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Recourse against Arbitral Awards

Gammon India Ltd. & Anr v. NHAI [Delhi HC, 23 June 2020]

GAMMON INDIA LTD. V. NHAI

Gammon India Ltd. & Anr v. NHAI [Delhi HC, 23 June 2020]

ISSUE:

  • Whether it is permissible for a court to rely on the findings of a subsequent award in resolving objections brought against a previous award in a case involving several awards and arbitration proceedings, whether it is permissible for a court to rely on the findings of a subsequent award in resolving objections brought against a previous award.
  • Whether the 1996 Arbitration and Conciliation Act have explicit provisions or established legal principles to handle the issue of multiple arbitral processes and promote effective dispute resolution?
  • Whether the Act contains instructions or procedures for dealing with the problem of varied arbitral processes and ensuring that dispute resolution adheres to the terms of the 1996 Arbitration and Conciliation Act?

RULE:

  • To avoid multiple arbitrations, parties interested in arbitration pertaining to the same contract should combine their claims into a single arbitration procedure if practicable. This ensures that dispute resolution is more efficient and effective.

FACTS:

  • A road building contract was signed between Gammon-Atlanta JV, a joint venture of Gammon India Ltd. and Atlanta Ltd. (“contractor”), and the National Highways Authority of India (NHAI).
  • Disputes emerged during contract execution, prompting the contractor to seek arbitration three times in 2005, 2007, and 2008.
  • Three independent arbitral tribunals were formed, and three separate arbitral awards were issued, each addressing a different dispute arising from the same contract.

HELD:

  • When contesting a previous award (2nd Award), the court considered whether it is permissible to rely on findings from a subsequent award (3rd Award).
  • To avoid confusion and inefficiency, the court emphasised that multiple arbitrations for disputes arising from the same contract should be avoided.
  • The court issued suggestions to reduce the number of arbitral hearings, such as raising all claims at the time of arbitration invocation and assigning a single panel to hear connected disputes.
  • It ruled that findings from a future award could not be used to support a challenge to a previous award.
  • When submitting Section 11 or Section 34 petitions, the court emphasised the need of specific disclosures regarding ongoing or concluded arbitration processes linked to the same contract.
Categories
Appointment and Challenge

HRD Corpn. v. GAIL (India) Ltd., (2018) 12 SCC 471

HRD CORPORATION V. GAIL INDIA LTD

HRD Corpn. v. GAIL (India) Ltd., (2018) 12 SCC 471

ISSUE:

  • Whether Justice Lahoti should be removed as an Arbitrator under Items 1, 8 and 15 of the seventh schedule of the Arbitration and Conciliation Act 1996?
  • Whether Justice Doabia should be removed as an Arbitrator under Items 1, 15 and 16 of the Act?

RULE:

  • The IBA Guidelines on Conflicts of Interest in International Arbitration lay down the general principles on the appointment of an arbitrator, wherein, it is mandated that every arbitrator shall be impartial and independent and shall remain so until the final award has been declared. The Guidelines also state that an Arbitrator must also decline said appointments if he/she has doubts regarding the ability to be impartial and independent.

FACTS:

  • The Respondents entered into a contract with the Appellants for the supply of wax, produced at the respondents plant. The Apellants later contended that the Respondents had wrongfully withheld the wax supplies and thus, invoked the arbitration clauses of the general agreement signed between both parties. Since three arbitrations had already taken place, the current dispute is a matter in relation to the fourth arbitration.
  • The Appellants appointed Justice K. Ramamoorthy and the Respondents appointed Justice Doabia as arbitrators respectfully. The two parties also mutually appointed Justice KK Lahoti as the presiding arbitrator. After Justice K. Ramamoorthy withdrew from the case, Justice Mukul was appointed to Appellants.
  • The Appellants challenged the appointment of Justice Doabia, stating that he had presided and rendered an award in another dispute between the two parties, and prayed that he must be removed as an arbitrator. Justice Lahoti’s appointment was also challenged since he was an advisor to the Respondents in a previous matter.
  • Justice Lahoti and Justice Doabia stated that they should be entitled to continue with the arbitration proceedings, and Justice Mugdal held that Justice Doabia’s appointment must be terminated whereas Justice Lahoti’s appointment was not to be challenged. The High Court dismissed the petitions, and the matter was then appealed to the Supreme Court.

