Supreme Court: Party Estopped From Challenging Award On The Ground Of Mandate Expiry After Accepting Extension Of Arbitrator's Mandate

 In the facts of the present case, Section 29A of the Act does not apply. At the relevant time, there was no statutory provision prescribing that an extension of the mandate of the Arbitrator must be in a particular form or be reduced to writing. The ground of challenge to the Award is not based on breach of any statutory provision. The Arbitrator had unilaterally extended the mandate on three occasions and even after expiry of the mandate had fixed a date of hearing. The Board did not raise any objection in its email dated 14.10.2015 that the mandate of the Arbitrator has expired. The Board thus had tacitly agreed to extension of the mandate of the Arbitrator. The Award was delivered on 27.10.2015. Thereafter, the Board on 28.10.2015 sent an email that it had not extended the mandate of the Arbitrator, and it shall proceed Under Section 14 of the Act. The grievance of the Board about the expiry of the mandate of the Arbitrator is a matter governed by the contract and not by the statute. The Board participated in the proceeding before the Arbitrator and had acquiesced with the alleged invalidity and cannot be allowed to turn around after the Award was passed and is estopped from challenging the Award on the ground that the mandate of the Arbitrator had expired. In so far as reliance placed by the Board on the decision of this Court4 is concerned, suffice to say that in the said decision, the Arbitrator did not have mandate in the absence of a valid arbitration agreement. This Court in the aforesaid decision held that question of waiver or estoppel did not arise as there cannot be any estoppel against the statute. The said decision has no application to the facts of the instant case. For the aforementioned reasons, we answer the first issue in the affirmative. {Para 21}

 IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 769-770 of 2026

Decided On: 26.05.2026

Gujarat Water Supply and Sewerage Board Vs. Saryu Plastics Pvt. Ltd.

Hon'ble Judges/Coram:

Pamidighantam Sri Narasimha and Alok Aradhe, JJ.

Author:  Alok Aradhe, J.

Citation: 𝟮𝟬𝟮𝟲 𝗜𝗡𝗦𝗖 𝟱𝟱𝟮,MANU/SC/0554/2026

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Whether Dissenting Opinion Of An Arbitrator Can Be Treated As An Award If The Majority Award Is Set Aside?

In Dakshin Haryana Bijli Vitran Nigam Ltd, the court recollected the

previous holding in Ssangyong Engg. & Construction Co. Ltd. v. NHAI (hereafter, “Ssangyong Engg. & Construction Co. Ltd.”) 2019 [7] SCR 522, wherein the court had set aside the majority award, but issued consequential directions in the peculiar facts of the case:

“In Ssangyong [Ssangyong Engg. & Construction Co.

Ltd. v. NHAI, (2019) 7 SCR 522], this Court upheld the view taken by the dissenting arbitrator in exercise of its powers under Article 142 of the Constitution, in order to do complete justice between the parties. The reason for doing so is mentioned in para 77 i.e. the considerable delay which would be caused if another arbitrationwas to be held. This Court exercised its extraordinary power in Ssangyong [Ssangyong Engg. & Construction Co. Ltd. v. NHAI,] keeping in mind the facts of the case, and the object of expeditious resolution of disputes under the Arbitration Act.”

However, the court did not, in Dakshin Haryana Bijli Vitran Nigam Ltd (supra) direct the dissenting opinion to be treated as an award. In the opinion of this court, that approach is correct, because there appears to be a slight divergence in thinking between Russel and Gary Born. The former, Russel is careful to point out that a dissenting opinion is not per se an award, but “is for the parties' information only and does not form part of the award, but it may be admissible as evidence in relation to the procedural matters in the event of a challenge.” However, Gary Born does not expressly say that the opinion is not a part of the award. That author yet clarifies that “This is an essential aspect of the process by which the parties have an opportunity to both, present their case, and hear the reasons for the Tribunal's decision; not hearing the dissent deprives the parties of an important aspect of this process.” {Para 26}

27. It is, therefore, evident that a dissenting opinion cannot be treated as an award if the majority award is set aside. It might provide useful clues in case there is a procedural issue which becomes critical during the challenge hearings. This court is of the opinion that there is another dimension to the matter. When a majority award is challenged by the aggrieved party, the focus of the court and the aggrieved party is to point out the errors or illegalities in the majority award. The minority award (or dissenting opinion, as the learned authors point out) only embodies the views of the arbitrator disagreeing with the majority. There is no occasion for anyone- such as the party aggrieved by the majority award, or, more crucially, the party who succeeds in the majority award, to challenge the soundness, plausibility, illegality or perversity in the approach or conclusions in the dissenting opinion. That dissenting opinion would not receive the level and standard of scrutiny which the majority award (which is under challenge) is subjected to. Therefore, the so-called conversion of the dissenting opinion, into a tribunal’s findings, [in the event a majority award is set aside] and elevation of that opinion as an award, would, with respect, be inappropriate and improper.

 2023INSC768

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO(S). 4658 OF 2023

M/S HINDUSTAN CONSTRUCTION COMPANY LIMITED 

Vs M/S NATIONAL HIGHWAYS AUTHORITY OF INDIA

Author: S. RAVINDRA BHAT, J.

