Common Commercial Disputes Queries – April 2022


by Gunjan Chhabra

Questions Answered in this Monthโ€™s CCDQ:

  1. ๐–๐ก๐ž๐ซ๐ž ๐œ๐š๐ง ๐š ๐ฉ๐š๐ซ๐ญ๐ฒ ๐Ÿ๐ข๐ฅ๐ž ๐š ๐’๐ž๐œ๐ญ๐ข๐จ๐ง 11 ๐€๐ฉ๐ฉ๐ฅ๐ข๐œ๐š๐ญ๐ข๐จ๐ง? ๐’๐ž๐š๐ญ ๐ฏ๐ฌ. ๐•๐ž๐ง๐ฎ๐ž ๐ฉ๐ž๐ซ๐ฌ๐ฉ๐ž๐œ๐ญ๐ข๐ฏ๐ž
  2. ๐ˆ๐ฌ ๐ญ๐ก๐ž ๐‚๐จ๐ง๐๐ข๐ญ๐ข๐จ๐ง ๐จ๐Ÿ ๐๐š๐ฒ๐ฆ๐ž๐ง๐ญ ๐จ๐Ÿ 50% ๐จ๐Ÿ ๐š๐ฆ๐จ๐ฎ๐ง๐ญ ๐š๐ฐ๐š๐ซ๐๐ž๐, ๐š๐ฉ๐ฉ๐ฅ๐ข๐œ๐š๐›๐ฅ๐ž ๐ญ๐จ ๐€๐ฉ๐ฉ๐ž๐š๐ฅ๐ฌ ๐š๐ซ๐ข๐ฌ๐ข๐ง๐  ๐จ๐ฎ๐ญ ๐จ๐Ÿ ๐œ๐จ๐ง๐ฌ๐ฎ๐ฆ๐ž๐ซ ๐œ๐จ๐ฆ๐ฉ๐ฅ๐š๐ข๐ง๐ญ๐ฌ ๐Ÿ๐ข๐ฅ๐ž๐ ๐ฉ๐ซ๐ข๐จ๐ซ ๐ญ๐จ 20.07.2020?
  3. ๐ˆ๐ฌ ๐€๐ฐ๐š๐ซ๐ ๐จ๐Ÿ ๐๐ž๐ง๐๐ž๐ง๐ญ๐ž ๐‹๐ข๐ญ๐ž ๐ˆ๐ง๐ญ๐ž๐ซ๐ž๐ฌ๐ญ ๐จ๐ง ๐ˆ๐ง๐ญ๐ž๐ซ๐ž๐ฌ๐ญ ๐›๐ฒ ๐ญ๐ก๐ž ๐€๐ซ๐›๐ข๐ญ๐ซ๐š๐ญ๐จ๐ซ, ๐ฉ๐ž๐ซ๐ฆ๐ข๐ฌ๐ฌ๐ข๐›๐ฅ๐ž?
  4. ๐€๐ซ๐ž ๐˜๐จ๐ฎ ๐ซ๐ž๐ช๐ฎ๐ข๐ซ๐ž๐ ๐ญ๐จ ๐ฌ๐ž๐ญ ๐จ๐ฎ๐ญ ๐ญ๐ก๐ž ๐๐ฎ๐š๐ง๐ญ๐ฎ๐ฆ ๐จ๐Ÿ ๐‚๐ฅ๐š๐ข๐ฆ๐ฌ ๐ข๐ง ๐š ๐๐จ๐ญ๐ข๐œ๐ž ๐‚๐จ๐ฆ๐ฆ๐ž๐ง๐œ๐ข๐ง๐  /๐ˆ๐ง๐ฏ๐จ๐ค๐ข๐ง๐  ๐€๐ซ๐›๐ข๐ญ๐ซ๐š๐ญ๐ข๐จ๐ง ๐ฎ๐ง๐๐ž๐ซ ๐’๐ž๐œ๐ญ๐ข๐จ๐ง 21?
  5. ๐ƒ๐จ๐ž๐ฌ ๐š๐ง ๐€๐ซ๐›๐ข๐ญ๐ซ๐š๐ญ๐ข๐จ๐ง ๐‚๐ฅ๐š๐ฎ๐ฌ๐ž ๐œ๐จ๐ง๐ญ๐š๐ข๐ง๐ž๐ ๐ข๐ง ๐“๐š๐ฑ ๐ข๐ง๐ฏ๐จ๐ข๐œ๐ž๐ฌ, ๐„๐ฌ๐ญ๐š๐›๐ฅ๐ข๐ฌ๐ก ๐ž๐ฑ๐ข๐ฌ๐ญ๐ž๐ง๐œ๐ž ๐จ๐Ÿ ๐š๐ง ๐€๐ซ๐›๐ข๐ญ๐ซ๐š๐ญ๐ข๐จ๐ง ๐€๐ ๐ซ๐ž๐ž๐ฆ๐ž๐ง๐ญ?

