The case centres around the scope of the Court’s jurisdiction and the role of the referral court in the appointment of an arbitrator, particularly in determining whether a non-signatory can be considered a party to an arbitration agreement. This matter pertains to an arbitration petition under Section 11(6) of The Arbitration and Conciliation Act, 1996.
In this case, the Family Arrangement Agreement (FAA) was signed between the AMP Group (the petitioners) and the JRS Group. The petitioners sought the appointment of a sole arbitrator to resolve disputes. The petitioners argued that the SRG Group, although not a signatory, should be included in the arbitration due to their involvement in negotiations and the benefits they derived from the FAA. The respondents opposed this, asserting that the SRG Group was not bound by the agreement.
The petitioners contended that despite the SRG Group not being a signatory, their involvement in negotiations and implementation of the FAA and their benefit from it should bind them to the agreement, warranting their inclusion in the arbitration proceedings. The JRS Group, while not objecting to arbitration with the AMP Group, opposed the inclusion of the SRG Group, arguing that the FAA was exclusively between the AMP and JRS Groups, with no obligations or definitions extending to the SRG Group. The SRG Group also asserted that they were neither parties to the FAA nor involved in its execution, arguing that there was no privity of contract between them and the petitioners and thus, they should be excluded from arbitration proceedings.
The primary legal issue was whether the SRG Group, as a non-signatory to the FAA, could be referred to arbitration, which required examining the scope of the referral court’s jurisdiction under Section 11(6) of the Act, 1996. After considering various earlier precedents like Cox and Kings Ltd. Vs. SAP India Pvt. Ltd. and Vidya Drolia and various documents crucial to the dispute, the Court concluded that while the SRG Group prima facie may be connected to the FAA and included in the settlement contemplated therein, this aspect should be looked into more closely by the Arbitral Tribunal. The Court emphasized that it should not engage in a mini-trial or delve into disputed facts. Given the complexity of determining whether the SRG Group is a veritable party to the arbitration agreement or not, the Court held that it is appropriate for the Arbitral Tribunal to assess the evidence and apply relevant legal doctrines, as outlined in the Cox and Kings decision.
Cox & Kings Ltd. filed a petition under Section 11(6), read with Section 11(12)(a) of the Arbitration & Conciliation Act, 1996, seeking the appointment of an arbitrator to adjudicate disputes and claims arising from an agreement signed between Cox & Kings Ltd. and SAP India Pvt. Ltd.
The dispute arose over the timely completion and implementation of SAP Hybris Software. SAP India assured Cox & Kings that 90% of the software was compatible with their requirements and that the remaining customization would take approximately 10 months. However, delays, project execution challenges, and a lack of response from SAP India, combined with missed deadlines, led to the initiation of arbitration proceedings.
Cox & Kings argued that several agreements existed between the parties, all of which were interlinked. They contended that SAP India’s parent company, though not a signatory to the agreement, played an active role in implementing the project and intervening in the dispute. This involvement, they claimed, made the parent company a “veritable party” to the agreement. Furthermore, Cox & Kings invoked the Group of Companies doctrine to include SAP SE (the parent company) in the arbitration and requested fresh arbitration proceedings, despite a previous arbitration being ongoing.
In response, SAP India countered that the same issue was already being adjudicated, and allowing another arbitration would lead to risk of conflicting judgments on the same subject matter and as such, the principles of res sub-judice and res judicata would be attracted to the second arbitration proceedings and consequently the present petition. They also argued that the parent company never consented to arbitration and that the arbitration clause did not extend to the parent company or any unrelated agreements.
After reviewing the materials on record, the court held that although the respondents raised numerous objections, none of these objections questioned the existence of the arbitration agreement under which the petition had been filed. The court found that the prima facie existence of an arbitration agreement was satisfied under Section 11 of the Act. The court ruled that once the arbitral tribunal was constituted, the respondents would be able to raise all legal objections, and the tribunal would consider these before proceeding with the case.
On the issue of including SAP SE (the parent company) in the arbitration, the court acknowledged the complexity of determining whether a non-signatory could be made a party to the arbitration. It deemed it appropriate for the arbitral tribunal to decide on this matter based on the facts and legal doctrines involved.
