Supreme Court of the United States: While deliberating on the issue that whether employees should always be permitted to bring their claims in collective actions, no matter what they agreed with their employers, the 9 judge Bench of the Court with a ratio of 5:4, held that the law embodied under the National Labor Relations Act (NLRA) clearly gives the employees rights to organize unions and bargain collectively, but it says nothing about how judges and arbitrators must try legal disputes that leave the workplace and enter the courtroom or arbitral forum. Furthermore the Supreme Court in the past has never read the right to class actions under the NLR Act.
The parties in dispute (Ernst & Young LLP v. Morris) entered into an agreement providing that they would arbitrate any disputes that might arise between them. The agreement stated that the employee could choose the arbitration provider and that the arbitrator could grant any relief that could be granted by a court in the relevant jurisdiction. The agreement also specified individualized arbitration, with claims “pertaining to different employees to be heard in separate proceedings. Morris sued Ernst & Young in federal court. He alleged that the firm had misclassified its junior accountants as professional employees and violated the federal Fair Labor Standards Act (FLSA) and California law. Morris further sought to pursue the state law claim as a class action under Federal Rule of Civil Procedure 23. The employees pleaded before the Court to infer that class and collective actions are “concerted activities” protected by Section 7 of the NLRA, which guarantees employees “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,
The majority decision was delivered by Neil M. Gorsuch, J. It was held by the majority that if workers were allowed to band together to press their claims, he wrote, the virtues Congress originally saw in arbitration, its speed and simplicity and inexpensiveness, would be shorn away and arbitration would wind up looking like the litigation it was meant to displace. However 4 Judges disagreed with the majority opinion. Ruth Bader Ginsburg, J., leading the dissent, termed the majority decision as “egregiously wrong” and stated that there “will be huge under-enforcement of federal and state statutes designed to advance the well being of vulnerable workers”. [EPIC System Corps v. Jacob Lewis, Case No. 16–285, decided on 21.05.2016]
Delhi High Court: A Division Bench comprising of Ravindra Bhat and A.K. Chawla, JJ., dismissed a First Appeal against an order declining grant of interim relief under Section 9 of the Arbitration and Conciliation Act, 1996.
The contract between the parties was the result of bidding in a public tendering process. The consideration of the contract was over Rs. 69 crores, with the period of execution being of 15 months along with an option to apply for extension. The appellant was aggrieved by the termination of contract after several defects and deficiencies during performance were pointed out. The grievance of the appellant was threefold viz. against invocation of performance guarantee, mobilization of advance bank guarantee and alleged unlawful termination of contract.
The Court directed that the issue of wrongful termination was a matter to be decided on merits during the arbitral proceedings and proceeded to decide upon the issues of invocation.
On that issue, the Court held that the performance guarantee mandates the bank to honour without demur any demand by the principal, who is the real beneficiary of any sums, claimed by it as due under the contract. In other words, the bank cannot adjudicate as to whether the claim by the beneficiary was in fact determined by it in accordance with the underlying contract between it and a third party. It was further held, that guarantee is an independent contract and has only a referential connection to the contract between the two parties, who agree upon the execution of performance of a particular contract for which the bank guarantee is issued. In the circumstances, mere invocation of a guarantee does not provide valid grounds for interdicting the invocation of guarantee. [M/s Classic KSM Bashir JV v. Rites Ltd., 2018 SCC OnLine Del 9056, decided on 14-05-2018]
Supreme Court: The Bench of RK Agrawal and AM Sapre, JJ has referred the question as to determination of the “seat” and “venue” for holding arbitration proceedings to a larger bench after the counsel brought to the Court’s notice that there are several decisions on the issue by the Benches of variable strength.
The Court, hence, said that though, the question regarding the “seat” and “venue” for holding arbitration proceedings by the arbitrators arising under the Arbitration Agreement/International Commercial Arbitration Agreement is primarily required to be decided keeping in view the terms of the arbitration agreement itself, but keeping in view the decisions by the Benches of variable strength and issues involved, which frequently arise in International Commercial Arbitration matters, the matter should be referred to a larger bench.
The Court was hearing the appeal arising from a Delhi High Court order wherein it was held that Indian Courts have no jurisdiction to entertain the application filed by the Union of India (appellant) under Section 34 of the Arbitration and Conciliation Act, 1996 to question the legality and correctness of the award in question and accordingly dismissed the appellant’s application as being not maintainable in Indian Courts.
The Counsel had brought to the Court’s notice that some decisions which have bearing over the questions arising in this appeal have been rendered by the Constitution Bench, some by Three- Judge Bench and remaining by the Two-Judge Bench and hence, the matter should be decided by an appropriate bench in order to clear the confusion.
The question placed before the larger bench is:
“when the arbitration agreement specifies the “venue” for holding the arbitration sittings by the arbitrators but does not specify the “seat”, then on what basis and by which principle, the parties have to decide the place of “seat” which has a material bearing for determining the applicability of laws of a particular country for deciding the post award arbitration proceedings.”
[Union of India v. Hardy Exploration and Production (India) INC, 2018 SCC OnLine SC 474, decided on 01.05.2018]
Hello and welcome to the live blog of the 5th NLUO International Maritime Arbitration Moot 2018 (IMAM). The competition begins today with the registration and inauguration followed by exchange of memos and draw of lots. 24 teams will be battling it out in preliminary rounds, followed by quarterfinals, semifinals and the much awaited finals. Schedule for Day 1(30/03/2018) : 15:00 – 16:00 hrs – Registration
16:45 – 17:30 hrs – Inauguration Ceremony
17:30 – 18:30 hrs – Penalty Appeals
18:30 – 19:30 hrs – Draw of Lots & Exchange of Memos
20:00 – 21:00 hrs – Dinner
Stay tuned for all the live updates and highlights for the next 3 days.
The teams are here in the seminar hall and registrations have begun, the opening ceremony will be starting at 16:45 hrs.
16:55 hrs The opening ceremony is under way and the Faculty Adviser of The Moot Society Dr. Ananya Chakraborty starts with the welcome note to all the participants talking about the different opportunities Maritime law has to offer and the experience participants will gain from the interactions with the highly qualified panel of judges.
17:00 hrs The Convenor of The Moot Society, Anmol Gupta, started with briefly laying out the schedule for the 3 days and also answering the queries of the teams regarding the draw of lots. She also explained the system of Penalty Appeals to the participants which further increases the transparency quotient. The Convenor ended by declaring the competition open.
