Case BriefsHigh Courts

Himachal Pradesh High Court: The instant petition was related to Section 29-A of Arbitration and Conciliation Act, 1996 entertained by Jyotsna Rewal Dua, J. where the petitioner sought an extension of time.

Factual matrix of the case was that when the dispute arose between the parties the matter was referred to a sole arbitrator who was Superintending Engineer. The Tribunal was unable to conclude the proceedings within the stipulated time of one year. Therefore the period of the passing of award was delayed by six months, but the extension was not fruitful as the period expired and yet the case was undecided. It was further suggested by the Arbitrator to apply to a Competent Authority for further extension of time.

Hence both the parties requested the Authority for extension of time for a further period of six months. The Authority further directed the parties to take steps in accordance with the amended provisions of the Act, 1996.

Anil Jaiswal and Rameeta Rahi, counsels for the respondents submitted a letter dated 10-07-2019, addressed to the respondents by the Executive Engineer, to the effect that their office had no objection in case the mandate of learned Arbitrator if was extended by six months.

The Court observed that, Section 29-A (4) and (5) which provided that, if the award was not made within the period specified or within the extended period, the mandate of the arbitrator was to be terminated unless the Court, either prior to or after the expiry of the period so specified, extended the said period. It was further observed that the proceedings were at a final stage, hence, the Court allowed the petition. The parties, through learned counsel representing them, were directed to co-operate in the arbitral proceedings and not to seek unnecessary adjournments before the Arbitrator and an endeavor was made to complete the arbitral proceedings well before the time granted.[Devki Nand Thakur v. State of H.P., Arb Case No. 43 of 2019, decided on 12-07-2019]

Case BriefsHigh Courts

Bombay High Court: C.V. Bhadang, J. allowed an appeal filed against the decision of the District Judge whereby he had dismissed appellant’s petition under Section 34 of the Arbitration and Conciliation Act, 1996.

The appellant had filed the said petition under Section 34 against the award of the Arbitrator made in the subject arbitration proceedings between the appellant and the respondent. The Arbitrator had rejected the counter claim filed by the appellant. The District Magistrate refused to consider some of the aspects challenged by the appellant on the ground that those were only findings of facts recorded by the Arbitrator and in the result dismissed his petition. Aggrieved thereby, the appellant filed the present appeal under Section 37.

S.D. Padiyar, Advocate representing for the appellant contended that the findings recorded by the Arbitrator were perverse and liable to set aside. Per contra, A.D. Bhobe, representing the respondent supported the impugned decision.

Relying on Mahendra Kumar v. State of M.P., (1987) 3 SCC 265, the High Court observed that Order 8 Rule 6-A CPC does not bar the filing of the counter claim by the defendants after filing of the written statement and the counter claim can be filed after delivery of defence provided that the cause of action for the same has accrued prior to such delivery of defence. Therefore, the Court held that it could not be disputed that the cause of action for the counter claim by the appellant seeking compensation in respect of the LPG cylinders and the pressure regulators which were found missing had arisen prior to the delivery of defence and, thus, on this ground, the counter claim could not have been dismissed.

Regarding the issue of consideration of finding of facts, the Judge relied on Associates Builders v. DDA, (2015) 3 SCC 49, observed: “I am conscious of the legal position that a finding of fact properly recorded by the Arbitrator is not open to challenge in the limited supervisory role attributed to the Court under Section 34 of the Act and much less in a further appeal under Section 37 of the Act. However, if the finding recorded is patently illegal and perverse where the Arbitrator has refused to acknowledge the material on record, the same, in my considered view, would be open to challenge as held by the Supreme Court in the case of Associate Builders.”

In the present case, it was found that one of the issues, the Arbitrator failed to take note of the documents produced even though he had acted upon the same in the earlier part of the award. Relying further on Mc Dermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181 for the proposition that the Court in the exercise of the jurisdiction under Section 34 cannot substitute or modify the award, the High Court quashed the award passed by the arbitrator while allowing the appeal. [Bharat Petroleum Corporation Ltd. v. Anuradha Ajit Malgaonkar, 2019 SCC OnLine Bom 1244, decided on 04-07-2019]

Case BriefsHigh Courts

Orissa High Court: Biswanath Rath, J. dismissed an arbitration appeal filed under Section 37(1) of the Arbitration and Conciliation Act, 1996.

