Consolidation of arbitration – an Overview
Introduction and meaning : Consolidation of a reference means joining two or more claims together under one arbitration so that they can be adjudicated together. Typically, a consolidation or a composite reference can be made to save time, money and resources of the arbitral tribunal as well as the parties. It is a procedural means to bring together two or more claims between the same parties arising under one composite transaction which can be instituted in one arbitration. Most commonly, for contracts of construction/ works, EPC, real estate development, joint ventures, share transfer and purchase, tenders etc., there may be layers of agreements, i.e. one principal agreement along with other connected, ancillary or supplemental agreements on the same subject matter. These contracts may lay down the rights, duties and obligations of the parties and detail the scope of work of the subject matter and form a composite transaction or a single project. Each of these agreements could contain a separate arbitration clause or give reference to the arbitration clause contained in the principal agreement with a binding intention. If disputes arise under one of such agreements, it may likely have an impact on the other agreements giving rise to claims between the parties under the other agreements. In such a situation, parties would have the option to invoke the arbitration clauses under each such agreement where their claims have arisen and seek to initiate arbitration proceedings for each such claim. This would lead to multiplicity of proceedings as well as multiple arbitration awards, that may ultimately lead to a conflict. Thus, consolidation of arbitration proceedings is a requisite in such situations. While the aforesaid is a simplified explanation of what consolidation entails, often it is a far complex process. In some cases, the ancillary or supplemental agreements may not contain arbitration clauses and only give reference to the principal agreement which could contain an arbitration clause. The Courts then would be required to interpret whether the arbitration clause in the principal agreement can be read into the ancillary agreement and be binding thereon. Further, the ancillary agreements may be with parties that are not parties to the principal agreement, and thus non-signatory to the arbitration agreement. The Courts would also be required to consider whether the claimant can initiate arbitration against a non-signatory. Under the Arbitration and Conciliation Act, 1996 (“Act”), there is no specific provision of consolidation of a reference, and there is no specific legislature which assists the parties as such. Jurisprudence on consolidation, if not the legislation, has much evolved over the years. While largely the facts of the cases determines whether consolidation can take place, there are a few parameters that are applied by the Courts while determining this issue. Consolidation of proceedings : when allowed The Hon’ble Supreme Court, in the case of PR Shah, Shares and Stock Brokers v BHH Securities Pvt Ltd & Ors. [(2012) 1 Supreme Court Cases 594] was considering an appeal under section 34 of the Act against an award passed in an arbitration where claims were arising out of two separate arbitration agreements, which were consolidated and a single award was passed. The Court held that that if A had a claim against B and C, and had separate arbitration agreements with B and C respectively, then there was no reason why A could not have a joint arbitration against B and C. If there were separate arbitrations for a common claim, then a likelihood of having conflicting awards arising out of these two arbitrations leading to multiplicity of decisions. The Court dismissed the appeal while holding that a common arbitration could be led in the given facts. The Hon’ble Supreme Court in the case of Chloro Controls v Severn Trent Water Purification Inc [(2013) 1 Supreme Court Cases 641] while inter alia considering the larger issue of binding non-signatories to arbitration, examined the issue of what constitutes a composite transaction. The Court observed that the transaction between the parties is of a composite nature where performance of the mother agreement may not be feasible without aid, execution and supplement of the ancillary agreements for achieving the common object and ultimately having a bearing on the dispute. Further, the principle of composite performance would have to be gathered from the co-joint reading of the principle and supplementary agreements on the one hand and on the other hand, the intention of the parties to treat it as such. The Delhi High Court, in the case of Gammon India Ltd & Anr v National Highways Authority of India [2020 SCC OnLine Del 659], analysed the need for consolidation of arbitration. Multiple arbitrations before different tribunals in respect of the same contract are bound to lead to enormous confusion. The constitution of multiple tribunals for the same contract would set the entire arbitration process at naught as the purpose of arbitration being a speedy dispute resolution mechanism would turn out to be counter-productive. The High Court while dismissing the Petition under section 34 of the Act, issued certain directions to avoid multiplicity of tribunals and inconsistent/ contradictory awards such as to the parties to disclose at the time of Petitions under section 11, whether any claims between the parties arising out of the same set of agreements / contract are already being adjudicated, and for the appointing authorities to avoid appointment of separate tribunals for claims arising out of the same contract or series of contracts. Hence, the Courts while deciding the consolidation of arbitrations opt to not apply a straitjacket formula and the same is largely depended on the nature of the transaction, whether the agreements are inter-dependent as well as the end result. Consolidation of proceedings: when not allowed In the case of M/s Duro Felguera, SA v M/s Gangavaram Port Ltd [(2017) 9 SCC 729], the Apex Court dealt with five connected petitions under section 11 of the Act arising out of five work contracts awarded by the Respondent to the Petitioner. The Petitioner was awarded a tender,
Tracing the chain of title – 12 years or 30 years?
