Category Archives: ARBITRATION

The Arbitration and Conciliation Act, 1996

EDITION 2018

Preliminary

Part 1 – Arbitration

Chapter I – General provisions
Chapter II – Arbitration agreement
Chapter III – Composition of arbitral tribunal
Chapter IV – Jurisdiction of arbitral tribunals
Chapter V – Conduct of arbitral proceedings
Chapter VI – Making of arbitral award and termination of proceedings
Chapter VII – Recourse against Arbitral Award
Chapter VIII – Finality and Enforcement of Arbitral Awards
Chapter IX – Appeals
Chapter X – Miscellaneous

Part 2-Enforcement of certain Foreign Awards[44-60]

Chapter I – New York Convention Awards
Chapter II – Geneva Convention Awards

Part 3-Conciliation [61-82]

Part 4- Supplementary Provisions

SEVEN SCHEDULES

Devider

The Arbitration and Conciliation Act, 1996

(26 of 1996)

[16th August, 1996]

An Act to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto.
Preamble. – Whereas the United Nations Commission on International Trade Law (UNCITRAL) has adopted the UNCITRAL Model Law on International Commercial Arbitration in 1985;
And Whereas the General Assembly of the United Nations has recommended that all countries give due consideration to the said Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice;
And Whereas the UNCITRAL has adopted the UNCITRAL Conciliation Rules in 1980;
And Whereas the General Assembly of the United Nations has recommended the use of the said Rules in cases where a dispute arises in the context of international commercial relations and the parties seek an amicable settlement of that dispute by recourse to conciliation;
And Whereas the said Model Law and Rules make significant contribution to the establishment of a unified legal framework for the fair and efficient settlement of disputes arising in international commercial relations;
And Whereas it is expedient to make law respecting arbitration and conciliation, taking into account the aforesaid Model Law and Rules;
Be it enacted by Parliament in the forty seventh year of the Republic as follows:

Preliminary

1. Short title, extent and commencement. – (1) This Act may be called The Arbitration and Conciliation Act , 1996.
(2) It extends to the whole of India:
Provided that Parts I, III and IV shall extend to the State of Jammu and Kashmir only in so far as they relate to international commercial arbitration or, as the case may be, international commercial conciliation.
Explanation. – In this sub-section, the expression international commercial conciliation shall have the same meaning as the expression international commercial arbitration in clause (f) of sub-section (1) of section 2, subject to the modification that for the word arbitration occurring therein, the word conciliation shall be substituted.
(3) It shall come into force on such [date] as the Central Government may, by notification in the Official Gazette, appoint.

Devider

Part I

Arbitration

CHAPTER I

General Provisions

2. Definitions. – (1) In this Part, unless the context otherwise requires,
(a) arbitration means any arbitration whether or not administered by permanent arbitral institution;

(b) arbitration agreement means an agreement referred to in section 7;

(c) arbitral award includes an interim award;

(d) arbitral tribunal means a sole arbitrator or a panel of arbitrators;

[(e) “Court” means—

(i) in the case of an arbitration other than international commercial arbitration, the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes;

(ii) in the case of international commercial arbitration, the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, and in other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court;]

(f) international commercial arbitration means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is

(i) an individual who is a national of, or habitually resident in, any country other than India; or

(ii) a body corporate which is incorporated in any country other than India; or

(iii) [* * *] an association or a body of individuals whose central management and control is exercised in any country other than India; or

(iv) the Government of a foreign country;

(g) legal representative means a person who in law represents the estate of a deceased person, and includes any person who inter-meddles with the estate of the deceased, and, where a party acts in a representative character, the person on whom the estate devolves on the death of the party so acting;

(h) party means a party to an arbitration agreement.

Scope

(2) This Part shall apply where the place of arbitration is in India.

[Provided that subject to an agreement to the contrary, the provisions of sections 9, 27 and clause (a) of sub-section (1) and sub-section (3) of section 37 shall also apply to international commercial arbitration, even if the place of arbitration is outside India, and an arbitral award made or to be made in such place is enforceable and recognised under the provisions of Part II of this Act.]
(3) This Part shall not affect any other law for the time being in force by virtue of which certain disputes may not be submitted to arbitration.
(4) This Part except sub-section (1) of section 40, sections 41 and 43 shall apply to every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to an arbitration agreement and as if that other enactment were an arbitration agreement, except insofar as the provisions of this Part are inconsistent with that other enactment or with any rules made thereunder.
(5) Subject to the provisions of sub-section (4), and save insofar as is otherwise provided by any law for the time being in force or in any agreement in force between India and any other country or countries, this Part shall apply to all arbitration’s and to all proceedings relating thereto.

Construction Of References

(6) Where this Part, except section 28, leaves the parties free to determine a certain issue, that freedom shall include the right of the parties to authorise any person including an institution, to determine that issue.

(7) An arbitral award made under this Part shall be considered as a domestic award.

(8) Where this Part
(a) refers to the fact that the parties have agreed or that they may agree, or

(b) in any other way refers to an agreement of the parties,

that agreement shall include any arbitration rules referred to in that agreement.

(9) Where this Part, other than clause (a) of section 25 or clause (a) of sub-section (2) of section 32, refers to a claim, it shall also apply to a counter-claim, and where it refers to a defence, it shall also apply to a defence to that counter-claim.

3. Receipt of written communications. – (1) Unless otherwise agreed by the parties,

(a) any written communication is deemed to have been received if it is delivered to the addressee personally or at his place of business, habitual residence or mailing address, and

(b) if none of the places referred to in clause (a) can be found after making a reasonable inquiry, a written communication is deemed to have been received if it is sent to the addressees last known place of business, habitual residence or mailing address by registered letter or by any other means which provides a record of the attempt to deliver it.

(2) The communication is deemed to have been received on the day it is so delivered.
(3) This section does not apply to written communications in respect of proceedings of any judicial authority.

4. Waiver of right to object. – A party who knows that
(a) any provision of this Part from which the parties may derogate, or

(b) any requirement under the arbitration agreement,

has not been complied with and yet proceeds with the arbitration without stating his objection to such non-compliance without undue delay or, if a time limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object.

5. Extent of judicial intervention – Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.

6. Administrative assistance. – In order to facilitate the conduct of the arbitral proceedings, the parties, or the arbitral tribunal with the consent of the parties, may arrange for administrative assistance by a suitable institution or person.

CHAPTER II

Arbitration Agreement

7. Arbitration agreement. – (1) In this Part, arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in
(a) a document signed by the parties;

(b) an exchange of letters, telex, telegrams or other means of telecommunication [including communication through electronic means] which provide a record of the agreement; or

(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.

(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.
8. Power to refer parties to arbitration where there is an arbitration agreement. – [(1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.]
(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.
[Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.]
(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.

9. Interim measures, etc., by Court. – (1) A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a Court:

(i) for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or

(ii) for an interim measure of protection in respect of any of the following matters, namely:

(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;

(b) securing the amount in dispute in the arbitration;

(c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;

(d) interim injunction or the appointment of a receiver;

(e) such other interim measure of protection as may appear to the Court to be just and convenient,

and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.

(2) Where, before the commencement of the arbitral proceedings, a Court passes an order for any interim measure of protection under sub-section (1), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine.
(3) Once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub-section (1), unless the Court finds that circumstances exist which may not render the remedy provided under section 17 efficacious.

CHAPTER III

Composition Of Arbitral Tribunal

10. Number of arbitrators. – (1) The parties are free to determine the number of arbitrators, provided that such number shall not be an even number.
(2) Failing the determination referred to in sub-section (1), the arbitral tribunal shall consist of a sole arbitrator.

11. Appointment of arbitrators. – (1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.
(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.
(4) If the appointment procedure in sub-section (3) applies and
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or

(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by [the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court].

(5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by [the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court].
(6) Where, under an appointment procedure agreed upon by the parties.
(a) a party fails to act as required under that procedure; or

(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or

(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure,

a party may request [the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court] to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
[(6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.
(6B) The designation of any person or institution by the Supreme Court or, as the case may be, the High Court, for the purposes of this section shall not be regarded as a delegation of judicial power by the Supreme Court or the High Court.]
(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to [the Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court is final and no appeal including Letters Patent Appeal shall lie against such decision].
[(8) The Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court, before appointing an arbitrator, shall seek a disclosure in writing from the prospective arbitrator in terms of sub-section (1) of section 12, and have due regard to—
(a) any qualifications required for the arbitrator by the agreement of the parties; and

(b) the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.]

(9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, [the Supreme Court or the person or institution designated by that Court] may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.
[(10) The Supreme Court or, as the case may be, the High Court, may make such scheme as the said Court may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6), to it.]
(11) Where more than one request has been made under sub-section (4) or sub-section (5) or sub-section (6) to [different High Courts or their designates, the High Court or its designate to whom the request has been first made] under the relevant sub-section shall alone be competent to decide on the request.
[(12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in an international commercial arbitration, the reference to the “Supreme Court or, as the case may be, the High Court” in those sub-sections shall be construed as a reference to the “Supreme Court”; and
(b) where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in any other arbitration, the reference to “the Supreme Court or, as the case may be, the High Court” in those sub-sections shall be construed as a reference to the “High Court” within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate, and where the High Court itself is the Court referred to in that clause, to that High Court.]

[(13) An application made under this section for appointment of an arbitrator or arbitrators shall be disposed of by the Supreme Court or the High Court or the person or institution designated by such Court, as the case may be, as expeditiously as possible and an endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.
(14) For the purpose of determination of the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal, the High Court may frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule.
Explanation. – For the removal of doubts, it is hereby clarified that this sub-section shall not apply to international commercial arbitration and in arbitration’s (other than international commercial arbitration) in case where parties have agreed for determination of fees as per the rules of an arbitral institution.]
[11A. Power of Central Government to amend Fourth Schedule. – (1) If the Central Government is satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, amend the Fourth Schedule and thereupon the Fourth Schedule shall be deemed to have been amended accordingly.
(2) A copy of every notification proposed to be issued under sub-section (1), shall be laid in draft before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in disapproving the issue of the notification or both Houses agree in making any modification in the notification, the notification shall not be issued or, as the case may be, shall be issued only in such modified form as may be agreed upon by the both Houses of Parliament.]

12. Grounds for challenge – [(1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances,—
(a) such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject-matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality; and

(b) which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months.

Explanation 1. – The grounds stated in the Fifth Schedule shall guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator.
Explanation 2. – The disclosure shall be made by such person in the form specified in the Sixth Schedule.]

(2) An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in sub-section (1) unless they have already been informed of them by him.
(3) An arbitrator may be challenged only if.
(a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or

(b) he does not possess the qualifications agreed to by the parties.

(4) A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.
[(5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing.]

13. Challenge procedure. – (1) Subject to sub-section (4), the parties are free to agree on a procedure for challenging an arbitrator.
(2) Failing any agreement referred to in sub-section (1), a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in sub-section (3) of section 12, send a written statement of the reasons for the challenge to the arbitral tribunal.
(3) Unless the arbitrator challenged under sub-section (2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge.
(4) If a challenge under any procedure agreed upon by the parties or under the procedure under sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award.
(5) Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with section 34.
(6) Where an arbitral award is set aside on an application made under sub-section (5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees.

14. Failure or impossibility to act. – [(1) The mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator, if’]
(a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and

(b) he withdraws from his office or the parties agree to the termination of his mandate.

(2) If a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate.
(3) If, under this section or sub-section (3) of section 13, an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or sub-section (3) of section 12.

15. Termination of mandate and substitution of arbitrator. – (1) In addition to the circumstances referred to in section 13 or section 14, the mandate of an arbitrator shall terminate
(a) where he withdraws from office for any reason; or

(b) by or pursuant to agreement of the parties.

(2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.
(3) Unless otherwise agreed by the parties, where an arbitrator is replaced under sub-section (2), any hearings previously held may be repeated at the discretion of the arbitral tribunal.
(4) Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator under this section shall not be invalid solely because there has been a change in the composition of the arbitral tribunal.

CHAPTER IV

Jurisdiction Of Arbitral Tribunals

16. Competence of arbitral tribunal to rule on its jurisdiction. – (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,
(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and

(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.

(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award.
(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34.

17. Interim measures ordered by arbitral tribunal – (1) A party may, during the arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to the arbitral tribunal—
(i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or

(ii) for an interim measure of protection in respect of any of the following matters, namely:—

(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;

(b) securing the amount in dispute in the arbitration;

(c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken, or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;

(d) interim injunction or the appointment of a receiver;

(e) such other interim measure of protection as may appear to the arbitral tribunal to be just and convenient, and the arbitral tribunal shall have the same power for making orders, as the court has for the purpose of, and in relation to, any proceedings before it.

(2) Subject to any orders passed in an appeal under section 37, any order issued by the arbitral tribunal under this section shall be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure, 1908, in the same manner as if it were an order of the Court.]

CHAPTER V

Conduct Of Arbitral Proceedings

18. Equal treatment of parties. – The parties shall be treated with equality and each party shall be given a full opportunity to present his case.

19. Determination of rules of procedure. (1) The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 (5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872).
(2) Subject to this Part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings.
(3) Failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate.
(4) The power of the arbitral tribunal under sub-section (3) includes the power to determine the admissibility, relevance, materiality and weight of any evidence.

20. Place of arbitration. – (1) The parties are free to agree on the place of arbitration.
(2) Failing any agreement referred to in sub-section (1), the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties.
(3) Notwithstanding sub-section (1) or sub-section (2), the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, goods or other property.

21. Commencement of arbitral proceedings. – Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.

22. Language. – (1) The parties are free to agree upon the language or languages to be used in the arbitral proceedings.
(2) Failing any agreement referred to in sub-section (1), the arbitral tribunal shall determine the language or languages to be used in the arbitral proceedings.
(3) The agreement or determination, unless otherwise specified, shall apply to any written statement by a party, any hearing and any arbitral award, decision or other communication by the arbitral tribunal.
(4) The arbitral tribunal may order that any documentary evidence shall be accompanied by a translation into the language or languages agreed upon by the parties or determined by the arbitral tribunal.

23. Statements of claim and defence. – (1) Within the period of time agreed upon by the parties or determined by the arbitral tribunal, the claimant shall state the facts supporting his claim, the points at issue and the relief or remedy sought, and the respondent shall state his defence in respect of these particulars, unless the parties have otherwise agreed as to the required elements of those statements.
(2) The parties may submit with their statements all documents they consider to be relevant or may add a reference to the documents or other evidence they will submit.
[(2A) The respondent, in support of his case, may also submit a counterclaim or plead a set-off, which shall be adjudicated upon by the arbitral tribunal, if such counterclaim or set-off falls within the scope of the arbitration agreement.]
(3) Unless otherwise agreed by the parties, either party may amend or supplement his claim or defence during the course of the arbitral proceedings, unless the arbitral tribunal considers it inappropriate to allow the amendment or supplement having regard to the delay in making it.

24. Hearings and written proceedings. – (1) Unless otherwise agreed by the parties, the arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials:
Provided that the arbitral tribunal shall hold oral hearings, at an appropriate stage of the proceedings, on a request by a party, unless the parties have agreed that no oral hearing shall be held.
[Provided further that the arbitral tribunal shall, as far as possible, hold oral hearings for the presentation of evidence or for oral argument on day-to-day basis, and not grant any adjournments unless sufficient cause is made out, and may impose costs including exemplary costs on the party seeking adjournment without any sufficient cause.]
(2) The parties shall be given sufficient advance notice of any hearing and of any meeting of the arbitral tribunal for the purposes of inspection of documents, goods or other property.
(3) All statements, documents or other information supplied to, or applications made to the arbitral tribunal by one party shall be communicated to the other party, and any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision shall be communicated to the parties.

25. Default of a party. – Unless otherwise agreed by the parties, where, without showing sufficient cause,
(a) the claimant fails to communicate his statement of claim in accordance with sub-section (1) of section 23, the arbitral tribunal shall terminate the proceedings;

(b) the respondent fails to communicate his statement of defence in accordance with sub-section (1) of section 23, the arbitral tribunal shall continue the proceedings without treating that failure in itself as an admission of the allegations by the claimant [and shall have the discretion to treat the right of the respondent to file such statement of defence as having been forfeited];

(c) a party fails to appear at an oral hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings and make the arbitral award on the evidence before it.

26. Expert appointment by arbitral tribunal. – (1) Unless otherwise agreed by the parties, the arbitral tribunal may
(a) appoint one or more experts to report to it on specific issues to be determined by the arbitral tribunal, and

(b) require a party to give the expert any relevant information or to produce, or to provide access to, any relevant documents, goods or other property for his inspection.

(2) Unless otherwise agreed by the parties, if a party so requests or if the arbitral tribunal considers it necessary, the expert shall, after delivery of his written or oral report, participate in an oral hearing where the parties have the opportunity to put questions to him and to present expert witnesses in order to testify on the points at issue.
(3) Unless otherwise agreed by the parties, the expert shall, on the request of a party, make available to that party for examination all documents, goods or other property in the possession of the expert with which he was provided in order to prepare his report.

27. Court assistance in taking evidence. – (1) The arbitral tribunal, or a party with the approval of the arbitral tribunal, may apply to the Court for assistance in taking evidence.
(2) The application shall specify
(a) the names and addresses of the parties and the arbitrators;

(b) the general nature of the claim and the relief sought;

(c) the evidence to be obtained, in particular,

(i) the name and address of any person to be heard as witness or expert witness and a statement of the subject-matter of the testimony required;

(ii) the description of any document to be produced or property to be inspected.

(3) The Court may, within its competence and according to its rules on taking evidence, execute the request by ordering that the evidence be provided directly to the arbitral tribunal.
(4) The Court may, while making an order under sub-section (3), issue the same processes to witnesses as it may issue in suits tried before it.
(5) Persons failing to attend in accordance with such process, or making any other default, or refusing to give their evidence, or guilty of any contempt to the arbitral tribunal during the conduct of arbitral proceedings, shall be subject to the like disadvantages, penalties and punishments by order of the Court on the representation of the arbitral tribunal as they would incur for the like offences in suits tried before the Court.
(6) In this section the expression Processes includes summonses and commissions for the examination of witnesses and summonses to produce documents.

CHAPTER VI

Making Of Arbitral Award And Termination Of Proceedings

28. Rules applicable to substance of dispute. – (1) Where the place of arbitration is situate in India,
(a) in an arbitration other than an international commercial arbitration, the arbitral tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India;

(b) in international commercial arbitration,

(i) the arbitral tribunal shall decide the dispute in accordance with the rules of law designated by the parties as applicable to the substance of the dispute;

(ii) any designation by the parties of the law or legal system of a given country shall be construed, unless otherwise expressed, as directly referring to the substantive law of that country and not to its conflict of laws rules;

(iii) failing any designation of the law under clause (a) by the parties, the arbitral tribunal shall apply the rules of law it considers to be appropriate given all the circumstances surrounding the dispute.

(2) The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorised it to do so.
[(3) While deciding and making an award, the arbitral tribunal shall, in all cases, take into account the terms of the contract and trade usages applicable to the transaction.]

29. Decision making by panel of arbitrators. – (1) Unless otherwise agreed by the parties, in arbitral proceedings with more than one arbitrator, any decision of the arbitral tribunal shall be made by a majority of all its members.
(2) Notwithstanding sub-section (1), if authorised by the parties or all the members of the arbitral tribunal, questions of procedure may be decided by the presiding arbitrator.

29A. Time limit for arbitral award. – (1) The award shall be made within a period of twelve months from the date the arbitral tribunal enters upon the reference.
Explanation. – For the purpose of this sub-section, an arbitral tribunal shall be deemed to have entered upon the reference on the date on which the arbitrator or all the arbitrators, as the case may be, have received notice, in writing, of their appointment.
(2) If the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree.
(3) The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months.
(4) If the award is not made within the period specified in sub-section (1) or the extended period specified under sub-section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period:
Provided that while extending the period under this sub-section, if the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five per cent. for each month of such delay.
(5) The extension of period referred to in sub-section (4) may be on the application of any of the parties and may be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court.
(6) While extending the period referred to in sub-section (4), it shall be open to the Court to substitute one or all of the arbitrators and if one or all of the arbitrators are substituted, the arbitral proceedings shall continue from the stage already reached and on the basis of the evidence and material already on record, and the arbitrator(s) appointed under this section shall be deemed to have received the said evidence and material.
(7) In the event of arbitrator(s) being appointed under this section, the arbitral tribunal thus reconstituted shall be deemed to be in continuation of the previously appointed arbitral tribunal.
(8) It shall be open to the Court to impose actual or exemplary costs upon any of the parties under this section.
(9) An application filed under sub-section (5) shall be disposed of by the Court as expeditiously as possible and endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.

29B. Fast track procedure. – (1) Notwithstanding anything contained in this Act, the parties to an arbitration agreement, may, at any stage either before or at the time of appointment of the arbitral tribunal, agree in writing to have their dispute resolved by fast track procedure specified in sub-section (3).
(2) The parties to the arbitration agreement, while agreeing for resolution of dispute by fast track procedure, may agree that the arbitral tribunal shall consist of a sole arbitrator who shall be chosen by the parties.
(3) The arbitral tribunal shall follow the following procedure while conducting arbitration proceedings under sub-section (1):
(a) The arbitral tribunal shall decide the dispute on the basis of written pleadings, documents and submissions filed by the parties without any oral hearing;

(b) The arbitral tribunal shall have power to call for any further information or clarification from the parties in addition to the pleadings and documents filed by them;

(c) An oral hearing may be held only, if, all the parties make a request or if the arbitral tribunal considers it necessary to have oral hearing for clarifying certain issues;

(d) The arbitral tribunal may dispense with any technical formalities, if an oral hearing is held, and adopt such procedure as deemed appropriate for expeditious disposal of the case.

(4) The award under this section shall be made within a period of six months from the date the arbitral tribunal enters upon the reference.
(5) If the award is not made within the period specified in sub-section (4), the provisions of sub-sections (3) to (9) of section 29A shall apply to the proceedings.
(6) The fees payable to the arbitrator and the manner of payment of the fees shall be such as may be agreed between the arbitrator and the parties.]

30. Settlement. – (1) It is not incompatible with an arbitration agreement for an arbitral tribunal to encourage settlement of the dispute and, with the agreement of the parties, the arbitral tribunal may use mediation, conciliation or other procedures at any time during the arbitral proceedings to encourage settlement.
(2) If, during arbitral proceedings, the parties settle the dispute, the arbitral tribunal shall terminate the proceedings and if, requested by the parties and not objected to by the arbitral tribunal, record the settlement in the form of an arbitral award on agreed terms.
(3) An arbitral award on agreed terms shall be made in accordance with section 31 and shall state that it is an arbitral award.
(4) An arbitral award on agreed terms shall have the same status and effect as any other arbitral award on the substance of the dispute.

31. Form and contents of arbitral award. – (1) An arbitral award shall be made in writing and shall be signed by the members of the arbitral tribunal.
(2) For the purposes of sub-section (1), in arbitral proceedings with more than one arbitrator, the signatures of the majority of all the members of the arbitral tribunal shall be sufficient so long as the reason for any omitted signature is stated.
(3) The arbitral award shall state the reasons upon which it is based, unless
(a) the parties have agreed that no reasons are to be given, or

(b) the award is an arbitral award on agreed terms under section 30.

(4) The arbitral award shall state its date and the place of arbitration as determined in accordance with section 20 and the award shall be deemed to have been made at that place.
(5) After the arbitral award is made, a signed copy shall be delivered to each party.
(6) The arbitral tribunal may, at any time during the arbitral proceedings, make an interim arbitral award on any matter with respect to which it may make a final arbitral award.
(7)(a) Unless otherwise agreed by the parties, where and insofar as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.
[(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two per cent. higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment.

(8) The costs of an arbitration shall be fixed by the arbitral tribunal in accordance with section 31A.]
Explanation. For the purpose of clause (a), costs means reasonable costs relating to
(i) the fees and expenses of the arbitrators and witnesses,

(ii) legal fees and expenses,

(iii) any administration fees of the institution supervising the arbitration, and

(iv) any other expenses incurred in connection with the arbitral proceedings and the arbitral award.

31A. Regime for costs – (1) In relation to any arbitration proceeding or a proceeding under any of the provisions of this Act pertaining to the arbitration, the Court or arbitral tribunal, notwithstanding anything contained in the Code of Civil Procedure,1908, shall have the discretion to determine—
(a) whether costs are payable by one party to another;

(b) the amount of such costs; and

(c) when such costs are to be paid.

Explanation. – For the purpose of this sub-section, “costs” means reasonable costs relating to—
(i) the fees and expenses of the arbitrators, Courts and witnesses;

(ii) legal fees and expenses;

(iii) any administration fees of the institution supervising the arbitration; and

(iv) any other expenses incurred in connection with the arbitral or Court proceedings and the arbitral award.

(2) If the Court or arbitral tribunal decides to make an order as to payment of costs,—
(a) the general rule is that the unsuccessful party shall be ordered to pay the costs of the successful party; or

(b) the Court or arbitral tribunal may make a different order for reasons to be recorded in writing.

(3) In determining the costs, the Court or arbitral tribunal shall have regard to all the circumstances, including—
(a) the conduct of all the parties;

(b) whether a party has succeeded partly in the case;

(c) whether the party had made a frivolous counter claim leading to delay in the disposal of the arbitral proceedings; and

(d) whether any reasonable offer to settle the dispute is made by a party and refused by the other party.

(4) The Court or arbitral tribunal may make any order under this section including the order that a party shall pay—
(a) a proportion of another party’s costs;

(b) a stated amount in respect of another party’s costs;

(c) costs from or until a certain date only;

(d) costs incurred before proceedings have begun;

(e) costs relating to particular steps taken in the proceedings;

(f) costs relating only to a distinct part of the proceedings; and

(g) interest on costs from or until a certain date.

(5) An agreement which has the effect that a party is to pay the whole or part of the costs of the arbitration in any event shall be only valid if such agreement is made after the dispute in question has arisen.]

32. Termination of proceedings. – (1) The arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal under sub-section (2).

(2) The arbitral tribunal shall issue an order for the termination of the arbitral proceedings where
(a) the claimant withdraws his claim, unless the respondent objects to the order and the arbitral tribunal recognises a legitimate interest on his part in obtaining a final settlement of the dispute,

(b) the parties agree on the termination of the proceedings, or

(c) the arbitral tribunal finds that the continuation of the proceedings has for any other reason become unnecessary or impossible.

(3) Subject to section 33 and sub-section (4) of section 34, the mandate of the arbitral tribunal shall terminate with the termination of the arbitral proceedings.

33. Correction and interpretation of award; additional award. – (1) Within thirty days from the receipt of the arbitral award, unless another period of time has been agreed upon by the parties
(a) a party, with notice to the other party, may request the arbitral tribunal to correct any computation errors, any clerical or typographical errors or any other errors of a similar nature occurring in the award;

(b) if so agreed by the parties, a party, with notice to the other party, may request the arbitral tribunal to give an interpretation of a specific point or part of the award.

(2) If the arbitral tribunal considers the request made under sub-section (1) to be justified, it shall make the correction or give the interpretation within thirty days from the receipt of the request and the interpretation shall form part of the arbitral award.
(3) The arbitral tribunal may correct any error of the type referred to in clause (a) of sub-section (1), on its own initiative, within thirty days from the date of the arbitral award.
(4) Unless otherwise agreed by the parties, a party with notice to the other party, may request, within thirty days from the receipt of the arbitral award, the arbitral tribunal to make an additional arbitral award as to claims presented in the arbitral proceedings but omitted from the arbitral award.
(5) If the arbitral tribunal considers the request made under sub-section (4) to be justified, it shall make the additional arbitral award within sixty days from the receipt of such request.
(6) The arbitral tribunal may extend, if necessary, the period of time within which it shall make a correction, give an interpretation or make an additional arbitral award under sub-section (2) of sub-section (5).
(7) Section 31 shall apply to a correction or interpretation of the arbitral award or to an additional arbitral award made under this section.

CHAPTER VII

Recourse Against Arbitral Award

34. Application for setting aside arbitral award. – (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).

(2) An arbitral award may be set aside by the Court only if

(a) the party making the application furnishes proof that

(i) a party was under some incapacity; or

(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or

(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or

(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or

(b) the Court finds that

(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or

(ii) the arbitral award is in conflict with the public policy of India.

[Explanation 1. – For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,—

(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or

(ii) it is in contravention with the fundamental policy of Indian law; or

(iii) it is in conflict with the most basic notions of morality or justice.

Explanation 2. – For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.

[(2A) An arbitral award arising out of arbitration’s other than international commercial arbitration’s, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:

Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.

(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:

Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.

(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.

(5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement.

(6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party.

CHAPTER VIII

Finality And Enforcement Of Arbitral Awards

35. Finality of arbitral awards. – Subject to this Part an arbitral award shall be final and binding on the parties and persons claiming under them respectively.

36. Enforcement. – (1) Where the time for making an application to set aside the arbitral award under section 34 has expired, then, subject to the provisions of sub-section (2), such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner as if it were a decree of the court.
(2) Where an application to set aside the arbitral award has been filed in the Court under section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of sub-section (3), on a separate application made for that purpose.
(3) Upon filing of an application under sub-section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing:
Provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908.

CHAPTER IX

Appeals

37. Appealable orders. – (1) An appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely:
[(a) refusing to refer the parties to arbitration under section 8;

(b) granting or refusing to grant any measure under section 9;

(c) setting aside or refusing to set aside an arbitral award under section 34.]

(2) An appeal shall also lie to a Court from an order of the arbitral tribunal
(a) accepting the plea referred to in sub-section (2) or sub-section (3) of section 16; or

(b) granting or refusing to grant an interim measure under section 17.

(3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.

CHAPTER X

Miscellaneous

38. Deposits. – (1) The arbitral tribunal may fix the amount of the deposit or supplementary deposit, as the case may be, as an advance for the costs referred to in sub-section (8) of section 31, which it expects will be incurred in respect of the claim submitted to it:
Provided that where, apart from the claim, a counter-claim has been submitted to the arbitral tribunal, it may fix separate amount of deposit for the claim and counter-claim.
(2) The deposit referred to in sub-section (1) shall be payable in equal shares by the parties:
Provided that where one party fails to pay his share of the deposit, the other party may pay that share:
Provided further that where the other party also does not pay the aforesaid share in respect of the claim or the counter-claim, the arbitral tribunal may suspend or terminate the arbitral proceedings in respect of such claim or counter-claim, as the case may be.
(3) Upon termination of the arbitral proceedings, the arbitral tribunal shall render an accounting to the parties of the deposits received and shall return any unexpended balance to the party or parties, as the case may be.

39. Lien on arbitral award and deposits as to costs. – (1) Subject to the provisions of sub-section (2) and to any provision to the contrary in the arbitration agreement, the arbitral tribunal shall have a lien on the arbitral award for any unpaid costs of the arbitration.
(2) If in any case an arbitral tribunal refuses to deliver its award except on payment of the costs demanded by it, the Court may, on an application in this behalf, order that the arbitral tribunal shall deliver the arbitral award to the applicant on payment into Court by the applicant of the costs demanded, and shall, after such inquiry, if any, as it thinks fit, further order that out of the money so paid into Court there shall be paid to the arbitral tribunal by way of costs such sum as the Court may consider reasonable and that the balance of the money, if any, shall be refunded to the applicant.
(3) An application under sub-section (2) may be made by any party unless the fees demanded have been fixed by written agreement between him and the arbitral tribunal, and the arbitral tribunal shall be entitled to appear and be heard on any such application.
(4) The Court may make such orders as it thinks fit respecting the costs of the arbitration where any question arises respecting such costs and the arbitral award contains no sufficient provision concerning them.

40. Arbitration agreement not to be discharged by death of party thereto. – (1) An arbitration agreement shall not be discharged by the death of any party thereto either as respects the deceased or as respects any other party, but shall in such event be enforceable by or against the legal representative of the deceased.
(2) The mandate of an arbitrator shall not be terminated by the death of any party by whom he was appointed.
(3) Nothing in this section shall affect the operation of any law by virtue of which any right of action is extinguished by the death of a person.

41. Provisions in case of insolvency. – (1) Where it is provided by a term in a contract to which an insolvent is a party that any dispute arising there out or in connection therewith shall be submitted to arbitration, the said term shall, if the receiver adopts the contract, be enforceable by or against him so far as it relates to any such dispute.
(2) Where a person who has been adjudged an insolvent had, before the commencement of the insolvency proceedings, become a party to an arbitration agreement, and any matter to which the agreement applies is required to be determined in connection with, or for the purposes of, the insolvency proceedings, then, if the case is one to which sub-section (1) does not apply, any other party or the receiver may apply to the judicial authority having jurisdiction in the insolvency proceedings for an order directing that the matter in question shall be submitted to arbitration in accordance with the arbitration agreement, and the judicial authority may, if it is of opinion that, having regard to all the circumstances of the case, the matter ought to be determined by arbitration, make an order accordingly.
(3) In this section the expression receiver includes an Official Assignee.

42. Jurisdiction – Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court.

43. Limitations. – (1) The Limitation Act, 1963 (36 of 1963), shall apply to arbitration’s as it applies to proceedings in Court.

(2) For the purposes of this section and the Limitation Act, 1963 (36 of 1963), an arbitration shall be deemed to have commenced on the date referred in section 21.

(3) Where an arbitration agreement to submit future disputes to arbitration provides that any claim to which the agreement applies shall be barred unless some step to commence arbitral proceedings is taken within a time fixed by the agreement, and a dispute arises to which the agreement applies, the Court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be caused, and notwithstanding that the time so fixed has expired, may on such terms, if any, as the justice of the case may require, extend the time for such period as it thinks proper.

(4) Where the Court orders that an arbitral award be set aside, the period between the commencement of the arbitration and the date of the order of the Court shall be excluded in computing the time prescribed by the Limitation Act, 1963 (36 of 1963), for the commencement of the proceedings (including arbitration) with respect to the dispute so submitted.

Devider

Part II

Enforcement Of Certain Foreign Awards

CHAPTER I

New York Convention Awards

44. Definition. – In this Chapter, unless the context otherwise requires, foreign award means an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October, 1960
(a) in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and

(b) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies.

45. Power of judicial authority to refer parties to arbitration. – Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement referred to in section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.
46. When foreign award binding. – Any foreign award which would be enforceable under this Chapter shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India and any references in this Chapter to enforcing a foreign award shall be construed as including references to relying on an award.
47. Evidence. – (1) The party applying for the enforcement of a foreign award shall, at the time of the application, produce before the Court
(a) the original award or a copy thereof, duly authenticated in the manner required by the law of the country in which it was made;

(b) the original agreement for arbitration or a duly certified copy thereof; and

(c) such evidence as may be necessary to prove that the award is a foreign award.

(2) If the award or agreement to be produced under sub-section (1) is in a foreign language, the party seeking to enforce the award shall produce a translation into English certified as correct by a diplomatic or consular agent of the country to which that party belongs or certified as correct in such other manner as may be sufficient according to the law in force in India.
[Explanation. – In this section and in the sections following in this Chapter, “Court” means the High Court having original jurisdiction to decide the questions forming the subject-matter of the arbitral award if the same had been the subject matter of a suit on its original civil jurisdiction and in other cases, in the High Court having jurisdiction to hear appeals from decrees of courts subordinate to such High Court.]
48. Conditions for enforcement of foreign awards. – (1) Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the Court proof that
(a) the parties to the agreement referred to in section 44 were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or

(b) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(c) the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or
(d) the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or

(e) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

(2) Enforcement of an arbitral award may also be refused if the Court finds that
(a) the subject-matter of the difference is not capable of settlement by arbitration under the law of India; or

(b) the enforcement of the award would be contrary to the public policy of India.

[Explanation 1. – For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,—
(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or

(ii) it is in contravention with the fundamental policy of Indian law; or

(iii) it is in conflict with the most basic notions of morality or justice.

Explanation 2. – For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.]
(3) If an application for the setting aside or suspension of the award has been made to a competent authority referred to in clause (e) of sub-section (1) the Court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security.

49. Enforcement of foreign awards. – Where the Court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that Court.

50. Appealable orders. – (1) An appeal shall lie from the order refusing to
(a) refer the parties to arbitration under section 45;

(b) enforce a foreign award under section 48,

to the Court authorised by law to hear appeals from such order.
(2) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.

51. Saving. – Nothing in this Chapter shall prejudice any rights which any person would have had of enforcing in India of any award or of availing himself in India of any award if this Chapter had not been enacted.

52. Chapter II not to apply. – Chapter II of this Part shall not apply in relation to foreign awards to which this Chapter applies.

CHAPTER II

Geneva Convention Awards

53. Interpretation. – In this Chapter foreign award means an arbitral award on differences relating to matters considered as commercial under the law in force in India made after the 28th day of July, 1924,
(a) in pursuance of an agreement for arbitration to which the Protocol set forth in the Second Schedule applies, and

(b) between persons of whom one is subject to the jurisdiction of some one of such Powers as the Central Government, being satisfied that reciprocal provisions have been made, may, by notification in the Official Gazette, declare to be parties to the Convention set forth in the Third Schedule, and of whom the other is subject to the jurisdiction of some other of the Powers aforesaid, and

(c) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made, may, by like notification, declare to be territories to which the said Convention applies,

and for the purposes of this Chapter an award shall not be deemed to be final if any proceedings for the purpose of contesting the validity of the award are pending in the country in which it was made.
54. Power of judicial authority to refer parties to arbitration. – Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), a judicial authority, on being seized of a dispute regarding a contract made between persons to whom section 53 applies and including an arbitration agreement, whether referring to present or future differences, which is valid under that section and capable of being carried into effect, shall refer the parties on the application of either of them or any person claiming through or under him to the decision of the arbitrators and such reference shall not prejudice the competence of the judicial authority in case the agreement or the arbitration cannot proceed or becomes inoperative.
55. Foreign awards when binding. – Any foreign award which would be enforceable under this Chapter shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India and any references in this Chapter to enforcing a foreign award shall be construed as including references to relying on an award.

56. Evidence. – (1) The party applying for the enforcement of a foreign award shall, at the time of application, produce before the Court
(a) the original award or a copy thereof duly authenticated in the manner required by the law of the country in which it was made;

(b) evidence proving that the award has become final; and

(c) such evidence as may be necessary to prove that the conditions mentioned in clauses (a) and (c) of sub-section (1) of section 57 are satisfied.

(2) Where any document requiring to be produced under sub-section (1) is in a foreign language, the party seeking to enforce the award shall produce a translation into English certified as correct by a diplomatic or consular agent of the country to which that party belongs or certified as correct in such other manner as may be sufficient according to the law in force in India.

Explanation 1. – In this section and all the following sections of this Chapter, Court means the principal civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction over the subject-matter of the award if the same had been the subject-matter of a suit, but does not include any civil Court of a grade inferior to such principal civil Court, or any Court of Small Causes.
[Explanation. – In this section and in the sections following in this Chapter, “Court” means the High Court having original jurisdiction to decide the questions forming the subject-matter of the arbitral award if the same had been the subject matter of a suit on its original civil jurisdiction and in other cases, in the High Court having jurisdiction to hear appeals from decrees of courts subordinate to such High Court.]
57. Conditions for enforcement of foreign awards. – (1) In order that a foreign award may be enforceable under this Chapter, it shall be necessary that
(a) the award has been made in pursuance of a submission to arbitration which is valid under the law applicable thereto;

(b) the subject-matter of the award is capable of settlement by arbitration under the law of India;

(c) the award has been made by the arbitral tribunal provided for in the submission to arbitration or constituted in the manner agreed upon by the parties and in conformity with the law governing the arbitration procedure;

(d) the award has become final in the country in which it has been made, in the sense that it will not be considered as such if it is open to opposition or appeal or if it is proved that any proceedings for the purpose of contesting the validity of the award are pending;

(e) the enforcement of the award is not contrary to the public policy or the law of India.

[Explanation 1. – For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,—
(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or

(ii) it is in contravention with the fundamental policy of Indian law; or

(iii) it is in conflict with the most basic notions of morality or justice.

Explanation 2. – For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.]
(2) Even if the conditions laid down in sub-section (1) are fulfilled, enforcement of the award shall be refused if the Court is satisfied that
(a) the award has been annulled in the country in which it was made;

(b) the party against whom it is sought to use the award was not given notice of the arbitration proceedings in sufficient time to enable him to present his case; or that, being under a legal incapacity, he was not properly represented;

(c) the award does not deal with the differences contemplated by or falling within the terms of the submission to arbitration or that it contains decisions on matters beyond the scope of the submission to arbitration:

Provided that if the award has not covered all the differences submitted to the arbitral tribunal, the Court may, if it thinks fit, postpone such enforcement or grant it subject to such guarantee as the Court may decide.
(3) If the party against whom the award has been made proves that under the law governing the arbitration procedure there is a ground, other than the grounds referred to in clauses (a) and (c) of sub-section (1) and clauses (b) and (c) of sub-section (2) entitling him to contest the validity of the award, the Court may, if it thinks fit, either refuse enforcement of the award or adjourn the consideration thereof, giving such party a reasonable time within which to have the award annulled by the competent tribunal.

58. Enforcement of foreign awards. – Where the Court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of the Court.

59. Appealable orders. – (1) An appeal shall lie from the order refusing
(a) to refer the parties to arbitration under section 54; and

(b) to enforce a foreign award under section 57,

to the Court authorised by law to hear appeals from such order.
(2) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.
60. Saving. – Nothing in this Chapter shall prejudice any rights which any person would have had of enforcing in India of any award or of availing himself in India of any award if this Chapter had not been enacted.

Devider

Part III

Conciliation

61. Application and scope. – (1) Save as otherwise provided by any law for the time being in force and unless the parties have otherwise agreed, this Part shall apply to conciliation of disputes arising out of legal relationship, whether contractual or not and to all proceedings relating thereto.
(2) This Part shall not apply where by virtue of any law for the time being in force certain disputes may not be submitted to conciliation.

62. Commencement of conciliation proceedings. – (1) The party initiating conciliation shall send to the other party a written invitation to conciliate under this Part, briefly identifying the subject of the dispute.
(2) Conciliation proceedings shall commence when the other party accepts in writing the invitation to conciliate.
(3) If the other party rejects the invitation, there will be no conciliation proceedings.
(4) If the party initiating conciliation does not receive a reply within thirty days from the date on which he sends the invitation, or within such other period of time as specified in the invitation, he may elect to treat this as a rejection of the invitation to conciliate and if he so elects, he shall inform in writing the other party accordingly.

63. Number of conciliators. – (1) There shall be one conciliator unless the parties agree that there shall be two or three conciliators.
(2) Where there is more than one conciliator, they ought, as a general rule, to act jointly.

64. Appointment of conciliators. – (1) Subject to sub-section (2),
(a) in conciliation proceedings with one conciliator, the parties may agree on the name of a sole conciliator;

(b) in conciliation proceedings with two conciliators, each party may appoint one conciliator;

(c) in conciliation proceedings with three conciliators, each party may appoint one conciliator and the parties may agree on the name of the third conciliator who shall act as the presiding conciliator.

(2) Parties may enlist the assistance of a suitable institution or person in connection with the appointment of conciliators, and in particular,
(a) a party may request such an institution or person to recommend the names of suitable individuals to act as conciliator; or

(b) the parties may agree that the appointment of one or more conciliators be made directly by such an institution or person:

Provided that in recommending or appointing individuals to act as conciliator, the institution or person shall have regard to such considerations as are likely to secure the appointment of an independent and impartial conciliator and, with respect to sole or third conciliator, shall take into account the advisability of appointing a conciliator of a nationality other than the nationalities of the parties.

65. Submission of statements to conciliator. – (1) The conciliator, upon his appointment, may request each party to submit to him a brief written statement describing the general nature of the dispute and the points at issue. Each party shall send a copy of such statement to the other party.
(2) The conciliator may request each party to submit to him a further written statement of his position and the facts and grounds in support thereof, supplemented by any documents and other evidence that such party deems appropriate. The party shall send a copy of such statement, documents and other evidence to the other party.
(3) At any stage of the conciliation proceedings, the conciliator may request a party to submit to him such additional information as he deems appropriate.
Explanation. – In this section and all the following sections of this Part, the term conciliator applies to a sole conciliator, two or three conciliators as the case may be.

66. Conciliator not bound by certain enactments. – The conciliator is not bound by the Code of Civil Procedure, 1908 (5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872).
67. Role of conciliator. – (1) The conciliator shall assist the parties in an independent and impartial manner in their attempt to reach an amicable settlement of their dispute.
(2) The conciliator shall be guided by principles of objectivity, fairness and justice, giving consideration to, among other things, the rights and obligations of the parties, the usages of the trade concerned and the circumstances surrounding the dispute, including any previous business practices between the parties.
(3) The conciliator may conduct the conciliation proceedings in such a manner as he considers appropriate, taking into account the circumstances of the case, the wishes the parties may express, including any request by a party that the conciliator hear oral statements, and the need for a speedy settlement of the dispute.
(4) The conciliator may, at any stage of the conciliation proceedings, make proposals for a settlement of the dispute. Such proposals need not be in writing and need not be accompanied by a statement of the reasons therefor.

68. Administrative assistance. – In order to facilitate the conduct of the conciliation proceedings, the parties, or the conciliator with the consent of the parties, may arrange for administrative assistance by a suitable institution or person.

69. Communication between conciliator and parties. – (1) The conciliator may invite the parties to meet him or may communicate with them orally or in writing. He may meet or communicate with the parties together or with each of them separately.
(2) Unless the parties have agreed upon the place where meetings with the conciliator are to be held, such place shall be determined by the conciliator, after consultation with the parties, having regard to the circumstances of the conciliation proceedings.
70. Disclosure of information. – When the conciliator receives factual information concerning the dispute from a party, he shall disclose the substance of that information to the other party in order that the other party may have the opportunity to present any explanation which he considers appropriate:
Provided that when a party gives any information to the conciliator subject to a specific condition that it be kept confidential, the conciliator shall not disclose that information to the other party.

71. Co-operation of parties with conciliator. – The parties shall in good faith co-operate with the conciliator and, in particular, shall endeavour to comply with requests by the conciliator to submit written materials, provide evidence and attend meetings.

72. Suggestions by parties for settlement of dispute. – Each party may, on his own initiative or at the invitation of the conciliator, submit to the conciliator suggestions for the settlement of the dispute.

73. Settlement agreement. – (1) When it appears to the conciliator that there exist elements of a settlement which may be acceptable to the parties, he shall formulate the terms of a possible settlement and submit them to the parties for their observations. After receiving the observations of the parties, the conciliator may reformulate the terms of a possible settlement in the light of such observations.
(2) If the parties reach agreement on a settlement of the dispute, they may draw up and sign a written settlement agreement. If requested by the parties, the conciliator may draw up, or assist the parties in drawing up, the settlement agreement.
(3) When the parties sign the settlement agreement, it shall be final and binding on the parties and persons claiming under them respectively.
(4) The conciliator shall authenticate the settlement agreement and furnish a copy thereof to each of the parties.

74. Status and effect of settlement agreement. – The settlement agreement shall have the same status and effect as if it is an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal under section 30.

75. Confidentiality. – Notwithstanding anything contained in any other law for the time being in force, the conciliator and the parties shall keep confidential all matters relating to the conciliation proceedings. Confidentiality shall extend also to the settlement agreement, except where its disclosure is necessary for purposes of implementation and enforcement.

76. Termination of conciliation proceedings. – The conciliation proceedings shall be terminated
(a) by the signing of the settlement agreement by the parties on the date of the agreement; or

(b) by a written declaration of the conciliator, after consultation with the parties, to the effect that further efforts at conciliation are no longer justified, on the date of the declaration; or

(c) by a written declaration of the parties addressed to the conciliator to the effect that the conciliation proceedings are terminated, on the date of the declaration; or

(d) by a written declaration of a party to the other party and the conciliator, if appointed, to the effect that the conciliation proceedings are terminated, on the date of the declaration.

77. Resort to arbitral or judicial proceedings. – The parties shall not initiate, during the conciliation proceedings, any arbitral or judicial proceedings in respect of a dispute that is the subject-matter of the conciliation proceedings except that a party may initiate arbitral or judicial proceedings where, in his opinion, such proceedings are necessary for preserving his rights.

78. Costs. – (1) Upon termination of the conciliation proceedings, the conciliator shall fix the costs of the conciliation and give written notice thereof to the parties.
(2) For the purpose of sub-section (1), costs means reasonable costs relating to
(a) the fee and expenses of the conciliator and witnesses requested by the conciliator with the consent of the parties;

(b) any expert advice requested by the conciliator with the consent of the parties;

(c) any assistance provided pursuant to clause (b) of sub-section (2) of section 64 and section 68;

(d) any other expenses incurred in connection with the conciliation proceedings and the settlement agreement.

(3) The costs shall be borne equally by the parties unless the settlement agreement provides for a different apportionment. All other expenses incurred by a party shall be borne by that party.
79. Deposits. – (1) The conciliator may direct each party to deposit an equal amount as an advance for the costs referred to in sub-section (2) of section 78 which he expects will be incurred.
(2) During the course of the conciliation proceedings, the conciliator may direct supplementary deposits in an equal amount from each party.
(3) If the required deposits under sub-sections (1) and (2) are not paid in full by both parties within thirty days, the conciliator may suspend the proceedings or may make a written declaration of termination of the proceedings to the parties, effective on the date of that declaration.
(4) Upon termination of the conciliation proceedings, the conciliator shall render an accounting to the parties of the deposits received and shall return any unexpended balance to the parties.

80. Role of conciliator in other proceedings. – Unless otherwise agreed by the parties,
(a) the conciliator shall not act as an arbitrator or as a representative or counsel of a party in any arbitral or judicial proceeding in respect of a dispute that is the subject of the conciliation proceedings;

(b) the conciliator shall not be presented by the parties as a witness in any arbitral or judicial proceedings.

81. Admissibility of evidence in other proceedings. – The parties shall not rely on or introduce as evidence in arbitral or judicial proceedings, whether or not such proceedings relate to the dispute that is the subject of the conciliation proceedings,
(a) views expressed or suggestions made by the other party in respect of a possible settlement of the dispute;

(b) admissions made by the other party in the course of the conciliation proceedings;

(c) proposals made by the conciliator;

(d) the fact that the other party had indicated his willingness to accept a proposal for settlement made by the conciliator.

Devider

Part IV

Supplementary Provisions

82. Power of High Court to make rules. – The High Court may make rules consistent with this Act as to all proceedings before the Court under this Act.

83. Removal of difficulties. – (1) If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order published in the Official Gazette, make such provisions, not inconsistent with the provisions of this Act as appear to it to be necessary or expedient for removing the difficulty:
Provided that no such order shall be made after the expiry of a period of two years from the date of commencement of this Act.
(2) Every order made under this section shall, as soon as may be after it is made, be laid before each House of Parliament.

84. Power to make rules. – (1) The Central Government may, by notification in the Official Gazette, make rules for carrying out the provisions of this Act.
(2) Every rule made by the Central Government under this Act shall be laid, as soon as may be, after it is made before each House of Parliament while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.

85. Repeal and saving. – (1) The Arbitration (Protocol and Convention) Act, 1937 (6 of 1937), the Arbitration Act, 1940 (10 of 1940) and the Foreign Awards (Recognition and Enforcement) Act, 1961 (45 of 1961) are hereby repealed.
(2) Notwithstanding such repeal,
(a) the provisions of the said enactments shall apply in relation to arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force;

(b) all rules made and notifications published, under the said enactments shall, to the extent to which they are not repugnant to this Act, be deemed respectively to have been made or issued under this Act.

