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2021-2022 Arbitration Summary
2021-2022 Arbitration Summary
2021-2022 Arbitration Summary
constitutional right and thus remedy under Articles 226 and 227 would
still be available despite the mandate of Section 5 of the IAAC but held
that it is prudent for a Judge to not exercise discretion to allow judicial
interference beyond the procedure established under the enactment.
The court held that power under Articles 226 and 227 needs to be
exercised in exceptional rarity, wherein one party is left remediless
under the statute, or a clear “bad faith” is shown by one of the parties
and held that this high standard set by this court is in terms of the
legislative intention to make the arbitration fair and efficient. The court
emphasised that parties should take the legal recourse that is provided
for in the legislation.
Viewed in this perspective, the court did not find either of the two
exceptional circumstances existing in the case at hand and set aside
the order of the Division Bench of the High Court where the High Court
had exercised jurisdiction under Article 226 to set aside the order of the
arbitrator passed under Section 16 of the IAAC.
This case reiterates the importance of non-intervention by the
courts, thereby making India a more lucrative seat for arbitration.
III. A pro-enforcement approach for emergency arbitrations
On 6-8-2021, the Supreme Court in Amazon.com NV Investment
Holdings LLC v. Future Retail Ltd.8 (FRL) allowed an emergency award
passed by an emergency arbitrator to be enforced under Section 17(2)
of the IAAC. The Court's decision puts to rest the heavily debated issue
of enforceability of emergency award. The Supreme Court recognised
that full party autonomy is given by the IAAC to have a dispute decided
in accordance with the institutional rules which can include emergency
arbitrators delivering interim orders, described as “awards”.
A dispute had arisen between Amazon.com NC Investment Holding
LLC (Amazon) and Future Coupons Pvt. Ltd. and Amazon invoked the
arbitration agreement which provided for institutional arbitration under
Singapore International Arbitration Centre (SIAC) rules, Indian seat
and Indian governing law. Before the Arbitral Tribunal could be formed,
Amazon sought for emergency interim relief under Rule 30.2 of
Arbitration Rules of the Singapore International Arbitration Centre
(SIAC Rules) as protective measure to restrain FRL from alienating
assets which was granted by the emergency arbitrator. Due to non-
compliance of the order of the emergency arbitrator, Amazon initiated
proceedings before Delhi High Court seeking enforcement of the
emergency order, which the court granted. Against the order of the
Single Bench, Future Group appealed before the Division Bench of the
Delhi High Court. Against the order of stay by the Division Bench of the
Delhi High Court, Amazon filed special leave petition (SLP) in the
Supreme Court.
The main question to be decided by the Supreme Court was whether
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the objectives of decongesting the court system and to give the parties
urgent interim relief.
The court has cleared the way for parties to opt for additional
expedited recourse under institutional rules and the aggrieved party
from the emergency award can be appeal the award under Section 37
of the IAAC. The decision also throws a word of caution that if the
parties wish not to be bound by the provisions of emergency arbitration
under the institutional rules then the parties should expressly exclude
applicability of provisions of emergency award.
Arbitration in the International regime
United Kingdom
1.Halliburton Co. v. Chubb Bermuda Insurance Ltd.
UK Supreme Court9 —
The dispute arose out of the appointment of a sole arbitrator who
was also subsequently appointed as arbitrator for a dispute with a
common party. Since the arbitrator failed to disclose the same,
Halliburton approached the court for removal of the arbitrator, which
was dismissed. The Court of Appeal noted that the disclosure
concerning appointment should have been made, but lack thereof does
not necessarily imply that there was a “real possibility of bias”.
Therefore, on appeal, two questions arose before the Supreme Court:
(a) Does an arbitrator have a duty to disclose information to parties
in circumstances where there have been multiple appointments in
related arbitrations?
(b) What test should be applied to issues of apparent bias once that
information has been disclosed or, where that information has not
been disclosed?
The UK Supreme Court held that disclosure is a legal duty under
English law unless waived by the parties. On the issue of multiple
arbitral appointments, It held that acceptance of arbitral appointments
concerning the same or overlapping subject-matter with only one
common party may give rise to an appearance of bias, as inequality of
knowledge between the common party and the other party or parties
may confer an unfair advantage. On the facts, the UK Supreme Court
determined that the arbitrator had breached his obligation to the
parties to make disclosure. The court reiterated that the test of bias laid
down in Porter v. Magill10 would apply, which is as follows:“The
question is whether the fair-minded and informed observer, having
considered the facts, would conclude that there was a real possibility
that the Tribunal was biased.”
2.Republic of Sierra Leone v. SL Mining Ltd.
UK High Court11 —
The arbitration clause that was part of the mining licence agreement
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which contains an
arbitration clause has or
has not been novated
cannot possibly be
decided in exercise of a
limited prima facie review
as to whether an
arbitration agreement
exists between the
parties.
It held that the court
cannot, at this stage,
enter into a mini trial or
elaborate review of the
facts and law which would
usurp the jurisdiction of
the Arbitral Tribunal.
