Arbitration Clause referring to 1940 Act

Applicability of Arbitration Act, 1996.

What is material for the purposes of the applicability of 1996 Act is the agreement between the parties to refer the disputes to arbitration. If there be such an arbitration agreement which satisfies the requirements of Section 7 of 1996 Act, and if no arbitral proceeding had commenced before 1996 Act came into force, the matter would be completely governed by the provisions of 1996 Act. Any reference to 1940 Act in the arbitration agreement would be of no consequence and the matter would be referred to arbitration only in terms of 1996 Act consistent with the basic intent of the parties as discernible from the arbitration agreement to refer the disputes to arbitration. Continue reading “Arbitration Clause referring to 1940 Act”

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Does Arbitration bars remedy under SARAFESI Act

Effect of Arbitration Clause.

Loan agreements contained arbitration clauses which were invoked by the appellant with the filing of cases under Section 9 of the Arbitration and Conciliation Act, 1996. In view thereof, initiation of any other proceedings under the SARFAESI Act if impermissible in law?

Because arbitration is an alternative to the proceedings under the RDB Act, it would not be obligatory on the Bank/Financial Institution to withdraw the proceedings pending before the arbitrator, prior to resorting to secure its interest under the SARFAESI Act. The Bank/financial institution can simultaneously proceed before the Arbitral Tribunal for adjudication of disputes and also take recourse to Section 13 of the SARFAESI Act for enforcement of its security interest. Both the proceedings can continue parallel to each other. Continue reading “Does Arbitration bars remedy under SARAFESI Act”

Interpretation of Price Adjustment aka Price Escalation/Variation Clause

Judicial Review of Arbitration Award:

The main reason because of which the NHAI lost in those proceedings was that two possible interpretations could be given to the clause in question and, therefore, the recourse taken by the Arbitral Tribunal by adopting one particular interpretation was not required to be interfered with. SLP against that was dismissed. In a situation like this, this Court would not have undertaken further exercise in the matter. However, another Arbitral Tribunal in the case of M/s. Ssangyong Engineering and Construction Co. Ltd. has accepted the other view, which goes in favour of the NHAI. It leads to an anomalous situation. The NHAI has entered into multiple contracts with different parties containing the same clauses of price variation. Once we find that Arbitral Tribunals are taking different views, and the view taken in favour of the NHAI is also one of the possible interpretations, the effect thereof would be to uphold both kinds of awards even when they are conflicting in nature in respect of the same contractual provision. It may not be appropriate to countenance such a situation which needs to be remedied. Therefore, under this peculiar situation, we deem it proper to go into the exercise of interpreting the said clause so that there is a uniformity in the approach of the Arbitral Tribunals dealing with this particular dispute and a sense of certainty is attached in the outcomes. Continue reading “Interpretation of Price Adjustment aka Price Escalation/Variation Clause”

Judicial Notice of a well known fact in public knowledge

Judicial notice of Satyam Scam of inflated profits:

B. Ramalinga Raju, Chairman, Satyam Computer Services Ltd. wrote a letter admitting inflated profits an bank/cash balances in financial statements which was addressed to the board of directors, SEBI and financial institutions; if could be admitted in evidence without formal proof?

Conclusion of Supreme Court:

The aforesaid letter, its contents and signature of the author of the letter – Mr. Raju, were never in dispute and nor at any point of time anyone questioned it. In other words, the existence of letter, its contents and signature of Mr. Raju on the letter were never doubted and nor its author (Mr. Raju) at any point of time retracted from his confessional statement made therein or denied having written such letter.

In my opinion, therefore, the letter in question was rightly received in evidence without requiring any further formal proof to corroborate its existence and contents. That apart, it being a “notorious fact” being in the knowledge of the whole World and especially those in the trade, the Courts could take judicial notice of such evidence as held by this Court in the case of Onkar Nath & Ors. Vs. Delhi Administration, (1977) 2 SCC 611. It is appropriate to quote the words of the leaned Judge- Justice Y.V.Chandrachud (as His Lordship then was), who speaking for the Bench held as under: Continue reading “Judicial Notice of a well known fact in public knowledge”

Arbitration agreement prohibiting grant of interest

When the terms of the agreement had prohibited award of interest, the Arbitrator could not award interest for the pendente lite period.

