IMPORTANT SUPREME COURT DECISIONS
RELATING TO ARBITRATION AND CONCILIATION
|
-By Adv. Sandesh
Ektare,
The role of UNCITRAL model :-
It was held by the Hon’ble Supreme court in the case of Konkan
railway Corpo. Ltd Vs Rani
Const. Pvt Ltd (A.I.R 2002 SC 778) that for
interpretation of the Arbitration and conciliation Act 1996, the model law and
judgments thereon are not a guide since the Act and the Model Law are not
identically worded.
In Rashtriya Ispat Nigam Ltd Vs Verma
Transport Co., it was held that the new Act, however, is not as
extensive as the English Arbitration Act. The new act was enacted in the light
if the UNCITRAL Model rules but in certain respects the legislature has gone
beyond the scope of the said rules.
In Centrotrade minerals
and metals Inc. V/s
Reference
through intervention of Court:-
There is no provision in
the 1996 Act for referring a matter to the Arbitral tribunal with a intervention of the court. However, if during the pendency
of the proceedings in the court, parties have entered into an arbitration
agreement, then they have to proceed in accordance with the provisions of the
act. The award when made attains the status of a decree. The award though
cannot be filed in the High Court and it has to be filed in the Court as
defined in sec 2(1)(e) for its enforcement as a decree u/s 36.Tamilnadu
Electricity board v/s Sumathi AIR 2000 SC 1603
Meaning of Commercial
In R.M. Investments and trading
company Pvt. Ltd. v/s Boeing Company(AIR 1994 SC 1136)The Supreme Court
has defined the term commercial as it should be given a wide interpretation so
as to cover matters arising from all relationships of a commercial nature,
whether contractual or not.
Relationships of
commercial nature include, but are not limited to the following transactions,
any trade transactions for the supply or exchange of goods or services,
distribution agreements, commercial representation or agency, factoring,
leasing, construction of works, engineering, consulting, licensing,
investments, financing, banking, insurance, exploitation agreement or
concession, joint venture, and other forms of industrial or business
co-operation, carriage of goods, or passengers by air, rail, sea, or road.
In Fatehchand Himmatlal V/s State of
Venue of Arbitration:-
Regarding the venue of
arbitration it was held in Sanshin
Chemicals Industry V/s Orient Carbons and Chemicals Ltd. (AIR 2001 SC 1919)
It was held by Supreme court that it is for the Arbitral tribunal to determine the
venue of arbitration if the arbitration clause does not so specify or the
parties cannot agree on the place where the arbitration hearings should be held.
In case the arbitral tribunal has to decide the venue and a decision is given,
such a decision is not a decision of dispute relating to the agreement and
cannot be called an award or an Interim award.
Award to be construed harmoni
In appreciating the words
used in the award given by the arbitrators, the court must bear in mind that
the arbitrators are laymen not familiar with the technical significance of
legal expressions, and so the court must read the relevant clauses in the award
as a whole with a view to determine what in effect and substance they intended
to decide. AIR 1960 SC 307.
Evidentiary value of award
It was held by the
Supreme court in Satish Kumar Vs Surinder
Kumar, AIR 1970 SC 833, that the award is ,in fact, a final
adjudication of a court of the parties own an award, which is on the face of it
irregular, is conclusive upon the merits of the controversy submitted. As
between the parties and their privies, an award is entitled to that respect
which is due to judgment of a court of last resort.
Status of arbitral award
The status of an arbitral
award has been clearly stated by the Hon’ble Supreme
Court in the case of Engineering Mazdoor
Sabha Vs Hind Cycles Ltd, AIR 1963 SC 874. According
to the Hon’ble S.C., An arbitral award is not
constituted by law but it is constituted by the parties and the power to decide
the dispute between the parties who appointed it is derived by it from the
agreement of the parties and from no other source. An Arbitral Tribunal is not
a tribunal because the State has not vested it with its inherent judicial power
and the power of adjudication which it exercises is derived by it from the
agreement of parties.
Section 2(1)(e),
Competency of court
It was held in Garwal Mandal Vikas Nigam Ltd Vs
An
exceptional case, an award can be challenged in the principle
civil court of original jurisdiction in a district and it includes a High court
in exercise of its original civil jurisdiction. However an exception was made
in case of Mcdermott International Inc Vs Burn
Standard Co Ltd, (2005)10 SCC 353, that where while appointing an
arbitrator, an order was passed by the Supreme court that as and when award
would be made, it would be filed in Supreme Court only and that if any application
was required to be made during or after the conclusion of arbitration
proceeding, the same should be filed in the Supreme court.
Section 2(1)(e) Cause of
action :-
In B.South East
Asia Shipping Co. Ltd. Vs Navbharat
Enterprises Pvt. Ltd. 1996(3) SCC433, The Supreme Court has defined
cause of action as a bundle of fax which give pause to enforce the legal injury
for redress in a court of law. The cause of action means, therefore, every
fact, which if traversed, would support his right to a Judgment of the court.
In other words, it is bundle of facts, which taken with a law applicable to
them gives the plaintiff a right to claim relief against the defendant. It must
include some act done by the defendant since in absence of such an act no cause
of action would possibly arise.
