Common Commercial Disputes Queries – March 2022


by Gunjan Chhabra

Questions Answered in this Monthโ€™s CCDQ:

  1. ๐‚๐š๐ง ๐€๐ซ๐›๐ข๐ญ๐ซ๐š๐ญ๐ข๐จ๐ง ๐ฎ๐ง๐๐ž๐ซ ๐ญ๐ก๐ž ๐ˆ๐ง๐๐ข๐š๐ง ๐“๐ž๐ฅ๐ž๐ ๐ซ๐š๐ฉ๐ก ๐€๐œ๐ญ, 1885 ๐จ๐ฎ๐ฌ๐ญ ๐ญ๐ก๐ž ๐ฃ๐ฎ๐ซ๐ข๐ฌ๐๐ข๐œ๐ญ๐ข๐จ๐ง ๐จ๐Ÿ ๐‚๐จ๐ง๐ฌ๐ฎ๐ฆ๐ž๐ซ ๐‚๐จ๐ฎ๐ซ๐ญ๐ฌ?
  2. ๐‚๐š๐ง ๐š ๐‚๐จ๐ฎ๐ซ๐ญ ๐ซ๐ž๐ฆ๐š๐ง๐ ๐ญ๐ก๐ž ๐ฆ๐š๐ญ๐ญ๐ž๐ซ ๐›๐š๐œ๐ค ๐ญ๐จ ๐ญ๐ก๐ž ๐ฌ๐š๐ฆ๐ž ๐€๐ซ๐›๐ข๐ญ๐ซ๐š๐ญ๐จ๐ซ ๐ฎ๐ง๐๐ž๐ซ ๐š ๐’๐ž๐œ๐ญ๐ข๐จ๐ง 34 ๐๐ž๐ญ๐ข๐ญ๐ข๐จ๐ง ๐จ๐ซ ๐š ๐’๐ž๐œ๐ญ๐ข๐จ๐ง 37 ๐€๐ฉ๐ฉ๐ž๐š๐ฅ? ๐๐€๐‘๐“ 1
  3. ๐‚๐š๐ง ๐š ๐‚๐จ๐ฎ๐ซ๐ญ ๐ซ๐ž๐ฆ๐š๐ง๐ ๐ญ๐ก๐ž ๐ฆ๐š๐ญ๐ญ๐ž๐ซ ๐›๐š๐œ๐ค ๐ญ๐จ ๐ญ๐ก๐ž ๐ฌ๐š๐ฆ๐ž ๐€๐ซ๐›๐ข๐ญ๐ซ๐š๐ญ๐จ๐ซ ๐ฎ๐ง๐๐ž๐ซ ๐š ๐’๐ž๐œ๐ญ๐ข๐จ๐ง 34 ๐๐ž๐ญ๐ข๐ญ๐ข๐จ๐ง ๐จ๐ซ ๐š ๐’๐ž๐œ๐ญ๐ข๐จ๐ง 37 ๐€๐ฉ๐ฉ๐ž๐š๐ฅ? ๐๐€๐‘๐“ 2
  4. ๐‚๐š๐ง ๐š ๐ฉ๐š๐ซ๐ญ๐ฒ ๐›๐ž ๐š๐ฅ๐ฅ๐จ๐ฐ๐ž๐ ๐ญ๐จ ๐š๐ฉ๐ฉ๐จ๐ข๐ง๐ญ ๐š๐ง ๐š๐ซ๐›๐ข๐ญ๐ซ๐š๐ญ๐จ๐ซ ๐€๐…๐“๐„๐‘ ๐š ๐’๐ž๐œ๐ญ๐ข๐จ๐ง 11 ๐๐ž๐ญ๐ข๐ญ๐ข๐จ๐ง ๐Ÿ๐จ๐ซ ๐€๐ฉ๐ฉ๐จ๐ข๐ง๐ญ๐ฆ๐ž๐ง๐ญ ๐ก๐š๐ฌ ๐š๐ฅ๐ซ๐ž๐š๐๐ฒ ๐›๐ž๐ž๐ง ๐Ÿ๐ข๐ฅ๐ž๐?
  5. ๐‚๐š๐ง ๐ƒ๐š๐ฆ๐š๐ ๐ž๐ฌ ๐›๐ž ๐ ๐ซ๐š๐ง๐ญ๐ž๐ ๐ข๐ง ๐ฅ๐ข๐ž๐ฎ ๐จ๐Ÿ ๐ฌ๐ฉ๐ž๐œ๐ข๐Ÿ๐ข๐œ ๐ฉ๐ž๐ซ๐Ÿ๐จ๐ซ๐ฆ๐š๐ง๐œ๐ž?
