrator. Therefore, the respondent's arbitrator was appointed, and the proceedings were commenced. As the proceedings were underway, the Supreme Court on 26.11.2019 delivered the judgment in Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd.,⁶ wherein it was held that the parties interested in the dispute, including the arbitrating parties, are ineligible to appoint the arbitrator unilaterally.

The petitioner contended that the facts of the instant case were squarely covered by the facts of the Perkins dictum (supra). Therefore, the petitioner requested the arbitrator to not proceed with the arbitral proceedings, since the mandate of the arbitrator stood terminated de jure. The arbitrator in response to petitioner's request stated that she would continue the arbitral proceedings unless a judicial order to terminate the same was granted. Hence, the present petition was filed by the petitioner under S.14 and S.15 of the Arbitration Act, seeking a declaration that the mandate of the arbitrator appointed by the respondent stands terminated and another arbitrator be appointed.

Held: The Court found merit in the petitioner's argument, and reiterated that the Hon'ble Supreme Court, in the Perkins dictum (supra), had stated that there could be two categories of cases, one where the managing director himself is made an arbitrator and second where the managing director unilaterally elects the arbitrator. The Supreme Court, while delivering the Perkins dictum relied upon the rationale laid in TRF Ltd. v. Energo Engg. Projects Ltd.,⁷ wherein it was held that the managing director was incompetent to be an arbitrator because he would be interested in the outcome of the case. Therefore, going by the same logic, the Supreme Court held that all such parties who would be interested in the outcome of the case would be deemed ineligible for unilaterally appointing the arbitrator. Relying on this principle, the Court proceeded to hold that unilateral appointment of an arbitrator by an authority which is interested in the outcome of the decision is impermissible in law.

On whether the decision in Perkins (supra) case, applied onto on-going arbitrations, the Court answered in the affirmative. The Court held that the Supreme Court in Bharat Broadband Limited v. United Telecoms Limited⁸ has already settled the position in this regard. Once the Supreme Court has laid the law under S.12(5) of the Arbitration Act, the mandate of the arbitrator is terminated de jure under S.14 of the Arbitration Act. Therefore, the decision in Perkins (supra) case will apply to on-going matters as well.

Cinepolis India Pvt. Ltd. v. Celebration City Projects Pvt. Ltd. and Ors.

High Court of Delhi

Arb. P. No. 334/ 2019; Citation – MANU/DE/0209/2020

>Decided on: 21.01.2020

Brief Facts: The Ghaziabad Development Authority, the first respondent and the second respondent entered into an agreement by way of a sale deed wherein the first respondent conveyed the rights of a multiplex to the second respondent.

Thereafter, the petitioner entered an arrangement with the second respondent, whereunder it invested approximately Rs. 25 crores to begin operations in the multiplex bought by the second respondent. When disputes arose between the parties, the petitioner attempted to invoke the arbitration clause in the sale deed for the mall, but was unsuccessful due to lack of cooperation and response from the respondents. Therefore, the petitioner filed the present petition, seeking the appointment of a sole arbitrator under S.11(6) of the Arbitration Act.

Held: The second respondent contested the jurisdiction of the Court to entertain the present petition, on the ground that the title deeds relied upon by the petitioner were signed in Ghaziabad. Similarly, the subject matter of the sale deed was also located in Ghaziabad. The petitioner on the contrary, contended that the objection of the second respondent to the territorial jurisdiction is bad in law, as the arbitration clause in the sale deed clearly provided for the place/ seat of the arbitration to be at New Delhi.

The Court leaned in favour of the petitioner's submission that the seat of the arbitration alone will determine which court would have jurisdiction to entertain a petition under S.11(6) of the Arbitration Act. The Court relied on, amongst other decisions, the judgment in Bharat Aluminium Company & Ors. v. Kaiser Aluminium Technical Service, Inc. & Ors.⁹ and held that a bare perusal of the arbitration clause shows that the parties have clearly designated New Delhi as the place for arbitration proceedings. Therefore, it was held that since the designated seat is at New Delhi, this Court would have jurisdiction to entertain the present petition, even though cause of action may have arisen in Ghaziabad.

M/s Arvind Kumar Jain v. Union of India

Arb. P 779/2019

High Court of Delhi

Decided on: 04.02.2020

Brief Facts: The parties entered into a contract for work ("Contract"). Pursuant to disputes having arisen under the Contract, the petitioner invoked the arbitration clause in the Contract. Upon receiving petitioner's request, the respondent requested for the appointment of a Gazetted Officer (JAG/SAG) of the Railways (respondent) as an arbitrator, but did not deny the disputes between the parties. However, the respondent's request required the petitioner to wave its right of objection under S.12(5) of the Arbitration Act. The respondent further submitted before the Court that it is agreeable to arbitration in accordance with clause 64 of the GCC, but the appointment of an arbitrator is held up for want of the requisite waiver from the petitioner.

The petitioner submitted that it had a justifiable doubt regarding the impartiality of the arbitral proceedings when respondent's own officer was proposed as sole arbitrator. It was further submitted that once the petitioner is aware of the contravention of S.12(5) of the Arbitration Act, the respondent could not have directed petitioner to furnish a waiver. Therefore, a prayer was made before the Court to appoint an independent Arbitrator.