Let us know about Penalty Appeals directly from our Convenor-
“As a recent participant in a moot, I remember losing my mind over a two mark deduction that potentially affected my team’s best memorial citation. There are often times that moot court competitions have been also criticized for being unfair. It is only after having had such experiences and realizing that moot court competitions in India should be more transparent that we wanted to follow this practice. Penalty appeals are nothing new but we do hope that all institutions take similar initiatives so as to improve the mooting culture in India and bring more fairness and transparency in the process.”
18:00 hrs Match ups are announced and Memorials are exchanged as the teams find out who they are up against for the Preliminary rounds tomorrow.
That’s it for today, we will be live with you tomorrow morning with the first session of preliminary rounds. Till then Goodbye!
Day 2 10:15 hrs
A very good morning to all, we are back with all the updates from the second day of NLUO IMAM 2018. The courtrooms are set, Teams all ready and the Preliminary rounds will begin at 11:00 hrs in 8 courtrooms. Following are the 23 teams battling it out in the preliminary rounds.
Amity Law School, Delhi (IP University)
School of Law, UPES
ILS Law College, Pune
Government Law College, Mumbai
University school of law and legal studies, Guru Gobind Singh Indraprastha University
National Law University, Delhi
School of Law, Christ University, Bangalore
National Law Institute University Bhopal
Rajiv Gandhi National University of Law, Punjab
Dr. Ram Manohar Lohiya National Law University
Gujarat National Law University, Gandhinagar
West Bengal National University of Juridical Sciences
National University of Advanced Legal Studies, Kochi
Pravin Gandhi College of Law
National Law School of India University, Bangalore
Hidayatullah National Law University, Raipur
Symbiosis Law School, Pune
Lloyd law college
Faculty Of Law, Delhi University
Maharashtra National Law University, Nagpur
Madhusudan Law College, Cuttack.
Symbiosis Law School, NOIDA
Jindal Global Law School
The first session is underway as the teams battle it out in the first round with the humid climate of Cuttack and the barrage of questions from the judges, they surely have their work cut out.
Courtroom-2 The Applicants contend on the of jurisdiction of the Honorable Tribunal and put up a compelling case in front of the judges and finish their submissions on a high. The Respondents contend that the claimants were aware of the zero tolerance policy of plastics and waste. Both the teams end up with a satisfying look on their face.
The first session of Preliminary rounds culminate, Judges take a 10 minutes break before the second session is underway.
The second session of preliminary rounds are now in progress.
14:30 hrs The teams now concluding their arguments for the second session of preliminary rounds.
The teams and judges have taken their seats for the third and final session of the preliminary rounds.
18:15 hrs We are now done with the Preliminary Rounds and will be announcing the Top 8 in a few minutes.
19:15 hrs The results for the Preliminary Rounds are out, Following are the top 8 teams.
ILS Law College, Pune
Rajiv Gandhi National University of Law, Punjab
National Law Institute University Bhopal
Dr. Ram Manohar Lohiya National Law University
Amity Law School, Delhi (IP University)
Gujarat National Law University, Gandhinagar
National Law School of India University, Bangalore
National Law University, Delhi
The Quarter Final rounds have now started with the teams vying for a top 4 spot.
Court Room 7
The judges are extensively grilling the Claimant on jurisdictional clauses, the counsel tries to deal with the questions through case laws and contends that the claimant’s silence does not amount to acceptance. The judges proceed to the next issue where the claimant is dealing with conceptual differences between indemnity and guarantee vis a vis damages but she fails to convince the bench with her submissions.
The bench questions about the fraud with respect to the letter of indemnity which means that the claimant’s haven’t come to the court with clean hands. The bench is not convinced with the submissions and asks the claimants to not beat around the bush and concede to the wrong in good faith.
Court Room 6
The Claimant started with Citing a case from US Jurisdiction which the bench was hesitant to accept, the Counsel tried to justify his claim by stating that the international arbitration depends upon the intention of the parties.
Second speaker discusses about the 3 contaminants and tries to justify the word contaminant as opposed to substances, he also tries to justify the scope of warranty.
Court Room 5
The claimant start their submissions by pointing out to the letter which is the core of the issue, the judges ask about the letter being a letter of indemnity or letter of warranty as contended by the respondents.
The respondent started their submissions asserting that the letter is a letter of warranty. He argues that the addendum to the contract was signed without prejudice, hence cannot be used as evidence.
With this the Quarterfinals are done. The teams and the judges head for dinner. Results of the Quarterfinals to be announced post dinner.
The top 4 teams in no particular order are
ILS Law College, Pune
Rajiv Gandhi National University of Law, Punjab
National Law Institute University Bhopal
Dr. Ram Manohar Lohiya National Law University
With this we come to the end of proceedings on day 2. See you tomorrow for the Semi Finals and Finals. Goodbye!
Hello and welcome all to the final day of the 5th NLUO International Maritime Arbitration Moot 2018 (IMAM). We will bring to you live updates from the Semi Finals and the Finals.
Semi Final 1 (RMLNLU vs RGNUL)
The Respondent start with challenging the Jurisdiction of the Tribunal and for the same justify it by stating that the disputes relate to the letter and not the charter party.
The Respondents are now being asked to take the tribunal through a timeline of the events so as to further facilitate the submissions, further the question of Contaminants is being posed by the tribunals which is dealt by the counsel by furthering the factual circumstances at the time of loading. The tribunal asks the counsel to move to his next submission.
The Counsel now moves forward to the submission regarding the charter party and how the addendum in the contract was without prejudice.
The Claimants now start with stating that the arbitration clause is broad enough to establish the claims. They claim further that their was no indication if they were previous remnants of the cargo. The tribunal questions the amount of due diligence necessary and was it carried out to ascertain no previous remnants of cargo were present.
The Tribunal further asks who the master is answerable to and questions the survey report and asks for the origin of 3 foreign objects in the cargo. The Tribunal cracks upon the claimants submissions so as to having too many presumptions. They further ask the Counsel to sum up his arguments.
The Second speaker starts with the issue of Counter Claim being time barred, The tribunal grills the unawareness of the authority cited and relied upon, regarding set off by the speaker. Tribunal questions the claimants on damages arising due to the presence of lumps of Tar in the cargo, the speaker contends that the respondents are responsible for any damages and liabilities arising out of loading which is the issue was in this case. The tribunal states that according to the charter party, it is the responsibility of the owner to check the ship before unloading.
The Counsel is questioned about the difference between demurrage and detention and further what was imposed in the present case. The Claimants are asked to wind up the arguments in a minute.
The respondents now proceed with rebuttals and lead with situation where the claimants have mislead the tribunal. They point out the wide disparity between the damages claimed.
This brings us to the end of the first Semi Final.
