By Gunjan Chhabra
Questions Answered in this Month’s CCDQ:
- 𝐖𝐢𝐥𝐥 a 𝐍𝐞𝐰 𝐈𝐧𝐭𝐞𝐫𝐩𝐫𝐞𝐭𝐚𝐭𝐢𝐨𝐧 𝐨𝐟 𝐒𝐜𝐡𝐞𝐝𝐮𝐥𝐞 4 𝐛𝐲 𝐂𝐨𝐮𝐫𝐭 𝐡𝐚𝐯𝐞 𝐚 𝐫𝐞𝐭𝐫𝐨𝐬𝐩𝐞𝐜𝐭𝐢𝐯𝐞 𝐞𝐟𝐟𝐞𝐜𝐭 𝐨𝐧 𝐀𝐓’s 𝐟𝐞𝐞 𝐚𝐥𝐫𝐞𝐚𝐝𝐲 𝐟𝐢𝐱𝐞𝐝?
- 𝐖𝐡𝐚𝐭 𝐢𝐬 𝐭𝐡𝐞 𝐒𝐞𝐚𝐭 𝐨𝐟 𝐀𝐫𝐛𝐢𝐭𝐫𝐚𝐭𝐢𝐨𝐧 𝐢𝐧 𝐚 𝐏𝐫𝐨𝐜𝐞𝐞𝐝𝐢𝐧𝐠 𝐜𝐨𝐧𝐝𝐮𝐜𝐭𝐞𝐝 𝐛𝐲 𝐌𝐒𝐄𝐅𝐂?
- 𝐂𝐚𝐧 𝐭𝐚𝐥𝐤𝐬 𝐨𝐟 𝐒𝐞𝐭𝐭𝐥𝐞𝐦𝐞𝐧𝐭 𝐏𝐨𝐬𝐭𝐩𝐨𝐧𝐞 𝐌𝐚𝐧𝐝𝐚𝐭𝐨𝐫𝐲 𝐭𝐢𝐦𝐞 𝐋𝐢𝐦𝐢𝐭𝐬 𝐬𝐩𝐞𝐜𝐢𝐟𝐢𝐞𝐝 𝐛𝐲 𝐒𝐭𝐚𝐭𝐮𝐭𝐞?
- 𝐖𝐡𝐢𝐜𝐡 𝐜𝐨𝐮𝐫𝐭 𝐡𝐚𝐬 𝐣𝐮𝐫𝐢𝐬𝐝𝐢𝐜𝐭𝐢𝐨𝐧 𝐢𝐟 𝐭𝐰𝐨 𝐜𝐨𝐧𝐭𝐫𝐚𝐝𝐢𝐜𝐭𝐨𝐫𝐲 𝐜𝐥𝐚𝐮𝐬𝐞𝐬 𝐞𝐱𝐢𝐬𝐭 𝐢𝐧 𝐀𝐠𝐫𝐞𝐞𝐦𝐞𝐧𝐭?
𝐖𝐢𝐥𝐥 a 𝐍𝐞𝐰 𝐈𝐧𝐭𝐞𝐫𝐩𝐫𝐞𝐭𝐚𝐭𝐢𝐨𝐧 𝐨𝐟 𝐒𝐜𝐡𝐞𝐝𝐮𝐥𝐞 4 𝐛𝐲 𝐂𝐨𝐮𝐫𝐭 𝐡𝐚𝐯𝐞 𝐚 𝐫𝐞𝐭𝐫𝐨𝐬𝐩𝐞𝐜𝐭𝐢𝐯𝐞 𝐞𝐟𝐟𝐞𝐜𝐭 𝐨𝐧 𝐀𝐓’s 𝐟𝐞𝐞 𝐚𝐥𝐫𝐞𝐚𝐝𝐲 𝐟𝐢𝐱𝐞𝐝?
In NHAI v. IJM Gayatri JV, (Delhi High Court, decided on 27.01.2023), NHAI had raised a question on the fee fixed by the Arbitral Tribunal (“AT”) claiming it to be violative of public policy and law laid down by various Courts.
This was a Petition filed under Section 36 seeking a stay on an arbitration award limited to the extent of directions given by AT to NHAI with respect to the payment of fee of the AT.
The relevant background of the dispute was that in September 2020, the AT had agreed that the fee would be paid as per Schedule IV of the #Arbitration & Conciliation Act, 1996. Once the fee payable to each arbitrator was quantified and directions passed to pay the same, NHAI failed to do so.