The appellant in his appeal, challenged the judgment of the District Judge, Sambalpur in Arbitration Petition No. 2 of 2004 dated 27-11-2006 where the District Judge while dismissing the Arbitration Petition confirmed the award passed by the learned Arbitrator involving Arbitration Case No. 2 of 2001

Learned counsel for the appellant, S. Mohanty, restricted his submission to the extent that for the receipt of the payment on the final bill without protest and having no claim any further involving the contract, whether the Arbitrator, as well as the District Judge, arrived in right conclusion involving the award and judgment therein? In filing the written note of argument, the learned counsel extended his claim to the interest part also.

The Court upheld the Arbitrator’s findings that the appellant has got the work executed through the claimant unnecessarily delayed the payment of final bill and that sole object behind the same was to ensure that in future the claimant would not make any claim against the respondent as in course of the execution of the work, the respondent had committed breach of contract and caused undue harassment to the claimant. In the contract, there was no provision for obtaining any such no claim undertaking from the contractor before payment of the final bill.

Relying on Asian Techs Ltd. v. Union of India, (2009) 10 SCC 354, the Court found that the final protest was received by the respondent under protest and therefore, the contract was not concluded. In view thereof, the Court found no scope for interfering on this aspect particularly exercising power under Section 37 of the Act.

On the issue of payment of interest, the Court relied upon Jiprakash Associates Ltd. (Jal) v. Tehri Hydro Development Corporation India Ltd., 2019 SCC Online SC 143 and Sree Kamatchi Amman Constructions v. Divisional Railway Manager (Works), (2010) 8 SCC 767 and held that unless and until there was an agreement, a party was not entitled to pre and pendente lite interest.

In view of the above, the Court found no scope for interfering in the aspect pertaining to payment of interest and dismissed the arbitration appeal.[Mahanadi Coal Fields Ltd. v. Kishorilal Loomba and Sons, 2019 SCC OnLine Ori 188, decided on 13-05-2019]

Case BriefsHigh Courts

Bombay High Court: S.C. Gupte, J. while setting aside an arbitral award for patent illegality, observed that “any forum, which adjudicates upon the rights and liabilities of the parties based on a contract, is enjoined upon to determine those rights and liabilities in accordance with the contractual terms, be it a court or an arbitral forum.”

The respondents were the borrowers of the Madhavpura Mercantile Coop. Bank Ltd. whose accounts were declared as non-performing assets (NPAs) for committing default in repayment of loans. To expedite the recoveries, the Bank formulated Compromise Scheme of Settlement (CSS-2013). As per the CSS, the NPA date in case of respondents was expressly stated to be 31-3-2001 and it was expressly stipulated that no conditional proposal for settlement or proposal disputing the NPA date would be accepted. The respondents accepted CSS unconditionally. Later, the respondents raised a dispute about the NPA date and therefore disputed their liability under the CSS. The matter went to arbitration and the Arbitral Tribunal accepted the respondents’ case on the applicable NPA date and made an award in their favour. Aggrieved thereby, the Bank filed the present petition.

The High Court was of the view that the arbitrator exceeded his jurisdiction by reformulating the contract between the parties contained in the CSS. It was noted that CSS-2013 was not a statutory scheme and nothing prevented the petitioner from naming any particular date as the NPA date, 31-3-2001 was treated as NPA date on the basis of statutory auditor’s report. It was made clear in CSS-2013 that the scheme could not be accepted conditionally. It was for the individual debtor to accept or reject the scheme. The respondents accepted it unconditionally which brought about a concluded contract substituting the original contract of loan between the parties. The Court said: “The arbitrator, who was to adjudicate the rights and liabilities of the parties, was expected to determine such rights and liabilities under such contract, namely, CSS2013. It was not open to him to question CSS-2013 or relieve any debtor from his obligations under it on some notion of equity or sympathy.” 

It was also observed: “The consensus between the parties to refer their dispute to arbitration merely implies that the parties are agreeable to have the dispute adjudicated by an arbitral forum as opposed to a court of law. The rights and liabilities, which are to be thereby determined, are the rights and liabilities arising under the contract. Such consensus does not in any way impinge upon these rights and liabilities.”