86. Repeal of Ordinance 27 of 1996 and saving. – (1) The Arbitration and Conciliation (Third) Ordinance, 1996 (27 of 1996) is hereby repealed.
(2) Notwithstanding such repeal, any order, rule, notification or scheme made or anything done or any action taken in pursuance of any provision of the said Ordinance shall be deemed to have been made, done or taken under the corresponding provisions of this Act.

Devider

The First Schedule

See section 44

Convention on the Recognition and Enforcement of Foreign Arbitral Awards

Article I

1. This Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought.
2. The term arbitral awards shall include not only awards made by arbitrators appointed for each case but also those made by permanent arbitral bodies to which the parties have submitted.
3. When signing, ratifying or acceding to this Convention, or notifying extension under article X hereof, any State may on the basis of reciprocity declare that it will apply the Convention to the recognition and enforcement of awards made only in the territory of another Contracting State. It may also declare that it will apply the Convention only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the national law of the State making such declaration.
Article II

1. Each Contracting State shall recognise an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of defined legal relationship, whether contractual or not, concerning a subject-matter capable of settlement by arbitration.
2. The term agreement in writing shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.
3. The Court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative and incapable of being performed.
Article III

Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards.
Article IV

1. To obtain the recognition and enforcement mentioned in the preceding article, the party applying for recognition and enforcement shall, at the time of the application, supply:
(a) the duly authenticated original award or a duly certified copy thereof;

(b) the original agreement referred to in article II or a duly certified copy thereof.

2. If the said award or agreement is not made in an official language of the country in which the award is relied upon, the party applying for recognition and enforcement of the award shall produce a translation of these documents into such language. The translation shall be certified by an official or sworn translator or by a diplomatic or consular agent.

Article V

1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that
(a) the parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or

(b) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or

(c) the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration; provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognised and enforced; or

(d) the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or

(e) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that
(a) the subject-matter of the difference is not capable of settlement by arbitration under the law of that country; or

(b) the recognition or enforcement of the award would be contrary to the public policy of that country.

Article VI

If an application for the setting aside or suspension of the award has been made to a competent authority referred to in article V(1)(e), the authority before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security.
Article VII

1. The provisions of the present Convention shall not affect the validity of multilateral or bilateral agreements concerning the recognition and enforcement of arbitral awards entered into by the Contracting States nor deprive any interested party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by the law or the treaties of the country where such award is sought to be relied upon.
2. The Ganeva Protocol on Arbitration Clauses of 1923 and the Ganeva Convention on the Execution of Foreign Arbitral Awards of 1927 shall cease to have effect between Contracting States on their becoming bound and to the extent that they become bound by this Convention.

Article VIII

1. This Convention shall be open until 31st December, 1958 for signature on behalf of any Member of the United Nations and also on behalf of any other State which is or hereafter becomes member of any specialised agency of the United Nations, or which is or hereafter becomes a party to the Statute of the International Court of Justice, or any other State to which an invitation has been addressed by the General Assembly of the United Nations.
2. This Convention shall be ratified and the instrument of ratification shall be deposited with the Secretary-General of the United Nations.
Article IX

1. This Convention shall be open for accession to all States referred to in article VIII.
2. Accession shall be effected by the deposit of an instrument of accession with the Secretary-General of the United Nations.
Article X

1. Any State may, at the time of signature, ratification or accession, declare that this Convention shall extend to all or any of the territories for the international relations of which it is responsible. Such a declaration shall take effect when the Convention enters into force for the State concerned.
2. At any time thereafter any such extension shall be made by notification addressed to the Secretary-General of the United Nations and shall take effect as from the ninetieth day after the day of receipt by the Secretary-General of the United Nations of this notification, or as from the date of entry into force of the Convention for the State concerned, whichever is the later.
3. With respect to those territories to which this Convention is not extended at the time of signature, ratification or accession, each State concerned shall consider the possibility of taking the necessary steps in order to extend the application of this Convention to such territories, subject, where necessary for constitutional reasons, to the consent of the Governments of such territories.

Article XI

In the case of a federal or non-unitary State, the following provisions shall apply:
(a) with respect of those articles of this Convention that come within the legislative jurisdiction of the federal authority, the obligations of the federal Government shall to this extent be the same as those of Contracting States which are not federal States;
(b) with respect to those articles of this Convention that come within the legislative jurisdiction of constituent States or provinces which are not, under the constitutional system of the federation, bound to take legislative action, the federal Government shall bring such articles with a favourable recommendation to the notice of the appropriate authorities of constituent States or provinces at the earliest possible moment;
(c) a federal State Party to this Convention shall, at the request of any other Contracting State transmitted through the Secretary-General of the United Nations, supply a statement of the law and practice of the federation and its constituent units in regard to any particular provision of this Convention, showing the extent to which effect has been given to that provision by legislative or other action.

Article XII

1. This Convention shall come into force on the ninetieth day following the date of deposit of the third instrument of ratification or accession.
2. For each State ratifying or acceding to this Convention after the deposit of the third instrument of ratification or accession, this Convention shall enter into force on the ninetieth day after deposit by such State of its instrument of ratification or accession.
Article XIII

1. Any Contracting State may denounce this Convention by a written notification to the Secretary-General of the United Nations. Denunciation shall take effect one year after the date of receipt of the notification by the Secretary-General.
2. Any State which has made a declaration or notification under article X may, at any time thereafter, by notification to the Secretary-General of the United Nations, declare that this Convention shall cease to extend to the territory concerned one year after the date of the receipt of the notification by the Secretary-General.
3. This Convention shall continue to be applicable to arbitral awards in respect of which recognition or enforcement proceedings have been instituted before the denunciation takes effect.
Article XIV

A Contracting State shall not be entitled to avail itself of the present Convention against other Contracting States except to the extent that it is itself bound to apply the Convention.

Article XV

The Secretary-General of the United Nations shall notify the States contemplated in article VIII of the following:
(a) signatures and ratifications in accordance with article VIII;
(b) accessions in accordance with article IX;
(c) declarations and notifications under articles I, X and XI;
(d) the date upon which this Convention enters into force in accordance with article XII;
(e) denunciations and notifications in accordance with article XIII.
Article XVI

1. This Convention, of which the Chinese, English, French, Russian and Spanish texts shall be equally authentic, shall be deposited in the archives of the United Nations.
2. The Secretary-General of the United Nations shall transmit a certified copy of this Convention to the States contemplated in article XIII.

Devider

The Second Schedule

See section 53

Protocol on Arbitration Clauses

The undersigned being duly authorised, declare that they accept, on behalf of the countries which they represent, the following provisions:
1. Each of the Contracting States recognises the validity of an agreement whether relating to existing or future differences between parties subject respectively to the jurisdiction of different Contracting States by which the parties to a contract agree to submit to arbitration all or any differences that may arise in connection with such contract relating to commercial matters or to any other matter capable of settlement by arbitration, whether or not the arbitration is to take place in a country to whose jurisdiction none of the parties is subject.
Each Contracting State reserves the right to limit the obligation mentioned above to contracts which are considered as commercial under its national law. Any Contracting State which avails itself of this right will notify the Secretary-General of the League of Nations in order that the other Contracting States may be so informed.
2. The arbitral procedure, including the constitution of the Arbitral Tribunal, shall be governed by the will of the parties and by the law of the country in whose territory the arbitration takes place.
The Contracting States agree to facilitate all steps in the procedure which require to be taken in their own territories, in accordance with the provisions of their law governing arbitral procedure applicable to existing differences.
3. Each Contracting State undertakes to ensure the execution by its authorities and in accordance with the provisions of its national laws of arbitral awards made in its own territory under the preceding articles.
4. The Tribunals of the Contracting Parties, on being seized of a dispute regarding a contract made between persons to whom Article I applies and including an Arbitration Agreement whether referring to present or future differences which is valid in virtue of the said article and capable of being carried into effect, shall refer the parties on the application of either of them to the decision of the Arbitrators.
Such reference shall not prejudice the competence of the judicial tribunals in case the agreement or the arbitration cannot proceed or becomes inoperative.
5. The present Protocol, which shall remain open for signature by all States, shall be ratified. The ratification shall be deposited as soon as possible with the Secretary-General of the League of Nations, who shall notify such deposit to all the Signatory States.
6. The present Protocol will come into force as soon as two ratifications have been deposited. Thereafter it will take effect, in the case of each Contracting State, one month after the notification by the Secretary-General of the deposit of its ratification.
7. The present Protocol may be denounced by any Contracting State on giving one years notice. Deunciation shall be effected by a notification addressed to the Secretary-General of the League, who will immediately transmit copies of such notification to all the other Signatory States and inform them of the date on which it was received. The denunciation shall take effect one year after the date on which it was notified to the Secretary-General, and shall operate only in respect of the notifying State.
8. The Contracting States may declare that their acceptance of the present Protocol does not include any or all of the under-mentioned territories: that is to say, their colonies, overseas possessions or territories, protectorates or the territories over which they exercise a mandate.
The said States may subsequently adhere separately on behalf of any territory thus excluded. The Secretary-General of the League of Nations shall be informed as soon as possible of such adhesions. He shall notify such adhesions to all Signatory States. They will take effect one month after the notification by the Secretary-General to all Signatory States.
The Contracting States may also denounce the Protocol separately on behalf of any of the territories referred to above. Article 7 applies to such denunciation.

Devider

The Third Schedule

See section 53

Convention on the Execution of Foreign Arbitral Awards

Article 1.

(1) In the territories of any High Contracting Party to which the present Convention applies, an arbitral award made in pursuance of an agreement, whether relating to existing or future differences (hereinafter called a submission to arbitration) covered by the Protocol on Arbitration Clauses opened at Geneva on September 24th, 1923, shall be recognised as binding and shall be enforced in accordance with the rules of the procedure of the territory where the award is relied upon, provided that the said award has been made in a territory of one of the High Contracting Parties to which the present Convention applies and between persons who are subject to the jurisdiction of one of the High Contracting Parties.
(2) To obtain such recognition or enforcement, it shall, further, be necessary:
(a) that the award has been made in pursuance of a submission to arbitration which is valid under the law applicable thereto;

(b) that the subject-matter of the award is capable of settlement by arbitration under the law of the country in which the award is sought to be relied upon;

(c) that the award has been made by the Arbitral Tribunal provided for in the submission to arbitration or constituted in the manner agreed upon by the parties and in conformity with the law governing the arbitration procedure;

(d) that the award has become final in the country in which it has been made, in the sense that it will not be considered as such if it is open to opposition, appeal or pourvoi en cessation (in the countries where such forms of procedure exist) or if it is proved that any proceedings for the purpose of contesting the validity of the award are pending;

(e) that the recognition or enforcement of the award is not contrary to the public policy or to the principles of the law of the country in which it is sought to be relied upon.

Article 2.

Even if the conditions laid down in Article I hereof are fulfilled, recognition and enforcement of the award shall be refused if the Court is satisfied:
(a) that the award has been annulled in the country in which it was made;

(b) that the party against whom it is sought to use the award was not given notice of the arbitration proceedings in sufficient time to enable him to present his case; or that, being under a legal incapacity, he was not properly represented;

(c) that the award does not deal with the differences contemplated by or falling within the terms of the submission to arbitration or that it contains decisions on matters beyond the scope of the submission to arbitration.

If the award has not covered all the questions submitted to the arbitral tribunal, the competent authority of the country where recognition or enforcement of the award is sought can, if it thinks fit, postpone such recognition or enforcement or grant it subject to such guarantee as that authority may decide.
Article 3.

If the party against whom the award has been made proves that, under the law governing the arbitration procedure, there is a ground, other than the grounds referred to in Article 1(a) and (c), and Article 2(b) and (c), entitling him to contest the validity of the award in a Court of Law, the Court may, if it thinks fit, either refuse recognition or enforcement of the award or adjourn the consideration thereof, giving such party a reasonable time within which to have the award annulled by the competent tribunal.
Article 4.

The party relying upon an award or claiming its enforcement must supply, in particular:
(1) the original award or a copy thereof duly authenticated, according to the requirements of the law of the country in which it was made;
(2) documentary or other evidence to prove that the award has become final, in the sense defined in Article 1(d), in the country in which it was made;
(3) when necessary, documentary or other evidence to prove that the conditions laid down in Article 1, paragraph (1) and paragraph (2)(a) and (c), have been fulfilled.
A translation of the award and of the other documents mentioned in this Article into the official language of the country where the award is sought to be relied upon may be demanded. Such translations must be certified correct by a diplomatic or consular agent of the country to which the party who seeks to rely upon the award belongs or by sworn translator of the country where the award is sought to be relied upon.
Article 5.

The provisions of the above Articles shall not deprive any interested party of the right of availing himself of an arbitral award in the manner and to the extent allowed by the law or the treaties of the country where such award is sought to be relied upon.
Article 6.

The present Convention applies only to arbitral awards made after the coming into force of the Protocol on Arbitration Clauses opened at Geneva on September 24th, 1923.
Article 7.

The present Convention, which will remain open to the signature of all the signatories of the Protocol of 1923 on Arbitration Clauses, shall be ratified.
It may be ratified only on behalf of those Members of the League of Nations and Non-Member States on whose behalf the Protocol of 1923 shall have been ratified.
Ratification shall be deposited as soon as possible with the Secretary-General of the League of Nations, who will notify such deposit to all the signatories.
Article 8.

The present Convention shall come into force three months after it shall have been ratified on behalf of two High Contracting Parties. Thereafter, it shall take effect, in the case of each High Contracting Party, three months after the deposit of the ratification on its behalf with the Secretary-General of the League of Nations.
Article 9.

The present Convention may be denounced on behalf of any Member of the League or Non-Member State. Denunciation shall be notified in writing to the Secretary-General of the League of Nations, who will immediately send a copy thereof, certified to be in conformity with the notifications, to all the other Contracting Parties, at the same time informing them of the date on which he received it.
The denunciation shall come into force only in respect of the High Contracting Party which shall have notified it and one year after such notification shall have reached the Secretary-General of the League of Nations.
The denunciation shall come into force only in respect of the High Contracting Party which shall have notified it and one year after such notification shall have reached the Secretary-General of the League of Nations.
The denunciation of the Protocol on Arbitration Clauses shall entail, ipso facto, the denunciation of the present Convention.
Article 10.

The present Convention does not apply to the Colonies, Protectorates or Territories under suzerainty or mandate of any High Contracting Party unless they are specially mentioned.
The application of this Convention to one or more of such Colonies, Protectorates or Territories to which the Protocol on Arbitration Clauses opened at Geneva on September 24th, 1923, applies, can be effected at any time by means of a declaration addressed to the Secretary-General of the League of Nations by one of the High Contracting Parties.
Such declaration shall take effect three months after the deposit thereof.
The High Contracting Parties can at any time denounce the Convention for all or any of the Colonies, Protectorates or territories referred to above. Article 9 hereof applied to such denunciation.
Article 11.

A certified copy of the present Convention shall be transmitted by the Secretary-General of the League of Nations to every Member of the League of Nations and to every Non-Member State which signs the same.

Devider

[The Fourth Schedule]

[See section 11 (14)]

Sum in dispute Model fee
Up to Rs. 5,00,000 Rs. 45,000
Above Rs. 5,00,000 and up to Rs. 20,00,000 Rs. 45,000 plus 3.5 per cent. of the claim amount over and above Rs. 5,00,000
Above Rs. 20,00,000 and up to Rs. 1,00,00,000 Rs. 97,500 plus 3 per cent. of the claim amount over and above Rs. 20,00,000
Above Rs. 1,00,00,000 and up to Rs. 10,00,00,000 Rs. 3,37,500 plus 1 per cent. of the claim amount over and above Rs. 1,00,00,000
Above Rs. 10,00,00,000 and Rs. 20,00,00,000 up to Rs. 12,37,500 plus 0.75 per cent. of the claim amount over and above Rs. 1,00,00,000
Above Rs. 20,00,00,000 Rs. 19,87,500 plus 0. 5 per cent. of the claim amount over and above Rs. 20,00,00,000 with a ceiling of Rs. 30,00,000

Note. – In the event, the arbitral tribunal is a sole arbitrator, he shall be entitled to an additional amount of twenty-five per cent. on the fee payable as per the table set out above.

Devider

[The Fifth Schedule]

[See section 12 (1)(b)]

The following grounds give rise to justifiable doubts as to the independence or impartiality of arbitrators:
Arbitrator’s relationship with the parties or counsel
1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party.
2. The arbitrator currently represents or advises one of the parties or an affiliate of one of the parties.
3. The arbitrator currently represents the lawyer or law firm acting as counsel for one of the parties.
4. The arbitrator is a lawyer in the same law firm which is representing one of the parties.
5. The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration.
6. The arbitrator’s law firm had a previous but terminated involvement in the case without the arbitrator being involved himself or herself.
7. The arbitrator’s law firm currently has a significant commercial relationship with one of the parties or an affiliate of one of the parties.
8. The arbitrator regularly advises the appointing party or an affiliate of the appointing party even though neither the arbitrator nor his or her firm derives a significant financial income therefrom.
9. The arbitrator has a close family relationship with one of the parties and in the case of companies with the persons in the management and controlling the company.
10. A close family member of the arbitrator has a significant financial interest in one of the parties or an affiliate of one of the parties.
11. The arbitrator is a legal representative of an entity that is a party in the arbitration.
12. The arbitrator is a manager, director or part of the management, or has a similar controlling influence in one of the parties.
13. The arbitrator has a significant financial interest in one of the parties or the outcome of the case.
14. The arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her firm derives a significant financial income therefrom.
Relationship of the arbitrator to the dispute.
15. The arbitrator has given legal advice or provided an expert opinion on the dispute to a party or an affiliate of one of the parties.
16. The arbitrator has previous involvement in the case.
Arbitrator’s direct or indirect interest in the dispute
17. The arbitrator holds shares, either directly or indirectly, in one of the parties or an affiliate of one of the parties that is privately held.
18. A close family member of the arbitrator has a significant financial interest in the outcome of the dispute.
19. The arbitrator or a close family member of the arbitrator has a close relationship with a third party who may be liable to recourse on the part of the unsuccessful party in the dispute.
Previous services for one of the parties or other involvement in the case
20. The arbitrator has within the past three years served as counsel for one of the parties or an affiliate of one of the parties or has previously advised or been consulted by the party or an affiliate of the party making the appointment in an unrelated matter, but the arbitrator and the party or the affiliate of the party have no ongoing relationship.
21. The arbitrator has within the past three years served as counsel against one of the parties or an affiliate of one of the parties in an unrelated matter.
22. The arbitrator has within the past three years been appointed as arbitrator on two or more occasions by one of the parties or an affiliate of one of the parties.
23. The arbitrator’s law firm has within the past three years acted for one of the parties or an affiliate of one of the parties in an unrelated matter without the involvement of the arbitrator.
24. The arbitrator currently serves, or has served within the past three years, as arbitrator in another arbitration on a related issue involving one of the parties or an affiliate of one of the parties.
Relationship between an arbitrator and another arbitrator or counsel
25. The arbitrator and another arbitrator are lawyers in the same law firm.
26. The arbitrator was within the past three years a partner of, or otherwise affiliated with, another arbitrator or any of the counsel in the same arbitration.
27. A lawyer in the arbitrator’s law firm is an arbitrator in another dispute involving the same party or parties or an affiliate of one of the parties.
28. A close family member of the arbitrator is a partner or employee of the law firm representing one of the parties, but is not assisting with the dispute.
29. The arbitrator has within the past three years received more than three appointments by the same counsel or the same law firm.
Relationship between arbitrator and party and others involved in the arbitration
30. The arbitrator’s law firm is currently acting adverse to one of the parties or an affiliate of one of the parties.
31. The arbitrator had been associated within the past three years with a party or an affiliate of one of the parties in a professional capacity, such as a former employee or partner.
Other circumstances
32. The arbitrator holds shares, either directly or indirectly, which by reason of number or denomination constitute a material holding in one of the parties or an affiliate of one of the parties that is publicly listed.
33. The arbitrator holds a position in an arbitration institution with appointing authority over the dispute.
34. The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties, where the affiliate is not directly involved in the matters in dispute in the arbitration.
Explanation 1. – The term “close family member” refers to a spouse, sibling, child, parent or life partner.
Explanation 2. – The term “affiliate” encompasses all companies in one group of companies including the parent company.
Explanation 3. – For the removal of doubts, it is clarified that it may be the practice in certain specific kinds of arbitration, such as maritime or commodities arbitration, to draw arbitrators from a small, specialised pool. If in such fields it is the custom and practice for parties frequently to appoint the same arbitrator in different cases, this is a relevant fact to be taken into account while applying the rules set out above.

[The Sixth Schedule]

[See section 12 (1)(b)]

Name:
Contact Details:
Prior Experience (Including Experience With Arbitrations):
Number Of Ongoing Arbitrations:
Circumstances disclosing any past or present relationship with or interest in any of the parties or in relation to the subject-matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to your Independence or Impartiality (List Out):
Circumstances which are likely to affect your ability to devote sufficient time to the arbitration and in particular your ability to finish the entire arbitration within twelve months (list out):

Devider

[The Seventh Schedule]

[See section 12 (5)]

Arbitrator’s relationship with the parties or counsel
1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party.
2. The arbitrator currently represents or advises one of the parties or an affiliate of one of the parties.
3. The arbitrator currently represents the lawyer or law firm acting as counsel for one of the parties.
4. The arbitrator is a lawyer in the same law firm which is representing one of the parties.
5. The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration.
6. The arbitrator’s law firm had a previous but terminated involvement in the case without the arbitrator being involved himself or herself.
7. The arbitrator’s law firm currently has a significant commercial relationship with one of the parties or an affiliate of one of the parties.
8. The arbitrator regularly advises the appointing party or an affiliate of the appointing party even though neither the arbitrator nor his or her firm derives a significant financial income therefrom.
9. The arbitrator has a close family relationship with one of the parties and in the case of companies with the persons in the management and controlling the company.
10. A close family member of the arbitrator has a significant financial interest in one of the parties or an affiliate of one of the parties.
11. The arbitrator is a legal representative of an entity that is a party in the arbitration.
12. The arbitrator is a manager, director or part of the management, or has a similar controlling influence in one of the parties.
13. The arbitrator has a significant financial interest in one of the parties or the outcome of the case.
14. The arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her firm derives a significant financial income therefrom.
Relationship of the arbitrator to the dispute
15. The arbitrator has given legal advice or provided an expert opinion on the dispute to a party or an affiliate of one of the parties.
16. The arbitrator has previous involvement in the case.
Arbitrator’s direct or indirect interest in the dispute
17. The arbitrator holds shares, either directly or indirectly, in one of the parties or an affiliate of one of the parties that is privately held.
18. A close family member of the arbitrator has a significant financial interest in the outcome of the dispute.
19. The arbitrator or a close family member of the arbitrator has a close relationship with a third party who may be liable to recourse on the part of the unsuccessful party in the dispute.
Explanation 1. – The term “close family member” refers to a spouse, sibling, child, parent or life partner.
Explanation 2. – The term “affiliate” encompasses all companies in one group of companies including the parent company.
Explanation 3. – For the removal of doubts, it is clarified that it may be the practice in certain specific kinds of arbitration, such as maritime or commodities arbitration, to draw arbitrators from a small, specialised pool. If in such fields it is the custom and practice for parties frequently to appoint the same arbitrator in different cases, this is a relevant fact to be taken into account while applying the rules set out above.

Introduction to the Indian Law of Arbitration and Conciliation Act 1996

Arbitration is a mechanism or a method of resolution of disputes that unlike court takes place in private, pursuant to agreement between the parties. The parties agree to be bound by the decision rendered by a chosen arbitrator after giving hearing. The endeavour of the court should be to honour and support the award as far as possible[Markfed Vanaspati & Allied  vs Union Of India on 14 September, 2007]

Russell on Arbitration 19th Edition at Pages 110-111 described the entire genesis of arbitration as under:- An arbitrator is neither more or less than a private judge of a private court (called an arbitral tribunal) who gives a private judgment (called an award). He is a judge in that a dispute is submitted to him; he is not a mere investigator but a person before whom material is placed by the parties, being either or both of evidence and submissions; he gives a decision in accordance with his duty to hold the scales fairly between the disputants in accordance with some recognized system of law and rules of natural justice. He is private in so far as (1) he is chosen and paid by the disputants (2) he does not sit in public (3) he acts in accordance with privately chosen procedure so far as that is not repugnant to public policy (4) so far as the law allows he is set up to the exclusion of the State Courts (5) his authority and powers are only whatsoever he is given by the disputants agreement (6) the effectiveness of his powers derives wholly from the private law of contract and accordingly the nature and exercise of those powers must not be contrary to the proper law of the contract or the public policy of England bearing in mind that the paramount public policy is that freedom of contract is not lightly to be inferred with.Whatever has been mentioned by Russell in this paragraph is equally true for Indian Arbitrators

The Arbitration and Conciliation Act, 1996 which has repealed the Arbitration Act of 1940 and which seeks to achieve the twin objectives of obliging the Arbitral Tribunal to give reasons for its arbitral award and reducing the supervisory role of Courts in arbitration proceedings. Section 31(3) of the said Act obliges the arbitral tribunal to state the reasons upon which it is based unless the parties have agreed that no reasons be given or the arbitral award is based on consent of the parties. There is, therefore, a paradigm shift in the legal position under the new Act which prescribes a uniform requirement for the arbitrators to give reasons except in the two situations mentioned above. The change in the legal approach towards arbitration as an Alternative Dispute Resolution Mechanism is perceptible both in regard to the requirement of giving reasons and the scope of interference by the Court with arbitral awards. While in regard to requirement of giving reasons the law has brought in dimensions not found under the old Act, the scope of interference appears to be shrinking in its amplitude, no matter judicial pronouncements at time appear to be heading towards a more expansive approach, that may appear to some to be opening up areas for judicial review on newer grounds falling under the caption “Public Policy” appearing in Section 34 of the Act. [M/S Anand Brothers P.Ltd.Tr.M.D vs Union Of India & Ors on 4 September, 2014]

Devider

This Paper Covers following Topics :

Indian Arbitration 

The Statute
FICCI Tribunal of Arbitration
Services in Arbitrations in India
Notifications and Circulars
Press Releases
Schemes, Reports & Forms
List of Institutions Providing
Supreme Court Judgments

International Arbitration

UNCITRAL Model Laws
International Convention and Treaties
International Statutes
International Arbitral Institutions-Rules & Procedures
Rules and Procedures of Other Institutions
Disputes Settled by Permanent Court of Arbitration
Institutional and Specialized Arbitration
International Commercial Arbitration

Sports Arbitration

  • International Cases
  • Model Arbitration Agreement
  • Model Arbitration Award (Domestic)

Devider

Arbitration and Conciliation Act, 1996

 PART I

Arbitration

1. General Provisions

2. Arbitration Agreement

3. Composition of Arbitral Tribunal [Ss. 10–11]

4. Jurisdiction of Arbitral Tribunals

5. Conduct of Arbitral Proceedings

6. Making of Arbitral Award and Termination of Proceedings

7. Recourse Against Arbitral Award

8. Finality and Enforcement of Arbitral Awards

9. Appeals

10. Miscellaneous

 PART II

Enforcement of Certain Foreign Awards

1. New York Convention Awards

2. Geneva Convention Awards

 PART III

Conciliation

Conciliation

 PART IV

Supplementary Provisions

Supplementary Provisions

First Schedule

Second Schedule

Third Schedule

 PART V

Alternative Disputes Redressal

Devider

 

Setting aside an Arbitral Award in India

The Arbitration and Conciliation Act, 1996

34. Application for setting aside arbitral award.

(1)Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).

(2)An arbitral award may be set aside by the Court only if—

(a)the party making the application furnishes proof that—

(i)a party was under some incapacity, or

(ii)the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or

(iii)the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iv)the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or

(v)the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or

(b)the Court finds that—

(i)the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or

(ii)the arbitral award is in conflict with the public policy of India.

Explanation 1. For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,—

(i)the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or

(ii)it is in contravention with the fundamental policy of Indian law; or

(iii)it is in conflict with the most basic notions of morality or justice.

Explanation 2.—For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.

(2A)An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:

Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.

(3)An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.

(4)On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.

(5)An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement.

(6)An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party.

COMMENT –The principle of Intervention:  The law with regard to Section 34 of Arbitration and Conciliation Act, 1996, is well settled that the jurisdiction of the Court to interfere with the award made by an arbitrator is very limited and consequently the court while entertaining an objection petition under Section 34 of the said Act cannot sit as a Court of Appeal and that evidence is not to be re- appreciated. The Apex Court in the case of Markfed Vanaspati and Allied Industries v. Union of India reported in (2007) 7 Supreme Court Cases 679, while relying on Bijendra Nath Srivastava (Dead) through LRs v. Mayank Srivastava And Others reported in (1994) 6 Supreme Court Cases 117, has observed that “the arbitrator is the sole judge of the quality as well as the quantity of the evidence. It will not be for the court to take upon itself the task of being a judge of the evidence before the arbitrator. The court should approach an award with a desire to support it, if that is reasonably possible, rather than to destroy it by calling it illegal.” Further in Mcdermott International Inc. v. Burn Standard Co. Ltd. & Ors reported in (2006) 11 SCC 181 it has been held by the Apex Court that “the 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only like, in case of fraud or bias by the arbitrators, violation of natural justice, etc.” Recently, the observations of the Apex Court in para 21 in P.R. Shah, Shares and Stock Brokers Private Limited v. B.H.H. Securities Private Limited And Others reported in (2012) 1 Supreme Court Cases 594 is worth noting in this respect. Para 21 reads as under:-
“21. A court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34 (2) of the Act. Therefore, in the absence of any ground under section 34 (2) of the Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at.”

Appreciation of facts and evidence: Where the Arbitral Tribunal has assessed the material and evidence placed before it in detail, the court while considering the objections under Section 34 of the said Act does not sit as a court of appeal and is not expected to re-appreciate the entire evidence and reassess the case of the parties. The jurisdiction under section 34 is not appellate in nature and an award passed by an Arbitrator cannot be set aside on the ground that it was erroneous. It is not open to the court to interfere with the award merely because in the opinion of the court, another view is possible. The duty of the court in these circumstances is to see whether the view taken by the Arbitrator is a plausible view on the facts, pleadings and evidence before the Arbitrator. Even if on the assessment of material, the court while considering the objections under section 34 is of the view that there are two views possible and the Arbitral Tribunal has taken one of the possible views which could have been taken on the material before it, the court would be reluctant to interfere. The court is not to substitute its view with the view of the Arbitrator if the view taken by the Arbitrator is reasonable and plausible.

A Civil Court examining the validity of an arbitral award under Section 34 of the AC Act exercises supervisory and not appellate jurisdiction over the awards of an arbitral tribunal.

A Civil Court examining the validity of an arbitral award under Section 34 of the Act exercises supervisory and not appellate jurisdiction over the awards of an arbitral tribunal. A court can set aside an arbitral award, only if any of the grounds mentioned in Sections 34(2)(a)(i) to (v) or Section 34(2)(b)(i) and (ii), or Section 28(1)(a) or 28(3) read with Section 34(2)(b)(ii) of the Act, are made out. An award adjudicating claims which are `excepted matters’ excluded from the scope of arbitration, would violate Section 34(2)(a)(iv) and 34(2)(b) of the Act. Making an award allowing or granting a claim, contrary to any provision of the contract, would violate Section 34(2)(b)(ii) read with Section 28(3) of the Act.[J.G. Engineers Pvt. Ltd. Versus Union of India and Another AIR 2011 SC 2477 : JT 2011 (5) SC 380 : (2011) 5 SCALE 46 : (2011) 5 SCC 758]

Whether the reference to ADR Process is mandatory Under Section 89 of Code [CPC]

Section 89 starts with the words “where it appears to the court that there exist elements of a settlement”. This clearly shows that cases which are not suited for ADR process should not be referred under section 89 of the Code. The court has to form an opinion that a case is one that is capable of being referred to and settled through ADR process. Having regard to the tenor of the provisions of Rule 1A of Order 10 of the Code, the civil court should invariably refer cases to ADR process. Only in certain recognized excluded categories of cases, it may choose not to refer to an ADR process. Where the case is unsuited for reference to any of the ADR process, the court will have to briefly record the reasons for not resorting to any of the settlement procedures prescribed under section 89 of the Code. Therefore, having a hearing after completion of pleadings, to consider recourse to ADR process under section 89 of the Code, is mandatory. But actual reference to an ADR process in all cases is not mandatory. Where the case falls under an excluded category there need not be reference to ADR process. In all other case reference to ADR process is a must.

The following categories of cases are normally considered to be not suitable for ADR process having regard to their nature :

(i) Representative suits under Order 1 Rule 8 CPC which involve public interest or interest of numerous persons who are not parties before the court. (In fact, even a compromise in such a suit is a difficult process requiring notice to the persons interested in the suit, before its acceptance).

(ii) Disputes relating to election to public offices (as contrasted from disputes between two groups trying to get control over the management of societies, clubs, association etc.).

(iii) Cases involving grant of authority by the court after enquiry, as for example, suits for
grant of probate or letters of administration.

(iv) Cases involving serious and specific allegations of fraud, fabrication of documents, forgery, impersonation, coercion etc.

(v) Cases requiring protection of courts, as for example, claims against minors, deities and mentally challenged and suits for declaration of title against government.

(vi) Cases involving prosecution for criminal offences.

All other suits and cases of civil nature in particular the following categories of cases (whether pending in civil courts or other special Tribunals/Forums) are normally suitable for ADR processes :

(i) All cases relating to trade, commerce and contracts, including
• disputes arising out of contracts (including all money claims);
• disputes relating to specific performance;
• disputes between suppliers and customers;
• disputes between bankers and customers;
• disputes between developers/builders and customers;
• disputes between landlords and tenants/licensor and licensees;(2008) 2 SCC 660
28
• disputes between insurer and insured;

(ii) All cases arising from strained or soured relationships, including
• disputes relating to matrimonial causes, maintenance, custody of children;
• disputes relating to partition/division among family members/co- parceners/
co-owners; and
• disputes relating to partnership among partners.

(iii) All cases where there is a need for continuation of the pre-existing relationship in
spite of the disputes, including
• disputes between neighbours (relating to easementary rights, encroachments,
nuisance etc.);
• disputes between employers and employees;
• disputes among members of societies/associations/Apartment owners
Associations;

(iv) All cases relating to tortious liability including
• claims for compensation in motor accidents/other accidents; and

(v) All consumer disputes including
• disputes where a trader/supplier/manufacturer/service provider is keen to
maintain his business/professional reputation and credibility or `product
popularity.

The above enumeration of `suitable’ and `unsuitable’ categorization of cases is not intended to be exhaustive or rigid. They are illustrative, which can be subjected to just exceptions or additions by the court/Tribunal exercising its jurisdiction/discretion in referring a dispute/ case to an ADR process. [ AFCONs Infrastructure Ltd. and AnOTHER Vs Cherian Varkey Construction Co. (P) Ltd. and OTHERS [ALL SC 2010 JULY ]

Purushottam S/o. Tulsiram Badwaik Vs. Anil & Ors.[ALL SC 2018 MAY]

KEYWORDS:- Arbitration Agreement-

c

DATE:- May 2, 2018

The validity of an arbitration agreement does not depend on the number of arbitrators specified therein. The number of arbitrators is dealt with separately in Section 10 which is a part of machinery provision for the working of the arbitration agreement. It is, therefore, clear that an arbitration agreement specifying an even number of arbitrators cannot be a ground to render the arbitration agreement invalid under the New Act

ACTS:-Section 8 of the Arbitration and Conciliation Act, 1996

SUPREME COURT OF INDIA

Purushottam S/o. Tulsiram Badwaik Vs. Anil & Ors.

[Civil Appeal No.4664 of 2018 arising out of SLP (Civil) No.14589 of 2016]

Uday Umesh Lalit, J.

1. Leave granted.

2. Rejection of application preferred by the appellant under Section 8 of the Arbitration and Conciliation Act, 1996 (“1996 Act” for short) as affirmed by the High Court of Bombay at Nagpur by its judgment and order dated 10.12.2015 in Civil Revision Application No.88 of 2015, is under challenge in this appeal.

3. The appellant and the respondents had entered into a Partnership Agreement dated 09.11.2005. Clause 15 of said Partnership Agreement was as under:

“15) That in case of any dispute between the partners as regards interpretation of this Deed or any other matter connected with the partnership business, the same shall be referred to for arbitration in accordance with the provisions of Indian Arbitration Act, 1940, and the decision of the Arbitrator shall be final and binding on all the partners.”

4. The appellant had also executed a registered Power of Attorney on 28.12.2006 in favour of the partners. In April 2014 the respondents filed Special Civil Suit No.16 of 2014 in the Court of Civil Judge, Senior Division, Bhandara for declaration, damages, accounts and permanent injunction against the appellant. Soon after receipt of the notice, the appellant preferred an application under Section 8 of 1996 Act to refer the dispute to arbitration in view of aforesaid clause 15 in the Partnership Agreement. The matter was contested. The Trial Court rejected said application by its order dated 05.01.2015. It was held that aforesaid clause 15 was vague, that there was no reference as to who should be the arbitrator, that there was no mention about selection of the arbitrator and that the dispute did not form subject matter of agreement within the meaning of Section 8 of 1996 Act.

5. The matter was carried further by the appellant by filing Civil Revision Application No.88 of 2015 in the High Court. The High Court took the view that the relevant clause indicated agreement between the parties to refer the disputes to arbitration as per provisions of the Indian Arbitration Act, 1940, (1940 Act, for short) although the Partnership Agreement was entered into much after the enactment of 1996 Act. Relying on portion of para 35 of the decision of this Court in Thyssen Stahlunion GMBH v. Steel Authority of India Ltd.1 and on the decision of a learned Single Judge of the Patna High Court in Rajan Kumar Verma and anr. v. Sachchidanand Singh2, the High Court observed in paragraphs 6 and 7 as under :- “The Supreme Court in Thyssen Stahlunion GMBH (supra) has observed in paragraph 35 of its judgment as under:

“35. Parties can agree to the applicability of the new Act even before the new Act comes into force and when the old Act is still holding the field. There is nothing in the language of Section 85(2)(a) which bars the parties from so agreeing. There is, however, a bar that they cannot agree to the applicability of the old Act after the new Act has come into force when arbitral proceedings under the old Act have not commenced though the arbitral agreement was under the old Act.” From aforesaid observations of the Supreme Court, it can be seen that if the arbitration proceedings had not been commenced under the Act of 1940 till the Act of 1996 came into force, same could not be commenced thereafter.

It has further been observed that there is a bar to agree to the applicability of the Act of 1940 after the Act of 1996 has come into force. Similar view taken in Rajan Kumar Verma (supra) by learned Single Judge of the Patna High Court stands upheld in view of rejection of the challenge thereto before the Supreme Court.” The High Court thus rejected the challenge and dismissed said Civil Revision by its judgment under appeal.

6. In support of this appeal, Mr. Chirag M. Shroff, learned Advocate submitted :-

(a) The reference to the 1940 Act in the partnership deed dated 09.11.2005 has to be necessarily referred to Arbitration process, as prevalent on the date of signing of the Agreement.

(b) The mention of 1940 Act will not defeat the intention of the parties to go for arbitration as a dispute resolution mechanism.

7. On the other hand, Mr. Amol Nirmalkumar Suryawanshi, learned Advocate appearing for the respondent submitted that the question as to whether 1996 Act or 1940 Act would govern the relationship between the parties was so fundamental that mistakes in that behalf would invalidate the entire arbitration clause and as such the courts below were justified in rejecting the submissions advanced by the appellant.

8. In the present case though the Partnership Agreement was entered into after 1996 Act had come into force, the relevant clause made reference to “arbitration in accordance with the provisions of Indian Arbitration Act, 1940”. It is not the case of the respondent that the agreement between the parties suffered from any infirmity on account of fraud, coercion, undue influence or misrepresentation. What is however projected is that the reference to arbitration in terms of 1940 Act was such a fundamental mistake that it would invalidate the entire arbitration clause and as such there could not be any reference to arbitration at all.

9. The term “Arbitration Agreement” has been defined in Section 7 of 1996 Act as under :-

“7. Arbitration agreement. –

(1) In this Part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained in –

(a) a document signed by the parties;

(b) an exchange of letters, telex telegrams or other means of telecommunication (including communication through electronic means) which provide a record of the agreement; or

(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.

(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make the arbitration clause part of the contract.”

10. Thus the basic requirements for an “arbitration agreement” are –

(a) an agreement between the parties to submit to arbitration all or certain disputes which have arisen or which may arise in future in respect of a defined legal relationship;

(b) such an arbitration agreement shall be in writing. The second requirement can be discernible from the documents or exchange of communication as well. These requirements as stipulated in Section 7 are certainly satisfied in the present matter. The question however remains is whether reference to 1940 Act in the agreement would have any bearing. At this stage, we may consider the provisions of Section 85 of 1996 Act which Section is to the following effect:

“85. Repeal and savings –

(1) The Arbitration (Protocol and Convention) Act, 1937 (6 of 1937), the Arbitration Act, 1940 (10 of 1940) and the Foreign Awards (Recognition and Enforcement) Act, 1961 (45 of 1961) are hereby repealed.

(2) Notwithstanding such repeal, –

(a) the provisions of the said enactments shall apply in relation to arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force;

(b) all rules made and notifications published, under the said enactments shall, to the extend to which they are not repugnant to this Act, be deemed respectively to have been made or issued under this Act.”

11. Sub-section (1) of Section 85 repealed three enactments including 1940 Act. Sub-section (2) stipulates inter alia that notwithstanding such repeal, the repealed enactment namely 1940 Act would continue to apply in relation to arbitral proceedings which had commenced before 1996 Act came into force unless the parties were to agree otherwise. The second limb of first clause of said sub-section (2) further stipulates that notwithstanding such repeal the provisions of 1996 Act would apply in relation to arbitral proceedings which commenced on or after 1996 Act came into force.

12. In M.M.T.C. Limited v. Sterlite Industries (India) Ltd.3, the arbitration agreement was of a date prior to the commencement of 1996 Act. The commencement of arbitral proceedings was however after 1996 Act had come into force and as such it was held by this Court in paragraph 11 that the provisions of 1996 Act would apply. Further, the arbitration clause contemplated appointment of two arbitrators and a question also arose whether the appointment of arbitrators had to be in tune with the clause in question or in terms of the provisions of 1996 Act. Paragraph Nos.1, 4, 5, 8, 10, 11, 12, and 13 of said decision are quoted hereunder for ready reference:

“1. The point involved for decision is, the effect of the Arbitration and Conciliation Act, 1996 (for short “New Act”) in the present case on the arbitration agreement made prior to the commencement of the New Act. Clause VII of the agreement dated 14-12-1993 between the parties is, as under:

“VII. In the event of any question or dispute arising under or out of or relating to the construction, meaning and operation or effect of this agreement or breach thereof, the matter in dispute shall be referred to arbitrator. Both the parties shall nominate one arbitrator each and the arbitrators shall appoint an umpire before proceeding with the reference. The decision of arbitrators or in the event of their not agreeing the decision of the umpire will be final and binding on the parties. The provisions of the Indian Arbitration Act and Rules made thereunder shall apply for proceedings. The arbitrators or the umpire, as the case may be, shall be entitled with the consent of the parties to enlarge the time, from time to time, for making the award. The arbitrators/umpire shall give a reasoned award. The venue of the arbitration shall be Bombay.”

(emphasis supplied)

4. The contention of the learned Attorney General on behalf of the appellant is that an arbitration agreement providing for the appointment of an even number of arbitrators is not a valid agreement because of Section 10(1) of the New Act; and, therefore, the only remedy in such a case is by a suit and not by arbitration. For this reason, he urged, that sub-section (2) of Section 10 is not attracted since there is no failure to determine the number of arbitrators according to sub-section (1). Another argument of the learned Attorney General was that Section 10 is a departure from 9 para 2 of the First Schedule of the Arbitration Act, 1940 (for short the 1940 Act), which reads as under:

“2. If the reference is to an even number of arbitrators the arbitrators shall appoint an umpire not later than one month from the latest date of their respective appointments.”

5. In reply Shri Dave, learned counsel for the respondent, contended that there is no such inconsistency between Section 10 of the New Act and the corresponding provision in the 1940 Act, both being substantially the same. The learned counsel contended that the provisions of the New Act must be construed to promote the object of implementing the scheme of alternative dispute resolution; and the New Act must be construed to enable the enforcement of the earlier arbitration agreements. It was urged that each of the parties having nominated its arbitrator, the third arbitrator was required to be appointed according to Section 11(3) and the failure to do so attracts the consequential results under the New Act. The learned counsel contended that the provision for the number of arbitrators is a machinery provision and does not affect the validity of the arbitration agreement which is to be determined according to Section 7 of the New Act.

8. Sub-section (3) of Section 7 requires an arbitration agreement to be in writing and sub-section (4) describes the kind of that writing. There is nothing in Section 7 to indicate the requirement of the number of arbitrators as a part of the arbitration agreement. Thus the validity of an arbitration agreement does not depend on the number of arbitrators specified therein. The number of arbitrators is dealt with separately in Section 10 which is a part of machinery provision for the working of the arbitration agreement. It is, therefore, clear that an arbitration agreement specifying an even number of arbitrators cannot be a ground to render the arbitration agreement invalid under the New Act as contended by the learned Attorney General.

10. The arbitration clause provides that each party shall nominate one arbitrator and the two arbitrators shall then appoint an umpire before proceeding with the reference. The arbitration agreement is valid as it satisfies the requirement of Section 7 of the New Act. Section 11(3) requires the two arbitrators to appoint the third 10 arbitrator or the umpire. There can be no doubt that the arbitration agreement in the present case accords with the implied condition contained in para 2 of the First Schedule to the Arbitration Act, 1940 requiring the two arbitrators, one each appointed by the two sides, to appoint an umpire not later than one month from the latest date of their respective appointments.

11. The question is whether there is anything in the New Act to make such an agreement unenforceable? We do not find any such indication in the New Act. There is no dispute that the arbitral proceeding in the present case commenced after the New Act came into force and, therefore, the New Act applies. In view of the term in the arbitration agreement that the two arbitrators would appoint the umpire or the third arbitrator before proceeding with the reference, the requirement of sub-section (1) of Section 10 is satisfied and subsection (2) thereof has no application. As earlier stated the agreement satisfies the requirement of Section 7 of the Act and, therefore, is a valid arbitration agreement. The appointment of arbitrators must, therefore, be governed by Section 11 of the New Act.

12. In view of the fact that each of the two parties have appointed their own arbitrators, namely, Justice M.N. Chandurkar (Retd.), and Justice S.P. Sapra (Retd.), Section 11(3) was attracted and the two appointed arbitrators were required to appoint a third arbitrator to act as the presiding arbitrator, failing which the Chief Justice of the High Court or any person or institution designated by him would be required to appoint the third arbitrator as required by Section 11(4) (b) of the New Act. Since the procedure prescribed in Section 11(3) has not been followed the further consequences provided in Section 11 must follow.

13. Accordingly, we direct that the Chief Justice of the High Court is to appoint the third arbitrator under Section 11(4)(b) of the New Act in view of the failure of the two appointed arbitrators to appoint the third arbitrator within thirty days from the date of their appointments. Direction given by the Chief Justice of the High Court is substituted to this effect.”

13. The arbitration clause in MMTC Ltd. (supra) contemplated an appointment process which was not strictly in tune with the provisions of 1996 Act and the agreement was:- “the provisions of the Indian Arbitration Act and Rules made thereunder shall apply for proceedings”.

The reference was thus to the provisions of 1940 Act. The reading of the decision shows that what was found crucial was date of commencement of the arbitral proceedings and if such commencement was after 1996 Act had come into force, the provisions that would govern the situation were held to be that of 1996 Act. The appointment process was also directed to be in tune with 1996 Act. What was found to be fundamental was whether there was an arbitration agreement in writing in terms of Section 7 of 1996 Act. The acceptance of submission in paragraph 5 would further show that 1996 Act must be so construed to enable the enforcement of the earlier arbitration agreement.

Logically, even if in a given case, reference to arbitration in the agreement entered into before 1996 Act came into force was in terms of 1940 Act and if the arbitral proceedings had not commenced before 1996 Act came into force, the provisions of 1996 Act alone would govern the situation. The reference to “Indian Arbitration Act” or to “arbitration under 1940 Act” in such cases would be of no consequence and the matter would still be governed under 1996 Act. Would it then make any difference if in an 12 agreement entered into after 1996 Act, the reference made by the parties in the agreement was to arbitration in terms of 1940 Act.

14. In Thyssen (supra) three appeals were considered together. In the first of those three appeals, the arbitral proceedings had commenced on 14.09.1995 under 1940 Act and the award was given by the sole arbitrator on 24.09.1997. A petition was filed under Sections 14 and 17 of 1940 Act on 13.10.1997 for making the award rule of the Court. In these proceedings an application was moved submitting that 1996 Act having come into force on 25.01.1996, it would be applicable in respect of enforcement of the award.

In the context of these facts, the question which arose for consideration was whether the award would be governed by 1996 Act for its enforcement or whether provisions of the 1940 Act would apply. In the second matter, the arbitral proceedings were held in the United Kingdom prior to the enforcement of 1996 Act and the award was made on 25.02.1996 in London and the question which arose was whether the award was governed by the provisions of 1996 Act for its enforcement or by the Foreign Awards Act. In the third matter the reference to the sole arbitrator was on 04.12.1993 and the award was given by the arbitrator on 23.02.1996 i.e. after 1996 Act had come into force.

The question that was framed in the third matter was, when Clause (a) of Section 85(2) of 1996 Act used the expression “unless otherwise agreed by the parties” could the parties agree for the applicability of 1996 Act even before 1996 Act had come into force. Thus the fact situation in all three matters was clear that the commencement of arbitral proceedings was much before 1996 Act came into force. Therefore, on the strength of Section 85(2)(a) of 1996 Act, it was held that the provisions of the repealed enactments including 1940 Act would continue to apply in relation to such arbitral proceedings. The conclusions are clear from paragraphs 29 and 42 of said decision.

15. However, the High Court has placed reliance on certain observations in paragraph 35 of Thyssen (supra). In our view the observations have been quoted and relied upon by the High Court completely out of context. What this Court considered in paragraph 35 was a possibility that in terms of Section 85(2)(a) of 1996 Act even when the proceedings had commenced under 1940 Act, the parties could still agree on the applicability of the 1996 Act. What this Court thereafter stated was the position in law that if the arbitral proceedings had not commenced before 1996 Act came into force, the parties could not by their agreement agree on the applicability of 1940 Act.

The idea was to emphasize that if the arbitral proceedings had not commenced as on the day when 1996 Act came into force, any subsequent commencement of arbitral proceedings had to be in terms of 1996 Act. These observations do not in any way suggest that, “if the arbitral proceedings had not commenced under the Act of 1940 till the Act of 1996 came into force, the same could not be commenced thereafter”. All that these observations indicate is that in such cases there cannot be applicability of 1940 Act and not, and we repeat, that there can be no arbitration at all.

16. The correct approach, according to us, would be in promoting the object of implementing the scheme of alternative dispute resolution as was rightly submitted in MMTC Ltd. (Supra). It would be farfetched to come to the conclusion that there could be no arbitration at all. As is clear from MMTC Ltd. (Supra) what is material for the purposes of the applicability of 1996 Act is the agreement between the parties to refer the disputes to arbitration. If there be such an arbitration agreement which satisfies the requirements of Section 7 of 1996 Act, and if no arbitral proceeding had commenced before 1996 Act came into force, the matter would be completely governed by the provisions of 1996 Act. Any reference to 1940 Act in the arbitration agreement would be of no consequence and the matter would be referred to arbitration only in terms of 1996 Act consistent with the basic intent of the parties as discernible from the arbitration agreement to refer the disputes to arbitration.

