Case Summaries on ADR

Case Analysis 1: Balco Case

Facts in a nutshell – The parties had agreed on the supply of equipment and the modernization and upgrading of manufacturing facilities. Inevitable disagreements occurred and were sent to arbitration in England, with awards in favour of the Respondent. The Appellant had applied to the Chhattisgarh High Court under Section 34 of the Act to have the award set aside.

1. Whether the two awards that were passed in England could be challenged in India u/s. 34 of the Act?
2. Whether Section 9 of the act was applicable or not?

Judgement – The court held that Section 2(7) of the Act serves to differentiate between domestic awards (Part I of the Act) and foreign awards (Part II of the Act), emphasizing that these two parts operate in separate domains with no overlap. Furthermore, the court made a crucial distinction between a ‘seat’ and a ‘location.’

This distinction becomes essential when the arbitration agreement designates a foreign country as the ‘seat’ of arbitration while choosing the Act as the governing law for the proceedings. In such cases, the court clarified that selecting a foreign nation as the seat of arbitration implies that the proceedings will be subject to the laws of that country regulating arbitrations.

Consequently, if the arbitration agreement specifies a seat or place of arbitration outside India, even if it mentions that the Act governs the arbitration proceedings, Part I of the Act will not be applicable.

This means that Indian courts cannot exercise supervisory authority over the arbitration or the award. Essentially, it signifies that the parties have contractually incorporated specific clauses from the Act concerning the internal functioning of their arbitration, as long as they don’t conflict with mandatory procedural or curial laws of the chosen foreign jurisdiction. In essence, Part I of the Act only applies to arbitrations conducted within India.

The court disagreed with the findings in the Bhatia International case and clarified that Indian courts do not have the authority to grant interim measures when the arbitration takes place outside India. Section 9 of the Act, upon careful examination, is seen to relate to interim relief sought before or after arbitral hearings or at some point after the arbitral award is issued but before its enforcement under Section 36 (Enforcement of domestic awards). This implies that Section 9 and the interim measures it offers are applicable only to arbitrations conducted within India.

Case Analysis 2: Bhatia International Case

This case is likely to draw the attention of those involved in commercial and legal dealings with India. Here is a concise summary of the pertinent facts: The parties involved in an international contract opted for arbitration following the ICC rules, with the arbitration proceedings taking place in Paris.

The foreign party, seeking to secure its ability to recover a favourable award against the Indian party, applied to an Indian court for interim measures to protect the Indian party’s assets. The Indian party opposed the application, arguing that since the arbitration was conducted in Paris, the New York Convention did not provide for the granting of interim measures by a court other than the one where the arbitration was being conducted.

Initially, the High Court rejected this argument. Subsequently, the Indian party appealed to the Supreme Court, which upheld the High Court’s decision. In essence, the Supreme Court of India ruled that Part I of the Arbitration and Conciliation Act of 1996, which incorporates the UNCITRAL Model Law and grants the court the authority to issue interim measures, applied even to arbitrations held outside India.

Case Analysis 3: Afcon Infrastructure Vs Konkan Railway Corporation Case

The petitioner and respondent entered into a contract on 12th December 2005 for the construction of the Katra-Laone, section of the Udhampur-Srinagar-Baramulla Rail Link Project. The dispute between the parties arose because of a wrongful deduction of payment made by the respondent to the petitioner.

The contract entered by the parties had an arbitration clause, and according to that arbitration clause, the arbitral tribunal must consist of 3 gazette officers. These officers must be prepared by the respondent. The power to appoint the rest of the arbitrators other than the three, the power is vested with the Respondent.

The petitioner first filed an application of the Arbitration and conciliation act 1996 under section 9 of the acct before the district court. The petitioner then applied section 11(3) (4) and section (6) before the High Court of Jammu and Kashmir according to the Jammu and Kashmir Arbitration and Conciliation Act, 1997. This application was filed to appoint an arbitrator.

By invoking the arbitration clause again, the petitioner vides the letter which was dated 2nd July 2018 and alleged that there was a failure from the side of the respondent to follow the prescribed procedure for appointing arbitrators and therefore section 11 (3) of the arbitration and conciliation act 1996 will govern in the appointment of the arbitral tribunal. The petitioner then nominated Mr. R.G. Kulkarni as a nominee arbitrator and asked the respondent to nominate their arbitrator within a period of 30 days.

