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2021 (11) TMI 458 - SC - Indian LawsNature of the award - award arising out of an international commercial arbitration - breach of settlement agreement - Arbitral proceedings and Court proceedings in relation to arbitral proceedings - HELD THAT - The respondent moved a petition under Section 34 of the said Act on 24.01.2015 before the Bombay High Court as Arbitration Petition No.167/2015, while the appellant filed for execution of the award. Consequently, the respondent also filed for stay of the enforcement of the award. Interim stay was granted on 06.04.2018 and the SLP against the same was dismissed, being SLP No.27085 of 2018. The learned Single Judge of the High Court set aside the award in terms of the judgment dated 19.05.2020. The appeal filed by the respondent under Section 37 of the said Act was dismissed by the Division Bench in terms of the impugned judgment dated 20.04.2021. The High Court also granted interim protection against withdrawal of the amount specified under the Deed of Settlement for a limited period of time. In the Special Leave Petition while issuing notice on 02.08.2021, the interim arrangement by the High Court was extended and after grant of leave, arguments were concluded on 28.09.2021. Nature of the award - appellant claims that it is an award arising out of an international commercial arbitration - HELD THAT - While the plea of the award being vitiated by patent illegality is available for an arbitral award, such an award has to be a purely domestic award, i.e. the plea of patent illegality is not available for an award which arises from international commercial arbitration post the amendment. Whether the amendment would apply in the facts of the present case? - HELD THAT - It is not in dispute that the Section 34 proceedings commenced prior to 23.10.2015, which is the crucial date. As to when the amendment would apply is an aspect that is no longer res integra. The arbitrator s conclusions are not in accordance with the fundamental policy of Indian law, and can thus be set aside under the pre-2015 interpretation of S. 34 of the said Act. It is also noted that clause 6 of the Deed of Settlement could not have been relied on to award liquidated damages in favour of the appellant, we agree with the observations of the Single Judge and the Division Bench in this regard. The fault cannot be found with the judgment of the learned Single Judge and the Division Bench to the extent it interferes with the award and sets aside the award - appeal dismissed.
Issues Involved:
1. Nature of the Arbitral Award. 2. Applicability of the Arbitration and Conciliation (Amendment) Act, 2015. 3. Breach of the Deed of Settlement. 4. Interpretation of Clause 6 of the Deed of Settlement. 5. Jurisdictional Challenge under Section 16 of the Arbitration and Conciliation Act, 1996. 6. Setting Aside the Arbitral Award under Section 34 of the Arbitration and Conciliation Act, 1996. Detailed Analysis: 1. Nature of the Arbitral Award: The appellant claimed that the award arose out of an "international commercial arbitration" as per Section 2(1)(f) of the Arbitration and Conciliation Act, 1996, because the appellant was based in Singapore. The court clarified that although the arbitration was conducted within India, it qualified as an international commercial arbitration. However, it was not considered a foreign award under Part II Section 44 of the Act. The distinction between purely domestic awards and domestic awards arising from international commercial arbitration was emphasized, particularly in the context of the scope of interference by courts. 2. Applicability of the Arbitration and Conciliation (Amendment) Act, 2015: The appellant argued that the amended Act should apply, making the test for setting aside the award more stringent. However, the court noted that the Section 34 proceedings commenced before the amendment date of 23.10.2015. Judicial precedents, including the judgments in Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd. and Ssangyong Engineering and Construction Company Ltd. v. National Highways Authority of India, clarified that the 2015 amendments apply prospectively to court proceedings initiated after the amendment date. The general phraseology in Clause 9 of the Deed of Settlement did not constitute an agreement to apply the amended Act. 3. Breach of the Deed of Settlement: The dispute centered on whether the respondent's wife’s emails constituted a breach of the Deed of Settlement. The appellant claimed these emails were defamatory and violated the agreement. The court found that the respondent had complied with the primary conditions of the Deed of Settlement, such as withdrawing complaints and facilitating the sale of shares. The emails, though indiscreet, did not justify denying the respondent his dues under the agreement. 4. Interpretation of Clause 6 of the Deed of Settlement: Clause 6 provided for the return of US$ 1.5 million if the respondent’s assurances were false. The court noted that the respondent had fulfilled his obligations, and the emails from his wife did not amount to a breach of the Deed of Settlement. The respondent could not be penalized for his wife’s conduct, especially since she was not a party to the agreement. 5. Jurisdictional Challenge under Section 16 of the Arbitration and Conciliation Act, 1996: The respondent challenged the arbitrator’s jurisdiction under Section 16, but the arbitrator ruled that the appellant’s claim could not be rejected at the threshold. The proceedings continued, and the arbitrator eventually awarded liquidated damages to the appellant. 6. Setting Aside the Arbitral Award under Section 34 of the Arbitration and Conciliation Act, 1996: The learned Single Judge and the Division Bench of the High Court set aside the arbitral award, finding it contrary to the fundamental policy of Indian law. The court agreed that the arbitrator’s conclusions were not sustainable, given the pre-2015 legal position. The award was found to be a travesty of justice, as it deprived the respondent of his rightful dues based on minor indiscretions by his wife. Conclusion: The Supreme Court upheld the decisions of the learned Single Judge and the Division Bench, setting aside the arbitral award. The appeal was dismissed with costs, affirming that the respondent was entitled to the benefits under the Deed of Settlement despite the emails sent by his wife.
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