TABLE OF CONTENTS

TABLE OF CONTENTS ..............................................................................................................................................1

LIST OF ABBREVIATIONS........................................................................................................................................2

INDEX OF AUTHORITIES .........................................................................................................................................3

STATEMENT OF JURISDICTION .............................................................................................................................5

STATEMENT OF FACTS ............................................................................................................................................6

ISSUES RAISED ..........................................................................................................................................................7

SUMMARY OF ARGUMENTS ...................................................................................................................................8

ARGUMENTS ADVANCED .......................................................................................................................................9

PRAYER ..................................................................................................................................................................... 18

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 LIST OF ABBREVIATIONS

& And
AIR All India Reporter
Mr. Mister
All. Allahabad
Anr. Another
Bom. Bombay
Govt. Government
Hon`ble Honorable
Ltd. Limited
Mad. Madras
MP Madhya Pradesh
No. Number
HC High Court
Ors. Others
Raj. Rajasthan
SCC Supreme Court Cases
SCR Supreme Court Reporter
SC Supreme Court
Cs Civil suit
Pvt. Private
V. Versus
Vol. Volume
Art. Article
r/w Read with
PIL Public Interest Litigation
Cl Clause

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 INDEX OF AUTHORITIES

BOOKS REFERRED:

1. G. K. Kwatra, Arbitration And Conciliation Law Of India: With Case Law On Uncitral
Model Law On Arbitration & Sale Of Goods(Indian Council Of Arbitration) (2010).
2. Ashwinie Kumar. Bansal, Arbitration: Procedure And Practice(Lexisnexis
Butterworthswadhwa Nagpur) (2009).
3. Tushar Kumar Biswas, Introduction To Arbitration In India: The Role Of The
Judiciary(Kluwer Law International) (2014).
4. Mahesh Prasad. Tandon, The Civil Procedure Code(Allahabad Law Agency) (1952)
5. C. K. Takwani & M. C. Thakker, Civil Procedure(Eastern Book Co.) (2000).
6. M. C. Sarkar & Prabhas Chandra. Sarkar, The Code Of Civil Procedure, Being (Act V Of
1908) With A Critical Commentary ..(Butterworth) (1925).

WEBSITE REFERRED:

1. www.manupatra.com
2. www.scconline.com

STATUTES:

1. The Civil Procedure Code, 1908,

2. The Arbitration and Conciliation Act, 1996.
3. Indian Contract Act, 1873.

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TABLE OF CASES

1. Sundaram Finance Limited v. Abdul Samad & Anr 1

2. Venture Global Engg v. Satyam Computer Services Ltd. 2
3. State of Maharashtra v. Atlanta Ltd
4. Naresh Batra v. Vikram Batra and Anr. 3
5. Singh Rekhi v. Delhi Development Authority4
6. Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd & Ors5.
7. Rashtriya Ispat Nigam Ltd. v. Verma Transport Company6
8. Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. Ltd7
9. S.B.P. and Company v. Patel Engineering Ltd. 8
10. P. Anand Gajapathu Raju & Ors. v. P.V.G. Raju & Ors. 9
11. Hindustan Petroleum Corpn Ltd v. Pinkcity Midway Petroleums 10
12. Today Homes & infra pvt ltd v. Ludhiana Improvement Trust 11
13. Magma Leasing and Finance Ltd. V. Potluri Madhavilata 12
14. Ayyasamy V. A. Paramasivam13
15. Bhatia International v. Bulk trading S.A. 14
16. Venture Global Engg v. Satyam Computer Services Ltd. 15
17. State of Gujarat v. B.B. Chauhan16
18. Dulal Poddar v. Executive Engg, Dona Canal Division17.
19. Satyabrata Ghose vs. Mugneeram Bangur & Co & Anr 18

1
Civil Appeal No. 1650 of 2018.
2
AIR 2008 SC 1061.
3
CRL.MISC.M.NO. 18899 OF 2005 (O&M).
4
(1998) 2 SCC 338.
5
AIR 2011 SC 2507.
6
AIR 2006 SC 2800.
7
Supra at 9.
8
2005 (8) SCC 618.
9
AIR 2000 SC 1886.
10
(2003) 6 SCC 503.
11
(2014) 5 SCC 68.
12
(2009) 10 SCC 103.
13
(2016) 10 SCC 386.

