ARBITRATION AND CONCILIATION ACT, 1996

Relevant Topic

Relevant Section

Key Issue

Summary Judgement

MANU ID

Appointment of an Arbitrator

Section 11(6): This section deals with failure to perform any function entrusted or any procedure agreed upon by the parties

Whether in a case falling under Section 11(6), the opposite party cannot appoint an arbitrator after expiry of 30 days from the date of demand.

Facts: The appellant had entered into a lease agreement with the respondent in respect of certain machineries. A dispute arose between the parties and the respondent sent a notice to the appellant invoking the arbitratio clause. The respondent appointed a sole Arbitrator as per the arbitration clause of the Lease Agreement and the Arbitrator in turn issued a notice to the appellant asking them to make their appearance before him . Thereafter, the appellant filed application before Hon'ble the Chief Justice of Bombay and prayed for appointment of another Arbitrator and the respondent opposed this application. This petition was rejected by the Chief Justice holding that as the Arbitrator had already been appointed by the first respondent, the Lessor, the petition was not maintainable. The question was whether in a case falling under Section 11(6), the opposite party cannot appoint an arbitrator after expiry of 30 days from the date of demand.

Held: Appointment of arbitrator after expiry of 30 days was held to be valid and the court stated that in cases arising under Section 11(6), if the opposite party has not made an appointment within 30 days of demand, the right to make appointment is not forfeited but continues, but an appointment has to be made before the former files application under Section 11 seeking appointment of an arbitrator. Only then the right of the opposite party ceases.

Datar Switchgears Ltd. vs. Tata Finance Ltd. and Ors. (18.10.2000 - SC) : MANU/SC/0651/2000

Arbitral Awards

Section 34: It provides for setting aside of an arbitral award by making an application to the Court, on the grounds stated therein.

Issue to be decided in this case was of jurisdiction

Facts: In this case a dispute arose between a registered broker with the National Stock Exchange and its client involving certain transactions. The client had initiated arbitration proceeding against the broker wherein the claim was rejected by an award given by the nominated sole arbitrator. The Respondent then filed an application under Section 34 of the Act, before the District Court, Delhi. By a judgment, the Additional District Judge referred to the exclusive jurisdiction clause contained in the agreement, and stated that he would have no jurisdiction to proceed further in the matter and, therefore, rejected the Section 34 application filed in Delhi. However, on appeal, the Delhi High Court held that the issue of jurisdiction in the present case was a question of fact and parties were not allowed to lead evidence on it. Accordingly, the High Court directed District Court to decide this question (in relation to existence of territorial jurisdiction of Delhi Courts) after framing a specific issue and permitting parties to lead evidence on it.

Held: The court held the moment a seat is determined it would vest the 'seat' curts wit exclusive jurisdiction i.e. if the seat is Mumbai, it would vest in Mumbai Courts with jurisdiction owing to the agreement. Secondly, it was held that the Section 34 proceedings are summary proceedings and framing of issues was not an integral process of the proceeding under Section 34.

Emkay Global Financial Services Ltd. vs. Girdhar Sondhi (20.08.2018 - SC) : MANU/SC/0875/2018

Arbitral Awards

Section 34: It provides for setting aside of an arbitral award by making an application to the Court, on the grounds stated therein.

Whether under Section 34(3) of Arbitration Act which states that an application for setting aside arbitral award may not be made after three months have elapsed from the date on which the party making the application had received the arbitral award.

Facts: The subject matter of arbitration in the case involved division of property between appellant and respondent and accordingly arbitration award was passed whereby certain properties were given to the Appellant and Respondent whereas some other assets were kept undivided with equal rights and interest thereon of both groups.

Appellant had filed an arbitration petition under Section 34 of the Act challenging the award andd contended that they learnt about the arbitral award only on certain date when they were served with the notice of execution petition filed by Respondent.

Hence, the issue in the case pertained to Section 34(3) of Arbitration Act which states that an application for setting aside arbitral award may not be made after three months have elapsed from the date on which the party making the application had received the arbitral award.

Held: It was held that with respect to the issue of limitation for filing application under Section 34 of the Act for setting aside the arbitral award, the period of limitation would commence only after a valid delivery of an arbitral award takes place under Section 31(5) of the Act. The Court dismissed the appeal on the ground that Anilkumar Patel, accepted the copy of the award on behalf of the entire family in his capacity as the Head of the family and hence the validity of such an award cannot be challenged by the family members on the ground of not having received a copy of the award.