The Court observed as follows:
- At the time when the fee had been fixed by the AT, the interpretation of the maximum fee under Schedule IV was INR 49,87,500. (Reliance placed on Rail Vikas Nigam Ltd. Vs. Simplex Infrastructures Ltd. O.M.P. (T) (COMM.) 28/2020 dated 10th July, 2020, which governed the law at that time).
- This logic and interpretation was reiterated by the AT in its order fixing the fee.
- Thereafter this interpretation was changed by the Supreme Court in its judgment passed on 19.04.2022, wherein the maximum limit of fee is now INR 30,000/- and not INR 48,87,500. (Reliance placed on Oil and Natural Gas Corporation Ltd. Vs. Afcons Gunanusa JV 222 SCC OnLine SC 1122).
- It was quite evident that the fixation of arbitral fee by the learned AT could not be faulted as it was done in accordance with the law prevailing at that time.
- In fact the Ld. AT had observed that although the then prevailing law was under challenge before the Supreme Court, as such there was no stay on the previous interpretation at the time of fixation of the fee schedule.\
In view of the above, the Court disposed off the application, still giving liberty to NHAI to agitate its challenge to the fee of the AT in its Petition under Section 34 of the A&C Act.
𝐖𝐡𝐚𝐭 𝐢𝐬 𝐭𝐡𝐞 𝐒𝐞𝐚𝐭 𝐨𝐟 𝐀𝐫𝐛𝐢𝐭𝐫𝐚𝐭𝐢𝐨𝐧 𝐢𝐧 𝐚 𝐏𝐫𝐨𝐜𝐞𝐞𝐝𝐢𝐧𝐠 𝐜𝐨𝐧𝐝𝐮𝐜𝐭𝐞𝐝 𝐛𝐲 𝐌𝐒𝐄𝐅𝐂?
Ahluwalia Contracts (India) Ltd. v. Ozone Research & Applications (I) Private Ltd. & Anr. (Delhi High Court, decided on 30.01.2023), was a Petition challenging an Award rendered by the Micro & Small Enterprises Facilitation Council (“MSEFC”) Nagpur, under Section 34 of the #Arbitration & Conciliation Act, 1996 (“A&C” Act)
Here an objection had been made as to the maintainability of the Petition on the ground of territorial jurisdiction.
The Purchase Order out of which disputes arose contained a jurisdiction clause mentioning that all disputes were subject to Delhi Jurisdiction. The Purchase Order did not contain an arbitration clause, however, arbitration had been conducted as per Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED Act”).
The Question was whether the seat of arbitration was in Delhi (due to the jurisdiction clause) or in Nagpur (where the present arbitration was conducted).
The Court observed as follows:
- The present case was one where there was no seat or venue expressly designated by the Agreement, as there was no arbitration clause.
- This would be distinguishable from a case which expressly designates a venue as well as a seat in an arbitration clause contained in the contract. (Distinguished Indian Oil Corporation Ltd. vs. FEPL Engineering (P) Ltd, dated 26.09.2019 in FAO(OS)(COMM) 92/2019.)
- In any case the Supreme Court has already laid down that the provisions of Chapter V of the MSMED Act, overrides the Arbitration Act & the contractual arrangement. A Private Agreement between the parties cannot obliterate the statutory provisions under the MSMED Act. (Reliance placed on Gujarat State Civil Supplies Corporation Ltd v. Mahakali Foods Pvt. Ltd. SLP(C) No. 12884/2020).
- In light of the above, the seat of Arbitration would be Nagpur, which is where the MSEFC conducted the arbitration.
In view of the above, the Petition was dismissed as not maintainable due to lack of territorial jurisdiction.
𝐂𝐚𝐧 𝐭𝐚𝐥𝐤𝐬 𝐨𝐟 𝐒𝐞𝐭𝐭𝐥𝐞𝐦𝐞𝐧𝐭 𝐏𝐨𝐬𝐭𝐩𝐨𝐧𝐞 𝐌𝐚𝐧𝐝𝐚𝐭𝐨𝐫𝐲 𝐭𝐢𝐦𝐞 𝐋𝐢𝐦𝐢𝐭𝐬 𝐬𝐩𝐞𝐜𝐢𝐟𝐢𝐞𝐝 𝐛𝐲 𝐒𝐭𝐚𝐭𝐮𝐭𝐞?
M/s Raj Chawla & Co. v. M/s Nine Media & Information (Delhi High Court, decided on 30.01.2023), was a Petition filed under Section 15 of the #Arbitration & Conciliation Act, 1996 (“A&C Act”) seeking appointment of a substitute arbitrator.