It was held that the impugned award, thus, deserved to be quashed, both on the grounds of patent illegality, since the declaration in it was in the face of a contract as well as for the reason of the arbitrator having taken an impossible view, or a view which no fair or judiciously mined person  would take. [Madhavpura Mercantile Coop Bank Ltd. v. Rasiklal D. Thakkar, Commercial Arbitration Petition No. 179 of 2016, decided on 25-03-2019]

Case BriefsHigh Courts

Rajasthan High Court: A Bench of Arun Bhansali, J. terminated the mandate of an arbitrator by stating that if an arbitrator creates a doubt in the mind of a party regarding prejudice against it and qua the impartial conduct of proceedings before the arbitral tribunal it renders him de jure/de facto incapable to perform his functions effectively.

The petitioner through his counsel Ankit Sareen has alleged that the arbitrator appointed has charged a fee which was beyond the fee prescribed under the Schedule IV attached to Arbitration Act along with the 2017 notification of High Court. Also even during the pendency of the writ petition before the High court, the arbitrator continued with the proceedings in the Commercial Court. Thus he has prayed before this court the mandate of the arbitrator be terminated under Section 14(1)(a) of the Arbitration Act.

The point to be considered was as to when the services of the arbitrator stands terminated which was then answered by the court by stating that he can be terminated when he becomes de jure or de facto unable to perform his functions. In this case, apart from charging an illegal fee, the arbitrator conducted the proceedings ex-parte order and posted the matter for final arguments despite the pendency of the writ petition. Accordingly, it suffices to hold the arbitrator guilty for his alleged acts and thus his mandate stood terminated under Section 14(1)(a) of the Act and the petitioner was allowed to appoint a substitute arbitrator.[Doshion (P) Ltd. v. Hindustan Zinc Ltd., 2019 SCC OnLine Raj 6, Order dated 03-01-2019]

Case BriefsHigh Courts

Delhi High Court: A Division Bench comprising of A.K. Chawla and S. Ravindra Bhat, JJ. ruled that Single Judge of the High Court could not have justly interfered with the arbitral award passed by the tribunal which was primarily based on findings of fact.

The appellant was aggrieved by the judgment of the Single Judge who upheld the objections of the respondent under Section 34 of the Arbitration and Conciliation Act, 1996 against the arbitral tribunal’s award.

The parties entered into a contract for construction work. The work was to be executed by the appellant as per the terms of the work order. Dispute arose between the parties regarding the payments relating to the contract. On an application moved by the appellant under Section 11, the Court appointed an arbitrator. The arbitration agreement itself was earlier disputed by the respondent but the arbitrator, as well as the Single Judge, consistently ruled in favour of its existence. The arbitrator in his award, party allowed a claim of the appellant. The award was challenged by the respondent by filing objections under Section 34. The Single Judge allowed the objections ad set aside the award. Aggrieved thereby, the appellant preferred the present appeal under Section 37.

Raghvendra M. Bajaj, Advocate led contentions on behalf of the appellant and relied on a series of e-mails and letters exchanged between the parties to support its claim. The respondent was represented by Amit Mahajan, Advocate. It is pertinent to note that the tribunal gave its award after perusing such correspondence; while the Single Judge assumed that only the written contract entered into between the parties was to be considered.

The High Court referred to Associate Builders v. DDA, (2015) 3 SCC 49, wherein the Supreme Court cautioned that under Section 34, the courts should not set aside arbitral award merely because they do not agree with interpretation of the agreement given by the arbitrator, rather it has to be shown that tribunal’s findings were based on no evidence or irrelevant evidence or was perverse. In the present case, the findings of the tribunal were pursuant to a process of reasoning and discussion and analysis of evidence and documents presented before it. It was observed that in such case, the scope of interference under Section 34 was minimal. The court held that the Single Judge could not have justly interfered with the award. Consequently, the appeal was allowed and the impugned judgment was set aside. [Wishwa Mittar Bajaj and Sons v. Shipra Estate Ltd. and Jaikishan Estates Developers (P) Ltd., 2018 SCC OnLine Del 12918, dated 14-12-2018]

Case BriefsHigh Courts

Jharkhand High Court: An arbitration appeal was filed before a Single Judge Bench comprising of Shree Chandrashekhar, J., under Section 37(1)(b) of Arbitration and Conciliation Act, 1996.

Facts of the case were that claimant, a construction company, was allotted the construction work of open channel and tunnel under Konar Irrigation Project and for the same, an agreement was executed. The construction work was to be completed in 3 years where time was the essence of the contract. Claimant had conveyed the problem faced by them in construction but the response of the Water Resources Department for the same took a long time. Claimant approached the Superintending Engineer, Tenughat Dam Circle to enter into arbitration and entering the same, arbitration took place and an award favouring claimant was passed.