Dated: AUGUST 24, 2023.

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Delhi HC: Arbitrator Can Declare Terms Of Contract Null, Even If No Declaration Is Sought By The Party In Its Pleadings

  It further held that because the rate of interest was left blank in Clause 60.8 (b) in the Appendix to the Bid to which a reference was made in the said clause. It was held to be uncertain and ineffective and therefore void under Section 29 of the Indian Contract Act.  {Para 24}

25. In the case of Oriental Structural Engineers Private Limited Vs. State of Kerala (2021) 6 SCC 150, manner of interpretation of Clause 60.8 of COPA, which is the subject matter of the present Award, came up for consideration. The plea of the rate of interest being left blank was specifically considered and the contention of the respondent was that not specifying the rate of interest and leaving it blank in the Appendix document amounted to a waiver and no interest was payable on any amount. Rejecting this plea, it was held that once there was a clause for levy of interest, merely because the rate of interest was not specified it would not amount to waiver but the Arbitrator, exercising his discretion, could award the interest at any reasonable rate. In the said case, the learned Arbitrator granted simple interest @ 8 % which was upheld by the Apex court.

26. The Arbitral Tribunal interpreted the terms of the contract and while rejecting the claim of the petitioner for compound Interest, it gave various reasons in which the clause providing for interest was also considered and held to be defunct, null and void being incomplete and vague. The objections of the Appellant that there being no pleading seeking clause 60.8 (b) to be declared null and void, the Ld. Arbitrator has made out a 3rd case in itself, is totally not tenable as it was within the domain of the Arbitrator to interpret the terms of the contract. The Tribunal exercised its discretion on the rate of interest to be granted, in absence of an agreement to this effect. The MajorityAward has given a well reasoned Award while granting simple interest.

 IN THE HIGH COURT OF DELHI AT NEW DELHI

Pronounced on: 13th March, 2023

 OMP (COMM.) 283/ 2021

M/S. MODI CONSTRUCTION COMPANY Vs M/S IRCON INTERNATIONAL LIMITED

CORAM:

 MS. JUSTICE NEENA BANSAL KRISHNA

Citation: 2023/DHC/001790

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𝐂𝐚𝐧 𝐚𝐧 𝐀𝐫𝐛𝐢𝐭𝐫𝐚𝐥 𝐓𝐫𝐢𝐛𝐮𝐧𝐚𝐥 𝐀𝐰𝐚𝐫𝐝 𝐭𝐡𝐞 𝐫𝐞𝐥𝐢𝐞𝐟 𝐨𝐟 𝐒𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐏𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐨𝐟 𝐚 𝐂𝐨𝐧𝐭𝐫𝐚𝐜𝐭?

 As regards the second ground of interference as per Section 14 of the Specific Relief Act, the relief granted by the Arbitrators is to sell the land to the appellant/developer or its nominees. Therefore, on the face of if, we do not find that there is anything for the Court to continuously monitor the specific performance of the parties. Therefore, we are unable to agree with the findings of the learned Single Judge in this regard. {Para 25}

26. As far as the next ground of violation of Section 20 of the Specific Relief Act by holding that the agreement is inequitable and holds out an unfair advantage to the appellant is concerned, the rival contentions of the parties and can be tabulated as follows:-

Thus, it can be seen that there are rival contentions between the parties which require appreciation of the evidence and taking into account the conduct of the parties during the transaction and when the Arbitral Tribunal had appraised the evidence and rendered its findings upon consideration of the facts that it is a case of specific performance, interference, once again on the ground of inequitable nature or unfair advantage would only be to sit on appeal over the arbitral award and therefore, was not possibly a ground available for the learned Judge to interfere with the award.

27. When the parties have chosen the arbitration as their forum by a valid arbitration clause, the autonomy of the parties has to upheld and the award of the Arbitral Tribunal shall be final unless it can be set aside under any one of the specific grounds available under Section 34 of the Act and the Courts will not interfere or set aside the award, merely because an alternative view is possible and have to adopt an hands-off approach. Therefore, we have no other option than to interfere with the Order of the Learned Judge in allowing the Original Petition. 

IN THE HIGH COURT OF MADRAS

O.S.A. No. 341 of 2019

Decided On: 28.09.2022

Macro Marvel Projects Ltd.  Vs.  J. Vengatesh and Ors.

Hon'ble Judges/Coram:

Paresh Upadhyay and D. Bharatha Chakravarthy, JJ.

Author: D. Bharatha Chakravarthy, J.

Citation: MANU/TN/7346/2022

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Whether the Small cause court has jurisdiction to try a claim for recovery of security deposit or damages or is said dispute arbitrable?

As held by this Court in the case of Brainvisa Technologies Pvt. Ltd. (supra) license fee, charges and rent are periodical payments made for use and occupation. A claim for recovery of the same, legitimately falls within the exclusive jurisdiction of the Court of Small Causes. In the case at hand, the respondent professes to withhold the security deposit on the ground that the applicant is liable to pay damages. Such a claim, in my considered view, does not fall within the exclusive jurisdiction of the Court of Small Causes, and is amenable to arbitration. 