Semi Final 2 NLIU vs ILS
The claimant starts with stating about the letter of indemnity responding to the question of the bench on the nature of the Letter in question. Further the question is regarding the subject matter of the warranty.
The claimant goes on to submit about the letter of warranty and what the implied warranty was as the shipowner. The tribunal asks about what the warranty actually was and where does the scope of compensation come from. The Counsel goes on defining warranty but is unable to convince the bench for the same.
The Bench though not satisfied asks the Counsel to move onto his next submission. Counsel now moves on to ascertain the liability of the respondent during loading but the bench further questions the duty of the master which was appointed by the claimant and hence asks about the duty of the Claimants.
Claimant now takes help of judicial decisions to prove their submission regarding the addendum to be signed without any prejudice. He concludes with stating about the demurrage clause and are asked about the deviation clause of the charter party.
The Respondent’s Counsel begins with the lack of Jurisdiction of the Tribunal and for the same the bench questions about the nature of the letter in question. The counsel contends that the charter party provides for jurisdiction in England and not Navigonia. Further the contents and intention of the Letter is further questioned by the bench.
The counsel now moves to the report by quarantine officers and how they have stated about the remnants of the previous cargo. He further moves to conclude his arguments by stating the responsibility of the owner to provide the crane-man and wench-man.
The Second speaker for the Respondents starts with the issue of the Port being prospectively safe. Further she talks about embargo being the source of prospective unsafe port, which is not an inherent reason of the port being unsafe. She moves on further to the issue of renomination of the port.
The bench asks the counsel to define what a voyage exactly means and further about the date of NOR being granted. The exchange further goes on with the team being grilled on the owners of the cargo. Further submitting that the delay was caused by unforeseen circumstances.
Counsel is asked to summarize all the issue and finish the arguments in a minute. Counsel ends with the issue of payment made which was unreasonable as it was done without the agreement of the respondents.
Claimants start with Rebuttals laying down point-wise issues to which the Respondents conclude with the Sur-Rebuttals stating the answers to all the points raised by the Claimants.
This brings us to the end of Second Semi-Final. The judges and participants now break for lunch.
The results are out the finalists are NLIU & RGNUL
16:00 hrs Final (RGNUL vs NLIU)
The Finals of the 5th NLUO International Maritime Arbitration Moot 2018 (IMAM) are underway. The claimants start their submissions with stating the jurisdiction clause. They further state the LMAA terms 2017 and move ahead with sating the facts of the case.
The claimant speaker contending that the Letter in question was a letter of indemnity and the respondent conceded to the fact before the actual obligation to indemnify arose.
The speaker moves onto the claims due to the presence of lumps of solidified tar. Further the Bench allows the Counsel to proceed with the issues and to be questioned later.
The speaker moves onto the issue of availability of safe port, and how it was the duty of the respondents to make availability of a safe port during the period of embargo.
The bench asks the claimants to clearly state the breaches that they are claiming against the Respondents.
The Claimants proceed with their prayer to conclude their submissions.
The Tribunal questions the claimant on their reliance over American case laws in an English Tribunal. Further they pose questions on the wordings of the LOI.
The claimants enter a detailed argument on art 5 of the Hague Visby Rules. With this argument the claimants have rested their case.
The Tribunal is now hearing the respondents first submission wherein they seek to oust the Jurisdiction of the tribunal.
The respondent cleverly addresses the arbitrators concern briefly before deferring the question to his co-council. The respondents also seem to have worked on the feedback provided by the judges in the semis of working on their time management as they seem to be making a conscious effort to lead the tribunal to their next submission.
The Respondent speaker moves to his second issue and discusses about the clause 18 of the charter party. The bench asserts the reason for rejection was not only NWG based on the phrase ‘Inter alia’.
The Second Counsel for the respondent starts her submissions by stating that the embargo imposed is an exception to the addendum, she carries on by defining a safe port and also specifically dealing with abnormalities. Further she defines how the embargo was within the ambit of such ambiguities. She submits that the embargo enforced was not the inherent characteristics of the port and the vessel was prospectively safe.
Counsel further moves ahead and submits that the delay was caused beyond the control of the Charterers, as the entry of NWG was not prohibited and the embargo came as a jolt. She submits that the respondents were not under obligation to renominate the port as it might have been an infringement to the third party rights.
The bench asks the Respondents to clear what their counter claim is to which the counsel is unable to satisfy the bench with the submissions regarding the same.
The bench now proceeds with questioning the claimants on their submissions. The Counsels facing a barrage of queries from the bench and are having a tough time answering them.
With this we come to the conclusion of the Finale. The winner to be announced in a few minutes.
The Valedictory ceremony is under way with the Vice Chancellor of National Law University Odisha delivering the opening address and also highlighting the importance of mooting and how the occasion in itself is an opportunity for young mooters.
The guest of honor Justice B R Sarangi relives his college days and how the mooting culture has changed from time and how more competitive it has become. He congratulated all the teams participating in the competition and wished them luck for future.
The Results are out
The award for Best Oralist goes to Romit Kohli from NLUD.
The award for Best Memorial goes to RMLNLU
The Runners Up are RGNUL
The Winners of 5th NLUO International Maritime Arbitration Moot 2018 (IMAM) are NLIU.
Dr. Ananya Chakrabarty delivered the vote of thanks and formally concluded the Competition.
This brings us to the end of The 5th NLUO International Maritime Arbitration Moot 2018 (IMAM).
It was a pleasure bringing you the live blog, we will be back next year, until then Goodbye!
Supreme Court: In the case where the Bench of RF Nariman and Navin Sinha, JJ was deciding the question as to the nature of the Arbitration and Conciliation (Amendment) Act, 2015, it was held:
“the Amendment Act is prospective in nature and will apply to those arbitral proceedings that are commenced, as understood by Section 21 of the Arbitration and Conciliation Act, 1996, on or after the Amendment Act, and to Court proceedings which have commenced on or after the Amendment Act came into force.”
Regarding the question as to whether Section 36 of the Arbitration and Conciliation Act, 1996, which was substituted by the Amendment Act, would apply in its amended form or in its original form to the appeals in question, the Court said that
“in all cases where the Section 34 petition is filed after the commencement of the Amendment Act, and an application for stay having been made under Section 36 therein, will be governed by Section 34 as amended and Section 36 as substituted.”
On the question relating to Section 34 petitions that have been filed before the commencement of the Amendment Act, which were governed by Section 36 of the old Act, the Court said:
“execution of a decree pertains to the realm of procedure, and that there is no substantive vested right in a judgment debtor to resist execution, Section 36, as substituted, would apply even to pending Section 34 applications on the date of commencement of the Amendment Act.”
