Revisiting Landmark Judgements In Arbitration

KEY TAKEAWAYS

• Arbitration is a form of Alternate Dispute Resolution (ADR). It is one of the most widely practiced forms of ADR.
• The Supreme Court, along with various High Courts, has passed a variety of judgements related to arbitration recently.
• The aim of this article is to look at various landmark judgements and understand their significance in arbitration better.
• Majority of the judgements covered are from cases between 2017 to 2020.
• Arbitration law in India has been laid down in the Arbitration and Conciliation Act, 1996. The Act covers both Domestic and International Arbitration.
• There have been several promulgations and ordinances that have been passed by the Government of India regarding Arbitration.
• Moreover, several amendments have been introduced in the Act between 2015 and 2019.

INTRODUCTION

Arbitration serves an alternate way of resolving disputes between two or more parties outside the purview of the courts. It has become a popular way of settling business contracts and it is a cost efficient, client friendly, time saving method of carrying out legal procedures. It also saves the parties from the hassles and tediousness involved in approaching the courts. The key elements of arbitration include, consent of the parties, a presiding authority, the seat of arbitration which determines the court which will be exercising its jurisdiction, the autonomy of the parties and the final nature of the outcome of arbitration. Let us now look at some landmark judgements related to arbitration.

LANDMARK JUDGEMENTS

Mother Boon Foods Pvt Ltd v. Mindscape One Marketing Pvt Ltd [O.M.P. COMM 136/2017]

Facts: The Respondent was a bread manufacturing company who had entered into a manufacturing agreement with Mother Boon, which is the Petitioner in this case. Disputes arose between the parties which led to the breakdown of the contract. Arbitration proceedings were initiated by the Respondent however, the Petitioner did not participate.

Issue: The issue raised in this case was whether an oral agreement can supersede a written agreement in arbitration.

Judgement: It was held that an oral agreement cannot supersede a written agreement. In an agreement of arbitration, as stated in the 1996 Act, it has to be in writing.

TRF Ltd v. Energo Engineering Projects Ltd [Civil Appeal No. 5306/2017]

Facts: There had been a dispute among both the parties regarding the pendency of contract. The aggrieved party, TRF, and the applicant had decided to settle the matter through arbitration. However, there was a disagreement regarding the method through which the arbitrator was to be appointed. However, Energo unilaterally appointed the arbitrator.

Issues: The issue arose in this case whether it was possible to unilaterally appoint an arbitrator.

Judgements: It was held by the court that once an arbitrator becomes ineligible by law, another arbitrator cannot be nominated by him. A person who is ineligible statutorily cannot nominate an arbitrator. It has been clarified in earlier judgments that a person who has an interest with regard to the outcomes of the arbitration proceedings is not eligible to be an arbitrator.

Hindustan Construction Company Ltd. v. Union of India [2019 SCC OnLine SC 1520]

Facts: The Petitioner, Hindustan Construction Company (HCC), specialised in large scale infrastructure. There were some disagreements regarding the construction projects. However, several arbitral awards were made in HCC’s favor. Subsequently, the Respondents filed an application under Section 34 of the Act, which led to a stay being imposed on the arbitral awards. Section 87 was also used to file special appeals to the arbitral rewards. The HCC then filed a series of writ petitions which challenged the constitutional validity of Section 87.

Issue: Was Section 87 of the Act constitutionally valid?

Judgement: Section 87, which granted an automatic stay on the arbitral award, was struck down as it was deemed arbitrary. It was incompatible with the amendments introduced in 2015. There would be no immediate stay on the arbitral award if a legal action challenging that award is filed.

M/s Dharmaratnakara Rai Bahadur v. M/s Bhaskar Raju & Brothers [Civil Appeal No. 1599/2020]

Facts: M/s Dharmaratnakara Rai Bahadur, the appellant was a registered trust which owned land. The Respondents, Bhaskar Raju made an offer to develop the land. A lease agreement was signed between the two parties. However, a dispute between them occurred regarding whether the document signed was a lease deed or an agreement to lease.

Issues: The issue that arose in this case was whether a lease deed that had been inadequately stamped could be used to enforce the arbitration clause mentioned therein.

Judgement: It was held by the Court that the proper stampig of the document is to be considered when dealing with a lease deed or any other document that would be required during an arbitration agreement. If the document is not properly signed then the Court will be unable to act upon the arbitration clause therein.

Arvind Kumar Jain v. Union of India [Arb. P 779/2019]

Facts: The Petitioner was given the contract to lay sewage lines along a railroad. Subsequently, a dispute arose between the parties. The dispute was to be settled by arbitration, as was agreed upon by both the parties. The Respondent, however, sought that the Section 12 (5) be waived. It was needed that the Respondent consented to the arbitrator being a Gazetted Officer of the Railway (JAG/SAG).

Issues: The issue that arose in this case was whether a Gazetted Officer of the Railways be appointed as an arbitrator, with special emphasis on Section 12 (5) of the Act.

Judgement: It was held that the apprehensions of the Petitioner regarding the appointment of the arbitrator by the Respondent were legitimate. Moreover, the Court rejected the Respondent’s contention that a Gazetted Railway Officer could be appointed as the arbitrator. It was also held that Section 12 (5) cannot be waived or prevented from invocation at the request of the Respondent.

CONCLUSION

There are no binding laws and statutes on arbitration in India. Majority of arbitration is dependent on the Arbitration Conciliation Act. The said Act ensures that the autonomy of the parties is upheld and taken into account. The Indian Law regarding Arbitration as a part of Alternative Dispute Resolution has largely been derived from the English Common Law. Since Arbitration is a legal mechanism to solve disputes outside the boundary of the law courts, the decision of the Arbitrator is binding upon the parties.