BGS SGS SOMA JV Vs. NHPC Ltd-10/12/2019

SUPREME COURT OF INDIA JUDGMENTS

SEAR FOR ARBITRATION: The fact that in all the three appeals before us the proceedings were finally held at New Delhi, and the awards were signed in New Delhi, and not at Faridabad, would lead to the conclusion that both parties have chosen New Delhi as the “seat” of arbitration under Section 20(1) of the Arbitration Act, 1996. This being the case, both parties have, therefore, chosen that the Courts at New Delhi alone would have exclusive jurisdiction over the arbitral proceedings. Therefore, the fact that a part of the cause of action may have arisen at Faridabad would not be relevant once the “seat” has been chosen, which would then amount to an exclusive jurisdiction clause so far as Courts of the “seat” are concerned.

SUPREME COURT OF INDIA

BGS SGS SOMA JV Vs. NHPC Ltd.

[Civil Appeal No. 9307 of 2019 arising out SLP (Civil) No. 25618 of 2018]

[Civil Appeal No. 9308 of 2019 arising out SLP (Civil) No. 25848 of 2018]

[Civil Appeal No. 9309 of 2019 arising out SLP (Civil) No. 28062 of 2018]

ACT: Section 37 of the Arbitration and Conciliation Act, 1996 and Section 13(1) of the Commercial Courts Act, UNCITRAL Arbitration Rules.

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Arbitration agreement Vs Agreement for decision by an expert

Advocatetanmoy Law Library

In the case of K.K. Modi v. K.N. Modi, (1998) 3 SCC 573, a Bench of this Court (of which one of us was a member) had the occasion to consider the essential ingredients of an arbitration clause. Among the ingredients which are described in the said judgment, two important ingredients are; that the agreement between the parties must contemplate that substantive rights of parties will be determined by the agreed Tribunal and that the Tribunal will determine the rights of the parties in an impartial and judicial manner with the Tribunal owing an equal obligation of fairness towards both sides and also that the agreement of the parties to refer their disputes to the decision of the Tribunal must be intended to be enforceable in law. There is a difference between an expert determination and arbitration.

S.K. Chawla in the Law of arbitration and Conciliation at Page 164 states as follows:

“4. arbitration agreement to be distinguished from agreement for decision by an engineer or expert, contracts may contain a clause that on certain questions the decision of an engineer, architect or another expert shall be final. The decision given in such cases by the engineer etc., is not an award. As pointed out by Bernstein, such a person is under no obligation, unless the contract otherwise provides, to receive evidence or submissions and is entitled to arrive at his decision solely upon the results of his own expertise and investigations. The procedure involved is not arbitration, and the arbitration Act does not apply to it. The primary material on which such person acts is his own knowledge and experience, supplemented if he thinks fit by

(i) his own investigations; and/or

(ii) material (which need not conform to rules of ‘evidence’) put up before him by either party.

An arbitrator on the other hand, acts primarily on material put before him by the parties. The determination by an engineer or an expert would involve a less thorough investigation. Only one mind will be brought to bear on the problem. There will be no discovery of documents, there will not normally be any oral ‘evidence’ or oral submissions.”


 

Fiza Developers and Inter-Trade P. Ltd. Versus AMCI (I) Ltd. AND ANOTHER-27/07/2009

In an adversarial process, each party to a dispute presents its case to the natural adjudicator seeking to demonstrate the correctness of his own case and the wrongness of the other.

 While an applicant in an application under Section 34 is interested in getting an order setting aside an award, his opponent is equally interested in ensuring that it is not set aside, but upheld. While an applicant presents his case to the Judge to prove that the award is liable to be set aside, the respondent puts forth his case to refute the claim of the applicant that the award is liable to be set aside. An application under Section 34 in that sense is adversarial in nature. But proceedings under Section 34 differ from regular civil suits in a significant aspect. In a regular civil suit, in the event of failure to file a defence, it will be lawful for the Court to pronounce the judgment on the basis of facts contained in the plaint (Vide Order VIII, Rule 5(2) of the Code). But in an application under Section 34, even if there is no contest, the Court cannot, on the basis of the averments contained in the application, set aside the award. Whether there is contest or not, the applicant has to prove one of the grounds set out in Section 34(2)(a) and (b). Even if the applicant does not rely upon the grounds under clause (b, the Court, on its own initiative, may examine the award to find out whether it is liable to be set aside on either of the two grounds mentioned in Section 34(2)(b). It is perhaps in this sense, the High Court has stated that the proceedings may not be adversarial. Be that as it may.

AIR 2009 SCW 6395 : JT 2009 (12) SC 519 : (2009) 11 SCALE 371


SUPREME COURT OF INDIA

Fiza Developers and Inter-Trade P. Ltd. Versus AMCI (I) Ltd. AND ANOTHER

(Before : R. V. Raveendran And B. Sudershan Reddy, JJ.)

Civil Appeal No. 5139 of 2009 (arising out of S. L. P. (C) No. 16281 of 2009,

Decided on : 27-07-2009.

Arbitration and Conciliation Act, 1996—Sections 34 and 34(2)—Civil Procedure Code, 1908—Order 14 Rule 1 and Order 14 Rule 4(b).

Counsel for the Parties:

P. P. Rao, Sr. Advocate, C. Paramasivam, P. Ramesh, R. Aneeshan, Rakesh K. Sharma, for Appellant

P. V. Shetty, Sr. Advocate, G. N. Reddy, Vijay Kumar, for Respondents.

Judgment

R. Vs. Raveendran, J—The respondent has entered appearance through caveat. Leave granted. Heard the learned counsel.

2. Certain disputes between respondent and appellant were referred to arbitration. The Arbitrator made an award dated 14-9-2005 directing the appellant to pay to the first respondent, a sum of ` 57.6 crores with interest. The appellant filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 (in short ‘Act’) before the City Civil Court, Bangalore for setting aside the said award. The respondent filed its written statement, resisting the claim. The appellant made an application under Order XIV, Rules 1 and 3 of Code of Civil Procedure (‘Code’ for short) read with Rule 4(b) of the High Court of Karnataka Arbitration (Proceedings before the Courts) Rules, 2001 (‘Rule’ for short) requesting the Court to frame issues in the matter. The civil Court rejected the application by an Order dated 12-9-2006.

3. The petitioner’s Writ Petition challenging the said order was dismissed on 12-9-2008. The learned Single Judge was of the view that applications under Section 34 were not necessarily in the nature of a adversarial proceeding where a dispute between two parties requires adjudication by the Court; that there is a legal presumption in favour of the award being valid; and that whether the opposite party joins issue or not, the person challenging the award has to make out one of the grounds enumerated under Section 34(2) of the Act. Therefore, he held that there is no need for the Court to frame issues, as is done in a civil suit. The writ appeal filed by the petitioner was dismissed by the impugned order, affirming the decision of the learned Single Judge. Feeling aggrieved, the appellant has filed this appeal by special leave.

4. Sri P. P. Rao, learned Senior Counsel, for the appellant, submitted that Section 34(2) of the Act requires the party making the application to prove the existence of one of the grounds enumerated therein, to set aside an award. He contended that if the respondent filed a written statement contesting the application under Section 34 of the Act, the Court will have to frame issues to focus the attention of the parties on the specific questions in controversy requiring adjudication, so that evidence can be led by the parties with reference to the issues. He submitted that unless issues were framed, the evidence led by parties would not be precise and to the point, but lengthy and meandering. He also contended that Rule 4(b) of the Rules requires an application under Section 34 of the Act, to be dealt with and decided as a suit under the Code of Civil Procedure, and therefore, it is obligatory for the Court to frame issues in proceedings under Section 34 of the Act.

5. On the other hand, Sri. P. Vishwanatha Shetty, learned counsel for the respondents, contended that having regard to the scheme of the Act, and the need to dispose of the applications under Section 34 of the Act expeditiously, such proceedings are clearly intended to be summary in nature, and therefore, issues were not required to be framed.

6. The question that therefore arises for consideration is whether ‘issues’ as contemplated under Order 14, Rule 1, CPC should be framed in applications under Section 34 of the Act.

Need for framing issues

7. The object of issues is to focus upon the questions on which evidence has to be led and to indicate the party on whom the burden of proof lies. Rules 1 of Order 14 of the Code dealing with framing of issues is extracted below :

“1. Framing of issues – (1) Issues arise when a matreial proposition of fact or law is affirmed by the one party and denied by the other.

(2) Material propositions are those propositions of law or fact which a plaintiff must allege in order to show a right to sue or a defendant must allege in order to constitute his defence.

(3) Each material proposition affirmed by one party and denied by the other shall form the subject of a distinct issue.

(4) Issues are of two kinds – (a) Issues of fact, and (b) issues of law.

(5) At the first hearing of the suit, the Court shall, after reading the plaint and the written statements, if any, and after examination under Rule 2 of Order X and after hearing the parties or their pleaders, ascertain upon what material propositions of fact or of law the parties are at variance, and shall thereupon proceed to frame and record the issues on which the right decision of the case appears to depend.

(6) Nothing in this rule requires the Court to frame and record issues where the defendant at the first hearing of the suit makes no defence.”

In Makhan Lal Bangal vs. Manas Bhunia (2001) 2 SCC 652, this Court held that the issues are important as they determine the scope of a trial by laying down the path for the trial to proceed, free from diversions and departures. This Court observed :

“The evidence shall be confined to issues and the pleadings. No evidence on controversies not covered by issues and the pleadings, shall normally be admitted, for each party leads evidence in Suppl ort of issues the burden of proving which lies on him. The object of an issue is to tie down the evidence and arguments and decision to a particular question so that there may be no doubt on what the dispute is. The judgment, then proceeding issue-wise would be able to tell precisely how the dispute was decided.”

There is no doubt that framing of issues is necessary in every contested regular civil suit. Equally clear is the position that in proceedings which are intended to be summary in nature, issues are not framed. Proceedings for setting aside exparte decrees, proceedings for restitution, proceedings for execution and proceedings for permission to sue as an indigent person, are illustrative of summary proceedings which are governed by the Code, where issues are not framed. In a summary proceeding, the respondent is given an opportunity to file his objections or written statement. Thereafter, the Court will permit the parties to file affidavits in proof of their respective stands, and if necessary, permit cross-examination by the other side, before hearing arguments. Framing of issues in such proceedings is not necessary. We hasten to add that when it is said issues are not necessary, it does not mean that evidence is not necessary.