17. Viewed thus, the High Court was not right in observing that there could be no arbitration at all in the present case. In situations where the relevant clause made reference to the applicability of “the provisions of the Indian Arbitration Act and Rules made thereunder” as was the case in MMTC Ltd. (Supra), on the strength of Section 85(2)(a) the governing provisions in respect of arbitral proceedings which had not commenced before 1996 had came into force would be those of 1996 Act alone. On the same reasoning even if an arbitration agreement entered into after 1996 Act had come into force were to make a reference to the applicable provisions of those under Indian Arbitration Act or 1940 Act, such stipulation would be of no consequence and the matter must be governed under provisions of 1996 Act. An incorrect reference or recital regarding applicability of 1940 Act would not render the entire arbitration agreement invalid.

Such stipulation will have to be read in the light of Section 85 of 1996 Act and in our view, principles governing such relationship have to be under and in tune with 1996 Act. As observed earlier, the requirements of “arbitration agreement” as stipulated in Section 7 of 1996 Act stand completely satisfied in the present matter nor has there been any suggestion that the agreement stood vitiated on account of any circumstances in the realm of undue  influence, fraud, coercion or misrepresentation. In the circumstances, the attempt must be to sub-serve the intent of the parties to resolve the disputes by alternative disputes resolution mechanism. The High Court was, therefore, completely in error.

18. We must also hold that the view taken by the learned Single Judge of the Patna High Court in Rajan Kumar Verma (Supra) is required to be seen in the light of the present decision. Said judgment of the learned Single Judge had not noted the decision of this Court in MMTC Ltd. (Supra). Summary dismissal of SLP(C) No.25036 of 2005 vide order dated 14.12.2005 by this Court would not mean affirmation of the view taken by the learned Single Judge insofar as declaration of law is concerned4.

19. We therefore set aside the judgment and order passed by the High Court and accept the appeal preferred by the appellant. The matter will have to be dealt with by the trial court in terms of Section 8 of 1996 Act. The parties shall appear before the trial court on 14th May, 2018 for effectuating the arbitration agreement.

20. The appeal stands allowed in aforesaid terms.

No costs.

………………………….J. (Arun Mishra)

………………………….J. (Uday Umesh Lalit)

New Delhi,

May 2, 2018

____________________________

1 (1999) 9 SCC 334

2 AIR 2006 Patna 1

3 (1996) 6 SCC 716

4 See Kunhayammed and others v. State of Kerala and another (2000) 6 SCC 359 para 27 Indian Oil Corporation Ltd. v. State of Bihar & Ors. (1986) 4 SCC 146 paras 6 to 10 17

Conduct of arbitral proceeding in India

Company Law Encyclopedia

UNDER ARBITRATION AND CONCILIATION ACT 1996 [SECTION 18 TO 27]

GO TO THE  MAIN PAGE 

18. Equal treatment of parties.

The parties shall be treated with equality and each party shall be given a full opportunity to present his case.

19. Determination of rules of procedure.

(1)The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 (5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872).

(2)Subject to this Part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings.

(3)Failing any agreement referred to in sub-section(2), the arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate.

(4)The power of the arbitral tribunal under sub-section (3) includes the power to determine the admissibility, relevance, materiality and weight of any evidence.

20. Place of arbitration.

(1)The parties are free to agree on the place of arbitration.

(2)Failing any agreement referred to in sub-section (1), the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties.

(3)Notwithstanding sub-section (1) or sub-section (2), the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, goods or other property.

COMMENT– Under part 1 parties can not decide the the place of arbitration to be outside of India.

21. Commencement of arbitral proceedings.

Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent( under section 3)

22. Language.

(1)The parties are free to agree upon the language or languages to be used in the arbitral proceedings.

(2)Failing any agreement referred to in sub-section (1), the arbitral tribunal shall determine the language or languages to be used in the arbitral proceedings.

(3)The agreement or determination, unless otherwise specified, shall apply to any written statement by a party, any hearing and any arbitral award, decision or other communication by the arbitral tribunal.

(4)The arbitral tribunal may order that any documentary evidence shall be accompanied by a translation into the language or languages agreed upon by the parties or determined by the arbitral tribunal.


23. Statements of claim and defence.

(1)Within the period of time agreed upon by the parties or determined by the arbitral tribunal, the claimant shall state the facts supporting his claim, the points at issue and the relief or remedy sought, and the respondent shall state his defence in respect of these particulars, unless the parties have otherwise agreed as to the required elements of those statements.

(2)The parties may submit with their statements all documents they consider to be relevant or may add a reference to the documents or other evidence they will submit.

(2A) The respondent, in support of his case, may also submit a counterclaim or plead a set-off, which shall be adjudicated upon by the arbitral tribunal, if such counterclaim or set-off falls within the scope of the arbitration agreement.

(3)Unless otherwise agreed by the parties, either party may amend or supplement his claim or defence during the course of the arbitral proceedings, unless the arbitral tribunal considers it inappropriate to allow the amendment or supplement having regard to the delay in making it.

24. Hearings and written proceedings.

(1)Unless otherwise agreed by the parties, the arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials:

Provided that the arbitral tribunal shall hold oral hearings, at an appropriate stage of the proceedings, on a request by a party, unless the parties have agreed that no oral hearing shall be held:

Provided further that the arbitral tribunal shall, as far as possible, hold oral hearings for the presentation of evidence or for oral argument on day-to-day basis, and not grant any adjournmentsunless sufficient cause is made out, and may impose costs including exemplary costs on the party seeking adjournment without any sufficient cause.

(2)The parties shall be given sufficient advance notice of any hearing and of any meeting of the arbitral tribunal for the purposes of inspection of documents, goods or other property.

(3)All statements, documents or other information supplied to, or applications made to the arbitral tribunal by one party shall be communicated to the other party, and any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision shall be communicated to the parties.

25. Default of a party.

Unless otherwise agreed by the parties, where, without showing sufficient cause,—

(a)the claimant fails to communicate his statement of claim in accordance with sub-section (1) of section 23, the arbitral tribunal shall terminate the proceedings;

(b)the respondent fails to communicate his statement of defence in accordance with sub-section (1) of section 23, the arbitral tribunal shall continue the proceedings without treating that failure in itself as an admission of the allegations by the claimant and shall have the discretion to treat the right of the respondent to file such statement of defence as having been forfeited. [the tribunal may proceed ex- party]

(c)a party fails to appear at an oral hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings and make the arbitral award on the evidence before it.

26. Expert appointed by arbitral tribunal.

(1)Unless otherwise agreed by the parties, the arbitral tribunal may(a)appoint one or more experts to report to it on specific issues to be determined by the arbitral tribunal, and(b)require a party to give the expert any relevant information or to produce, or to provide access to, any relevant documents, goods or other property for his inspection.

(2)Unless otherwise agreed by the parties, if a party so requests or if the arbitral tribunal considers it necessary, the expert shall, after delivery of his written or oral report, participate in an oral hearing where the parties have the opportunity to put questions to him and to present expert witnesses in order to testify on the points at issue.

(3)Unless otherwise agreed by the parties, the expert shall, on the request of a party, make available to that party for examination all documents, goods or other property in the possession of the expert with which he was provided in order to prepare his report.

[cost of the expert shall be undertaken by the parties]

27. Court assistance in taking evidence.

(1)The arbitral tribunal, or a party with the approval of the arbitral tribunal, may apply to the Court for assistance in taking evidence.

(2)The application shall specify—(a)the names and addresses of the parties and the arbitrators;(b)the general nature of the claim and the relief sought;(c)the evidence to be obtained, in particular,—(i)the name and address of any person to be heard as witness or expert witness and a statement of the subject-matter of the testimony required;(ii)the description of any document to be produced or property to be inspected.

(3)The Court may, within its competence and according to its rules on taking evidence, execute the request by ordering that the evidence be provided directly to the arbitral tribunal.

(4)The Court may, while making an order under sub-section (3), issue the same processes to witnesses as it may issue in suits tried before it.

(5)Persons failing to attend in accordance with such process, or making any other default, or refusing to give their evidence, or guilty of any contempt to the arbitral tribunal during the conduct of arbitral proceedings, shall be subject to the like disadvantages, penalties and punishments by order of the Court on the representation of the arbitral tribunal as they would incur for the like offences in suits tried before the Court.

(6)In this section the expression “Processes” includes summonses and commissions for the examination of witnesses and summonses to produce documents.

COMMENT– The purpose of this section is to issue summon to a witness or anybody having custody of relevant documents and the  Jurisdictional Court shall take responsibility to issue summon and order the subject to appear directly before the Arbitral Tribunal.

line

GO TO THE  MAIN PAGE 

M/s. Indian Farmers Fertilizer Co-Operative Ltd. Vs. M/s. Bhadra Products [SC 2018 January]

KEYWORDS:-ARBITRATION-Interim award-jurisdiction- Error of Law- Error of jurisdiction-

Capture

DATE:- January 23, 2018-

  • Interim award can  be set aside under Section 34 of the Arbitration and Conciliation Act, 1996
  • The award dated 23rd July, 2015 is an interim award, which being an arbitral award, can be challenged separately and independently under Section 34 of the Act. We are of the view that such an award, which does not relate to the arbitral tribunal’s own jurisdiction under Section 16, does not have to follow the drill of Section 16(5) and (6) of the Act. Having said this, we are of the view that Parliament may consider amending Section 34 of the Act so as to consolidate all interim awards together with the final arbitral award, so that one challenge under Section 34 can be made after delivery of the final arbitral award.

ACTS:- Section 34 of the Arbitration and Conciliation Act, 1996

SUPREME COURT OF INDIA

M/s. Indian Farmers Fertilizer Co-Operative Ltd. Vs. M/s. Bhadra Products

[Civil Appeal No. 824 of 2018 arising out of SLP (C) No.19771 of 2017]

R.F. Nariman, J.

1. Leave granted.

2. An interesting question arises as to Whether an award delivered by an Arbitrator, which decides the issue of limitation, can be said to be an interim award, and whether such interim award can then be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”). The brief facts necessary to dispose of the present appeal are as follows.

3. The appellant before us issued a tender enquiry to 19 parties, including the respondent, for supply of Defoamers. The respondent submitted its bid, pursuant to which a Letter of Intent dated 2nd November, 2006 was issued to the respondent for supply of 800 Metric Tonnes of Defoamers to be used for production of 3,08,880 Metric Tonnes of P2O5. By 11th April, 2007, the respondent had supplied 800 Metric Tonnes of Defoamers, however, they could not achieve the targeted production by the end of 1st November, 2007, which was the validity of the supply period. After considerable delay, on 6th June, 2011, the respondent issued a legal notice demanding payment of Rs.6,35,74,245/- on 27th September, 2012.

The appellant made it clear that there was nothing due and payable to the respondent. Since disputes arose between the parties, on 1st October, 2014 the respondent invoked arbitration, and on 25th January, 2015, Justice Deepak Verma, a retired Judge of the Supreme Court, was appointed as the sole arbitrator. On 3rd March, 2015, issues were framed. On 23rd July, 2015, the learned Arbitrator thought it fit to take up the issue of limitation first, inasmuch as the counsel appearing for both the parties submitted that this issue could be decided on the basis of documentary evidence alone.

This issue was then decided in favour of the claimant stating that their claims had not become time barred. A petition filed under Section 34 of the Act challenged the aforesaid award, styling it as the ‘First Partial Award’. On 8th October, 2015, the District Judge, Jagatsinghpur, dismissed the Section 34 Petition stating that the aforesaid award could not be said to be an interim award and that, therefore, the Court lacked jurisdiction to proceed further under Section 34 of the Act. The appeal to the High Court of Orissa was dismissed by the impugned order dated 30th June, 2017, reiterating the reasoning of the learned District Judge.

4. Appearing on behalf of the appellant, Mr. K.K. Venugopal, learned Attorney General, has argued before us that the award made on 23rd July, 2015 is an interim award under the Act and would, therefore, be amenable to challenge under Section 34 of the Act as such. He referred us to various provisions of the Act and buttressed his stand with reference to a number of judgments, including, in particular, the judgment of National Thermal Power Corpn. Ltd. v. Siemens Atkeingesellschaft, (2007) 4 SCC 451. He also referred us to various judgments on what constitutes an interim award and argued that, according to him, the point of limitation being one of the issues raised by the parties, was finally decided by the aforesaid award and would, therefore, be amenable to challenge.

5. Shri Ajit Kumar Sinha, learned senior advocate appearing on behalf of the respondent, also placed reliance on various sections of the Act, in particular Sections 16 and 37 thereof. According to the learned senior advocate, a ruling on the point of limitation is a ruling on “jurisdiction” and any finding thereon goes to the root of the case. This being the case, the drill of Section 16 has to be followed, and as the plea of limitation has been rejected by the learned Arbitrator, the arbitral proceedings have to continue further and the challenge has to be postponed only after all other issues have been decided.

According to the learned senior advocate, the scheme of Section 37, in particular Section 37(2)(a), also makes it clear that appeals lie only from an order under Section 16 accepting the plea but not rejecting it. Also, according to the learned senior advocate, the present award cannot be said to be an interim award, but is merely an order passed under Section 16 of the Act. He also relied upon several judgments to buttress his point of view and relied heavily upon judgments which held that a decision on a point of limitation goes to jurisdiction in which case Section 16 of the Act would get attracted.

6. Having heard learned counsel for both parties, it is important to first set out the relevant provisions of the Act, which are as under:

“2. Definitions.-

(1) In this Part, unless the context otherwise requires,-

(c) “arbitral award” includes an interim award;

xxx xxx xxx

16. Competence of arbitral tribunal to rule on its jurisdiction.-

(1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,-

(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and

(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.

(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator.

(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.

(4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified.

(5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award.

(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34.

xxx xxx xxx

31. Form and contents of arbitral award.-

(6) The arbitral tribunal may, at any time during the arbitral proceedings, make an interim arbitral award on any matter with respect to which it may make a final arbitral award.

xxx xxx xxx

32. Termination of proceedings.-

(1) The arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal under sub-section (2).

xxx xxx xxx

37. Appealable orders.-

(1) An appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely:-

(a) refusing to refer the parties to arbitration under section 8;

(b) granting or refusing to grant any measure under section 9;

(c) setting aside or refusing to set aside an arbitral award under section 34.

(2) Appeal shall also lie to a court from an order of the arbitral tribunal-

(a) accepting the plea referred to in sub-section (2) or sub-section (3) of section 16; or

(b) granting or refusing to grant an interim measure under section 17.

(3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.”

7. The point at issue is a narrow one: whether an award on the issue of limitation can first be said to be an interim award and, second, as to whether a decision on a point of limitation would go to jurisdiction and, therefore, be covered by Section 16 of the Act.

8. As can be seen from Section 2(c) and Section 31(6), except for stating that an arbitral award includes an interim award, the Act is silent and does not define what an interim award is. We are, therefore, left with Section 31(6) which delineates the scope of interim arbitral awards and states that the arbitral tribunal may make an interim arbitral award on any matter with respect to which it may make a final arbitral award.

9. The language of Section 31(6) is advisedly wide in nature. A reading of the said sub-section makes it clear that the jurisdiction to make an interim arbitral award is left to the good sense of the arbitral tribunal, and that it extends to “any matter” with respect to which it may make a final arbitral award. The expression “matter” is wide in nature, and subsumes issues at which the parties are in dispute. It is clear, therefore, that any point of dispute between the parties which has to be answered by the arbitral tribunal can be the subject matter of an interim arbitral award.

However, it is important to add a note of caution. In an appropriate case, the issue of more than one award may be necessitated on the facts of that case. However, by dealing with the matter in a piecemeal fashion, what must be borne in mind is that the resolution of the dispute as a whole will be delayed and parties will be put to additional expense. The arbitral tribunal should, therefore, consider whether there is any real advantage in delivering interim awards or in proceeding with the matter as a whole and delivering one final award, bearing in mind the avoidance of delay and additional expense. Ultimately, a fair means for resolution of all disputes should be uppermost in the mind of the arbitral tribunal.

10. To complete the scheme of the Act, Section 32(1) is also material. This section goes on to state that the arbitral proceedings would be terminated only by the final arbitral award, as opposed to an interim award, thus making it clear that there can be one or more interim awards, prior to a final award, which conclusively determine some of the issues between the parties, culminating in a final arbitral award which ultimately decides all remaining issues between the parties.

11. The English Arbitration Act, 1996, throws some light on what is regarded as an interim award under English Law. Section 47 thereof states:

“47 Awards on different issues, & c.

(1) Unless otherwise agreed by the parties, the tribunal may make more than one award at different times on different aspects of the matters to be determined.

(2) The tribunal may, in particular, make an award relating-

(a) to an issue affecting the whole claim, or

(b) to a part only of the claims or cross-claims submitted to it for decision.

(3) If the tribunal does so, it shall specify in its award the issue, or the claim or part of a claim, which is the subject matter of the award.”

12. By reading this section, it becomes clear that more than one award finally determining any particular issue before the arbitral tribunal can be made on different aspects of the matters to be determined. A preliminary issue affecting the whole claim would expressly be the subject matter of an interim award under the English Act. The English Act advisedly does not use the expression “interim” or “partial”, so as to make it clear that the award covered by Section 47 of the English Act would be a 10 final determination of the particular issue that the arbitral tribunal has decided.

13. In Exmar BV v National Iranian Tanker Co. [1992] 1 Lloyd’s Rep. 169, an interim final award was made, which contained the decision that it would not issue any such award in the claimant’s favour pending determination of the respondent’s counter claims. Detailed reasons were given for this decision. The Judge, therefore, characterized the aforesaid award as an award finally deciding a particular issue between the parties, and concluded that as a result thereof, he had jurisdiction to review the tribunal’s decision.

14. In Satwant Singh Sodhi v. State of Punjab (1999) 3 SCC 487 at 491 and 493, an interim award in respect of one particular item was made by the arbitrator in that case. The question before the Court was whether such award could be made the rule of the Court separately or could be said to have been superseded by a final award made on all the claims later.

This Court held:

“6. The question whether interim award is final to the extent it goes or has effect till the final award is delivered will depend upon the form of the award. If the interim award is intended to have effect only so long as the final award is not delivered it will have the force of the interim award and it will cease to have effect after the final award is made. If, on the other hand, the interim award is intended to finally determine the rights of the parties it will have the force of a complete award and will have effect even after the final award is delivered. The terms of the award dated 26-11-1992 do not indicate that the same is of interim nature.” On the facts of the case, the Court then went on to hold:

“11. This Court in Rikhabdass v. Ballabhdas [AIR 1962 SC 551 : 1962 Supp (1) SCR 475] held that once an award is made and signed by the arbitrator, the arbitrator becomes functus officio. In Juggilal Kamlapat v. General Fibre Dealers Ltd. [AIR 1962 SC 1123 : 1962 Supp (2) SCR 101] this Court held that an arbitrator having signed his award becomes functus officio but that did not mean that in no circumstances could there be further arbitration proceedings where an award was set aside or that the same arbitrator could never have anything to do with the award with respect to the same dispute. Thus in the present case, it was not open to the arbitrator to redetermine the claim and make an award.

Therefore, the view taken by the trial court that the earlier award made and written though signed was not pronounced but nevertheless had become complete and final, therefore, should be made the rule of the court appears to us to be correct with regard to Item 1 inasmuch as the claim in relation to Item 1 could not have been adjudicated by the arbitrator again and it has been rightly excluded from the second award made by the arbitrator on 28-1-1994.

Thus the view taken by the trial court on this aspect also appears to us to be correct. Therefore, the trial court has rightly ordered the award dated 28-1-1994 to be the rule of the court except for Item 1 and in respect of which the award dated 26-11-1992 was ordered to be the rule of the court.” It is, thus, clear that the first award that was made that finally determined one issue between the parties, with respect to Item no.1 of the claim, was held to be an interim award inasmuch as it finally determined claim 1 between the parties and, therefore, could not be re-adjudicated all over again.

15. In McDermott International Inc. v. Burn Standard Co. Ltd. (2006) 11 SCC 181 at page 211-212, under the heading ‘validity of the partial award’, this Court held:

“68. The 1996 Act does not use the expression “partial award”. It uses interim award or final award. An award has been defined under Section 2(c) to include an interim award. Sub-section (6) of Section 31 contemplates an interim award. An interim award in terms of the said provision is not one in respect of which a final award can be made, but it may be a final award on the matters covered thereby, but made at an interim stage.

69. The learned arbitrator evolved the aforementioned procedure so as to enable the parties to address themselves as regards certain disputes at the first instance. As would appear from the partial award of the learned arbitrator, he deferred some claims. He further expressed his hope and trust that in relation to some claims, the parties would arrive at some sort of settlement having regard to the fact that ONGC directly or indirectly was involved therein. While in relation to some of the claims, a finality was attached to the award, certain claims were deferred so as to enable the learned arbitrator to advert thereto at a later stage. If the partial award answers the definition of the award, as envisaged under Section 2(c) of the 1996 Act, for all intent and purport, it would be a final award. In fact, the validity of the said award had also been questioned by BSCL by filing an objection in relation thereto.

70. We cannot also lose sight of the fact that BSCL did not raise any objection before the arbitrator in relation to the jurisdiction of the arbitrator. A ground to that effect has also not been taken in its application under Section 34 of the Act. We, however, even otherwise do not agree with the contention of Mr Mitra that a partial award is akin to a preliminary decree. On the other hand, we are of the opinion that it is final in all respects with regard to disputes referred to the arbitrator which are subject-matters of such award. We may add that some arbitrators instead and in place of using the expression “interim award” use the expression “partial award”.

By reason thereof the nature and character of an award is not changed. As, for example, we may notice that in arbitral proceedings conducted under the Rules of Arbitration of the International Chamber of Commerce, the expression “partial award” is generally used by the arbitrators in place of interim award. In any view of the matter, BSCL is not in any way prejudiced. We may state that both the partial award and the final award are subject-matter of challenge under Section 34 of the Act.” The aforesaid judgment makes it clear that an interim award or partial award is a final award on matters covered therein made at an intermediate stage of the arbitral proceedings.

16. Tested in the light of the statutory provisions and the case law cited above, it is clear that as the learned Arbitrator has disposed of one matter between the parties i.e. the issue of limitation finally, the award dated 23rd July, 2015 is an “interim award” within the meaning of Section 2(1)(c) of the Act and being subsumed within the expression “arbitral award” could, therefore, have been challenged under Section 34 of the Act.

17. However, Shri Sinha has argued before us that the award dated 23rd July, 2015 being a ruling on the arbitral tribunal’s jurisdiction would fall within Section 16 of the Act, and inasmuch as the decision taken on the point of limitation was rejected, the drill of Section 16 must be followed in which case all other issues have to be decided first, and it is only after such issues are decided that such an award can be challenged under Section 34 of the Act. Section 16 of the Act lays down what, in arbitration law, is stated to be the Kompetenz-kompetenz principle, viz. that an arbitral tribunal may rule on its own jurisdiction.

At one time, the law was that the arbitrator, being a creature of the contract, could not rule on the existence or validity of the arbitration clause contained in the contract. This, however, gave way to the Kompetenz principle which was adopted by the UNCITRAL Model Law. Article 16 of the UNCITRAL Model Law, on which Section 16 of the Act is based, reads as follows:

“Article 16. Competence of arbitral tribunal to rule on its jurisdiction

(1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.

(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence. A party is not precluded from raising such a plea by the fact that he has appointed, or participated in the appointment of, an arbitrator. A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. The arbitral tribunal may, in either case, admit a later plea if it considers the delay justified.

(3) The arbitral tribunal may rule on a plea referred to in paragraph (2) of this article either as a preliminary question or in an award on the merits. If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within thirty days after having received notice of that ruling, the court specified in article 6 to decide the matter, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award.”

18. The Statement of Objects and Reasons of the Act expressly refers to the UNCITRAL Model Law in the following terms:

“3. Though the said UNCITRAL Model Law and Rules are intended to deal with international commercial arbitration and conciliation, they could, with appropriate modifications, serve as a model for legislation on domestic arbitration and conciliation. The present Bill seeks to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and to define the law relating to conciliation, taking into account the said UNCITRAL Model Law and Rules.”

19. It may be noticed that Section 16(1) to (4) are based on Article 16 of the UNCITRAL Model Law. The Kompetenz principle deals with the arbitral tribunal’s jurisdiction in the narrow sense of ruling on objections with respect to the existence or validity of the arbitration agreement. What is important to notice in the language of Section 16(1) is the fact that the arbitral tribunal may rule on its own jurisdiction, which makes it clear that it refers to whether the arbitral tribunal may embark upon an inquiry into the issues raised by parties to the dispute.

20. Here again, the English Arbitration Act of 1996 throws some light on the problem before us. Sections 30 and 31 of the said Act read as under:

“30 Competence of tribunal to rule on its own jurisdiction. –

(1) Unless otherwise agreed by the parties, the arbitral tribunal may rule on its own substantive jurisdiction, that is, as to-

(a) whether there is a valid arbitration agreement,

(b) whether the tribunal is properly constituted, and

(c) what matters have been submitted to arbitration in accordance with the arbitration agreement.

(2) Any such ruling may be challenged by any available arbitral process of appeal or review or in accordance with the provisions of this Part.

31 Objection to substantive jurisdiction of tribunal. –

(1) An objection that the arbitral tribunal lacks substantive jurisdiction at the outset of the proceedings must be raised by a party not later than the time he takes the first step in the proceedings to 18 contest the merits of any matter in relation to which he challenges the tribunal’s jurisdiction. A party is not precluded from raising such an objection by the fact that he has appointed or participated in the appointment of an arbitrator.

(2) Any objection during the course of the arbitral proceedings that the arbitral tribunal is exceeding its substantive jurisdiction must be made as soon as possible after the matter alleged to be beyond its jurisdiction is raised.

(3) The arbitral tribunal may admit an objection later than the time specified in subsection (1) or (2) if it considers the delay justified.

(4) Where an objection is duly taken to the tribunal’s substantive jurisdiction and the tribunal has power to rule on its own jurisdiction, it may-

(a) rule on the matter in an award as to jurisdiction, or (b) deal with the objection in its award on the merits. If the parties agree which of these courses the tribunal should take, the tribunal shall proceed accordingly.

(5) The tribunal may in any case, and shall if the parties so agree, stay proceedings whilst an application is made to the court under section 32 (determination of preliminary point of jurisdiction).”

These sections make it clear that the Kompetenz principle, which is also followed by the English Arbitration Act of 1996, is that the “jurisdiction” mentioned in Section 16 has reference to three things:

(1) as to whether there is the existence of a valid arbitration agreement;

(2) whether the arbitral tribunal is properly constituted; and (3) matters 19 submitted to arbitration should be in accordance with the arbitration agreement.

21. That “jurisdiction” is a coat of many colours, and that the said word displays a certain colour depending upon the context in which it is mentioned, is well-settled. In the classic sense, in Official Trustee v. Sachindra Nath Chatterjee, (1969) 3 SCR 92 at 99, “jurisdiction” is stated to be: “In the order of Reference to a Full Bench in the case of Sukhlal v. Tara Chand [(1905) ILR 33 Cal 68] it was stated that jurisdiction may be defined to be the power of a Court to hear and determine a cause, to adjudicate and exercise any judicial power in relation to it: in other words, by jurisdiction is meant the authority which a Court has to decide matters that are litigated before it or to take cognizance of matters presented in a formal way for its decision.

An examination of the cases in the books discloses numerous attempts to define the term ‘jurisdiction’, which has been stated to be ‘the power to hear and determine issues of law and fact’, the authority by which the judicial officer take cognizance of and ‘decide causes’; ‘the authority to hear and decide a legal controversy’, ‘the power to hear and determine the subject-matter in controversy between parties to a suit and to adjudicate or exercise any judicial power over them;’ ‘the power to hear, determine and pronounce judgment on the issues before the Court’; ‘the power or authority which is conferred upon a Court by the Legislature to hear and determine causes between parties and to carry the judgments into effect’; ‘the power to enquire into the facts, to apply the law, to pronounce the judgment and to carry it into execution’.” (Mukherjee, Acting CJ, speaking for Full Bench of the Calcutta High Court in Hirday Nath Roy v. Ramachandra Barna Sarma ILR 68 Cal 138)

22. A Constitution Bench of this Court in Ittavira Mathai v. Varkey Varkey, (1964) 1 SCR 495 at 501-503, made a distinction between an erroneous decision on limitation being an error of law which is within the jurisdiction of the Court, and a decision where the Court acts without jurisdiction in the following terms: “The first point raised by Paikedy for the appellant is that the decree in OS No. 59 of 1093 obtained by Anantha Iyer and his brother in the suit on the hypothecation bond executed by Ittiyavira in favour of Ramalinga Iyer was a nullity because the suit was barred by time. In assuming that the suit was barred by time, it is difficult to appreciate the contention of learned counsel that the decree can be treated as a nullity and ignored in subsequent litigation.

If the suit was barred by time and yet, the court decreed it, the court would be committing an illegality and therefore the aggrieved party would be entitled to have the decree set aside by preferring an appeal against it. But it is well settled that a court having jurisdiction over the subject-matter of the suit and over the parties thereto, though bound to decide right may decide wrong; and that even though it decided wrong it would not be doing something which it had no jurisdiction to do. It had 21 the jurisdiction over the subject-matter and it had the jurisdiction over the party and, therefore, merely because it made an error in deciding a vital issue in the suit, it cannot be said that it has acted beyond its jurisdiction.

As has often been said, courts have jurisdiction to decide right or to decide wrong and even though they decide wrong, the decrees rendered by them cannot be treated as nullities. Learned counsel, however, referred us to the decision of the Privy Council in Maqbul Ahmad v. Onkar Pratap Narain Singh [AIR (1935) PC 85] and contended that since the court is bound under the provisions of Section 3 of the Limitation Act to ascertain for itself whether the suit before it was within time, it would act without jurisdiction if it fails to do so. All that the decision relied upon says is that Section 3 of the Limitation Act is peremptory and that it is the duty of the court to take notice of this provision and give effect to it even though the point of limitation is not referred to in the pleadings.

The Privy Council has not said that where the court fails to perform its duty, it acts without jurisdiction. If it fails to do its duty, it merely makes an error of law and an error of law can be corrected only in the manner laid down in the Civil Procedure Code. If the party aggrieved does not take appropriate steps to have that error corrected, the erroneous decree will hold good and will not be open to challenge on the basis of being a nullity.”

23. It is in this sense of the term that “jurisdiction” has been used in Section 16 of the Act. Indeed, in NTPC (supra) at 460-461, a Division Bench of this Court, after setting out Sections 16 and 37 held:

“10. Now, the only question that remains to be decided in the present case is whether against the order of partial award an appeal is maintainable directly under Section 37 of the Act or not. We have considered the submissions of learned counsel for the appellant and after going through the counterclaim and the partial award, we are of the opinion that no question of jurisdiction arises in the matter so as to enable the appellant to file a direct appeal under Section 37 of the Act before the High Court. As already mentioned above, an appeal under sub-section (2) of Section 37 only lies if there is an order passed under Sections 16(2) and (3) of the Act. Sections 16(2) and (3) deal with the exercise of jurisdiction.

The plea of jurisdiction was not taken by the appellant. It was taken by the respondent in order to meet their counterclaim. But it was not in the context of the fact that the Tribunal had no jurisdiction, it was in the context that this question of counterclaim was no more open to be decided for the simple reason that all the issues which had been raised in Counterclaims 1 to 10 had already been settled in the minutes of meeting dated 6-4-2000/7-4-2000 and it was recorded that no other issues were to be resolved in first and third contracts.

Therefore, we fail to understand how the question of jurisdiction was involved in the matter. In fact it was in the context of the fact that the entire counterclaims have already been satisfied and settled in the meeting that it was concluded that no further issues remained to be settled. In this context, the counterclaims filed by the appellant were opposed. If any grievance was there, that should have been (sic raised) by the respondent and not by the appellant. It is only the finding of fact recorded by the Tribunal after considering the counterclaim vis-à-vis the minutes of meeting dated 6-4-2000/7-4-2000. Therefore, there was no question of jurisdiction involved in the matter so as to enable the appellant to approach the High Court directly.” Interestingly, in a separate concurring judgment, P.K. Balasubramanyan, J., held:

“17. In the larger sense, any refusal to go into the merits of a claim may be in the realm of jurisdiction. Even the dismissal of the claim as barred by limitation may in a sense touch on the jurisdiction of the court or tribunal. When a claim is dismissed on the ground of it being barred by limitation, it will be, in a sense, a case of the court or tribunal refusing to exercise jurisdiction to go into the merits of the claim. In Pandurang Dhoni Chougule v. Maruti Hari Jadhav [AIR 1996 SC 153 : (1996) 1 SCR 102] this Court observed that: (AIR p. 155, para 10)

“It is well settled that a plea of limitation or a plea of res judicata is a plea of law which concerns the jurisdiction of the court which tries the proceedings. A finding on these pleas in favour of the party raising them would oust the jurisdiction of the court, and so, an erroneous decision on these pleas can be said to be concerned with questions of jurisdiction which fall within the purview of Section 115 of the Code.” In a particular sense, therefore, any declining to go into the merits of a claim could be said to be a case of refusal to exercise jurisdiction.

18. The expression “jurisdiction” is a word of many hues. Its colour is to be discerned from the setting in which it is used. When we look at Section 16 of the 24 Act, we find that the said provision is one, which deals with the competence of the Arbitral Tribunal to rule on its own jurisdiction. SBP & Co. v. Patel Engg. Ltd. [(2005) 8 SCC 618] in a sense confined the operation of Section 16 to cases where the Arbitral Tribunal was constituted at the instance of the parties to the contract without reference to the Chief Justice under Section 11(6) of the Act.

In a case where the parties had thus constituted the Arbitral Tribunal without recourse to Section 11(6) of the Act, they still have the right to question the jurisdiction of the Arbitral Tribunal including the right to invite a ruling on any objection with respect to the existence or validity of the arbitration agreement. It could therefore rule that there existed no arbitration agreement, that the arbitration agreement was not valid, or that the arbitration agreement did not confer jurisdiction on the Tribunal to adjudicate upon the particular claim that is put forward before it.

Under sub-section (5), it has the obligation to decide the plea and where it rejects the plea, it could continue with the arbitral proceedings and make the award. Under sub-section (6), a party aggrieved by such an arbitral award may make an application for setting aside such arbitral award in accordance with Section 34. In other words, in the challenge to the award, the party aggrieved could raise the contention that the Tribunal had no jurisdiction to pass it or that it had exceeded its authority, in passing it.

This happens when the Tribunal proceeds to pass an award. It is in the context of the various sub-sections of Section 16 that one has to understand the content of the expression “jurisdiction” and the scope of the appeal provision. In a case where the Arbitral Tribunal proceeds to pass an award after overruling the objection relating to jurisdiction, it is clear from sub-section (6) of Section 16 that the parties have to resort to Section 34 of the Act to get rid of that award, if possible. But, if the Tribunal declines jurisdiction or declines to 25 pass an award and dismisses the arbitral proceedings, the party aggrieved is not without a remedy. Section 37(2) deals with such a situation.

Where the plea of absence of jurisdiction or a claim being in excess of jurisdiction is accepted by the Arbitral Tribunal and it refuses to go into the merits of the claim by declining jurisdiction, a direct appeal is provided. In the context of Section 16 and the specific wording of Section 37(2)(a) of the Act, it would be appropriate to hold that what is made directly appealable by Section 37(2)(a) of the Act is only an acceptance of a plea of absence of jurisdiction, or of excessive exercise of jurisdiction and the refusal to proceed further either wholly or partly.

19. In a case where a counterclaim is referred to and dealt with and a plea that the counterclaim does not survive in view of the settlement of disputes between the parties earlier arrived at is accepted, it could not be held to be a case of refusal to exercise jurisdiction by the Arbitral Tribunal. Same is the position when an Arbitral Tribunal finds that a claim was dead and was not available to be made at the relevant time or that the claim was not maintainable for other valid reasons or that the claim was barred by limitation.

They are all adjudications by the Tribunal on the merits of the claim and in such a case the aggrieved party can have recourse only to Section 34 of the Act and will have to succeed on establishing any of the grounds available under that provision. It would not be open to that party to take up the position that by refusing to go into the merits of his claim, the Arbitral Tribunal had upheld a plea that it does not have jurisdiction to entertain the claim and hence the award or order made by it, comes within the purview of Section 16(2) of the Act and consequently is appealable under Section 37(2) (a) of the Act.”

26 (at pages 463-464)

24. This judgment is determinative of the issue at hand and has our respectful concurrence. However, various judgments were referred to by learned senior advocate appearing on behalf of the respondent, in which “jurisdiction” in the wide sense was used. Thus, a jurisdictional error under Section 115 of the Code of Civil Procedure, 1908, dealing with revision petitions, was held to include questions which relate to res judicata and limitation. [See Pandurang Dhoni Chougule v. Maruti Hari Jadhav (1966) 1 SCR 102 at 107)].

25. This judgment was expressly referred to in the context of Anisminic v. Foreign Compensation Commission, (1969) 2 AC 147, delivered in England, which virtually made all “errors of law” “errors of jurisdiction” in the Administrative Law sphere and explained in M.L. Sethi v. R.P. Kapur, (1972) 2 SCC 427 at 435 as under: “…The dicta of the majority of the House of Lords in the above case would show the extent to which “lack” and “excess” of jurisdiction have been assimilated or, in other words, the extent to which we have moved away from the traditional concept of “jurisdiction”.

The effect of the dicta in that case is to 27 reduce the difference between jurisdictional error and error of law within jurisdiction almost to vanishing point. The practical effect of the decision is that any error of law can be reckoned as jurisdictional. This comes perilously close to saying that there is jurisdiction if the decision is right in law but none if it is wrong. Almost any misconstruction of a statute can be represented as “basing their decision on a matter with which they have no right to deal”, “imposing an unwarranted condition” or “addressing themselves to a wrong question”.

The majority opinion in the case leaves a Court or Tribunal with virtually no margin of legal error. Whether there is excess of jurisdiction or merely error within jurisdiction can be determined only by construing the empowering statute, which will give little guidance. It is really a question of how much latitude the court is prepared to allow. In the end it can only be a value judgment (see H.N.R. Wade, “Constitutional and Administrative Aspects of the Anisminic case”. Law Quarterly Review, Vol. 85,1969, p. 198).

Why is it that a wrong decision on a question of limitation or res judicata was treated as a jurisdictional error and liable to be interfered with in revision? It is a bit difficult to understand how an erroneous decision on a question of limitation or res judicata would oust the jurisdiction of the court in the primitive sense of the term and render the decision or a decree embodying the decision a nullity liable to collateral attack. The reason can only be that the error of law was considered as vital by the court. And there is no yardstick to determine the magnitude of the error other than the opinion of the Court…”

26. Likewise, in Hari Prasad Mulshanker Trivedi v. V.B. Raju (1974) 3 SCC 415 at 423-424, a Constitution Bench of this Court again referred to the blurring of lines between errors of law and errors of jurisdiction found in Anisminic (supra) as follows: “Though the dividing line between lack of jurisdiction or power and erroneous exercise of it has become thin with the decision of the House of Lords in the Anisminic case, [(1967) 3 WLR 382] we do not think that the distinction between the two has been completely wiped out. We are aware of the difficulty in formulating an exhaustive rule to tell when there is lack of power and when there is an erroneous exercise of it.

The difficulty has arisen because the word “jurisdiction” is an expression which is used in a variety of senses and takes its colour from its context, (see per Diplock, J., at p. 394 in the Anisminic case). Whereas the “pure” theory of jurisdiction would reduce jurisdictional control to a vanishing point, the adoption of a narrower meaning might result in a more useful legal concept even though the formal structure of law may lose something of its logical symmetry.

“At bottom the problem of defining the concept of jurisdiction for purpose of judicial review has been one of public policy rather than one of logic”. [S. A. Smith : “Judicial Review of Administrative Action”, 2nd Edn., p. 98] And viewed from the aspect of public policy as reflected in the provisions of the 1950 and 1951 Acts, we do not think that a wrong decision on a question of ordinary residence for the purpose of entering a person’s name in the electoral roll should be treated as a jurisdictional error which can be judicially reviewed either in a civil court or before an election tribunal.”

27. In ITW Signode India Ltd. v. CCE (2004) 3 SCC 48 at 74, a case strongly relied upon by Shri Sinha, this Court held in the context of limitation qua recovery of duty under Section 11A of the Central Excise Act, 1944 as follows: “69. The question of limitation involves a question of jurisdiction. The finding of fact on the question of jurisdiction would be a jurisdictional fact. Such a jurisdictional question is to be determined having regard to both fact and law involved therein.

The Tribunal, in our opinion, committed a manifest error in not determining the said question, particularly, when in the absence of any finding of fact that such short-levy of excise duty related to any positive act on the part of the appellant by way of fraud, collusion, wilful misstatement or suppression of facts, the extended period of limitation could not have been invoked and in that view of the matter no show-cause notice in terms of Rule 10 could have been issued.”

28. Given the context of Section 11A of the Central Excise Act, 1944, obviously the expression “jurisdiction” would mean something more than merely being able to embark on the merits of a dispute. In a recent judgment under Section 9A of the Code of Civil Procedure, 1908 (as inserted by the State of Maharashtra), this Court in Foreshore Coop. Housing Society Ltd. v. Praveen D. Desai (2015) 6 SCC 412, referred to the 30 expression “jurisdiction” occurring in Section 9A and held an earlier judgment of this Court to be per incuriam.

Though the Constitution Bench judgment in Ittavira (supra) was mentioned by the Bench, referring to the argument of one of the counsel for the parties, in the concluding portion, this judgment is not referred to at all. In any case, the reasoning of the Court in that case was in the context of Section 9A which, when contrasted with Order XIV of the Code of Civil Procedure, 1908, made the Court accept the wider concept of “jurisdiction” as laid down in Pandurang (supra).

29. In our view, therefore, it is clear that the award dated 23rd July, 2015 is an interim award, which being an arbitral award, can be challenged separately and independently under Section 34 of the Act. We are of the view that such an award, which does not relate to the arbitral tribunal’s own jurisdiction under Section 16, does not have to follow the drill of Section 16(5) and (6) of the Act. Having said this, we are of the view that Parliament may consider amending Section 34 of the Act so as to consolidate all interim awards together with the final arbitral award, so that one challenge under Section 34 can be made after delivery of the final arbitral award. Piecemeal challenges like piecemeal awards lead to unnecessary delay and additional expense.

30. The appeal is, accordingly, allowed and the impugned judgment is set aside. The Section 34 proceedings before the District Judge, Jagatsinghpur may now be decided. There shall, however, be no order as to costs.

 (R.F. Nariman)

 (Navin Sinha)

New Delhi;

January 23, 2018.

Maharashtra State Electricity Distribution Company Ltd. Vs. M/s. Datar Switchgear Ltd. & Ors.[SC 2018 JANUARY]

KEYWORDS:- Constitution of an Arbitral Tribunal-DELAY-

Capture

DATE: JANUARY 18, 2018-

  • Arbitration petition filed under Section 34 of the Act was sought to be amended after a delay of eight years. Further, the amendment in the appeal, taking those very grounds on which amendment in the arbitration petition was sought, was sought after a delay of 3 1/2 years. The High Court, thus, rightly rejected these summons.

ACTS: Section 34 of the Arbitration and Conciliation Act, 1996-

SUPREME COURT OF INDIA

Maharashtra State Electricity Distribution Company Ltd. Vs. M/s. Datar Switchgear Ltd. & Ors.

[Civil Appeal No. 10466 of 2017]

A.K. SIKRI, J.

1. The appellant herein had awarded a contract to the respondent. Dispute had arisen leading to the constitution of an Arbitral Tribunal (having regard to the Arbitration Agreement contained in the contract between the parties) and those arbitration proceedings culminated in the Arbitral Award dated June 18, 2004. An application under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘Act’) was filed by the appellant, questioning the correctness of the Award which was dismissed by the learned Single Judge of the High Court vide orders dated March 18, 2009 and April 30, 2009 thereby affirming the Arbitral Award. Intra-court appeal thereagainst, which was preferred by the appellant, has been dismissed by the Division Bench of the High Court vide judgment dated October 19, 2013. It is the validity of that judgment which is the subject matter of the instant appeal.

2. With the aforesaid preliminary comments on the nature of proceedings, we turn to the events that took place, in a chronological manner, that are relevant for deciding the lis:

EVENTS :

The respondent was awarded a contract for installation of Low Tension Load Management Systems (LTLMS) at various locations by the appellant during the year 1993-1994. The respondent participated in another tender in the year 1996 for installation of approximately 23000 numbers LTLMS.

The appellant awarded a work order dated January 15, 1997 for installation of 11760 numbers of LTLMS to the respondent against the above tender of 1996 and the balance quantities were awarded to other tenderers. According to the appellant, against the installation made by the respondent previously in the year 1993-1994, there were large scale complaints and the issue of defective equipments having been supplied by the respondent which issue was being raised in the press repeatedly.

In view of the criticism faced by the respondent, the respondent voluntarily offered to not only supply 11760 LTLMS against the order placed in January 1997 but also undertook to replace all defective Low Tension Switched Capacitators (LTSCs) supplied by them against the previous contract of 1993-1994 with new technology LTLMS and charge the old lease rentals against the replaced LTSC during the pendency of the earlier contract. The appellant accepting the package offer by the respondents issued Letter of Intent in respect of 12555 numbers panel of 1993-1994 contract objects to be replaced by new panels along with additional quantity of 23672 numbers fresh panels. The appellant finally placed a composite work order dated March 27, 1997 with the respondent to:

(i) Supply 11,760 numbers equipments against the tender of 1996-1997 contract. B-I Locations;

(ii) 12,555 numbers replacement of equipments against the 1993-1994 contract – B-II locations; and

(iii) 23,672 numbers equipments which was a package with the B-II locations – B-III locations.

Clause 5.1 of the letter of Work Order dated March 27, 1997 provided as under:

“The supply and installation of the LM Systems shall commence within four months from the date of this work order or opening of Letter of Credit or receipt of complete list of locations of DTCs whichever is later. The entire supply and installation of LM System covered under schedules at Annexure – B-I, Annexure – B-II and Annexure – B-III shall be completed within twenty months thereafter.”

3. During the execution of the said contract, some issues arose between the parties. As per the respondents, the appellant primarily committed two kinds of breaches, namely, the appellant did not supply the list of location where the contract objects had to be installed and, further, the appellant also did not renew the Letter of Credit (LC) through which the lease rentals were being paid for the installed objects. A series of correspondence was exchanged between the parties on the aforesaid two counts as the appellant maintained that it had not committed any fault in respect of any of the aforesaid aspects.

As against the total number of 47497 LTLMS to be installed by the respondents, it installed 17294 numbers and thereafter terminated the contract vide letter dated February 19, 1999 alleging breaches on the part of the appellant which according to the respondent entitled the respondent to terminate the contract. The respondent undertook to maintain 17,294 contracts objects installed by them on the condition that lease rental of the same would be paid by the appellant. The respondent further claimed that they had manufactured 14,206 numbers objects which were waiting to be installed for which locations were not intimated by the appellant.

4. As per the appellant, under the original tender of 1996, the respondent was only entitled to supply and maintain 11760 contract objects and 12555 replacement of 1993/94 contract was as a package, with 23672 supply of contract objects and, failure to replace the contract objects of 1993/94 completely disentitled the respondent from the right to supply any contract object under the additional quantities of 23672 contract objects awarded as package beyond the ratio in which the B-II locations were replaced vis-a-vis the additional quantity awarded in B-III locations.

Thus, the partial termination by the respondent was illegal and arbitrary because as against 12,555 B-II locations, the respondent had installed only 2,014 equipments and thus they were aware of 10,541 B-II locations which were for replacement basis. Hence it was incorrect on their part to suggest that they had a right to terminate the contract due to non-supply of list of locations.

5. A meeting was held between the officials of the appellant and representatives of the respondent and it was duly recorded in the Minutes of Meeting dated March 11, 1999 that the Chairman of the appellant had informed the respondent that the maps were readily available in the Kolhapur zone and requested the respondent to take up the work immediately. However, the respondent stated that it was not in a position to start the work immediately.

The appellant wrote letter dated April 5, 1999 to the respondent bringing out its extreme dissatisfaction in the manner in which the work was being carried out by the respondent and calling upon the respondent to stick to the implementation of the programme as per the terms and conditions of the Work Order. The respondent by letter dated April 21, 1999 terminated the contract in its entirety and refused to maintain even the objects installed by them.

6. Dispute having arisen; for adjudicating these disputes, Arbitral Tribunal in terms of Arbitration Agreement was constituted. The Tribunal commenced its proceedings on February 19, 1999 and on June 18, 2004 passed a final award directing the appellant to pay Rs.185,97,86,399/- to the respondent as damages which included:

(i) Rs. 109 crores towards the installed object.

(ii) Rs. 71 crores towards the objects manufactured by the respondent which were ready for installation which they claimed could not be installed due to lack of list of locations; and

(iii) Rs. 6.52 crores towards raw material allegedly purchased by the respondent for the manufacture of remaining equipments.

7. As aforesaid, before the arbitrators, the respondents had primarily contended two defaults by the appellant. First, that the appellant did not supply the list of locations where the contract objects had to be installed and second, that the appellant did not renew the LC through which the lease rentals were being paid for the installed objects.

8. The Arbitral Tribunal, however, found no fault with the appellant as regards non-renewal of the LC observing that the respondent had terminated the contract in its entirety on April 21, 1999 whereas the LC was valid upto April 30, 1999. The finding regarding non-renewal of LC by the Arbitral Tribunal was affirmed by the learned Single Judge (Justice D.K. Deshmukh) vide judgment dated August 3, 2005 when the Award was initially set aside. The said finding was also affirmed by the Ld. Division Bench of the Bombay High Court vide its judgment dated October 22, 2008. However, partly allowing the appeal of the respondent, the judgment of the learned Single Judge dated August 3, 2005 was set aside and the matter was remanded back for fresh consideration. While adopting this course of action, the Division Bench in its judgment dated October 22, 2008 observed as under:

“44. The Court if decides an application under Section 34 should either expressly or impliedly say that the award was being set aside because it was contrary to the terms of the contract or the Award was in any way violative of the public policy or the award was contrary to the substantive law in India viz., Sections 55 and 73 of the Indian Contract Act or the award was vitiated by perversity in evidence in contract or the adjudication of a claim has been made in respect whereof there was no dispute or difference or the award was vitiated by internal contradictions.

In the present judgment which is under challenge, we have not found any such findings either expressly or impliedly though in the pleadings the issues were raised which should be the subject matter of a petition under Section 34 of the Act of 1996. Therefore, we find that it will be necessary for this Court to set aside the judgment impugned and remand the case back for adjudication afresh in accordance with the parameters set out by Section 34 of the 1996 Act.

45. In view of the above, the appeal is allowed. Impugned judgment and order dated 3rd August 2005 passed by the learned Judge of this Court in Arbitration Petition No. 374 of 2004 is set aside. The case is remanded back for adjudication afresh in accordance with the parameters set out by Section 34 of the Arbitration and Conciliation Act, 1996.”

9. After the remand, the learned Single Judge (Justice Roshan Dalvi) by order dated March 18, 2009 rejected the case of the appellant on the ground that no case under Section 34(2)(iv) of the Act had been made out by the appellant. The aforesaid order dated March 18, 2009 of the learned Single Judge was challenged by the appellant before the Division Bench of the Bombay High Court. The Division Bench, while hearing the appeal, passed the following order on April 21, 2009:

“1. Learned counsel for the petitioner has tried to submit before this Court that certain arguments quoted by the learned Single Judge in the impugned judgment were not argued by him and they have been put up by the learned Single Judge in his mouth. Under these circumstances we find it appropriate to direct the petitioner to approach the Ld. Single Judge seeking correction and/or withdrawal and/or the modification of the submission which are put up in his mouth. After appropriate orders are passed by the Ld. Single Judge, appeal be placed for admission.

