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” →

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.

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Sovereign Immunity in Commercial Matters?

Scope of Sovereign Immunity:

Business or commercial activities carried out by one Country in the territory of another country ordinarily not entitled to plead sovereign immunity.

Principle of sovereign Immunity

There is no agreed principle except this: that each State ought to have proper respect for the dignity and independence of other States. Beyond that principle there is no common ground. It is left to each State to apply the principle in its own way, and each has applied it differently. Some have adopted a rule of absolute immunity which, if carried to its logical extreme, is in danger of becoming an instrument of injustice. Others have adopted a rule of immunity for public acts but not for private acts, which has turned out to be a most elusive test. All admit exceptions. There is no uniform practice. There is no uniform rule. So there is no help there.
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Agreement to enter into arbitration agreement.

Agreement to enter into agreement is not unequivocal and therefore not enforceable.

Relevant clause of the Partnership deed provided that if there is any dispute touching the partnership arising between the partners, the same shall be mutually decided by the parties or shall be referred to arbitration if the parties so determine.

If the clause had merely said that in the event of disputes arising between the parties, they “shall be referred to arbitration”, it would have been an arbitration agreement. But the use of the words “shall be referred for arbitration if the parties so determine” completely changes the complexion of the provision.

The expression “determine” indicates that the parties are required to reach a decision by application of mind. Therefore, when clause 16 uses the words “the dispute shall be referred for arbitration if the parties so determine”, it means that it is not an arbitration agreement but a provision which enables arbitration only if the parties mutually decide after due consideration as to whether the disputes should be referred to arbitration or not.

In effect, the clause requires the consent of parties before the disputes can be referred to arbitration. The main attribute of an arbitration agreement, namely, consensus ad idem to refer the disputes to arbitration is missing in clause 16 relating to settlement of disputes. Therefore it is not an arbitration agreement, as defined under section 7 of the Act. In the absence of an arbitration agreement, the question of exercising power under section 11 of the Act to appoint an Arbitrator does not arise.

[Source: Jagdish Chander v. Ramesh Chander (Supreme Court of India)]