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Foreign Awards and their Enforcement

Reliance Industries Limited and Anr v. Union of India, (2014) 7 SCC 603

RELIANCE INDUSTRIES LTD. V. UOI

Reliance Industries Limited and Anr v. Union of India, (2014) 7 SCC 603

ISSUE:

  • Whether the disputes concerning royalties, cess, service tax, and the Comptroller and Auditor General’s (CAG) audit are arbitrable under the relevant laws and contractual agreements, or do they challenge the validity of the Oilfields (Regulation and Development) Act, 1948, rendering any agreement to arbitrate void under Section 23 of the Indian Contract Act, 1872?
  • Whether the Arbitral Tribunal has the authority to make decisions on disputes involving royalties, cess, service tax, and the CAG audit, despite the cited rules and precedents, and whether its conclusions are enforceable in India, given the potential defense under Article V(2)(b) of the New York Convention based on public policy considerations?

RULE:

  • Disputes are arbitrated based on applicable laws, commercial agreements, and public policy considerations, and the enforceability of arbitral verdicts in India is subject to the requirements of the New York Convention, which provides for potential public policy defenses.

FACTS:

  • The lawsuit featured disagreements about Production Sharing Contracts (PSCs) for the exploration and production of petroleum from specified areas between the Union of India (Government of India), Reliance Industries Limited (RIL), and BG Exploration and Production India Limited (BG).
  • The parties signed two PSCs, one with RIL and one with BG.
  • Arbitration clauses in the PSCs selected London as the venue of arbitration.
  • Disputes ensued between the parties, and an arbitral tribunal was formed, with London serving as the venue.
  • The court was asked whether various allegations, including royalties, cess, service tax, and the Comptroller and Auditor General’s (CAG) audit were arbitrable under Indian law.

HELD:

  • The Court ruled that applicable laws, contractual agreements, and public policy considerations should establish the arbitrability of disputes.
  • The Court emphasized that agreements that violate Indian law, particularly those that call into question the constitutionality of Indian legislation, may be unlawful and unenforceable.
  • The Court recognized that awards may need to be enforced in India and that public policy factors may influence arbitral award enforcement.
  • The Court evaluated the potential defense to execution of any award under Article V(2)(b) of the New York Convention on Arbitration in considering the arbitrability of claims about royalties.
  • The Court referred to pertinent Indian law statutes, arbitration norms, and prior judgments (Nataraj Studios vs. Navarang Studios, Amrit Banaspati Co. Ltd. vs. State of Punjab, Mafatlal Industries Ltd. vs. Union of India).
  • Finally, the Court did not decide on the arbitrability of the claims in this judgment but instead posed two questions to be resolved in subsequent procedures.
  • The Court articulated issues to determine whether royalties and other claims were arbitrable and whether they could be resolved using public policy and Indian legal rules.
  • The Delhi High Court’s decision to apply Part I of the Arbitration Act because the substantive contract was governed by Indian law was overturned.
  • If required, the award’s enforceability in India can be challenged on public policy grounds.
  • Because the parties willingly agreed to English law regulating the arbitration agreement, the Indian party is not without recourse if the award is attempted to be enforced outside of India.
  • The appeal was granted, and the High Court’s decision was reversed.
Categories
Foreign Awards and their Enforcement

Shin etsu chemical co ltd v. M/s Aksh Optifibre Ltd & Anr Civil Appeal No 5048 of 2005

SHIN ETSU CHEMICAL V. M/S AKSH OPTIFIBRE LTD.

Shin etsu chemical co ltd v. M/s Aksh Optifibre Ltd & Anr Civil Appeal No 5048 of 2005

ISSUE:

  • When a party objects to the enforceability of an arbitration agreement, does Section 45 of the Arbitration and Conciliation Act of 1996 require a prima facie finding or a final judgment on its validity?
  • Whether the Arbitration and Conciliation Act of 1996 aims to reduce judicial intervention in the arbitral procedure and accelerate dispute settlement by the UNCITRAL Model Law on International Commercial Arbitration?