Held: The moot question was held to be whether the respondent could insist on the appointment of a Gazetted Officer of Railways as an arbitrator in the aforementioned proceedings, especially in the light of apprehension expressed by the petitioner and the express provision under S.12(5) of the Arbitration Act.

The Court relied on the decision of Hon'ble Supreme Court in Perkins Eastman Architects DPC v. HSCC (India) Ltd.¹⁰ to hold that a person who is interested in the outcome of the arbitration must be ineligible to not only act as an arbitrator, but also to appoint anyone else as an arbitrator. Therefore, the petitioner's prayer for appointment of an independent arbitrator was granted. The Court rejected the respondent's arguments for appointment of Gazetted Officer from the Railways. It was further held that a party cannot be compelled to furnish a waiver from the applicability of Section 12(5) of the Arbitration Act.

Vijay Karia v. Prysmian Cavi E Sistemi SRL & Ors.

Civil Appeal No. 1544 of 2020

Supreme Court of India

Decided on 13.02.2020

Brief Facts: Respondents in the matter had initiated arbitration under the London Court of International Arbitration Rules (2014) against the appellants, alleging material breach of certain contractual obligations. The appellants in turn, had raised several counter-claims against the respondents. On the issues of jurisdiction, material breaches and counter-claims raised by the appellant, the arbitrator had pronounced three partial final awards. Subsequently, the final award was passed in April 2017.

The four awards in question were not challenged before the courts of England, although the provision for such challenge was available to the appellants. These awards were challenged for the first time when they were sought to be enforced before the High Court of Bombay. However, the challenge was declined by the High Court of Bombay, stating that none of the grounds raised to resist enforcement of the awards fell within the scope of the narrow exceptions provided in Section 48 of the Arbitration Act. Thereafter, the Appellants preferred a special leave petition before the Supreme Court, under Article 136 of the Constitution of India.

Held: The Court took this opportunity to clarify that the scope of intervention of a Court under Article 136 of the Constitution is extremely limited and cannot be used to circumvent legislative policy set out in the Arbitration Act. Having established this, the Court proceeded to discuss the matter at hand in the context of international jurisprudence on enforcement of foreign arbitral awards and recognising the "pro-enforcement bias" being adopted in countries where execution is sought. The Court also observed that Courts in a country of primary jurisdiction i.e., a country where the award has been rendered has far more power when it comes to review of an arbitral award, as compared to the Courts in countries of secondary jurisdiction i.e., the countries where execution of the foreign award is sought. In the circumstances of this case, India being a country of secondary jurisdiction, the Courts in India have very limited scope to interfere with a foreign arbitral award.

The Court further stated that ground of violation of principles of "natural justice" may be invoked for resisting enforcement of a foreign arbitral award only if it is such that the party resisting enforcement was not given a fair opportunity of hearing. The onus seems to be on the party seeking the benefit of this ground to prove that it was not given a fair opportunity to present its case. As far as the "public policy" ground goes, the Court was of the opinion that failure of the arbitral tribunal to consider an issue which goes to the root of the matter, or contravention of "fundamental policy" of Indian law may be valid grounds for resisting enforcement. However, contravention of "fundamental policy" is not to be equated with contravention of just about any statute/statutory provision, which may be easily rectifiable in nature. The appellant here tried to plead breach of a Foreign Exchange Management Act, 1999 provision as a violation of "fundamental policy", but this argument was outright rejected by the Court.

M/s Dharmaratnakara Rai Bahadur v. M/s Bhaskar Raju & Brothers

Civil Appeal No. 1599/2020

Supreme Court of India

Decided on: 14.02.2020

Brief Facts: The claims arose out of lease deeds, which were admittedly neither registered, nor sufficiently stamped, as required under the Karnataka Stamp Act, 1957 ("Karnataka Stamp Act"). It was also an admitted fact that the respondents had not paid stamp duty and penalty despite being directed to do so by the Registrar (Judicial), High Court of Karnataka. In this background, the moot question before the Hon'ble Supreme Court was whether an insufficiently stamped lease deed could be acted upon, in order to enforce the arbitration clause contained within the deed.

Held: The Court held that when a lease deed or any other instrument is relied upon as the document containing an arbitration agreement, the Court should at the outset, consider whether an objection in that behalf is raised or not and whether the document is properly stamped.

The Court relied upon its decision in SMS Tea Estates Private Limited vs. Chandmari Tea Company Private Limited,¹¹ wherein the same question had arisen for its consideration in relation to the Karnataka Stamp Act. The Court held that S.35 of the Karnataka Stamp Act mandates that instruments are duly stamped, in order to be admissible in evidence and acted upon. Therefore, it was clarified and reiterated that unless the stamp duty and penalty due in respect of an instrument is paid, a Court cannot act upon an arbitration agreement which forms part of such an unstamped instrument.

SSIPL Lifestyle Private Limited and Ors. v. Vama Apparels (India) Private Limited and Ors.