  6. ๐‚๐š๐ง ๐ฒ๐จ๐ฎ ๐Ÿ๐ข๐ฅ๐ž ๐š ๐ฃ๐ฎ๐ซ๐ข๐ฌ๐๐ข๐œ๐ญ๐ข๐จ๐ง๐š๐ฅ ๐จ๐›๐ฃ๐ž๐œ๐ญ๐ข๐จ๐ง ๐ข๐ง ๐š๐ง ๐„๐ง๐Ÿ๐จ๐ซ๐œ๐ž๐ฆ๐ž๐ง๐ญ ๐ฉ๐ซ๐จ๐œ๐ž๐ž๐๐ข๐ง๐ ๐ฌ ๐Ÿ๐จ๐ซ ๐š ๐…๐จ๐ซ๐ž๐ข๐ ๐ง ๐€๐ฐ๐š๐ซ๐, ๐š๐ง๐ ๐ญ๐ก๐ž๐ง ๐ฅ๐š๐ญ๐ž๐ซ ๐Ÿ๐ข๐ฅ๐ž ๐š ๐œ๐จ๐ฆ๐ฉ๐ฅ๐ž๐ญ๐ž ๐จ๐›๐ฃ๐ž๐œ๐ญ๐ข๐จ๐ง?
  7. ๐‚๐š๐ง ๐ฒ๐จ๐ฎ ๐Ž๐ฏ๐ž๐ซ๐œ๐จ๐ฆ๐ž ๐’๐ญ๐š๐ญ๐ฎ๐ญ๐ž ๐๐ซ๐ž๐ฌ๐œ๐ซ๐ข๐›๐ž๐ ๐‹๐ข๐ฆ๐ข๐ญ๐š๐ญ๐ข๐จ๐ง ๐ข๐ง ๐š ๐’๐ญ๐š๐ญ๐ฎ๐ญ๐จ๐ซ๐ฒ ๐€๐ซ๐›๐ข๐ญ๐ซ๐š๐ญ๐ข๐จ๐ง ๐ฐ๐ข๐ญ๐ก ๐ญ๐ก๐ž ๐ก๐ž๐ฅ๐ฉ ๐จ๐Ÿ ๐‹๐ข๐ฆ๐ข๐ญ๐š๐ญ๐ข๐จ๐ง ๐š๐œ๐ญ?
  8. ๐ƒ๐จ๐ž๐ฌ ๐’๐ž๐œ๐ญ๐ข๐จ๐ง 22 ๐จ๐Ÿ ๐ญ๐ก๐ž ๐‹๐ข๐ฆ๐ข๐ญ๐š๐ญ๐ข๐จ๐ง ๐€๐œ๐ญ, ๐š๐ฉ๐ฉ๐ฅ๐ฒ ๐ญ๐จ ๐ฉ๐ซ๐จ๐œ๐ž๐ž๐๐ข๐ง๐ ๐ฌ ๐ฎ๐ง๐๐ž๐ซ ๐ญ๐ก๐ž ๐ˆ๐๐‚?
  9. ๐‚๐š๐ง ๐š๐ง ๐€๐ซ๐›๐ข๐ญ๐ซ๐š๐ญ๐จ๐ซ ๐ž๐ง๐ญ๐ž๐ซ๐ญ๐š๐ข๐ง ๐ญ๐ก๐ž ๐ซ๐ž๐ฅ๐ข๐ž๐Ÿ ๐จ๐Ÿ ๐ซ๐ž๐ฌ๐ญ๐จ๐ซ๐š๐ญ๐ข๐จ๐ง ๐จ๐Ÿ ๐š๐ง ๐€๐ ๐ซ๐ž๐ž๐ฆ๐ž๐ง๐ญ ๐š๐Ÿ๐ญ๐ž๐ซ ๐ญ๐ž๐ซ๐ฆ๐ข๐ง๐š๐ญ๐ข๐จ๐ง?
  10. ๐‡๐จ๐ฐ ๐ข๐ฆ๐ฉ๐จ๐ซ๐ญ๐š๐ง๐ญ ๐ข๐ฌ ๐ญ๐ก๐ž ๐ƒ๐ซ๐š๐Ÿ๐ญ๐ข๐ง๐  ๐จ๐Ÿ ๐š๐ง ๐€๐ซ๐›๐ข๐ญ๐ซ๐š๐ญ๐ข๐จ๐ง ๐‚๐ฅ๐š๐ฎ๐ฌ๐ž?

Can Arbitration under the Indian Telegraph Act, 1885 oust the jurisdiction of Consumer Courts?

