Landmark Cases in Arbitration Law

Following are some of the landmark and impressive judgments delivered by

the Indian Courts on Arbitration law.

Salem Advocates Bar Association 2005 (S.89

CPC)
Salem Advocates Bar Association v Union of India, (AIR 2005 SC 3353)
is a leading case that redefined the contours of civil litigation in India in a
quite meaningful way.

In addition to deliberating on various provisions of the Civil Procedure Code

1909, this case also delved into the various facets of Arbitration.

The court held that the Arbitration and Conciliation Acts of 1996 and 1987 do
not contemplate a situation where the Court asks the parties to choose any
one of the ADR mechanisms, namely, arbitration, conciliation, or Lok Adalat.

These Acts, thus, are applicable only from the stage after the reference is
made under S.89 of the Civil Procedure Code 1909 (CPC).

It was held further that in view of the right to a speedy trial being implicit in
A.21 of the Constitution, and in order to provide fair, speedy, and
inexpensive justice to the litigating public, the Supreme Court has
recommended that High Courts adopt, with or without modification, the
model Civil Procedure Alternative Dispute Resolution and Mediation Rules
framed by the Law Commission of India.

nd the rules so framed by the High Courts are to supplement the rules
framed under the Family Court Act, 1984.

KK Modi v KN Modi 1998 (Expert Determination)

The highlights of the KK Modi v KN Modi, (AIR 1998 SC 1297) include-

An expert’s determination is not enforceable like an arbitral award. Nor it can

be challenged in a court of law.
Expert determination is the referral of a dispute to an independent third
party, who uses her expertise to resolve a dispute.

Such determination is helpful for determining valuation, intellectual property,

or accounting disputes. The expert is not required to give reasons for her
determination.

To look whether the agreement between parties contemplates an arbitration

or expert determination, one has to examine the true intent and purpose of
the agreement. The terminology “arbitrator” or “arbitration” is persuasive,
but not always conclusive.

Grid Corporation of Orissa v Indian Change

Chrome Ltd 1998 (Arbitration under other
Statutes)
In the Grid Corporation of Orissa v Indian Change Chrome Ltd., (AIR 1998
Ori 101), the court held that there are a large number of Central and State
Acts, which specifically provide for arbitration in respect of disputes arising
out of matters covered by those enactments.

Instances of such enactments are the Electricity Act, 1910 and the Electricity
(Supply) Act, 1948.

Since such arbitration would also be governed by the 1996 Act, the provision
for statutory arbitration in such legislation is deemed to be an arbitration
agreement.

Union of India v East Coast Boat Builders and

Engineers Ltd 1999 (Domestic and International
Arbitration)
The court in Union of India v East Coast Boat Builders and Engineers Ltd.
(AIR 1999 Del 44), held that the Arbitration Act of 1996 seeks to consolidate
and amend the law relating to domestic arbitration, international commercial
arbitration, enforcement of foreign arbitral awards and to define the law
relating to conciliation, taking into account the UNCITRAL Model Law and
Rules.
The Model Law and Rules, however, do not become part of the 1996 Act, so
as to become an aid to construe the provisions of the 1996 Act.

P. Anand Gajapathi Raj v PVG Raju, 2000

(Reference to Arbitration)
In P. Anand Gajapathi Raj v PVG Raju, (AIR 2000 SC 1886), the court held
that under the 1996 Arbitration Act, there is no provision for reference to
arbitration by the intervention of the Court.

S.5 of the 1996 Act limits the role of the judiciary in matters of arbitration,
which is in consonance with the object of the Act, to encourage expeditious
and less expensive resolution of disputes with minimum interference of the
Court.

Firm Ashok Traders v Gurumukh Das Saluja

2004 (Arbitration Agreement)
The highlights of the Firm Ashok Traders v. Gurumukh Das Saluja, (2004) 3
SCC 155, include-

That the existence of an arbitration agreement is a condition precedent for

the exercise of power to appoint an arbitrator under S.11 of the 1996 Act.

The issue of the existence and validity of the “arbitration agreement” is

altogether different from the substantive contract in which it is embedded.

That the arbitration agreement survives the annulment of the main contract
since it is separable from the other clauses of the contract. The arbitration
clause constitutes an agreement by itself.

Haryana Telecom Ltd. v Sterlite Industries

(India) Ltd. 1999
In Haryana Telecom Ltd. v Sterlite Industries (India) Ltd., (AIR 1999 SC 35
2354), the court held that the power to order winding up of a company is
conferred exclusively upon the Company Court by the Companies Act.
As the arbitrator has no jurisdiction to wind up a company, the Court cannot
make a reference to arbitration under S.8 of the Arbitration Act 1996.

Similarly, in Chiranjilal Shrilal Goenka v Jasjit Singh, (1993) 2 SCC 507, the
court held that since the judgment in the probate suit under the Indian
Succession Act is a judgment in rem, such a question cannot be referred to
arbitration.

P Anand Gajapathi Raju v PVG Raju, 2000 (S.8

Application Time)
The court in P Anand Gajapathi Raju v PVG Raju, (AIR 2000 SC 1886),
held that-

An application under S.8 of the 1996 Act can be filed in the same suit or as
an independent application before the same Court.

Ordinarily, an application under S.8 of the 1996 Act has to be filed before
filing the written statement in the suit concerned.

But when the defendant, even after filing the written statement, applies for
reference to arbitration and the plaintiff raises no objection, the Court can
refer the dispute to arbitration.