The judgment reaffirmed the limited role of the court at the referral stage, emphasizing that the arbitral tribunal is best suited to resolve complex issues such as the applicability of the arbitration agreement to non-signatories.
In the present case the Hon’ble Delhi High Court has decided an interesting issue as to whether the ceiling of the Arbitral Tribunal fees under the Schedule IV was to be calculated on the basis of claims and counterclaims together or separately for the claims and counterclaim.
The facts of the present case are that the Hon’ble Court had appointed a sole arbitrator and had directed that the Arbitrator’s fee would be determined in terms of the Schedule IV of the Arbitration & Conciliation Act, 1996 (“1996 Act”). After the hearing in the matter was concluded, Ahluwalia Contracts India Limited (“Petitioner) filed a Petition under section 39(2) of the 1996 Act seeking directions to the sole arbitrator to deliver the arbitral award in the matter. The Ld. Arbitrator had passed an order dated 12.08.2023 in the said matter, and the said order records the final computation of the arbitrator’s fees. The Ld. Sole Arbitrator in the said order had further recorded that the computation of the fees was based on the judgement dated 10.07.2020 passed by the Hon’ble Delhi High Court in Rail Vikas Nigam Limited V. Simplex Infrastructures Limited. According to the said judgment, the upper limit of the fees payable to the sole Arbitrator under the Fourth Schedule of the 1996 Act is Rs. 62,34,375. This interpretation of the Fourth Schedule of the 1996 Act was prevalent on 24.11.2020 when the said matter was assigned to the Ld. Sole Arbitrator. Furthermore, the Hon’ble Supreme Court’s Judgment dated 30.08.2022 in ONGC V. Afcons Gunanusa JV is a subsequent judgment and applicable retrospectively.
The Hon’ble Delhi High Court observed that the judgment in the matter of Rail Vikas Nigam Limited V. Simplex Infrastructures Limited provided that the upper limit of fees payable to a sole arbitrator as per the Fourth Schedule would be calculated assuming that the sum in dispute would be consideration of the claims and counterclaims together. As such the maximum fee under the Fourth Schedule of the 1996 Act, would be Rs. 62,34,375. The said judgement was subsequently, overruled by ONGC V. Afcons Gunanusa JV which provided that the ceiling would be calculated separately for claims and separately for counterclaims. The Hon’ble Delhi High Court observed that the Ld. Sole Arbitrator passed the aforesaid order in August 2023. However, the judgment in the matter of ONGC V. Afcons Gunanusa JV had already declared that the Rail Vikas Nigam Limited V. Simplex Infrastructures Limited was not good law. Therefore, the Ld. Arbitrator erred in relying upon a judgment which had already been set aside.
Arbitrators do not have the power to unilaterally issue binding and enforceable orders determining their own fees. Any party can file a Petition under Section 39(2) of the 1996 Act, to seek review of the fees demanded by the arbitrators. Thus, the Hon’ble Delhi High Court held that the Ld. Sole Arbitrator had erroneously applied the judgment in the matter of Rail Vikas Nigam Limited V. Simplex Infrastructures Limited. The ceiling limit for both claims and counter claims needs to be applied separately and on the basis of this calculation, some amounts were directed to be refunded to the Petitioner.
In the instant case, the Hon’ble Supreme Court has held that the Arbitrator has the power to award pre-reference & pendente lite interest even when agreement is silent about the same. The facts of the present case are that the State of West Bengal (“Respondent”) had issued a notice in 2010 inviting tender for road widening work and strengthening of Egra Bajkul road under the Tamluk Highway Division in Purbo Medinipur District. The Respondent accepted Pam Developments Private Limited’s (“Appellant”) offer and subsequently, the Respondent issued a Work Order for the project to be completed within a period of 18 months. The project was delayed, (by about 5 months); however, the work was finally completed in November 2012. Accordingly, upon completion of the said project, the Appellant raised a bill for Rs. 77,85,290/- and the same was in addition to seven other claims under different heads, owing to alleged delays on part of the Respondent. The Respondent denied its liability towards making any payment whatsoever to the Appellant. As such disputes and differences arose between the parties and the matter was ultimately referred to the Arbitration. The Ld. Arbitrator passed an award in 2018, and awarded an interest of 12% p.a. from April 2016 to January 2018 and 9.25% p.a. post award interest till date of actual payment.
