Case BriefsHigh Courts

Delhi High Court: Vibhu Bakhru, J., held that whether claims are barred by limitation is a mixed question of fact and law and is required to be examined by the Arbitral Tribunal.

The petitioner (PDL) had filed the instant petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 praying that an arbitrator can be appointed on behalf of the respondent (FRL).

Factual Background

PDL had entered into an agreement with the Delhi Metro Rail Corporation Limited, whereby a specified area on the ground and first floor within the Station Box was allocated for constructing a shopping complex under the name and style of ‘Parsvnath Mall’.

PDL was given the right to sub-license the use of the facility for the period of the agreement and for the uses specified.

Thereafter, PDL and FRL entered into a sub-license agreement (Contract) wherein two units on the ground and first floors were agreed to be sub-licensed to FRL for running a departmental store under the name of ‘Big Bazaar’.

During the subsistence of the Contract, in the year 2007, the Government of India enacted the Finance Act, 2007 by virtue of which the service of renting/licensing immovable properties for commercial use was included as a taxable service and brought under the nest of service tax. Consequently, the licensing of the premises to FRL under the Contract was a taxable service.

PDL claimed that FRL was liable to bear the additional burden of service tax; however, FRL had failed to reimburse the service tax.

FRL submitted that no stipulation was contained in the Contract for payment of service tax.

Analysis, Law and Decision

Whether the petition for the appointment of an arbitrator required to be rejected on the ground that the main agreement is insufficiently stamped?

High Court observed that, an arbitration agreement, even though embodied in a main agreement, is a separate agreement and invalidation of the main agreement does not necessarily invalidate the arbitration agreement.

An arbitration agreement is not required to be compulsorily registered.

Hence, the doctrine of severability, denying the benefit of an arbitration agreement to a party on the ground of any deficiency in the main agreement, may not be apposite.

Well Settled Law

By virtue of Section 11(6A) of the A&C Act, the scope of examination under Section 11 of the A&C Act is confined to the existence of an arbitration agreement.

The Bench observed that, in cases where there is no vestige of doubt that the claims are not arbitrable or the agreement is invalid, the Courts may decline to refer the parties to arbitration but not in any other case.

Supreme Court’s decision in NCC Ltd. v. Indian Oil Corpn. Ltd., 2019 SCC OnLine Del 6964, was also referred.

High Court opined that it would be apposite for this Court to adjudicate the issue of whether PDL’s claims were barred by limitation, the same shall be decided by an Arbitral Tribunal.

PDL had nominated Mr S.C. Jain, Additional District Judge (Retired) as its nominated Arbitrator. Accordingly, Mr Laxmi Kant Gaur, District Judge (Retired), is appointed as FRL’s nominated Arbitrator. Further, it was stated that both the arbitrators shall appoint the third arbitrator for the constitution of the Arbitral Tribunal.

The petition was allowed under the above terms. [Parsvnath Developers Ltd. v. Future Retail Ltd., 2022 SCC OnLine Del 1017, decided on 12-4-2022]


Advocates before the Court:

For the Petitioner: Mr Rahul Malhotra and Mr Rishu Kant Sharma, Advocates.

For the Respondent: Mr Sudhir K. Makkar, Senior Advocate with Ms Saumya Gupta, Ms Veera Mathai, Ms Yogita Rathore, Advocates.

Case BriefsHigh Courts

Delhi High Court: Mukta Gupta, J., decided that mere use of word ‘Arbitration’ in the heading of an Agreement would not mean the existence of an arbitration agreement.

Petitioner sought appointment of an Arbitrator for solving the disputes in relation to the software development arising out of the agreement between the parties and costs.

As per the petitioner, petitioner and respondent had entered into a Master Service Agreement and after the start of the project, the petitioner raised concerns due to the delay on part of the respondent.

Respondent introduced a new person for communication with the petitioner and showed no intention of resolving the issues flagged by the petitioner. Hence, the petitioner sent a legal notice to the respondent invoking arbitration.

The response by the respondent to the legal notice was that, there was no arbitration agreement between the parties.

Clause 11 of the Master Service Agreement dated 29th July 2021 between the parties reads as under:-

“11. Jurisdiction, Arbitration & Dispute Resolution

This Agreement and any dispute or claim relating to it, its enforceability or its termination shall be governed and interpreted according to the laws of India Subject to this Clause 11, the Courts at Delhi, shall have exclusive jurisdiction over any disputes under this Agreement”.

 It was submitted that the above-said clause did not provide that the parties agreed to refer their disputes for resolution through arbitration, just on the basis of noting the word ‘Arbitration’ the petitioner claimed resolution of disputes arising between the parties through arbitration.

Issue for Consideration

Whether the use of the word ‘Arbitration’ in the heading of an Agreement would entail existence of an arbitration agreement?

The said issue was dealt with by this Court in Avant Garde Clean Room & Engg. Solutions (P) Ltd. v. Ind Swift Ltd., (2014) 210 DLT 714.

High Court, in view of the above decision, held that,

Mere use of the word ‘Arbitration’ in the heading in Clause 11 of the Agreement between the parties would not lead to inference that there exists an agreement between the parties seeking resolution of disputes through arbitration.”

Therefore, in view of the above, no ground to appoint an arbitrator was found. The petition was dismissed. [Foomill (P) Ltd. v. Affle (India) Ltd., 2022 SCC OnLine Del 843, decided on 25-3-2022]


Advocates before the Court:

For the Petitioner: Mr. Rajiv Kr.Choudhary, Advocate with Mr.Manash Barman, Advocate.

For the Respondent: Mr .Kapil Madan, Advocate with Ms. Ramya Verma, Advocate.

Op EdsOP. ED.

Introduction

The term emergency arbitration has gained much prominence after various developments which took place in the legal battle that ensued between two corporate giants viz. Amazon and Future Group. Previous to this, one was acutely aware of this particular kind of interim relief wherein an “emergency arbitrator” is appointed to issue emergency relief before the constitution of the Arbitral Tribunal, and same can be very detrimental in ensuring that any of the parties does not suffer on account of procedural delay or even to protect the very subject-matter of the arbitration. Even the parties who consciously opt for arbitration are under impression that it is a quicker dispute resolution mechanism and at the threshold, emphasis needs to be made for approaching the problem of generating an interim relief even before the formation of the Arbitration Tribunal. The present article discusses about emergency arbitration, its advantages, challenges, and its legal status in India.

What is an emergency arbitration

There may be an instance, where parties may need an urgent interim relief even before the constitution of an Arbitral Tribunal so that the very purpose of parties opting for the arbitration does not get defeated. In such cases, emergency arbitration comes into the picture. The concept of emergency arbitration is akin to the concept of ad-interim injunction as provided by Section 37 of the Specific Relief Act, 1963[1] and regulated by the Code of Civil Procedure, 1908[2], wherein both the cases the primary measure is the preservation of the matter in status quo till the dispute is heard on merits. The provision of ad interim injunction is wildly used by the Indian courts while restraining one party in civil disputes and intellectual property cases. It is pertinent to mention herein that an emergency arbitrator is agreed to and arranged by the parties themselves without recourse to a tribunal at the first instance, therefore it is advisable to opt for any institutional arbitration, which recognises the concept of the emergency arbitrator and can arrange for it at the earliest, over adhoc arbitration, as in the latter case, if parties fail to reach consensus over the appointment of an arbitrator, or if any of the parties fails to appoint an arbitrator, the parties, even not intending, would be forced to take the recourse of the courts, for the appointment of an arbitrator, which in cases, may lead to delay in adjudication of the dispute. However, the provision of emergency arbitration is, enforceable and applicable only to parties who are signatories to the arbitration agreement and is applicable unless the contracting parties have opted out of it.

The provision of emergency arbitration was adopted, at first, by the International Centre for Dispute Resolution (“ICDR” for short) in 2006, wherein the concept of the emergency arbitrator and its procedures were laid down. Thereafter, the 2012 version of the International Chamber of Commerce (“ICC” for short) Rules also adopted the same provisions as that of the ICDR. The 2012 version of ICC Rules provided for the emergency arbitrator to be appointed when a party needs urgent interim or conservatory measures that cannot await the constitution of an Arbitral Tribunal and the same were then followed, by other institutions as well, such as Netherlands Arbitration Institute (“NAI” for short), the Singapore International Arbitration Centre (“SIAC” for short), Swiss Arbitration, Institute of the Stockholm Chamber of Commerce (“SCC” for short), the Australian Centre for International Commercial Arbitration (“ACIA” for short).3

SIAC, for example, have introduced the concept of emergency arbitration which allows an emergency arbitrator to be appointed before an arbitration even begins, within the space of one calendar day, who is required within the space of 2 weeks to issue emergency interim measures, freezing the status quo, assuming that the claimant, the party, requesting such measures, has demonstrated the appropriate need for that. This provides a mechanism for ensuring that the party’s rights are safeguarded, while the dispute resolution process proceeds.4

As pointed out by Gary Born:5

At the same time, these Rules all require very prompt and professional action by the arbitral institution and emergency arbitrator, which imposes burdens and risks on the institution, and thus, the parties. Despite this, unless practical application in coming years is to the contrary, these approaches appear to be sensible steps towards improving the arbitral process.

Advantages of emergency Arbitration

It goes without saying that the sole objective of the emergency arbitration is to provide urgent pro tem or conservatory measures to a party who cannot await the formation of an Arbitral Tribunal.6 In addition to this, this provision can eliminate the difficulty of a party who is under obligation to approach before courts in different jurisdictions for obtaining any instant relief, per contra same can be conveniently granted by the emergency arbitrator and can be enforced thenceforth by applying before the courts of a different jurisdiction. It also obliterates the chances of different courts in different jurisdictions passing varied orders further enhancing the complication for the parties, therefore, bringing uniformity in the order, and courts in different jurisdictions are only left with the responsibility of enforcing it within their jurisdiction. Hence, in nutshell, we can say that the present process is more time efficient for the courts inasmuch the parties, and perhaps most importantly, it provides for an immediate temporary solution which parties are bound to comply since the award passed on this head also becomes precedence once the Arbitral Tribunal is constituted.7

Challenges to emergency arbitration

The foremost challenge of an emergency arbitration is its recognition and enforceability. Many countries are still in process of recognising the sanctity and binding nature of the order passed by an emergency arbitrator which gives a preclusive effect whereas a lot of it including its enforcement depends on which jurisdiction the application for enforcement is filed. There may be a probability that a country might recognise the provision of emergency arbitration and will enforce the order passed by it but in the same case, any court of different jurisdiction might be incapable to recognise and enforce the same, due to reason of absence of specific legislation which recognises the order passed by an emergency arbitration. The situation gets much grimmer when an interim order passed by an emergency arbitrator is unlikely to qualify as an award and the situation becomes much dicey on how different courts would react to such requests and much likely the parties who has interim order in his favour would be left at the mercy of the respective courts to get it enforced.

Another challenge is that it is interim binding and once the Arbitral Tribunal is constituted the same is not binding and in case if any other person is appointed as an arbitrator to the substantive Tribunal, the latter can vary or suspend it, in case the time stipulated for such award has not expired. The form of interim relief can also play a part particularly when interim relief granted by the emergency arbitrator is in the form of order rather than an award.8

One major particular drawback is that there is no certainty for the consequences of non-compliance of the order made by the emergency arbitrator. Although, Article 29(2) of the ICC Rules requires the parties to undertake to comply with any order made by the emergency arbitrator, however, the same is silent about any consequences of non-compliance thereof. Parties who even manage to get interim orders in their favour would further struggle to get it enforced and will still need to rely on the support of the courts of that jurisdiction, meaning thereby that they are being virtually dragged into the litigation which they never intended to do so.

For instance, in India, the statutory provision relating to emergency arbitration is not clear, as the Arbitration and Conciliation Act, 19969 (“the Act” for short), is silent about the concept of emergency arbitration. Even if we read Section 2(1)(d) of the Act10 which defines an Arbitral Tribunal, goes on to describe it as a sole arbitrator or a panel of arbitrators. It is silent about whether an emergency arbitrator comes within the definition of the Arbitral Tribunal or not. The said has created a very dicey situation in the minds of the corporate giants who choose the seat of arbitration on basis of the flexibility of the local laws in adopting international conventions whereas predominantly the New York Convention11. More so, when the Act is silent on the recognition of emergency arbitrator it is very less likely that same can be enforced by the Indian courts.

Mechanism for emergency arbitration

The emergency arbitration procedure, which is broadly similar in all the above-named arbitration institutions, provides for a sole arbitrator to be appointed by the institution on request of any of the parties, on an expedited basis, to determine the immediate interim relief claimed by the party. The appointed emergency arbitrator is free to set his procedures, which should be clear from the outset. The procedures set by the emergency arbitrator could include the timelines for exchange of submissions inasmuch any reply thereto, a hearing if any, the mode of communication to be adopted by the parties, and how evidence is to be adduced.12 One thing worth mentioning is that interim measures or conservatory relief granted by an emergency arbitrator would be having an effect only for a stipulated period, as the same has been constituted for a limited purpose that is for grant of interim or conservatory relief and would immediately dissolve thereafter, once the purpose is served or the stipulated period has expired. To get a good understanding of how whole process of emergency arbitration is conducted, refer to this concise, yet comprehensive YouTube video.13

Legal status of emergency arbitration in India

Despite there being no statutory recognition for the order passed by an emergency arbitrator, the  Supreme Court has come up with a very artful interpretation of the Act, suitably meeting the needs of the New York Convention, in the famous case Amazon.com NV Investment Holdings LLC v. Future Retail Ltd.14, holding that the interim award passed by an emergency arbitrator appointed under the Arbitration Rules of the Singapore International Arbitration Centre is recognised under Section 17(1) of the Act15, and thus, enforceable under Section 17(2) of the Act. The Court was wise to further observe that there was nothing contained in the Act which prohibits contracting parties from agreeing to a provision providing for an award made by an emergency arbitrator. On the contrary, it was observed that a conjoint reading of Sections 2(6) and (8) of the Act16, if given a harmonious interpretation, would allow the contracting parties to incorporate institutional rules into their arbitration agreement, and such incorporation should be given paramount importance whereby in case the institutional rule provides for emergency arbitrator’s orders, the same would be covered under the Act. In particular, the Supreme Court was of the view that if the orders of an emergency arbitrator are not given effect to then the same would render the whole concept of emergency arbitration otiose.

Conclusion

That the Supreme Court has shown much-needed enthusiasm towards upholding the instrumental rules which include orders passed by an emergency arbitrator and such orders are referable to inasmuch can be made under Section 17(1) of the Act. The holistic approach adopted by the Supreme Court would further robust the arbitration mechanism in India and needless to say that the same would enlighten India’s prospect towards becoming an international arbitration hub. It would certainly help India in making a big leap in following international comity in the field of international arbitration and would also stand the test of minimum judicial intervention in respect of the arbitration proceedings, which was envisaged in Article 5 of the UNCITRAL Model Law on International Commercial Arbitration and also incorporated in the form of Section 5 of the Act17. Moreover, in the present conditions, what works as icing on the cake is that the recognition and thus enforcing of such orders will certainly decongest the Indian courts which are already neck-deep in work. However, whatever herein is said, does come with a caveat, that is, arbitration mechanism only offers an alternative option to litigation wherein it is intended only to supplement and not supplant the legal system enshrined in the Constitution. A perfect example would be that of Belgium which in 1985, in an attempt to make the country arbitration friendly inasmuch the preferred seat for international arbitrations, provided that a non-Belgian citizen who had no business in Belgium would not be permitted to apply to a Belgium court to set aside an arbitral award. It was believed and was done under the impression that with no judicial review of the award in Belgium, parties especially international parties, would be attracted to choose Belgium as a seat for arbitration. However, the reality was to the contrary, wherein nobody opted for Belgium for the seat of arbitration, which can be mainly attributed to the reason of lack of possible court review.18Thus, this analysis, clearly suggests that even parties in international arbitration prefer court supervision at the place of arbitration.


* Advocate. Author can be reached at <advshivamkunwar@gmail.com>.

[1] Specific Relief Act, 1963, S. 37.

[2]Code of Civil Procedure, 1908.

3 Swiss Rules, 2012, Art. 43; Australian Centre for International Commercial Arbitration Rules, 2011, Art. 28(1); NAI Arbitration Rules, 2010, Art. 42; Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce, 2010, Appendix II, Art. 8; SIAC Rules, 2013, Art. 26(2), 28ASA Bull. 462 (2010).

4 Modern Arbitration: Live – An Interview with Gary Born, <https://www.wilmerhale.com/-/media/files/shared_content/editorial/news/documents/20190319-modern-arbitration-live-an-interview-with-gary-born.pdf>.

5Gary B. Born,  International Commercial Arbitration, Ch. 17 on Provisional Relief in International Arbitration, 2453 (2nd Edn., Kluwer Law International 2014).

6Martin J. Valasek and Jenna Anne De Jong, Enforceability of Interim Measures and Emergency Arbitrator Decisions, <https://www.nortonrosefulbright.com/en-in/knowledge/publications/6651d077/enforceability-of-interim-measures-and-emergency-arbitrator-decisions>.

7ICC Rules of Arbitration, 2012, Arts. 29(1) & (4) and Appendix V.

8Martin J. Valasek and Jenna Anne De Jong, Enforceability of Interim Measures and Emergency Arbitrator Decisions, <https://www.nortonrosefulbright.com/en-in/knowledge/publications/6651d077/enforceability-of-interim-measures-and-emergency-arbitrator-decisions>.

9Arbitration and Conciliation Act, 1996.

10Arbitration and Conciliation Act, 1996, S. 2(1)(d).

11United Nations Conference on International Commercial Arbitration Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958.

12Stephanie Khan and Benson Lim, Emergency Arbitrator Procedures: What Should a Practice Note of Best Practices Consider?,  <http://arbitrationblog.kluwerarbitration.com/2019/01/11/emergency-arbitrator-procedures-what-should-a-practice-note-of-best-practices-consider/>.

13https://www.youtube.com/watch?v=EWziM90stb8.

14(2022) 1 SCC 209.

15Arbitration and Conciliation Act, 1996, S. 17(1).

16Arbitration and Conciliation Act, 1996, Ss. 2(6) and (8).

17Arbitration and Conciliation Act, 1996, S. 5.

18Ajar Rab, Chapter X Delocalization/Autonomous Theory in International Commercial Arbitration 58 (NALSAR University of Law, Hyderabad, First Edn., 2019 Reprint 2021).

Op EdsOP. ED.