The arbitration agreement need not be in existence before the action is

brought in Court, but can be brought into existence while the action is
pending.

Once the matter is referred to arbitration, proceedings in the civil suit stand
disposed of. The Court to which the party shall have recourse to challenge
the award would be a Court as defined in S.2(e) of the Act and not the Court
to which an application under S.8 is made.

Tamil Nadu Electricity Board v Sumathi, 2000

In Tamil Nadu, Electricity Board v Sumathi, (AIR 2000 SC 1603), the court
held that a High Court, in the exercise of its writ jurisdiction, has no power to
refer the matter to an arbitrator and to pass a decree thereon on the award
being submitted before it.
Sundaram Finance Ltd. v NEPC India Ltd, 1999
(Interim Orders)
In Sundaram Finance Ltd. v NEPC India Ltd, (AIR 1999 SC 565), the Court is
empowered under S.9 of the Arbitration Act 1996 to pass interim orders,
even before the commencement of arbitration proceedings. Such interim
orders can precede the issuance of a notice invoking the arbitration clause.

SBP and Co. v Patel Engineering Ltd., 2005 (HC

Power to Appoint Arbitrator)
SBP and Co. v Patel Engineering Ltd., 2005 (3) Arb LR 285 (SC), is a
landmark case where the court deliberated on so many issues pertaining to
the Arbitration Act of 1996.

The court held that once a matter reaches arbitration, the High Court would
not interfere with orders passed by the arbitrator or the arbitral tribunal
during the course of arbitration proceedings. The parties are permitted to
approach the Court only under S.37 or under S.34 of the 1996 Act.

It held further that the power of the Chief Justice under S.11 of the 1996 Act
to appoint an arbitral tribunal is a judicial power.

Since adjudication is involved in constituting an arbitral tribunal, it is a

judicial order. The Chief Justice or the person designated by her is bound to
decide-

 Whether she has jurisdiction;

 Whether there is an arbitration agreement;
 Whether the applicant is a party to the arbitration agreement;
 Whether the conditions for the exercise of power have been fulfilled;
and
 Where an arbitrator is to be appointed, the fitness of the person to
be appointed.
Furthermore, that the process, being adjudicatory in nature, restricts the
power of the Chief Justice to designate, by excluding non-judicial institutions
or a non-judicial authority, from performing such a function.
The court also held that proper notice must be issued to the non-applicant to
give her an opportunity to be heard before appointing an arbitrator under
S.11 of the 1996 Act.

With regards to challenging the decision of the Chief Justice, the court held
that no appeal lies against the decision of the Chief Justice of India or her
designate while entertaining an application under S.11(6) of the 1996 Act,
and such a decision is final.

It is, however, open to a party to challenge the decision of the Chief Justice
of a High Court or her designate by way of A.136 of the Constitution.

MCD v Jagan Nath Ashok Kumar, 1987

In MCD v Jagan Nath Ashok Kumar, (1987) 4 SCC 497, the court held that
the arbitrator is the sole judge of the quality and quantity of evidence.

And that it will not be for the Court to re-appreciate the evidence before the
arbitrator, even if there is a possibility that on the same evidence, the Court
may arrive at a different conclusion than the one arrived at by the arbitrator.

Similarly, if a question of law is referred to the arbitrator, and she arrives at

a conclusion, it is not open to challenge the award on the ground then an
alternative view of the law is possible. (Alopi Parshad & Sons Ltd. v Union of
India, (1960) 2 SCR 793)

Krishna Bhagya Jala Nigam Ltd. v G Harish

Chandra Reddy, 2007
In Krishna Bhagya Jala Nigam Ltd. v G Harish Chandra Reddy, (2007) 2 SCC
720), the court ruled that where a party consented to arbitration by the
arbitral tribunal as per the arbitration clause and participated in arbitral
proceedings, it cannot later take the plea that there was no arbitration
clause.

The principle of acquiescence, however, is inapplicable where an arbitrator

unilaterally enlarges her power to arbitrate and assumes jurisdiction on
matters not before her.

Union of India v Popular Constructions, 2001

In Union of India v Popular Constructions, (2001) 8 SCC 470, the court held
that the arbitral award becomes immediately enforceable without any further
act of the Court, once the time expires to challenge the award under S.34 of
the 1996 Act.

If there were any remaining doubts on the interpretation of the language

used in S.34, the scheme of the 1996 Act would resolve the issue in favor of
curtailing the court’s powers by the exclusion of the operation of S. 5 of the
Limitation Act.

NTPC v Singer Company, 1993 (Foreign Award)

The court in NTPC v. Singer Company, AIR 1993 SC 998 held that the
expression “foreign award” under Part II of the Arbitration Act 1996 means
an arbitral award on differences between persons arising out of a legal
relationship, considered as commercial, under the law in India.

It held further that an award is ‘foreign’ not merely because it is made on the
territory of a foreign state, but because it is made in such territory and in
respect of an arbitration agreement not governed by the law of India.

Republic of India v Agusta Westland

International Ltd. 2019
In Republic of India v Agusta Westland International Ltd. 2019 SCC
Online Del 6419, the Supreme Court held that 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.

Important judgments by the Supreme Court of India in 2021

Sanjiv Prakash v. Seema Kukreja, April 2021

Issue
The dispute stemmed from a Memorandum of Understanding signed by
members of the Prakash family (i.e., the Appellant and the Respondents),
who together owned 100% of ANI Media Private Ltd. The Memorandum of
Understanding stated among other things that if any member of the Prakash
family wanted to sell or donate their interests, they may do so to the
Appellant. The Memorandum of Understanding included an arbitration clause
that stipulated that disputes would be resolved by a single arbitrator.