{Para 45}

 IN THE HIGH COURT OF BOMBAY

Arbitration Application No. 340 of 2019

Decided On: 05.05.2022

 Bafna Motors Private Limited  Vs.  Amanulla Khan

Hon'ble Judges/Coram:

N.J. Jamadar, J.

Citation: MANU/MH/1583/2022

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Whether the court is obliged to hear the appeal on merit if it is barred by limitation?

 The questions of law purported to be raised in this Special Leave Petition are misconceived. The right of appeal is a statutory right,  subject to the laws of limitation. The law of limitation is valid substantive law, which extinguishes the right to sue, and/or the right to appeal. Once an appeal is found to be barred by limitation, there can be no question of any obligation of the Court to consider the merits of the case of the Appellant.{Para 21}

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

SLP (CIVIL) NO. 5301 OF 2022

STATE OF UTTAR PRADESH & ORS. Vs  M/S SATISH CHAND SHIVHARE AND BROTHERS 

Dated: APRIL 04, 2022

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Can the court remit an award to the arbitrator in the absence of findings on contentious issues?

When it is the specific case of the Respondent that there is no finding at all, on point No. 1 viz. "whether the contract was illegally and abruptly terminated by the Respondent?", remission Under Section 34(4) of the Act, is not permissible. In our view, Section 34(4) of the Act, can be resorted to record reasons on the finding already given in the award or to fill up the gaps in the reasoning of the award. There is a difference between 'finding' and 'reasons' as pointed out by the learned Senior Counsel appearing for the Respondent in the judgment in the case of Income Tax Officer, A Ward, Sitapur v. Murlidhar Bhagwan Das MANU/SC/0097/1964 : AIR 1965 SC 342. It is clear from the aforesaid judgment that 'finding is a decision on an issue'. Further, in the judgment in the case of J. Ashoka v. University of Agricultural Sciences and Ors. MANU/SC/1613/2016 : (2017) 2 SCC 609, this Court has held that 'reasons are the links between the materials on which certain conclusions are based and the actual conclusions'. In absence of any finding on point No. 1, as pleaded by the Respondent and further, it is their case that relevant material produced before the Arbitrator to prove 'accord and satisfaction' between the parties, is not considered, and the same amounts to patent illegality, such aspects are to be considered by the Court itself. It cannot be said that it is a case where additional reasons are to be given or gaps in the reasoning, in absence of a finding on point No. 1 viz. "whether the contract was illegally and abruptly terminated by the Respondent?"

21. Further, Section 34(4) of the Act itself makes it clear that it is the discretion vested with the Court for remitting the matter to Arbitral Tribunal to give an opportunity to resume the proceedings or not. The words "where it is appropriate" itself indicate that it is the discretion to be exercised by the Court, to remit the matter when requested by a party. When application is filed Under Section 34(4) of the Act, the same is to be considered keeping in mind the grounds raised in the application Under Section 34(1) of the Act by the party, who has questioned the award of the Arbitral Tribunal and the grounds raised in the application filed Under Section 34(4) of the Act and the reply thereto. Merely because an application is filed Under Section 34(4) of the Act by a party, it is not always obligatory on the part of the Court to remit the matter to Arbitral Tribunal. The discretionary power conferred Under Section 34(4) of the Act, is to be exercised where there is inadequate reasoning or to fill up the gaps in the reasoning, in support of the findings which are already recorded in the award. Under guise of additional reasons and filling up the gaps in the reasoning, no award can be remitted to the Arbitrator, where there are no findings on the contentious issues in the award. If there are no findings on the contentious issues in the award or if any findings are recorded ignoring the material evidence on record, the same are acceptable grounds for setting aside the award itself. Under guise of either additional reasons or filling up the gaps in the reasoning, the power conferred on the Court cannot be relegated to the Arbitrator. In absence of any finding on contentious issue, no amount of reasons can cure the defect in the award. A harmonious reading of Section 31, 34(1), 34(2A) and 34(4) of the Arbitration and Conciliation Act, 1996, make it clear that in appropriate cases, on the request made by a party, Court can give an opportunity to the arbitrator to resume the arbitral proceedings for giving reasons or to fill up the gaps in the reasoning in support of a finding, which is already rendered in the award. But at the same time, when it prima facie appears that there is a patent illegality in the award itself, by not recording a finding on a contentious issue, in such cases, Court may not accede to the request of a party for giving an opportunity to the Arbitral Tribunal to resume the arbitral proceedings. Further, as rightly contended by the learned Counsel appearing for the Respondent, that on the plea of 'accord and satisfaction' on further consideration of evidence, which is ignored earlier, even if the arbitral tribunal wants to consciously hold that there was 'accord and satisfaction' between the parties, it cannot do so by altering the award itself, which he has already passed.

 IN THE SUPREME COURT OF INDIA

Civil Appeal No. 7 of 2022 

Decided On: 03.01.2022

I-Pay Clearing Services Private Limited Vs.  ICICI Bank Limited

Hon'ble Judges/Coram:

R. Subhash Reddy and Hrishikesh Roy, JJ.

Author: R. Subhash Reddy, J.

Citation: MANU/SC/0005/2022

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Whether the order of the arbitrator refusing to entertain a counterclaim is the interim award?

