THE SUPREME COURT JUDGEMENTS ON

ARBITRATION

 M/S Emaar Mgf Land Limited vs Aftab Singh Civil Appeal

Nos.23512-23513 of 2017 (decided on 10 December 2018) 

Issue: The Supreme Court of India dealt with the question of whether a remedy
under the Indian Consumer Protection Act, 1986 (CPA) being a special remedy
can be initiated and continued in spite of there being any arbitration agreement
between the parties. The Appellant prayed before the Court to refer the parties
to arbitration depending heavily on the amended Section 8 of the Arbitration
and Conciliation Act, 1996 of India (‘Act’) which mandates a judicial authority
to refer the dispute to arbitration, if such judicial authority is of the opinion that
prima facie the arbitration agreement exists.

Facts: The Appellant builder purchased a land to construct a township. The

Respondent buyer submitted application to purchase a villa in the aforesaid
township. The Parties entered into an Agreement containing an arbitration
Clause (Clause 43) providing for settlement of disputes between parties under
the Act. Dispute arose between the Parties and the Respondent filed a complaint
against the Appellant in the National Consumer Disputes Redressal
Commission (NCDRC) to direct the Appellant to deliver the possession of villa
along with other prayers. NCDRC is a special forum established by the Central
Government of India under Section 9(c) of CPA. It exercises jurisdiction
envisioned in Section 21 of CPA wherein it may, inter alia, entertain complaints
where the value of the goods or services and compensation, if any, claimed
exceeds rupees one crore. In response to the Complaint filed by the Respondent,
the Appellant filed an application under Section 8 of the Act before the NCDRC
praying to refer the matter to arbitration.

Held: The court held that the consumer forums established under the CPA are
not bound to refer the dispute raised in the complaint to an arbitral tribunal in
terms of the arbitration Clause contained in the agreement entered into between
the parties.
The Court noticed that the Act contains two Parts – Part I “Arbitration” and Part
II “Enforcement of Certain Foreign Awards”. Chapter I of Part I is “General
Provisions”, in which Section 2 deals with definitions but it is covered by
general header of Chapter I “General Provisions”. Section 2(3) does not contain
any definition but contain a general provision which clarifies that “[t]his Part
shall not affect any other law for the time being in force by virtue of which
certain disputes may not be submitted to arbitration”. Therefore, Section 2(3) of
the Act gives prevalence of any other law for the time being in force by virtue
of which certain disputes may not be succumbed to arbitration i.e. they are not
arbitrable.
After considering the legislative intent and object in bringing the amendment to
Section 8 in 2015 Act taking into consideration the 246th Law Commission
Report (of 2014), 176th Report of the Law Commission on the “Arbitration and
Conciliation (Amendment) Bill, (2001) and 2015 Act apprehended that the
words “notwithstanding any judgment, decree or order of the Supreme Court or
any Court” were meant only to those precedents where it was laid down that the
judicial authority while making reference under Section 8 shall entitle to look
into various facets of the arbitration agreement, subject matter of the arbitration
whether the claim is alive or not, whether the arbitration agreement is null and
void. The words added in Section 8 of the Act shall not be meant for any other
meaning.
Additional, the Apex Court also held that in the event a person entitled to seek
an additional special remedy provided under the statutes does not opt for the
additional/special remedy and he is a party to an arbitration agreement, there is
no inhibition in disputes being proceeded in arbitration. It is solitary the case
where specific/special remedies are provided for and which are opted by an
aggrieved person that judicial authority can refuse to consign the parties to the
arbitration.