It was held by the
Supreme Court in Nalanda
Ceramic and Industries Ltd. Vs N.S. Chaoudhary and
Co.,(AIR 1977 SC 2142 that if an
award was made in pursuance of an agreement which was entered into between the
parties in Calcutta, then only that the High Court at Calcutta has jurisdiction
to entertain the proceedings.
Section 2(1)(e) Place of
making of contract
Making of an offer at a
particular place does not form cause of action in a suite for damages for
breach of contract. Ordinarily, acceptance of an offer and its intimation results
in a contract and hence, suite can be filled in a court within whose
jurisdiction the acceptance was communicated. A.B.C. Lamin
Art Pvt. Ltd. Vs A.P Agencies,
Place of payment of money:
Where the petitioner
alleged that the formal experience of a contract and payment under the contract
had been made within the territory of a particular court and the averments were
not controverter by the respondent in his affidavit in opposition it would not
be correct to say that the said court did not have territorial jurisdiction.
Section 2(2)
In a very famous case of Bhatia
International Vs Bulk Trading S.A., AIR 2002 SC 1432, it was held by the Supreme Court that,
applicability of Part I of the Act is not restricted by section 2 (2) of the
Act to domestic / international arbitration that takes place in India. Omission
by the legislature to provide that Part I will not apply to international
arbitration taking place out side
Waiver of right to object
“Waiver” is not strictly
defined in its application in arbitration proceedings. As per the dictionary
meaning a person is said to waive injury when he abandons the remedy which the
law gives him for it, and may be express or implied. If the applicant having a
clear knowledge of the circumstances on which he might have founded an
objection to the arbitrators proceeding to make their award, submits to the
arbitration going on and allows the arbitrators to deal with the case as it
stands before them taking the chance of decision being more or less favourable to himself, it is too late for him after the
award has been made to raise objection. N. Chellappan Vs
Secretary,
In Sikkim Subba
Associates Vs State of Sikkim, AIR 2001 SC 2062, it was held that Waiver involves a conscious ,
voluntary and international relinquishment or abandonment of a know existing
legal right advantages, benefit, claim or privilege which express for such a
waiver, the party have enjoyed.
Arbitration agreement – waiver of
In Dharma Prathisthanam
Vs Mandok const , AIR 2005 SC 214, it was held that , what confers jurisdiction
on the arbitrators to hear and decide a dispute is an arbitration agreement and
where there is no such agreement there is an initial want of jurisdiction which
cannot be cured even by acquiescence. The arbitrator derives their jurisdiction
from the agreement and consent.
Section 5
By virtue of this
section, notwithstanding any law for the time being in force, no judicial
authority can intervene in any arbitration matter except when so permitted by
any of the stipulations in part I of the Act. This section clearly indicates
the legislative intent to minimize supervisory role of the courts to ensure
that the intervention of the courts is minimal. Shree
Shubh laxmi Fabrics Pvt Ltd Vs Chandmal Baradiya, AIR 2005 SC 2161.
Section 7
The Hon’ble
Supreme Court has given a very detail view regarding the scope of arbitration
clause in an arbitration proceedings in the case of Union
of
In State of U.P. Vs Bridge and Roof
Co Ltd (India)AIR 1996 SC 3515, it was held
that where the parties have agreed to settle their dispute by arbitration and
if there is an agreement in that respect, the court will not permit recourse to
any other remedy without invoking the remedy by way of arbitration unless, both
the parties to the dispute agrees on another mode of dispute resolution.
Section 8 :- power to refer parties to
arbitration
In Union of
In Olympus Superstructures Pvt Ltd Vs Meena Vijay Khaitan, AIR 1999 SC 2102, it was held that if
there is a situation where there are disputes and differences in connection
with the main agreement and also disputes regarding some other matters ,
connected with the subject matter of the main agreement, then in such a
situation, disputes can be referred to the arbitral tribunal.
Section 9 :- interim
measures by courts
In Bhatia International Vs Bulk
Trading S.A., AIR 2002 SC 1432, it was held that an order restraining a
party from proceeding with the arbitration cannot be said to be an interim
measure that could be granted under this section. Provisions of the act are
designed to reduce to an acceptable minimum the interference of courts with the
conduct of arbitration and the finality of awards. It is recognized that in the
interest of justice and the healthy arbitral system there should only be a
limited scope for recourse to courts.
Section 11 Appointment of Arbitrator :-
It was held by the Hon’ble Supreme Court in Union of India Vs M.P. Gupta and
Union of India Vs V.S. Eng Pvt Ltd AIR 2007 SC 285, that when and
where the arbitration agreement specifically provides for the appointment of
two gazette officer of equal status as arbitrators, it is incumbent upon the
court to give effect to the stipulation. Thus appointment made by court in
complete disregard of the term of the agreement cannot be upheld.
In the case of Bhupindersingh Bindra Vs Union of India, AIR 1995 SC 2464, it was
confirmed by the Supreme Court that where for some reason it is not possible to
appoint an arbitrator in terms of the agreement of the parties then the court
has to look for selecting a suitable person outside the provision of the
agreement.