Where can a party file a Section 11 Application? Seat vs. Venue Perspective


In Ravi Ranjan Developers Pvt. Ltd. v. Aditya Kumar Chatterjee (#SupremeCourtofIndia, decided on 24.03.2022), the parties had entered into a Development Agreement(“DA”) for a property situated in Muzaffarpur, Bihar, with arbitration clause as follows:

โ€œ37. That in case of any dispute or difference between the parties arising out of and relating to this development agreement, the same shall be settled by reference of the disputes or differences to the Arbitrators appointed by both the parties and such Arbitration shall be conducted under the provisions of the Indian Arbitration and Conciliation Act, 1996 as amended from time to time and the sitting of the said Arbitral Tribunal shall be at Kolkata.โ€

The Agreement was executed & registered at Bihar.         

When disputes arose & there was a failure to appoint arbitrator as per the Clause, Respondent moved Calcutta HC under S. 11 of #Arbitration & Conciliation Act, 1996 (“A&C Act”) for appointment of #arbitrator. Despite there being a territorial jurisdictional objection by the Appellant, Calcutta HC had appointed arbitrator with consent of both parties. 

The Question before the Supreme Court was whether Calcutta HC had jurisdiction to entertain the S. 11 filed by Respondent before it.        

The Supreme Court observed as follows:        

  1. The DA was admittedly executed & registered outside jurisdiction of Calcutta HC, & the same was also true for the property in question, & the registered office of the appellant. In fact the Appellant had no establishment and did not carry on any business within the Calcutta High Courtโ€™s jurisdiction. 
  2. As per Section 2(1)(e) of the A&C Act, read with Sections 19-20 of the CPC & the facts of the present case, no part of cause of action for the Appellant would have arisen within the Calcutta HCโ€™s jurisdiction. 
  3. Even though Court for S. 11 specifically mentions HC alone (not any other lower court having principal civil jurisdiction), S. 11 and S. 2(1)(e) still have to be harmoniously construed in so far as the HC under S. 11 has to be a court which exercises supervisory jurisdiction over a Court within the meaning of Section 2(1)(e) of the A&C Act. It cannot simply be ANY High Court in India. 
  4. As per the Arbitration Clause the parties only agreed that the sitting of the Arbitral Tribunal would be in Kolkata. Kolkata was the venue of the sittings which cannot be equated to the seat/place of arbitration (Reliance placed on Union of India v. Hardy Exploration and Production (India) Inc(2019) 13 SCC 472 & Mankastu Impex Private Limited v. Airvisual Limited (2020) 5 SCC 399).
  5. An order without jurisdiction could be questioned at any time at any stage, irrespective of the consent given by the Appellant. Defect of jurisdiction cannot be cured by consent of parties. Therefore the consent in the Appointment Order was irrelevant for the issue of jurisdiction. (Reliance placed on Kiran Singh and Ors. v. Chaman Paswan and Ors. AIR 1954 SC 340)

In view of the above since the Arbitrator had been appointed by a Court without jurisdiction (albeit with consent), the appointment was set aside, and fresh appointment was made.