 M/s. Simplex Infrastructure Ltd. Vs. Union of India, Civil Appeal

No. 11866 of 2018 (decided on 5 December 2018)

Issue: The issue before the Apex Court was whether the High Court was
justified in condoning the delay in filing the application under Section 34 of the
Act by the Respondent.
Facts: The Parties got into a construction agreement in 2006. Dispute arose
between the parties and after going through arbitration, an award (Award) was
rendered in 2014.  During the pendency of the arbitration proceedings, the
Appellant filed an application for interim measures before the Calcutta High
Court which was duly contested by the Respondent. In 2015, the Award was
assailed under Section 34 of the Act by the Respondent before an incorrect
Court (District Judge, Port Blair).  The District Judge, Port Blair dismissed the
Respondent’s application under Section 34 of the Act for want of jurisdiction
reasoning that when an application for interim measures has been made
regarding an arbitration agreement before the Calcutta High Court under the
same part; that Court shall only have the jurisdiction over the arbitration
proceedings and all subsequent application arising out of that agreement and the
arbitral proceedings shall be made in that court and in no other court.
Subsequently, in 2016, the Respondent again challenged the Award under
Section 34 of the Act but this time before the court with proper jurisdiction i.e.
the High Court of Calcutta with an application for condonation of delay.

Held: The Supreme Court held that the words “but not thereafter” appearing in
Section 34(3) of the Act makes it profusely clear that as far as the limitation for
filing an application for setting aside an arbitral award is concerned, the
statutory period prescribed is three months which is extendable by an added
period of up to thirty days (and no more) subject to the satisfaction of the court
that sufficient reasons were provided for the delay.
Consequently, the Court set aside the disputed order of the High Court and held
that the administrative difficulties would not be a valid reason to condone a
delay above and beyond the statutory prescribed period under Section 34 of the
Act.

 Radha Chemicals v Union of India Civil Appeal No. 10386 of 2018

(decided on 10 October 2018)

Issue: The Supreme Court decided whether the Court has the power to remand
the matter to the Arbitrator for a fresh decision?
Facts: The arbitrator decided an issue in its award. This award was questioned
before the Single Judge a High Court under Section 34 of the Act. The Single
Judge opined that the aforesaid issue has not been decided correctlly by the
arbitrator and therefore the award shall be remanded back to the arbitrator to be
decided afresh. This order of the Single judge was challenged before the
Division Bench of the High Court which affirmed the decision of the Single
judge. This order of the Division Bench was then appealed before the Supreme
Court.

Held: The Supreme Court held that the partial discretion available to the Court
under Section 34(4) to remand an award can be exercised only upon a written
application made in that behalf by a party to the arbitration proceedings and
such power could not be exercised by deferring the proceedings under Section
34 of the Act. The Apex Court clearly stated that the Court cannot exercise this
limited power of deferring the proceedings before it suo moto. Further, the
limited remedy available under Section 34(4) is required to be invoked by the
party to the arbitral proceedings before the final award is set aside by the Court.

 K. Kishan v. M/S Vijay Nirman Company Pvt. Ltd. Civil Appeal no.
21824 of 2017, (decided on 14 August, 2018) 

Issue: The Apex Court dealt with the issue of whether the Indian Insolvency
and Bankruptcy Code, 2016 (the Code) can be invoked in respect of an
operational debt where an Arbitral Award has been passed against the
operational debtor, which has not yet been finally adjudicated upon.

Facts: The Respondent sub-contracted a little amount of work to a third party

based on which the said third party entered into a further agreement with a
fourth party. As a result of this prearrangement, a tripartite MOU was signed
between the Respondent, the third party and the fourth party. Dispute arouse
between the parties and the matters were referred to arbitration and the tribunal
passed an award (the Award) in favour of the Respondent. Subsequently, the
Respondent sent a demand notice (the Notice) to the third party under Section 8
of the Code. The Notice was disputed by the third party, who argued that the
amount claimed under the Notice was the subject-matter of the arbitration
proceeding. Later, the third party challenged the Award under Section 34 of the
Indian Arbitration Act. Then, the Respondent filed a petition under Section 9 of
the Code before the National Company Law Tribunal of India (the NCLT)
claiming that the amount awarded in the arbitration has become ‘Operational
Debt’ to be paid by the third party as defined under Section 3(11) of the Code.
Per contra, the third party argued that the said award is under challenge and the
challenge proceedings are sub judice. The NCLT admitted the Section 9 petition
and held that a challenge petition was pending was immaterial for the reason
that the claim stood admitted, and there was no stay of the Award. In appeal, the
Appellate Tribunal upheld this decision stating that the non-obstante clause
contained in Section 238 of the Code would override the Act.