2. Appeal No. 165 of 2009 be heard along with this Appeal.

3. Since contentions raised before the Ld. Single Judge are in dispute as stated above and the Petitioner has been directed to approach the Ld. Single Judge for the purpose of correction and/or modification, and also in view of the fact that the impugned order has not attained finality for the purpose of being considered by us, we find it inappropriate to consider Notice of Motion (being Notice of Motion No. of 2009) for interim relief at this stage. The said notice of motion will be considered after the appropriate orders are passed by the Ld. Single Judge on approach to the Ld. Single Judge by the Petitioner.”

10. The learned Single Judge by order dated April 30, 2009 clarified her order by saying that although the appellant has Civil Appeal No. 10466 of 2017 Page 9 of 65 argued the matter challenging the award being beyond the contract between the parties and being opposed to public policy, the learned Single Judge in her considered opinion rejected the same under Section 34(2)(iv) of the Act.

11. Appeal of the appellant was thereafter listed before the Division Bench in which order dated May 2, 2009 was passed staying the Award upon the condition that the appellant deposits the principal amount and submits bank guarantee qua the interest awarded by the arbitrators. This order was challenged by both the parties by filing their respective SLP.

This Court while hearing these SLPs, modified the order of the High Court, directing the appellant to deposit Rs.65 crores with the Bombay High Court and furnish a bank guarantee in the sum of Rs.200 crores. Amount of Rs.65 crores was allowed to be withdrawn by the appellant upon furnishing bank guarantee subject to the outcome of the appeal before the High Court.

12. In the appeal before the High Court, the appellant raised certain additional grounds. Thereafter, the matter was heard finally and vide impugned judgment, the appeal of the appellant has been dismissed by the High Court.

ORDER OF THE HIGH COURT

13. Before adverting to the arguments that are advanced by Mr. Vikas Singh, learned senior counsel appearing for the appellant and reply thereto of Mr. Rafique Dada, learned senior counsel who appeared for the respondent, it would be wise to scan through the impugned judgment of the Division Bench in order to understand and appreciate the line of reasoning which is the basis of justifying and upholding the order of the learned Single Judge and dismissing the objections of the appellant to the award rendered by the Arbitral Tribunal. In a very elaborate judgment, which runs into more than 150 pages, the High court has discussed various facets of the case under the following heads:

1. Brief Synopsis and chronology of events.

2. Remand

3. Submissions and finding on interpretation of the order of Apex Court dated 25/8/2009 passed in SLP filed by MSEB, challenging the order of remand passed by the Division Bench of this Court headed by Bilal Nazki, J

4. Notice of Motion No.3227 of 2010

5. Notice of Motion No.461 of 2010.

6. Scope of interference under Sections 34 and 37 of the said Act; the interpretation of the term “public policy” and; power of the Court to interfere on that ground.

7. Points (i) to (vi) extensively urged by MSEB

8. Submissions and finding on Point No. (i) Whether the Arbitral Tribunal and the learned Single Judge were justified in coming to the conclusion that the MSEB had committed breach of contract by not supplying DTC Lists?

9. Submissions and finding on Point No.(ii) Whether the contract was one complete contract and the same could not be split up as argued by the Claimants?

10. Submissions and finding on Point No. (iii) Whether Claimants/DSL waived their right to receive complete lists of locations; and on Point No (iv) Whether the Award is contrary to the public policy as mentioned under Section 34 of the Arbitration and Conciliation Act, 1996?

11. Submissions and finding on Point No. (iv) Whether the Award is contrary to the Public Policy as mentioned under Section 34 of the Arbitration and Conciliation Act, 1996? (v) Whether the damages were properly awarded? and (vi) Whether the aspect of mitigation was properly considered?

12. Chamber Summonses filed by MSEB

13. Conclusion.

14. After narrating the scope of the work and the gist of the dispute which led to initiation of arbitration proceedings, the High Court noted that respondent filed its claims under various heads aggregating to Rs.1053,06,78,342/- and the counter claims of the appellant were to the tune of Rs.1273,70,26,669/- crores approximately.

Appellant had examined as many as 26 witnesses in support of its case whereas the respondent had examined its Managing Director who was in charge of the project. After conclusion of the evidence and hearing the arguments, the Arbitral Tribunal partly allowed the claims of the respondent, holding that respondent was entitled to a sum of Rs. 1,79,15,87,009/- (Rs. 185,97,86,399 – 6,81,99,390) along with interest @ 10% per annum payable from the date of the Award till realisation.

Cost of rupees one crore was also awarded. Counter claims of the appellant were dismissed. After taking note of the aforesaid facts in brief, the High Court dealt with the contention of the appellant herein that the matter needed to be remanded back to the learned Single Judge on the ground that the submission of the appellant that the Award was against the public policy had not been considered by the learned Single Judge. After comprehensive discussion, this argument has been rejected authoritatively.

In the process, the High Court also dealt with the submissions predicated on Order dated August 25, 2009 passed by this Court in special leave petition which was filed by the appellant whereby order of remand passed by Division Bench of the High Court, in the earlier round was challenged. Notice of Motion Nos. 3227 of 2010 and 461 of 2010 also came to be included in the discussion while dealing with the aforesaid issue.

Thereafter, the High Court has discussed the scope of interference under Sections 34 and 37 of the Act, with particular reference to the ground of challenge on the basis that the award is against “Public Policy of India”. After referring to the law on this pivotal aspect, the High Court noted the points of arguments advanced by the appellant affirming part of challenge to the Award. Six points which were advanced by the appellant in this behalf are as under:

(i) Whether the Arbitral Tribunal and the learned Single Judge were justified in coming to the conclusion that the MSEB had committed breach of contract by not supplying DTC Lists?

(ii) Whether the contract was one complete contract and the same could not be split up as argued by the Claimants?

(iii) Whether Claimants/DSL waived their right to receive complete lists of locations?

(iv) Whether the Award is contrary to the public policy as mentioned under Section 34 of the Arbitration and Conciliation Act, 1996?

(v) Whether the damages were properly awarded?

(vi) Whether the aspect of mitigation was properly considered?

15. Thereafter, discussion ensued on each of the aforesaid issue, one-by-one. On the first point, the High Court has concluded that the Arbitral Tribunal was justified in coming to conclusion that the appellant had committed breach of the contract by not supplying DTC list. While so concluding, the High Court went into the events which took place in this behalf, gist of the evidence as well as the manner in which the issue was upraised by the Arbitral Tribunal.

The High Court has held that the finding which was given by the Arbitral Tribunal, after taking into consideration the rival contentions raised in the claim and in the written statement on this aspect is a finding of fact which was given after examining the material on record. The High Court further noted that this finding was upheld by the learned Single Judge also and the manner in which the learned Single Judge dealt with the issue has been taken note of.

This being a finding of fact, as per the High Court it was not possible for it to substitute its own view to the views taken by the Arbitral Tribunal or the learned Single Judge and arrive at different conclusion, even if two views were possible. Notwithstanding the same, the Division Bench again examined this very issue on merits after going through the various clauses in the contract entered into between the parties. Taking particular note of clauses 5.2 and 5.3, the Division Bench has affirmed the findings of the Arbitral Tribunal in the following manner:

“46. Clause 5.2 is also relevant since it stipulates about the manner in which installation/replacement work was to be carried out by DSL. The work was to be completed in three Zones, viz., Kolhapur Zone, Nasik Zone and Aurangabad Zone. In clause 5.2 sequence of Zones was mentioned in which the work was to be carried out and it was as under:-

(a) Kolhapur Zone

(b) Nasik Zone. Work to be commenced on completion of work in Kolhapur Zone.

(c) Aurangabad Zone. Work to commence on completion of work in Nasik Zone.

The sequence therefore was that, first in Kolhapur Zone B-I, B-II, B-III objects were to be installed and, thereafter, in Nasik again B-I, B-II, B-III objects were to be installed and finally in Aurangabad, B-I, B-II and B-III objects were to be installed. The said schedule of completion of work, however, was changed from time to time and, finally, again, in December, 1998 MSEB informed DSL to follow the schedule as per clause 5.2.

47. Clause 5.3 lays down that supply, erection at site and commissioning of the contract objects was to be done within a stipulated time.

It also clarified that time is the essence of the contract and if there was delay in performance due to any reason MSEB would be entitled to claim liquidated damages. The chronology of events indicates that on 14/7/1997, MSEB by its letter informed DSL that Lists of DTC locations were ready with the Circle Offices and DSL should collect the same.

The case of DSL in brief is that though it was represented by MSEB that Lists were ready and available on 14/7/1997, Lists were not supplied and, as a result, installations could not be done and as many as 120 letters had to be written by DSL to MSEB, requesting them to supply the Lists.

Secondly, sequence of completion of work also was changed from time to time and suddenly on 21/12/1998 Circle Engineer informed DSL that sequence as per clause 5.2 of the work order had to be adhered to and, DSL was therefore constrained to send a letter of termination dated 19/02/1999 and even thereafter in a meeting which was held on 11/3/1999 between the Chairman of the MSEB, DSL and other two parties who were awarded the contract, as mentioned in clause 17 of the minutes of the meeting, the Chairman informed DSL that the Lists were readily available in Kolhapur Zone and asked Mr. Datar to take up the work under B-II and B-III schedule immediately and the Chairman directed that CEs present in the meeting that it was the Board’s responsibility to give the list with maps to the agencies and expeditious steps should be taken in that regard.

It was, therefore, contended that as late as 11/3/1999, the Chairman himself had conceded that the Lists were not made available to DSL. In this context, certain letters assume importance regarding change of sequence of work. The work order dated 27/3/1997 shows that the work initially had to be done in Kolhapur Zone, then in Nasik Zone and finally in Aurangabad Zone.

Thereafter, Chief Engineer, MSEB by his letter dated 4/11/1997 changed the sequence and directed that the work should be completed initially in Nasik Zone in respect of B-I, B-II, B-III Lists, then in Kolhapur Zone and finally in Aurangabad Zone. This sequence was again modified by the Chief Engineer’s letter dated 25/5/1998 and modification was made in the sequence of schedule and sequence of zone continued and work could be completed at any stage in any Zone. Again, third modification was made by Chief Engineer’s letter dated 17/6/1998 and there was modification in respect of Zones and work could be carried out in any Zone in any sequence.

Then there was fourth modification by Chief Engineer’s letter dated 21/12/1998 and direction was given to strictly adhere to the original work order sequence. According to DSL, because the Lists were not supplied though the contract objects/gadgets were ready for installation and though they were taken to the sites at the respective Zones, they could not be installed and were lying stranded causing monetary loss on account of transportation, manual labour etc. and non-installation of contract objects resulted in DSL not getting benefit of lease rentals.”

16. Interestingly, before the Division Bench, the appellant had raised certain additional points on this aspect, which were not argued before the Tribunal or even before the learned Single Judge, viz., the non-supply of DTC locations did not amount to breach of fundamental term of the contract which led to termination of contract by the respondent. We would like to reproduce, at this stage, this part of discussion as well:

“48. It must be noted here that before the learned Single Judge and before this Court, some of the points which were never urged before the Tribunal had been sought to be urged. In the written submissions which have been tendered before us and what was urged before us was that the Arbitral Tribunal had committed serious error by holding that non- supply of DTC locations amounts to breach of fundamental term of contract which led to termination of contract by Respondents/Claimants. It has been contended before us that since each contract object was a separate lease contract, the Arbitrator’s Award has to be considered in three parts

(i) qua uninstalled objects,

(ii) qua installed objects and

(iii) damages in respect of the objects not even manufactured and it has to be noted here that Tribunal has framed one of the points as under:-

(A) Whether the Claimants were ready and willing to perform their part of the contract and if so, whether Respondents prevented the Claimants from doing so? While answering this point, the point was discussed in two parts. Firstly, whether the Claimants were ready and willing to perform their part of the contract and, secondly, whether Respondents have prevented the Claimants from doing so. In this context, after having held that Claimants were ready and willing to perform their part of the contract, while considering the second point, the Tribunal had taken into consideration the question of supply of DTC Lists and whether it was a fundamental term of the contract.

After having held that MSEB had prevented DSL from performing their part of the contract even though they were ready and willing to do so, the question of damages has been thereafter separately considered and on that point Tribunal has adopted a particular method of calculation of damages. In our view, it is not permissible for MSEB to now change their submissions in this manner. However, even if the submissions, as advanced before us by MSEB, are taken into consideration, they are devoid of merits.”

17. Thereafter, the High Court took note of another argument of the appellant herein, namely, the contract was terminated by the respondent on account of non-renewal of Letter of Credit in view of respondent’s letter dated February 19, 1999. However, the High Court did not accept the said argument as valid and rejected the same. Thereafter, the High Court has recorded its specific findings on Point No. 1 and we reproduce relevant portion thereof as under:

“In our view from the material on record, it is abundantly clear that supply of DTC Lists was a fundamental term of the Work Order and MSEB had miserably failed in complying with the said fundamental term and there was a breach on the part of the MSEB in supplying the DTC locations which eventually prevented DSL from installation of contract objects.

It has to be noted here that after the work order was issued by MSEB, DSL had to make necessary arrangements for the purpose of carrying out the process of installation of the contract objects. This included procurement of raw material from a foreign country, starting the process of manufacturing gadgets, making arrangements for transportation of these contract objects to the places where the said gadgets were to be installed, employment of trained, skilled and other staff, making available vehicles for transporting these contract objects to the DTC location where they were to be installed and, finally, coordinating with the Officers of MSEB so that after the contract objects were installed, a Certificate of installation could be given by the Officers of MSEB so that from that point onwards, lease rentals could become payable to DSL.

It has to be borne in mind that the nature of the Work Order was such that it was in the interest of DSL to ensure that the contract objects are installed and certificates to that effect are obtained from the Officers of MSEB. It does not sound to reason that after having invested huge amount of almost Rs 163 crores, as observed by the Tribunal in the Award, DSL would not install the objects because it was in their interest to get the objects installed so that returns on their huge investment would start thereafter.

It is inconceivable therefore that though DTC Lists were available, DSL would not install the contract objects. Various facts and figures were given by MSEB to show that DTC locations were known to DSL and yet they had failed in installing the contract objects is without any substance. It cannot be forgotten that, initially, the sequence of installation was Kolhapur, Nasik and Aurangabad. This sequence was later on changed to Nasik, Kolhapur and Aurangabad. This was again changed and permission was given to DSL to install the objects at any time at any place and, lastly, again, this was changed and direction was given to DSL to adhere to the sequence as per the Work Order.

This being the position, even assuming that Civil Appeal No. 10466 of 2017 Page 20 of 65 B-II Lists were available, DSL could not have installed these contract objects because they were asked to follow the schedule again by letter dated 21/12/1998 and, therefore, even if the lists were available, it was not possible for DSL to simultaneously install all those objects since they were told to adhere to the sequence in the Work Order if the lists of locations under B-I were not given, even assuming that they had B-II lists of locations they could not have and were not actually allowed to install at the said B-II locations. It has come on record that more than 10,000 objects were manufactured and ready for installation.

There is no earthly reason why DSL would fail to install the objects which were inspected and ready for installation. The only obvious reason would be that they were unable to do so on account of various orders which were passed by MSEB from time to time preventing them from performing their obligation. MSEB has not examined any of its Superintending Engineers who were in charge of supplying the Lists. The cumulative effect of all the material which has been brought on record is that it clearly demonstrates the failure on the part of MSEB in supplying the Lists of DTC locations which was a fundamental term of the contract.”

18. Coming to point no. 2, the High Court noted that this point was not urged before the Tribunal or before the learned Single Judge, namely, the contract was not one complete contract. For this reason, held the High Court, it was not permissible for the appellant to urge the same for the first time before it.

19. Point nos. 3 and 4 were taken up together for discussion. Insofar as point no. 3 is concerned, the Court noted that relevant provisions in the light of which this point was to be examined, were Sections 39, 53, 55 and 63 of the Contract Act. The High Court found that when Chief Engineer of the appellant had written a letter dated December 21, 1998 informing the respondent that work had to be carried as per the original schedule given in the Work Order, viz., Kolhapur, Nasik and Aurangabad and a further direction was given not to install objects at B-III locations, only at that stage the appellant had refused to perform their part of promise.

Only, thereafter, notice was given by respondent on February 19, 1999 and finally the contract was terminated on April 21, 1999. Therefore, there was no waiver of right of acquiescence on the part of the respondent and, thus, argument of the appellant could not be accepted that the respondent had waived their right to terminate the contract. The High Court also held that the question of waiver or acquiescence is a question of fact and since there was a finding of fact by the Arbitral Tribunal (which was upheld by the Single Judge as well) that there was no waiver or acquiescence on the part of the respondent, such an argument was not even available to the appellant in appeal under Section 37 of the Act.

On this basis, the Division Bench rejected the contention of the appellant that the respondent waived its right to receive complete list of locations. In the process, the High Court has also rejected the contention of the appellant that as a consequence of waiver of right to receive list of DTC locations, the only option which was available to the respondent was to have given notice to the appellant that it was accepting the performance of the promise other than at the time agreed upon or that the respondent was entitled to any compensation.

20. With the aforesaid findings on Point no. 3, the High Court rejected the contention of the appellant that the award of damages was against the public policy.

21. Thereafter, the High Court discussed the question of quantum of damages as raised in Point No. 5. It went through the exercise done by the Arbitral Tribunal in this behalf, i.e., the manner in which the damages are calculated by the Tribunal. It found that the Tribunal had appreciated to determine the damages payable to the respondent in respect of lease rent for duration of seven years for 17294 contract objects which were installed and a figure of Rs. 108,02,53,173/- in this behalf was arrived at. In respect of 14206 stranded objects, the Tribunal held that the damages which were payable on account of aforesaid stranded objects were to the tune of Rs. 14,28,55,536/- for a period of one year at the rate of Rs. 10,056/- per year for each contract object and for a duration of five years Rs. 71,42,77,680/-.

As regards those objects which were not manufactured, the Arbitral Tribunal took into consideration the value of unused imported raw material. On that basis it came to the conclusion that damages in respect of imported raw material left unused for 16487 contract objects were Rs. 6,52,55,546/-. In this manner, it arrived at a total figure of Rs. 185,97,86,399/- and deducted a sum of Rs. 6,81,99,390/- which was paid by the appellant to the respondent pursuant to interim orders passed by the Tribunal.

22. After taking note of the manner in which the Tribunal awarded the damages, the High Court noted the challenge of the appellant’s counsel to the award of damages, which were as under:

(i) Since there was no breach committed by the appellant and that the respondent had no right to terminate the contract, no damages were payable.

(ii) Since the cost of contract object was on an average of Rs. 9,000/- per object, the respondent, at the best, was entitled to nominal profit of 10-15% on the said cost. Therefore, the Arbitral Tribunal had granted excessive damages.

(iii) The damages were wrongly awarded for objects not even manufactured and such an award was in violation of public policy as mentioned in Section 34 of the Act.

(iv) According to the understanding of the appellant, the contract was coming to an end on March 19, 1999 and the contract objects, therefore, should have been manufactured by it. Thus, failure to manufacture the same did not entitle them to claim any damages qua the objects not manufactured.

(v) Since the contract was novated, the respondent was obliged to manufacture the objects as and when the lists were supplied to it and, therefore, the question of payment of any compensation qua the objects not manufactured did not arise.

(vi) There was no default qua the installed or qua uninstalled objects and on this ground also the Tribunal was not justified in granting any compensation whatsoever.

(vii) In respect of the installed objects, the only breach was non-renewal of the Letter of Credit. Likewise, in respect of un-installed objects, the only breach was non-submission of lists of locations. Insofar as non-renewal of Letter of Credit is concerned Arbitral Tribunal had decided this issue in favour of the appellant and, therefore, no damages were awardable. In respect of uninstalled objects, the respondent had 16473 lists of location and they were obliged to maintain 2500 buffer stock. However, the respondent had manufactured only 14206 objects, therefore, there was no question of payment of any damages qua uninstalled objects.

23. Since this issue was connected with Point No. 6, i.e., mitigation of damages, the High Court dealt with the argument of mitigation as well. Here, contention of the appellant was that according to the respondents the breach, if at all, took place only on December 21, 1998 when permission for simultaneous installation in B-III was withdrawn and no steps whatsoever to remedy the breach thereafter were taken by the respondents. This showed that the respondents had not tried to mitigate their loss and were not entitled to get damages. Here the argument of the respondent was also noted and after considering the respective arguments, the High court has not found any substance in the submissions of the appellant. It has given following reasons for adopting this course of action:

“73. We agree with the submissions made by the learned Senior Counsel appearing on behalf of DSL for the following reasons: First of all, it has to be noted that Arbitral Tribunal in its Award has recorded a finding of fact that MSEB had committed breach of the contract by not supplying the lists of DTC locations and this breach was a fundamental breach of the agreement. Secondly, it is held that MSEB had prevented DSL from performing its part of the contract and, therefore, they were entitled to get damages.

The Arbitral Tribunal, thereafter, relying on the Judgment of the Supreme Court in Union of India v/s. Sugauli Sugar (Pvt.) Ltd. [(1976) 3 SCC 32)] has observed that innocent party who has proved the breach of contract to supply what he had contracted to get, such a party should be placed in as good a situation as if the contract had been performed and, therefore, damages which the Claimants/DSL were entitled to have to be determined on the said principle.

The Tribunal has then held that lease rent is one of the measures for ascertaining damages and, in that context, after relying on the Work Order, came to the conclusion that entitlement of the Claimants was to secure lease rent accrued from the date of installation of the contract objects. In this context, therefore, for the sake of convenience the question of quantum of damages was considered with reference to

(a) installation of contract objects,

(b) stranded objects and

(c) objects not manufactured.

The submission of the learned Senior Counsel appearing on behalf of MSEB that the Arbitral Tribunal had split up the contract into three parts, though the contract was one single contract, is without any substance. It has to be noted that the Arbitral Tribunal first came to the conclusion that there was a breach on the part of MSEB in supplying the lists of DTC locations.

Having held, that there was a breach and that the Claimants/DSL were entitled to claim compensation, while ascertaining the amount of compensation, for the sake of convenience, it has considered the aspect of granting damages in the above manner. The entire thrust of the argument of MSEB, therefore, is misconceived. MSEB has tried to give a twist to their tale by contending that 17,294 contract objects being installed, there was no question of awarding damages for the installed objects and, secondly, since termination of Letter of Credit was held not to be illegal, it was not open for the Arbitral Tribunal to have awarded damages for the uninstalled objects and the objects which were not manufactured.

This submission is totally misconceived, firstly because it has been consistently held that the Arbitral Tribunal alone is competent to decide the manner of calculation of damages which are to be awarded as also the method which is to be adopted by the Tribunal. In the present case, the Arbitral Tribunal has held that lease rent is one of the measures for ascertaining damages.

The Apex Court in McDermott vs. Burn Standard [(2006) 11 SCC 181] has observed as under:-

“106. We do not intend to delve deep into the matter as it is an accepted position that different formulae can be applied in different circumstances and the question as to whether damages should be computed by taking recourse to one or the other formula, having regard to the facts and circumstances of a particular case, would eminently fall within the domain of the arbitrator.

110. As computation depends on circumstances and methods to compute damages, how the quantum thereof should be determined is a matter which would fall for the decision of the arbitrator. We, however, see no reason to interfere with that part of the award in view of the fact that the aforementioned formula evolved over the years, is accepted internationally and, therefore, cannot be said to be wholly contrary to the provisions of the Indian law.”

24. Citing few more judgments and after extensively quoting therefrom1, the High Court proceeded further with the discussion

(a) Dwarka Das v. State of M.P. and Another

(b) ONGC v. Comex

(c) Prakash Kharade v. Dr. Vijay Kumar Khandre and Others

(d) Grandhi v. Vissamastti

(e) Mirza Javed Murtaza v. U.P. Financial Corporation Kanpur and another as follows:

“The Arbitral Tribunal, therefore, after having adopted lease rent as one of the methods of ascertaining damages has thereafter considered what damages should be awarded by way of lease rentals on installed objects, stranded objects and the objects not manufactured. In our view, it is not possible to find fault with the finding of the Arbitral Tribunal on the measure and method for ascertaining and calculating the damages which have been adopted by it to arrive at the final figure of compensation to be payable to the Claimants/DSL.

It is also quite well settled position in law that once it is established that the party was justified in terminating the contract on account of fundamental breach of contract then, in that event, such an innocent party is entitled to claim damages for the entire contract, i.e., for the part which is performed and also for remaining part of the contract which it was prevented to perform.

This principle is quite well settled in number of cases. The Tribunal, therefore, was perfectly justified in calculating the damages in the aforesaid manner. In this view of the matter we do not propose to deal with the judgments on which reliance is sought to be placed by MSEB. So far as the question of mitigation is concerned, the Tribunal has specifically held that the contract objects were unique objects which had to be manufactured according to the specifications laid down by the MSEB and, therefore, these contract objects could not be disposed of in the open market. Even if the said contract objects were dismantled, value would become nil.

The Tribunal also observed that Datar deposed with reference to Exhibit-C-16 that efforts were made to sell the contract objects stranded in the factory to other Electricity Boards but those efforts did not succeed. The question of mitigation, therefore, was considered by the Tribunal and the submissions of MSEB were not accepted. In our view, reasoning given by the Tribunal cannot be faulted.”

25. According to the High Court, the Arbitral Tribunal had awarded damages in a most conservative manner and, thus, committed no illegalities in awarding these damages. At the end, the High Court dealt with the Chamber Summons which were filed by the appellant and on detailed discussion thereupon, dismissed all these Summons.

26. As a consequence, the appeal of the appellant stood dismissed.

ARGUMENTS OF THE APPELLANT:

27. Mr. Vikas Singh referred to the tender of 1993-94, pursuant to which the respondent had installed 12,555 numbers of LTSC, and submitted that the respondent was maintaining the same but large scale complaints about the inefficiency of LTSC was received with the appellant. Having regard to this criticism faced by the respondent, it volunteered to replace the installations made in the earlier contract and charge the old rental in respect of the same. In the meantime, pursuant to tender of the year 1996 for installation, the respondent was awarded work for installation of 11,760 contract objects. Going by the said assurance, the appellant awarded a work order dated March 27, 1997 for replacement of 12,555 panels of earlier contract objects plus installation of 23,672 LTMS panels and the work order finally became as under:

(i) Supply 11,760 numbers equipments against the tender of 1996-1997 contract. B-I Locations;

(ii) 12,555 numbers replacement of equipments against the 1993-94 contract – B-II locations; and

(iii) 23,672 numbers equipments which was given as a package with the B-II Locations – B-III locations.

28. Mr. Vikas Singh referred to Clause 5.1 of the contract as per which entire supply and installation of L.M. Systems covered by schedules at Annexures – B-I, B-II and B-III was to be completed within twenty months. He thereafter read out the correspondence that was exchanged between the parties and on that basis, he sought to argue that as per the appellant, the list of locations was ready on July 14, 1997 but it is the respondent who was facing difficulties in installation of the contract objects and violating the terms of the contract with impunity.

The respondent had even withdrawn money in excess of its entitlement. Vide letter dated December 21, 1998, the appellant had written to the respondent to do installation of B-I and B-II first before B-III locations, as by that date, the respondent had already installed 17,294 objects out of which B-II was only 2014. However, the respondents in their Civil Appeal No. 10466 of 2017 Page 31 of 65 reply dated March 21, 1998 asserted their right to install the objects at B-III locations simultaneously. He further pointed out that in their letter dated February 18, 1999, the respondent admitted having received Rs.4.34 crores in excess of their entitlement, however, on the very next date, i.e. on February 19, 1999, it sought to terminate the contract qua the uninstalled objects numbering 30,695 but volunteered to maintain the installed objects provided that the rent for the same was forthcoming.

It was argued that since the payment of rent was by means of an irrevocable LC, and since the LC was valid on February 19, 1999, the offer of maintaining 17,294 objects was clearly accepted by the appellant as the appellant did not cancel the LC in spite of termination of the contract qua uninstalled objects on February 19, 1999. In other words, the LC continued to remain alive even after termination of the contract on February 19, 1999 in order to make payment of future rentals qua the uninstalled objects. In spite thereof, the respondent, vide its communication dated April 21, 1999, terminated the contract. It was submitted in the aforesaid backdrop that the action of the respondents was clearly illegal.

It was further argued that the findings of the Arbitral Tribunal that the appellant had committed the fundamental breach of the contract in not providing the complete list of the contract objects to the respondents is clearly erroneous which is patently illegal and contrary to the terms of the contract. It was submitted that the entire premise of the Arbitral Tribunal to record this finding was on the basis of the letter of the appellant dated December 21, 1998 which had only debarred the respondent from installing B-III locations as the respondent was indulging in the malpractice of charging bills higher than what they were entitled to which is proved by the credit note given by the respondents themselves on February 18, 1999. The said letter did not debar the respondent from installing the B-II locations which were 10,541 remaining to be installed on February 19, 1999.

The Arbitral Tribunal recorded a perverse finding which resulted in patent illegality in the award that by letter dated December 21, 1998 the appellant had debarred the respondent from installing the B-II locations when clearly neither the same was mentioned in the said letter nor was the same understood contemporaneously by the respondent in their response dated December 23, 1999 wherein they merely protested from being denied the opportunity to install the B-III objects.

The Arbitral Tribunal accordingly committed a grave mistake in holding that the appellant had committed a fundamental breach when clearly on the date of termination the respondent had with them 10541 B-II locations and admittedly 1633 B-I locations in Kolhapur Zone and they were under an obligation under the contract to maintain 2500 buffer objects and hence the respondent had only 14026 contract objects at that time whereas they were required to maintain at least 14,674 contract objects on the said date.

29. Next submission of Mr. Vikas Singh, learned senior counsel, was that the Arbitral Tribunal gave a specific finding that the LC was valid till April 30, 1999 and there was no default on the part of the appellant in this behalf, which finding was also confirmed by the learned Single Judge as well as by the Division Bench which had heard the appeal in the first round.

Therefore, there was no occasion whatsoever for the Arbitral Tribunal to award damages qua the installed objects as there was no default alleged and there was no default held to have been committed by the appellant qua the same.

30. Much emphasis was laid by the learned senior counsel for the appellant on the order dated August 3, 2005 passed by the learned Single Judge in the appellant’s petition under Section 34 of the Act (in the first round), whereby the learned Single Judge had decided the case in favour of the appellant holding that there could not be any direction for payment of damages in respect of the installed objects as no default was found by the Arbitral Tribunal and, therefore, the Tribunal committed a grave mistake in awarding compensation in respect thereof. In order dated August 3, 2005, the learned Single Judge had also held that the Arbitral Tribunal had committed illegality by awarding compensation in respect of the objects manufactured but not installed while permitting the respondents to retain the same.

Likewise, the award was faulted with to the extent that the Arbitral Tribunal awarded the amount for the raw material available with the respondent, without directing the respondent to handover the said raw material to the appellant. Though, this order dated August 3, 2005 was set aside by the Division Bench in appeal which was preferred by the respondent, submission of the learned senior counsel was that it was erroneously set aside on the only ground that the Single Judge while allowing Section 34 petition had not specifically mentioned the particular section under which the petition had been allowed when clearly the order of the learned Single Judge had been passed on the ground that the award is against the public policy of India and hence it was clearly referable to Section 34(2)(b)(ii) of the Act.

Hence, there was no occasion or necessity to remand the matter back to the Single Judge of the High Court. Since the direction by the Division Bench were to the Single Judge was to decide the matter in a time bound manner, even before the appeal against the order of the Division Bench could be heard by the Supreme Court, the learned Single Judge of the Bombay High Court rejected Section 34 petition on a completely erroneous premise as if that the appellant had argued the case under Section 34(2)(iv) when admittedly no arguments had been raised under the said Section and the entire arguments as well as the written submission were only with regard to the award being contrary to the public policy which is under Section 34(2)(b)(ii). In this manner, submitted the learned senior counsel, the learned Single Judge went beyond the mandate of the Division Bench while dismissing the petition of the appellant in its entirety under Section 34 of the Act and the Division Bench has also erred in giving its imprimatur to such an order of the Single Judge.

31. Continuing his submissions with great emphasis, Mr. Vikas Singh further argued that an important issue which need consideration is as to whether the contract was one complete contract and whether the same could or could not be split up as argued by the respondents. He referred to the provisions of the contract, the relevant correspondence and the submission of the respondents witnesses to refute the respondents contention that the contract was one bargain and there was no right to split up the same. He also referred to the certain judgments to contend that the contract in question can be held to be clearly severable and it is the duty of the Courts to severe the enforceable part vis-à-vis the unenforceable part.

32. Touching upon the facet of the uninstalled object, it was submitted that in terms of the work order, the supply and installation was to commence from the date of the work order or opening of LC or receipt of complete list of locations of DTCs, whichever is later.

On July 14, 1997, the appellant wrote to the respondents that the list of locations was available with the circle office. The respondents assumed July 14, 1997 as the date of making available the complete list of locations without actually receiving the said list from the circle office. The clause very clearly provided the four month period to commence from the date of receipt of list of complete locations and admittedly the respondent did not receive the list of locations on July 14, 1997 nor any time thereafter till they started installation on November 2 Firm Bhagwandas Shobhalal Jain, a Registered firm and Anr. v. State of Madhya Pradesh, AIR 1966 MP 95; Shin Satellite Public Co. Ltd. v. Jain Studios Ltd., (2006) 2 SCC 628; Beed District Central Coop. Bank Ltd. v. State of Maharashtra & Ors., (2006) 8 SCC 514, Daruka & Co. v. Union of India & Ors., (1973) 2 SCC 617 and Food Corporation of India v. Yousuff and Co., Kerala High Court (DB) (17.11.1980) A.S. No. 31 of 1976 at Page 2296 (starting from 2280-2297 of volume X) 18, 1997, considering the four month period to start from July 19, 1997 i.e. the date of receipt of the communication dated July 14, 1997.

Clearly, the respondent had enough time after July 14, 1997 to insist upon the complete list of locations before any installation was started by them on November 18, 1997. Therefore, argued the learned senior counsel, it is the respondent which committed breach of contract in not completing the work.

33. Mr. Vikas Singh once again emphasised the submission which was made before the learned arbitrator as well as the High Court, that there was a waiver by the respondent in respect of list of DTC location and the consequences of such a waiver had to flow as per Section 55 read with Section 63 of the Contract Act. It was submitted that this Court has held in the case of Waman Shriniwas Kini v. Ratilal Bhagwandas & Co.3 at para 13 “waiver is the amendment of a right which normally everybody had a liberty to waive. A waiver is nothing unless it amounts to a release it signifies nothing more than an intention to insist upon the right”.

Accordingly, once the waiver takes place, the clause with regard to providing the complete list does not remain a fundamental term of the contract and the respondent would not be entitled to claim any damages for the non-supply of the list. 3 1959 Supp.

(2) SCR 217 He also referred to the decision in Jagad Bandhu Chatterjee v. Smt. Nilima Rani & Ors.4 wherein at para 5, it is stated “it is open to a promisee to dispense with or remit, wholly or in part, the performance of the promise made to him or he can accept instead of it any satisfaction which he thinks fit.”

He also relied upon the judgment in Babulal Badriprasad Varma v. Surat Municipal Corporation & Ors.5 and pointed out that in that case, the Court has considered various judgments on the issue of waiver in paragraph 42 to 49, which laid down that waiver amounts to abandonment of right in such a way that the other parties entitled to plead the abandonment by way of confession and avoidance if the right is thereafter asserted and is either expressed or implied from the conduct. Number of other judgments laying down the same proposition of law were also referred to.

34. Additionally, it was submitted that the appellant had on June 17, 1998 permitted the respondent to make feeder-wise installation irrespective of B-I, B-II and B-III locations. Between June 17, 1998 to December 21, 1998 i.e. for a period of more than six months, the respondents had all the B-II locations available to them which is 12,555 out of which they only installed 4 (1969) 3 SCC 445 5 (2008) 12 SCC 401 2014 and they did not install 10541 B-II locations which were the locations where the respondent had themselves installed the contract objects against tender of 1993 and 1994 and were maintaining the said objects at the time when the present tender was awarded and hence were in the complete knowledge of the said locations.

The endeavour was to show that the respondent was aware of sufficient number of locations, even B-II locations and, therefore, there was no reason to terminate the contract and, in fact, it is the respondent which had failed to perform its obligations under the contract and was, thus, responsible for the breach thereof. On that premise, the submission was that award of the Arbitral Tribunal qua the uninstalled object is patently illegal and it also shocks the conscience of the Court and is liable to be set aside as being opposed to public policy.

Specifically adverting to the damages awarded qua installed objects, it was argued that the work order clearly provided that each contract object was a separate contract between the appellant and the respondent and, therefore, it was incumbent upon the Arbitral Tribunal to decide as to what fault had been committed by the appellant qua the installed objects before granting any damages for the same. Absence of this exercise, contended the learned senior counsel, had rendered the award illegal and in violation of public policy as mentioned in Section 34 of the Act.

35. While questioning the damages awarded in respect of objects not even manufactured; quantum of damages awarded by the Tribunal and failure on the part of the respondent to mitigate the losses, the same arguments were advanced which were taken before the High Court as well. It is also submitted that the High Court committed serious error in rejecting the chamber summons.

Arguments in Reply by the Respondent:

36. Mr. Dada, learned senior counsel appearing for the respondent, strongly refuted all the aforesaid submissions of the appellant and made earnest effort to show that the entire approach of the Arbitral Tribunal in dealing with the issues and awarding the damages was correct in law and this award was rightly held by the learned Single Judge as well as the Division Bench of the High Court.

37. At the outset, Mr. Dada emphasized the crucial nature of the contract in question, which was essentially for operating lease for ten years in respect of energy saving devices which were to be installed by respondent No.2 on the locations to be given by the appellant herein. He pointed out that since it was a contract for operating these devices on lease basis, entire investment was to be made by respondent No.2 and the appellant was only to give the lease rent, that too on the condition that contract objects were working satisfactorily.

Further, the contract being a ‘lease’ contract, the ownership of the equipment had to remain with respondent No.2 and was never to be transferred to the appellant. In the aforesaid scenario, argued the learned senior counsel for respondent No.2, respondent No.2 could perform its part of the contract of installation of objects only on furnishing the DTC locations. He argued that the appellant failed to discharge this obligation and, thus, committed fundamental breach of the contract. This has been held so by the Arbitral Tribunal and this very finding was upheld by the High Court as well. Submission was that this being a finding of fact, the breach of contract on the part of the appellant stands established.

38. Elaborating on this aspect, it was contended that the appellant made an unequivocal representation to respondent No.2 on 14.07.1997 that complete lists for DTC locations, including Schedule B-II, are ready with the district offices. Respondent No.2 acted upon the said representation and Civil Appeal No. 10466 of 2017 Page 42 of 65 commenced installation in November 1997. On 20.04.1998, the appellant threatened respondent No.2 with liquidated damages and warned that time will not be extended for installation. This letter glossed over the fact that DTC locations were withheld by the district offices of the appellant.

Both parties were ad idem that time had started to run and installation was to be completed before 18.03.1999 (twenty months from 18.07.1997, i.e. the date of receipt of the letter dated 14.07.1997 from the appellant). Despite rigorous follow up and distress appeals by respondent No.2 through more than 120 letters, the appellant did not furnish complete lists of DTC locations. On 21.12.1998, the appellant directed the work to proceed strictly in the sequence – Kolhapur, Nasik and Aurangabad Zones, with further sequences B-1, B-2 and B-3. The appellant stopped work under B03 indefinitely without assigning any reason. However, even till 19.02.1999, respondent No.2 was not provided with complete list of B-I locations in Kolhapur.

Despite representation of 11.02.1999 from Technical Member of the appellant to give lists within four days, i.e. by 15.02.1999, no lists were received. Realizing the futility of expecting cooperation from the appellant, respondent No.2 terminated the contract on 19.02.1999.

39. It was further submitted that respondent No.2 still ‘offered’ to maintain the 17294 installed objects (however, the appellant was admitting installation of only 7000 contract objects as of July 199, as stated by respondent No.2 in the interim application filed before the Arbitrators), provided that payment was made without demur or dispute – obviously alluding to the financial blockade by NIL performance certificates and fabrication of failure reports. Respondent No.2 gave the appellant seven days to convey if the said “offer” was acceptable. Admittedly, the appellant did not accept the offer and proceeded to make a counter claim against respondent No.2 on the footing that respondent No.2 had abandoned the entire contract on 19.02.1999, including that for installed objects.

40. It was next argued by Mr. Dada that after the disputes were referred to the Arbitral Tribunal, it went into the length and breadth of each issue in minute detail. This Tribunal consisted of eminent retired Judges who scanned through the deposition of witnesses produced before it as well as other documentary evidence. 125 sittings, over a period of five years, were held in the process, which culminated into a fully reasoned and unanimous award dated 18.06.2004 running into 150 pages, as per which the was decided in favour of respondent No.2 and against the appellant. His argument was that most of the submissions of the appellant were questioning the findings of facts only and this Court would not embark on such a journey and decide correctness thereof in exercise of its jurisdiction under Article 136 of the Constitution.

41. We find adequate force in the aforesaid submission of Mr. Dada. Let us first take note of these findings:

FINDINGS OF FACTS:

42. Reasoning contained in the Award reveals following salient findings returned by the Arbitral Tribunal:

(i) The appellant prevented respondent No.2 from performing the contract.

(ii) Respondent No.2 was ready and willing to perform the contract all throughout.

(iii) The appellant chose not to examine any of its Superintending Engineers who were in-charge for giving DTC locations to respondent No.2 and, as found by the Arbitral Tribunal, they were the kingpins of each circle for performance of the contract.

(iv) There is considerable merit in the submission of respondent Civil Appeal No. 10466 of 2017 Page 45 of 65 No.2 that the Minutes of the Meeting dated 24.06.1998 is a fabricated document.

(v) It is not possible to accede to the submission of the appellant that respondent No.2 had adequate lists of locations available and still failed to install the contract objects.

(vi) It is obvious that there is something seriously wrong in the working of the appellant. Once a letter is listed in the affidavit of documents, it is surprising how the letter was not traceable. Be that as it may, the fact remains that prior to the date of termination of contract, at least in three Circles, the appellant had directed stoppage of installation work.

(vii) It is unfortunate that the Head Office of the appellant lacked control over the field offices and which ultimately led to the failure of the project. It is futile to even suggest that the breach was not a fundamental one.

(viii) Respondent No.2 was ready and willing to perform their part of the contract while the appellant committed a breach by failure to supply DTC locations as per the terms of the contract.

(ix) Respondent No.2 invested Rs.163 crores in the project.

(x) The appellant failed to prove that deductions effected in the Civil Appeal No. 10466 of 2017 Page 46 of 65 Performance Certificates were proper.

(xi) The appellant indulged in tampering the commissioning reports produced on record. The attempt does not behove to a statutory body and requires to be deprecated. The attempt made by the appellant by producing documents which are tampered with and which are not genuine indicates that the appellant was willing to go to any extent to make allegations against respondent No.2.

(xii) The appellant did not make available large number of documents disclosed in the affidavit of documents on the ground that the same are not available.

(xiii) Counter claim of the appellant is misconceived and is nothing short of counter blast to the claim made against respondent No.2.

(xiv) It was the appellant and appellant alone who had committed fundamental breaches of the terms of the work order.

(xv) The appellant has raised untenable and unsustainable defences which led to considerable delay in concluding the proceedings. These are findings of facts based upon the material evidence that emerged on the record of the case.

TERMINATION OF CONTRACT WAS VALID AND JUSTIFIED:

43. Categorical findings are arrived at by the Arbitral Tribunal to the effect that insofar as respondent No.2 is concerned, it was always ready and willing to perform its contractual obligations, but was prevented by the appellant from such performance. Another specific finding which is returned by the Arbitral Tribunal is that the appellant had not given the list of locations and, therefore, its submission that respondent No.2 had adequate lists of locations available but still failed to install the contract objects was not acceptable. In fact, on this count, the Arbitral Tribunal has commented upon the working of the appellant itself and expressed its dismay about lack of control by the Head Office of the appellant over the field offices which led to the failure of the contract.

These are findings of facts which are arrived at by the Arbitral Tribunal after appreciating the evidence and documents on record. From these findings it stands established that there is a fundamental breach on the part of the appellant in carrying out its obligations, with no fault of respondent No.2 which had invested whooping amount of Rs.163 crores in the project. A perusal of the award reveals that the Tribunal investigated the conduct of entire transaction between the parties pertaining to the work order, including withholding of DTC locations, allegations and counter allegations by the parties concerning installed objects.

The arbitrators did not focus on a particular breach qua particular number of objects/class of objects. Respondent No.2 is right in its submission that the fundamental breach, by its very nature, pervades the entire contract and once acted committed, the contract as a whole stands abrogated. It is on the aforesaid basis that the Arbitral Tribunal has come to the conclusion that the termination of contract by respondent No.2 was in order and valid. The proposition of law that the Arbitral Tribunal is the master of evidence and the findings of fact which are arrived at by the arbitrators on the basis of evidence on record are not to be scrutinised as if the Court was sitting in appeal now stands settled by catena of judgments pronounced by this Court without any exception thereto6.

44. At this stage, we may deal with the contention of the appellant to the effect that the arbitrators have themselves recorded a finding that the LC was still in operation and had not expired and, therefore, the finding of the Tribunal that the contract was terminated validly was self contradictory. 6 (See – Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49, and S. Munishamappa v. B. Venkatarayappa & Ors., (1981) 3 SCC 260)

45. Though this contention appears to be attractive in the first blush, we find no substance in the same on deeper examination thereof. It was rightly contended by Mr. Dada that the Arbitral Tribunal has held that since the contract was terminated on 19.02.1999, the appellant was not required to renew the LC. In other words, since there was no contract in existence after 19.02.1999, there could not be a breach. It is APT to quote the following discussion from the award of the arbitrators:

“24…The grievance of the Claimants that by not renewing letter of credit which expired on April 30, 1999, the Respondents have committed the breach, cannot be accepted. In the first instance, the Claimants cannot complain about non-renewal of Letter of Credit on April 30, 1999 when the claimants themselves have terminated the contract by notice dated February 19, 1999. Secondly, the claimants have invoked the arbitration on April 13, 1999 and these events having taken place prior to April 30, 1999, there was no point in Respondents renewing Letter of Credit for the benefit of the Claimants.”

46. By the aforesaid analysis, the Arbitral Tribunal did not accept the contention of respondent No.2, which was predicated on non-renewal of the LC. However, the context in which these observations are made is abundantly clear. The Arbitral Tribunal had confined the discussion revolving around the contention of respondent No.2 as to why the LC was not extended even after 30.04.1999. In this hue, it was observed that there was no reason or rationale in doing so when the contract had itself come to an end as it had been terminated by respondent No.2 itself vide notice dated 19.02.1999. It would not follow therefrom that respondent No.2 was wrong in terminating the contract.

Insofar as the termination of the contract is concerned, the Arbitral Tribunal dealt with the issue specifically and on independent examination thereof had came to the conclusion that respondent No.2 was justified in the said action as there were other breaches on the part of the appellant. It is to be borne in mind that non-renewal of LC was not the only breach alleged by respondent No.2, which had asserted various other acts of breach on the part of the appellant. In this behalf, Mr. Dada drew our attention, and rightly so, to the letter dated 18.11.1998 which is contemporaneous to the letter of termination, wherein respondent No.2 categorically alleged fabrication of Commissioning Reports of installed objects and the financial blockade created by the issue of NIL Performance Certificates by the appellant.

This letter is referred to in the letter of 19.02.1999 by incorporating references contained in the letter dated 23.12.1998. Respondent No.2, in its Statement of Claim, has also asserted the harassment and deliberate breach of the appellant in the course of installation of objects such as fabrication of failure reports and Civil Appeal No. 10466 of 2017 Page 51 of 65 commissioning reports, obstructing payments by bogus deductions in performance certificates and other wrong practices of the appellant staff. The serious grievances of respondent No.2 in respect of installed objects were considered at length by the Arbitral Tribunal and accepted the same.

47. We have already referred to these findings hereinabove. Learned senior counsel appearing for respondent No.2 referred to the judgment of this Court in Juggilal Kamlapat v. Pratapmal Rameshwar7 wherein it has been held that repudiation of a contract can be justified on the basis of any ground that existed in fact, even though not stated in the correspondence. Following passage from the said judgment needs a quote:

“23. It was also contended that the defendant not having raised the plea in their correspondence with the plaintiff that the delivery orders tendered were defective, was estopped from justifying their requisition of the contracts on that around. As the High Court has pointed out no case of estoppel was pleaded by the plaintiff and, therefore, it was the plaintiff who should be precluded from raising the question of estoppel. Apart from that, the law permits defendant to justify the repudiation on any ground which existed at the time of the repudiation whether or not the ground was stated in the correspondence. (See Nune Sivayya v. Maddu Ranganayakulu, AIR 1935 PC 67 : 62 IA 89, 98).”

48. One more aspect needs to be adverted to at this stage which incidentally arises in view of the submission of Mr. Vikas Singh, learned senior counsel appearing for the appellant.

49. It was argued that respondent No.2 should have installed objects at least under category B-2, even if there was breach on the part of the appellant in supplying locations for categories B-1 and B-3.

This was refuted by learned senior counsel appearing for respondent No.2 on the round that the Arbitral Tribunal had specifically considered and rejected this argument and the approach of the arbitrators is even upheld by the learned Single Judge as well as the Division Bench of the High Court. We may point out that the Arbitral Tribunal has dealt with this aspect in the following manner: “Datar was asked a specific question as to how the Claimants did not install the contract objects in category B-II and the answer of the witness was in four parts.

The witness claimed that

(a) the contract was entered into considering the commercial efficacy of installing given quantity of B-I and B-III categories to counter balance low revenue from B-II category. The witness claimed that as the Respondents did not supply the list of categories B-I and B-III, the Claimants were entitled to withhold installation of category B-II;

(b) The annually installed at Nasik under B-II category was install at Nasik under B-II category was relatively less obstructive in Nasik Circle;

(c) the locations under category B-II were intervened with locations of categories B-I and B-III and it was practically unviable to install objects of category B-II selectively. The list of B-II category was also required to be re identified by the Respondents separately as was done for the Nasik Circle and

(d) the Respondents unilaterally willingly revoked the permission granted earlier to install simultaneously by letter dated December 21, 1998. Some of the reasons given by the witness cannot be termed as unreasonable in the facts and circumstances of the case. It cannot be overlooked that in respect of installation of objects under category B-II, the Claimants were entitled only to the rates fixed under year 1993 and 1994 contract till the expiration of six year period while in respect of categories B-I and B-III, the lease rentals were considerably high.

In any event, it does not lie in the mouth of the Respondents to urge that the claimants should have installed contract objects under category B-II when specific directions were given on December 21, 1998 to install objects under category B-II only after completion of installation under category B-I. The Respondents claimed that 16,477 locations were available on February 19, 1999 but that is not correct because taking into consideration 10,541 locations of category B-II the available locations out of B-I and B-III categories were 5,932.”

50. The Division Bench dealt with this contention in the following manner: “In our view from the material on record, it is abundantly clear that supply of DTC Lists was a fundamental term of the Work Order and MSEB had miserably failed in complying with the said fundamental term and there was a breach on the part of the MSEB in supplying the DTC locations which eventually prevented DSL from installation of contract objects. It has to be noted here that after the work order was issued by MSEB, DSL had to make necessary arrangements for the purpose of carrying out the process of installation of the contract objects.

