1.
Hardy Exploration
Basically, if venue is mentioned, without any conditions, then based on a holistic interpretation
of the clause, venue may be the seat. However, if there is a condition precedent for venue, that
needs to be satisfied. If satisfied, then venue may be the seat. Otherwise, the arbitral tribunal
has to actively determine the seat.
2. Brahmani River Pellets
Clause-
Basically, since venue was agreed without any condition precedent, Court held that
Bhubaneswar will be the seat also. Can this be considered an application of Hardy Exploration
itself?
Note: The fact that words such as “only”, “exclusive” etc are not used does not mean
venue/place is not the seat.
3. BGS SGS Soma
Held:
A bit extreme from Hardy Exploration’s principle- not a holistic reading, but a sure-shot
formula. Collapsing the distinction between venue and seat altogether. Also does not consider
Hardy Exploration’s point of condition precedent.
On facts- Since proceedings were conducted in Delhi, award signed there, Delhi is the seat.
Reverse engineering based on the conduct of the parties.
4. Mankatsu Impex
Held:
Deviated a bit from BGS Soma- merely because place is notified, does not mean that Hong
Kong is the seat. Must see it holistically- sort of leaning towards the Hardy Exploration
principle.
5. Arif Azim
Closest Connection Test
Moved away from the closest connection test to the Shashoua principle
The court applied the same to facts, and held that since only one venue- Dubai is mentioned,
along with the Rules, and it will anchor the proceedings, it is the seat of arbitration.
Principles laid down
6. Young Achievers
If the contract has been novated, then the arb clause in the previous contract cannot be relied
upon. However, if it is a case of accord and satisfaction, then it may be relied upon.
7. SMS Tea Estates- respects severability
3 points
Arb clause is a collateral term to the contract. It’s as if there are two contracts rolled up
in one for convenience.
o Thus, even if the arb clause is in a contract which otherwise requires
registration, the arb clause can be relied upon (severability argument basically).
Exception: If the void and unenforceability goes to the arb clause also
o Note, however, that this was also based a lot on Section 49 of the Registration
Act, which allows the unregistered document to be used as evidence of a
collateral transaction
o Also note that if the exception is taken as a defence, the same will be considered
by the arbitrator, not the Court.
If the contract is not duly stamped, then it is inadmissible in evidence under Section 35
of the Stamp Act
o This goes to the arb clause also- following the procedure of the Stamp Act, the
arb clause in the contract, which is not duly stamped, cannot be relied upon.
Basically, non-registration is not an impediment for relying on the arb clause, as the
Court uses severability here. However, where the contract is not duly stamped, the Court
uses Section 35 of the Stamp Act to argue that even the arb clause cannot be relied upon.
8. NN Global 1- 3J- respects severability the mos
Basic severability argument used to hold that unstamped contract does not render the arb clause
in it void, unenforceable or non-existent. However, final adjudication of the substantive rights
flowing from the contract can be done only after complying with the stamping obligations.
9. NN Global 2- 5J- Hagg diya
Same as SMS Tea Estates- using Sections 33, 35 and 38 of the Stamp Act- effect of unstamping
is that the arb clause is non-existent in the eyes of the law.
10. Reference- 7J- Good on severability
Inadequate stamping is a curable defect, and only renders the contract inadmissible in evidence,
not void. Referral Court only must see whether the arb agreement prima facie exists, any
objection as to stamping should be seen by the arbitral tribunal (Section 16, kompetenz-
kompetenz).
On the scope of judicial interference in Sections 8 and 11:
Affirmed that SBP is legislatively overruled- not that much judicial interference
Just see prima-facie existence of the arbitration agreement with respect to the
requirements of Section 7- don’t see validity of the arbitration agreement rn (overruled
Vidya Drolia on this point)
SBP
In SPB & Co. v. Patel Engineering Ltd., a seven-Judge Bench of this Court held that the power
exercised by the Chief Justice of India or a Chief Justice of the High Court Under Section 11(6)
is a judicial power. In the process, this Court analysed the scope of the powers and authority
of the referral court Under Section 11(6). Moreover, this Court noted that Sections 8 and 11
are complementary in nature.
