Welcome to the updates from Indian arbitration law for the month of June, 2020.
The situation regarding resumption of normal functioning of courts in India remains fluid. Various high courts have extended their interim orders – Delhi up to 31 August, Karnataka up to 7 August, Kerala up to 3 August, Allahabad up to 10 July, Bombay up to 31 August, and Calcutta up to 30 September.
Internationally, various arbitral institutions like the Singapore International Arbitration Center, are revisiting their rules for the conduct of arbitration. COVID-19 has perhaps accelerated a process that had already been on the anvil for some institutions such as the London Court of International Arbitration. The International Court of Arbitration has also released a guidance note aimed at mitigating the effects of COVID-19.
Various Indian arbitral institutions have also been revamping their rules. The Indian Arbitration Forum has released guidelines for the conduct of arbitrators.
From the Docket
The Supreme Court has finally given a proper closure to the drawn out Centrotrade Minerals v. Hindustan Copper matter involving Centrotrade’s effort to enforce a foreign award passed by the arbitral appellate authority. The Court in its earlier decision, had already declared two-tier arbitration to be valid. The Supreme Court upheld the principle of party autonomy and held that the parties to the arbitration agreement were free to decide not only on the procedural law to be followed but also the substantive law. The Court further held that a two-tier arbitration mechanism providing for an appeal (to an arbitral tribunal) was not against public policy. Giving effect to its earlier decision, the Supreme Court in this present decision, held that the foreign award passed by the appellate authority can be enforced in India provided the provisions of Section 48 of the Act are fulfilled.
In Gammon India v. NHAI, the Delhi High Court noted that multiplicity in arbitration proceedings between the same parties, in respect of the same contract or the same series of contracts has rendered the arbitral process complex and counterproductive. In order to avoid multiplicity of arbitral tribunals and contradictory awards, the Court has issued the following directions:
- The parties approaching the Court under Section 34 of the Act ought to disclose any other proceedings pending or adjudicated in respect of the same contract or series of contracts and at what stage those proceedings were, along with the forum where the proceedings are pending.
The parties ought to disclose any other pending Section 34 petition in respect of the same contract and seek disposal of all such petitions together to avoid conflicting findings and conclusions.
- The parties approaching the Court under Section 11 ought to disclose if any tribunal has already been constituted for adjudicating the claims of either party arising out of the same contract or the same series of contracts. In case the Tribunal is constituted, an endeavour can be made by the arbitral institution or the High Court under Section 11, to refer the matter to the same tribunal order to avoid conflicting findings.
- The appointing authorities under contract clauses should avoid appointment of different arbitrators/ arbitral tribunals for different claims/disputes arising from the same contract, or same series of contracts.
The High Court of Delhi has reiterated that while exercising power under Section 9 of the Act, the Court should be mindful of the principles under Order XXXIX Rule 1 & 2 of the Code of Civil Procedure dealing with temporary injunctions and the underlying principles of Order XXXVIII Rule 5 of the Code of Civil Procedure dealing with furnishing security for production of property in Sterling and Wilson International v. Sunshakti Solar.
In DSC Ventures v. Ministry of Road Transport and Highways, the High Court of Delhi dismissed a petition under Section 11(6) of the Act filed by the claimant seeking appointment of a substitute arbitrator on behalf of the Ministry, after the position became vacant due to the death of the original nominee arbitrator of the Ministry. The High Court held that the time-limit of 30-days prescribed under Section 11 would not be applicable. In the present matter, the substitute arbitrator was appointed under the terms of the order of the arbitral tribunal. The Court held that there was no notice from any party to appoint the substitute arbitrator and that the other party had already appointed the sole arbitrator in accordance with the contract, which was silent regarding the time limit for such appointment.
In our view, in this case, since the nominee of MoRTH passed away after the award had been reserved, the claimant could have asked the truncated tribunal to pass the award, in line with a 2019-judgment of the Delhi High Court where the court rejected the contention that a truncated tribunal could not pass an award when one of the members resigns after conclusion of arguments.
In Technimont v. ONGC Petro Additions, the question before the Hon’ble High Court of Delhi was whether the losing party in arbitration proceedings can seek an extension of the bank guarantees furnished by the successful party for the performance of the contracts pending adjudication under Section 34 of the Act. The Court, relying on the Delhi High Court’s judgement on Nussli Switzerland Ltd. v. Organizing Committee FAO(OS) 121/2014 and the Bombay High Court’s decision in Dirk India Private Limited v. MSEGC (2013) 7 Bom. CR 493 held that in a Section 34 petition, the setting aside of the arbitral award rejecting the counterclaims of the respondent does not result in the same being decreed in its favour. While rejecting a petition under Section 34, the court does not pass an order decreeing the claim. If the respondent succeeds in such a petition, there is no sum due or payable to the respondent and the losing party cannot seek the extension of bank guarantees.
In Rail Vikas Nigam Ltd. v. Simplex infrastructures Ltd., the Delhi High Court, while interpreting the fees of the arbitrators under Entry No. 6 of Schedule IV of the Arbitration and Conciliation Act, 1996, held that the ceiling of Rs. 30 lakhs is not inclusive of the base fee of Rs. 19,87,500/-. The Court opined that the word ‘plus’ is disjunctive between the base fee and the additional fee chargeable. The Court held that Rs. 30 lakhs is the limit on the ad valorem fee chargeable on the value of the claim exceeding Rs. 20 crores.
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.