This included procurement of raw material from a foreign country, starting the process of manufacturing gadgets, making arrangements for transportation of these contract objects to the places where the said gadgets were to be installed, employment of trained, skilled and other staff, making available vehicles for transporting these contract objects to the DTC location where they were to be installed and, finally, co-ordinating with the Officers of MSEB so that after the contract objects were installed, a Certificate of installation could be given by the Officers of MSEB so that from that point onwards, lease rentals could become payable to DSL.

It has to be borne in mind that the nature of the Work Order was such that it was in the interest of DSL to ensure that the contract objects are installed and certificates to that effect are obtained from the Officers of MSEB. It does not sound to reason that after having invested huge amount of almost Rs 163 crores, as observed by the Tribunal in the Award, DSL would not install the objects because it was in their interest to get the objects installed so that returns on their huge investment would start thereafter. It is inconceivable therefore that though DTC Lists were available, DSL would not install the contract objects.

Various facts and figures were given by MSEB to show that DTC locations were known to DSL and yet they had failed in installing the contract objects is without any substance. It cannot be forgotten that, initially, the sequence of installation was Kolhapur, Nasik and Aurangabad. This sequence was later on changed to Nasik, Kolhapur and Aurangabad. This was again changed and permission was given to DSL to install the objects at any time at any place and, lastly, again, this was changed and direction was given to DSL to adhere to the sequence as per the Work Order.

This being the position, even assuming that B-II Lists were available, DSL could not have installed these contract objects because they were asked to follow the schedule again by letter dated 21/12/1998 and, therefore, even if the lists were available, it was not possible for DSL to simultaneously install all those objects since they were told to adhere to the sequence in the Work Order if the lists of locations under B-I were not given, even assuming that they had B-II lists of locations they could not have and were not actually allowed to install at the said B-II locations. It has come on record that more than 10,000 objects were manufactured and ready for installation.

There is no earthly reason why DSL would fail to install the objects which were inspected and ready for installation. The only obvious reason would be that they were unable to do so on account of various orders which were passed by MSEB from time to time preventing them from performing their obligation. MSEB has not examined any of its Superintending Engineers who were in charge of supplying the Lists. The cumulative effect of all the material which has been brought on record is that it clearly demonstrates the failure on the part of MSEB in supplying the Lists of DTC locations which was a fundamental term of the contract.”

51. We agree with the contention of respondent No.2 that these are pure findings of facts and there is no perversity therein. It may, however, be pointed out that out of 12555 B-2 category objects under the work order, 9515 objects were to be installed in Kolhapur Zone, i.e. 76% of the said category. Vide letter dated 14.07.1997, the Chief Engineer, Kolhapur Zone admittedly directed respondent No.2 to first complete new installation (B-1 and B-3) and only thereafter take up installation under category B-2. The locations for B-1 and B-3 from Kolhapur were admittedly never furnished. Therefore, this contention of the appellant also warrants a rejection.

52. The award of the Arbitral Tribunal having been affirmed by the learned Single Judge as well as the Division Bench of the High Court, that too after dealing with each and every argument raised by the appellant in detail, which is negatived, we hold that Mr. Dada is correct in his argument that there is no question of law which is involved herein and the only attempt of the appellant was to re-argue the matter afresh, which was impermissible.

AWARD OF DAMAGES:

53. Refuting the argument of the appellant that there was no breach in respect of 17294 installed objects and, therefore, no damages were payable in that behalf, Mr. Dada pointed out that the appellant had itself submitted before the Arbitral Tribunal as under: “The respondents submitted that the claimants at the most would be entitled to the costs of the objects installed, i.e. cost of 17294 contract objects. Alternatively it was submitted that the claimants would be entitled to lease rent for reasonable period after deducting the cost of maintenance and taking out of print outs.”

He also pointed out that identical submission is to be found in the written submissions filed by the appellant before the Arbitral Tribunal at para 13. According to him, the arbitrators accepted the said submission of the appellant and awarded damages. The appellant is, therefore, not at all entitled to invoke public policy to challenge the award on the said premise. This aspect has been considered by the Division Bench at para 73, which has already been reproduced above.

54. We see substance in the contention of respondent No.2 and are of the opinion that the appellant cannot now turn around and raise objection to the award of damages which are measured Civil Appeal No. 10466 of 2017 Page 57 of 65 having regard to the loss suffered by respondent No.2 in terms of lease rent for reasonable period for which it would have been entitled to otherwise.

55. That apart, we also find that the Arbitral Tribunal, while awarding the damages, has relied upon the judgment of this Court in Union of India & Ors. v. Sugauli Sugar Works (P) Ltd.8 wherein a cardinal principle of damages had been laid down to the effect that the injured party should be placed in as good a position as money could do as if the contract had been performed. Following passage from the said judgment was kept in mind by the Arbitral Tribunal:

“22. The market rate is a presumptive test because it is the general intention of the law that, in giving damages, for breach of contract, the party complaining should, so far as it can be done by money, be placed in the same position as he would have been in if the contract had been performed. The rule as to market price is intended to secure only an indemnity to the purchaser. The market value is taken because it is presumed to be the true value of the goods to the purchaser.

One of the principles for award of damages is that as far as possible he who has proved a breach of a bargain to supply what he has contracted to get is to be placed as far as money can do it, in as good a situation as if the contract had been performed. The fundamental basis thus is compensation for the pecuniary loss which naturally flows from the breach.

Therefore, the principle is that as far as possible the injured party should be placed in as good a situation as if the contract had been performed. In other words, it is to provide compensation for pecuniary loss which naturally flows from the breach. The High Court correctly applied these principles and adopted the contract price in the facts and circumstances of the case as the correct basis for compensation.”

56. In the instant case, applying the aforesaid principle, the Arbitral Tribunal, for the purpose of classification, considered a 30% reduction in lease rent to compute damages for installed objects, 50% reduction in lease rent to compute damages for manufactured but uninstalled objects and the bare cost of raw materials for the objects not manufactured. No pendente lite interest was awarded, though the proceedings went on for five and a half years. Thus, the Arbitral Tribunal awarded almost the same amount as was invested by respondent No.2 for the project. Interest was awarded only @ 10% per annum from the date of the award as opposed to the prevailing bank rate of about 21%. The aforesaid being a reasonable and plausible measure adopted by the Arbitral Tribunal for awarding the damages, there is no question of interdicting with the same.

57. It may be noted that Mr. Dada had argued that it was incumbent upon the Arbitral Tribunal to take into account the practices of leasing trade when making the award, having regard to the provisions of Section 28(3) of the Indian Contract Act, 1872. He had drawn our attention to Article 13(2) of UNIDROIT Convention on international lease, which stipulates as under: “Where the lessee’s default is substantial, then subject to paragraph 5 the lessor may also require accelerated payment of the value of the future rentals, where the leasing agreement so provides, or may terminate the leasing agreement and after such termination:

(a) recover possession of the equipment; and

(b) recover such damages as will place the lessor in the position in which it would have been had the lessee performed the leasing agreement in accordance with its terms.”

58. In the aforesaid backdrop, we agree with the approach of the High Court in spelling out the proposition of law that once it is established that the party was justified in terminating the contract on account of fundamental breach thereof, then the said innocent party is entitled to claim damages for the entire contract, i.e. for the part which is performed and also for the part of the contract which it was prevented from performing.

We may usefully refer to the following dicta laid down in Suisse Atlantique Societe d’Armament SA v. NV Rotterdamsche Kolen Centrale9: “…if facts of that kind could be proved I think it would be open to the arbitrators to find that the respondents had committed a fundamental or repudiatory breach. One way of looking at the matter would be to ask whether the party in breach has by his breach produced a situation fundamentally different from anything which the parties could as reasonable men have contemplated when the contract was made.

Then one would have to ask not only what had already 9 1966 A.C. 361 (pages 397-398) happened but also what was likely to happen in future. And there the fact that the breach was deliberate might be of great importance. If fundamental breach is established the next question is what effect, if any, that has on the applicability of other terms of the contract.

This question has often arisen with regard to clauses excluding liability, in whole or in part, of the party in breach. I do not think that there is generally much difficulty where the innocent party has elected to treat the breach as a repudiation, bring the contract to an end and sue for damages. Then the whole contract has ceased to exist, including the exclusion clause, and I do not see how that clause can then be used to exclude an action for loss which will be suffered by the innocent party after it has ceased to exist, such as loss of the profit which would have accrued if the contract had run its full term…”

(emphasis supplied)

59. We, thus, do not find any infirmity in the manner in which damages are awarded in favour of respondent No.2.

RE: MITIGATION OF DAMAGES

60. Mr. Rafique Dada also countered the argument of the appellant on mitigation of damages with the submission that this aspect was specifically considered and the contention of the appellant in this behalf was rejected not only by the Arbitral Tribunal but by the High Court as well. He referred to the relevant portion of the discussion in the award as well as the judgments. We find that the Arbitral Tribunal has dealt with this aspect and held that the contract objects were custom built in the following manner:

“55. Respondents submitted that the Claimants did not make any efforts to mitigate the loss suffered. The submission is without any merit for more than one reason. In the first instance, the contract objects manufactured in pursuance of the orders of the Respondents were custom built i.e. to the specifications laid down by the Respondents and these contract objects cannot be disposed in open market. Datar deposed with reference to Exh. C 16 that efforts were made to sell the contract objects stranded in the factory to other Electricity Boards but those efforts did not succeed. It was contended by the Respondents that the claimants should have dismantled the stranded contract objects and sold the components thereof. The submission is only required to be slated to be rejected. Once an electronic instrument is dismantled, then the value almost becomes nil. In any event, the Claimants have established that efforts were made to mitigate the loss.”

61. The learned Single Judge as well as the Division Bench of the High Court has given its imprimatur to the aforesaid findings. It, therefore, becomes apparent that the objects in question were manufactured by respondent No.2 to suit the specific needs of the appellant ad they could not be used otherwise. Therefore, there was no possibility on the part of respondent No.2 to make an endeavour to dispose of the same in order to mitigate the loses.

RE: WAIVER

62. The argument of the appellant on waiver is also successfully met by respondent No.2. Submission of Mr. Dada, Civil Appeal No. 10466 of 2017 Page 62 of 65 on this argument, was that both parties went to trial before the Arbitral Tribunal on the basis that the time to start work under the contract had commenced with reference to letter dated 14.07.1997 of the appellant signed by the Chief Engineer who was the competent authority under the contract. The same Chief Engineer insisted, by letter dated 20.04.1998, that liquidated damages would be imposed if the work was not completed in time.

We may point out that the Arbitral Tribunal considered and rejected this argument of waiver, as set up by the appellant, in the following words: “18… It was then contended that the Claimants had waived the right to receive the lists of locations from the Respondents. By reference to clause 5.1 of the work order, it was submitted that the Claimants were to commence installation within four months from (a) the date of the work order;

(b) opening of Letter of Credit and (c) on receipt of complete list of locations, whichever is later. It was contended that the Claimants were entitled to wait till all the lists were supplied to installation, but as the Claimants commenced installation even though the entire lists were not supplied, it should be concluded that the Claimants have waived their right. The submission is desperate and wholly unfair. The Respondents were in a hurry to complete the installation within a period of 20 months with an object to save the large amount lost due to loss of energy.

Merely because the Claimants acted in a reasonable manner and did not insist upon the terms of the contract, it is absurd to suggest that the Claimants waived their right to complain about non-supply of lists of locations. It was then submitted that the Claimants had installed contract objects on the oral instructions and on the basis of chits issued by some of the Officers of the Respondents and that was contrary to the terms of the work order which provided that installation should be only on locations, the lists of which are given in accordance with the format at Annexure ‘E’ to the work order. It was also submitted that on 155 locations at Jalgaon, Dhule and Aurangabad, the lists were received by the Claimants from Authorities who were not competent to issue such lists.

The submission has no merit because while undertaking such a huge project, the parties were not keen on strict compliance of each and every term and condition of the contract. Such an instance would have defeated the contract at once because the contract had to be carried out over a large area and with the interaction of large number of people. These factors cannot establish that the claimants have waived their right to complaint about the failure to supply lists of location…”

63. Mr. Vikas Singh, learned senior counsel appearing for the appellant, referred to and relied upon various judgments in support of his contention. These judgments deal with the scope of interference in the awards passed by the arbitrators. It is not even necessary to deal with these judgments inasmuch as, on the facts of this case, as discussed in detail hereinabove, none of the judgments gets attracted. Likewise, effort on the part of the appellant to rely upon the judgment of the learned single Judge of the High Court in the first round is futile as that was set aside by the Division Bench and matter was remitted back to the single Judge of the High Court to decide it afresh.

RE: ORDER ON CHAMBER SUMMONS

64. Three chamber summons were taken out by the appellant during the pendency of this appeal before the Division Bench. By these chamber summons, the appellant intended to amend the petition which was filed by it under Section 34 of the Act as well as the appeal. The High Court after detailed discussion in the impugned judgment rejected these summons. We find that the amendment sought was highly belated. Arbitration petition filed under Section 34 of the Act was sought to be amended after a delay of eight years. Further, the amendment in the appeal, taking those very grounds on which amendment in the arbitration petition was sought, was sought after a delay of 3 1/2 years. The High Court, thus, rightly rejected these summons and it is not necessary to have any elaborate discussion on these aspects.

65. In the ultimate analysis, having found no merit in any of the arguments raised by the appellant, the appeal is dismissed with costs.

 (A.K. SIKRI)

 (ASHOK BHUSHAN)

NEW DELHI;

JANUARY 18, 2018

M/s. Inox Wind Ltd. Vs. M/s. Thermocables Ltd [SC 2018 January]

KEYWORDS:-APPOINTMENT OF ARBITRATOR-STANDARD FORM OF CONTRACT-

Capture

DATE:-January 05, 2018-

  • Though general reference to an earlier contract is not sufficient for incorporation of an arbitration clause in the later contract, a general reference to a standard form would be enough for incorporation of the arbitration clause.
  • The purchase order is a single contract and general reference to the standard form even if it is not by a trade association or a professional body is sufficient for incorporation of the arbitration clause.

ACTS:-Section 11 (6) of the Arbitration and Conciliation Act, 1996

HISTORY: The Appellant,  issued a notice dated 30.10.2014 proposing the name of a sole arbitrator in terms of the Standard Terms and Conditions. In the absence of any response, the Appellant moved the High Court of Judicature at Allahabad by filing an application under Section 11 (6) of the Act.

SUPREME COURT OF INDIA

M/s. Inox Wind Ltd. Vs. M/s. Thermocables Ltd.

[Civil Appeal No. 19 of 2018 arising out of SLP (Civil) No.31049 of 2016]

L. NAGESWARA RAO, J.

1. Leave granted.

2. This appeal is directed against the judgment of the High Court of Judicature at Allahabad dismissing the application filed by the Appellant under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’).

3. The Appellant is a manufacturer of wind turbine generators (WTGs). The Respondent is engaged in the business of manufacture of wind power cables and other types of cables. Two purchase orders dated 13.12.2012 and 02.02.2013 were issued by the Appellant to the Respondent for supply of cables for their WTGs. According to the Purchase Order, the supply was to be according to the terms mentioned in the order and the Standard Terms and Conditions that were attached thereto. Apart from the other conditions, the Standard Terms and Conditions contain a clause pertaining to dispute resolution. The said clause provides for a dispute to be resolved by a sole arbitrator in accordance with the provisions of the Arbitration and Conciliation Act, 1996. The material on record indicates that the Respondent accepted all the terms and conditions mentioned in the Purchase Order except the delivery period as is evident from a letter dated 15.12.2012.

4. The Respondent, pursuant to the Purchase Order, supplied wind power cables to the Appellant. While laying the cables supplied by the Respondent-company, the Appellant discovered that the outer sheaths of the cables of 150 sq. mm. were cracked. This forced them to stop the WTGs so as to avert damage to expensive equipment. According to the Appellant, the Respondent-company did not replace the cables. The Appellant, therefore, was constrained to issue a notice dated 30.10.2014 proposing the name of a sole arbitrator in terms of the Standard Terms and Conditions. In the absence of any response, the Appellant moved the High Court of Judicature at Allahabad by filing an application under Section 11 (6) of the Act.

5. The High Court dismissed the said application by holding that an arbitrator cannot be appointed as the Appellant did not prove the existence of an arbitration agreement. The High Court relied upon the judgment of this Court in M.R. Engineers and Contractors Private Limited v. Som Datt Builders Limited, (2009) 7 SCC 696 to hold that there is no special reference to the arbitration clause in the standard terms and conditions, so the arbitration clause cannot be said to have been incorporated into the purchase order.

6. We have heard the counsel for the Appellant and Respondent. The judgment of this Court in M.R. Engineers’ case (supra) was relied upon by both the parties. Before proceeding further, it would be necessary to appreciate the ratio of the said judgment. A few facts necessary to understand the dispute in the said case are that the Appellant therein was a sub-contractor of the Respondent. The Appellant was entrusted a part of the work by the Respondent-contractor which pertained to ‘construction of project directorate building’. It was mentioned in the sub-contract that it shall be carried out as per the terms and conditions applicable to the main contract.

A dispute arose between the parties which made the Appellant therein to approach the High Court for appointment of an arbitrator under Section 11 (6) of the Arbitration and Conciliation Act, 1996. The High Court of Kerala rejected the application on the ground that the arbitration clause in the main contract was not incorporated by reference in the contract between the Appellant and Respondent therein. In the appeal before this Court, the Appellant submitted that his case was squarely covered by Section 7 (5) of the Act and that the arbitration clause from the main contract was incorporated by reference in the sub contract between him and the Respondent.

7. This Court considered the scope of Section 7 (5) of the Act and held that a conscious acceptance of the arbitration clause found in another document is necessary for the purpose of incorporating it into the contract. It was further held that general rules of construction of contracts would have to be followed as there were no guidelines in Section 7(5) regarding the conditions that need to be fulfilled before construing a reference to a portion of a contract as a reference incorporating the whole of it along with the arbitration clause contained in it. While distinguishing ‘reference’ to another document from ‘incorporation’, this Court observed that the relevant factor was the intention of the parties either to adopt the document in its entirety or to borrow specific portions of the said document. In this connection, the Court held as follows: (M.R. Engineers’ case, para 17-19)

“17. We will give a few instances of incorporation and mere reference to explain the position (illustrative and not exhaustive). If a contract refers to a document and provides that the said document shall form part and parcel of the contract, or that all terms and conditions of the said document shall be read or treated as a part of the contract, or that the contract will be governed by the provisions of the said document, or that the terms and conditions of the said document shall be incorporated into the contract, the terms and conditions of the document in entirety will get bodily lifted and incorporated into the contract.

When there is such incorporation of the terms and conditions of a document, every term of such document (except to the extent it is inconsistent with any specific provision in the contract) will apply to the contract. If the document so incorporated contains a provision for settlement of disputes by arbitration, the said arbitration clause also will apply to the contract.

18. On the other hand, where there is only a reference to a document in a contract in a particular context, the document will not get incorporated in entirety into the contract. For example, if a contract provides that the specifications of the supplies will be as provided in an earlier contract or another purchase order, then it will be necessary to look to that document only for the limited purpose of ascertainment of specifications of the goods to be supplied. The referred document cannot be looked into for any other purpose, say price or payment of price. Similarly, if a contract between X and Y provides that the terms of payment to Y will be as in the contract between X and Z, then only the terms of payment from the contract between X and Z, will be read as part of the contract between X and Y. The other terms, say relating to quantity or delivery cannot be looked into.

19. Sub-section (5) of Section 7 merely reiterates these well-settled principles of construction of contracts. It makes it clear that where there is a reference to a document in a contract, and the reference shows that the document was not intended to be incorporated in entirety, then the reference will not make the arbitration clause in the document, a part of the contract, unless there is a special reference to the arbitration clause so as to make it applicable.”

8. Relevant passages from Russell on Arbitration 23 rd Edition (2007) which were relied upon by this Court for interpretation of Section 7 (5) of the Arbitration and Conciliation Act, 1996 are as under: (M.R. Engineers’ case, para 20-21)

“20. The following passages from Russell on Arbitration throw considerable light on the position while dealing with Section 6(2) of the (English) Arbitration Act, 1996 corresponding to Section 7(5) of the Indian Act. (See pp. 52-55, 23rd Edn.):

“Reference to another document.-The terms of a contract may have to be ascertained by reference to more than one document. Ascertaining which documents constitute the contractual documents and in what, if any, order of priority they should be read is a problem encountered in many commercial transactions, particularly those involving shipping and construction. This issue has to be determined by applying the usual principles of construction and attempting to infer the parties’ intentions by means of an objective assessment of the evidence.

This may make questions of incorporation irrelevant, if for example it is clear that the contractual documents in question are entirely separate and no intention to incorporate the terms of one in the other can be established. However, the contractual document defining and imposing the performance obligations may be found to incorporate another document which contains an arbitration agreement. If there is a dispute about the performance obligations, that dispute may need to be decided according to the arbitration provisions of that other document. This very commonly occurs when the principal contractual document refers to standard form terms containing an arbitration agreement.

However the standard form wording may not be apt for the contract in which the parties seek to incorporate it, or the reference may be to another contract between parties at least one of whom is different. In these circumstances it may be possible to argue that the purported incorporation of the arbitration agreement is ineffective.

The draftsmen of the Arbitration Act, 1996 were asked to provide specific guidance on the issue, but they preferred to leave it to the court to decide whether there had been a valid incorporation by reference. (Para 2.044) *** Subject to drawing a distinction between incorporation of an arbitration agreement contained in a document setting out standard form terms and one contained in some other contract between different parties, judicial thinking seems to have favoured the approach of Sir John Megaw in Aughton, namely, that general words of incorporation are not sufficient. Rather, particular reference to the arbitration clause needs to be made to comply with Section 6 of the Arbitration Act, 1996, unless special circumstances exist. (Para 2.047) Reference to standard form terms.-

If the document sought to be incorporated is a standard form set of terms and conditions the courts are more likely to accept that general words of incorporation will suffice. This is because the parties can be expected to be more familiar with those standard terms including the arbitration clause.” (Para 2.048)

21. After referring to the view of Sir John Megaw in Aughton Ltd. v. M.F. Kent Services Ltd. [(1991) 57 BLR 1] that specific words were necessary to incorporate an arbitration clause and that the reference in a sub-contract to another contract’s terms and conditions would not suffice to incorporate the arbitration clause into the sub-contract, followed in Barrett & Son (Brickwork) Ltd. v. Henry Boot Management Ltd.[1995 CILL 1026] , Trygg Hansa Insurance Co. Ltd. v. Equitas Ltd. [(1998) 2 Lloyds’ Rep 439] and AIG Europe (UK) Ltd. v. Ethniki [(2000) 2 All ER 566 (CA)] and Sea Trade Maritime Corpn. v. Hellenic Mutual War Risks Assn. (Bermuda) Ltd. No. 2 [2006 EWHC 2530] , Russell concludes:

“The current position therefore seems to be that if the arbitration agreement is incorporated from a standard form a general reference to those terms is sufficient, but at least in the case of reference to a non-standard form contract in the context of construction and reinsurance contracts and bills of lading a specific reference to the arbitration agreement is necessary.”

9. This Court also discussed the scope of Section 7 (5) of the Act and summarised as follows: (M.R. Engineers’ case, para 24)

“24. The scope and intent of Section 7(5) of the Act may therefore be summarised thus:

(i) An arbitration clause in another document, would get incorporated into a contract by reference, if the following conditions are fulfilled:

(1) the contract should contain a clear reference to the documents containing arbitration clause,

(2) the reference to the other document should clearly indicate an intention to incorporate the arbitration clause into the contract,

(3) the arbitration clause should be appropriate, that is capable of application in respect of disputes under the contract and should not be repugnant to any term of the contract.

(ii) When the parties enter into a contract, making a general reference to another contract, such general reference would not have the effect of incorporating the arbitration clause from the referred document into the contract between the parties. The arbitration clause from another contract can be incorporated into the contract (where such reference is made), only by a specific reference to arbitration clause.

(iii) Where a contract between the parties provides that the execution or performance of that contract shall be in terms of another contract (which contains the terms and conditions relating to performance and a provision for settlement of disputes by arbitration), then, the terms of the referred contract in regard to execution/performance alone will apply, and not the arbitration agreement in the referred contract, unless there is special reference to the arbitration clause also.

(iv) Where the contract provides that the standard form of terms and conditions of an independent trade or professional institution (as for example the standard terms and conditions of a trade association or architects association) will bind them or apply to the contract, such standard form of terms and conditions including any provision for arbitration in such standard terms and conditions, shall be deemed to be incorporated by reference. Sometimes the contract may also say that the parties are familiar with those terms and conditions or that the parties have read and understood the said terms and conditions.

(v) Where the contract between the parties stipulates that the conditions of contract of one of the parties to the contract shall form a part of their contract (as for example the general conditions of contract of the Government where the Government is a party), the arbitration clause forming part of such general conditions of contract will apply to the contract between the parties.”

10. It was ultimately found that the intention of the parties was not to incorporate the main contract in its entirety into the sub-contract. Further, this Court held that the arbitration clause in the main contract was inapplicable to the contract between the parties as the main contract was between the Public Works Department, Government of Kerala and the contractor in which the arbitration clause contemplated appointment of a committee of three arbitrators, with one each to be appointed by the State of Kerala and the Respondent therein and the third to be nominated by the Director General Road Development, Ministry of Surface Transport Roads in Government of India. Appointment of a committee of arbitrators with representatives of State of Kerala and the Government of India was totally irrelevant for the contract between the contractor and the sub-contractor.

11. Section 6 (2) of the Arbitration Act, 1996 which extends to England, Wales and Northern Ireland is in pari materia with Section 7 (5) of the Arbitration and Conciliation Act, 1996 and it reads as under:-

“6. Definition of arbitration agreement. …

(2) The reference in an agreement to a written form of arbitration clause or to a document containing an arbitration clause constitutes an arbitration agreement if the reference is such as to make that clause part of the agreement.”

12. It will be useful to understand the interpretation of the incorporation issue in England. The question whether the general words of incorporation are sufficient to incorporate an arbitration agreement arose for consideration of the High Court of Justice, Queen’s Bench Division, Commercial Court in Sea Trade Maritime Corporation v. Hellenic Mutual War Risks Association (Bermuda) Limited, The Athena [2006] EWHC 2530 (Comm). In the said case the difference between incorporation in a single contract case and a two contract case was recognized. If there is a reference to a secondary document in a contract between two parties and that secondary document is a contract to which at least one party is different from the parties to the contract in question, it would be a two contract case.

In other words, if the secondary document is between other parties or if only one of the parties to the contract in dispute is party to an earlier contract to which a reference is made, then it would be a two contract case. In such a contract general reference to the earlier contract would not be sufficient to incorporate the arbitration clause. However, if the reference is to standard terms in a contract that would be a case of ‘single contract’ and the use of general words to incorporate the arbitration agreement by a reference is permissible. As the reference in that case was to a standard form of contract which was a single contract case, Justice Langley held that the general words of incorporation were enough to incorporate an arbitration clause.

13. The question of incorporation of the arbitration clause from an earlier contract by general reference into a later contract came up for consideration before the Queen’s Bench Division again in Habas Sinai Ve Tibbi Gazlar Isthisal Endustri AS v. Sometal SAL [2010] EWHC 29 (Comm). The contract in the said case pertained to sale of 10,000 metric tons of steel scrap. There were several terms in the contract under the headings material, quantity, price, shipment, discharge, rate, payment and final weight. Apart from the said terms, the contract contained a clause which was in the following terms: “All the rest will be same as our previous contracts.”

14. The dispute that arose in that case was whether general words mentioned above were capable of incorporating an arbitration clause. The difference in approach between cases in which the parties incorporate the terms of a contract between the other parties or between one of them with a third party on the one hand and those in which they incorporate the standard terms on the other hand, was noticed. The following broad categories in which the parties attempt to incorporate an arbitration clause were recognized by the Court, which are as follows:

“(1) A and B make a contract in which they incorporate standard terms. These may be the standard terms of one party set out on the back of an offer letter or an order, or contained in another document to which reference is made; or terms embodied in the rules of an organisation of which A or B or both are members; or they may be terms standard in a particular trade or industry.

(2) A and B make a contract incorporating terms previously agreed between A and B in another contract or contracts to which they were both parties (3) A and B make a contract incorporating terms agreed between A (or B) and C. Common examples are a bill of lading incorporating the terms of a charter to which A is a party; reinsurance contracts incorporating the terms of an underlying insurance; excess insurance contracts incorporating the terms of the primary layer of insurance; and building or engineering sub contracts incorporating the terms of a main contract or sub-sub contracts incorporating the terms of a sub contract.

(4) A and B make a contract incorporating terms agreed between C and D. Bills of lading, reinsurance and insurance contracts and building contracts may fall into this category.”

15. In Habas’s case (supra), Justice Christopher Clarke followed the ratio in the case of ‘the Athena’ (supra) and held that in single contract cases (categories 1 and 2), a general reference would be sufficient for incorporation of an arbitration clause from a standard form of contract. In cases falling under categories 3 and 4 mentioned above which are two contract cases, it was held that a stricter rule has to be followed by insisting on a specific reference to the arbitration clause from an earlier contract. Reliance placed on the judgment of Sir John Megaw in Aughton v MF Kent Services [1991] 31 Con L.R. 60 was repelled in the following terms:

“53 I do not regard myself as bound by the decisions of the Court of Appeal in Aughton v Kent and The Ethniki to reach a different conclusion. Both were two-contract cases. Further the judgments of Sir John Megaw and Lord Justice Ralph Gibson are, in part in conflict so as to preclude either of them being binding authority even in a two contract case. The agreement of Evans LJ with Sir John Megaw’s ” analysis of the authorities with regard to arbitration clauses and specifically with regard to the incorporation of charterparty arbitration clauses into bills of lading ” was obiter.”

16. The point pertaining to the independent nature of an arbitration clause being determinative of the dispute pertaining to incorporation was also dealt with in the said judgment as follows:

“51 Like Langley J, however, I do not accept that, in a single contract case, the independent nature of the arbitration clause should determine whether it is to be incorporated. A commercial lawyer would probably understand that an arbitration clause is a separate contract collateral to another substantive contract and that the expression “arbitration clause” is, on that account, something of a misnomer for “the arbitration contract which is ancillary to the primary contract”.

But a businessman would have no difficulty in regarding the arbitration clause (as he would call it) as part of a contract and as capable of incorporation, by appropriate wording, as any other term of such a contract; and it is, as it seems to me to a businessman’s understanding that the court should be disposed to. give effect. A businessman who had agreed with his counterparty a contract with 10 specific terms under various headings and then agreed with the same counterparty terms 1-5 under the same headings as before and, as to the rest, that all the terms of the previous contract should apply, would, I think, be surprised to find that “all” should be interpreted so as to mean “all but the arbitration clause”.

17. For a better understanding of the single and two contract cases and reference to standard form terms it is relevant to examine Russell on Arbitration 24 th Edition (2015) which is as under: (See pp. 52-54, 24rd Edn.) “Reference to standard form terms, single and two contract cases. If the document sought to be incorporated is a standard form set of terms and conditions the courts are more likely to accept that general words of incorporation will suffice. This is because the parties can be expected to be more familiar with those standard terms, including the arbitration clause.

In Sea Trade Maritime Corp v. Hellenic Mutual War Risks Association (Bermuda) Ltd, (The “Athena”) No.2 the Court drew a distinction between what is described as a “two contract case”, that is where the arbitration clause is contained in a secondary document which is a contract to which at least one party is different from the parties to the contract in question, and “a single contract case” where the arbitration clause is in standard terms to be found in another document.

Relying on dictum of Bingham LJ in Federal Bulk Carries Inc v. C. Itoh & Co Ltd (The “Federal Bulker”), Langley J stated that: “In principle, English law accepts incorporation of standard terms by the use of general words and, I would add, particularly so when the terms are readily available and the question arises in the context of dealings between established players in a well-known market. The principle, as the dictum makes clear, does not distinguish between a term which is an arbitration clause and one which addresses other issues. In contrast, and for the very reason that it concerns other parties, a “stricter rule” is applied in charterparty/bills of lading cases. The reason given is that the other party may have no knowledge nor ready means of knowledge of the relevant terms. Further, as the authorities illustrate, the terms of an arbitration clause may require adjustment if they are to be made to apply to the parties to a different contract.”

The Court therefore reinforced the distinction between incorporation by reference of standard form terms and of the terms of a different contract, and concluded that in a single contract case general words of incorporation are sufficient, whereas by its nature a two contract case may require specific reference to the other contract, unless the secondary document is stated to be based on standard form terms containing an arbitration agreement. In that case, presumably specific reference to the arbitration clause would not be needed.

As discussed below, this approach has been endorsed in subsequent cases, albeit drawing a slightly different but “material” distinction between incorporation of the terms of a separate contract – standard or otherwise – made between the same parties which are treated as “single contract” cases, even where there is in fact more than one contract; and those where the terms to be incorporated are contained in a contract between one or more different parties which are treated as the “two contract” cases. (Para 2-049)

Extension of the single contract cases. Recently, the courts appear to have extended the “single contract” principle applicable to standard form contracts, where general words of incorporation will suffice, to other types of contract where the same rationale can be said to apply. Thus, if the document sought to be incorporated is a bespoke contract between the same parties, the courts have accepted this as a “single contract” case where general words of incorporation will suffice, even though the other contract is not on standard terms and constitutes an entirely separate agreement.

The rationale for this approach is that the parties have already contracted on the terms said to be incorporated and are therefore even more likely to be familiar with the term relied on than a party resisting incorporation of a standard term. Put another way, if general words of incorporation are sufficient for the latter, they should be even more so for the former. The courts also appear to have accepted as a “single contract” case a situation where the contract referred to is between one of the parties to the original contract and a third party, where the contracts as a whole “were entered into in the context of a single commercial relationship”.(Para 2-050)

[Emphasis Supplied]

18. This Court in M.R. Engineers’ case, which is discussed in detail supra, held the rule to be that an arbitration clause in an earlier contract cannot be incorporated by a general reference. The exception to the rule is a reference to a standard form of contract by a trade association or a professional institution in which case a general reference would be sufficient for incorporation of an arbitration clause. Reliance was placed by this Court on Russell on Arbitration 23 rd Edition (2007) . The development of law regarding incorporation after the judgment in M.R. Engineers requires careful consideration.

It has been held in Habas Sinai Ve Tibbi Gazlar Isthisal Endustri AS v Sometal SAL [2010] EWHC 29 (Comm) that a standard form of one party is also recognized as a ‘single contract’ case. In the said case, it was also held that in single contract cases general reference is enough for incorporation of an arbitration clause from a standard form of contract. There is no distinction that is drawn between standard forms by recognized trade associations or professional institutions on one hand and standard terms of one party on the other. Russell on Arbitration 24 th Edition (2015) also takes note of the Habas’s case.

19. We are of the opinion that though general reference to an earlier contract is not sufficient for incorporation of an arbitration clause in the later contract, a general reference to a standard form would be enough for incorporation of the arbitration clause. In M.R. Engineers this Court restricted the exceptions to standard form of contract of trade associations and professional institutions. In view of the development of law after the judgment in M.R. Engineers’ case, we are of the opinion that a general reference to a consensual standard form is sufficient for incorporation of an arbitration clause. In other words, general reference to a standard form of contract of one party will be enough for incorporation of arbitration clause.

A perusal of the passage from Russell on Arbitration 24th Edition (2015) would demonstrate the change in position of law pertaining to incorporation when read in conjunction with the earlier edition relied upon by this Court in M.R. Engineers’ case. We are in agreement with the judgment in M.R. Engineer’s case with a modification that a general reference to a standard form of contract of one party along with those of trade associations and professional bodies will be sufficient to incorporate the arbitration clause.

20. In the present case, the purchase order was issued by the Appellant in which it was categorically mentioned that the supply would be as per the terms mentioned therein and in the attached standard terms and conditions. The Respondent by his letter dated 15.12.2012 confirmed its acceptance of the terms and conditions mentioned in the purchase order except delivery period. The dispute arose after the delivery of the goods.

No doubt, there is nothing forthcoming from the pleadings or the submissions made by the parties that the standard form attached to the purchase order is of a trade association or a professional body. However, the Respondent was aware of the standard terms and conditions which were attached to the purchase order. The purchase order is a single contract and general reference to the standard form even if it is not by a trade association or a professional body is sufficient for incorporation of the arbitration clause.

21. For the aforementioned reasons, the appeal is allowed and the judgment of the High Court is set aside. Justice Sushil Harkauli is appointed as the Arbitrator to adjudicate the dispute between the parties.

 [S.A. BOBDE]

 [L. NAGESWARA RAO]

New Delhi;

January 05, 2018

Union of India Vs. M/s. Susaka Pvt. Ltd. & Ors.[ SC 2017 DECEMBER]

KEYWORDS:-  Jurisdiction of the Arbitral Tribunal-

Capture

December 08, 2017-

  • It is a well-settled principle in Arbitration Law that the award of an Arbitral Tribunal once passed is binding on the parties. The reason being that the parties having chosen their own Arbitrator and given him an authority to decide the specific disputes arising between them must respect his decision as far as possible and should not make any attempt to find fault in each issue decided by him only because it is decided against one party. It is only when the issue decided is found to be bad in law in the light of any of the specified grounds set out in Section 34 of the Act, the Court may consider it appropriate to interfere in the award else not.

SUPREME COURT OF INDIA

Union of India Vs. M/s. Susaka Pvt. Ltd. & Ors.

[Civil Appeal No.8530 of 2009]

Abhay Manohar Sapre, J.

1. This appeal is filed by the Union of India against the final judgment and order dated 11.02.2005 passed by the High Court of Bombay in Appeal (Ld) No.666 of 2003 in Arbitration Petition No.96 of 2003 whereby the Division Bench of the High Court allowed the appeal filed by respondent No.1 herein and set aside the order dated 21.04.2003 passed by the Single Judge in Arbitration Petition No.96 of 2003.

2. The issue involved in the appeal is short and, therefore, it is not necessary to set out the entire factual scenario of the case except to the extent necessary to appreciate the issue.

3. In short, the question, which arises for consideration in this appeal, is whether the Arbitral Tribunal was justified in awarding interest on various claims for different periods to the claimant (respondent No.1), namely,

(i) for a pre-reference period, i.e., 04.03.1996 to 05.05.1999 @ 15% p.a.;

(ii) pendent lite, i.e., for the period from 06.05.1999 to 09.09.2002 @ 12% p.a.; and

(iii) post reference period, i.e., 09.09.2002 till payment @ 18% p.a., total (first and second) Rs.12,89,033/- on the awarded sum.

Brief facts:

4. A works contract (repairing work of 25 No. stators of TAO-659 Traction Motors of Electric Locomotives type WCAMI of Electric Loco Shed-Valsad) was awarded by the Union of India (Railways) – the appellant herein to respondent No.1 (claimant) on 19.12.1994.

5. In execution of the works contract, various disputes arose between the parties. Since the General Conditions of Contract (in short, “GCC”) contained Clause 56(1) to decide the disputes arising out of the contract through arbitration, respondent No.1(claimant) invoked the arbitration clause and filed an application in the High Court of Bombay under Section 11(5) of the Arbitration and Conciliation Act (hereinafter referred to as “the Act”) praying therein for appointment of the Arbitral Tribunal in terms of Clause 56(1) and to make a reference to the Arbitral Tribunal for deciding the disputes which had arisen between the parties.

6. The High Court, by order dated 27.07.2001, with consent of both the parties allowed respondent No.1’s application and referred the various claims (1 4 to 17) made by the respondent (claimant) against the appellant for their adjudication by the Arbitral Tribunal, which consisted of three Arbitrators (Railway Officials). The order making the reference to the Arbitral Tribunal reads as under:

“There is no dispute that claims Nos. 1 to 13 which are mentioned in the letter dated 19th August, 1999, Exhibit “B” to the Application, are already referred for arbitration to Shri B.B. Verma, Presiding Joint Arbitrator & FA & CAO (I), Churchgate and two other Arbitrators,

(i) Shri Arunendra Kumar, Jt. Arbitrator & CRSE, Churchgate and

(ii) Shri S.K. Kulshrestha, Jt. Arbitrator & CE, N.F. Railway.

2. By Consent, claim at Sr. No. 16 (Claim No. 2.1) and at Sr. No. 17 (Claim No. 2.2) are also referred for arbitration to the same Arbitrators who shall decide these claims along with claim Nos. 1 to 15. They shall also be free to decide pre-reference interest, Pendente lite interest, further interest and costs considering the agreement. The Respondent shall be free to file counter-claim, if any.”

7. Parties submitted to the jurisdiction of the Arbitral Tribunal, filed their statement of claim/reply etc. and adduced evidence. The Arbitral Tribunal, by their unanimous reasoned award dated 5 11.09.2002, partly allowed the claims of respondent No.1 against the appellant as under:

Claim No.

Brief Description

Claim Amount in Rs.

Amount awarded in Rs.

1.1

Loss suffered due to under-utilization of equipment purchased specially for This contract.

6,97,554

3,48,777

1.2

Material purchased not utilized.

3,00,723

3,00,723

1.3

Loss of Profit

4,65,409 (Revised to Rs. 4,44,620)

2,32,703

1.4,1.5 & 2.1

1.4 -Overheads during contracted period under utilized-

4,65,409

3,41,830

1.5-Overheads from 9.6.1995 to 4.3.1996 –

3,89,165

2.1-Overheads from 5.3.1996 to 30.06.1996

3,06,748

1.7 & 2.2

1.7 – Amount for the period 1.7.94 to 29.6.1996

3,28,085

1,64,042

2.2 – Amount for the period 5.3.96 to 30.09.1996

1,24,174

1.6

Payment under price variation clause

85,106

85,106

1.8 & 2.3 2.4

Payment of pre lite interest from 13.12.95 to 5.5.99

As accrued

12,89,033

Total

27,62,214

8. The appellant-Union of India, felt aggrieved of the Arbitral Award, challenged its legality by filing an application under Section 34 of the Act in Bombay High Court (Single Judge).

9. The Single Judge, by order dated 21.04.2003, allowed the appeal in part and made two modifications in the arbitral award with respect to the date of award of interest on the claim of respondent No.1 for damages and on the claim of one purchase item. The Single Judge made the interest payable from the date of award till realization. So far as the challenge to other claims including award of interest on such claims were concerned, the Single Judge rejected the appellant’s all objections and upheld the award in totality for all purposes.

10. Respondent No.1 (claimant), felt aggrieved against that part of the order of the Single Judge which interfered in part in the arbitral award, filed appeal before the Division Bench. So far as the appellant-Union of India was concerned, they did not file any appeal against that part of the order of the Single Judge which had rejected substantially their application filed under Section 34 of the Act. In this view of the matter, the award to that extent became final.

11. By impugned judgment, the Division Bench of the High Court allowed respondent No.1’s appeal and set aside the order of the Single Judge. It was held that no ground under Section 34 of the Act had been made out by the Union of India to modify the award to the extent of awarding interest on the claim.

In other words, in the opinion of Division Bench, the ground on which the limited interference was made by the Single Judge for setting aside a part of the Award in relation to award of interest from a particular date on two (2) claims to respondent No.1 (claimant) was not a ground falling under Section 34 of the Act and, therefore, the order of Single Judge was not legally sustainable. It was accordingly set aside resulting in upholding of the entire award and dismissal of Section 34 application in its entirety. It is against this order, the Union of India (Railways) felt aggrieved and filed the present appeal by way of special leave in this Court.

12. Heard Ms. Kiran Suri, learned senior counsel for the appellant and Mr. Vinay Navare, learned counsel for respondent No.1.

13. Ms. Kiran Suri, learned senior counsel, appearing for the appellant (Union of India) while challenging the legality and correctness of the impugned judgment has argued only one point.

14. According to learned counsel, the Arbitral Tribunal mis-conducted in awarding interest on various claims and, therefore, a ground to set aside the arbitral award under Section 34 of the Act is made out.

15. Placing reliance on Clause 13(3) of GCC, learned counsel urged that since clause 13(3) provides that no interest will be payable upon the earnest money or the security deposit or amounts payable to the contractor under the contract (except Government securities), respondent No.1 (claimant) was not entitled to claim interest on any of the heads.

16. In other words, the submission was that the Arbitral Tribunal mis-conducted in awarding interest to respondent No.1 (claimant) on their various claims when the clause 13(3) of GCC did not allow them to claim any interest on the sums payable under the contract except on Government securities, if deposited with the appellant.

17. It was, therefore, her submission that the award to this extent was not legally sustainable and, therefore, it was liable to be set aside under Section 34 of the Act. Learned counsel elaborated this submission by placing reliance on the provisions of the Act and some decided cases cited at the Bar.

18. In reply, learned counsel for respondent No.1 (claimant) supported the impugned judgment and contended that the aforementioned point urged by the appellant was neither raised nor urged before the Arbitral Tribunal nor the High Court, i.e., Single Judge and also Division Bench and hence it cannot be permitted to be raised, for the first time, in an 11 appeal under Article 136 of the Constitution for want of any factual foundation and finding by any Court on such plea.

19. Having heard learned counsel for the parties and on perusal of the record of the case, we are inclined to accept the argument of learned counsel for respondent No.1 as, in our view, it has a force and hence deserves acceptance.

20. It is not in dispute that the appellant did not raise the plea based on clause 13(3) of the GCC against respondent No.1 at any stage of the proceedings either in their reply filed before the Arbitral Tribunal or/and in submissions except raising it, for the first time, before this Court in this appeal.

21. On the other hand, we find that in Section 11 (5) proceedings, the appellant did not raise this objection in their reply and instead gave their express consent to refer the issue of award of interest payable on various claims (1 to 17) to Arbitral Tribunal considering the said claim to be arbitrable under the contract.

22. In our opinion, the appellant could have registered their objection before the Single Judge at the time of making a reference to the Arbitral Tribunal by pointing out Clause 13(3) of GCC or could have reserved their right to raise such objection before the Arbitral Tribunal. It was, however, not done.

23. Not only that, we further find that the appellant, in their reply, filed before the Arbitral Tribunal also did not raise this plea and allowed the Arbitral Tribunal to adjudicate the said issue on merits.

24. If the appellant was so keen to place reliance on clause 13(3) of GCC to defeat the claim of respondent No.1 relating to the award of interest on various claims, then it was necessary for the appellant to have raised such plea specifically, in their reply, before the Arbitral Tribunal. No such plea was raised even before the Arbitral Tribunal.

25. Though we find that the appellant raised this ground, for the first time, in Section 34 proceedings [see-ground (cc)] before the Single Judge but again this ground was not pressed at the time of arguments. It is clear from the perusal of the Single Judge’s order. Not only that, the appellant again did not raise this plea before the Division Bench.

26. In the light of aforementioned factual scenario emerging from the record of the case, we cannot grant any indulgence to the appellant (Union of India) to raise such plea for the first time here. In our view, it is a clear case of waiver or/and abandonment of a plea at the initial stage itself.

27. Everyone has a right to waive and to agree to waive the advantage of a law made solely for the benefit and protection of the individual in his private capacity, which may be dispensed with without infringing any public right or public policy. Cuilibet licet renuntiare juri pro se introducto. (See Maxwell on The Interpretation of Statutes 12th Edition at page 328)

28. If a plea is available-whether on facts or law, it has to be raised by the party at appropriate stage in accordance with law. If not raised or/and given up with consent, the party would be precluded from raising such plea at a later stage of the proceedings on the principle of waiver. If permitted to raise, it causes prejudice to other party. In our opinion, this principle applies to this case.

29. In our opinion, the appellant is otherwise not entitled to raise the plea on yet another ground. It is not in dispute that the appellant’s application filed under Section 34 of the Act was partly allowed by the Single Judge only to the extent of two claims regarding award of interest. In other words, the application suffered dismissal substantially on all other claims except two claims mentioned above. However, despite suffering substantial dismissal, the appellant did not file any appeal to challenge the part dismissal of their application.

30. In this view of the matter, in our view, the order of the Single Judge insofar as it resulted in dismissal of the appellant’s application became final and attained finality. In order to keep the issue alive, the appellant was under obligation to file regular appeal before the Division Bench against that part of the Single Judge’s order by which their application under Section 34 of the Act in relation to all other claims had been dismissed. It was only then in the event of dismissal of the appeal, the issues raised therein could have been pursued in appeal to this Court under Article 136 of the Constitution and that too only on the grounds raised therein and decided against the appellant. It was, however, not done by the appellant.

31. In our opinion, therefore, this is yet another infirmity which renders the appeal devoid of any merit.

32. In our considered view, the grant of award of interest on arbitrable claims by the Arbitral Tribunal is not inherently illegal or against any public policy or per se bad in law or beyond the powers of the Arbitral Tribunal. In other words, it is permissible to award interest in arbitrable claims by the Arbitral Tribunal.

33. Indeed, Section 31(7) (a) and (b) of the Act empowers the Arbitral Tribunal to award interest on the awarded sum and secondly, it is always subject to the agreement between the parties.

34. It is a well-settled principle in Arbitration Law that the award of an Arbitral Tribunal once passed is binding on the parties. The reason being that the parties having chosen their own Arbitrator and given him an authority to decide the specific disputes arising between them must respect his decision as far as possible and should not make any attempt to find fault in each issue decided by him only because it is decided against one party. It is only when the issue decided is found to be bad in law in the light of any of the specified grounds set out in Section 34 of the Act, the Court may consider it appropriate to interfere in the award else not. The case at hand falls in former category.

35. This case reminds us of the apt observations made by former Chief Justice M.C. Chagla in Firm Kaluram Sitaram vs. The Dominion of India, AIR 1954 Bombay

50. That was also a case between the Railways and private party (citizen) wherein the learned Chief Justice, in his distinctive style of writing, commented upon the manner in which the Railway contested the case against the private party (citizen) by raising some technical pleas and observed as under: “Now, we have often had occasion to say that when the State deals with a citizen it should not ordinarily rely on technicalities, and if the State is satisfied that the case of the citizen is a just one, even though legal defences may be open to it, it must act, as has been said by eminent judges, as an honest person.”

36. The aforementioned observations has full application to the case at hand because here also, the appellant (railways) pursued their technical legal point up to this Court against respondent No.1 (claimant) without even raising it at any stage of proceedings much less to find out whether it could be made a ground under Section 34 of the Act to seek its setting aside. All was being done to defeat respondent No.1’s just claim of interest which was rightly awarded by the Arbitral Tribunal and upheld by the Courts below on other grounds.

37. Learned counsel for the appellant did not urge any other point to attack the impugned judgment including the reasoning given in support of the award of interest except to urge the aforesaid point to challenge its legality, which we have repelled by not permitting the appellant to raise it in this appeal.

38. In view of foregoing discussion, we find no merit in the appeal, which thus fails and is accordingly dismissed.

 [ABHAY MANOHAR SAPRE]

 [NAVIN SINHA]

New Delhi;

December 08, 2017



BOOK REFERRED : Maxwell on The Interpretation of Statutes 12th Edition at page 328

Venture Global Engineering LLC Vs. Tech Mahindra Ltd. & ANR Etc[SC 2017]

KEYWORDS:-Issue estoppel-public policy and fraud-doctrine of “alter ego of the  Company

SC INDEx

SUPREME COURT OF INDIA

[Civil Appeal Nos. 17753-17755 of 2017 arising out of SLP (C) No(S). 29747-29749 of 2013] [Civil Appeal Nos. 17756 of 2017 arising out of SLP (C) No. 8298 of 2014]

BENCH :-  (J. CHELAMESWAR) (ABHAY MANOHAR SAPRE)

ACTS:- Chapters I or II of Part II of the Arbitration and Conciliation Act, 1996

DATE:-November 01, 2017


[Civil Appeal Nos. 17753-17755 of 2017 arising out of SLP (C) Nos. 29747-29749/2013]

[Civil Appeal No. 17756 of 2017 arising out of SLP (C) No. 8298/2014]

Tech Mahindra Ltd. & another Etc. Vs. Venture Global Engineering LLC

Chelameswar, J.

