22Light v OSEPL Pvt. Ltd.: An able defense to appointment of an arbitrator?
1. Introduction 2. Facts of the Matter 3. Was there an Arbitrable Dispute? 4. Scope of Judicial Review of Claims 5. Why is such prima facie examination necessary? 6. Conclusion – Nikhilesh Koundinya, 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 © 2020 Solomon & Co., All rights reserved.
Overview of the Mediation Bill, 2021
Introduction In a world where disputes are an inevitable facet of human interaction, governments and legal systems are increasingly turning to alternative methods of conflict resolution to alleviate the burden on courts and promote more efficient and harmonious solutions. One such significant stride towards streamlining conflict resolution mechanisms is through the Mediation Bill, 2021 (“Bill”), which has made its mark in the legislative landscape of India. The journey of the Bill through the review process of the Standing Committee, the Rajya Sabha, and the Lok Sabha reflects a meticulous approach to institutionalise the mediation process within the country’s legal framework. This approach specifically focuses on institutional mediation to resolve disputes, encourage community mediation, and make online mediation an acceptable and cost-effective process. Various provisions such as section 89 of the Code of Civil Procedure, 1908, section 28 of the Indian Contract Act, 1872, and section 442 of the Companies Act, 2013 provide for mediation as a viable option for resolving disputes amicably. However, there was a vacuum prior to the introduction of the Bill, as no legislation provided for the procedure and related intricacies of this mechanism. Therefore, there was a need for a stand-alone law to remove the inconsistencies between the various pieces of existing legislation. The key features of the Bill are abridged below: Applicability of the Bill The provisions of the Bill apply to the mediation proceedings conducted in India where: Non-applicability of the Bill The Bill states that certain disputes should not be referred for mediation, such as: Pre-litigation mediation The Bill introduces a concept of pre-litigation mediation wherein the parties may voluntarily attempt to resolve the disputes before filing any suit and the same can be carried out irrespective of the existence of any mediation agreement. The procedure for court-annexed mediation shall be determined by the Supreme Court or the High Court wherein the Supreme Court or the High Court will constitute a mediation committee that will maintain a panel of mediators for conducting mediations. The Bill also permits online mediation, provided that both parties agree in writing to mediate disputes online. The parties must also only use secure computer networks, or video/audio conferencing when conducting online mediation. Appointment of mediator A person of any nationality may be appointed as a mediator provided that he possesses such qualifications, experience and accreditation as may be prescribed. The parties can either mutually agree upon a mediator and the procedure of its appointment or in cases of a dispute, a mediator shall be appointed by a mediation service provider from the panel of mediators within seven (7) days of such application. To ensure a bias-free and fair mediation process, a mediator is required to be a neutral third party and should be impartial in its conduct. The Bill recognizes and enforces the same by obligating the mediators to disclose any potential circumstance that may constitute a conflict of interest or is likely to give rise to justifiable doubts as to the independence or impartiality of the mediator in the conduct of the mediation before the commencement of the mediation process itself. Interim relief prior to mediation A party may file a lawsuit or other appropriate legal action before a court or tribunal with appropriate jurisdiction to request immediate interim relief prior to the start of, or throughout, mediation proceedings under the Bill. In addition, the Bill gives courts and tribunals the authority to refer parties to mediation at any point during the legal process. Withdrawal from mediation Either party may withdraw from mediation at any time after completion of the first two (2) mediation sessions. In case, any party fails to attend the first two mediation sessions without any reasonable cause which results in the failure of mediation, the court, in subsequent litigation proceedings on the same subject matter between the parties, may impose necessary costs on the party who had failed to attend the mediation sessions. Time limit for completion of mediation Mediation shall be completed within a period of one twenty (120) days from the date fixed for the first appearance before the mediator which may be extended for a period as agreed by the parties, but not exceeding sixty (60) days. Mediation settlement agreement It is a written agreement signed by the parties to settle their disputes which is authenticated by the mediator. The parties herein can also settle disputes that were not part of the scope of mediation prior to the commencement of the mediation proceedings. The mediation settlement agreement has the same binding effect and enforceability as a Court’s judgment or a decree, challengeable only on the grounds of fraud, corruption, impersonation or relating to any dispute not fit for mediation. Confidentiality of mediation proceedings All parties are required to keep the following aspects related to mediation confidential: Mediation Council of India The Bill also talks about establishing a Mediation Council of India (“Council”) to promote and regulate both domestic as well as international mediation in India. The members of the Council are to be selected from amongst the Supreme Court or the High Court judges, eminent persons and academicians in the field of mediation, and key government officials. The Bill also lays down the roles, responsibilities, and duties of the Council. Analysis The Bill was further amended in the year 2023 based on the suggestions and recommendations of the Standing Committee. Few suggestions have been incorporated; however, a plethora of shortcomings persist and warrant careful consideration and reflection. Some of such lacunas are elucidated herein: Firstly, in pre-litigation mediation, the parties have the option to seek interim relief from a court or a tribunal in “Exceptional Circumstances” under section 8 of the Bill. However, there lies ambiguity surrounding what constitutes an exceptional circumstance as there exists no qualifying criteria for the same. This may lead to multiple court interventions along with delay which fails to fulfil the object of the Bill. Further, there is no appeal mechanism available against an order passed under the relevant section. Furthermore, in the pursuit of
