Arbitration and Conciliation Act 1996

Section 34 - 4 of the Arbitration and Conciliation Act, 1996 – A fly in the ointment - Part I

Introduction

The recourse available to a party seeking to challenge an arbitral award is provided for in Section 34 of the Arbitration and Conciliation Act, 1996 (the “Arbitration Act”). Section 34(2) of the Arbitration Act has undergone a few statutory amendments, and has been the subject of innumerable judgments, which highlight the contours within which a challenge to an arbitral award is available. Given that party autonomy and finality of awards are hallmarks of the arbitral process, both the Parliament as well as the judiciary have strived for minimal judicial interference with arbitral awards and arbitration proceedings. This has been done by tightening and limiting the scope and interpretation of the grounds available under Section 34(2) of the Arbitration Act.
Continue Reading Section 34(4) of the Arbitration and Conciliation Act, 1996 – A Fly in the Ointment? (Part I)

The Supreme Court reaffirms the scope of patent illegality

Background

The Supreme Court has, in Patel Engineering Limited v. North Eastern Electric Power Corporation Limited,[1] reaffirmed the scope of patent illegality, post the 2015 amendment of the Arbitration and Conciliation Act, 1996 (“Act”), as a ground to challenge a domestic award under Section 34 of the Act.

Disputes between Patel Engineering Limited (“Patel Engineering”) and North Eastern Electric Power Corporation Limited (“NEEPCL”), arising out of works contracts for three separate packages, culminated in three arbitral awards dated March 29, 2016. One of the issues in each of the three arbitral proceedings was which clause of the conditions of contract would apply to decide the rate at which Patel Engineering was entitled to extra payment for additional quantities of lead. The arbitrator’s interpretation was in favour of Patel Engineering in all three awards. NEEPCL challenged the awards before the Additional Deputy Commissioner (Judicial), Shillong, who upheld the awards.
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SUPREME COURT’S CONTINUOUS BATTLE WITH COVID-19

I. Introduction

The last few months have been extremely unpredictable and extraordinary for the world as it continuously battles against the novel Corona virus (“Covid-19”) in all its spheres. In India, the economy has suffered a severe blow and the legal fraternity and judicial system seems to be no different due to a lack of digital infrastructure.

Recently, by an order dated May 6, 2020 (“May 06 Order”)[1], the Hon’ble Supreme Court extended all periods of limitation prescribed under the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) and under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”) w.e.f. March 15, 2020 until further orders. This order has a tremendous implication for strict timelines prescribed under these statutes. In this article, we will analyse whether the May 06 Order was necessary in light of the order dated March 23, 2020 (“March 23 Order”) passed by the Hon’ble Supreme Court in the same proceedings[2] and thereafter, explore the implication of the same.
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The Pursuit of Enforcement – Can the Corporate Cloaks be Unravelled

Introduction

It is trite that a company is a separate legal entity, and is distinct from its members.[1] As Lord Sumption observed in Prest v Petrodel Resources Ltd.[2], “The separate personality and property of a company is sometimes described as a fiction, and in a sense it is. But the fiction is the whole foundation of English company and insolvency law.” Equally sacrosanct is the principle that arbitration proceeds on the basis of an agreement between parties. After all, “like consummated romance, arbitration rests on consent”.[3] However, practical considerations have led to the marginal dilution of these otherwise fundamental principles.

There are instances where a company and its members are not treated as separate legal entities (i.e. where the corporate ‘veil’ is pierced). Similarly, there are cases where arbitral proceedings enjoin non-signatories.[4] A unique amalgam of these exceptions is found in cases where an arbitral award is sought to be executed against an entity that was never a party to the arbitral proceedings. For example, in Cheran Properties Limited v. Kasturi and Sons Limited and Ors.[5] (“Cheran Properties”), applying the ‘group of companies’ doctrine expounded in Chloro Controls,[6] and analysing Section 35 of the Arbitration and Conciliation Act, 1996 (“Act”) to ascertain who “persons claiming under them” would be for the purpose of binding such persons to the arbitral award, the Supreme Court permitted enforcement of an arbitral award against a third party/non-signatory. In this post, however, our focus is on whether Indian courts have pierced the corporate veil to execute an arbitral award against a third party to the arbitral proceedings when such third party’s unique relationship with the award debtor has been exploited to fraudulently circumvent or frustrate execution of the arbitral award.
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Domestic Arbitration receives booster shot from Supreme Court

  