Scope of proceedings under Section 34 of the Act

8. Section 34 of the Act deals with applications for setting aside arbitral awards. Sub-section (1) provides that recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with subsections (2) and (3). Relevant portion of sub-section (2) of Section 34 is extracted below : “(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 decision 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 : **********

Sub-section (3) makes it clear that an application for setting aside the award has to be made within three months (extendable by not more than thirty days).

9. The scheme and provisions of the Act disclose two significant aspect relating to Courts vis-a-vis arbitration. The first is that there should be minimal interference by Courts in matters relating to arbitration. Second is the sense of urgency shown with reference to arbitration matters brought to Court, requiring promptness in disposal. Section 5 of the Act provides that notwithstanding anything contained in any other law for the time being in force, in matters governed by Part I of the Act, no judicial authority shall intervene except where so provided in the Act. Section 34 of the Act makes it clear than an Arbitral award can be set aside on the grounds enumerated in sub-section (2) of Section 34 and on no other ground. Sub-section (3) of Section 34 provides that an application for setting aside may not be made after three months and the maximum delay that can be condoned is only 30 days. In other words, the maximum period for challenging an award is three months plus 30 days, even if there is sufficient cause for condonation of a longer period delay. Section 36 provides that an award shall be enforced in the same manner as if it were a decree of the Court, but only on the expiry of the time for making an application to set asi,de the arbitral award under Section 34, or such application having been made, only after it has been refused. Thus, until the disposal of the application under Section 34 of the Act, there is an implied prohibition of enforcement of the arbitral award. The very filing and pendency of an application under Section 34, in effect, operates as a stay of the enforcement of the award.

10. We may therefore examine the question for consideration, by bearing three factors in mind. The first is that the Act is a special enactment and Section 34 provides for a special remedy. The second is that an arbitration award can be set aside only upon one of the grounds mentioned in sub-section (2) of Section 34 exists. The third is that proceedings under Section 34 requires to be dealt with expeditiously.

11. The scope of enquiry in a proceeding under Section 34 is restricted to consideration whether any one of the grounds mentioned in sub-section (2) of Section 34 exists for setting aside the award. We may approvingly extract the analysis relating to ‘Grounds of Challenge’ from the Law and Practice of Arbitration and Conciliation by Shri O. P. Malhotra (First Edition, Page 768, Para (I) 34-14) :

“Section 5 regulates Court intervention in arbitral process. It provides that notwithstanding anything contained in any other law for the time being in force in India, in matters governed by Part I of this Act, the Court will not intervene except where so porovided in this part. Pursuant to this policy, Section 34 imposes certain restrictions on the right of the Court to set aside an arbitral award. It provides, in all, seven grounds for setting aside an award. In other words, an arbitral award can be set aside only if one or more of these seven grounds exists. The first five grounds have been set forth in Section 34(2)(a). In order to successfully invoke any of these grounds, a party has to plead and prove the existence of one or more of such grounds. That is to say, the party challenging the award has to discharge the burden of proof by adducing sufficient credible evidence to show the existence of any one of such grounds.

The rest two grounds are contained in Section 34(2)(b) which provides that an award may be set aside by the Court on its own initiative if the subject-matter of the dispute is not arbitrable or the impugned award is in conflict with the public policy of India.”

The grounds for setting aside the award are specific. Therefore, necessarily a petitioner who files an application will have to plead the facts necessary to make out the ingredients of any of the grounds mentioned in sub-section (2) and prove the same. Therefore, the only question that arises in an application under Section 34 of the Act is whether the award requires to be set aside on any of the specified grounds in subsection (2) thereof. Sub-section (2) also Clearly places the burden of proof on the person who makes the application. Therefore, the question arising for adjudication as also the person on whom the burden of proof is placed is statutorily specified. Therefore, the need for issues is obviated. Framing of issues is necessary only where different types of material propositions of fact or law are affirmed by one party and are denied by the other and it is, therefore, necessary for the Court to identify the issues and specify the party on whom the burden to prove the same lies. When this exercise has already been done by the statute, there is no need for framing the issues. In other words, an application under Section 34 of the Act is a single issue proceeding, where the very fact that the application has been instituted under that particular provision declares the issue involved. Any further exercise to frame issues will only delay the proceedings. It is thus clear that issues need not be framed in applications under Section 34 of the Act.

What is the effect of Rule 4(b) of the Karnataka Rules ?

12. We may now examine whether rule 4(b) of the Rules framed by the High Court of Karnataka requires framing of issues. Rule 4 relied on by the appellant deals with “contents of application” and clause (b) which is relevant is extracted below :

“(b) Application under Section 14 or section 34 shall be registered as an arbitration suit, the applicant being treated as the plaintiff and the parties to the award other than the applicant being treated as defendants and the proceedings thereafter shall be continued as in the case of a suit and all the provisions of the Civil Procedure Code, 1908, shall apply to such proceeding insofar as they could be made applicable.”

It is no doubt true that the rule require that an application under Section 34 should be registered as an ‘arbitration suit’ and that the proceedings shall be conducted as in the case of a suit and all provisions of Civil Procedure Code which apply to such proceedings in so far as they could be made applicable. Rule 4 will have to read with Rule 12 which deals with “Applicability of the Civil Procedure Code, 1908”. It reads as under:

“Subject to what is provided for in the Arbitration and Conciliation Act and these Rules, the provisions of the Code of Civil Procedure and Karnataka Civil Rules of Practice may be applied to the proceedings under the Act to the extent considered necessary or appropriated by the Court of Judicial Authority.”

Rule 12 makes it clear that the provisions of Code will be applicable only to the extent considered necessary or appropriate by the Court. Thus there is no wholesale or automatic import of all the provisions of the Code, into proceedings under Section 34 of the Act, as that will defeat the very purpose and object of the Act. As already noticed, the Code deals with and makes provisions for regular civil suits as well as summary suits and proceedings. Therefore, rule 4(b) cannot be read or understood as making applicable all provisions of the Code, which apply to regular civil suits, to proceedings under Section 34. The Rules were made to give effect to the provisions of the Act and should be understood in consonance with the specific provisions and the object of the Act.

Conclusions :

13. Before concluding, there is a need to clarify the observation by the High Court that a proceeding under Section 34 may not be in the nature of adversarial proceedings. In an adversarial process, each party to a dispute presents its case to the natural adjudicator seeking to demonstrate the correctness of his own case and the wrongness of the other. (See : P. Ramanatha Iyer’s Advanced Law Lexicon, Third Edition, Vol. I, Page 152). While an applicant in an application under Section 34 is interested in getting an order setting aside an award, his opponent is equally interested in ensuring that it is not set aside, but upheld. While an applicant presents his case to the Judge to prove that the award is liable to be set aside, the respondent puts forth his case to refute the claim of the applicant that the award is liable to be set aside. An application under Section 34 in that sense is adversarial in nature. But proceedings under Section 34 differ from regular civil suits in a significant aspect. In a regular civil suit, in the event of failure to file a defence, it will be lawful for the Court to pronounce the judgment on the basis of facts contained in the plaint (Vide Order VIII, Rule 5(2) of the Code). But in an application under Section 34, even if there is no contest, the Court cannot, on the basis of the averments contained in the application, set aside the award. Whether there is contest or not, the applicant has to prove one of the grounds set out in Section 34(2)(a) and (b). Even if the applicant does not rely upon the grounds under clause (b, the Court, on its own initiative, may examine the award to find out whether it is liable to be set aside on either of the two grounds mentioned in Section 34(2)(b). It is perhaps in this sense, the High Court has stated that the proceedings may not be adversarial. Be that as it may.

14. Having regard to the object of the Act, that is providing an expeditious alternative binding dispute resolution process with minimal Court intervention, it is difficult to envisage proceedings under Section 34 of the Act as full-fledged regular civil suits under Code of Civil Procedure. Applications under Section 34 of the Act are summary proceedings with provision for objections by the defendant/respondent, followed by an opportunity to the applicant to ‘prove’ the existence of any ground under Section 34(2). The applicant is permitted to file affidavits of his witnesses in proof. A corresponding opportunity is given to the defendant/respondent to place his evidence by affidavit. Where the case so warrants, the Court permits cross-examination of the persons swearing to the affidavit. Thereafter, Court hears arguments and/or receives written submissions and decides the matter. This is of course the routine procedure. The Court may vary the said procedure, depending upon the facts of any particular case or the local rules. What is however clear is that framing of issues as contemplated under Rule 1 of Order 14 of the Code is not an integral part of the process of proceedings under Section 34 of the Act.

15. We therefore find no reason to interfere with the impugned order of the High Court. The appeal is dismissed. As the award is of the year 2005, we request the City Civil Court to dispose of the application expeditiously.

M/s. Canara Nidhi Ltd. Vs. M. Shashikala and Others-23/09/2019

The proceedings under Section 34 of the Act are summary in nature.

Issues need not be stuck at the stage of hearing a Section 34 application, which is a summary procedure

The scope of enquiry in the proceedings under Section 34 of the Act is restricted to a consideration whether any of the grounds mentioned in Section 34(2) or Section 13(5) or Section 16(6) are made out to set aside the award. The grounds for setting aside the award are specific. It is imperative for expeditious disposal of cases that the arbitration cases under Section 34 of the Act should be decided only with reference to the pleadings and the evidence placed before the arbitral tribunal and the grounds specified under Section 34(2) of the Act.

When the order of the District Judge dismissing the application filed by respondent Nos.1 and 2 does not suffer from perversity, the High Court, in the exercise of its supervisory jurisdiction under Articles 226 and 227 of the Constitution of India, ought not to have interfered with the order

ACTS: Section 34 of the Arbitration and Conciliation Act, 1996 /Order XIV Rule 1 of Civil Procedure Code

SUPREME COURT OF INDIA

M/s. Canara Nidhi Ltd. Vs. M. Shashikala and Others

[Civil Appeal No. 7544-7545 of 2019 arising out of SLP(C) Nos. 35673-74 of 2014]

R. BANUMATHI, J.

1. Leave granted.

2. In the application under Section 34 of the Arbitration and Conciliation Act, 1996 (the Act) seeking to set aside the award, whether the parties can adduce evidence to prove the specified grounds in sub-section (2) to Section 34 of the Act, is the question falling for consideration in these appeals.

