Welcome back to our updates from the world of arbitration!

The Asian International Arbitration Centre has revised its Arbitration Rules. The revised rules have come into effect from 1st August 2021. The revised rules can be accessed here.

The Appeal filed by the Indian Government against the decision of the International Arbitration Tribunal granting an award of Rs. 22,100 crore to Vodafona in the retrospective tax dispute would be heard by the Singapore International Commercial Court (SICC).

Replying to an unstarred question raised in the Lok Sabha regarding the Tax Dispute with Cairn Energy, the Government of India has admitted that an order has been passed by a French court freezing certain properties of the Indian Government in the case pertaining to Cairn Energy. Further, no formal proposal is sent by Cairn Energy to find an amicable solution to the dispute.

The Finance Ministry has introduced the Taxation Laws (Amendment) Bill, 2021 in the Lok Sabha, which aims to withdraw tax demands made on indirect transfer of Indian assets prior to May 28, 2012. All tax demand on the companies regarding the indirect transfer of Indian assets prior to May 28, 2012 will be withdrawn.

From the Docket

There were two major developments in arbitration law since our last alert.

First, the Supreme Court has finally ended the debate surrounding the legality of an emergency award in India. The Supreme Court in Amazon vs Future Retail has held that section 17 of the Arbitration and Conciliation Act, 1996 when construed in the light of the other provisions undoubtedly leads to the conclusion emergency award can be enforced under the provisions of section 17(2). The Court held that full party autonomy is given to the parties to adjudicate their disputes in accordance with institutional rules which can include Emergency Arbitrators delivering interim orders, defined as “awards” under the Act.

The second big development is SC’s ruling in NHAI vs M. Hakeem, which finally settles the debate on whether an award can only be set aside or modified (also) during hearing of objections under Section 34 of the Act. While examining the scope of section 34 of the Act, the Supreme Court held that section 34 has a limited remedy either to set aside an award or remand the matter under the circumstances mentioned in Section 34 of the Arbitration Act, 1996. The court, therefore, cannot modify the arbitral award.

In PSA SICAL Terminal vs Chidambranar Port Trust Tuticorin, the Supreme Court has held that an arbitrator cannot  re­write  the contract for the parties, as the same would amount to a breach of the fundamental principles of justice, therefore entitling a Court to set aside the arbitral award.  This act of the arbitrator will shock the conscience of the  Court and as such,   would fall in the exceptional category to set aside the arbitral award. The jurisdiction of the arbitrator is confined to the four corners of the agreement.

The Delhi High Court in Navayuga Bengalooru Tollway vs NHAI has held that the power under section 9 of the Act to grant ‘interim measures’ and ‘protection’ can only be exercised without entailing final adjudication of the dispute. The Court held that the Act does not entail adjudication in two stages, i.e., summary adjudication by the Court under Section 9 and a final adjudication by the Arbitral Tribunal.

In Atindra Construction vs GAIL, the Delhi High Court has held that a mere allegation of misrepresentation would not be sufficient ground to direct stay on invocation of bank guarantees. The Court held that in order to grant stay against the invocation of a bank guarantee it is necessary to plead and indicate sufficient material to establish fraud.

In Cement Corporation of India vs Promac Engineering Industries, a division bench of the Delhi High Court has held that sub-clause (e) of section 9(1)(ii) of the Arbitration and Conciliation Act, 1996 Act is a residuary clause that gives ample power the courts to issue such other interim directions that are not covered by sub-clauses (a) to (d) of section 9(i) (ii). However, the Court held that this residual clause will not cover any order passed by the Tribunal concerning the calculation of fee that is based on the interpretation of the provisions of the IV Schedule of the Arbitration and Conciliation Act, 1996.

In Komal Narula vs. DMI Finance, the Delhi High Court has held that the arbitral award may be set aside if the notices regarding the constitution of the Arbitral Tribunal were not duly served or notice of the arbitration proceedings was not intimated to the parties to the arbitration proceedings.

In M/s Jyoti Sarup Mittal. v. The Executive Engineer -XXIII, South Delhi Municipal Corporation, the Delhi High Court has held that the fundamental agreement between the parties would not perish even though the mechanism for the appointment of an arbitrator is illegal. The appointment of arbitrator clause is ancillary to the agreement to refer the disputes to arbitration and the same may be considered severable. Thus, even though the mechanism for appointment of the arbitrator can no longer be followed, the agreement between the parties to refer the disputes to arbitration would still survive.

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