The Court also directed that a copy of this judgment be given to the Ministry of Law and Justice:
“The Government will be well-advised in keeping the aforesaid Statement of Objects and Reasons in the forefront, if it proposes to enact Section 87 on the lines indicated in the Government’s press release dated 7th March, 2018. The immediate effect of the proposed Section 87 would be to put all the important amendments made by the Amendment Act on a back-burner, such as the important amendments made to Sections 28 and 34 in particular, which, as has been stated by the Statement of Objects and Reasons.”
The Court said that it is this basic scheme which is adhered to by Section 26 of the Amendment Act, which ought not to be displaced as the very object of the enactment of the Amendment Act would otherwise be defeated. [Board of Cricket Control of India v. Kochi Cricket Pvt. Ltd., 2018 SCC OnLine SC 232, decided on 16.03.2018]
Supreme Court: The bench of J. Chelameswar and SK Kaul, JJ held that the enforcement of an award through its execution can be filed anywhere in the country where such decree can be executed and there is no requirement for obtaining a transfer of the decree from the Court, which would have jurisdiction over the arbitral proceedings.
Different High Courts had given different opinion on the question as to whether an award under the Arbitration & Conciliation Act, 1996 is required to be first filed in the court having jurisdiction over the arbitration proceedings for execution and then to obtain transfer of the decree or whether the award can be straightway filed and executed in the Court where the assets are located is required to be settled in the present appeal.
Delhi High Court, Kerala High Court, Madras High Court, Rajasthan High Court, Allahabad High Court, Punjab & Haryana High Court and Karnataka High Court were of the opinion:
“An award is to be enforced in accordance with the provisions of the said Code in the same manner as if it were a decree of the Court as per Section 36 of the said Act does not imply that the award is a decree of a particular court and it is only a fiction. Thus, the award can be filed for execution before the court where the assets of the judgment debtor are located.”
However, the Madhya Pradesh and Himachal Pradesh High Courts held:
“The transfer of decree should first be obtained before filing the execution petition before the Court where the assets are located.”
After discussing various provisions of the Act and the various orders of the High Courts at length, the Bench said:
“An award under Section 36 of the said Act, is equated to a decree of the Court for the purposes of execution and only for that purpose. Thus, it was rightly observed that while an award passed by the arbitral tribunal is deemed to be a decree under Section 36 of the said Act, there was no deeming fiction anywhere to hold that the Court within whose jurisdiction the arbitral award was passed should be taken to be the Court, which passed the decree. The said Act actually transcends all territorial barriers.”
It was, hence, held that the view taken by the Madhya Pradesh High Court and the Himachal Pradesh High Court is held to be not good in law while the views of Delhi High Court, Kerala High Court, Madras High Court, Rajasthan High Court, Allahabad High Court, Punjab & Haryana High Court and Karnataka High Court reflect the correct legal position. [Sundaram Finance Limited v. Abdul Samad, 2018 SCC OnLine SC 121, decided on 15.02.2018]
Delhi High Court: A Division Bench comprising of Gita Mittal, Actg. CJ and C. Hari Shankar, J., disposed of an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 on grounds of the underlying dispute being settled by a settlement agreement by way of mediation.
The parties had preferred an appeal each, both of which were dealt with the court jointly. The appellant had challenged the order which upheld the arbitral award in favour of the respondent, whereas the respondent had appealed against the order rejecting a petition under Section 9 of the Arbitration Act with regard to the subject matter of the aforesaid arbitral award. The Court on the date of hearing noted that the dispute between the parties appeared to be capable of being resolved through mediation. The parties were, consequently, referred to Mr. Sudhanshu Batra, Sr. Advocate/Mediator at Delhi High Court Mediation and Conciliation Centre. The parties were able to arrive at a settlement and the original settlement agreement was forwarded to the Court. The parties confirmed the correctness of the record received. Additionally, the counsel stated that the parties had acted upon the terms thereof and in view of the settlement in place, nothing survived for further adjudication. Hence, the appeal may be disposed of. The Court, noting the same, disposed of the appeals. [M/s Konka Group Company Ltd v. M/s A2VP Distributors, 2018 SCC OnLine Del 7015, decided on 31.01.2018]
Delhi High Court: A Division Bench comprising of G.S Sistani and V Kameswar Rao, JJ., dismissed an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter “Arbitration Act”) read with Section 10 of the Delhi High Court Act, 1966 and Section 13 of the Commercial Courts Act, 2015 against the order of a Single Judge wherein the appellants had raised objections against the award of the arbitrator under Section 34 of the Arbitration Act.
The crux of the argument of the appellants was that the arbitrator failed to follow the principles of natural justice by not making a full and fair disclosure that he had been appointed as an arbitrator by the respondent in as many as 43 cases prior to the present case. The appellants pleaded that on this ground alone, the award rendered by the arbitrator should be set aside. The appellants, admittedly, had not urged this argument before the Single Judge.
The Court noticed that the arbitrator had issued a notice to the parties, wherein the following relevant sentence was quoted, “….currently adjudicating on multiple claims filed by the claimant company.” The order-sheet reflected that the hearing was attended by counsel for both parties. Consequently, the Court found no grounds for interfering with the order passed by the Single Judge for two reasons. The first being that the argument urged before the Court was not raised in front of the Single Judge, and secondly, the judgment in Aditya Ganapa v. Religare Finvest Ltd. (OMP No. 1038 of 2014, decided on 30.01.2015) relied on by the appellants did not fit in the factum of the present case where the arbitrator had indeed, disclosed his interest to the parties. Appeal dismissed. [Sidhi Industries v. M/s Religare Finvest Ltd., 2017 SCC OnLine Del 12685, decided on 11.12.2017]
In the recent decision of the Supreme Court (SC) in Duro Felguera, SA v. Gangavaram Port Ltd., while holding that the doctrine of “composite reference”, is not applicable in the present case, the Court clarified as to when a composite reference to arbitration in case of multiple agreements can be made. In fact, the decision is also in line with the objective and intention of the Arbitration and Conciliation (Amendment) Act, 2015 as it affirmed the position pertaining to limited intervention of the Court at the stage of appointment of arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 (Act) and narrow scope of challenge to an award in international commercial arbitration.