It was also confirmed in
the above stated case that the court must make all possible efforts to appoint
an arbitrator in accordance of the agreement, but if it is not possible, the endeavour of the court should be appoint a person who is
agreeable to the parties to dispute.
Appointment of arbitrators by consent
In Arvind Construction
(P)Ltd Vs Kalinga Mining Corp, AIR 2007 SC 2144, it
was held that the appointment of an arbitrator must be made by the Chief
Justice or his designate with due expedition otherwise the very purpose of
going in for arbitration would be defeated. Where any application under this
section is pending before Chief Justice before the High Court for over two
years without orders, parties on the suggestion of Supreme Court can agree for
appointment of a sole arbitrator.
Order of the Chief Justice adjudicatory
:-
In a very prominent case
of Konkan Railways Corp Ltd Vs Mehul
Construction Co, AIR 2000 SC 2821, it was held by a three judge bench
of the Supreme Court, that the order of the Chief Justice in case of appointment
of arbitrators in case of domestic arbitrations and that of the Chief Justice
of the India in an International commercial arbitrations, shall be deemed to
have been made in his administrative capacity and the aggrieved party could
approach the arbitral tribunal under section 16 for challenging the
jurisdiction of the tribunal. This view of the Supreme Court was confirmed by a
Constitution Bench of the Supreme Court in another important case Konkan Railways Corp Ltd Vs Rani
Construction Co, AIR 2002 SC 778.
Named Arbitrator when may not allow to act
In an arbitration
proceeding , it is expected from the arbitrator so appointed for the proceedings,
that he should not only be fair and impartial but also that he should enjoy the
confidence of the parties and if the arbitrator so appointed does not meet this
criteria , he would not qualify to act as an arbitrator further in the
proceedings. Bihar State mineral Dev Corp Vs Encon
Builders (I)(P) Ltd AIR 2003 SC 3668.
Appointment by non designated authority
In Consolidate Constructions Co Vs
State of Orrisa, AIR 1963 SC 90, it was held
that where the appointment of an arbitrator is made by a person other that the
one named in the arbitration agreement to make such appointment, then the
proceedings before such arbitrator and award made by him are null and void
since acquiescence cannot cure defect of jurisdiction.
Regarding the appointment
of arbitrator, it was stated that once the parties agreed for adjudication of
the dispute through arbitration, it is not open for either of them to resale
from the bargain, as held in Jagdish
Chander Bhatia Vs Lachman Das Bhatia, AIR 1991 SC 89.
Section 12, Grounds for challenge of appointment
An arbitrator must not be
guilty of any act which can possibly be construed as indicative of partiality
or unfairness. The purity of
administration requires that the party to the proceeding should have an
apprehension that the authority or the arbitrator is biased and likely to
decide the case against the party.
In Uttarpradesh
Cooperative Federation Ltd Vs Sunder Bros, AIR 1967 SC 249, it was held
that a party to the proceeding may be released from the bargain if he can show
that the selected arbitrator is likely to show bias or by sufficient reason to
suspect that he will act unfairly or that he has been guilty of continued
unreasonable conduct.
In State of Rajasthan Vs Nav Bharat Construction co, AIR 2005 SC 4430, it was stated by the Supreme Court that a mere
allegation , unsupported by any proof or evidence, that the arbitrator was
regularly appearing for one of the parties and assisting it in preparation, can
not be countenanced.
Writ petition is barred for challenging order of
arbitrator
In S.B.P. & Co Vs Patel Eng.
Ltd, AIR 2006 SC 450, it was held that, an order passed by an arbitral
tribunal during the course of arbitral proceedings, can not be challenged in a
Write Petition. The aggrieved party can avail the provision of Section 34 of
the Arbitration and Conciliation Act, after the award has been filed. Once the
arbitration proceedings are commenced, the parties have to wait until the award
has been pronounced, unless, of course, a right of appeal is available to them
under section 37 even at an earlier stage.
Section 13, Challenge procedure
Bias:
the famous author Russell defined as, “there is a universal
agreement among jurists of all countries, that it is of the first importance
that Judicial tribunal should be honest, impartial and
disinterested”
In Secretary Transport Dept Vs Munuswamy Mudaliar, AIR 1988 SC
2232, it was held that reasonable apprehension of bias in the mind of a
reasonable man can be a ground for the removal of an arbitrator. A predisposition to decide for or against one
party, without proper regard to the true merits of the dispute is bias. The
reasonable apprehension must be based on cogent material.
In Kumaon Mandal Vikas Nigam Ltd Vs Girija Shankar Pant, AIR 2001 SC 24, it was held that mere
general statements will not be sufficient for the purpose of indication of ill
will. There must be cogent evidence available on record to come to the
conclusion as to whether in fact there was existing bias which resulted in
miscarriage of justice.
Section 14 Failure to or impossibility to act:-
In Grid Corporation of Orissa Ltd.Vs A.E.S.Corporation AIR 2002
SC 3435, it was held that an application under sec 11(6) can be moved
before the Chief Justice for appointment of arbitrator, but a petition that the
arbitrator has failed to act can be filed only in the Court. Thus a joined
application u/s 11(6) and 14 for appointment of a third arbitrator is not
maintainable because for both sections is different.