In the case of Vodafone Idea Cellular Ltd. Vs. Ajay Kumar Agarwal (#SupremeCourtofIndia, 3 Judge bench, decided on 16.02.2022), the Respondent had instituted a consumer complaint before the District Consumer Disputes Redressal Forum, Ahmedabad, alleging deficiency of service on the part of the Appellant, due to an alleged over-charge by the Appellant through the โ€œauto-payโ€ system of the Respondentโ€™s credit card.

The Question which arose was, whether Section 7B of Indian Telegraph Act, 1885 providing for statutory arbitration ousts the jurisdiction of the consumer forum in deciding a dispute between a telecom company & a consumer.

The Court observed as follows:

  1. The definition of โ€˜serviceโ€™ as per Section 2(o) of the Consumer Protection Act, 1968 (CPA) is couched in wide terms which includes โ€œservice of any description which is made available to potential usersโ€. This employs the โ€˜means and includesโ€™ formula which makes the definition non-exhuastive.
  2. The definition of service specifically incorporates telecom services. 
  3. The only exclusions of services for the jurisdiction of a consumer court are (I) services rendered free of charge (ii) services under a contract of personal service.
  4. Under Section 7B of Indian Telegraph Act, any dispute concerning a telegraph line, appliance or apparatus, between the telegraph authority, and the beneficiary of the service, has to be determined by arbitration. 
  5. While the Telegraph Act can be construed to be a special enactment for regulating telegraphs, the CPA is a special and later enactment intended to protect the interest and welfare of consumers.
  6. The Court has already previously held that arbitration agreements governed by the #Arbitration & Conciliation Act, 1996 will not oust the jurisdiction of consumer forum to entertain complaints for deficiency of goods or services (Reliance placed on Emaar MGF Land Ltd. v. Aftab Singh (2019) 12 SCC 751).
  7. It would not make a difference that Section 7B of the telegraph Act is a statutory remedy of arbitration, and would not oust the jurisdiction of the consumer forum. The CPA and its successor the CPA 2019 are subsequent enactments to protect interest of consumers, & an ouster of jurisdiction cannot be lightly assumed unless express words are used or such consequence follows by necessary implication. (Overruled General Manager, Telecom v. M Krishnan (2009) 8 SCC 481).
  8. Where there is any inconsistency between two legislations, the later law, even if general in nature (although CPA is special law), would override an earlier special law (Reliance placed on Ajoy Kumar Banerjee v. Union of India (1984) 3 SCC 127).

In view of the above, It was held that the consumer forum had jurisdiction despite the statutory remedy of arbitration under the Telegraph Act. The consumer had a choice between the two options, and the consumerโ€™s choice was valid.

๐‚๐š๐ง ๐š ๐‚๐จ๐ฎ๐ซ๐ญ ๐ซ๐ž๐ฆ๐š๐ง๐ ๐ญ๐ก๐ž ๐ฆ๐š๐ญ๐ญ๐ž๐ซ ๐›๐š๐œ๐ค ๐ญ๐จ ๐ญ๐ก๐ž ๐ฌ๐š๐ฆ๐ž ๐€๐ซ๐›๐ข๐ญ๐ซ๐š๐ญ๐จ๐ซ ๐ฎ๐ง๐๐ž๐ซ ๐š ๐’๐ž๐œ๐ญ๐ข๐จ๐ง 34 ๐๐ž๐ญ๐ข๐ญ๐ข๐จ๐ง ๐จ๐ซ ๐š ๐’๐ž๐œ๐ญ๐ข๐จ๐ง 37 ๐€๐ฉ๐ฉ๐ž๐š๐ฅ? ๐๐€๐‘๐“ 1

In the case of Parthasarathy vs. E Springs Avenues Pvt. Ltd. (#SupremeCourtofIndia , decided on 18.02.2022), the High Court, under Section 37 of the #Arbitration & Conciliation Act, 1996 had set aside the award passed by the #arbitrator and remanded the matter back to the arbitrator for a fresh decision.

The Court observed as follows:

  1. When a court is entertaining an Appeal under Section 37 of the Act, only two options are available to it:
  2. Either the High Court may relegate the parties for a fresh arbitration.
  3. The Court may consider the appeal on merits on the basis of material available on record within the scope and jurisdiction under Section 37.
  • As per the law already laid down, the High Court has no jurisdiction to remand the matter to the same arbitrator unless it is consented by both parties. (Reliance placed on Kinnari Mullick and Anr. Vs. Ghanshyam Das Damani (2018) 11 SCC 328 and I-Pay Clearing Services Pvt. Ltd. Vs. ICICI Bank Ltd. (2022) SCC OnLine SC 4)

In view of the above law, the Supreme Court quashed the judgment of the High Court, and directed the High Court to consider the appeals on merits.ย 

Can a Court remand the matter back to the same Arbitrator under a Section 34 Petition or a Section 37 Appeal? PART 2

In the case of Mutha Construction v. Strategic Brand Solutions (#SupremeCourtofIndia , decided on 04.02.2022), the High Court single judge had, in a Petition under Section 34, set aside the award and remanded the matter to the Sole Arbitrator to pass a fresh award. This was done by way of a consent order.