“Is a 2:1 decision perceived by the losing party as more legitimate than a decision by a sole arbitrator, because “three heads are better than one”? That makes no sense – quite the opposite … In the eyes of the losing party, the 2:1 decision is less legitimate than that of a sole arbitrator in whose selection the opponent had no more and no less than an equal say.

This has nothing to do per se with the choice between a sole arbitrator and a tribunal comprising three or more arbitrators. In either case, since every possible arbitrator is chosen jointly by the parties, or is appointed by a neutral institution, each is invested with an equal measure of confidence and an equal claim to moral authority. Not so when there are unilateral appointments. Disputants tend to be interested in one thing only: winning. They exercise their right of unilateral appointment, like everything else, with that overriding objective in view. The result is speculation about ways and means to shape a favourable tribunal, or at least to avoid a tribunal favourable to the other side – which is logically assumed to be speculating with the same fervour, and toward the same end.

Forgotten is the search for an arbitrator trusted by both sides….

The unilaterally nominated arbitrator is the product of realism, doubtless, indispensable in a complex world of inter communal transactions, as a way of making arbitration acceptable – though in a manner which immediately dilutes its purity.”

–Jan Paulsson[1]

The subject of appointment of the arbitral tribunal is a vexed issue that has in the past few years, since the 2015 amendment[2] to the Arbitration Act[3] in India, received considerable judicial scrutiny in the Supreme Court and the High Courts. The importance of appointing arbitrators in which both the parties have mutual confidence, and fairness and impartiality of the arbitrator, has been stressed in recent judgments of the Supreme Court in the context of whether a particular party to the dispute should have the power to act as an arbitrator or  appoint a sole arbitrator. The Supreme Court has categorically laid down that where a party has an interest in the outcome of the decision, it is not entitled to appoint and/or to participate in any manner in the appointment of the arbitrator. In this regard, the importance of fairness of the arbitrator and absence of bias, as well as the concept of mutual confidence of the parties in the arbitrator, has been given primacy over the concept of party autonomy and the significance of the plain contractual text of the arbitration agreement, at least in the context of appointment of sole arbitrators.  The genesis of this lies in the principle of equal treatment of parties, which is one of the core principles of justice deliverance. The principle of ‘equal treatment’ has a rich history in modern legal thought, that is inextricably linked to the right to a fair trial. The principle traces its roots as far back as the great Charter of Liberties, The Megna Carta Libertatum, in 1215, which is widely considered to have moved legal institutions across the globe, closer to the ideal of equal justice under law and “embedded equality within due process”.[4]

The landmark judgment of the French Cour de Cassation in Societes BKMI et Siemens v. Societe Dutco,[5] has clarified and strengthened its applicability to arbitrations. Dutco commenced an International Chamber of Commerce (‘ICC’) arbitration, against BKMI and Siemens. A consortium was formed by them to construct a cement plant in Oman. The arbitration clause stated that “all disputes arising under the agreement would be settled by arbitration in Paris in accordance with the ICC Arbitration Rules, by three arbitrators appointed in accordance with those Rules”. The respondents, BKMI and Siemens were asked to nominate an arbitrator jointly, to which they raised an objection. After rejecting this, the said parties were asked to make a joint nomination and the Tribunal was constituted. The Tribunal rendered a partial award after holding that it had been properly constituted. The respondents applied to the Cour d’appel de Paris to have the award altered on the ground that the Tribunal was irregularly constituted, which was rejected by the appellate court. The parties therefore went to the Cour de Cassation, which reversed the Court of Appeal’s decision. It held that the principle of equality of parties in designation of the arbitrator is a matter of public policy and a party can waive the principle only after the dispute has arisen. Pursuant to this judgment institutional rules were revised, even those of the International Chamber of Commerce (ICC) and the London Court of International Arbitration (LCIA). They provide that the claimant(s) and the respondent(s) must jointly nominate their respective co-arbitrators; failing the joint appointment, by either side, the institution will appoint the entire Tribunal.[6]

In India, the principle in Dutco[7] has been applied in the landmark judgment of the Supreme Court in Perkins Eastman Architects DPC v. HSCC (India) Ltd.[8] The Court relied upon the observations in Dutco[9] case that,

“An independent mind is indispensable in the exercise of judicial power, whatever the source of that power may be, and it is one of the essential qualities of an arbitrator.”

This judgment came in the context of an arbitration clause which gave powers to the Chairman and Managing Director of HSCC (India) to appoint an arbitrator. The Court held, relying upon the judgment in TRF Limited v. Energo Engg. Projects Ltd.,[10]  that even in a case where the Managing Director was only empowered or authorised to appoint an arbitrator, even in such a case, because of the interest that he would be said to have in the outcome of the result in the disputes, the element of invalidity would be directly relatable to and arise from  such an interest, and if there was such a possibility of bias, it would be there in either category, whether the party acts as the arbitrator itself or when it is only empowered to appoint an arbitrator. The Court thus reiterated the principle in the Bharat Broadband[11] judgment and applied it also to situations where the party had the power to appoint a sole arbitrator. In Bharat Broadband Network Ltd. v. United Telecoms Ltd. [12]the arbitration clause provided that if any disputes arise then they shall be referred to the sole arbitration of the CMD, BBNL, and if the CMD is unable and/or unwilling to act, then to the sole arbitration of some other person appointed by the CMD. The said procedure of appointment was challenged on the ground of violation of Section 12 [13]of the amended Arbitration Act in 2015, read with Seventh Schedule[14] thereto. The Court held that under the new provision of Section 12(5) what is clear is that where under any agreement between the parties, a person falls within any of the categories set out in the Seventh Schedule, he is, as a matter of law, ineligible to be appointed as an arbitrator. In such a scenario, the party can straightway apply under Section 14[15] for declaration of the same and for a declaration that the mandate of the arbitrator stands terminated under Section 14(1) of the Act itself.

These three decisions make it abundantly clear that the 2015 amendments lay down a clear position that where a party has an interest in the outcome of the decision, it is not entitled to appoint and/or to participate in any manner in the appointment of the arbitrator. The judgments in TRF Limited[16], Bharat Broadband[17] and Perkins[18] are a welcome step in the direction of a fair arbitration, in consonance with the principles of fair trial, and removing any effect of impartiality or bias in the arbitrator’s decision. It has created much need clarity in law, and a positive interpretation of the purpose and effect of the 2015 amendments.

The key question that arises therefore is, whether and to what extent, the principles laid down in these judgments should be made applicable to the issue of validity of party appointed arbitrators in the case of multi-arbitrator tribunals, such as a three-member arbitral tribunal. The question that needs to be answered is whether the same principle extends, and should extend, to appointments made by a party in an arbitral tribunal comprising of three members, wherein one party appoints their nominee, the other party appoints their nominee, and the two nominees appoint a third arbitrator. This question requires serious consideration. Currently, the above principles are not considered to be applicable in the context of arbitrator appointments made by the parties in a three-member arbitral tribunal. The Supreme Court in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV)[19], observed at para 35 relying on para 21 of  Perkins[20] judgment, that in a three-member panel, the right to appoint an arbitrator by the party is counterbalanced by the other side also by appointing an arbitrator of its choice and, therefore, it is allowed.

Going a step further, recent judgments of the Supreme Court have held as valid such contractual clauses where the Government is a party, allowing it to give a panel of names, consisting of ex-government employees, from which the opposite party has to nominate its arbitrator. In Voestalpine Schienen GMBH v. Delhi Metro Rail Corporation Limited,[21] the arbitral panel consisted of three members, of which one was to be nominated from the list of arbitrators given by DMRC by the petitioner company, Voestalpine. The panel of arbitrators drawn by DMRC consisted of persons who had worked in the Railways under the Central Government, or the Central Works Departments or public sector undertakings. However, it was not acceptable to the petitioner as the petitioner felt that the panel prepared by DMRC consisted of serving and/or retired engineers, either of DMRC or of the government departments or public sector undertakings, who did not qualify as independent arbitrators. The Supreme Court considered the amendments made in the 2015 Act, as well as the recommendations of the Law Commission[22] on the subject of ‘neutrality of arbitrators’. At paras 15 to 23 of the judgment, the Supreme Court discussed in detail, the principles regarding independence and impartiality of the arbitrators, and it held that,

20. Independence and impartiality of the arbitrator are the hallmarks of any arbitration proceedings. Rule against bias is one of the fundamental principles of natural justice which applied to all judicial and quasi-judicial proceedings. It is for this reason that notwithstanding the fact that relationship between the parties to the arbitration and the arbitrators themselves are contractual in nature, and the source of an arbitrator’s appointment is deduced from the agreement entered between the parties, notwithstanding the same non-independence and non-impartiality of such arbitrator (though contractually agreed upon) would render him ineligible to conduct the arbitration. The genesis behind this rationale is that even when an arbitrator is appointed in terms of the contract, and by the parties to the contract, he is independent of the parties. Functions and duties require him to rise above the partisan interests of the parties and not to act in, or so as to further, the particular interest of either party. After all, the arbitrator has adjudicatory role to perform and, therefore, he must be independent of parties as well as impartial.”[23]

Having held so, the Court went on to examine whether appointment from a panel of government employees and/or ex-government employees is valid. It held that this by itself may not make such a person ineligible because the panel consists of persons who have worked in the Railways under the Central Government, or the Central Public Works Departments, or public sector undertakings, and therefore, they cannot be treated as employees or consultants or advisor of the respondent DMRC. The Court went on to hold that if this argument is accepted, then no person who had either worked in any capacity with the Central Government or other autonomous or public sector undertakings would be eligible to act as an arbitrator, even when he is not remotely connected with the party in question, like DMRC in that case. It held that the amended provision put an embargo on a person to act as an arbitrator, who is the employee to the party in dispute, or a consultant or an advisor or has had any past or present relationship with DMRC, which was not the case.

The Court while clearly asserting the importance of independence and impartiality in appointment of arbitrators, and it being the cornerstone of consideration of validity of such appointments, did not lay down a clear test and, instead, drew an artificial line. It held that on the one hand, the employees of the government body which are litigating, are not allowed, but the employees of other government organisations are allowed, when in fact these employees would also perhaps fall foul of the same test as DMRC’s employees which are discussed in detail in the said judgment. The Court then eventually held that only five names as suggested in the panel are not broad-based enough, and therefore, DMRC should give broadness to its panel, which has already been given by DMRC by giving names of 31 persons. The judgment thus held that as long as an ex-government employee is not directly connected with the government body, which is litigating, and the panel is broad-based enough, the said procedure of appointment of arbitrators would not fall out of the requirements of the 2015 amendment of the Arbitration Act.

The above judgment was applied in the judgment of the Supreme Court in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV)[24], albeit with a result which was perhaps unintended by Voestalpine[25] judgment. In this case the appellant, which fell under the Ministry of Railways, sent a letter with the names of four serving Railway officers and the respondent was asked to select any two names from the list of four railway officers and communicate them to the appellant. As per the arbitration clause, then the appellant would select the nominee of the respondent from the two names given by the respondent and appoint the other arbitrators also from the three members panel and indicate the presiding arbitrator from amongst the three arbitrators. The respondent disagreed with the said procedure and refused to select the two arbitrators and refused to waive its right under Section 12(5) of the amended Arbitration Act. It filed a petition under Section 11(6) of the Act to the High Court, for appointment of an arbitrator.  The High Court rejected the arguments of the appellant that the arbitrator has to be appointed only from the panel of arbitrators and appointed a retired High Court Judge as the arbitrator. In appeal, the Supreme Court held that the High Court is not justified in appointing any independent arbitrator de hors the procedure for appointment of the arbitrator, as prescribed under Clause 64(b) of the General Conditions of Contract. The Court held, relying on a passage in Voestalpine[26] that simply because a person is a retired officer from the Government, he would not be rendered ineligible to act as an arbitrator. Based on this, the Supreme Court held that the very reason for empanelling the retired Railway Officers is to ensure that the technical aspects of the disputes are suitably resolved by utilising their expertise and merely because they are retired employees who have worked in the Railways, it does not make them ineligible to act as arbitrators. This judgment goes contrary to the judgment in Voestalpine[27], wherein the independence and impartiality of the arbitrator was stressed and the Court held that the employees in that case of DMRC (which was a party), serving of retired, cannot be appointed as an arbitrator. In this case, the Supreme Court upheld the appointment of employees of the Railways wherein the appellant in question, was falling under the aegis of the Ministry of Railways. On the issue whether the General Manager can be given the power to appoint the arbitrator, the judgment goes contrary to the Supreme Court’s judgment in Perkins[28], as even the presiding arbitrator was to be appointed by the General Manager. The Court held in this context that,

 “38. … In response to the respondent’s letter dated 26.09.2018, the appellant has sent a panel of four retired Railway Officers to act as arbitrators giving the details of those retired officers and requesting the respondent to select any two from the list and communicate to the office of the General Manager. Since the respondent has been given the power to select two names from out of the four names of the panel, the power of the appellant nominating its arbitrator gets counter-balanced by the power of choice given to the respondent. Thus, the power of the General Manager to nominate the arbitrator is counter-balanced by the power of the respondent to select any of the two nominees from out of the four names suggested from the panel of the retired officers. In view of the modified Clauses 64(3)(a)(ii) and 64(3)(b) of GCC, it cannot therefore be said that the General Manager has become ineligible to act as the arbitrator. We do not find any merit in the contrary contention of the respondent. The decision in TRF Limited[29] is not applicable to the present case.[30]

Even otherwise also in this case, the panel was only a panel of four arbitrators which was not a broad-based panel, as laid down in Voestalpine[31] judgment.

Thus, on the one hand, the Court has reiterated the importance of independence and impartiality of arbitrators. However, on the other hand, it seems as a practical way out, keeping in mind the prevalent practices and preferences, the Court has allowed for certain exceptions. The difficulty in this approach is that whether a panel is “broad based” or not in itself is a subjective test which runs the risk of getting diluted, and thereby diluting the core principle which it seeks to protect, which is to ensure independence and impartiality of the arbitrators appointed. This is the effect also of the Railway Electrification[32] judgment has had, while it sought to apply the principle, laid down in the Voestalpine[33] judgment.

In the case of either sole arbitrator or a Tribunal comprising of three or more arbitrators, where the tribunal is either jointly chosen by the parties or appointed by a neutral institution, there is equal measure of confidence in the arbitrators. But this is not so when there are unilateral appointments, and therein lies the problem. As Jan Paulsson, states,

“Parties tend to be interested in one thing only: winning. They exercise the right of unilateral appointment, like everything else, with that overriding objective in view. The result is speculation about ways and means to shape a favorable tribunal, or at least to avoid a tribunal favorable to the other side – which is logically assumed to be speculating with the same fervor, and towards the same end…We must confront an uncomfortable fact.Two recent studies at commercial arbitration revealed that the dissenting opinions were almost invariably (in more than 95% of cases) returned by the arbitrators nominated by the losing party. The fact that the dissenting arbitrators are always those who have been appointed by the party aggrieved by the majority decision does not in or itself point to a failure of ethics. It may simply be that the appointing party have made an accurate reading of how the nominee is likely to view certain propositions of law or circumstances of facts. The problem is that the inevitability of such calculations proves the unilateral appointments are inconsistent with the fundamental premise of arbitration, the mutual confidence in arbitrators. Of course, we must live with compromises. The unilaterally appointed arbitrator is the product of realism, doubtless, indispensable in a complex world of inter communal transactions, as a way of making arbitration acceptable – though in a manner which immediately dilutes its purity. Although the practice of giving the parties the right to nominate its arbitrator, is a practical way of making arbitration more acceptable and serves the need of the party to be comfortable with the process, eventually, he must keep in mind that the benchmark is to have a completely independently nominated arbitral tribunal. It is important to keep the benchmark in mind, so that through education and spread of knowledge, over a period, one can reach this benchmark, and not give into the doubtless insecurities of the parties appointing the arbitrator. The party’s attachment to the practice of unilateral appointment is ill-conceived.”[34]

There are several reasons for the parties to want to have the power to nominate its own arbitrator to an arbitral tribunal consisting of three members or more. Primarily, perhaps it gives a greater sense of control over the proceedings to the party and makes it feel that the arbitrator nominated by the party will help it win its case, but this then equally applies to the expectations of the other side which has nominated its own arbitrator. The purpose it serves perhaps is thus only to give psychological comfort to the party rather than any particular advantage. In any case if indeed one party was to have any such advantage, then it would defeat the basic purpose of having a fair and impartial mechanism to resolve disputes. Secondly, there are other factors where a party either feels that it may be that the arbitrator appointed by it would have a better understanding in terms of any specialised skill or knowledge, but then that could be taken care of even if appointments are made by an independent party or institution, and for that purpose alone there is no necessity perhaps to have unilateral appointments. As an extension of the first point above a party may also feel that an arbitrator nominated by it may have a better understanding of its case, or from a particular cultural understanding point of view, but this purpose can also be well achieved by other mature mechanisms. In fact, the net result of the exercise of unilateral appointments may well only turn out to be counter-productive to the parties as it prevents the free flow and exchange of thoughts between the arbitrators on account of mutual mistrust. As Hans Smit comments,

“The presence of a partisan arbitrator on a panel will normally reduce, if not eliminate, the free exchange of ideas amongst the members of the panel. The chair will be less receptive to arguments that appear to be moved by partisan considerations or made join one of the arbitrators.”[35]

Further experienced practitioners, such as Professor Van Den Berghave made reports where it is evidenced that an elevated number of dissents are produced by the arbitrator that was unilaterally appointed by the party, who loses the arbitration. Dissents are used then to also challenge the arbitral award, and it affects the speedy enforcement of the same.[36]

Party autonomy and practical necessities or preferences of parties are a factor to consider for the purpose of lending acceptability to arbitration as a mechanism for alternate dispute resolution, but at the same time, equally, if not more, the key aspect that needs to be examined and considered is to reduce the possibility of doubt concerning the neutrality, impartiality, and independence of arbitrators. Perhaps the best solution is to have appointments to be made by a neutral body, which is impartial, reputed, and effective. Alternatively, as a middle way, such an institution (a neutral body) can even formulate a list of arbitrators that are duly vetted, and the parties can then be made to select from that list. This would reduce the chances of the arbitrator being biased towards the appointing party. Either which way, the need of the hour is to evolve a suitable framework for appointments to multi-arbitrator panels. The endeavour of the present discussion is to highlight that the evolution of the law in this area, which was started by the judgments in TRF Limited[37], Bharat Broadband[38] and Perkins[39], is required to be taken to its logical conclusion by a well-considered decision of the courts in this regard, which evolves a suitable framework, after looking into all the competing factors. This would further strengthen arbitration as a mechanism for alternate dispute resolution, in the same way in which the judgments in Bharat Broadband[40] and Perkins[41] have done.


