Domestic updates

Priyanka Taksh Sood & Ors. v. Sunworld Residency Pvt. Ltd. & Anr., ARB. P. 868/2021, (High Court of Delhi)

In this case, the Hon’ble Delhi High Court held that if there is a dispute regarding the refund of payment from a real estate developer under the ‘Flat Buyer Agreement’, then the dispute is arbitrable even though a concurrent remedy under the RERA Act might be available.

The Respondent had assumed the construction of a Group Housing Society “Sunworld Arista" in Noida. The Petitioner and her late husband were joint allottees of a flat. The Parties entered into an agreement. On 27.04.2017, the Petitioner decided to cancel the allotment and requested a refund of the amount from the Respondent, which the Respondent failed to do. The Petitioner then invoked arbitration under the agreement and filed a petition under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (“Act”) for the appointment of a sole arbitrator.

The Respondent argued that since it was registered with Uttar Pradesh Real Estate Regulatory Authority (RERA), the jurisdiction to hear and decide the disputes under Sections 88 and 89 would lie before UP RERA.

It was observed by the Court that Section 79 of the RERA Act did not apply to proceedings initiated before a forum that cannot be called a Civil Court and that Section 18 of the RERA Act provides that the remedy under the Section was "without prejudice to any other remedy available". The Court, applying the Doctrine of Election and relying on the judgments of the Hon’ble Supreme Court of A.P. State Financial Corporation versus M/s GAR Re-rolling Corporation (1994) and Emaar MGF Ltd. and Anr. versus Aftab Singh (2018) held that since the Parties had not initiated any proceedings under the RERA Act, the Petitioner could avail the option of initiating arbitration since the availability of alternate remedies or remedies under other special statutes would not bar a petition under the Act. However, if proceedings under RERA had been initiated, then an application under the Act would not have been maintainable. Provisions of the RERA Act are not in derogation to any other law but are in addition to them and hence would be consistent with the provisions of the Act. The petition was allowed and a sole arbitrator was appointed.

Shanghai Electric Group Co. Ltd. v. Reliance Infrastructure Ltd. O.M.P. (I) (COMM.) 433 of 2022, (High Court of Delhi)

In this case, the Hon’ble Delhi High Court held that the applicability of Section 9 of the Act, as provided for in the proviso to Section 2(2) of the Act cannot be presumed or interpreted to be excluded just because the Parties have chosen a foreign-seated institutional arbitration under UNCITRAL Rules.

The Parties had entered into a contract. On failure by the Respondent to fulfill its obligation, the Petitioner invoked the arbitration clause as per which the proceedings were to be administered by SIAC under the UNCITRAL Rules and the seat was in Singapore. The Petitioner filed an application under Section 9 of the Act. The Respondent argued that the application under Section 9 was not maintainable since the Parties had agreed on a foreign seated arbitration under the UNCITRAL Rules.

The Hon’ble Court held that it cannot be presumed that the maintainability of an application under Section 9 of the Act as provided under the proviso to Section 2(2) of the Act is excluded on the ground that the Parties had chosen a foreign-seated institutional arbitration under UNCITRAL Rules law since it such a choice made by the Parties cannot be considered as “an agreement to the contrary”.

BEML Ltd. v. Prakash Parcel Services Ltd., M.F.A. No. 4180 of 2019 (AA), (High Court of Karnataka)

In this case, the Hon’ble High Court of Karnataka held that an application under Section 8 of the Act would not be maintainable after the Arbitrator has ruled that it doesn’t have jurisdiction.

The Parties had entered into an agreement which had an arbitration clause. The Parties invoked the arbitration clause and the dispute was referred to a sole arbitrator. The jurisdiction of the arbitrator was challenged by the Respondent. The arbitrator accepted the objection to its jurisdiction and ruled that it had no jurisdiction to hear the matter. The Arbitrator further allowed the Respondent to pursue other appropriate legal remedies. Since the Appellant had not challenged the order of the arbitrator, the Respondent filed a recovery suit in civil court. Thereafter, a Section 8 application under the Act was filed by the Appellant. Since the application was rejected by the trial court, the Appellant challenged the order of the trial court.

It was observed by the court that since the Appellant had not challenged the order of the arbitrator, it had waived its right to refer the dispute to arbitration and the award of the arbitrator had attained finality.