Thereafter the Petitioner moved an application seeking modification of the order submitting that there was no consent which had been accorded for the same. However, the said application was rejected by the Single Judge. 

Thereafter against this order of rejection, the Petitioner moved an appeal to the Division Bench, which was later withdrawn, and then moved a review before the same single judge.

The said review petition was also rejected stating that the original order had been passed by consent.

Against the said orders the Petitioner filed a Special Leave Petition before the Supreme Court. 

The Supreme Court observed as follows:

  1. From the wordings of the original order, it is clear that it was a consent order.
  2. Once it is held that the original order setting aside the award and remanding the matter back to the arbitrator, was a consent order, the principle of law laid down in other judgments do not apply. (Distinguished Kinnari Mullick and Anr. Vs. Ghanshyam Das Damani (2018) 11 SCC 328, Dyna Technologies Private Limited vs. Crompton Greaves Limited, 2019 SCC OnLine SC 1656; and I-Pay Clearing Services Pvt. Ltd. Vs. ICICI Bank Ltd. (2022) SCC OnLine SC 4).
  3. Even in a case where the award is set aside under Section 34 on whatever grounds, the parties can still agree for the fresh #arbitration to be conducted by the same arbitrator.
  4. Once the order was passed by the Single Judge on consent, it is not open for the Petitioner to contend that the matter may not and/or ought not to have been remanded to the same sole #arbitrator.

In view of the above the Supreme Court upheld the order of the High Court & the SLP was dismissed.

Can a party be allowed to appoint an Arbitrator AFTER a Section 11 Petition for Appointment has already been filed?

The case of M/s. Durga Welding Works Vs. Chief Engineer, Railway Electrification, Allahabad (#supremeCourtofIndia, decided on 04.01.2022), had extremely peculiar facts:

  1. On 03.08.2009 Durga served notice for appointment of arbitrator & settlement of claims, which was duly served on the Chief Engineer. 
  2. Since the Chief Engineer failed to appoint an arbitrator, on 23.10.2009, Durga approached Orissa HC for appointment of arbitrator u/S 11(6).
  3. Thereafter Durga completely forgot about the petition and took no steps, so that the Chief Engineer never had notice that such a petition had been filed.
  4. Then on 28.01.2010, the Chief Engineer responded to Durgaโ€™s letter dated 03.08.2009 providing Durga with a panel of 4 persons, to select 2 persons. 
  5. Thereafter on 17.02.2010, Durga filed a Petition seeking an order restraining the Chief engineer from appointing an arbitrator & again the petition simply remained pending. Durga took no action in either of the two proceedings filed by it.
  6. On 28.10.2020, Durga selected 2 officers from the panel suggested by the Chief Engineer, whereafter on 24.09.2010 the Chief Engineer constituted an #arbitration tribunal (AT). The parties subsequently submitted their pleadings in arbitration.
  7. After this, on 27.12.2011 Durga filed an application before the AT that they should stop proceedings as the AT had not been constituted in time.
  8. Since, the AT had been constituted with consent of both parties it continued hearing the case, but Durga stopped appearing before the AT, & the matter proceeded ex parte, after which on 21.06.2013 ex parte award was passed. 
  9. After 3 years of this award, Durga finally took some steps in the Section 11 Petition, which the HC then dismissed having regard to the peculiar facts of the case.

It was against this order of dismissal that Durga then approached the Supreme Court.

The Supreme Court observed as follows:

  1. It is a settled position of law that once an Application under Section 11(6) has been filed for appointment of #arbitrator before High Court, the Court alone holds jurisdiction to appoint the arbitrator. The rights of the Respondent stand forfeited. (Reliance placed on Datar Switchgears Ltd. Vs. Tata Finance Ltd. & Anr. 2000(8) SCC 151 & followed in Punj Lloyd Ltd. Vs. Petronet MHB Ltd. 2006(2) SCC 638)
  2. However, the peculiar facts of this case show, that not only was the AT constituted with consent, but also notices were issued by the HC 3 years after passing of the award. 
  3. Even though, the position of law is settled, in the peculiar facts of the case, the HC had not committed any error of law in dismissing the Section 11 Petition.

