Arbitration in India- 10 Landmark Judgements of 2021

March 17, 2023
Arbitration agreement

By Nihit Nagpal and Devika Mehra

  1. Shapoorji Pallonji and Co. Pvt. Ltd. v Rattan India Power Ltd. & Anr., SCC OnLine Del 3688.

    Bids were invited for the performance of civil work related to boilers by IndiaBulls. The contract was given to Shapoorji on behalf of Elena but the letterhead was issued by IndiaBulls. The issue that arose before the court was whether, on invocation of the arbitration clause, the third party to the case (IndiaBulls) can be invited to such arbitration proceedings or not.

    It was held that a third party to the arbitration agreement can be made a party to such agreement based on the doctrine of ‘group of companies’. A non – signatory company is bound by this agreement, subject to the fulfilment of certain conditions. Firstly, affiliation with the parent company where a direct relationship exists with the signatory company; secondly, where the subject matter is also applicable to this company; and thirdly, the party is involved in the disputed transaction[1]. The court cited various judgments to conclude that where a non-binding party to the arbitration agreement notifies and takes part in policy decisions with relation to the conflict, such parties can be made a part of the arbitration agreement.

  2. Inox Renewables Ltd. v. Jayesh Electricals Ltd., 2021 SCC Onlien SC 448.

    The facts of this case pertained to a purchase order placed at Jaipur, but the venue of the arbitration was Ahmedabad. The Gujarat High Court directed the parties to take the matter to the court under whose jurisdiction the transaction had taken place (i.e. at Jaipur). The issue dealt with by the Supreme Court was whether the venue, that is Ahmedabad, is also the seat of the arbitration?
    The Apex Court overturned the decision laid down in BGS SGS Soma[2]and held that the venue of arbitration is also the seat of arbitration. In the instant case, there was no written agreement made by the parties to shift the venue, but the move had been consensual. The Court held that since Ahmedabad had been chosen as the site, it is also to be considered as the seat of arbitration and any further difficulties will be addressed by the Ahmedabad court. The Court overruled the Gujarat High Court’s order and emphasized the mutual agreement on the venue of arbitration and recognised this venue as the seat of arbitration proceedings.

  3. Godrej Properties Ltd. v. Goldbricks Infrastructure Pvt. Ltd., 2021 SCC OnLine Bom 3448

    The Bombay High Court, in agreement with both the parties, appointed an arbitrator. Both the parties moved applications for interim relief, but the adjudication was reserved by the arbitrator in consideration of the Court’s orders. The Respondent filed a second application under the same provision as the first application and the arbitrator passed an ex-parte order for interim relief. Considering the facts, the High Court delved into the validity of ex-parte interim order.
    The Court highlighted Section 18 of the Arbitration Act which puts parties to the agreement on the same pedestal. This becomes relevant considering the notion of audi alteram partem as each party is required to be given an equal opportunity to be heard. The court relied on the provisions of statutory law and observed that parties must not only be treated fairly but be provided with timely notice and sufficient opportunity to put forth their case. The ex-parte interim order was set aside as the party filing the second application had not even been heard. The court further pronounced that in matters arising out of Section 17 of the Act, the tribunals cannot pass an ex-parte interim order, even if they believe that urgent orders are needed.

  4. Gemini Bay Transcription Pvt. Ltd. v. Integrated Sales Service Ltd. and Anr., 2021 SCC OnLine SC 572

    DMC Management Consultants entered into an agreement with Integrated Sales Service to be represented by them. This representation agreement contained an arbitration clause that authorized the laws of the State of Delaware, USA to administer the clauses of the agreement. After the successful completion of two contracts facilitated by Integrated Sales Service, Gemini Bay Transcription created a shadow company and challenged the commission owed to Integrated Sales Service to itself. The issue with the Supreme Court was to decide on enforcement of the foreign award with respect to non-signatory to Arbitration Agreement.
    The Court analysed the nature of foreign decrees and the exceptions on their enforcement. It concluded that the restrictions on enforcement on the basis of public policy should be construed narrowly. The Court recognised the loss faced by Integrated Sales Service and acknowledged the compensation accrued to it. Now, since the arbitrator had applied Delaware State Law (as stipulated in the original agreement) on the conflict, the Appellants claimed non-execution of the foreign award on the ground of ‘Public Policy’. The Apex Court discussed all matters of consideration in the arbitral proceeding and held that the case does not shock the conscience of the courts and passed an order in favour of the Respondents granting them their due compensation.

  5. DLF Home Developers Ltd. v. Rajpura Homes Pvt. Ltd., 2021 SCC OnLine SC 781

    DHDL and Ridgewood Holdings Ltd. invested in a joint venture to construct and maintain properties which was later sold to a company in Mauritius. DHDL filed two petitions to invoke arbitration under the agreements. The respondents claimed that arbitration could be invoked through the agreement for sale, but not from that on construction. The issue before the court was of collusion of both these arbitration clauses.

    The court held that since the parties had agreed to the completion of the process of purchase, no dispute can arise out of this agreement, but since the arbitration clause from the construction agreement stands valid, the seat of arbitration should be decided from it. Further, the merging of both the arbitration clauses was left to the appointed arbitrator. The decision outlined the power of High Courts under Section 11 of the Arbitration and Conciliation Act, 1996. They are powers of review, where the court is empowered to decide the right course of action for dispute settlement after thoroughly examining the material facts of the conflict. The powers of the court are not merely restricted to redirecting the case to the arbitral tribunals, they need to give due consideration to the arbitrability of the matter and further authorise parties to pursue arbitration. This becomes relevant after the 2015 amendment which tends to reduce judicial interference

  6. Delhi Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail Corporation Ltd., 2021 SCC OnLine SC 695

    DMRC through an appeal under Section 37 of Arbitration Act and Section 13 of the Commercial Courts Act, 2015 succeeded in partial setting aside of the arbitral award. The issue at hand was the power of courts to review the award and also of judicial intervention to enforce arbitral awards.