14
AIR 2002 SC 1432.
15
AIR 2008 SC 1061.
16
AIR 2003 NOC 211 (Guj).
17
(2004) 1 SCC 73; Sona Finance Ltd. v. Tirupati Paper Mills Ltd, (2003) 4 RAJ 719 (Del).
18
AIR 1954 SC 44.

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 STATEMENT OF JURISDICTION

The counsel has approached the Hon’ble court under the jurisdiction of Section 9619 of the Civil
Procedure Code, 1908.

19
Appeal from original decree.- (1) Save where otherwise expressly provided in the body of this Code or by any
other law for the time being in force, an appeal shall lie from every decree passed by any court exercising original
jurisdiction to the court authorized to hear appeals from the decisions of such court.
(2) An appeal may lie from an original decree passed ex parte.
(3) No appeal shall lie from a decree passed by the court with the consent of parties.
(4) No appeal shall lie, except on a question of law, from a decree in any suit of the nature cognizable by courts of
small causes, when the amount or value of the subject matter of the original suit does not exceed ten thousand
rupees.

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 STATEMENT OF FACTS

BACKGROUND

Kalakriti is a small scale firm in Jharkhand, which is indulged in manufacturing of handicrafts items which is a
specialty of the state. They have the contractual employees. The terms and condition of service incorporates an
arbitration clause contemplating that any dispute arising between the owners and artist will be resolved without
resorting to court through mechanism of arbitration.

DISPUTE

Being aware of the fact that the firm is able to create huge demand for its product in the national as well as foreign
market, the workers thought that the firm is earning huge profit. They asked that their payment should be in
proportion to turnover of the firm, and called in a strike. Further, they moved to the court seeking remedy.

RESULTANT APPEAL

Kalakriti, the appeallnt pleaded that the matter be referred to arbitration, that the profits are low and that the firm has
incurred a loss owing to the strike, but the lower court decided against them.

Hence, this appeal before thy Hon’ble Court.

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 ISSUES RAISED

ISSUE 1:

WHETHER THE APPEAL IS MAINTAINABLE?

ISSUE 2:

WHETHER THE DECISION OF THE LOWER COURT PASSED IN SPITE OF THE ARBITRATION AGREEMENT BETWEEN
THE PARTIES IS VALID?

ISSUE 3:

WHETHER THE ARBITRAL AWARD IN FAVOR OF BANGLADESHI COMPANY AND AGAINST THE APPELLANT BE SET
ASIDE UNDER SECTION 34 OF THE ARBITRATION AND CONCILIATION ACT, 1996?

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 SUMMARY OF ARGUMENTS

1. THAT THE APPEAL IS MAINTAINABLE.

It is most humbly submitted before the hon’ble court that the present appeal has been filed under S. 96 of the Code
of Civil Procedure, 1908. In the present case, the lower court decided in favor of the workers, without taking into
consideration the provision of Arbitration and Conciliation Act, 1996, hence this appeal from the decree passed by
the lower court. The high court has power to adjudicate upon matters of setting aside arbitral award under section 34
of the Arbitration and Conciliation Act, 1996. Exercising the inherent power of the High Court, the abovementioned
application and appeal be clubbed together, thereby making the present matter maintainable.