Kanti Bijlee Utpadan Nigam Ltd. v. Paltech Cooling Towers & Equipments Ltd., O.M.P. (COMM.) 154 of 2021 (High Court of Delhi)

In this case, the Delhi High Court held that an award which provides for a lumpsum amount against specified claims of a party will not be maintainable.

The Parties had entered into a Supply and Service Contract. A dispute arose between the Parties which was referred to arbitration and the Respondent submitted its statement of claim. The Petitioner submitted its defence and counterclaims that were outright rejected since they were raised after an 11-month delay. The arbitrator awarded a lumpsum amount including all claim amounts. This award was challenged under Section 34(4) of the Act.

It was held by the court that such an award was not maintainable since awarding a lumpsum amount against specific claims proves that the award was passed without proper adjudication and such an award would be unsustainable.

National Highway Authority of India v. Transstroy (India) Ltd., 2022 SCC Online SC 832

The Apex Court in this case held that the Counter Claim of a party cannot be dismissed merely because the claims were not notified before invoking Arbitration. The parties had entered into an EPC Agreement dated 13.11.2014 where the Respondent agreed to carry out improvement/augmentation of the National Highway in Tamil Nadu. Disputes arose between the parties and the Respondent invoked the Arbitration Clause in the Contract and appointed the Arbitrator. Resultantly, both parties nominated the Arbitrators, and accordingly, the Arbitral Tribunal was constituted.

Upon commencement of Arbitration, the Respondent filed its Statement of Claim which was followed by the Appellant’s Statement of Defence wherein it reserved its right to claim damages and stated that it would prefer a Counterclaim. Thereafter, the appellant sent a letter to the arbitral tribunal seeking an extension of time for filing its counterclaim. However, the request was rejected by the Tribunal. The Appellant subsequently moved an application under Section 23(2A) of the Act to place its counterclaim on record. The Tribunal again rejected the said application as the Appellant had not notified the claims and followed the procedure outlined in Clause 26 of the Contract. Aggrieved by the order of the Arbitral Tribunal rejecting the application, the appellant preferred an appeal before the High Court of Delhi. The Court also dismissed the appeal on the same ground. Thereafter, the appellant preferred an SLP against the impugned order.

The Supreme Court was of the opinion that due to the narrow interpretation of the Arbitration Clause by the Arbitral Tribunal and High Court, the valuable right of the Appellant to submit a Counterclaim was taken away. The Court held that when Section 23 of the Act expressly provided for filing of a Counterclaim, there was no reason to curtail the right of the Appellant to make the Counterclaim which would lead to parallel proceedings before various forums. The Apex Court held that not allowing the Appellant to file the Counterclaim would defeat the object and purpose of Section 23(2A) of the Act. Thus, the Court allowed the Appellant to file the Counterclaim.

Indian Oil Corporation Limited v. NCC Limited, 2022 SCC Online SC 896

The Supreme Court in this case dealt with the scope of inquiry by the court in a Section 11 petition under the Arbitration and Conciliation Act 1996 (“the Act”), where the arbitration agreement excludes certain disputes from the purview of the arbitration clause. NCC Limited (NCCL) invoked the arbitration clause under the Contract pursuant to which Indian Oil Corporation Limited (IOCL) referred NCCL’s disputes regarding the arbitrability of its notified claims to the General Manager. In respect of NCCL’s claims arising out of one of the contracts, the general manager dismissed the claim stating that the dispute does not fall under the purview of notified claim and hence the matter could not be referred to arbitration.

An application was filed before the Delhi High Court under section 11 of the Act in respect of the notified claims and for other matters wherein the court appointed an arbitrator, reiterating that Section 11(6A) limits the power of courts to examine the jurisdiction/arbitrability of the dispute. The High Court held that where there is a dispute regarding the decision by the General Manager regarding whether a claim could be categorized as ‘notified claims’, the same has to be adjudicated by the Arbitral Tribunal only. The High Court further held that unless there was an “open and shut case” that a particular dispute did not fall within the ambit of the arbitration agreement, the matter would have to be resolved by an Arbitral Tribunal. The Court would allow the Tribunal to conclude on the matter given under the doctrine of Kompetenz-Kompetenz, recognised under Section 16 of the Act. Being aggrieved, IOCL preferred five civil appeals challenging the judgments and orders of the Delhi High Court before the Supreme Court.