RULE:

  • The key problem is the interpretation of Section 45 of the Arbitration and Conciliation Act, 1996, which focuses on the type of adjudication required when a party claims that the arbitration agreement is “null and void, inoperative, or incapable of being performed.” The rule requires the judicial authority to evaluate whether a prima facie decision or a final ruling on the objection should be issued.

FACTS:

  • The issue concerns a disagreement between the Appellant and Respondent No. 1, who signed into an agreement on November 16th and 18th, 2000, that includes an arbitration clause.
  • The agreement stipulated that any issues would be resolved through arbitration in Tokyo, Japan, by the International Chamber of Commerce regulations.
  • On December 31, 2002, the Appellant canceled the agreement.
  • Respondent No. 1 filed a suit against the Appellant seeking a declaration and injunction to cancel the agreement, claiming that the terms were unconscionable, unfair, against public policy, and entered into under duress, rendering it void and incapable of performance.
  • The trial court granted the Appellant’s Section 8 application and referred the parties to arbitration.
  • Respondent No. 1 filed a petition under Article 227 of the Indian Constitution, stating that Section 45 of the Act should have been applied instead of Section 8.
  • The High Court ruled that the trial court should have used Section 45 and ordered a new trial under Section 45.

HELD:

  • The court based its conclusion on the parties’ affidavits and business realities, as it was impossible to study the records in-depth due to a lack of evidence confirming the broker’s authorization to act on behalf of the shipping company.
  • Because the arbitral tribunal would revisit the issue, the court used the criteria of a “plainly arguable case” or a “strongly arguable case.” However, it was not established that this criterion must be followed in all circumstances because it may not be prescribed by legislation in other countries.
  • It was recognized that the Arbitration and Conciliation Act of 1996 is not an exact adaptation of the UNCITRAL Model Law and that the articles of the Hong Kong Arbitration Ordinance deviate from the requirements of the UNCITRAL Model Law.
  • The case ordered that applications filed under Section 45 to dispute the validity of an arbitration agreement be considered as soon as possible, ideally within three months of filing. In rare circumstances requiring oral evidence, the judicial authority may extend the term by three months with a report to the superior/appellate authority.
Categories
Appointment and Challenge Non Signatories

Pravin Electricals Pvt Ltd v. Galaxy Infra and Engineering Pvt Ltd., 2021 SCC Online SC 190.

ISSUE:

Whether the party has filed a complaint with the proper High Court?

Whether an arbitration agreement exists for the arbitrator to resolve? - Whether the party, who has applied for reference and is a party to such agreement, be entitled to a more thorough assessment?

RULE:

The scope of judicial intervention in the determination of the validity of an arbitration agreement is limited.

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Non Intervention Recourse against Arbitral Awards

Ssangyong v. NHAI [Supreme Court, S 8 May 2019]

SSANGYONG V. NHAI

Ssangyong v. NHAI [Supreme Court, S 8 May 2019]

ISSUE:

  • Whether the Supreme Court’s explanation of the meaning of “public policy” under Section 34 of the Indian Arbitration and Conciliation Act, as amended by the 2015 Act, result in a more predictable and constrained application of this ground for setting aside arbitration awards?
  • Whether the Supreme Court’s decision on the prospective applicability of the 2015 Act to Section 34 applications effectively prevents the use of “public policy” and “patent illegality” as grounds for challenging domestic and foreign arbitration awards initiated prior to the 2015 Act’s enactment?

RULE:

  • The Supreme Court’s clarification of the scope of “public policy” under Section 34 of the Indian Arbitration and Conciliation Act, as amended by the 2015 Act, seeks to limit the broad interpretation of “fundamental policy of Indian law” and establishes specific criteria for assessing public policy challenges in arbitration. This rule aims to make the “public policy” justification for setting aside awards more predictable and restricted. The Supreme Court’s decision on the future applicability of the 2015 Act to Section 34 applications establishes that the 2015 Act’s modifications apply only to applications for setting aside awards filed on or after the 2015 Act’s start date. This rule is meant to prevent “public policy” from being abused.