3. BNSL v. Whether period of The Supreme Court held
Nortel limitation for filing that period of limitation
Networks application under for filing an application
India (P) Section 11 of the under Section 11 of the
Ltd. 15
IAAC would be IAAC would be governed
covered by Article by Article 137 of the First
137 of the Limitation Schedule of the Limitation
Act, 1963 and would Act, 1963. The Court held
begin to run from period of limitation will
date of failure to begin to run from the date
appoint? when there is failure to
(Section 11, IAAC appoint the arbitrator. The
and Article 137, court made a distinction
Limitation Act, between jurisdictional
1963) issues (such as issues
with respect to the
existence, scope and
validity of the arbitration
agreement) and
admissibility issues which
relate to procedural
requirements (such as a
breach of pre-arbitration
requirements, for
instance, a mandatory
requirement for mediation
before the
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commencement of
arbitration, or a challenge
to a claim or a part of the
claim being either time-
barred, or prohibited, until
some precondition has
been fulfilled). It further
held that limitation is an
admissibility issue and in
rare and exceptional
cases, where the claims
are ex facie time-barred,
and it is manifest that
there is no subsisting
dispute, the court may
refuse to make the
reference under Section
11 of the IAAC.
4. Pravin Whether orders The court while dealing
Electricals under Sections 8 with an appeal from a
(P) Ltd. v. and 11 are brought petition under Section 11
Galaxy Infra on par qua (6) of the IAAC observed
and Engg. appealability as well that by a process of
(P) Ltd.16 after the judgment judicial interpretation, this
of Vidya Drolia v. Court in Vidya Drolia v.
Durga Trading Durga Trading Corpn.18 ,
Corpn.17 , (Vidya Drolia)has now
[Sections 11(6), 11 read the “prima facie test”
(7) and 37 of the into Section 11(6-A) so as
IAAC] to bring the provisions of
Sections 8(1) and 11(6)
read with Section 11(6-A)
of the IAAC on par,
whereas in cases decided
under Section 8, a refusal
to refer parties to
arbitration is appealable
under Section 37(1)(a), a
similar refusal to refer
parties to arbitration
under Section 11(6) read
with Sections 6(A) and 7
is not appealable. The
Court, thus, observed that
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by notification
declares to be
territories to which
the New York
Convention applies.
The Supreme Court held
that all requirements
posed under Section 44
(1) were procedural in
nature and the object of
which was to satisfy that
an award was indeed a
foreign award.
The Supreme Court
observed that Section 47
(1)(c) being procedural in
nature did not go to the
extent of requiring
substantive evidence to
“prove” that a non-
signatory to an arbitration
agreement can be bound
by a foreign award. In
fact, Section 47(1)(c) only
spoke of evidence as may
be necessary to prove that
an award is a foreign
award.
The Supreme Court, while
stating the difference
between Sections 44 and
48 of the IAAC observed
that, since Section 44
refers to “persons” and
not “parties”, a foreign
award could be binding on
the “persons” not being
signatories to such an
arbitration agreement.
12. PASL Wind Whether two Indian The Supreme Court held
Solutions (P) parties can choose a that the following four
Ltd. v. GE foreign seat? ingredients are essential
Power (Sections 47 and 49 for an award to be
Conversion of the IAAC) designated as a foreign
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conclusion by the
adjudicating authority is
that there is default and
the debt is payable, the
bogey of arbitration to
delay the process would
not arise despite the
position that the
agreement between the
parties indisputably
contains an arbitration
clause.
Ultimately, once the NCLT
is satisfied that the there
is a financial debt and a
default within the
meaning of Section 7 of
the IBC, any subsequent
application under Section
8 of the ACA is not
maintainable.
Only when the application
under Section 7 of the IBC
fails, the NCLT may refer
the dispute to arbitration.
14. Arcelor Mittal Whether a court has The Supreme Court held
Nippon Steel the power to that even after the
(India) Ltd. entertain an constitution of an Arbitral
v. Essar Bulk application under Tribunal, the court was
Terminal Section 9(1) of the not denuded of the power
Ltd.34 IAAC once the to grant interim relief
Arbitral Tribunal had under Section 9(1) of the
been constituted, IAAC. The Supreme Court
and if so, what is the clarified that once an
true meaning and Arbitral Tribunal is
purport of the constituted, the court
expression cannot take up an
“entertain” in application under Section
Section 9(3) of the 9 for consideration, unless
IAAC? the remedy under Section
Whether the court is 17 is inefficacious.
obliged to examine However, once an
the efficacy of the application is taken up for
remedy under consideration and the
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charged by an
Arbitral Tribunal
(except in the case
of a sole arbitrator)
shall be INR
30,00,000, which is
in line with the
legislative intent,
which was also
indicated in the
commission report.
(iv) The Court held that
the ceiling is
applicable to each
individual arbitrator,
and any other
interpretation would
lead to absurd
consequences.
