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Category: Appointment and Challenge

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Appointment and Challenge

Sanjiv Prakash v. Seema Kukreja and Ors., 2021 SCC Online SC 282

SANJIV PRAKASH V. SEEMA KUKREJA AND ORS.

Sanjiv Prakash v. Seema Kukreja and Ors., 2021 SCC Online SC 282

ISSUE:

  • Whether an agreement which contains an arbitration clause has or has not been novated be decided in the exercise of a limited prima facie review as to whether an arbitration agreement exists between the parties.

RULE:

  • The existence of an arbitration agreement presupposes a valid agreement which the Court would enforce by relegating the parties to the arbitration.
  • The existence of an arbitration agreement means an arbitration agreement that meets and satisfies the statutory requirements of both the Arbitration Act and the Contract Act and when it is enforceable in law.

FACTS:

  • The Appellant and his family members (Respondents) were shareholders in Asian Films Laboratories Private Limited, afterwards renamed ANI Media Private Limited (Company), which was established as a private limited company.
  • The Appellant was approached by Thomson Reuters Corporation (Reuters) about a long-term equity investment and partnership with the Company with the stipulation that the Appellant would be actively involved in the operation of the Company.
  • It was agreed in a Memorandum of Understanding (MOU), that in the event the Respondents wanted to sell their shares, the Appellant would have the first opportunity to buy them. The Arbitration Agreement, another arbitration clause, was included in the MOU.
  • Invoking the MOU’s arbitration clause and claiming that the transfer of one of the respondents transferred their shares to another respondent violated his preemptive right to buy the transferred shares, the Appellant gave notice of arbitration to the respondents.
  • The Appellant requested that the Respondents accept the arbiter he had chosen. The Respondents who were allegedly in violation of the MOU asserted that the SHA superseded the MOU and that the Arbitration Agreement, therefore, did not apply.
  • A petition under Section 11 of the Act was filed before the High Court of Delhi by the Appellant for the appointment of an arbitrator. The Hon’ble High Court refused to appoint an arbitrator. The Hon’ble Apex Court was approached.

HELD:

  • It was held that for the Section 11 Court to decide any matter, the “existence of an arbitration agreement” is mandatory.
  • Whether or not an arbitration agreement exists is a question to be determined by the Arbitral Tribunal.
  • The Court said that the detailed arguments on whether an agreement that contains an arbitration clause has or has not been novated could not be decided in the exercise of a limited prima facie review as to whether an arbitration agreement exists between the parties.
  • The Hon’ble SC set aside the judgment of the High Court and referred the parties to the arbitration of a sole arbitrator who was supposed to decide the dispute between the parties without referring to any observations made by the SC.
Categories
Appointment and Challenge

National Highways Authority of India v. Sayedabad Tea Company, 2019 SCC ONLINE SC 1102

NATIONAL HIGHWAYS AUTHORITY OF INDIA V. SAYEDABAD TEA COMPANY

National Highways Authority of India v. Sayedabad Tea Company, 2019 SCC ONLINE SC 1102

ISSUE:

  • Whether or not Section 11 (6) of the Arbitration and Conciliation Act of 1996 stands forfeited when the central Government exercised its right, which is bestowed by Section 3G (5) of the National Highway Act 1956 Act, to appoint an Arbitrator?

RULE:

  • Being a special enactment, the National Highway Act of 1956 is a code in and of itself that lays out the acquisition process as well as the method used to determine compensation by the competent authority. Anyone who feels that the compensation set under subsections (1) or (2) of Section 3G of the Act of 1956 is unfair can certainly move to appoint an arbitrator, who the Central Government is required to name under Section 3G(5) of the Act of 1956.

FACTS:

  • The Appellant (National Highways Authority of India) acquired the subject land, which is 5.08 acres in size and is part of the “Sayedabad Tea Estate” in Mouza Purba, in accordance with its authority under Section 3(D) of the Act 1956, by means of a notification dated November 22, 2005, in order to build highways.
  • On December 8, 2006, the respondent applicant submitted a request to the Central Government for the appointment of an arbitrator in accordance with Section 3G(5) after expressing dissatisfaction with the compensation award made by the appropriate authority under paragraph (1) of Section 3G of the Act, 1956.
  • It is claimed that the Central Government failed to react to his request for the appointment of an arbitrator in accordance with a letter dated December 8, 2006, within a reasonable amount of time.
  • The High Court of Calcutta held that the right of appointment of the Arbitrator by the Central Government stands forfeited as it failed to appoint the Arbitrator until the filing of the application under Section 11(6) of the Act, 1996 before the High Court of Calcutta and appointment of Arbitrator during the pendency of proceedings, cannot be said to be a valid appointment and hence referred the matter to be placed before the Chief Justice for naming an Arbitrator to vide its Order dated July 6 2007.
  • Getting the review application dismissed in the Hon’ble High Court of Calcutta, the Appellant moved to the Supreme Court.

HELD:

  • According to the Hon’ble Supreme Court, the High Court of Calcutta did not have the authority to appoint an arbitrator under Section 11 of the Act, 1996.
  • The Arbitration Act’s provisions can only be used where the Highway Act is silent, the Court further noted. As a result, Section 11, in this instance, cannot be upheld.
  • The Arbitration Act’s provisions can only be used where the Highway Act is silent, the Court further noted. As a result, Section 11, in this instance, cannot be upheld.
  • The Arbitrator was ratified by the Court and given immediate instructions to decide the case and present the arbitral ruling. The earlier rulings of the High Court were overturned by the Supreme Court.
Categories
Appointment and Challenge

Indian Oil Corporation v Raja Transport, (2009) 8 SCC 520

INDIAN OIL CORPORATION V RAJA TRANSPORT

Indian Oil Corporation v Raja Transport, (2009) 8 SCC 520

ISSUE:

  • Whether appointing the Indian Oil Corporation’s Director as Arbitrator would take away the independence and impartiality of the arbitral tribunal?

