Uttarakhand Purv Sainik Kalyan Nigam Limited v. Northern Coal Field Limited
[SLP (C) 11476
of 2019, Supreme Court of India]
A question which arose
before the Supreme Court was whether a petition under Section 11 of the
Arbitration and Conciliation Act, 1996 (“Arbitration Act”) could be
rejected by the High Court at the threshold itself on the premise of the claim
of the Petitioner being barred by limitation.
The brief facts of the
case were as follows. The Petitioner and Respondent entered into an agreement
dated 21.12.2010 for provision of security services by the Petitioner to the
Respondent. Disputes arose between the parties and the Petitioner sent a demand
notice to the Respondent in 2013. Subsequently, the Petitioner invoked the
arbitration clause in the agreement in 2016. Upon failure on the part of the
Respondent to nominate an arbitrator in terms of the agreement, the Petitioner
approached the High Court under Section 11 of the Arbitration Act for
appointment of the arbitrator. The Respondent questioned the petition on the
ground that that the claim of the Petitioner was barred by limitation. The High
Court upheld the contention of the Respondent, refused to appoint an arbitrator
and dismissed the Section 11 Petition on the ground of limitation.
The Supreme examined
the extant position of the aspect of appointment of arbitrators (envisaged
under Section 11 of the Arbitration Act, more particularly Section 11 (6A)
thereof) and observed that the scope of jurisdiction of the High Court (in a
pre-reference stage) is limited and is confined only to the ‘existence of an
arbitration clause or arbitration agreement’. Further, the court also held that
the issue of limitation involves mixed questions of facts and law, and hence
ought to be dealt with by the arbitral tribunal and not by the High Court at a
pre-reference stage. With the said observations, the Supreme Court set aside
the order the High Court.
Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV)
[Civil
Appeal 9486-87/2019, Supreme Court of India]
The question which
arose in the present matter was whether a party to an arbitration agreement
(which provides for the procedure to appoint an arbitrator in case of a
dispute) can surpass the said procedure and directly approach the High Court
under Section 11 of the Arbitration Act on the premise that such arbitration
agreement does not provide for appointment of a neutral arbitrator.
The facts of the matter
were as follows. The Appellant awarded a works contract to the Respondent and
the parties entered into an agreement which contained an arbitration clause.
Further, the said arbitration clause also provided for a procedure for
appointment of an arbitrator. Disputes arose between the parties and the
Respondent invoked the arbitrator. However, the Respondent resisted the
procedure for appointment of the arbitrator (in accordance with the terms of
the arbitration clause) and directly filed a Section 11 Petition before the
High Court seeking the appointment of an arbitrator on the ground that the
arbitration clause did not provide for appointment of a neutral arbitrator. The
Appellant objected to the said petition by stating that the procedure for
appointment of arbitrator provided under the arbitration clause must be adhered
to. The High Court agreed with the contentions of the Respondent and appointed
a sole arbitrator dehors the procedure in the arbitration clause. The
Appellant assailed the order of the High Court before the Supreme Court.
The Supreme Court while
relying on various previous judgments observed that the proposed arbitrator (being
a retired officer of a government organization) cannot be considered to be
disqualified under Section 12 (5) of the Arbitration Act. Such officers are
appointed as they have technical expertise in the field in which dispute has
arisen.
The court also held
that the right of a party to appoint an arbitrator (under an arbitration
clause) ceases only when a request for appointment is made (by the other party)
but the said appointment is made by the first party prior to filing of an
application under Section 11 of the Act by the other party. In the present
case, since the Respondent resisted the appointment of an arbitrator by not
responding to the Appellants letter (for appointment of an arbitrator) therefore,
it could not take a stance that since the Appellant failed to appoint an
arbitrator prior to preferring a Section 11 Petition, its right to appoint an
arbitrator ceased.
Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram & other Charities and Ors. v. Bhaskar Raju & Brothers and Ors.