The Respondents filed a Petition under Section 34 of the Arbitration and Conciliation Act, 1996 (“1996 Act”) challenging the said award passed by the Ld. Arbitrator. The Hon’ble District Judge partly allowed the said Petition filed by the Respondent thereby setting aside claim no. 1 for loss of business and claim no. 2 for uneconomic utilization of plant and machinery as the Ld. Arbitrator didn’t account for the loss of 135 days at the behest of the Appellant while determining the alleged 200 days of ‘wasted machine’. Being aggrieved the Appellant filed an Appeal under Section 37 of the 1996 Act and the Respondent filed a Cross Appeal whereby it sought to set aside the rest of the claims as well. The Hon’ble Calcutta High Court set aside the claim no. 1 as well as claim nos. 3 and 4 but restored the award with respect to claim no. 2. However, while retaining claim no. 5 as it is, the Hon’ble Calcutta High Court slightly modified claim no. 6 relating to pre-reference interest. Being aggrieved, the Appellant filed an Appeal in Supreme Court. One of the issues of dispute between the parties was regarding the award of pre-reference, pendete- lite and post award interest, despite the contract not providing for an express provision for the grant of pre-reference interest.
The Hon’ble Supreme Court observed that Section 31(7)(a) of the 1996 Act, does not make a distinction between pre-reference and pendente lite interest, and it also sanctifies party autonomy by restricting the power to grant pre-reference and pendente lite interest if the agreement bars the payment of interest. However, if the agreement is silent on grant of interest or does not specifically prohibit the same, arbitrator’s power to grant pre-reference and pendente lite interest is not restricted. The Hon’ble Supreme Court observed that the pendente lite interest is a matter of procedural law and pre-reference interest is governed by the substantive law. Therefore, grant of pre-reference interest cannot be sourced solely on Section 37 of 1996 Act. Being substantive law, it has to be based on agreement between the parties (express or implied) or statutory provision. Hence, on the issue of grant of interest, the award was upheld. Accordingly, the Hon’ble Supreme Court disposed of the said Appeals.
In a recent decision, the Delhi High Court held that notice under Section 21 of the Arbitration and Conciliation Act is not required if a claim is filed as a counterclaim for which reference has already been made by the court.
In the captioned case, the Appellant being ASF Insignia SEZ Private Ltd. (“AISPL”), engaged in real estate and construction, had entered into a work contract with Shapoorji Pallonji and Company Private Ltd. (“SPCPL”). This contract was later amended through a Tripartite Novation Agreement, replacing AISPL with M/s Black Canyon SEZ Private Ltd. (“BCSPL”) in all responsibilities and obligations. Furthermore, AISPL issued a Letter of Comfort, ensuring payment by BCSPL if they defaulted under the Work Contract. Due to delays, BCSPL and SPCPL agreed to foreclose the Work Contract, leading to a Settlement Agreement, which didn’t include AISPL as a party.
Thereafter, AISPL received a demand notice from SPCPL under Section 8 of Insolvency and Bankruptcy Code, 2016 demanding payment from AISPL by mischaracterizing AISPL as a Corporate Guarantor based on the Letter of Comfort. NCLT dismissed SPCPL’s application against AISPL stating that AISPL could not be treated as a Corporate Guarantor but despite NCLT’s order, SPCPL issued notice for invocation of arbitration.