The award was challenged by the Department by a petition under Sections 12, 13, 16 and 34 of the Act before the High Court. Impugned order’s legality was in question on the ground that the claims of claimant were barred under the limitation law. Claimant contended that Arbitrator answered the issue of limitation which is a question of fact against the Department and therefore it was not open to re-examination under Section 34 of the Act.  Court viewed that it would be wrong to completely immune finding in arbitration from judicial scrutiny in a proceeding under Section 34 or Section 37 as the same cannot be done if an error on the face of award is found.

High Court was of the view that the finding by Arbitrator of the claims not barred by limitation was an error apparent on the face of the award. Therefore, the arbitration appeal partly succeeded and impugned order to the extent where claims of claimant were allowed was declared time-barred claims and was set aside. [State of Jharkhand v. Sutlej Construction Limited,2018 SCC OnLine Jhar 1474, dated 12-10-2018]

Case BriefsHigh Courts

Karnataka High Court: A Single judge bench comprising of Dinesh Maheshwari, J. while hearing a petition praying for the appointment of an arbitrator, ruled that if an agreement between parties provides for arbitration and a dispute arises therefrom then it must be settled through arbitration.

The petitioner company, involved in exporting of fruit products, approached the respondent to process mangoes for export purpose. On respondent’s assurance that it possessed the necessary machinery and expertise to process mangoes, an agreement was executed between the parties. However, respondent delayed in the process of unloading mangoes. Since the season was drawing to a close and there was a loss in business due to the delays caused by respondent, the petitioner gave it a concession for procuring mangoes on its own and a further concession for processing the rejections into mango pulp. But still the respondent did not take steps to procure mangoes and also failed to meet the quantity and quality of the finished product.

Despite these lapses, the respondent raised an invoice which the petitioner refused to clear. In turn, the petitioner sent it a legal notice demanding payment for loss caused due to respondent’s failure to meet its contractual obligations. Since respondent did not revert to the said notice, petitioner invoked arbitration clause of the agreement nominating an arbitrator and called upon respondent to do the same. Respondent’s failure to even nominate an arbitrator, constrained the petitioner to file the instant petition.

The limited aspect for the court’s consideration was whether there existed an arbitration agreement between the parties. On perusal of the agreement executed between parties, the court noted that clause 5 of the said agreement provided that in case of disputes between parties not being settled amicably, the same would be settled in arbitration.

It was held if a dispute between the parties cannot be resolved amicably and there is the failure to appoint an arbitrator, then in such a case, it is just and proper that an independent arbitrator be appointed to adjudicate upon and decide such dispute. Accordingly, the petition was disposed of by appointing a retired judge as an arbitrator.[Pellagic Food Ingredients (P) Ltd. v. Oceanic Edibles International Limited, Civil Miscellaneous Petition No. 300 of 2016, decided on 09-10-2018]

Case BriefsHigh Courts

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

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

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

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

Case BriefsHigh Courts

Delhi High Court: A Single Judge Bench comprising of Pratibha M. Singh, J., allowed a petition filed by the Food Corporation of India challenging the award passed by the Arbitrator whereby its claim was dismissed by a cryptic award.

The matter arose out of an agreement between the petitioner and the respondent whereby the respondent had agreed to store, mill and supply certain quantity of paddy to the petitioner. Due to default on the part of the respondent in the performance of terms of agreement, the petitioner incurred a huge loss. Consequently, in pursuance of the arbitration clause as contained in the agreement, the petitioner moved for arbitration. However, even after more than 30 hearings of the matter before the arbitrator, the respondent did not appear even once. Hence, the arbitrator, vide the award impugned, dismissed the claim of the petitioner observing that since the respondent did not appear, nothing remained to be adjudicated. Aggrieved thereby, the instant petition was filed.