 Section 34 of the 1996 Act allows recourse to a Court against any "arbitral award". "Arbitral award" is defined in Section 2(1)(c) as including an interim award. {Para 9}

10. "Interim award" is, however, not defined in the 1996 Act. Section 31(6) of the 1996 Act, however, empowers an Arbitral Tribunal to make an interim award on any matter with respect to which it may make a final arbitral award. Section 31(6) of the 1996 Act reads thus:

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

11. Inasmuch as an interim award is also an "arbitral award" as defined in Section 2(c), an interim award would be susceptible to challenge under Section 34 of the 1996 Act. This fact was noticed by the Supreme Court in Indian Farmers Fertilizer Cooperative Ltd. v. Bhadra Products MANU/SC/0026/2018 : (2018) 2 SCC 534 (IFFCO, hereinafter). The issue before the Supreme Court, in that case, was whether an order rejecting a claim on the ground of limitation, could be treated as "interim award", so as to make the order amenable to challenge under Section 34 of the 1996 Act. The Supreme Court, in IFCO MANU/SC/0026/2018 : (2018) 2 SCC 534, while noticing that the 1996 Act does not define "interim award", proceeded to opine as under:

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

8. The language of Section 31(6) is advisedly wide in nature. A reading of the said sub-section makes it clear that the jurisdiction to make an interim arbitral award is left to the good sense of the Arbitral Tribunal, and that it extends to "any matter" with respect to which it may make a final arbitral award. The expression "matter" is wide in nature, and subsumes issues at which the parties are in dispute. It is clear, therefore, that any point of dispute between the parties which has to be answered by the arbitral tribunal can be the subject matter of an interim arbitral award. However, it is important to add a note of caution. In an appropriate case, the issue of more than one award may be necessitated on the facts of that case. However, by dealing with the matter in a piecemeal fashion, what must be borne in mind is that the resolution of the dispute as a whole will be delayed and parties will be put to additional expense. The arbitral tribunal should, therefore, consider whether there is any real advantage in delivering interim awards or in proceeding with the matter as a whole and delivering one final award, bearing in mind the avoidance of delay and additional expense. Ultimately, a fair means for resolution of all disputes should be uppermost in the mind of the arbitral tribunal.

12. In my view, the import of the afore-extracted passages from the judgment of the Supreme Court in IFFCO MANU/SC/0026/2018 : (2018) 2 SCC 534 is clear and categorical. Any matter, on which an Arbitral Tribunal may make a final award, can also be subject of an interim award made by it. If, therefore, the decision of the Arbitral Tribunal brings a quietus to an issue before the Arbitral Tribunal, and is an order which the Arbitral Tribunal is empowered to pass at the final stage, it would constitute an "interim award" within the meaning of Section 31(6) and, consequently, within the meaning of Section 34 of the 1996 Act.

A decision that the counter-claim is not maintainable and is, therefore, liable to be rejected, is a decision which an Arbitral Tribunal can certainly take at the final stage of the proceedings, especially in view of the power conferred on the Arbitral Tribunal, by Section 16 of the 1996 Act, to rule on its own jurisdiction especially in view of the power conferred on the Arbitral Tribunal by Section 16 of the 1996 Act, to rule on its own jurisdiction. Being, therefore, in the nature of a decision which could be taken at the final stage of the proceedings, i.e. in the final award which the Arbitral Tribunal would pass, such a decision, when taken at an interlocutory stage, would, in my view, certainly constitute an "interim award" within the meaning of the 1996 Act, in view of the law laid down in IFFCO MANU/SC/0026/2018 : (2018) 2 SCC 534.

IN THE HIGH COURT OF DELHI

O.M.P. (COMM) 224/2021 and I.A. 9860/2021

 National Highways Authority of India Vs.  Abhijeet Angul Sambalpur Toll Road Limited

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Can the arbitrator refuse to entertain a counterclaim if it is not as per his liberty?

 The right of the petitioner to file counter-claims exists independent of any liberty granted by the learned Arbitral Tribunal. It is always open to the learned Arbitral Tribunal to reject the counterclaims either on merits or on limitation or even on the ground that they are not arbitrable within the scope of the reference made to learned Arbitral Tribunal, in exercise of the powers conferred by it by Section 16 of the 1996 Act1, which empowers an Arbitral Tribunal to rule on its own jurisdiction. The learned Arbitral Tribunal could not, however, take a view that it would not entertain any such counter-claim, if preferred before it.

IN THE HIGH COURT OF DELHI

O.M.P. (COMM) 224/2021 and I.A. 9860/2021

 National Highways Authority of India Vs.  Abhijeet Angul Sambalpur Toll Road Limited

Hon'ble Judges/Coram:

C. Hari Shankar, J.

Decided On: 28.02.2022

Citation: MANU/DE/0735/2022

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Can an arbitrator grant compensation if there is a delay by one party even in the absence of an escalation clause?

Reliance is placed on National Building Construction Corporation v. Decor India Pvt. Ltd.(2004) SCC OnLine Del 243., wherein this Court held that “It is a settled law that where there is no escalation clause in the arbitration agreement, the arbitrator cannot assume jurisdiction to award an increased rate”. Thus, there is an apparent error in Arbitrator’s finding in this regard.