HELD:

  • The Apex Court also dismissed the challenges regarding the appointments of Justice Doabia and Justice Lahoti and emphasized the difference between the fifth and seventh schedules of the Act in pursuance to the 2016 amendment. The Court stated that since in this case the Arbitral Tribunal did not declare an award, challenges pertaining to the fifth schedule could not be delved into by the Court.
  • The challenge regarding Justice Lahoti and Justice Doabia’s appointments were dismissed and the dispute which Justice Lahoti had delivered an opinion upon was not in concern with the present dispute at hand, and Items 8 and 15 could not stand as eligible arguments. The Court held that Justice Doabia could not be disqualified by the fact that he had rendered an award in a different dispute between the two parties.
Categories
Arbitrability

Lamps Plus, Inc., et al v. Varela, 2019 SCC OnLine US SC 50

LAMPS PLUS INC V. VARELA

Lamps Plus, Inc., et al v. Varela, 2019 SCC OnLine US SC 50

ISSUE:

  • Whether Federal Arbitration Act (FAA) precludes a state law interpretation of an arbitration agreement which would authorize class arbitration based on general language commonly used in arbitration agreements?

RULE:

  • The Doctrine of Contra Proferentem, which roughly translates to “guilt of the drafter”, usually applied in contract law states that any clause or term considered to be ambiguous in an agreement should be interpreted against the party which requestion or included the clause in the first place.

FACTS:

  • In 2016, a hacker tricked one of the employees in the Petitioners company (Lamps Plus Inc) into disclosing tax information and credentials of more than 1300 employees. A fraudulent income tax return was then filed under the Respondents (Frank Varela) name and the Respondent then filed a class action suit against the Petitioner on behalf of himself and all other employees whose information had been released.
  • It is to be noted that the Respondent and all other employees had an arbitration agreement in their employment contract, on the basis of which the Petitioner sought to compel arbitration, but on an individual basis and not on a class-wide basis and urged to dismiss the class action suit.
  • The District Court, while rejecting the individual arbitration request, authorized class-action arbitration and dismissed the Respondents arguments. The Respondents appealed the District Courts decision, but the Ninth Circuit upheld the same, stating that the agreement in this dispute was ambiguous and arbitrary on the issue of class arbitration. The matter was then appealed before the Supreme Court of the United States.

HELD:

  • The Supreme court first stated that it had the jurisdiction to review the lower courts’ decision and held that the mere availability of a class action suit is a matter of consent, where all parties must consent to class arbitration for it to be an option.
  • In a 5-4 opinion, the Supreme Court reversed the decision by the Ninth Circuit and held that under the Federal Arbitration Act, an ambiguous agreement cannot provide the necessary basis to conclude that all parties have agreed to submit to class arbitration.
Categories
Recourse against Arbitral Awards

Megha Enterprises And Ors v. Haldiram Snacks Pvt Ltd (Judgment dated March 1).

MEGHA ENTERPRISES V. HALDIRAM SNACKS PVT. LTD.

Megha Enterprises And Ors v. Haldiram Snacks Pvt Ltd (Judgment dated March 1).

ISSUE:

  • Whether the Arbitral Tribunal’s decision that Haldiram’s claim is not barred by limitation because Megha acknowledged her debt through email conversations complies with Section 18 of the Limitation Act?
  • Whether, in light of the High Sea Sale Agreements’ choice of jurisdiction, the Arbitral Tribunal’s decision that it had territorial jurisdiction to decide Haldiram’s claims is legally sound and consistent with the parties’ intentions under the agreements?

RULE:

  • The Arbitration and Conciliation Act of 1996 (A&C Act) controls the arbitration proceedings in this matter, while the Limitation Act of 1963 is consulted for concerns concerning the limitation period.