1. Leave granted in both the SLPs. I had the advantage of reading the opinion of my learned brother Justice Sapre. While I agree with the conclusion recorded by him that the High Court erred in its conclusion on the question whether the proceedings initiated by VENTURE in OP No. 390 of 2008 are barred by the principle of “issue estoppel”, I am unable to persuade myself to agree with his conclusions that the judgment under appeal is required to be reversed on the questions relating to public policy and fraud for the following reasons;

2. The facts of these appeals are narrated in great detail by my learned brother. There is no need to repeat except to mention those which are essential for the purpose of my conclusion.

3. An Arbitral Award dated 3rd April, 2006 (hereinafter the AWARD) came to be passed in an arbitration between VENTURE and SATYAM.

The relevant portion of the AWARD reads as under:

“A. I order VGE to deliver to Satyam share certificates in form suitable for immediate transfer to Satyam or its designee evidencing all of VGE’s ownership interest legal and/or beneficial in SVES. I further order it to do all that may otherwise be necessary to effect the transfer of such ownership to Satyam or its designee.”

4. The dispute leading to the Arbitration and the AWARD arose out of the Agreement dated 20th October, 1999 (Agreement I) entered into between VENTURE and SATYAM.

5. Article VIII of the said Agreement defined the expression “Events of Default” and stipulated the consequences thereof:

“ARTICLE VIII EVENTS of DEFAULT AND REMEDIES

Section 8.01 Events of Default For the purposes of this Agreement, an “Event of Default” means, with respect to any Shareholder, the occurrence of any of the following:

(a) A Bankruptcy Event occurs with respect to such Shareholder.

(b) Subject to clause (c) and (d) below, such Shareholder breaches this Agreement in any material respect and fails to cure such breach within thirty (30) days after being notified in writing by the other Shareholder of such breach.

(c) A Shareholder Transfers, or attempts to Transfer, any Shares in violation of the transfer restrictions set forth in Article VII of this Agreement.

(d) Such Shareholder is subject to Change in Control

Section 8.02 Rights Upon Events of Default Generally

Upon the occurrence of an Event of Default (other than a Bankruptcy Event) with respect to any Shareholder (the Defaulting Shareholder”), the other Shareholder (the “Non- Defaulting Shareholder”) shall have the option, within thirty (30) days after becoming aware of the Event of Default to (a) purchase the Defaulting Shareholder’s Shares at book value and repay Shareholder’s loan, or

(b) cause the immediate dissolution and liquidation of the COMPANY in accordance with Article IX. Either of such options must be exercised by the Non-Defaulting Shareholder by written notice to the Defaulting Shareholder within thirty (30) days after becoming aware of the subject Event of Default.

Section 8.03 Rights Upon Bankruptcy Event

Upon the occurrence of a Bankruptcy Event with respect to any Shareholder (the “Bankrupt Shareholder”), such shareholder shall give immediate written notice to the other Shareholder (the “Solvent Shareholder”). The Solvent Shareholder shall have the option of

(a) purchasing the Shares held by the Bankruptcy Shareholder at book value and repay such Shareholder’s loans or

(b) causing the immediate dissolution of liquidation of the company in accordance with Article IX. Either of such options must be exercised by the Solvent Shareholder by written notice to the Bankrupt Shareholder within one hundred twenty (120) days of receipt of notice of the Bankruptcy Event from the Bankrupt shareholder.

Section 8.04 Remedies Not Exclusive

The rights granted in this Article are not exclusive of any other rights or remedies available at law or in equity.”

6. The arbitrator inter alia opined that an Event of Default on the part of VENTURE occurred and therefore, VENTURE (the defaulting shareholder) is liable to transfer its interest i.e. 50 per cent of the shares in the JVC to SATYAM (non-defaulting shareholder).

7. SATYAM filed a petition in the Eastern District Court of Michigan, US seeking enforcement of the AWARD against VENTURE. Admittedly, the petition was allowed on 31st July, 2006 and the District Court of Michigan by its judgment directed the enforcement of the AWARD. It appears that VENTURE appealed against the said order in the 6th Circuit, US Appellate Court in Michigan.

8. I assume for the purpose of these appeals that the directions of the Eastern District Court of Michigan dated 31st July, 2006 is legally tenable. In the final analysis, enforcement of the AWARD means transfer of the shares (property of VENTURE) in the JVC. Since the JVC is a company registered (incorporated) in India, transfer of shares therein will have to be effected in accordance with the relevant procedure established by law of India i.e. the Companies Act and other related enactments which obligate VENTURE to perform certain acts. If VENTURE declines to perform its obligations, the directions contained in the judgment of the American Court will have to be executed in India in accordance with the procedure prescribed under the Code of Civil Procedure, 1908 for the enforcement of foreign judgments or decrees, as the case may be.

9. Be that as it may, in my opinion, it was really not necessary for SATYAM to have approached the American Court for the enforcement of the AWARD, whether the AWARD is a “foreign award” as defined under Chapters I or II of Part II of the Arbitration and Conciliation Act, 1996 (hereafter “the ACT”) or not, in view of  the judgments of this Court in Bhatia’s case and BALCO’s case, Part I of the ACT is applicable to the AWARD since the AWARD is anterior to the date of the judgment of this Court in BALCO’s case.

“Para 197. … Thus, in order to do complete justice, we hereby order, that the law now declared by this Court shall apply prospectively, to all the arbitration agreements executed hereafter.” Therefore, the AWARD would be enforceable as if it were a decree of a civil court in view of Section 364 of the ACT.

10. The only way VENTURE could avoid the enforcement of the AWARD is by having the AWARD set aside either under Section 34 of the ACT or any other procedure applicable under any other applicable law in any other appropriate jurisdiction available to VENTURE under the principles of international law. We are not informed of any such proceeding either subsisting or successfully pursued by VENTURE in any jurisdiction.

On the other hand, VENTURE initiated proceedings on 13th April, 2006 before the District Court for the Northern District of Illinois Eastern Division, USA for a declaration that the AWARD was not enforceable in the United States of America. Subsequently, even that application was dismissed as withdrawn by an Order of that Court dated 25th April, 2006.

11. Thereafter, VENTURE filed OS No. 80 of 2006 on 28th April, 2006 before the Ist Additional Chief Judge, City Civil Court, Secunderabad seeking mainly two reliefs:

i. a declaration that the Award was illegal and without jurisdiction; and

ii. a permanent injunction restraining Satyam from enforcing the Award.

12. This Court had an occasion to examine the maintainability of the said suit in an appeal arising out of certain interlocutory proceedings (detailed in the judgment of my learned brother) in Venture Global Engineering v. Satyam Computer Services Ltd. & Another, (2008) 4 SCC 190 (hereinafter called VENTURE-I). In substance, this Court held (subject to certain qualifications) that VENTURE is not disentitled to challenge the AWARD in India.

13. Consequent upon the judgment in VENTURE-I, the Ist Additional Chief Judge, City Civil Court, Secunderabad transferred O.S. No. 80 of 2006 to the Court of 2nd Additional Chief Judge City 8 Civil Court at Hyderabad. The suit was converted into an application under Section 34 of the ACT and was renumbered O.P. No. 390 of 2008. The Suit/O.P. as originally filed was based on certain grounds other than the grounds on which the O.P. eventually came to be allowed.

14. On the 7th of January 2009, Ramalinga Raju, the Chairman and founder of SATYAM made a statement in writing5 wherein he made certain admissions to the effect that the balance sheets of SATYAM had been manipulated to inflate profits to the tune of Rs. 7080 crores.

15. VENTURE filed an application6 under Order VIII Rule 9 of the CPC seeking permission to plead additional facts by amending the pleadings in O.P. No. 390 of 2008. VENTURE contended that the facts disclosed by Ramalinga Raju and the subsequent developments “are crucial at the adjudication of the disputes between the parties” and prayed;

“In the foregoing fats (sic) and circumstances it is humbly submitted that the Hon’ble Court may be pleased to pass the following orders;

a) That the subsequent developments and events as stated in this petition in para 3 to 21 together with the accompanying documentation be brought on Record.

b) Such other or further orders as may be necessary in the interests of justice.”

The Trial Court, by an order dated the 3rd of November, 2009 allowed the application.

16. SATYAM challenged the order dated 3rd November, 2009 in a revision petition before the High Court. By an order dated the 19th of February, 2010, the High Court allowed the revision petition and dismissed Venture’s application. The High Court held (in substance) that under Section 34 of the ACT, an application for setting aside of an Award could only be filed within 3 months (extendable only by another 30 days) from the date of the Award permitting attack against the AWARD on a new ground would amount to permitting the AWARD to be challenged after the expiration of limitation.

17. VENTURE appealed to this Court. This Court, by judgment of the 11th of August, 20107, allowed the appeal and restored the order of the Trial Court.

“39. Therefore, this Court is unable to accept the contention of the learned counsel for the respondent that the expression “fraud in the making of the award” has to be narrowly construed. This Court cannot do so primarily because fraud being of “infinite variety” may take many forms, and secondly, the expression `the making of the award’ will have to be read in conjunction with whether the award “was induced or affected by fraud”.

40. On such conjoint reading, this Court is unable to accept the contentions of the learned counsel for the respondents that facts which surfaced subsequent to the making of the award, but have a nexus with the facts constituting the award, are not relevant to demonstrate that there has been fraud in the making of the award. Concealment of relevant and material facts, which should have been disclosed before the arbitrator, is an act of fraud.

If the argument advanced by the learned counsel for the respondents is accepted, then a party, who has suffered an award against another party who has concealed facts and obtained an award, cannot rely on facts which have surfaced subsequently even if those facts have a bearing on the facts constituting the award. Concealed facts in the very nature of things surface subsequently. Such a construction would defeat the principle of due process and would be opposed to the concept of public policy incorporated in the explanation.”

18. Thereafter, OP No. 390 of 2008 was heard and allowed by the trial Court by its Order dated 31.01.2012. The AWARD was set aside. 7 Venture Global Engineering v. Satyam Computer Services Limited & Another, (2010) 8 SCC 660 (“Venture-II”)

19. The trial court framed as many as 8 points for consideration, and they read:

“(1) Whether the proceeding as it stands now before this Court is a suit in the true sense of the term and whether the instant original proceeding can still be construed as a suit as contended by the respondents and, if so, whether the proceeding is liable to be dismissed as not maintainable?

(2) Whether the proceeding, even if construed as an original petition under Section 34 of the Act, is still liable to be dismissed as not maintainable as contended by the respondents?

(3) Whether the instant proceeding is barred by the law of limitation and is liable to be dismissed on that ground?

(4) Whether the Bankruptcy of petitioner’s affiliates does not constitute a bankruptcy event as per the terms and conditions agreed to between the parties?

(5) Whether the award in so far as the order of transfer of petitioner’s shares to the 1st respondent at the book value is violation of Foreign Exchange Management Act and also a violation of public policy?

(6) Whether the Award is vitiated by any irregularities in the financial statements of 1st respondent as set out in additional pleadings?

(7) Whether the petitioner was under any incapacity on account of the suppression of material facts and the indulgence in fraud by the 1st respondent which were said to have come to light after the passing of the award by the learned Tribunal?

And, if so, whether such suppression of material facts and fraud have any causative link, and, if so, whether the award is vitiated by fraud on the part of the 1st respondent in the facts and circumstances urged by the petitioner?

And, if so, whether the award is liable to be set aside?

8. Whether the petitioner had made out valid and sufficient grounds to set aside the impugned award, and if so, the award is liable to be set aside?

9. To what relief?

20. After an elaborate discussion of the said points, the trial court concluded at para 12 of the judgment. “Before the last point is taken up, it is necessary to sum up the discussion and findings. Under point number 1, it is held that the present proceeding after conversion from the Suit to the Original Petition cannot be construed to be a suit and hence cannot be rejected on the assumption that the suit is not maintainable. Under point number 2, it is held that the present proceeding which to be construed as an Original Petition under Section 34 of the Act is not liable to be dismissed as not maintainable.

Under point number 3 it is held that the instant proceeding i.e. Original Petition is not barred by Law of Limitation. Under point number 4 answered against the Petitioner it is held that bankruptcy of Petitioner’s affiliates had constituted a bankruptcy event as per the terms and conditions agreed to between the parties. However, it is to be noted that when this finding was recorded by the Arbitral Tribunal the additional pleas now urged by the Petitioner before this court were not available to the Petitioner and hence the additional pleas were not brought to the notice of the learned Arbitral Tribunal.

The said findings of the Arbitral Tribunal can be sustained if only the issue of fraud is not taken into consideration. Thus, in the absence of plea of the suppression of material facts and fraud on the part of the 1st Respondent, the findings of the learned arbitrator that the bankruptcy of Petitioner’s affiliates constitutes a bankruptcy event is sustainable. However, after the suppressed material facts and fraud have come to light even that finding of the Arbitral Tribunal cannot be sustained for the reasons already assigned under point numbers 6 and 7. Under point number 5, the award in so far as it ordered transfer of petitioner’s share to the 1st Respondent @ book value is in violation to FEMA and Public Policy of India.

Under points numbers 6 and 7, it is held that the award which is affected and induced by fraud is vitiated and cannot be enforced being opposed to Public Policy of India and is liable to set aside. In view of the above findings, this Court holds that the Petitioner has made out valid and sufficient grounds to set-aside the impugned award and hence, the award is liable to be set aside. The point is accordingly answered.”

21. In substance, the trial court held all the points in favour of VENTURE except Point No.4 and concluded that the AWARD is 13 required to be set aside on two grounds,

(i) the direction in the AWARD to transfer the shares in JVC of VENTURE at book value is in conflict with the requirements of The Foreign Exchange Management Act, 1999 (hereafter referred to as “FEMA”) and therefore violation of public policy8,

(ii) The AWARD is unsustainable because of the financial irregularities and the manipulation of the accounts of SATYAM.9 In the opinion of the trial court, the AWARD “is affected and induced by fraud” and cannot be enforced being opposed to public policy of India.

22. Whether the above conclusions are tenable? was the question before the High Court. The High Court framed 8 points for consideration in the judgment under appeal.

“1) Whether the institution of the proceedings by the 1st respondent in the Indian Courts to enforce a foreign award can be justified in view of the judgment of the Supreme Court in BALCO’S case (4 supra)?

2) Whether the principle of ‘issue estoppel’ gets attracted in the facts of the case?

3) Whether it is competent for a party to arbitration to invoke Part-I as well as Part-II of the Arbitration Act in relation to a foreign award?

4) Whether the ground of fraud raised by the appellant has been pleaded and proved as required in law, and whether the finding recorded by the trial Court on that aspect can be sustained?

5) Whether the award can be said to be opposed to public policy, on the ground that the transfer of money for its implementation, needs permission, under FEMA?

6) Whether an Indian Court can set aside a foreign award, which has already been enforced in the proceedings with the participation of both the parties to the award?

7) Whether the trial Court followed the correct procedure in deciding the O.P.? and

8) Whether the miscellaneous orders that are challenged in certain appeals and revisions can be sustained in law?”

23. Point Nos.4 and 5 above are relevant in the context of the twin reasons given by the trial court for arriving at the conclusion that the AWARD is required to be set-aside.

24. The High Court opined that the findings recorded by the trial court are unsustainable. The relevant portion of the judgment under appeal insofar as it pertains to point No. 4 reads:

“In every alternative sentence, the word ‘fraud’ has been used and it was proceeded as though fraud was proved. It is important to mention that the trial Court did not record any finding to the effect 15 that fraud has been proved by the 1st respondent, much less any reference was made to the oral and documentary evidence. It hardly needs any mention that the OP was required to be tried as a suit, particularly when allegations of far-reaching consequences were made. However, the trial Court was mostly impressed by the contents of the charge-sheet filed against Mr. Ramalinga Raju by the investigating agencies.

Even while the cases are pending trial before the respective Courts, it has proceeded as though the allegation as to fraud was proved. For all practical purposes, it has rendered the trial before the concerned Courts, nugatory. We are, therefore, of the clear view that the finding of the trial Court on the question of fraud does not accord with law.”

Coming to point No. 5, the High Court held:

“It is also important to mention that I.A. No. 1331 of 2009 did not contain any plea as to public policy.

It was only in relation to alleged fraud. The observation of the trial Court is erroneous and contrary to record. It is possible to argue that, if the complaint itself is that the award is opposed to public policy, an aggrieved party cannot be expected to raise that plea before the Arbitrator;

and if the violation of the public policy is brought about by the award, the complaint cannot be made at any stage, anterior to that.

However, when a ground of that nature is raised under Section 34 of the Act, it must be demonstrated as to how the award is opposed to public policy. Even at the cost of repetition, it can be said that, it is only when the award exhorts a party to the proceedings to take steps, that has the effect of contravening law of the land, in which it is to be enforced, that the ground can be invoked. There is not even a semblance of finding by the trial Court in this behalf. It is trite that every step for enforcing the award must be in accordance with the relevant provisions of law. Therefore, we answer this point in favour of the appellant.”

25. The net result of the litigation is that while the Trial Court set aside the AWARD, the High Court reversed the trial court judgment and restored the AWARD.

26. Aggrieved by the judgment, the present two appeals are filed one by VENTURE and other by SATYAM now represented by Tech Mahindra.

27. Naturally VENTURE is aggrieved by the judgment. Notwithstanding the fact SATYAM succeeded before the High Court, SATYAM also filed a separate appeal (being SLP(C) No. 8298 of 2014) questioning the correctness of the decision of the High Court insofar as it held that the trial court had the jurisdiction to examine the legality of the AWARD.

28. The crux of the entire litigation is that VENTURE seeks to have the AWARD set aside. It must be remembered that SATYAM has not initiated any proceeding so far in India for the enforcement of the AWARD.

29. As rightly pointed out by my learned brother, though various submissions were made both before the trial court and the High Court, before this Court VENTURE confined its attack on the 17 AWARD only to two grounds i.e. the AWARD is contrary to the public policy of India because compliance with the AWARD would amount to violation of the provisions of the FEMA ACT., and the AWARD is required to be set aside because of the “fraud” disclosed by the statement dated 7th January 2009 of Ramalinga Raju.

30. Under the scheme of the ACT an award can be set aside in this country only on the grounds enumerated in Section 34,* if an application praying for such a relief is filed in accordance with the procedure stipulated therein.
Section 34(2)(b)(ii) stipulates that an award which is in conflict with public policy of India is liable to be set aside.


*Section 34. Application for setting aside arbitral award.— 

(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).

(2) An arbitral award may be set aside by the Court only if a. the party making the application furnishes proof that

i. a party was under some incapacity, or

ii. the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or

iii. the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

iv. the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or

v. the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or

b. the Court finds that

i. the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or

ii. the arbitral award is in conflict with the public policy of India. application praying for such a relief is filed in accordance with the procedure stipulated therein. Section 34(2)(b)(ii) stipulates that an award which is in conflict with public policy of India is liable to be set aside.

Explanation I.-For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-

(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or

(ii) it is in contravention with the fundamental policy of Indian law; or

(iii) it is in conflict with the most basic notions of morality or justice.

Explanation 2.- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.

(2A) An Arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.

(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.

(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.

(5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement.

(6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party. 19 In the Explanation to Section 34(2) it is declared that “… an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud …”


In the Explanation to Section 34(2) it is declared that “… an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud …”

31. Though the trial Court had set aside the AWARD purportedly on two grounds, in essence the ground is only one, that the AWARD is in conflict with the public policy of India. Because the conclusion of the trial court on Point Nos. 6 & 7 framed by it that “the AWARD is affected and induced by fraud” is also an aspect of the “conflict with the public policy of India.”

32. I am of the opinion that the High Court is right in reversing the judgment of the trial court, though the reasons given by the High Court, in my opinion, are not very elegant and logical. Therefore, I propose to examine the correctness of the conclusions of the trial court on Points No.5, 6 & 7 framed by it.

PUBLIC POLICY:

33. The trial court recorded that the AWARD is required to be set aside on the ground that the AWARD is opposed to the public policy of India. In the opinion of the trial court, the AWARD contained directions which are in conflict with the FEMA Act and Regulations 20 made thereunder. The trial court considered this under Point No.5 framed by it in para no.10 of its judgment. It framed the question as follows:

“(a) The question under this point is this: ‘Whether the award in so far as the order of transfer of petitioner’s shares to the 1st Respondent at the book value is a violation of Foreign Exchange Management Act and violation of public policy?’ The trial court took note of the contention of VENTURE:

(b) The contentions of the petitioner on this aspect are as under: “It is admitted that the Award directed 1st Respondent to acquire the Petitioner’s shares in Respondent No. 2 at book value being less than its fair value. Such a direction was in express violation of the Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000, which require such transfers to take place at fair value…”

34. The submission of VENTURE appears to be:

(i) The AWARD insofar as it directed VENTURE to transfer its shares in the JVC to SATYAM at book value is in violation of the Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000; and

(ii) The book value of the shares of JVC is less than that of their fair value.

35. It must be pointed out here that even according to the trial court SATYAM argued “that the book value of the shares is the price of shares as recorded in the books of accounts of the Company. It may be above or below the market value.” On the above rival submissions, the trial Court concluded; “Thus the award to the extent it directed the transfer of Petitioner’s shares to the 1st Respondent at the rate of book value is violation of Foreign Exchange Management Act and consequently the public policy.

***** ***** ***** ***** *****

In view of the discussion coupled with reasons the point is answered in favour of the petitioner and against the Respondents holding that the award in so far as it ordered for transfer of petitioner’s shares to the 1st Respondent at book value is a violation of Foreign Exchange Management Act and violation of public policy.”

36. In the entire discussion dealing with the submission, neither the text of the regulations nor the scheme of either the FEMA Act or the regulations is subjected to any analysis. The trial court did not even indicate the number of the regulation which mandates (if at all) that the transfer such as the one directed by the AWARD is required to be only at “fair value’ of the shares. The trial court simply accepted the submission of VENTURE.

37. Assuming for the sake of argument that there is some stipulation in the abovementioned regulation which forbids the transfer of shares in question except “for a fair value”, there is no discussion in the judgment of the trial court as to;

(i) what is meant by fair value of the shares under FEMA;

(ii) how that fair value is to be determined;

(iii) whether the fair value of shares is the same as market value of shares;

(iv) what exactly is the fair value of the shares in question;

The trial court did not even record a finding that the book value of the shares of the JVC is less than that of their market value or fair value. It must also be pointed out here that the trial court did not even refer to any pleading on the basis of which submission was made before it.

38. The entire exercise undertaken by the trial court only demonstrates the unfortunate trend in the legal system where without settling the facts in issue first and identifying the questions 23 of law relevant in the context for determining the controversy between the parties, case law is dumped upon and examined by the courts.

The result is an exercise like the one undertaken by the trial court. I am of the opinion that the conclusion recorded by the trial court on Point No.5 is without any basis in facts and without even identifying the provision of law with which the AWARD is in conflict with. Hence, in my opinion, the conclusion in this point cannot be sustained.

39. In the process of such uncharted debate, the trial court undertook an examination whether the payment of US$ 622,656 to be made towards the book value of the shares requires permission of the Reserve Bank of India and whether such permission is required to precede the award etc. I failed to identify any categoric conclusion recorded by the trial court on that question. Whether there are any pleadings calling upon the court to examine those questions is also not indicated in the judgment.

FRAUD:

40. The next question is – whether fudging of the accounts of SATYAM would in any way provide a ground for VENTURE to seek setting aside of the AWARD? 41. The content of the letter11 dated 7th January 2009 of Ramalinga Raju, if true undoubtedly would have legal consequences both civil and criminal for SATYAM, Ramalinga Raju and some more persons who are responsible for the fudging of the accounts of SATYAM. Various civil and criminal proceedings were in fact initiated and some consequences followed.

According to the Statement of Ramalinga Raju, the fudging of accounts of SATYAM took place over a number of years.12 11 Extracted in extenso by my learned brother The gap in the balance Sheet has arisen purely on account of inflated profits over a period of last several years (limited only to Satyam standalone, books of subsidiaries reflecting true performance). What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years.

It has attained unmanageable proportions as the size of company operations grew significantly (annualized revenue run rate of Rs. 11,276 crore in the September quarter, 2008 and official reserves of Rs. 8,392 crore). The differential in the real profits and the one reflected in the books was further accentuated by the fact that the company had to carry additional resources and assets to justify higher lever of operations – thereby significantly increasing the costs.

Ramalinga Raju’s statement is not very clear regarding the point of time at which the fudging of the accounts of SATYAM commenced.13 42. In my opinion, Points No.6 & 7 framed by the trial court are too vague and imprecise. Section 34(2) of the ACT declares that if making of an award is either “induced or affected by fraud”, the same is liable to be set aside. Whether the facts relating to the fudging of the accounts of SATYAM and the non-disclosure of those facts by SATYAM before the arbitrator would amount either

(i) to ‘inducing’ the making of the AWARD by fraud; or

(ii) the AWARD made in ignorance of those facts by virtue of non-disclosure of those facts by SATYAM would be an ‘award affected by fraud’, – would be the questions relevant for deciding whether the AWARD is required to be set aside.

43. The expression “Fraud” has no definition in law which has universal application. In “KERR on the Law of Fraud and Mistake”14, it is said: The trial court at para 11(a) of the judgment recorded a submission that the fudging commenced w.e.f. the year 2002. 14 McDonnell, Denis Lane & Monroe, John George, A Treatise on the Law of Fraud and Mistake, KERR ON THE LAW of FRAUD AND MISTAKE, 1952 (7th Edn.) Sweet & Maxwell Limited (London), page 1. 26 “It is not easy to give a definition of what constitutes fraud in the extensive signification in which that term is understood by Civil Courts of Justice.

The Courts have always avoided hampering themselves by defining or laying down as a general proposition what shall be held to constitute fraud. Fraud is infinite in variety … Courts have always declined to define it, … reserving to themselves the liberty to deal with it under whatever form it may present itself.

Fraud … may be said to include properly all acts, omissions, and concealments which involve a breach of legal or equitable duty, trust or confidence, justly reposed, and are injurious to another, or by which an undue or unconscientious advantage is taken of another. All surprise, trick, cunning, dissembling and other unfair way that is used to cheat any one is considered as fraud. Fraud in all cases implies a willful act on the part of any one, whereby another is sought to be deprived, by illegal or inequitable means, of what he is entitled to.”

The ACT does not define the expression ‘Fraud’. A reference is made to the definition of the expression ‘Fraud’ in Section 17 of the Contract Act, 1872 in a bid to explain the meaning of the word ‘fraud’.15 15 Section 19 of the Contract Act declares that if the consent to an agreement is caused by fraud, such agreement though a contract, is voidable at the option of the party whose consent was so caused. “Section 19 Voidability of agreements without free consent.-When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.

A party to a contract, whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representations made had been true.” Section 17 of the Contract Act defines fraud. Section 17. ‘Fraud’ defined.- ‘Fraud’ means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract:-

(1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true; (2) the active concealment of a fact by one having knowledge or belief of the fact; (3) a promise made without any intention of performing it;

44. But the fact remains, such a definition is valid only in the context of contracts. In my opinion, the definition under Section 17 of the Contract Act may not be of any great assistance, to understand the meaning and scope of the explanation to Section 34(2) of the ACT. From the language of the explanation to Section 34(2), what renders an AWARD liable to be set aside is that the making of the AWARD must have been induced by fraud or the AWARD is affected by fraud.

Neither does the trial court judgment identify the legal parameters for recording a conclusion that the making of the AWARD was induced by or fraud or that the AWARD is affected by fraud, nor does it explain how the non-disclosure of the facts relating to the true financial status of SATYAM actually is an inducement for making of the AWARD. On the other hand, the trial court relied upon the observations made by this Court in VENTURE-II (Venture Global Engineering v. Satyam Computer Services Limited & Another, (2010) 8 SCC 660), that “concealment (4) any other act fitted to deceive;

(5) any such act or omission as the law specially declares to be fraudulent. 28 of relevant and material facts which should have been disclosed before the Arbitrator is an act of fraud” to support the conclusion that the AWARD is required to be set aside. The Trial Court opined that: “In the light of this legal position and the pleadings supported by documentary evidence on record, I am of the well considered view that there is adequate pleading on the point of material suppression of facts and fraud and also the required standard of evidence to prima facie accept the version of the Petitioner on the application of the test of preponderance of probabilities.

… Therefore, the non-disclosure of material facts and fraud go to the root of the matter and suggest that they do have a causative link affecting the award. In view of the detailed discussions coupled with the reasons, the points 6 and 7 are thus answered in favour of the Petitioner and against the Respondent 1 and 2 holding that the Award is vitiated by irregularities in the financial statements of 1st Respondent as set out in additional pleadings and that the Petitioner was under an incapacity on account of the acts of fraud committed by the 1st Respondent which had come to light after the passing of the award by the learned Tribunal and, therefore, such acts of fraud have causative link, and hence, the award which is affected and induced by fraud is vitiated and cannot be enforced being opposed to Public Policy of India and is liable to set aside on the grounds of material suppression of facts, fraud, incapacity of the Petitioner and violation of Public Policy of India.”

45. In my opinion, the conclusion of the trial court that the various facts brought on record by VENTURE borne by the disclosure statement of Ramalinga Raju dated 7th January, 2009 and the subsequent developments thereafter (I shall refer to them collectively as ‘CONCEALED FACTS’ for the sake of convenience) are material facts which ought to have been disclosed before the Arbitrator and the failure to make such a disclosure would render the AWARD liable to be set aside is wholly untenable. No reference is made to the pleadings of VENTURE as to how VENTURE believed that the “CONCEALED FACTS” are material for the adjudication of the dispute by the arbitrator. Equally absent is the discussion by the trial court as to how the “CONCEALED FACTS” would become material facts in the context of the arbitration. In the entire discussion on point nos.6 & 7, the trial court does not give any reason justifying the conclusion that the “CONCEALED FACTS” are material facts in the context of the arbitration.

Except mechanically repeating the words of this Court that the non-disclosure or concealment of the material facts before the arbitrator is an act of fraud, there is no discussion as to how the CONCEALED FACTS are material facts whose concealment resulted in inducing the making of the AWARD by fraud or affected by fraud.

46. It must be remembered here that this Court in VENTURE-II categorically declared:

“44. This Court also holds that the facts concealed must have a causative link. And if the concealed facts, disclosed after the passing of the award, have a causative link with the facts constituting or inducing the award, such facts are relevant in a setting-aside proceeding and award may be set aside as affected or induced by fraud. The question in this case is therefore one of relevance of the materials which the appellant wants to bring on record by way of amendment in its plea for setting aside the award.

45. Whether the award will be set aside or not is a different question and that has to be decided by the appropriate court. In this appeal, this Court is concerned only with the question whether by allowing the amendment, as prayed for by the appellant, the Court will allow material facts to be brought on record in the pending setting-aside proceeding. Judging the case from this angle, this Court is of the opinion that in the interest of justice and considering the fairness of procedure, the Court should allow the appellant to bring those materials on record as those materials are not wholly irrelevant or they may have a bearing on the appellant’s plea for setting aside the award.

46. Nothing said in this judgment will be construed as even remotely expressing any opinion on the legality of the award. That question will be decided by the court where the setting-aside proceeding is pending. The proceeding for setting aside the award may be disposed of as early as possible, preferably within 4 months.”

This Court only held that the CONCEALED FACTS of Ramalinga Raju are relevant and, therefore, VENTURE must be permitted to plead those facts. But this Court did not make any declaration that such facts would constitute material facts rendering the AWARD liable to be set aside on the ground that the non-disclosure of those facts before the arbitrator would amount to fraud, inducing the making of the AWARD or that the AWARD is affected by the fraud. At the same time, this Court categorically declared in para 61 that 31 “nothing said in the judgment will be construed as even remotely expressing any opinion on the legality of the award.”

47. The High Court rightly disagreed with the conclusions of the trial court and reversed the judgment of the trial court. High Court ought to have given more cogent reasons for the disagreement.

48. In the circumstances, I am of the opinion that the High Court rightly reversed the judgment of the trial court, not warranting any interference by this Court in exercise of the discretionary jurisdiction under Article 136 of the Constitution of India. I would therefore dismiss the appeals of VENTURE.

[Civil Appeal No. of 2017 arising out of SLP (C) No. 8298/2014]

49. If this Court agrees with the conclusion of the High Court that the AWARD is not liable to be set aside, the appeal of SATYAM would become purely academic. Even otherwise, a reading of the Special Leave Petition discloses, all that SATYAM is seeking is to reagitate the question of the applicability of Part-I of the ACT to an international commercial arbitration. In other words, it is a challenge to the correctness of the decision of a Constitution Bench of this Court in BALCO’s case. I am of the opinion that such a course ought not to be permitted. I would, therefore, dismiss the appeal of SATYAM.

(J. CHELAMESWAR)

New Delhi

November 01, 2017


Venture Global Engineering LLC Vs. Tech Mahindra Ltd. & ANR. Etc.

[Civil Appeal Nos. 17756 of 2017 arising out of SLP (C) Nos. 29747-29749/2013]

Tech Mahindra Ltd. & ANR. Etc. Vs. Venture Global Engineering LLC.

[Civil Appeal No. of 2017 arising out of SLP (C) No. 8298/2014]

Abhay Manohar Sapre, J.

1. Special Leave Petition (Civil) Nos.29747-29749 of 2013 are filed by the Venture Global Engineering 2 LLC. Special Leave Petition (C) No.8298 of 2014 is filed by Tech Mahindra Ltd. Both of them are Bodies Corporate. They are the plaintiff and the 1st defendant respectively in O.S. No.87 of 2012 on the file of the 1st Additional Chief Judge, City Civil Court, Secunderabad.

2. Leave granted.

3. O.S. No.87 of 2012 was filed praying that an Arbitral Award dated 03.04.2006 (hereinafter referred to as the “Award”) be set aside in exercise of the power under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “AAC Act”). O.S. No. 87 of 2012 was transferred to the Court of Chief Judge, City Civil Court, Hyderabad and re-numbered as O.P. No. 390 of 2008.

4. By order dated 31.01.2012, O.P. No.390 of 2008 was allowed setting aside the Award.

5. Aggrieved by the said order, the defendant preferred three appeals to the High Court of Andhra Pradesh. By a common judgment dated 23.08.2013, the High Court allowed the appeals. Hence, the instant appeals.


6. The necessary background facts of these appeals are:

7. For the sake of convenience and brevity, the plaintiff-Venture Global Engineering LLC is hereinafter referred to as “Venture”, whereas defendant No.1-Tech Mahindra (formerly known as Satyam Computer Services Private Ltd. is hereinafter referred to as “Satyam” and defendant No.2-Satyam Venture Engineering Services is hereinafter referred to as “JVC”.

8. Plaintiff-Venture in O.S. No.87 of 2012 is a Company incorporated under the US laws. It is one of a group of companies.

9. Satyam is an Indian Company registered under the Companies Act, 1956 with its office at Hyderabad engaged in the business of computer software.

10. On 20.10.1999, the Venture and Satyam entered into a Joint Venture and Shareholder Agreement (hereinafter referred to as Agreement-I) for incorporating JVC. The entire shareholding of JVC is to be held between the two collaborating companies equally. The Agreement consists of XI Articles. Each Article consists of several sections.

11. Annexure-A to the Agreement defines several expressions used in the Agreement.

12. The provisions of Agreement-I relevant to the controversy on hand are:

(i) Section 6 (a) to (e) of Article VI which provide that both Venture and Satyam would not compete in any manner in the business of JVC and 5 also would not compete inter se in their respective business directly or indirectly so long as both of them hold shares in JVC and also within two years after they cease to hold the shares in the JVC.

(ii) Section 8.01 of Article VIII defines the expression “event of default”. It then sets out four events of default in clauses (a) to (d). One such event specified in Clause (a) is – “A bankruptcy event when occurs with respect to a shareholder.”

It reads as under:

“Section 8.01 Events of Default For purposes of this Agreement, an “Event of Default” means, with respect to any Shareholder, the occurrence of any of the following:

(a) A Bankruptcy Event occurs with respect to such Shareholder.

(b) Subject to clause (c) and (d) below, such Shareholder breaches this Agreement in an material respect and fails to cure such breach within thirty(30) days after being notified in writing the other Shareholder of such breach. (c) A Shareholder Transfers, or attempts to 6 Transfer, any Shares in violation of the transfer restrictions set forth in Article VII of this Agreement. (d) Such Shareholder is subject to a Change in Control.”

(iii) Section 8.02 provides the consequences of the occurrence of any “event of default”. It reads as under: “Section 8.02 Rights Upon Events of Default Generally Upon the occurrence of an Event of Default (other than a Bankruptcy Event) with respect to any Shareholder (the “Defaulting Shareholder”), the other Shareholder (the “Non-Defaulting Shareholder”) shall have the option, within thirty (30) days after becoming aware of the Event of Default to

(a) purchase the Defaulting Shareholder’s Shares at book value and repay Shareholder’s loan, or

(b) cause the immediate dissolution and liquidation of the COMPANY in accordance with Article IX.

Either of such options must be exercised by the Non-Defaulting Shareholder by written notice to the Defaulting Shareholder within thirty (30) days after becoming aware of the subject Event of Default.”

(iv) Sections 8.03 and 8.04 stipulate the rights and obligations flowing from the occurrence 7 of the “event of default”. One of them is that the non-defaulting shareholder shall have an option within 30 days after becoming aware of the occurrence of the “event of default” to either purchase the defaulting shareholder’s shares at book value or cause the immediate dissolution and liquidation of the JVC Company following the procedure prescribed in Agreement-I.

It read as under:

“Section 8.03 Rights Upon Bankruptcy Event Upon the occurrence of a Bankruptcy Event with respect to any Shareholder (the “Bankrupt Shareholder”), such shareholder shall give immediate written notice to the other Shareholder (the “Solvent Shareholder”).

The Solvent Shareholder shall have the option of

(a) purchasing the Shares held by the Bankruptcy Shareholder at book value and repay such Shareholder’s loans or

(b) causing the immediate dissolution of liquidation of the company in accordance with Article IX. Either of such options must be exercised by the Solvent Shareholder by written notice to the Bankrupt Shareholder within one hundred Twenty (120) days of receipt of notice of the Bankruptcy Event from the Bankrupt shareholder.”

“Section 8.04 Remedies Not Exclusive – The rights granted in this Article are not exclusive of any other rights or remedies available at law or in equity.”

(v) Article XI, Section 11.05

(a) prescribes the procedure for the settlement of disputes: “

(a) In the event of a dispute between the parties to this Agreement regarding the terms and conditions of this Agreement or any of the transaction documents, the Parties shall negotiate in good faith for a period of 30 days in an effort to resolve the issues causing such dispute.

If such negotiations are not successful, the parties shall submit the disagreement to the senior officer VENTURE and the senior officer of SATYAM designees for their review and resolution in such manner as they deem necessary or appropriate. Compliance with this Section 11.5

(a) shall be a condition precedent to the commencement of any judicial or other legal proceeding.”

(vi) Section 11.05

(b) stipulates the governing law of the agreement;

“(b) This Agreement shall be construed in accordance with and governed by the laws of the State Michigan, United States, without regard to the conflicts of law rules of such jurisdiction. Disputes between the parties that cannot be resolved via negotiations shall be submitted for final, binding arbitration to 9 the London Court of Arbitration.”

It provides that the disputes between the parties, if not settled through negotiations, shall be referred to arbitration to the London Court of International Arbitration (hereinafter referred to as LCIA).

(vii) Section 11.05(c) stipulates ensuring compliance of provisions of Companies Act and other applicable Acts/Rules, which are in force in India at any time.

It reads as under:

“(c) Notwithstanding anything to the contrary in this agreement, the Shareholders shall at all times act in accordance with the Company’s Act and other applicable Acts/Rules being in force, in India, at any time.”

13. Pursuant to the aforementioned Agreement, Satyam, Venture and JVC entered into another Agreement dated 11.02.2000, Agreement-II called Non-Compete Agreement. Clause 5 of the Agreement provides that the Agreement shall be governed by and construed according to laws of the State of 10 Michigan (US) without regard to conflicts of law rules of its jurisdiction. It then also provides that the disputes between the parties, if cannot be mutually resolved, shall be referred to arbitration to the LCIA. It also provides that a party to the Agreement may seek injunctive relief in a Court of competent jurisdiction restraining a violation of the Agreement. It reads as under:

“Clause 5 – This agreement shall be governed by and construed according to the Laws of the States of Michigan, United States, without regard to conflicts of law rules of such jurisdiction. Disputes between the parties which cannot be resolved via negotiations shall be submitted for final, binding arbitration to the London Court of Arbitration. In addition, a party may seek injunctive relief in a court of competent jurisdiction, restraining a violation of this agreement.”

14. In September 2000, Satyam entered into an Agreement with another American Company called- TRW Automotive to provide information technology to TRW. Satyam also entered into a “sub-contract” 11 with the JVC to share the benefits of the business with TRW.

15. Between March 2003 to May 2004, 21 members of the Group of Companies of which the Venture is a member filed bankruptcy proceedings in U.S. Courts and were declared bankrupt.

16. Aforementioned two events gave rise to disputes between Venture and Satyam. Eventually Satyam invoked the arbitration clause contained in Section 11.5 (b) of Agreement-I by filing a request with the LCIA for arbitration on 25.07.2005 against Venture.

17. On 10.09.2005 the LCIA appointed Mr. Paul B. Hanon as sole Arbitrator to decide the disputes. Both the parties entered appearance before the Arbitrator and filed their respective claims against each other.

18. The Arbitrator delivered his reasoned Award on 03.04.2006. He rejected the claims of Venture and allowed the claims of Satyam.

19. The Arbitrator held that an “event of default (bankruptcy)” on the part of Venture had occurred entitling Satyam to claim reliefs specified in Section 8.03 of Agreement-I against Venture. The Arbitrator also held that Venture violated Agreement-II by failing to provide business as stipulated in the Agreement.

20. The relevant part of the operative portion of the Award reads as under:

“A. I order VGE1 to deliver to Satyam share certificates in form suitable for immediate transfer to Satyam2 or its designee evidencing all of VGE’s ownership interest (legal and/or beneficial) in SVES3. I further order it to do all that may otherwise be necessary to effect the transfer of such ownership to Satyam or its designee.

B. Concurrently with the transfer of 1 VGE = VENTURE 2 Satyam = SATYAM 3 SVES = JVC 13 ownership described in Section 6.1A above, I order Satyam to pay VGE US$622,656, such sum being the net difference between the amount payable by Satyam to VGE for the book value of the share of SVES (plus interest) and the amount payable by VGE to Satyam for the disgorgement of royalties paid to VGE by SVES (plus interest).

C. I order VGE to pay Satyam GBP48,777.48, the costs of the Arbitration as determined by the LCIA Court.

D. I order VGE to pay to Satyam US$1,488,454.11 Satyam’s additional costs as determined in Section 5.12 hereof.

E. I order VGE to pay Satyam interest at the 5 per cent per annum compounded annually on the unpaid balance of the sums set forth in Sections 6.1 C and D hereof until such sums are paid.

F. I declare that Satyam is released from its obligation under the NCA not to compete with SVES or VGE with respect to engineering services to the automotive industry.”

21. Aggrieved by the Award, Venture filed a complaint against Satyam on 13.04.2006 before the United States District Court for the Northern District of Illinois, Eastern Division (USA) seeking a declaration that the Award was not enforceable in 14 US. By an Order dated 25.04.2006, the said complaint was dismissed as withdrawn.

22. On 14.04.2006, Satyam filed a petition against Venture in Eastern District Court of Michigan (US) seeking to enforce the Award against the Venture. On 28.04.2006, Venture filed its response and cross-petition in Satyam’s petition. By Order dated 31.07.2006, Satyam’s petition was allowed directing enforcement of the Award.

23. Aggrieved by order dated 31.07.2006, Venture filed an appeal on 08.09.2006 in 6th circuit US appeal Court in Michigan.

24. On 28.04.2006, Venture filed a civil suit (O.S. No.80/2006) before the 1st Additional Chief Judge City Civil Court Secunderabad seeking

(i) a declaration that the Award is illegal and without jurisdiction,

(ii) a decree for grant of permanent injunction restraining Satyam from enforcing the Award which, inter alia, directed Venture to sell their 50% shares of JVC to Satyam at book value.

25. In the said suit, on 15.06.2006, an ex parte injunction order was passed restraining Satyam from enforcing the Award insofar as it directed transfer of shares by Venture to Satyam.

26. Aggrieved by the order dated 15.06.2006, Satyam filed Misc. Appeal No.519/2006 in the High Court of Andhra Pradesh. By its order dated 13.09.2006, the High Court allowed the said appeal, remitted the matter to the Trial Court for fresh adjudication on merits.

27. On remand, Satyam filed an application (IA No.2042/2006) under Order VII Rule 11 of the Code of Civil Procedure, 1908 (in short “the Code”) praying for rejection of the plaint and dismissal of suit. 28. By order dated 28.12.2006, the Trial Judge allowed the application. The plaint was rejected.

29. Challenging the said order, Venture filed appeal before the High Court. The High Court dismissed the appeal on 27.02.2007. 30. Aggrieved by the said order, Venture moved this Court. This Court allowed the appeal by a reported judgment in Venture Global Engineering vs. Satyam Computer Services Ltd. & Anr., (2008) 4 SCC 190 (hereinafter referred to as “Venture-I”).

This Court, inter alia, held that:

(i) Venture was entitled to challenge the Award in Indian Courts as the provisions of Part I of AAC Act will apply to the Award in the light of law laid down in Bhatia International vs. Bulk Trading S.A. & Anr., (2002) 4 SCC 105 (See Paras 33/35);

(ii) That Award violates the provisions of FEMA and the Companies Act (Para 34);

(iii) That parties will have a right to challenge 17 the Award including its enforceability in Indian Courts by virtue of Section 11.05(c) of Agreement-I which has an overriding effect on all clauses of the Agreement including Section 11.05(b) – (Para 39);

(iv) That Satyam violated the terms of Agreement-I when they sought transfer of shares of Indian company in US Courts (Paras 40/44);

(v) That the appropriate remedy for a person, aggrieved by the Award, lies in filing application under Section 34 of the AAC Act in Indian Courts rather than filing a civil suit;

(vi) Conversion of the suit into proceedings under Section 34 of the AAC Act is permissible in law and such proceedings can be transferred to the Court of competent jurisdiction, if necessary (Para 41);

(vii) That Satyam should not have continued with the proceedings filed in US Courts against 18 Venture on the strength of the Award in the light of injunction orders passed by the Courts in India against Satyam and (Para 42),

(viii) That in the light of law laid down in Bhatia International’s case (supra), even though the Award in question is a foreign Award, yet it will be governed by Part I of the Act (Para 47).

31. This Court observed “we have not expressed anything on merits of the claim of both the parties.” This Court further observed that the Trial Court was at liberty to transfer the case to the competent Court to decide the case (if found necessary) on merits and directed parties to maintain status quo with respect to transfer of shares.

32. On 17.01.2008, the Eastern District of Michigan Southern Division, US Court passed an order observing therein that Venture violated the order of US Courts which directed the enforcement 19 of the Award and called upon the parties to move to this Court. Venture filed an appeal to US Court of Appeal. In the appeal, Venture attempted to provide some new evidence to show fraud played by Satyam. It was, however, dismissed on 09.04.2009

33. In the meanwhile, both Venture and Satyam filed review petitions against the order dated 10.01.2008 passed in Venture I by this Court. By order dated 29.04.2008, this Court dismissed both the review petitions.

34. Pursuant to the order of this Court in Venture I, the Ist Addl. Chief Judge, City Civil Court, Secunderabad transferred O.S. No.80 of 2006 to the Court of 2nd Additional Chief Judge, City Civil Court of Hyderabad. The suit was then converted into an application under Section 34 of the Act and was renumbered as O.P. No. 390/2008.

35. On 07.01.2009, B. Ramalinga Raju-Chairman 20 and founder of the Satyam made a disclosure and confessed in writing that the balance sheets of Satyam had been manipulated inflating the profits to the tune of Rs.7080 crores. M/s Price Waterhouse Cooper (PWC), the auditors of Satyam was compelled to declare that the financial statements of Satyam could no longer be considered accurate or/and reliable.

36. Venture filed an application (IA No. 1331 of 2009 dated 12.06.2009) under Order VIII Rule 9 of the Code in O.P. No.390/2008 seeking permission to bring additional facts on record by amending the pleadings to question the legality of the Award. It was contended that the disclosure of facts made by Ramlainga Raju prima facie constituted a fraud and misrepresentation committed by Satyam on all the stakeholders including Venture and, therefore, the Award is liable to be set aside on this ground in 21 addition to those already taken. The Trial Court, by order dated 03.11.2009, allowed the application.

37. Challenging the order, Satyam filed a revision before the High Court. By order dated 19.02.2010, the revision was allowed. The application (IA No.1331/2009) filed by Venture stood dismissed. The High Court held that under Section 34 of the AAC Act, an application for setting aside of an Award could be filed only within 3 months (extendable by 30 days) from the date of the Award and a new ground of attack to the Award cannot be permitted after the expiry of the period of limitation.

38. Venture carried the matter to this Court. This Court, by judgment dated 11.08.2010, in Venture Global Engineering vs. Satyam Computer Services Limited & Anr. (2010) 8 SCC 660 (hereinafter referred to as Venture II) allowed the appeal and restored the order of the Trial Court. 22 This Court held that the facts, which are sought to be brought on record by the Venture, are relevant for deciding the rights of the parties to O.P. No. 390 of 2008. It was also held that those facts have causative link with the facts, which constituted the lis of the Award or induced the making of the Award and, therefore, relevant and material for deciding the legality of the Award.

39. In substance, this Court permitted Venture to challenge the Award on the ground that it was obtained by playing fraud/misrepresentation/ suppression of material facts.

40. It is apposite to quote Paras 44 to 46 of this Court’s judgment, which dealt with this issue: “44. This Court also holds that the facts concealed must have a causative link. And if the concealed facts, disclosed after the passing of the award, have a causative link with the facts constituting or inducing the award, such facts are relevant in a settingaside proceeding and award may be set aside as affected or induced by fraud. The question in this case is therefore one of relevance of 23 the materials which the appellant wants to bring on record by way of amendment in its plea for setting aside the award.

45. Whether the award will be set aside or not is a different question and that has to be decided by the appropriate court. In this appeal, this Court is concerned only with the question whether by allowing the amendment, as prayed for by the appellant, the Court will allow material facts to be brought on record in the pending setting aside proceeding. Judging the case from this angle, this Court is of the opinion that in the interest of justice and considering the fairness of procedure, the Court should allow the appellant to bring those materials on record as those materials are not wholly irrelevant or they may have a bearing on the appellant’s plea for setting aside the award.

46. Nothing said in this judgment will be construed as even remotely expressing any opinion on the legality of the award. That question will be decided by the court where the setting-aside proceeding is pending. The proceeding for setting aside the award may be disposed of as early as possible, preferably within 4 months.”

41. On 28.12.2010, Venture filed a complaint (suit) in U.S. District Court of Easter District of Michigan against Satyam alleging, inter alia, that the Award is vitiated by the fraudulent conduct of 24 the former Chairman of Satyam, who suppressed the material facts in the arbitral proceedings. In the complaint (suit), Venture alleged that Ramalinga Raju played fraud and misrepresentation on all stakeholders of Satyam including Venture and also on judicial process. It, therefore, prayed that the Award in question be set aside on this ground.

