The Supreme Court Revisits the Consequences of Non-Payment of Stamp Duty on the Arbitration Agreement – Part I

Introduction

Recently, a three-judge bench of the Supreme Court in M/s N.N. Global Mercantile Pvt. Ltd. v. M/s Indo Unique Flame Ltd. & Others[1] has reiterated and clarified the law on the (i) doctrine of separability of arbitration agreements from the underlying contract; (ii) arbitrability of disputes involving fraud; and (iii) maintainability of a writ petition against orders passed under the Arbitration and Conciliation Act, 1996 (“Arbitration Act”).
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Can Two Indian Parties choose foreign law to govern their arbitration agreement - The Delhi High Court answers in the Affirmative

Introduction:

Recognising that an arbitration agreement between parties is an agreement independent of the substantive contract, the Delhi High Court in Dholi Spintex Pvt. Ltd. v. Louis Dreyfus Company India Pvt. Ltd.[1] has held that two Indian parties can choose a foreign law as the law governing the arbitration between them. The Court has also reiterated the legal position on limited interference by Courts in international arbitrations.
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Anti-Arbitration Injunctions - Judicial trends and finding the middle path

An Anti-Arbitration Injunction (“AAI”) is an injunction granted by courts to restrain parties or an arbitral tribunal from either commencing or continuing with arbitration proceedings.[1]  An AAI is generally sought before an arbitration commences or in the course of the arbitration hearing or after the conclusion of substantive hearing but before the

Emergency Awards passed in Foreign-seated Arbitration - Enforceable or not

A recent award passed by an Emergency Arbitrator at the instance of Amazon.com NV Investment Holdings in relation to Reliance Retail Ventures Limited’s (RRVL) ongoing acquisition of Future Group’s retail, wholesale, logistics, and warehousing arm, has once again brought into sharp focus a gap in India’s aspirations to improve Ease of Doing Business in the country and create a conducive environment for enforcement of awards passed in foreign seated arbitrations.

Although the said Emergency Award directed Future Group to maintain status quo with regard to the transaction[1], recent news reports have confirmed that Future Group has already approached the Hon’ble Delhi High Court by way of a suit seeking to restrain Amazon from preventing the ₹24,713 crore deal from going through.[2]
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Does an Arbitration Clause survive Novation of an Agreement 

Introduction:

Recently in Sanjiv Prakash v. Seema Kukreja & Ors.[1], the Delhi High Court has reiterated that novation of an agreement would necessarily result in destruction of the arbitration clause contained therein. In this regard, it was observed that an arbitration agreement being a creation of an agreement may be destroyed by agreement.

Facts of the case:

Respondent No. 3 had incorporated a company in 1971, under the name of Asian Films Laboratories Private Limited, which was subsequently renamed as ANI Media Private Limited in 1997 (“Company”). The shareholders of the said Company were Respondent No. 3’s son (“Petitioner”) and his daughter and wife (“Respondent No. 1” and “Respondent No. 2” respectively) (Petitioner and Respondents together hereinafter referred to as the “Family”). The Petitioner was the Managing Director of the Company. In 1996, Thomson Reuters Corporation Pte. Limited (“Reuters”) approached the Petitioner for a long-term equity investment in the Company on the condition that the Petitioner would play an active role in the management of the Company.
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Ethical Practices to be followed by a Mediator

My joy was boundless. I had learnt the true practice of law. I had learnt to find out the better side of human nature and to enter men’s hearts. I realised the true function of a lawyer was to unite parties riven asunder. The lesson was so indelibly burnt into me that a large part of my time during the twenty years of my practice as a lawyer was occupied in bringing about private compromises of hundreds of cases. I lost nothing thereby – not even money, certainly not my soul.”

Mahatma Gandhi

Alternate dispute resolution (“ADR”) mechanisms have become the front runner in the dispute resolution space, with mediation gaining a great deal of traction in the last couple of decades. This is so not only with respect to disputes amongst individuals, but companies as well. It is seen that a myriad range of civil disputes such as disputes arising out of contractual relationships, family or matrimonial relationships, employment, partnerships, tortious disputes and consumer disputes can be resolved through mediation.
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Arbitrable or Not – India at Crossroads

As a rule, arbitral tribunals have been considered capable of adjudicating every civil or commercial dispute, which can be decided by a civil court, subject to: (i) the dispute being covered under the arbitration agreement; (ii) the party/ parties to the dispute referring the same to arbitration and (iii) the disputes being capable of adjudication and settlement by arbitration.

Having said that, the most contentious issue debated on arbitrability has been “subject-matter arbitrability” i.e. whether the disputes are capable of adjudication and settlement by arbitration. Historically, several disputes in India have been considered ‘non-arbitrable’ on the ground that the subject matter of the dispute is not capable of resolution by arbitration under the Indian law. This has largely been in line with the UNCITRAL Model Law, which permits domestic courts to set aside an arbitral award based on “subject-matter arbitrability”, under the domestic law[1].
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The Final Word on the Limitation Period for Enforcement of Foreign Awards

The Supreme Court has, in its recent judgment of Government of India v. Vedanta Limited & Ors.[1], settled the law relating to limitation for filing petitions for enforcement and execution of foreign awards in India. The Court held that petitions seeking enforcement/execution of foreign awards are required to be filed within three years from the date when the right to apply accrues and in the event there is any delay in filing such petitions, the same can be condoned under Section 5 of the Limitation Act, 1963 (“Limitation Act”).
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Foreign Arbitral Award – The Pro-Enforcement Trend Continues

The courts of this country should not be places where resolution of disputes begins. They should be the places where the disputes end after alternative methods of resolving disputes have been considered and tried.