Mediation Bill 2023: Paving the Way for Effortless Dispute Resolution
Introduction With rise in rapid industrialization and a robust boost in commerce, one cannot obliviate a pivotal aspect of the commerce industry, being disputes that may arise between the parties under the contractual agreement. The escalation in disputes arising from contractual agreements, coupled with the arduous nature of litigation, has compelled parties to explore alternative avenues for dispute resolution. This has led to the adoption of Alternate Dispute Resolution (ADR) mechanisms, such as Arbitration, Conciliation, and Mediation. While Arbitration being a preferred mode of mechanism due to a streamlined process and resolving disputes in a time framed manner, Conciliation was preferred when parties were seeking resolution of disputes through an expert who would aim to help the parties to reach a mutually acceptable settlement. However, Mediation was an unexplored avenue due to lack of a clear legislative framework and inadequate infrastructure. With an exponential increase in resolving the disputes, parties considered resolving in the conventional way i.e. requiring them to seek redress through the appropriate courts of law. However, the backlog of cases and lengthy process of trials hinders the justice dispensation within time. As a matter of fact, the Hon’ble Chief Justice of India N. V. Ramana (Retd.) emphasized the formation of mediation centres as the alternate dispute resolution mechanism, as it can reduce the pendency of cases and it further allows the litigants a degree of control over the dispute resolution process. With an intention to increase the settlement of disputes outside the Court and encourage and facilitate mediation, the Hon’ble Supreme Court formed a panel in 2020 headed by Shri Niranjan Bhat to prepare a draft legislation on Mediation. After deliberations and recommendations finally, the Lok Sabha passed the Mediation Bill 2023 on 7th August, 2023, right after its approval by the Rajya Sabha. The bill, in an attempt to encourage settlement and resolving disputes by way of mediation, introduces innovative features aimed at addressing the shortcomings of the existing legal framework. People are privy to the concept of out of Court settlement, but its efficacy has been hindered by a lack of comprehensive rules and measures, as well as the absence of an autonomous governing body and the Mediation Bill aims to void the said gaps. Section 89 of the Code of Civil Procedure, 1908 vests a discretion upon the Courts to direct the parties to attempt settlement especially in commercial disputes. But the Section is a discretionary power vested upon Courts and not a mandatory provision and hence, failed to meet the object of settlement through courts. In 2018, to appeal the parties to the commercial contract and facilitate settlement before initiation of any commercial suit, the Parliament on 10th August 2018, passed a bill by inserting Section 12A to the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015. The 2018 amendment for the first time, tossed the concept of as “Pre-institution mediation and settlement”, routing parties to first approach the mediation Centre and attempt to settle the matter and then litigate after failure to succeed in mediation. However, certain gaps and deficiencies in the Act were not thoroughly addressed during discussions and deliberations in the Lok Sabha. In an attempt to stage India at the centre point where disputes can be settled with an effective and backed up piece of legislation, the Mediation Bill hammers resolving disputes of both domestic as well as international nature and transactions which is the need of the growing times. The mediator’s role encompasses facilitating party autonomy, fostering constructive dialogues, and ensuring active participation by all parties involved, ultimately culminating in a well-negotiated resolution. Mediation Bill: A boon to the Commercial disputes? The Mediation Bill has several features which are likely to attract more parties towards mediation as against the Court preferred modes of resolving disputes. Unbiassed Mediator: To curb the possibility of any kind of bias in any case that may arise during the conduct of mediation proceedings, the Mediation Bill under Section 12 (1), mandates filing of disclosure before initiation of mediation proceedings by the assigned/elected mediator. This will help eliminate any justifiable doubts that may that doubt his independence or impartiality while conducting mediation. Mediated Settlement Agreement a binding contract: After effective mediation, parties shall reduce in writing under a settlement agreement termed as “Mediated settlement agreement” all terms and conditions duly authenticated by the Mediator. This formalized document serves as a binding contract, outlining the rights, responsibilities, and obligations of each party based on their consensus during the mediation process and shall be enforceable in accordance with the provisions of the Code of Civil Procedure. Timebound Process along with option to Withdraw if mediation likely to fail: The bill aims to reduce the time limit under which the parties may complete the mediation process, requiring them to finish the process in a period of 180 days which may further be extending by another 180 days and not beyond that. The time bound process shall compel the mediation centers or mediator to resolve the disputes effectively and in a circumscribed time period, without any undue delay. Further, after the first two sessions, in case the settlement seems to hit a roadblock, any party may voluntarily withdraw from the mediation without having to wait for the 180 days’ timeframe to get over. This provision empowers the parties by allowing them to assess the viability of the settlement and make an informed decision regarding their continued participation in the mediation proceedings. Privilege against disclosure: In an attempt to encourage parties to settle the dispute that has arisen, the acts safeguards the parties, by way of a confidentiality, under which, any participant, mediator, expert and/or advisors cannot be compelled to act as a witness or disclose any admission that if so, is required by any tribunal or Court of law or divulge any valuable information that might have been discussed during the mediation process. This provision, therefore, serves as a robust mechanism to uphold the sanctity of discussions and information shared during mediation,
Unauthorized Possession and Mesne Profits: Legal Implications and Analysis
1. Introduction: 2. Genesis of Mesne Profits: 3. Unauthorized Possession in Mesne Profits: 4. Concluding Reflections: Shruti Mehta, 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 © 2020 Solomon & Co., All rights reserved.