Recently, the Supreme Court in Quippo Construction Equipment Limited V. Janardan Nirman Private Limited[1] held that if a party to an arbitration agreement chooses not to participate in arbitral proceedings, that party is deemed to have waived the right to raise objections regarding jurisdiction of the arbitral tribunal or the scope of its authority at a later stage. While dealing with objections to a domestic arbitral award, the Supreme Court also had occasion to comment on the perennial seat vs venue debate. In doing so, it inter alia observed that objections with respect to ‘place of arbitration’ may have significance in international commercial arbitrations (where the place of arbitration may determine which curial law would apply), but not so much in domestic arbitrations.
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SC refuses unilateral appointment of single arbitrator

Arbitration is a method of alternate dispute resolution wherein a third party is appointed for adjudication of disputes between the concerned parties. In such a scenario, preserving the sanctity of the judicial process becomes imperative. As arbitration requires adjudication on rights of the parties involved, principles of natural justice play a critical role in avoiding any potential risk of miscarriage of justice. The first principle of natural justice is ‘nemo judex in causa sua’, which means ‘no man can be a judge in his own cause’. This principle intends to avoid any ‘reasonable apprehension of bias’ that may arise during any judicial process.
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Enforcement of Foreign Awards in India – Have the brakes been applied

In NAFED v. Alimenta S.A.,[1] the Supreme Court held a foreign award to be unenforceable, on the basis that the transaction contemplated would have violated Indian law, and was therefore contrary to the public policy of India. 

The narrow scope of public policy:

Over the last decade, the judiciary and the legislature have been at pains to change the .existing judicial discourse and legislative intent to make India a regional hub for arbitration. A logical corollary has been a concerted effort to minimise judicial interference. Particularly in the context of foreign awards (where even after a ruling of enforceability, actual recovery may take years), Indian courts have to the most part, refused to interfere.
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Supreme Court denounces speculative litigation seeking to resist enforcement of foreign awards

Introduction

Over the years, Indian Courts have increasingly limited their interference with arbitral awards. This approach of non-interference is more so when it comes to enforcement of foreign awards under Section 48 of the Arbitration and Conciliation Act, 1996 (“Act”) as has been reaffirmed in a recent judgment of the Supreme Court in Vijay Karia (“Appellants”) and Ors. v. Prysmain Cavi E Sistemi SRL & Ors[1] (“Respondents”).

In this case, the Supreme Court had occasion to consider an appeal against the order of a single judge of the Bombay High Court, allowing enforcement of a London seated foreign award (“Foreign Award’). In doing so, the Supreme Court dismissed the appeal and came down heavily on the Appellants for engaging in speculative litigation and attempting to invoke the limited powers of the Supreme Court under Article 136[2] only to resist enforcement of the Foreign Award.
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Conditional or unconditional stay, that is the question – The fate of arbitral awards in India, pending challenge

Background

Ever since the enactment of the Arbitration and Conciliation Act, 1996 (the “Arbitration Act”), arbitral awards have been statutorily granted the same status as a decree of a civil court by way of a deeming fiction under Section 36 of the Arbitration Act. Up until the amendment of the Arbitration Act in 2015, the filing of an application challenging an arbitral award had the effect of an automatic stay on the enforcement of the award. The Arbitration and Conciliation (Amendment) Act, 2015 (the “2015 Amendment Act”) changed this, by mandating a separate application to be filed seeking stay of the award, which may (or may not) be granted by the court, subject to such conditions as it may deem fit.
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Arbitration Agreements in Unstamped Documents

Introduction

There has been constant confusion with respect to admissibility of unstamped documents. Section 35 of the Indian Stamp Act, 1899 (“Stamp Act”), provides that an unstamped or inadequately stamped document is inadmissible in evidence. Applying Section 35 of the Stamp Act, the Supreme Court in Garware Wall Ropes Ltd v. Coastal Marine Construction & Engineering Ltd [1](“Garware Judgement”) held that an arbitration agreement contained in an unstamped contract cannot be taken in evidence and invoked. It was further held that, in case the Court is faced with an unstamped document, it must proceed to impound the same, in accordance with the provisions of the Stamp Act; only once such an impounding is done — the deficit stamp duty and penalty paid, can the Court proceed on the basis of the arbitration agreement.
Continue Reading Invoking Arbitration Agreements in Unstamped Documents – A Case Comment on Garware Wall Ropes v. Coastal Marine Constructions & Engineering