Judgment
The Supreme Court of India has examined the limiting scope of Section 11 of
Arbitration and Conciliation Act, 1996 and concluded that the issue of
novation of an agreement cannot be determined by the courts in the limited
prima facie assessment of whether the parties have entered into an
arbitration agreement. The Supreme Court relied on the decision in Vidya
Drolia vs Durga Trading Corporation, (2020) which ruled that the Court can
only intervene at the pre-reference stage if it can be demonstrated that the
claims are prima facie time-barred and dead or that there is no pending
dispute. All other cases should be sent to an arbitral tribunal for a merits
ruling. This would likewise be the situation if a motion for novation was filed.

Analysis of the judgment

This decision is a welcome respite for a judiciary overburdened with such
suits, which obstruct the efficient operation of a separate and independent
conflict settlement process. However, one disadvantage of this decision is
that it may prevent parties who are subjected to onerous arbitrations from
seeking relief in civil court if the arbitration agreements are no longer in
effect owing to the novation of the original contract. In any event, it is
extremely difficult to please everyone, no matter what you do.

M/S NN Global Mercantile Pvt Ltd v. M/S Indo

Unique Flame Ltd & Others, January 2021

Issue
The main legal question in the Global Mercantile decision was whether an
arbitration agreement or an arbitration clause included in a contract might be
declared void due to non–stamping and non–fulfillment of technical
compliances.

Judgment
The Supreme Court ruled that non-stamping/inadequate stamping is
treatable. In addition, because the arbitration agreement is,
 1. An independent agreement.
2. The non-payment of duty on the contract was not actionable under
the stamping legislation, but it did not preclude the parties from
relying on the contract’s arbitration clause.
The Supreme Court reversed its prior decision in M/S Sms Tea Estates P.Ltd
vs M/S Chandmari Tea Co. P.Ltd, (2011) and found the conclusions
in Garware Wall Ropers Ltd. vs Coastal Marine Constructions, (2019) to be
incorrect. However, because this ruling had just been confirmed by a
Supreme Court coordination bench. The Supreme Court referred the case to
a bigger court for decision. The Supreme Court has issued instructions for
how courts and tribunals should handle non-stamping or inadequate
stamping objections.

 An arbitral tribunal will seize the document and order the parties to
pay the stamp duty and any penalties to the collector’s satisfaction.

 The court will send the case to arbitration rather than impounding
the document under Section 8. However, before the tribunal decides
on the issue, the court will order the parties to stamp the document.

 The court can provide remedies to protect the arbitration’s subject

matter under Section 9, but it will then seize the document and
order the parties to pay the stamp duty.

 The court will appoint a tribunal under Section 11, but the parties
must stamp the document before the tribunal may rule on the issue.

Analysis of the judgment

The Global Mercantile decision was a welcome one, preserving the core
of Section 16 of the Arbitration Act and honouring the draftsmen’s purpose.
The primary purpose of this Act is to protect the parties’ “Equitable Rights,”
not to compel them to go to court or to use litigation as an alternative
remedial mechanism, which will in no way fulfill the actual objective of the
Arbitration Act and would cause the parties to suffer. The Indian courts,
through its precedents, must set an example and encourage parties to use
arbitration as an alternative dispute resolution process, rather than focusing
on technical compliances. Instead, the focus should be on the bigger picture,
which will benefit the parties.

The Global Mercantile decision has not only set a precedent on a national
level, but it has also had international ramifications. In conformity with the
arbitration process created in India, this precedent will undoubtedly favor a
foreign firm. This judgment has also assumed the onus of clearing the air
with regard to the debates over the arbitrability of fraud in India and has
used a holistic approach in reaching its conclusion on the topic. This decision
has unquestionably raised the bar and provided a glimmer of hope to the
parties by preserving the substance of the two interlinked historic concepts of
“Doctrine of Severability” and “Kompetenz Kompetenz.”

Haryana Space Application Centre (HARSAC) and

Anr. v. Pan India Consultants Pvt. Ltd. and Anr.,
January 2021

Issue
Pan India filed an application with the Additional District Judge, Chandigarh
(District Judge) under Section 29A(4) of the Arbitration and Conciliation Act,
1996 stating that the arbitral judgment was ready to be pronounced and that
the whole cost had been paid to the tribunal. HARSAC objected to the
application, claiming that it should be denied due to a lack of adequate
grounds for granting an extension under Section 29A(4). The panel was
given a three-month extension by the District Judge to complete the
procedures. HARSAC then filed a revision appeal with the High Court, asking
the court to overturn the District Judge’s ruling and granting an extension of
time to pass the arbitral award. Due to the epidemic, the High Court granted
a four-month extension to let the parties finish their arguments within three
months, with one month set aside for the tribunal to issue the arbitral
decision. HARSAC filed a special leave petition with the Hon’ble Supreme
Court, expressing its dissatisfaction with the aforementioned High Court
judgment.