2. THAT THE DECISION OF THE LOWER COURT PASSED IN SPITE OF THE ARBITRATION AGREEMENT
BETWEEN THE PARTIES BE SET ASIDE.

The essentials of Section 8 had been fulfilled in the present case, and there was a pre-exisiting arbitration agreement
between the parties. The lower court should have had as a matter of preliminary issue decided upon the question of
its jurisdiction, wherein Section 8 providing for express ouster of jurisdiction of the court should have had referred
the matter to arbitration. Having failed to do this, the lower court has erred in passing the decree, thereby making it
liable to be set aside.

3. THAT THE ARBITRAL AWARD IN FAVOR OF BANGLADESHI COMPANY AND AGAINST THE APPELLANT
BE SET ASIDE UNDER SECTION 34 OF THE ARBITRATION AND CONCILIATION ACT, 1996.

It is humbly submitted that the arbitral award be set aside on the ground that the appellant did not get to represent
itself, thus violation of section 34 of the act. The impossibility of performance rendered the contract void ab initio
and the award could not be seeked.

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 ARGUMENTS ADVANCED

1. THAT THE APPEAL IS MAINTAINABLE.

It is most humbly submitted before the hon’ble court that the present appeal has been filed under S. 96 of the Code
of Civil Procedure, 1908. Section 96 provides for appeal from original decree. In the present case, the lower court
decided in favor of the workers, without taking into consideration the provision of Arbitration and Conciliation Act,
1996, hence this appeal from the decree passed by the lower court. This court has the power to adjudicate upon such
matters and set aside the decision of the lower court by correct application of the law, and hence, it is humbly
pleaded that the present appeal is maintainable.

1. 1 APPLICATION UNDER SECTION 34 IS MAINTAINABLE

In Sundaram Finance Limited v. Abdul Samad & Anr 20, the Supreme Court held that for execution or setting aside
arbitral award, the application can be filed anywhere in the country where such decree can be executed and there is
no requirement for obtaining a transfer of the decree from the Court, which would have jurisdiction over the arbitral
proceedings. Furthermore, respondent 2 is entitled to receive an arbitral award from the appellant owing to non-
fulfillment of consignment by the latter. The appellant was not given proper notice neither did it get a chance to
represent its case properly before the arbitrator owing to the fact that the appellant was engaged in the on-going
strike and later in the suit which the respondent 1 had filed. The arbitral award falls within the definition of
‘Domestic Award’ hence governed by Part I of the Act. Part I applies to whole of India, including Jammu and
Kashmir. Section 2(1)(e) defines court, but does not provide that courts in India will not have jurisdiction even in
respect of an arbitration that takes place outside India. Thus, courts in India will have jurisdiction in respect of an
international commercial arbitration. An ouster of jurisdiction has to be express, but there has no where been
provided that Part I shall apply “only” to arbitrations in India. In Venture Global Engg v. Satyam Computer
Services Ltd.21, it was held that unless the applicability of Section 34 has been excluded the parties may challenge
the award before a court in India. In State of Maharashtra v. Atlanta Ltd.22, both the parties were aggrieved by the
arbitral award. The appellant applied for setting aside arbitral award under Section 34 before the District Judge
while the respondent applied before the High Court of Bombay. The Supreme Court Hence, ruled that the competent
court for the purpose of Arbitration and Concilliation Act, 1996 would be the superior most court exercising original
jurisdiction, i.e., the High Court and not the District Court. Moreover, Section 37 provides that no second appeal
shall lie before any court other than the Supreme Court by other means. If moved to the lower court, the interest of
the appellant would be greatly prejudiced. Therefore, it is most humbly submitted that the present application under
Section 34 for setting aside the arbitral award before this court is maintainable.