The High Court, on perusal of the award impugned, held that it was unsustainable. It was noted that the petitioner had deposited, before the arbitrator, detailed accounts of dealings which formed the basis of its claim. The Court was of the view that the reasoning given by the arbitrator for dismissal was quite cryptic. Detailedaffidavit was filed by the petitioner, however, none of the facts were considered by the arbitrator. The Court observed that without giving any findings on the claim of the petitioner, the arbitration could not have been terminated. Non-appearance of a party-respondent cannot result in dismissal of claims. Such a course of action defies basic logic. A claimant cannot be punished for non-appearance of the respondent. An arbitrator has a duty to decide claims in accordance with law. Therefore, the petition was allowed and the award impugned set aside. [FCI, Ludhiana v. Gupta Rice & General Mills, Ludhiana,2018 SCC OnLine Del 11961, decided on 13-09-2018]

Case BriefsSupreme Court

Supreme Court: A Bench comprising of A.M. Sapre and S. Abdul Nazeer, JJ. disposed of an appeal filed against the judgment of the Bombay High Court whereby the petition of the appellant was dismissed.

The appellant was a Government of India undertaking controlled by the Ministry of Chemicals and Fertilizers. A dispute arose between the appellant and the Maharashtra Housing and Area Development Authority in relation to the disposal of 263.57 acres of land owned by the appellant in Pimpri, Pune. The appellant, in order to resolve the dispute, filed a writ petition before the High Court which was dismissed. Aggrieved thereby, the appellant preferred the instant appeal.

The Supreme Court referred to ONGC v. CCE, 1995 Supp (4) SCC 541 and ONGC v. City and Industrial Development Corpn. (Maharashtra) Ltd., (2007) 7 SCC 39 and observed that Order 27 Rule 5 CPC casts a duty on the Court to ensure that such disputes should be resolved amicably. Also, the parties had submitted that they were willing for the matter to be referred to arbitration. Accordingly, the Court appointed Justice R.V. Raveendran (former Judge, Supreme Court) as the sole Arbitrator for settling the dispute between the parties. The appeal was disposed of in the terms above. [Hindustan Antibiotics Ltd. v. MHADA, 2018 SCC OnLine SC 1732, decided on 04-10-2018]

Case BriefsHigh Courts

Calcutta High Court: A Single Judge Bench comprising of Ashis Kumar Chakraborty. J. decided an arbitration petition, wherein the arbitrator was appointed by the Court in light of disagreement between the parties on appointment of the arbitrator.

The parties entered into a Contract for certain works. Clause 10.1 of the General Conditions of Agreement provided that any dispute arising under and out of the said contract was to be decided by arbitration process conducted by the arbitrator appointed by mutual consent of both the parties. Eventually a dispute arose between the parties under the Contract. The petitioner suggested that the matter be decided by SCOPE, Delhi. However, the respondent refused the suggestion. Therefore, the application under Section 11(6) of the Arbitration and Conciliation Act, 1996 was filed before the Court for appointing the arbitrator.

The Court perused the agreement and found that there was no dispute as to the fact that there was an arbitration clause in the contract in terms of Clause 10.1 of the General Conditions of Contract. The Court held that in view of the insertion of sub-section (6A) of Section 11, an application under Section 11(6) has to succeed if there is no dispute among the parties as to the existence of an arbitration clause. Accordingly, the petition was allowed and retired Justice Tapan Kumar Dutt was appointed as the sole arbitrator to decide upon the matter. [F. Harley and Co. (P) Ltd. v. SAIL, 2018 SCC OnLine Cal 2054, dated 07.05.2018]

Case BriefsHigh Courts

Himachal Pradesh High Court: A petition filed under Section 11 of the Arbitration and Conciliation Act, 1996 was allowed by a Single Judge Bench comprising of Vivek Singh Thakur, J.

The petition was filed for appointment of an arbitrator to adjudicate upon the claim of the petitioner against the respondents arising out of an agreement entered into between them for construction of link road. The respondents controverted the claim of the petitioners and filed counter allegations. The respondents submitted that the Superintending Engineer, Arbitration Circle, HPPWD, Solan was appointed as an arbitrator but it was not accepted by the petitioners.

After considering the record, the High Court observed that there was a dispute arising out of the agreement entered into between the parties. It was an undisputed fact that the said agreement contained an arbitration clause (Clause 25). However, the Court held that in light of Section 12 (5) of the Act, the appointment of the Superintending Engineer as an arbitrator was untenable. Thus, the petition was allowed and a retired Judge was appointed as an arbitrator to adjudicate upon the matter. [Tilak Raj v. Chief Engineer, 2018 SCC OnLine HP 563, dated 03-05-2018]

Case BriefsHigh Courts

Delhi High Court: A Division Bench comprising of G.S Sistani and V Kameswar Rao, JJ., dismissed an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter “Arbitration Act”) read with Section 10 of the Delhi High Court Act, 1966 and Section 13 of the Commercial Courts Act, 2015 against the order of a Single Judge wherein the appellants had raised objections against the award of the arbitrator under Section 34 of the Arbitration Act.