๐ˆ๐ฌ ๐ญ๐ก๐ž ๐‚๐จ๐ง๐๐ข๐ญ๐ข๐จ๐ง ๐จ๐Ÿ ๐๐š๐ฒ๐ฆ๐ž๐ง๐ญ ๐จ๐Ÿ 50% ๐จ๐Ÿ ๐š๐ฆ๐จ๐ฎ๐ง๐ญ ๐š๐ฐ๐š๐ซ๐๐ž๐, ๐š๐ฉ๐ฉ๐ฅ๐ข๐œ๐š๐›๐ฅ๐ž ๐ญ๐จ ๐€๐ฉ๐ฉ๐ž๐š๐ฅ๐ฌ ๐š๐ซ๐ข๐ฌ๐ข๐ง๐  ๐จ๐ฎ๐ญ ๐จ๐Ÿ ๐œ๐จ๐ง๐ฌ๐ฎ๐ฆ๐ž๐ซ ๐œ๐จ๐ฆ๐ฉ๐ฅ๐š๐ข๐ง๐ญ๐ฌ ๐Ÿ๐ข๐ฅ๐ž๐ ๐ฉ๐ซ๐ข๐จ๐ซ ๐ญ๐จ 20.07.2020?

This question arose in the case of ECGC Limited v. Mokul Shriram EPC JV (#SupremeCourtofIndia , decided on 15.02.2022).

As per Consumer Protection Act, 1986 (โ€œ1986 Actโ€) S. 23, any person filing an Appeal before the Supreme Court (โ€œSCโ€) from an order of the National Commission was required to deposit 50% of the amount awarded OR INR 50,000 whichever was less.

This provision was made more onerous in S. 67 of the Consumer Protection Act, 2019(โ€œ2019 Actโ€) which came into effect on 20.07.2020. As per S. 67, the appeal to SC is now conditional on deposit of 50% of amount awarded & the lesser option of INR 50,000 has been removed.

The SC observed as follows:

  1. S. 107 of the 2019 Act, repeals the 1986 Act. It specifically mentions that any action purported to have been taken under the 1986 Act, shall not prejudice or affect S. 6 of General Clauses Act, 1897.
  2. S. 6(c)&(e) of General Clauses act, provides that the repeal of enactment does not affect any right acquired or accrued under the enactment so repealed or affect any legal proceeding in respect of such a right, unless a different intention appears from the repealing statute. 
  3. Usually the law applicable to an appeal such as the court fee payable on an appeal, or the penalty payable as a condition to filing the appeal, would be the law which existed when the lis in the lowest court was filed, unless the law expressly or by necessary implication, has been amended retrospectively. (Reliance placed on several judgments including State of Bombay v. M/s. Supreme General Films Exchange Ltd. AIR1960 SC 980, M/s. Hardeodas Jagannath v. The State of Assam AIR 1970 SC 724, K. Raveendranathan Nair v. Commissioner of Income Tax (2017) 9 SCC 355, Ramesh Singh & Anr. v. Cinta Devi & Ors (1996) 3 SCC 142 etc.).
  4. The right of appeal from the decision of an inferior court/tribunal to a superior court/tribunal becomes vested in a party when the proceedings are first initiated. it is not a mere procedural right but a vested right. An intention to interfere with/impair or imperil such a vested right cannot be presumed unless such intention be clearly manifested by express words or necessary implication. (Reliance placed on Janardan Reddy v. State [(1950) SCR 941] & in Ganpat Rai v. Agarwal Chamber of Commerce Ltd. [(1952) SCJ 564])
  5. The Line of judgments which take a view that right of appeal is a creation of statute which legislature is competent to determine the conditions of, do not deal with amending or repealing statute, & therefore are inapplicable.

In view of the above, the SC held that the onerous condition of payment of 50% of the amount awarded would not be applicable to the complaints filed prior to the commencement of the 2019 act, ie. Prior to 20.07.2020.

