Case BriefsHigh Courts

Kerala High Court: R. Narayana Pisharadi, J. dismissed a petition praying for quashing the criminal proceedings against the petitioner initiated under Section 482 of the Code of Criminal Procedure, 1973 when a simultaneous arbitration proceeding was going on against the petitioner in a civil court.

The petitioner was a surety for one, M.L. George, who had subscribed for four of the respondent company’s chitties and defaulted in paying a certain balance amount. As surety for George, the petitioner was supposed to pay the balance amount to the respondent company on his default. The petitioner failed to pay the amount owed by Mr George to the respondent company and hence a complaint was filed against the petitioner under Section 138 of the Negotiable Instruments Act, 1881.

The counsels for petitioner P.V. Kunhikrishnan and P.V. Anoop contended that the averments in the complaint do not constitute the ingredients of the offence punishable under Section 138 of the Negotiable Instruments Act, 1881. Further, it was contended that the initiation of the arbitration proceedings at the instance of the respondent affected the maintainability of the complaint filed against the petitioner for an offence punishable under the Negotiable Instruments Act, 1881.

The Court did not find any merit in the contentions of the petitioner and hence rejected the petitioner’s contentions. Reliance was placed on the case of Sri Krishna Agencies v. State of A.P., (2009) 1 SCC 69 where the Supreme Court, setting aside the order of the High Court for quashing proceedings under Section 138 of the Negotiable Instruments Act, 1881, on the grounds of simultaneous arbitration proceeding, held that disputes to arbitration could not be an effective substitute for a criminal prosecution when the disputed act is an offence. It must, however, be elementary that the two are based on the independent cause of action.

Hence, the Court consequently dismissed the petition and allowed both criminal and civil proceedings simultaneously against the petitioner. [Bindhu A.V. v. Sree Gokulam Chit And Finance Co. (P) Ltd., 2020 SCC OnLine Ker 198, decided on 17-01-2020]

Case BriefsHigh Courts

Bombay High Court: A.S. Chandurkar, J., clarified that a contract whereby an advocate asks for the fee based on the outcome of the arbitration proceedings, wherein he acted in the capacity of a “counsel” for the party and did not appear as an “advocate”, is valid.

It is pertinent to note that such contracts (generally called a contract for a contingent fee) are held to be opposed to public policy and hence void under Section 23 of the Contract Act, 1872 where such contract is entered into by an Advocate with his client.

In the present case, the respondent was a partnership firm engaged in providing consultancy services in arbitration matters. They entered into an agreement with the appellant as per which, they were to represent the appellant in an arbitration proceeding. As per the terms of the agreement, the respondent would be entitled to 1% of the award amount upto Rs 1 crore, and 1.5% thereof over Rs 1 crore. Based on the result of the arbitration proceedings, the respondent raised a claim for an amount of over Rs 1.28 crores. However, the appellant did not pay the amount and the respondent filed a recovery suit which was allowed by the trial court.

An important question before the High Court was — whether the agreement was hit by the provisions of Section 23 of the Contract Act, 1872?

D.V. Chavan, Advocate appearing for the appellant urged that the partner of the respondent firm who appeared in the arbitration proceeding was a qualified advocate, and thus he was precluded from seeking remuneration on the basis of the outcome of the proceedings in which he represented the appellant. Per contra, Yash Maheshwari, Advocate representing the respondent submitted that the partner concerned of the respondent firm was not a registered advocate under the Advocates Act, 1961.

The Court discussed the decision of ‘G’, a Senior Advocate of the Supreme Court, In re, AIR 1954 SC 557 and noted that in Paragraph 11 of that case, the Supreme Court observed that there was nothing morally wrong, nothing to shock the conscience, nothing against public policy and public morals in such a transaction “per se” when a legal practitioner is not concerned. Also, such agreements are legally enforceable when entered into between third parties.

Noting that the “aforesaid observations” though in the passing are in the nature of obiter dicta and hence binding on this Court.”, the High Court observed, “The aforesaid observations are clear that with regard to such an agreement in which a legal practitioner is not involved, the same would be legally enforceable. It is thus clear that an agreement of the aforesaid nature if entered into by an Advocate would be against public policy and the same may not be so when third parties are involved.”

As per the Court, there was no evidence to indicate that the partner of the respondent firm acted as an “Advocate while representing the appellant; in fact, he represented them only as their counsel, and the representation before the arbitrator could not be said to be a representation before the Court. It was held: “Mere fact that the said partner happened to be a law graduate by itself would not be sufficient to conclude that the agreement entered into by him for being entitled to remuneration based on the outcome of the arbitration proceedings would render that agreement contrary and opposed to public policy and hence void under Section 23 of the Act of 1872.”