20
Civil Appeal No. 1650 of 2018.
21
AIR 2008 SC 1061.
22
AIR 2014 SC 1093.

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 1. 2 POWER OF HIGH COURT TO CLUB THE APPEAL AND APPLICATION

It is humbly pleaded that the appeal against the lower court’s decision and the application for setting aside the
arbitral award, be clubbed together by the High Court in exercise of its inherent power under Section 151 of the
Code of Civil Procedure, 1908. The section provides that for the ends of justice, or to prevent abuse of the process of
the court, the High Court in exercise of its inherent power may be exercised. In Naresh Batra v. Vikram Batra and
Anr.23 , the court clubbed the matters together in exercise of its inherent power. Similarly, the high court taking into
consideration that in both these cases there has been abuse of the process of law specified under the Arbitration and
Conciliation Act, 1996 be pleased to club the two matters before the hon’ble court.

2. THAT THE DECISION OF THE LOWER COURT PASSED IN SPITE OF THE ARBITRATION AGREEMENT
BETWEEN THE PARTIES BE SET ASIDE.

“Arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which
have arisen or may arise between then in respect of a defined legal relationship, whether contractual or not.”24 An
arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate
agreement.”25 The term ‘dispute’ has not been expressly defined in the Act. The term means “a conflict or
controversy of claim of rights, assertion of rights” 26. The Supreme Court in Major Inder Singh Rekhi v. Delhi
Development Authority27 held that a dispute arises when a claim is asserted by one party and denied by the other on
whatever grounds and whether in a case a dispute has arisen or not, has to be found out from the facts and
circumstances of the case. Abiding by the above decision it is clear that in the present case, the arbitration clause in
the contract of service makes it a binding arbitration agreement wherein all disputes need to be resolved by
arbitration. Further, the conflict over the payment is a ‘dispute’ in the sense of the term as explained by the Supreme
Court, henceforth had to be resolved by arbitration only.

In Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd & Ors28., the Supreme Court laid down that if an
application under Section 8 is filed, the court will have to decide:

 Whether all the parties to the suit are parties to the arbitration agreement?
 Whether the disputes which are the subject matter of disputes fall within the scope of arbitration
agreement?
 Whether the defendants had applied under Section 8 of the Act?
 Whether the relief sought in the suit is those that can be adjudicated and granted in arbitration?

23
CRL.MISC.M.NO. 18899 OF 2005 (O&M).
24
Section 7 (1) Arbitration and Conciliation Act, 1996.
25
Section 7(2) Arbitration and Conciliation Act, 1996.
26
Black’s Law Dictionary.
27
(1998) 2 SCC 338.
28
AIR 2011 SC 2507.

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In the present case,

 The workers and the firm were bound by an arbitration agreement; hence the parties to the present suit as
well as appeal are parties to the arbitration agreement.
 The subject matter of the dispute is ‘increment in wages/ salary’; which falls within the scope of arbitration
agreement as the agreement states that “any dispute arising between the owners and artist will be resolved
without resorting to court through mechanism of arbitration”. The term “any dispute” is inclusive of the
present dispute as well.
 The third essential had been clarified in the case of Rashtriya Ispat Nigam Ltd. v. Verma Transport
Company29, stating that it refers to a submission of the party making the application under S. 8 of the Act,
wherein the court must decide whether the party seeking reference to arbitration has waived his right to
invoke the arbitration clause. The appellant had at the outset, in their pleadings had submitted that the suit
be referred to arbitration, citing Section 8 of the Act, which is evident of the fact that they at no point of
time waived their right to invoke the arbitration clause.
 In Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. Ltd30, an illustrative list of arbitrable
and non-arbitrable disputes had been enlisted by the Supreme Court. In the list on point iii, the court stated
“All cases where there is a need for continuation of the pre-existing relationship in spite of the disputes,
including disputes between neighbors (relating to easementary rights, encroachments, nuisance,
etc.);disputes between employers and employees” are arbitrable. The relief sought by the workers is
increment of salary/ wages, which can be adjudicated upon by the arbitrator and the relief can be granted
therein as the case may be.

Therefore, all essentials laid down above, being duly fulfilled, the application of the appellant should have been
accepted by the lower court. Failing this, the decision passed therein is liable to be set aside.

