Arbitration Brief Case – October 2024

Greetings! Welcome to all arbitration enthusiasts. We bring to you the latest updates, arbitration rulings, emerging trends and practical guidance of the month of October 2024 to stay informed and up to date in arbitration law.

Rendezvous – Indian Courts and Arbitration

Supreme Court of India

Application seeking extension of mandate under Section 29A (4) read with (5) maintainable even after the expiry of the twelve or six-month period. – Rohan Builders (India) Private Limited vs. Berger Paint India Limited. [SLP (Civil) No. 23320 of 2023]

The Supreme Court has finally put to rest the conflicting views surrounding maintainability of application(s) under Section 29A (4) & (5) after the expiry of mandate and has held that such an application is maintainable even after the expiry of mandate of the arbitrator. The Apex Court set aside the diametrically opposite findings of the High Court of Kolkata in Rohan Builders (India) Pvt. Ltd. vs. Berger Paints India Limited[1]  and High Court of Judicature at Patna in South Bihar Power Distribution Company Ltd. vs. Bhagalpur Electricity Distribution Company Pvt. Ltd. [2] Disagreeing with the reasoning given by the Kolkata High Court, the Supreme Court observed that termination of the arbitral tribunal’s mandate cannot be conditional upon filing of an extension application. However, the Court cautioned that extension ought not to be granted mechanically on mere filing of an application and Courts should grant the same on sufficient cause of delay, to ensure due diligence on part of the parties in promptly filing extension applications.

The Apex Court once again explains how non-signatories may be bound by Arbitration Agreements – Ajay Madhusudan Patel & Ors. vs. Jyotrindra S. Patel & Ors. [Arbitration Petition No. 19 of 2024].

The court concluded that the intention of the parties to be bound by an arbitration agreement can be gathered from the circumstances that surround participation of the non-signatory party in negotiation, performance, and termination of the underlying contract containing such an agreement. The Supreme Court relied on the definition of ‘parties’ under Section 2(1)(h) read with Section 7 of the 1996 Act which includes signatory as well as non-signatory parties and held that the persons or entities who have not formally signed the arbitration agreement or the underlying contract containing the arbitration agreement may also be bound by the terms of the agreement when the parties intended for them to be bound by same.

Post-award interest is statutorily applicable and law does not permit parties to contract out of the same – R.P. Garg vs. The Chief General Manager, Telecom Department & Ors. [Civil Appeal No. 10472 of 2024].

In an award passed by the Ld. Sole Arbitrator, the principle claim of the party was allowed but the claim for interest was denied as the contract between the parties did not permit grant of post award interest. It appears that during the execution proceedings, the issue of post award interest was raised, but dismissed. Thereafter, after undergoing appeal and revision, the issue finally reached the Supreme Court. Upon consideration, the Supreme Court has held that clause (b) of Section 31(7) of the 1996 Act, does not give parties the right to “contract out” interest for the post-award period. The Court further nullified the assumption of High Court that payment of interest for the post-award period is subject to the contract. The Court while doing so, also referred to the judgement of Morgan Securities & Credits (P) Ltd. V. Videocon Industries (2023) 1 SCC 602 which dealt with the issue of prohibition of pendente-lite interest and concluded that this line of judgment(s) will have no application to the facts of the present case where the claims related to post-award interest only.

High Court of Delhi

Arbitrator cannot unilaterally confer upon itself jurisdiction, even if he is the named arbitrator in the agreement when the opposite party does not accede to his appointment – Meenakshi Agarwal vs. M/s Rototech [O.M.P. (T) (COMM.) 60 of 2024].

While deciding a peculiar matter, the Hon’ble High Court of Delhi recently held that where the arbitration clause contemplates appointment of a particular person as arbitrator, such person cannot assume jurisdiction in case the opposite party does not accede to his appointment. In this matter, Ms. Meenakshi Agarwal had served a Section 21 notice to Rototech for reference of disputes to arbitration by an arbitrator named by both the parties in the lease deed. However, Rototech did not reply to the said notice. The named arbitrator addressed a notice to Rototech for initiation of arbitration, however, Rototech did not participate in the proceedings and the arbitrator proceeded ex-parte. The High Court terminated the mandate of the named arbitrator as he was de jure ineligible to proceed with the proceedings. The High Court held that the only avenue open to litigant was to approach the Court under Section 11(5) after the opposite party did not accede to the appointment of named arbitrator.

The appointment of an arbitrator is not unilateral if consent of non-signatories is not taken – Yves Saint Laurent vs. Brompton Lifestyle Brands Private Limited & Anr. [O.M.P (T)(COMM) No. 29 of 2023].

Recently, the High Court of Delhi while dismissing a Section 14 petition read along with Section 12(5) of the 1996 Act, rejected the objection of the Petitioner that being a non-signatory to the arbitration agreement, it never consented to any appointment of arbitrator, and the appointment was bad in law. The High Court was hearing an application under section 14 challenging the jurisdiction of the tribunal wherein the Petitioner contended that since it was not a signatory to the arbitration agreement, appointment of arbitrator is unilateral because the petitioner had not consented to it. However, the Court interpreted Section 21 of the Act and stated that the term ‘a party to an arbitration agreement’ contemplates the requirement of consensus regarding appointment of the arbitrator, which applies only to the parties to the arbitration agreement, and not to a non-signatory who is sought to be included in the proceedings.

High Court at Calcutta

Compliance with pre-arbitration formalities not mandatory and the same can be waived by consensus – Jayashree Electromech Private Limited vs. The West Bengal State Electricity Transmission Company Limited, [Arbitration Petition (COMM) No. 751 of 2024].

The High Court at Calcutta while allowing a petition under Section 11, stated that the compliance with pre-arbitration stages can be waived by consensus as forcing the petitioner back to the rigmarole of pre-arbitration formalities would be an unnecessary and futile exercise. The court reasoned that, “The law does not mandate the compliance of prior formalities as a pre-condition of reference to arbitration. Such prior conditions emanate entirely from agreement between the parties. Thus, by necessary implication, what is agreed on consensus can also be waived by consensus.” Admittedly, several correspondences between the parties were exchanged and all efforts of the petitioner to have the dispute resolve by the mutual discussion failed. Taking note of the “no objection” given by the Respondent for reference of dispute to arbitration in writ petition pending inter se parties, the Court held that there was an unambiguous concession for reference of dispute to arbitration.  

Arbitration Highlights – Global

• Costa Rica enacted Law No. 10535, currently referred to as the Harmonization Law which has taken a step forward in adopting a dualist approach to international and domestic arbitrations. This dualist provision has made arbitration as an easier and convenient dispute resolution mechanism in the Country. For instance, Arbitral institutions in Costa Rica are now allowed to appoint arbitrators if the parties fail to agree on the same. Moreso, the new provision added all non-signatories in the negotiation, execution or termination of the arbitration agreement. (Article 7A).

• Among various reforms, the enactment has also established a mandatory provision provision for a three -member arbitral tribunal in International Commercial Arbitrations and Sole Arbitrator in Domestic Arbitrations unless the parties agree otherwise. Previously, the Central American Country had enacted the Law No. 7727 on Alternative Dispute Resolution and Promotion of Social Peace in 1998 and then went on enact Law No. 8937 on International Commercial Arbitration based on the UNCITRAL Model Law.  

[1] Arbitration Petition No. 328 of 2023

[2] Civil Writ Jurisdiction Case No. 20350 of 2021.

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