Introduction On account of rapid industrial development and uninterrupted ever-growing urbanization the demand for land for development residential, commercial, industrial, as well as for establishing larger modern farmhouses has increased tremendously and so is the need for investigating the title of such properties, in order to avoid deceit, suppression and exploitation. A search into the ownership of the property of the person is called the investigation of title. This is carried out on behalf of the person who may be interested in the property either as a purchaser or in the capacity of a creditor or a lender who is to accept the property or land as a security. The creditor or lender is interested in getting the property (i.e. its ownership) investigated, so as to ensure, that the title of the property is quite clear and that he is assured of the repayment of advances made in favour of the said property owner. Object Of Investigating The Title: The investigation is carried out broadly with the intentions that: What Does Having An Ownership/posession Of The Property Mean? Control over the land is possible only when one is having actual physical contact with this said land. The word possession denotes a continuing contact with the land. This also exhibits mental element to possess the property and use the same to the exclusion of others. The possession of the land is therefore legally placed side by side with the ownership of it, consequently a person not the owner of the land, becomes its owner. Whereas the owner dispossessed on account of his continuous absence of any contact with the land loses its ownership. In short possession is the most important component of ownership. The possession of the land is also considered prima facie evidence of the title to the said land. In common parlance “possession is 90% ownership.” Is Possession And Ownership The Same? A possession of the land for a very long period is taken up as a sufficient condition for granting ownership and also assigning the title even though the property belonged to another person. It must always be remembered that the possession of the land matures into its ownership, in the course of time by legal orders. It may also be possible that the possession as a right can also be gained under a mutual agreement between the owner and the possessor. There have also been several instances, particularly in remote forsaken villages and towns where possession of land of many persons maybe by usurption as these lands have been abandoned and remained unclaimed for over a long period of time. It can therefore be concluded that the possession is the badge of ownership of the land. Adverse Possession Adverse possession that is continued possession over a period of time is one of the methods of acquiring title to land or property. For the actual owner of the land the title to land is lost by adverse possession being proved by the person even though that person is wrongfully possessing the land. There is no statutory definition of adverse possession. Generally, it can be understood as a possession which is adversed or opposed to ones interest of the real owner of the property. Therefore, mere possession even for a long time without a claim of right does not create adverse possession, as there is absence of intention of using others property adversely, to his own interest therein. In short, adverse possession means hostile possession which is explicitly or implicitly in denial of the title of real owner. Because law of limitation does not concern with the bona fides of the person who has adversely possessed the land the person adversely possessing the land is converted into a valid possessor, provided it is established that the possession of the adverse possessor continues for the full period of 12 years as stipulated in the statute, for whatever maybe the cause. If the continuity in possession is broken, the adverse possessor fails to acquire title under the statute. 