In S.B.P. and Company v. Patel Engineering Ltd.31, the Apex Court held that where there is an arbitration
agreement between the parties, and one of the parties, ignoring it, files an action before a judicial authority and the
other party raises an objection, the judicial authority has to consider the objection and if the objection is found
sustainable, it is bound to refer the parties to arbitration.

In P. Anand Gajapathu Raju & Ors. v. P.V.G. Raju & Ors.32, the Supreme Court held “The language of Section 8
is peremptory. It is therefore, obligatory for the court to refer the parties to arbitration in terms of their arbitration
agreement. All the rights, obligations and remedies of the parties would now be governed by the new Act including
the right to challenge the reward.”

29
AIR 2006 SC 2800.
30
Supra at 9.
31
2005 (8) SCC 618.
32
AIR 2000 SC 1886.

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In Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. Ltd 33, the Apex Court held that if there was a
pre-existing arbitration agreement betweeb the parties, in all probability, even before the suit reaches the stage to be
governed by Order 10 of the Code, the matter would have stood to be referred to arbitration by invoking S. 8 of the
Arbitration & Conciliation Act, 1996 and there would be no need to have recourse to Section 89 of the Code. The
appellant has approached this court under Section 8 of the Arbitration & Conciliation Act, 1996 and not Section 89
of the Code of Civil Procedure, 1908 because Section 89 pre-supposes that there is no pre-existing arbitration
agreement between the parties, whereas S. 8 envisages a situation where there is an arbitration agreement and
therefore, an application has been made to the judicial authority to refer the matter to arbitration. Also, abiding by
the abovementioned judgment, the matter ought to have been referred to arbitration even before first hearing.

Hindustan Petroleum Corpn Ltd v. Pinkcity Midway Petroleums34, where the court in para 14 observed that if in an
agreement the parties before the civil court, there is a clause for arbitration, it is mandatory for the civil court to refer
the dispute to arbitrator. In the said case, the existence of arbitral clause was not denied by either of the parties and
hence in accordance with the mandatory nature of section 8, the court referred the dispute to arbitration.

Today Homes & infra pvt ltd v. Ludhiana Improvement Trust 35 in which the Punjab & Haryana High Court refused
to refer the dispute to arbitration under section 8 on the basis that underlying contract is void. An SLP was filed
against this decision of the Punjab & Haryana High Court in the Supreme Court and the Court held that the Ld.
Judge of High Court has erred in not referring the dispute to the arbitration by going into detailed scrutiny of the
agreement as at the stage of section 8, the Judge is only required to decide such preliminary issues as of jurisdiction
to entertain the application, existence of valid arbitration agreement, whether a live claim existed or not for the
purpose of appointment of an arbitrator.

Therefore, the decision on the jurisdiction of the lower court should have had been its preliminary issue and should
have been decided at the outset, wherein the plea of the appellant to refer the matter to arbitration should have been
accepted by the court.

The court further referred to Magma Leasing and Finance Ltd. V. Potluri Madhavilata 36 in which it was again
reiterated that no option is left to the court, once the prerequisites of section 8 of act are fully satisfied. In the end,
the court held that once an application in due compliance of section 8 is filed, the approach of civil court should be
not to see whether the court has jurisdiction, but to see whether its jurisdiction has been ousted. There is a lot of
difference between the two approaches. Once it is brought to the notice of the court that its jurisdiction is barred by
virtue of procedure under a special statue, the civil court should first see whether there is an ouster of its jurisdiction
in terms of compliance with the procedure under the special statue. The basic principle of our jurisprudence
is generalia specialibus non derogant i.e. a general law should yield to the special law. In such a situation, the

33
Supra at 9.
34
(2003) 6 SCC 503.
35
(2014) 5 SCC 68.
36
(2009) 10 SCC 103.

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approach shall not be to see where there is still jurisdiction of civil court under general law but whether it has been
ousted by the special law.