3. These appeals arise out of the judgment dated 12.09.2014 passed by the High Court of Karnataka at Bangalore in Writ Petition Nos.18374-75 of 2010 (GM-RES) in and by which the High Court set aside the order passed by the District Judge and directed the District Judge to “recast the issues” and permit respondent Nos.1 and 2 to file affidavits of their witnesses and also permitting cross-examination of the witnesses.

4. Brief facts which led to filing of these appeals are as under:- The appellant is the financial institution and the appellant advanced a loan of Rs.50,00,000/- to respondent No.1 and respondent Nos.2, 4 and 5 to 8 were the guarantors in respect of such loan. The loan was secured by a mortgage with deposit of title deeds and respondent No.1 is also said to have executed a demand promissory note for repayment of the loan. There was an arbitration clause in the agreement to resolve dispute between the parties. It is alleged that the first respondent did not repay the loan and failed to discharge the liabilities arising out of the transaction. The dispute between the appellant and the first respondent was referred to arbitration to the third respondent-Arbitrator. Before the arbitrator, both the parties adduced oral and documentary evidence. The arbitrator passed an award dated 15.12.2007 and directed the respondents to pay an amount of Rs.63,82,802/- with interest on Rs.50,00,000/- at 14% per annum from 11.08.2000 and cost of Rs.52,959/-.

5. Assailing the award, respondent No.1 filed AS No.1 of 2008 under Section 34 of the Act in the Court of District Judge at Mangalore. Before the District Judge, respondent Nos.1 and 2 filed an application under Section 151 CPC to permit the respondents to adduce evidence. The appellant filed objections to the said application. By the order dated 02.06.2010, the learned District Judge dismissed the said application. Holding that the grounds urged in the application can very well be met with by the records of the arbitration proceedings and by perusing the arbitral award, the learned District Judge further held that in any event, there is no necessity of adducing fresh evidence in the application filed under Section 34 of the Act.

6. Aggrieved by the dismissal of their application under Section 151 CPC, respondent Nos.1 and 2 filed writ petitions before the High Court under Articles 226 and 227 of the Constitution of India. The High Court by the impugned judgment allowed the writ petitions and directed the learned District Judge to “recast the issues” and allow respondent Nos.1 and 2 to file affidavits of their witnesses and further allow cross-examination of the witnesses. After referring to the judgment in Fiza Developers and Inter-Trade Private Limited v. AMCI (India) Private Limited and another (2009) 17 SCC 796, the High Court observed that in order to prove the existence of the grounds under Section 34(2) of the Act, respondent Nos.1 and 2 are permitted to file affidavits of their witnesses. In the impugned judgment, the High Court concluded that the reasoning of the District Judge not permitting respondent Nos.1 and 2 to file their own affidavits and affidavits of other witnesses to prove their case is erroneous and opposed to settled principles of law. As pointed out earlier, the learned District Judge was directed to “recast the issues” and the court below was directed to permit respondent Nos.1 and 2 to file affidavits of their witnesses and extend corresponding opportunity to the appellant to place their evidence by affidavit. Being aggrieved, the appellant has preferred these appeals. This Court ordered notice vide order dated 06.01.2015 and further ordered that there shall be stay of the proceedings in AS No.1 of 2008.

7. Assailing the impugned judgment, Mr. S.N. Bhat, learned counsel appearing for the appellant submitted that it is wellsettled that proceedings under Section 34 of the Act is summary in nature and the scope of the said proceedings is very limited. It was submitted that the validity of the award has to be decided on the basis of the materials produced before the arbitrator and there is no scope for adducing fresh evidence before the court in the proceedings under Section 34 of the Act. The learned counsel submitted that the High Court, in the present case, misread the ratio of the decision of the Supreme Court in Fiza Developers. It was inter alia urged that in any event, in the present case, respondent Nos.1 and 2 did not make out any exceptional grounds for permission to lead fresh evidence in the proceedings under Section 34 of the Act and the learned District Judge rightly rejected the application filed by respondent Nos.1 and 2 for permission to lead evidence. The learned counsel urged that the High Court erred in interfering with the order passed by the trial court in interlocutory application.

8. Reiterating the findings of the impugned judgment of the High Court, Ms. E.R. Sumathy, learned counsel appearing for respondent Nos.1 and 2 submitted that in order to prove the grounds stated in the application filed under Section 34 of the Act adducing additional evidence is necessary. It was submitted that respondent Nos.1 and 2 sought to adduce evidence to prove the grounds enumerated under Section 34(2) (a) of the Act. The learned counsel submitted that the grounds for setting aside the award are specific and therefore, necessarily respondent Nos.1 and 2 will have to plead and prove the grounds mentioned in Section 34(2) of the Act and prove the same and the High Court rightly allowed the writ petitions giving an opportunity to respondent Nos.1 and 2 to adduce evidence in the proceedings under Section 34 of the Act.

9. The proceedings under Section 34 of the Act are summary in nature. The scope of enquiry in the proceedings under Section 34 of the Act is restricted to a consideration whether any of the grounds mentioned in Section 34(2) or Section 13(5) or Section 16(6) are made out to set aside the award. The grounds for setting aside the award are specific. It is imperative for expeditious disposal of cases that the arbitration cases under Section 34 of the Act should be decided only with reference to the pleadings and the evidence placed before the arbitral tribunal and the grounds specified under Section 34(2) of the Act.

10. The learned counsel for respondent Nos.1 and 2 submitted that in view of Rule 4(b) of the High Court of Karnataka Arbitration (Proceedings before the Courts) Rules, 2001, (Karnataka High Court Arbitration Rules) all the proceedings of the Civil Procedure Code, 1908 shall apply to such proceedings and therefore, the High Court rightly allowed the writ petitions and permitted respondent Nos.1 and 2 to file their own affidavits and also the affidavits of the witnesses. Rule 4(b) of the Karnataka High Court Arbitration Rules provides that all the proceedings of the Civil Procedure Code shall apply to such proceeding/application filed under Sections 14 or 34 of the Act insofar as they could be made applicable. Rule 4(b) of Karnataka High Court Arbitration Rules, in our view, are only procedural. In Fiza Developers, the Supreme Court noticed Rule 4(b) of Karnataka High Court Arbitration Rules and made it clear that there is no wholesale or automatic import of all the provisions of Civil Procedure Code into the proceedings under Section 34 of the Act as that will defeat the very purpose and object of the Arbitration Act, 1996.

11. In Fiza Developers, the question which arose for consideration by the court was whether issues as contemplated under Order XIV Rule 1 of Civil Procedure Code should be framed in the application under Section 34 of the Act. The court held that framing of issues as contemplated under Order XIV Rule 1 CPC is not required in an application under Section 34 of the Act which proceeding is summary in nature. In paras (14), (17), (21) and (24) of Fiza Developers, it was held as under:-

“14. In a summary proceeding, the respondent is given an opportunity to file his objections or written statement. Thereafter, the court will permit the parties to file affidavits in proof of their respective stands, and if necessary permit cross-examination by the other side, before hearing arguments. Framing of issues in such proceedings is not necessary. We hasten to add that when it is said issues are not necessary, it does not mean that evidence is not necessary. ……..

17. The scheme and provisions of the Act disclose two significant aspects relating to courts vis-à-vis arbitration. The first is that there should be minimal interference by courts in matters relating to arbitration. Second is the sense of urgency shown with reference to arbitration matters brought to court, requiring promptness in disposal. ……….

21. We may therefore examine the question for consideration by bearing three factors in mind. The first is that the Act is a special enactment and Section 34 provides for a special remedy. The second is that an arbitration award can be set aside only upon one of the grounds mentioned in sub-section (2) of Section 34 exists. The third is that proceedings under Section 34 requires to be dealt with expeditiously. ……..

24. In other words, an application under Section 34 of the Act is a single issue proceeding, where the very fact that the application has been instituted under that particular provision declares the issue involved. Any further exercise to frame issues will only delay the proceedings. It is thus clear that issues need not be framed in applications under Section 34 of the Act.”

12. Though this Court held that the applications under Section 34 of the Act are summary proceedings, an opportunity to the aggrieved party has to be afforded to prove existence of any of the grounds under Section 34(2) of the Act. This court thus permitted the applicant thereon to file affidavits of his witnesses in proof thereof. In para (31) of Fiza Developers, this Court held as under:-

31. Applications under Section 34 of the Act are summary proceedings with provision for objections by the respondent defendant, followed by an opportunity to the applicant to “prove” the existence of any ground under Section 34(2). The applicant is permitted to file affidavits of his witnesses in proof. A corresponding opportunity is given to the respondent-defendant to place his evidence by affidavit. Where the case so warrants, the court permits cross-examination of the persons swearing to the affidavit. Thereafter, the court hears arguments and/or receives written submissions and decides the matter. This is of course the routine procedure. The court may vary the said procedure, depending upon the facts of any particular case or the local rules. What is however clear is that framing of issues as contemplated under Rule 1 of Order 14 of the Code is not an integral part of the process of a proceedings under Section 34 of the Act.”

13. After referring to the judgment in Fiza Developers, in the impugned judgment, the High Court held that respondent Nos.1 and 2 are to be afforded an opportunity to file their and their witnesses’ affidavits in proof of their case to prove the grounds set out in Section 34(2)(a) of the Act.

14. After the decision in Fiza Developers, Section 34 was amended by Act 3 of 2016 by which sub-sections (5) and (6) of Section 34 were added to the Principal Act w.e.f. 23.10.2015. Sub-sections (5) and (6) to Section 34 of the Act read as under:-

“34. Application for setting aside arbitral award.- (1)-(4) …….. (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.”