Anilkumar Jinabhai Patel (D) thr. L.Rs. vs. Pravinchandra Jinabhai Patel and Ors. (27.03.2018 - SC) : MANU/SC/0295/2018

International Arbitration

No Relevant Section

Whether there is a bar to a foreign lawyer for conducting arbitration in India

Facts: This appeal was filed against the order wherein the directions were issued to restrict foreign law firms/lawyers to practice in India.

Held: There is absolutely no bar to a foreign lawyer for conducting arbitrations in India. If the matter is governed by an international commercial arbitration agreement, conduct of proceedings may fall with the provisions of the Arbitration Act. Even in such cases, Code of Conduct, if any, applicable to the legal profession in India had to be followed.

Bar Council of India vs. A.K. Balaji and Ors. (13.03.2018 - SC) : MANU/SC/0239/2018

Arbitration agreements

Section 7: Arbitration agreement

Whether the mentioned clause was an arbitration clause or not.

Facts: Modi Family owned various public limited companies. They also owned various assets. Differences arose between the parties and respondent invoked the arbitration clause. The issue in this case was whether this clause was an arbitration clause or not.

Held: It was held that it was not an arbitration clause. Supreme Court observed that while there are no conclusive tests, one can follow a set of guidelines in deciding the terms of the agreement i.e. whether they have agreed to solve disputes through arbitration or whether the agreement is to refer an issue to an expert.

K.K. Modi vs. K.N. Modi and Ors. (04.02.1998 - SC) : MANU/SC/0092/1998

Appointment of an Arbitrator

Section 11(6): This section deals with failure to perform any function entrusted or any procedure agreed upon by the parties

Nature of power under Section 11(6)

Facts: Section 12(2) of the act provides full freedom to the parties to agree upon a procedure for the appointment of the arbitrator. Usually, the parties provide for the appointment of a named arbitrator, or in the case of an institutional arbitration, a designee institution. Ii few of such procedure for appointment of the arbitrators, it is left for future agreement between the parties.In situations, where the parties are not able to agree on the procedure, or the arbitrators are unable to agree upon the third arbitrator, or the designee institution is unable to perform its functions related to the procedure of appointment of the arbitral tribunal, Section 11(6) of the Act provides for such appointment by giving a default power to Chief justice to decide. The issue in this case was regarding the nature of such power.

Held: The Supreme Court clarified and explaind that the function of Supreme Court or High Court is judicial, quasi-judicial & not purely administrative.

S.B.P. and Co. vs. Patel Engineering Ltd. and Ors. (26.10.2005 - SC) : MANU/SC/1787/2005

Arbitral Awards

Section 34: It provides for setting aside of an arbitral award by making an application to the Court, on the grounds stated therein.

The scope and ambit of court's jurisdiction where award passed by arbitral award is challenged under Section 34 of the Act.

Facts: The point of controversy in this case was the scope and ambit of court's jurisdiction where award passed by arbitral award is challenged under Section 34 of the Act.

Held: Supreme Court held that the award could be set aside when the applying party provided proof that it was under some incapacity; or the arbitration agreement was not valid; or the award dealt with a dispute contemplated by the terms of the arbitration clause; or the applying party was not properly notified of the appointment of the arbitrator. Additionally, the composition of the Tribunal has to be in accordance with the agreement of the parties for a court to set aside the award.

Further it was held that the expression public policy as found under Section 48 would not bring within its fold the grounds of patent illegality. Hence, the enforcement of the award could not be refused on the grounds of it being against the substantive laws & terms of contract

Oil & Natural Gas Corporation Ltd. vs. SAW Pipes Ltd. (17.04.2003 - SC) : MANU/SC/0314/2003

Referring parties to arbitration where an arbitration agreement is there

Section 8: Power to refer parties to arbitration where there is an arbitration agreement

Whether during pendency of an appeal a court can refer the parties to arbitration or whether the court can stay the Judicial Proceedings and refer the parties to arbitration.

Facts: Issue in this case was whether during pendency of an appeal a court can refer the parties to arbitration or whether the court can stay the Judicial Proceedings and refer the parties to arbitration.

Held: The arbitration agreement is valid unser Section 7 of the new act and reference under Section 8 during the pendency of an appeal can be made to arbitration.