*Advocate, Supreme Court of India; Solicitor (England & Wales). BA LLB (Hons.) (NLSIU, Bangalore – 1998), LLM in Corporate & Commercial Law (London School of Economics – 2000). Author can be reached at shamiksanjanwala@gmail.com.

[1]Professor Jan Paulsson, Moral Hazard in International Dispute Resolution, Inaugural Lecture 29-4- 2010,
TDM 2 (2011), available at <www.transnational-dispute-management.com>

[2] Arbitration and Conciliation (Amendment) Act, 2015.

[3] Arbitration and Conciliation Act, 1996.

[4]Maxi Scherer, Dharshini Prasad and Dina Prokic, The Principle of Equal Treatment in International Arbitration, available at SSRN:<https://ssrn.com/abstract=3377237>.

[5] 7-1-1992 – XV Yearbook Com. Arb. (1992) 124.

[6]Maxi Scherer, Dharshini Prasad and Dina Prokic, The Principle of Equal Treatment in International Arbitration, available at SSRN:<https://ssrn.com/abstract=3377237>.

[7] Societes BKMI et Siemens v. Societe Dutco, 7-1-1992 – XV Yearbook Com. Arb. (1992) 124.

[8]2019 SCC Online SC 1517.

[9] Societes BKMI et Siemens v. Societe Dutco, 7-1-1992 – XV Yearbook Com. Arb. (1992) 124.

[10](2017) 8 SCC 377.

[11] Bharat Broadband Network Ltd.  v. United Telecoms Ltd., (2019) 5 SCC 755.

[12](2019) 5 SCC 755

[13] Arbitration and Conciliation Act, 1996, S. 12.

[14] Arbitration and Conciliation Act, 1996, Seventh Schedule.

[15] Arbitration and Conciliation Act, 1996, S. 14.

[16] (2017) 8 SCC 377.

[17] (2019) 5 SCC 755.

[18] 2019 SCC Online SC 1517.

[19](2020) 14 SCC 712.

[20] 2019 SCC Online SC 1517.

[21](2017) 4 SCC 665.

[22] Law Commission of India, Report No. 246 on Amendments to the Arbitration and Conciliation Act, 1996 (August, 2014).

[23](2017) 4 SCC 665, 687.

[24] (2020) 14 SCC 712.

[25] (2017) 4 SCC 665.

[26] (2017) 4 SCC 665.

[27] (2017) 4 SCC 665.

[28] 2019 SCC Online SC 1517.

[29] (2017) 8 SCC 377.

[30] (2020) 14 SCC 712, 731.

[31]  (2017) 4 SCC 665.

[32] Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), (2020) 14 SCC 712.

[33] (2017) 4 SCC 665.

[34]Professor Jan Paulsson, Moral Hazard in International Dispute Resolution, Inaugural Lecture, 29-4-2010,

TDM 2 (2011), <www.transnational-dispute-management.com>.

[35]Duarte, Herman, Unilateral Appointments of Arbitrators: Perverse Incentives in International Arbitration? (May 20, 2012). Latin American and the Caribbean Law and Economics Association Annual Conference, XVI Edn., available at < https://ssrn.com/abstract=2063186 or http://dx.doi.org/10.2139/ssrn.2063186>.

[36]Duarte, Herman, Unilateral Appointments of Arbitrators: Perverse Incentives in International Arbitration? (May 20, 2012). Latin American and the Caribbean Law and Economics Association Annual Conference, XVI Edn., available at SSRN:< https://ssrn.com/abstract=2063186 or http://dx.doi.org/10.2139/ssrn.2063186>.

[37] (2017) 8 SCC 377.

[38] (2019) 5 SCC 755.

[39] 2019 SCC Online SC 1517.

[40] (2019) 5 SCC 755.

[41] 2019 SCC Online SC 1517.

Case BriefsHigh Courts

Delhi High Court: Suresh Kumar Kait, J., addressed an appeal under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996 against the interim order passed by Arbitrator was preferred.

Factual Background

Vide the Interim order, an application filed by the appellant under the provisions of Section 17 of the Arbitration and Conciliation Act, 1996 to restrain respondent 9 (Zee Entertainment Enterprises Ltd) from going ahead with its Scheme of Arrangement with Sony Pictures Networks India Pvt. Limited and Bangla Entertainment Private Limited was rejected.

An appeal was instituted based upon four agreements executed between the appellant and respondents 1,3,4 and 5 along with respondent 2 as co-borrower for the loan amount of Rs 726,00,000.

As per the Loan Agreement, it was obligatory upon the Borrowing Respondents to create security in favour of appellant/lender to its satisfaction and in complete contradiction and defiance of terms of Loan Agreement, the borrowing respondents failed to create adequate security.

Analysis and Decision

As per Clause 20 of the Declaration and Acknowledgment, on return of the title deed, the mortgage stood released and appellant issued a “No objection for release of the title deeds” to respondents 1 to 8 in respect of the title deeds of the property situated in Hyderabad over the original title deeds in terms of Declaration and Acknowledgement for a consideration of Rs 225 crores.

Thus, the declaration and acknowledgement got terminated and respondent 9 had no further or other obligation towards the appellant.

Therefore, respondent 9, who was not a party or signatory to the loan agreements, is not bound by the terms of the loan agreement.

Bench stated that the involvement of respondent 9 as obligator was only to the extent that it was a mortgagor of its Hyderabad property which was offered by the borrowers as security cover.

Once, upon receipt of Rs. 225 crores by appellant in terms of NOC dated 01.06.2020, title deeds of property of respondent no.9 have been released, the mortgage does not subsist anymore.

In view of the above facts and circumstances, High Court opined that there was no illegality and perversity in the impugned order. [Indiabulls Housing Finance Ltd. v. GNEX Projects (P) Ltd., 2022 SCC OnLine Del 753, decided on 14-3-2022]


Advocates before the Court:

For the Appellant:

Mr. Vineet Malhotra, Ms. Sonali Jaitley Bakhshi, Mr. Jaiyesh Bakhshi, Ms. Rini Badoni, Ms. Sanjana Bakshi, Mr. Chirag Sharma, Mr. Daman Popli, Mr. Siddharth Dey, Mr.Amreen Qureshi & Mr. Vishal Gohri, Advocates

For the Respondents:

Mr. Arvind Nayar, Senior Advocate with Ms. Ritwika Nanda, Ms. Petal Chandhok & Ms. Akshita Salampuria, Advocates for all respondents 1 to 17 (except respondent No. 9)

Mr. Parag P. Tripathi, Senior Advocate with Ms. Ritwika Nanda, Ms. Petal Chandhok, Ms. Akshita Salampuria & Ms. Mishika Bajpai, Advocates for respondent No. 9.

Cyril Amarchand MangaldasExperts Corner

The Supreme Court of India has retrospectively applied a prohibition inserted by a 2015 amendment, where employees of a party cannot be appointed as arbitrators, to arbitrations commenced even before the amendment.

In Ellora Paper Mills v. State of M.P.,[1] the Supreme Court (Court) held that a tribunal comprised entirely of officers of the State had “lost its mandate” by virtue of the 2015 amendment (2015 amendment) to the Arbitration and Conciliation Act, 1996 (Act), which inter alia prevents appointing arbitrators who are the employees, consultants, or advisors, or persons that have any other past or present business relationship with a party to the dispute.

A reading of the judgment suggests that the Court premised its ruling on the fact that the underlying arbitration did not technically commence because the State had obtained a stay on proceedings from the Madhya Pradesh High Court. Therefore, the arbitration was deemed to have commenced after the 2015 amendment, due to which the judgment does not strictly apply the 2015 amendment retrospectively. However, as we explain below, obtaining a stay on proceedings presupposes that those proceedings have commenced. On that basis, this decision could serve as precedent for extending the 2015 amendment retrospectively.

The 2015 amendment inserted Section 12(5) and the Fifth, Sixth, and Seventh Schedules to the Act. Under Section 12(5), persons who fall within the Seventh Schedule are ineligible to act as arbitrators, unless the parties by way of express agreement waive the disqualification after the dispute arises. Besides the appointment of employees or consultants, other examples of such ineligibilities include having a significant financial interest in the outcome of the case, or being a lawyer in the same law firm which is representing one of the parties.

Under Section 12 of the Act, an arbitrator must disclose grounds that may give rise to “justifiable doubts” about his impartiality and independence. The grounds for this purpose are mentioned in the Fifth Schedule. Some of these grounds (namely, Entries 1-19) also appear in the Seventh Schedule, which governs when an arbitrator becomes ineligible for appointment. There is a commonality of grounds in the Fifth and Seventh Schedules for the sole purpose of ensuring that the grounds in the Seventh Schedule are made aware to the parties by the arbitrator due to her obligations in the Fifth Schedule. In this sense, the 2015 amendment creates a dichotomy between grounds that may give rise to justifiable doubts, which become the subject of a challenge to the arbitrator, and grounds in the Seventh Schedule that automatically render an arbitrator ineligible and terminate her mandate.

The Fifth and Seventh Schedules are inspired by the IBA Guidelines on the Conflicts of Interest in International Arbitration (IBA Guidelines), issued by the International Bar Association (IBA). However, they depart from the IBA Guidelines on the point of waiver. Unlike the IBA Guidelines, the proviso to Section 12(5) allows parties to waive the ineligibility in the Seventh Schedule after a dispute arises by way of an express agreement in writing.

In its judgment in Ellora Paper Mills[2], the Court ruled that because the Arbitral Tribunal constituted to hear the underlying dispute was composed of employees of the State, they became ineligible after the 2015 amendment, thereby terminating their mandate. Therefore, the Court ruled that the Tribunal could not continue, and a fresh arbitrator had to be appointed as per the Act.

The Court’s decision is a useful consolidation of the various rulings on Section 12(5) of the Act, and serves as a reminder for parties to assess whether arbitration agreements concluded before the various amendments to the Act need a rethink in light of the changing legal landscape. However, the decision’s impact on arbitrations commenced before the 2015 amendment is worrisome, as it has the potential effect of: (1) applying this substantive retrospectively (although, as discussed below this is based on the court’s interpretation that the arbitration did not “commence” before 2015 – which we argue is not accurate); and (2) compelling pre-amendment arbitrations to start afresh by reconstituting the Tribunal—to the extent the Tribunal has become ineligible and loses its mandate to act—even if the arbitration is at an advanced stage.

Facts

At the heart of controversy is a government tender issued by the State of Madhya Pradesh for the supply of specialised paper for the year 1993-1994. Ellora Paper Mills (Ellora) bid successfully and was awarded a contract through a supply order.

Subsequently, Ellora remonstrated that the State did not honour its payment obligations under the contract and had also rejected some consignments without justification. The State informed Ellora that the paper supplied did not conform to its specifications and could not be utilised.

From 1994 onwards, Ellora filed a variety of civil actions against the State. One of these was a civil suit for the recovery of money. The State approached the civil court under Section 8 of the Act, seeking a stay of the civil proceeding and requesting that the parties be referred to arbitration. The civil court rejected this application. On appeal, the Madhya Pradesh High Court in 2000 referred the parties to arbitration. A tribunal called the “Stationery Purchase Committee” was then constituted in the same year. It comprised of five officers of the State, including Deputy Secretary, Department of Revenue, Deputy Secretary, General Administration Department, and Deputy Secretary, Department of Finance.

Between 2000 and 2019, the arbitration did not progress in view of Ellora’s numerous objections to the Tribunal’s jurisdiction and consequent litigation on the matter. Ultimately, in 2019 Ellora filed an application before the Madhya Pradesh High Court under Section 14 (failure or impossibility to act) read with Sections 11 (appointment of arbitrators) and 15 (termination of mandate and substitution of arbitrator) of the Act. It requested that a new tribunal be constituted, as the Stationery Purchase Committee had become ineligible pursuant to the 2015 amendment inserting Section 12(5) in the Act.

Before the High Court, Ellora argued that because the nominated arbitrators were all employees of the State, they were hit by the ineligibility in Entry 1 of the Seventh Schedule of the Act, which bars an arbitrator from being an employee, consultant, advisor or having any other past or present business relationship with a party. By reason of their ineligibility, Ellora asserted that the ineligible arbitrators could not appoint their replacement arbitrators either.

The High Court rejected Ellora’s application. It relied on the Supreme Court’s decisions in BCCI v. Kochi Cricket (P) Ltd.[3] and Union of India v. Parmar Construction Co.,[4] where the Court had ruled that provisions of the 2015 amendment will not apply to arbitral proceedings commenced before the 2015 amendment unless the parties otherwise agreed. In this case, the High Court ruled that the prohibition in Section 12(5) read with the Seventh Schedule­—inserted by the 2015 amendment—preventing a party from appointing its own employees to an Arbitral Tribunal did not apply to the arbitration, as it had commenced before the 2015 amendment. Ellora appealed this decision to the Court.

Arguments by the parties

Before the court, Ellora argued that in the absence of an express agreement in writing to continue with the arbitration proceedings, the mandate of the Stationery Purchase Committee had terminated after the insertion of Section 12(5) of the Act.

In response, the State argued that since the Arbitral Tribunal was constituted in 2000, Section 12(5) would not apply. The State asserted that the 2015 amendment, which was brought into effect from 23-10-2015 did not have retrospective application.

The Court’s decision

The Court observed that though the Tribunal was formed in 2000, there was no real progress in the arbitration due to the various litigations initiated by Ellora, which culminated in a stay granted by the Madhya Pradesh High Court from 2001 to 2017. “[T]he fact remains”, the Court said, that “no further steps whatsoever have been taken in the arbitration proceedings and therefore technically it cannot be said that the arbitration proceedings by (the Stationery Purchase Committee) has commenced”.

Accepting that the Arbitral Tribunal—comprising officers of the State—were hit by the disqualification in Section 12(5) read with Entry 1 in the Seventh Schedule of the Act, the Court ruled that all the members had become ineligible to continue as arbitrators. When the arbitration clause is found to be foul with the amended provision, the appointment of arbitrators would be “beyond the pale of the arbitration agreement”, empowering a court to appoint an arbitrator as may be permissible, the Court ruled.

 

As a result, the Court ruled that a fresh arbitrator had to be appointed under the provisions of the Act. It set aside the decision of the High Court. Interestingly, instead of remanding the matter to the High Court for appointing a fresh arbitrator, the Court went ahead and appointed its own choice of an arbitrator (retired Justice Abhay Manohar Sapre). It did so because the dispute was pending for over 21 years.

Comment

The Court in Ellora Paper Mills[5] engaged on the limited legal question (for the first time) of whether an ineligibility, when it exists, applies to arbitration proceedings initiated before the 2015 amendment. Previous decisions, though sharing the commonality of a contract concluded before the 2015 amendment, were nevertheless in respect of arbitration proceedings commenced after the 2015 amendment. The implications of the judgment in Ellora Paper Mills[6] on arbitral proceedings before the 2015 amendment are worrisome and against business prudence.

(1) 2015 amendment given retrospective applicability without legal basis

Firstly, the Court said because the arbitration did not progress since 2000, the arbitration proceedings did not “technically” commence.[7] This finding, it may be argued, can be looked at differently since Ellora could have never obtained a stay on proceedings that did not commence at all. Therefore, the Court’s observation that the arbitration did not “technically” commence is contrary to the stay having been granted.

At any rate, the court seems to have relied on the nascent stage of the underlying arbitration to make the ineligibility in Section 12(5) read with the Seventh Schedule applicable to members of the Arbitral Tribunal, by virtue of their relationship with the State. While this ruling is correct in attempting to remedy the wrongs that the Fifth and Seventh Schedules to the Act aim to redress, it allows a subsequent judicial forum to halt arbitral proceedings at an advanced stage and appoint a new arbitrator if a party petitions to have the Tribunal’s mandate terminated retrospectively on applying the standards of the 2015. This would seriously hamper the efficacy of the previous proceedings and would require the whole dispute to be heard afresh. One way to distinguish this case is the Court ruled as it did since it found that the arbitral proceedings had not commenced and therefore that they are deemed to have been commenced after 2015. However, as described above, this finding is also open to other interpretations.

The Court’s reliance on previous decisions on Section 12(5) to arrive at its ruling deserves some inspection.

By way of background, the genesis of the legal discussion surrounding Section 12(5) is in two decisions of the Court in Voestalpine Schienen GmbH v. Delhi Metro Rail Corpn. Ltd.[8] and HRD Corpn. v. GAIL (India) Ltd.[9] In these cases, the Court characterised an arbitrator’s ineligibility in the Seventh Schedule as one which goes to the “root of the appointment”. This is because the arbitrator’s ineligibility is by operation of law, and renders her without any inherent jurisdiction to continue. In such cases, the Court ruled that a challenge to the arbitrator (or the Tribunal) is not needed. An aggrieved party needs to instead file an application under Section 14(2) of the Act, which deals with an application to a court for terminating an arbitrator’s mandate.

In TRF Ltd. v. Energo Engg. Projects Ltd.[10] (TRF) the Court considered whether the Managing Director of a party designated as an appointing authority, and subsequently rendered ineligible under Section 12(5) read with the Seventh Schedule could then nominate an arbitrator as his/her replacement. The Court invoked the maxim qui facit per alium facit per se (what one does through another is done by oneself), and ruled that the nomination of an arbitrator by an ineligible arbitrator would be tantamount to the ineligible arbitrator carrying on the arbitration herself. This was not allowed.

Subsequently, in Bharat Broadband Network Ltd. v. United Telecoms Ltd.,[11] (BBNL) the Court ruled that the decision in TRF[12] does not save appointments by ineligible managing directors even if such appointments were made before the judgment in TRF.[13] Both TRF[14] and BBNL[15] are decisions where the contract was concluded before the 2015 amendment but the dispute itself arose after the 2015 amendment.

At this juncture, it is noteworthy to mention that the proviso to Section 12(5) allows parties to waive an arbitrator’s ineligibility once the dispute arises “by an express agreement in writing”. Interpreting these words, the Court in BBNL[16] said the requirement under Section 12(5) is to have an express agreement in writing, which disallows implied agreements (or conduct) such as filing a statement of claim in the arbitration. In any case, the Court added, party autonomy in waiving the ineligibility under Section 12(5) by express agreement “is to be respected only in certain exceptional situations” such as family arbitrations or situations where the ineligible person commands blind faith by both parties to the dispute.