FACTS:

  • The issue stemmed from a contract between Ssangyong Engineering and the National Highways Authority of India (NHAI) to build a four-lane bypass on a National Highway.
  • The disagreement centred on calculating compensation for inflation in construction material prices, with the agreed-upon approach being the Wholesale Price Index (WPI) using 1993-1994 as the base year.
  • Ssangyong objected to NHAI’s circular amending the WPI base year to 2004-2005.
  • The arbitral tribunal rendered a majority judgement upholding the NHAI’s amendment and a minority decision opposing it.
  • Ssangyong contested the majority award as being contrary to public policy, which resulted in an appeal to the Supreme Court.

HELD:

  • Previous cases’ broad interpretations of “fundamental policy of Indian law” were rejected.
  • Clarification on interpretations of public policy aspects under Section 34: “fundamental policy of Indian law” – Violation of a statute defending national interests, disdain for orders of superior courts in India, and natural justice principles.
  • “most basic notions of morality or justice” – Awarded against justice and morality when it disturbs the court’s conscience.
  • “patent illegality” – Illegality that goes to the heart of the issue while excluding erroneous application of law or re-appreciation of facts.
  • The 2015 Act’s Potential Applicability:
  • Affirmation that the 2015 Act modifying Section 34 is fully prospective and applies to all applications filed on or after October 23, 2015, regardless of when arbitration procedures began.
  • The Supreme Court exercised its authority under Article 142 of the Constitution to declare the minority decision as the parties’ award.
  • Raised concerns about the effectiveness of Section 34 remedies.
    It has been suggested that if a majority verdict is overturned, the parties may have to start the arbitration process all over again.
  • Recognised that using Article 142 appears to contradict earlier principles that it must not lose sight of statutory provisions.
Categories
Recourse against Arbitral Awards

South East Asia Marine Engineering and Constructions Ltd v. Oil India Limited [Supreme Court, 11 May 2020 in Civil Appeal No. 673 of 2012]

SOUTH EAST ASIA MARINE ENGINEERING V. OIL INDIA LTD.

South East Asia Marine Engineering and Constructions Ltd v. Oil India Limited [Supreme Court, 11 May 2020 in Civil Appeal No. 673 of 2012]

ISSUE:

  • Whether the arbitral tribunal’s interpretation of Clause 23 as involving a price increase in high-speed diesel (HSD) due to an Executive Order was a reasonable construction of the contract provisions, given that the contract appeared to envisage a fixed rate for the contractor?
  • Whether the arbitral tribunal’s interpretation, while based on the principle of harmonious interpretation, was so implausible and contrary to the overall terms of the contract that it could be considered against Indian public policy, justifying the High Court’s overturning of the arbitral award?

RULE:

  • While courts and tribunals should normally use a harmonic interpretation of contract words to determine the parties’ intent, such interpretation must nevertheless be consistent with the contract’s overall terms and conditions. An interpretation that is not plausible in the context of the contract may be rejected, particularly if it contradicts the contract’s plain stipulations and is contrary to Indian public policy.

FACTS:

  • OIL awarded SEAMEC a contract for drilling and related operations that includes a “change in law clause” (Clause 23).
  • The contract authorised SEAMEC to seek payment for additional expenditures incurred as a result of legal changes.
  • An Executive Order caused a rise in the price of HSD, which is necessary for SEAMEC’s operations.
  • SEAMEC contended that the price rise constituted a “change in law” under Clause 23, but OIL disagreed.
  • The arbitral tribunal found in favour of SEAMEC, applying a broad interpretation of the Article.
  • The District Judge upheld the award after it was challenged under Section 34 of the Arbitration and Conciliation Act 1996.
  • The High Court overturned the award, ruling that the interpretation was incorrect and against public policy.
  • SEAMEC filed an appeal with the Supreme Court.