12 Years Or 30 Years Of Search? In order to ascertain the validity of the title, it is important to trace the chain of title of the property for the period of 30 years (“Full Search”). There exists another thought in this regard. Some think that tracing out the chain of title for the period of 12 years is sufficient (“Limited Search”). This opinion of theirs is based on the point of limitation period for action for claiming relief against adverse possession is 12 years and they therefore ignore searches beyond that period (i.e. 13 years). However, searches for a period of 30 years benefits the seller/buyer in truly identifying the defects in the title and subsequently correcting or remedying the same. Conclusion In Conclusion, depending on the nature of the transaction, the objective of the parties and the value of the property involved, it is decided whether a Full Search or a Limited Search can be conducted. However, Unlike Full Searches, in a Limited Search, the search relating to the history of the property may be limited to restricted aspects such as recent title history, encumbrances on the property, disputes related to the property etc. – Krutika Jain, Associate Solomon & Co. __________________________________________________________________________________ About Solomon & Co. Solomon & Co., Advocates & Solicitors (Firm) was founded in 1909 and is amongst India’s oldest law-firms. The Firm is a full-service law firm that provides legal service to Indian and international companies and high net-worth individuals on all aspects of Indian law. “Disclaimer” The information contained on this article is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. The application and impact of laws can vary widely based on the specific facts involved. As such, it should not be used as a substitute for consultation with a competent adviser. Before making any decision or taking any action, the reader should always consult a professional adviser relating to
Bombay Hight Court Rules in Favor of Housing Society, Paving Way for Long-Delayed Redevelopment
On 11th September 2024, in a significant ruling, the Bombay High Court has granted relief to Kher Nagar Sukhsadan Co-operative Housing Society Ltd. (“Petitioner“), paving the way for the redevelopment of their dilapidated building, which had been stalled due to objections raised by AA Estates Private Limited (“AA Estates“) and its Resolution Professional (RP) during its Corporate Insolvency Resolution Process (“CIRP”). The court addressed a long-standing dispute involving the redevelopment of a building categorized as “C-1” (unfit for habitation) and affected by the moratorium imposed on AA Estates under the Insolvency and Bankruptcy Code, 2019. Facts The Kher Nagar Sukhsadan Society, located in Bandra East, Mumbai, had entered into a Development Agreement with AA Estates in 2005, granting the latter redevelopment rights over the building. However, despite the initial agreement and a supplemental agreement in 2014, AA Estates failed to make any significant progress. Notices issued by the Municipal Corporation of Greater Bombay in 2017 declared the building as hazardous, and the society members were forced to live in unsafe conditions. After waiting for over a decade and account of AA Estates inaction, the Petitioner terminated the agreement with AA Estates in 2019 and subsequently appointed Tristar Development LLP (“Tristar“) as their new developer. Tristar took steps and obtained various permissions/approvals towards the redevelopment of the Petitioner’s building. During this timelines, AA Estates, which was undergoing CIRP raised objections, claiming the redevelopment rights over the building and citing the moratorium under the IBC. The moratorium on AA Estates was imposed twice. The first moratorium came into effect on 14th November 2019, when the NCLT initiated CIRP against AA Estates. During this period, the Interim Resolution Professional (IRP) informed the Petitioner that no coercive actions could be taken against AA Estates. However, this order was vacated on 12th June 2020 by the NCLT. After this, a second moratorium was imposed on 6th December 2022 when the NCLT reappointed a Resolution Professional for AA Estates. Following the second moratorium, the RP issued letters in April and August 2023, instructing authorities not to process any redevelopment permissions for the Petitioner’s property, claiming that AA Estates had an interest in the project. The Bombay High Court’s findings The court observed that AA Estates had consistently failed to meet its obligations, including redevelopment work, and had no legal ground to continue objecting to the redevelopment. Citing the precedents of Manohar M. Ghatalia & Ors. v. State of Maharashtra[] and Tagore Nagar Shree Ganesh Krupa Cooperative Housing Society Ltd. v. State of Maharashtra[], the court held that the development rights did not form part of the assets of