Hello and welcome back, arbitration enthusiasts! Our newsletter is your compass to cutting-edge insights, simple strategies, and the latest in arbitration. Happy reading!
In an important development, the Expert Committee on Arbitration Law led by Shri Dr. T.K. Vishwanathan has recommended a complete overhaul of the Arbitration and Conciliation Act, 1996 (Arbitration Act), in its report dated 07.02.2024.
Key recommendations:-
- Amendment of Sections 2(2), 20(1), 20(2), 20(3), 28(1) and 31(4) to insert the terms “seat” and “venue” instead of “place” wherever it occurs in the Arbitration Act. As per the Expert Committee, this will bring the Arbitration Act in consonance with internationally accepted practices and judgments of Supreme Court of India.
- Amendment to the definition of ‘Court’ to include Courts having first and foremost jurisdiction over the ‘seat’ of arbitration. Additionally, for institutional arbitrations having a specified value of Rs.50 crore or higher, the original jurisdiction shall lie only with the High Court having jurisdiction over the seat of arbitration
- Amendment to Section 6 in order to include techno-legal utilities in order to assist arbitral tribunals. These techno-legal services include, but are not limited to, secure online platforms for efficient document sharing, technological support for transcription, recordings and virtual hearings and cybersecurity measures.
- Amendments to Section 7 to allow arbitral tribunals to act upon and take into evidence an unstamped or insufficiently stamped arbitration agreement.
- Amendments to Section 9 mandating commencement of arbitration proceedings within 30 days from the date of filing of such application.
- Amendments to Section 12 by inserting a provision for Emergency Arbitrations and enforcement of awards passed thereto.
- Amendments to Section 16 to, inter alia, provide for expeditious disposal of these applications by Arbitral Tribunals.
- Amendment to Section 17 by inserting a new sub-section granting power to arbitral tribunal to confirm, vacate or modify the ad interim measures granted by Section 9 Court or Emergency Arbitrator.
- Amendment by insertion of new Section 18 mandating disclosure of identity of non-party which is funding a party to the arbitration.
- Amendment of Section 19 to provide for model Rules of Procedure to be specified in Eight Schedule, with appropriate modifications.
- Amendments of Section 31 for award of interest and costs in the arbitration proceedings.
- Amendment to Section 37 to provide for appeal against an order rejecting or accepting the objection raised under Section 16 (2) and (3) of the Arbitration Act.
- Omission of Schedule IV providing for fees of the arbitral tribunal.
Rendezvous – Indian Courts and Arbitration
Referred to larger bench – Whether Courts can modify Arbitral Award under Section 34 or 37 of Arbitration Act: Supreme Court refers to larger bench – Gayatri Balasamy vs. M/s ISG Novasoft Technologies Limited [SLP (C) Nos. 15336 – 15337/2021]
A three-judge bench of the Hon’ble Supreme Court of India, while noting conflicting judicial decisions on ‘whether Courts can modify arbitral award(s) under Section 34 or Section 37 of the Arbitration and Conciliation Act, 1996’, has referred the question to a larger bench.
While doing so, the Supreme Court noted that on hand, a line of decisions answers the aforesaid question in the negative, but on the other hand, there are several decisions which have either modified the awards of the arbitral tribunal or upheld orders under challenge, thereby modifying the awards.
The authors believe that while “modification of an award” may not be in line with international practice, domestic arbitration in India is beset with multiple levels of appeals that can take substantial time for disposal. Therefore, setting aside versus modification of the award ultimately leads to frustration with the objective of time and cost efficiency.
Supreme Court recommends amendment to Section 11(6) of the Arbitration Act – M/s Arif Azim Co. Ltd. vs. M/S Aptech Ltd. [Arbitration Petition No. 29 of 2023]
The Supreme Court has laid down a two-pronged test to be applied by courts, while considering the issue of limitation in filing an application under Section 11(6) of the Arbitration Act. Firstly, whether the petition under Section 11(6) of the Arbitration Act is barred by limitation; and secondly, whether the claims sought to be arbitrated are ex-facie dead claims and are thus barred by limitation on the date of commencement of arbitration proceedings. If either of these issues is answered against the party seeking referral of disputes to arbitration, the court may refuse to appoint an arbitral tribunal.
While doing so, the Supreme Court held that as per Article 137 of the Limitation Act, the right to apply for the appointment of an arbitrator reckons after the lapse of 30 (thirty) days period from the date of receipt of notice under Section 21 of the Arbitration Act and continues for 3 (three) years. This period of 3 (three) years, the Supreme Court expressed, is unduly long and goes against the very spirit of the Act, 1996 which provides for expeditious resolution of commercial disputes within a time-bound manner.