FACTS:

  • Megha and Coral engaged into contracts for the sale and acquisition of crude palm oil.
  • In 2013, invoices were sent, and payments were due within a specific time frame.
  • Coral merged with Haldiram, and Haldiram demanded the outstanding sum from Megha.
  • Megha challenged the allegation, claiming that it was not obligated to pay.
  • Haldiram requested arbitration, and the Arbitral Tribunal was formed to settle the claims.
  • The primary question in this case is the limitation period for Haldiram’s claim and whether Megha’s statements might be considered acknowledgements of the debt.

HELD:

  • The Arbitral Tribunal dismissed the claim that it lacked territorial jurisdiction.
  • It ruled that Haldiram’s claims were not prohibited by limitation, citing certain interactions, including emails, as evidence of debt acknowledgement.
  • Megha appealed the Arbitral Tribunal’s ruling, claiming that the communications did not comply with Section 18 of the Limitation Act.
  • The main point of contention is the appraisal of evidence and the implementation of the limitation period.
Categories
Number of Arbitrators

Lohia v. Lohia (2002) 1 Arb LR 493 (SC)

LOHIA V. LOHIA

Lohia v. Lohia (2002) 1 Arb LR 493 (SC)

ISSUE:

  • Whether Section 10 is a non-derogable provision in arbitration? Whether a mandatory provision of the Act can be waived by the parties?

RULE:

  • The appellant contended that Section 10 is a mandatory provision of the Act. In the present matter, the Arbitral tribunal was not validly constituted, hence it should be void and invalid. Moreover, if the constitution of the arbitrators is invalid, it should also render the award void. The appellant also contended that Section 16 does not provide for any challenge of the constitution of the Arbitration Tribunal. Therefore, an invalidly constituted tribunal deems lack of jurisdiction.

FACTS:

  • The Appellant and Respondent had a family dispute over business and properties. For which two arbitrators were hired (Mr. Pramod Kumar Khaitan, and Mr.Sardul Singh Jain).
  • An award was passed by the two arbitrators on 6th October 1996. On 22nd December 1997, the first respondent filed an application in Calcutta High Court for setting aside the award.
  • The contention was that, under Section 10 of The Arbitration and Conciliation Act, 1966, an even number of arbitrators cannot be present.
  • Since in the present matter, two arbitrators were present, it was contended that arbitration was void and invalid.
  • On the same line of reasoning, it was also contended that the award is henceforth also void and invalid.

HELD:

  • The court held the contention of Section 10 is a non-derogable provision, unacceptable.
  • Since it cannot be said that an arbitration agreement becomes invalid when only two arbitrators are appointed. In such a case, Section 11(3), the two arbitrators can appoint a third one.
  • The court held that an appointment of the third arbitrator can be done at a later stage, i.e when the two differ, and need not be mandatorily done at the initial stages of the agreement.
  • Further, the court held that an award can only be set aside under the provisions of Sections 12, 13, 16, and 34. An award cannot be set aside if the composition of the arbitral tribunal and proceedings are in accordance with the agreement between the parties.
  • The right to challenge an award, in case tribunal and proceedings are not in accordance, is also restricted.
  • In a sense that, even if the composition of the arbitral tribunal or the arbitral procedure is not in accordance with the agreement of the parties but if such composition or procedure is in accordance with the provisions of the Act, then the party cannot challenge the award.
Categories
Number of Arbitrators

MMTC Ltd. vs. Sterlite Industries Ltd. (1996), 6 SCC 716

MMTC LTD. V. STERILE INDUSTRIES

MMTC Ltd. v. Sterlite Industries Ltd. (1996), 6 SCC 716

ISSUE:

  • Whether the arbitration clause in the sales contract between MMTC and Sterlite was valid and enforceable.
  • Whether the arbitrator had jurisdiction to hear the dispute.
  • Whether the arbitrator’s award was valid and enforceable.

RULE:

  • Arbitration clauses in international commercial contracts are valid and enforceable in India.