Gangavaram Port Limited (GPL) herein the respondent awarded tender work to a Spanish Company — Duro Felguera Plant as Industrials SA (Duro Felguera) and its Indian subsidiary — M/s Felguera Gruas India (P) Ltd. (FGI). Subsequently this original contract was divided into five distinct contracts with different works description. The contract pertaining to supply of bulk material handling equipment’s was awarded to Duro Felguera. Whereas the other remaining four contracts, were awarded to FGI (i.e. Indian subsidiary). Each of these contracts contained an arbitration clause. Apart from this, Duro Felguera also entered into a corporate guarantee, thereby guaranteeing due performance of all the works awarded to Duro Felguera and FGI, which had its own arbitration clause. Later on, a tripartite Memorandum of Understanding (MoU) was executed between Duro Felguera, FGI and GPL. When dispute arose, the petitioner and its Indian subsidiary issued five separate arbitration notices (i.e. one by petitioner and four by Indian subsidiary). Whereas the respondent issued a comprehensive one arbitration notice.
GPL inter alia contended that the MoU being the latest had subsumed all the separate agreements and therefore there can only be one agreement, hence only one Arbitral Tribunal for all the disputes emanating from the five different agreements and the corporate guarantee was to be constituted. According to GPL, since MoU referred to original contract which contained arbitration clause, the original contract with its arbitration clause shall be deemed to have been incorporated in the MoU. It was further contended that having regard to the nature of works in each contract and in order to avoid conflicting awards, huge wastage of time, resources and expenses it would be just and proper to make a “composite reference” and have a single Arbitral Tribunal of “international commercial arbitration” for settling the dispute arising between the parties as the same would be consistent with the intention of the parties and public policy.
On the other hand, the contention of the Duro Felguera was that all the five contracts were distinct and separate, as regards, their content and subject-matter and hence there cannot be a “composite reference” for efficacious dispute settlement. It was also contended that MoU cannot override the terms of five contracts which includes different arbitration clauses, as the MoU only listed the priority of the documents which was to be considered in order to have clarity in carrying out the works and nothing more.
The SC held that there cannot be a single arbitration reference for disputes arising out of different agreements, even if they are interlinked to a single transaction. This decision of the SC is in contrast with the ratio laid down in its earlier decision of Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc. (Chloro Controls), wherein the doctrine of “composite reference” was recognised.
Scope of S. 7(5) — Mere reference of a document cannot lead to an inference that arbitration clause in the document becomes part of the agreement by such reference
The Court held that for incorporation of an arbitration clause by reference it requires “a conscious acceptance” of the arbitration clause from another document, as a part of the contract, before such arbitration clause could be read as a part of the contract between the parties. The question whether or not the arbitration clause contained in another document, is incorporated in the contract would essentially be a question of intention of the parties to be gathered from the terms of the contract. The SC held that the fact that the MoU makes a reference to the original agreement does not indicate that, by such reference, arbitration clause was intended to be incorporated in the MoU. The reason being that the MoU only make a reference to original agreement in order to have more clarity in execution of the work and such general reference will not be sufficient to hold that the arbitration clause in the original agreement is incorporated in the MoU. Thus the Court laid down the test of general and specific reference of the document for the applicability of incorporation by reference test. This observation of the SC is in line with its dicta laid down in M.R. Engineers & Contractors (P) Ltd. v. Som Datt Builders Ltd. Hence the Court made it clear that inclusion of arbitration agreement by reference would require more than a general reference to another contract.
Composite reference when permissible
GPL placed reliance on Chloro Controls to contend that where various agreements constitute a composite transaction, Court can refer disputes to arbitration if all ancillary agreements are relatable to principal agreement and performance of one agreement is so intrinsically interlinked with other agreements. Though Chloro Controls has considered the doctrine of “composite reference”, the SC in the present case distinguished the same. In Chloro Controls the principal agreement contained an arbitration clause which required that any dispute or difference arising under or in connection with the principal agreement, which could not be settled by friendly negotiation and agreement between the parties, would be finally settled by arbitration conducted in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce. The words “under or in connection with” had wider ambit. However, no such clause was present in the case at hand. All five contracts as well as the corporate guarantee have separate arbitration clauses which were neither dependent on the terms and conditions of the original contract nor on the MoU. Therefore no composite reference to arbitration was allowed in the present case. On analysing the reasoning of the Court it can be concluded that the Court has clarified the principle laid down in Chloro Controls as one that limits the reference to composite arbitration in case of intrinsically interlinked agreements by the wording of the arbitration clause of the principal agreement. Therefore the Court interpreted the law laid down in Chloro Controls as one that makes reference to composite arbitration dependent on an interpretation of the arbitration clause in the principal agreement to be wide enough to allow such a reference and not merely when the agreements are intrinsically interlinked.
Scope of enquiry under S. 11(6-A) of the Act
The Supreme Court by its earlier decision in SBP & Co. v. Patel Engg. Ltd., had waived the scope of court’s power under Section 11 of the Act. However, by virtue of 2015 amendment this position has changed and the power of court to appoint an arbitrator under Section 11(6-A) of the Act have been narrowed down with the sole purpose to minimise the Court’s intervention at the stage of appointing the arbitrator. The Delhi High Court in Picasso Digital Media (P) Ltd. v. Pick-A-Cent Consultancy Service (P) Ltd. followed the same line of thoughts wherein it held that the court, at the stage of appointment of arbitrator, cannot examine whether the respondent has a justified claim of misrepresentation against the petitioner as that would be a question to be examined by the arbitrator in the arbitration proceedings. The SC, in the present case, confirmed this position of law. This is one of the first case of Section 11(6-A) before this Court. The Court in explicit terms clarified its role at the stage of Section 11(6-A) petition to be to prima facie examine the existence of a valid arbitration agreement and not its validity and therefore concluded that: “From the record, all that we could see are five separate letters of award; five separate contracts; separate subject-matters; separate and distinct work; each containing separate arbitration clause.…”
In the present case there were six arbitrable agreements (five agreements for works and one corporate guarantee) and each agreement contains a provision for arbitration. Hence, the Court concluded that there has to be an Arbitral Tribunal for the disputes pertaining to each agreement. While the arbitrators can be the same, there has to be six tribunals — two for international commercial arbitration involving the Spanish Company M/s Duro Felguera, SA and four for the domestic.
This case sets a standard regarding drafting of an arbitration clause in multiple agreements so as to bring all those agreements within the purview of Section 7 of the Act. Further, since this is one of the first few cases under Section 11(6-A) it provides us with the scope of the term “existence of an arbitration agreement”. This decision becomes relevant as it would throw a guiding light on what subsumes within an analysis of existence of an arbitration agreement and what is covered under validity of an arbitration agreement. Further, this decision of SC is in line with the legislative intent and promotes pro-arbitration approach by minimising Court’s intervention at the stage of Section 11 of the Act.
