Welcome back to our updates from the world of arbitration.
The Delhi High Court has vacated an order staying the appointment of a Joint Secretary of the Ministry of Law & Justice as the custodian of the undertakings of the International Centre for Alternative Dispute Resolution. The International Centre for Alternative Dispute Resolution had earlier approached the High Court challenging the New Delhi International Arbitration Centre Ordinance 2019, which had resulted in the takeover of the ICADR. Under Section 7 of the Ordinance, all assets are transferred to and vested in the central government.
The bench comprising the Chief Justice Rajendra Menon and Justice V Kameswar Rao vacated the order in the review petition filed against the interim order passed in a writ petition challenging the ordinance. While vacating the order, the bench further directed that all the pending arbitration cases with the ICADR shall be permitted to be carried out in the same manner as they were being done prior to the ordinance.
A challenge to an arbitral award on the ground of public policy can only be made in very exceptional circumstances, the Supreme Court has reiterated.
Dealing with an issue related to Section 34 of the Arbitration and Conciliation Act, 1996 in a petition filed by a Korean company, whose bid for construction of a four-lane bypass on a national highway in Madhya Pradesh was accepted in 2005 by the National Highways Authority of India, the bench of Justices Rohinton Nariman and Vineet Sarin said that this ground can be attracted only in very exceptional circumstances when the conscience of the court is shocked by infraction of some fundamental notions or principles of justice.
You can read more about this judgment later in this newsletter.
In a suit seeking compensation, punitive damages, and other relief against the defendant, the Delhi High Court has held that existence of a tortious claim for exemplary damages would not be a ground to permit any party to wriggle out of an arbitration clause in a contract.
The Supreme Court has observed that the termination of Arbitration proceedings by the Arbitrator under Section 32(2)(c) of the Arbitration and Conciliation Act cannot be recalled.
From the docket
There is a difference between the termination of a mandate under Section 32 and proceedings coming to an end under Section 25. The Supreme Court in Sai Babu v. Clariya Steels Pvt. Ltd, faced with the issue of recalling termination of mandate under Section 32(3) of the Arbitration and Conciliation Act, 1996, held that no recall application would lie in such cases. The court relied on SREI Infrastructure Finance Limited v. Tuff Drilling Private Limited, where the Supreme Court had observed that phrase “the mandate of the Arbitral Tribunal shall terminate” in Section 32(3) and its omission in Section 25(a) should be treated with a purpose and object.
In Ssangyong Engineering and Construction Company Ltd v. NHAI, the Supreme Court decided that amendments made to Section 34 in 2015 would apply only to an application made after October 23, 2015. While stating that the amendments were prospective in nature, the court has in effect made the provisions of the amendment applicable to arbitrations that had commenced prior to the amendment where an application for setting aside was made after that date.
In the same case, the court also held that the unilateral addition or alteration to a contract cannot be imposed upon an unwilling party. While observing that the public policy exception is to be exercised only in exceptional circumstances, the court set aside the arbitral award on the grounds that it conflicted with the most basic notion of justice.
In SAP India Private Limited v. Cox & Kings Limited, the Bombay High Court held that a party that failed to appoint an arbitrator initially cannot fill up the vacancy caused on the resignation or recusal of the arbitrator appointed by a court in exercise of its powers under Section 11(6) of the Act.
Citing the Supreme Court’s decisions in Yashwith Constructions v. Simplex Concrete Piles and Shailesh Dhairyawan v. Mohan Balkrishna Lulla, the court held that Section 15(2), which required the appointment of a substitute arbitrator “according to the rules” applicable to the appointment of the original arbitrator, meant that the appointment of a substitute arbitrator must be done according to the “original agreement” or “provision applicable to the appointment of an arbitrator at the initial stage”.
In Fernas Construction v. ONGC Petro Additions, the Delhi High Court interpreted the ‘group of companies doctrine’ and citing the Supreme Court judgment in Chloro Controls v. Severn Trent Water Purification, ruled that a company being one within a group of companies, can bind its non-signatory affiliates or sister or parent concerns to an arbitration agreement, if the circumstances demonstrate that the mutual intention of all the parties was to bind both the signatories and the non-signatory affiliates to the agreement.
The geographical location at which the arbitration proceedings are carried out cannot be taken into consideration as a relevant factor to identify the seat of arbitration, the Delhi High Court said. In Dwarika Projects v. Superintending Engineer Karnal PWD, the Court decided that in case of a disagreement between the parties as to the place or seat of arbitration, the factors to be taken into account in order to determine the jurisdiction are (1) the place of execution of the contract, (2) the place where the work stipulated in the contract is being executed, and (3) the provisions and conditions specified in the contract and other ancillary documents.
Meanwhile there is a growing trend for a pragmatic approach to the arbitration of intellectual property disputes, and there is sufficient precedent to bolster it, one author has noted.
Leading American attorney Mark Bravin said that third party funding should be encouraged “as it empowers parties who can’t afford the procedures but have a right to justice”.
Upset over delays in enforcing contractual obligations and arbitral awards, infrastructure finance major Srei has said it would be cautious where the government or its agencies are a contracting party.
These were the updates from the world of arbitration in May. Thank you for reading. We will be in your inbox again next month.