HELD:

  • Both the arbitral tribunal and the High Court were overruled by the Supreme Court.
  • While a harmonic reading of a contract is normally prefered, it should not contradict the overall terms and circumstances of the deal.
  • The contract envisioned a set fee for SEAMEC, according to the Court, and there was no specific language in the contract linking price changes with a “change in law.”
  • SEAMEC’s broad interpretation of Clause 23 was ruled improbable by the tribunal because it was not supported by adequate evidence.
  • When two credible opinions exist, the Supreme Court clarified that the Court should not interfere with the arbitrator’s decision. In this case, however, the tribunal’s interpretation was not even an option.
  • Finally, the Supreme Court declined to intervene in the High Court’s decision to vacate the arbitral verdict.
Categories
Arbitral Awards

Steel Authority of India v. Primetals Technologies India Pvt. Ltd. [(Delhi HC, 12 March]

STEEL AUTHORITY OF INDIA V. PRIMETALS TECHNOLOGIES

Steel Authority of India v. Primetals Technologies India Pvt. Ltd. [(Delhi HC, 12 March]

ISSUE:

  • Whether the petitioner’s challenge under Section 34 of the Arbitration and Conciliation Act, 1996, to the arbitral award dated 15.10.2019, which allowed the respondent’s claims with costs and interest, justified in light of contractual disagreements concerning CENVAT credit and tax reimbursement?
  • Whether the learned Arbitrator correctly interpret the contract terms regarding the deduction of CENVAT credit and reimbursement of Central Sales Tax, and were the awarded claims, costs, and interest reasonable and in accordance with the petitioner-respondent contract?

RULE:

  • The case, which involves a challenge to an arbitral ruling, is governed under the Arbitration and Conciliation Act of 1996. Sections 34 and 33 of the Act, which deal with appealing awards and correction/interpretation, are fundamental to the legal rules. Contract law considerations also apply when interpreting CENVAT credit and tax reimbursement contract conditions.

FACTS:

  • Steel Authority of India Limited (petitioner) issued a contract to a consortium that comprised the respondent for a steel mill project.
  • Among the terms stipulated in the contract were the acquisition of commodities and the reimbursement of taxes.
  • When the response sought recovery for Central Sales Tax (CST) paid by its subcontractors/vendors, disagreements occurred.
  • The petitioner challenged the reimbursement, claiming inconsistencies in the contract provisions concerning CENVAT credit and tax deductions.
  • The case was sent to arbitration, and the arbitrator recognised five claims made by the respondent and two counterclaims made by the petitioner.
  • Arbitration procedures were initiated due to a disagreement over the interpretation of the contract provisions, specifically involving deductions for the shortfall in CENVAT credit and reimbursement of CST.
  • By ruling dated 14.09.2018 in Arbitration Case(C) No.31/2018, the Hon’ble Supreme Court submitted the matter to a Sole Arbitrator.

HELD:

  • The respondent was entitled to CST reimbursement under the contract, subject to a price schedule ceiling.
  • The arbitrator explained that deductions for the CENVAT credit deficiency could only be made from the gross contract price, not the nett contract price.
  • The refusal of the petitioner to repay CST paid by subcontractors/vendors was not warranted.
  • The arbitrator granted the respondent’s claims, including CST reimbursement, as well as actual arbitration costs and interest at 14% per year.
  • The petitioner’s Section 34 challenge to the arbitral award was dismissed, and the award was confirmed.
  • The refusal of the petitioner to repay CST paid by subcontractors/vendors was considered unreasonable.
  • The arbitrator granted the respondent’s claims, including CST reimbursement, as well as actual arbitration costs and interest at a rate of 14% each year.
  • The petitioner’s Section 34 challenge to the arbitral award was dismissed, and the award was confirmed.
Categories
Appointment and Challenge

Voestalpine Schienen GmbH v. Delhi Metro Rail Corpn. Ltd., (2017) 4 SCC 665

VOESTALPINE SCHIENEN GMBH v. DELHI METRO RAIL CORPORATION LTD.