    The court held that setting aside of an award is governed by Section 34 and relies upon multiple judgments to reiterate the judicial authority on reviewing the subject matter of the arbitration. The court discovered that in multiple cases enforcement is dismissed and this results in undermining the authority of arbitral tribunals. The court emphasised that dissection of the dispute by courts corrodes the objective of the Arbitration Act. The judiciary should refrain from reassessing the merits of the case. On the subject of ‘patent illegality’, it was held that every inaccuracy of law cannot be labelled as ‘patent illegality’ and since courts are not witnesses to appeals on the arbitral awards they should further refrain from analysing the case on this aspect.

  7. NV Investment Holdings LLC v. Future Retail Limited, 2021 SCC OnLine SC 145.

    This case pertained to the power of the court to review and decide an appeal on an emergency arbitral award under Sections 17(1) and 17(2) of the Arbitration Act; and whether an emergency arbitral award is appealable or qualifies as an order within the scope of Section 17?

    The Supreme Court observed that the appointment of an emergency arbitrator is within the rules of SIAC and mandated by the statutory provisions of India. The Court further clarified that an emergency arbitrator is well within the ambit of the meaning of arbitral tribunal. The Supreme Court suggested that an emergency arbitral award is akin to the order passed by an arbitral tribunal. This emergency award qualifies under the standards of an order under Section 17 of the Act and is enforceable as a decree. Appeals against an interim order for relief will render the object of arbitration futile. In furtherance of expeditious settlement, the Apex Court declared emergency awards as orders which can be enforced by the High Courts but material consideration are not to be appealed there.

  8. PSA Sical Terminals Pvt. Ltd. v. Board of Trustees of V.O Chidambranar Port Tuticorin and Ors., 2021 SCC OnLine SC 508.

    The Arbitral Tribunal in the instant case issued orders to convert the license agreement from a royalty-based model to revenue sharing model. An arbitration agreement was entered into consensually by both parties, and the tribunal was referenced to the dispute. The issue was whether an arbitral award can be set aside if the Arbitral Tribunal went beyond the scope of the contract?

    The Court mentioned the non-existence of the appellate powers of the court. Further, the court discussed the perversity of an arbitral award to seek non-enforcement on the grounds of ‘patent illegality’. An award is perverse when its findings are not based on evidence; when courts declare based on immaterial facts; and when vital evidence is ignored by a tribunal while arriving at an award. It was held that the arbitration tribunals are bound by the terms of the contract and they cannot alter, modify or add new terms to such contracts. If the arbitrator acts beyond the scope of the contract, his jurisdiction over the matter ceases to exist. The award was made for a term not existing at the time of the dispute and the ignorance of this material evidence rendered the arbitral award liable to be revoked on the ground of ‘patent illegality’.

  9. Laxmi Continental Construction v. State of U.P. and Anr., 2021 SCC OnLine SC 750

    A chief engineer not related to the construction was appointed as a sole arbitrator according to terms agreed upon by both parties. The arbitration was delayed for a significant period, when the final date came in 1996. The arbitrator ceased to be a Central Government employee in 1995 owing to retirement- conditions for appointment of the arbitrator were very specific. Whether such arbitrator can continue to perform his roles even after retirement? It was the virtue of his post that had brought the responsibility of appointment as an arbitrator to him. The issue was whether his mandate had ended, or whether the continuance of his exercise of power amounted to misconduct?

    The arbitrator at the time of appointment qualified under certain conditions and can remain to arbitrate unless he is disqualified by statutory provisions. While relying on a precedent the Apex Court held that his authority as the sole arbitrator will not come to an end on his retirement. He is still empowered and qualified within the arbitration clause to declare awards. On the question of misconduct by the arbitrator, the court said that the arbitrator had acted on the orders of the Civil Judge to pass an award within a month. Hence, he was not liable for misconduct as he was acting on orders of the court.

  10. Garg Builders v. Bharat Heavy Electricals, 2021 SCC OnLine SC 855

    Whether an arbitrator can attract a pendente lite interest when it is specifically barred by the contract? Pendente lite interest is the interest that accrues during the pendency of an award.

    The court held that the process is solely governed by the contract and the arbitrator derives his/her power from the mutual agreement. The relief granted by the arbitrator cannot be beyond the scope of the contract and should be within the limits set by both parties. Herein the sole arbitrator cannot grant this interest accrued on the compensation as it is specifically denied by the parties. The interest barring clause was not ultra vires to Section 28 of the Contract Act as the option to not receive any interest on the award was expressly mentioned in the contract and consented to by both parties. It was further held that tribunals and courts cannot go beyond their powers of being appointed as referees on an agreement. Their appointment and power is limited by the contract and is subject to conditions agreed by the parties. The questions of allowance before the arbitral tribunal are not vast, they are limited in scope on the basis of the agreements forged by the parties.

[1] Mahanagar Telephone Nigam Ltd. v. Canara Bank, 2020 12 SCC 767
[2] Arbitration Case No.74 (CIS No. ARB/118/2017).

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