CS (COMM) 735/2018; Citation - MANU/DE/0521/2020

High Court of Delhi

Decided On: 19.02.2020

Brief Facts: The plaintiffs filed two recovery suits against the defendants on 17 February 2018. The summons in these suits were issued by the Court on 15 March 2018. On 16 May 2018, the defendants were allowed to file the written statement. On account of a parallel proceeding in the NCLT commenced on 17 May 2018 the defendant refrained from filing a written statement.

Upon conclusion of the insolvency proceedings on 8 October 2018, the defendants moved S.8 applications in each of the suits, thereby seeking reference to arbitration in accordance with the arbitration clause in the agreement between the parties.

The petitioners objected to the S.8 applications on the ground that since the limitation period for filing of written statement had expired, even Section 8 Applications cannot be filed by the defendants. Therefore, the question that arose for consideration of the Court was whether the limitation for filing of written statement as prescribed in the Code of Civil Procedure, 1908 ("CPC"), as well as the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 ("Commercial Courts Act") would be applicable for filing of an application under S. 8 of the Arbitration Act.

Held: The Court held that there is a limitation period in terms of the duration for filing an application for reference to arbitration under S.8 of the Arbitration Act, and also that this limitation period is tied up with the date prescribed for filing of written statement. This means that, a litigant may be deemed to have waived off its right to seek reference to arbitration if it files a statement of defence without first filing a S.8 application, or if it fails to file a S.8 application till the date by which the statement of defence could have been filed.

The court further read through S.8 of the Arbitration Act as it were before the amendment of 2015 and compared it with the amended language of S.8. The Court concluded that the amendment to S.8 is a conscious step taken by the legislature, towards prescribing a limitation period for filing the S.8 application. The mention of the word "date" in the amended provision means that a reference is being made to a precise date to remove the ambiguity regarding the exact period of limitation prior to the 2015 amendment. The entire intention is that those parties who wish to proceed for arbitration ought to do so with alacrity and speed, and not procrastinate. Thus, the limitation period for filing of written statement as prescribed in the CPC as well as Commercial Courts Act would be applicable for filing of an application under S.8 of the Arbitration Act.

Cairn India Ltd. and Ors. v. Government of India

High Court of Delhi

O.M.P. (EFA) (COMM.) 15/2016, I.A. Nos. 20459/2014 and 3558/2015

Decided on: 19.02.2020

Brief Facts: The present matter relates to an enforcement petition filed under S.47 and S.49 of the Arbitration Act. The petitioners unanimously sought the enforcement of a foreign award ("Award") dated 18 January 2011. The Government of India objected to the enforcement of the Award under S.48 of the Arbitration Act.

Although the award was rendered on 18 January 2011, the petitioners filed an enforcement petition under sections 47 and 49 of the Arbitration Act, as late as on 15 October 2014. Hence, the present dispute arose where one of the key issues was whether the enforcement petition was barred by limitation and in construing the period of limitation, whether Article 136 or Article 137 of the Limitation Act, 1963 ("Limitation Act") would apply.

Held: The Court noted that there are two diametrically opposite views on the issue as to which of the two articles, Article 136 or Article 137 of the Limitation Act would apply in the present case. On one hand, a single judge of the High Court of Madras in M/s. Compania Naviera 'SODNOC v. Bharat Refineries Ltd. & Anr.¹² held that a foreign award is already stamped as a decree and hence a foreign award holder has got twelve (12) years like that of a decree-holder; whereas on the other hand, the Bombay High Court, to the contrary, held in Noy Vallesina Engineering Spa v. Jindal Drugs Limited¹³ that where an application for enforcement or execution of a foreign award was filed, it will be governed by the provisions of Article 137 of the Limitation Act (residuary provision), if at that stage the Court had not recorded its satisfaction that the award is enforceable.

The Court considered the conflicting views in the above-mentioned judgments and held that in order to give effect to the purpose and object of the Arbitration Act, which is speedy and robust disposal of disputes, it would make sense to read the provisions of the Limitation Act "pragmatically" rather than in a "pedantic manner". The Court held that a foreign award is enforceable on its own strength and not necessarily dependent on whether or not it goes through the process of S.48 proceedings under the Arbitration Act, because in case of international arbitral awards, there is no restriction on forum in which the recognition or enforcement of such award can be sought. Therefore, it was decided that Article 136 of the Limitation Act would apply to an enforcement petition and the present enforcement petition is not barred by limitation.

Shri Chand Construction and Apartments Pvt. Ltd. v. Tata Capital Housing Finance Ltd.

High Court of Delhi

CS(OS)179/2019; Citation – MANU/DE/0706/2020

Decide on: 04.03.2020

Brief Facts: The plaintiffs sued the defendants in the present case for damages, on account of the loss of title deeds of their immovable property, deposited with the defendants by way of equitable mortgage. The written statement of the defendants in this matter was not filed within the time granted by the Joint Registrar of the High Court of Delhi. Therefore, the Court passed an order to close the right of defendants to file a written statement, while also directing the plaintiffs to proceed for the recording of evidence on the next date (Impugned Order).

The defendant preferred an appeal before the Division Bench against the Impugned Order, and this appeal was allowed. The defendants were thereby granted an extension till 11 October 2019 to file the written statement.

