Last month, we noted some of the key changes brought in by recent amendments made to India’s arbitration law. Even though the provision requiring arbitration panels to consist of Indian nationals alone received some criticism from Justice Rohinton Nariman of the Supreme Court, the response to many of the new provisions such as those requiring the appointment of an arbitrator to be made directly by an arbitral institute designated by the Supreme Court or the High Court, remained one of optimism.

Meanwhile, the Income Tax Department’s recent interpretation of “windfall gains” to include damages received by a foreign company under an arbitral award, has struck a sour note. While the Delhi High Court invalidated the move, critics said that the absurd interpretation seriously dents India’s image in the commercial world.

The NHAI’s annual report for FY18, shows the value of arbitration claims against the authority has steadily increased to Rs 55,344 crore, as against Rs 42,074 crore in FY17 and Rs 30,071 crore in FY16.

From the docket

In Mayavati Trading v. Pradyut Deb Burman, a three-judge bench of the Supreme Court overruled its judgment in United India Insurance v. Antique Art Exports on the scope of the power of a high court or the Supreme Court while appointing an arbitrator. It held that Section 11(6A) has to be restricted to the determination of the existence of an arbitration agreement. Referring to the omission of Section 11(6A) by the 2019 amendment, the Court noted that now (that is, after the 2019 amendments) arbitrators would be appointed by institutions and the courts are no longer required to appoint arbitrators and consequently, to determine whether an arbitration agreement exists.

Reiterating that an application under Section 11 of the Arbitration and Conciliation Act was not maintainable if a person is not satisfied with the quantum of compensation determined by the competent authority for the acquisition of land under Section 3G(5) of the National Highways Act, 1956, a specialised law, the Supreme Court in National Highways Authority of India v. Sayedabad Tea Company, upheld its judgment in GM (Project), NHAI v. Prakash Chand Pradhan. It further noted that any person aggrieved by the central government’s failure to appoint an arbitrator within a reasonable time under the 1956 Act may file a writ petition or even a suit.

In Bata India v. AVS International, the Delhi High Court held that an arbitration under Section 18 of the Micro, Small and Medium Enterprises Act, 2006 would override a contractual arbitration clause in an agreement between the parties. On a plea taken by Bata India however, that in light of Section 80 of the Arbitration and Conciliation Act, a person who has acted as a conciliator between the parties cannot act as arbitrator, the court noted the conflicting views of various High Courts but did not express an opinion.
The authors of this email are of the opinion that the views that the Bombay High Court has expressed on this subject are correct as the MSMED Act itself incorporates Section 80 of the Arbitration and Conciliation Act. Thus, once the Facilitation Council under the MSMED Act has acted as a conciliator, it should not act as arbitrator and instead, should refer the dispute for adjudication to any other institution providing alternate dispute resolution services.

In Canara Nidhi Limited v. M Sashikala, the Supreme Court, while deciding an application under Section 34, held that parties should ordinarily not be allowed to file additional evidence. The Court should confine its inquiry to the material or record that was before the arbitrator.

We hope you enjoyed this update on the significant developments in arbitration in India during September. We will be back with more news next month.

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