* Kiran Devrani, Practicing Lawyer, Dispute Resolution; Graduate, Vivekananda Institute of Professional Studies, GGSIPU (Batch of 2015) and Surabhi Lal, Practicing Lawyer, Dispute Resolution; Graduate, National Law University, Delhi (Batch of 2016).
“when an arbitrator is appointed by this Court and further directions are issued, it retains seisin over the arbitration proceedings and in such circumstances, the Supreme Court is the only court for the purposes of Section 2(c) of the Arbitration Act, 1940.”
Stating that the jurisdiction of a Court conferred under a statute cannot be allowed to shift or become flexible because of a superior court’s interference in the matter in a different manner, the bench explained:
“When arbitrator is not appointed under the Act and the matter is challenged before the High Court or, for that matter, the Supreme Court and, eventually, an arbitrator is appointed and some directions are issued, it will be inappropriate and inapposite to say that the superior court has the jurisdiction to deal with the objections filed under Sections 30 and 33 of the Act.”
The Bench further explained that the Section 39 of the Act provides for an appeal and solely because a superior court appoints the arbitrator or issues directions or has retained some control over the arbitrator by requiring him to file the award in this Court, it cannot be regarded as a court of first instance as that would go contrary to the definition of the term ‘court’ as used in the dictionary clause as well as in Section 31(4) of the Act. The bench said that the Supreme Court:
“may make a reference to an arbitrator on consent but to hold it as a legal principle that it can also entertain objections as the original court will invite a fundamental fallacy pertaining to jurisdiction.”
The Court, hence, overruled the above-mentioned verdicts and all the other verdicts of this Court that state the law on the basis of the said verdicts. [State of Jharkhand v. Hindustan Construction Co. Ltd, 2017 SCC OnLine SC 1458, decided on 14.12.2017]
Supreme Court: In the dispute between 95-year-old veteran actor Dilip Kumar and the developer of his Pali Hill Porperty, the bench of J Chelameswar and S. Abdul Nazeer, JJ referred the matter for resolution by arbitration and directed both the parties to submit their dispute for arbitration by the Former Supreme Court judge, Justice P. Venkatarama Reddy.
As per the development agreement entered into in June 2006, Dilip Kumar was entitled to 50% of the “Development potential” and the developers were jointly entitled to the balance 50% of the “development potential”. The development was to be completed within 24 months, however, till date no development worth mentioning has taken place. Respondent developer PRAJITA was not the original party to the agreement but stepped into the shoes of one of the developers on 20.04.2010 under a deed of assignment. It was alleged that PRAJITA has posted armed guards around the property in question preventing the appellant from entering the property. Appellant actor had contended that he was willing to pay an amount of Rs. 20 crores to PRAJITA in order to have an undisturbed possession and peaceful enjoyment of the property.
Apart from referring the matter to arbitration, the Court gave the below mentioned directions:
The appellant shall deposit an amount of Rs. 20 crores by demand draft to the Registry of this Court within a period of four weeks from today and intimate the same to PRAJITA.
Upon the receipt of such intimation, PRAJITA shall withdraw all the security personnel deployed by it and hand over possession of the property in question within a period of seven days from the date of the receipt of the above-mentioned intimation to the appellant in the presence of the Commissioner of Police, Mumbai or any other senior police officer subordinate to the Commissioner of Police, Mumbai to be nominated by the Commissioner of Police.
The Commissioner of Police or his nominee shall draw a Panchnama of the fact of the handing over of the property by PRAJITA to the appellant and file the same in the Registry of this Court within a week from the date of the handing over of the possession.
Upon the filing of the Panchnama with the Registry of this Court, PRAJITA shall be at liberty to withdraw the amount of Rs. 20 crores deposited by the appellant pursuant to this order
The Court said that, the question as to whether PRAJITA would be entitled for any damages apart from receiving the above-mentioned amount of Rs. 20 crores from the appellant will be decided by the arbitrator appointed by the Court. [Yusuf Khan v. Prajita Developers Pvt. Ltd., 2017 SCC OnLine SC 1016, decided on 30.08.2017]
Delhi High Court: While deciding a case where no acceptance was communicated as regards sale contracts and the other party sought to enforce the award rendered by invoking the arbitration clause in the contract, the Single Bench of Vibhu Bakhru, J. declined to enforce the award in view of no communication of acceptance of the contract to the other party.
The present case dealt with two companies at a preliminary stage of negotiation for sale of palm oil, whereby the seller, who presumed the existence of a binding contract between the two, sought to enforce the award given by an Arbitral Tribunal which held the contracts to be existing, it being a usual practice to conclude unsigned contracts.
This Court, however, while analyzing the facts and circumstances of the case in light of its previous judgments and addressing the question as to whether an arbitration agreement existed between the parties, held that Section 44(a) of the Arbitration and Conciliation Act, 1996 clearly mandates the agreement to be in writing, and since the contracts had not been signed there could have been no communication or meeting of minds, thereby concluding no enforceable contract between the parties and the subsequent entailing causes of action by invocation of the arbitration clause or otherwise.[Virgoz Oils & Fats Pvt. Ltd.v. National Agricultural Co-Operative Marketing Federation of India, 2016 SCC OnLine Del 6203, decided on 05.12.2016]
Supreme Court: Explaining the scope of Section 8 of the Arbitration and Conciliation Act, 1996, the Bench of Dr. A.K. Sikri and D.Y. Chandrachud, JJ held that mere allegation of fraud simplicitor may not be a ground to nullify the effect of arbitration agreement between the parties. Where there are simple allegations of fraud touching upon the internal affairs of the party inter se and it has no implication in the public domain, the arbitration clause need not be avoided and the parties can be relegated to arbitration.
The Court further explained that it is only in those cases where the Court finds that there are very serious allegations of fraud which make a virtual case of criminal offence or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by civil court on the appreciation of the voluminous evidence that needs to be produced, the Court can sidetrack the agreement by dismissing application under Section 8 and proceed with the suit on merits. It can be so done also in those cases where there are serious allegations of forgery/fabrication of documents in support of the plea of fraud or where fraud is alleged against the arbitration provision itself or is of such a nature that permeates the entire contract, including the agreement to arbitrate, meaning thereby in those cases where fraud goes to the validity of the contract itself of the entire contract which contains the arbitration clause or the validity of the arbitration clause itself.