In this case, the Petitioner had initially filed an application under Section 11 of the A&C Act for appointment of an arbitrator when disputes had arisen between the parties. The Court had appointed an arbitrator, and stated that the reference would take affect only after September, 2018, till which time parties were given time to amicably resolve their disputes.
After this, apparently the parties kept attempting to settle their disputes amicably, and it was only in October 2021 that the arbitrator seems to have called the parties for a preliminary hearing. However, in the same month, the arbitrator recused herself from the proceedings, which is when the Petitioner filed the present Petition.
The question before Court was whether substitute arbitrator could be appointed after such a delay keeping in mind the time limit of Section 29A of the A&C Act.
The Court observed as follows:-
- Both parties contended that the date of “commencement” of arbitration could be taken as September, 2018 as there was no separate letter of appointment of the #Arbitrator.
- As per the unamended Section 29A which was introduced with effect from October 2015 (lately amended in August, 2019) the award was required to be rendered within twelve months from date of reference.
- Since the order of reference was made in 2018 itself, In terms of the unamended Section 29A, the award was to be rendered by September 2019.
- Even if the situation was viewed from the amended Section 29A, then the pleadings have to be completed before the AT within a period of six months from date of arbitrator receiving notice of appointment. Even this date had passed, as the date of commencement was being taken as September 2018 but the Statement of claims itself was filed in September 2021.
- As per record, the petitioner had approached the arbitrator with the Statement of Claim for the first time in September 2021. According to the parties, before this the parties were exploring settlement.
- Notwithstanding, the talks of settlement could not have stopped the march of limitation prescribed by section 29A of the A&C Act.
- The Court therefore held that since the award had not been rendered within statute specified time limits, the mandate of arbitrator mandatorily stood terminated and therefore the Court had no jurisdiction to appoint a substitute arbitrator under Section 15 of the A&C Act.
In view of the above, the Petition was dismissed.
𝐖𝐡𝐢𝐜𝐡 𝐜𝐨𝐮𝐫𝐭 𝐡𝐚𝐬 𝐣𝐮𝐫𝐢𝐬𝐝𝐢𝐜𝐭𝐢𝐨𝐧 𝐢𝐟 𝐭𝐰𝐨 𝐜𝐨𝐧𝐭𝐫𝐚𝐝𝐢𝐜𝐭𝐨𝐫𝐲 𝐜𝐥𝐚𝐮𝐬𝐞𝐬 𝐞𝐱𝐢𝐬𝐭 𝐢𝐧 𝐀𝐠𝐫𝐞𝐞𝐦𝐞𝐧𝐭?
This was the issue which came up in the case of Sunil Kumar Chandra v. SPIRE TECHPARK PRIVATE LIMITED (Delhi High court, decided on 18.01.2023).
The Agreement between the parties related to the Respondent handing over a lockable unit to the Petitioner in the World Trade Center within a period of 36 months from the date of entering into the Agreement. When disputes arose between the parties due to non handing over of the unit to the Petitioner, the Petitioner approached the Delhi High Court for appointment of #abitrator under section 11 of the #Arbitration and Conciliation Act, 1996.
An issue of maintainability was raised by the Respondent stating that although clause 18.2 mentioned that disputes were to be resolved by arbitration to be held at New Delhi, Clause 18.3 provided for courts at Gautam Buddha Nagar were to have jurisdiction, due to which Delhi Courts lacked territorial jurisdiction.
The Court observed as follows:
- On due consideration, it appeared that Clause 18.3 was subject to Clause 18.2. Clause 18.3 was ambiguous at best.
- Under the Law of Arbitration, unlike the Code of Civil Procedure which applies to suits filed in courts, a reference to “seat” is a concept by which a neutral venue can be chosen by the parties to an arbitration clause, without prejudice to Sections 16 to 21 of the CPC. The moment seat is designated, it would vest exclusive jurisdiction to courts of the seat for regulating arbitration proceedings between parties. In this case parties had agreed that New Delhi would be construed as “seat” of arbitration.
- In a document of this nature, where it is not possible to read two clauses harmoniously, then incase of such an inconsistency, the earlier clause is to prevail. (Reliance placed on Ramkishorelal v. Kamal Narayan; 1963 Supp (2) SCR 417).
- In view of the above Clause 18.2 was held to prevail over Clause 18.3, the Court held it did have jurisdiction to entertain the disputes and the Petition was maintainable.
In light of the same the Court went on to appoint the Sole Arbitrator.