28. Once it was found that there was delay in execution of the Agreement due to the conduct of UOI. As a repercussion, they became liable for consequences of delay, on account of increase in prices even in the absence of any escalation clause. Food Corporation of India vs. A.M. Ahmed and Co. and Ors., AIR 2007 SC 82, K.N. Sathyapalan (dead) by LRs v. State of Kerala and Anr., (2007) 13 SCC 43., etc.

29. For extended period, the Arbitrator has relied upon Clause 10CC of GCC which provides the formula for calculation of price escalation. The challenge to Claim No. 5 is principally premised only on the Arbitrator’s interpretation of applicability of Clause 10CC. Even if Clause 10CC had a limited application and was only to apply for price variation only during the terms of the Agreement, mechanism therein could be adopted to calculate price escalation. In the aforesaid circumstances, the Arbitrator appears to have acted within his jurisdiction in allowing some of the claims on account of escalation. Further, the Arbitrator has excluded the component of overhead and profit and reduced the claim amount for a period of 12 months for which delay was apportioned against UOI. Therefore, the findings rendered to that effect are sustainable and cannot be disturbed in the present proceedings.

IN THE HIGH COURT OF DELHI AT NEW DELHI

 O.M.P. (COMM) 44/2021

UNION OF INDIA  Vs C AND C CONSTRUCTION LTD. 

CORAM:

HON'BLE MR. JUSTICE SANJEEV NARULA

Author: SANJEEV NARULA, J. 

Dated:28th October, 2021

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Can the arbitrator adjudicate any dispute about the lease agreement between the parties not contemplated by the arbitration clause?

 In the instant case, the Respondent invoked the Arbitration Clause under the Dealership Agreement and approached the Director (Marketing) of the Appellant who appointed Mr. B.L. Parihar as the sole Arbitrator. The Arbitrator, Mr. B.L. Parihar, nominated by the Director (Marketing) of the Appellant had no authority and/or jurisdiction to adjudicate any dispute pertaining to the lease agreement.

34. The Arbitral Award is liable to be set aside in so far as the same deals with disputes with regard to the Lease Agreement which are not contemplated by the Arbitration Clause in the dealership agreement and/or in other words, do not fall within the terms of the submission to Arbitration. The Arbitral award is thus liable to be set aside under Section 34(2)(a)(iv) of the 1996 Act. The decision enhancing the lease rent is patently beyond the scope of the submission to arbitration. {Para 33}

 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 837-838 OF 2022

Indian Oil Corporation Ltd. Vs M/s Shree Ganesh Petroleum Rajgurunagar

Author: Indira Banerjee, J.

Dated: FEBRUARY 01, 2022

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Whether arbitrator can award Liquidated Damages Over & Above Actual Damages?

 The expression “whether or not actual damage or loss is proved to have been caused thereby” means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded. {Para 43.6. }

22. In the present case as the actual damages suffered by the respondent were proven and accepted by the learned Sole Arbitrator, liquidated damages over and above such actual damages could not have been awarded. Accordingly, the Arbitral Award insofar as it grants Rs.8,38,656/- in favour of the respondent is set aside.

 IN THE HIGH COURT OF DELHI AT NEW DELHI

FAO(OS) 415/2011& CM APPLs. 44584-5/2021

BHOPAL DAL UDYOG Vs FOOD CORPORTION OF INDIA 

CORAM:

HON'BLE MR. JUSTICE MANMOHAN

HON'BLE MR. JUSTICE NAVIN CHAWLA

Author: NAVIN CHAWLA, J.

Date of Decision: 04.01.2022

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Whether 𝐚𝐧 𝐀𝐫𝐛𝐢𝐭𝐫𝐚𝐭𝐨𝐫 𝐚𝐩𝐩𝐨𝐢𝐧𝐭𝐞𝐝 𝐛𝐞𝐟𝐨𝐫𝐞 𝐭𝐡𝐞 2015 𝐚𝐦𝐞𝐧𝐝𝐦𝐞𝐧𝐭 𝐀𝐜𝐭, 𝐛𝐞 𝐫𝐞𝐦𝐨𝐯𝐞𝐝 𝐛𝐲 𝐂𝐨𝐮𝐫𝐭 𝐢𝐧𝐭𝐞𝐫𝐯𝐞𝐧𝐭𝐢𝐨𝐧 𝐝𝐮𝐞 𝐭𝐨 𝐚 𝐬𝐮𝐛𝐬𝐞𝐪𝐮𝐞𝐧𝐭 𝐃𝐢𝐬𝐪𝐮𝐚𝐥𝐢𝐟𝐢𝐜𝐚𝐭𝐢𝐨𝐧 𝐮𝐧𝐝𝐞𝐫 𝐒𝐞𝐜𝐭𝐢𝐨𝐧 12(5)?

Ellora had filed Application under Section 14 read with Sections 11 and 15 of the Arbitration & Conciliation Act, 1996 seeking termination of mandate of the then constituted Arbitral Tribunal (AT) & to appoint a new arbitration, before the High Court of Madhya Pradesh. 

The said Application had been dismissed by the MP High Court, against which Ellora had preferred an Appeal before the Supreme Court. 