In Jaipur Zila Dugdh Utpadak Sahkari Sangh Ltd. v. Ajay Sales & Suppliers[17] the Court considered whether the chairman of one of the parties could act as a sole arbitrator in the dispute. The contract in this case was also before the 2015 amendment, but disputes arose after the 2015 amendment. Observing that since an arbitrator derives her power of appointment from the arbitration agreement, if the arbitration agreement itself becomes contrary to law, the Court said the ineligible arbitrator can no longer continue to act. In such cases, it would be appropriate for a party to approach a court and have a replacement arbitrator appointed.

On facts, the Court in Jaipur Zila Dugdh[18] ruled that a chairman would be ineligible under the Seventh Schedule since he (i) has a business relationship with one of the parties to the dispute; (ii) has a controlling influence over one of the parties; and (iii) represents or advises one of the parties or their affiliates.

 

In Ellora Paper Mills[19], the contract and arbitration were both before the 2015 amendment—a unique factual matrix not seen in TRF[20], BBNL[21], or Jaipur Zila Dugdh[22]. Yet the Court relied on these three decisions and extended the 2015 amendment to an arbitration proceeding commenced before the 2015 amendment. While it is true that an arbitrator becomes ineligible by virtue of the 2015 amendment, the question before the Court was whether that ineligibility would operate in the arbitration in question, commenced several years prior in time. The Court ruled that it did on the basis that the underlying arbitration never commenced because of the stay order. However, the Court did not engage any further on whether its ruling meant all pre-2015 amendment arbitrations would now expose themselves to the 2015 amendment.

The applicability of the 2015 amendment to arbitral proceedings, while the subject of some initial controversy, is now a settled question in view of the judgment in BCCI v. Kochi Cricket (P) Ltd.[23] where the Court ruled that the 2015 amendment applies prospectively to arbitral proceedings i.e. to arbitrations commencing after 23-10-2015, which is the date when the 2015 amendment came into effect. As for court proceedings relating to arbitration proceedings, the Court ruled that the 2015 amendment would apply to all court proceedings even if initiated before the 2015 amendment.

The Government sought to nullify this ruling through the Arbitration and Conciliation (Amendment) Act, 2019, which inserted a new Section 87 that provided that (unless the parties agreed otherwise) the 2015 amendments would apply prospectively to all arbitral and court proceedings commenced after 23-10-2015 and not otherwise. The Court struck this down as unconstitutional in Hindustan Construction Co. Ltd. v. Union of India.[24] As a result, the position in BCCI[25] is the law today.

Therefore, the judgment in Ellora Paper Mills[26] read in the context of these cases seems to be a deviation from the effect of the ruling in BCCI[27]. Both BCCI[28] and Ellora Paper Mills[29] were rendered by two-Judge Benches. Section 26 of the 2015 amendment is also designed to apply prospectively since it states, “Nothing contained in the (2015 amendment) shall apply to the arbitral proceedings commenced, in accordance with the provisions of Section 21 of (the Act) unless the parties otherwise agree….”

The only remaining issue on the retrospective applicability of the 2015 amendment to arbitral proceedings is when can parties said to have agreed to make the amendment applicable to their arbitration. Case law suggests that the standard of proof for such an agreement is high. For example, S.P. Singla Constructions (P) Ltd. v. State of H.P.[30] ruled that a contractual clause that said any statutory modifications or re-enactments to the Arbitration Act, 1940 shall also apply to the arbitration proceedings under that clause were itself not sufficient to make the 2015 amendment to Section 12(5) applicable to arbitral proceedings commenced in 2013. The Court in Ellora Paper Mills[31] did not consider that commencing an arbitration before the 2015 amendment was itself evidence that the parties did not intend to make the 2015 amendment apply to their arbitration.

(2) Amending existing arbitration agreements and powers of the court as an appellate forum

Nevertheless, Ellora Paper Mills[32] and the judgments it relies on has an important commercial implication. Arbitration agreements, particularly in government contracts, concluded before 2015 may still stipulate the appointment of an arbitrator in contravention of the Seventh Schedule.

Where a party believes it would not prefer to waive this disqualification in future, it must initiate negotiations to amend the arbitration clause and bring it in line with the Act. This would save a lot of legal costs and precious time after a dispute arises.

Section 14 of the Act inter alia says an arbitrator’s mandate terminates if he becomes de jure unable to perform his functions. The effect of case law on Section 12(5) read with the Seventh Schedule is an ineligible arbitrator becomes de jure unable to perform his functions, consequently seeing his mandate terminated. If the parties disagree on this fact that the mandate is terminated, they can apply to a court under Section 14 to receive a judicial decision on this point.

Another important aspect of Ellora Paper Mills[33] is the Court’s decision to appoint a replacement arbitrator itself, instead of remanding the case to the Madhya Pradesh High Court. The Court cites the sheer delay in proceedings as a ground for exercising its powers (presumably under Article 142 of the Indian Constitution) to appoint a replacement arbitrator.[34] This is a welcome move, as it shows the Court’s willingness to exercise its powers as an appellate forum to do justice.

(3) Impact of Ellora Paper Mills on government maintained panels of arbitrators

In Voestalpine Schienen GmbH v. Delhi Metro Rail Corpn. Ltd.[35] (DMRC case) the arbitration clause stipulated that the Delhi Metro Rail Corporation would forward names of five persons from a 31-member panel it maintains to the other party, which would then have to choose its nominee arbitrator from the shortlisted names. The other party challenged this procedure on grounds that the panel comprises of government employees who did not qualify as independent arbitrators.

The Court said the fact that one of the members of the panel was a government employee did not by itself make the person ineligible under Section 12(5), as such persons would possess the necessary technical background to decide the case. The true test was whether such a panel member could be treated as an employee or consultant or advisor of the Delhi Metro Rail Corporation specifically.

As a result, maintaining a panel of arbitrators is not disallowed under the scheme of Section 12(5) of the Act. Nevertheless, the Court in its judgment in the DMRC[36] observed that it is not appropriate for the other party to have been given only five names from a larger pool of 31 names. The Court also said the scope of the panel ought to be expanded, with even retired private sector technical persons as well as persons with a legal background brought under its ambit.

Government contracts today are likely to contain arbitration clauses that fall foul of the prohibition in Section 12(5) read with the Seventh Schedule. As a final takeaway, these clauses should be amended to address the rulings of the series of judgments culminating with Ellora Paper Mills[37] and to address the observations in the DMRC[38]. In particular, clauses that specify designations of government employees as arbitrators can no longer remain, unless those arbitrators are employees of a different government department. Equally, a panel of arbitrators maintained by a government department (or the Government itself) must be diverse, and should allow the opposite party scope to select from a wide pool of people.

Conclusion

The importance of choosing a technically qualified arbitrator can never be overstated. However, the law installs some protections to prevent a party, especially when it is a government entity, from breaching the rule against bias by appointing their own employee, consultant or advisor or anyone with a past business relationship as an arbitrator. While applying this welcome change in Indian law however, care should be taken such that its impact does not unsettle past arbitrations. Of course in this case, the Court was trying to correct a historical long and galvanise a slow moving arbitration – this however should not be read to mean that all pre-amendment arbitrations would now open themselves up to the rigours of the 2015 amendment standards on appointment. A fine balance in this regard has to be maintained to apply these changes even handedly.


† Partner at Cyril Amarchand Mangaldas.

†† Associate at Cyril Amarchand Mangaldas.

[1] 2022 SCC OnLine SC 8.

[2] 2022 SCC OnLine SC 8.

[3] (2018) 6 SCC 287.

[4] (2019) 15 SCC 682.

[5] 2022 SCC OnLine SC 8.

[6] 2022 SCC OnLine SC 8.

[7] 2022 SCC OnLine SC 8, Para 6

[8] (2017) 4 SCC 665.

[9] (2018) 12 SCC 471.

[10] (2017) 8 SCC 377.

[11] (2019) 5 SCC 755.

[12] (2017) 8 SCC 377.

[13] (2017) 8 SCC 377.

[14] (2017) 8 SCC 377.

[15] (2019) 5 SCC 755.

[16] (2019) 5 SCC 755.

[17] 2021 SCC OnLine SC 730.

[18] 2021 SCC OnLine SC 730.

[19] 2022 SCC OnLine SC 8.

[20] (2017) 8 SCC 377.

[21] (2019) 5 SCC 755.

[22] 2021 SCC OnLine SC 730.

[23] (2018) 6 SCC 287.

[24] (2020) 17 SCC 324 : 2019 SCC OnLine SC 1520.

[25] (2018) 6 SCC 287.

[26] 2022 SCC OnLine SC 8.

[27] (2018) 6 SCC 287.

[28] (2018) 6 SCC 287.

[29] 2022 SCC OnLine SC 8.

[30] (2019) 2 SCC 488.

[31] 2022 SCC OnLine SC 8.

[32] 2022 SCC OnLine SC 8.

[33] 2022 SCC OnLine SC 8.

[34] 2022 SCC OnLine SC 8, Para 11.

[35] (2017) 4 SCC 665.

[36] (2017) 4 SCC 665.

[37] 2022 SCC OnLine SC 8.

[38] (2017) 4 SCC 665.

Case BriefsHigh Courts

Bombay High Court: B.P. Colabawalla, J., addressed an arbitration application filed under Section 11 of the Arbitration and Conciliation Act, 1996.

Instant application was filed under Section 11 of the Arbitration and Conciliation Act, 1996 seeking the appointment of a Sole Arbitrator to adjudicate upon the disputes and differences between the applicant and respondent arising out of the Service Level Agreement.

High Court noted that the existence of the Arbitration Clause has not been disputed by the respondent.

Grounds on which the application was opposed:

  • Dispute between the parties is not arbitrable as the claims made by the applicant is outside the term of SLA as well as the pleaded case of the applicant as reflected

For the above-stated, respondent’s counsel brought to the Court’s attention Clause 2.1 of the SLA which defined the term of SLA and stipulated that the same shall continue to be in force and in effect for a period of three years and can be extended for a term of one year and shall supersede all prior or contemporaneous communications, proposals and agreements between the respondent and the petitioner.

Further, the counsel submitted that the period of SLA came to an end on 2-05-2017. However, the claim of the applicant was in relation to the services rendered and invoices raised for the period after 2-5-2017. Hence, he submitted that the disputes were clearly not arbitrable and there was no question of referring the disputes to arbitration.

High Court stated that it cannot come to the conclusion as to whether the disputes between the applicant and the respondent are arbitrable or otherwise.

Another argument was that the disputes cannot be referred to arbitration because there is a fraud that has been played by the applicant on the respondent. On being unimpressed with the said argument, Court expressed that on the issue of fraud, the law is well settled. Supreme Court in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2021) 4 SCC 379, clearly held that all civil or commercial disputes, either contractual or non-contractual, which can be adjudicated upon by a Civil Court, in principle, can be adjudicated and resolved through arbitration, unless it is excluded expressly either by statute, or by necessary implication.

Supreme Court has categorically held that the Arbitration and Conciliation Act, 1996 does not exclude any category of disputes as being non-arbitrable. Section 2 (3) of the Arbitration Act, however, recognizes that certain categories of disputes by law may not be submitted to arbitration. Finally, the Supreme Court has held that the civil aspect of fraud is considered to be arbitrable in contemporary arbitration jurisprudence with the only exception being where the allegation is that the Arbitration Agreement itself is vitiated by fraud or fraudulent inducement, or the fraud goes to the validity of the underlying contract, and impeaches the arbitration clause itself.

Respondent’s case was that the alleged fraud was that the former employees of the Respondent (in connivance with the Applicant) continued to avail of the services of the Applicant beyond the expiry of the SLA merely to siphon off the funds of the Respondent unlawfully.

Further, the fraud alleged was that the former employees, along with the applicant siphoned off monies of the Respondent even after the expiry of the said SLA.

The Court opined that the respondent counsel’s submission that dispute between parties cannot be referred to arbitration on account of fraud was incorrect.

High Court held that it has no hesitation in constituting the arbitral tribunal to decide the disputes and differences between the applicant and the respondent arising out of the said SLA.

Parties agreed before the Court that for the purposes of deciding their disputes and differences Mikhail Behl an Advocate of this Court, be appointed as a Sole Arbitrator.

Order of the Court:

(a) By consent of parties, Mr Mikhail Behl, an advocate of this Court is hereby appointed to act as a Sole Arbitrator to decide the disputes and differences between the Applicant and the Respondent arising out of and/or in connection with and/or in relation to the Service Level Agreement dated 3rd May, 2014.

(b) A copy of this order will be communicated to the learned Sole Arbitrator by the advocates for the Applicant within a period of two weeks from today.

(c) The learned Sole Arbitrator is requested to forward his Statement of Disclosure under Section 11 (8) read with Section 12 (1) of the Arbitration Act to the advocates for the Applicant so as to enable them to file the same in the Registry of this Court. The Registry of this Court shall retain the said Statement on the file of this Application and a copy of the same shall be furnished by the advocates for the Applicant to the advocates for the Respondent.

(d) The parties shall appear before the Sole Arbitrator on such date and at such place as he nominates to obtain appropriate directions with regard to fixing a schedule for completing pleadings etc. The Arbitral Tribunal shall give all further directions with reference to the arbitration and also as to how it is to proceed.

(e) Contact and communication particulars shall be provided by both sides to the Sole Arbitrator within a period of two weeks. This information shall include a valid and functional email address as well as mobile numbers of the respective advocates.

(f) The Respondent is at liberty to raise all questions of jurisdiction within the meaning of Section 16 of the Arbitration Act. All contentions in that regard are expressly kept open on both sides. It is made clear that any observations made by me herein are only prima facie and tentative and shall not bind the Arbitral Tribunal while deciding any issue of jurisdiction. It is however made clear that the Respondent shall not be allowed to contend before the Arbitral Tribunal that there does not exist an Arbitration Agreement as the same has been expressly admitted.

(g) The parties have agreed that the Arbitral Tribunal shall be free to fix its own fees and shall not be bound by the 4th Schedule of the Arbitration and Conciliation Act, 1996 or the Bombay High Court (Fee payable to Arbitrators) Rules, 2018. The parties further agree that all arbitral costs and fees of the Arbitrator will be borne by the parties equally and will be subject to the final Award that may be passed by the Tribunal.

(h) The parties immediately consent to a further extension of up to six months to complete the Arbitration should the learned Sole Arbitrator find it necessary.

(i) The parties have agreed that the venue and seat of the arbitration will be in Mumbai.

In view of the above terms, the arbitration application was disposed of.[One Point One Solutions Ltd. v. Reliance Nippon Life Insurance Company Ltd., 2021 SCC OnLine Bom 7861, decided on 28-9-2021]


Advocates before the Court:

Mr Jamshed Master a/w Delan Fernandez, Radhika Motwani i/b Purazar P. Fouzdar, for the Applicant.

Mr Shyam Kapadia a/w Dhruva Gandhi, Mehafrin Mehta i/b HSA Advocates, for the Respondent.

Case BriefsSupreme Court

Supreme Court: The 3-judge Bench comprising of N.V. Ramana, CJ., A.S. Bopanna and Hima Kohli*, JJ., held that Arbitral Tribunal is empowered to award interest on post award interest.

The instant appeal was filed by UHL Power Co. Ltd. against the order of the Himachal Pradesh High Court disallowing it pre-claim interest i.e., interest from the date when expenses were incurred, till the date of lodging the claim.

Background

Noticeably, the Sole Arbitrator had awarded a sum of Rs. 26,08,89,107.35p. in favour of UHL towards expenses claimed along with pre-claim interest capitalized annually, on the expenses so incurred. Further, compound interest was awarded at 9% per annum till the date of claim and in the event the awarded amount is not realized within a period of six months, future interest was awarded at 18% per annum on the principal claim with interest.  However, in appeal under Section 34 of the Arbitration Act, 1996 the Single Judge had disallowed the entire claim of UHL.

The said judgment was challenged by UHL under Section 37 of the Arbitration Act and the Division Bench of the High Court had awarded a sum of Rs. 9,10,26,558.74 in favour of UHL, being the actual principal amount along with simple interest at 6% per annum from the date of filing of the claim, till the date of realization of the awarded amount.

Can interest be awarded on post-award interest?

For declining payment of compound interest awarded by the Sole Arbitrator to UHL, the Division Bench relied on the decision in State of Haryana v. S.L. Arora & Co., (2010) 3 SCC 690, to hold that in the absence of any provision for interest upon interest in the contract, the Arbitral Tribunals do not have the power to award interest upon interest, or compound interest, either for the pre-award period or for the post-award period.

Since the decision of S.L. Arora’s case had been overruled in Hyder Consulting (UK) Ltd. v. State of Orissa, (2015) 2 SCC 189, now, post-award interest can be granted by an Arbitrator on the interest amount awarded. Therefore, the Bench held that the findings returned in the impugned judgment to the effect that the Arbitral Tribunal is not empowered to grant compound interest or interest upon interest and only simple interest can be awarded in favour of UHL on the principal amount claimed, was quashed and set aside. Consequently, the findings of the Division Bench insofar as it related to grant of the interest component, were reversed and the arbitral award was restore on the above aspect in favour of UHL.

Whether Memorandum of Undertaking and Implementation Agreement were Separate Documents?

Rejecting the argument of the State that the Memorandum of Undertaking (MoU) did not merge into the Implementation Agreement, as both were distinct documents and that the MoU contained a separate Arbitration clause numbered as Clause 18, whereas the Implementation Agreement contained Clause 20, the Bench opined that a perusal of the recitals and the clauses contained in the Implementation Agreement belied such a submission, specifically, that the said MoU had been mentioned as “Appendix A” in the second recital of the Implementation Agreement.

Further, the same could be reinforced on a reading of the definition of the word “Agreement” as used in Clause 2.2 of the Implementation Agreement which clearly states that the word “Agreement” wherever used in the Implementation Agreement, shall include all its appendices and annexures and the MoU having been described by the parties as Appendix A to the Implementation Agreement, would have to be treated as having merged with the Implementation Agreement for all effects and purposes. Consequently, the Bench affirmed the findings of the Division Bench that the MoU had merged with the Implementation Agreement and, therefore,

“…the disputes that were referable to arbitration under the Implementation Agreement were to include disputes arising under the MoU, even though the latter document did contain a separate arbitration clause.”

Analysis and Conclusion

Rejecting the argument of the State that the Implementation Agreement had to be executed within a period of one year and since the provision for extension beyond one year was applicable only to the conditions contemplated in Clause 4.1(a) and (b) and not to those stipulated in Clause 4.1(c) to (g), the Bench said,

“When the parties to the Implementation Agreement were ad idem that the period of one year available to UHL to commence the construction activity was to be reckoned after the major requirements prescribed in Clause 4.1 could be obtained, then any argument sought to be advanced to segregate the obligations under different sub-heads of Clause 4.1 only to lay the blame at the door of UHL when the requisite clearances were to be obtained by the State Government from the Central Government and Centralized Authorities, is devoid of merits, besides being completely unreasonable and illogical.”