AA Estates under the CIRP. The court also pointed out that no material distinction existed between the present case and the cited precedents. Both cases established that the developer (in both cases, AA Estates) had failed to fulfill its obligations under a redevelopment agreement and therefore could not claim any vested rights in the property or hinder redevelopment. The Court emphasized that the members of the Petitioner society had a fundamental right to safe and habitable housing and could not be deprived of their rights due to the CIRP proceedings of AA Estates. The court found the RP’s letters, which attempted to halt the redevelopment, illegal and inconsistent with the record. The Court directed the MCGM and MHADA to process and grant all pending permissions for the redevelopment within two months, thereby allowing Tristar Development LLP to proceed with the project. The court also formally recognized Tristar as the appointed developer and dismissed any claims or objections raised by AA Estates or its Resolution Professional regarding the redevelopment. Furthermore, the court concluded that the redevelopment rights of the society’s property did not fall within the scope of AA Estates’ assets under the CIRP, and the moratorium did not apply to these rights. Conclusion This judgment brings much-needed relief to the members of the Petitioner Society, who had been living in dilapidated conditions for years. The judgment reinforces the right of housing societies to terminate agreements with developers who fail to fulfil their obligations and seek alternative solutions, even when the developer is undergoing insolvency proceedings. The case is a reminder of the judiciary’s role in balancing the interests of insolvent companies and the fundamental rights of citizens. – Ankita Mishra, Associate, Solomon & Co. About Solomon & Co. Solomon & Co. (Advocates & Solicitors) was founded in 1909 and is amongst India’s oldest law-firms. The Firm is a full-service firm that provides legal service to Indian and international companies and high net-worth individuals on all aspects of Indian law. “Disclaimer” The information contained in this article is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. The application and impact of laws can vary widely based on the specific facts involved. As such, it should not be used as a substitute for consultation with a competent adviser. Before making any decision or taking any action, the reader should always consult a professional adviser relating to the relevant article posting. Copyright © 2024 Solomon & Co., All rights reserved.
Delhi High Court reaffirms principle of minimum interference in arbitral awards
In a recent judgment passed in Union of India v. M/s Parishudh Machines Pvt. Ltd[] the Delhi High Court, reinforced the principle that the findings of an arbitral tribunal, particularly regarding the assessment of evidence, should be respected and upheld unless there is a compelling reason to interfere. The case underscores the limited scope of judicial intervention in arbitral awards, which is a cornerstone of arbitration law aimed at preserving the finality and integrity of the arbitration process. 1. Background The dispute between the Ministry of Railways (“Railways”) and M/s Parishudh Machines Private Limited (“Parishudh”) arose from a contract awarded by the Railways for the supply of a CNC Twin Spindle Chucker machine. The contract stipulated a delivery period of 300 days to the Diesel Locomotive Works in Varanasi, with the deadline later extended twice. After the final extension, the Railways refused further delays and terminated the contract when the delivery was not completed on time. The dispute was referred to arbitration, where the arbitrator ruled in favour of Parishudh, awarding them 70% of the machine’s cost along with interest. Dissatisfied with the arbitral award, the Railways approached the Commercial Court under Section 34 of the Arbitration and Conciliation Act, 1996 (“Act”) seeking to set aside the award. The Commercial Court dismissed their petition, prompting the Railways to file an appeal under Section 37(1)(b) of the Act before the Delhi High Court. 