In A. Ayyasamy V. A. Paramasivam37, the court though accepting the fact that provision in section 8 is pre-emptive
and mandatory in nature and hence the court should refer the dispute to arbitration when existence of arbitration
clause is not disputed, went a step ahead and laid down certain exceptions to this rule. The court carved out
exceptions on the basis of which a court can refuse to refer the dispute to arbitration even when essentials of section
8 are fulfilled. The exceptions laid down are,

I. Where court finds very serious allegation of fraud that makes a virtual case of criminal offence, or
II. Where allegations of fraud are so complicated that it becomes essential that such complex issues can be decided only
by civil court on appreciation of voluminous evidence, or
III. Where serious allegations of forgery/fabrication of documents in support of the plea of fraud, or
IV. Where fraud is alleged against arbitration provision itself, or
V. Where fraud alleged permeates the entire contract, including agreement to arbitrate where fraud goes to the validity of
contract itself or contract that contains arbitration clause or validity of arbitration clause itself.

In the present case, none of the above exceptions were present, hence, the lower court should have had as a matter of
preliminary issue decided upon the question of its jurisdiction, wherein Section 8 providing for express ouster of
jurisdiction of the court should have had referred the matter to arbitration. Having failed to do this, the lower court
has erred in passing the decree, therefore it is humbly pleaded, that the decision of the lower court be set aside and
the matter be referred to arbitration for settling the disputes.

3. THAT THE ARBITRAL AWARD IN FAVOR OF BANGLADESHI COMPANY AND AGAINST THE APPELLANT
BE SET ASIDE UNDER SECTION 34 OF THE ARBITRATION AND CONCILIATION ACT, 1996?

3.1. INTERNATIONAL COMMERCIAL ARBITRATION & APPLICABILITY OF PART I OF THE ACT

A dispute between an Indian Company and a foreign company giving rise to an arbitral proceeding is regarded as an
international commercial arbitration. In an international commercial arbitration, where the parties decide that they
shall be governed by Indian laws in respect to the agreement and arbitration, such an award under such an agreement
could be regarded as coming under Part I of the Act. It is regarded as a domestic award though made in a foreign
country and according to the ICC rules and regulations. The Supreme Court in Bhatia International v. Bulk trading
S.A.38, explained the applicability of Part I to international commercial arbitration. The court said that the provisions
of Part I are equally applicable to international commercial arbitrations held outside India, unless any such

37
(2016) 10 SCC 386.

38
AIR 2002 SC 1432.

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provisions have been excluded by agreement between the parties, expressly or by implication. The very object of the
Arbitration and Conciliation Act, 1996 was to establish a uniform legal framework for the fair and efficient
settlement of disputes arising in international commercial arbitration.

Section 2(1)(f) defines international commercial arbitration and makes no distinction between one held in India or
outside India. It may be held in a country which is a signatory to New York Convention, Geneva Convention or a
Non- Convention Country. Part II applies only to arbitrations which take place in a convention country. Also Part I
applies to whole of India, including Jammu and Kashmir. Section 2(1)(e) defines court, but does not provide that
courts in India will not have jurisdiction even in respect of an arbitration that takes place outside India. Thus, courts
in India will have jurisdiction in respect of an international commercial arbitration. An ouster of jurisdiction has to
be express, but there has no where been provided that Part I shall apply “only” to arbitrations in India. The wording
of sub-section (2) of S. 2 suggests that the intention of the legislature was to make provisions of Part I compulsorily
to an arbitration including commercial international arbitration. An award passed in an arbitration proceeding in
India are considered domestic awards, governed by part I of the Act along with those passed in an international
commercial arbitration held outside India unless the parties by express or implied agreement, exclude all or any of
its provisions. An award passed by a convention country is foreign award, but that passed by a non-convention
country is not a foreign award and shall not be governed by Part II of the Act. In Venture Global Engg v. Satyam
Computer Services Ltd.39, it was held that unless the applicability of Section 34 has been excluded the parties may
challenge the award before a court in India.