Judgment
The Hon’ble Supreme Court was of the opinion that, under Section 12(5) of
the Arbitration Act, 1996 read with the Seventh Schedule, the nomination of
the Principal Secretary, Government of Haryana as the nominee arbitrator of
the appellant, which was a nodal agency of the Government of Haryana, was
unlawful. It was pointed out that under Section 12(5) of the Arbitration Act,
any individual whose connection with the parties falls into any of the
categories listed in the Seventh Schedule is ineligible to be chosen as an
arbitrator, regardless of any prior agreement to the contrary. The Hon’ble
Supreme Court ruled that Section 12(5) of the Arbitration Act, coupled with
the Seventh Schedule, was an obligatory and non-derogable clause.

In the instance at hand, it was determined that the Principal Secretary of the
Government would be unqualified to serve as an arbitrator because he would
have a controlling influence on the HARSAC, which is a state-run nodal
agency. During the hearing, the counsel for both parties agreed to the
replacement of the present panel by selecting a single arbitrator to finish the
arbitral procedures. The Hon’ble Supreme Court then appointed a substitute
arbitrator, who would continue the proceedings from where they were at the
time of the order’s receipt and issue an arbitral decision within six months.

Analysis of the judgment

The Supreme Court’s current decision is extremely important. As previously
stated, neither party has ever objected to any of the arbitrators being
appointed because they were unqualified under Section 12(5) of the Act.
Despite the fact that the arbitral proceedings had been ongoing for nearly
four years and were nearing completion, the Supreme Court, in an SLP
arising from a petition filed under Section 29 A, took suo motu cognizance of
the invalidity of appointing the Principal Secretary of the Haryana
Government as an arbitrator.

The Supreme Court has often ruled in favour of “arbitrator neutrality” since
the addition of Section 12(5) to the Act by the Arbitration and Conciliation
(Amendment) Act 2015. The current judgment appears to serve the same
goal, in that the SC looked at the issue of ineligibility for the appointment of
an arbitrator, regardless of whether such objections were submitted by any
of the parties or the stage of the arbitral proceedings at the time.

Government of Maharashtra v. Borse Brothers

Engineers & Contractors Pvt. Ltd., March 2021

Issue
Three identical appeals were heard by the Hon’ble Supreme Court, with the
main issue being whether the ruling in N.V. International v. State of Assam,
(2019) correctly established the law. The High Court of Bombay rejected the
Government of Maharashtra’s appeal in a Civil Appeal resulting from the SLP
in a ruling dated December 17, 2020. The High Court of Bombay declined to
excuse the 120 days delay in filing the appeal under Section 37 of the
Arbitration and Conciliation Act, 1996 (Arbitration Act). The issue in all of the
appeals before the Hon’ble Supreme Court is the time limit for filing an
appeal under Section 37 of the Arbitration Act, contesting a judgment made
under Section 34 of the Arbitration Act.

Judgment
The Hon’ble Supreme Court stated that the Commercial Courts Act,
2015 (Commercial Courts Act), which establishes a stipulated value for
application, would only apply to appeals under Section 37 of the Arbitration
Act if the specified value exceeded three lakh rupees. The limitation period
would be 60 days in such situations when an appeal under Section 37 of the
Arbitration Act was directed by Section 13 of the Commercial Courts Act.

Where the Commercial Courts Act does not cover an appeal under Section 37
of the Arbitration Act because the stated value is less than three lakhs, the
provisions of Articles 116 and 117 of the Limitation Act, 1963 apply.
According to Article 116 of the Limitation Act, if an appeal was brought to the
High Court from an order of a subordinate court, the term of limitation was
set at 90 (ninety) days from the day the order was passed by the
subordinate court. Similarly, if an appeal is brought from a High Court order
to the same court or a court other than the High Court, the term of limitation
is 30 (thirty) days under Article 117 of the Limitation Act.

On the issue of the delay being excused, the Hon’ble Supreme Court
concluded that in all of the aforementioned appeals, a little delay may be
excused as an exception rather than a rule. A court may only allow a limited-
term if the party operated in good faith and the court considers that the
opposing party may have gained equity and justice that is now being lost due
to the first party’s inaction and negligence.

Analysis of the judgment

The Court has offered essential clarification on the limitation time for
submitting appeals under Section 37 of the Arbitration Act, as well as the
condonation of delays in filing such appeals, focusing on the underlying goal
of quick resolution of disputes. The Court has made comprehensive
observations on the subject, taking into account the relevant legal rules as
well as the importance of adhering to deadlines, particularly in business
disputes. Furthermore, in keeping with the principle of “equality before the
law,” the Court has tried to put all parties participating in commercial activity
on an equal basis by adopting the same yardstick to postpone condonation in
instances involving public sector businesses. The Supreme Court has made
yet another commendable and forward-thinking effort in the area of
arbitration and commercial disputes.

Indus Biotech Pvt. Ltd. v. Kotak India Venture

(Offshore) Fund, March 2021

Issue
Indus Biotech Private Limited issued Optionally Convertible Redeemable
Preference Shares (OCRPS) to Kotak India Venture Fund. The parties agreed
on the terms of conversion and redemption of the OCRPS in their Share
Subscription and Shareholders Agreement (SSSA). An arbitration clause was
included in the SSSA. The parties couldn’t agree on the proper methodology
to use for converting Kotak’s OCRPS into paid-up equity shares, as well as
the amount of any subsequent refund.

When Indus failed to redeem the Optionally Convertible Redeemable

Preference Share, Kotak filed an application with the National Company Law
Tribunal under Section 7 of the Insolvency & Bankruptcy Code, 2016 (IBC) to
initiate a corporate insolvency resolution procedure. Indus responded by
requesting that the Tribunal submit the parties to arbitration under Section 8
of the Arbitration & Conciliation Act 1996 under the SSSA.

