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50 Landmark Decisions on Arbitration Law in India

(2018-2019) - Part I
Bar & Bench April 6 2019

2,839

Tariq Khan

The malaise of the Indian Courts articulated in Guru Nanak Foundation v. Rattan Singh and Sons, is as
true today as it was so many years ago. In that case, Justice DA Desai succinctly stated:

"Interminable, time consuming, complex and expensive Court procedures impelled jurists to search for
an alternative Forum, less formal, more e ective and speedy for resolution of disputes, avoiding
procedural claptrap and this led them to Arbitration Act, 1940.
 However, the way in which the proceedings under the Act are conducted and without exception
challenged in Courts, has made Lawyers laugh and legal philosophers weep...Informal Forum chosen by
the parties for expeditious disposal of their disputes has by the decisions of the Court been clothed with
'legalese' of unforeseeable complexity."

The UNCITRAL Model Law, on which the Arbitration Act is based, also aims to, “protect the arbitral
process from unpredictable or disruptive court interference” as this is, “essential to parties who choose
arbitration (in particular foreign parties)".

Arbitration in India is often criticized due to unruly court interference. However, recent judicial
pronouncements indicate that Indian courts are taking an increasingly pro-arbitration stance. 

Following are the 50 landmark decisions delivered by the Indian Courts on Arbitration law in 2018-
2019.

SECTION 7

Whether Arbitration Agreement can be binding on Non-Signatory to the Agreement?

1. Cheran Properties Ltd. v. Kasturi and Sons Ltd. & Ors. Civil Appeal 10025/2017

While observing the principle enunciated in Chloro Controls that a non-signatory may also be bound by
an arbitration agreement in certain cases, the Court held that the group of companies doctrine is
essentially intended to facilitate the ful llment of a mutually held intent between the parties, where the
circumstances indicate that the intent was to bind both signatories and non signatories.

The e ort is to nd the true essence of the business arrangement and to unravel from a layered
structure of commercial arrangements, an intent to bind someone who is not formally a signatory, but
has assumed the obligation to be bound by the actions of a signatory.

Non-parties to an Arbitration Agreement cannot be made party to an Arbitration, Delhi High

Court [Read Judgment]

2. R.V. Solutions Pvt. Ltd. v. Ajay Kumar Dixit & Ors. 2019 SCC Online Del 6531 CS Comm 745/2017

The Delhi High Court held that a non-signatory or third party could be subjected to Arbitration without
its consent, only in exceptional cases. There needs to be either a direct relationship to the signatory
party of the Arbitration Agreement, or commonality of the subject matter, or composite transactions in
the agreement between the parties.

[Also See: Ameet Lal Chand v. Rishabh Enterprises SLP (c) 16798/2017]

Incorrect reference regarding the applicability of the Indian Arbitration Act, 1940 would not
render the entire Arbitration Agreement invalid

3. Purushottam S/o Tulsiram Badwaik v. Anil & Ors. Civil Appeal No.4664 of 2018

The Bench of Justice Arun Mishra and Justice UU Lalit of the Supreme Court observed that even if an
arbitration agreement entered into after the 1996 Act had come into force were to make a reference to
the applicable provisions of those under Indian Arbitration Act or 1940 Act, such stipulation would be
of no consequence and the matter must be governed under the provisions of 1996 Act. Further, the
Court held that an incorrect reference or recital regarding the applicability of the 1940 Act would not
render the entire arbitration agreement invalid.

4. Mother Boon Foods Pvt Ltd v. Mindscape One Marketing Pvt Ltd O.M.P. (COMM) 136/2017
The Court held that an arbitration agreement, as per the 1996 Act, has to be in writing. Since the
arbitration clause -which is a part of the contract - was in writing, the same could not have been
superseded by any oral demand or agreement.

[Also See: Shyam Sunder Agarwal v. P. Narotham Rao And Ors. Civil Appeal No. 6872 of 2018 and
Varinder Pal Singh & Anr Versus BPTP Ltd ARB.P. 350/2017]

SECTION 8

Whether Arbitration Clause can oust the jurisdiction of consumer forums?

5. M/S Emaar MGF Land Limited & Anr. v. Aftab Singh, 2018 SCC Online SC 2771

The Supreme Court upheld the NCDRC’s decision whereby it ruled that an Arbitration Clause in a
Buyer’s Agreement cannot circumscribe the jurisdiction of a Consumer Fora, notwithstanding the
amendments made to Section 8 of the Arbitration Act.