In the meanwhile, this application filed by the defendant, to refer parties to arbitration came up before the Court. The defendants pleaded that there was an agreement to arbitrate, between the parties, and the parties should therefore be referred to arbitration. The plaintiffs opposed defendant's request for reference arbitration stating that the conduct of defendant in appealing against the closure of its right to file written submissions shall mean that the defendant opted to continue with the proceedings. The defendant according to the plaintiffs had disentitled itself from the right to file a S.8 application under the Arbitration Act, for reference to arbitration. Hence, the present dispute.

Held: The first issue for consideration in the present dispute is whether an application for seeking extension of time for filing written statement would constitute the "first statement on the substance of the issue" under S.8 of the Arbitration Act.

The Court deliberated on the legal precedent in this regard,¹⁴ particularly the decision of the Supreme Court in Greaves Cotton Ltd. v. United Machinery and Appliances (2017) 2 SCC 268, wherein it was held that an application for seeking extension of time for filing written statement would not constitute the "first statement on the substance of the issue", as it did not reply to the allegations in the plaint.

The Court while relying on this position, went a step further and opined that where a Court has extended the time to file the written statement, it has to be held that the time for filing application under S.8 of the Arbitration Act also stands extended.

The second question that the Court has addressed in this decision, is whether there can be a valid arbitration clause providing for arbitration of claims of one of the parties and providing for the remedy before a Court, or any other fora for claims of the other party. In this regard, the Court stated that the words "all or certain disputes" permit classification of disputes, but do not permit classification of claims. These words do not allow a provision providing for claims of one of the parties, arising in respect of a defined legal relationship, to be adjudicated by arbitration while the claims of the other party arising in respect of the same legal relationship, to be adjudicated by any other mode of dispute resolution. This would be contrary to the public policy prohibiting splitting up of claims and causes of action as enshrined in the provisions of the CPC, and would result in multiplicity of proceedings.

Mankastu Impex Private Limited vs. Airvisual Limited

Citation: MANU/SC/0283/2020

Supreme Court of India

Decided On: 05.03.2020

Brief Facts: Mankastu Impex filed a petition under S. 11 of the Arbitration Act before the Supreme Court. Mankastu Impex and Airvisual had entered into a memorandum of understanding ("MoU") on 12 September 2016, agreeing that Mankastu Impex would be the exclusive distributor of Airvisual's air quality monitors for a period of five (5) years. Airvisual was subsequently acquired by IQAir, who rejected Mankastu Impex's exclusive rights of sale of Airvisual's products, thereby leading to the present dispute. Mankastu Impex invoked the arbitration against Airvisual on 8 December 2017.

Held: The question before the Court pertained to whether Hong Kong would be the "place of arbitration" or the "seat of arbitration", and whether the Supreme Court has the jurisdiction to entertain the instant petition. The Supreme Court observed that mere expression "place of arbitration" cannot be the basis to determine the intention of the parties that they have intended place as the "seat of arbitration". The expression "arbitration administered in Honk Kong" seems to have been the determining factor in the decision of the Court, that Hong Kong was indeed intended by the parties to be the "seat of arbitration". The Court therefore declined to exercise jurisdiction in the matter. However, no comments were offered by the Court on the correctness of the position taken by the Supreme Court previously in BGS SGS Soma JV v. NHPC Ltd.¹⁵

Sona Corporation India Pvt. Ltd. v. Ingram Micro India Pvt. Ltd. and Ors.

High Court of Delhi

Arb. A. Comm. 4/2019; Citation – MANU/DE/0247/2020

Decided on: 20.01.2020

Brief Facts: The dispute in the present case relates to the violation of terms, as well as unilateral termination of two registered lease deeds executed between the appellant (lessor) and respondents (lessees). The High Court of Delhi referred the matter to arbitration, whereby the respondents filed a counter-claim for refund of Rs. 2,70,00,000 given as security deposit under the lease deed between the parties.

The respondents also filed an application under S.17 of the Arbitration Act and prayed for directions against the appellant to refund the security deposit in full. The application of respondents under S.17 was disposed off by the arbitral tribunal vide order dated 11.12.2018 and the appellant in order to secure the refund of the security deposit, undertook to put forth one of its properties which would not be subject to any encumbrances other than leasing, till the conclusion of the arbitral proceedings.

The respondents subsequently filed a second application under S.17 of the Arbitration Act, praying for a fresh order on the ground that the property given by appellants as security, as per order dated 11.12.2018, was already mortgaged by the appellant for a sum of Rs. 73,79,50,000. Therefore, the second order was sought by the respondent for initiating contempt proceedings against the appellant for violating the order and undertaking both dated 11.12.2018.

The arbitral tribunal then passed a fresh order, recalling its earlier order of 11.12.2018, and directing the appellant to furnish a bank guarantee of Rs. 2,70,00,000 valid for twelve (12) months or open a fixed deposit account of the same amount, endorsing that the fixed deposit will be payable on orders of the arbitral tribunal. The aggrieved appellants filed an appeal under S.37(2) of the Arbitration Act, against this order of the arbitral tribunal. Hence, the present dispute.