Judgment
To decide whether the subject matter, in this case, was arbitrable, the
Hon’ble Supreme Court looked to the recent decision in Vidya Drolia and
Others v. Durga Trading Corporation, (2020). The Hon’ble Supreme Court
stated that when a process is in rem, a dispute is non-arbitrable, and the IBC
proceeding is to be deemed in rem only after it is allowed, based on the
comprehensive analysis undertaken in Vidya Drolia. However, it should be
emphasized that in this case, the application under Section 7 of the IBC was
denied. Given the request to send parties to arbitration made under Section
8 of the Arbitration Act, the moot question was whether an application filed
under Section 7 of the IBC before it was admitted may be referred to
arbitration.

The Hon’ble Supreme Court noted that the legal position of IBC supersedes
all other laws, as stipulated in Section 238 of the IBC, was well-established.
In such a case, even though the corporate debtor filed an application under
Section 8 of the Arbitration Act, the NCLT must consider the contentions
raised in the application filed under Section 7 of the IBC, review the financial
creditor’s materials, and assess whether there is a default. Despite the
presence of an arbitration agreement between the parties, if the NCLT comes
to the inescapable conclusion that there is a default and the debt is due, no
reference to arbitration will be made.

As a result, the Hon’ble Supreme Court clarified, while summarising the

procedure, that in any proceeding pending before the NCLT under Section 7
of the IBC, if such petition is admitted upon the NCLT recording the
satisfaction with regard to the default and the debt due from the corporate
debtor, any subsequent application under Section 8 of the Arbitration Act will
not be maintainable. As a result, based on the circumstances of the case, the
Hon’ble Supreme Court determined that the NCLT’s decision was reasonable,
and Indus’ motion for the establishment of the arbitral tribunal was granted.
Analysis of the judgment
The NCLT’s decision is not based on the merits of the Section 7 IBC
application. If the presence of a disagreement is not an inquiry for a Section
7 IBC action and the Section 7 IBC application must be reviewed first, the SC
should have set aside the impugned order and returned the case to NCLT for
a decision on the merits of the Section 7 IBC proceedings. If the chance
comes, the Court might consider clarifying that the NCLT cannot resolve the
Section 8 of Arbitration and Conciliation Act case first and then dismiss the
Section 7 IBC suit as a corollary or result.

Inox Renewables Ltd. v Jayesh Electricals Ltd.

Issue
This arbitration case began with a purchase order naming Jaipur as the site,
but the parties decided to hold the proceedings in Ahmedabad instead. The
award was made in favour of the respondent and was afterwards challenged
in Ahmedabad because the arbitration was placed in Ahmedabad, the
Petitioner claimed that the Ahmedabad courts had exclusive jurisdiction to
hear the case. After the Ahmedabad Court and the High Court differed, the
Petitioner went to the Supreme Court.

Judgment
The Supreme Court determined that the parties had consented to shift the
venue to Ahmedabad and that no written agreement was required. When
Ahmedabad was chosen as the site, it also became the “seat” of the
arbitration, which meant that any challenges had to be brought before the
Ahmedabad courts.

Analysis of the Judgment

This judgment follows BGS SGS Soma (2019), which ruled that in the
absence of any contrary evidence, the agreed-upon “venue” would likewise
be the “seat.” BGS SGS Soma, on the other hand, disagreed with hardy
exploration, which ruled that the “venue” would not automatically be the
“seat,” and that there must be other evidence indicating that the parties
intended for the “venue” to also be the “seat.”

Oriental Structural Engineers Pvt. Ltd. v State of

Kerala
Issue
The employer granted the contractor a contract for the upgrade of two
segments of a state roadway. The lone issue of contention before the
Supreme Court was the Contractor’s demand for interest for late payments
under several headings. If the employer failed to make payments within the
agreed-upon time frame, the contractor was allowed to seek interest
compounded monthly. The interest rates were specified in the ‘Appendix to
Bid.’ The contractor (as the winning bidder) has to fill out the blank interest
clause. The contractor left the section in the ‘Appendix to Bid’ for entering
the rate of interest blank. Furthermore, the contractor had previously
indicated in letters that “we certify that there is no provision in the contract
for interest on late payments, and hence interest would not be claimed.”
Their “commitment not to demand any interest on the stated sum provided
by you be considered simply as a goodwill gesture so that our future
payments are delivered to us without any delay,” they said. The Supreme
Court had to decide whether the contractor was entitled to interest for late
payment despite a blank interest clause.

Judgment
Due to the lack of an exclusion clause, the SC held that the Tribunal may
have awarded interest as a compensating or equitable remedy. The Supreme
Court, in deciding whether the Tribunal can assign such interest, referred to
the G.C. Roy case (1991), in which interest was determined to be
fundamentally compensatory in character. It went on to say that
under Section 31(7)(a) of the Act, the same was extensively included. As a
result, the Supreme Court reinstated the tribunal’s decision, overturning
rulings from previous courts.

The Supreme Court concluded by stating that the agreement was silent on
the rate of interest, but provided for the payment of interest on late
payments. As an equitable measure, the Supreme Court granted simple
interest at the rate of 8% on outstanding monies.