It was, hence, said that while dealing with an application under Section 8 of the Act, the focus of the Court has to be on the question as to whether jurisdiction of the Court has been ousted instead of focusing on the issue as to whether the Court has jurisdiction or not. It has to be kept in mind that insofar as the statutory scheme of the Act is concerned, it does not specifically exclude any category of cases as non-arbitrable. Such categories of non-arbitrable subjects such as disputes relating to rights and liabilities which give rise to or arise out of criminal offences; matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights and child custody; Insolvency and winding up; etc., are carved out by the Courts, keeping in mind the principle of common law that certain disputes which are of public nature, etc. are not capable of adjudication and settlement by arbitration and for resolution of such disputes, Courts are better suited than a private forum of arbitration.
D.Y. Chandrachud, J added that the Arbitration and Conciliation Act, 1996, should be interpreted so as to bring in line the principles underlying its interpretation in a manner that is consistent with prevailing approaches in the common law world. Jurisprudence in India must evolve towards strengthening the institutional efficacy of arbitration. Deference to a forum chosen by parties as a complete remedy for resolving all their claims is but part of that evolution. Minimising the intervention of courts is again a recognition of the same principle. [A. Ayyasamy v. A. Paramasivam, 2016 SCC OnLine SC 1110, decided on 04.10.2016]
Supreme Court: Deciding the question as to whether an appeal against the judgment of the Single Judge in an international arbitration matter is appealable to the Division Bench or to put it otherwise, whether the intra-court appeal would lie because of the Letters Patent, the Court held that such appeal is maintainable before the division bench and has to be treated as an appeal under Section 50(1) (b) of the Arbitration and Conciliation Act, 1996 and has to be adjudicated within the said parameters.
Rejecting the argument that the Letters Patent Appeal was not available in arbitration matters and Section 13 of the Commercial Courts, Commercial Division and Commercial Appellate Division of the High Courts Act, 2015, the Court held that Section 13 of the 2015 Act bars an appeal under Letters Patent unless an appeal is provided under the 1996 Act. Such an appeal is provided under Section 5 of the 2015 Act where a forum is created, i.e., Commercial Appellate Division. The Letters Patent Appeal could not have been invoked if Section 50 of the 1996 Act would not have provided for an appeal. But it does provide for an appeal. Section 50(1)(b) of 1996 Act has not been amended by the 2015 Act that has come into force on 23.10.2015. Thus, an appeal under Section 50(1)(b) of the 1996 Act before the Division Bench is maintainable.
The bench of DIpak Misra and C. Nagappan, JJ, hence, held that a conspectus reading of Sections 5 and 13 of the 2015 Act and Section 50 of the 1996 Act which has remained unamended leads to the irresistible conclusion that a Letters Patent Appeal is maintainable before the Division Bench. [Arun Dev Upadhyaya v. Integrated Sales Service Ltd, 2016 SCC OnLine SC 1053, decided on 30.09.2016]
Supreme Court: Considering the sad state of affairs of long drawn expensive and cumbersome trials to resolve disputes between two Government owned corporations and the fact that one of the parties in the case at hand had with considerable tenacity opposed the move aimed at a quick and effective resolution of the conflict and resultant quietus to the controversy by a reference of the disputes to arbitration in terms of the Arbitration and Conciliation Act, 1996, the bench of T.S. Thakur, CJ and R. Banumathi, J. referred the matter for adjudication to Justice K.G. Balakrishnan, Former Chief Justice of Supreme Court, who is hereby appointed as Sole Arbitrator to adjudicate upon all claims and counter claims which the parties may choose to file before him.
In the present case, the parties had entered into a contract for construction of a Coal Handling Plant and a Clause in the Contract provided for adjudication of disputes between the parties by way of arbitration. Disputes between the parties were referred for resolution in terms of the “permanent in-house administrative machinery” set up by the Government. Both the parties, upon being dissatisfied with the awards, challenged the award in appeals filed before the Law Secretary, Department of Legal Affairs, Ministry of Law and Justice in terms of the in-house mechanism provided by the Government. The appellant then filed a civil suit before the High Court of Delhi alleging that the Arbitral award passed by the appellate authority was according to the appellant illegal and vitiated by errors apparent on the face of the record, hence, liable to be set aside.
Discussing the question of remanding the case to the Civil Court, the Court noticed that an arbitral award under the Permanent Machinery of Arbitration may give quietus to the controversy if the same is accepted by the parties to the dispute. In cases, however, a party does not accept the award, as is the position in the case at hand, the arbitral award may not put an end to the controversy. Such an award being outside the framework of the law governing arbitration will not be legally enforceable in a court of law. Just because a Government owned company has resorted to the permanent procedure or taken part in the proceedings there can be no estoppel against its seeking redress in accordance with law. Making reference to a sole arbitrator for adjudication of all outstanding disputes between the two corporations, the Court held that the alternative to such arbitration is a long drawn expensive and cumbersome trial of the suit filed by the appellant before a civil court and the difficulties that beset the execution of an award made under a non-statutory administrative mechanism and that both these courses are unattractive with no prospects of an early fruition. [NORTHERN COALFIELD LTD v. HEAVY ENGINEERING CORP. LTD, 2016 SCC OnLine SC 697, decided on 13.07.2016]
Supreme Court: Dealing with the question relating to interpretation of Section 69(3) of the Partnership Act, 1932 with reference to its applicability to Arbitral proceedings, the bench of Fakkir Mohamed Ibrahim Kalifulla and C. Nagappan, JJ held that the Arbitral Proceedings do not come under the expression “other proceedings” of Section 69(3) of the Partnership Act and hence, the ban imposed under the said Section 69 can have no application to Arbitral proceedings as well as the Arbitration Award.
Interpreting S. 69 of the Partnership Act, the Court held that in order to attract the said Section, first and foremost the pending proceeding must be a suit instituted in a Court and in that suit a claim of set off or other proceedings will also be barred by virtue of the provision set out in sub-sections (1) and (2) of Section 69 as specifically stipulated in sub-section (3) of the said Section. Having regard to the manner in which the expressions are couched in sub-section (3), a claim of set off or other proceedings cannot have independent existence. In other words, the foundation for the application of the said sub-section should be the initiation of a suit in which a claim of set off or other proceedings which intrinsically connected with the suit arise and not otherwise.