Upholding the view of the Division Bench that the Single Judge committed a gross error in re-appreciating the findings returned by the Arbitral Tribunal and taking an entirely different view as it was not open to the said Court to do so in proceedings under Section 34 of the Arbitration Act, by virtually acting as a Court of Appeal.

Consequently, the Bench restored the findings returned in the arbitral award to the effect that the State of Himachal Pradesh had proceeded to terminate the Implementation Agreement before expiry of the prescribed period which could have been extended up to 24 months, reckoned from the “effective date”, i.e. five months prior to the stipulated period by adopting a distorted interpretation of Clause 4 of the Implementation Agreement, which was impermissible.

In view of the above, the appeal preferred by UHL was partly allowed, while appeal filed by the State of Himachal Pradesh was rejected in toto.

[UHL Power Co. Ltd. v. State of Himachal Pradesh, 2022 SCC OnLine SC 19, decided on 07-01-2022]


*Judgment by: Justice Hima Kohli


Kamini Sharma, Editorial Assistant has put this report together 

 

Case BriefsSupreme Court

Supreme Court: Explaining the provision of remission under Section 34 (4) of the Arbitration and Conciliation Act, 1996, the bench of R. Subhash Reddy* and Hrishikesh Roy, JJ has held that under guise of additional reasons and filling up the gaps in the reasoning, no award can be remitted to the Arbitrator, where there are no findings on the contentious issues in the award.

Factual Background

I-Pay Clearing Services Private Limited, the appellant, entered into an agreement with ICICI Bank Limited, the respondent, to provide technology and manage the operations and processing of the Smart Card based loyalty programs for HPCL. It was for HPCL, which was to improve fuel sales at their retail outlets. The appellant was required to develop various software application packages for management of Smart Card based loyalty programs. The said agreement was followed by another agreement, as per which, the appellant was to develop a software for postpaid Smart Card Loyalty Program akin to a Credit Card under the name “Drive Smart Software”. To further expand their customer base, the respondent requested the appellant to also develop a “Drive Track Fleet Card” management solution for the fleet industry. However, in view of sudden move by the Respondent in abruptly terminating the Service Provider Agreement dated 04.11.2002, it was alleged by the appellant that all its operations were paralyzed and that it has suffered losses of over Rs.50 crores, on account of loss of jobs of its employees, losses on account of employee retrenchment compensation, etc. The appellant made a total claim of Rs.95 crores against the respondent.

Justice R.G.Sindhakar (Retd.), who was appointed as Sole Arbitrator, passed award dated 13.11.2017, directing the respondent to pay to the appellant Rs. 50 Crores, together with interest @18% per annum from the date of award till payment and further directed to pay an amount of Rs.50,000/- towards the costs.

Aggrieved by the award of learned Sole Arbitrator, the respondent filed application under Section 34(1) of the Act for setting aside the award claiming that there was accord and satisfaction between the parties and the contractual obligations between the parties was closed mutually and amicably.

The award of the learned Arbitrator was mainly questioned on the ground that it suffers from patent illegality, inasmuch as there is no finding recorded in the award to show that the respondent-ICICI Bank has illegally and abruptly terminated the contract. It was argued that without addressing the vital issue viz. whether there was an illegal and abrupt termination of the contract or not, as pleaded, the Arbitrator has allowed the claim to the extent of Rs.50 crores, as such, the same is patently illegal and erroneous. Thus, it is pleaded that in view of settled legal position that lack of reasons or gaps in the reasoning, is a curable defect under Section 34(4) of the Act, award can be remitted to the arbitrator to give reasons.

The Bombay High Court, however, was of the view that the defect in the award is not curable, as such, there is no merit in the application filed by the appellant under Section 34(4) of the Act and dismissed the same.

Analysis

  • Section 31 of the Act deals with ‘form and contents of arbitral award’. As per the same, an arbitral award shall be made in writing and shall be signed by the members of the Arbitral Tribunal. The arbitral award shall state the reasons, upon which it is based, unless parties agree that no reasons are to be given, or the award is an arbitral award on agreed terms under Section 30 of the Act.
  • The recourse to a Court against an arbitral award is to be in terms of Section 34(1) of the Act. As per Section 34(2A) of the Act, if the arbitral award arising out of arbitrations other than international commercial arbitrations, is vitiated by patent illegality, same is a ground for setting aside the award.
  • As per Section 34(4) of the Act, on receipt of an application under subsection (1), in appropriate cases on a request by a party, Court may adjourn the proceedings for a period determined by it in the order to give the Arbitral Tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of Arbitral Tribunal, will eliminate the grounds for setting aside the arbitral award.

Considering the abovementioned provisions, the Court held that when it is the specific case of the respondent that there is no finding at all, on the question as to “whether the contract was illegally and abruptly terminated by the respondent?”, remission under Section 34(4) of the Act, is not permissible.

It was explained that Section 34(4) of the Act, can be resorted to record reasons on the finding already given in the award or to fill up the gaps in the reasoning of the award.

Explaining the difference between ‘finding’ and ‘reasons’, the Court noticed that ‘finding is a decision on an issue’[1] and ‘reasons are the links between the materials on which certain conclusions are based and the actual conclusions’[2].

Hence, in absence of any finding on the question as to “whether the contract was illegally and abruptly terminated by the respondent?”, it cannot be said that it is a case where additional reasons are to be given or gaps in the reasoning.

Further, Section 34(4) of the Act itself makes it clear that it is the discretion vested with the Court for remitting the matter to Arbitral Tribunal to give an opportunity to resume the proceedings or not. The words “where it is appropriate” itself indicate that it is the discretion to be exercised by the Court, to remit the matter when requested by a party.

When application is filed under Section 34(4) of the Act, the same is to be considered keeping in mind the grounds raised in the application under Section 34(1) of the Act by the party, who has questioned the award of the Arbitral Tribunal and the grounds raised in the application filed under Section 34(4) of the Act and the reply thereto. Merely because an application is filed under Section 34(4) of the Act by a party, it is not always obligatory on the part of the Court to remit the matter to Arbitral Tribunal.

It was explained that the discretionary power conferred under Section 34(4) of the Act, is to be exercised where there is inadequate reasoning or to fill up the gaps in the reasoning, in support of the findings which are already recorded in the award.

“Under guise of additional reasons and filling up the gaps in the reasoning, no award can be remitted to the Arbitrator, where there are no findings on the contentious issues in the award. If there are no findings on the contentious issues in the award or if any findings are recorded ignoring the material evidence on record, the same are acceptable grounds for setting aside the award itself. Under guise of either additional reasons or filling up the gaps in the reasoning, the power conferred on the Court cannot be relegated to the Arbitrator. In absence of any finding on contentious issue, no amount of reasons can cure the defect in the award. “

[I-Pay Clearing Services Private Limited v. ICICI Bank Limited, 2022 SCC OnLine SC 4, decided on 03.01.2021]


*Judgment by: Justice R. Subhash Reddy


Counsels

For Appellant: Senior Advocates Dr. Abhishek Manu Singhvi and Nakul Dewan,

For Respondent: Senior Advocate K.V.Vishwanathan


[1] Income Tax Officer, A Ward, Sitapur v. Murlidhar Bhagwan Das, AIR 1965 SC 342

[2] J. Ashoka v. University of Agricultural Sciences, (2017) 2 SCC 609

Case BriefsHigh Courts

Allahabad High Court: Noting the significance of Sections 14 and 15 of the Arbitration and Conciliation Act, 1996, Jayant Banerji, J., expressed that,

If the arbitrator had been rendered functus officio, there existed no occasion to invoke the provisions of Sections 14 and 15 of the Act for appointing a substitute arbitrator.

Instant application was filed to seek the appointment of an independent arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996.

Factual Background

Applicants and OPs entered into a contract. Since a dispute arose between the parties under clause 70 of the general conditions of the stated agreement which provides for arbitration, the competent authority appointed Baljit Singh as the sole arbitrator who made the final award.

The stated award was challenged before the District Judge by means of an application under Section 34 of the Act for setting aside the award. Later the Court remitted the matter back to the Arbitrator to reconsider all the issues raised before the Court in light of the terms of the Contract as well as the issue regarding the extension of period for completion of work of 3rd phase and to pass the award fresh.

It was noted that the Arbitrator Mr Baljit Singh resigned and withdrew from the aforesaid arbitration proceedings citing his ineligibility to continue as Arbitrator as he had retired, and only a serving officer could be an Arbitrator as per the agreement.

Applicant’s counsel submitted that despite serving several reminders to OPs, no substitute Arbitrator was being appointed by them, hence the application was filed.

Court had made a query to the applicant’s counsel that:

Whether the Court exercising jurisdiction under Section 34 of the Act, had power to remand the matter to the Arbitrator after setting aside the arbitral award, and if not, whether the present application would be maintainable?

Counsel while referring to Section 14 and 15 of the Act, contended that since the matter was remanded and Arbitrator withdrew from his office, his mandate stood terminated, and therefore, under Section 15(2) of the Act, a substitute Arbitrator was required to be appointed.

Lower Court

Court below, while affirming that an award by the arbitrator cannot be modified, set aside the award, and proceeded to hold that the matter required reconsideration in light of the terms of the contract, and remitted the case to the arbitrator.

In Supreme Court’s decision of Kinnari Mullick v. Ghanshyam Das Damani, (2018) 11 SCC 328, it was held that no power had been invested by the Parliament in the Court to remand the matter to the Arbitral Tribunal except to adjourn the proceedings for the limited purpose mentioned in Section 34 (4) of the Act.

In the above decision it was also observed that,

Limited discretion available to the Court under Section 34(4) of the Act can be exercised only upon a written application made in that behalf by a party to the arbitration proceedings.

Present Position:

Hence, the order passed by the Court under Section 34 of the Act remitting the matter back to the Arbitrator to reconsider all the issues would be beyond the statutory mandate conferred on the Court and was thus without jurisdiction.

In view of the facts of the present matter, after making the final arbitral award, given the provisions of Section 32(1) and subject to Section 32(3), the mandate of the arbitral tribunal stood terminated with the termination of the arbitral proceedings.

Thereafter, the Arbitrator became functus officio and therefore, remitting the matter back to him by the Court to reconsider all the issues was not permissible.

Pertinent observation of the Court:

Since the arbitrator had been rendered functus officio, there existed no occasion to invoke the provisions of Sections 14 and 15 of the Act for appointing a substitute arbitrator. 

Sections 14 and 15 of the Act provide for appointment of a substitute arbitrator where the specified conditions cause the mandate of an arbitrator to terminate.

Further, the Court elaborated its observations that, mandate of an arbitrator stems forth from an arbitration agreement under Section 7 of the Act and his appointment under Section 11 of the Act.

Sections 14 and 15 of the Act would only be applicable where the arbitral proceedings are pending.

In the present case, under Section 32(1) of the Act, the arbitral proceedings stood terminated by the final arbitral award, and, in view of Section 32 (3) of the Act, the mandate of the arbitral tribunal stood terminated with the termination of the arbitral proceedings.

High Court stated that, there was no averment in the present application that, after setting aside of the award passed by the arbitral tribunal, under the aforesaid provision of clause 70 of the agreement, any written notice had been given to the OPs regarding any dispute, to initiate arbitration proceedings de novo.

Therefore, there was no failure on part of the OPs to act or discharge a function which would entitle the applicants to invoke the powers conferred by Section 11 (4) (5) and (6) of the Act.

In view of the above discussion, present application was dismissed. [P.N. Garg, Engineers & Contractors v. Sultania Infantry Lines Bhopal, Appln. U/S 11(4) No. 92 of 2021, decided on 16-11-2021]


Advocates before the Court:

Counsel for Applicant: Aarushi Khare

Case BriefsSupreme Court

Supreme Court: The bench of SA Nazeer* and Krishna Murari, JJ has held that if the contract contains a specific clause which expressly bars payment of interest, then it is not open for the arbitrator to grant pendente lite interest.

Facts

Parties entered into a contract for construction of boundary wall at 2×750 MW Pragati III Combined Cycle Power at Bawana, Delhi, which, inter alia, contained the interest barring the following clause:

“Clause 17: No interest shall be payable by BHEL on Earnest Money Deposit, Security Deposit or on any moneys due to the contractor.”

When the dispute arose between the parties, the appellant, apart from claiming various amounts under different heads, inter alia claimed pre-reference, pendente lite and future interest at the rate of 24% on the value of the award.

The Arbitrator concluded that there is no prohibition in the contract about payment of interest for the pre-suit, pendente lite and future period.  Therefore, he awarded pendente lite and future interest at the rate of 10% p.a. to the appellant on the award amount from the date of filing of the claim petition i.e. 02.12.2011 till the date of realization of the award amount.

Analysis

Interest payments are governed in general by the Interest Act, 1978 in addition to the specific statutes that govern an impugned matter.

  • Section 2 (a) of the Interest Act defines a “Court” which includes both a Tribunal and an Arbitrator.
  • Section 3 allows a “Court” to grant interest at prevailing interest rates in various cases. The provisions of Section 3 (3) of the Interest Act, 1978 explicitly allows the parties to waive their claim to an interest by virtue of an agreement. Section 3(3)(a)(ii) states that the Interest Act will not apply to situations where the payment of interest is “barred by virtue of an express agreement”.

Further, the provisions of the Arbitration and Conciliation Act, 1996 give paramount importance to the contract entered into between the parties and categorically restricts the power of an arbitrator to award pre-reference and pendente  lite  interest when the parties themselves have agreed to the contrary.

Section 31(7)(a) of the 1996 Act which deals with the payment of interest is as under :

“31(7)(a) Unless otherwise agreed by the parties, where and insofar as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.”

The provision makes it clear that if the contract prohibits pre-reference and pendente lite interest, the arbitrator cannot award interest for the said period.

In the present case, clause barring interest is very clear and categorical. It uses the expression “any moneys due to the contractor” by the employer which includes the amount awarded by the arbitrator.

Hence, it was held that when there is an express statutory permission for the parties to contract out of receiving interest and they have done so without any vitiation of free consent, it is not open for the Arbitrator to grant pendent lite interest.

Important rulings

Sayeed Ahmed and Company v. State of Uttar Pradesh, (2009) 12 SCC 26

A provision has been made under Section 31(7)(a) of the 1996 Act in relation to the power of the arbitrator to award interest.  As per this section, if the contract bars payment of interest, the arbitrator cannot award interest from the date of cause of action till the date of award.

Sree Kamatchi Amman Constructions v. Divisional Railway Manager (Works), (2010) 8 SCC 767

here the parties had agreed that the interest shall not be payable, the Arbitral Tribunal cannot award interest between the date on which the cause of action arose to the date of the award.

Sri Chittaranjan Maity v. Union of India, (2017) 9 SCC 611

If a contract prohibits award of interest for pre-award period, the arbitrator cannot award interest for the said period.

[Garg Builders v. Bharat Heavy Electricals Ltd., 2021 SCC OnLine SC 855, decided on 04.10.2021]

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Counsels:

For appellant: Advocate Sanjay Bansal

For respondent: Advocate Pallav Kumar


*Judgment by: Justice SA Nazeer

Know Thy Judge | Justice S. Abdul Nazeer

Case BriefsHigh Courts

Delhi High Court: While observing that the role of ICADR Rules shall come into play with regard to the procedure to be followed, only after the arbitration commences before the appropriate jurisdiction of law, Suresh Kumar Kait, J., reiterated the observation of BGS SGS SOMA JV v. NHPC, (2020) 4 SCC 234, wherein it was stated that if the arbitration agreement provides that arbitration proceedings “shall be held” at a particular venue, then that indicates arbitration proceedings would be anchored at such venue, and therefore, the choice of venue is also a choice of the seat of arbitration.

Background

Petitioner claimed to be one of the most reputed construction company specialized in construction of bridges and other projects across the country.

Respondent – Construction and Design Services, was a 100% undertaking of Government of Uttar Pradesh, which claimed to be providing construction and design Services.

Respondent had invited proposals for Qualification cum Request for Proposal to undertake design, engineering, procurement and construction of a dedicated corridor for old and differently-abled persons during Kumbh and Magh Mela at Sangam, Allahabad, Uttar Pradesh.

In the bidding process, the petitioner was stated to be the successful bidder with lowest bid. Therefore, respondent had issued a Letter of Award in favour of the petitioner and a formal contract was executed between the parties.

Petitioner had immediately taken steps like mobilization of resources, the appointment of various third-party Consultants.

However, respondent utterly failed in fulfilling its part of obligations, as in terms of Clause- 4.1.3 of the said Contract, the “Right of Way” in respect to the said works was to be provided by the respondent to the petitioner within 15 days of the date of the agreement, but even after expiry of the entire period of 30 months, respondent did not do so

Respondent did not even compensate the petitioner for the cost incurred by it towards fulfilling its part of obligations. Further, due to non-performance of obligations, the petitioner claimed to have incurred huge loss of productivity, turnover, overhead costs, contractor’s profits and earning capacity besides cost of construction under the Contract in question.

Vide a letter, the respondent intimated that the project as well as the contract ought to be terminated.

Further, petitioner raised an invoice towards “Termination of Payment”, which shall constitute full and final payment and respondent shall make the payment within 30 days and shall discharge the bank guarantees.

Adding to the above, petitioner also demanded extension of bank guarantees for a further period in an attempt to disown the termination notice which was already acknowledged by the petitioner.

Though the respondent communicated to the petitioner that the decision of termination of Contract was taken by Prayagraj Mela Board and till the time the said decision is under consideration and finalized by the Government of Uttar Pradesh, the Contract in question is “valid” and subsists and there is no liability towards “Termination Payment” except for refund of performance security in case the project is withdrawn by the State of Uttar Pradesh.

When efforts to amicably resolve the dispute failed, petitioner invoked the arbitration, to which the respondent communicated the petitioner that once the Contract itself has been revoked without commencement of work and bank guarantees have been returned, no dispute between the parties survives and so, the invocation of arbitration clause 26.03 was untenable.

Analysis, Law and Decision

High Court on considering the above, stated that the disputes between the parties have to be referred to an Arbitrator.

As per Clause 26.3.1, upon invocation of arbitration by either party, the proceedings shall be conducted in accordance with the Rules of Arbitration of the International Centre for Alternative Dispute Resolution, New delhi and the venue of such Arbitration shall be Lucknow.