The main contention raised by Ellora was that the AT, being officers of the Respondent, had lost their mandate in view of Section 12(5) read with Seventh Schedule of the A&C Act.

The Court observed as below:

1. The AT was constituted in 2001, when the AT constituted of employees of Respondent. The employees have since retired also. However, since 2001 no other steps were taken in arbitration, and as such it can’t be said the proceedings had commenced. 

2. As such after the 2015 Amendment Act, with the effect of Section 12(5) read with Seventh Schedule, all of the members of the constituted AT become ineligible to continue as arbitrators. (Reliance placed on Jaipur Zila Dugdh Utpadak Sahkari Sangh Limited )

3. It cannot be said that merely because Ellora had participated in the arbitration proceedings before the AT, he could not have approached the High Court for fresh appointment of arbitrator. This is because the waiver of the disqualification under Section 12(5) has to be “expressly” and in writing, and cannot be implied by mere participation. (Reliance placed on Bharat Broadband Network Limited v. United Telecoms Limited, (2019) 5 SCC 755.

In view of the above, it was declared by the Supreme Court that the already constituted AT were ineligible to act as arbitrators, and accordingly, a fresh arbitrator was appointed to adjudicate the disputes between the parties. 

 In the Supreme Court of India

(Before M.R. Shah and B.V. Nagarathna, JJ.)

Ellora Paper Mills Limited Vs State of Madhya Pradesh 

Civil Appeal No. 7697 of 2021

Decided on January 4, 2022

Citation: 2022 SCC OnLine SC 8

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Whether arbitrator can grant post award compound interest without there being an express clause under the contract?

In UHL POWER COMPANY LIMITED vs. State of Himachal Pradesh SupremeCourtofIndia , three judge bench, decided on 07.01.2022), the Arbitrator had awarded compound interest in favour of UHL @ 9% per annum till the date of claim and in the event the awarded amount was not realized within a period of six months from the date of making the award, future interest was awarded @ 18% per annum on the principal claim with interest.

The question was whether the tribunal could have awarded compound interest on claims without there being an express clause under the contract.

Here the Division Bench had held that compound interest can be awarded only if there is a specific contract, or authority under a statute, for compounding of interest and that there is no general discretion vested arbitrators to award compound interest, either pre-award or post award period. (Relying on Haryana v. S.L. Arora and Co. MANU/SC/0131/2010 : (2010) 3 SCC 690)

The Court, while setting aside the judgment of the High Court, and upholding the award held as follows:

1. It has already been held by the SC that SL Arora has been wrongly decided. The Arbitral Tribunal, as per Section 31(7)(b) has power to grant interest on the “sum” awarded, and the “sum” awarded can include the interest component for the pre-reference and pendent-lite period. (Reliance placed on Hyder Consulting (UK) Ltd. v. Governor, State of Orissa through Chief Engineer (2015) 2 SCC 189)

2. The single judge committed a gross error in re-appreciating the findings returned by the Arbitral Tribunal and taking an entirely different view with respect to interpretation of contract terms, as it was not open for the Court to do so under Section 34 of the Arbitration & Conciliation Act, 1996, by virtually acting as Court of appeal. 

3. When it comes to scope of an Appeal under Section 37, the jurisdiction of Appellate Court is all the more circumscribed. 

4. It is also settled law that where two views are possible, the Court cannot interfere in the plausible view taken by the arbitrator supported by reasoning. (Reliance placed on Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1)

In the Supreme Court of India

(Before N.V. Ramana, C.J. and A.S. Bopanna and Hima Kohli, JJ.)

Civil Appeal No. 10341 of 2011

UHL Power Company Ltd. Vs State of Himachal Pradesh 

Civil Appeal No. 10341 of 2011 and Civil Appeal No. 10342 of 2011

Decided on January 7, 2022

Citation: 2022 SCC OnLine SC 19

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Whether a party can challenge jurisdiction of arbitrator during execution of arbitration award?

The contention raised was as follows:

1. As per Section 36 of the Arbitration & Conciliation Act, 1996, an arbitral award is to be executed by the civil court in the same manner as if it were a decree of the Court.

2. Since the award has to be executed as a decree, the executing court would be able to decide certain questions as provided under Section 47 of the Code of Civil Procedure, 1908.

3. Amongst the various questions which an executing court has power to determine it also has power to determine jurisdiction of the Court which passed the Decree (There is legal principle that the executing court shall not go behind the decree, but there are two exceptions to this rule, & the executing courts may deny to execute the decree if (a) decree is passed under fraud (b) the court which passed the decree lacks inherent jurisdiction.

4. As a consequence, the executing Court under Section 47 of the CPC, should have power to decide whether the Arbitrator lacked jurisdiction to pass the award.

The Court, while rejecting the contention, held as follows:

1. The Arbitration & Conciliation Act, 1996 is a special and self contained code in itself, whereas CPC is a general law of procedure, thus in case of conflict, it is the special law which will prevail (Reliance placed on Deep Industries Ltd. v. ONGC, (2020) 15 SCC 706)

2. The ground of lack of jurisdiction has to be taken by a party at the threshold of the proceedings. It cannot be challenged under Section 47 of the CPC (Reliance placed on Gas Authority of India Limited v. Keti Construction (I) Limited & others (2007) 5 SCC 38).