15. The judgment in Fiza Developers was considered by Justice B.N. Srikrishna Committee which reviewed the institutionalisation of the arbitration mechanism and pointed out that opportunity to furnish proof in proceedings under Section 34 of the Arbitration Act has led to inconsistent practices. The said Committee reported as under:-

“5. Amendment to Section 34(2)(a) of the ACA: Sub-section (2) (a) of Section 34 of the ACA provides for the setting aside of arbitral awards by the court in certain circumstances. The party applying for setting aside the arbitral award has to furnish proof to the court. This requirement to furnish proof has led to inconsistent practices in some High Courts, where they have insisted on Section 34 proceedings being conducted in the manner as a regular civil suit. This is despite the Supreme Court ruling in Fiza Developers & Inter-Trade (P) Ltd. v. AMCI (India) (P) Ltd. (2009) 17 SCC 796 that proceedings under Section 34 should not be conducted in the same manner as civil suits, with framing of issues under Rule 1 of Order 14 of the CPC. In light of this, the Committee is of the view that a suitable amendment may be made to Section 34(2)(a) to ensure that proceedings under Section 34 are conducted expeditiously. Recommendation: An amendment may be made to Section 34(2) (a) of the Arbitration and Conciliation Act, 1996, substituting the words ‘furnishes proof that’ with the words ‘establishes on the basis of the Arbitral Tribunal’s record that’.”

[Report of Justice B.N. Srikrishna Committee quoted in Emkay Global Financial Services Ltd. v. Girdhar Sondhi (2018) 9 SCC 49]

16. Based upon Justice B.N. Srikrishna Committee’s report, Section 34 of the Principal Act has been amended by Arbitration and Conciliation (Amendment) Act, 2019 as under:-

“7. Amendment of Section 34.-In Section 34 of the principal Act, in sub-section (2), in clause (a), for the words “furnishes proof that”, the words “establishes on the basis of the record of the Arbitral Tribunal that” shall be substituted.”

17. After referring to Justice B.N. Srikrishna Committee’s report and other judgments and observing that the decision in Fiza Developers must be read in the light of the amendment made in Section 34(5) and Section 34(6) of the Act and amendment to Section 34 of the Arbitration Act, 1996, in Emkay Global Financial Services Limited v. Girdhar Sondhi (2018) 9 SCC 49, it was held as under:-

“21. It will thus be seen that speedy resolution of arbitral disputes has been the reason for enacting the 1996 Act, and continues to be the reason for adding amendments to the said Act to strengthen the aforesaid object. Quite obviously, if issues are to be framed and oral evidence taken in a summary proceeding under Section 34, this object will be defeated. It is also on the cards that if Bill No. 100 of 2018 is passed, then evidence at the stage of a Section 34 application will be dispensed with altogether. Given the current state of the law, we are of the view that the two early Delhi High Court judgments in Sandeep Kumar v. Ashok Hans 2004 SCC OnLine Del 106, Sial Bioenergie v. SBEC Systems 2004 SCC OnLine Del 863, cited by us hereinabove, correctly reflect the position in law as to furnishing proof under Section 34(2)(a). So does the Calcutta High Court judgment in WEB Techniques and Net Solutions (P) Ltd. v. Gati Ltd. 2012 SCC OnLine Cal 4271. We may hasten to add that if the procedure followed by the Punjab and Haryana High Court judgment in Punjab SIDC Ltd. v. Sunil K. Kansal 2012 SCC Online P & H 19641 is to be adhered to, the time-limit of one year would only be observed in most cases in the breach. We, therefore, overrule the said decision. We are constrained to observe that Fiza Developers was a step in the right direction as its ultimate ratio is that issues need not be struck at the stage of hearing a Section 34 application, which is a summary procedure.

However, this judgment must now be read in the light of the amendment made in Sections 34(5) and 34(6). So read, we clarify the legal position by stating that an application for setting aside an arbitral award will not ordinarily require anything beyond the record that was before the arbitrator. However, if there are matters not contained in such record, and are relevant to the determination of issues arising under Section 34(2)( a ), they may be brought to the notice of the Court by way of affidavits filed by both parties. Cross-examination of persons swearing to the affidavits should not be allowed unless absolutely necessary, as the truth will emerge on a reading of the affidavits filed by both parties.

We, therefore, set aside the judgment in Girdhar Sondhi v. Emkay Global Financial Services Ltd. 2017 SCC OnLine Del 12758 of the Delhi High Court and reinstate that of the learned Additional District Judge dated 22-9-2016. The appeal is accordingly allowed with no order as to costs.” The legal position is thus clarified that Section 34 application will not ordinarily require anything beyond the record that was before the arbitrator and that cross-examination of persons swearing in to the affidavits should not be allowed unless absolutely necessary.

18. The question falling for consideration is whether the present case is such an exceptional circumstance that it was necessary to grant opportunity to respondent Nos.1 and 2 to file affidavits and to cross-examine the witnesses is made out. The affidavit filed by the respondents along with application filed under Section 151 CPC does not indicate as to what point the first respondent intends to adduce except stating that the first respondent intends to adduce additional evidence relating to the subject of dispute. The affidavit does not disclose specific documents or evidence required to be produced except stating that the first respondent intends to adduce additional evidence or otherwise the first respondent will be subjected to hardship in the arbitration suit filed by her under Section 34 of the Act. As rightly contended by the learned counsel appearing for the appellant that there are no specific averments in the affidavit as to the necessity and relevance of the additional evidence sought to be adduced.

19. By perusal of the award, it is seen that before the arbitrator, respondent No.1 filed her written statement and other respondents also filed separate written statements. It was contended that the documents were forged. Both parties adduced oral and documentary evidence. The appellant led evidence by examining two witnesses Balakrishna Nayak (PW-1) and B.A. Baliga (PW-2) and exhibited documents P1 to P47. Respondent Nos.1 and 2 also examined five witnesses viz. M. Shashikala (RW-1), Mamatha @ Mumtaz Hameed (RW- 2), Latha (RW-3), Chitralekha Umesh (RW-4) and B.R. Nagesh (RW-5).

Respondent Nos.1 and 2 also produced documentary evidence Ex.-R1 to R13. As held by the District Judge, the grounds urged in the application can very well be considered by the evidence adduced in the arbitration proceedings and considering the arbitral award. Further, the application filed by respondent Nos.1 and 2 seeking permission to adduce evidence, no ground was made out as to the necessity of adducing evidence and what was the nature of the evidence sought to be led by respondent Nos.1 and 2. The proceedings under Section 34 of the Act are summary proceedings and is not in the nature of a regular suit.

By adding sub-sections (5) and (6) to Section 34 of the Act, the Act has specified the time period of one year for disposal of the application under Section 34 of the Act. The object of sub-sections (5) and (6) to Section 34 fixing time frame to dispose of the matter filed under Section 34 of the Arbitration Act, 1996 is to avoid delay and to dispose of the application expeditiously and in any event within a period of one year from the date of which the notice referred to in Section 34(5) of the Act is served upon the other party. In the arbitration proceedings, the parties had sufficient opportunity to adduce oral and documentary evidence.

The High Court did not keep in view that respondent Nos.1 and 2 have not made out grounds that it is an exceptional case to permit them to adduce evidence in the application under Section 34 of the Act. The said directions of the High Court amount to retrial on the merits of the issues decided by the arbitrator. When the order of the District Judge dismissing the application filed by respondent Nos.1 and 2 does not suffer from perversity, the High Court, in exercise of its supervisory jurisdiction under Articles 226 and 227 of the Constitution of India, ought not to have interfered with the order passed by the District Judge and the impugned judgment cannot be sustained.

20. In the result, the impugned judgment dated 12.09.2014 passed by the High Court of Karnataka at Bangalore in Writ Petition Nos.18374-75 of 2010 (GM-RES) is set aside and these appeals are allowed. The order of the District Judge dismissing the application filed under Section 151 CPC in AS No.1 of 2008 is affirmed. The learned District Judge shall take up AS No.1 of 2008 and dispose of the same expeditiously in accordance with the law. No costs.

J. [R. BANUMATHI]

J. [A.S. BOPANNA]

New Delhi;

September 23, 2019

M/s. Avinash Hitech City 2 Society & Ors. Vs. Boddu Manikya Malini & ANR. etc. 6/9/2019

SUPREME COURT OF INDIA

M/s. Avinash Hitech City 2 Society & Ors. Vs. Boddu Manikya Malini & ANR. etc.

[Civil Appeal Nos. 7047-7049 of 2019 arising out of SLP (Civil) Nos. 4213-4215 of 2019]

M. R. Shah, J.

1. Leave granted.

2. Feeling aggrieved and dissatisfied with the impugned common judgment and order dated 22.11.2018 passed by the High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh in C.M.A. Nos. 1257, 1379 and 1380 of 2017 by which the High Court has dismissed the said appeals and has confirmed the order passed by the learned Principal District Judge, Ranga Reddy rejecting applications under Section 8 of the Arbitration and Conciliation Act, 1996 filed by the appellants herein and has refused to refer the dispute between the parties to the Arbitrator, the original applicants have preferred the present appeals.

3. The facts leading to the present appeals in nutshell are as under:

3.1 That the original landowners of the land admeasuring 25 acres and 68 cents in aggregate forming part of Survey Nos. 30, 34, 35 and 38 situated at Gachibowli Village, Serilingampally, Rangareddy District executed 17 development agreements cum power of attorney in favour of one Phoenix Infocity Private Limited for developing an integrated complex comprising of residential units, commercial and office spaces and service apartments on the project land. Subsequently, the owners constituted themselves into three societies registered under the Andhra Pradesh Societies Registration Act, 2001, namely Avinash Hitech City 2 Society (appellant no. 1), Ganga Hitech City 2 Society and Vignesh Hitech City 2 Society.

That the said societies applied for and were granted codeveloper status in respect of the SEZ Project. It appears that thereafter the parties to each of the Development Agreements executed Supplementary Development Agreements to their respective Development Agreement. That, in terms of the Development Agreements and the Supplementary Development Agreements, the constructed space in the proposed buildings were to be shared in the ratio of 37.5 : 62.5 between the owners and the developer. Accordingly, the developer was allotted 11 commercial complexes and the owners were allotted 4 commercial complexes.