Question for Consideration:

Whether the seat of arbitration shall be New Delhi in the light that the arbitration has to be conducted in accordance with the Rules of Arbitration of the International Centre for Alternative Dispute Resolution, New Delhi

OR

Lucknow, in the light of agreement that the venue of such arbitration shall be Lucknow?

Primary Argument:

Counsel for both sides laid emphasis upon the distinction between the “venue” and “seat” of arbitration and several decisions in this regard were cited before this Court. According to learned counsel for the petitioner, “venue” of arbitration does not include the “seat” of the arbitration and since the arbitration has to be conducted in terms of Rules of Arbitration of the International Centre for Alternative Dispute Resolution, New Delhi, therefore, seat of the Arbitrator has to be New Delhi. On the contrary, learned counsel for respondent strenuously argued that in terms of clause 26.3.1, the venue of arbitration has to be Lucknow only.

In the Supreme Court decision of Bharat Aluminum Company Ltd. v. Kaiser Aluminum Technical Services Inc, (2012) 9 SCC 552, recognized that “Seat” and “Venue” are different and observed that the “Seat” of arbitration is the center of gravity of the arbitration and the “Venue” is the geographical location where such arbitration meetings are conducted. The Court held that under sub- Section (2), (2) and (3) of Section 20 of the Arbitration and Conciliation Act, 1996, “Place of Arbitration” is used interchangeably.

In Indus Mobile Distribution (P) Ltd. v. Datawind Innovations (P) Ltd., (2017) 7 SCC 678, the Supreme Court had dealt with the issue whether the seat of arbitration suggests the jurisdiction and held that once a seat is determined, the courts at seat shall have the exclusive jurisdiction for the purpose of regulating arbitral proceedings. However, in the said case, the parties had not only agreed to the seat of arbitration but also had an exclusive jurisdiction clause, which ousted other jurisdictions.

Further, in Mankastu Impex (P) Ltd. v. Airvisual Ltd., (2020) 5 SCC 399,  while dealing with the issue of whether the seat of arbitration shall be New Delhi or Hongkong, observed that mere expression of place of arbitration will not entail that the parties intended it to be the seat. The intention of the parties to the seat has to be determined from other clauses of the Agreement and the conduct of the parties.

In the decision of BGS SGS SOMA JV v. NHPC, (2020) 4 SCC 234, it was held that the Court observed that if the arbitration agreement provides that arbitration proceedings “shall be held” at a particular venue, then that indicates arbitration proceedings would be anchored at such venue, and therefore, the choice of venue is also a choice of the seat of arbitration. Court reiterated that once the parties designate the seat of arbitration, only the courts governing the seat have exclusive jurisdiction to govern such arbitration proceeding and jurisdiction of all other courts stand ousted.

Hence in view of the Supreme Court decision in BGS SGS SOMA JV v. NHPC, (2020) 4 SCC 234 the observation of the Court that “choice of venue is also a choice of the seat of arbitration”, High Court in the present matter found that in Clause-26.3.1 of Article-26 of the Agreement, the parties had agreed that the venue of arbitration shall be “Lucknow‟ and therefore, the courts at Lucknow shall have the exclusive jurisdiction to entertain the disputes arising out of Agreement in question.

Bench opined that the role of ICADR Rules shall come into play with regard to procedure to be followed, only after the arbitration commences before the appropriate jurisdiction of law, which was in the present matter “Lucknow”.

Therefore, it was held that Court had no jurisdiction to entertain the present petition seeing appointment of an arbitrator and hence was dismissed, with liberty to the petitioner to approach the Court at Lucknow.[S.P. Singla Constructions (P) Ltd. v. Construction and Design Services, Uttar Pradesh Jal Nigam; 2021 SCC OnLine Del 4454, decided on 23-09-2021]


Advocates before the Court:

For the Petitioner: Anirudh Wadhwa, Advocate

For the Respondent: Rishabh Kapoor, Naman Tandon, Mayank Punia, Advocates

Case BriefsSupreme Court

Supreme Court: The bench of MR Shah* and AS Bopanna, JJ has held that once an officer of the department is appointed as an Arbitrator considering the arbitration clause, his mandate to continue the arbitration proceedings shall come to an end on his retirement if the Arbitration clause doesn’t specifically provide for the same. Consequently, it was held that continuance of the arbitration proceedings by such an Arbitrator after his retirement cannot be said to be committing a misconduct by such a Sole Arbitrator.

The ruling came in the case where a Chief Engineer was appointed as a Sole Arbitrator based on the Arbitration Clause in a contract relating to the earthwork including lining of V.U.G.C. from KM 10 to KM 11.

In order to understand the issue, it is important to note the key highlights of the Arbitration Clause i.e. Clause 52 of the Agreement:

  • on the receipt of the notice from the contractor of his intention to refer the dispute to the arbitration the Chief Engineer shall send to the contractor a list of three officers of the rank of Superintending Engineer or higher, who have not been connected with the work under the contract.
  • the contractor shall within fifteen days of receipt of the list select and communicate to the Chief Engineer the name of one officer from the list, who shall then be appointed as the Sole Arbitrator.
  • if a contractor is failed to communicate his selection of name, within the stipulated period, the Chief Engineer shall without delay select one officer from the list and appoint him as the Sole Arbitrator.
  • if the Chief Engineer fails to send such a list within 30 days, as stipulated, the contractor shall send a similar list to the Chief Engineer within fifteen days and the Chief Engineer shall then select an officer from the list and appoint him as the Sole Arbitrator within fifteen days.
  • the arbitration shall be conducted in accordance with the provisions of the Indian Arbitration Act, 1940.

The Court, hence, noticed that the only qualification for appointment as an arbitrator is that he should be the officer of the rank of the Superintending Engineer or higher. Once such an officer is appointed as an Arbitrator, he continues to be the Sole Arbitrator till the arbitration proceedings are concluded unless he incurs the disqualification under the provisions of the Indian Arbitration Act, 1940.

“Even after his retirement, the arbitration proceedings have to be continued by the same Arbitrator. Clause 52 of the agreement does not provide at all that on the retirement of such an officer, who is appointed as a Sole Arbitrator, he shall not continue as a Sole Arbitrator and/or the mandate to continue with the arbitration proceedings will come to an end.”

It is also pertinent to note that, in the present case, the Civil Judge (Senior Division), Roorkee extended the time to the Sole Arbitrator to complete the arbitration proceedings and granted further period of 30 days which was after his retirement and after specifically overruling/rejecting the objections raised by the respondents that after retirement, he cannot continue with the arbitration proceedings. Therefore, once the Sole Arbitrator continued with the arbitration proceedings and passed the award within the extended period of time, it cannot be said that he has misconducted himself as he continued with the arbitration proceedings.

Considering the relevant law and the provisions under the Arbitration clause, the Court held that the Sole Arbitrator, who at the relevant time was the Chief Engineer and was qualified to become the Sole Arbitrator was even nominated and/or appointed by the Chief Engineer as per clause 52. Therefore, considering the clause 52 of the agreement, it cannot be said that his mandate to continue with the arbitration proceedings would come to an end on his retirement.

[Laxmi Continental Construction Co. v. State of UP, 2021 SCC OnLine SC 750, decided on 20.09.2021]

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Appearances before the Court by:

For appellant: Advocate Mukesh Kumar Sharma

For State of UP: Senior Advocate Ravindra Raizada


*Judgment by: Justice MR Shah

Know Thy Judge | Justice M. R. Shah

Case BriefsSupreme Court

Supreme Court: Expressing on the aspect of independence and impartiality of the arbitrators, Division Bench of M.R. Shah and Aniruddha Bose, JJ., held that,

Though the word ‘Chairman’ is not mentioned explicitly in Seventh Schedule, at the same time, it would fall under clause 1, clause 2, clause 5, and clause 12 of the Seventh Schedule, hence will be ineligible for the purpose of the arbitration.

The above schedule is to be read with Section 12(5) of the Arbitration and Conciliation Act.

Aggrieved and dissatisfied with the impugned order of Rajasthan High Court allowing applications under Section 11 of the Arbitration and Conciliation Act, 1996 and appointing an Arbitrator, Jaipur Zila Dugdh Utpadak Sahkari Sangh Ltd., preferred the present Special Leave Petitions.

Facts leading to the present matter

Respondent and the Sahkari Sangh entered into a Distributorship Agreement for the distribution of milk and butter milk in certain zones in Jaipur for a period of two years.

Disputes arose between the two and as per Clause 13 of the said agreement, all disputes and differences arising out of or in any way touching or concerning the agreement, whatsoever shall be referred to the sole Arbitrator, the Chairman, Jaipur Zila Dugh Utpadak Sahkari Sangh Ltd. and his decision shall be final and binding for the parties.

Respondent approached the Sole Arbitrator for settlement of a commercial dispute between the parties.

But during the pendency of the arbitration proceedings, the respondent approached the High Court for appointment of an arbitrator in exercise of powers under Section 11 of the Act and invoking the arbitration contained in clause 13 of the Agreement.

Opposing the above, petitioner submitted that once the respondent has approached the Sole Arbitrator invoking clause 13 and participated in the arbitration proceedings, it is not open for it to approach the High Court to appoint an arbitrator under Section 11 of the Act.

High Court considering Section 12(5) read with 7th Schedule to the Act, allowed the said application and had appointed the former District and Sessions Judge to act as an arbitrator.

Analysis, Law and Decision

Supreme Court noted that the High Court while allowing the application under Section 11 of the Act had appointed the arbitrator other than the Chairman.

Petitioners Contention:

Agreement was prior to the insertion of Sub­section (5) of Section 12 read with Seventh Schedule to the Act and therefore the disqualification under Sub­section (5) of Section 12 read with Seventh Schedule to the Act shall not be applicable and that once an arbitrator – Chairman started the arbitration proceedings thereafter the High Court is not justified in appointing an arbitrator.

Court’s view:

Petitioner’s contention stated above had no substance.

Supreme Court’s decisions in Trf Ltd. v. Energo Engineering Projects Ltd., (2017) 8 SCC 377, Voestalpine Schienen GMBH v. Delhi Metro Rail Corporation Ltd., (2017) 4 SCC 665, considered in detail the object and purpose of insertion of Section 12(5) read with Seventh Schedule to the Act.

In the decision of Voestalpine Schienen GMBH v. Delhi Metro Rail Corporation Ltd., (2017) 4 SCC 665, it was observed and held by the Court that the main purpose of amending the provision was to provide for ‘neutrality of arbitrators.’

Further, it was observed in the case that,

Sub­section (5) of Section 12 lays down that notwithstanding any prior agreement to the contrary, any person whose relationship with the parties or counsel or the subject­matter of the dispute falls under any of the categories specified in the Seventh Schedule, he shall be ineligible to be appointed as an arbitrator. It is further observed that in such an eventuality i.e. when the arbitration clause finds foul with the amended provisions (Sub­section (5) of Section 12 read with Seventh Schedule) the appointment of an arbitrator would be beyond pale of the arbitration agreement, empowering the court to appoint such arbitrator as may be permissible. It is further observed that, that would be the effect of non obstante clause contained in sub­section (5) of Section 12 and the other party cannot insist on appointment of the arbitrator in terms of the arbitration agreement.

Adding to the above list of decisions, Court added another one, Bharat Broadband Network Ltd.v. Telecoms Limited, (2019) 5 SCC 755, wherein it was observed that Section 12(5) read with Seventh Schedule made it clear that if the arbitrator falls in any one of the categories specified in the Seventh Schedule, he becomes ‘ineligible’ to act as an arbitrator. Once he becomes ineligible he then becomes dejure unable to perform his functions.

Petitioners Contention:

In view of Section 58 of the Rajasthan Cooperative Societies Act, 2001, the dispute between the parties is to be resolved by the Registrar only and as per Bye Laws 30 of Rajasthan Cooperative Societies Act, 2001 shall be applicable and therefore no court shall have jurisdiction and therefore the dispute referred to the former District Judge is unsustainable has no substance.

Court’s view:

Bench opined that, despite Section 58 of the Rajasthan Cooperative Societies Act, 2001, there is an agreement between the parties to resolve the dispute through arbitrator – Chairman. Parties are bound by the agreement and the arbitration clause contained in the Agreement.

Hence, neither Section 58 of the Rajasthan Cooperative Societies Act, 2001 shall not be applicable at all nor the same shall come in the way of appointing the arbitrator under the Arbitration Act.

Significant Question:

Whether the Chairman who is an elected member of the petitioner Sahkari Sangh can be said to be ineligible under Section 12(5) read with Seventh Schedule to the Act or not?

As per the petitioner, Seventh Schedule to the Act ‘Chairman’ is not mentioned and only Manager, Director or part of the Management can be said to be ineligible.

Court’s view:

Bench expressed that Section 12 (5) read with Seventh Schedule was inserted bearing in mind the ‘impartiality and independence’ of the arbitrators. It had been inserted with the purpose of ‘neutrality of arbitrators.’

Independence and impartiality of the arbitrators are the hallmarks of any arbitration proceedings, as observed in Voestalpine Schienen GMBH v. Delhi Metro Rail Corporation Ltd., (2017) 4 SCC 665.

Rule against bias is one of the fundamental principles of natural justice which apply to all judicial proceedings and quasi­judicial proceedings and it is for this reason that despite the contractually agreed upon, the persons mentioned in Sub­section (5) of Section 12 read with Seventh Schedule to the Act would render himself ineligible to conduct the arbitration.

In view of the above-cited decision, Supreme Court held that Chairman of the petitioner Sangh can certainly be held to be ‘ineligible’ to continue as an arbitrator. Court added that though the word ‘Chairman’ is not specifically mentioned, but it would fall in the category of Clause 1; Clause 2; Clause 5; Clause 12 which read as under:

“1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party.

  1. The arbitrator currently represents or advises one of the parties or an affiliate of one of the parties
  2. The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration.
  1. The arbitrator is a manager, director or part of the management, or has a similar controlling influence in one of the parties.”

Therefore, Chairman who was elected member/Director of the Sangh could certainly be said to be ‘ineligible’ to become an arbitrator as per Section 12(5) read with Seventh Schedule to the Act.

Petitioner’s Contention:

Respondents participated in the arbitration proceedings before the sole arbitrator – Chairman and therefore he ought not to have approached the High Court for appointment of arbitrator under Section 11

Court’s view:

While citing the decision of this Court in Bharat Broadband Network Ltd. v. Telecoms Limited, (2019) 5 SCC 755, wherein it was stated that there must be an ‘express agreement’ in writing to satisfy the requirements of Section 12(5) proviso, Bench found the above substance also unsustainable.

Conclusion

On considering the above discussion, Supreme Court held that once the sole arbitrator – Chairman is ‘ineligible’ to act as an arbitrator to resolve the dispute between the parties in view of Section 12(5) read with Seventh Schedule to the Act he loses mandate to continue as a sole arbitrator.

Hence, High Court did not commit any error in appointing the arbitrator other than the sole arbitrator – Chairman.

Taking into consideration the above reasons, Supreme Court dismissed the applications. [Jaipur Zila Dugdh Utpadak Sahkari Sangh Ltd. v. Ajay Sales & Suppliers, 2021 SCC OnLine SC 730, decided on 9-09-2021]


Advocates before the Court

Gunjan Pathak, Counsel for the Petitioners

Case BriefsHigh Courts

Delhi High Court: C. Hari Shankar, J. observed that,

The question of whether, once a bench of the Supreme Court has doubted the correctness of an earlier bench of co-equal strength, and referred the issue to a larger bench, Courts lower in hierarchy should continue to follow the earlier decision, appears to be debatable.

Instant petition was filed under Section 11 (5) of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator to arbitrate on the dispute between the parties.

Parties having failed to arrive at any agreement regarding the arbitrator to arbitrate on the disputes, the petitioner has approached this Court under Section 11(5) of the 1996 Act.

Respondent’s Counsel raised objection regarding the reference of the disputes to arbitration is that the agreement between the parties is inadequately stamped.

He relied on the decision of Supreme Court in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2021) 4 SCC 379, to contend that, till this defect is rectified, the Court cannot refer the dispute to arbitration.

Petitioner’s counsel submitted that the arbitration agreement was sufficiently stamped and that, even if it were not, this aspect could be decided by the Arbitrator.

After copiously reproducing from the decision of N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2021) 4 SCC 379, the Court pointed that in fact, the decision in NN Global defeats submission of the respondent. After this, the respondent sought to rely on the earlier decision of coequal strength in Vidya Drolia. Notably, the decision of Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 on this aspect was doubted by the later judgment of coequal strength in NN Global.

Analysis, Law and Decision

High Court remarked that,

 “…question of whether, once a bench of the Supreme Court has doubted the correctness of an earlier bench of co-equal strength, and referred the issue to a larger bench, Courts lower in hierarchy should continue to follow the earlier decision, appears to be debatable.”

Bench referred the parties to Delhi International Arbitration Centre which would appoint a suitable arbitrator to arbitrate thereon. Arbitration would take place under the aegis of the DIAC and would abide by its rules and regulations.

Lastly, the Court held that all issues of fact and law, including the aspect of non-stamping of the agreement between the parties and, if so, the consequences thereof on arbitrability of the dispute, are left open for agitation before the learned Arbitrator. [Bhagwati Devi Gupta v. Star Infratech (P) Ltd., 2021 SCC OnLine Del 3995, decided on 11-08-2021]


Advocates before the Court:

For the Petitioners: Shalabh Singhal, Advocate 

For the Respondent: Rakesh Saini, Advocate

Op EdsOP. ED.

“Arbitrators and Arbitral Tribunals are creatures not of statute but of contract[1].”

Universally arbitration is recognised as one of the most noteworthy alternative dispute resolution processes. Arbitration provides a much-needed respite to ailing litigants to seek redressal of their grievances by an autonomous process, with limited or no judicial intervention. In fact, the perquisites of arbitral proceedings are too profuse to be chronicled in a few words. The Supreme Court in Govt. of Orissa v. G.C. Roy[2], while distinguishing the process of determination of disputes through judicial means, in contrast with, arbitration proceedings, observed, “…resolution of dispute by court, through judicial process is costly and time consuming … alternative method of settlement of dispute through arbitration is a speedy and convenient process….” Similarly, in Shailesh Dhairyawan v. Mohan Balkrishna Lulla[3], the Supreme Court acknowledged that the parties choose arbitration as a dispute resolution mechanism, “keeping in view that it offers a timely, private, less formal and cost-effective approach for the binding determination of disputes. It provides the parties with greater control of the process than a court hearing.” Consequently, endorsing the numerous benefits which may ensue from an arbitration proceeding, it is quite understandable that the Indian Courts[4] have repeated avowed that the said process needs to be encouraged, considering the, “high pendency of cases in the courts and cost of litigation.”