Analysis of the Judgment

In construction contract disputes, blank interest provisions and letters similar
to the Contractor’s correspondence are common. Contractors intentionally or
unconsciously do not put in the rate of interest in the bid documents while
bidding. Furthermore, in order to facilitate liquidity in the short term,
contractors frequently address communications renouncing rights to interest
on late payments. In such a circumstance, the foregoing ruling gives some
advice for collecting interest on late payments.
 1. The employer appears to have failed to effectively establish a cause
of waiver of interest payments before the arbitral tribunal in the first
instance. Furthermore, by leaving the blank interest clause blank,
the employer does not appear to have provided evidence as to the
competitive advantage the contractor gained at the time of bidding.
If the employer’s pleadings and evidence on these points had been
comprehensive, it may have gotten a different result.
2. The award of pendente lite interest is based on a compensating
approach. Despite the absence of a clause entitling such an award of
interest, employers are routinely saddled with compounded interest,
as the tribunal found. In the absence of a provision entitling such an
award, the Supreme Court confines the award of interest to the
criteria given out by the Supreme Court in the G.C. Roy decision and
the current decision.
3. It’s worth emphasising that the current decision is based on case
law from before the 2015 revision that interprets Section 34 of the
1996 Arbitration Act. This is because the challenge was brought
before the modification before the District Court of Ernakulam under
Section 34 of the Arbitration Act, 1996. This author has previously
written on this blog on the Supreme Court’s view of the impact of
the 2015 change to Section 34 of the Arbitration Act, 1996.
Regardless, the principles established in this judgment will govern
the interpretation of Section 31(7) of the Arbitration Act, 1996
under comparable facts and circumstances.

Bhaven Construction Through Authorised

Signatory Premjibhai K. Shah v. Executive
Engineer Sardar Sarovar Narmada Nigam Ltd.&
Anr.

Issue
The appellant and the first respondent entered into a contract for the
manufacturing and supply of bricks (Agreement). As a result of the parties’
disagreements, the appellant invoked the arbitration provision and requested
the appointment of a single arbitrator. In this case, the first respondent
opposed the appellant’s request for an arbitrator by filing an application
under Section 16 of the Arbitration Act. The first respondent claimed that the
arbitration was time-barred because the issue was not subject to the
Arbitration Act. Regardless of the first respondent’s concerns, the lone
arbitrator was chosen.
In the current case, the appellant has challenged the decision of the Division
Bench of the High Court. The appellant argued that the High Court’s Division
Bench erred by interfering with the Single Judge’s ruling. The fact that the
first respondent also filed a challenge to the final decision under Section 34
of the Arbitration Act demonstrated that the first respondent was attempting
to circumvent the enactment’s framework.

Judgment
The Hon’ble Supreme Court recognised right away that the Arbitration Act is
a code in and of itself, with clear legal implications. The non-obstante
provision in Section 5 of the Arbitration Act, for example, is intended to limit
undue court involvement. Section 5 explicitly says that no judicial authority
may intervene in the arbitral proceedings unless the legislation expressly
authorized it.

The Hon’ble Supreme Court decided in this case that the appellant had
followed the procedure set forth in the Agreement to choose the only
arbitrator. The first respondent then invoked Section 16(2) of the Arbitration
Act to dispute the sole arbitrator’s authority. Following that, the first
respondent filed a petition under Article 226 of the Indian Constitution
challenging the arbitrator’s ruling under Section 16(2) of the Arbitration Act.
It was noted that, as is customary, Section 34 of the Arbitration Act allows
for a challenging procedure. The use of the term “only” under Section 34,
according to the Hon’ble Supreme Court, served the dual goals of making the
Arbitration Act a comprehensive law and establishing the mechanism for
appealing arbitral decisions.

Analysis of the judgment

The Supreme Court has emphasised that the parties to an arbitration
agreement must only seek adjudication within the bounds of the Arbitration
Act, in keeping with the well-established norm of minimal judicial
involvement. Parties are not expected to use additional statutory help unless
they are left destitute or there is an element of bad faith involved, according
to the Court. Parties should keep in mind that, while the Court’s power under
Articles 226 and Article 227 of the Indian Constitution is vast and all-
encompassing, it is only accessible in extraordinary situations. The Supreme
Court’s decision is another step toward making India an arbitration-friendly
country.

Chintels India Ltd. v. Bhayana Builders P. Ltd

Issue
The Supreme Court decided in Chintels India Ltd., whether an appeal
under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 may be
maintained from a decision refusing to excuse the appellant’s delay in
submitting an application under Section 34 of the Act to set aside the arbitral
award. The Ld. Single Judge denied the motion for condonation of delay in an
application filed under Section 34 of the Act to set aside an award dated 3
May 2019, and so dismissed the Section 34 Application itself, in an order
dated 4 June 2020.

Judgment
The Supreme Court differentiated BGS SGS Soma, stating that the delay was
tolerated in that case and that the judgment did not constitute a definitive
ruling on the issue. A refusal to tolerate delay, on the other hand, would be a
final judgment, as it would result in the challenge being rejected. As a result,
such orders are appealable under Section 37(1). (c). “Setting aside…an
arbitral award under Section 34,” states Section 37(1)(c), according to the
Court. This would entail dismissing a challenge not just on the merits but
also for being late. The Court also maintained the long-held view that Section
5 of the Limitation Act of 1963 does not apply to Section 34 challenges, and
that no delay longer than 3 months and 30 days may be excused.