In the present case, the agreement was made in India as between the Indian and Bangladeshi company. Such is the
case, because, the appellant has similar contracts with all its customers, henceforth contracting with each customer
as per their country’s laws is highly unlikely. The company also has its customers in non-convention countries,
probiding a separate arbitration proceeding for each customer by the company is highly unlikely. Moreover, since
the company has been providing for arbitration in all its agreements be it with their own employees or customers, it
signifies that the firm would have never envisaged arbitration proceedings being carried out by the customers in
their own states as per their own laws. Specifically in the case of the dispute between the appellant and Bangladeshi
company, the appellant never left the country owing to the fact that the firm was engaged in another litigation
against it, nor applied to the court ever for seeking such permission. Henceforth, the award which the Bangladeshi
company is entitled to receive, has been ascertained in India as per India Laws, to which the Bangladeshi company
also agreed. This being the case, the award is a domestic award falling under Part I of the Arbitration Act.

The Supreme Court in Bhatia International v. Bulk trading S.A.40, explained the applicability of Part I to
international commercial arbitration. The court said that the provisions of Part I are equally applicable to
international commercial arbitrations held outside India, unless any such provisions have been excluded by
agreement between the parties, expressly or by implication. The very object of the Arbitration and Conciliation Act,
1996 was to establish a uniform legal framework for the fair and efficient settlement of disputes arising in

39
AIR 2008 SC 1061.
40
AIR 2002 SC 1432.

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international commercial arbitration. Section 2(1)(f) defines international commercial arbitration and makes no
distinction between one held in India or outside India. It may be held in a country which is a signatory to New York
Convention, Geneva Convention or a Non- Convention Country. Part II applies only to arbitrations which take place
in a convention country. Also Part I applies to whole of India, including Jammu and Kashmir.

Therefore, in the present case, applicability of Part I as per the agreement between the parties is highly likely, and
the court has the power to adjudicate upon and set aside the award under the grounds mentioned in Section 34 of the
Arbitration and Conciliation Act, 1996.

3.2. Ground under Section 34 for setting aside Arbitral Award

Section 34 of the Act is based on Article 34 of UNCITRAL Model Arbitration Law 41. It provides for various
grounds for setting aside domestic award. Particularly, S. 34(2)(a)(iii) permits challenge to an award on the grounds:

 That the party was not given proper notice of the appointment of an arbitrator
 That the party was not given proper notice of the arbitral proceedings, or
 That the party was for some reason unable to present his case.

In State of Gujarat v. B.B. Chauhan42 it was held that it is essential that the parties be given proper notice of the
arbitral proceedings so that they may file their statements of claim or defence as required by Section 23. Failure to
give such notice may deprive the parties of the opportunity of placing their cases before the Tribunal. If for any good
reason a party is prevented from appearing and presenting his case before the Tribunal, the award will be liable to be
set aside as the party will be deemed to have been deprived of an opportunity of being heard. Ex-parte award given
by the arbitrator has been held illegal and hence liable to be set aside, in Dulal Poddar v. Executive Engg, Dona
Canal Division43.

In the present case, the appellant was involved in the on going strike in his industry by the workers and later in the
litigation by the workers against it. Given such circumstances, in the arbitration proceeding conducted by the
Bangladeshi Company, the appellant could not present his case well, owing to which the provision of Section 34(2)
(a) (iii), is attracted and the arbitral award is liable to be set aside.

3.3. Impossibility of Performance

“The doctrine of frustration comes into play when a contract becomes impossible of performance, after it was made,
on account of circumstances beyond the control of parties”

- Mr (Retd) Justice B K Mukherjea

41
Municipal Corpr of Greater Mumbai v. Prestress Products (India), (2003) 4 RAJ 363 (Bom).
42
AIR 2003 NOC 211 (Guj).
43
(2004) 1 SCC 73; Sona Finance Ltd. v. Tirupati Paper Mills Ltd, (2003) 4 RAJ 719 (Del).