42. Satyam entered appearance in the aforesaid complaint/suit filed by Venture and opposed the complaint on several grounds. By order dated 30.03.2012, U.S. District Court dismissed the Venture’s complaint/suit. On 10.04.2012, Venture filed an application in the complaint seeking permission to amend the complaint/suit. The U.S. Court, by order dated 23.08.2012, dismissed the application. On 21.09.2012, Venture filed an appeal to U.S. Court of appeal against the order dated 30.03.2012 rejecting their complaint/suit. 25 Venture also filed an appeal on 12.12.2012 to U.S. Court of appeal against the order dated 23.03.2012 by which their amended application was rejected.

43. On 13.09.2012, U.S. Court of appeal for the sixth Circuit allowed the appeal filed by Venture and set aside the order of the District Court dismissing the suit/complaint filed by Venture. The suit/complaint is now remanded to the District Court. It is pending.

44. Coming back to the litigation pending in Indian Courts, consequent upon the judgment of this Court in Venture-II, Satyam joined issues with Venture on the additional pleadings and contended that the facts pleaded have no causative links with Award. Satyam also objected to admissibility of the documents filed by Venture. The Trial Court heard the application filed by Venture under Section 34 of the AAC Act and by its final order dated 31.01.2012 26 allowed the application and set aside the Award. The Trial Court held:

(i) civil suit filed by Venture could be converted to be an application under Section 34 of the AAC Act and, accordingly, converted;

(ii) the application filed by Venture under Section 34 of the AAC Act is within the period of limitation;

(iii) the Court to which the civil suit was transferred has jurisdiction to try and decide the application under Section 34 of the AAC Act;

(iv) bankruptcy of the Venture’s affiliates constitutes an event of default as defined under Agreement-I;

(v) the Award insofar as it directs the Venture to transfer their 50% shares of JVC to Satyam for book value violates the provisions of FEMA and is against public policy;

(vi) the facts revealed by the statement made by Ramalinga Raju (Chairman of Satyam) constitute fraud and mis-representation played by Satyam on various stakeholders in Satyam including Venture;

(vii) it has causative link with the facts which formed the basis of the Award.

45. It is, therefore, held that the Award is not sustainable in law. Sustaining such Award would be against public policy and the grounds mentioned above would cumulatively constitute ground for setting aside the Award under Section 34 of the AAC Act.

46. Aggrieved by the said order, Satyam carried the matter in appeal to the High Court in CMA No.832/2012.

47. After the aforesaid judgment, Venture filed another civil suit being O.S.No.87/2012 in the Court of Ist Additional Chief Judge, Secunderabad against Satyam seeking restitution of all their rights in JVC as a consequence of setting aside of the 28 Award. During the pendency of the suit, Venture also applied for grant of ex parte interim relief (IA No.1143/2012) in relation to transfer of shares of JVC and by another application being IA No. 1360/2012 sought order restraining Satyam and JVC not to take any major decision in the affairs of JVC.

48. By orders dated 27.04.2012 and 04.06.2012, both the applications were disposed of by the 1st Additional Chief Judge directing the parties to maintain status quo in relation to the subject matter of both the I.As.

49. Satyam preferred two appeals against the said two orders – CMAs 834 and 844 of 2012. The three appeals were clubbed together.

50. By interim order dated 22.08.2012, the High Court directed all the parties to appeals to maintain status quo in relation to the affairs of JVC and also 29 in relation to the rights of the shareholders of the said company and of Venture.

51. By final order dated 23.08.2013, the High Court allowed the appeals filed by Satyam. The High Court, inter alia, held that:

(i) the civil suit/application filed by Venture under Section 34 of the Act is maintainable and not hit by the decision of Bharat Aluminium Company vs. Kaiser Aluminium Technical Services Inc. (in short “Balco”), for the reason that the agreements in question were executed between the parties prior to BALCO regime whereas the decision rendered in BALCO has a prospective effect;

(ii) proceedings in question are governed by part I of the AAC Act;

(iii) Civil suits/application under Section 34 of the 30 AAC Act filed by Venture in Indian Courts are hit by the principle of “issue estoppel” and are thus not maintainable in law;

(iv) Venture had no right to invoke both Part I and Part II, i.e., Sections 34 and 48 because it is against the Scheme of the AAC Act;

(v) a case of fraud and misrepresentation set up by Venture in additional pleadings is not in accordance with law inasmuch as these allegations neither satisfies the requirements of law and nor were proved by oral or documentary evidence;

(vi) the Award in question is not against the public policy;

(vii) since the issues arising between the parties have attained finality in US Courts and hence now they cannot be reopened in Indian Courts by taking recourse to the provisions of the AAC 31 Act; and

(viii) since both the parties to the suit/application did not agree to treat the documents filed by them as proved and no evidence was adduced to prove them in accordance with law although the application under Section 34 of the AAC Act is required to be decided like a suit, the Trial Court did not follow the stipulated procedure while deciding the application.

52. Aggrieved by the said judgment, both Venture and Satyam filed instant appeals by way of special leave petitions before this Court.

53. Venture, in substance, seeks restoration of the order of the Trial Court, which had allowed their application under Section 34 of the AAC Act and had set aside the Award.

54. Satyam’s challenge is confined only to the finding of the High Court that the Trial Court has 32 jurisdiction to entertain and decide the application filed under Section 34 of the AAC Act.

55. Heard Mr. K. K. Venugopal, learned senior counsel for Venture Global Engineering LLCappellant in SLP(C) Nos.29747-49 of 2013 and respondent in S.L.P.(C) No.8298 of 2014, Mr. K.V. Vishwanathan, learned senior counsel for Tech Mahindra Ltd.-respondent No.1 in SLP(C) Nos.29747-49 of 2013 and appellant No.1 in S.L.P.(C) No.8298 of 2014 and Mr. Iqbal Chagla, learned senior counsel for Satyam Venture Engineering Services-respondent No.2 in SLP(C) Nos.29747-49 of 2013 and appellant No.2 in S.L.P.(C) No.8298 of 2014 and also perused the written submissions filed by the parties.

56. Mr. K. K. Venugopal, learned senior counsel, appearing for the Venture while assailing the legality and correctness of the impugned judgment urged many-fold submissions as detailed hereinbelow and submitted that the impugned judgment is legally unsustainable inasmuch as it is based on wrong application of law which governs the issues whereas the order of the Trial Court which rightly allowed the application filed by the appellant under Section 34 of the AAC Act and set aside the award deserves to be restored.

57. While elaborating his arguments, learned senior counsel submitted that firstly, the Award impugned in Section 34 proceedings out of which these appeals arise is vitiated on account of fraud, misrepresentation and suppression of material facts played by Mr. Raju in the affairs of Satyam. According to learned counsel, a ground of fraud which stands made out in this case squarely falls under Section 34 of the AAC Act and, therefore, the Award in question deserves to be set aside.

58. In the second place, learned senior counsel submitted that it is not in dispute that Mr. Raju, in no uncertain terms, admitted in his letter dated 07.01.2009 that he not only indulged in several fraudulent and illegal acts in the affairs of Satyam but also indulged in manipulating and fabricating the accounts and the balance-sheet of Satyam with a sole intention to secure illegal monetary gains.

59. Learned senior counsel, therefore, submitted that such fraudulent and illegal acts of Mr. Raju once surfaced in the public domain had a direct bearing over the issues involved in the arbitral proceedings because these acts relate to the period prior to commencement of arbitral proceedings and continued during the pendency of arbitral proceedings but without any knowledge to Venture and learned Arbitrator and hence the entire arbitral proceedings, which eventually culminated in 35 passing of the impugned award in ignorance of these material major events connected with Venture, Satyam and their affiliates, stood vitiated on account of Mr. Raju’s activities.

60. In other words, the submission was that, if the factum of the fraud, misrepresentation, suppression etc. had been disclosed or/and had come to the notice of the Arbitrator or/and Venture, it being the most relevant and material ground, the same could be made basis for seeking setting aside of the arbitral proceedings including the Award in question. In any event, according to learned counsel, the arbitral proceedings would not have then resulted in passing of the Award in question in favour of Satyam, had these facts been taken into consideration?

61. In the third place, learned senior counsel submitted that if the fraud/manipulation/ 36 misrepresentation/suppression of material facts had been disclosed to all the stakeholders including Venture when actually committed and, in all fairness, it ought to have been disclosed by Mr. Raju then it would have enabled Venture to terminate Agreement-I forthwith and claim appropriate reliefs against Satyam in terms of Agreement-I at that time itself.

62. In the fourth place, learned senior counsel submitted that firstly, the fraud/misrepresentation /suppression played by Mr. Raju in the affairs of Satyam was prior in point of time as compared to the “event of default” by the Venture and secondly, the acts of Mr. Raju also constituted an “event of default” under Section 8.01(b) read with Section 11.05 (c) for termination of Agreement-I and for claiming reliefs against Satyam as per Agreement-I.

63. In the fifth place, learned senior counsel  submitted that the confessional statement of Mr. Raju was a “notorious fact” and known to the whole world and especially known to those in market and, therefore, judicial notice of such fact could be taken by the Court for relying upon the letter including its contents against Satyam without any further evidence to prove it.

64. In the sixth place, learned senior counsel submitted that it is a fundamental principle of law that any award/order/judgment passed in judicial proceedings once found to have been obtained by a party against his adversary by taking recourse to illegal means such as fraud, manipulation, misrepresentation, suppression of material facts etc. then the entire judicial proceedings including award/order/judgment passed therein is rendered void ab initio. The reason is that fraud/manipulation/misrepresentation/suppression  of material facts etc., if resorted to while prosecuting the judicial proceedings for obtaining the order/judgment/award, the same would result in vitiating such judicial proceedings.

65. This legal principle, according to learned senior counsel, applies to the facts of this case with full force and, therefore, the fraud played, manipulation done and suppression of material facts made by Mr. Raju as its creator was rightly held proved by the Trial Court and was, therefore, rightly made basis to quash the Award in question on the ground of it being against the public policy of India.

66. In the seventh place, learned senior counsel submitted that the acts of Mr. Raju attracted the rigor of Section 8.01(b) read with Section 11.05 (c) and since Section 11.05(c) has an overriding effect on all sections, as held by this Court in Venture-I, if 39 these acts had been disclosed, it would have enabled the Venture to seek termination of Agreement-I under Sections 8.02 and 8.03 against Satyam.

67. In other words, according to learned senior counsel, there was a causative link between the acts of Mr. Raju, which he did in the affairs of Satyam and the issues which were subject matter of arbitral proceedings. It is for this reason, learned counsel urged that the acts of Mr. Raju constituted an “event of default” under Section 8.01 read with Sections 8.01(b) and 11.05(c). Venture, according to him, was, therefore, deprived of exercising their right against Satyam to claim reliefs in terms of Agreement-I due to suppression of the acts by Mr. Raju from all stakeholders.

68. In the eighth place, learned senior counsel submitted that Satyam committed another breach 40 of Section 4.01 when it appointed Mr. Raju as one of the nominee Directors on the Board of JVC. It was also an “event of default” under Section 8.01 read with Section 4.01, which entitled the Venture to terminate the Agreement-I and seek appropriate reliefs against Satyam.

69. According to learned senior counsel, a person who indulged in such acts was not eligible for being nominated in the Board of JVC.

70. In the ninth place, learned senior counsel submitted that the scope and width of Sections 8.01(b) and 11.05 (c) is wide enough to include the acts of Mr. Raju which he did in affairs of Satyam and his acts were sufficient for terminating the Agreement-I and seek appropriate relief as provided in the Agreement-I.

71. In the tenth place, learned senior counsel, placing reliance on the doctrine of “alter ego of the  Company”, contended that this doctrine applies to the facts of this case and, therefore, if the issues arising in the case are examined in the light of this doctrine, the Award impugned is liable to be set aside on this ground also.

72. In the eleventh place, learned senior counsel contended that in order to decide the questions involved, it is not necessary to appreciate any evidence and the issues have to be decided only on the basis of material on record, which is not in dispute. Learned counsel, therefore, urged that keeping in view these submissions, the Award is against the public policy of India as explained and clarified in Section 34(2)(b)(ii) Explanation I(i)(ii) and (iii) read with Explanation 2 of the AAC Act and hence it deserves to be set aside on this ground also.

73. It is essentially these submissions and some  more which are dealt with infra were elaborated by the learned counsel with the aid of relevant sections of Agreement-I and II together with decisions of this Court described as Venture I and Venture II rendered in the earlier round of litigation in this very case, relevant provisions of the AAC Act and decided cases cited at the Bar.

74. In reply, learned counsel for the respondents supported the impugned order and contended that the appellant has failed to make out any case for interference by this Court in the impugned order inasmuch as none of the submissions urged by learned counsel for the appellant has any merit and deserve rejection for want of any factual foundation.

75. Learned counsel further contended that firstly, the appellant’s submissions are based on sheer hypothesis with no factual foundation and hence cannot be made basis to set aside the arbitral proceedings and Award. It was urged that otherwise also they are totally irrelevant and have no causative link in any manner with the arbitral proceedings and nor they have any kind of impact on the arbitral proceedings much less adverse and lastly, the acts of Mr. Raju were in relation to affairs of Satyam and hence had no significance while examining the legality and correctness of arbitral proceedings and Award under Section 34 of AAC Act. It was also urged that there is no evidence to prove the alleged acts of Mr. Raju as being illegal in any manner. Learned counsel elaborated these submissions by placing reliance on relevant sections of Agreement -I and the decided case law.

76. Having heard learned counsel for the parties and on perusal of the record of the case and the written submissions, I find force in the submissions urged by Mr. K.K. Venugopal, learned senior 44 counsel for the appellant (Venture).

77. In substance, the questions, which arise for consideration in these appeals, are essentially three. In other words, the fate of these appeals largely depends upon the answers to the following questions as, in my view, these questions are interlinked together.

78. First, whether the acts of Mr. Raju in the affairs of Satyam, as admitted by him in his letter dated 07.01.2009, amounts to misrepresentation/ suppression of material facts and, if so, whether they could be made basis to seek quashing of an Award dated 03.04.2006 of the sole Arbitrator on the ground of it being against the public policy of India under Section 34(2)(b)(ii) read with Explanation (1)(i)(ii) and (iii) of the AAC Act; second, whether the acts of Mr. Raju, in the affairs of Satyam, has any causative link to the arbitral 45 proceedings or/and to JVC affairs and, if so, whether such acts constitute an “event of default” under Section 8.01(b) read with Section 11.05(c) thereby entitling the Venture to terminate the Agreement I and claim relief as contemplated in Sections 8.03 and 8.04 against Satyam; and third, if the aforesaid questions are answered in affirmative then whether they constitute a ground to enable the Court to set aside the Award under Section 34 of AAC Act.

79. Before I examine the facts of this case to answer the aforementioned questions, it is necessary to take note of the law, which applies to the case on hand. Indeed, if I may say so, it is fairly well settled by the several decisions of this Court.

80. The expression “fraud” occurring in Section 34 is not defined in the AAC Act but is defined in Section 17 of the Indian Contract Act,1872.

It reads as under:

“17. ‘Fraud’ defined.-‘Fraud’ means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract:- –

(1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true;

(2) the active concealment of a fact by one having knowledge or belief of the fact;

(3) a promise made without any intention of performing it;

(4) any other act fitted to deceive;

(5) any such act or omission as the law specially declares to be fraudulent.

Explanation.-Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence, is, in itself, equivalent to speech.”

81. The expression “public policy of India” and what it includes is explained and clarified for avoiding any doubt in the Explanation I(i), (ii) and (iii) and Explanation 2 of Section 34(2)(b)(ii) of the 47 AAC Act. It reads as under: Section 34. Application for setting aside arbitral award-

(1)…………………………………………………………

(2) An arbitral award may be set aside by the Court only if-

(a)…………………………………………………………

(b) the Court finds that-

(i)………………………………………………………

(ii) the arbitral award is in conflict with the public policy of India.

Explanation 1.-For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or

(iii) it is in conflict with the most basic notions of morality or justice.

Explanation 2.-For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.”

82. The expression “fraud”, what it means and once proved to have been committed by the party to the Lis against his adversary then its effect on the judicial proceedings was succinctly explained by this Court in Ram Chandra Singh vs. Savitri Devi & Ors., in the following words: “Fraud as is well known vitiates every solemn act. Fraud and justice never dwell together. Fraud is a conduct either by letter or words, which induces the other person or authority to take a definite determinative stand as a response to the conduct of the former either by word or letter.

It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentation may also give reason to claim relief against fraud. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by willfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations which he knows to be false, and injury ensues therefrom although the motive from which the representations proceeded may not have been bad. An act of fraud on court is always viewed seriously.

A collusion or conspiracy with a view to deprive the rights of others in relation to a property would render the transaction void ab initio. Fraud and deception are synonymous. Although in a given case a deception may not amount to fraud, fraud is anathema to all equitable principles and any affair tainted with fraud 49 cannot be perpetuated or saved by the application of any equitable doctrine including res judicata.”

83. Similarly, how the leading authors have dealt with the expressions “fraud”, “misrepresentation”, “suppression of material facts” with reference to various English cases also need to be taken note of. This is what the learned author – “Kerr” in his book “Fraud and Mistake” has said on these expressions. 84. While dealing with the question as to what constitutes fraud, the learned author said,

“What amounts to fraud has been settled by the decision of House of Lords in Derry vs. Peek (f) where lord Herscheel said “fraud is proved when it is shown that a false representation has been made

(1) knowingly or

(2) without belief in its truth or

(3) recklessly, careless whether it be true or false.” (See Kerr on Fraud and Mistake- Seventh Edition. 50 Page 10/11).

85. The author has said that, Courts of Equity have from a very early period had jurisdiction to set aside Awards on the ground of fraud, except where it is excluded by Statute. So also, if the Award was obtained by fraud or concealment of material circumstances on the part of one of the parties so as to mislead the Arbitrator or if either party be guilty of fraudulent concealment of matters which he ought to have declared, or if he willfully mislead or deceive the Arbitrator, such Award may be set aside. (See – Kerr on Fraud and Mistake – Seventh Edition – pages 424, 425)

86. The author said that, if a man makes a representation in point of fact, whether by suppressing the truth or suggesting what is false, however innocent his motive may have been, he is equally responsible in a civil proceeding as if he had while committing these acts done so with a view to injure others or to benefit himself. It matters not that there was no intention to cheat or injure the person to whom the statement was made. (See – Kerr on Fraud and Mistake – Seventh Edition, page 7)

87. This rule of law is applicable not only between the two individuals entering into any contract but is also applicable between an individual and a company and also between the two companies. (See- Kerr on Fraud and Mistake – Seventh Edition, page 99).

88. The author said that this principle is also not limited to cases where an express and distinct representation by words has been made, but it applies equally to cases where a man by his silence causes another to believe in the existence of a certain state of things, or so conducts himself as to induce a reasonable man to take the representation to be true, and to believe that it was meant that he should act upon it, and the other accordingly acts upon it and so alters his previous position. (See – Kerr on Fraud and Mistake – Seventh Edition, page 110).

89. The author said that where there is a duty or obligation to speak, and a man in breach of that duty or obligation holds his tongue and does not speak and does not say the thing which he was bound to say, if that be done with the intention of inducing the other party to act upon the belief that the reason why he did not speak was because he had nothing to say, there is a fraud (See- Kerr on Fraud and Mistake-Seventh Edition, page 110).

90. So far as expression “public policy of India” in the context of arbitration cases is concerned, this Court examined the meaning, scope and ambit of 53 this expression for the first time in the case of Renusagar Power Co. Ltd. vs. General Electric Co., 1994 Suppl(1) SCC 644 in the context of Foreign Awards (Recognition & Enforcement) Act, 1961. It was then examined in the case of Oil & Natural Gas Corporation Ltd. vs. Saw Pipes Ltd., (2003) 5 SCC 705[ONGC(I)] and then again in another case of Oil & Natural Gas Corporation Ltd. vs. Western Geco International Ltd., (2014) 9 SCC 263[ONGC(II)]. It was recently examined in Associate Builders vs. Delhi Development Authority, (2015) 3 SCC 49 in the context of Section 34 of the Arbitration and Conciliation Act, 1996.

91. In between this period, this Court had also examined the expression in some cases. However, in Associate Builders’s case (supra), this Court examined the expression in detail in the light of all previous decisions referred above on the subject. R.F. Nariman, J. speaking for the Bench held that the law laid down in the cases ONGC (I) and ONGC (II) has been consistently followed by this Court till date. His Lordship further clarified the meaning of expression-“public policy of India” and what it includes therein and held that violation of the provisions of Foreign Exchange Act, disregarding orders of superior Courts in India and their binding effect, if disregarded, would be violative of the Fundamental Policy of Indian Laws.

It was, however, held that juristic principle of “judicial approach” demands that a decision be fair, reasonable and objective. In other words, a decision which is wholly arbitrary and whimsical would not be termed as fair, reasonable or an objective determination of the questions involved in the case. It was also held that observance of audi alteram partem principle is also a part of juristic principle which needs to be followed. It was held that if the Award is against justice or morality, it is against public policy. It was held that if there is a patent illegality noticed in the Award, it is also against public policy.

92. Keeping in view the aforementioned broad principle of law in mind, I examine the questions in the light of undisputed facts of the case on hand and in the context of the submissions urged.

93. It is apposite to take note of some more relevant sections of Agreement-I in addition to those quoted above. In my view, these sections also have material bearing over the controversy involved as they show the true nature of Joint Venture Agreement. Instead of quoting these sections in verbatim, its reference alone may suffice.

94. These relevant sections are,

(1) Recitals in the 56 Agreement,

(2) Clause C of Recitals,

(3) Section 1.01(c) and (d),

(4) Section 3.02-Place of business,

(5) Section 4.01-Authority of Board; Election of Chairman,

(6) Section 4.03-Board Meetings and related matters,

(7) Section 4.06-Financial, Accounting and Tax Matters,

(8) Section 5.06- Capital,

(9) Section 5.07-Relationship between the Shareholders and the Company,

(10) Section 5.08- Power of Board of Directors,

(11) Section 6.03- Ownership of Proprietary Information; Public Disclosures; Non-use of Proprietary and Confidential information,

(12) Section 6.07- Representation and Warranties,

(13) Definitions of expressions –

(a) Affiliate,

(b) Company’s Act, and

(c) Shareholder or Shareholders.

95. Reading of Agreement-I as a whole and, in particular, in the context of the afore-noted sections of the Agreement would go to show

(1) the nature of 57 the Joint Venture Agreement,

(2) who are parties to the agreement and what are their inter se rights and obligations, and

(3) how and in what manner the JVC was to do business in India.

96. Following features emerge from reading the Agreements:

(i) First, the Joint Venture Agreement was between the “Satyam and its affiliates” on the one part and “Venture and its affiliates” on the other part. In other words, Agreement I and Agreement II were between the “Satyam” and “Venture” as also it included along with them their respective “affiliates” (See-Recitals in Agreement I-which read -“hereinafter together with all its affiliates, referred to as “Satyam” and “Venture” ).

(ii) Second, Satyam and Venture were the only two shareholders of JVC each holding 50% equity share capital of JVC.

(iii) Third, since JVC was formed to do its new business in India, it was made obligatory upon “Satyam and its affiliates”, “Venture and its affiliates” and “JVC” to ensure compliance of all the Indian Laws in force. In other words, all the stakeholders, who formed the “JVC”, were under legal obligation to ensure strict compliance of all the Indian Laws (Acts/Rules/Regulations) not only in relation to business activities of “JVC” alone but also to ensure compliance of all the Indian laws in their respective business activities jointly and severally, namely, Satyam, Satyam’s affiliates, Venture and Venture’s affiliates.

(iv) Fourth, Satyam to begin with was to provide all infrastructural facilities to JVC to enable it to start its new business in India.

(v) Fifth, the Chairman of JVC was to be nominated by Satyam, who would have a right to preside over all Board of Directors’ meetings of JVC.

(vi) Sixth, it was obligatory on JVC to maintain “true and correct” accounts of JVC by ensuring strict compliance of all Indian laws governing accounting and finances and to disclose to their major stakeholders the true picture of the JVC’s financial status.

97. It is not in dispute that the Agreements were entered into in the year 1999 whereas the business operations of JVC began in 2000. It is also not in dispute that in terms of Section 5.06(a) and (b), Satyam was to give loan in cash and provide all infrastructural facilities, Human Resources, Accounting, Networking facilities and legal advice to JVC.

It is also not in dispute that Satyam and Venture, on 20.10.1999, had prepared a financial plan pursuant thereto each one had contributed $US 300.000 and $US 60.000 per month to cover 60 short falls in Bank loan of JVC. (page 176 of SLP paper book). It is also not in dispute that in terms of the Agreements (Section 4.01/5.03), Mr. Raju was nominated as Chairman of JVC and he presided over all the Board of Directors meetings of JVC from 2000 onwards in addition to presiding over of the Board meetings of Satyam being its Chairman.

98. At this stage, it is apposite to reproduce in verbatim the most crucial document namely, a “confessional statement of Mr. Raju in the form of a letter dated 7th January, 2009 addressed to Satyam’s Board of Directors”. It is this confessional statement, which turned the entire complexion of the case on hand.

99. As mentioned above, this Court, in earlier round of litigation in two decisions, namely, Venture I and II, permitted the Venture to raise the additional plea in Section 34 proceedings to  challenge the arbitral proceedings including the Award on the basis of Mr. Raju’s confessional statement made on 07.01.2009. It was held by this Court that such being a material fact which came into existence as a subsequent event had a direct bearing over the issues arising in the case, the legality and correctness of arbitral proceedings including the Award could, therefore, be tested in the light of this material subsequent event.

It was also held that since the case on hand relates to the period prior to Balco’s regime (supra), it would be governed by Bhatia (supra) regime and, in consequence, fall in Part I of the AAC Act. It was held that, as a result, the legality of the Award, though foreign in nature, could still be decided under Section 34 of the AAC Act by the Indian Courts. These findings attained finality being rendered inter se parties in this very case, are 62 binding on the parties. This is the reason, why the issues arising in this case are being decided in these proceedings.

100. The letter dated 07.01.2009 reads as under:

“To the Board of Directors Satyam Computer Services Ltd. From B. Ramalinga Raju Chairman, Satyam Computer Services Ltd. January 7, 2009 Dear Board Members, It is with deep regret, and tremendous burden that I am carrying on my conscience, that I would like to bring the following facts to your notice:

1. The Balance Sheet carries as of September 30, 2008.

a. Inflated (non-existent)cash and bank balances of Rs.5,040 crore (as against Rs.5361 crore reflected in the books)

b. An accrued interest of Rs.376 crore which is non-existent. c. An understated liability of Rs.1,230 crore on account of funds arranged by me. d. An over stated debtors position of Rs.490 crore (as against Rs.2651 reflected in the books) 63 2. For the September quarter (Q2) we reported a revenue of Rs.2,700 crore and an operating margin of Rs.649 crore (24% of revenues) as against the actual revenues of Rs.2,112 crore and an actual operating margin of Rs.61 crore (3% of revenues). This has resulted in artificial cash and bank balances going up by Rs.583 crore in Q2 alone.

The gap in the balance Sheet has arisen purely on account of inflated profits over a period of last several years (limited only to Satyam stand alone, books of subsidiaries reflecting true performance). What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of company operations grew significantly (annualized revenue run rate of Rs.11,276 crore in the September quarter, 2008 and official reserves of Rs.8,392 crore).

The differential in the real profits and the one reflected in the books was further accentuated by the fact that the company had to carry additional resources and assets to justify higher level of operations – thereby significantly increasing the costs. Every attempt made to eliminate the gap failed. As the promoters held a small percentage of equity, the concern was that poor performance would result in a take-over, thereby exposing the gap. It was like riding a tiger, not knowing how to get off without being eaten.

The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones. Maytas’ investors were convinced that this is a good divestment opportunity and a strategic fit. Once Satyam’s problem was solved, it was hoped that Maytas’ payments can be delayed. But that was not to be. What followed in the last several days is common knowledge. I would like the Board to know:

1. That neither myself, nor the Managing Director (including our spouses) sold any shares in the last eight years – excepting for a small proportion declared and sold for philanthropic purposes.

2. That in the last two years a net amount of Rs.1,230 crore was arranged to Satyam (not reflected in the books of Satyam) to keep the operations going by resorting to pledging all the promoter shares and raising funds from known sources by giving all kinds of assurances (Statement enclosed, only to the members of the board). Significant dividend payments, acquisitions, capital expenditure to provide for growth did not help matters. Every attempt was made to keep the wheel moving and to ensure prompt payment of salaries to the associates. The last straw was the selling of most of the pledged share by the lenders on account of margin triggers.

3. That neither me, nor the Managing Director took even one rupee/dollar from the company and have not benefited in financial terms on account of the inflated results. 4. None of the board members, past or present, had any knowledge of the situation in which the company is placed. Even business leaders and senior executives in the company, such as, Ram Mynampati, Subu D, T.R. Anand, 65 Keshab Panda, Virender Agarwal, A.S. Murthy, Hari T, SV Krishnan, Vijay Prasad, Manish Mehta, Murali V, Sriram Papani, Kiran Kavale, Joe Lagioia, Ravindra Penumetsa, Jayaraman and Prabhakar Gupta are unaware of the real situation as against the books of accounts.

None of my or Managing Director’s immediate or extended family members has any idea about these issues. Having put these facts before you, I leave it to the wisdom of the board to take the matters forward. However, I am also taking the liberty to recommend the following steps:

1. A Task Force has been formed in the last few days to address the situation arising out of the failed Maytas acquisition attempt. This consists of some of the most accomplished leaders of Satyam: Subu D, T.R. Anand, Keshab Panda and Virender Agarwal, representing business functions, and A.S. Murthy, Hari T and Murali V representing support functions. I suggest that Ram Mynampati be made the Chairman of this Task Force to immediately address some of the operational matters on hand. Ram can also act as an interim CEO reporting to the board.

2. Merrill Lynch can be entrusted with the task of quickly exploring some Merger opportunities.

3. You may have a ‘restatement of accounts’ prepared by the auditors in light of the facts that I have placed before you. I have promoted and have been associated with Satyam for well over twenty years now. I 66 have seen it grow from few people to 53,000 people, with 185 Fortune 500 companies as customers and operations in 66 countries.

Satyam has established an excellent leadership and competency base at all levels. I sincerely apologize to all Satyamites and stakeholders, who have made Satyam a special organization, for the current situation. I am confident they will stand by the company in this hour of crisis. In light of the above, I fervently appeal to the board to hold together to take some important steps. Mr. T.R. Prasad is well placed to mobilize support from the government at this crucial time. With the hope that members of the Task Force and the financial advisor, Merrill Lynch (now Bank of America) will stand by the company at this crucial hour, I am marking copies of this statement to them as well.

Under the circumstances, I am tendering my resignation as the chairman of Satyam and shall continue in this position only till such time the current board is expanded. My continuance is just to ensure enhancement of the board over the next several days or as early as possible. I am now prepared to subject myself to the laws of the land and face consequences thereof. (B.Ramalinga Raju) Copies marked to: 1.Chairman SEBI 2. Stock Exchanges”

(Emphasis supplied)”

101. It may here be mentioned that the aforesaid letter, its contents and signature of the author of the letter – Mr. Raju, were never in dispute and nor at any point of time anyone questioned it. In other words, the existence of letter, its contents and signature of Mr. Raju on the letter were never doubted and nor its author (Mr. Raju) at any point of time retracted from his confessional statement made therein or denied having written such letter. 102. In my opinion, therefore, the letter in question was rightly received in evidence without requiring any further formal proof to corroborate its existence and contents.

That apart, it being a “notorious fact” being in the knowledge of the whole World and especially those in the trade, the Courts could take judicial notice of such evidence as held by this Court in the case of Onkar Nath & Ors. Vs. Delhi Administration. It is appropriate to quote the words of the leaned Judge- Justice Y.V.Chandrachud (as His Lordship then was), who speaking for the Bench held as under:

“6. One of the points urged before us is whether the courts below were justified in taking judicial notice of the fact that on the date when the appellants delivered their speeches a railway strike was imminent and that such a strike was in fact launched on May 8, 1974. Section 56 of the Evidence Act provides that no fact of which the Court will take judicial notice need be proved. Section 57 enumerates facts of which the Court “shall” take judicial notice and states that on all matters of public history, literature, science or art the Court may resort for its aid to appropriate books or documents of reference.

The list of facts mentioned in Section 57 of which the Court can take judicial notice is not exhaustive and indeed the purpose of the section is to provide that the Court shall take judicial notice of certain facts rather than exhaust the category of facts of which the Court may in appropriate cases take judicial notice. Recognition of facts without formal proof is a matter of expediency and no one has ever questioned the need and wisdom of accepting the existence of matters which are unquestionably within public knowledge.

(See Taylor, 11th Edn., pp. 3-12; Wigmore, Section 2571, footnote; Stephen’s Digest, notes to Article 58; Whitley Stokes’ Anglo-Indian Codes, Vol. II, p. 887.) Shutting the judicial eye to the existence of such facts and matters is in a sense an insult to commonsense and would tend to reduce the judicial process to a meaningless and wasteful ritual. No court therefore insists on formal proof, by evidence, of notorious facts of history, past or present. The date of poll, the passing away of a man of eminence and events that have rocked the nation need no proof and are judicially noticed. Judicial notice, in such matters, takes the place of proof and is of equal force. In fact, as a means of establishing notorious and widely known facts it is superior to formal means of proof.

Accordingly, the courts below were justified in assuming, without formal evidence, that the Railway strike was imminent on May 5, 1974 and that a strike paralysing the civic life of the Nation was undertaken by a section of workers on May 8, 1974.” 103. I apply the aforementioned principle of law to the facts of this case and hold that letter dated 07.01.2006 of Mr. Raju did not require any more formal proof.

104. On reading its contents, I am of the view that the acts of Mr. Raju, in the affairs of Satyam, were essentially in the nature of manipulating and fabricating the accounts books/balance-sheets of Satyam. These acts were done by Mr. Raju without knowledge to all the stakeholders of Satyam 70 including Venture. These acts were detrimental to the interest of all the stakeholders who were/are directly and indirectly dealing and involved in the affairs of Satyam and its affiliates at all material times.

105. In my opinion, it is a clear case where Mr. Raju suppressed the real facts relating to the affairs of Satyam from its stakeholders and, on the other hand, went on indulging in manipulating and fabricating the accounts books/balance-sheets of Satyam.

106. Satyam, being a limited Company registered under the Indian Companies Act, 1956, was under legal obligation to ensure strict compliance of the Companies Act.

107. Section 209 of the Companies Act deals with Books of Account of the Company. Sub-section (3) thereof casts an obligation on the Company to keep  “proper books of account” as are necessary to give a “true and fair view of the state of affairs of the Company” or its Branch office and explain its transactions.

108. Similarly, Section 211 of the Act deals with “form and contents of balance-sheet and profit and loss account of the Company”. This Section again casts an obligation on every Company that it shall give “true and fair view of the state of affairs of the company” at the end of the financial year. Subsection( 3B) provides that if the Company does not comply with the accounting standard prescribed then they have to disclose the reasons for not being able to do so. Non-compliance of these provisions renders the Company to suffer penalty prescribed under Section 628 and other Sections of the Act.

109. Keeping in view the requirements of Sections 209 and 211, I am of the considered opinion that  the acts of Mr. Raju, in the affairs of Satyam, were prima facie in breach of Sections 209 and 211 of 1956 Act and other Acts. It had adverse impact on the affairs of Satyam, its affiliates and on those who were dealing with Satyam at the relevant time.

110. These acts also constituted the acts of misrepresentation and suppression of material facts on the part of Mr. Raju which he himself candidly confessed to have done it by expressing his regrets only in his letter dated 07.01.2009. In my view, the principle of law quoted from “Kerr” above squarely applies to the facts of this case. I, accordingly, hold so against Satyam.

111. This takes me to examine the next question as to whether the acts of Mr. Raju, in the affairs of Satyam, amount to “event of default” under Sections 8.01 and 11.05(c) of Agreement-I and, if so, its effect on the rights of the parties to the Agreement.

112. In my opinion, the acts of Mr. Raju amount to “event of default” under Section 8.01(b) and Section 11.05(c) of Agreement-I for the following reasons:

113. First, the acts satisfy the requirements of Section 8.01(b) read with Section 11.05 (c) of Agreement-I.

114. Second, Section 11.05(c) which gives overriding effect on all Sections of Agreement I casts an obligation on “Shareholders” to ensure compliance of all laws of India. The expressions “Shareholder” and “Shareholders” include “Venture”, “Satyam”, their affiliates and assigns.

115. A fortorari, non-compliance of any provision(s) of any Act/Rules by any shareholder would, therefore, amount to “event of default” under Sections 8.01(b) and 11.05(c) of Agreement-I.

116. Third, having regard to the nature of the Agreement, it is clear that Section 11.05(c) applies  to the affairs of JVC so also it applies to the shareholders of JVC, viz., Satyam, Venture and their respective affiliates in the affairs of their respective business activities. In my view, to confine the applicability of Section 11.05(c) only to the affairs of JVC would defeat the very purpose of Joint Venture Agreement. It would also not be the true interpretation of Section 11.05(c) and nor was it intended by the parties.

117. In this view of the matter, in my view, breach on the part of Satyam, who was 50% shareholder of JVC, was clearly made out under Agreement-I thereby entitling Venture to take recourse to the remedies provided in Sections 8.03 and 8.04 against Satyam on happening of such events.

118. Fourth, the acts of Mr. Raju, in the affairs of Satyam, were not isolated but spread over in several years in past as is clear from his own statement 75 (see -Para 2 of the letter) and were prior in point of time as compared to the breach committed by Venture.

119. Fifth, the affairs of Satyam had a direct bearing over the rights of the parties to the Agreement and also on the affairs of JVC because Satyam and Venture were the only 2 shareholders of JVC each having 50% stakes therein;

second, Satyam and its affiliates were also party to the Agreements with Venture and their affiliates;

third, the entire capital including providing of the loan facilities to JVC were to be funded by Satyam and Venture as per Agreement dated 20.10.1999 whereas operative infrastructure was to be provided by Satyam;

fourth, Mr. Raju was the Chairman of Satyam and JVC and, as such being in dual capacity, was in a position to control the affairs of both the Companies, i.e., Satyam and JVC; fifth and the most pertinently, the affairs of Satyam, Venture, JVC and their respective affiliates were so intrinsically connected with each other that any major event occurring in one Company would have had direct and indirect impact on the working of other group companies. Agreement-I, in my view, has to be construed accordingly while deciding the rights of all parties to the Agreement.

120. It could not be, therefore, contended that there was no causative link of any kind between these Companies inter se. On the other hand, taking into consideration these admitted facts including the findings of this Court rendered earlier in Venture-I and II, I am clearly of the view that there existed causative link inter se these companies. To hold otherwise would be nullifying the findings of this Court recorded earlier in Venture-I and II.

121. In the light of aforesaid reasons, any major event occurring in the affairs of Satyam could be made basis for determining the rights of the parties arising out Agreement I.

122. A fortiori, the acts of Mr. Raju, in the affairs of Satyam, had also direct bearing over the claim filed by Satyam against Venture in arbitration proceedings in London Court of Arbitration in 2005 because Satyam’s claim also arose out of Agreement I/II. Had Mr. Raju brought his acts of Satyam to the notice of shareholders/Board of Directors of JVC in any Board meeting of JVC, Venture too would have been able to get first right to terminate Agreement-I under Section 8.01(b) read with Section 11.05(c) and claim appropriate reliefs against Satyam because, as held above, Satyam breach was prior in point of time.

123. In my opinion, Venture was, therefore, 78 deprived of their legal and contractual rights to exercise against Satyam but for no fault of theirs. Venture also lost their right to defend Satyam’s claim before the Arbitrator on these grounds, which were deliberately suppressed by Satyam from Venture.

124. Sixth, it is a well settled principle of law that commission of fraud, misrepresentation, suppression of material facts from the adversary in the judicial proceedings and the Court/Arbitrator result in vitiating the entire judicial/arbitral proceedings including judgment/order/award passed thereon once come to the knowledge of the party concerned. On proving existence of commission of fraud, misrepresentation, suppression of material facts by the party concern, the judicial/arbitral proceedings are rendered illegal and void ab initio. This principle applies to arbitral 79 proceedings in question and to Award dated 03.04.2006 and thus renders both void ab initio. I accordingly hold so.

125. Seventh, the Award dated 03.04.2006 is also against the public policy of India in the light of law laid down by this Court in the case of Associate builder’s case quoted supra, It is, therefore, liable to be set aside for the reasons that it is proved that the Award was obtained by Satyam against Venture by misrepresentation and suppression of material facts having bearing over the proceedings; second, the acts of Mr. Raju, in the affairs of Satyam, as its Chairman violated several sections of IPC, Companies Act and FEMA; and third, the arbitral proceedings in question due to this reason, which came to knowledge to all stakeholders of Satyam including Venture subsequent to passing of the Award could not be said to have been held fairly or reasonably but were concluded to the detriment of the interest of Venture causing them prejudice while defending their interest before the learned Arbitrator. It also deprived Venture from exercising their contractual right for want of knowledge of these acts of Mr. Raju against Satyam at appropriate stage in court of law in terms of agreement. All this occurred obviously due to Satyam concealing these major events at all relevant time from Venture.

126. As taken note of above, once the fraud, misrepresentation or suppression of fact, if found to have been done by the party in any judicial proceedings is later discovered or disclosed then it would relate back to the date of its actual commission and would necessarily result in vitiating such judicial proceedings. Such is the case here.

127. The Award of an arbitral Tribunal can be set 81 aside only on the grounds specified in Section 34 of the AAC Act and on no other ground. The Court cannot act as an Appellate Court to examine the legality of Award nor it can examine the merits of claim by entering in factual arena like an Appellate Court. It has to confine its enquiry only to the limited issue as to whether any ground specified in Section 34 of AAC Act is made out or not. Once the ground under Section 34 of the AAC Act is made out, the Award then has to be set aside. In the case on hand, in my view, a ground under Section 34(2)(b)(ii) read with Explanation I (i)(ii) and (iii) is made out. I accordingly hold so.

128. In the light of foregoing discussion, I am of the opinion that the arbitral proceedings including the Award in question was passed in violation of public policy of India under Section 34(2)(b)(ii) read with Explanation 1(i), (ii) and (iii) of the AAC Act and 82 thus not legally sustainable. I accordingly hold so.

129. This takes me to examine the next argument of learned senior counsel for the appellant that the High Court was not right in dismissing the appellant’s application by applying the principle of “issue-estoppel”. I find force in the appellant’s submission.

130. This Court in the case of Masud Khan vs. State of Uttar Pradesh, (1974) 3 SCC 469 had the occasion to consider the question of applicability of principle of “issue-estoppel” to judicial proceedings. Their Lordships speaking through A. Alagiriswami, J. examined the facts of that case in the light of law laid down in several English and Indian cases and held that principle of “issue-estoppel” applies to criminal proceedings only and not to any other proceedings. This is what His Lordship held in para 4 and in concluding para:

“4. But that apart, this matter could be decided on another point. The question of issue-estoppel has been considered by this Court in Pritam Singh v. State of Punjab, AIR 1956 SC 415, Manipur Administration v. Thokchom Bira Singh, AIR 1965 SC 87 and Piara Singh v. Staff of Punjab,(1969) 1 SCC 379. Issue-estoppel arises only if the earlier as well as the subsequent proceedings were criminal prosecutions. In the present case while the earlier one was a criminal prosecution the present is merely an action taken under the Foreigners (Internment) Order for the purpose of deporting the petitioner out of India. It is not a criminal prosecution.

The principle of issue-estoppel is simply this: that where an issue of fact has been tried by a competent court on a former occasion and a finding has been reached in favour of an accused, such a finding would constitute an estoppel or res judicata against the prosecution not as a bar to the trial and conviction of the accused for a different or distinct offence but as precluding the reception of evidence to disturb that finding of fact when the accused is tried subsequently even for a different offence which might be permitted by law. Pritam Singh case was based on the decision of the Privy Council is Sambasivam v. Public Prosecutor, Federation of Malaya, (1950) AC 458. In that case Lord MacDermott speaking for the Board said:

“The effect of a verdict of acquittal pronounced by a competent court on a lawful charge and after a lawful trial is not completely stated by saying that the person acquitted cannot be tried again for the same  offence. To that it must be added that the verdict is binding and conclusive in all subsequent proceedings between the parties to the adjudication.” It should be kept clearly in mind that the proceeding referred to herein is a criminal prosecution. The plea of issue-estoppel is not the same as the plea of double jeopardy or autrefois acquit. In King v. Wilkes, 77 CLR 511, Dixon, J., referring to the question of issue-estoppel said:

“…it appears to me that there is nothing wrong in the view that there is an issue-estoppel, if it appears by record of itself or as explained by proper evidence, that the same point was determined in favour of a prisoner in a previous criminal trial which is brought in issue on a second criminal trial of the same prisoner … There must be a prior proceeding determined against the Crown necessarily involving an issue which again arises in a subsequent proceeding by the Crown against the same prisoner.

The allegation of the Crown in the subsequent proceeding must itself be inconsistent with the acquittal of the prisoner in the previous proceeding. But if such a condition of affairs arises I see no reason why the ordinary rules of issue-estoppel should not apply…. Issue-estoppel is concerned with the judicial establishment of a proposition of law or fact between parties.

It depends upon well-known doctrines which control the relitigation of issues which are settled by prior litigation.” The emphasis here again would be seen to be on the determination of criminal liability. In Marz v. Queen, 96 CLR 62, the High Court of Australia said: “The Crown is as much precluded by an estoppel by judgment in criminal proceedings as is a subject in civil proceedings… The law which gives effect to issue estoppel is not concerned with the correctness or incorrectness of the finding which amounts to an estoppel, still less with the process of reasoning by which the finding was reached in fact … It is enough that an issue or issues have been distinctly raised or found.

Once that is done, then, so long as the finding stands, if there be any subsequent litigation between the same parties, no allegations legally inconsistent with the finding, may be made by one of them against the other.” Here again it is to be remembered that the principle applies to two criminal proceedings and the proceeding with which we are now concerned is not a criminal proceeding. We therefore hold that there is no substance in this contention.

5. The petition is dismissed.”

131. Applying the aforesaid principle of law to the facts of the case, I find that the arbitral proceedings out of which these appeals arise are essentially in the nature of the civil proceedings and, therefore, in the light of law laid down in the case of Masud Khan(supra), the High Court was not right in applying the principle of “issue-estoppel” for dismissing the application filed by the appellant under Section 34 of the AAC Act.

132. In other words, the application filed by the appellant under Section 34 of the AAC Act could not be dismissed by applying the principle of “issueestoppel”, which in the light of law laid down in the case of Masud Khan (supra) had no application to the civil proceedings.

133. Mr. Chagla and Mr. Vishwanathan, learned senior counsel for the respondents, apart from supporting the impugned judgment of the High  Court made various submissions on the merits of the case as taken note of supra. However, in the light of the detailed reasoning given supra, the submissions of learned counsel for the respondents do not survive. They need not be, therefore, dealt with separately again in detail.

134. Yet, another submission of Mr. Vishwanathan in Satyam’s appeal that Satyam still has a right to raise the issues on merits in Section 34 proceedings in Trial Court has no substance in the light of what I have held above.

135. In my view, the issues arising in the case must be given quietus in third round of litigation in this Court and which I hereby give to the case. Moreover, when the grounds urged by the appellant (Venture) to attack the Award are made out on merits in these proceedings and which were also dealt with by the two Courts below then I do not 88 find any justification to again send the case back to the Trial Court to decide the case on merits on some other ground. It is more so when such prayer was not made in the Courts below.

136. That apart, there is enough material on record on which decision could be rendered on the merits of the case. Indeed, it was so rendered by the Trial Court and the High Court though of reversal. In the light of facts emerging from the record, it is not considered necessary to have another round of litigation for filing any additional material or to adduce any more evidence again before the Trial Court.

137. Learned counsel for the appellant attacked the legality of the Award on other grounds also. In the light of foregoing discussion, I do not consider it necessary to deal with any other grounds.

138. Learned counsel for the appellant cited several  decisions in support of his submission. These decisions are: 2008(4) SCC 190, 2010(8) SCC 660, 2015(10) SCC 213, 2016(2) Scale 60, 2003(5) SCC 705, 1997(3) SCC 540, 1993(2) SCC 507,1996(4) SCC 622, 1972 Appeal Cases 153, 2015(4) SCC 609, 1995(2) SCC 513, 2010(8) SCC 665, 1994(1) SCC 1, 2000(3) SCC 581, 1964(4) SCR 19, 1974(1) SCC 242, 2003(8) SCC 673, 1955(2) SCR 271, 1969(1) SCR 1006, 1977(2) SCC 611, 2010(8) SCC 660, 1995(1) SCC 478, 2005(4) SCC 605, 2005(4) SCC 530, 2015(4) SCC 609, 2010(8) SCC 44, 2011(1) SCC 74, 2009(10) SCC 259, 2016(4) SCC 126 and 1955(1) SCR 206.

139. Learned Counsel for the respondents cited several decisions in support of his submissions. These decisions are: 1966(3) SCC 527, 2010(4) SCC 491, 1972 (2) SCR 646, 1968(3) SCR 1, 2012(8) SCC 148, AIR 1971 SC 1949, 1972(4) SCC 562, 2013(10) 90 SCC 758, 1966(3) SCR 283, 1996(4) SCC 622, 2010(7) SCC 1, 1977(2) SCC 611, 1977(8) SCC 683, 2003(11) SCC 405, 1996(6) SCC 665, 2005(4) SCC 530, 2006(6) SCC 94, 2009(17) SCC 796, 1951 SCR 548, 1998(4) SCC 577 and 1996(5) SCC 550.

140. I have carefully gone through these decisions cited at the bar by both the learned counsel appearing for the parties. In my view, there can be no quarrel to the legal principles laid down in these cases as they are laid down in the light of facts involved in them. However, in the light of what I have held supra, it is not necessary to deal with each of these decisions in detail separately.

141. I, however, consider it apposite to mention that I have considered the issue arising in arbitral proceedings in the context of AAC Act only and, have not expressed any opinion on any of the case relating to this case which are pending in various 91 Courts in India including in foreign Courts against Satyam and its officials and vice versa. All such pending cases will, accordingly, be decided in accordance with law.

142. In view of foregoing discussion, the questions posed above are answered in affirmative and in favour of the appellant (Venture) and against the respondent(Satyam). The appeals filed by Venture Global Engineering LLC thus succeed and are, accordingly, allowed with cost of Rs.5 lacs payable by Satyam to the appellant (Venture). Impugned judgment of the High Court is accordingly set aside and that of the judgment/order passed by the Trial Court is hereby restored.

143. As a consequence, the application filed by the Venture (appellant herein) under Section 34 of the AAC Act, out of which these appeals arise, is allowed. As a result thereof, the entire arbitral proceedings including the Award dated 03.04.2006 passed by the sole Arbitrator is set aside as being against the public policy of India under Section 34(b)(ii) read with Explanation I(i)(ii) and (iii) of the AAC Act.

144. As a Consequence, the appeal filed by Tech Mahindra is dismissed.

[ABHAY MANOHAR SAPRE]

New Delhi;

November 01, 2017


O R D E R

In view of the difference of opinion in terms of separate judgments pronounced by us in these appeals today, the Registry is directed to place the papers before Hon’ble the Chief Justice of India for appropriate further course of action.