Furthermore, Section 14 petition was filed by BCSPL, seeking termination of the mandate of the Sole Arbitrator on the grounds that he had become de jure incapable of performing his functions in respect of the arbitral proceedings arising out of the Works Contract, the Novation Agreement, and the Settlement Agreement. SPCPL filed its Statement of Defence (“SoD”) but did not file Counter Claim and instead filed a Statement of Claim (“SoC”) naming BCSPL, AISPL and ASF Buildtech Private Ltd. (“ABPL”) as Respondents without due permission from the ld. Sole Arbitrator. In response, BCSPL filed an application under Section 16 contending that SPCPL has forfeited or failed to file its counterclaim and that arbitrator does not have jurisdiction to decide the SoC presented by SPCPL, which was dismissed by the Arbitrator via Order dated 23rd May, 2023. Thus, formal noticed on the SoC of SPCPL were issued to the two other Respondents, AISPL and ABPL, to appear before the ld. Arbitral Tribunal and file their respective SoDs within six weeks. After which both AISPL and ABPL filed their respective applications under Section 16 challenging the authority of the ld. Sole Arbitrator which was rejected by the Arbitrator vide Order dated 17th October, 2023.
The arbitrator had also bifurcated the arbitral proceedings by Order dated 7th July, 2023 into two cases:
Thereafter, a batch of two appeals under Section 37(2) of the Arbitration and Conciliation Act, 1996, along with a petition under Section 14 of the Act, was filed, seeking to set aside the orders dated 23.05.2023 and 17.10.2023 issued by the Sole Arbitrator.
In its analysis, the Hon’ble Delhi Court noted that AISPL and BCSPL, are entities within the ASF group, were under the same management. The Court observed that SPCPL's filing of a separate SoC instead of a counterclaim was unconventional but permissible under the circumstances. Further, the Court set aside the delineation of cases 1 and 2 and stated that for all practical purposes, the case pending before the Sole Arbitrator is to be treated as one case arising out of reference order dated 22-07-2022.
The Delhi High Court concluded that no separate notice under Section 21 of the Arbitration and Conciliation Act was required if the claim was filed as a counterclaim. The Court upheld the Arbitrator's decisions and rejected the termination of the Arbitrator's mandate. The Court also affirmed that the claims against AISPL and ABPL were maintainable under the Group of Companies doctrine to avoid multiplicity of proceedings and ensure consistent findings.
In the present matter, the Bombay High Court held that the Court has the power to grant interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 (“A&C Act”) even after an Arbitral Tribunal is constituted, if circumstances so warrant. The dispute involved partners of a construction firm wherein one partner (“Petitioner”) invoked arbitration under the partnership Deed dated 21.10.2021 against other 2 partners (“Respondents”) of the firm mainly on the ground that that the Respondents were dealing with the business of the firm and firm’s property to the detriment of the Petitioner. The Petitioner filed a petition under Section 9 and also an Application under Section 11 of the A&C Act for appointment of an Arbitrator.
Subsequently, the Petitioner was able to secure a status quo order in Section 9 petition and the Petition was disposed of. The Court also appointed a Sole Arbitrator and directed that status quo order would continue to operate until the Arbitrator makes and renders the final award. Thereafter, the Petitioner was constrained to file an Application under Section 17 of the A&C Act since Respondent No. 1 was not complying with the order and had resumed construction activities in collusion with Respondent No. 2. Since the Petitioner could not get relief under Section 17 of the A&C Act, the Petitioner filed this Section 9 petition for the appointment of a Court Receiver.
The court observed after considering various cases, that it would not interfere with the exercise of discretion by the Arbitral Tribunal and substitute its own view except when the Arbitral Tribunal has acted arbitrarily, capriciously, or ignored well-settled principles of law regulating the grant or refusal of interlocutory injunctions. Also, the court cannot reassess the material on which the Tribunal has based its decision as long as the Tribunal has taken a plausible view and exercised its discretion reasonably and judiciously. However, the court allowed this Petition, stating that Respondent No. 1 had acted with impunity and in brazen disregard of the Tribunal’s order. Citing the Hon’ble Supreme Court case of Arcelor Mittal Nippon Steel (India) Ltd. v. Essar Bulk Terminal Ltd., the court observed that a harmonious reading of Sections 9(1) and 9(3) of the Arbitration Act indicates that the court is not deprived of its power to grant interim relief when an Arbitral Tribunal is constituted. The court must examine whether the Applicant has an efficacious remedy under Section 17 of the A&C Act. In such circumstances, the court has the discretion to entertain an application for interim relief under Section 9 of the Arbitration Act.