Sandra Day O’Connor, Former Associate Justice of the Supreme Court of the United States

The law on Arbitration in India is constantly evolving. Arbitration clauses are now the norm that figure in nearly all commercial agreements whether it is domestic in nature or has an international flavour. Over the years, the Arbitration and Conciliation Act, 1996 (Act) has undergone several changes to address various issues arising thereunder. An important aspect of the Act that has seen significant development is enforcement of foreign awards, both through legislative and judicial intervention.
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Avitel v. HSBC: Finality on the Question of Arbitrability when Allegations of Fraud are Raised By Indranil Deshmukh, Vineet Unnikrishnan and Samhita Mehra The Supreme Court in the case of Avitel Post Studioz Limited v. HSBC PI Holdings (Mauritius) Limited (“Avitel Case”) has recently engaged with the question of whether allegations of fraud can be adjudicated in arbitration, or whether they require adjudication before a court. In its judgment, the Court has laid down clear tests to determine when a dispute involving allegation of fraud is arbitrable, and when it would require adjudication before a court. Material Facts In this case, a Share Subscription Agreement (“SSA”) dated April 21, 2011, was entered into between Avitel and HSBC, by way of which HSBC invested USD 60 million in Avitel to acquire 7.80% of its shareholding. The SSA contained a clause providing for arbitration at the Singapore International Arbitration Centre in case of a dispute. An accompany Shareholders’ Agreement (“SHA”) dated May 6, 2011, was also executed, which contained an identical arbitration clause. Thereafter, a dispute arose between the parties. HSBC alleged that the promoters of Avitel, namely, the Jain Family, had induced HSBC to invest in Avitel by making a representation that Avitel was on the verge of finalising a lucrative contract with the British Broadcasting Corporation. HSBC alleged that there was no such contract, and that around USD 51 million from the USD 60 million investment had in fact been siphoned away to other companies owned or controlled by the Jain Family. Arbitral proceedings were initiated, and a final award was passed in favour of HSBC inter alia holding the above allegations to be true (“Award”). The matter reached the Supreme Court in the context of a petition under Section 9 of the Arbitration and Conciliation Act, 1996 (“Act”), filed by HSBC seeking orders of deposit of the full claim amount of USD 60 million to protect the subject matter of the Award, pending enforcement of the same. Issues and Discussion The Supreme Court was asked to consider whether HSBC had a prima facie case for enforcement of the Award in India. Challenging the enforcement of the Award, it was contended on behalf of Avitel that since the allegations of fraud have been made in arbitral proceedings involving serious criminal offences, such as forgery and impersonation, such a dispute is not arbitrable then under Indian law and the award unenforceable, as a consequence. On behalf of HSBC, it was contended that non-arbitrability would be triggered only in cases where serious allegations of fraud would vitiate the arbitration agreement and not in other cases. After taking stock of the jurisprudence on this point thus far, the Court held that “serious allegations of fraud”, leading to non-arbitrability would arise only if either of following two tests were satisfied, and not otherwise. 1. Where the Court finds that the arbitration agreement itself cannot be said to exist being vitiated by fraud; or 2. Where allegations are made against the State or its instrumentalities, relating to arbitrary, fraudulent, or mala fide conduct, giving rise to question of public law as opposed to questions limited to the contractual relationship between the parties. This means that all other cases involving “serious allegations of fraud” i.e. cases that do not meet the above two tests laid down by the Supreme Court, would be arbitrable. Applying the aforesaid test to the facts before it, the Court found that the issues raised and answered in the Award were the subject matter of civil as opposed to criminal proceedings. The fact that a separate criminal proceeding was sought to be initiated by HSBC is of no consequence whatsoever. It was held that the impersonation, false representations and siphoning of funds found to have been committed were all inter parties and had no “public flavour” so as to be non-arbitrable on account of allegations of fraud. As such, the Supreme Court inter alia upheld the orders of deposit of the full claim amount of USD 60 million to be kept aside for the purposes of enforcement of the Award in India. Way Forward The Supreme Court’s judgment in the Avitel Case lends clarity to courts and arbitral tribunals, which should aid in weeding out incessant and creative submissions to “wriggle out” out of arbitration agreements. The two grounds forming exceptions to arbitrability of matters involving serious allegations of fraud as crystallised by the Supreme Court are clearly identifiable and easily discernable. Therefore, the judgment in the Avitel Case is likely to save precious judicial time that may otherwise have been spent in deliberating on the question of arbitrability of a dispute involving allegations of fraud.  

The Supreme Court in the case of Avitel Post Studioz Limited v. HSBC PI Holdings (Mauritius) Limited[1] (“Avitel Case”) has recently engaged with the question of whether allegations of fraud can be adjudicated  in arbitration, or whether they require adjudication before a court. In its judgment, the Court has laid down clear tests to determine when a dispute involving allegation of fraud is arbitrable, and when it would require adjudication before a court.
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