Held: The Supreme Court held that the operational creditors cannot use the
Code either prematurely or for extraneous considerations or as a substitute for
debt enforcement procedures. The object of the Code, at least insofar as
operational creditors are concerned, is to place the insolvency process against a
corporate debtor only in clear cases where a real dispute between the parties as
to the debt owed does not exist.
Under the Code, insofar as an operational debt is concerned, all that has to be
perceived is whether the said debt can be said to be disputed, and that the filing
of a Section 34 petition against an Arbitral Award shows that a pre-existing
dispute which culminates at the first stage of the proceedings in an Award,
continues even after the Award is set, in any case till the final adjudicatory
process under Sections 34 & 37 has taken place. The Court also held that there
is no inconsistency between the Code and the Act.

 United India Insurance Co. Ltd. & Anr. v. Hyundai Engineering and
Construction Co. Ltd. & Ors., Civil Appeal no. 8146 of 2018
(decided on 21 September 2018) 

Issue: The Supreme Court of India dealt with the question of Applicability Of
the Section 11 (6A) Of The Arbitration And Conciliation Act, 1996 In Case Of
An Conditional Arbitration Clause. 

Facts: The Appellant gave some construction contract to the Respondent. The
Appellant obtained an insurance policy to cover the entire construction project.
The insurance policy had an arbitration clause. During the construction an
accident occurred because of which the Respondent incurred huge losses which
was duly conveyed to the Appellant. As per the Surveyor’s and Loss Adjuster’s
report, the damage was on account of the faulty design and improper execution
of the project and was not payable under the policy. Besides the stated report, a
Committee of Experts was set up by the Ministry of Road Transport and
Highways, Government of India, to enquire about the accident. The Appellant
conveyed this to the respondents that their claim was found to be not payable
and henceforth stands repudiated. The Respondent entered correspondence with
the appellants to reopen and re-assess its decision of refutation of the claim.
Finally, the appellants informed the respondents that it was unable to
“reconsider” the claim which has already been repudiated. The Respondent
invoked the arbitration. Unable to reach any agreement on the appointment of
an arbitrator, the Respondent filed a petition to the High Court for the
appointment of an arbitrator under Sections 11(4) & 11(6) of the Indian
Arbitration Act. The High Court appointed an arbitrator having opined that
arbitration agreement existed in the form of clause 7 of the Insurance Policy.

Held: The Apex Court held that the arbitration clause has to be interpreted
strictly. The subject clause 7 is a conditional expression of intent. Such an
arbitration clause will get activated or kindled only if the dispute between the
parties is limited to the quantum to be paid under the policy. An arbitration
clause would enliven or invigorate only if the insurer admits or accepts its
liability under or in respect of the concerned policy. Therefore, there can be no
arbitration in cases where the insurance company disputes or does not accept the
liability under or in respect of the policy. After, going through evidence
regarding the repudiation of claim, the court further held that the plea of the
appellants falls in an excepted category and non-arbitrable matter within the
meaning of the opening part of clause 7.

 M/S Emkay Global Financial Services Ltd. v. Girdhar Sondhi, (Civil

Appeal No. 8367 of 2018 (Arising out of SLP (Civil) No.33248 of
2017) (decided on 20 August 2018)

Issue: The Supreme Court of India in this case, dealt with the interpretation of
“furnish proof” while challenging an award under Section 34 of the Indian
Arbitration Act (the Act). In simple words, the Court addressed the issue of
whether there is any requirement to lead evidence in an application to challenge
an award under the Act.

Facts: In this case, under the arbitration clause, the arbitration was subject to
Bye-laws. The arbitration proceeding took place under the National Stock
Exchange Bye-laws. Under these Bye-laws, Chapter VII granted exclusive
jurisdiction to the civil courts in Mumbai with regard to the disputes that arise
under it. A dispute arose between the parties and the Respondent initiated
arbitration proceedings. An award was passed against the Respondent by the
sole arbitrator. The Respondent challenged this award under Section 34 of the
Act in a District Court in Delhi which was rejected due to the exclusive
jurisdiction clause. They further appealed at the Delhi High Court, wherein the
Single Judge referred back the parties to the District Judge to first frame an
issue, and then decide on evidence, including the opportunity to cross-examine
witnesses who give depositions.