In light of the above, the court correctly exercised its power and appointed a Court Receiver, granting the said relief to Petitioner under Section 9.
In the present case, the Hon’ble Delhi High Court ruled that mere initiation of arbitration proceedings does not preclude a Corporate Debtor from pursuing other legal remedies, including those available under the Insolvency and Bankruptcy Code, 2016 (“IBC”)
The present dispute is between the Petitioners (the shareholders and buyers of the shares) and the Respondents (the promoters and the founders of the Petitioner No. 1). The Respondents had approached OFB Tech Private Limited and the Petitioner No. 2 (Agri Farms Private Limited) to sell their 100% shares in Petitioner No. 1 company to the Petitioner No. 2. Thereafter, the Respondent signed and executed a term sheet wherein they projected an average EBITDA of around Rs. 17,92,00,000/- for the Financial Year 2021-2022 based on the turnover of Rs. 501 Crores and 390 Crores for the years 2021-2022 and 2022-2023 respectively. However, the actual average EBITDA was approximately around Rs. 4,50,36,307 which was much lower than projected EBITDA (Rs. 17.92 Crores).
The erstwhile shareholders had assured and represented to the Petitioner No. 2 that the EBITDA reflected in the books of accounts was not the true indicator of their valuation, and that actual EBITDA was around Rs. 17,92,00,000/- and the same had been achieved by utilizing only 75% of the plant capacity and there was scope of growth for the Petitioner No. 2. Based on the Respondents representations, the Petitioner No. 2 and the Respondents entered into Share Purchase Agreement dated 7th October 2022 which was subsequently amended. Also, the Petitioner No. 1 and the Respondents entered into Credit Facility Agreement. Subsequently, it came to the knowledge of the Petitioners that the Respondents had falsified previous years accounting figures. Further, the Respondents even failed to provide transitional services. As the disputes and difference arose between the parties, the Petitioners issued notice under section 21 of the Arbitration & Conciliation Act, 1996 (“the Act”) and invoked arbitration.
The Respondents contended that the two separate agreements and signatories resulted in misjoinder of cause of action and that there is no dispute inter se the parties and the amounts due from the Petitioners are admitted and consequently the Respondents had filed a Petition under section 7 of the IBC in the Hon’ble National Company Law Tribunal, Jaipur. The Hon’ble Delhi High Court held that various disputes were mentioned in the legal notices and the invocation notice addressed to the Respondents and the Respondents had acknowledged certain amounts as due. Further, the Ld. Arbitrator has the liberty to register the two arbitrations separately if it is determined that the agreements cannot be consolidated. Accordingly, the Hon’ble Delhi High Court allowed the application filed by the Petitioner seeking appointment of the arbitrator and appointed an arbitrator and referred the parties to the arbitration.
In present appeal, the Supreme Court discussed the issue regarding the legality and validity of the order of termination of the arbitral proceedings under Clause (c) of Sub-section (2) of Section 32 of the Arbitration and Conciliation Act, 1996 (“the Act”) passed by the Arbitral Tribunal.
The case arose from an appeal challenging the Bombay High Court's order that set aside the arbitral tribunal’s termination of arbitral proceedings between the Appellant and the Respondents (referred as “Sheil” and “Marico”) under Section 32(2)(c) of the Act, 1996.
The factual matrix in the present case is that Sheil and Marico had filed separate suits against the Appellant, which were referred to the same sole arbitrator by court orders in 2011. The arbitrator first heard Marico's claim and passed an award in 2017. In 2020, the Appellant filed an application under Section 32(2)(c) of the Act. seeking termination of Sheil’s arbitral proceedings on the ground that Sheil had abandoned its claim by not taking any steps for 8 years after filing the statement of claim. The arbitrator allowed the application and terminated Sheil’s proceedings, holding that Sheil had abandoned the claim. The Bombay High Court set this order aside.