Clause 13 (3) of the contract entered into between the parties read as under:

“13(3). No interest will be payable upon the earnest money and the security deposit or amounts payable to the contractor under the contract, but Government Securities deposited in terms of sub-clause(1) of this clause will be repayable with interest accrued thereon.”

It has been held thus: Continue reading “Arbitration agreement prohibiting grant of interest”

Arbitration clause does not bar jurisdiction of Rent Controller or Civil Court

Arbitration clause in lease deed does no bar suit for eviction

Can tenant invoke arbitration clause in the face of civil suit by landlord:

In the light of the foregoing discussion and the authority of the precedents, we hold that both by reason of Section 28 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 and by reason of the broader considerations of public policy mentioned by us earlier and also in Deccan Merchants Cooperative Bank Ltd. v. Dalichand Jugraj Jain, the Court of Small Causes has and the arbitrator has not the jurisdiction to decide the question whether the respondent-licensor landlord is entitled to seek possession of the two Studios and other premises together with machinery and equipment from the appellant-licensee tenant. That this is the real dispute between the parties is abundantly clear from the petition filed by the respondents in the High Court of Bombay, under Section 8 of the Arbitration Act seeking a reference to Arbitration. The petition refers to the notices exchanged by the parties, the respondent calling upon the appellant to hand over possession of the Studios to him and the appellant claiming to be a tenant or protected licensee in respect of the Studios. The relationship between the parties being that of licensor-landlord and licensee tenant and the dispute between them relating to the possession of the licensed demised premises, there is no help from the conclusion that the Court of Small Causes alone has the jurisdiction and the arbitrator has none to adjudicate upon the dispute between the parties.”

Continue reading “Arbitration clause does not bar jurisdiction of Rent Controller or Civil Court”

Multiple arbitration agreements between same parties

Expediency of one Arbitration Tribunal instead of multiple Tribunals

The amended Section 11 of Arbitration Act, 1996 reads as under:-

“11. Appointment of arbitrators.- (1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.
(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.

(3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.

Continue reading “Multiple arbitration agreements between same parties”

Limitation for counter claim in Arbitration proceedings

Date of commencement of arbitration:

Section 3 of Limitation Act, 1963 specifies the date of institution for suit, but does not specify the date of `institution’ for arbitration proceedings. Section 21 of the Act supplies the omission. But for section 21, there would be considerable confusion as to what would be the date of `institution’ in regard to the arbitration proceedings. ….. In view of section 21 of the Act providing that the arbitration proceedings shall be deemed to commence on the date on which “the request for that dispute to be referred to arbitration is received by the respondent” the said confusion is cleared. Therefore the purpose of section 21 of the Act is to determine the date of commencement of the arbitration proceedings, relevant mainly for deciding whether the claims of the claimant are barred by limitation or not.

Counter-claim:

As far as counter claims are concerned, there is no room for ambiguity in regard to the relevant date for determining the limitation. Section 3(2)(b) of Limitation Act, 1963 provides that in regard to a counter claim in suits, the date on which the counter claim is made in court shall be deemed to be the date of institution of the counter claim. As Limitation Act, 1963 is made applicable to arbitrations, in the case of a counter claim by a respondent in an arbitral proceedings, the date on which the counter claim is made before the arbitrator will be the date of “institution” in so far as counter claim is concerned. There is, therefore, no need to provide a date of `commencement’ as in the case of claims of a claimant. Section 21 of the Act is therefore not relevant for counter claims. There is however one exception. Where the respondent against whom a claim is made, had also made a claim against the claimant and sought arbitration by serving a notice to the claimant but subsequently raises that claim as a counter claim in the arbitration proceedings initiated by the claimant, instead of filing a separate application under section 11 of the Act, the limitation for such counter claim should be computed, as on the date of service of notice of such claim on the claimant and not on the date of filing of the counter claim.

Appointment of arbitrator if reference of dispute?