Held: The Apex Court held that once courts in Mumbai have exclusive
jurisdiction, that is to be read with the National Stock Exchange Bye-laws, it is
clear that it is the Mumbai courts and the Mumbai courts alone, before which an
award can be challenged under Section 34 of the Act. The arbitration that was
conducted at Delhi was only at a convenient venue earmarked by the National
Stock Exchange.

 The State of Bihar & Ors. v. Bihar Rajya Bhumi Vikas Bank Samiti,
(Civil Appeal no. 7314 of 2018) (decided on 30 July, 2018)

Issue: The Apex Court dealt with the issue of whether Section 34(5) of the
Indian Arbitration Act (the Act) (amended by Act 3 of 2016 (w.e.f. 23rd
October, 2015), is mandatory or directory. As per the said provision, the party
challenging an award has to issue a notice to other party informing about the
initiation of challenge proceedings in court.
Facts: An application to set aside an award was filed under Section 34 of the
Act which was then dismissed by the Single Bench of the Patna High Court
holding that Section 34(5) is directory and not mandatory. This was over turned
by the Division Bench of the Patna High Court, holding that the notice under
Section 34(5) is a condition precedent before challenging an award. Before the
High Court, the common ground between the parties was that no prior notice
was issued to the other party in terms of the said Section 34(5), nor was the
application under Section 34 accompanied by an affidavit that was obligatory
by the said sub-section. The appeal was then made to the Supreme Court against
the order of the Division Bench of Patna High Court.

Held: The Supreme Court held that the notice under Section 34(5) is not a
condition precedent/mandatory but it is a procedural provision which seeks to
reduce the delay in deciding applications under Section 34.

 Shyam Sunder Agarwal v. P. Narotham Rao and Ors. (Civil Appeal

no. 6872 of 2018) (decided on 23 July, 2018)

Issue: The Supreme Court of India examined the wordings of an arbitration

clause in question to decide whether the said clause treated as an arbitration
clause in the light of words used such as “Mediators/Arbitrators”, “any
breaches”, “decision” in it.

Facts: The dispute arose out of a MOU executed between the parties for
sale and purchase of shares in which all the parties were Directors. The
issue before the Court was whether Clause 12 of the said MOU can be stated to
be an arbitration clause.

Held: The Apex Court held that the wordings of MOU is clearly
inconsistent with the view that it intended that the disputes which would arise
later, would be decided by arbitration. Hence the said clause is not an arbitration
clause.
  M/s Raveechee and Co. vs. Union of India, civil appeal nos. 5964-
5965  of 2018 (decided on 3 July, 2018) 

Issue: The Supreme Court of India in this case dealt with the issue of whether
an arbitrator has the power to award interest pendente lite. 

Facts: M/s Raveechee and Co. (Raveechee) entered into a contract for
quarrying, stacking etc., with the Government of India (GOI). Disputes arose
between the parties due to which Raveechee appointed the Arbitrator to settle
the disputes. The arbitrator passed an award along with an interest pendente lite
at 12% on the award. Subsequently Raveechee filed the execution proceedings
in the Civil Court which were challenged by the GOI in the High Court. The
High Court set aside the award qua the interest awarded pendente lite.
Thereafter, the matter went into the Supreme Court for final decision. 

Held: The Apex Court held that the bar to award interest on the amounts
payable under the contract would not be sufficient to deny the payment of
interest pendente lite. The Court further held that the Arbitrator has the power to
award interest pendente lite were justified. It comes under the jurisdiction of the
Arbitrator.

 Haier Telecom (India) Private Ltd v. Drive India Enterprise

Solutions Ltd. SLP (Civil) Diary No(s). 25631/2018 (decided on 12
March, 2018)

Issue: The Supreme Court of India had to decide whether an application to

leave to defend under Order 37 Rule 3(5) of the Indian Code of Civil Procedure,
1908 (CPC) which has to be filed by a party within a period of 10 days
to disclose ‘such facts as may be sufficient to entitle him …to defend such
suit should be treated as the ‘first statement on Merits’ in terms of Section 8 of
the Indian Arbitration Act.

