May 9, 2022
Dispute Resolution News Letter- April - May 2022
Gujarat Housing Board & Anr. VS. Vandemataram Projects Private Limited
Citation – Civil Appeal No. 2093/2022
Judgment date – 21.03.2022
Facts of the case:
In the month of January 2018, the Gujarat Housing Board (“Appellant“) issued the Mukhya Mantri Gruh Yojna tender for the planning, design, and construction of flat type, high-rise buildings/commercial units for various income groups in Ahmedabad, Vadodara Division. Vandemataram Projects Private Limited (“Respondent“) submitted a bid to the appellant and was chosen as the winning bidder after a technical and financial evaluation. The appellant, however, canceled the contract on 7th June 2021, because the respondent was unable to begin the work of the project. The respondent was enraged by this decision and hence decided to move to the Gujarat High Court (“High Court”) to have the decision of 7th June 2021 quashed and set aside.
Objections to the maintainability of the writ application were filed before the High Court on the grounds that the writ applicant had an alternative remedy in the form of invoking the arbitration clause. The High Court ordered the Board to repay the forfeited money of INR 1,66,05,000 within 15 days of receiving a copy of the writ as well as to issue a new tender notice and continue with the project. Further, the High Court also ordered the appellant to reimburse INR 21,66,470 to the respondents. The appellant, who was dissatisfied with the decision, used Article 226 of the Constitution and finally brought the case before the Hon’ble Supreme Court.
Issues:
Whether there is any remedy under Article 226 of the Constitution of India for contractual matters where there already exists an arbitration clause?
Held:
While overturning the High Court’s order and relegating the parties to the remedy provided by the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), the apex Court stated that invoking Article 226 of the Indian Constitution for a contractual matter where there was an existing arbitration clause was not the appropriate remedy and nor could the High Court have examined the matter and granted the relief.
K S&CO Comments:
The apex court, in this matter, passed a very crucial judgment safeguarding the ambit of the arbitration clause in contractual matters. The presence of an arbitration clause does not completely eliminate jurisdiction under Article 226 in all cases; rather, it must be determined on a case-by-case basis whether recourse to a public law remedy can be justified. Unless a justifiable reason for invoking writ jurisdiction is provided, we believe the courts would prefer not to intervene with the arbitral process or the dispute resolution mechanism chosen by the parties to a dispute.
Haryana Urban Development Authority, Karnal VS. Mehta Construction Company
Citation – 2693/2022
Judgment date – 30.03.2022
Facts of the case:
On 6th July 1998, Mehta Construction Company (“Respondent”) entered into an agreement with Haryana Urban Development Authority (“Appellant”) whereby the respondent was to construct water body, water body fall, pedestrian bridge, backwall of deck, pump chamber etc. in Karnal, for an amount not exceeding Rs.32.50 lakhs. Disputes arose between the parties with respect to the terms and conditions of the agreement. The respondent, then, filed an application before the Punjab and Haryana High Court (“High Court”) under section 11 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) for the appointment of an arbitrator for the adjudication of disputes in the said contract. An arbitral award was passed in favour of the Respondent but the Appellant was aggrieved by this and hence filed objections to the award before the Additional District Judge, Karnal under section 34 of the Arbitration Act.
The Additional District Judge at Karnal observed that the Appellant’s challenges were precluded by limitation and hence refused to change the arbitral award. Following that, the Appellant filed an application with the High Court under section 37 of the Arbitration Act for challenging the Additional District Judge’s Order. However, the High Court upheld the Additional District Judge’s decision and declined to interfere in the case which aggrieved the Appellant and made them move the Hon’ble Supreme Court for relief.
Issues:
Whether an arbitral award can be set aside on ground of erroneous application of law or by misappreciation of evidence?
Held:
The Hon’ble Supreme Court overturned the orders of the High Court and the Additional District Judge of Karnal and held that the High Court and the Additional District Judge, Karnal had not fully appreciated the objections raised and remitted it to the Additional District Judge, Karnal for the objections to be heard anew and on merits.
K S&CO Comments:
In this case, the apex court upheld the importance of detailed review and eliminated the reasoning which was set forth in the order of the high court as it was generalized and did not deal with the case in detail. Further, the Bench of the Hon’ble Supreme Court remitting a case back to the district judge for fresh consideration irrespective of the earlier orders could be considered as a qualitative development in the judiciary system of our country.
Satyen Construction VS. State of West Bengal
Citation – MANU/WB/0513/2022
Judgment date – 08.04.2022
Facts of the case:
In light of an award dated 24 December, 2018, M/s. Satyen Construction (“Petitioner”) was awarded a sum of Rs 2,66,69,73/- for various claims and also a further sum of Rs 1,37,85,395/- for costs along with interest @ 18% per annum from 25th December, 2018 till the date of payment. The State of West Bengal (“Respondent”) then filed an application under section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) which is pending. The respondent also filed an application under section 36(2) of the Arbitration Act for the stay of operation of the arbitral award. A bench of the Calcutta High Court (“High Court”) directed the respondent to furnish security by responding to this application. Further, the petitioner made an application under section 9 of the Arbitration Act for seeking liberty to withdraw the security amount deposited by the respondent with the registrar to which the respondents contended that the relief sort by the petitioner was beyond the scope and ambit of section 9 of the Arbitration Act.