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The doctrine of frustration has been envisaged in Chapter IV in Section 56 of the Contract Act. The term
‘frustration’ has been defined in the Black’s Law Dictionary 44 as “The prevention or hindering of the attainment of
a goal, such as contractual performance” andin relation to ‘contracts’ the terms has been described as “The
doctrine that if a party’s principal purpose is substianlly frustrated by unanticipated change in circumstances, that
party’s duties are discharged and the contract is considered terminated".

From Section 56 of the Indian Contract Act, it is evident that the section envisages some impossibility or
unlawfulness of the performance of the act which the parties had not contemplated. It leads to a pertinent question as
to what is such impossible act that would lead to frustration of contract. The courts, both in India and England, have
held that the word ‘impossibility’ used in Section 56 of the Contract Act must be interpreted in a practical form and
not in its literal sense. Thus, a contract would come under the purview of Section 56 of the Contract Act even if it is
not an absolute impossibility, but the contract has fundamentally changed, which the parties had not contemplated at
the time of the agreement.

In Satyabrata Ghose vs. Mugneeram Bangur & Co & Anr45, it was held that the “doctrine of frustration of contract
is really an aspect or part of the law of discharge of contract by reason of supervening impossibility or illegality of
the act agreed to be done and hence comes within the purview of Section 56 of the Indian Contract, Act”. In order to
establish that a contract is frustrated, the below mentioned conditions are required to be satisfied:-

 There must be a valid and subsisting contract between the parties;

 There must be some part of the contract yet to be performed;

 That part of the contract, which is yet to be performed, should become impossible or unlawful; and

 That the impossibility should be by reasons of some event which the promisor could not prevent.

In the present case, the consignment taken up by the company had to be completed by the workers, the ‘artists’ and
its fulfillment could have been possible only on account of their skills and talent. Owing to the fact that there was
strike in the industry, the workers were not working, following which the consignment could not be completed. This
being a work requiring special skill, the workers could not be replaced for it would also have been unethical. There
was a valid contract between the parties, the consignment was yet to be performed, owing to the above mentioned
circumstances, the contract became impossible to be performed, and this impossibility could not be envisaged or
prevented by the appellant. The strike being uninformed and the workers having moved to the court directly, without
referring the matter to arbitration elongated the procedure, and delayed in the fulfillment of the consignment. This
rendered the performance of contract impossible by the appellant.

By virtue of Section 56, impossibility of contract makes the contract void ab initio, seeking award in a contract
which is void ab initio is inept, hence, it is humbly pleaded that in the present case the appellant could not present its

44
Black’s Law Dictionary Ninth Edition.
45
AIR 1954 SC 44.

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case in the arbitration tribunal, having done so the appellant would have stated the above mentioned grounds, which
rendered the contract void ab initio, thereby making the question of arbitral award invalid at the outset.

APPEAL ON BEHALF OF APPELLANT Page 17

 PRAYER

Wherefore in light of the facts stated, issues raised, arguments advanced and authorities cited, the appellant most
humbly prays before this Hon’ble Court, to be graciously pleased to kindly:

1. Declare and adjudicate that the appeal is maintainable.

2. Declare and adjudicate that the decision of the lower court be set aside as the lower court did not have
jurisdiction to decide the matter and the matter had to be referred to Arbitration.
3. Declare and adjudicate that the arbitral award be set aside in favour of the Bangladeshi Company and
against the appellant.

And / Or

Pass any decision in favor of the Appellant that it may deem fit in the ends of justice, equity and good conscience.

All of which is most humbly and respectfully submitted.

Date: 29th May, 2018

Place: Ranchi

s/d

Counsel On Behalf Of the Appellant

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