Consequently, if the judicial authority acting Under Section 8 has to mandatorily decide the
issue of jurisdiction before referring the parties to arbitration, the same standard of scrutiny
was also held to be applicable to the reference Under Section 11. In conclusion, it was held that
the Chief Justice or their designate at the referral stage Under Section 11(6) had the right to
determine all preliminary issues.
Boghara Polyfab
Court under Section 11 must see validity of the arb agreement, can see issues such as limitation,
should not go into merits or whether a claim falls within the arb agreement’s scope.
Duro Felguera
Vidya Drolia
Existence = Validity under Section 11, so can see that
Court in In Re: Global
11. M.R. Engineers
Section 7(5)- Arb agreement by reference
Since severability and possible lack of knowledge, special reference to the arb clause is
generally necessary. Exceptions, where general reference may suffice- where standard terms
and conditions of a trade association or professional body/regulatory institution (government
also where it says the conditions of contract).
12. Inox Winds
Change from the norm-exception: Test is single-contract and two-contract cases
Two-contract cases: Reference is to a previous contract where only one of the current two
parties are present.
Single-contract cases: Reference is to a previous contract between the same parties, or of the
standard terms and conditions of one of the parties, which are annexed to the present contract,
or contained in another document to which reference is made. Standard forms of terms and
conditions of a trade association, industry etc also fall within this.
13. Sukanya Holdings
Where a CS is filed, which is broader than the subject-matter of the arbitration agreement, and
which includes parties who are not in the arbitration agreement, cannot bifurcate it under
Section 8.
Basically, cannot say that Parties A,B and C go for arbitration for issues X, Y, and Z, while the
remaining parties stay in the suit for the other issues.
14. BALCO
Changed after 2015 amendment to Section 2(2), which inserted the proviso.
15. Booz Allen
Arbitrability has 3 facets:
a) Disputes are not capable of settlement by arbitration
b) Disputes are not covered by the arbitration agreement
c) Issue decided upon was not referred to arbitration
Where the dispute relates to rights in rem, it is not arbitrable. 6 examples of non-arbitrability:
i) Criminal offences
ii) Matrimonial matters
iii) Guardianship matters
iv) Insolvency and winding-up
v) Testamentary matters
vi) Eviction and tenancy disputes governed by special statutes
Agreement to sell/mortgage is arbitrable, even if specific performance is claimed.
However, a mortgage suit relates to rights in rem and is, hence, not arbitrable.
16. Avitel
Merely because criminal proceedings can or have been instituted in respect of a subject-matter,
does not make it non-arbitrable (limited Booz Allen’s point of criminal offences to this extent).
Serious allegations of fraud, even where criminal proceedings have been instituted, can be
considered non-arbitrable if either of 2 conditions are satisfied:
a) Arb agreement cannot exist as a result of the fraud
b) Allegations are against the State or its instrumentalities, and relate to questions of
public law
17. Vidya Drolia
5-fold test of arbitrability:
i) Relates to rights in rem, not personam (Booz Allen)
ii) Requires centralised adjudication, not mutual
iii) Excluded by statute
iv) Have erga omnes effect, affect third party rights essentially
v) Relates to sovereign and public functions of the State
Application:
Tenancy disputes, which are not governed by special statutes, are arbitrable as they do
not concern rights in rem and do not have any erga omnes effect.
For fraud, same as Avitel
Claims covered by the DRT Act are not arbitrable, as the statute is operative.
Intracompany disputes are also not arbitrable as they relate to rights in rem.
Consumers cannot waive their right to approach the statutory judicial forums by opting
for arbitration.