The Supreme Court upheld the High Court’s order, making some important observations on the scope of Section 32(2)(c) of the Act. It held that the power under this provision can only be exercised if the arbitral tribunal records its satisfaction based on material on record that continuation of proceedings has become unnecessary or impossible. Mere failure by a Claimant to request the tribunal to fix a hearing date cannot lead to the conclusion that the proceedings have become unnecessary.
The Court states that it is the arbitral tribunal’s duty to fix meetings/hearings even if parties do not make such requests. The failure of a Claimant to do so, by itself, is no ground to conclude that proceedings have become unnecessary. As for abandonment of claim by a Claimant being a ground to invoke Section 32(2)(c), the Court said abandonment cannot be readily inferred. Only if the established conduct of a Claimant leads to the sole conclusion that the claim has been given up, can abandonment be inferred.
Applying these principles, the Court found that in the present case, there was no material to conclude that Sheil had abandoned its claim against the Appellant. The fact that Sheil did not challenge the Marico award or take steps for hearings after that award did not amount to abandonment. The termination order was thus held to be illegal.
Accordingly, the appeal was dismissed, and parties were directed to get a substitute arbitrator appointed for the pending Sheil vs Dani Wooltex arbitration, as the previous sole arbitrator had withdrawn.
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The present case deals with limitation of jurisdiction of court to appoint an Arbitrator under Section 11 of the Arbitration and Conciliation Act 1996 (“1996 Act”) vis-à-vis Micro Small and Medium Enterprises Development Act, 2006 (“MSMED Act”).
In the present case, the Petitioner sought appointment of an Arbitrator when a reference under MSMED was already made. The plea of the Petitioner was that the Arbitrator appointed under MSMED Act cannot entertain claim/counter claim prior to the registration of the supplier i.e., the Respondent under MSMED Act. The Petitioner claimed that various work orders were issued between 2013 and 2022 and that the Respondent was registered under the MSMED Act in the year 2021. The Petitioner argued that since the disputes arose before the Respondent was registered under the MSMED Act, an Arbitrator appointed under the MSMED Act wouldn't have jurisdiction over these claims, and thus, they sought the appointment of an Arbitrator by the court under the 1996 Act. The Respondent, however, denying the allegations stated that they were registered under the MSMED Act, and thus the claims should be resolved through arbitration under that MSMED Act. It was also argued that the debit notes issued by the Petitioner were in response to a demand notice issued by the Respondent and were manufactured only to thwart proceedings under the MSMED Act. Both parties cited the judgment of Silpi Industries & Ors. vs. Kerala State Road Transport Corporation & Anr. (2021) 18 SCC 790, highlighting the key differences between arbitration mechanisms under the MSMED Act and the 1996 Act.
The Hon’ble High Court, while dealing with the issue in detail correctly and accurately emphasized upon the primacy of the MSMED Act in resolving disputes involving micro, small and medium enterprises, having overriding effect over the 1996 Act. The Court dismissed the present petition and observed that since arbitration proceedings were already initiated under the MSMED Act, and the debit notes were issued after the Respondent's registration under the MSMED Act, an Arbitrator need not be appointed under the 1996 Act. In summary, the court fairly ruled in favor of the Respondent, dismissing the Petitioner's request for the appointment of an Arbitrator under the 1996 Act.
The Delhi High Court in the present case held that service through email or WhatsApp was sufficient for invocation of Arbitration in case of a valid agreement and hence referred the disputes between the parties to arbitration as per the arbitration agreement.
The facts of the present case are such that the Petitioners and the Respondents entered into a lease agreement which contained an arbitration clause stating that adjudication of disputes by reference to arbitration to be conducted at New Delhi in accordance with the Rules of Delhi International Arbitration Centre. Under the same clause, Courts in New Delhi have also been vested with exclusive jurisdiction under the Agreement. As disputes arose between the parties, the Petitioner invoked the arbitration clause and issued notice dated 31.12.2022 to the Respondents nominating Arbitrators to adjudicate the dispute, to which there was no response. Subsequently, the Petitioners filed the present application under S.11 of the Arbitration and Conciliation Act, 1996 for the appointment of Arbitrator. The Hon’ble Court vide order dated 12.01.2024 permitted service by email and WhatsApp at the addresses and phone numbers mentioned in the Agreement, following which the Petitioner filed an affidavit of service dated 22.02.2024 which demonstrated that email and WhatsApp service was completed on 20.02.2024. Furthermore, the Hon’ble Court passed an order permitting service through RPAD and Speed Post on 06.03.2024 on address mentioned in the memo of parties, to which the Ld. Joint Registrar recorded in the order dated 04.04.2024 that valid service has not been effected by these means in view of the Speed Post tracking report.