Referring Parties to Arbitration has serious civil consequences

6. Kerala State Electricity Board and Anr. v. Kurien E. Kathilal- Civil Appeal Nos.3164-3165 of 2017

Referring the parties to arbitration has serious civil consequences procedurally and substantively.
When there was no arbitration agreement between the parties, without a joint memo or a joint
application of the parties, the High Court ought not to have referred the parties to arbitration, the
Supreme Court held in this case.

SECTION 9

Section 9 of the Arbitration Act cannot bypass Section 41 of the Speci c Relief Act

7. Parsoli Motor Works (P) Ltd. v. BMW India P Ltd. 2018 SCC Online Del 6556

The Delhi High Court held that injunctions that cannot be granted under Section 41 of the Speci c
Relief Act, cannot be granted under Section 9 of Arbitration Act, 1996 either.

Related: Cabinet approves Ordinance to establish New Delhi International Arbitration Centre

SECTION 11

Arbitral Clause to be strictly construed

8. Oriental Insurance Company Limited v. M/s Narbheram Power and Steel Pvt. Ltd. Civil Appeal No.
2268 of 2018

The Supreme Court held that an arbitration clause is required to be strictly construed. Any expression
in the clause must unequivocally express the intent of arbitration.

[Also See: United India Insurance Co. Ltd. & Anr. v. Hyundai Engineering and Construction Co. Ltd. &
Ors 2018 SCC Online SC 1045]

Appointment of Arbitrator cannot be challenged under Section 11 (6) of the Arbitration and
Conciliation Act, 1996

9. Sp Singla Constructions Pvt. Ltd. v State of Himachal Pradesh & Anr. 2018 SCC Online SC 2673
Issuance of notice of request under Section 11 is mandatory for ling an application therein 

10. Golden Chariot Recreations Pvt Ltd. v Mukesh Panika & Anr. 2018 SCC online del 10050

Whether an agreement which is not adequately stamped would disable the Court from acting
upon the Arbitration clause incorporated in the Agreement

11.Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engineering Ltd. Civil Appeal
No.3631/2019

The Court held that the High Court must impound the instrument which has not borne stamp duty and
hand it over to the Authority who will then decide issues qua payment of stamp duty and penalty (if
any) as expeditiously as possible, and preferably within a period of 45 days from the date on which the
authority receives the instrument. As soon as the stamp duty is paid on the instrument, any of the
parties can bring the instrument to the notice of the high court which will then proceed to expeditiously
hear and dispose of the Section 11 application.  "

Jurisdiction of Court

12. BHEL v. Uttar Pradesh Rajya Vidhyut Utpadan Nigam Limited Arb. P 78/2019]

Relying on AAA Landmark Pvt. Ltd. vs. AKME Projects Ltd. & Ors, the Supreme Court held that where the
parties agree not to insist upon the exclusive jurisdiction clause in an Agreement or raise such
objection, and by their conduct, waive such condition/submit themselves to another Court’s
jurisdiction, it cannot be said that the Court other than the one in which exclusive jurisdiction has been
vested, would be without jurisdiction.

Related: Arbitration Act: A Section 11 Handbook for Respondents

Fees prescribed in the Fourth Schedule of the Act is only suggestive

13. Paschimanchal Vidyut Vitran Nigam Limited v. M/S IL & FS Engineering & Construction Company
Limited O.M.P.(MISC.)(COMM.) 164/2018

The question before the Delhi High Court was whether the provisions of the Fourth Schedule of the Act
pertaining to the fee to be paid to the arbitrators would apply to domestic ad hoc arbitrations where
parties have not approached the Court for the constitution of an Arbitral Tribunal.

It was held that the provision with regard to fees contained in Section 11(14) of the Act is only an
enabling provision. The concerned High Court has been given the leeway to frame rules, if it chooses to
do so. Since the parties did not approach the Court for the constitution of the Arbitral Tribunal, the
Court would have no role to play in xing the fees of the Arbitral Tribunal as no such power is vested in
the Court. Further, provisions of sub-section (14) of Section 11 clearly indicate that the fee prescribed in
the Fourth Schedule of the Act is only suggestive. 

14. NCC Limited v Indian Oil Corporation Limited 2019 SCC online Del 6964

The Court observed that the insertion of Section 11(6A) by the Amendment Act, 2015 has considerably
narrowed down the scope of examination by the Court. It is con ned only to the existence of an
Arbitration Agreement, relatable to the dispute at hand.

Court can appoint independent arbitrator only after resorting to the procedure in the
Arbitration Agreement

15. Union of India v. Parmar Construction Company Civil Appeal No (s). 3303 of 2019
SECTION 12 AND 13

Whether disclosing only the major requirement of Schedule VI of the Arbitration Act, 1996 and
leaving other relevant aspects of the said Schedule would amount to improper disclosure?