On the basis of above, the appeal was dismissed.

Can Damages be granted in lieu of specific performance?

UNIVERSAL PETRO-CHEMICALS LTD. v. B.P. PLC (#SupremeCourtofIndia decided on 23.02.2022), was an SLP arising from an order passed in an appeal by the Division Bench of High Court (“DB”). 

Here, the Appellant had filed a suit for specific performance of a collaboration agreement and some further agreements, entered into with the Respondent, when the Respondent had attempted to terminate the Agreements. The suit was for declaration that the termination was void & specific performance of the agreements, amongst other reliefs sought. 

As regards the relief of specific performance the court had held that the relief of specific performance could not be granted in view of the bar in Section 14 (1) (b) of the Specific Relief Act, 1963. The High Court observed that the contract involved performance of future unspecified obligations & duties & that it would not be possible for the Court to enforce specific performance of the material terms of the contract. Therefore, though the termination of the agreement was found not to be in accordance with law but the specific performance of the contract was not granted. However, other injunctions were granted as sought for by the Appellant. 

The main submission of the Appellant before the Supreme Court was that when the case was filed in 2008, at that point specific performance could have been granted, but now since the agreements stood expired through efflux of time, damages in lieu thereof should be awarded in terms of Section 21(5) of the Specific Relief Act. 

The Supreme Court observed, regarding the claim of compensation as follows:

  1. The Appellant had not claimed compensation expressly, either in its suit, or in the ensuing appeal. 
  2. In fact, it was a specific submission of the Appellant before the Division Bench that no relief in the nature of damages &/or compensation could be granted. It was submitted that it was difficult to quantify such damages/compensation as neither the anticipated loss of business nor estimated value of the goodwill could be prospectively assessed.
  3. Even after the agreements stood expired by efflux of time in 2009, the Appellant thereafter, did not seek any amendment to the Plaint asking for compensation either in addition or in substitution of the performance of the agreement. 
  4. In such a case, grant of a such a relief would be in the teeth of express provisions of Section 21 of the Specific Relief act, which is not permissible. 
  5. Even on an equitable consideration, the Court cannot ignore or overlook provisions of a statute. Equity must yield to the law. 

(Reliance placed on Shamsu Suhara Beevi v. G. Alex & Anr. (2004) 8 SCC 569)

In view thereof, it was held that the Appellant was not entitled to a claim for damages, & the SLP was dismissed.

Can you file a jurisdictional objection in an Enforcement Proceedings for a Foreign Award and then later file a complete objections?

In the case of TAQA India Power Ventures Private Limited & And v. NCC Infrastructure Holdings Limited (#DelhiHighCourt, decided on 01.02.2022), TAQA had filed a Petition under Section 48 of the #Arbitration & Conciliation Act, 1996 (enforcement of a foreign award) in the year 2018, and NCC had limited its objections only on the ground of territorial jurisdiction of the Court.

When the arguments before the Court finished, at the end of arguments, the Respondent submitted that incase the Court decides that TAQAโ€™s petition is maintainable, NCC should be given an opportunity to file its objections on merits.

The Court here observed the following, with regard to the said request by NCC:

  1. The Scheme of Section 48 does not envisage piecemeal consideration of the issue of maintainability of the execution case concerning foreign awards, at first, and the issue of enforceability later on. Both issues must be considered simultaneously with a view of speedy disposal, which is the very intent and object of the Act, particularly so while dealing with foreign awards. (Reliance placed on LMJ International Limited v. Sleepwell Industries Company Limited: (2019) 5 SCC 302 & Government of India v. Vedanta Limited and Ors.: (2020) 10 SCC 1.).
  2. It is incorrect to state that the question of filing further objections under Section 48 would arise only after the Court has decided the issue regarding territorial jurisdiction to enforce an award under Section 47. (Distinguished Shristi Infrastructure Development Corporation Limited v. Rishima SA Investments LLC (Mauritius) & Anr.: Civil Appeal No. 5696 of 2019, decided on 19.07.2019.)

In view of the above the Court found that there was no ground to grant further time to NCC to file objections on merits.

Despite the above observations, in interest of justice, NCC was allowed an additional opportunity to file its objections regarding enforcement of the award on depositing costs with the Delhi High Court Legal Services Committee. 

Can you Overcome Statute Prescribed Limitation in a Statutory Arbitration with the help of Limitation Act?

Bihar Industrial Area Development Authority & Ors. Vs. Rama Kant Singh (#SupremeCourtofIndia, decided on 15.03.2022 ), was a case where the arbitration had been undertaken under the Bihar Public Works Contracts Disputes Arbitration Tribunal Act, 2008 (โ€œ2008 Actโ€).

