ARBITRATION – LATEST JUDICIAL DECISIONS

[Mr. M. GOVINDARAJAN]

Arbitration is the alternative dispute resolution available to resolve the commercial disputes either domestically or internationally.  The readers may know the procedures involved in the said Act. In this article the latest judicial decisions are discussed which involve various issues.

Preliminary issue

In ‘N.R.C. Limited V. Kalyan Dombivli Municipal Corporation and another’ - 2015 (2) TMI 483 - BOMBAY HIGH COURT it was held that where the reference to arbitration is made without the intervention of the Court, the arbitral tribunal can decide the question affecting its jurisdiction, one of which is the existence of arbitration agreement.  But where the intervention of the Court is sought for the purpose, the Court has the discretion to decide the preliminary issue of existence and validity of arbitration agreement. The same principle will have to apply an application for reference to arbitration made under Section 8.

Jurisdiction of Court

Section 2(1)(e) contains an exhaustive definition making out only the Principal Civil Court of jurisdiction or a High Court having original jurisdiction of the State and no other as ‘Court’ for the purposes of Part I of the Act. The expression ‘with reference to an agreement’ makes it clear that Section 42 will apply to application made after the arbitration proceedings have come to an end provided they are made under Part I.

In ‘State of West Bengal V. Associated Contractors’ - 2014 (10) TMI 437 - SUPREME COURT the State of West Bengal filed an application under Section 34 to set aside the arbitral award before the Principal Civil Court of the District Judge at Jalpaiguri.  Against this the respondent filed a writ petition before the High Court. The High Court, Calcutta allowed the petition holding that the High Court of Calcutta in its ordinary original civil jurisdiction is only the principal court which can entertain an application for setting aside the award. The Supreme Court, on the appeal filed by the State of West Bengal that nothing has been shown as to how the High Court of Calcutta does not possess jurisdiction. The order passed by Calcutta High Court is correct and does not need any interference.

Appointment of arbitrator by Court

In ‘Utkal Galvanizars Limited V. Power Grid Corporation of India Limited 2015 (2) TMI 484 - DELHI HIGH COURT the Delhi High Court held that since the respondent had invoked the arbitration clause and the petitioner had failed  to nominate his arbitrator in terms of the agreement, the respondent has rightly nominated his arbitrator as sole arbitrator. The High Court has, therefore, no jurisdiction to appoint any other person as arbitrator.

Existence of arbitrable dispute

In  ‘New India Assurance Co., Limited V. Genus Power Infrastructure Limited’ - (2014 (12) TMI 1115 - SUPREME COURT) the respondent issued a notice to the appellant that the discharge voucher was signed under extreme duress, coercion and undue influence exercised by the appellant who took undue advantage of the extreme financial difficulties of the respondent. The respondent further sought to appoint its nominee arbitrator.  The appellant contended that there was no arbitral dispute at all.  The Delhi High Court appointed a sole arbitrator on the application held by the respondent.  The Supreme Court held that upon execution of the letter of subrogation there was full and final settlement of the claim. There was no arbitrable dispute existed so as to exercise power under Section 11 of the Act. The High Court was not justified in exercising power under Section 11 of the Act.

Two tier arbitration

In ‘Steel Authority of India Limited V. Engineering Project India Limited’ 2015 (2) TMI 485 - DELHI HIGH COURT the contract was substituted by an arbitration agreement the resolution of their disputes through PMA, which contained two tier mechanism i.e., arbitrator and appellate authority.  SAIL initiated proceedings under PMA and filed its claim before the sole arbitrator who passed award partly in favour of SAIL and also partly allowed the counter claim of EPIL. The Appellate Authority increased the amount of award to EPIL  The present petitioner SAIL contended that the arbitration agreement excludes the judicial review.  The High Court did not accept the contention of the SAIL.  The High Court held that the Act does not provide for two tier arbitration procedure. The High Court further held that SAIL had voluntarily accepted the two tier arbitration and did not impugn the same. Thus the validity of two tiered arbitration agreement need not be considered in this petition.

Invocation of Bank guarantee

In ‘Vintec Electronics Private Limited V. HCL Technologies Limited’ - 2007 (11) TMI 588 - SUPREME COURT the Supreme Court held that the process of arbitral proceedings is not a ground to restrain the invocation of the bank guarantee especially when there is no allegation that it would not be difficult to realize the amount from the respondent.

In ‘RPP Infra Projects Limited V. NTPC, TN Energy & another’ 2015 (2) TMI 486 - DELHI HIGH COURT the Delhi High Court held that merely pendency of a reference before the arbitration is not a ground to issue restrain order to the bank guarantee.  The High Court further held that the pendency of the arbitration proceedings also is not a ground to restrain the respondent from invoking bank guarantee.

In ‘Voltas Limited V. NCC Limited and another’ 2015 (2) TMI 487 - DELHI HIGH COURT the petition has been filed under Section 9 of the Arbitration and Conciliation Act, 1996 for the relief that the respondent No.1 be restrained from invoking three bank guarantees. The High Court held that the petitioner cannot be said to be suffered an irretrievable injury if the stay is not granted to it.  The petitioner is not entitled to any relief.

Objection to the award

Section 34 of the Act provides for filing an application for setting aside the arbitral award. In ‘Mukesh Nanji Gala and others V. M/s Heritage Enterprises & another’ 2015 (2) TMI 488 - BOMBAY HIGH COURT none of the members of the society were parties to the development agreement entered between the respondent No. 1 and the society. Since the society did not challenge the impugned award and the award affects the rights of the members, the petitioners, who are the members of the society filed the present petition challenging the award.  The High Court held that the arbitral tribunal is a private forum and gets jurisdiction to adjudicate upon the dispute between the parties to the agreement and not the persons who are not parties to the arbitration agreement.