In Keshav
Singh Dwarka Das Vs Indian Engineering Company, AIR
1972 SC 1538, it was
held at where the appointed person after acceptance of Office refuses to act or
will not act, the parties have to take recourse to the court.
In Chanderbhan Harbhajan Lal Vs State of
Section 15 Termination of mandate and
substitution of arbitrator:-
Regarding the
admissibility of evidence recorded before earlier arbitrator it was held in Kalyan Peoples cooperative Bank Ltd. Vs Dulhan Bibi Aqual
Amin Saheb Patil AIR 1966 SC1072, that question of mode of
proof is a question of procedure and is capable of being waived and therefore
evidence taken in a previous judicial proceeding can be made admissible in a
subsequent proceeding by the consent of parties.
Section 16 ,Competence of Arbitral
Tribunal
In Nimet
Resource Inc Vs Essar Steels Ltd AIR 2000 SC 3107, it was held that when the correspondence or
exchange of documents between the parties are not clear as to the existence or
non existence of arbitration agreement in terms of section 7, the appropriate
course would be that the arbitrator should decide such a question under section
16.
In Wellington Associates Ltd Vs Kirit Mehta ,AIR 2000 SC 1379 it
was decided that the Chief Justice has the jurisdiction to decide whether an
arbitration clause exists between the parties at the time of making the
appointment.
In Hindustan Petroleum Corp Ltd Vs Pinkcity Midway Petroleum, AIR 2003 SC 2881, it was held that if there are any objection
regarding the applicability of arbitration clause in the agreement which goes
to the root of the jurisdiction of the arbitral tribunal, the same should be
raised before it.
Section 17, Interim measures ordered by the
tribunal
The Hon’ble
Supreme Court, in Olympus Superstructures Pvt Ltd Vs Meena Vijay Khaitan, AIR 1999 SC
2102, relied on Halsbury’s Law and held that the dispute or difference which
the parties to an arbitration agreement agree to refer must consist of a
justifiable issue triable civilly. A fair test of
this is whether the difference can be compromised lawfully by way of accord and
satisfaction.
Section 18
The Supreme Court on the
question of misconduct has held that, in an arbitration agreement where the
terms of the contract expressly prohibits awards of compensation for damages on
account of prolongation of contract, and the arbitrator still awards the
damages, it would be misconduct on his part. As held in Continental
Construction co Ltd Vs State of
On the question of
natural justice, it was held by the Supreme Court, that an arbitrator must
ordinarily follow the principles of natural justice, but where the parties
agree on the point that the proceeding may be conducted in any particular way,
the contract prevails over what are called principles of natural justice. Payyavula Vengamma Vs Payyavula Kesanna, AIR 1953 SC
21.
Award based on personal knowledge
In Dewan
Singh Vs Champat Singh, AIR 1970 SC 967, it
was held that if the parties vest the power with the arbitrator to decide the
dispute in ‘whatever manner’ that does not mean that the arbitrators can decide
the matter on the basis of their personal knowledge.
Section 19 Determination of rules
The arbitrator is the
sole judge of the quality as well as quantity of evidence and it will not be
for the court to take upon itself the task of being judge of the evidence
before the arbitrator. It may be possible that on the same evidence the court
might have arrived at a different conclusion that the one arrived at by the
arbitrator but that by itself is no ground for setting aside the award of the
arbitrator. Municipal Corporation of
Arbitration not governed by Evidence Act
In Ganges Waterproof Works (P) Ltd
Vs Union of India, AIR 1999 SC 1102, it was held that an arbitrator is not bound by
the terms of the Evidence Act in matters of recording and relying upon
evidence. He can rely upon documentary evidence filed before him especially
when the same have not been denied by either party.
Framing of issue :-
Deciding this question,
the Supreme Court held that, if at the time of making an award, the arbitrator
corrected certain issues, which did not in any manner prejudice the cause of
either party and more so, when the parties have fought the case before the
arbitrator on the basis of amended claim, it cannot be said that he was guilty
of misconduct because of having amended the issue behind the back of the
parties. Madanlal Roshanlal
Mahajan Vs Hukamchand Mills
Ltd, AIR 1967 SC 1030.
Disposal of interlocutory applications
In International Airport Authority
of India Vs K.D. Bali, AIR 1988 SC 1099, it is not necessary for the
arbitrator to record long reasoned order on the preliminary objections of a
party and indeed the law does not demand writing such a long order.
Section 20, Place of arbitration
It is not open for the
arbitrator to fix the venue of arbitration proceeding of his choice regardless
of the convenience of the parties. When there is no condition in the
arbitration agreement empowering the arbitrator to fix the venue of arbitration
as he thought fit, the arbitration in fixing the venue of meeting must take
into account all the material circumstances including the residence of the
parties and their witnesses, the subject matter of the reference and the
balance of convenience. Sanshin chemical Industry Vs Oriental
Carbons and Chemicals Ltd, AIR 2001 SC 1219.