The Supreme Court expressed disagreement with the view of the High Court and held that after the insertion of sub-section (6­A) in Section 11 of the Arbitration Act, the scope of inquiry by the Court in Section 11 petition is confined only to ascertain as to whether a binding arbitration agreement exists qua the parties before it. The Court held that although the issues of non-arbitrability and jurisdiction of the Tribunal are to be normally decided by the Arbitral Tribunal, however, if the facts are very clear and glaring and in view of the specific clauses, those issues can also be decided by the Court at the stage of appointing an arbitrator.

Mahanadi Coalfields Ltd. v. IVRCL AMR Joint Venture, 2022 SCC Online SC 960

The Supreme Court was called upon to examine the validity of an arbitration clause titled 'Settlement of Disputes/Arbitration'. The Respondent had approached the High Court of Orissa for the appointment of a sole arbitrator under Section 11 of the Arbitration & Conciliation Act, which was allowed by the Single Judge. Thus, the Appellant being aggrieved by the High Court’s decision preferred the present appeal.

It was argued that clause 15 of the Contract Agreement does not constitute an arbitration agreement and thus the very invocation of the jurisdiction under Section 11(6) was not valid.

The Supreme Court observed that Clause 15 of the Contract Agreement is a dispute resolution mechanism at the company level, rather than an arbitration agreement. Consequently, in case of a dispute, the Respondent was supposed to write to the Engineer-in-charge for resolving the dispute.  The Arbitration Agreement should disclose a determination and obligation on behalf of parties to refer disputes to arbitration. The Court referred to the judgment in Jagdish Chander v. Ramesh Chander (2007) 5 SCC 719, and observed that, in the present case, the substantive part of Clause 15 makes it clear that there is no arbitration agreement between the parties agreeing to refer either present or future disputes to arbitration. Thus, it was held that mere use of the word “arbitration” or “arbitrator” in a clause will not make it an arbitration agreement if it requires or contemplates a further or fresh consent of the parties for reference to arbitration.

Food Corporation of India v. Adani Agri Logistics Ltd, 2022 SCC Online Del 1880

The issue before the Delhi High Court, in this case, was whether the Arbitrator can alter/interpret the express terms of the agreement between the parties. In this case, the work for developing the facilities was to be completed within 36 months from the date of the agreement and it was for 20 years from the date of operation. It was submitted that the express agreement between the parties stated that the twenty years period would be calculated from May 2007.

The parties by exchange of letters had agreed that the period of 20 years would begin from the date of arrangement i.e., 11.05.2007. Thereafter, the parties also entered into a Supplementary Agreement when the project work stood substantially completed. Subsequently, by letter dated 19.11.2013, it was decided that the SCH charges were to be determined by taking 28.09.2013 as the date of the operation. Therefore, the Respondent issued a letter dated 10.01.2014 stating that the Respondent is willing to accept 28.09.2013 as the date of operation if the twenty-year service period also commences from the said date. However, the Petitioner did not agree with the said proposition and reiterated that the twenty-year period commenced on 11.05.2007 when the interim arrangement was made.

In view of the dispute, the Respondent invoked the dispute resolution mechanism. The arbitral tribunal partly allowed the claims of the Respondent and held that the twenty-year service period would commence from 28.09.2013. The Petitioner challenged the arbitral award to the extent that the Arbitrator was bound to follow the express agreement between the parties.

It is important to note here that other than the letters mentioned above, the Minutes of Meeting dated 04.12.2012 and Supplementary Agreement dated 12.02.2013 also noted that the 20-year service period would commence on 11.05.2007. The Delhi High Court observed that there was no ambiguity as to the terms of the contract, and therefore, there was no occasion for the Arbitral Tribunal to apply the business efficacy test and it is not open for the Arbitral Tribunal to re-write the contract between the parties on any notion of equity.

