Arbitration Law- Landmark cases of 2019- 2020

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Arbitration Act, 1996- Landmark cases of 2019- 2020

A three member bench of the Hon’ble Supreme Court comprising of Hon’ble Mr. Justice R.F. Nariman, Hon’ble Mr. Justice Surya Kant and Hon’ble Mr. Justice V. Ramasubramanium, struck down Section 87 of the Arbitration & Conciliation Act, 1996 (Arbitration Act) as being “manifestly arbitrary” in terms of Article 14 of the Constitution of India.
The Bench observed that Section 87 of the Arbitration Act is against the intent of the Arbitration and Conciliation (Amendment) Act, 2015 and further nullifies the ratio laid down in the recent judgment of Board of Control for Cricket in India Vs. Kochi Cricket Pvt. Ltd., wherein it was observed that the intent and purport of Section 87 is contrary to the overall scheme of the Arbitration Act and the 2015 Amendment.
Accordingly, Section 26 of the 2015 Amendment was revived by the Supreme Court and the decision rendered in Board of Control for Cricket in India Vs. Kochi Cricket Pvt. Ltd. (decided on 15.03.2018) continues to apply as the guiding principle for determining the applicability of the 2015 Amendment.

The Hon’ble Supreme Court through a two-judge bench struck down the clause that required a 10 per cent pre-deposit of the claim amount prior to initiating arbitration proceedings.
In this case, the State Board had issued a notice inviting tender for works related to augmentation of water supply, sewerage schemed, pumping stations, etc. The arbitration clause of the contract required the petitioner herein to furnish a “deposit at call” for 10 per cent of the amount claimed in the name of the arbitrator till the announcement of the award.
The bench observed that arbitration shall be encouraged because of high pendency of cases and costs of litigation and that a deposit of 10 per cent of claim would be greater than any court fee and would deter a party from arbitration. The Court held that the particular clause is violative of Article 14 as it would discourage a party from invoking arbitration proceedings amidst a dispute.

The Supreme Court of India, in this case, dealt with arbitral appointments under section 11 of the Arbitration and Conciliation Act 1996, vis-a-vis section 3G(5) of the National Highways Act 1956, which provides for the appointment of an arbitrator by the central government in special situations.
The Supreme Court held that the Highways Act, being a special law, would have an overriding effect on a general law such as the Arbitration Act.
The Supreme Court relied on the ratio in Gujarat Urja Vikash Nigam Ltd v Essar Power Limited (2008) 4 SCC 755, wherein statutory provisions of the Electricity Act 2003 adjudicating the dispute between the licensees and the generating companies were held to be a special enactment and Arbitration Act of 1996, Section 11 was not made available to the parties.

The Supreme Court while hearing an application under Section 11(6) read with Section 11 (12) (a) of the Arbitration Act held that a person who has an interest in the outcome of a dispute must not have the power to appoint a sole arbitrator.
A contract was entered into between a consortium of applicants and the respondent, whereby the contract contained an elaborate arbitration (dispute resolution) clause, which provided that i)any dispute or difference shall be referred to arbitration before sole arbitrator appointed by the Chief Managing Director of the Respondent, & ii) such appointment has to be within 30 days from receipt of request for arbitration. After dispute arose between the parties, the applicant called upon the CMD of Respondent to appoint a sole arbitrator, who did so after the period of 30 days was over.
The applicant contested the same for the delay in appointment and also for the requirement of an independent and impartial arbitrator, for which application under Section 11(6) was moved.
The court thus held that a person who is ineligible to act as an arbitrator cannot also appoint an arbitrator. Secondly, the Court has the power to intervene under Section 11 unless the appointment on the face of it is valid.

The parties entered into a contract for conduct of certain exhibitions of the respondent in India, whereby the petitioner was required to act as the local partner of the respondent. Due to material breach of the terms of contract by the petitioner, the respondent exercised its right under the termination clause of the contract and issued a notice of termination to the petitioner.
The petitioner disputed the validity of the notice of termination issued by the respondent, alleging that it was improperly issued, and approached the High Court of Delhi under Section 9 of the Arbitration Act to seek a two-fold remedy by way of interim measures: (i) quashing of the notice of termination issued by respondent; (ii) ex-parte ad interim order restraining the respondent from giving effect to the notice of termination.
The Hon’ble High Court of Delhi held that specific performance of a determinable contract cannot be enforced because of the specific bar under Section 14(d) of the Specific Relief Act, 1963. It was concluded that the Court cannot exercise interference under Section 9 of the Arbitration Act to grant an injunction against operation of termination, or the enforcement of the terminated agreement.

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