It seems that the respondents are the owners who have been allotted a share in building H1B and also are the members of the appellant no. 1 Society. It appears that, thereafter, an Addendum to the Supplementary Development Agreement was executed by inter alia the appellants and the respondents (excluding the lessee, HCL Technologies Limited) on 12.03.2010. Clause 19 of the Addendum provides for the mechanism to resolve the dispute between the parties (which shall be dealt with hereinbelow). Clause 13 of the Addendum is with respect to the collection of lease rents in respect of the extends leased out in a given building earmarked as the share of the owners till the completion. Clause 16 empowers the societies to determine and collect monthly maintenance charges from the owners and Clause 18 provides that the owners are liable to pay the proportionate share of common expenses for upkeep and maintenance to the societies.

3.2 A cold shell of building H1B was completed by the developer and appellant no. 1 Society converted the same to warm shell by setting up the air conditioning facilities, backup generators and backup power implementation, building management system implementation, electrical works and civil works and the funds for the same were raised by appellant no. 1 Society by way of bank loans. Thereafter, various spaces in building H1B were leased out to HCL Technologies Ltd. and the rents were collected by appellant no. 1 Society.

3.3 That, thereafter, the respondents filed a petition under Section 23 of the Andhra Pradesh Societies Registration Act, 2001 (for short ‘the Societies Registration Act’) before the Principal District Judge, Ranga Reddy District making an allegation that their purported share in the rentals were not being paid to them and prayed for a direction to appellant no. 1 Society to produce the entire accounts for the rental amounts received by it from the tenants along with audit reports and minute books from 2011 to 2015. The respondents also prayed that appellant no. 1 Society be directed to pay amounts already due to the respondents, being their purported share in the rental amounts.

That, thereafter another petition was filed by the respondents praying that the Court split appellant no. 1 Society into two different societies claiming to have “lost all faith and confidence on the integrity” of the executive committee of appellant no. 1 Society and claiming that their interest could no longer be protected by appellant no. 1 Society. That, thereafter, third application was filed by the respondents before the learned District Judge under Section 23 of the Societies Registration Act and prayed for a mandatory injunction against the appellants herein directing them to inter alia distribute the rents purportedly received by appellant no. 1 Society.

3.4 In the light of the arbitration Clause 19 of the Addendum, the appellants filed petitions under Section 8 of the Arbitration and Conciliation Act, 1996 seeking the appointment of an arbitrator in accordance with Clause 19 of the Addendum. All the three applications came to be dismissed by the learned District Judge on the ground that the disputes between the parties in the petition under Section 23 of the Societies Registration Act are not covered under Clause 19 of the Addendum.

3.5 Aggrieved by the order of the learned District Judge dismissing the application under Section 8 of the Arbitration and Conciliation Act, the appellants herein preferred three separate appeals before the High Court. By the impugned common judgment and order dated 22.11.2018, the High Court has dismissed the said appeals.

Hence, the present appeals.

4. Shri Jayant Bhushan, learned Senior Advocate appearing on behalf of the appellants has vehemently submitted that, in the facts and circumstances of the case, the High Court has materially erred in dismissing the appeals and confirming the order passed by the learned District Judge dismissing the applications filed under Section 8 of the Arbitration and Conciliation Act, 1996. It is vehemently submitted by Shri Jayant Bhushan, learned Senior Advocate appearing on behalf of the appellants that the High Court has failed to appreciate Clause 19 of the Addendum to the Supplementary Development Agreement dated 12.03.2010 in proper perspective while dismissing the applications of the appellants under Section 8 of the Arbitration and Conciliation Act, 1996.

4.1 It is vehemently submitted by the learned Senior Advocate appearing on behalf of the appellants that the dispute between the appellants and the respondents is the quantum of the share claimed by the respondents in the lease rents collected by appellant no. 1 Society. It is submitted that the respondents are claiming their share in the rent collected by appellant no. 1 Society relying upon the relevant provisions of the Development Agreements and the Supplementary Development Agreements and the Addendum. It is submitted that, therefore, the dispute can be said to be arising out of the agreements executed between the parties and the Addendum.

It is submitted that, therefore, Clause 19 of the Addendum shall be squarely applicable. It is further submitted that Clause 19 of the Addendum is very clear and, as per Clause 19, any dispute between the owners, including the dispute relating to the Addendum and all questions relating to its interpretation shall be construed in accordance with the laws of India. It further provides that, except as otherwise specifically provided in the Agreement, in the event of any dispute or difference arising among the parties out of, in connection with or relating to this agreement, shall be governed by Clause 19 of the Addendum and Subclauses (a) to (g) of Clause 19 shall be applicable. It is submitted that therefore the dispute between the parties for which the respondents filed the application under Section 23 of the Societies Registration Act before the District Judge shall be squarely covered within Clause 19 and therefore the High Court ought to have allowed the appeals and ought to have referred the dispute to Arbitrator as per Clause 19 of the Addendum.

4.2 It is further submitted by the learned Senior Advocate appearing on behalf of the appellants that the High Court has materially erred in observing and holding that in the event of any dispute which involves two or more owners of the space in the same building only, Clause 19 shall be applicable.

4.3 It is vehemently submitted by Shri Jayant Bhushan, learned Senior Advocate for the appellants that appellant no.1 Society is a codeveloper and has received the rent as per Clause 13 of the Agreement. It is submitted that in any case when the respondents are claiming their share in the rent collected and received by the appellant and the dispute is sharing of the rent of the space rented, certainly Clause 19 of the Addendum shall be applicable.

4.4 It is further submitted by the learned Senior Advocate appearing on behalf of the appellants that the High Court has materially erred in considering Subclause (e) of Clause 19 of the Addendum only and has materially erred in not considering the entire Clause 19 of the Addendum and the intention of the parties to the Agreement/Addendum.

4.5 Making the above submissions, it is prayed to allow the present appeals and quash and set aside the impugned common judgment and order passed by the High Court and consequently allow the three applications filed under Section 8 of the Arbitration and Conciliation Act and refer the dispute between the parties for which the respondents filed an application under Section 23 of the Societies Registration Act to Arbitration.

5. Shri Joy Basu, learned Senior Advocate appearing on behalf of the contesting respondents has opposed the present appeals and has supported the impugned common judgment and order passed by the High Court.

5.1 It is vehemently submitted by the learned Senior Advocate appearing on behalf of the respondents that, in the facts and circumstances of the case and considering the relevant subclauses of Clause 19 of the Addendum, the High Court has rightly not interfered with the order passed by the learned District Judge while not referring the dispute to Arbitration and not appointing the Arbitrator.

5.2 It is vehemently submitted by learned Senior Advocate appearing on behalf of the respondents that on fair reading of Clause 19 of the Addendum, only the disputes and differences arising between the Owners [Subclause (c) of Clause 19]; the dispute which involves two or more societies or owners who are the members of the different societies [Subclause (d) of Clause 19]; or the dispute which involves two or more owners of the space in the same building [Subclause (e) of Clause 19], are required to be referred to Arbitration and to the Arbitral Tribunal comprising of the sole arbitrator.

It is submitted that, in the present case, the dispute between the respondents and the appellants cannot be said to be between the owners or between the two or more societies. It is submitted that even the opening part of Clause 19 specifically refers to any dispute between the owners. It is submitted that therefore the High Court has rightly observed and held that the dispute between the respondents and the appellants shall not fall in any of the Subclauses of Clause 19. It is submitted that no error has been committed by the High Court and the learned District Judge.

5.3 Making the above submissions, it is prayed to dismiss the present appeals.

6. We have heard the learned counsel appearing on behalf of the respective parties at length. At the outset, it is required to be noted that the dispute between the parties for which the respondents have initiated proceedings under Section 23 of the Societies Registration Act is with respect to sharing of the rent of the leased space. It is required to be noted that appellant no. 1 Society claims to be the codeveloper. It cannot be disputed and it is not in dispute that owners, societies and developers are the parties to the Development Agreements, Supplementary Development Agreements and the Addendum.

According to appellant no. 1codeveloper, after execution of the Development Agreements, Supplementary Development Agreements and the Addendum, a cold shell in building H1B was completed by the developer and appellant no. 1 Society (as codeveloper), converted the same to warm shall by setting up the air conditioning facilities, backup generators and backup power implementation, building management system implementation, electrical works and civil works and the funds for the same were raised by appellant no. 1 Society by way of bank loans. That, thereafter, various spaces in building H1B were leased out to HCL Technologies Limited and one other and they recovered the rent from the lessee.

As per Clause 13 of the Addendum/Agreement which sets out that the societies would be the “sole authorities” to collect/receive the lease rents in respect of the extends leased out in a given building earmarked as the share of the owners in the completion and pool the entire revenue generated from each of the buildings by way of lease rents and distribute the same to the owners, prorata to their respective shares in the buildup space in the project after addressing the liabilities towards loans. Therefore, the dispute between the respondents and the appellants with respect to the sharing of the rent with respect to the leased space can be said to be related to the Addendum and/or in connection with or relating to the Addendum.

7. Clause 19 of the Addendum, which is the arbitration clause and provides how to settle the dispute between the parties, reads as under:

“The owners agree that any dispute between the Owners, including the dispute relating to this Addendum and all questions relating to its interpretation shall be construed in accordance with the laws of India, without reference to its principles of conflicts of law. Except as otherwise specifically provided in this Agreement, the following provisions apply in the event of any dispute or difference arising among the Parties out of, in connection with or relating to the Agreement (The ‘Dispute’).

(a) The Dispute shall be deemed to have occurred, when one Party serves on the other Party/ies a notice stating the nature of the Dispute (‘Notice of Dispute’).

(b) The Parties hereto agree that they will use all reasonable efforts to resolve among themselves, any Dispute between them through negotiations.

(c) Any Dispute and differences whatsoever arising between the Owners which could not be resolved by Parties through negotiations, within a period of thirty (30) days from the service of the Notice of Dispute, the same shall be referred to and shall finally be settled by arbitration in accordance with the (Indian) Arbitration and Conciliation Act, 1996, and all the proceedings shall be conducted in English and a daily transcript in English shall be prepared.