Internationals updates

Case Name: Amazon.com NV Investment Holdings LLC v. Future Retail Ltd. And Future Coupons Pvt. Ltd.
SIAC Case No. 960 of 2020

Supreme Court Civil Appeal Nos. 4492-4493 of 2021

In an arbitration initiated by US retail giant ‘Amazon’ in 2020 (under SIAC rules based in New Delhi) against an Indian conglomerate ‘Future Group,’ the arbitral tribunal in its latest order dated 28 June 2022, denied the respondent’s request for early dismissal of the claims under Section 32 of the Arbitration and Conciliation Act (1996). The Respondent, Future Group, had argued for an early termination of the arbitration proceedings on the basis of an Order by the Competition Commission of India (CCI) suspending the agreement between Amazon and Future for the acquisition of a 49% stake in the latter due to the alleged suppression/ concealment and/or misrepresentation of important facts by Amazon, amounting to a “breach of trust”.¹ Future had also argued that insolvency proceedings had also been initiated against the company and as a result, the proceedings in SIAC should be paused. However, the arbitral tribunal, in this case, comprising of Michael Hwang SC, Albert Jan van den Berg, and Jan Paulsson, held that the CCI’s decision and subsequent initiation of insolvency proceedings had not rendered the arbitration in this case “unnecessary or impossible”² as the grounds for the termination of the proceedings under Section 32 of the Arbitration Act had not been satisfied.³ The Court did not consider it necessary to make any finding on Amazon’s contention that Future’s application for the termination of proceedings should be rejected due to its “contumacious conduct.”⁴

In this case, Amazon has sought to halt the execution of an agreement between Future Group and Reliance Industries for the sale of the former’s assets for a consideration of US $3.4 billion, as it contends that the said agreement is in breach of a 2019 shareholder’s agreement between itself and the Future Group, wherein it acquired 49% stake in the latter. In October 2020, an Emergency Arbitrator V.K. Rajah SC, rendered an Award directing the suspension of the transaction between Future and Reliance until the matter was finally decided, which was upheld by the Hon’ble Supreme Court.

CEF and another v. CEH⁵

“Moser Award”
[2022] SGCA 54
Singapore Court of Appeal
Civil Appeal No. 153 of 2020

Judgment on 18.07.2022

In this case, a contract for the supply of engineering equipment and services to design and build a steel-making Plant in Malaysia for €92.7 million was granted to an Italian multinational, Danieli, and its Malaysian subsidiary. Due to several delays in the construction of the Project, Malaysian steelmaker (and the award creditor in this case), Southern Steel, terminated the contract. Thereafter, both parties initiated separate arbitrations in the ICC in 2016 which were later consolidated before one tribunal.

In 2019, a majority Award was issued by a tribunal chaired by Michael Moser along with Alan Thambiayah and Mauro Bussani, in which it held that Southern Steel could seek the recission of the contract due to Danieli’s misrepresentations. Pursuant to this finding, the tribunal ordered Danieli to pay damages to compensate Southern for the losses it incurred due to its reliance on the former’s misrepresentations. However, interestingly, the tribunal only awarded 25% of the damages sought by Southern due to “deficiencies in the respondent’s claim for reliance loss.”⁶

In an appeal of the said Award before the Singapore Court of Appeal, the Court vide its judgment dated 18 July 2022, partially set aside the award of €62 million due to the “flexible approach” followed by the ICC tribunal in accepting and relying upon the evidence on the quantum of damages put forth by Southern that it itself had concluded, suffered from “deficiencies”. The Court observed that during the course of the ICC arbitration, Southern had failed to substantiate its claim for damages by failing to provide documentary evidence or explaining how the existing documents substantiated its claim. The Court observed that such a failure “could only mean that the claim for reliance loss had to be rejected in its entirety.”⁷ As a result, while the Court upheld the validity of the rest of the Award, it allowed the appeal to stand to the extent of dismissing the order of the tribunal on damages and set it aside as it resulted in “an arbitrary decision that could not have been anticipated by the parties.”⁸

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1. Amazon.com NV Investment Holdings LLC under Sections 43A, 44 and 45 of the Competition Act, 2002, In Re., 2021 SCC Online CCI 71, decided on 17-12-2021. ↩
2. Cosmo Sanderson, “Future fails to secure early dismissal of Amazon claim”, 29 June 2022, Global Arbitration Review.  Available at <https://globalarbitrationreview.com/article/future-fails-secure-early-dismissal-of-amazon-claim> ↩
3. https://economictimes.indiatimes.com/markets/stocks/news/siac-rejects-future-group-plea-to-terminate-arbitration-proceedings/articleshow/92531114.cms?from=md ↩
4. Ibid. ↩
5. The judgement of the Singapore Court of Appeal dated 18 July 2022 is available at: <[2022] SGCA 54 (elitigation.sg)> ↩
6. Para 120 of the Judgment.↩
7. Ibid. ↩
8. Para 123 of the Judgment. ↩