The Hon’ble Court, after looking at the facts of the matter took into consideration that service by Speed Post was attempted however in the report, it stated that no such person was available at the address. However, the Hon’ble Court correctly arrived at the conclusion that the arbitration agreement was valid and service upon the respondents has been duly effected by email and WhatsApp which is sufficient, hence the court appropriately allowed the petition and referred the disputes to arbitration.
The present case is a pivotal judgemnt whein the Apex Court allowed the enforcenment of a foreign arbitral award and held that only under exceptional cases an enforcement of foreign arbitral award can be declined on the grounds of bias. The Appellants in the present case contested the enforcement of a foreign award under Section 48 of the Arbitration Act. The High Court upheld the enforcement, allowing attachment orders to continue. Thereafter, the Respondnets alleged fraud in securing a US$ 60 million investment, leading to arbitration where damages were awarded. The Apex Court affirmed the arbitrability of fraud under Section 9. When the Appellants failed to comply, contempt proceedings ensued, resulting in imprisonment.
The Apex Court assessed objections under Section 48(2)(b), focusing on arbitral bias and public policy violations. Referring to Vijay Karia v. Prysmian Cavi E Sistemi SRL and Shipowner (Netherlands) v. Cattle and Meat dealer (Germany), the Apex Court stressed that challenges to enforcement have limited scope and should be justified only in exceptional cases of blatant disregard of Section 48. Further, the Court stated that the objection of bias must be first raised in the country of origin of award and not directly at the time of enforcement.
The Court made a reference to the New York Convention and cited its decision in Ssangyong Engg. & Construction Co. Ltd. v. NHAI and concluded that the most basic notions of morality and justice under the concept og ‘public policy’ would include bias.
The Apex Court highlighted the need for adopting international best practices in determining bias and emphasized that enforcement should only be refused in exceptional circumstances. After examining the implications of IBA Guidelines, the Court found no bias that violated fundamental notions of morality and justice. Consequemtly, the Apex Court upheld the High Court's decision.
In the present case, the Apex Court drew the distinction between ‘reference’ and ‘incorporation’ of arbitration clause in agreements. The Court discussed the law laid down in the case of MR Engineers and Contractors Private Limited vs. Som Datt Builders Limited and discussed its points of distinctions from Inox Wind Limited vs Thermocables Limited.
Based on the judgment passed in the case of MR Engineers and Contractors Private Limited [supra], the Court observed that sub-section (5) of Section 7 of the Arbitration Act and opined that a reference to the document in the contract should be such that it shows intent to incorporate the arbitration clause contained in the document into the contract. In Inox Wind Limited, though the Apex Court agreed with the view held in MR Engineers and Contractors Private Limited, it has differed and held that though a general reference to an earlier contract is not sufficient for the incorporation of an arbitration clause in the later contract, a general reference to a standard form would be enough for the incorporation of the arbitration clause. Further, in Inox Wind Limited, the Apex Court held that it was a case of a ‘single-contract’ and not ‘two-contract case’ and, therefore, the arbitration clause as mentioned in the terms and conditions would be applicable.
The Apex Court opined that the present case was was a ‘two-contract’ case and not a ‘single contract’ case. It is not a case of ‘incorporation’ but a case of ‘reference.' As such, a general reference would not have the effect of incorporating the arbitration clause of the other contract, especially since Clause 7.0 of the LOI i.e. the first contract clearly stated that the redressal of the dispute between the parties has to be only through civil courts having jurisdiction of Delhi alone. Consequently, the Delhi High Court's decision was overturned and the Appeals were allowed.