(d) In the event of any dispute which involves two or more Societies or Owners who are the members of two different Societies, the arbitral tribunal shall comprise of three or more arbitrators. In such a situation, each party to the dispute shall appoint one arbitrator, who shall be from the office bearers of their respective Societies and the two or more arbitrators so appointed shall appoint a presiding arbitrator, who shall be one of the office bearers of the Hitech City2 Owners Welfare Association (HOWA) and the Chairman of the arbitral tribunal; and the venue of arbitration shall be in Hyderabad, India.

(e) In the event of any dispute which involves two or more Owners of the space in the same building, the arbitral tribunal shall comprise of the sold arbitrator. In such a situation, each party to the dispute shall refer the matter to the office bearers of their respective Society which shall be the arbitral tribunal; and the venue of arbitration shall be in Hyderabad, India.

(f) The Parties are debarred from exercising any right or filing any application to any court or tribunal having jurisdiction in connection with matters involving substantial questions of law arising during any arbitration.

(g) The Parties here by submit to the Arbitrator’s award and the award shall be enforceable in any competent court of law.”

7.1 On reading Clause 19 of the Addendum as a whole, it appears that in the event of dispute or difference among the parties out of, in connection with or relating to the agreement, the same shall be referred to arbitration. However, subclauses (c), (d) and (e) provide for different procedure in the event of any disputes and differences between the owners; between two or more societies or owners who are the members of two different societies and between two or more owners of the space in the same building.

Subclause (c) of Clause 19 provides that any disputes or differences whatsoever arising between owners, which could not be resolved by the parties through negotiations, within a period of 30 days from the service of the notice of dispute, the same shall be referred to and shall finally be settled by the arbitration in accordance with the (Indian) Arbitration and Conciliation Act, 1996. Subclause (d) of Clause 19 provides that in the event of any dispute which involves two or more societies or owners who are the members of two different societies, the arbitral tribunal shall comprise of three or more arbitrators.

It further provides, “who shall be appointed as a presiding arbitrator; who shall be the Chairman of the arbitral tribunal and the venue of the arbitration”. Subclause (e) of Clause 19 provides that in the event of any dispute which involves two or more owners of the space in the same building, the arbitral tribunal shall comprise of the sole arbitrator and, in such a situation, each party to the dispute shall refer the matter to the office bearers of their respective Society which shall be the arbitral tribunal and the venue of arbitration shall be in Hyderabad.

7.2 As observed hereinabove, Clause 19 shall be applicable in the event of any dispute and difference arising among the parties out of, in connection with or relating to the agreement. As observed hereinabove, the developers, owners, societies and the original owners and even subsequent societies formed are parties to the agreement and the Addendum. It is also required to be noted and, as observed hereinabove, the dispute is with respect to sharing of the rent of the leased space and it can be said that the respondents are also claiming the share relying upon the Development Agreements; Supplementary Development Agreements and the Addendum. Therefore, the dispute can be said to in connection with or relating to the Agreements also.

7.3 Considering the above facts and circumstances, both the High Court and the learned District Judge have committed grave error in not referring the dispute between the appellants and the respondents to the arbitration. We are of the opinion that Clause 19 of the Addendum to the Supplementary Development Agreement shall be squarely applicable and therefore the disputes between the respondents and the appellants for which the respondents initiated proceedings under the Societies Registration Act, are required to be referred to the Arbitration and/or to the Arbitral Tribunal.

8. In view of the above and for the reasons stated above, all these appeals are allowed. The impugned common judgment and order dated 22.11.2018 passed by the High Court in C.M.A. Nos. 1257, 1379 and 1380 of 2017 is hereby quashed and set aside. The order passed by the learned District Judge rejecting the applications submitted by the appellants under Section 8 of the Arbitration and Conciliation Act, 1996 are also hereby quashed and set aside. Consequently, the applications submitted by the appellants under Section 8 of the Arbitration and Conciliation Act, 1996 are hereby allowed and the disputes between the respondents and the appellants are hereby directed to be referred to the Arbitration.

No costs.

J. (ARUN MISHRA)

J. (M. R. SHAH)

New Delhi

September 6, 2019

Whether a claim is barred by res judicata or whether a claim is “mala fide”, it will be decided by examining facts and relevant documents.

Supreme Court in Indian Oil Corporation Ltd. vs. S.P.S. Engineering Ltd.[ (2011) 3 S.C.C. 507 ]

“14. To find out whether a claim is barred by res judicata, or whether a claim is “mala fide”, it will be necessary to examine the facts and relevant documents.

What is to be decided in an application under Section 11 of the Act is whether there is an arbitration agreement between the parties. The Chief Justice or his designate is not expected to go into the merits of the claim or examine the tenability of the claim, in an application under Section 11 of the Act.

The Chief Justice or his designate may however choose to decide whether the claim is a dead (long-barred) claim or whether the parties have, by recording satisfaction, exhausted all rights, obligations and remedies under the contract, so that neither the contract nor the arbitration agreement survived. When it is said that the Chief Justice or his designate may choose to decide whether the claim is a dead claim, it is implied that he will do so only when the claim is evidently and patently a long time-barred claim and there is no need for any detailed consideration of evidence. We may elucidate by an illustration: if the contractor makes a claim a decade or so after completion of the work without referring to any acknowledgment of a liability or other factors that kept the claim alive in law, and the claim is patently long time-barred, the Chief Justice or his designate will examine whether the claim is a dead claim (that is, a long time-barred claim). On the other hand, if the contractor makes a claim for payment, beyond three years of completing of the work but say within five years of completion of work, and alleges that the final bill was drawn up and payments were made within three years before the claim, the Court will not enter into a disputed question whether the claim was barred by limitation or not. The Court will leave the matter to the decision of the Tribunal. If the distinction between apparent and obvious dead claims, and claims involving disputed issues of limitation is not kept in view, the Chief Justice or his designate will end up deciding the question of limitation in all applications under Section 11 of the Act.” ( emphasis supplied)

New Delhi International Arbitration Centre Act, 2019

(Act No. 17 of 2019)

The following Act of Parliament received the assent of the President on the 26th July, 2019, and is hereby published for general information: –

Dated 26.7.2019.

An Act to provide for the establishment and incorporation of the New Delhi International Arbitration Centre for the purpose of creating an independent and autonomous regime for institutionalised arbitration and for acquisition and transfer of the undertakings of the International Centre for Alternative Dispute Resolution and to vest such undertakings in the New Delhi International Arbitration Centre for the better management of arbitration so as to make it a hub for institutional arbitration and to declare the New Delhi International Arbitration Centre to be an institution of national importance and for matters connected therewith or incidental thereto.

Whereas dispute resolution process has a huge impact on the Indian economy and global perception on doing business in our country and it has become necessary to inspire confidence and credibility among the litigants of commercial disputes;

And Whereas rapidly changing economic activity demands expeditious settlement of disputes and creation and establishment of institutional arbitration;

And Whereas the International Centre for Alternative Dispute Resolution was set up Registration Act, 1860, with the objective of promoting alternative dispute resolution mechanism and providing facilities for the same;

And Whereas the International Centre for Alternative Dispute Resolution has received land and substantial funding by way of grants and other benefits from the Central Government for constructing infrastructure and making other facilities;

And Whereas the International Centre for Alternative Dispute Resolution has not been able to actively engage and embrace developments in the arbitration ecosystem and to create a reputation par excellence keeping pace with the dynamic nature of arbitration over more than two decades;

And Whereas studies conducted by the High Level Committee appointed by the Central Government indicate that the International Centre for Alternative Dispute Resolution has failed to address the growing needs of the institutional arbitration and also to bear optimum caseload and to become better choice to the parties for arbitration;

And Whereas it has become expedient to take over the undertakings of the International Centre for Alternative Dispute Resolution including its regional offices without interfering with its activities and without adversely affecting its character as a Society but to utilise its existing infrastructure and other facilities which have been set up by using the public funds provided by the Government and to incorporate a robust institution for domestic and international arbitration to be known as the New Delhi International Arbitration Centre;

And Whereas it is considered necessary to declare the New Delhi International Arbitration Centre as an institution of national importance for its overall development as a major arbitration hub by promoting quick and efficient dispute resolution mechanism.

Be it enacted by Parliament in the Seventieth Year of the Republic of India as follows: –

CHAPTER I

Preliminary

1. Short title and commencement. – (1) This Act may be called the New Delhi International Arbitration Centre Act, 2019.
(2) It shall be deemed to have come into force on the 2nd March, 2019.

2. Definitions. – (1) In this Act, unless the context otherwise requires, –
(a) “Centre” means the New Delhi International Arbitration Centre established and incorporated under section 3;

(b) “Chairperson” means the Chairperson of the Centre referred to in clause (a) of section 5;

(c) “Chief Executive Officer” means the Chief Executive Officer appointed under section 21;

(d) “Committee” means the relevant Committee of the Centre referred to in section 19;

(e) “Custodian” means the person who is appointed as Custodian under sub-section (2) of section 11 in respect of the undertakings;

(f) “Fund” means the Fund of the Centre to be maintained under section 25;

(g) “Member” means Full-time or Part-time Member of the Centre and includes the Chairperson;

(h) “notification” means a notification published in the Official Gazette;

(i) “prescribed” means prescribed by rules made by the Central Government under this Act;

(j) “regulations” means regulations made by the Centre under this Act;

(k) “Society” means the International Centre for Alternative Dispute Resolution, registered as such under the Societies Registration Act, 1860, and having its registered office at New Delhi;

(l) “specified date” means the date as may be specified by the Central Government by notification;

(m) “undertakings” means the undertakings of the Society which vests with the Central Government under section 7.

(2) All other words and expressions used herein but not defined and defined in the Arbitration and Conciliation Act, 1996, shall have the same meanings as assigned to them in that Act.

CHAPTER II

Establishment and Incorporation of New Delhi International Arbitration Centre

3. Establishment and incorporation of New Delhi International Arbitration Centre. – (1) The Central Government shall, by notification, establish a body to be called the New Delhi International Arbitration Centre for the purposes of exercising the powers and discharging the functions under this Act.
(2) The Centre shall be a body corporate by the name aforesaid, having perpetual succession and a common seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property, both movable and immovable, and to enter into contract, and shall, by the said name, sue or be sued.