RULE:

  • Government contract arbitration clauses stating that an employee of the Department (often a high official unrelated to the work or the contract) will serve as the Arbitrator are valid and enforceable.
  • While the appointment of an employee as an arbitrator is not ipso facto a ground to raise a presumption of bias.

FACTS:

  • In 2005, the Appellant (IOC) appointed the Respondent (Raja Trasport) as its dealer for the retail sale of petroleum products. Later, the Appellant terminated the dealership of the Respondent on the recommendation of its Vigilance Department.
  • The Respondent filed in the Court of Civil Judge Dehradun for a declaration that the order of termination of the dealership was illegal and void.
  • The Appellant filed an application under the Civil Procedure Code, praying that the suit be rejected, and the matter be referred to arbitration in terms of Clause 69 of the agreement. The Court of Civil Judge allowed the said application filed by the Appellant, directing the parties to refer the matter to arbitration within two months.
  • The Respondent issued a notice dated 4.1.2006 through its counsel to the Appellant, referring to the Appellant’s insistence that only its Director (Marketing) or an officer nominated by him could act as the Arbitrator in pursuance of the order of the Civil Judge.
  • The Respondent filed an application under section 11(6) of the Act in March 2006 before the Chief Justice of Uttaranchal High Court, praying for the appointment of an independent arbitrator to decide the dispute relating to the validity of the termination of the dealership.
  • The Hon’ble Uttaranchal High Court appointed a retired High Court Judge as the sole Arbitrator to decide the dispute. The said order of the Chief Justice is challenged by the Appellant.

HELD:

  • The Hon’ble Supreme Court held that in an arbitration agreement, parties are free to choose an employee of one of the parties to serve as an arbitrator.
  • Additionally, it was decided that the Court had the right to reject to designate an employee of one party as the Arbitrator in a dispute if there was any reason to doubt his impartiality or independence.
  • If a party enters into a contract with a government agency, statutory corporation, or public sector organisation knowing full well that it contains an arbitration clause specifying that one of its secretaries or directors shall serve as the Arbitrator, he cannot later claim that he is okay with dispute resolution through arbitration, but not by the named Arbitrator.
  • The Court concluded arbitration agreements in government contracts providing that an employee of the Department (usually a high official unconnected with the work or the contract) will be the Arbitrator are neither void nor unenforceable.
Categories
Appointment and Challenge

Aravali Power Company Pvt. Ltd. v. M/s. Era Infra Engineering Limited, 2017 SCC OnLine SC 1072

ARAVALI POWER COMPANY PVT. LTD. V. M/S. ERA INFRA ENGINEERING LIMITED

Aravali Power Company Pvt. Ltd. v. M/s. Era Infra Engineering Limited, 2017 SCC OnLine SC 1072

ISSUE:

  • Whether challenging the appointment of the arbitrator, appointed pre-2015 Amendment on the strength of the 2015 Amendments valid?

RULE:

  • The scheme of Section 11 shows that the emphasis is on the terms of the agreement being adhered to and/or given effect as closely as possible. In other words, the Court may ask to do what has not been done. The Court must first ensure that the remedies provided for are exhausted. It is not mandatory for the Chief Justice or any person or institution designated by him to appoint the named arbitrator or arbitrators. But at the same time, due regard has to be given to the qualifications required by the agreement and other considerations.

FACTS:

  • Aravalli Power Co. Pvt. Ltd and M/s Era Infra Engineering Limited had disagreements over the terms of the contract for the permanent township that was to be built for the Indra Gandhi Super Thermal Power Project at Jhajjar, Haryana.
  • The aforementioned contract stipulated that the arbitrator would be the project manager or another individual chosen by the chairman of National Thermal Power Corporation (NTPC).
  • The Respondent started arbitration proceedings by letter dated July 29, 2015, asking the Appellant to designate an arbitrator. As the only arbiter, the Chief Executive of APCPC was selected.
  • In 2016, the Respondent first contested the arbitrator’s appointment and subsequently petitioned the Delhi High Court under Section 14 of the Act to have the arbitrator’s appointment terminated. Additionally, the Respondent submitted an application for the appointment of an arbitrator under Section 11(6).
  • By its ruling, the High Court invalidated the Appellant’s nomination of the arbitrator and ordered them to nominate names of the three-panel arbitrators from various departments so that the Respondent might select one of them. The aforementioned order was eventually challenged before the Indian Supreme Court.

HELD:

  • The Court held that because arbitration was invoked before the Amendment Act went into effect, the party cannot use the revised Section 11 of the 1996 Act to contest the arbitrator’s appointment that has already been made.
  • The 2015 Amendment Act put a stop to the practice of designating the officials of one of the contracting parties.
  • The Hon’ble Supreme Court further stated that the law established in the Northern Railway Administration must be implemented in pre-amendment instances and that the conditions of the contract should be adhered to and/or given effect to as closely as practicable.
  • Thus, the Hon’ble Supreme Court has categorically held that insofar as Section 11 of the Act is concerned, the amended provisions will have no applicability if the invocation of arbitration is before October 23 2015.