Analysis of the judgment

In terms of the decision’s implications, the courts may now witness a rush of
appeals under Section 37 of the Act coming from decisions refusing to set
aside an arbitral award if the delay was not excused under Section 34(3) of
the Act. While the Supreme Court has clearly said that any delay of more
than 120 days cannot be excused under Section 34 of the Act, it remains to
be seen if an appeal will be made against such decisions under Section 37,
and how the Supreme Court would respond in such a case.

Pravin Electricals Pvt. Ltd. v Galaxy Infra and

Engineering Pvt. Ltd.

Issue
Praveen Electricals Pvt. Ltd. filed a Special Leave Petition in the Hon’ble
Supreme Court of India against Galaxy Infra Engineering Pvt. Ltd., contesting
a judgment of the Hon’ble Delhi High Court. The HC appointed a Sole
Arbitrator for the adjudication of disputes between the parties under Section
11(6) of the Arbitration and Conciliation Act, 1996, via the aforementioned
order. Galaxy filed the suit after using the arbitration clause in a Consultancy
Agreement that PEPL and Galaxy had signed.

Judgment
The Hon’ble Supreme Court rules that determining whether the parties have
entered into an arbitration agreement must be entrusted to an arbitrator,
who will review the documentary material presented to him in detail after
witnesses have been cross-examined on it. For these reasons, we reverse the
Delhi High Court’s ruling insofar as it clearly concludes that the parties have
entered into an Arbitration Agreement. However, the court supported the
final judgment designating former Delhi High Court Judge Justice G.S. Sistani
as a Sole Arbitrator.

The experienced Judge will first assess whether the parties have entered into
an Arbitration Agreement as a preliminary issue, and will only examine the
merits of the case if that agreement is discovered. It is stressed that all
problems will be decided without regard to the court’s views, which are
purely preliminary in nature. The appeal is granted in the conditions stated
above.

Analysis of the judgment

In its 246th Report, the Law Commission of India looked at the degree to
which a court might intervene in the appointment of an arbitrator under
Section 11 of the Act. As a result, Section 11 of the Act must be added,
which states that when selecting an arbitrator. The court shall limit its inquiry
to the presence of an arbitration agreement. As a result, the court’s action at
the time of the arbitrator’s selection is limited. It’s worth noting that the
court has been given powers to assess the legality of an agreement under
Section 8 of the Act, as opposed to the court’s jurisdiction under Section 11
of the Act, which only requires it to look at the presence of an arbitration
agreement.

As a result, unlike the court under Section 11 of the Act, the court under
Section 8 of the Act considers a variety of criteria while evaluating the
legality of an arbitration agreement. Given that the area of investigation for a
court in Section 11 and Section 8 scenario may differ, could it be stated that
because an appeal arises from a judgment in a Section 8 application, the
same should logically apply to a Section 11 application?

Bharat Sanchar Nigam Ltd. and Anr. v. M/s.

Nortel Networks India Pvt. Ltd
Issue
The Hon’ble Supreme Court reviewed an appeal under Section 11 of the
Arbitration and Conciliation Act, 1996 in this case. The division bench of
Justice Indu Malhotra and Justice Ajay Rastogi focused on two key issues –

1. The time limit for filing an application under Section 11 of the Act;
and
2. Whether the court can refuse to make a referral under Section 11 if
the claims are prima facie time-barred.

Judgment
The Supreme Court decided that the time limit for submitting an application
under Section 11 of the Arbitration and Conciliation Act, 1996 is regulated by
Article 137 of the first schedule of the Limitation Act, 1963. Article 137 is a
supplemental provision that establishes a limitation period for any application
for which no term of limitation is set forth in any of the Articles of the
Limitation Act’s Schedule. It specifies a three-year restriction term from the
date on which the right to apply accrues.

The time of limitation will begin to run from the date of failing to appoint the
arbitrator, according to the ruling, which was issued on March 10, 2021. “It
is now reasonably well-settled that the limitation for submitting an
application under Section 11 would emerge if the arbitrator was not
appointed within 30 days after the issue of the notification seeking
arbitration,” the court said. In other words, an application under Section 11
can only be submitted after a notice of arbitration has been issued in respect
of the specific claim(s) / dispute(s) to be referred to arbitration, and the
appointment has not been made.

Analysis of the judgment

The Supreme Court’s decision, in this case, is a positive step toward
providing much-needed clarification on the jurisprudence of Section 11,
particularly in light of the many decisions and modifications to the statute
itself. Interference at the Section 11 stage is only justified in rare
circumstances, according to the court. However, in light of the Vidya Drolia
decision (2020), where the Court equated examination under Section 11 of
the Act with review under Section 8 of the Act, a well-defined and concise
explanation from a bigger bench is still required.

Furthermore, the Hon’ble Court correctly observed that the three-year time
limit for submitting an application under Section 11 of the Act, as established
by Article 137 of the Limitation Act, is a lengthy period that is inconsistent
with the Act’s goals. It is frequently observed that the parties abuse the
lengthy term of limitation, and so a modification to decrease the period of
limitation for filing an application under Section 11 of the Act would be highly
helpful under the Indian arbitration regime.

Secunderabad Cantonment Board v B.

Ramachandraiah & Sons

Issue
The current case includes appeals stemming from petitions filed under
Section 11 of the 1996 Arbitration and Conciliation Act. The Secunderabad
Cantonment Board, the appellant, had issued a Notice Inviting Tender (NIT)
for a contract to rehabilitate roads. The Appellant and the respondent, B.
Ramachandraiah and Sons, signed into three agreements in accordance with
the NIT. The question, in this case, was whether sending
letters/correspondences would prolong the time limit for filing a Section 11
petition and if the court may dismiss the petition because it was filed too
late.