P. Anand Gajapathi Raju and Ors. vs. P.V.G. Raju (Died) and Ors. (28.03.2000 - SC) : MANU/SC/0281/2000

Interim measures by court

Section 9: Interim measures etc. by Court

Whether the Indian Court can provide interim measures where the seat of arbitration is outside India.

Facts: The appellant and respondent executed an agreement in relation to supply of equipment , modernisation and up-gradation of the production facilities of the appellant. Certain dispute arose between the parties leading to arbitration proceedings. The question arose in this case was whether the Indian Court can provide interim measures where the seat of arbitration is outside India.

Held: Section 9 is limited in its application to arbitration which takes place in India, however after the amendment of 2015, the provisions apply to International Commercial Arbitration even if the place of arbitration is outside India.

Bharat Aluminium Company vs. Kaiser Aluminium Technical Services Inc. (28.01.2016 - SC) : MANU/SC/0090/2016

Enforcement of foreign awards

Section 48: This section provides for conditions for enforcement of foreign awards.

Enforceability of Foreign Awards was under consideration

Facts: Enforceability of Foreign Awards was under consideration.

Held: Supreme Court held and made a distiction between public policy when used in the context of enforcement of domestic awards & foreign awards, by holding that in the latter a more restricted meaning was applicable. The enforcement of a foreign award can be refused only if such enforcement is found to be contrary to (1) fundamental policy of Indian law; or (2) the interests of India; or (3) justice or morality. The objections raised by the Appellant do not fall in any of these categories and, therefore, the foreign awards cannot be held to be contrary to public policy of India as contemplated Under Section 48(2)(b).

Shri Lal Mahal Ltd. vs. Progetto Grano Spa (03.07.2013 - SC) : MANU/SC/0655/2013

Referring parties to arbitration where an arbitration agreement is there

Section 8: Power to refer parties to arbitration where there is an arbitration agreement

Whether an arbitrator would have jurisdiction to winding up company.

Facts: In this case party A filed a winding up petition before High Court and Party B moved an application to refer the matter to arbitration as there was an arbitration agreement. Issue in this case whether an arbitrator would have jurisdiction to winding up company.

Held: An arbitrator not withstanding any agreements between the parties would have no jurisdiction to entertain a matter which is non-arbitrable

Haryana Telecom Ltd. vs. Sterlite Industries (India) Ltd. (13.07.1999 - SC) : MANU/SC/0401/1999

Appointment of Certain Number of Arbitrators

Section 10: Parties can appoint as many number of arbitrators,but the selection should be in odd numbers. Even a sole arbitrator can be appointed

Section 11: Appointment of Arbitrators

Whether an agreement is invalidated due to appointment of even number of arbitrators.

Facts: The respondent in this case claimed that it has not received certain due amount from the appellant and hence the arbitration clause was invoked. as per the agreement the respondent appointed their arbitrator but the appelant claimed that arbitration cannot be resorted. While the proceeding commenced, New Act came into force. The first issue which arose was whether the case will proceed according to old act or new act. and second issue was whether an agreement is invalidated due to appointment of even number of arbitrators.

Held: It was held that the proceeding will commence according to new act. For the second issue the court held that If the parti93es provide for appointment of even number arbitrators that does not mean that the agreement becomes invalid. Under Section 11(3), the two arbitrators should then appoint the third arbitrator who shall act as a presiding arbitrator.

M.M.T.C. Limited vs. Sterlite Industries (India) Ltd. (18.11.1996 - SC) : MANU/SC/1298/1996

Interpretation of arbitral award

Section 33: This section provides that within 30 days or time on which parties agrees, from the time award was given- Parties can request for correction or error to the arbitral tribunal

Whether an arbitrator can unilaterally enlarge his own power to arbitrate any of disputes

Facts: The respondent and the appellant had enetered into an agreement for excavation of feeder canal. A dispute arose between them and arbitration clause was invoked. The question which arose in this case was whether an arbitrator can unilaterally enlarge his own power to arbitrate any of disputes?

Held: It was held that the arbitrator cannot enlarge the scope of of the arbitrabiity and it is for the court to decide the claim in dispute or any clause or any things related therof. Further the court held "mere acceptance or acquiescence to the jurisdiction of the arbitrator for adjudication of the dispute as to the extent of the arbitration agreement or arbitrability of the dispute does not disentitle the appellant to have the remedy under Section 33 through the court."

Union of India (UOI) vs. G.S. Atwal and Co. (Asansole) (22.02.1996 - SC) : MANU/SC/1130/1996