Section 21 Commencement of proceeding
In Milkfood Ltd
Vs GMC Ice Cream (P) Ltd, AIR 2004 SC 3145, the Supreme Court held that,
A notice of arbitration or commencement of an
arbitration may not bear the same meaning, as different dates may be specified
for commencement of arbitration for different purposes. What matters is the
context in which the expressions are used.
Section 23
, Statement of claim and defense :-
In Madanlal Roshanlal Mahajan Vs Hukamchand Mills Ltd, AIR 1967 SC 1030, it was held that when
the objecting party has suffered no prejudice by amendment of an issue and
parties well knew the amended claim and have contested the case before the
arbitrator on that footing, the contention of the objector that by amending the
issue behind his back, the arbitrator
was guilty of misconduct is of no force.
Section
28 Rules applicable to substance of dispute :-
In an important case of ONGC
Ltd Vs SAW Pipes Ltd, AIR 2003 SC 2629, it was held by the Hon’ble Supreme Court that , if on taking into
consideration contractual terms, the award on the face of it is erroneous and
in the violation of the terms of the contract, then it would be violation of
sub section (3) of this section. When the award is erroneous on the basis of
record with regard to the propositions of law or its application, the court
will have jurisdiction to interfere the award. If the award is contrary to the
substantive provisions of law or the terms of the contract, it would be penalty
illegal, which would be interfered with under this section. However, such
failure of procedure should be patent affecting the rights of the parties.
To decide
as per the terms of the contract :-
In Associated Engg
Co Vs Government of Andhra Pradesh,AIR 1992 SC 232, it was held that , the Arbitrator can not act
arbitrarily, irrationally, capriciously or independently of the contract. His
sole function is to arbitrate in terms of the contract. He has no power apart
from what the parties have given under the contract. If he has travelled
outside the bounds of the contract, he has acted without jurisdiction. A
conscious disregard of the law or the provisions of contract from which he has
derived his power and authority vitiates the award.
In Thawardas Pherumal Vs Union of India, AIR 1955 SC 468, it was
held that the Arbitrator is the tribunal selected by the parties to decide
their disputes according to law and so is bound to follow and apply the law,
and if he does not, he can be set right by the court provided his error appears
on the face of the award.
In National Thermal Power Corporation
Vs Singer Co , AIR 1993 SC 998, it was held that the Judge has to apply
the proper law for the parties in such circumstances by putting himself in the
place of a “reasonable man”. He has to determine the intention of the parties
by asking himself “how a just and a reasonable person would have regarded the
problem”
Section 30 Settlement :-
In Gurunanak Foundation Vs Rattan singh
and Sons AIR 1981 SC 2075, it
was held regarding the encouragement to settle the dispute through
mediation, that the very concept of
arbitration is based on the system that was prevailing in panchayats for resolution of disputes and difference which arose between two
parties. The decision was taken on the spur of the moment and both the parties
graciously accepted the decision as final and binding on them without any
murmur.
Execution of settlement awards
:-
If a
settlement agreement comes into existence, it gets the status and effect of an
arbitral awards on agreed terms on the substance of the dispute rendered by an
arbitral tribunal under this section. However, even a compromise petition signed
by both the parties cannot be enforced by resorting to execution proceedings
unless such it is accepted by the court and the court puts its seal of approval
on the same. Mysore Cement Ltd Vs Svedala Barmac Ltd AIR 2003 SC
3493
Section 31 Form and contents of arbitral award :-
Even assuming
that there was an error of construction of the agreement or even that there was
an error of law in arriving at a conclusion, such an error is not an error
amenable to correction even in a reasoned award under the law. U.P.
Hotels Vs U.P, State Electricity Board, AIR 1989 SC 268
Stamp duty on award :-
In Hindustan
Steel Ltd Vs Dilip construction co, AIR 1969 SC 1238, it was held that stamp
act is a fiscal measure enacted to secure revenue for the State on certain classes
of instruments. It is not enacted to arm a litigant with a weapon of technically
to meet the case of his opponents. The stringent provisions of the act are
conceived in the interest of revenue. Once that object is secured according to
law, the party stating his claim on the instrument will not be defeated on the
ground of the initial defect in the instrument.
Registration of Award :-
In Satishkumar Vs Surinder kumar AIR 1970 SC 833, it was held that, an award
given under the Arbitration Act requires registration under section 17(1) (b)
of the Registration Act If the award affects partition of an immovable property
exceeding the value of Rs, 100/-
In Sardar Singh Vs
If due to an injunction order, the arbitrators were
prevented from taking steps for registration of the award, the entire period
during which the award remained in the custody of the court was to be excluded
for the purposes of computation of the period of four months for getting the
award registered. Raj kumar Vs Tarapada Dey, AIR 1987 SC 2195.
Return of award for registration
:-
In Champalal Vs Samrathbai,
AIR 1960 SC 629, it was
held that where the unregistered award was filed by the arbitrator in the
court, its subsequent registration was not invalid as the filing of an
unregistered award under section 49 of the Registration Act is not prohibited ,
but what was provided by that provision was that such an award could not be
taken in evidence so as affect immovable properties falling under section 17 of
the Registration Act.