 (J. CHELAMESWAR)

(ABHAY MANOHAR SAPRE)

NEW DELHI

NOVEMBER 1, 2017


Bhatia International vs. Bulk Trading S.A. & Anr., (2002) 4 SCC 105 2 Bharat Aluminium Company vs. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 (CB)

Arbitration and Conciliation Act, 1996  

Law Library-

Arbitration and Conciliation act 1996

Preliminary

Part 1 – Arbitration

Chapter I – General provisions
Chapter II – Arbitration agreement
Chapter III – Composition of arbitral tribunal
Chapter IV – Jurisdiction of arbitral tribunals
Chapter V – Conduct of arbitral proceedings
Chapter VI – Making of arbitral award and termination of proceedings
Chapter VII – Recourse against Arbitral Award
Chapter VIII – Finality and Enforcement of Arbitral Awards
Chapter IX – Appeals
Chapter X – Miscellaneous

Part 2-Enforcement of certain Foreign Awards[44-60]

Chapter I – New York Convention Awards
Chapter II – Geneva Convention Awards

Part 3-Conciliation [61-82]

Part 4- Supplementary Provisions

THE FIRST SCHEDULE-THE SECOND SCHEDULE-THE THIRD SCHEDULE-THE -FOURTH SCHEDULE –THE FIFTH SCHEDULE-THE SIXTH SCHEDULE-THE SEVENTH SCHEDULE

The Appointment of Arbitrators by the CJI Scheme 1996

The Arbitration and Conciliation Act, 1996 (“Act”) has been amended by the Arbitration and Conciliation (Amendment) Ordinance, 2015 (“Ordinance”), promulgated by the President of India on October 23, 2015.

Devider

The Arbitration and Conciliation Act, 1996 [ ALL SECTIONS WITH NOTES ] 

[16th August, 1996]

BE it enacted by Parliament in the Forty-seventh Year of the Republic of India as follows:

An Act to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto.

Preamble.—WHEREAS the United Nations Commission on International Trade Law (UNCITRAL) has adopted the UNCITRAL Model Law on International Commercial Arbitration in 1985; 

AND WHEREAS the General Assembly of the United Nations has recommended that all countries give due consideration to the said Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice; 

AND WHEREAS the UNCITRAL has adopted the UNCITRAL Conciliation Rules in 1980; 

AND WHEREAS the General Assembly of the United Nations has recommended the use of the said Rules in cases where a dispute arises in the context of international commercial relations and the parties seek an amicable settlement of that dispute by recourse to conciliation; AND WHEREAS the said Model Law and Rules make significant contribution to the establishment of a unified legal framework for the fair and efficient settlement of disputes arising in international commercial relations; 

AND WHEREAS it is expedient to make law respecting arbitration and conciliation, taking into account the aforesaid Model Law and Rules;

COMMENT- UNCITRAL was created in 1996 by the UN General Assembly.Since inception it has produced the following documents .

♥ The United Nations Commission on International Trade Law (UNCITRAL) is the core legal body of the United Nations system in the field of international trade law, with a mandate to further the progressive harmonization and unification of the law of international trade.

The New York Convention was prepared by the United Nations prior to the establishment of UNCITRAL in 1969. Nevertheless, promotion of the New York Convention is an integral part of the Commission’s programme of work.

Devider

PRELIMINARY

1. Short title, extent and commencement.

(1) This Act may be called the Arbitration and Conciliation Act, 1996.

(2) It extends to the whole of India:

Provided that Parts I, III and IV shall extend to the State of Jammu and Kashmir only in so far as they relate to international commercial arbitration or, as the case may be, international commercial conciliation.

Explanation—In this sub-section, the expression “international commercial conciliation” shall have the same meaning as the expression “international commercial arbitration” in clause (f) of sub-section (1) of section 2, subject to the modification that for the word “arbitration” occurring therein, the word “conciliation” shall be substituted.

(3)It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.

COMMENT – Part 2 (NYCA and GCA)  and International arbitration have full application to the State of Jammu & Kashmir, and for this, no additional amendment has been required to the Constitution of Jammu and Kashmir u/s 147  of it.

Devider

Part I

 Arbitration Chapter I General provisions

2. Definitions.—

(1) In this Part, unless the context otherwise requires,

(a)“arbitration” means any arbitration whether or not administered by permanent arbitral institution;

(b)“arbitration agreement” means an agreement referred to in section 7;

(c)“arbitral award” includes an interim award;

(d)“arbitral tribunal” means a sole arbitrator or a panel of arbitrators;

(e)“Court” means—(i) in the case of an arbitration other than international commercial arbitration, the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes;

(ii) in the case of international commercial arbitration, the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, and in other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court;

(f)“International commercial arbitration” means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is—(i) an individual who is a national of, or habitually resident in, any country other than India; or (ii) a body corporate which is incorporated in any country other than India; or (iii) an association or a body of individuals whose central management and control is exercised in any country other than India; or (iv) the Government of a foreign country;

(g)“legal representative” means a person who in law represents the estate of a deceased person, and includes any person who intermeddles with the estate of the deceased, and, where a party acts in a representative character, the person on whom the estate devolves on the death of the party so acting;

(h)“party” means a party to an arbitration agreement.


Scope

(2) This Part shall apply where the place of arbitration is in India:

Provided that subject to an agreement to the contrary, the provisions of sections 27 and clause (a) of sub-section (1) and sub-section (3) of section 37 shall also apply to international commercial arbitration, even if the place of arbitration is outside India, and an arbitral award made or to be made in such place is enforceable and recognised under the provisions of Part II of this Act. 

(3)This Part shall not affect any other law for the time being in force by virtue of which certain disputes may not be submitted to arbitration.

(4)This Part except sub-section (1) of section 40, sections 41 and 43 shall apply to every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to an arbitration agreement and as if that other enactment were an arbitration agreement, except in so far as the provisions of this Part are inconsistent with that other enactment or with any rules made thereunder.

(5)Subject to the provisions of sub-section (4), and save in so far as is otherwise provided by any law for the time being in force or in any agreement in force between India and any other country or countries, this Part shall apply to all arbitrations and to all proceedings relating thereto.


Construction of reference

(6)Where this Part, except section 28, leaves the parties free to determine a certain issue, that freedom shall include the right of the parties to authorise any person including an institution, to determine that issue.

(7)An arbitral award made under this Part shall be considered as a domestic award.

(8)Where this Part—(a)refers to the fact that the parties have agreed or that they may agree, or (b)in any other way refers to an agreement of the parties,that agreement shall include any arbitration rules referred to in that agreement.

(9)Where this Part, other than clause (a) of section 25 or clause (a) of sub-section (2) of section 32, refers to a claim, it shall also apply to a counterclaim, and where it refers to a defense, it shall also apply to a defense to that counterclaim.

3. Receipt of written communications—

(1)Unless otherwise agreed by the parties,—(a)any written communication is deemed to have been received if it is delivered to the addressee personally or at his place of business, habitual residence or mailing address, and (b)if none of the places referred to in clause (a) can be found after making a reasonable inquiry, a written communication is deemed to have been received if it is sent to the addressee’s last known place of business, habitual residence or mailing address by registered letter or by any other means which provides a record of the attempt to deliver it.

(2)The communication is deemed to have been received on the day it is so delivered.(3)This section does not apply to written communications in respect of proceedings of any judicial authority.

COMMENT: Written communication is the seed of the constitution of any arbitration tribunal and Arbitration proceeding starts with u/s 21 of the Act. U/S 29A an arbitral tribunal shall be deemed to have entered upon the reference on the date on which the arbitrator or all the arbitrators, as the case may be, have received notice.

4. Waiver of right to object.
A party who knows that—(a) any provision of this Part from which the parties may derogate, or

 (b)any requirement under the arbitration agreement,has not been complied with and yet proceeds with the arbitration without stating his objection to such non-compliance without undue delay or, if a time limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object.

5. Extent of judicial intervention.

Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.

 6. Administrative assistance.

In order to facilitate the conduct of the arbitral proceedings, the parties, or the arbitral tribunal with the consent of the parties, may arrange for administrative assistance by a suitable institution or person.

 

Devider

Chapter II

Arbitration agreement

 7. Arbitration agreement.

(1)In this Part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. (2)An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

(3)An arbitration agreement shall be in writing.

(4)An arbitration agreement is in writing if it is contained in—(a)a document signed by the parties; (b)an exchange of letters, telex, telegrams or other means of telecommunication including communication through electronic means which provide a record of the agreement; or (c)an exchange of statements of claim and defense in which the existence of the agreement is alleged by one party and not denied by the other.

(5)The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.

8. Power to refer parties to arbitration where there is an arbitration agreement.
(1)A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.

(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof:

Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.

(3)Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.

Devider

9. Interim measures, etc., by Court.

(1)A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court— (i)for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or

(ii)for an interim measure of protection in respect of any of the following matters, namely

(a)the preservation, interim custody or sale of any goods which are the subject-matter     of   the arbitration agreement; 

(b)securing the amount in dispute in the arbitration;

(c)the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;

(d)interim injunction or the appointment of a receiver;

(e)such other interim measure of protection as may appear to the Court to be just and convenient,and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.

(2)Where, before the commencement of the arbitral proceedings, a Court passes an order for any interim measure of protection under sub-section (1), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine.

(3)Once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub-section (1), unless the Court finds that circumstances exist which may not render the remedy provided under section 17 efficacious.

COMMENT – The Court has limited jurisdiction u/s 7(3) to entertain an application if any special or exceptional circumstances beyond the control of section 17 has not been established. U/S 17 the arbitral tribunal is competent to provide interim measures to an aggrieved party. This section shall be read with section 5 of the act.

Devider

Chapter III

Composition of arbitral tribunal

 10. Number of arbitrators.—

(1) The parties are free to determine the number of arbitrators, provided that such number shall not be an even number. (2) Failing the determination referred to in sub-section (1), the arbitral tribunal shall consist of a sole arbitrator.

11. Appointment of arbitrators.—

(1)A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.

 (2)Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.

(3)Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.

(4)If the appointment procedure in sub-section (3) applies and—(a)a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or (b)the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment,the appointment shall be made, upon request of a party, by the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court;

(5)Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court.

(6) Where, under an appointment procedure agreed upon by the parties,—(a)a party fails to act as required under that procedure; or (b)the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or (c)a person, including an institution, fails to perform any function entrusted to him or it under that procedure,a party may request the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.

(6A)The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall,   notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.

(6B)The designation of any person or institution by the Supreme Court or, as the case may be, the High Court, for the purposes of this section shall not be regarded as a delegation of judicial power by the Supreme Court or the High Court.

(7)A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court is final and no appeal including Letters Patent Appeal shall lie against such decision.

(8)The Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court, before appointing an arbitrator, shall seek a disclosure in writing from the prospective arbitrator in terms of sub-section (1) of section 12, and have due regard to—(a)any qualifications required for the arbitrator by the agreement of the parties; and(b)the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.

(9)In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Supreme Court or the person or institution designated by that Court may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.

(10)The Supreme Court or, as the case may be, the High Court, may make such scheme as the said Court may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6), to it.

(11)Where more than one request has been made under sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justices of different High Courts or their designates, different High Courts or their designates, the High Court or its designate to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request.

(12)(a)Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in an international commercial arbitration, the reference to the “Supreme Court or, as the case may be, the High Court” in those sub-sections shall be construed as a reference to the “Supreme Court”; and(b)Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in any other arbitration, the reference to “the Supreme Court or, as the case may be, the High Court” in those sub-sections shall be construed as a reference to the “High Court” within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate, and where the High Court itself is the Court referred to in that clause, to that High Court.

(13)An application made under this section for appointment of an arbitrator or arbitrators shall be disposed of by the Supreme Court or the High Court or the person or institution designated by such Court, as the case may be, as expeditiously as possible and an endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.

(14)For the purpose of determination of the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal, the High Court may frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule.

Explanation.—For the removal of doubts, it is hereby clarified that this sub-section shall not apply to international commercial arbitration and in arbitrations (other than international commercial arbitration) in case where parties have agreed for determination of fees as per the rules of an arbitral institution.

 11A. Power of Central Government to amend Fourth Schedule.—

(1)If the Central Government Government is satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, amend the Fourth Schedule and thereupon the Fourth Schedule shall be deemed to have been amended accordingly.

(2)A copy of every notification proposed to be issued under sub-section (1), shall be laid in draft before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in disapproving the issue of the notification or both Houses agree in making any modification in the notification, the notification shall not be issued or, as the case may be, shall be issued only in such modified form as may be agreed upon by the both Houses of Parliament.

 12. Grounds for challenge (of the appointment of arbitrator)

(1)When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances,(a)such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject-matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality; and(b)which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months.

 Explanation 1.—The grounds stated in the Fifth Schedule shall guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator.

Explanation 2.—The disclosure shall be made by such person in the form specified in the Sixth Schedule.

(2)An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in sub-section (1) unless they have already been informed of them by him.

(3)An arbitrator may be challenged only if—(a)circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or(b)he does not possess the qualifications agreed to by the parties.

(4)A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.

(5)Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator:

Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing.

13. Challenge procedure-( challenge to be made before the tribunal only)

(1)Subject to sub-section (4), the parties are free to agree on a procedure for challenging an arbitrator.

(2)Failing any agreement referred to in sub-section (1), a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in sub-section (3) of section 12, send a written statement of the reasons for the challenge to the arbitral tribunal.

(3)Unless the arbitrator challenged under sub-section (2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge.

(4)If a challenge under any procedure agreed upon by the parties or under the procedure under sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award.

(5)Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with section 34.

(6)Where an arbitral award is set aside on an application made under sub-section (5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees.

COMMENT A party failed to challenge the appointment of the Arbitrator before the same tribunal can challenge the Award passed by it U/S 34.

14. Failure or impossibility to act.

(1)The mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator, if(a)he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and (b)he withdraws from his office or the parties agree to the termination of his mandate.

(2)If a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate.

(3)If, under this section or sub-section (3) of section 13, an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or sub-section (3) of section 12.


15. Termination of mandate and substitution of arbitrator—

(1)In addition to the circumstances referred to in section 13 or section 14, the mandate of an arbitrator shall terminate

(a)where he withdraws from office for any reason; or (b) by or pursuant to agreement of the parties.

(2)Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.

(3)Unless otherwise agreed by the parties, where an arbitrator is replaced under sub-section (2), any hearings previously held may be repeated at the discretion of the arbitral tribunal.

(4)Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator under this section shall not be invalid solely because there has been a change in the composition of the arbitral tribunal.

Devider

Chapter IV

Jurisdiction of arbitral tribunals

 16. Competence of arbitral tribunal to rule on its jurisdiction.

(1)The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,—(a)an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and(b)a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.

 (2)A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator.

(3)A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.

(4)The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified.

(5)The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award.

(6)A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34.

COMMENT– The tribunal shall decide its own jurisdiction and the party failed in the question of jurisdiction may challenge the Award u/s 34 for setting aside.


17. Interim measures ordered by arbitral tribunal.

(1)A party may, during the arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to the arbitral tribunal

(i)for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or

(ii)for an interim measure of protection in respect of any of the following matters, namely:

(a)the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;

(b)securing the amount in dispute in the arbitration;

(c)the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken, or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;

(d)interim injunction or the appointment of a receiver;

(e)such other interim measure of protection as may appear to the arbitral tribunal to be just and convenient,and the arbitral tribunal shall have the same power for making orders, as the court has for the purpose of, and in relation to, any proceedings before it.

(2)Subject to any orders passed in an appeal under section 37, any order issued by the arbitral tribunal under this section shall be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were an order of the Court.

Devider

Chapter V

Conduct of arbitral proceedings [CLICK]

Devider

Chapter VI

Making of arbitral award and termination of proceedings

28. Rules applicable to substance of dispute.

(1)Where the place of arbitration is situate in India,—(a)in an arbitration other than an international commercial arbitration, the arbitral tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India;

(b)in international commercial arbitration—

(i)the arbitral tribunal shall decide the dispute in accordance with the rules of law designated by the parties as applicable to the substance of the dispute;

(ii)any designation by the parties of the law or legal system of a given country shall be construed, unless otherwise expressed, as directly referring to the substantive law of that country and not to its conflict of laws rules;

(iii)failing any designation of the law under clause (a) by the parties, the arbitral tribunal shall apply the rules of law it considers to be appropriate given all the circumstances surrounding the dispute.

(2)The arbitral tribunal shall decide ex aequo et bono(from equity and conscience) or as amiable compositeur(equity) only if the parties have expressly authorised it to do so.

(3)While deciding and making an award, the arbitral tribunal shall, in all cases, take into account the terms of the contract and trade usages applicable to the transaction.

COMMENT – The concept of amiable compositeur has its historical origins in French law, namely in amicabilis compositor of canon law, who acted rather as conciliator than decision-maker in a dispute, and in dispute settlement through the arbitrator which developed in the second half of the 17th century and who was not bound to apply strict rules of civil procedure and substantive law (ex aequo et bono). The concept was first enacted in the Code Napoleon and the French Code of Civil Procedure of 1806

An arbitrator acting as amiable compositeur is deciding the dispute before him according to law and legal principles, nevertheless is authorized to modify the effect of certain nonmandatory legal provisions. Ex aequo et bono is a dispute settlement out of law, according to moral principles. An arbitrator deciding as ex aequo et bono is allowed to disregard not only the non-mandatory rules, but also the mandatory provisions of law, as long as they respect international public policy (Bühring-Uhle, Ch.: Arbitration and Mediation in International Business, The Netherlands: Kluwer Law Internaitonal, 2006, p. 40 )

However to avoid subjectivity of the arbitrator in the application of equity, the parties may make use of their right to provide the arbitrators with specific criteria for their decision – either by reference to amiable composition developed in a particular legal system, or by referring to some broad notion of fairness, or by including a set of concrete standards to guide the arbitrators in reaching their decisions. This way the arbitrator is guided by what the parties consider to be fair and equitable.

29. Decision making by panel of arbitrators.—

(1) Unless otherwise agreed by the parties, in arbitral proceedings with more than one arbitrator, any decision of the arbitral tribunal shall be made by a majority of all its members.

(2) Notwithstanding sub-section (1), if authorised by the parties or all the members of the arbitral tribunal, questions of procedure may be decided by the presiding arbitrator.

29A. Time limit for arbitral award.—

(1)The award shall be made within a period of twelve months from the date the arbitral tribunal enters upon the reference.

Explanation.—For the purpose of this sub-section, an arbitral tribunal shall be deemed to have entered upon the reference on the date on which the arbitrator or all the arbitrators, as the case may be, have received notice, in writing, of their appointment.

(2)If the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree.

(3)The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months.

(4)If the award is not made within the period specified in sub-section (1) or the extended period specified under sub-section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period:Provided that while extending the period under this sub-section, if the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five per cent. for each month of such delay.

(5)The extension of period referred to in sub-section (4) may be on the application of any of the parties and may be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court.

(6)While extending the period referred to in sub-section (4), it shall be open to the Court to substitute one or all of the arbitrators and if one or all of the arbitrators are substituted, the arbitral proceedings shall continue from the stage already reached and on the basis of the evidence and material already on record, and the arbitrator(s) appointed under this section shall be deemed to have received the said evidence and material.

(7)In the event of arbitrator(s) being appointed under this section, the arbitral tribunal thus reconstituted shall be deemed to be in continuation of the previously appointed arbitral tribunal.

(8)It shall be open to the Court to impose actual or exemplary costs upon any of the parties under this section.

(9)An application filed under sub-section  (5) shall be disposed of by the Court as expeditiously as possible and endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.

29B. Fast track procedure (more speedy procedure within the procedure)

(1)Notwithstanding anything contained in this Act, the parties to an arbitration agreement, may, at any stage either before or at the time of appointment of the arbitral tribunal, agree in writing to have their dispute resolved by fast track procedure specified in sub-section (3).

(2)The parties to the arbitration agreement, while agreeing for resolution of dispute by fast track procedure, may agree that the arbitral tribunal shall consist of a sole arbitrator who shall be chosen by the parties.

(3)The arbitral tribunal shall follow the following procedure while conducting arbitration proceedings under sub-section (1):—

(a)The arbitral tribunal shall decide the dispute on the basis of written pleadings, documents and submissions filed by the parties without any oral hearing;

(b)The arbitral tribunal shall have power to call for any further information or clarification from the parties in addition to the pleadings and documents filed by them;

(c)An oral hearing may be held only, if, all the parties make a request or if the arbitral tribunal considers it necessary to have oral hearing for clarifying certain issues;

(d)The arbitral tribunal may dispense with any technical formalities, if an oral hearing is held, and adopt such procedure as deemed appropriate for expeditious disposal of the case.

(4)The award under this section shall be made within a period of six months from the date the arbitral tribunal enters upon the reference.

(5)If the award is not made within the period specified in sub-section (4), the provisions of sub-sections (3) to (9) of section 29A shall apply to the proceedings.

(6)The fees payable to the arbitrator and the manner of payment of the fees shall be such as may be agreed between the arbitrator and the parties.

30. Settlement.—

(1)It is not incompatible with an arbitration agreement for an arbitral tribunal to encourage settlement of the dispute and, with the agreement of the parties, the arbitral tribunal may use mediation, conciliation or other procedures at any time during the arbitral proceedings to encourage settlement.

(2)If, during arbitral proceedings, the parties settle the dispute, the arbitral tribunal shall terminate the proceedings and, if requested by the parties and not objected to by the arbitral tribunal, record the settlement in the form of an arbitral award on agreed terms.

(3)An arbitral award on agreed terms shall be made in accordance with section 31 and shall state that it is an arbitral award.

(4)An arbitral award on agreed terms shall have the same status and effect as any other arbitral award on the substance of the dispute.

31. Form and contents of arbitral award.—

(1)An arbitral award shall be made in writing and shall be signed by the members of the arbitral tribunal.

(2)For the purposes of sub-section (1), in arbitral proceedings with more than one arbitrator, the signatures of the majority of all the members of the arbitral tribunal shall be sufficient so long as the reason for any omitted signature is stated.

(3)The arbitral award shall state the reasons upon which it is based, unless—(a)the parties have agreed that no reasons are to be given, or(b)the award is an arbitral award on agreed terms under section 30.

(4)The arbitral award shall state its date and the place of arbitration as determined in accordance with section 20 and the award shall be deemed to have been made at that place.

(5)After the arbitral award is made, a signed copy shall be delivered to each party.

(6)The arbitral tribunal may, at any time during the arbitral proceedings, make an interim arbitral award on any matter with respect to which it may make a final arbitral award.

(7)(a)Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.(b)A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two per cent. higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment.

Explanation.—The expression “current rate of interest” shall have the same meaning as assigned to it under clause (b) of section 2 of the Interest Act, 1978 (14 of 1978).

(8)The costs of an arbitration shall be fixed by the arbitral tribunal in accordance with section 31A.

Explanation—For the purpose of clause (a), “costs” means reasonable costs relating to—(i)the fees and expenses of the arbitrators and witnesses,(ii)legal fees and expenses,(iii)any administration fees of the institution supervising the arbitration, and(iv)any other expenses incurred in connection with the arbitral proceedings and the arbitral award.

31A- Regime for costs—

(1)In relation to any arbitration proceeding or a proceeding under any of the provisions of this Act pertaining to the arbitration, the Court or arbitral tribunal, notwithstanding anything contained in the Code of Civil Procedure, 1908 (5 of 1908), shall have the discretion to determine—(a)whether costs are payable by one party to another;(b)the amount of such costs; and(c)when such costs are to be paid.Explanation.—For the purpose of this sub-section, “costs” means reasonable costs relating to—(i)the fees and expenses of the arbitrators, Courts and witnesses;(ii)legal fees and expenses;(iii)any administration fees of the institution supervising the arbitration; and(iv)any other expenses incurred in connection with the arbitral or Court proceedings and the arbitral award.

(2)If the Court or arbitral tribunal decides to make an order as to payment of costs,—(a)the general rule is that the unsuccessful party shall be ordered to pay the costs of the successful party; or(b)the Court or arbitral tribunal may make a different order for reasons to be recorded in writing.

(3)In determining the costs, the Court or arbitral tribunal shall have regard to all the circumstances, including—(a)the conduct of all the parties;(b)whether a party has succeeded partly in the case;(c)whether the party had made a frivolous counterclaim leading to delay in the disposal of the arbitral proceedings; and(d)whether any reasonable offer to settle the dispute is made by a party and refused by the other party.

(4)The Court or arbitral tribunal may make any order under this section including the order that a party shall pay—(a)a proportion of another party’s costs;(b)a stated amount in respect of another party’s costs;(c)costs from or until a certain date only;(d)costs incurred before proceedings have begun;(e)costs relating to particular steps taken in the proceedings;(f)costs relating only to a distinct part of the proceedings; and(g)interest on costs from or until a certain date.

(5)An agreement which has the effect that a party is to pay the whole or part of the costs of the arbitration in any event shall be only valid if such agreement is made after the dispute in question has arisen.


32. Termination of proceedings.

(1)The arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal under sub-section (2).

(2)The arbitral tribunal shall issue an order for the termination of the arbitral proceedings where—(a)the claimant withdraws his claim, unless the respondent objects to the order and the arbitral tribunal recognises a legitimate interest on his part in obtaining a final settlement of the dispute,(b)the parties agree on the termination of the proceedings, or(c)the arbitral tribunal finds that the continuation of the proceedings has for any other reason become unnecessary or impossible.

(3)Subject to section 33 and sub-section (4) of section 34, the mandate of the arbitral tribunal shall terminate with the termination of the arbitral proceedings.

33. Correction and interpretation of award; additional award.

(1)Within thirty days from the receipt of the arbitral award, unless another period of time has been agreed upon by the parties(a)a party, with notice to the other party, may request the arbitral tribunal to correct any computation errors, any clerical or typographical errors or any other errors of a similar nature occurring in the award;(b)if so agreed by the parties, a party, with notice to the other party, may request the arbitral tribunal to give an interpretation of a specific point or part of the award.

(2)If the arbitral tribunal considers the request made under sub-section (1) to be justified, it shall make the correction or give the interpretation within thirty days from the receipt of the request and the interpretation shall form part of the arbitral award.

(3)The arbitral tribunal may correct any error of the type referred to in clause (a) of sub-section (1), on its own initiative, within thirty days from the date of the arbitral award.

(4)Unless otherwise agreed by the parties, a party with notice to the other party, may request, within thirty days from the receipt of the arbitral award, the arbitral tribunal to make an additional arbitral award as to claims presented in the arbitral proceedings but omitted from the arbitral award.

(5)If the arbitral tribunal considers the request made under sub-section(4) to be justified, it shall make the additional arbitral award within sixty days from the receipt of such request.

(6)The arbitral tribunal may extend, if necessary, the period of time within which it shall make a correction, give an interpretation or make an additional arbitral award under sub-section (2) or sub-section(5).

(7)Section 31 shall apply to a correction or interpretation of the arbitral award or to an additional arbitral award made under this section.

Devider

Chapter VII

Recourse against Arbitral Award

Devider

Chapter VIII

Finality and Enforcement of Arbitral Awards

35. Finality of arbitral awards.

Subject to this Part an arbitral award shall be final and binding on the parties and persons claiming under them respectively.


36. Enforcement.

(1)Where the time for making an application to set aside the arbitral award under section 34 has expired, then, subject to the provisions of sub-section (2), such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were a decree of the court.

(2)Where an application to set aside the arbitral award has been filed in the Court under section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of sub-section (3), on a separate application made for that purpose.

(3)Upon filing of an application under sub-section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing:Provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908 (5 of 1908).

Devider

Chapter IX

Appeals

37. Appealable orders.

(1)An appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely:

(a)refusing to refer the parties to arbitration under section 8;

(b)granting or refusing to grant any measure under section 9;

(c)setting aside or refusing to set aside an arbitral award under section 34.

(2)Appeal shall also lie to a court from an order of the arbitral tribunal—

(a)accepting the plea referred to in sub-section (2) or sub-section (3) of section 16; or

(b)granting or refusing to grant an interim measure under section 17.

(3)No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.

Devider

Chapter X

Miscellaneous

38. Deposits.—

(1)The arbitral tribunal may fix the amount of the deposit or supplementary deposit, as the case may be, as an advance for the costs referred to in sub-section (8) of section 31, which it expects will be incurred in respect of the claim submitted to it:Provided that where, apart from the claim, a counter-claim has been submitted to the arbitral tribunal, it may fix separate amount of deposit for the claim and counter-claim.(2)The deposit referred to in sub-section (1) shall be payable in equal shares by the parties:Provided that where one party fails to pay his share of the deposit, the other party may pay that share:Provided further that where the other party also does not pay the aforesaid share in respect of the claim or the counter-claim, the arbitral tribunal may suspend or terminate the arbitral proceedings in respect of such claim or counter-claim, as the case may be.(3)Upon termination of the arbitral proceedings, the arbitral tribunal shall render an accounting to the parties of the deposits received and shall return any unexpended balance to the party or parties, as the case may be.

39. Lien on arbitral award and deposits as to costs.—

(1)Subject to the provisions of sub-section (2) and to any provision to the contrary in the arbitration agreement, the arbitral tribunal shall have a lien on the arbitral award for any unpaid costs of the arbitration.

(2)If in any case an arbitral tribunal refuses to deliver its award except on payment of the costs demanded by it, the Court may, on an application in this behalf, order that the arbitral tribunal shall deliver the arbitral award to the applicant on payment into Court by the applicant of the costs demanded, and shall, after such inquiry, if any, as it thinks fit, further order that out of the money so paid into Court there shall be paid to the arbitral tribunal by way of costs such sum as the Court may consider reasonable and that the balance of the money, if any, shall be refunded to the applicant.

(3)An application under sub-section(2) may be made by any party unless the fees demanded have been fixed by written agreement between him and the arbitral tribunal, and the arbitral tribunal shall be entitled to appear and be heard on any such application.

(4)The Court may make such orders as it thinks fit respecting the costs of the arbitration where any question arises respecting such costs and the arbitral award contains no sufficient provision concerning them.

40. Arbitration agreement not to be discharged by death of party thereto.—

(1)An arbitration agreement shall not be discharged by the death of any party thereto either as respects the deceased or as respects any other party, but shall in such event be enforceable by or against the legal representative of the deceased.

(2)The mandate of an arbitrator shall not be terminated by the death of any party by whom he was appointed.

(3)Nothing in this section shall affect the operation of any law by virtue of which any right of action is extinguished by the death of a person.

41. Provisions in case of insolvency.—

(1)Where it is provided by a term in a contract to which an insolvent is a party that any dispute arising thereout or in connection therewith shall be submitted to arbitration, the said term shall, if the receiver adopts the contract, be enforceable by or against him so far as it relates to any such dispute.

(2)Where a person who has been adjudged an insolvent had, before the commencement of the insolvency proceedings, become a party to an arbitration agreement, and any matter to which the agreement applies is required to be determined in connection with, or for the purposes of, the insolvency proceedings, then, if the case is one to which sub-section (1) does not apply, any other party or the receiver may apply to the judicial authority having jurisdiction in the insolvency proceedings for an order directing that the matter in question shall be submitted to arbitration in accordance with the arbitration agreement, and the judicial authority may, if it is of opinion that, having regard to all the circumstances of the case, the matter ought to be determined by arbitration, make an order accordingly.

(3)In this section the expression “receiver” includes an Official Assignee.


42. Jurisdiction.

Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court.

43. Limitations.

(1)The Limitation Act, 1963 (36 of 1963), shall apply to arbitrations as it applies to  proceedings in court.

(2)For the purposes of this section and the Limitation Act, 1963 (36 of 1963), an arbitration shall be deemed to have commenced on the date referred to in section 21.

(3)Where an arbitration agreement to submit future disputes to arbitration provides that any claim to which the agreement applies shall be barred unless some step to commence arbitral proceedings is taken within a time fixed by the agreement, and a dispute arises to which the agreement applies, the Court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be caused, and notwithstanding that the time so fixed has expired, may on such terms, if any, as the justice of the case may require, extend the time for such period as it thinks proper.

(4)Where the Court orders that an arbitral award be set aside, the period between the commencement of the arbitration and the date of the order of the Court shall be excluded in computing the time prescribed by the Limitation Act, 1963 (36 of 1963), for the commencement of the proceedings (including arbitration) with respect to the dispute so submitted.

Devider

Part 2-Enforcement of certain Foreign Awards[44-60]

Chapter I – New York Convention Awards
Chapter II – Geneva Convention Awards

Devider

Part III of The Arbitration And Conciliation Act, 1996 [sec 61 t0 81]

Law of Conciliation

Devider

Part IV

 Supplementary Provisions

82. Power of High Court to make rules.

The High Court may make rules consistent with this Act as to all proceedings before the Court under this Act.

83. Removal of difficulties.

(1)If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order published in the Official Gazette, make such provisions, not inconsistent with the provisions of this Act as appear to it to be necessary or expedient for removing the difficulty:Provided that no such order shall made be after the expiry of a period of two years from the date of commencement of this Act.

(2)Every order made under this section shall, as soon as may be after it is made, be laid before each Houses of Parliament.

84. Power to make rules.

(1)The Central Government may, by notification in the Official Gazette, make rules for carrying out the provisions of this Act.

(2)Every rule made by the Central Government under this Act shall be laid, as soon as may be, after it is made before each House of Parliament while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.

85. Repeal and savings.

(1)The Arbitration (Protocol and Convention) Act, 1937 (6 of 1937), the Arbitration Act, 1940 (10 of 1940) and the Foreign Awards (Recognition and Enforcement) Act, 1961 (45 of 1961) are hereby repealed.(2)Notwithstanding such repeal,(a)the provisions of the said enactments shall apply in relation to arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force;(b)all rules made and notifications published, under the said enactments shall, to the extent to which they are not repugnant to this Act, be deemed respectively to have been made or issued under this Act.

86. Repeal and saving.

(1)The Arbitration and Conciliation (Third) Ordinance, 1996 (Ord. 27 of 1996) is hereby repealed.(2)Notwithstanding such repeal, any order, rule, notification or scheme made or anything done or any action taken in pursuance of any provision of the said Ordinance shall be deemed to have been made, done or taken under the corresponding provisions of this Act.

Devider

 

THE FOURTH SCHEDULE

See section 11(14)     

Sum in dispute Model fee
Up to Rs. 5,00,000 Rs. 45,000
Above Rs. 5,00,000 and up to Rs. 20,00,000 Rs. 45,000 plus 3.5 per cent. of the claim amount over and above Rs. 5,00,000
Above Rs. 20,00,000 and up to Rs. 1,00,00,000 Rs. 97,500 plus 3 per cent. of the claim amount over and above Rs. 20,00,000
Above Rs. 1,00,00,000 and up to Rs. 10,00,00,000 Rs. 3,37,500 plus 1 per cent. of the claim amount over and above Rs. 1,00,00,000
Above Rs. 10,00,00,000 and up to Rs. 20,00,00,000 Rs. 12,37,500 plus 0.75 per cent. of the claim amount over and above Rs. 1,00,00,000
Above Rs. 20,00,00,000 Rs. 19,87,500 plus 0.5 per cent. of the claim amount over and above Rs. 20,00,00,000 with a ceiling of Rs. 30,00,000

Note:- In the event, the arbitral tribunal is a sole arbitrator, he shall be entitled to an additional amount of twenty-five per cent. on the fee payable as per the table set out above.

Devider

THE FIFTH SCHEDULE

(See section 12 (1)(b)

The following grounds give rise to justifiable doubts as to the independence or impartiality of arbitrators :Arbitrator’s relationship with the parties or counsel(1)The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party.(2)The arbitrator currently represents or advises one of the parties or an affiliate of one of the parties.(3)The arbitrator currently represents the lawyer or law firm acting as counsel for one of the parties.(4)The arbitrator is a lawyer in the same law firm which is representing one of the parties.(5)The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration.(6)The arbitrator’s law firm had a previous but terminated involvement in the case without the arbitrator being involved himself or herself.(7)The arbitrator’s law firm currently has a significant commercial relationship with one of the parties or an affiliate of one of the parties.(8)The arbitrator regularly advises the appointing party or an affiliate of the appointing party even though neither the arbitrator nor his or her firm derives a significant financial income therefrom.(9)The arbitrator has a close family relationship with one of the parties and in the case of companies with the persons in the management and controlling the company.(10)A close family member of the arbitrator has a significant financial interest in one of the parties or an affiliate of one of the parties.(11)The arbitrator is a legal representative of an entity that is a party in the arbitration.(12)The arbitrator is a manager, director or part of the management, or has a similar controlling influence in one of the parties.(13)The arbitrator has a significant financial interest in one of the parties or the outcome of the case.(14)The arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her firm derives a significant financial income therefrom.Relationship of the arbitrator to the dispute(15)The arbitrator has given legal advice or provided an expert opinion on the dispute to a party or an affiliate of one of the parties.(16)The arbitrator has previous involvement in the case.Arbitrator’s direct or indirect interest in the dispute(17)The arbitrator holds shares, either directly or indirectly, in one of the parties or an affiliate of one of the parties that is privately held.(18)A close family member of the arbitrator has a significant financial interest in the outcome of the dispute.(19)The arbitrator or a close family member of the arbitrator has a close relationship with a third party who may be liable to recourse on the part of the unsuccessful party in the dispute.Previous services for one of the parties or other involvement in the case(20)The arbitrator has within the past three years served as counsel for one of the parties or an affiliate of one of the parties or has previously advised or been consulted by the party or an affiliate of the party making the appointment in an unrelated matter, but the arbitrator and the party or the affiliate of the party have no ongoing relationship.(21)The arbitrator has within the past three years served as counsel against one of the parties or an affiliate of one of the parties in an unrelated matter.(22)The arbitrator has within the past three years been appointed as arbitrator on two or more occasions by one of the parties or an affiliate of one of the parties.(23)The arbitrator’s law firm has within the past three years acted for one of the parties or an affiliate of one of the parties in an unrelated matter without the involvement of the arbitrator.(24)The arbitrator currently serves, or has served within the past three years, as arbitrator in another arbitration on a related issue involving one of the parties or an affiliate of one of the parties.Relationship between an arbitrator and another arbitrator or counsel(25)The arbitrator and another arbitrator are lawyers in the same law firm.(26)The arbitrator was within the past three years a partner of, or otherwise affiliated with, another arbitrator or any of the counsel in the same arbitration.(27)A lawyer in the arbitrator’s law firm is an arbitrator in another dispute involving the same party or parties or an affiliate of one of the parties.(28)A close family member of the arbitrator is a partner or employee of the law firm representing one of the parties, but is not assisting with the dispute.(29)The arbitrator has within the past three years received more than three appointments by the same counsel or the same law firm.Relationship between arbitrator and party and others involved in the arbitration(30)The arbitrator’s law firm is currently acting adverse to one of the parties or an affiliate of one of the parties.(31)The arbitrator had been associated within the past three years with a party or an affiliate of one of the parties in a professional capacity, such as a former employee or partner.Other circumstances(32)The arbitrator holds shares, either directly or indirectly, which by reason of number or denomination constitute a material holding in one of the parties or an affiliate of one of the parties that is publicly listed.(33)The arbitrator holds a position in an arbitration institution with appointing authority over the dispute.(34)The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties, where the affiliate is not directly involved in the matters in dispute in the arbitration.

Explanation 1.– The term “close family member” refers to a spouse, sibling, child, parent or life partner.

Explanation 2.– The term “affiliate” encompasses all companies in one group of companies including the parent company.

Explanation 3.– For the removal of doubts, it is clarified that it may be the practice in certain specific kinds of arbitration, such as maritime or commodities arbitration, to draw arbitrators from a small, specialised pool. If in such fields it is the custom and practice for parties frequently to appoint the same arbitrator in different cases, this is a relevant fact to be taken into account while applying the rules set out above.

Devider

THE SIXTH SCHEDULE

(See section 12 (1)(b)

NAME:CONTACT DETAILS:PRIOR EXPERIENCE (INCLUDING EXPERIENCE WITH ARBITRATIONS):NUMBER OF ONGOING ARBITRATIONS:CIRCUMSTANCES DISCLOSING ANY PAST OR PRESENT RELATIONSHIP WITH OR INTEREST IN ANY OF THE PARTIES OR IN RELATION TO THE SUBJECT-MATTER IN DISPUTE, WHETHER FINANCIAL, BUSINESS, PROFESSIONAL OR OTHER KIND, WHICH IS LIKELY TO GIVE RISE TO JUSTIFIABLE DOUBTS AS TO YOUR INDEPENDENCE OR IMPARTIALITY (LIST OUT):CIRCUMSTANCES WHICH ARE LIKELY TO AFFECT YOUR ABILITY TO DEVOTE SUFFICIENT TIME TO THE ARBITRATION AND IN PARTICULAR YOUR ABILITY TO FINISH THE ENTIRE ARBITRATION WITHIN TWELVE MONTHS (LIST OUT):

Devider

THE SEVENTH SCHEDULE

(See section 12 (5)

Arbitrator’s relationship with the parties or counsel(1)The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party.(2)The arbitrator currently represents or advises one of the parties or an affiliate of one of the parties.(3)The arbitrator currently represents the lawyer or law firm acting as counsel for one of the parties.(4)The arbitrator is a lawyer in the same law firm which is representing one of the parties.(5)The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration.(6)The arbitrator’s law firm had a previous but terminated involvement in the case without the arbitrator being involved himself or herself.(7)The arbitrator’s law firm currently has a significant commercial relationship with one of the parties or an affiliate of one of the parties.(8)The arbitrator regularly advises the appointing party or an affiliate of the appointing party even though neither the arbitrator nor his or her firm derives a significant financial income therefrom.(9)The arbitrator has a close family relationship with one of the parties and in the case of companies with the persons in the management and controlling the company.(10)A close family member of the arbitrator has a significant financial interest in one of the parties or an affiliate of one of the parties.(11)The arbitrator is a legal representative of an entity that is a party in the arbitration.(12)The arbitrator is a manager, director or part of the management, or has a similar controlling influence in one of the parties.(13)The arbitrator has a significant financial interest in one of the parties or the outcome of the case.(14)The arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her firm derives a significant financial income therefrom.Relationship of the arbitrator to the dispute(15)The arbitrator has given legal advice or provided an expert opinion on the dispute to a party or an affiliate of one of the parties.(16)The arbitrator has previous involvement in the case.Arbitrator’s direct or indirect interest in the dispute(17)The arbitrator holds shares, either directly or indirectly, in one of the parties or an affiliate of one of the parties that is privately held.(18)A close family member of the arbitrator has a significant financial interest in the outcome of the dispute.(19)The arbitrator or a close family member of the arbitrator has a close relationship with a third party who may be liable to recourse on the part of the unsuccessful party in the dispute.Explanation 1.– The term “close family member” refers to a spouse, sibling, child, parent or life partner.Explanation 2.– The term “affiliate” encompasses all companies in one group of companies including the parent company.Explanation 3.– For the removal of doubts, it is clarified that it may be the practice in certain specific kinds of arbitration, such as maritime or commodities arbitration, to draw arbitrators from a small, specialised pool. If in such fields it is the custom and practice for parties frequently to appoint the same arbitrator in different cases, this is a relevant fact to be taken into account while applying the rules set out above.

Devider

Model Adjudication

U/S 11(6)- GORKHA SECURITY SERVICES versus SCHOOL OF PLANNING & ARCHITECTURE (2017)

Webp.net-gifmaker

SPORTS LAW IN INDIA

Four Sports, a lot of balls and stuff

Sports law in India is a collection of some Court Cases and Policy decisions under the auspices Government of India. India never enacted a statute in this field like some countries to be mentioned below. What we called Sport`s law is a borrowed term in Indian legal field, as we borrowed so many legal ideas from abroad.

SUBJECT TO 7 TH  SCHEDULE, STATE LIST, ENTRY 33 OF THE INDIAN CONSTITUTION, ENACTING OF SPORTS LAW IS SUBJECT MATTER OF STATE( FEDERAL). NO STATE HAS YET ENACTED ANY LAW GOVERNING SPORTS.

THEREFORE THERE EXISTS NO  SUBSTANTIVE SPORTS LAW IN INDIA COMPARING WITH The Sports Development Act 1997 (ACT 576) OF MALAYSIA OR  The Amateur Sports Act of 1978 (36 U.S.C.A. § 391) OF USA.


 AN IDEAL INDIAN SPORTS LAW MAY CONSISTS OF:

A.SPORTS POLICIES AND SPORTS  GOVERNANCE

B.THE LEGAL REGULATION OF SPORTS

C. SPORTS PARTICIPATION

D. SPORTS AND CONTRACT OF EMPLOYMENT

E.Protection of Sports person from Physical Injury

F. Controlling of Spots Violence

F. Prohibition of drug use

G. Enforcement of Intellectual Property Law in Sports

H. Sports franchise and player auctioning

I. Maintenance of Sports Stadium

J. Auction and mutual transfer of players.

k. Betting in sports etc………

“Sports bodies have to have a degree of autonomy with the Government playing the role of an effective regulator” D O S S I E R to IOA BY the Govt of India dated  16 T June  2010.

Webp.net-gifmaker

JUDICIAL REVIEW UNDER WRIT JURISDICTION

BCCI is a Society and was registered as such on 28.11.1940 under the Tamil Nadu Societies Registration Act, 1860. BCCI is ‘State’ under Article 12 of the Indian constitution by Zee Telefilms Ltd. & Anr vs Union Of India & Ors on 2 February, 2005 LINK

  • The BCCI has a monopoly over organized cricket in India. Every youngster, maybe an aspiring Rahul Dravid or an Irfan Pathan, who dreams to play cricket for his State or zone or India cannot do so without the permission and approval of the BCCI. We must not forget that cricket, is no longer what it used to be. It is not just a sport which people dressed in white flannels and rolled up shirt-sleeves enjoyed on lazy summer’s afternoons in England between sips of tea and munches of scones. It is no longer the reserve of the nawabs, the maharajas, the brown sahebs and the rich who had the time and the inclination. It now permeates all levels of society. To many it presents itself as an opportunity to a better livelihood. Cases abound in India, where cricket has brought financial succour to persons and their families who were otherwise doomed to lead lives enslaved in poverty. Cricket is regarded as a profession, an avocation. Many in India, play cricket not just for the love of the game but for to heir own survival. The BCCI performs the vital public duty and function of providing this opportunity. It has an elaborate network and is a massive organisation controlling every aspect of cricket in India. Dr Singhvi, the learned senior counsel who appealed on behalf of BCCI, submitted that no part of the capital of BCCI is held by the Government; no financial assistance of the State is enjoyed by it; the Government does not exercise any control over it; BCCI is a non-statutory body; no public duty is imposed upon it by statute; it is a society, nothing but a ”private club” and as such issuance of a writ against it would be completely beyond the scope of article 226 of the Constitution of India. This argument is untenable in the light of the discussion above.( RAHUL MEHERA VS UOI, DELHI HIGH COURT 2004) .  If a public duty or public function is involved, anybody, public or private, qua that duty or function, and limited to that, would be subject to judicial scrutiny under the extraordinary writ jurisdiction of article 226 The BCCI which is the simple repository of everything cricket in India has attained this ”giant” stature through its organisation, skill, the craze for the game in India and last but not the least by the tacit approval of the Government. Its objects are the functions and duties it has arrogated to itself. Many of these are in the nature of public duties and functions. Others may be in the field of private law such as private contracts, internal rules not affecting the public at large etc.,. Therefore, BCCI cannot be said to be beyond the sweep of article 226 in all eventualities for all times to come. That is the certificate that BCCI wants from this court. We are afraid, we cannot grant that. Consequently, this petition cannot be thrown out on the maintainability issue(VIDE RAHUL MEHERA)

  • In Ajay Jadeja VS UOI Delhi High court 2001, it is observed:

    ”When the Government stands by and lets a body like BCCI assume the prerogative of being a sole representative of India for cricket by permitting BCCI to choose the team for India for appearance in events like the World Cup, then it necessarily imbues BCCI with the public functions at least in or far as the selection of the team to represent India and India’s representation in International Cricket fora and regulation of Cricket in India is concerned. Thus the monopoly status of the respondent No. 2 is evident. It is also clear that such monopoly status is indisputably state recognized as evident from the later of Ministry of Culture, Youth Affairs an Sports dated 22nd December 2000 and indeed by acquiescence of the Government, can be considered state conferred. Similarly the plea of the BCCI that it does not own or lease the stadia is of no consequence as the stadia are owned and leased by its members and it is not disputed that all international matches are played in such stadia. Similarly, membership of BCCI of the International Cricket Conference (ICC) cannot ipso facto imply that it is not amenable to writ jurisdiction. In fact, BCCI represented India on this own showing and depending upon the nature of the action impugned, would be amenable to writ jurisdiction.” We agree. BCCI, like everyone else, is amenable to writ jurisdiction. However, not every action of BCCI would be subject to the scrutiny of judicial review. Only those actions which fall within the ambit of public law would call for any direction, order or writ under article 226. Disputes or acts in the sphere of pure private law having no traces of public law would not be the subject matter of writs, directions or order to be issued under article 226.

  • Indian Hockey Federation (IHF) is an autonomous society registered under the Societies Registration Act, 1860 and has got recognition of Ministry of Youth Affairs & Sports as apex national level sports federation engaged in promotion of the game of Men’s Hockey in the country.

Webp.net-gifmaker

SPORTS REGULATION 

MINISTRY OF YOUTH AND SPORTS

NATIONAL SPORTS POLICY 2001

In terms of the National Sports Policy, 2001, the Central Government, in conjunction with the State Government, the Olympic Association (IOA) and the National Sports Federation will concertedly pursue the twin objectives of “Broad-basing” of Sports and “Achieving Excellence in Sports at the National and International levels .

National Sports Development Code 2011

The various orders/ circulars issued by the Government from time to time are amalgamated under this National Sports Development Code of India, 2011.

Webp.net-gifmaker

SPORTS ARBITRATION 

COURT OF ARBITRATION FOR SPORTS AS A DISPUTE RESOLUTION BODY CAS &TAS

The CAS Statute of 1984 was accompanied by a set of procedural Regulations. Both were modified slightly in 1990. Under these rules, the CAS was composed of 60 members appointed by the IOC, the International Federations (IF), the National Olympic Committees (NOC) and the IOC President (15 members each).

OBJECT: With the aim of facilitating the resolution of disputes in the field of sport, an arbitration institution entitled the “Court of Arbitration for Sport” (hereinafter the CAS) has been created, and that, with the aim of ensuring the protection of the rights of the parties before the CAS and the absolute independence of this institution, the parties have decided by mutual agreement to create a Foundation for international sports-related arbitration, called the “International Council of Arbitration for Sport” (hereinafter the ICAS), under the aegis of which the CAS will henceforth be placed.

UEFA Anti-Doping : UEFA is recognised as one of the world’s leading team-sport organisations in the fight against doping, and the organisation continually strives to ensure that its education and testing programmes remain at the cutting edge of science and recognised good practice in all areas of prevention and detection.

SPORTS CONTRACTS: A TYPICAL SPORTS CONTRACT COULD BE AS BELOW:

  1. Professional services contracts – SALARY, INSURANCE, DURATION, NUMBER OF MATCHES AND OTHER FINANCIAL INITIATIVE( INDIAN CONTRACT LAW APPLICABLE)
  2. Endorsement contracts: IT IS GENERALLY SPONSORSHIP CONTRACT OR ADVERTISEMENT CONTRACT
  3.  Appearance contracts: GUEST APPEARANCE BY A SPORTS PERSON FOR THE ORGANISER IN PUBLIC FUNCTION.

INDIAN ARBITRATION ACT 1996

THE SEXUAL HARASSMENT OF SPORTS WOMEN: Act to provide protection against sexual harassment of women at workplace and for the prevention and redressal of complaints of sexual harassment and for matters connected therewith or incidental thereto.

GO TOP