On such view of the matter, along with the decision on other points which also went against the appellant, the Court dismissed the present appeal and confirmed the decree passed by the trial court. [Jayaswal Ashoka Infrastructure (P) Ltd. v. Pansare Lawad Sallagar, 2019 SCC OnLine Bom 578, decided on 07-03-2019]

Case BriefsHigh Courts

Jammu & Kashmir High Court: A Division Bench comprising of Sindhu Sharma, Dhiraj Singh Thakur, JJ., allowed an LPA filed against the order of the writ court whereby the court had remanded the matter back to the arbitrator/additional registrar, co-operative societies and directed him to conduct the arbitration as per the provisions of Arbitration and Conciliation Act after formulating proper issues.

The main issue that arose before the Court was whether the High Court had erred in passing the impugned order.

The Court observed that from a bare perusal of the award passed by the arbitrator, it can be concluded that it was a non-speaking order which did not specify about the liability of the respondent. The Court further observed that since the Cooperative Societies Act, 1989 is a self-sufficient law which provides for the procedure of conducting the arbitration. Lastly, the Court observed that there is no mandate on the part of the arbitrator to frame issues before adjudicating a dispute, however, he may do so for the sake of crystallizing the dispute.

The Court held that the order of the writ court should be modified to the extent that it directs the arbitration proceedings to be conducted under the Arbitration and Conciliation Act. The Court held that the arbitrator may conduct the proceedings under the Cooperative Societies Act, 1989. Resultantly, the Court partly allowed the appeal. [Citizens Co-operative Bank Ltd. v. Krishan Lal Choudhary,2018 SCC OnLine J&K 747, order dated 22-10-2018]

Case BriefsHigh Courts

Bombay High Court: A Division Bench comprising of B.R. Gavai and M.S. Karnik, JJ. dismissed a petition filed against the order of the Arbitrator whereby petitioner’s application challenging the arbitration proceedings was rejected.

In view of the agreement between the parties, arbitration proceedings were commenced with one R.S. Bhandurge as the sole arbitrator. However, after a period of one year, he discontinued and the present arbitrator came to be appointed as the sole arbitrator by the respondent. The petitioner filed an application that continuation of arbitration proceedings by the present arbitrator was not permissible in law. This application was rejected by the sole arbitrator. Aggrieved thereby, the petitioner preferred the instant petition.

The High Court perused the record and found that contentions raised on behalf of the petitioner were without substance. Reference was made to Supreme Court decision in SBP and Co. v. Patel Engineering Ltd., (2005) 8 SCC 618 wherein the Apex Court had held that once the arbitration proceedings have commenced, the parties will have to wait until the award is pronounced, unless a right of appeal is available at an earlier stage under Section 37 of the Arbitration and Conciliation Act, 1996. It was observed that the High Court while exercising power under Article 226 or 227 of the Constitution, cannot entertain any petition challenging an interlocutory order passed in arbitration proceedings. In light of the above, the petition was dismissed. [Suchitra Chavan v. Axis Bank Asset Sales Centre,2018 SCC OnLine Bom 2854, dated 10-09-2018]

Case BriefsHigh Courts

Delhi High Court: The Division Bench comprising S. Ravindra Bhat and Yogesh Khanna, JJ. set aside the decision of the Single Bench wherein it was that the Bangalore City Civil Court had no jurisdiction to hear the dispute related to arbitration between ISRO’s Antrix Corporation and Devas Multimedia.

An agreement was entered between Antrix Corporation and Devas Multimedia and further terminated unilaterally by Antrix due to ‘national security reasons.’ The agreement provided settlement of the dispute by arbitration and Devas accordingly pulled Antrix to International Court of Arbitration i.e. ‘ICC’. Antrix approached Bangalore Court to restrain Devas from proceeding with the arbitration and stop the International Court from going ahead with the matter. In 2015, the International Court ruling asked Antrix to pay USD 672 million to Devas for unlawful termination of the agreement. Subsequently, in September 2015, Devas moved to Delhi High Court for implementation of the arbitral award by seeking attachment of bank accounts of Antrix but the latter challenged its jurisdiction. Thereafter, it was held Antrix’s pleas in the court in Bangalore were not maintainable.

Antrix contended that under Section 9 of Arbitration and Conciliation once an application was made to a “court”, only that “court” would have jurisdiction over all subsequent applications made by either party under the Act, by virtue of Section 42. On the other hand, it was contended by Devas that Antrix had claimed substantially similar reliefs in its Section 11 petition before the Supreme Court which was dismissed, thereby leading to an issue estoppel. Allowing Antrix to re-agitate similar claims in a Section 9 petition before the City Civil Court would amount to forum shopping and an abuse of process of the courts.

However, contentions of Antrix were upheld against those of Devas. Section 42 precluded the jurisdiction and the Bangalore Court being first seized of Antrix’s petition would first decide Antrix’s initial plea against the arbitration proceedings. If it is found to be maintainable and bonafide, then Section 42 would be applicable, however, if not then that application would be treated as non-est and application in Delhi High Court would not be hit by Section 42. [Antrix Corpn. Ltd. v. Devas Multimedia Pvt. Ltd., 2018 SCC OnLine Del 9338, decided on 30-05-2018]