FACTS:

  • MMTC Ltd. (MMTC) is a public sector undertaking under the Government of India, engaged in the import and export of commodities.
  • Sterlite Industries Ltd. (Sterlite) is a private company engaged in the manufacturing of copper and copper products.
  • MMTC and Sterlite entered into a sales contract for the supply of copper cathodes.
  • The sales contract contained an arbitration clause, which provided that any disputes arising out of the contract would be settled by arbitration in London.
  • A dispute arose between MMTC and Sterlite regarding the quality of the copper cathodes.
  • Sterlite initiated arbitration proceedings in London.
  • MMTC objected to the arbitration proceedings, arguing that the arbitration clause was not valid and enforceable.
  • The arbitrator rejected MMTC’s objections and ruled in favor of Sterlite. – MMTC challenged the arbitrator’s award in the Supreme Court of India.

HELD:

  • The arbitration clause in the sales contract between MMTC and Sterlite was valid and enforceable.
  • The arbitrator had jurisdiction to hear the dispute.
  • The arbitrator’s award was valid and enforceable.
  • The Court also rejected MMTC’s arguments that the arbitration agreement was entered into under duress, that it was unconscionable, and that the arbitrator was biased. – The Court’s decision is significant because it establishes the principle that arbitration clauses in international commercial contracts are valid and enforceable in India.
Categories
Foreign Awards and their Enforcement

MSM Satellite Pvt. Ltd. v. World Sport Group Ltd. Appeal(Lodging) No. 534 of 2010 in Notice of Motion No. 1809 of 2010 in Suit No. 1828 of 2010

MSM SATELLITE V. WORLD SPORT GROUP

MSM Satellite Pvt. Ltd. v. World Sport Group Ltd. Appeal(Lodging) No. 534 of 2010 in Notice of Motion No. 1809 of 2010 in Suit No. 1828 of 2010

ISSUE:

  • Whether the validity of the Bombay High Court’s injunction judgement, which barred WSG from pursuing ICC arbitration and favoured MSM’s accusations of fraud and deception?
  • Whether the parties’ disagreement should be resolved through Singapore ICC arbitration, as agreed in their agreement, or through Indian courts.?

RULE:

  • According to the New York Convention, which is similar to the Indian Arbitration and Conciliation Act, an arbitration agreement does not become void or incapable of performance just because the dispute involves charges of misrepresentation. Courts cannot refuse to refer a case to arbitration only because one side has claimed fraud. An arbitration panel has the ability to resolve disputes involving fraud or misrepresentation. Courts must send a dispute to arbitration if the parties’ agreement contains an arbitration clause, unless the agreement is “void, inoperative, or impossible to perform.”

FACTS:

  • The Board of Control for Cricket in India (BCCI) and MSM Satellite (Singapore) Pte. Ltd. (MSM) were at odds over media rights for the Indian Premier League (IPL).
  • The BCCI granted World Sports Group (WSG) global media rights for ten years in 2008.
  • MSM alleged that there was a pre-bid arrangement in place under which MSM pledged to gain global media rights to broadcast IPL for the first two years.
  • After one season, BCCI cancelled the agreement and started negotiations with WSG, prompting MSM to bring a complaint against BCCI.
  • In 2009, WSG and MSM reached an arrangement in which WSG agreed to give up all global media rights to IPL in exchange for INR 4.7 billion, and MSM may purchase these rights straight from BCCI.
  • A stipulation in the agreement stated that any dispute resulting from the agreement would be referred to the Singapore ICC arbitration.