3. If the contention of the Petitioner is accepted, it would defeat the whole purpose of Arbitration of expeditious relief, and lead to opening of pandora’s box even after an award has attained finality.

Madhya Pradesh High Court

Canara Bank vs Bank Of India on 6 January, 2022

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Whether arbitrator should grant interest pendente lite contrary to agreement between the parties?

Having regard to the above, we are of the view that the High Court was justified in rejecting the claim of the appellant seeking pendente lite interest on the award amount. {Para 18}

19. This takes us to the next question as to whether Clause 17 of the Contract is ultra vires in terms of Section 28 of the Indian Contract Act, 1872. According to Section 28, a contract is void to the extent it restricts absolutely a party from enforcing his rights by usual proceedings in ordinary courts or if it limits the time within which he may enforce his rights. Exception I to this section contains a rule that a contract by which two or more persons agree that any dispute which has arisen or which may arise between them in respect of any subject or class of subjects shall be referred to arbitration is not illegal. The question, therefore, is whether the contracts barring payment of interest extinguish the rights of the parties. Exception 1 to Section 28 reads as under :
“Exception 1: Saving of contract to refer to arbitration dispute that may arise. – This section shall not render illegal a contract, by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shall be referred to arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect of the dispute so referred.”

20. Exception I to Section 28 saves contracts where the right to move the Court for appropriate relief is restricted but where the parties have agreed to resolve their dispute through arbitration. Thus, a lawful agreement to refer the matter to arbitration can be made a condition precedent before going to courts and it does not violate Section 28. No cause of action then accrues until the Arbitrator has made the award and the only amount awarded in such arbitration is recoverable in respect of the dispute so referred. Section 31(7)(a) of the 1996 Act which allows parties to waive any claim to interest including pendente lite and the power of the Arbitrator to grant interest is subject to the agreement of the parties.

21. It is pertinent to note that interest payments are governed in general by the Interest Act, 1978 in addition to the specific statutes that govern an impugned matter. Section 2 (a) of the Interest Act defines a “Court” which includes both a Tribunal and an Arbitrator. In turn, Section 3 allows a “Court” to grant interest at prevailing interest rates in various cases. The provisions of Section 3 (3) of the Interest Act, 1978 explicitly allows the parties to waive their claim to an interest by virtue of an agreement. Section 3(3)(a)(ii) states that the Interest Act will not apply to situations where the payment of interest is “barred by virtue of an express agreement”.

22. Thus, when there is an express statutory permission for the parties to contract out of receiving interest and they have done so without any vitiation of free consent, it is not open for the Arbitrator to grant pendent lite interest. We are of the considered opinion that Clause 17 of the contract is not ultra vires in terms of Section 28 of the Indian Contract Act, 1872.

                      Supreme Court

JUSTICE S. ABDUL NAZEER JUSTICE KRISHNA MURARI

GARG BUILDERS Vs. BHARAT HEAVY ELECTRICALS LIMITED

CIVIL APPEAL NO. 6216 OF 2021

4th October 2021

Author: S. ABDUL NAZEER, J.

Citation: 2021 ALL SCR 2191

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Whether arbitrator can grant increase in prices if there is delay in performance of contract due to fault of one party?

P.M. Paul v. Union of India [1989 Supp (1) SCC 368] is a case which is almost identical on facts. In this matter the work could not be completed during the period of the contract and the contractor was accordingly granted extension of time to complete the same. By an order of this Court, the dispute was referred to an arbitrator on the reference as to who was responsible for the delay in the completion of the work, what were to be the repercussions of the delay and how to apportion the responsibility and the consequences. The arbitrator made an award in favour of the contractor which was duly challenged by the Union of India with the matter finally reaching this Court at the instance of the contractor and this is what the Court had to say : (SCC p. 373, para 13)

“13. It was submitted that if the contract work was not completed within the stipulated time which it appears was not done then the contractor has got a right to ask for extension of time, and he could claim difference in price. This is precisely what he has done and has obtained a portion of the claim in the award. It was submitted on behalf of the Union of India that failure to complete the contract was not the case. Hence, there was no substance in the objections raised. Furthermore, in the objections raised, it must be within the time provided for the application under Section 30 i.e. 30 days during which the objection was not specifically taken, we are of the opinion that there is no substance in this objection sought to be raised in opposition to the award. Once it was found that the arbitrator had jurisdiction to find that there was delay in execution of the contract due to the conduct of the respondent, the respondent was liable for the consequences of the delay, namely, increase in prices. Therefore, the arbitrator had jurisdiction to go into this question. He has gone into that question and has awarded as he did.”{Para 19}

IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 3376-3337 of 2008

Decided On: 07.05.2008

Associated Construction  Vs. Pawanhans Helicopters Pvt. Ltd.

Hon'ble Judges/Coram:

Tarun Chatterjee and H.S. Bedi, JJ.

Author: H.S. Bedi, J.

