ARBITRATION ACT — LIST OF CASES

Section 2(1)(b) and Section 7: ARBITRATION AGREEMENT

Bihar State Mineral Development Corporation v. Encon Builders Pvt Ltd

- essential elements arbitration agreement

Jagdish Chander v. Ramesh Chander

- when option exists to refer the dispute to arbitration or not, then it is NOT a binding
agreement

Chloro Controls Pvt Ltd. v. Severn Trent Water Purifier Company

- whether arbitration clause in the Principal agreement makes ancillary agreements

binding to arbitration clause as well? Answered in affirmative

Wellington Assn v. Kirti Mehta

- SC held that section 7 does not cover a situation where parties agree that they ‘may’ file
a suit in case of dispute or may file a suit in case of dispute or may enter in to arbitration
proceedings. ‘Arbitration agreement’ under Section 7 means an agreement by the parties
to submit to arbitration. It postulates an agreement, which necessitates or mandates the
parties to appoint an arbitrator and then submit their disputes to arbitration.

- The intention to submit to arbitration in an arbitration agreement must be made in

unequivocal terms. Intention needs to be clear as day and not vague or optional.

Great Offshore Ltd. v. Iranian Offshore Engineering and Construction Company

- technical irregularities in an arbitration agreement per se will not make it invalid.

- The intention of the parties to arbitrate is of utmost importance in deciding on the validity
of an arbitration agreement.

- The judgment also lays down that the courts, while deciding on an application for
appointment of an arbitrator, should not go into technicalities of the agreement in
question. The technicalities such as stamping, seals, signatures or production of original
agreement have been described by the Court as ‘red tape that has to be removed before
the parties can get what they really want – an efficient and potentially cheap resolution of

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 their dispute’ and these technical issues are to be considered as mere indicators of intent
and should not be insisted upon if parties are able to show intent (to arbitrate) in other

ways.

U.P Rajkiya Nirman Nigam Ltd. (U.P State Construction Corporation) v. Indure Pvt Ltd

- appointment of arbitrator and subsequent challenge to the arbitration proceedings is valid,

the party is not estopped from challenging the existence of agreement.

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 Section 2 (1) (f)- International Commercial Arbitration & Seat of Arbitration

Pre BALCO:

Bhatia International v. Bulk Trading-2002

Venture Global Engineering v. Satyam Computers (now Tech Mahindra) - 2008

TDM Infrastructure v. UE Development - 2008

Post BALCO:

Bharat Aluminium Company Ltd v. Kaiser Aluminium Technical Services 2007

Yograj Infrastructure v. Ssang Yong Engineering and Construction Co Ltd -2011

Enercon India v. Enercon GmBH- 2014

I-MAX Corporation vs E-CITY Entertainment Pvt Ltd

- CHALLENGING FOREIGN ARBITRATION AWARD U/S 34 OF THE ACT

- The Apex Court considered whether to maintain a petition challenging a foreign award
under Section 34 of the Act in India, under the pre-BALCO regime, which permits challenges
to foreign awards in India unless the parties have expressly or impliedly excluded the
operation of Part I of the Act and in its judgment while setting aside the position taken by
the Bombay High Court, has significantly blurred this categorization and the position which
stands out as on date can be summarized as: "The choice of institutional arbitral rules (ICC
Rules in this case) and the consequent choice of seat by the arbitral institution (London)
operated as exclusion of Part I of the Arbitration and Conciliation Act, 1996, thereby ousting
the jurisdiction of Indian Courts to maintain and entertain a challenge to the foreign award.."

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 Section 8 - Power of Judicial Authority to refer the case to Arbitration

Haryana Telecom Ltd. v Sterlite Industries India Ltd.

Section 11- Appointment of Arbitrators

Ludhiana Improvement Trust & Anr v Today Homes and Infrastructure (Pvt) Ltd

- It was contended and upheld that since an arbitration agreement obtained fraudulently
would be void and unenforceable, it would be necessary for the court to exercise its judicial
power under section 11 of the Act, as held in SBP & Co v Patel Engineering Ltd, and
decide on the existence of an arbitration agreement prior to the appointment of the

arbitral tribunal.

Section 11 (8) - Disclosure by Arbitrators in writing

National Insurance Company Ltd. v. Boghara Polyfab Pvt. Ltd., (2009) 1 SCC 267

(see SBP v Patel Engineering case)

Facts:

- The respondent (Insured) obtained a standard Fire and Special Perils (with a floater) Policy
from the appellant (Insurer) to cover its goods in its godowns situated at Surat.

- The appellant issued an additional endorsement increasing the sum insured.