Registration – when not required
When an award
stated merely an existing fact viz that the existing
documents relating to debts obtained on lands would remain as before, as
securities till payment of debts and that the debtor would have no right to
transfer the land, held that the award did not either create, or of its own
force, declare any interest in any immovable property required to be
registered.
Award – who can file :-
If a party to
the arbitration , by his letter requests the
arbitrator to send to his lawyer the award for filing the same in court and the
arbitrator obliges on such a request, it could be said that the arbitrator by
necessary implication authorized the party’s counsel to file the award and the
connected papers in court. Food Corporation of
It is not correct
to say that an award should be filed only if the parties make a request to the
arbitrator to file the award or make an application to the court for that
purpose, especially when there is no prohibition in the act
against the arbitrator filing his award sue motu
in the court. State of
Mere handing
over of the award to a party does not necessarily imply that the award has been
given the authority to the arbitrator to file the same into the court on his
behalf. That authority has to be specifically alleged and proved. Binod Bihari singh Vs Union of India AIR 1993 SC 1245, Kumbha Mawji Vs Dominion of
Section 33 Correction and interpretation of award :-
An arbitrator is
functus officio after he has made the award,
but this only mean that no power is left in the arbitrator to make any change
in substance in the award that he had made. This section gives the power to the
arbitrator to correct any clerical mistake or error arising from any accidental
slip or omission in the award. Juggilal Kamlapat Vs General
fibers Dealers Ltd AIR 1962 SC 1123.
Section 34 Setting aside an arbitral award :-
This is a very
important section the whole Arbitration and Conciliation Act 1996. There are a
plenty of cases in which the Hon’ble Supreme court
has laid down their view deciding the cases.
In Olympus
Superstructures Pvt Ltd Vs Meena
Vijay Khaitan, AIR 1999 SC 2102, it was held that this
section is based on Art 34 of the UNCITRAL Model Law and it will be noticed
that under the 1996 Act, the scope of the provisions for setting aside the
award is far less the same as under section 30 or 33 of the Arbitration Act
1940.
In State
of Rajasthan Vs Nav Bharat Construction co, AIR 2002
SC 258, It was held that if a party fails to establish his case within
the four corners of this section, the award cannot be set aside.
In Shanmughasundaram Vs Diravia Nadar, AIR 2005 SC 1836, It
was held that an award can be set aside where all the necessary parties are not
impleaded in the litigation. An award which is
unenforceable and invalid on the date it is made, cannot be upheld on
possibilities and eventualities which might occur in the future. An Award
cannot be upheld on guess work and speculations.
Section 36 Enforcement of Award :-
Where application were filed by the petitioners in respect of two
awards in the same arbitration case, it was held that provisions of Order XXI
Rule 18 and 19 of C.P.C. were not applicable. N.R. Constructions Pvt Ltd Vs Shri Ram Badan singh,
A clause in a
decree passed in terms of an award providing that on the happening of certain events,
the vendor shall be entitle to take back possession of property, does not make
the award declaratory so as to make it incapable of execution. Prakash Chandra Khurana
Vs Harnamsingh , AIR 1973 SC 2065.
Section 37 Appealable orders :-
In proceeding
to set aside the award, the appellate court cannot sit in an appeal over the
conclusion of the arbitrator by re examining and re appraising the evidence
considered by the arbitrator and hold that conclusion reached by the arbitrator
is wrong. President,
Section 40 Arbitration agreement not to be
discharged by death of the party :-
Arbitration
proceedings cannot become incompetent only because the legal representatives of
the deceased person, who died during the pendency of the arbitration
proceedings, were not brought on record in view of order XXX Rule 4 of the CPC . As held by the
Supreme Court in
Laxmi Ice Factory Vs Union of
Section 42 Jurisdiction :-
The main object of introducing the new
provision is to entrust the decision of the relevant dispute to the specified
court, and to require the parties to bring the said dispute for the decision of
the said court in the form of petitions, remedy by a regular suit being
excluded. Jawaharlal Burman
Vs Union of
Section 43 Limitation :-
Cause of
action
The cause of
arbitration corresponds to the cause of action in litigation treating a cause
of arbitration in the same way as a cause of action would be treated if the proceedings
were in a court of law . State
of
Section 44 Enforcement of Foreign Awards
Commerce, undoubtedly is traffic, but it is some thing
more, it is intercourse. It describes the commercial intercourse between
nations and parts of nations, in all its branches, and is regulated by
prescribing rules for carrying on that intercourse. Transocean Shipping Agency (p)
Ltd Vs
Section
45 Power of judicial authority to refer parties to arbitration
:-
Submission
means an agreement to refer or an arbitral clause and does not mean an actual
submission or completed reference and that the word “agreement” means a
commercial contract and not an agreement to refer or an arbitral clause. Tractroexport Vs Tarapore and Co , AIR 1971 SC 1
It was pointed out that even though if a
company is a party to the joint venture agreement, no arbitration has been
provided for disputes between the shareholders and the company or in relation
to allegations on the affairs of the company. Sumitomo Corporation Vs CDC
Financial Services (
A court while
exercising its judicial functions would ordinarily not pass an order which
would make one of the parties to the lis violate a
lawful order passed by the another court.