๐ˆ๐ฌ ๐€๐ฐ๐š๐ซ๐ ๐จ๐Ÿ ๐๐ž๐ง๐๐ž๐ง๐ญ๐ž ๐‹๐ข๐ญ๐ž ๐ˆ๐ง๐ญ๐ž๐ซ๐ž๐ฌ๐ญ ๐จ๐ง ๐ˆ๐ง๐ญ๐ž๐ซ๐ž๐ฌ๐ญ ๐›๐ฒ ๐ญ๐ก๐ž ๐€๐ซ๐›๐ข๐ญ๐ซ๐š๐ญ๐จ๐ซ, ๐ฉ๐ž๐ซ๐ฆ๐ข๐ฌ๐ฌ๐ข๐›๐ฅ๐ž?

In the case of Delhi Development Authority (DDA) vs. M/s WATCON WATER SPECIALISTS PVT LTD (Watcon), (Delhi High Court, decided on 19.04.2022), DDA had entered into contract with Watcon for construction, refurbishment and work of Siri Fort Complex, Yamuna Sports Complex and Commonwealth Games Village. 

When disputes arose between the parties, the parties underwent arbitration, and in the arbitration proceedings, various claims were raised by Watcon including Air Lifting Charges towards equipment placed at Siri Fort complex as well as interest thereon.

The award was thereafter challenged before Court under Section 34 of the Arbitration & Conciliation Act, and the controversy before the Court was restricted to the award of โ€œairlifting chargesโ€ and โ€œinterest on airlifting chargesโ€.

The Court observed as follows:

  1. The Arbitral Tribunal had examined the clauses in the contract and had interpreted that the term โ€œrelevant documentsโ€ provided in the contract, for establishing the claim for airlifting charges, meant documents which established that the equipment had in fact been airlifted and nothing more. DDAโ€™s contention that separate invoices for airlifting charges needed to be submitted, as part of โ€œrelevant documentsโ€ was not accepted.
  2. The interpretation of terms of the contract falls within the jurisdiction of the Arbitral Tribunal.
  3. If the #arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction, and such an error is not an error on the face of the award. (Reliance placed on MSK Projects India (JV) Ltd. v. State of Rajasthan and Anr, (2011) 10 SCC 573, and Steel Authority of India Ltd. v. Gupta Brother Steel Tubes Ltd.: (2009) 10 SCC 63 ).
  4. Patent illegality should be illegality which goes to the root of the matter. Every error of law would not fall within this expression. Contravention of law not linked to public policy or public interest is beyond the scope of the expression. (Reliance placed on Delhi Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail Corporation Ltd.: 2021 SCC OnLine SC 695). 
  5. Since the question regarding interpretation of contract clauses was not perverse or patently illegal, the Court could not interfere. 
  6. The award of pendente lite, interest on interest claims was found to be erroneous & unsustainable and was therefore set aside. This is because awarding pendente lite interest on interest claims amounts to awarding interest on interest.
  7. However, the award of future interest on interest claims is permissible in view of Section 31(7)(a) that amount awarded is liable to carry interests, and such amounts awarded may include interests also. 

On the above terms, the petition was disposed off.

๐€๐ซ๐ž ๐˜๐จ๐ฎ ๐ซ๐ž๐ช๐ฎ๐ข๐ซ๐ž๐ ๐ญ๐จ ๐ฌ๐ž๐ญ ๐จ๐ฎ๐ญ ๐ญ๐ก๐ž ๐๐ฎ๐š๐ง๐ญ๐ฎ๐ฆ ๐จ๐Ÿ ๐‚๐ฅ๐š๐ข๐ฆ๐ฌ ๐ข๐ง ๐š ๐๐จ๐ญ๐ข๐œ๐ž ๐‚๐จ๐ฆ๐ฆ๐ž๐ง๐œ๐ข๐ง๐  /๐ˆ๐ง๐ฏ๐จ๐ค๐ข๐ง๐  ๐€๐ซ๐›๐ข๐ญ๐ซ๐š๐ญ๐ข๐จ๐ง ๐ฎ๐ง๐๐ž๐ซ ๐’๐ž๐œ๐ญ๐ข๐จ๐ง 21?