Under Section 9 of the 2008 Act any dispute arising between the parties could be referred to #arbitration, even if the contract between the parties contained no arbitration clause. 

One of the contentions raised before the Arbitral Tribunal (AT) constituted under the 2008 Act for the disputes between the parties was that the disputes raised by the Respondent were barred by limitation as the act provided a 1 year period for referring disputes to arbitration.

In this regard, the AT held that by the applicability of Article 137 of the Limitation Act, 1963 (residual provision providing for 3 year limitation from the date when right to apply accrues) the reference was not limitation barred.

The Supreme Court observed as follows:

  1. Section 8 of the 2008 Act provided that in case any provisions were construed to be in conflict with the Arbitration & Conciliation Act, 1996, the 2008 Act would prevail to the extent of conflict.
  2. Section 9(1) of the 2008 Act provided, irrespective of any arbitration clause in the agreement between the parties, any party could refer a dispute within one year from the date on which the dispute arose. 
  3. Section 18 also contained a provision for extension of limitation period by the AT if the AT is satisfied that the party had sufficient cause for not making a reference. 
  4. As per Section 9(1) of the 2008 Act, the period of limitation in the present case would be 1 year from the date on which the agreement was terminated, ie. When the dispute arose. 
  5. As the 2008 Act provides for a specific period of limitation, Article 137 of the schedule in the 1963 Limitation Act will not apply. To that extent, the Arbitration Tribunal has committed an error. 
  6. However, under S. 18 of the 2008 Act, the AT had power to condone the delay. The Court noted that the Respondent had made representation against the order of termination of contract, which was kept pending for an inordinately long time, and this is how the Respondent had explained the delay before the AT. It was on this ground that AT was satisfied for condonation of delay, even if it had erroneously applied Article 137.
  7. Therefore the condonation of delay was not incorrect, and not a fit case for interference by the SC.

In view of the above, the award was not interfered with in principle. However, since there was a large delay of 21 months by the Respondent in approaching the AT the interest granted under the award was modified.

Does Section 22 of the Limitation Act, apply to proceedings under the IBC?

In Intec Capital Limited vs. RATCHET LABORATORIES LIMITED (NCLT, New Delhi, decided on 14.03.2022), Intec had filed an application under Section 7 of the #Insolvency & #Bankruptcy Code (IBC) to trigger the Corporate Insolvency Resolution Process (CIRP) against Ratchet. 

In this case, Ratchett had obtained a loan from Intec (an NBFC), as per the loan agreement of which, defaults were committed by Ratchett. After this, Intec had recalled the entire loan vide loan recall notice cum Arbitration Notice on 06.05.2015. 

An arbitration proceeding and a proceeding under Section 138 (cheque bouncing) of the Negotiable Instruments Act was also initiated by Intec against Ratchett. 

The award in the #arbitration proceedings was rendered on 26.02.2016.

On limitation, Intec had submitted:

  • Since Ratchett continued non-payment of further EMIs, the default was continuing in terms of Section 22 of the Limitation Act.
  • Since the last cheque of instalment (which was a Post Dated Cheque โ€œPDCโ€) bounced on 17.01.2018, a fresh cause of action would start from that date under Section 18 of the Limitation Act.

Regarding limitation, the Court observed as follows:

  1. The โ€œdate of defaultโ€ relevant for initiation of CIRP would be 06.05.2015, ie. The date of the loan recall notice.
  2. The dishonouring of the PDC would not give rise to fresh cause of action under Section 18 of the Limitation Act (Distinguished Jituanlal Achariya v. Rameshwar Lal Agarwalla, AIR 1967 SC 1118, as in that case the payment of PDC was construed as an admission under Section 18, and in this case the PDCs must have been obtained at the time of obtaining the loan and not thereafter.)
  3. Section 22 of the Limitation Act, (โ€œbreaches and tortsโ€), is not applicable for counting the period of limitation for initiation of CIRP under Section 7 (Relied on Mr. Sagar Sharma & Anr. Vs. Phoenix ARC Private Limited & Ors. Company Appeal (AT) (Insolvency) No. 177 of 2019, decided on 07.02.2020).
  4. The present application was filed in the year 2021, much later than 3 years from loan recall notice, and also the date of award ie. 26.02.2016.

In view of the above, the application was rejected as being barred by limitation.