 Customarily, the genesis of arbitration proceedings lies under a contract or an “arbitration agreement[5]” wherein the parties agree to submit to arbitration, “all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.” As per Section 7(4) of the Arbitration and Conciliation Act, 1996 (Arbitration Act) such an agreement, in turn, may be in a form of a document signed by the parties or an exchange of letters, telex, telegrams or other means of telecommunication, including communication through electronic means, which provide a record of the agreement or an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. In fact, it is trite law[6] that there is no prescribed format/form of an arbitration agreement and the only prerequisite is the ascertainment of the fact, “whether the parties have agreed that if disputes arise between them in respect of the subject-matter of contract such dispute shall be referred to arbitration, then such an arrangement would spell out an arbitration agreement.” Regardless of the manner and form in which an arbitration agreement may be constructed, it is, however, an established fact that where the parties willingly submit to arbitration as a mode of their dispute resolution, the scope of such proceedings and the confines of arbitrator’s jurisdiction get contractually defined. As a corollary, an arbitrator is expected to exercise his power and authority within the terms and confines of contract, as executed between the parties to a dispute, and cannot, under a guise of doing justice[7], “award contrary to the terms [thereof]”. It is, in fact, a settled law[8] that an arbitrator cannot act arbitrarily, irrationally, capriciously or independent of the contract and in a case where an arbitrator transgresses beyond contractual limitations, “he would be acting without jurisdiction, whereas if he has remained inside the parameters of the contract, his award cannot be questioned on the ground that it contains an error apparent on the face of the record.” As per the Supreme Court[9], jurisdiction of the arbitrator is confined within the four corners of an arbitration agreement for, “he can only pass such an order which may be the subject-matter of reference”.

 Irrespective of the contractual limitation on arbitral proceeding, it is not quite uncommon that during such proceeding, parties may elevate certain claims which may fall outside the purview of their contract(s). One of such commonly invoked claims pertains to the escalation cost or escalation charge, being the monetary claim arising pursuant to inflation, as a result of time gap in the performance of any contract. Generally, the parties to an agreement make specific provisions pertaining to the grant or refusal of escalation cost(s)/charge(s) under their agreement. However, difficulty arises in a case where no such stipulation is envisaged or foreseen by contracting parties. Nonetheless, even in these states of imbroglio, courts have not abrogated their responsibility of extricating the layers of incertitude and providing a needed lucidity on the subject.

Undoubtedly, there can be no occasion for ambiguity in cases where there is an explicit prohibition under a contract regarding the claims pertaining to escalation cost. In fact, in this regard, the Supreme Court in New India Civil Erectors (P) Ltd. v. Oil & Natural Gas Corpn.[10] has firmly voiced its disapproval regarding the grant of any amount against price escalation, despite an explicit contractual embargo towards the agitation of such claims. Similarly, the Supreme Court in Continental Construction Co. Ltd. v. State of M.P.[11], struck down the award of an arbitrator for extra claim resulting due to price escalation by, inter alia, observing, “there are specific clauses referred to hereinbefore which barred consideration of extra claims in the event of price escalation”. At the same time, the Supreme Court in State of Orissa v. Sudhakar Das[12], considering a scenario of absence of escalation cost clause under a contract, inter alia, observed:

  1. It is not disputed that the arbitration agreement contained no escalation clause. In the absence of any escalation clause, an arbitrator cannot assume any jurisdiction to award any amount towards escalation. That part of the award which grants escalation charges is clearly not sustainable and suffers from a patent error. The decree, insofar as the award of escalation charges is concerned, cannot, therefore, be sustained.

Clearly, these precedents and the observations made therein are harmonious with the general principle of arbitration that the powers of an arbitrator are bounded within the contractual realms. Accordingly, in the event of an explicit prohibition under a contract pertaining to the grant of escalation charges, as a rule, or in the absence of any clause/term pertaining to such claims under an agreement, ordinarily, it would not be within the domain of an arbitrator to award any amount towards escalation.

However, it is to be noted that there have been several instances, wherein the courts, despite the absence of an explicit cause pertaining to the grant of escalation charge under an agreement, have favoured grant thereof, weighing the factors such as the; implicit and inherent meaning and interplay of various terms of/stipulations under the contract, lack of any prohibitive clause under contract to such conferment, facts and circumstances involved, equity, etc. In one such instance[13], the Supreme Court, while acknowledging that escalation is, “a normal incident arising out of gap of time in this inflationary age in performing any contract”, upheld an arbitral award which, inter alia, permitted/granted escalation cost despite the absence of an unequivocal provision/price escalation clause under arbitration agreement/ reference. Significantly, the reasons which governed the said conclusion of the Court, inter alia, were that since in the instant case, “[o]nce it was found that the arbitrator had jurisdiction to find that there was delay in execution of the contract due to the conduct of the respondent, the respondent was liable for the consequences of the delay, namely, increase in prices. Therefore, the arbitrator had jurisdiction to go into this question.” The said reasoning of the Court can be discerned in light of its earlier observation in Tarapore & Co. v. State of M.P.[14], inter alia, to the effect that even in the absence of any explicit contractual term, an arbitrator is within his power to exercise jurisdiction in cases where something follows as a necessary concomitant to what was agreed upon by parties under a contract. In fact, as per the Court,

“it cannot be held that the arbitrators had no jurisdiction to make the award because of lack of specific provision permitting the claim at hand. This does not conclude the matter. It has to be seen whether the term of the agreement permitted entertainment of the claim by necessary implication.”

Significantly, though, the Court dismissed the argument to the effect that whatever is not excluded specifically by the contract can be subject-matter of claim by a contractor on the ground that the same, “will mock at the terms agreed upon”, however, held, “Of course, if something flows as a necessary concomitant to what was agreed upon, courts can assume that too as a part of the contract between the parties.”

In another illustration, the Supreme Court in K.N. Sathyapalan v. State of Kerala[15], being specifically posed with the issue, “whether in the absence of any price escalation clause in the original agreement and a specific prohibition to the contrary in the supplemental agreement, the appellant could have made any claim on account of escalation of costs”, inter alia, observed:

  1. Ordinarily, the parties would be bound by the terms agreed upon in the contract, but in the event one of the parties to the contract is unable to fulfil its obligations under the contract which has a direct bearing on the work to be executed by the other party, the arbitrator is vested with the authority to compensate the second party for the extra costs incurred by him as a result of the failure of the first party to live up to its obligations. Significantly, these observations were, subsequently, reiterated and affirmed by the Court in Assam SEB Buildworth (P) Ltd.[16] Noticeably, a perusal of these dictates would demonstrate that the reasons for upholding the grant of escalation cost under the said circumstances appears to be premised on the principle of equity and the absence of any explicit embargo to the grant of escalation charges under a contract. Reasonably, under the circumstances where delay in performance of its obligations by one of the parties to a contract have a direct nexus on the deferment of contractual compliance by another, in the absence of an explicit prohibition, grant of escalation charges by an arbitrator may not only sensible, rather, equitable and fair.

In a related context the Supreme Court in Associated Construction v. Pawanhans Helicopters Ltd.[17], inter alia, dealt with the issue, “whether the contractual prohibitions regarding the grant of escalation cost can be extended beyond the duration of such an agreement”. Significantly, in the instant case, though, on one hand, there were specific clauses under the contract which explicitly prohibited claims pertaining to fluctuation in price and compensation for the subsequent increase in cost of material, etc., however, it was noted by the Court that the contracting parties had stipulated under their agreement that there, “could be a situation where the contractor had suffered loss for whatever reasons which was required to be reimbursed as per procedure prescribed in Clause 43. Clause 43(2) also specifically provided that Clause 43 was without prejudice to any other rights and remedies that the contractor might possess.” At the same time, while acknowledging that timely performance of contractual obligations was agreed to be the essence of the contract in this specific instance, the Court, opined, “even assuming for a moment that there could be no price escalation during the period of 4 months i.e., during the pendency of the contract, such embargo would not be carried beyond that period as time was of the essence of the contract.” Accordingly, the Court approved the grant of additional claims towards escalation cost/ charges, in favour of one of the participants to the said contract, against the work performed by it beyond the agreed term/duration, for the reasons of delay solely attributable to the conduct of the other party. Significantly, the said remarks are in stark contrast with the  Court’s observations in New India Civil Erectors (P) Ltd. case[18], inter alia, to the effect:

  1. …stipulation provides clearly that there shall be no escalation on any ground whatsoever and the said prohibition is effective till the completion of the work. The learned arbitrators, could not therefore have awarded any amount on the ground that the appellant must have incurred extra expense in carrying out the construction after the expiry of the original contract period … Merely because time was made the essence of the contract and the work was contemplated to be completed within 15 months, it does not follow that the aforesaid stipulation was confined to the original contract period.

Notably, though, the Supreme Court in Associated Construction case did not have an occasion to deal with its earlier decision in New India Civil Erectors (P) Ltd. case, however, there are certain explicit distinguishing features of these precedents. Firstly, in the former case, the delay in performance of contract by the claimant was attributable due to the defaults committed by the other contracting party, which was not the situation in latter. At the same time, though, in Associated Construction case, the claims for escalation cost beyond the period of contract were held to be justified on a general clause/term regarding reimbursement of losses under the contract involved, however, no such similar clause was cited/noted by the Court in New India Civil Erectors (P) Ltd. case. Nevertheless, it would be an appreciated stride, in case, the extraneous/illusive conflict between these dictates is resolved by a larger Bench of the Supreme Court.

Determinately, resolutions pertaining to the grant or refusal of escalation cost/charges, akin to other claims, inter alia, revolve on[19], “the construction of the contract in that case, the evidence placed before the arbitrator and other facts and circumstances of the case.” Undoubtedly, the grant of escalation cost in utter negation of an explicit contractual prohibition to the said effect, contradicts the fundamental and core principles of arbitration and the jurisdiction of an arbitrator. However, in contrast, failure of an arbitrator to exercise its authority to grant such costs/in appropriate cases/instances, where no contractual prohibitions exist, would certainly negate the principles of justice, equity and fairness. It is trite law[20] that that, though, an arbitrator is required to decide on issues within contractual terms, however, “if an arbitrator construes a term of the contract in a reasonable manner” that, cannot, by in itself become a reason for setting aside of an arbitral award. Consequently, while roving through the rugged terrains of arbitral proceedings, an arbitrator is required to not only adopt an approach of caution and circumspection, rather, must be equipped with a thorough knowledge of law and skills to appreciate the contractual terms in their exact spirit and intent, in order to establish an equilibrium between divergent assertions. Further, it is quite understandable that it is not enough that an arbitrator does not transgresses his contractually defined restraints, rather, must have astuteness to appreciate an agreement in its true form so as to not out rightly negate claims, which are necessarily concomitant to such agreements and at the same time imminent, valid, just and equitable.


Advocate, Supreme Court and High Court(s), e-mail: abhigoyal85@gmail.com.

[1] HMJ V. Ramasubramanian in 4G Identity Solutions (P) Ltd. v. Bloom Solutions (P) Ltd., 2018 SCC OnLine Hyd 22.

[2] (1992) 1 SCC 508.

[3] (2016) 3 SCC 619.

[4] Refer to State of J&K v. Dev Dutt Pandit, (1999) 7 SCC 339.

[5] Refer to S. 7(1) of the Arbitration and Conciliation Act, 1996.

[6] Refer to Rukmanibai Gupta v. Collector, (1980) 4 SCC 556.

[7] State of Rajasthan v. Nav Bharat Construction Co., (2006) 1 SCC 86.

[8] Refer to Bharat Coking Coal Ltd. v. Annapurna Construction, (2003) 8 SCC 154.

[9] Army Welfare Housing Organisation v. Sumangal Services (P) Ltd., (2004) 9 SCC 619.

[10] (1997) 11 SCC 75.

[11] (1988) 3 SCC 82.

[12] (2000) 3 SCC 27.

[13] P.M. Paul v. Union of India, 1989 Supp (1) SCC 368 [Refer also to Food Corporation of India v. A.M. Ahmed & Co., (2006) 13 SCC 779].

[14] (1994) 3 SCC 521.

[15] (2007) 13 SCC 43.

[16] (2017) 8 SCC 146.

[17] (2008) 16 SCC 128.

[18] (1997) 11 SCC 75.

[19] Refer to NTPC v. Deconar Services (P) Ltd., 2021 SCC OnLine SC 498

[20] Refer to Associate Builders v. DDA, (2015) 3 SCC 49.

Case BriefsSupreme Court

Supreme Court: A Division Bench comprising of R.F. Nariman and B.R. Gavai, JJ. held that an arbitral award which is based on no evidence and/or in ignorance of evidence would come under the realm of patent illegality. The Court also held that an arbitrator cannot rewrite the contract for the parties.

Facts and Appeal

In 1998, the respondent−Tuticorin Port Trust (“Trust”) awarded a tender to the appellant−Company for certain development and operation works at the Tuticorin Port for 30 years on a Build, Operate and Transfer basis. Shorn of details, commercial differences arose between the parties relating primarily to royalty/revenue sharing model. The Company requested the Trust to amend the License Agreement to incorporate revenue sharing model in place of royalty model. This was however rejected by the Trust.

In 2012, the Company invoked arbitration clause under the License Agreement. The Arbitral Tribunal passed an award in favour of the Company directing conversion of royalty model to revenue sharing model. Thereafter, the Trust presented a petition under Section 34 of the Arbitration and Conciliation Act, 1996 for setting aside an arbitral award. This petition was rejected by the District Judge, Tuticorin. Against this, the Trust filed an appeal before the Madras High Court. The appeal was allowed and the award made by the Arbitral Tribunal was set aside. Aggrieved, the Company approached the Supreme Court.

Analysis and Observations

Scope of interference with an arbitral award in India      

Relying on a catena of judgments including MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163 and SsangYong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131,  the Supreme Court noted it to be settled legal position that in an application for setting aside an arbitral award filed under Section 34 of the Arbitration Act, the court does not act as an appellate court and reappreciate the evidence. The scope of interference is limited to grounds provided under Section 34. Interference would be warranted when the award is in violation of public policy of India. A judicial intervention on account of interfering on the merits of the award would not be permissible.

Principles of natural justice as contained in Sections 18 and 34(2)(a)(iii) of the Arbitration Act continue to be grounds of the challenge of an award. Awards that shock the conscience of the court can be set aside for being in conflict with justice or morality. An award can be set aside on the ground of patent illegality appearing on the face of the award as such, which goes to the roots of the matter.

Merits of the case

Article 14 of the License Agreement

The bone of contention between the parties was Article 14 of the License Agreement which dealt with ‘Change in Law’. Article 14.3 provided that the Licensee (appellant−Company) may request for amendments in terms of the License Agreement if after the date of the License Agreement there is any change in law which substantially affects rights of the Licensee. The questions before the Court were:

(i) Whether the Arbitral Tribunal was justified in finding a change in law which entitled the Company to invoke Article 14.3 of the License Agreement; and

(ii) Whether the Arbitral Tribunal was justified in converting the contract from royalty model to revenue sharing model.

The Court said that for answering the questions, it will have to consider documents on record as well as the conduct of the parties and their intention as could be gathered from the material. For such propsition, reliance was placed on MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163.

Findings of the Arbitral Tribunal

It was noted by the Court that entire finding of the Arbitral Tribunal was based on a premise that when the parties entered into the contract in 1998, there was an existing policy which provided royalty to be factored into the cost while fixation of tariff. That, subsequently in 2003, Government of India changed the policy thereby providing that royalty will not be so factored while fixing tariff. In 2005, there was yet another change in policy vide which royalty was allowed to be factored in while fixing tariff, but subject to a maximum of the bid of second lowest bidder. According to the Arbitral Tribunal, this amounted to change in law which adversely affected the Company.

Examining the correctness of such finding, the Court found that when Letter of Intent was issued to the Company in January 1998, there was no policy/guidelines at all. The relevant guidelines were adopted by the authority concerned (Tariff Authority for Major Ports “TAMP”) only in February 1998. Even these 1998 Guidelines did not provide for factoring royalty in cost while determining tariff.

Notably, it was in the year 1999, that the Company presented a proposal before TAMP to revise tariff. The proposal was approved by TAMP, and royalty was allowed to be factored in cost while fixing tariff, however, this was only on account of the Trust’s conditional approval to the proposal submitted by the Company. The TAMP also made clear that its order should not be interpreted to amount to any implicit approval of royalty related issues which were left to be decided by the Trust and the Government of India.

Then came the first notification in 2003, where the Government of India decided to clarify, as a matter of policy, that royalty payment shall not be factored into account as cost for fixation of tariff.

Next came the second notification in 2005, superseding the 1998 Guidelines. The new guidelines provided that royalty payment will not be admissible cost for tariff computation. Further, in Build, Operate and Transfer cases such as that of the Company, it was allowed that tariff computation can factor in royalty payment as cost subject however only to a maximum of the amount quoted by next lowest bidder.

On a conjoint reading of all documents, the Court concluded that:

In this scenario, the finding of the Arbitral Tribunal, that there was a law when the Agreement was entered into between the parties, which provided royalty as a pass-through and that the said law has been changed for the first time in 2003 and subsequently again changed in 2005, in our view, is a finding based on ‘no evidence‘.

The Court was of the opinion that the Arbitral Tribunal totally failed to take into consideration relevant aspects of the matter as discussed above. Noting that the Arbitral Tribunal arrived at its decision based on ‘no evidence’ and in ‘ignorance of vital evidence’, the Court held that the findings of the Arbitral Tribunal would come in the realm of perversity as explained in Associated Builders v. DDA, (2015) 3 SCC 49.

Conversion of royalty payment model to revenue sharing model

The next issue was whether the Arbitral Tribunal was justified in substituting royalty payment model to revenue sharing model. While considering this, the Court opined that:

A contract duly entered into between the parties cannot be substituted unilaterally without the  consent of the parties.

Gathering the  intention of the parties from documents on record, the Court found that the Company wanted the License Agreement to be amended to change royalty payment method to revenue sharing method. Whereas, the Trust always opposed it and was not agreeable to any such amendment. Noting that the Arbitral Tribunal ignored the stand of the Trust to thrust upon a new term in the License Agreement, the Court observed:

It is thus clear that the Award has created a new contract for the parties by unilateral intention of [the Company] as against the intention of [the Trust].