Ministry of Youth Affairs and sports vs. Agility Logistics Pvt. Ltd. (Delhi High Court, decided on 07.04.2022) was an objection petition against an award, filed under Section 34 of the Arbitration & Conciliation Act, 1996.

Here one of the Grounds raised before the Court was that the Arbitral Tribunal had failed to appreciate that the amount claimed by Agility in its Statement of Claims was much higher than that as mentioned in the Notice issued under Section 21 of the A&C Act. it was argued on behalf of the Ministry, that it was not open for the Arbitral Tribunal to award any claim in excess of the claim in respect of which #arbitration was invoked or to entertain any other claim.

The Court observed as follows:

  1. It is not necessary that a notice under Section 21 of the A&C Act quantifies the amounts claimed. All that is required is for it to set out the disputes. In the present case, it is not disputed that the Notice under Section 21 of the A&C Act clearly communicated the disputes between the parties.
  2. The Arbitral Tribunal had examined the said contention and found that the issue was covered by the decision of the Supreme Court in State of Goa v. Praveen Enterprises:2011 SCC OnLine SC 860. On this basis the Arbitral Tribunal had observed that it was not necessary for the claims to be specifically stated in the notice under Section 21 of the A&C Act, and therefore, the same could not be rejected only on the ground that there was no mention of the same in the notice under Section 21 of the A&C Act.
  3. It was also not in dispute that the claims made by Agility fell within the scope of the Arbitration Agreement (Arbitration Clause) and it is also not disputed that the same were not barred by any provision of the Limitation Act, 1963

In view of the above, the Court concluded that the contention raised by the Ministry held no water. 

๐ƒ๐จ๐ž๐ฌ ๐š๐ง ๐€๐ซ๐›๐ข๐ญ๐ซ๐š๐ญ๐ข๐จ๐ง ๐‚๐ฅ๐š๐ฎ๐ฌ๐ž ๐œ๐จ๐ง๐ญ๐š๐ข๐ง๐ž๐ ๐ข๐ง ๐“๐š๐ฑ ๐ข๐ง๐ฏ๐จ๐ข๐œ๐ž๐ฌ, ๐„๐ฌ๐ญ๐š๐›๐ฅ๐ข๐ฌ๐ก ๐ž๐ฑ๐ข๐ฌ๐ญ๐ž๐ง๐œ๐ž ๐จ๐Ÿ ๐š๐ง ๐€๐ซ๐›๐ข๐ญ๐ซ๐š๐ญ๐ข๐จ๐ง ๐€๐ ๐ซ๐ž๐ž๐ฆ๐ž๐ง๐ญ?

In Concrete Additives and Chemicals Pvt. Ltd. Vs S N Engineering Services Pvt. Ltd. (Bombay High Court, decided on 17.01.2022) an Application had been filed under Section 11 for appointment of an Arbitral Tribunal.

Here, although the purchase orders did not contain an arbitration clause, the tax invoices, which the Application used to issue when executing the purchase orders, contained an arbitration clause under its โ€œterms and conditionsโ€ column.

The Court, while deciding the application observed as follows:

  1. The issuance of tax invoices was a unilateral act on the part of the applicant. The contract between the parties was actually born under the purchase orders. The purchase orders did not contain or make any reference to an arbitration agreement between the parties.
  2. The acceptance of tax invoices by the Respondent could not be held to create an arbitration agreement between the parties as per Section 7 of the #Arbitration & Conciliation Act, 1996, and the acceptance of tax invoices was merely relevant to accept the delivery of the goods and payment thereof.

In view of the above, it was held that there was no arbitration agreement between the parties, and accordingly the petition was dismissed.

The case is currently pending in the Supreme Court and notice has already been issued.

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