2. High Court’s Observations and Rulings The primary issues before the Delhi High Court were twofold: whether the Arbitral Tribunal’s findings, particularly regarding the evidence, were correct and whether the tribunal was biased in its decision-making. a. Allegations of Bias The Railways argued that the Arbitral Tribunal was biased, primarily because it considered documents submitted by Parishudh during the final stages of the arbitration. The High Court dismissed these allegations, noting that the Tribunal had allowed the submission of additional documents after recognizing their critical importance in resolving the dispute. Importantly, the Tribunal’s decision to accept these documents was well-reasoned, and there was no indication of partiality. The High Court emphasized that allegations of bias must be substantiated with clear evidence, which was absent in the present case. b. Assessment of Evidence and Interpretation of Contractual Terms The Railways contended that Parishudh had delayed the contract’s performance, justifying the termination and negating any liability for damages. They invoked specific contractual clauses that emphasized the importance of timely delivery and provided for liquidated damages in the event of delays. The High Court, however, pointed out that the Tribunal had carefully considered these contractual terms and found that the delays were significantly attributable to the Railways themselves. Factors such as delayed approvals, late site handovers, and the failure to provide necessary components were all found to have contributed to the delay. The High Court reaffirmed that the Arbitral Tribunal is the “master of evidence,” meaning that its evaluation of evidence, if reasonable, should not be re-examined by courts as though on appeal. This principle is critical in arbitration, where the arbitrator’s role as a factfinder is central to the process. The Court further emphasized that judicial intervention under Sections 34 and 37 of the Arbitration Act is limited to instances of patent illegality or cases where the arbitral award is so perverse that it shocks the conscience of the court. In this case, the High Court found no such issues and upheld the arbitral award. The Delhi High Court relied on Supreme Court precedents[] to reiterate that errors in contract interpretation are within the arbitrator’s jurisdiction and should not attract judicial correction unless they constitute gross illegality or irrationality. In reinforcing the principle of minimal judicial interference in arbitral awards, the Court also relied on the recent Supreme Court ruling in Hindustan Construction Co. Ltd. v. NHAI[] wherein it had been held that courts should refrain from interfering with arbitral awards that are well-reasoned and present a plausible view, even if a judge might personally favour a different interpretation. The Court emphasized that the judicial inclination to adopt a “corrective lens” is inappropriate under Sections 34 and 37 of the Act. Errors in contract interpretation are within the arbitrator’s jurisdiction, and unless there is a clear case of patent illegality or perverse reasoning, the arbitrator’s decision must be respected and left undisturbed. Conclusion The judgment serves as a robust affirmation of the principle of minimal judicial interference in arbitral awards. By respecting the arbitrator’s role as the master of evidence and limiting its review to cases of evident illegality, the Court has reinforced the autonomy of the arbitration process. This judgment not only upholds the sanctity of arbitration but also sends a clear message to parties that the finality of arbitral awards will be maintained, barring exceptional circumstances and that judicial interference is only warranted in cases of blatant errors or procedural unfairness, ensuring that arbitration remains an effective and efficient method of resolving commercial disputes. – Ankita Mishra, Associate, Solomon & Co. About Solomon & Co. Solomon & Co. (Advocates & Solicitors) was founded in 1909 and is amongst India’s oldest law-firms. The Firm is a full-service firm that provides legal service to Indian and international companies and high net-worth individuals on all aspects of Indian law. “Disclaimer” The information contained in this article is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. The application and impact of laws can vary widely based on the specific facts involved. As such, it should not be used as a substitute for consultation with a competent adviser. Before making any decision or taking any action, the reader should always consult a professional adviser relating to the relevant article posting. Copyright © 2024 Solomon & Co., All rights reserved.