๐‚๐š๐ง ๐š๐ง ๐€๐ซ๐›๐ข๐ญ๐ซ๐š๐ญ๐จ๐ซ ๐ž๐ง๐ญ๐ž๐ซ๐ญ๐š๐ข๐ง ๐ญ๐ก๐ž ๐ซ๐ž๐ฅ๐ข๐ž๐Ÿ ๐จ๐Ÿ ๐ซ๐ž๐ฌ๐ญ๐จ๐ซ๐š๐ญ๐ข๐จ๐ง ๐จ๐Ÿ ๐š๐ง ๐€๐ ๐ซ๐ž๐ž๐ฆ๐ž๐ง๐ญ ๐š๐Ÿ๐ญ๐ž๐ซ ๐ญ๐ž๐ซ๐ฆ๐ข๐ง๐š๐ญ๐ข๐จ๐ง?

The case of Prasanna v. Union of India (Bombay High Court, Division Bench, decided on 17.03.2022), was a Writ Petition seeking restoration of the Distribution Agency after setting aside of the termination letter sent by UOI. 

One of the key objections raised by UOI was that since the Distributor Agreement contained an #arbitration clause, all disputes including the reliefs sought by the Petitioner were to be referred to arbitration, and the writ Petition was not maintainable. This was especially because there was no allegation of breach of principles of natural justice by UOI in termination.

Petitioner on the other hand submitted, that such a relief would be beyond the scope of arbitration.

The Court observed as follows:

  1. There is no absolute bar for the Arbitrator to grant restoration of distribution agency and such relief can be granted depending on surrounding circumstances. (Relied on Ankur Filling Station vs. Hindustan Petroleum Corporation Limited and another (2011) 12 SCC 749, which has still been referred to larger bench of 5 judges).
  2. In absence of the action of termination of the distributorship agency having some public law character attached to it, there would be no reason to entertain the writ petition. (Relied on Union of India and others vs. Puna Hinda (2021) 10 SCC 690, distinguished Harbanslal Sahnia and another vs. Indian Oil Corporation Limited and ors. (2003) 2 SCC 107)
  3. The question whether the respondent nos. 3 and 4 were justified in invoking Clauses of the Distributorship Agreement for terminating the same can be best examined by the #Arbitrator under the Arbitration Clause of the Distributorship Agreement. 

In view of the above, the writ Petition was not entertained on merits, and Rule was discharged. The interim order staying the termination was continued for a period of four weeks, providing ample opportunity to the Petitioner to approach the arbitrator. 

๐‡๐จ๐ฐ ๐ข๐ฆ๐ฉ๐จ๐ซ๐ญ๐š๐ง๐ญ ๐ข๐ฌ ๐ญ๐ก๐ž ๐ƒ๐ซ๐š๐Ÿ๐ญ๐ข๐ง๐  ๐จ๐Ÿ ๐š๐ง ๐€๐ซ๐›๐ข๐ญ๐ซ๐š๐ญ๐ข๐จ๐ง ๐‚๐ฅ๐š๐ฎ๐ฌ๐ž?

In the case of Foomill Private Limited v. Affie (India) Limited (Delhi High Court, decided on 25.03.2022), Foomill had filed an Application for Appointment of an #Arbitrator under Section 11 of the #Arbitration & Conciliation Act, 1996.

The Arbitration Clause in the Agreement was as follows:

