LATEST CASE LAWS IN ARBITRATION

[Mr. M. GOVINDARAJAN]

Introduction

The Arbitration and Conciliation Act, 1996 (‘Act’ for short) has been enacted for resolution of dispute, depending upon the terms and conditions of the agreement.  Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court.  The parties and arbitrators meet in person to conduct the hearing in which the parties present arguments and evidence in support of their respective cases. After the conclusion of the hearing, the arbitrators deliberate the facts of the case and render a written decision called an award.  The award passed by the arbitrator is binding on the parties to the agreement unless it is challenged before the Court.  The award can be challenged under Section 34 of the Act.  The Court on the application may confirm the award or modify the award or set aside the award.  There are much litigation on arbitration and its procedure and process.  Some of the decided case laws are given in this article for the benefit of the readers.

SARFAESI

In OM PRAKASH KUMAWAT AND RENU KUMAWAT VERSUS HERO HOUSING FINANCE LTD - 2022 (5) TMI 1079 - RAJASTHAN HIGH COURT the High Court held that merely because there exists an arbitration clause between the parties and the respondent having filed an application under section 9 of the Arbitration and Conciliation Act, 1996, the proceedings under the SARFAESI Act cannot be held to be non maintainable.  The proceedings under the SARFAESI Act and the Arbitration and Conciliation Act, 1996 can go hand in hand.

Recalling the order

In UNION OF INDIA VERSUS DELHI STATE CONSUMER CO OPERATIVE FEDERATION LTD. [2022 (5) TMI 975 - DELHI HIGH COURT], the High Court held that an order  of termination of proceedings under Section 25(a) of the Arbitration and Conciliation Act, 1996 can be recalled by the Arbitral Tribunal on the application of the claimant.  The High Court directed the Arbitrator to consider the applications presented by the Union for recall of the orders terminating the arbitral proceedings.

Interest

In DELHI AIRPORT METRO EXPRESS PRIVATE LIMITED VERSUS DELHI METRO RAIL CORPORATION [2022 (5) TMI 977 - SUPREME COURT] the Supreme Court held that the power of the Arbitral Tribunal to award interest would operate if it is not otherwise agreed by the parties.  If there is an agreement between the parties to the contrary, the Arbitral Tribunal would lose its discretion to award interest and will have to be guided by the agreement between the parties.  The Arbitral Tribunal is not bound to award interest.  It has a discretion to award the interest or not to award.  It further has discretion to award interest at such rate as it deems reasonable.  It further has discretion to award interest on the whole or any part of the money.

Second application

In M/S MODERN CONSTRUCTION COMPANY VERSUS STATE OF JHARKHAND - 2022 (5) TMI 1109 - JHARKHAND HIGH COURT, the applicant made fresh request for appointment of arbitrator in view of arbitration clause, since, the dispute as has been raised will be said to have not resolved due to quashing and setting aside of the award by the order passed by the Court of Law.  The Jharkhand High Court ruled that a second application for the appointment of arbitrator can be filed even though no liberty has been granted by the Court while setting aside the Arbitral Award.

Termination of arbitration

In SWADESH KUMAR AGARWAL VERSUS DINESH KUMAR AGARWAL & ORS, ETC., ETC. - 2022 (5) TMI 306 - SUPREME COURT, the Madhya Pradesh High Court in exercise of powers under section 11(6) of the Act terminated the mandate of sole arbitrator appointed by the parties themselves.  The High Court also appointed a fresh arbitrator on the ground that the mandate of sole arbitrator stood terminated in view of Section 14(1)(a) of the Act.  On appeal the Supreme Court held that-

• Once the dispute is referred to arbitration and the sole arbitrator is appointed by the parties by mutual consent and the arbitrator is so appointed the arbitration agreement could not be invoked for the second time.
• In a case where there is a dispute or controversy on the mandate of the arbitrator being terminated on the ground mentioned in section 14(1)(a) such a dispute has to be raised before the ‘Court’ as defined under section 2(e) of the Act and such a dispute cannot be decided on an application filed under section 11(6) of the Act.

Nonpayment of stamp duty

In N.N. GLOBAL MERCANTILE PVT. LTD. VERSUS INDO UNIQUE FLAME LTD. AND ORS. - 2021 (1) TMI 1121 - SUPREME COURT, the Supreme Court held that when parties entered into a commercial contract containing an arbitration clause, they essentially entered into two separate agreements viz., firstly, the substantive contract and secondly, the agreement to arbitrate.  The arbitration agreement’s autonomy came out of the twin concepts of severability of an arbitration agreement kompetenz-kompetenz principle.    The Supreme Court further held that stamp act was a fiscal measure that was enacted to secure the revenue of the State in      certain classes of instruments.  The nonpayment of stamp duty under the Stamp Act would make the substantive contract inadmissible as evidence.  However such a defect was curable and would no longer exist if the stamp duty was paid.  Since no stamp duty was prescribed for an arbitration agreement in the Stamp Act, there would be no legal impediment to the enforceability of the arbitration agreement in the instant matter.

Sole proprietorship whether falls under international commercial arbitration?

In AMWAY INDIA ENTERPRISES PVT. LTD. VERSUS RAVINDRANATH RAO SINDHIA & ANR. - 2021 (3) TMI 245 - SUPREME COURT the Supreme Court held that an analysis of section 2(1)(f) of the Arbitration Act would show that in any transaction if at least one of the parties is a foreign national, or habitually resident in, any country other than India; or by a body corporate which is incorporated in any country other than India; or by the government of a foreign country, the arbitration becomes the international commercial arbitration notwithstanding the fact that the individual, body corporate, or government of a foreign country referred to in Section 2(1)(f) carry on business in India through a business office in India. 

Moratorium under Insolvency

In INDUS BIOTECH PRIVATE LIMITED VERSUS KOTAK INDIA VENTURE (OFFSHORE) FUND (EARLIER KNOWN AS KOTAK INDIA VENTURE LIMITED) & OTHERS - 2021 (3) TMI 1178 - SUPREME COURT, the Supreme Court held that any proceeding which is pending before the National Company Law Tribunal under section 7 of the Insolvency and Bankruptcy Code, 2016, if such petition is admitted upon the National Company Law Tribunal recording the satisfaction with regard to the default and the debt being due from the corporate debtor, any application under Section 8 of the Arbitration Act made thereafter will not be maintainable.

In SIRPUR PAPER MILLS LIMITED VERSUS I.K. MERCHANTS PVT. LTD. (FORMERLY KNOWN AS I.K. MERCHANTS) - 2021 (5) TMI 494 - CALCUTTA HIGH COURT the Calcutta High Court held that an application for setting aside an arbitral award under Section 34 of the Act was filed before the High Court.  During the pendency of the proceedings corporate insolvency resolution process were initiated against the petitioner and subsequently a moratorium was also brought into effect under Section 14 of the Insolvency and Bankruptcy Code, 2016.  The High Court noted that the respondent had sufficient opportunities to approach the National Company Law Tribunal for appropriate relief.  Hence the respondent was under an obligation to take active steps under the Insolvency and Bankruptcy Code, 2016, instead of waiting for the adjudication of the application under Section 34 of the Arbitration Act.  The High Court found that firstly, the respondent was free to enforce the award against the petitioner, especially in the absence of an application for stay under the amended provision of section 36 of the Arbitration Act.  Secondly the respondent could have pursued its claim before a forum contemplated under the Insolvency and Bankruptcy Code, 2016.  The High Court thus concluded that the claim of the award holder had extinguished upon the approval of the resolution plan under section 31 of the Insolvency and Bankruptcy Code, 2016.