Section
48 :-
For enforcement of a foreign award there is no
need to follow separate procedure, one for deciding enforceability of award to
make it a rule of court or decree and the other for execution thereafter. Forest
Day Lawson Ltd Vs Jindal Exports Ltd, AIR 2001 SC
2293
Section 49 Enforcement of foreign awards :-
In Thyssen Stablunion GBMH Vs Steel authority of India Ltd AIR 1999 SC
3923, it was held that if the
provisions of the foreign Awards Act and new act relating to the enforcement of
foreign awards are juxtaposed there would appear to be hardly any
difference.
Section 54 :-
In Societe De Traction
Et D’ Electricite Societe Anonyme Vs Kamini Engg Corp Ltd , AIR 1964 SC 558, it was held that when the arbitration clause
is valid and binding on an Indian Company and when the Indian Company files a
suit against the foreign company in an Indian Court on the basis of the
Collaboration agreement, the suit can be stayed.
In Svenska Handelsbanken Vs
Indian Charge Chrome Ltd , AIR 1994 SC 462, it was held that plaintiff by filling a plaint
cannot make the arbitration clause invalid or inoperative.
Section 57 Foreign awards when binding:-
In
Shiva Jute Baling Ltd Vs Hindley and Co Ltd, AIR 1959
SC 1357, deciding the question regarding award according to law in
India when enforceable, held that, when a contract provided for measure of
liquidated damages and the arbitrators, who conducted the arbitral proceeding
in London, awarded the maximum amount named in the contract ,
the award was not bad on the face of it as being contrary to that of Laws in
India.
CONCILIATION
Section 61 Conciliation :
The law
applicable for arbitration thus far had been that an arbitrator was an
adjudicator and not a conciliator, as held in Associated Engg
Co. Vs Govt of Andhara
Pradesh, AIR 1992 SC 232.
In Ramji Dayawala and sons
(p) Ltd Vs Invest Import, AIR 1981 SC 2085, it was stated by the
Supreme Court that , protected, time consuming, exasperating and atrociously expensinve court trials impelled an alternative mode of
resolution of disputes between the parties, arbitrate – don’t litigate.
Arbitration being a mode of resolution of disputes by a Judge of the choice of
the parties was considered preferable to adjudication of disputes by courts.
Section 73 Settlement Agreements
:-
The Settlement
takes shape only when the parties draw up the settlement agreement or request
the conciliator to prepare the same and affix their signatures to it. The
settlement agreement signed by the parties to the dispute,
is final and binding on the parties and persons claiming under them. Harsh Dayaram Thakur Vs State of
It was also
held in this case that if a statute prescribes a procedure for doing a thing,
that thing has to be done according to the prescribed procedure.
In Mysore
Cement Ltd Vs Svedala Barmac
Ltd. AIR 2003 SC 3493, it was held that it is only that agreement which
has been arrived at in conformity with the manner stipulated and form envisaged
and got duly authenticated in accordance with this section ,
alone can be assigned the status of a settlement agreement within the meaning
of and for effective purpose of the act and not otherwise.
Section 85 :-
Regarding the
retrospective applicability of an amended act, it had been laid down by the
Supreme Court in Nami Gopal Mitra Vs State of Bihar, AIR 1970 SC 1636, that, it
is therefore clear that as a general rule the amended law relating to procedure
operates respectively. But there is another equally important principle, viz, that a statute should not be construed as to create
new disabilities or obligation or impose new duties in respect of transaction
which were complete at time the amending act came into force.
SHIN SATELLITE PUBLIC CO.
LTD. vs. JAIN STUDIOS LTD.
2006 2 SCC 628
• Applicability
of Doctrine of Severability to Arbitration Agreement.
Whether the
invalid part of the arbitration
clause can be
severed and the rest of the
agreement could be made enforceable and as to what is the test of deciding
validity of such a contract.
The Court
referring to Halsbury's Laws
of England 4th Edition
held that it is
no doubt true
that a court
of law will
read the agreement
as it is and
cannot rewrite nor
create a new
one. It is
also true that
the contract must be
read as a whole and
it is not open
to dissect it by
taking out a part treating
it to be
contrary to law
and by rdering
enforcement of the
rest if otherwise it is not
permissible. But it is
well settled that if
a contract is
in several parts,
some of which
are legal and enforceable
and some are
unenforceable, lawful parts
can be enforced provided they
are severable.
Further, the
proper test for
deciding the validity
or otherwise of an
agreement or order
is "substantial severability" and
not "textual
divisibility". The court must
consider the question whether the parties could have
agreed on the
valid terms of
the agreement had
they known that
the other terms
were invalid or
unlawful. If the
answer to the said
question is in
the affirmative, the
doctrine of severability would apply
and the valid
terms of the
agreement could be
enforced, ignoring invalid terms.
To hold otherwise
would be "to
expose the covenanter to
the almost inevitable
risk of litigation
which in nine cases out of ten he is very ill-able to
afford".