Arbitrability three stages of consideration:
a) At the Section 8/11 stage
b) Before the AT
c) Section 34
For a), the referral Court can take a prima facie review of arbitrability, but if it feels that the
same will be inadequate, then refer to the AT.
Prabhat Steel Traders- Bombay HC
Arvind Constructions
United India Insurance Co. (3J)
After Duro Felguera. Appeal from Section 11 decision of the Calcutta HC. Had to interpret
Clause 7 of the policy, and whether it unequivocally consents for arbitration or there are certain
conditions.
HC relied on Duro and said we just have to see existence, so fine. However, Supreme Court
distinguished from Duro, and went into the construction of the arb agreement, to determine the
issue of consent (which should have been done by the AT ideally)
Konkan Railway (overruled)
Nature of power exercised under Section 11(6) is administrative not adjudicatory in nature,
hence not amenable to Article 136 jurisdiction.
Pravin Electricals
Dispute as to the existence of the arb agreement itself, convoluted facts regarding the
Consultancy Agreement
Should the Court look at this? Can undertake a prima facie assessment even in the In: re
jurisprudence, because can see formal validity w.r.t Section 7.
MSP Infra (overruled)
Jurisdictional defence cannot be raised under Section 34, if not raised before the AT under
Section 16.
Public policy means policy of India, not just Individual State.
Lion Engineering
16 and 34 are different stages, can raise jurisdictional plea under Section 34 even though not
raised before.
Public Policy includes both Central and State law, not just pan-India legislations.
Quippo
Party did not participate in the arb proceedings and did not raise the ground of jurisdiction
before the AT- held, now precluded
In direct contrast to Lion Engineering
McDermott International
Interim/Partial award, if it finally decides the matters covered thereby, are amenable to
challenge under Section 34
Modification done here w.r.t interest (Important for Hakeem and Balaswamy)
Public Policy for a matter would depend on the nature of the transaction and the nature of the
statute.
Renusagar
First case on public policy. Observations made, however, in the context of the Foreign Awards
Act, not even A and C Act.
3 aspects of public policy:
a) Fundamental policy of Indian law
b) Morality or justice
c) Contrary to the interests of India
ONGC Saw Pipes
Expanded the definition to also include patent illegality, which shocks the conscience of the
Court, within public policy.
ONGC vs Western Geco
Fundamental policy of Indian Law includes 3 juristic principles:
a) Judicial approach
b) Following PNJ: Not just audi alteram palteram, but application of mind
c) No perversity, illegality- wednesbury unreasonableness
Associate Builders
3rd juristic principle of Western Geco: Perversity would arise if finding on no evidence, missing
vital evidence, or based on irrelevant considerations.
Morality and Injustice: Where enforcement of the award would shock the conscience of the
Court
Patent Illegality has 3 aspects:
a) Contravention of substantive law, going to the root of the matter, not trivial, shocking
the conscience- basically what Saw Pipes said
b) Contravention of the Arbitration Act itself
c) Contravention of Section 28(3), meaning contravention of the contract and other rules
applicable (not to be confused with a reasonable interpretation taken)
Ssangyong
2015 Amendment applies to all Section 34 applications made after its notification, irrespective
of when the award was passed (retrospective application)
Expansion done by Saw Pipes and Western Geco done away with. For understanding public
policy, go back to Associate Builders.
For patent illegality, point a) of Associate Builders followed
Basically,
For public policy, two grounds remain: Fundamental policy of Indian Law, and
Morality/Justice
For fundamental policy, it includes the 3 juristic principles (judicial approach, PNJ with
application of mind, and no perversity). No perversity is with respect to evidence and all
(Western Geco as analysed by Associate Builders)
Morality and justice would be applicable when the award shocks the conscience of the
Court (Associate Builders)
Patent illegality is introduced as a new ground- this, however, only includes part a) of
Associate Builders analysis (root of the matter, not trivial- essentially what Saw Pipes
and Geco said)
South East Asia Marine Engineering
Where two views are permissible, cannot interfere with the AT’s view, must respect that
No respect for public policy as circumscribed by Ssangyong, just a plain review- no regard for
the juristic principles etc
Patel Engineering
Re-affirms that a mere violation of substantive law is not patent illegality- however, if arbitrator
does not give any reasons and contravenes Section 31(3), then obviously set aside.