Issue:
Whether section 9 of the Arbitration Act can be extended to enforce the award or for granting the fruits of the award as an interim measure?
Held:
The Hon’ble High Court was of the view that the scope of section 9 of the Arbitration Act cannot be extended for enforcement of the award or for granting the fruits of the award to the award holder as an interim measure. Thus, it dismissed the application which was filed under section 9 of the Arbitration Act wherein liberty to withdraw a sum of Rs 4,11,89,759/- deposited by the respondent upon furnishing of appropriate security was sought.
K S&CO Comments:
In the present case, the Hon’ble High Court took a stand of dismissing the application filed and reiterated the scope of section 9 of the Arbitration Act. Further, it was also mentioned that there have been a number of decisions passed by the Hon’ble Supreme Court wherein the petitioner had been permitted to withdraw the amount deposited. Nonetheless, the court took a strong stand of dismissing the application and rejecting the prayer for withdrawal in the case on hand.
Roop Singh Bhatty and others v. M/s. Shriram City Union Finance Limited
Citation: Civil Revision Petition Nos. 1354 and 1934 of 2021 (Telangana High Court)
Judgement dated: 08.04.2022
Facts of the case:
M/s.Shriram City Union Finance Limited, the respondent, had sanctioned a loan of Rs. 25,00,000/- to the petitioner, Roop Singh Bhatty. Although, petitioners had agreed to repay the loan amount plus financial costs, they defaulted on their loan by not paying the full amount owed later. The respondent then invoked the arbitration clause and on April 27, 2016, they filed a Claim Statement with the sole Arbitrator. On December 21, 2016, the petitioners filed their statement of defence. On December 27, 2017, over a year later, the Arbitrator delivered the award. The respondent, M/s. Shriram City Union Finance Limited, moved to the Court of III Additional District Judge at Warangal, seeking execution of the award because the sum quantified by the Arbitrator was not paid. The Execution Court overruled the petitioners’ objections, granting the Execution Petition. The petitioner filed the revision petition before the Telangana High Court.
The petitioner contended that the arbitral award was not passed within 1 year from the date of filing the claim by the respondent in this case. As per section 29A(1) of the Arbitration and Conciliation Act, the award is supposed to be passed within a period of 12 months from the date tribunal enters upon the reference.
Issues:
Whether or not an Arbitral award passed after 12 months from the date of filing the claim is valid?
Held:
The court held that the mandate of the arbitrator terminates after the expiry of the prescribed period which is 12 months making the arbitrator functus-officio and the award passed by him nullity under the provisions of section 29A of the Arbitration and Conciliation Act.
K S&CO Comments:
The Telangana High Court’s balanced judgement leaves no doubt by holding that an arbitral award is a nullity if it is passed beyond the authorised period. This is self-evident and must be followed at all times.
Parenteral Drugs Ltd VS. Gati Kintetsu Express Pvt. Ltd.
Citation – MANU/MP/0890/2022
Judgment date – 12.04.2022
Facts of the case:
Parenteral Drugs (India) Limited (“Appellant”) filed an application before the District Court of Indore under section 34 of the Arbitration and Conciliation Act (“Arbitration Act”) challenging the arbitral award rendered in Hyderabad by an arbitral tribunal. Gati Kintetsu Express Pvt. Ltd. (“Respondent”) opposed the appellant’s application on the grounds that the court lacked jurisdiction to hear it and that the parties had a valid arbitration agreement. However, the district judge decided the appellant’s application on the merits and dismissed it. The appellant filed an appeal under section 37 of the Arbitration Act against the district judge’s order before the Madhya Pradesh High Court (“High Court”).
The appellant asserted before the High Court that there was no arbitration agreement between the parties and that the arbitrator had incorrectly assumed jurisdiction over the parties’ dispute. The appellant contended that a portion of the cause of action arose in Indore as the transactions between the appellant and the respondent occurred in the same city and hence the court in Indore would have jurisdiction to hear the application filed under section 34 of the Arbitration Act. The High Court noted that the appellant raised an objection to the arbitrator’s jurisdiction for the first time in the application filed under section 34 of the Arbitration Act before the district court of Indore.
Issue:
Whether the arbitral award can be challenged in a different jurisdiction where it is stated that no arbitration agreement existed?
Held:
The High Court held that an application under section 34 of the Arbitration Act to set aside an arbitral award cannot be filed in a court that lacks jurisdiction under the arbitration agreement solely on the basis that the cause of action arises within its jurisdiction even if a party disputes the existence of an arbitration agreement.
K S & Co Comments:
In the present case the court has rightly upheld the spirit of the Arbitration Act by holding that if the appellant submits an appropriate application under section 34 of the Arbitration Act and before the court of competent jurisdiction and also within such period of time which was still available to the appellant, then the same shall be decided by the court of competent authority.
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