Section 11 of the Act requires the Chief Justice or his designate only to appoint the arbitrator/s. It does not require the Chief Justice or his designate to identify the disputes or refer them to the Arbitral Tribunal for adjudication. Where the appointment procedure in an arbitration agreement requires disputes to be formulated and specifically referred to the arbitrator and confers jurisdiction upon the arbitrator to decide only such referred disputes, when an application is filed under section 11(6) of the Act, alleging that such procedure is not followed, the Chief Justice or his designate will take necessary measures under section 11(6) of the Act to ensure compliance by the parties with such procedure. Where the arbitration agreement requires the disputes to be formulated and referred to arbitration by an appointing authority, and the appointing authority fails to do so, the Chief Justice or his designate will direct the appointing authority to formulate the disputes for reference as required by the arbitration agreement. The assumption by the courts below that a reference of specific disputes to the Arbitrator by the Chief Justice or his designate is necessary while making appointment of arbitrator under section 11 of the Act, is without any basis. Equally baseless is the assumption that where one party filed an application under section 11 and gets an arbitrator appointed the arbitrator can decide only the disputes raised by the applicant under section 11 of the Act and not the counter claims of the respondent.

Section 23 of the Act enables the claimant to file a statement of claim stating the facts supporting his claim, the points at issue and the relief or remedy sought by him and enables the respondent to state his defence in respect of those claims. Section 2(9) provides that if any provision [other than section 25 (a) or section 32(2)(a)], refers to a “claim”, it shall apply to a “counter claim” and where it refers to a “defence”, it shall also apply to a defence to that counter claim. This would mean that a respondent can file a counter claim giving the facts supporting the counter claim, the points at issue and the relief or remedy sought in that behalf and the claimant (who is the respondent in the counter claim) will be entitled to file his defence to such counter claim. Once the claims and counter claims are before the arbitrator, the arbitrator will decide whether they fall within the scope of the arbitration agreement and whether he has jurisdiction to adjudicate on those disputes (whether they are claims or the counter claims) and if the answer is in the affirmative, proceed to adjudicate upon the same.

[Source: State of Goa vs. Pravin Enterprises, 2012 (12) SCC 581 followed in Voltas India Ltd. vs. Rolta India Ltd. (SC on 14 Feb. 2014)]

Click here to read more about Law of Limitation in India.

Arbitration Clause in Trust Deed is not Enforceable.

Appointment of Arbitrator:

The existence of an arbitration agreement as defined under Section 7 of the Act is a condition precedent for exercise of power to appoint an arbitrator/Arbitral Tribunal, under Section 11 of the Act by the Chief Justice or his designate. It is not permissible to appoint an arbitrator to adjudicate the disputes between the parties, in the absence of an arbitration agreement or mutual consent.

But mere use of the word ‘arbitration’ or ‘arbitrator’ in a clause will not make it an arbitration agreement, if it requires or contemplates a further or fresh consent of the parties for reference to arbitration. For example, use of words such as “parties can, if they so desire, refer their disputes to arbitration” or “in the event of any dispute, the parties may also agree to refer the same to arbitration” or “if any disputes arise between the parties, they should consider settlement by arbitration” in a clause relating to settlement of disputes, indicate that the clause is not intended to be an arbitration agreement. Similarly, a clause which states that “if the parties so decide, the disputes shall be referred to arbitration” or “any disputes between parties, if they so agree, shall be referred to arbitration” is not an arbitration agreement. Continue reading “Arbitration Clause in Trust Deed is not Enforceable.”

Understanding the jargon called arbitration.

What is an arbitration?

Arbitration is a mechanism for adjudication of the dispute between two parties by a private person or a panel of person chosen by the parties who are called Arbitrator or Arbitral Tribunal. Arbitration is an alternative dispute resolution Technique in which the Court or the State have the very limited role to play.

Procedure of Arbitration.

Unlike Court the Arbitrator is free to choose his/her own procedure. However, the parties are free to agree on any particular procedure to be followed by an Arbitrator and in such case such procedure shall be binding upon the Arbitrator and Arbitration shall be conducted accordingly. Continue reading “Understanding the jargon called arbitration.”