On July 11th, 2018, the respondent vided the letter. The petitioner also joined the issue on 3rd August 2018 asserting, inter-alia, that the arbitration contained in the letter was fresh and unrelated to the one pending in the High Court of Jammu and Kashmir. The respondent claimed that the arbitral tribunal was formed by following the terms and conditions of the contract and responded by rejecting the petitioner’s nominee. The petitioner later filed a petition under Section 11(6) of the Arbitration and Conciliation Act 1996.

Issue of the case

The issue of the case was whether or not the court had jurisdiction to decide and entertain a petition under section 11 regarding the appointment of arbitrators.

The decision of the court

The High Court of Bombay held that the recognized the jurisdiction mentioned under Section 42 of the Arbitration and Conciliation Act, 1996 in order to entertain any application in respect of an arbitration agreement under Part I of the act, once such an application is made to a court, by any other court other than the court to which such application is first made, does not apply to the applications like the application for appointment of an arbitrator under Section 11 of the Arbitration Act, 1996 or the application to the judicial authority under Section 8 of the Arbitration and conciliation  Act, 1996.

Case Analysis 4: SBP And Co. V. Patel Engineering Ltd. And Ors.

The case in question revolves around a contractual dispute arising from the Koyna Hydroelectric Project in the state of Maharashtra, India. The parties had an agreement that included a clause (Clause 19) specifying arbitration as the means to resolve disputes. If a dispute arose, two arbitrators, one appointed by each party, were to conduct arbitration proceedings in Bombay, with the option to select an umpire if needed.

However, a disagreement between the parties led to a situation where the appointment of arbitrators became contentious. The petitioner appointed an arbitrator (Respondent No. 2), but Respondent No. 1’s first choice was declined due to prior involvement with the project. Eventually, S.L. Jain was appointed as Respondent No. 1’s arbitrator. When disputes persisted, Respondent No. 1 sought to appoint a third arbitrator/umpire, citing Section 15(2) of the Arbitration and Conciliation Act, 1996.

Respondent No. 2 disagreed with the need for a third arbitrator and challenged the appointment in the Bombay High Court. The High Court upheld the appointment of a retired judge as the third arbitrator. The petitioner then filed a petition under Section 11 of the Arbitration and Conciliation Act, 1996, contesting the High Court’s decision.

The central issue before the Supreme Court was whether the power to appoint an arbitrator, exercised by the Chief Justice of India, Chief Justice of a High Court, or a judge designated by them, is a judicial or administrative function. Respondent No. 2 argued against the appointment of the third arbitrator, claiming that the dispute should be resolved by a sole arbitrator.

The Supreme Court, in this case, departed from its previous ruling in Konkan Railway Corpn. Ltd. &Anr. vs. Rani Construction Pvt. Ltd., which classified this function as administrative rather than judicial. The Court held that the power under Section 11(6) of the Act is indeed judicial, not administrative.

Thus, the Court will appoint an arbitrator only if the conditions specified in this section are met. It clarified that the principle of Kompetenz- kompetenz, which allows the arbitral tribunal to determine its own jurisdiction, applies only in cases where an arbitrator has not yet been appointed.

Furthermore, the Court emphasized that under Section 11(6) of the Act, the term ‘Institution’ refers specifically to a judge of any High Court or the Supreme Court. This ruling clarified the scope of authority under this section. In summary, this case underscores the judicial nature of the power to appoint an arbitrator and its implications for arbitration proceedings in India.

Case Analysis 5: Amazon Case Emergency Arbitrators

In this case, two major companies i.e., Amazon (Amazon.com NV Investment Holdings LLC) and Future Group (Future Retail Ltd -FRL and Future Coupons Private Ltd -FCPL) entered into a series of agreements. These agreements entitled Amazon to the exclusive rights in the retail assets of Future Group and obliged Future Group to receive written consent from Amazon before delineating the assets.