Held: The Court in the present case compared the powers of arbitral tribunal under S.17 of the Arbitration Act to powers of the Court under S.9 of the Arbitration Act. The decision takes note of the fact that S.9 of the Arbitration Act provides for "various interim orders that a Court could pass", however, S.17 of the Arbitration Act used the expression "any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject matter of the dispute". Therefore, it was a pre-requisite for the party applying for interim relief before the arbitral tribunal to show that a specific interim relief covered under S.9, was also covered within the limited language of S.17 of the Arbitration Act. It is in this background that the amended S.17 was introduced to the Arbitration Act, the wording of which has been moulded to bring it in line with the wording of S.9 of the Arbitration Act. An arbitral tribunal now has the same powers as a Court, when it comes to granting interim relief to the parties.

In light of these enhanced powers of the arbitral tribunal under S.17 of the Arbitration Act, it was necessary for the Courts to limit judicial review of arbitral orders. Therefore, the Court here relied upon the decision rendered in Green Infra Wind Energy Limited vs. Regen Powertech Private Limited,¹⁶ wherein it was observed that the court in exercise of powers under S.37 of the Arbitration Act cannot interfere with the order passed by an arbitral tribunal under S.17, unless the discretion exercised by such arbitral tribunal is found to be perverse or contrary to law. Since no perversity or infirmity was observed in the order of the arbitral tribunal in this matter, no interference was deemed necessary.

Bina Modi and Ors. v. Lalit Modi & Ors.

High Court of Delhi

CS(OS)84/2020; Citation – MANU/DE/0685/2020

Decided on: 03.03.2020

Brief Facts: The present case involves a dispute amongst the surviving Trustees of K.K. Modi Family Trust ("Family Trust") namely Charu Modi, Bina Modi, Sameer Modi and Lalit Modi. K.K. Modi executed a trust deed wherein the trust mentioned the contingent course of action of the Family Trust on the demise of K.K Modi. One of the essentials in the Trust Deed was to convene a meeting of the Board of Trustees to unanimously decide whether to continue operations or to sell in part or whole of the Trust Fund comprised of various assets.

However, it is further stipulated that in order to give effect to the decision taken at the meeting, the written consent of all surviving trustees would be required. A dispute emerged in the present case upon the demise of K.K. Modi, as Lalit Modi contended that the trust fund must be sold and distributed amongst the trustees, given the lack of unanimity amongst the trustees. On the contrary, Bina Modi, Charu Modi and Samir Modi ("Plaintiffs") contended that the operations of the Family Trust must continue without the sale of trust fund.

After failed attempts at amicably resolving the dispute, Lalit Modi filed for emergency measures before the International Court of Arbitration ("ICA") of the International Chambers of Commerce ("ICC") seeking to restrain the Plaintiffs from taking any steps in relation to Family Trust or the trust fund. The ICC appointed an emergency arbitrator, who amongst other things, directed the parties to schedule a preliminary call/ meeting of emergency arbitration proceedings on 22 February 2020. The Plaintiffs participated in the hearing before emergency arbitrator on 22 February 2020, without prejudice to their right to object. The emergency arbitrator set the date of further physical hearing of the emergency arbitration proceeding for 7 March 2020.

The Plaintiffs therefore approached the Delhi High Court seeking the following reliefs: (i) to declare the arbitration agreement as null, unenforceable and void; (ii) to declare Lalit Modi's application for emergency arbitration proceedings as null and void; (iii) to grant an anti-arbitration injunction restraining defendant Lalit Modi from prosecuting or continuing with application for emergency measures; and to direct ICC to enforce the order passed in terms of prayers made above.

Held: The Court held that there lies no merit in the contention that the procedure followed by the ICC was repugnant to that of the Arbitration Act of India. It was held that the Arbitration Act is governed by the principle of freedom of the parties and S.19 thereof expressly provides that the parties are free to agree on the procedure to be followed by the arbitral tribunal while conducting the proceedings.

The parties consciously changed the provisions within the trust deed in question to allow arbitration at the ICC. Moreover, the Court also gave due to the fact that by virtue of the status of the parties, all of whom belong to a business family, they are well accustomed to litigations and arbitration of all kinds. Therefore, it could not be said that they were not aware of the procedure of ICC. Thus, the ground of "haste makes waste", cannot be invoked. A party, having expressly agreed to a particular state of affairs, cannot subsequently raise the argument of forum non conveniens, which is available only in cases of concurrent jurisdiction.

The Court further held that the principles pertaining to anti-suit injunction suits, as held in Mcdonald's India Pvt. Ltd. Vs. Vikram Bakshi¹⁷ are not attracted to anti-arbitration injunction suits, for the reason that the Arbitration Act is a complete code in itself, empowering an arbitral tribunal to rule on its own jurisdiction.

Indian Oil Corporation Limited v. Toyo Engineering Corporation and Ors.

High Court of Delhi

O.M.P (COMM) 316/2019; Citation – MANU/DE/0728/2020

Decided on: 06.03.2020

Brief Facts: The respondents in the present matter filed an application under S.36(3) of the Arbitration Act and Order XLI Rule 5 read with S.151 of the CPC, seeking modification of an order passed by the High Court of Delhi on 09 August 2019. The respondents contend that the Arbitration and Conciliation (Amendment) Act, 2019 received assent on 09.08.2019 i.e., the same date on which the impugned was passed, directing the petitioner to make only a partial deposit of the award amount (roughly only about 20%).