Reiterating that a party to the Agreement cannot be made liable to perform something for which it has not entered into a contract, the Court concluded that:

In our view, rewriting a contract for the parties would be breach of fundamental principles of justice entitling a Court to interfere since such case would be one which shocks the conscience of the Court and as such, would fall in the exceptional category.

Decision

In such view of the matter, the Supreme Court was of the considered opinion that the impugned award passed by the Arbitral Tribunal would come under the realm of “patent illegality” and therefore it was rightly set aside by the High Court. [PSA SICAL Terminals (P) Ltd. v. V.O. Chidambranar Port Trust, 2021 SCC OnLine SC 508, decided on 28-7-2021]


Tejaswi Pandit, Senior Editorial Assistant has reported this brief.

Case BriefsSupreme Court

Supreme Court: The Division Bench of R.F. Nariman and B.R. Gavai, JJ., while addressing a significant and interesting question of law expressed that,

“If one were to include the power to modify an award in Section 34, one would be crossing the Lakshman Rekha”

Interesting Question of Law

Whether the power of a Court under Section 34 of the Arbitration and Conciliation Act, 1996 to ‘set aside’ an award of an arbitrator would include the power to modify such an award?

Madras High Court decision 

A Division Bench of the Madras High Court had disposed of a large number of appeals filed under Section 37 of the said Act laying down as a matter of law that, at least insofar as arbitral awards made under the National Highways Act, 1956, Section 34 of the Arbitration Act must be so read as to permit modification of an arbitral award made under the National Highways Act so as to enhance compensation awarded by an Arbitrator.

Factual Matrix

The crux of the matter was that the above-stated appeals concerned notifications issued under the provisions of National Highways Act and awards passed. The said notifications were of the year 2009 onwards and the awards made were based on the ‘guideline value’ of the lands in question and not on the basis of sale deeds of similar lands.

It was stated that the competent authority had granted abysmally low amounts.

In Section 34 petitions that were filed before the District and Sessions Judge, the said amounts were enhanced to Rs 645 per sq. meter and the award of the Collector was therefore modified by the District Court in exercise of jurisdiction under Section 34 of the Arbitration Act.

Further, in the appeal filed to Division Bench, the above-stated modification was upheld, with there being a remand order to fix compensation for certain trees and crops.

Analysis, Law and Decision

Section 34 of the Arbitration Act

Bench noted that far from Section 34 being in the nature of an appellate provision, it provides only for setting aside awards on very limited grounds, such grounds being contained in sub-sections (2) and (3) of Section 34.

It is the opinion of the arbitral tribunal which counts in order to eliminate the grounds for setting aside the award, which may be indicated by the court hearing the Section 34 application.

Further, the Court stated that Section 34 is modelled on the UNCITRAL Model Law on International Commercial Arbitration, 1985 under which no power to modify an award is given to a court hearing a challenge to an award.

Old v. New

Elaborating more, Bench added that by way of contrast, under Sections 15 and 16 of the Arbitration Act, 1940, the court is given the power to modify or correct an award in the circumstances mentioned in Section 15, apart from a power to remit the award under Section 16.

Thus, under the scheme of the old Act, an award may be remitted, modified or otherwise set aside given the grounds contained in Section 30 of the 1940 Act, which are broader than the grounds contained in Section 34 of the 1996 Act.

In Supreme Court’s decision of MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163, it was decided that Section 34 proceeding does not contain any challenge on the merits of the award.

Adding to the above, Court stated that the point raised in the appeals stands concluded in McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181.

Delhi High Court’s decision in Cybernetics Network (P) Ltd. v. Bisquare Technologies (P) Ltd., 2012 SCC OnLine Del 1155 is also instructive.

Court’s opinion

Hence, in Court’s opinion, there cannot be a doubt that Section 24 of the Arbitration Act, 1996 cannot be held to include within it a power to modify an award.

McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181 was followed in Kinnari Mullick v. Ghanshyam Das Damani, (2018) 11 SCC 328. Also, in Dakshin Haryana Bijli Vitran Nigam Ltd. v. Navigant Technologies Pvt. Ltd., 2021 SCC OnLine SC 157, a recent judgment of this Court also followed McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181 stating that there is no power to modify an arbitral award under Section 34 as:

(f) In law, where the Court sets aside the award passed by the majority members of the tribunal, the underlying disputes would require to be decided afresh in an appropriate proceeding.

Under Section 34 of the Arbitration Act, the Court may either dismiss the objections filed, and uphold the award, or set aside the award if the grounds contained in sub-sections (2) and (2A) are made out. There is no power to modify an arbitral award.

Judicial Trend

Therefore, in view of the above discussed, it can be stated that this question has now been settled finally by at least 3 decisions of the Supreme Court.

To state that the judicial trend appears to favour an interpretation that would read into Section 34 a power to modify, revise or vary the award would be to ignore the previous law contained in the 1940 Act; as also to ignore the fact that the 1996 Act was enacted based on the UNCITRAL Model Law on International Commercial Arbitration, 1985.

Coming to the submission in support of the impugned judgment that the fact that the Central Government appoints an arbitrator and the arbitration would therefore not be consensual, resulting in a government servant rubber-stamping an award which then cannot be challenged on its merits, cannot possibly lead to the conclusion that, therefore, a challenge on merits must be provided driving a coach and four through Section 34 of the Arbitration Act, 1996. The impugned judgment is also incorrect on this score.

Lastly, the Supreme Court stated that if one were to include the power to modify an award in Section 34, one would be crossing the Lakshman Rekha and doing what, according to the justice of a case, ought to be done.

Parliament very clearly intended that no power of modification of an award exists in Section 34 of the Arbitration Act, 1996.

In several cases, the NHAI has not filed appeals even in matters which are similar i.e., arising from the same Section 3A Notification, as a result of which certain landowners have got away with enhanced compensation given to them by the District Court. Also, we cannot shut our eyes to the fact the arbitrator has awarded compensation on a completely perverse basis i.e., by taking into account ‘guideline value’ which is relevant only for stamp duty purposes, and not taking into account sale deeds which would have reflected the proper market value of the land.

Differential Compensation

The Court noted that in several cases, the NHAI has not filed appeals even in matters which are similar i.e., arising from the same Section 3A Notification, as a result of which certain landowners have got away with enhanced compensation given to them by the District Court. Also, the arbitrator has awarded compensation on a completely perverse basis i.e., by taking into account ‘guideline value’ which is relevant only for stamp duty purposes, and not taking into account sale deeds that would have reflected the proper market value of the land.

The Court was of the opinion that the said differential compensation cannot be awarded on the ground that a different public purpose is sought to be achieved. Also, the legislature cannot say that, however laudable the public purpose and however important it is to expedite the process of land acquisition, differential compensation is to be paid depending upon the public purpose involved or the statute involved.

Illustration

Take the case of a single owner of land who has two parcels of land adjacent to each other. One parcel of land abuts the national highway, whereas the other parcel of land is at some distance from the national highway. Can it be said that the land which abuts the national highway, and which is acquired under the National Highways Act, will yield a compensation much lesser than the adjacent land which is acquired under the Land Acquisition Act only because in the former case, an award is by a government servant which cannot be challenged on merits, as opposed to an award made under Part III of the Land Acquisition Act by the reference Court with two appeals in which the merits of the award can be gone into? There can be no doubt that discrimination would be writ large in such cases.

However, since the NH Amendment Act, 1997 had not been challenged before the Court, it refrained from saying anything more. It was said that in the facts and circumstances of the case interference under Article 136 was not called for.[National Highways v. M. Hakeem,  2021 SCC OnLine SC 473, decided on 20-07-2021]

Alternate Dispute ResolutionCase BriefsHigh Courts

Delhi High Court: Jayant Nath, J., observed that the assignment of the trademark is by a contract and not by a statutory act. It does not involve any exercise of sovereign functions of the State.

Defendant filed an application under Section 8 of the Arbitration and Conciliation Act, 1996.

Master Long Term Supply Agreement 

Plaintiff submitted that the parties had entered into Master Long Term Supply Agreement by which the defendant on an exclusive basis had supplied to the plaintiff exclusive brands of the defendant “Golden’s Gold Flake, Golden Classic, Taj Chhap, Panama and Chancellor”.

The above-stated brands were being sold, supplied and distributed exclusively in the domestic and international market.

Trademark Agreement and Amendment Agreement

Later, plaintiff entered into a trademark agreement and amendment agreement and was granted exclusive non-assignable, non-transferable license to manufacture the defendant’s product to be manufactured exclusively at the plaintiff’s factory at Noida and were to be marketed and distributed.

Plaintiff submitted that despite huge capital and operational expenditure made by the plaintiff to increase the availability of defendant’s product, the defendant arbitrarily cancelled the trademark license agreement.

A termination notice by the defendant was issued. Since the commercial production had not started the agreement was terminated with immediate effect.

By another termination notice, the defendant company stated that timely payment was not made in terms of the agreement and hence plaintiff was to have no right to manufacture and sell the exclusive brands of the defendant in the market from that point onwards.

In view of the above-stated circumstances, the present suit was filed.

It was prayed that the disputes between the plaintiff and the defendant raised be referred to a sole Arbitrator.

Analysis, Law and Decision

Bench firstly noted the legal position by referring to Section 8 of Arbitration and Conciliation Act, further Supreme Court’s decision in Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1, was referred.

As per the above decision, actions in rem including grant and issue of patents and registration of trademarks are exclusive matters falling within the sovereign and government functions and have erga omnes effect. Such grants confer monopolistic rights, and they are non-arbitrable.

Further, reference to the decision of the co-ordinate Bench of this Court was made in Hero Electric Vehicles (P) Ltd. v. Lectro E-Mobility (P) Ltd., 2021 SCC OnLine Del 1058 as it applies on all fours to the facts of the present matter.

Court held that the dispute did not pertain to infringement of a trademark on the ground that the defendants are using a deceptively similar trademark. The ground was that the right to use the trademark was conferred by a particular agreement on a particular group of the family. Even if the plaintiff in that case were to rely on any provisions of the Trademark Act the essential infraction as allegedly committed by the defendant was not the provisions of the Trademark Act but the provisions of the agreements in question. The dispute which emanates out of the agreement between the parties was held to be arbitrable. The court also clarified that the controversy in the said case did not relate to grant or registration of trademarks. The said trademarks stood granted and registered. It was also held that assignment of a trademark is by a contract and is not a statutory fiat. It does not involve any exercise of sovereign functions.

Primarily the crux of the issue was that the dispute was relating to interpretation of the terms of the Trademark Agreement and amendment agreement executed between parties and whether the termination of the said agreements by the defendant and cancellation of the assignment of the trademark in favour of the plaintiffs was legal and valid.

“right that is asserted by the plaintiff is not a right that emanates from the Trademark Act but a right that emanates from the Trademark Agreement and the amendment agreement.”

In the present matter, Bench held that it cannot be said that the disputes are not arbitrable.

In view of the above discussion, the application was allowed. [Golden Tobie (P) Ltd. v. Golden Tobacco Ltd., 2021 SCC OnLine Del 3029, decided on 4-06-2021]


Advocates before the Court:

For the plaintiff: Mr. Kailash Vasdev, Sr. Adv. with Ms. Priyadarshi Manish and Ms. Anjali J. Manish, Advs.

For the Defendant: Mr. Sumeet Verma, Mr. Vijay Kumar Wadhwa and Mr. Maninder Pratap Singh, Advocates.

Case BriefsHigh Courts

Delhi High Court: V. Kameswar Rao, J., refused to interfere with the award passed by the Arbitrator and dismissed a petition filed under Section 34 of the Arbitration and Conciliation Act, 1996.

Instant petition was filed under Section 34 of the Arbitration and Conciliation Act.

Chronology of Events

Present petition was filed before the District Court and vide Order dated 3-01-2017 the Additional District Judge directed the parties to appear before the District and Sessions Judge.

Petitioner sought adjournment before the District and Sessions Judge on the ground that a Transfer Petition was pending adjudication before this Court. The Transfer Petition was disposed of as infructuous vide order December 5, 2017.

District Judge noted the respondent’s counsel that the petitioner has not conducted the matter with due diligence and good faith and noted that the question of due diligence not being within the jurisdiction of the said Court placed this matter before the Registrar General of this Court.

Factual Matrix

Petitioner and respondent entered into a non-exclusive Distributorship Agreement. Subsequently, parties entered into annual agreements for the years 2007, 2008 and 2009, and in terms of the said agreement, petitioner placed purchase orders on the respondent for the supply of goods, which in turn were sold by petitioner to its customers.

What led to the invocation of arbitration and adjudication of disputes?

Respondent stated that it had supplied goods to the petitioner against various purchase orders and raised invoices accordingly and further claimed that the petitioner had failed and neglected to make payments against invoices for sums aggregating Rs 54, 14, 934, which became due and payable.

Petitioner in view of the above, issued 9 cheques, however, the said cheques were dishonoured on presentation.

Cheques for security?

According to the petitioner the said cheques were issued at the instance of the respondent only as a security for any payment that may become due. In addition to the claim for unpaid invoices, the respondent also raised claims for non-supply of ‘C’ Forms and the consequent liability of sales tax before the Arbitrator.

Petitioner submitted that parties were having good business relations for the last 14-15 years, however, the petitioner started receiving complaints from its buyers regarding breakage of soft ferrite components. Even though the respondent assured to replace the broken goods with new ones, it failed to do so.

Petitioner’s stance on cheques being dishonoured

It was stated that the cheques were provided on the request of the General Manager (Marketing) of the respondent on June 26, 2009, for depicting the same in the books of Accounts for quarterly ending for security purposes as to cover the exposure limit as per Distributorship Agreement and on the assurance that they shall not be presented without consent of the petitioner. The cheques were not returned even after repeated requests of the petitioner, thereby forcing the petitioner to write a letter to its Bank, not to honor the said cheques.

Arbitrator concluded that a sum of ₹54,14,934/- was recoverable by the respondent/claimant from the petitioner against its outstanding dues.

The arbitrator held that a net amount of ₹36,92,423/- was recoverable by the respondent/claimant from the petitioner plus a sum of Rs.1,85,000/- towards the arbitration fee and actual expenses) along with interest @ 12.25% p.a. on Rs 1, 85, 000/-.

Analysis, Law and Decision

Firstly, the Court dealt with the contentions of petitioner’s Advocate Rohit Goel, that the award passed by the Arbitrator was liable to be set aside as it was in violation of Chapter XI of the CPC; it doesn’t bear signatures on each and every page and the award was typed in 3 different fonts on 3 different types of sheets.

Bench for the above submission stated that the reference made to Chapter XI was an error. Reference was intended to Part I of the CPC wherein Section 33 refers to a Judgment and a Decree. With regard to the award being typed in different fonts, the same shall not make the award invalid and the same was not supported by any rule/law.

Competency of Authorised representative of respondent – Laxmi Dutt Sharma (L.D. Sharma) sign, verify and file the claim petition in absence of any resolution was concerned, Bench referred to the reasons given by Arbitrator to determine the competency of the representative.

Petitioner’s counsel did not make any submission to contradict the arbitrator’s conclusion for the above-stated.

Arbitrator rightly relied upon the decision of Supreme Court in United Bank of India v. Naresh Kumar, (1996) 6 SCC 660, wherein it was held that on a reading of Order VI Rule 14 together with Order XXIX Rule 1 CPC, it would appear that even in the absence of any formal letter of authority or power of attorney having been executed a person referred to in Rule 1 of Order XXIX by virtue of the office which he holds, can sign and verify the pleadings on behalf of the corporation. Additionally, de hors Order XXIX Rule 1 of CPC, a company is a juristic entity, it can duly authorise any person to sign the plaint or the written statement on its behalf, which would be regarded as compliance with the provisions of Order VI Rule 14 CPC.

Supreme Court also held that there is a presumption of valid institution of a Suit once the same is prosecuted for a number of years.

Bench also found the Supreme Court’s decision laid above to be satisfying in the present case as the litigation between the parties had commenced in the year 2010 and already 6 years had already elapsed on the date of award.

High Court reiterated that Arbitrator was justified in his conclusion on the competency of L.D. Sharma to file the claim petition on behalf of the respondent company.

Absence of a complete, authenticated and duly stamped statement of account

Petitioner’s counsel as per the above-stated reason submitted that the arbitrator could not have granted the amount.

Bench stated that respondent had submitted that soft ferrite were supplied for which the amount was not paid by the petitioner. When the petitioner was informed that no supply would be made in the future if previous dues were not cleared, petitioner issued 9 cheques towards discharge of their part liability and the said cheques were dishonoured and returned.

Further, the Court noted that witness did not deny the purchase orders; invoices and cargo receipts. Arbitrator was right in relying upon Ex. R-66, which was a communication of the respondent as per which an amount of Rs 54,14,934 was payable and after adjustment of TOD, commission, the amount payable by the petitioner was Rs 40,95,221.

Arbitrator was justified in holding that the said amount was recoverable towards outstanding dues and after adjustment of certain amounts in favour of the petitioner, granted a sum of Rs.36,92,423/- to the respondent herein.

Whether respondent was justified in terminating the Distributorship Agreement?

Clause 8.1of the Distributorship Agreement also reads as under:

The Company reserves the right to terminate the agreement at any time at its discretion without assigning any reason therefor.”

Respondent had a justifiable reason for the respondent to terminate the Agreement in as such as that no payment of invoices worth Rs 54,14,934 was forthcoming from petitioner.

Petitioner, in an email, had itself expressed that it was not possible to continue to associate itself with the respondent.

Hence there was justification for the termination of the Distributorship Agreement by the respondent.

Further, L.D.  Sharma, CW-1 had stated during his cross-examination that the goods found defective were replaced, the defect in quality was of component T-10 due to reasons of saturation and variation in AL. Petitioner had suffered no loss.

Nothing on record was brought to show that the petitioner had to pay the amount claimed as damages to its customers.

High Court found Advocate Bharat Chugh’s reliance on Associate Builders  v. Delhi Development Authority, (2015) 3 SCC 49  justified.

Bench also stated that Supreme Court followed the test of judicial review as laid down in Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49, in a plethora of judgments and the recent one being Anglo American Metallurgical Coal Pty. Ltd v. MMTC Ltd.,  (2021) 3 SCC 308.

In view of the above discussion, the petition was dismissed.[Pragya Electronics (P) Ltd. v. Cosmo Ferrites Ltd., 2021 SCC OnLine Del 3428, decided on 23-06-2021]


Advocates before the Court:

For the petitioner: Mr. Rohit Goel Advocate

For the Respondents: Mr. Bharat Chugh & Mr. Sujoy Sur, Advocates