Recently, the Delhi High Court refused to hold a third-party funder liable for furnishing security in enforcement of a foreign award, ruling that the funder — not being either a party to the arbitration agreement, the arbitration, or the eventual award — could not be “mulcted with liability, which they have neither undertaken nor are aware of”. Continue Reading Third party Funding – A funder remains a ‘Third Party” and not a ‘Party’ to the arbitration or award
Does the arbitration clause in a commercial contract becomes unenforceable due to non-payment of stamp duty, or it is preserved by the separability doctrine? This question has riddled the Supreme Court of India (“SC”) repeatedly and has resulted in contrary views being adopted by various three-judge benches. The issue has been finally laid to rest by a constitution bench of the SC through its judgment dated April 25, 2023 in M/s N. N. Global Mercantile Private Limited v. M/s. Indo Unique Flame Ltd. & Ors.[i] , wherein it held that an unstamped instrument in need of stamping is not a contract and not enforceable in law. Therefore, the arbitration clause contained therein is also unenforceable. Similarly, an arbitration agreement, which attracts stamp duty but is not stamped or insufficiently stamped, cannot be acted upon. Interestingly, the decision has not been unanimous since two Hon’ble Judges have dissented. Continue Reading Does Non-Stamping of a Contract Render an Arbitration Clause Contained in it Unenforceable? The Supreme Court Says Yes
A two judge bench of the Supreme Court has recently passed a landmark judgment, expanding the scope of judicial inquiry under Section 11 of the Arbitration and Conciliation Act, 1996, (“Act”), in DLF Home Developers Limited v. Rajapura Homes Private Limited & Anr[1] and DLF Home Developers Limited v. Begur OMR Homes Private Limited & Anr[2].Continue Reading SC expands the scope of judicial inquiry under Section 11 of the Arbitration and Conciliation Act, 1996
1. On June 18, 2021, the Delhi High Court, in proceedings seeking enforcement of arbitral awards against foreign states, has reiterated the principle of restrictive immunity and upheld the basic tenets of International Commercial Arbitration – flexibility, stability, efficiency, and its legally binding nature. The Court held that prior consent of the Central Government under Section 86 of the Code of Civil Procedure, 1908 (“Code”), is not required for enforcement of arbitral awards against a foreign state. Importantly, it also held that foreign state cannot claim sovereign immunity for the purpose of stalling enforcement of an arbitral award rendered against it, and which arises out of a commercial transaction.Continue Reading Indian Courts continue with the pro-enforcement approach: Delhi HC reiterates principle of restrictive immunity in enforcement of arbitral awards against foreign states
When faced with a suit or proceeding in any court or tribunal when there is an arbitration clause in the agreement, Section 8 of the Arbitration and Conciliation Act, 1996 (“Act”), empowers a judicial authority to refer parties to arbitration, thereby honouring the parties’ (pre-dispute) bargain. The Law Commission of India, in its 246th report, recommended amendments to Sections 8 and 11(6A)[1] of the Arbitration Act, with the intent to restrict the scope of judicial intervention at the pre-arbitral stage only to prima facie determine whether an arbitration agreement exists, thereby making it imperative for such judicial authority to refer the parties to arbitration, leaving the final determination of the existence and validity of an arbitration agreement to the arbitral tribunal under Section 16.
Continue Reading How Much is Too Much? Supreme Court on Scope of Examination of Arbitration Agreement at Pre-Arbitral Stage
The High Court of Delhi (“Delhi HC”) in its recent judgment in the case of Arjun Ahluwalia and Ors v Air India Limited[1] (“Arjun v Air India”) gave a ruling in favour of Air India’s pilots, who were seeking withdrawal of resignations and reinstatement of terminated employees. The Delhi HC passed a common judgment (“Judgment”) in the distinct writ petitions filed by pilots who are permanent employees (“PE”) and pilots working as full-time equivalent (“FTEs”) under fixed term contracts (collectively, “Employees” or “Petitioners”) as their petitions dealt with several common issues. The Judgment distils the principles applicable to resignations under service law and opines on the validity of financial constraint as a ground for termination of employees in State operated companies.
Continue Reading Withdrawal of resignation valid, until effected – Delhi High Court rules
Recently, in NTPC v. M/s Deconar Services Pvt. Ltd.[1], a three judge bench of the Supreme Court has, in line with the settled principle of minimum interference in arbitral awards, inter alia reiterated that in order to succeed in a challenge against an arbitral award, the party challenging the award must show that the arbitrator’s award suffered from perversity; or an error of law; or that the arbitrator had otherwise misconducted himself. The Court highlighted that merely showing that there is another reasonable interpretation or possible view on the basis of the material on record is insufficient to allow interference by the Court.
Continue Reading Supreme Court Reiterates that Courts Do Not Sit in Appeal over an Award passed by an Arbitrator
In our earlier article,[1] we had discussed the decision of the Supreme Court in Garware Wall Ropes Ltd. v. Coastal Marine Construction & Engineering Ltd. (“Garware Judgment”).[2] We had remarked that much was left to be done to strike a balance between arbitration law, stamping law and the equitable rights of litigants. We had analysed how the Garware Judgment took a narrow view on invoking arbitration agreements in unstamped documents, in holding that an arbitration could not be invoked in case of an arbitration agreement forming a part of an unstamped document, until the defect of non-stamping was rectified. It held that before proceeding under the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), the Court ought to impound the document and send it for collection of stamp duty dues. This also meant that neither the parties, nor the Court could appoint an arbitrator till the requisite stamp duty was paid.
Continue Reading Invoking Arbitration Agreements in Unstamped Documents – Course Correction from the Garware Wall Ropes’ Judgment
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.
Continue Reading Can Two Indian Parties choose foreign law to govern their arbitration agreement? The Delhi High Court answers in the Affirmative