The respondents contend that following the decision in Hindustan Construction Company Limited & Anr. v. Union of India & Ors.,¹⁸ the award holder should not be deprived of the fruits of arbitration and therefore, the petitioner should be directed to deposit full quantum of the award which along with interest amounts to Rs. 695 Crores as on 27 January 2020. The respondents further relied upon the case of Mathur & Kapre Associates Private Limited v. ESIC,¹⁹ and other orders to contend that directions for deposit of the entire award amount have been issued by Courts. The respondents therefore argued that the order dated 09 August 2019 should be modified to bring it in line with the recent decisions that direct deposit of entire award amounts, and a sum of Rs. 695 Crores should be deposited by the petitioner.

The petitioner argued that there was an attempt to create a wrong impression that the impugned order was passed at a point in time when the law permitted an automatic stay of the arbitral award, during the pendency of proceedings under S.34 of the Arbitration Act. However, the petitioner contends that the legal position on 09 August 2019 was such that there would be no such automatic stay of the arbitral awards. The petitioner further alleged that the applicant is seeking rehearing of an issue which was otherwise already argued extensively on 09 August 2019, and already decided upon by the Court. Therefore, the present dispute arises in relation to the order passed on 09 August 2019 and the quantum of the deposit to be made by the petitioner.

Held: The Court acknowledged that there have been instances in the recent past, wherein the Supreme Court and the High Court of Delhi have passed several orders directing the objector to deposit 75% or even 100% of the award amount, before the enforcement of the award is stayed. However, the appropriate stage of considering the amount which the petitioner must deposit on the enforcement of the award was on 09 August 2019, when the Court heard the parties on the stay application. Where a Court has already heard the parties at length and exercised its discretion to direct a deposit of Rs. 125 Crores, the only thing that needs to be seen is whether the Court can exercise the discretion once again and modify the order despite the fact that there has been no change in the circumstances.

The Court here therefore held that since the respondents failed to plead any change of circumstances in the application and there was no such argument even during the hearing of the application, there was no merit in the application.

Badri Singh Vinimay Private Limited v. MMTC Limited

High Court of Delhi

O.M.P 225/2015, Citation - MANU/DE/0036/2020

Decided on: 06.01.2020

Brief Facts: The petitioner in the present case filed a petition under S.34 of the Arbitration Act, praying for the setting aside of an award passed by a sole arbitrator on 02 December 2014. awarding a sum of Rs. 1,12,27,431 along with interest and costs on the same to the respondent.

The dispute relates to a contract for the sale of 1500 metric tonnes of imported lentils. The respondent contends that the petitioner failed to lift the goods upon acceptance of his bid for 250 metric tonnes of lentils that led the respondent to sell the material to third parties at petitioners' risk. Thereafter, the respondent invoked arbitration under the rules of ICA and claimed the losses incurred in the sale.

Aggrieved by the plea for arbitration, the petitioner approached the City Civil Court of Calcutta to challenge the validity of the arbitration agreement between the parties. The respondents filed an application to refer the parties to arbitration under S.8 and S.21 of the Arbitration Act. The City Civil Court did not grant any stay on the arbitration. Thereafter, the respondent proceeded with the arbitral proceedings. The petitioner repeatedly requested the arbitrator to adjourn the proceedings, only to have the requests refused. Here onwards, the petitioner did not participate in the arbitral proceedings while the arbitrator recorded evidence from the respondent and passed the impugned award.

The petitioner contended that the arbitral proceedings were vitiated on account of invocation of arbitration and improper procedure having been adopted. The petitioners alleged that there was no notice invoking arbitration in accordance with Rule 15 of ICA Rules and S.21 of the Arbitration Act. Hence the present petition to determine whether a proper notice invoking arbitral proceeding was sent by the respondents to the petitioner in the present case?

Held: The High Court of Delhi while determining the essentials of a notice invoking arbitration under S.21 of the Arbitration Act and the Rules of Indian Council of Arbitration held that communication narrating a set of facts, claiming a disputed amount and contemplating arbitration in the alternative is sufficient to qualify as a notice of a request for arbitration.

The High Court of Delhi also reiterated the decision in RIICO Ltd. Jaipur & Ors. v. Manoj Ajmera & Anr.²⁰ and held that S.21 of the Arbitration Act required a party to send a request to the counter-party for the dispute to be referred to arbitration and the communication from the respondent meets this requirement. Thus, the initiation of arbitration proceedings in such a situation was expressly contemplated.

The Chief General Manager (Contracts), Neyveli Lignite Corporation Ltd. v. Driplex Water Engineering Ltd. and Ors.

LPA 688/2019, Citation – MANU/DE/0337/2020

High Court of Delhi

Decided On: 29.01.2020

Brief Facts: The petitioner in the instant matter had challenged a judgment of a single judge of the High Court of Delhi, dismissing a writ petition filed by it, impugning an order passed by the Micro and Small Enterprises Facilitation Council ("MSEF Council"). The MSEF Council's Order acceded to the request of the first respondent instituted arbitral proceedings at the Delhi International Arbitration Centre ("DIAC") under S.18(3) of the Micro, Small and Medium Enterprises Development Act, 2006 ("MSMEDA").