Judgment
The claim for arbitration in this matter was submitted via a letter dated
November 7, 2006, according to the Hon’ble Supreme Court. This demand
was reaffirmed in a letter dated January 13, 2007, in which it was also stated
that an arbitrator must be appointed within 30 days. As a result, the
Supreme Court ruled that the statute of limitations began to run on and from
February 12, 2007. Even though the beginning point for restriction on merits
was 16.02.2010, which was 30 days after the Appellant’s first refusal of the
appointment of an arbitrator, and a period of three years had elapsed by
February 2013, the claim on merits was determined to be hopelessly time-
barred. As a result, the Supreme Court determined that the High Court could
not have chosen an arbitrator. As a result, the appeals were granted.

Analysis of the judgment

The 1996 Act was written with the goal of resolving conflicts quickly.
Timelines of various lengths have been presented. The Arbitration and
Conciliation (Amendment) Act, 2015 modified the 1996 Act to provide
additional measures for a speedy resolution of arbitral proceedings. Section
11 does not provide a deadline for filing an application for the appointment of
an Arbitrator under Subsection (6).
There is no time limit for filing an application for appointment of an Arbitrator
under the Schedule to The Limitation Act, 1963. It would be covered by
Article 137’s residual provision, which stipulates a three-year term from the
date when the right to apply accrues. However, this is an excessively long
amount of time. It would be required for Parliament to alter Section 11,
establishing a time limit within which a party may apply to the Court for the
appointment of an arbitrator under Section 11 of the 1996 Act.

Chief General Manager (IPC), M.P. Power Trading

Co. Ltd. and Ors. v Narmada Equipments P. Ltd.

Issue
The State Electricity Commission has legislative authority to judge conflicts
between licensees and generating firms and to send an issue to arbitration,
according to Section 86(1)(f) of the Electricity Act, 2003. As a result, the
commission’s nomination of arbitrators takes precedence over the High
Court’s appointment of arbitrators.

Judgment
The Supreme Court stated that Section 86(1)(f) of the Electricity Act is a
special provision that supersedes Section 11 of the Arbitration and
Conciliation Act, 1996 Act’s general provisions. The State Electricity
Commission has legislative authority to judge conflicts between licensees and
generating firms and to send any issue to arbitration, according to Section
86(1)(f). Furthermore, Section 174 of the Electricity Act gives the 1996 Act
precedence over anything conflicting in any other legislation now in force or
in any instrument having effect under the authority of any law other than the
2003 Act.

The Supreme Court went on to say that if there is an inherent lack of

jurisdiction, the plea might be raised at any point in the proceedings, even in
collateral procedures. The Court reaffirmed the long-held principle that a
decree issued by a court with no subject matter jurisdiction is null and void,
and that its invalidity can be shown whenever and whenever it is attempted
to be implemented or relied upon. Even if the parties agree, a jurisdictional
fault cannot be remedied. Because Section 86(1)(f) exclusively pertains to
disputes between licensees and producing firms, the State Electricity
Commission has the power to appoint the arbitrator. As a result, the High
Court’s decision appointing an arbitrator under Section 11(6) of the 1996 Act
is void. As a result, the appeal was granted, and the High Court’s judgment
was reversed.
The Supreme Court decided, “This will not prevent the respondent from
availing himself of the legal remedies open to him.” However, we have
expressed no view on the merits of the appellant’s concerns, which would be
examined by the proper forum if raised. There will be no costing order.”

Dakshin Haryana Bijli Vitran Nigam Ltd. v

Navigant Technologies Pvt. Ltd.

Issue
The issue, in this case, was whether the statute of limitations for filing a
petition under Section 34 of the Act would begin on the day the draft award
was disseminated or on the date the parties received the signed copy of the
judgment.

Judgment
The Supreme Court stated from the beginning, after thoroughly examining
and discussing the 1996 Act’s framework, that the legislation accepts just
one arbitral decision, whether unanimous or divided between the majority
and minority views. As a result, a minority opinion, or an arbitrator’s
dissenting position, is simply an opinion, not an award. However, a party
aggrieved by the majority judgment may use the dissenting view’s logic and
conclusions to support their separate arguments.

The Supreme Court said that an arbitral award is essentially a judgment

reached by the majority members of an arbitral tribunal that is ‘final and
binding’ on the parties. Even Section 35 of the 1996 Act states that an award
must be final and binding, and a dissenting opinion does not meet these
requirements: It does not decide the parties’ enforceable rights or obligations
under Section 36, and (ii) it is not final and binding on the parties.

Finally, a decision to set aside an arbitral award under Section 34 of the 1996
Act is largely the decision of the majority members of the panel, not the
dissenting opinion. As a result, an award, i.e., the judgment reached by the
majority of the tribunal members, might be set aside.

Analysis of the judgment

The Supreme Court decided on merits that, despite the fact that the award
was pronounced on 27.04.2018, the signed copy of the award was only given
on 19.05.2018, after a comprehensive study and review of the scheme and
phrasing used under the 1996 Act. Only a copy of the award was supplied on
27.04.2018 for the only purpose of pointing out any errors, but the parties
did not do so, and the award was signed and handed over to the parties on
19.05.2018.

As a result, the Supreme Court stated unequivocally that the time of

limitation for raising objections must be calculated from the day on which the
parties were given a signed copy of the award.