Some landmark cases in arbitration law in India have drastically altered the scope and understanding of the arbitration process in the country.
Indian legal system that is primarily built upon the colonial common law system is often criticized for its rigorous formalities, complexities, and inordinate delays in the justice delivery system.
However, some of these landmark cases in arbitration law suggest otherwise.
These decisions show that on occasions, courts do take seriously their obligation to facilitate such modes of dispute settlements that fulfill the fundamental right to “speedy trial” as being implicit in article 21 of the Indian Constitution (Hussainara Khatoon v the State of Bihar, AIR 1979 SC 1360).
Landmark Cases in Arbitration Law
Following are some of the landmark and impressive judgments delivered by the Indian Courts on Arbitration law.
Salem Advocates Bar Association 2005 (S.89 CPC)
Salem Advocates Bar Association v Union of India, (AIR 2005 SC 3353) is a leading case that redefined the contours of civil litigation in India in a quite meaningful way.
In addition to deliberating on various provisions of the Civil Procedure Code 1909, this case also delved into the various facets of Arbitration.
The court held that the Arbitration and Conciliation Acts of 1996 and 1987 do not contemplate a situation where the Court asks the parties to choose any one of the ADR mechanisms, namely, arbitration, conciliation, or Lok Adalat.
These Acts, thus, are applicable only from the stage after the reference is made under S.89 of the Civil Procedure Code 1909 (CPC).
It was held further that in view of the right to a speedy trial being implicit in A.21 of the Constitution, and in order to provide fair, speedy, and inexpensive justice to the litigating public, the Supreme Court has recommended that High Courts adopt, with or without modification, the model Civil Procedure Alternative Dispute Resolution and Mediation Rules framed by the Law Commission of India.
And the rules so framed by the High Courts are to supplement the rules framed under the Family Court Act, 1984.
KK Modi v KN Modi 1998 (Expert Determination)
The highlights of the KK Modi v KN Modi, (AIR 1998 SC 1297) include-
An expert’s determination is not enforceable like an arbitral award. Nor it can be challenged in a court of law.
Expert determination is the referral of a dispute to an independent third party, who uses her expertise to resolve a dispute.
Such determination is helpful for determining valuation, intellectual property, or accounting disputes. The expert is not required to give reasons for her determination.
To look whether the agreement between parties contemplates an arbitration or expert determination, one has to examine the true intent and purpose of the agreement. The terminology “arbitrator” or “arbitration” is persuasive, but not always conclusive.
Grid Corporation of Orissa v Indian Change Chrome Ltd 1998 (Arbitration under other Statutes)
In the Grid Corporation of Orissa v Indian Change Chrome Ltd., (AIR 1998 Ori 101), the court held that there are a large number of Central and State Acts, which specifically provide for arbitration in respect of disputes arising out of matters covered by those enactments.
Instances of such enactments are the Electricity Act, 1910 and the Electricity (Supply) Act, 1948.
Since such arbitration would also be governed by the 1996 Act, the provision for statutory arbitration in such legislation is deemed to be an arbitration agreement.
Union of India v East Coast Boat Builders and Engineers Ltd 1999 (Domestic and International Arbitration)
The court in Union of India v East Coast Boat Builders and Engineers Ltd. (AIR 1999 Del 44), held that the Arbitration Act of 1996 seeks to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and to define the law relating to conciliation, taking into account the UNCITRAL Model Law and Rules.
The Model Law and Rules, however, do not become part of the 1996 Act, so as to become an aid to construe the provisions of the 1996 Act.
P. Anand Gajapathi Raj v PVG Raju, 2000 (Reference to Arbitration)
In P. Anand Gajapathi Raj v PVG Raju, (AIR 2000 SC 1886), the court held that under the 1996 Arbitration Act, there is no provision for reference to arbitration by the intervention of the Court.
S.5 of the 1996 Act limits the role of the judiciary in matters of arbitration, which is in consonance with the object of the Act, to encourage expeditious and less expensive resolution of disputes with minimum interference of the Court.
Firm Ashok Traders v Gurumukh Das Saluja 2004 (Arbitration Agreement)
The highlights of the Firm Ashok Traders v. Gurumukh Das Saluja, (2004) 3 SCC 155, include-
That the existence of an arbitration agreement is a condition precedent for the exercise of power to appoint an arbitrator under S.11 of the 1996 Act.
The issue of the existence and validity of the “arbitration agreement” is altogether different from the substantive contract in which it is embedded.
That the arbitration agreement survives the annulment of the main contract since it is separable from the other clauses of the contract. The arbitration clause constitutes an agreement by itself.
Haryana Telecom Ltd. v Sterlite Industries (India) Ltd. 1999
In Haryana Telecom Ltd. v Sterlite Industries (India) Ltd., (AIR 1999 SC 35 2354), the court held that the power to order winding up of a company is conferred exclusively upon the Company Court by the Companies Act.
As the arbitrator has no jurisdiction to wind up a company, the Court cannot make a reference to arbitration under S.8 of the Arbitration Act 1996.
Similarly, in Chiranjilal Shrilal Goenka v Jasjit Singh, (1993) 2 SCC 507, the court held that since the judgment in the probate suit under the Indian Succession Act is a judgment in rem, such a question cannot be referred to arbitration.
P Anand Gajapathi Raju v PVG Raju, 2000 (S.8 Application Time)
The court in P Anand Gajapathi Raju v PVG Raju, (AIR 2000 SC 1886), held that-
An application under S.8 of the 1996 Act can be filed in the same suit or as an independent application before the same Court.
Ordinarily, an application under S.8 of the 1996 Act has to be filed before filing the written statement in the suit concerned.