HELD:

  • The court emphasised that the New York Convention, to which India is a member, promotes and facilitates cross-border acceptance and enforcement of arbitral judgements, thereby contributing to the growth of international arbitration.
  • The court emphasised that arbitration is an alternative dispute resolution tool chosen by parties to resolve their issues efficiently and expeditiously, and that courts must respect this choice.
  • It emphasised that courts should not intervene in arbitration procedures unless there are exceptional circumstances, such as where the arbitration agreement is clearly invalid or incapable of being implemented.
  • The decision emphasised the importance of parties’ sovereignty in choosing arbitration as their prefered mode of dispute resolution and the sanctity of arbitration agreements.
  • The court’s judgement attempted to foster an environment favourable to international arbitration in India by preventing needless intrusion by Indian courts in such processes.
  • In this instance, the court determined that the parties had agreed to refer their dispute to the Singapore ICC arbitration, and that this agreement should be upheld and enforced in accordance with international law and arbitration norms. The judgement of the court confirmed India’s adherence to international arbitration rules and principles, aligning it with worldwide best practises for resolving international commercial disputes.
Categories
Foreign Awards and their Enforcement

National Agricultural Cooperative Marketing Federation of India v. Alimenta SA 2020 SCC OnLine SC 381

NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERATION OF INDIA V. ALIMENTA

National Agricultural Cooperative Marketing Federation of India v Alimenta SA 2020 SCC OnLine SC 381

ISSUE:

  • “Whether the Indian Supreme Court’s extensive review of the merits of the foreign arbitral award in the NAFED case aligns with the pro-enforcement bias stipulated in Section 48 of the 1996 Act and the New York Convention’s principles of minimal judicial intervention?”
  • Whether a violation of India’s export policy can legitimately be regarded as a violation of public policy under Section 48 of the 1996 Act, and whether this broader interpretation may lead to increased difficulties in enforcing foreign arbitrary judgments in India?”

RULE:

  • Section 7(1)(b)(ii) of the Foreign Awards (Recognition and Enforcement) Act, 1961 (now Section 48(2)(b) of the Arbitration and Conciliation Act, 1996), which allows for the refusal of enforcement of foreign arbitral awards on grounds of public policy, is one of the important legal provisions.

FACTS:

  • NAFED and Alimenta S.A. signed an agreement to supply Indian HPS groundnut.
  • The deal incorporated terms and conditions from the FOSFA 20 contract, which included a clause indicating that the agreement would be canceled if an executive order or law imposed an export embargo.
  • Due to export limitations imposed by the Indian government’s Export Control Order, NAFED could not perform the contract, prompting an arbitration procedure before FOSFA.
  • FOSFA awarded Alimenta damages, which the FOSFA Board of Appeal confirmed.
  • Alimenta attempted to have this international arbitral award enforced in India.

HELD:

  • In the NAFED case, the Indian Supreme Court thoroughly analyzed the merits of a foreign arbitral judgment, including determining whether factors such as export limitations justified the failure to complete a contract.
  • The Court held that enforcing the foreign award could be contrary to Indian national policy, notably in export policy. It was decided that a violation of export policy might be regarded a breach of public policy, which could be used to refuse enforcement.
  • The NAFED decision raised concerns about the pro-enforcement bias specified in Section 48 of the 1996 Act, since it appeared to allow for extended scrutiny and potential denial of enforcement based on public policy grounds.
  • The Court’s reading of public policy, particularly in the context of export policy, diverged from previous decisions, such as Renusagar, which had a narrower view of what constituted a violation of public policy.
  • The judgment created uncertainty and called into question the precedential value of prior decisions, leading to confusion in Indian law regarding the implementation of international arbitral awards. This could have ramifications for India’s reputation as an international arbitration center.
Categories
Foreign Awards and their Enforcement

P.E.C. Ltd v. Austbulk Shipping SDN BHD, 2018 (15)

P.E.C. LTD. V. AUSTBULK SHIPPING

P.E.C. Ltd v. Austbulk Shipping SDN BHD, 2018 (15)

ISSUE:

  • Whether an application for the execution of a foreign award under Section 47 of the Arbitration and Conciliation Act, 1996, could be dismissed if it was not accompanied by the appropriate arbitration agreement?
  • How the phrase “shall” should be construed in Section 47 of the Act in the context of producing documents, such as the original arbitration agreement, during the initial stage of submitting an application for the enforcement of a foreign award?