16. Goel Construction Co. Pvt. Ltd. v. ICAI O.M.P. (T) (Comm.) 120/2018

The Court held that the Arbitrator was under a misconception that he need not disclose the other
relevant aspects of the Sixth Schedule to the Act. Further, it was held that compliance with the major
requirement of the said Schedule is not enough, and the Court directed the Arbitrator to give full
disclosure in terms of the Sixth Schedule of the Act.

17. Manish Anand & Ors. v. Fiitjee Ltd., 2018 SCC Online Del 7587

The Court held that though the disclosure is not in terms of the Sixth Schedule of the Act, if it discloses
the most vital aspect of the same, the mandate of the Arbitrator cannot be terminated.

Whether after the coming into force of the Arbitration and Conciliation (Amendment) Act, 2015
and in view of Section 12 (5) of the Act, the appointment of the arbitrator by the Managing
Director is null and void.

18. Worlds Window Infrastructure & Logistics Pvt. Ltd. v. Central Warehousing Corporation [ARB.P.
437/2018] O.M.P. (T) (COMM.) 45/2018

The Delhi High Court held that that the amendment to the Act does not in any way take away the
power vested in one of the parties to the Arbitration Agreement to appoint an Arbitrator. In such
agreements, the burden of ensuring that the person so appointed shall not fall foul of any of the
provisions of the Fifth or the Seventh Schedule of the Act will be even higher and open to greater
scrutiny.

Related: Time for Insurance Companies to respect the remedy of Arbitration

19. TRF Ltd v. Energo Engineering Projects Ltd Civil Appeal No. 5306 of 2017

Once the arbitrator has become ineligible by operation of law, he cannot nominate another as an
arbitrator. It is inconceivable in law that a person who is statutorily ineligible can nominate a person.
Needless to say, once the infrastructure collapses, the superstructure is bound to collapse. 

SECTION 14 AND 15

20. National Highways Authority OF India v. Gammon Engineers and Contractor Pvt Ltd O.M.P. (T)
(Comm.) 39/2018

The Court held that the Arbitral Tribunal cannot accept the appointment in part and rewrite the
arbitration agreement between the parties.

SECTION 26

21. Precious Sapphires Ltd v. Amira Pure Foods Private Ltd. EX.P. 330/2015

It was held that the Arbitration and Conciliation Act, 1996, being a special statute, shall prevail over the
Delhi High Court Act, which would be a general statute dealing with the jurisdiction and procedure of
the High Court. Further, it was held that Section 26 of the Amending Act does not exclude the
application of the amended Explanation to Section 47 of the Act to proceedings pending in the High
Court on that date.
SECTION 29 A 

22. Republic of India v. Agusta Westland International Ltd. 2019 SCC Online Del 6419

Section 29A of the Arbitration and Conciliation Act, 1996 is not applicable to proceedings already
initiated in terms of Section 21 of the Principal Act i.e. prior to coming into force of the 2015
Amendment Act. 

SECTION 31

Whether an Arbitral Award can be set aside on the ground that one of the members of the
Arbitral Tribunal had withdrawn from the Arbitration proceedings prior to the pronouncement
of the award?

23. CIMMCO LTD. versus Union of India O.M.P. (COMM) 297/2016

The Court held that if this question is answered in the a rmative, then any party which is unhappy
with the manner in which the Arbitral Tribunal is proceeding in a given matter can inspire its nominee-
Arbitrator on the Arbitral Tribunal to withdraw from the arbitration proceedings at the last hour. 

Further, the Court relied on Section 31(2) of the 1996 Act to hold that where the Arbitral Tribunal
comprises more than one arbitrator, the signatures of the majority of all members of the Arbitral
Tribunal would be su cient for framing an Award, so long as reasons are given for any omitted
signature. 

SECTION 33

24. M/s Chandok Machineries v. M/s S.N. Sunderson & Co. 2018 SCC Online Del 12782

In this case, the Arbitral Award was signed by the Third Arbitrator after the mandate of the Arbitral
Tribunal had terminated. However, the reasons for the delay in signing the Award were set out in an
order on an application under section 33(1)(a) led by the respondent. 

The challenge under Section 34 was raised on the ground that mandate of the Arbitral Tribunal had
terminated prior to the signing of Award by the third Arbitrator. The Court observed that a procedural
irregularity of this nature ought not to vitiate the entire decision-making process, particularly when it is
capable of being cured. Since the reasons for the delay in the signing were stated in the Order of
application under section 33, the lacuna of the Award was cured.

To be continued.

The author is a Senior Associate at Advani and Co.

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