Welcome to the latest updates from arbitration in India.
Let us first acknowledge the fact that we may look back at 2018 as the year that Indian courts finally broke with the past and consistently refused to intervene with the enforcement of arbitral awards. If this holds true, we can thank the decisions of the Supreme Court in Kandla Export Corporation v. OCI Corporation, BCCI v. Kochi Cricket, and NHAI v. Bsc-Rbm-Pati Joint Venture.
The Supreme Court has ruled that administrative difficulties would not be a valid reason to condone a delay to file an application to set aside an arbitration award, beyond the statutory prescribed period under Section 34 of the Arbitration and Conciliation Act.
The apex court has also made an effort to impose some consistency on decisions of tribunals in imposing interest on awards. In Vedanta v. Shenzen Shandong Nuclear Power Construction, it held that arbitral tribunals must impose rates of interest as per the laws of the seat of the arbitration unless something contrary is agreed between the parties.
In South Delhi Municipal Corporation v. SMS AAMW Tollways, the Court held that if there is no specific mention of arbitration as a mode of dispute resolution in the agreement itself, implying a ‘Designated Officer’ to act as an arbitrator is invalid. Such an officer would lack the jurisdiction necessary to act as an arbitrator.
2018 is also the year that India jumped 23 places to secure the 77th rank in the Ease of Doing Business Index. Niti Ayog’s Amitab Kant wrote that institutional arbitration could help India reach the top 50 in the index for 2020 by loosening the stranglehold that pendency has on enforcement of contracts and other legal delays.
Bit by BIT
One of the factors that the Ease of Doing Business Index does not account for is the government’s refusal to honour global arbitration awards on tax disputes. Weeks before an international arbitration tribunal rules on retrospective tax levied by India, the Income Tax Department has sold almost all of Cairn Energy Plc’s attached shares to recover a part of the Rs 10,247 crore retrospective tax demand. The Indian government had used a 2012 law to tax the past income of a few foreign firms including Cairn Energy. Cairn Energy held 4.95 per cent stake in mining major Vedanta Ltd which the Income Tax Department had attached after issuing its tax demand in 2014 on alleged capital gains. Cairn said it wants the international arbitration case under the India-UK Bilateral Investment Treaty to nullify the effects of the tax assessment and compensate Cairn.
Korea’s state power utility Kowepo has begun arbitration proceedings against India for not honouring the fuel supply commitment to its gas-based power plant in Maharashtra. Kowepo is protected under the India-Korea bilateral investment treaty and Comprehensive Economic Partnership Agreement and it has sought resolution of issues surrounding its project in six months or $400-million compensation for loss and damages.
Senior Advocate Arvind Datar wrote that to require parties under India’s model Bilateral Investment Treaty to go to arbitration only after the exhaustion of legal remedies would make BIT arbitration meaningless.
Does Section 8(1)(a) of the Right to Information Act exempt the dissemination of documents related to investment treaty arbitration?
The government has sought the setting aside of an international arbitration award that ruled in favour of a Reliance-led consortium that includes UK-bsed BP Plc and Niko Resources of Canada. The government said that “the award strikes at the heart of the public policy and has given a premium to a contractor (RIL) that has amassed vast wealth by committing an insidious fraud as well as criminal offence”
The Union Law Ministry has noted the government’s poor record in domestic and international commercial arbitration. “There have been numerous instances where huge losses in the form of damages payable by the government occur on account of breach of contractual obligations due to lack of competent advice,” it said in a draft cabinet note seeking the creation of an integrated legal division.
Other news from the docket
In SP Singla Constructions v. Himachal Pradesh, the Supreme Court held that the provisions of the amended Arbitration and Conciliation Act are not applicable to arbitration proceedings commenced before October 23, 2015.
In Caravel Shipping Services v. Premier Sea Foods Exim, the Court held that the only requirement for a valid arbitration agreement is that it should be in writing and it need not be signed.
An application made at the initial stage for the enforcement of a foreign award shall not be dismissed for not producing the documents required under Section 47 of the Act. This defeat can be cured at a later stage, the Court said in P.E.C. Limited v. Austbulk Shipping.
The Delhi High Court has upheld its own power to execute foreign arbitration awards despite amendments in the Delhi High Court Act relating to pecuniary jurisdiction. The amended Arbitration and Conciliation Act, a special Act vis-a vis the Delhi High Court Act, would prevail.
In M. Ashraf v. Kasim VK, the Kerala High Court held that the power to grant interim measures of protection under Section 9 of the Arbitration and Conciliation Act, 1996 extends beyond the passing of an arbitral award and up to its enforcement.
Vijay Chhibber, a former Secretary with the Ministry of Road Transport and Highways, has identified improved dispute resolution as one of the reasons for India’s improved performance in highway construction.
Reliance Infrastructure has won a Rs 16.14 crore arbitration award against the National Highway Authority of India. A three-member arbitration tribunal ordered NHAI to pay Rs 16.14 crore by February 10, 2019. This order is in addition to a Rs 200 crore arbitration award the company bagged earlier in August for the same NHAI project for cost over-run and loss of revenue. The arbitration had arisen in relation to TD Toll Road, a wholly owned subsidiary of Reliance, which designed, built and is operating an 87-km-long 4-lane national highway, NH45, connecting Trichy and Dindigul in Tamil Nadu.
After the Maharashtra State Road Development Corporation (MSRDC) rejected its claim for additional compensation to the tune of Rs 648 crore for delays in completing the Bandra-Worli Sea Link, infrastructure major Hindustan Construction Company has filed an arbitration petition in the Bombay High Court, blaming the government for the delay.
The flagship Udhampur-Srinagar-Baramulla Rail Link project is likely to miss its 2020 target also. Construction work on the main arch for the iconic bridge over the Chenab river in the Katra-Banihal section has stopped due to technical and contractual issues including arbitration.
GMR Infrastructure has settled an ongoing arbitration with the private equity investors in its airport business GMR Airports Ltd (GAL). It has agreed to pay Rs 3560 crore to SBI Macquarie, Standard Chartered Private Equity, JM Financial Old Lane and others in lieu of their entire holding of compulsorily convertible preference shares in GAL.
The Bombay High Court, while hearing an execution application filed by a Singapore-based firm on an international arbitration order passed in its favor by the Queens Bench of the United Kingdom, has directed a court receiver to take possession of the various properties belonging to Ashapura Minechem. In 2010, the UK court had directed Ashapura to pay Armada Singapore USD 65 million with an interest of five per cent per year.
SPML Infra Limited has won a Rs 475 million arbitration award against Jharkhand Urja Utpadan Nigam. D.G.R. Patnaik, a retired judge of the Jharkhand High Court, was the sole arbitrator.
The Dalmia Group has won an arbitration award of Rs 160 crore over a land dispute with the Delhi-based Ansal API Group and have now approached the Delhi High Court for enforcement of the arbitration award. RC Lahoti, a former chief justice of India, was the sole arbitrator.
The group had joined hands with Ansal API more than a decade ago through its real estate arm Landmark Holdings to develop three townships in north India. The Dalmias later decided to exit the partnership and the Ansals agreed to pay the Dalmias to compensate for their interest in the 50:50 joint venture.
That’s all for now from all of us at Sarthak. We wish you a peaceful conclusion to the year and much happiness and prosperity in the new year!