RULE:

  • The execution of international arbitral awards in India is governed by Section 47 of the Arbitration and Conciliation Act, 1996. Section 47 requires the party seeking international award enforcement to present certain papers, including the original arbitration agreement, at the time of application.

FACTS:

  • A foreign award was being enforced and executed in this instance.
  • The main question was whether an application for enforcement under Section 47 of the Arbitration and Conciliation Act of 1996 was filed without an associated arbitration agreement.
  • Section 47 of the Act requires certain papers, including the original arbitration agreement, to be presented during the application for enforcement of a foreign award.
  • The side seeking enforcement failed to present the arbitration agreement at the time of the application, resulting in a disagreement.
  • The Supreme Court was asked to define the word “shall” in Section 47 and to rule on the consequences of failing to produce the arbitration agreement during the initial application.
  • The decision emphasised the importance of balancing the New York Convention criteria.

HELD:

  • Non-compliance with the production of papers, including the original arbitration agreement, as required by Section 47, should not automatically result in the dismissal of the application at the initial stage of filing an application for the execution of a foreign award.
  • The party seeking enforcement may be asked to correct the fault of non-filing of the arbitration agreement, and the arbitration agreement’s validity will be established at a later stage of the enforcement procedures.
  • To respect the New York Convention’s objectives and avoid impediments to enforcement procedures, the word “shall” in Section 47 should be construed as “may.” This interpretation allows for greater flexibility during the first filing step.
  • However, this view that “shall” means “may” only applies to the application’s initial stage. As a result, the party is still required to present the required documents, including the arbitration agreement, as stated in Section 47.
Categories
Recourse against Arbitral Awards

Patel Engineering Ltd. v. NEEPCO [Supreme Court. 22 May 2020]

PATEL ENGINEERING LTD. V. NEEPCO

Patel Engineering Ltd. v. NEEPCO [Supreme Court. 22 May 2020]

ISSUE:

  • Whether the Meghalaya High Court’s decision to overturn the arbitral award was justified on the basis of ‘patent illegality.’
  • Whether the Amendment Act of 2015’s modifications to the Arbitration and Conciliation Act of 1996 should be considered in this instance?

RULE:

  • Section 34(2A) of the Arbitration and Conciliation Act, 1996, empowers the court to vacate a domestic arbitral ruling if it is tainted by ‘patent illegality’ on the face of the award. The term “patent illegality” refers to situations in which the arbitrator’s ruling is determined to be perverse, unreasonable, or opposed to substantive provisions of law, the 1996 Act, or the conditions of the contract.

FACTS:

  • Patel Engineering Ltd. (PEL) and North Eastern Electric Power Corporation Ltd. (NEEPCO) had a disagreement over a works contract containing three separate arbitration clauses, which resulted in three separate arbitral rulings in favour of PEL.
  • NEEPCO appealed the awards to the Additional Deputy Commissioner under Section 34 of the Act, who upheld them.
  • NEEPCO appealed the awards to the Meghalaya High Court (HC), which overturned them.
  • PEL petitioned the Supreme Court for special leave petitions (SLPs), which were denied. PEL then filed review petitions with the Meghalaya High Court, saying that the HC used the pre-Amendment Act provisions incorrectly.
  • The review requests were also denied, prompting PEL to file an appeal with the Supreme Court.

HELD:

  • The Supreme Court ruled that the 2015 modifications to the Arbitration and Conciliation Act should be taken into account in this instance.
  • The Court reaffirmed the breadth of ‘patent illegality’ as a basis for overturning a domestic arbitral ruling.
  • The concept of ‘patent illegality’ allows an award to be overturned if it is found to be perverse, unreasonable, or contradictory to the substantive requirements of law, the 1996 Act, or the contract.
  • The Court upheld the Meghalaya High Court’s decision to vacate the arbitral award, finding that it was unreasonable and perverse, and that the arbitrator’s viewpoint was not even a plausible viewpoint.
  • PEL’s review applications were denied, upholding the Meghalaya High Court’s decision to vacate the arbitral verdict.