Real Implementation of Prevention of Workplace Sexual Harassment
The Constitution of India enshrines fundamental rights to equality and life under Articles 14, 15, and 21, gender discrimination in the form of sexual harassment at the workplace is a direct violation of these rights. Such harassment not only fosters an unsafe and hostile work environment for women but also severely hinders their ability to succeed in today’s competitive world. Beyond impairing their professional performance, it has far-reaching consequences on their social and economic development, often leading to physical and emotional distress. Sexual harassment of women is nowhere near a new concept and it’s a tale as old as time. However, with globalization and the continued influx of women in the mainstream workforce of India, sexual harassment at workplace has become a latest disquisition. Since 2013 and the advent of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“Act”), enacted by the Ministry of Women and Child Development, whose roots lie in the Vishakha Guidelines of 1997, formulated after the Bhanwari Devi gang rape case in Rajasthan, multiple legislations, related committees as well as landmark judgements have come into play. Following the POSH Act, the government introduced the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Rules, 2013 under the Act. Additionally, the Criminal Law (Amendment) Act, 2013 was passed in the same year, criminalizing offenses such as sexual harassment, stalking, and voyeurism. The primary aim of the POSH Act is to prevent and protect women from sexual harassment in the workplace and to provide an effective system for redressing such complaints. While the statute is intended to offer every woman—regardless of age or employment status—a safe, secure, and dignified working environment, free from all forms of harassment, its successful implementation continues to be a challenge. The Vishakha Guidelines have significantly raised organizational awareness regarding workplace sexual harassment, particularly in the formal sector, by formalizing compliance requirements. While these guidelines have been instrumental in setting standards and making companies more conscious of their responsibilities, there is still considerable room for improvement. The guidelines have facilitated a more structured approach to addressing harassment within corporate environments; however, they fall short when it comes to the informal sector and domestic workers, who remain largely unprotected. In May 2023, the Supreme Court of India in the landmark judgement of Aureliano Fernandes Vs. State of Goa and Others (Civil Appeal No. 2482 of 2014), acknowledged that even after a decade of the promulgation of the POSH Act, there are ‘serious lapses in its implementation’. To remedy the situation, the Supreme Court issued various directions for effective implementation of the POSH Act. The Supreme Court observed that however salutary the enactment of the POSH Act may be, it will never succeed in providing dignity and respect that women deserve at the workplace unless there is strict adherence to the enforcement regime and a proactive approach by all State and non-State actors. Accordingly, in order to “fulfil the promise that the POSH Act holds out to working women all over the country” it gave a list of fresh directions. A major limitation of the POSH Act is in the ambiguous definitions of crucial terms such as “workplace,” “sexual harassment,” and “employee.” This lack of clarity results in inconsistent interpretations, making it difficult to apply the Act’s provisions uniformly across various organizations and industries. Despite progress, there are critical gaps in implementation and enforcement of the guidelines and legislations based of it. The actual benefits often accrue more to businesses than to victims, as is highlighted by the case of Bhanwari Devi, where the intended protections did not fully reach the victim, while her case is what is claimed to have brought about the Landmark Judgement, so to say. The prevailing outlook in the Indian society places the burden of reporting and the potential backlash on the complainant, discouraging many from coming forward. Additionally, power dynamics within organizations frequently suppress minor complaints, with many issues being overlooked or dismissed. The Local Committees (LCs) with inadequate support systems further exacerbates the problem. Needless to mention, a thorough review is crucial to refine and clarify definitions within the Act. Expanding the definition of “workplace” to include remote work, off-site locations, and informal sectors would extend the Act’s coverage. Additionally, providing a more detailed explanation of what constitutes sexual harassment and incorporating other forms of harassment and discrimination would create a more comprehensive protection framework. Clear definitions ensure consistent and uniform application of the Act’s requirements across different sectors and work environments. The Supreme Court’s latest directions from the 2023 judgement should also help in shedding some light on the better implementation of the Act by organizations. This clarity would aid employers, workers, and law enforcement in effectively implementing and enforcing the Act. By broadening its scope, the Act would offer robust protection against various forms of harassment, irrespective of workplace or employment level, fostering a more equitable and inclusive work environment. This evolution of the POSH Act would result in a more effective framework, addressing a wider range of workplace issues and promoting a safer, more respectful environment for all employees. In conclusion, harassment and crimes against women are issues that require first a change in societal approach and then a strong backing by the law, and for the movement to truly advance, organizations must focus on robust internal policies, proactive measures, and genuine support for all employees, extending beyond mere compliance with existing laws. –Manasvini, Associate, Solomon & Co. About Solomon & Co. Solomon & Co. (Advocates & Solicitors) was founded in 1909 and is amongst India’s oldest law-firms. The Firm is a full-service firm that provides legal service to Indian and international companies and high net-worth individuals on all aspects of Indian law. “Disclaimer” The information contained in this article is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. The application and impact of laws can vary widely based on the specific facts