Mandate under Section 29A can be extended, if the Award is rendered during the pendency of such application – National Skill Development Corporation vs. Best First Step and Ors. [O.M.P. (Misc.) (Comm.) No. 608 of 2023]
The Delhi High Court while reconciling its prior judgments in Powergrid Corpn. of India Ltd. v. SPML Infra Ltd. 2023 SCC OnLine Del 8324 and Harkirat Singh Sodhi v. Oram Foods (P) Ltd. 2023 SCC OnLine Del 3674 has clarified the position of law and held that where a Section 29A Application is filed prior to the award having been delivered, and the award is delivered during the pendency of such application, the same would be maintainable. However, a petition filed after the award is delivered and proceedings for setting aside have been instituted, is not maintainable. The Court also reiterated the already settled position of law that a petition under Section 29A of the Act can be filed even after the mandate has expired.
Arbitral Awards passed under MSMED Act cannot be challenged by invoking writ jurisdiction – State Trading Corporation of India Ltd. vs. Micro and Small Enterprises Facilitation Council Delhi and Anr. [LPA 91/2024]
Recently, the Hon’ble High Court of Delhi, affirmed the order of a learned Single Judge and held that a writ petition under Articles 226 / 227 of the Constitution for setting aside the Award was not maintainable and the learned Single Judge has rightly dismissed the writ petition.
While doing so, the Court also relied upon the recent decision of the Supreme Court in M/s India Glycols limited and Anr. vs. Micro and Small Enterprises Facilitation Council, Medchal – Malkajgiri and Ors. to hold that Section 18 of MSMED Act provides for a statutory remedy under Section 34 of the Arbitration Act. The Court further noted that entertaining such writ petitions would bypass the pre-deposit requirement under Section 19 of MSMED Act and that the requirement of pre-deposit cannot be mischievously avoided by invoking writ jurisdictions.
Specific reference in contract to an arbitration clause contained in another document necessary for application of Arbitration Act: M/s Mac Associates vs. Parvinder Singh [FAO (Comm.) No. 261/2023]
Recently, the High Court of Delhi, while affirming the findings of a Commercial Court, held that an explicit and specific reference to the arbitration clause contained in another document is necessary for its inclusion in the subsequent contract. In the said case, it appears that two separate works were being executed by the contractor. The first contract contained a dispute resolution clause, referring parties to arbitration. However, the subsequent work order only gave a general reference to the first contract and fell short of incorporating the terms of the said contract into the subsequent work order.
The Hon’ble High Court examined the scope of Section 7 (5) of the Arbitration Act i.e., arbitration agreement by reference in a contract. The Court relied upon the decision of the Supreme Court in M.R. Engineers & Contractors (P) Ltd. vs. Som Datt Builders Ltd. (2009) 7 SCC 696 and held that the arbitration clause from the main contract between could not be incorporated into the work order through a general reference.
Challenge to an award on grounds of arbitrator bias, cannot be done for the first time under Section 34 of the Arbitration Act – Allied-Dynamic Joint Venture vs Ircon International Ltd., Delhi (OMP (Comm.) No. 451 of 2016)
The Delhi High Court clarified that challenging an arbitral award on the grounds of arbitrator bias is not permissible if such a challenge was not brought up during the arbitration proceedings. The petitioner fully participated in the arbitration without challenging the tribunal’s jurisdiction based on bias. Although the petitioner claimed to have raised the issue of bias through letters, no formal adjudication or request for a change of arbitrator based on bias was made during the proceedings. Moreover, no action was taken to address the allegation of bias. Therefore, the award cannot be challenged under Section 34 of the Arbitration and Conciliation Act, 1996.
Hyundai Construction Equipment India Pvt. Ltd vs. Saumya Mining Limited and Another (Arbitration Petition No. 32 of 2022)
The Bombay High Court dismissed an application for the appointment of an arbitrator on the ground that it lacked jurisdiction. The Court while doing so, relied on the Supreme Court rulings in the matters of BGS SGS Soma v. NHPC Limited and M/s Ravi Ranjan Developers Private Limited v. Aditya Kumar Chatterjee to reiterate that under Section 42 of the Arbitration Act, the earliest application having been made to the Court in which part of the cause of action arises would have exclusive jurisdiction to hear all matters. It was held that an application made under Section 11 of the Act for the appointment of an arbitrator cannot be moved before any High Court in India, irrespective of its territorial jurisdiction.
Arbitration Highlights – Global
The Court of Arbitration for Sport (CAS) upholds the International Olympic Committee’s (IOC) decision to suspend the Russian Olympic Committee (ROC): CAS, a global organization dedicated for resolving sports-related disputes through arbitration has dismissed the appeal filed by ROC seeking reversal of order passed by IOC suspending it. IOC ruled that ROC’s decision to declare Ukrainian’s organization under Russian authority and attempt to absorb Ukrainian sports organization violated the Olympic Charter by compromising the territorial integrity of the National Olympic Committee.
DISCLAIMER
The content provided in this newsletter is intended for general awareness purposes only and should not be considered as legal advice. Readers are advised to consult with a qualified legal professional regarding any specific issues mentioned herein.
We welcome your comments and suggestions. For any comments, suggestions or further clarifications, please contact us at knowledge@sarthaklaw.com.
Thank you for reading! We will be back in your inbox soon with more updates. Until then, stay safe and stay healthy!