- The respondent reported loss/damage to their stocks on account of heavy rains and
flooding.

- The appellant informed the surveyor that the insured sum was less than what he had
taken into account.

- On this, dispute arouse between the parties as to the amount to be paid.

Judgment:

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- The CJ, in exercising his powers under Section 11, does not have to decide all the
preliminary questions set out in Patel Engineering. The Court segregated the preliminary
issues into three categories, that is, “(i) issues which the Chief Justice or his designate is
bound to decide; (ii) issues which he can also decide, that is, issues which he may choose

to decide; and (iii) issues which should be left to the Arbitral Tribunal to decide.”

- The first category included the CJ’s territorial jurisdiction as well as the issue of whether
there was an arbitration agreement and whether the Section 11 applicant is indeed a party

to the agreement.

- The second, optional category included issues of whether claim is a dead (barred by
limitation) claim or a live claim and whether the parties have concluded their contract by
recording satisfaction of their mutual rights and obligation or by receiving the final
payment without objection. If the Chief Justice did decide to rule on these optional issues,
his decision would be final and cannot be reopened by the tribunal. However, the court
urged the Chief Justice to exercise caution in exercising this option and to be guided by
the objective of the Act of “expediting the arbitration process with minimum judicial

intervention”.

- The last category of issues which the Chief Justice should not decide included issues of
“(i) Whether a claim made falls within the arbitration clause (as for example, a matter which
is reserved for final decision of a departmental authority and excepted or excluded from
arbitration)” or “(ii) Merits or any claim involved in the arbitration.”

Picasso v. Pick-a-Cet Consultancy Services

- Picasso and Pick-A-Cent had entered into a Memorandum of Understanding (“MoU”) on

July 1, 2009 in terms of which Picasso was to grant Pick-A-Cent a franchisee of the ‘Picasso
Animation College’ in Bangalore. The MoU provided for disputes arising from the
agreement to be referred to a sole arbitrator. Neither party contested the existence of a
valid MoU or arbitration agreement. However, Pick-A-Cent alleged that Picasso had made
certain misrepresentations regarding ownership of intellectual property transferred
between the parties. Pick-A-Cent relied on a case to argue that allegations of fraud must

be settled in Court and not through arbitration.

- Denying the claim, the Court noted that the decision cited had been passed prior to the
amendments to the Act, which has changed the law significantly. Under the amended Act,
sub-section 6A of Section 11 requires that the court confine its examination of petitions
under Section 11 to the existence of an arbitration agreement. The Court observed that at

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 this stage of proceedings, it could not examine whether Pick-A-Cent has a justified claim
of fraud against Picasso which would be a question to be determined by the arbitrator in
the arbitration proceedings. Thus, as long as the parties agreed about the existence of an

arbitration agreement, the Court was bound to appoint an arbitrator.

- Where a valid arbitration agreement has been entered into by the parties, the Court would
necessarily have to appoint an arbitrator. Any allegations as to arbitrability of the dispute
or the jurisdiction of the tribunal would be examined by the arbitrator in the arbitral

proceedings and not by the court.

Datar Switchgear v. Tata Finance

- If the parties to an arbitration agreement have agreed upon procedure for arbitration and
they do not act according to that consented procedure, the in such a case, the opposite

party may move the Court U/S 11 of the Act.

- 30 day statutory period is to be provided as U/S 11 Cl. (4) and (5)

Reliance, PB and NIKO v UOI

Is appointment of an Arbitrator by the Sc/ HC’s an Administrative or Judicial Act?

(refer to book)
Before: Appointment of Arbitrator by the SC/ HC’s is an Administrative Act

Konkan Railway v. Mehul Construction

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Konkan Railway v. Rani Engineering

After: Appointment of Arbitrator by the SC/ HC’s is a Judicial Act

SBP Ltd v. Patel Engineering - 7 Judge Bench, SC - (2005) 8 SCC 618

• The power exercised by the Chief Justice of the High Court or the Chief Justice of

India under S. 11(6) of the Act is not an administrative power. It is a judicial power.

• The power under S. 11(6) of the Act, in its entirety, could be delegated, by the Chief
Justice of the High Court only to another judge of that court and by the Chief Justice

of India to another judge of the Supreme Court.

• In case of designation of a judge of the High Court or of the Supreme Court, the
power that is exercised by the designated, judge would be that of the Chief Justice as

conferred by the statute.