Reverse CIRP: Breathing New Life into Distressed Assets
1. Introduction: 2. Overview of Reverse CIRP: This article proceeds to discuss the process of Reverse CIRP, its defects, and how an ex-ante regulatory regime would work in its betterment. The Deficiencies in the Present Regime: The need for an ex-ante Approach: Conclusion: Nishka Shah, 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 © 2020 Solomon & Co., All rights reserved.
CPC and Trademarks Act: Demystifying Jurisdiction Clauses
Introduction Mischief Rule of Interpretation Through this interpretative lens, it becomes apparent that the jurisdiction clauses in these acts are plaintiff-centric. They aim to address the inconvenience and costs faced by injured parties, encouraging them to seek relief more conveniently and efficiently, thereby promoting access to justice. Notably, the geographical location of the defendants and the place where the cause of action arises are irrelevant in such cases. Sections 134(2) and 62(2) do not make any reference to the location of the cause of action or the defendants’ whereabouts. However, challenges such as forum shopping and inconsistencies in the interpretation and application of trademark laws persist. These challenges underscore the need for continued review and refinement of jurisdictional provisions to ensure fairness and consistency in the adjudication of trademark disputes. Indian Performing Right Society Ltd. v. Sanjay Dalia, Burger King Corporation v. Techchand Shewakramani & Ors Manugraph India Ltd v. Simarq Technologies Pvt Ltd & Ors Conclusion The divergent interpretations of jurisdictional provisions by the Bombay and Delhi High Courts highlight the ongoing judicial effort to balance convenience for plaintiffs with fairness to defendants in intellectual property disputes. The rulings underscore the need for clarity and consistency in applying these legal principles. As seen in the case of Manugraph India Ltd v. Simarq Technologies Pvt Ltd & Ors, the Bombay High Court allowed jurisdiction based on the location of the plaintiff’s principal place of business, emphasizing the intent to prevent misuse of remote subordinate offices. In contrast, the Delhi High Court’s decision in the case of Ultra Home Construction Pvt. Ltd. v. Purushottam Kumar Chaubey & Ors focused on the cause of action, requiring suits to be filed where it arose. Thesediffering approaches reflect the complex nature of jurisdictional issues and the necessity for continuous legal refinement. Moving forward, it is imperative for the judiciary to harmonize these interpretations to ensure equitable access to justice and efficient resolution of intellectual property disputes, fostering a legal environment that supports both plaintiffs and defendants. Nishka Shah, 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.
Section 9 (2) of the Arbitration & Conciliation Act, 1996: A voluntary / mandatory provision?
Introduction Conclusion Nikhilesh Koundinya, 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 © 2020 Solomon & Co., All rights reserved.