[Civil Appeal No. 1599 of 2020, Supreme
Court of India]
In the present matter,
the question which arose was whether an application under Section 11 of the
Arbitration Act could be entertained in the context of an arbitration agreement
which was insufficiently stamped as per the provisions of the Indian Stamp Act,
1899 (“Stamp Act”).
The Supreme Court while
relying on its judgement of SMS Tea Estates Pvt. Ltd. v. Chandmari Tea
Company Pvt. Ltd. reiterated the position that an insufficiently stamped
arbitration agreement cannot be relied upon and is inadmissible in evidence.
The Supreme Court also observed that an application under Section 11 of the
Arbitration Act is to be accompanied with an original arbitration agreement or
a duly certified copy thereof. It is the duty of the court to see whether the
document is duly stamped or not. If the instrument is not stamped then the same
is required to be impounded and dealt with in the manner provided under the
Stamp Act.
Rakesh Brothers v. Haryana Housing Board
[Arb. 17/2020, Punjab and Haryana High Court]
In the present matter,
the question which arose before the High Court was whether an arbitrator can be
appointed by a party to the dispute (who has a right to appoint one under the
arbitration clause) after filing of a Section 11 Petition by the other party.
The brief facts of the
case were as follows. The Petitioner and Respondent executed a contract for
construction of flats which contained an arbitration clause. Disputes arose
between the parties and the Petitioner wrote to the Respondent nominating certain
arbitrator(s) and seeking the consent from the Respondent on their nomination.
When no consent came forth from the Respondent, the Petitioner filed the
Section 11 Petition before the jurisdictional High Court. However, during the
pendency of the said Section 11 Petition, the Respondent made the appointment
of an arbitrator and contented before the High Court that the Section 11
Petition had been rendered infructuous upon such appointment. The High Court
rejected the contentions of the Respondent and observed that upon filing of the
Section 11 Petition by the Petitioner, the right of the Respondent to appoint
an arbitrator stood forfeited. Reliance was placed by the High Court on the
judgements of the Supreme Court in Datar Switchgears Ltd. v. Tata Finance
Ltd. and Deep Trading Company v. Indian Oil Corporation.
Chennai Container Terminal Pvt. Ltd. v. Board of Trustees For Chennai Port Trust
[O.P.
No. 643/2019, Madras High Court]
In the said matter, a
question arose as to the scope and ambit of a Section 11 Petition and also on
the applicability of the principles of res-judicata to a Section 11 Petition.
In the said matter, a license agreement (containing an arbitration clause) was
executed between the Petitioner and the Respondent. Disputes arose between the
parties, claims and counter claims were made, arbitration was invoked and an
arbitral award rendered by the arbitrator. In the award, certain claims of both
parties were allowed by the arbitrator. The arbitral award travelled to the
Supreme Court and attained finality. Finally, the recovery process was
initiated by adjustments of the awarded amounts. During the course of such
adjustments, a dispute arose regarding the collection of post award interest.
The Petitioner questioned the right of the Respondent of recovering post-award
interest amounts which had been turned down in the arbitral award.
Consequently, the
Petitioner filed a Section 11 Petition before the High Court for appointment of
an arbitrator to adjudicate this issue of post award interest amounts. The
Respondent questioned the said petition by inter alia contending that
since the arbitration clause has been invoked and the award has been made
regarding a particular dispute the present claim regarding the interest was
barred by res-judicata the
arbitration clause had worked itself out. On the contrary, the Petitioner
contented that there could be no threshold consideration or rejection of its
claim on the ground of res- judicata.
The High Court observed
that the occasion to venture into whether the claim was hit by res-judicata or
not did not arise as under Section 11 (6-A) of the Arbitration Act, all it had
to see was whether there existed an arbitration clause or not. The court
observed that the claims regarding interest were raised, framed and given a
legal quietus in the previous round of arbitration/litigation. The Court
further held that an arbitration agreement is like a special purpose vehicle
created to resolve disputes between parties, and if that special purpose is achieved
then the said arbitration agreement/clause will work its way out. In the given
facts and circumstances, the court concluded that there did not exist any
‘live’ arbitration agreement between the parties. Consequently, the Section 11
Petition was rejected.