The appellant, a public sector enterprise engaged in the production of power using lignite, had invited tenders for certain work relating to thermal power stations. One of the essentials for the bidder was to show that it had a turnover of more than Rs. 11 crores. The first respondent claimed that it had a turnover of more than Rs. 20 Crores consistently from 2001-2004. Therefore, the parties entered into a contract wherein Rs. 63 Crores were payable to the first respondent. The petitioner claimed that the first respondent failed to complete the work within a timely manner, and therefore the petitioner withheld the performance bank guarantee offered by the first respondent of Rs. 6.30 Crores.

Thereafter, disputes arose between the parties and the first respondent applied before the MSEF Council to recover certain sums. The petitioner contended that the MSEF Council lacked jurisdiction to entertain the present matter for the first respondent could not project itself as a small enterprise. Thus, the first respondent failed to meet the criteria set forth in the MSMEDA under S.7(1)(b)(ii). The first respondent in its rejoinder contended that it was a registered small-scale industrial unit with the Department of Industries, Haryana vide certificate dated 08 May 1981. To resolve the dispute, the MSEF Council referred parties to arbitration under S.18(3) of the MSMEDA. Hence, the present appeal.

Held: The moot question here was whether a supplier that had not obtained registration within the period prescribed under the MSMEDA, but had done so after entering into a contract with the buyer, would be entitled to benefits contained in the MSMEDA. The High Court of Delhi upheld the view taken in the case of GE T&D India Limited v. Reliable Engineering Projects and Marketing,²¹ thereby holding that MSMEDA being a beneficial legislation, a supplier as described hereinabove is indeed entitled to seek recourse to the beneficial provision of statutory arbitration as contained in the MSMEDA.

Parmeet Singh Chatwal and Ors. v. Ashwani Sahani

Citation: MANU/DE/0442/2020

High Court of Delhi

Decided On: 14.02.2020

Brief Facts: The petitioner in the present case was purchasing fabrics as per his specifications from the respondent. The respondent raised bills in the name of the petitioner for the fabrics so purchased. The respondent stated that as per his record, there was an outstanding payment of Rs. 15,52,964 payable by the petitioner for his purchases. It was also submitted by the respondent that delayed payment attracted interest at the rate of 24% per annum. Therefore, the respondent claimed a sum of Rs. 11,18,124 on account of interest.

The petitioner meanwhile issued a cheque for Rs. 1,00,000, which was returned unpaid. As a result, the respondent invoked arbitration for recovery of the outstanding balance from the petitioner. The arbitral tribunal decided in favour of the respondents.

Aggrieved by the award rendered in favour of the respondent, the petitioner filed a S.34 petition under the Arbitration Act to challenge the award and the arbitration agreement itself. It was the case of the respondent that invoices raised against the petitioner in their usual trade had mentioned an 'arbitration clause' which was produced at the bottom of an invoice in a small font and read as follows, "We are a member of Delhi Mercantile Association in case of any dispute its decision is final and binding for both the parties". Similarly, another set of invoices had the following clause printed on it, "all disputes regarding this invoice will be settled by Delhi Hindustani Mercantile Association and will be binding on both parties". Therefore, the respondents contended that the arbitration agreement was very much valid and enforceable.

The main question for consideration here was whether in the present dispute, there is an arbitration agreement between the parties at dispute, and whether plaintiff is entitled to recover his claimed amount along with interest from the defendants.

Held: The Court reiterated the decision of the Supreme Court in Punjab State v. Dinanath,²² wherein it was held that on a bare perusal of the definition of arbitration agreement, it would clearly show that an arbitration agreement is not required to be in any particular form. What is required to be ascertained is whether the parties have agreed that if any dispute arises between them in respect of the subject-matter of the contract, such dispute shall be referred to arbitration. The Court noted that on facts, there is no record of any finding regarding the intention of the parties to agree to settle their dispute through arbitration. The award merely concluded the existence of an arbitration clause without giving any reasons.

The Court was further of the opinion that the question of agreement to arbitrate aside, the clause itself was vaguely structured. Therefore, such a clause would not be an arbitration agreement, and the parties were not ad idem in this regard. As there is no arbitration agreement, the award and the proceedings shall be vitiated. Even otherwise, the claim of the petitioner was held to be barred by limitation.

Meera Goyal v. Priti Saraf

High Court of Delhi

Citation - MANU/DE/0607/2020

Decided on – 26.02.2020

Brief Facts: The present dispute relates to a dispute that arose between the petitioner, who is the owner of certain property, and the respondent who sought to buy such property by way of an agreement of sale. The said property admeasured over 1205 square yards and the sale consideration was fixed at Rs. 63,28,50,750. The respondent initially paid a sum of Rs. 12.50 Crores as earnest money, and thereafter another Rs. 5.40 Crores .

However, the petitioner alleges that the respondent failed to pay the remaining balance within the prescribed timeline and therefore, the petitioner terminated the contract. Accordingly, the respondent preferred petitions before High Court of Delhi under S.9 and S.11 of the Arbitration Act, alleging that the petitioner breached the contract and therefore, the earnest money was liable to be refunded to the respondent along with damages. The parties were referred to arbitration by the Court.