4. Declaration of New Delhi International Arbitration Centre as an institution of national importance. – (1)Whereas, the objects of the New Delhi International Arbitration Centre are such as to make it as an institution of national importance, it is hereby declared that the New Delhi International Arbitration Centre is an institution of national importance.
(2) The head office of the Centre shall be at New Delhi and it may with the previous approval of the Central Government, establish branches at other places in India and abroad.

5. Composition of Centre. – The Centre shall consist of the following Members, namely: –

(a) a person, who has been a Judge of the Supreme Court or a Judge of a High Court or an eminent person, having special knowledge and experience in the conduct or administration of arbitration, law or management, appointed by the Central Government in consultation with the Chief Justice of India – Chairperson;

(b) two eminent persons having substantial knowledge and experience in institutional arbitration, both domestic and international, appointed by the Central Government – Full-time Members or Part-time Members;

(c) one representative of a recognised body of commerce and industry, chosen on rotational basis by the Central Government – Part-time Member;

(d) Secretary, Department of Legal Affairs, Ministry of Law and Justice or his representative, not below the rank of the Joint Secretary – Member, ex officio;

(e) one Financial Adviser nominated by the Department of Expenditure, Ministry of Finance – Member, ex officio; and

(f) Chief Executive Officer – Member, ex officio.

6. Terms and conditions, etc., of Chairperson and Members. – (1) The Chairperson and Members shall hold office for a term of three years from the date on which they enter upon their office and shall be eligible for re-appointment:

Provided that no Chairperson or Member shall hold office as such after he has attained the age of seventy years in the case of Chairperson and sixty-seven years in the case of a Member.

(2) The terms and conditions, salaries and allowances payable to the Chairperson and Full-time Member shall be such as may be prescribed.

(3) The term of office of a Member appointed to fill a casual vacancy shall be for the remainder of the term of the Member in whose place he has been appointed.

(4) The Part-time Member shall be entitled to such travelling and other allowances as may be prescribed.

CHAPTER III

Acquisition and Transfer of Undertakings of Society

7. Transfer and vesting. – On and from the specified date, so much of the undertakings of the Society as form part of, or are relatable to the Society, and the right, title and interest of the Society in relation to such undertakings, shall, by virtue of this Act, stand transferred to, and vest in, the Central Government.

8. General effect of vesting. – (1) The undertakings vested under section 7 shall be deemed to include all assets, rights, leaseholds, powers, authorities and privileges, and all property (movable and immovable), including lands, buildings, works, projects, instruments, automobiles and other vehicles, cash balances, funds, including reserve funds, investments and book debts of the Society as form part of, or are relatable to, the Society and all other rights and interest arising out of such properties as were immediately before the commencement of the New Delhi International Arbitration Centre Ordinance, 2019 in the ownership, possession, power or control of the Society, and all books of account, registers and all other documents of whatever nature relating thereto.
(2) All properties and assets as aforesaid which have vested in the Central Government under section 7 shall, by force of such vesting, be freed and discharged from any trust, obligation, mortgage, charge, lien and all other encumbrances affecting them or of any attachment, injunction, decree or order of any court or other authority restricting the use of such properties or assets in any manner or appointing any receiver in respect of the whole or any part of such properties or assets shall be deemed to have been withdrawn.
(3) Any licence or other instrument granted to the Society in relation to any undertaking which has vested in the Central Government under section 7 at any time before the specified date and in force immediately before the specified date, shall continue to be in force on and after such day in accordance with its tenor in relation to and for the purpose of such undertaking or where the undertaking is directed under section 10, to vest in the Centre, the Centre shall be deemed to be substituted in such licence or other instrument as if such licence or other instrument had been granted to the Centre and the Centre shall hold it for the remainder of the period which the Society would have held it under the terms thereof.
(4) If, on the specified date, any suit, appeal or other proceeding, of whatever nature, in relation to any property or asset which has vested in the Central Government under section 7, instituted or preferred by or against the Society is pending, the same shall not abate, be discontinued or be, in any way, prejudicially affected by reason of the transfer of the undertaking of the Society of anything contained in this Act, but the suit, appeal or other proceeding may be continued, prosecuted or enforced by or against the Central Government or where the undertakings of the Society are directed under section 10, to vest in the Centre, by or against the Centre.

9. Liability prior to specified date. – Every liability in relation to any undertaking in respect of any period prior to the specified date, shall be enforceable against the Society and not against the Central Government.

10. Power of Central Government to direct vesting of undertaking in Centre. – (1) Notwithstanding anything contained in sections 7 and 8, the Central Government shall, as soon as may be after the specified date, direct by notification, that the undertakings and the right, title and interest of the Society in relation to such undertakings which had vested in the Central Government under section 7, shall, vest in the Centre either on the date of publication of the notification or on such earlier or later date as may be specified in the notification.
(2) Where the right, title and interest of the Society in relation to the undertakings vest, under sub-section (1), in the Centre, the Centre shall, on and from the date of such vesting, be deemed to have become the owner in relation to such undertakings and the rights and liabilities of the Central Government in relation to such undertakings shall, on and from the date of such vesting, be deemed to have become, the rights and liabilities, respectively, of the Centre.

11. Management, etc., of undertakings. – (1) The general superintendence, direction, control and management of affairs of the undertakings, the right, the interest in relation to which have vested in the Central Government under section 7, shall-
(a) where a direction has been made by the Central Government under sub-section (1) of section 10, vest in the Centre; or

(b) where no such direction has been made by the Central Government, vest in the Custodian appointed by the Central Government under sub-section (2),

and, thereupon, the Centre or the Custodian so appointed, as the case may be, shall be entitled to exercise all such powers and do all such things as the Society, is authorised to exercise and do in relation to its undertakings.
(2) The Central Government may appoint any person as the Custodian of the undertakings in relation to which no direction has been made by it under sub-section (1) of section 10.
(3) The Custodian so appointed shall receive such remuneration as the Central Government may fix and shall hold office during the pleasure of the Central Government.

12. Duties of persons in charge of management of undertakings to deliver all assets. – (1) On the vesting of the management of the undertakings in the Centre or on the appointment of a Custodian under sub-section (2) of section 11, all persons in charge of management of the undertakings immediately before such vesting or appointment shall be bound to deliver to the Centre or Custodian, as the case may be, all assets, books of account, registers and other documents in their custody relating to the undertakings.
(2) The Central Government may issue such directions as it may deem desirable in the circumstances of the case to the Custodian as to the powers and duties of the Custodian and such Custodian may also, if it is considered necessary so to do, apply to the Central Government at any time for instructions as to the manner in which the management of the undertaking shall be conducted or in relation to any other matter arising in the course of such management.
(3) Any person who on the specified date, has in his possession or under his control, any books, documents or other papers relating to the undertakings shall be liable to account for the said books, documents or other papers to the Central Government or the Custodian or the Centre, as the case may be, and shall deliver them to the Central Government or the Custodian or the Centre or to such person or body of persons as the Central Government or the Centre may specify in this behalf.
(4) The Central Government or the Centre may take or cause to be taken, all necessary steps for securing possession of all undertakings which have vested in the Central Government or the Centre under this Act.
(5) The Society shall, within such period as the Central Government may allow in this behalf, furnish to that Government a complete inventory of all its properties and assets, as on the commencement of the New Delhi International Arbitration Centre Ordinance, 2019 pertaining to the undertaking and for this purpose, the Central Government or Custodian or the Centre shall afford to the Society, or body all reasonable facilities.

13. Certain powers of Central Government or Centre. – The Central Government or the Custodian or the Centre shall be entitled to receive up to the specified date, to the exclusion of all other persons, any money due to the Society in relation to its undertakings which have vested in the Central Government or Custodian or the Centre, as the case may be, and realised after the commencement of the New Delhi International Arbitration Centre Ordinance, 2019, notwithstanding that the realisation pertains to a period prior to the commencement of the New Delhi International Arbitration Centre Ordinance, 2019.

4. Objects of Centre. – The objects of the Centre shall be,-

(a) to bring targeted reforms to develop itself as a flagship institution for conducting international and domestic arbitration;

(b) to promote research and study, providing teaching and training, and organising conferences and seminars in arbitration, conciliation, mediation and other alternative dispute resolution matters;

(c) to provide facilities and administrative assistance for conciliation, mediation and arbitral proceedings;

(d) to maintain panels of accredited arbitrators, conciliators and mediators both at national and international level or specialists such as surveyors and investigators;

(e) to collaborate with other national and international institutions and organisations for ensuring credibility of the Centre as a specialised institution in arbitration and conciliation;

(f) to set up facilities in India and abroad to promote the activities of the Centre;

(g) to lay down parameters for different modes of alternative dispute resolution mechanisms being adopted by the Centre; and

(h) such other objectives as it may deem fit with the approval of the Central Government.

15. Functions of Centre. – Without prejudice to the provisions contained in section 14, the Centre shall strive,-

(a) to facilitate for conducting international and domestic arbitration and conciliation in the most professional manner;

(b) to provide cost effective and timely services for the conduct of arbitration and conciliation at national and international level;

(c) to promote studies in the field of alternative dispute resolution and related matters, and to promote reforms in the system of settlement of disputes;

(d) to undertake teaching and to provide for diffusion of knowledge of law and procedures on alternative dispute resolution and related matters and to award certificates and other academic or professional distinction;

(e) to impart training in alternative dispute resolution and related matters to those who are handling arbitration, conciliation and mediation;

(f) to co-operate with other societies, institutions and organisations, national or international for promoting alternative dispute resolution; and

(g) to perform such other functions as may be entrusted to it by the Central Government for promoting alternative dispute resolution.

16. Vacancies, etc., not to invalidate proceedings of Centre. – No act or proceedings of the Centre shall be invalid merely by reason of,-
(a) any vacancy or any defect in the constitution of the Centre; or

(b) any defect in the appointment of a person acting as a Member of the Centre; or

(c) any irregularity in the procedure of the Centre not affecting the merits of the case.

17. Resignation of Members. – The Chairperson or the Full-time Member or Part-time Member may, by notice in writing, under his hand addressed to the Central Government, resign his office:

Provided that the Chairperson or the Full-time Member shall, unless he is permitted by the Central Government to relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of his term of office, whichever is the earlier.