The agreements also prohibited Future Group from the transfer of its retail assets to ‘restricted persons’. The Reliance Industries Group, which was listed under the category of ‘restricted persons’, thereafter entered into a transaction with Future Group for a future amalgamation transferring the retail assets to the Reliance Group. This transfer was the disputed transaction that led to arbitration proceedings between Amazon and Future Group. 

Amazon initiated arbitration against Future Group under the SIAC Rules (Rules of Singapore International Arbitration Centre) as per the arbitration clause in the agreement. Also, it was pre-decided that the seat of arbitration would be New Delhi, India. An emergency arbitrator rendered an Interim Relief on October 25, 202 in favor of Amazon.

However, as Future Group did not comply with the emergency award, Amazon initiated proceedings in the Delhi High Court to enforce the emergency award. The case was later forwarded by way of appeal to the Supreme Court to decide on the issues mentioned below.

The SC formulated, among others, the following issues which are noteworthy: 

1.      Whether an emergency arbitrator is an arbitrator under the Arbitration &Conciliation Act, and Whether an “award” delivered by an Emergency Arbitrator appointed under Schedule 1 of the SIAC Rules can be considered as an order under Section 17(1) of the Act?

2.      Whether an order passed under Section 17(2) of the Act in the enforcement of the award of an Emergency Arbitrator by a learned Single Judge of the High Court appealable?

Supreme Court’s Decision

The Arbitration and Conciliation Act (A&C Act) does not consist of the words ‘Emergency Arbitrator’ or ‘Emergency award’ for that matter. However, the Court noted that the parties have the freedom to agree to a set of Arbitral Institutional Rules.

This implies that the parties have the right to use provisions of emergency arbitration present in the rules chosen by them. The following sections from the A&C Act denote this:

Section 2(6)– Authorizes the parties to decide an arbitral institution for the determination of issues that arise between the parties.

Section 2(8)– Parties can agree on the arbitration rules to be applied.

Section 19(2)- they can also agree on the procedure that shall be followed by the tribunal for the proper conduct of its proceedings.

In light of the above-mentioned provisions, the Supreme Court stated that the core idea behind this was to respect party autonomy during the arbitration. It further noted that choosing an emergency arbitrator and carrying proceedings for interim relief as per the institutional rules do not violate the A&C Act as there is no provision mentioned in it that prohibits such a practice. 

Case Analysis 6: Hardy Exploration Case

The court issued a ruling emphasizing that the mere ‘venue’ of arbitration does not automatically constitute its ‘seat,’ and the term ‘place’ can only be equated with ‘seat’ when specific conditions are met.

The court clarified, “The term ‘place’ does not ipso facto become equivalent to ‘seat,’ and it can assume the role of ‘seat’ only if certain conditions are satisfied. Conversely, the term ‘venue’ can become a ‘seat’ if additional elements are attached to it.”

In the case at hand, the court determined that since the arbitration agreement did not explicitly specify a seat, the task of designating the seat fell within the purview of the arbitral tribunal.

The court stressed that merely conducting meetings in different locations, such as Kuala Lumpur, and signing the award there did not constitute a determination of the seat. These locations were regarded as ‘venue’ and could not be equated with the ‘seat’ or ‘place’ of arbitration.

Based on this interpretation, the court overturned the decision of the Delhi High Court, concluding that Indian courts had jurisdiction to entertain challenges under Section 34 of the Arbitration and Conciliation Act.

Case Analysis 7: Soma Case

In this recent landmark decision, the Supreme Court of India, in the case of BGS SGS SOMA JV v. NHPC Ltd., has reaffirmed and elaborated upon the principles established in the BALCO v. Kaiser Aluminum Technical Services Inc. case. The Court clarified that when parties choose a specific city in India as the seat of arbitration, this choice grants exclusive supervisory jurisdiction to the courts of that designated city over the entire arbitration process.

Case Analysis 8: Renu Sagar Case

In the Renusagar case, the Supreme Court reviewed the concept of public policy and ordered that the enforcement of a foreign award would be refused on the ground that it is contrary to public policy if such enforcement would be contrary to (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality.

This article has been contributed by Manthan Tyagi, a student at NarseeMonjee Institute of Management Studies, Bangalore.