Delhi High Court
1. KLA Const. 1. Whether the The Delhi High Court,
Technologies prior consent of answering in the negative,
(P) Ltd. v. Central summarised the position
Embassy of Government is of law as follows:
Islamic necessary 44. The prior
Republic of under Section consent of Central
Afghanistan47 86(3) of the Government is not
Civil Procedure necessary under
Code to enforce Section 86(3) of the
an arbitral Civil Procedure Code to
award against enforce an arbitral
a Foreign award against a foreign
State? State.
2. Whether a 45. A foreign State
foreign State cannot claim a
can claim sovereign immunity
sovereign against enforcement of
immunity an arbitral award
against arising out of a
enforcement of commercial transaction.
arbitral award 46. Section 36 of the
arising out of a Arbitration and
commercial Conciliation Act treats
transaction? an arbitral award as a
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seek sovereign
immunity for the
purpose of stalling
execution of an arbitral
award rendered against
it. Once a foreign State
opts to wear the hat of
a commercial entity, it
would be bound by the
rules of the commercial
legal ecosystem and
cannot be permitted to
seek any immunity,
which is otherwise
available to it only
when it is acting in its
sovereign capacity. It is
the purpose and nature
of the transaction of
the foreign State which
would determine
whether the
transaction, and the
contract governing the
same, represents a
purely commercial
activity or whether the
same is a manifestation
of an exercise of
sovereign authority.
49. Arbitration being
a consensual and
binding mechanism of
dispute settlement, it
cannot be contended
by a foreign State that
its consent must be
sought once again at
the stage of
enforcement of an
arbitral award against
it, while ignoring the
fact that the arbitral
award is the
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above consensual
process, on the
specious ground that
they are entitled to
special treatment
purely on account of
being foreign States,
then the very edifice of
international
commercial arbitration
would collapse. Foreign
States cannot be
permitted to act with
impunity in this regard
to the grave detriment
of the counterparty in
the arbitration
proceedings.
The Embassy of Islamic
Republic of Afghanistan
filed a special leave to
appeal before the
Supreme Court against
the impugned final
judgment and order dated
18-6-2021 passed by the
High Court. However, this
SLP was withdrawn on
grounds of compromise.
2. Golden Tobie Whether disputes The High Court of Delhi
(P) Ltd. v. involving held that while
Golden assignment of grant/issue of patents and
Tobacco trademark registration of trade marks
Ltd.48 arbitrable? are exclusive matters
(Section 8 of the falling within the
IAAC) sovereign and government
function and are non-
arbitrable but disputes
arising from trade mark
licence or assignment
agreements are disputes
under contract and do not
involve exercise of any
sovereign function and are
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incapable of being
performed.
I respectfully concur with
the principles set out
therein. Therefore, these
tests should be applied to
the case at hand.”
Calcutta High Court
1. Sirpur Paper Does an application The High Court held that
Mills Ltd. v. for setting aside of it was the obligation of
I.K. award under Section the award holder to take
Merchants 34 become active steps under the IBC
(P) Ltd.52 infructuous if the instead of waiting for the
management of the adjudication of the
award debtor is application under Section
taken over by a new 34 of the IAAC. Merely
entity following the because a Section 34
procedure under petition was filed, does
IBC? not imply that award
[Section 34 and holder was stayed from
Insolvency and filing claim as an
Bankruptcy Code, operational creditor under
2016 (IBC)] IBC.
The court noted that an
operational creditor who
fails to lodge a claim in
the CIRP literally missed
boarding the claims bus
for chasing the fruits of an
award even where a
challenge to the award is
pending in a civil court.
Therefore, the petition
was dismissed as
infructuous.
Concluding remarks
The IAAC has been shaped by various amendments and judicial
pronouncements. The 2019 amendments to the IAAC rectified several
lacunae in both, parts I and II of the IAAC thereby making India a
more arbitration-friendly jurisdiction. The 2021 amendments that are
currently underway also attempt to further that objective, although
their practical implications remain to be seen.
The above judgments indicate that India has taken many steps
towards becoming a pro-arbitration jurisdiction, thereby making it a
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††
Senior Associate, Khaitan & Co.
†††
Associate, Khaitan & Co.
3
(2020) 4 SCC 234.
4
2022 SCC OnLine SC 642.
6
(2022) 1 SCC 75.
8
(2022) 1 SCC 209.
9
[2020] 3 WLR 1474 : 2020 UKSC 48.
12
2021 SGHC 244.
14
(2021) 9 SCC 732.
15
(2021) 5 SCC 738.
17 (2021) 2 SCC 1.
18
(2021) 2 SCC 1.
19 (2021) 2 SCC 1.
21
(2011) 14 SCC 66.
24
(2021) 4 SCC 379.
25
(2021) 7 SCC 657.
27
(2021) 9 SCC 1.
30
(2021) 6 SCC 460.
32 (2021) 7 SCC 1.
33
(2021) 6 SCC 436.
36
(2022) 2 SCC 275.
37
2022 SCC OnLine SC 864.
39
(2021) 2 SCC 1.
40
(2021) 3 SCC 103.
42
(2021) 8 SCC 465.
43 (2022) 3 SCC 1.
50
(2021) 4 Mad LJ 147 (Mad).
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