Voestalpine Schienen GmbH v. Delhi Metro Rail Corpn. Ltd., (2017) 4 SCC 665

ISSUE:

  • Whether the Panel of Arbitrators by DMRC is in violation of Section 12(5) of the Arbitration and Conciliation Act 1996?

RULE:

  • Section 12(5) of the Arbitration and Conciliation Act 1996 holds that a person would be rendered ineligible to be appointed arbitrator or part of an Arbitral Tribunal if he/she stands to hold a relationship with either of the disputing parties.

FACTS:

  • The Respondents (DMRC) awarded a contract to the Plaintiffs (Voestalpine) for the supply of rails. The General Contract contained an arbitration clause which stated that particular procedure which was to be followed for the constitution of the Arbitral Tribunal in case of a dispute between the contracting parties.
  • The Arbitration clause specifically stated that the Respondents would forward five names to the Petitioners and they would have to choose its nominee arbitrator from the said panel. On forwarding the names, the Petitioners did not accept the same and argued that the panel is contrary to Section 12(5) of the Act.
  • The Respondents then filed a suit for the appointment of an independent arbitrator or tribunal. The same was heard before the Supreme Court of India.

HELD:

  • The Supreme Court held that the selection of retired engineers or PSU’s did not violation Section 12(5) of the Arbitration Act, and the Court rejected the contention that government entities and PSU’s were a conflict of interest in being arbitrators or part of the Arbitral Tribunal.
  • The Court stated, forming an important precedent, that in disputes in relation to Government Contracts, private parties would not be able to object the process of nomination of Arbitrators by the Government entity, unless they were absolutely able to prove a conflict of interest.
Categories
Trademark

Zee Telefilms Ltd. v. Sundial Communications Pvt. Ltd., 2003 SCC OnLine Bom 344

ISSUE:

Whether there are similarities between the two contended marks and do they create confusion

Whether the Defendant's mark violates the copyright of the Plaintiff?

Whether there was a misuse of confidential information or not?

RULE:

The Principle of Confidentiality, ensued in Article 21 of the Constitution under the Right to Privacy, and under the Information Technology Act 2000, states that when information is disclosed to a third party or used without the data owner's permission, he is entitled to take legal action on the account of loss or damage incurred as a result of the same.

Section 51 and Section 13 of the Copyright Act 1957 also state that an idea is not protected by a copyright, it only becomes a copyright when the idea is embodied in a tangible form.

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Copyright

The Chancellor, Masters & Scholars of University of Oxford Ors. v. Rameshwari Photocopy Services and Ors., 235 (2016) DLT 409

ISSUE:

Did the reproduction of sections in the course packs constitute copyright infringement?

RULE:

Section 52(1)(i), in particular, stated that the reproduction of any work by a teacher or a pupil in the course of instruction or as part of the question to be answered in an examination or answers to such questions all constituted fair dealing of that work.

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Trademark

Win-Medicare Ltd. v. DUA Pharmaceuticals (P) Ltd., 1997 SCC OnLine Del 803

ISSUE:

Whether the mark “DICLOMOL” being used by the Plaintiff and “DICAMOL” being used by the Defendant, for the manufacture of their products, are so similar that confusion is likely to be created amongst consumers, the public and those who are dealing with the Plaintiff Company?

Whether the Plaintiffs have a legal right to prevent the Defendants from using the mark “DICAMOL” to carry on their business, manufacturing, and marketing of the product?

RULE:

Rules 1 & 2 of Order XXXIX of the Code of Civil Procedure 1908 empower Courts to grant an injunction on the basis that it is just and convenient to do so to prevent injury or breach from arising, and Rule 2 specifically lays down the conditions that must be fulfilled; a prima facie case, balance of convenience, and irreparable loss or injury.

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