Rejecting the contention that an Arbitral proceeding can be equated to a Civil Court Proceeding, the Court took notice of the Sections 35 and 36 of the Arbitration and Conciliation Act, 1996 and held that Section 36 of the 1996 Act only creates a statutory fiction which is limited for the purpose of enforcement of the Award. The deeming fiction is specifically restricted to treat the Award as a decree of a Court, exclusively for the purpose of execution, though as a matter of fact, it is only an Award of Arbitral proceeding. It is a settled proposition, that a statutory provision will have to be construed from the words that are expressly used and it is not for the Court to add or substitute any word to it. Therefore, going by Sections 35 and 36 of the 1996 Act it cannot be held that the entire Arbitral proceeding is a Civil Court proceedings for the purpose of applicability of Section 69(3) of the Partnership Act. [Umesh Goel v. Himachal Pradesh Cooperative Group Housing Society Ltd., 2016 SCC OnLine SC 624, decided on 29.06.2016]
Delhi High Court: Deciding on a public interest litigation wherein relief was sought that no retired Supreme Court Judge can give chamber advice to any party and that no retired Supreme Court or High Court Judge will take up arbitration work while he or she is a Chairperson or Member of any Government appointed constitutional or statutory body, commission, commission of inquiry, tribunal or appellate body, the division bench of G. Rohini, C.J and Rajiv Sahai Endlaw, J observed that it is a settled principle of law that a full time employee, as certainly full time Chairpersons or Presidents or Members of Tribunals or Commissions or Statutory Authorities are not entitled to take up any other employment or vocation and certainly an arbitration would constitute an employment. The Court reasoned that a full time employee is expected to spend his energy and resources to his employment and should not divert to any other job or vocation.
In the instant case an affidavit was filed by the Under Secretary, the Department of Legal Affairs, Ministry of Law & Justice, and Government of India wherein it was stated that the issue of taking up arbitration work by the Chairpersons or Members of Tribunals and Statutory Authorities, while so functioning was under consideration and it was proposed to formulate a “Uniform Policy” regulation the terms and conditions of service of such authorities. Eventually the Tribunals, Appellate Tribunals and Other Authorities (Conditions of Service) Bill, 2014 had been drafted and was introduced in the Rajya Sabha which provided that no person while holding office as the Chairman or Member shall act as an arbitrator save that he may with the permission of the Central Government complete his uncompleted arbitration work at the time of appointment. The counsel for the petitioner contended that this delay on part of the legislature is resulting in members taking up arbitration work to the detriment of full time office held by them. While the learned ASG contended that the bill is still under examination.
Referring to a catena of cases like Sukumar Mukherjee v. State of West Bengal (1993) 3 SCC 723, Dr Haniraj L. Chulani v. Bar Council of Maharashtra & Goa (1996) 3 SCC 342, the Court stated that it is no argument or consideration that the whole time authority would be acting as arbitrator only during the hours he is not working as Chairperson or Member. Giving further reasons, the Court said that giving any kind of directions would be overstepping the limits as the present issue falls in the domain of legislature and giving due respect to the doctrine of separation of powers respondents are directed to bestow special attention on the issue and to ensure that appropriate legislation is made at the earliest. [Common Cause v. Union of India, 2015 SCC Online Del 14003, decided on 11.12.2015]
Case Reported in 2015 SCC Vol. 3 March 7, 2015 Part 1
None of the grounds contained in S. 34(2)(a) deal with the merits of the decision rendered by an arbitral award, it is only when arbitral award is in conflict with public policy of India as per S. 34(2)(b)(ii), that merits of an arbitral award are to be looked into under certain specified circumstances. Said circumstances include when the award is in conflict with fundamental policy of Indian law, interest of India, justice or morality and patent illegality. When any of the heads/sub-heads of test of “public policy” is applied to an arbitral award, court does not act as court of appeal. Interference is permissible only when findings of arbitrator are arbitrary, capricious or perverse, or when conscience of court is shocked, or when illegality is not trivial but goes to root of the matter, not when merely another view is possible. Furthermore, arbitrator being ultimate master of quantity and quality of evidence while drawing arbitral award, award based on little evidence or on evidence which does not measure up in quality to a trained legal mind cannot be held invalid. Once it is found that arbitrator’s approach is neither arbitrary nor capricious, no interference is called for on facts. (2015) 3 SCC 49
Supreme Court: Deciding a short question as to what should be the approach of the Court, once an application is duly filed in terms of Section 8 of the Arbitration and Conciliation Act, 1996 before the civil court, the bench of MY Eqbal and Kurian Joseph, JJ held that the approach of the civil court should be not to see whether the court has jurisdiction but to see whether it’s jurisdiction has been ousted. The Court further held that once it is brought to the notice of the court that its jurisdiction has been taken away in terms of the procedure prescribed under a special statue, the civil court should first see whether there is ouster of jurisdiction in terms or compliance of the procedure under the special statute.
Regarding the general law approach that a court should first see whether it has jurisdiction or not, the Court, referring to generalia specialibus non derogant rule, said that Such approaches would only delay the resolution of disputes and complicate the redressal of grievance and of course unnecessarily increase the pendency in the court.
Section 8 of the Arbitration and Conciliation Act, 1966 comes into play when there is an agreement between the parties to refer the disputes or differences arising out of the agreement to arbitration, and either party, ignoring the terms of the agreement, approaches the civil court, the other party can, under the said Section, move the court for referring the parties to arbitration before the first statement on the substance of the dispute is filed. Sundaram Finance Ltd. v. T. Thankam,2015 SCC OnLine SC 147, decided on 20.02.2015
Bombay High Court: While interpreting an arbitration agreement, a bench comprising of Mohit S. Shah, CJ and M. S. Sonak, J held that in an agreement between two groups,group entities which are not signatories to the agreement may also be made party to the arbitration agreement if they are referred to in the contract.
In the present case, a joint venture company was set up by two groups through a joint venture agreement. Under the agreement, the definition of the appellant group included “such other entities controlled by him or his immediate relatives or his group companies directly or indirectly”. Similarly, the definition of the respondent group included “…and their immediate relatives taken together and such other entities controlled by them or their immediate relatives directly or indirectly”. Disputes arose between the parties when the appellant group alleged that the respondent group were carrying on a competitive business. The appellant group thus approached the Court to seek interim relief under Section 9 of the Arbitration and Conciliation Act, 1996.
The Court after listening to the arguments on both sides, observed that the joint venture agreement was entered into between the two groups and not between specific individuals or entities. Thus, the immediate relatives and the entities controlled by the respective groups were also held to be bound by the terms of the agreement. The Court also observed that the legislative intent of the Act was to encourage arbitration. Therefore it was held that the aforesaid principles were required to be applied to the agreement and the arbitration agreement therein.
The Court thus reiterated that an arbitration agreement ought to be construed in a broad and common sense manner and that the arbitration agreement should be interpreted having regard to words and phraseology therein and no term or phrase should be treated as meaningless, especially if they are consistent with the other parts of the agreement. Rakesh S. Kathotia vs. Milton Global Ltd., 2014 SCC Online Bom 1119, decided on 22-09-2014