Facts: The parties had two separate arbitration clauses in two separate
agreements. Haier Telecom (India) (HTI) filed an application before the High
Court of Bombay under Section 8 of the Indian Arbitration Act to refer the
parties to arbitration since there is/are arbitration agreement(s) between the
parties. This was rejected by the Bombay High Court on the ground that the said
application was filed by HTI after it had filed its application seeking leave to
defend under Order 37 Rule 3 of the CPC, in the Drive India Enterprise’s
(DIE) summary suit.

Held: The Apex Court presumed the existence of arbitration agreement

between the parties based on an earlier application filed by DIE for interim
measures under Section 9 of the Indian Arbitration Act. The Court noticed that
HTI, in its application seeking leave to defend, has questioned the
maintainability of the DIE’s suit and thereafter, it has followed up with an
application to refer the parties to arbitration under Section 8 of the Indian
Arbitration Act.
Therefore, the Court had issued a notice to answer this question as to whether or
not, under no circumstances, can the action of HTI of filing an application to
refer the parties to arbitration, be construed to mean that HTI has acquiesced to
the jurisdiction of the Court to hear DIE’s summary suit, and waived its right to
invoke the arbitration clause.

 Board of Control for Cricket in India (BCCI) v Kochi Cricket Pvt.

Ltd. & Ors. APPEAL Nos. 2879-2880 OF 2018 (decided on 15
March, 2018) 

Issue: The Supreme Court of India, in this case dealt with the interpretation and
applicability of Section 26 of the Arbitration and Conciliation (Amendment)
Act, 2015 (Amendment Act) in relation to: (a) arbitration proceedings; and/or
(b) legal proceedings in connection with such arbitration proceedings. 

Facts: A number of appeals were heard together as they dealt with the same
question of law. The facts here arise from the first appeal, i.e., Board of Control
for Cricket in India vs. Kochi Cricket Pvt. Ltd. and Ors. The case is related to a
franchise agreement, wherein certain disputes arose between the parties
resulting in the respondents initiating arbitration proceedings. The arbitrator
appointed passed two arbitral awards dated June 22, 2015 in favour of the
respondents. BCCI challenged the said awards under Section 34 of the
Arbitration and Conciliation Act, 1996 (Act). The respondents, subsequently,
filed execution applications in connection with the aforesaid awards on
November 26, 2015. The BCCI, through chamber summons, resisted the
execution applications on the ground that Section 36 of the Act (as unamended)
would be applicable and that there would be an automatic stay until its own
Section 34 applications were disposed of. The Single Judge ruled that the
amended Section 36 would apply (as opposed to the unamended Section 36)
and, henceforth, no automatic stay could be pleaded.

Held: The Supreme Court held that Section 26 of the Amendment Act
undeniably constitutes of two parts, both of which are independent of one
another. It further held that the first part relates to the arbitration proceedings
per se only and the second part relates to the court proceedings arising out of
arbitration alone.
Arbitration proceedings initiated prior to the ordinance will not be governed by
the amended provisions. However, the parties if they wish can mutually agree to
apply amended provisions to old arbitrations, as it is a matter of procedure.
Natural consequence of the negative language in first part of section 26 is that
arbitration proceeding initiated after 23 October 2015 will be governed by the
amended provisions.
Second part of Section 26 does not relate to the arbitration proceedings per se
but only to the court proceedings relating to arbitration. The court proceedings
that started after the ordinance will be governed by amended provisions. This
remains the position whether the court proceeding relate to old or new
arbitrations.
The Court further held that the amended Section 36 applies to pending Section
34 applications as well. The enforcement of an award and its execution are not
two different things. Automatic stay was nothing but a clog on a right; it did not
deliberate any specific right. The amendment removes that clog. Applying
purposive interpretation to give effect to the intent of the amendments, it held
that amended Section 36 was intended to apply retrospectively. Ergo, the
automatic stay contained in old Section 36 no more applies to any pending
Section 34 proceeding.