The National Highways Authority of India (NHAI) has cleared IL&FS’ claims worth Rs 902 crore related to a single road project that is part of the Delhi-Mumbai industrial corridor. The authority is looking to settle a majority of its arbitration cases, with claims running over Rs 70,000 crore, through conciliation, its chief said.
If India needs to become an international hub for arbitration, then the country needs to allow foreign arbitrators to represent matters related to foreign parties, senior counsel Arvind Datar said, echoing the views of several other experts that we have mentioned in past editions of this newsletter, in relation to the latest amendments made to the Arbitration Act.
Meanwhile, there is growing conviction that it is only a matter of time before online dispute resolution is adopted at scale in India.
Reuters has reported a new legislative proposal to improve protections in India for foreign investors, including new adjudicating authorities for the swift resolution of disputes.
India has entered into an investment cooperation and facilitation treaty with Brazil – the first one after the government approved a new template in 2015 for such bilateral pacts and started renegotiating similar agreements entered into with other nations. The new template provides for a new investor state dispute settlement mechanism that requires foreign investors to exhaust local remedies before going for international arbitration.
From the Docket
In Uttarakhand Purv Sainik Kalyan Nigam Limited v. Northern Coal Field Limited, the Supreme Court has reiterated that after the amendments to the Arbitration & Conciliation Act in 2015, the court has to examine only the existence of the arbitration agreement and nothing else when deciding an application under Section 11 of the Act. The Supreme Court held that issues such as limitation can be examined by the arbitral tribunal under Section 16 of the Act. The Supreme Court also explained the exception to the principle of Kompetenz-Kompetenz, when the agreement is vitiated as being procured by fraud. The exception will also be applicable when the arbitration agreement does not come into existence, as in a case where parties enter into a draft agreement as a step prior to the final contract. In both these exceptions, the Supreme Court observed that the arbitral tribunal cannot assume jurisdiction.
In M/s N.V International v. The State of Assam and Others, the Supreme Court held that the issue – whether an appeal under Section 37 of the Arbitration & Conciliation Act can be filed even if the 90 day period is over, and a condonation of delay application is made under Section 5 of the Limitation Act – is no longer res integra. The Supreme Court relying upon its judgment and order in Union of India v. Varindera Const. Limited, SLP (Civil) No. 23155/2013 held that, once the delay in filing the appeal is beyond 120 days, the same cannot be condoned.
In Central Organisation for Rural Electrification v. M/s ECI-SPIC-SMO-MCML (Joint Venture), a three-judge bench of the Supreme Court has interpreted the procedure for appointment of the arbitral tribunal in railway contracts. The Supreme Court held that under Clause 64(3)(a)(ii), there is a waiver of applicability of Section 12(5) of the Act. The Supreme Court further held that there is no embargo on the appointment of a retired railway officer as an arbitrator. The Supreme Court also distinguished the judgments in TRF Limited v. Energco Projects Limited and Perkins Eastman Architects to hold that the General Manager would be the competent authority to appoint the arbitrator as for the appointment of the arbitrator; the General Manager is required to send a panel of at least 4 names of Railway officer of one or more department within sixty days of the notice. After this, the contractor has the right to nominate at least 2 names out of the panel for appointment, and the General Manager is bound to appoint at least one out of them as the contractor’s nominee and will also appoint another member to counterbalance the number of arbitrators.
In Dyna Technologies Private Limited v. Crompton Greaves Limited, the Supreme Court highlighted the difference between unintelligible awards and inadequacy of reasons in an award under the Act. The court discussed about the three characteristics of a reasoned order, which are: proper, intelligible and adequate. The court observed that if the award is challenged on the basis of “adequacy of reasons” then the court has to decide the same under Section 34 based on the degree of particularity of reasoning having regard to the nature of issues falling for consideration. The degree of particularity depends upon the complexity of the issue and therefore the court needs to have regard to the documents submitted and contentions raised, so that awards with inadequate reasons are not set aside in casual manner. Regarding ordinary unintelligible awards, they are set aside subject to party autonomy to do away with the reasoned award. The court further observed that, regarding absence of reasoning, the power to cure such defects have been mentioned under Section 34(4) of the Arbitration Act. When there is complete perversity in the reasoning of the award, then it can be challenged under the provisions of Section 34 of the Arbitration Act.
The Supreme Court has held that the tribunal under the Gujarat Public Works Contracts Disputes Arbitration Tribunal Act, 1992 has the power to issue interim reliefs and Section 17 of the Arbitration & COnciliation Act merely compliments the same. In this judgment, the Supreme Court also held that the judgement of Gangotri Enterprises Limited v. Union of India and others, (2016) 11 SCC 720, is per incuriam because it was based on Union of India v. Raman Iron Foundry, (1974) 2 SCC 231 which had been overruled in H.M. Kamaluddin Ansari & Co. v. Union of India, (1983) 4 SCC 417.
The Delhi High Court, in G+H Schallschutz GmbH v. Bharat Heavy Electricals Limited, has reiterated that the scope of interference in international commercial arbitrations has been narrowed after the 2015 amendments and patent illegality is no longer a ground for challenging international commercial arbitration awards in India. The Delhi High Court held further that the interpretation of contract is purely the domain of the arbitrator and the Court would not interfere with the same, only because different interpretations are possible.
Advancing the jurisprudence now being created by judgments such as TRF Limited v. Energco Projects Limited and Perkins Eastman, the Delhi High Court has held that the Company, acting through its Board of Directors and any other person appointed by the company would be ineligible under Section 12(5) read with Schedule VII of the Act to appoint the sole arbitrator. The court held that the directors of the company as a part of board of directors would be interested in the outcome of the arbitration proceedings and therefore, the company is run collectively by the directors and it is evident from section 166 of the Companies Act 2013.
In an order, the Delhi High Court while dismissing an application for extension of time for making the award has held that, the amended Sections 23(4) and 29A (1) of Act are procedural in nature and they would apply to the pending arbitrations as on the date of the amendment. In effect the extended time period as enforced by the Arbitration and Conciliation (Amendment) Act, 2019 for the conclusion of the arbitration will apply to the pending arbitrations.
The debate regarding the seat and venue of arbitration rages on in India. In December, 2019, the Supreme Court further explored this issue in BGS-SGS-Soma (Joint Venture) v. NHPC Limited. The Supreme Court held that whenever there is an express designation of ‘venue’ and no designation of any alternative place as ‘seat’, “combined with a supranational body of rules governing the arbitration” and no other significant contrary indication, the conclusion is that in such situation the ‘venue’ shall be treated as “seat”. The Supreme Court also concluded that the expression “arbitration proceedings”, when qualified with ‘venue’, the ‘venue’ shall be treated as ‘seat’. The Supreme Court held that the expression “arbitration proceedings” does not include just one or more individual hearings but the arbitration proceedings as a whole. As a matter of abundant caution, the Supreme Court clarified that when the expression “arbitration proceedings” is contrasted with expressions like “tribunals are to meet or have witnesses, experts or the parties”, where only hearings are to take place, such ‘venue’ would not be treated as ‘seat’. Further, when expressions like “arbitration proceedings shall be held at a particular place” is used, it means that the intention of the parties is to anchor the arbitration proceedings to a particular place, which shall be the ‘seat’ of the arbitration. The Supreme Court also held that Union of India v. Hardy Exploration and Production (India) Inc. 2018 SCC Online SC 1640 cannot be considered as a good law as it is contrary to the five-judge bench judgement of Bharat Aluminium Co. (BALCO) v. Kaiser Aluminium Technical Service, Inc. (2012) 9 SCC 552.