Early Neutral Evaluation – A Much-Needed Form Of Alternate Dispute Resolution In India
TABLE OF CONTENTS Abstract 2 List of Abbreviations 3 List of Statutes 4 List of Cases 5 Statement of Problem 6 Research Objectives 6 Research Questions 6 Scope and Limitation of the Research 6 Research Methodology 7 Literature Review 7-10 Scheme of Chapters 10-11 Chapter 1: Introduction 12-15 Chapter II: What is ENE? 16-19 Chapter III: Comparative Analysis between India, U.S. and U.K. 20-25 Chapter IV. Way Forward and Proposed Reforms 26-27 Chapter V: Conclusion 28 Bibliography 29-32 ABSTRACT The National Judicial Data Grid has as on 27th April 2024 revealed a staggering number of more than Four Crore pending civil and criminal cases in India, showcasing the immense strain on the country’s judicial system. Amidst this, Alternate Dispute Resolution has emerged as a prominent method that encourages and ensures early resolution of disputes. A key reason behind the widespread adoption of Alternate Dispute Resolution is its ability to offer parties a faster and more cost – effective way to resolve disputes compared to traditional litigation. Alternate Dispute Resolution also provides more flexibility and control to the parties involved in finding mutually agreeable solutions. While the traditional ADR methods are arbitration, mediation and conciliation are well known and legislatively recognized there are other forms of ADR slowly permeating in the judicial systems around the world such as Dispute Resolution Boards, Mini-Trials, Ombudsman, Expert Determination etc. This paper studies one of the emerging form of dispute resolution, i.e., Early Neutral Evaluation (“ENE”). ENE is a voluntary procedure used in the early stages of the dispute i.e., begins; before the litigation process begins; however, it can also be considered by the parties after the litigation process is initiated. During the ENE process a neutral party reviews the issues and facts as presented by the parties and provides a frank assessment of some or all aspects of the case. The paper studies the growth of ENE and its journey from inception to being one of the most relied upon forms of dispute resolution in U.S.A. and U.K. The paper goes on to address the need for introducing ENE in India and further explains as to how the same is already incorporated implicitly under the Civil Procedure Code, 1908. The paper concludes with how ENE can help in tackling pendency of cases in India and how the said technique would assist in streamlining multiple matters. LIST OF ABBREVIATIONS ADR Alternative Dispute Resolution U.S. United States of America U.K. United Kingdom NJDG National Judicial Data Grid DBs Dispute Boards ODR Online Dispute Resolution ENE Early Neutral Evaluation v. Versus Ors. Others Anr. Another LIST OF STATUTES LIST OF CASES While the U.S. and U.K. legal landscape has adopted ENE in its laws to resolve disputes and differences between the parties, India though having recognized ENE has not taken any action to include the said method within its legislative landscape. The thesis makes a novel attempt at describing what ENE is, how is it different from other forms of dispute resolution, some of the characteristics of ENE which make it a much-needed method in the dispute resolution landscape of India and the ways in which the same may be included in the legislative landscape of India going forward. The main objectives of the present thesis are as under: The present thesis deals with the concept and working of ENE. The researcher has confined his study to the understanding of ENE and examining its applicability to the Indian judicial landscape. The researcher has further limited his research to three key jurisdictions, India, U.K. and U.S.A. Research Techniques: While conducting the research, the thesis is firmly doctrinal in its methodology as it entails an analysis of legal materials that support the research and analysis, the relevant legal texts to interpret what law exists regarding the particular context. The thesis also incorporates a comparative approach to compare legal rules from different jurisdictions to find the best solutions. The comparative methods also allow for the identification of differences and similarities in legal concepts. Collection of Data It includes the analysis of various statutes, judicial decisions and study through reasoning by referring to articles, books, journals, case laws, websites and magazines. The primary source of data collection used by the researcher is the judgments, legislations and reports. The secondary source of data collection used by the researcher is articles from reliable sources like SSRN, Kluwer arbitration, books, journals, newspapers, literature information, articles, reports, web sources and authentic dictionaries. It includes analysis of the statues and studies through reasoning by referring to articles, journals, case laws and websites. For this thesis, the literature review explores the meaning of ENE through various papers and looks at the use of ENE in foreign jurisdictions. For this thesis, the researcher has relied on the Bluebook (20th edition) style of citation uniformly throughout. The outcome of the Literature Review: The review of literature has been extremely helpful to understand the method of ENE and its functioning. Further, the review has helped to understand the benefits of adopting the method of ENE in the legislative landscape of India which will be extremely useful in proposing methods and reforms on inclusion of ENE to India. The present thesis is divided into the following headings: Chapter- I Introduction The introduction chapter gives a brief introduction to the topic of the thesis. It also includes the objective, scope, limitations, significance, utility, research questions and hypothesis. It also deals with the methodology adopted to carry out the research. Chapter- II What is ENE? The said chapter introduces the concept of ENE and iterates on how the same was discovered. It also provides a brief description on where the concept was promulgated in the beginning and its results. Chapter- III Comparative Analysis between India, U.S. and U.K. The said chapter discusses the use of ENE in U.S. and U.K. and compares the same with India. It further looks at the laws of U.S. and U.K. as observes as to how the said countries apply ENE to reduce the dependency on courts
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,
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.