NATIONAL
HIGHWAY AUTHORITY OF
(2006)10 SCC
763
·
Jurisdiction of Court in case of resignation of
arbitrator - cannot rewrite a contract.
·
Hierarchy not a consideration in appointment of arbitrators
The question
before the Supreme
Court was with
regard to the
scope of jurisdiction of
the court on
the resignation of
an arbitrator and whether consent given by one party is
enough to rewrite the contract. It was held that on resignation or termination
of mandate of an arbitrator, the process of appointment of arbitrator begins a fresh
in accordance with the terms of the contract. Unless the mechanism/procedure
for the appointment of the substitute arbitrator fails
or is not exhausted, the court cannot assume
jurisdiction under section 11(6) of the arbitration and conciliation act,
1996. If the
court assumes jurisdiction in
the above mentioned situation, it will be vitiated.
In the present case,
by alleging that
one of the arbitrators
is a retired judicial person,
the respondent has
admitted to rewrite
the contract between the
parties, which is
against the law
of the land.
Also, if the process
of appointment is
clearly mentioned in the agreement
clause, the court cannot import any further qualifications. Various courts
have held that
the parties are
required to comply
with the procedure of
appointment as agreed
to and without the
agreed contractual
procedure having been
exhausted, the court
cannot interfere and appoint a substitute arbitrator. In this
matter, the Supreme
Court has clarified
that in accordance with S.15
(2) of the
Act read together
with the contract
on the termination of
the mandate of
the Presiding Arbitrator,
the other two nominated
arbitrators were first
required to reach
a consensus and only
on the failure
to do so
was the Respondent
No. 2 (Indian Road Congress) authorised to
make an appointment.
The High Court
could assume jurisdiction under
s 11(6) of
the Act only
if Respondent No. 2 failed to assume
jurisdiction. Further, the
court has pointed
out that it is
wrong to contend
that in case
one of the
arbitrators is a
retired Judge, the Presiding
Arbitrator should also
be a retired
Judge. The court rejected
the contention that
in case one
of the arbitrators
is a retired Chief
Justice, the Presiding
Arbitrator should be
at least a retired
Chief Justice or
a retired Judge
of a High
Court with considerable experience.
The parties would be bound by the terms of the contract in the
appointment of arbitrators.
MCDERMOTT INTERNATIONAL
INC. vs. BURN STANDARD CO. LTD.
(2006)11 SCC 181
·
Power of court to interfere u/s 34 of Arbitration
and Conciliation Act, 1996.
·
Relevant factors and materials for interpretation
of contract by an arbitrator.
It was
observed that power
under Section 34
of the Arbitration
Act, 1996 was limited
to quashing the
award if sufficient
reason is found.
The 1996
Act makes provision
for the supervisory
role of courts,
for the review of
arbitral award only
to ensure fairness.
The court cannot correct errors by the arbitrators. It can only quash the award leaving the
parties free to begin the arbitration again
if it is
desired. The arbitral award
can be set aside if
it is contrary
to policy of law,
public policy or to justice and morality or if it is patently illegal or
arbitrary. Further, it was
also noted that
it is not
necessary that every
claim made by one party to arbitration be followed by a denial. If a
matter is referred to an
arbitrator within a
reasonable time, the
party invoking the arbitration
clause may proceed
on the basis
that the other
party to the contract
has denied his
claim or is
not otherwise interested
in referring the dispute to the arbitrator. As regards
construction of contract
by an arbitrator,
it was held
that the construction of
contract is within
the jurisdiction of
the arbitrators having regard
to the wide
nature, scope and
ambit of the arbitration agreement
and they cannot
be said to
have misdirected themselves in
passing the award
by taking into
consideration the conduct of
the parties. Once it
is held that
the arbitrator had
the jurisdiction, no further
question shall be raised
and the court
will not exercise its
jurisdiction unless it is
found that there exists
any bar on the face of the record.
SHREE RAM MILLS LTD. vs. UTILITY PREMISES (P) LTD.
(2007) 4 SCC
599
• Preliminary
Proceedings before Arbitration Proceedings
The Supreme
Court, while upholding
the decision of
the High Court, held
that the High
Court, while entertaining an
application under Section 11(6)
of
the Arbitration
and Reconciliation Act
1996, may decide preliminary
matters relating to
the Arbitration. This
is not a violation
of the principles
of Arbitration, but
rather, a means
for effectively putting the
arbitration procedure into
motion by. The
High Court is thus empowered to look into matters of existence and
validity of arbitration agreement,
and whether the
current dispute falls
within its ambit, while hearing an application under Section 11(6).
SIDDHIVINAYAK REALITIES (P) LTD. vs.
TULIP
HOSPITALITY SERVICES LTD.
(2007) 4 SCC
612
·
Precedence of contract based dispute settlement
before Arbitration
In this
case, apart from
an arbitration clause
in the sale
agreement, there was a
separate Escrow Agreement
entered into between
the two parties which
provided for the
two joint Escrow
Agents to consult
and come to decision in the case of a default of any party. It was held
that the Escrow Arrangement would have priority. Those provisions would apply before arbitration
is entered into. Also, this can be
avoided if it can be shown that
the arrangement has
an element of bias in it.