• The Chief Justice or the designated judge will have the right to decide the preliminary
aspects as indicated in the earlier part of this judgment. These will be, his own
jurisdiction, to entertain the request, the existence of a valid arbitration agreement,
the existence or otherwise of a live claim, the existence of the condition for the exercise
of his power and on the qualifications of the arbitrator or arbitrators. The Chief Justice
or the judge designated would be entitled to seek the opinion of an institution in the
matter of nominating an arbitrator qualified in terms of S. 11(8) of the Act if the need
arises but the order appointing the arbitrator could only be that of the Chief Justice

or the judge designate.

• Designation of a district judge as the authority under S. 11(6) of the Act by the Chief
Justice of the High Court is not warranted on the scheme of the Act.

• Once the matter reaches the arbitral tribunal or the sole arbitrator, the High Court
would not interfere with orders passed by the arbitrator or the arbitral tribunal during
the course of the arbitration proceedings and the parties could approach the court
only in terms of Section 37 of the Act or in terms of S. 34 of the Act.

- SC held that the appointing function in Section 11 is a judicial function where the Chief
Justice should examine certain jurisdictional questions like the existence and validity of the
arbitration agreement. The exact scope of enquiry of the Chief Justice was set out by the

Supreme Court as follows:

“It is necessary to define what exactly the Chief Justice, approached with an application under
Section 11 of the Act, is to decide at that stage. Obviously, he HAS TO DECIDE his own
jurisdiction in the sense, whether the party making the motion has approached the right

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High Court. He has to decide whether there is an arbitration agreement, as defined in the
Act and whether the person who has made the request before him, is a party to such an
agreement. It is necessary to indicate that he CAN ALSO DECIDE the question whether the
claim was a dead one; or a long barred claim that was sought to be resurrected and whether
the parties have concluded the transaction by recording satisfaction of their mutual rights
and obligations or by receiving the final payment without objection. CANNOT DECIDE: It
may not be possible at that stage, to decide whether a live claim made, is one which
comes within the purview of the arbitration clause. It will be appropriate to leave that
question to be decided by the arbitral tribunal on taking evidence, along with the merits
of the claims involved in the arbitration. The Chief Justice has to decide whether the
applicant has satisfied the conditions for appointing an arbitrator under Section 11(6) of the
Act…”

Chloro Controls Pvt Ltd. v. Severn Trent Water Purifier Company (2013) 1 SCC 641

- A three-judge bench of the Supreme Court said that “it is only for the purpose of finding
out whether the arbitral procedure has to be started that the Chief Justice has to record
satisfaction that there remains a live issue in between the parties.
- … The Chief Justice only has to record his satisfaction that prima facie the issue has not
become dead by the lapse of time or that any party to the agreement has not slept over its
rights beyond the time permitted by law to agitate those issues covered by the agreement….”
- Thus, “…the Chief Justice may not decide certain issues finally and upon recording
satisfaction that prima facie the issue has not become dead even leave it for the Arbitral
Tribunal to decide.”
- The Court also upheld the categorisation laid down in Boghara Polyfab Private Limited:
“We have no reason to differ with the classification carved out in National Insurance Co. as

it is very much in conformity with the judgment of the Constitution Bench in SBP.”

Section 12: Grounds of Challenge of Appointment of an Arbitrator

Dream Valley Farms Pvt Ltd v Religare (2016 SC)

- The SC entertained a petition seeking an appointment of an arbitrator, on the ground that

the arbitrator presiding over the arbitral proceedings had made misleading disclosures.

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- Dream Valley and Religare started arbitration proceedings and appointed a sole arbitrator
in pursuance of the same.

- The arbitrator made the declaration in the format of the Sixth Schedule of the amended
Act, stating that he had been presiding over 20 arbitrations out of which a majority formed
a part of disputes in connection with group companies without mentioning whether these

group companies were connected to Religare.

- After the proceedings had commenced, a further disclosure by the arbitrator revealed that
the arbitrator had been appointed by Religare in twenty matters and was in fact, serving
as an arbitrator in twenty seven matters related to Religare. Interestingly, instead of
initiating a process of challenging the appointment of the arbitrator under Section 13 of
the Act, Dream Valley filed the present petition under Section 11 for appointment of a

new impartial arbitrator.

- The Court held that had misled Dream Valley – suppressing facts that ought to have been
disclosed in the first instance. Thus noting, the Court held that the arbitrator had become
de jure disqualified from continuing in his position in terms of Section 14(1)(a) of the
Act, and his mandate accordingly stood terminated.

- The Court emphasised on the amendments made to Section 12 and 13 of the Act- which
impose a mandatory obligation on a person approached in connection with appointment
as an arbitrator to disclose any circumstances which are likely to give rise to justifiable

doubts as to his/her impartiality or independence.

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