18. Removal of Members. – (1) The Central Government may, remove a Member from his office if he,-
(a) is an undischarged insolvent; or

(b) has engaged at any time (except Part-time Member), during his term of office, in any paid employment; or

(c) has been convicted of an offence which, in the opinion of the Central Government, involves moral turpitude; or

(d) has acquired such financial or other interest as is likely to affect prejudicially his functions as a Member; or

(e) has so abused his position as to render his continuance in office prejudicial to the public interest; or

(f) has become physically or mentally incapable of acting as a Member.

(2) Notwithstanding anything contained in sub-section (1), no Member shall be removed from his office on the grounds specified in clauses (d) and (e) of that sub-section unless the Supreme Court, on a reference being made to it in this behalf by the Central Government, has, on an inquiry, held by it in accordance with such procedure as may be prescribed in this behalf by the Supreme Court, reported that the Member, ought on such ground or grounds to be removed.

19. Committees of Centre. – (1) The Centre may constitute such Committees as may be considered necessary to administer various aspects of its functions.
(2) The composition and functions of the Committees referred to in sub-section (1) shall be such as may be prescribed.
(3) The Committee shall meet at such time and at such places and shall observe such rules of procedure in regard to the transaction of business at its meetings including the quorum as may be specified by the regulations.

20. Meetings of Centre. – (1) The Chairperson shall ordinarily preside at the meetings of the Centre:
Provided that, in his absence, the Member chosen by the other Members present amongst themselves shall preside at the meetings.
(2) It shall be the duty of the Chairperson to ensure that the decisions taken by the Centre are implemented.
(3) The Chairperson shall exercise such other powers and perform such other duties as are assigned to him under this Act.
(4) The Centre shall meet at least four times a year and follow such procedure in its meetings including quorum at such meetings in such manner as may be specified by the regulations.
(5) All questions which come up before any meeting of the Centre shall be –
(a) decided by a majority of votes by the Members present and voting, and in the event of an equality of votes, the Chairperson or in his absence, the person presiding, shall have a casting vote;

(b) dealt with as expeditiously as possible and the Centre shall dispose of the same within a period of sixty days from the date of receipt of the application:

Provided that where any such application could not be disposed of within the said period of sixty days, the Centre shall record its reasons in writing for not disposing of the application within that period.
(6) The Chairperson may invite any expert, not being a Member, to attend the meetings of the Centre, but such invitee shall not be entitled to vote at the meeting.

21. Chief Executive Officer. – (1) There shall be a Chief Executive Officer of the Centre who shall be responsible for day-to-day administration of the Centre and for this purpose, he shall maintain liaison with the Centre and the Secretariat.
(2) The appointment, qualifications and the terms and conditions of services of the Chief Executive Officer shall be such as may be specified by the regulations.
(3) The Chief Executive Officer shall exercise such powers and discharge such functions as may be specified by the regulations or as may be delegated to him by the Centre.
22. Delegation of powers. – The Centre may, for the purpose of discharging of its powers, functions and duties, by general or special order in writing, specify the powers and duties conferred or imposed upon the Centre by or under this Act (except the power to make regulation) which may also be exercised or performed by the Chief Executive Officer or any officer or officers of the Centre and the conditions and restrictions, if any, subject to which the powers and duties may be exercised and performed.

23. Secretariat. – (1) There shall be a Secretariat to the Centre consisting of –

(a) Registrar, who shall supervise the activities of the Centre;

(b) Counsel, dealing with the matters relating to domestic and international arbitration; and

(c) such number of other officers and employees as may be prescribed.

(2) The qualifications, experience, method of selection and the functions of the Registrar, Counsel and other officers and employees shall be such as may be prescribed.

CHAPTER IV

Finance, Accounts and Audit

24. Grants by Central Government. – The Central Government may, after due appropriation made by Parliament by law in this behalf, pay to the Centre in each financial year such sums of money and in such manner as it may think fit for being utilised for the purposes of this Act.

25. Fund of Centre. – (1) The Centre shall maintain a Fund to which shall be credited, –
(a) all monies provided by the Central Government;

(b) all fees and other charges received during or in connection with the arbitration, conciliation, mediation or other proceedings;

(c) all monies received by the Centre for the facilities provided by it to the parties;

(d) all monies received by the Centre in the form of donations, grants, contributions and income from other sources; and

(e) the amount received from the investment income.

(2) All monies credited to the Fund shall be deposited in such banks or invested in such manner as may be decided by the Centre.
(3) The Fund shall be applied towards meeting the salaries and other allowances of Members and the expenses of the Centre including expenses incurred in the exercise of its powers and discharge of its duties under this Act.

26. Accounts and audit. – (1) The Centre shall maintain proper accounts and other relevant records and prepare an annual statement of accounts, including the balance sheet, in such form and manner as may be prescribed in consultation with the Comptroller and Auditor-General of India.
(2) The accounts of the Centre shall be audited by the Comptroller and Auditor- General of India and any expenditure incurred by him in connection with such audit shall be payable by the Centre to the Comptroller and Auditor-General of India.
(3) The Comptroller and Auditor-General of India and any person appointed by him in connection with the audit of the accounts of the Centre shall have the same rights, privileges and authority in connection with such audit as the Comptroller and Auditor-General of India has in connection with the audit of the Government accounts, and, in particular, shall have the right to demand the production of books, accounts, connected vouchers and other documents and papers and to inspect the offices of the Centre.
(4) The accounts of the Centre as certified by the Comptroller and Auditor-General of India or any other person appointed by him in this behalf together with the audit report thereon shall be forwarded annually to the Central Government and the Central Government shall cause the same to be laid before each House of Parliament.

27. Assessment of assets and liabilities of undertaking. – The assets and liabilities in relation to any undertaking under this Act shall be caused to be assessed by any agency authorised by the Comptroller and Auditor-General of India in such manner as may be specified by him and any payment on a claim to be made in relation thereto shall be settled by him between the Society and the Central Government and shall be paid by the Society or the Central Government, as the case may be, in the manner as may be specified by the Comptroller and Auditor-General of India.

CHAPTER V

Chamber of Arbitration and Arbitration Academy

28. Chamber of Arbitration. – (1) The Centre shall, establish a Chamber of Arbitration which shall empanel the Arbitrators and also scrutinise the applications for admission in the panel of reputed arbitrators to maintain a permanent panel of arbitrators.
(2) The Chamber of Arbitration shall consist of experienced arbitration practitioners of repute, at national and international level and persons having wide experience in the area of alternative dispute resolution and conciliation.
(3) The Centre shall by regulations lay down the criteria for admission to the panel of the cadre so as to maintain a pool of reputed arbitrators having expertise in international commercial arbitration and arbitration other than international commercial arbitration.
(4) The Registrar to the Secretariat of the Centre shall act as the Member-Secretary to the Chamber of Arbitration.

29. Arbitration Academy. – (1) The Centre may establish an Arbitration Academy-

(a) to train the arbitrators, particularly in the area of international commercial arbitration to compete on par with the reputed international arbitral institutions;

(b) to conduct research in the area of alternative dispute resolution and allied areas; and

(c) to give suggestions for achieving the objectives of the Act.

(2) For the purposes of sub-section (1), there may be constituted a permanent three member committee in order to suggest and to submit a report to the Centre with respect to the amendments, if any, necessary to the rules and regulations made under this Act.

CHAPTER VI

Miscellaneous

30. Power to make rules. – (1) The Central Government may, by notification, make rules to carry out the provisions of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power, such rules may make provision for –
(a) the terms and conditions and the salaries and allowances payable to the Chairperson and Full-time Members under sub-section (2) of section 6;

(b) the travelling and other allowances payable to the Part-time Members under sub-section (4) of section 6;

(c) the composition and functions of the Committees referred to in sub-section (2) of section 19;

(d) the number of officers and employees of the Secretariat of the Centre under clause (c) of sub-section (1) of section 23;

(e) the qualifications, experience, method of selection and the functions of the Registrar, Counsel and other officers and employees of the Centre under sub-section (2) of section 23;

(f) annual statement of accounts, including the balance sheet under sub-section (1) of section 26; and

(g) any other matter in respect of which provision is to be made or may be made under this Act.

31. Power to make regulations. – (1) The Centre may, with the previous approval of the Central Government, by notification, make regulations consistent with this Act and the rules made thereunder to provide for all matters for which provision is necessary or expedient for the purposes of giving effect to the purposes of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, such regulations may make provision for-
(a) the time and place and the rules of procedure to be observed in regard to the transaction of business of the Committee at the meetings including the quorum under sub-section (3) of section 19;

(b) the time and place and rules of procedure in regard to the transaction of business of the Centre or any Committee including the quorum at the meeting under sub-section (4) of section 20;

(c) the appointment, qualifications and the terms and conditions of service of the Chief Executive Officer under sub-section (2) of section 21;

(d) the powers and functions of the Chief Executive Officer under sub-section (3) of section 21;

(e) the criteria for admission to the panel of reputed arbitrators under sub-section (3) of section 28; and

(f) any other matter in respect of which provision, in the opinion of the Centre, is necessary for the performance of its functions under this Act.

32. Laying of rules and regulations. – Every rule and regulation made 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 regulation or both Houses agree that the rule or regulation should not be made, the rule or regulation 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 or regulation.

33. Protection of action taken in good faith. – No suit, prosecution or other legal proceedings shall lie against the Centre, the Chairperson or Members or its employees and arbitrators for anything which is in good faith done or intended to be done under this Act or the rules or regulations made thereunder.

34. Power to remove difficulty. – (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 may appear to it to be necessary for removing the difficulty:
Provided that no such order shall be made under this section 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 be laid, as soon as may be after it is made, before each House of Parliament.

35. Repeal and savings. – (1) The New Delhi International Arbitration Centre Ordinance, 2019 is hereby repealed.
(2) Notwithstanding such repeal, anything done or any action taken under the New Delhi International Arbitration Centre Ordinance, 2019, shall be deemed to have been done or taken under the provisions of this Act.

Law of Arbitration

Law of Arbitration

 

United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958)

New York Convention

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 recognize 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 a 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 or 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 recognized 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 Geneva Protocol on Arbitration Clauses of 1923 and the Geneva 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 31 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 a member of any specialized 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 to 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 and 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 VIII.