Patent illegality:
a) Decision is perverse, irrational such that no reasonable man would arrive at the
conclusion
b) Illegality going to the root of the matter, shocking conscience
c) Not a fair and reasonable construction of the Contract, not a possible view
Again going back a bit to the Associate Builders’ patent illegality
Sundaram Finance
Whether Court can pass interim order under Section 9 before arbitral proceedings commence?
Answer: Yes. However, there has to be a manifest intent to arbitrate the dispute
Have to show that even though the proceedings have not commenced, they are atleast
contemplated. Will start in a reasonable time (now it’s statutorily 90 days).
Adhunik Steels Ltd
What factors to consider while granting injunction under Section 9?
Normal rules for getting injunctive relief under the CPC apply here too- prima facie case,
balance of convenience, grave and irreparable harm, just and convenient
Same as Arvind Constructions basically
Firm Ashok Traders
“For the moment suffice it to say that the right conferred by Section 9 cannot be said to be one
arising out of a contract.”
“In short, filing of an application by a party by virtue of its being a party to an arbitration
agreement is for securing a relief which the Court has power to grant before, during or after
arbitral proceedings by virtue of Section 9 of the A & C Act. The relief sought for in an
application under Section 9 of A & C Act is neither in a suit nor a right arising from a contract.”
On Manifest Intention- just repeats Sundaram Finance
Can use this to argue on the effect of not commencing within 90 days now
Group of Companies
Chloro Controls
On Section 45:
On GoC
Can implead non-signatories as well, but the referral Court has to see:
a) Direct relationship with the signatory parties
b) Composite nature of the transaction
a. Very important. See whether ancillary agreements are necessary for executing
the main, mother agreement
c) Commonality of subject matter
“Where the agreements are consequential and in the nature of a follow-up to the principal or
mother agreement, the latter containing the arbitration agreement and such agreements being
so intrinsically intermingled or inter-dependent that it is their composite performance
which shall discharge the parties of their respective mutual obligations and
performances, this would be a sufficient indicator of intent of the parties to refer
signatory as well as non-signatory parties to arbitration. The principle of 'composite
performance' would have to be gathered from the conjoint reading of the principal and
supplementary agreements on the one hand and the explicit intention of the parties and the
attendant circumstances on the other.”
Reached this route through Section 45’s usage of “parties claiming through or under him”
which wasn’t earlier in Section 8
MTNL vs Canara Bank
Relied on intention, tacit consent theories. Advocated for single economic unit/reality as a
factor too.
So basically, see involvement in the performance, negotiation of the contract, commonality of
subject matter, relationship with the parties, composite transaction, tight corporate structure so
as to consider it a single economic entity.
Shapoorji Palanji
Discussion on consent theories, GoC “compelling” a non-signatory etc, even though MTNL
relied on contract law and framed GoC as a mutual intention, consent-based theory.
Cox and Kings- 5J
Have to see intention from all facts and circumstances- signing is just one of the indicators
See whether the non-signatory has a substantial, positive and direct impact on the negotiation,
performance etc
No incidental involvement, mere legal and commercial relationship is not enough
independently
Jalour Singh
Lok Adalat- purely conciliatory, administrative role- not judicial, adjudicatory
Have to facilitate settlement, and then make the award accordingly (not made of independent
verdict)
Cannot hear the parties, impose views for forcing settlements
B.P. Moideen
Lok Adaalat cannot give directions to the parties if there’s no settlement
Recurring problem: Acting as judges, adversarial
Bhargavi Constructions
Lok Adaalat award can only be challenged under Article 226/227 and that too on very limited
grounds