Citation: AIR2008SC 2911, 2008(2)ARBLR473(SC ), 2008 (3) AWC 3048 (SC ), 2008-4-LW926, 2009(1)RC R(C ivil)34,

2008(8)SC ALE451, (2008)16SC C 128,MANU/SC/7630/2008

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Whether the appeal is maintainable U/S 37 of Arbitration Act against the order passed by the arbitrator in the application for party addition?

Hindustan Prefab Ltd. (hereinafter ‘HPL’) has filed the present

appeal under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996 (hereinafter the ‘A&C Act’) impugning an order dated

09.04.2021 (hereinafter ‘the impugned order’) passed by the learned Arbitral Tribunal. By the impugned order, the Arbitral Tribunal rejected the appellant’s application to implead National Law University, Orissa (hereinafter ‘NLUO’) in the arbitral proceedings pending between HPL and the respondent (hereafter ‘NCC’).

5. First of all, this Court has serious reservations as to whether the present appeal is maintainable. Impleadment of a party is not an “interim measure”, which as the expression suggests would be

operative till conclusion of the arbitral proceedings. The application for seeking impleadment of NLUO before the Arbitral Tribunal cannot be considered as an application for an interim measure of protection. Thus, such a relief would not fall within the scope of an application under Section 17 of the A&C Act. Consequently, it is doubtful whether any order of the Arbitral Tribunal for refusing to join any other party in the arbitral proceedings can be made a subject matter of an appeal under Section 37 of the A&C Act.

IN THE HIGH COURT OF DELHI AT NEW DELHI

 Date of Judgment : 3rd June, 2021

ARB. A. (COMM.) 26/2021 and IA Nos. 7261/2021

& 7262/2021

HINDUSTANT PREFAB LTD.  Vs M/S. NCC LIMITED 

CORAM:

HON'BLE MR. JUSTICE VIBHU BAKHRU

Dated:  03.06.2021

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Whether arbitrator should decide the application for interim relief in arbitration relying on principles for grant of temporary injunction?

Being an arbitral tribunal and having a trooping of Civil Court, while making decisions, the arbitral tribunal has to follow the procedure as contemplated under law.  If any interim Order of injunction is to be passed exparte, certainly, the tribunal has to keep in mind the well settled principles of law.  While granting interim injunctions, only on being satisfied that there is a prima facie case in favour of the applicant and that balance of convenience is in his favour and irreparable loss or injury is likely to occur in the event of injunction not granted and  only on being satisfied with the above grounds, interim Order of injunction can be granted by the tribunal.  Whereas, in many Orders, this Court has come across, particularly in the arbitration cases, arising out of hire purchase and finance agreement, the arbitrator nominated by the financiers are passing Orders mechanically, without following any rule of law.  Any such Order, in my view, cannot be sustained in the eye of law.  Therefore, while passing any Order in the nature of interim injunction, the basic well established principles have to be followed by the arbitrator. 

42.  While passing any order for preservation or interim custody or a sale of any goods, which is subject matter of arbitral agreement or to secure any amount, also preservation, the well established principles have to be followed by the arbitrators.  Similarly, whenever the arbitral tribunal finds that such interim measures have to be passed, the arbitrator has to satisfy himself prima facie case of the applicant.  The tribunal also has to find out the actual dispute and bonafide contest existing between the parties.  Prima facie in the sense, the tribunal has to satisfy that the plaintiff has made positive averments that he has a strong case and legal right over the property, which has to be preserved or protected.  To find out balance of convenience, the tribunal has to find out whether there is any bonafide contest between the parties and on which side the balance of convenience lies.  Similarly, the tribunal also has to weigh whether in the event of not granting any injunction, the applicant will be really put to irreparable loss and injury.  Only on being satisfied with these facts, interim Orders, particularly in the nature of injunction, can be granted.  

 IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED : 17.09.2020

CORAM :

 MR.JUSTICE N.SATHISH KUMAR

C.M.A.Nos.25 to 28, 30 and 66 to 88 of 2020

and C.M.P.Nos.271, 273, 275, 277, 289,

617 to 621, 623 to 640 of 2020

Flywheel Logistics Solutions Pvt. Ltd.  Vs M/s.Hinduja Leyland Finance Ltd.,

 

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What is distinction between power of court and arbitrator to grant interim relief to party to arbitration against third party?

Reading of Section 9 of the Act as well as the judgments in Value Advisory (supra) and Gatx India (supra) makes it clear that the scope of power of a Court under Section 9 of the Act is not limited to parties to an Arbitration Agreement and the Court can issue interim directions even against a third party. The distinction between the powers under Section 9 of the Act and Section 17 of the Act has a clear rationale. An Arbitrator is a creature of the contract between the parties and therefore cannot venture outside the contract to issue directions to parties who are non-parties to the Arbitration Agreement. This limitation is not applicable to a Court exercising power under Section 9 of the Act.

IN THE HIGH COURT OF DELHI

O.M.P. (I) (COMM) No. 35/2020 and I.A. 3251/2020

Decided On: 10.06.2020

Blue Coast Infrastructure Development Pvt. Ltd.  Vs.  Blue Coast Hotels Ltd. and Ors.

Hon'ble Judges/Coram:

Jyoti Singh, J.

Citation: MANU/DE/1259/2020

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