Hello! Welcome back to updates from the world of arbitration for July, 2020.
Courts in India have not resumed full normal functioning and various high courts have extended their interim orders – Delhi up to 31 October, Karnataka up to 30 September, Kerala up to 7 September, Allahabad up to 31 October, Bombay up to 31 August, and Calcutta up to 30 September.
There is growing demand for litigation funding in India among corporates as they seek to finance legal costs. Mani Gupta, a partner at our firm, participated in a webinar on the subject and you can watch the recording here.
From the Docket
In Avitel Post Studioz v. HSBC, the Supreme Court, after reviewing the judgments relating to the arbitrability of fraud, held that “serious allegations of fraud” arise only if either of two tests laid down are satisfied, and not otherwise. The first test is satisfied only when it can be said that the arbitration clause or agreement itself cannot be said to exist. The court must be able to make a clear finding that the party against whom that breach is alleged cannot be said to have entered into the agreement relating to arbitration at all. The second test can be said to have been met when allegations of arbitrary, fraudulent, or mala fide conduct are made against the State or its instrumentalities, thus necessitating the hearing of the case by a writ court in which questions are raised which are not predominantly questions arising from the contract itself or breach thereof, but questions arising in the public law domain.
In Dharamvir Khosla v. Asian Hotels, the High Court of Delhi held that the court cannot go into the issue of whether a dispute is arbitrable or not in a Section 11 application but is required to do so when deciding an application under Section 8 of the Act. The Court further held that the amendment to Section 8 of the Act cannot be given a wide meaning to inundate the entire concept and regime of special legislation where such disputes were held to be non-arbitrable. The Court further highlighted that even after the amendment to Section 8, the order under Section 8 being judicial in nature, the Court would consider the existence of the arbitration agreement between the parties along with whether the subject matter of the dispute is arbitrable by a public forum and not by a special court or tribunal or relates to any additional or specific relief falling in the category of exempted matter resulting in a judgment in rem. The Court further added that the excepted category is not exhaustive and thus it would depend on the facts of each case.
In ONGC Petro Additions v. Ferns Construction, the High Court of Delhi finally put an end to the controversy surrounding the retrospective application of the amended Section 29A of the Act. Two coordinate benches of the Delhi High Court had given contradictory views here and here. The Court in Ferns Construction held that the judgement in MBL Infrastructures was per incuriam as the attention of the court was not drawn to the earlier order passed by the Court in Shapoorji Pallonji v. Jindal India Thermal Power. Therefore, the Court held that the provisions of Section 29A(1) (as amended by the 2019 Amendment Act) shall apply to all pending arbitrations seated in India as on August 30, 2019, and commenced after October 23, 2015. The Court also relied on BCCI v. Kochi Cricket, (2018) 6 SCC 287, where the Supreme Court opined that Section 29A of the Act, as incorporated in by way of the 2015 Amendment was a procedural law, as it does not create new rights and liabilities.
In Pankaj Arora v. AVV Hospitality,the High Court of Delhi while deciding on the power of the arbitrator under Section 16 to rule on his own jurisdiction held that there is no strict rule to decide the jurisdiction issue at first, though ordinarily, the issue of jurisdiction is dealt with at first. The Court held that if the issue related to the jurisdiction was decided prior to rendering the final arbitral award, no violation of Section 16 could be said to have occurred.
In Barminco Indian Underground Mining Services v. Hindustan Zinc, the Rajasthan High Court held that the definition clause present in Section 2(1) of the Act applies to the whole Act and not limited to Part-1 of the Act. The Court also clarified that even when an arbitration agreement can result in a foreign award covered under Part-II of the Act, the arbitration can be an arbitration other than the international commercial arbitration. The Court also emphasised the point that since in the present case scenario the seat of the arbitration was Singapore, it cannot be said that the arbitration is a domestic arbitration. The award passed will not be a domestic award. There exists a third situation where the arbitration is not an international commercial arbitration (as the nationality of both parties was Indian and nationality being the sole determining or decisive factor) but the award will be a foreign party.
In Prasar Bharati v. M/s Stracon India Limited & Anr., the Delhi High Court has held that an order passed by the court under Section 36 of the Act cannot be appealed under Section 13 of the Commercial Courts Act, 2015. While discussing the ambit of Section 13 of the Commercial Courts Act, 2015, the court opined that Section 13 deals with appeals from orders passed by a Commercial Division of a High Court to the Commercial Appellate Division of that High Court, which are enumerated under Order XLIII of the Code of Civil Procedure, or from orders which are mentioned in Section 37 of the Act. The Court also clarified that by “applying the principle of “generalia specialibus non derogant”, the Arbitration and Conciliation Act, 1996 would be considered as a special Act for all proceedings arising under the Act and it would, therefore, prevail over the Commercial Courts Act which would be treated as a general Act.”
In Bhandari Engineers & Builders v. Maharia Raj Joint Venture, the High Court of Delhi has issued various directions that shall apply to all execution proceedings, including the execution proceedings under Section 36 of the Arbitration and Conciliation Act in order to overcome the delays and difficulties in the executions of decrees or awards and address expeditious disposal of the execution petitions. As part of the directions, the High Court has issued revised formats for affidavits of assets and income of various classes of judgment debtors. Further, the High Court has also held that the executing court at the initial stage itself can restrain the judgment-debtor from transferring, alienating or disposing of or otherwise parting with the possession of any assets to the tune of the decretal or award amount except in the ordinary course of business such as payment of salaries and statutory dues.
Thank you for reading! We will be back in your inbox next month with more updates from the world of arbitration law! Till then, stay safe.