The crux of the argument of the appellants was that the arbitrator failed to follow the principles of natural justice by not making a full and fair disclosure that he had been appointed as an arbitrator by the respondent in as many as 43 cases prior to the present case. The appellants pleaded that on this ground alone, the award rendered by the arbitrator should be set aside. The appellants, admittedly, had not urged this argument before the Single Judge.

The Court noticed that the arbitrator had issued a notice to the parties, wherein the following relevant sentence was quoted, “….currently adjudicating on multiple claims filed by the claimant company.” The order-sheet reflected that the hearing was attended by counsel for both parties. Consequently, the Court found no grounds for interfering with the order passed by the Single Judge for two reasons. The first being that the argument urged before the Court was not raised in front of the Single Judge, and secondly, the judgment in Aditya Ganapa v. Religare Finvest Ltd. (OMP No. 1038 of 2014, decided on 30.01.2015) relied on by the appellants did not fit in the factum of the present case where the arbitrator had indeed, disclosed his interest to the parties. Appeal dismissed. [Sidhi Industries v. M/s Religare Finvest Ltd.,  2017 SCC OnLine Del 12685, decided on 11.12.2017]

Case BriefsHigh Courts

Madhya Pradesh High Court: In three separate writ petitions, the termination of the mandate of the Arbitrator and the appointment of a new arbitrator was allowed by the Court.

The main question before the Court was whether the mandate of an Arbitrator can be terminated and a new arbitrator be appointed in his place. The parties had entered into an agreement which had an arbitration clause. When a dispute arose between the parties, a single Arbitrator was appointed to resolve the dispute.

The Court observed that in these cases the Arbitrator did not proceed with the dispute resolution process after 14.03.2009 even though he was free to proceed with the matter. A reading of Section 14(1)(1) of the Arbitration and Conciliation Act shows that the mandate of the Arbitrator shall terminate if he becomes unable to perform his duties de jure or de-facto or he fails to act without undue delay. Here the mandate of the Arbitrator was held to be terminated due to the undue delay caused in the proceedings.

As to the question of appointment of a new Arbitrator, the Court stated that since mandate of the previous Arbitrator stands terminated due to undue delay, a suitable Arbitrator can be appointed for the present case as the arbitration clause as well as the dispute is still existent. [Swadesh kumar Agrawal v. Dinesh Kumar Agrawal, 2017 SCC OnLine MP 1180 decided on 07.09.2017]

Case BriefsHigh Courts

Delhi High Court: A Single Bench of Vibhu Bhakhru,J. Held that an arbitrator will not have the power to lift the corporate veil so as to bind other party, who have not agreed to arbitration agreement.

An educational project “agreement” was entered into between IGNOU and UEIT. IGNOU stated that they were entitled to receive fees, but UEIT neglected the contention and failed to remit the same, IGNOU terminated the agreement and invoked arbitration clause and claimed for dues in reply to this statement of claim a joint counter claim for compensation was made by UEIT and Sudhir Gopi, managing director of the company stating that, IGNOU enrolled students from other institutes which operate illegally outside the trade free zones, and IGNOU has also withhold the mark-sheets of students stating that work at center is suspended. Arbitration tribunal ordered in favor of IGNOU, making both Gopi and UEIT liable stating that Gopi holds 99 shares out of 100 and is face of the company and made no distinction between himself and UEIT by making joint claims.

The Court held that IGNOU’s claim is bad in reference to “mis- joinder” of parties as Gopi is not a party to the agreement as “an arbitration agreement must be in writing” as per Section 7(3) of the Arbitration and Conciliation Act, 1996 and here Gopi has not signed the agreement in his personal capacity, court further stated that just because a person holds maximum share and is face of the company, it doesn’t make him personally bound as company is an “independent juristic entity” and therefore arbitrator cannot lift the corporate veil and bind the non-signatories to an arbitration agreement. Court allowed the petition and set aside the award of arbitration tribunal. [Sudhir Gopi v. Indira Gandhi National Open University, 2017 SCC OnLine Del 8345 , decided on 16.05.2017]