During the arbitral proceedings, the arbitrator in the present case did not entertain the petitioner's oral objection under S.16(3) of the Arbitration Act that the respondent's claim was not covered by damages. The petitioner also filed applications under S.16(2) and S.16(3) of the Arbitration Act, which were again rejected by the arbitrator.

Therefore, the petitioner contended that the refusal of the arbitrator to entertain the above-mentioned applications under S.16(2) and S.16(3) amounted to passing an interim award which could be challenged under S.34 of the Arbitration Act.

Held: The moot question in the present case was whether the order passed by the arbitrator qualified as an interim award and if yes, then whether the same is liable to be set aside.

The Court deliberated upon the issue and held that there had been no determination by the learned arbitrator on the objections raised by the petitioner. In such cases, the Court asks if it can be stated that any right of the parties was finally determined, this being a necessary pre-condition for any order to be termed as an interim award under S.31(6) of the Arbitration Act. The Court clarified that the answer is a clear 'no'.

The learned arbitrator had with abundant clarity held that the objections of the petitioner would be decided at the time of passing of the final award and, therefore, it cannot be deemed as a 'rejection' of the petitioner's objections. The fact however remained that there had been absolutely no determination of the petitioner's objections until that point, as the arbitral proceedings were yet to be concluded. That being the position, the impugned award does not qualify as an interim award for the purpose of being challenged under S.34 of the Arbitration Act.

MMTC Ltd. v. Anglo American Metallurgical Coal Pty. Ltd.

High Court of Delhi

FAO (OS) 532/2015 and C.M. Appl. 20560/2015, Citation – MANU/DE/0664/2020

Decided on: 02.03.2020

Brief Facts: This case involves an appeal under S.37 of the Arbitration Act against a judgment passed a single judge of the High Court of Delhi under S.34 of the Arbitration Act, dismissing objections to a majority arbitral award. The appellant in the present case (Government of India) entered into a long-term agreement ("Agreement") with the respondent, on 07 March 2007. The appellant thereby agreed to purchase a certain quantity of coking coal from the respondent over three delivery periods. The Agreement was later modified by an addendum to have two more delivery periods in an extension of the timeline. In the meanwhile, after the issuance of the addendum in the Agreement, the appellant requested to reduce the price of the coal for the fifth delivery lot, given the prevailing global financial crisis at the time.

The dispute therefore arose in relation to the fifth lot of coking coal wherein the appellant maintained that the respondent failed to supply 4,54,034 metric tonne of coking coal while to the contrary, the respondent contended that the appellant failed to purchase the coal in breach of an agreement.

The respondent during the arbitral proceedings claimed damages on account of non-lifting of 4,53,034 metric tonne of coking coal by the appellant, which was allowed by the arbitral tribunal, to grant damages to the tune of 78,720,414.92 USD by award dated 12 May 2014. Thereafter, the appellant challenged this award under S.34 of the Arbitration Act and failed. Hence, the present petition.

Held: The Court held in proceedings conducted under S. 37 of the Arbitration Act, that the Court is not to re-appreciate evidence, much less in a case where the arbitral tribunal as well as the single Judge under S.34 have agreed with a certain view on the facts of the case. However, it is also the law that where a factual inference is based on no evidence, the Court may interfere with such inference even under S.37 of the Arbitration Act.

In the present case, the Court was of the opinion that the decision is based on imaginary evidence, which is the same as a decision rendered on no evidence or ignorance of vital evidence. A decision based on such imaginary documents would necessarily be perverse. The Court relied upon the decision in Associate Builders v. DDA²³ and held that if majority of the arbitrators in the arbitral tribunal ignore what is plainly stated in commercial correspondence and read into e-mails words that do not exist, or ignore words that are contained in e-mails, this can only pave the way for complete injustice. The award in question was therefore set aside.

Footnotes

1 (2016) 11 SCC 720.

2 (1974) 2 SCC 231.

3 (1983) 4 SCC 417,

4 Inserted by Section 8, Arbitration and Conciliation (Amendment) Act, 2015.

5 2020(1)ARBLR19(SC)

6 2019 SCC OnLine SC 1517

7 (2017) 8 SCC 377

8 (2019) 5 SCC 755

9 (2012)9SCC552

10 2019 SCC Online SC 1517.

11 (2011) 14 SCC 66.

12 AIR 2007 MADRAS 251.

13 2006 SCCOnLine Bom 545.

14 Krishna Radhu v. The Emmar MGF Construction Pvt. Ltd. MANU/DE/3422/2016; Rashtriya Ispat Nigam Ltd. v. Verma Transport Company AIR 2006 SC 2800.

15 2019 (17) SCALE 369.

16 MANU/DE/1348/2018.

17 (2016) 232 DLT 394.

18 MANU/SC/1638/2019.

19 OMP (ENF)(COMM) 14/2019.

20 (2008) 2 ArbLR 388.

21 (2017) 238 DLT 79.

22 (2007) 5 SCC 28.

23 (2015) 3 SCC 49.

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