But when the defendant, even after filing the written statement, applies for reference to arbitration and the plaintiff raises no objection, the Court can refer the dispute to arbitration.
The arbitration agreement need not be in existence before the action is brought in Court, but can be brought into existence while the action is pending.
Once the matter is referred to arbitration, proceedings in the civil suit stand disposed of. The Court to which the party shall have recourse to challenge the award would be a Court as defined in S.2(e) of the Act and not the Court to which an application under S.8 is made.
Tamil Nadu Electricity Board v Sumathi, 2000
In Tamil Nadu, Electricity Board v Sumathi, (AIR 2000 SC 1603), the court held that a High Court, in the exercise of its writ jurisdiction, has no power to refer the matter to an arbitrator and to pass a decree thereon on the award being submitted before it.
Sundaram Finance Ltd. v NEPC India Ltd, 1999 (Interim Orders)
In Sundaram Finance Ltd. v NEPC India Ltd, (AIR 1999 SC 565), the Court is empowered under S.9 of the Arbitration Act 1996 to pass interim orders, even before the commencement of arbitration proceedings. Such interim orders can precede the issuance of a notice invoking the arbitration clause.
SBP and Co. v Patel Engineering Ltd., 2005 (HC Power to Appoint Arbitrator)
SBP and Co. v Patel Engineering Ltd., 2005 (3) Arb LR 285 (SC), is a landmark case where the court deliberated on so many issues pertaining to the Arbitration Act of 1996.
The court held that once a matter reaches arbitration, the High Court would not interfere with orders passed by the arbitrator or the arbitral tribunal during the course of arbitration proceedings. The parties are permitted to approach the Court only under S.37 or under S.34 of the 1996 Act.
It held further that the power of the Chief Justice under S.11 of the 1996 Act to appoint an arbitral tribunal is a judicial power.
Since adjudication is involved in constituting an arbitral tribunal, it is a judicial order. The Chief Justice or the person designated by her is bound to decide-
- Whether she has jurisdiction;
- Whether there is an arbitration agreement;
- Whether the applicant is a party to the arbitration agreement;
- Whether the conditions for the exercise of power have been fulfilled; and
- Where an arbitrator is to be appointed, the fitness of the person to be appointed.
Furthermore, that the process, being adjudicatory in nature, restricts the power of the Chief Justice to designate, by excluding non-judicial institutions or a non-judicial authority, from performing such a function.
The court also held that proper notice must be issued to the non-applicant to give her an opportunity to be heard before appointing an arbitrator under S.11 of the 1996 Act.
With regards to challenging the decision of the Chief Justice, the court held that no appeal lies against the decision of the Chief Justice of India or her designate while entertaining an application under S.11(6) of the 1996 Act, and such a decision is final.
It is, however, open to a party to challenge the decision of the Chief Justice of a High Court or her designate by way of A.136 of the Constitution.
MCD v Jagan Nath Ashok Kumar, 1987
In MCD v Jagan Nath Ashok Kumar, (1987) 4 SCC 497, the court held that the arbitrator is the sole judge of the quality and quantity of evidence.
And that it will not be for the Court to re-appreciate the evidence before the arbitrator, even if there is a possibility that on the same evidence, the Court may arrive at a different conclusion than the one arrived at by the arbitrator.
Similarly, if a question of law is referred to the arbitrator, and she arrives at a conclusion, it is not open to challenge the award on the ground then an alternative view of the law is possible. (Alopi Parshad & Sons Ltd. v Union of India, (1960) 2 SCR 793)
Krishna Bhagya Jala Nigam Ltd. v G Harish Chandra Reddy, 2007
In Krishna Bhagya Jala Nigam Ltd. v G Harish Chandra Reddy, (2007) 2 SCC 720), the court ruled that where a party consented to arbitration by the arbitral tribunal as per the arbitration clause and participated in arbitral proceedings, it cannot later take the plea that there was no arbitration clause.
The principle of acquiescence, however, is inapplicable where an arbitrator unilaterally enlarges her power to arbitrate and assumes jurisdiction on matters not before her.
Union of India v Popular Constructions, 2001
In Union of India v Popular Constructions, (2001) 8 SCC 470, the court held that the arbitral award becomes immediately enforceable without any further act of the Court, once the time expires to challenge the award under S.34 of the 1996 Act.
If there were any remaining doubts on the interpretation of the language used in S.34, the scheme of the 1996 Act would resolve the issue in favor of curtailing the court’s powers by the exclusion of the operation of S. 5 of the Limitation Act.
NTPC v Singer Company, 1993 (Foreign Award)
The court in NTPC v. Singer Company, AIR 1993 SC 998 held that the expression “foreign award” under Part II of the Arbitration Act 1996 means an arbitral award on differences between persons arising out of a legal relationship, considered as commercial, under the law in India.
It held further that an award is ‘foreign’ not merely because it is made on the territory of a foreign state, but because it is made in such territory and in respect of an arbitration agreement not governed by the law of India.
Republic of India v Agusta Westland International Ltd. 2019
In Republic of India v Agusta Westland International Ltd. 2019 SCC Online Del 6419, the Supreme Court held that section 29A of the Arbitration and Conciliation Act, 1996 is not applicable to proceedings already initiated in terms of Section 21 of the Principal Act i.e. prior to coming into force of the 2015 Amendment Act.
Suggested Readings:
- Alternative Dispute Resolution Class Notes
- Landmark Cases in Contract Law in India
- Landmark Cases in CPC 1908
Credits
- BCI Preparatory Materials
- Indian Kanoon
- Bar and Bench