“11. ๐˜‘๐˜ถ๐˜ณ๐˜ช๐˜ด๐˜ฅ๐˜ช๐˜ค๐˜ต๐˜ช๐˜ฐ๐˜ฏ, ๐˜ˆ๐˜ณ๐˜ฃ๐˜ช๐˜ต๐˜ณ๐˜ข๐˜ต๐˜ช๐˜ฐ๐˜ฏ & ๐˜‹๐˜ช๐˜ด๐˜ฑ๐˜ถ๐˜ต๐˜ฆ ๐˜™๐˜ฆ๐˜ด๐˜ฐ๐˜ญ๐˜ถ๐˜ต๐˜ช๐˜ฐ๐˜ฏ ๐˜›๐˜ฉ๐˜ช๐˜ด ๐˜ˆ๐˜จ๐˜ณ๐˜ฆ๐˜ฆ๐˜ฎ๐˜ฆ๐˜ฏ๐˜ต ๐˜ข๐˜ฏ๐˜ฅ ๐˜ข๐˜ฏ๐˜บ ๐˜ฅ๐˜ช๐˜ด๐˜ฑ๐˜ถ๐˜ต๐˜ฆ ๐˜ฐ๐˜ณ ๐˜ค๐˜ญ๐˜ข๐˜ช๐˜ฎ ๐˜ณ๐˜ฆ๐˜ญ๐˜ข๐˜ต๐˜ช๐˜ฏ๐˜จ ๐˜ต๐˜ฐ ๐˜ช๐˜ต, ๐˜ช๐˜ต๐˜ด ๐˜ฆ๐˜ฏ๐˜ง๐˜ฐ๐˜ณ๐˜ค๐˜ฆ๐˜ข๐˜ฃ๐˜ช๐˜ญ๐˜ช๐˜ต๐˜บ ๐˜ฐ๐˜ณ ๐˜ช๐˜ต๐˜ด ๐˜ต๐˜ฆ๐˜ณ๐˜ฎ๐˜ช๐˜ฏ๐˜ข๐˜ต๐˜ช๐˜ฐ๐˜ฏ ๐˜ด๐˜ฉ๐˜ข๐˜ญ๐˜ญ ๐˜ฃ๐˜ฆ ๐˜จ๐˜ฐ๐˜ท๐˜ฆ๐˜ณ๐˜ฏ๐˜ฆ๐˜ฅ ๐˜ข๐˜ฏ๐˜ฅ ๐˜ช๐˜ฏ๐˜ต๐˜ฆ๐˜ณ๐˜ฑ๐˜ณ๐˜ฆ๐˜ต๐˜ฆ๐˜ฅ ๐˜ข๐˜ค๐˜ค๐˜ฐ๐˜ณ๐˜ฅ๐˜ช๐˜ฏ๐˜จ ๐˜ต๐˜ฐ ๐˜ต๐˜ฉ๐˜ฆ ๐˜ญ๐˜ข๐˜ธ๐˜ด ๐˜ฐ๐˜ง ๐˜๐˜ฏ๐˜ฅ๐˜ช๐˜ข ๐˜š๐˜ถ๐˜ฃ๐˜ซ๐˜ฆ๐˜ค๐˜ต ๐˜ต๐˜ฐ ๐˜ต๐˜ฉ๐˜ช๐˜ด ๐˜Š๐˜ญ๐˜ข๐˜ถ๐˜ด๐˜ฆ 11, ๐˜ต๐˜ฉ๐˜ฆ ๐˜Š๐˜ฐ๐˜ถ๐˜ณ๐˜ต๐˜ด ๐˜ข๐˜ต ๐˜‹๐˜ฆ๐˜ญ๐˜ฉ๐˜ช, ๐˜ด๐˜ฉ๐˜ข๐˜ญ๐˜ญ ๐˜ฉ๐˜ข๐˜ท๐˜ฆ ๐˜ฆ๐˜น๐˜ค๐˜ญ๐˜ถ๐˜ด๐˜ช๐˜ท๐˜ฆ ๐˜ซ๐˜ถ๐˜ณ๐˜ช๐˜ด๐˜ฅ๐˜ช๐˜ค๐˜ต๐˜ช๐˜ฐ๐˜ฏ ๐˜ฐ๐˜ท๐˜ฆ๐˜ณ ๐˜ข๐˜ฏ๐˜บ ๐˜ฅ๐˜ช๐˜ด๐˜ฑ๐˜ถ๐˜ต๐˜ฆ๐˜ด ๐˜ถ๐˜ฏ๐˜ฅ๐˜ฆ๐˜ณ ๐˜ต๐˜ฉ๐˜ช๐˜ด ๐˜ˆ๐˜จ๐˜ณ๐˜ฆ๐˜ฆ๐˜ฎ๐˜ฆ๐˜ฏ๐˜ต.”

The Court observed regarding the arbitration clause as follows:

  1. Mere mentioning of the word โ€˜arbitrationโ€™ in the heading of a clause does not mean that it becomes an arbitration clause (Relied on (2014) 210 DLT 714 Avant Garde Clean Room & Engg. Solutions Pvt. Ltd. Vs. Ind Swift Limited).
  2. The main body of the clause completely contradicts the existence of arbitration agreement, since it provides that any disputes shall be subject to exclusive jurisdiction of Courts at New Delhi. 
  3. The expression arbitration or arbitrator has not been used at all in the main body of the clause. 
  4. The clause does not contain any terms or condition to even remotely suggest that the parties agreed to constitute a private tribunal to adjudicate their disputes under the Agreement finally. 
  5. The intention of the parties to enter into an arbitration agreement has to be gathered from the terms of the agreement. in this case, it cannot be said that the terms of the agreement clearly indicate an intention on the part of the parties to the agreement to refer their disputes to a private tribunal for adjudication, and willingness to be bound by the decision of such tribunal. (Jagdish Chander v. Ramesh Chander & Ors. (2007) 5 SCC 719)

In view of the above, it was held that the above clause cannot be construed as an arbitration clause by mere use of the word โ€œarbitrationโ€ in the heading.

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