The Allahabad High Court while dismissing an appeal said that the Arbitration Act being a legislation for speedy redressal, the delay in filing the appeal can only be allowed if the appellant makes out a very strong case and explains the reasons for delay.

A Single Bench of Justice Shekhar B Saraf passed this order while hearing an appeal filed by National Highways Authority Of India.

This is an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 arising out of an order passed under Section 34 of the Act.

It is to be noted that the application filed by the appellant before the Court below under Section 34 of the Act was also delayed by four months and the same was dismissed as time barred.

There is furthermore an inordinate delay of 552 days in filing this appeal under Section 37 of the Act.

In M/s N.V International v State of Assam & Ors reported in 2020 (2) SCC 109 [Coram:- Rohinton Fali Nariman and S. Ravindra Bhat, JJ] and Government of Maharashtra (Water Resources Department) Represented by Executive Engineer v M/s Borse Brothers Engineers & Contractors Pvt Ltd reported in (2021) 6 SCC 460 [Coram :- Rohinton Fali Nariman, B.R Gavai and Hrishikesh Roy, JJ] the Supreme Court has stated that such a delay in filing an appeal under Section 37 of the Act cannot be allowed, the Court noted.

The Court said that,

The issue with regard to filing an appeal under Section 37 of the Act is no longer resolved as the same has been settled by the Supreme Court.

In fact, the Supreme Court while upholding the judgement of the High Court went on to say that just because other persons have been granted relief in other matters that by itself would not be a ground for condoning the delay. The Supreme Court has deprecated the practice of taking lenient view and stated that just because the Courts, on earlier occasions, had taken lenient view would not entitle the petitioner as a matter of right to be entitled to condonation of delay where no proper explanation was provided by the petitioner.

The Couer observed that,

In the case, the reasons provided for condonation of delay are without assigning any specific reasons for the delay. No documents have been provided for the reasons given in the said affidavit. Furthermore, the only ground that has been taken for condonation of delay is that the counsel, who was appearing before the Arbitrator, did not inform the Department regarding order dated July 12, 2022 and it was only when the respondent made an application on December 8, 2023 for compensation, the appellant wrote a letter dated January 6, 2024 for obtaining certified copy of the order. Thereafter, legal advice was sought and finally on January 19, 2024 a decision was taken for filing the appeal.

This explanation does not cut any ice whatsoever as the law of limitation as explained in the judgments and elaborated in the judgment in Pathapati Subba Reddy (Died) By L.Rs and others (supra) penned by Pankaj Mithal, J is that the discretionary power is only to be exercised when sufficient cause is made out and compelling reasons are provided for condonation of delay. In this case, one does not find any such reason provided which would enable the Court to condone the delay.

“In fact, it is crystal clear that the appellant has acted in a lackadaisical manner from the very inception as it appears from the records that the application under Section 34 of the Act of the appellant was also dismissed as time barred on the ground that the filing of the appeal was delayed by four months. It is clear that in spite of the same, the appeal has been filed once again belatedly with a delay of 552 days. The filing of the appeal is a mere attempt to cloak the laissez faire attitude taken by the appellant from the very beginning”, the Court further observed while dismissing the appeal.

In the light of the above, the Court rejected the delay condonation application.

The Supreme Court on Tuesday heard part submissions made on behalf Afcons Gunanusa JV, dealing with the primary issue as to whether a separate fee under the Fourth Schedule of Arbitration and Conciliation Act, 1966 is payable on counterclaim or not.

Senior Advocate Abhishek Manu Singhvi, who appeared for Afcons Gunanusa JV in continuation of his previous arguments countering the submissions of Attorney General K.K. Venugopal, further submitted that once the arbitrator has fixed fees unilaterally, it sounds unreasonable. “There is no unilateral variation in my case.”

“Nothing is fixed, yet clause is there, Fourth Schedule is given a go-by with their own consent and Fourth Schedule is not final and binding on the arbitrator,” Singhvi submitted.

Justice Chandrachud said: “You control cross-examinations, isn’t it right? After 70 hearings, then we can say to fix fees at later stage. Can this not happen? If arbitrator have overall cap, then there is no question.”

Justice Chandrachud: “You give us a set of suggestions, there should not be a straitjacket formula. Such suggestions should bring reform in arbitration. An ideal situation is being done at upfront but not at later stage, to avoid complexity in further proceedings. We cannot be in a situation where we can say arbitrator to fix fees of Rs 15,000, that will shake the backbone of arbitration.”

AG Venugopal said: Fourth Schedule to stand as it is now. Arbitrator should decide as per Fourth Schedule. Ask the parties estimates for the fees depending on the number of hearings.’

To this, Singhvi submitted that upfront fees actually would be 2-3 hearings on the subject. Further counterclaim is not being challenged by ONGC.

“There was not a law that they should fix fees in the beginning, Section 14, 15, 16 of Arbitration Act does not come into picture,” contended Singhvi for Afcons.

“Your lordship cannot stretch the law so much as demanded by ONGC,” Singhvi said.

He submitted that costs include expenses which includes fees of lawyer, fees of arbitrator, stenographer fees. “There cannot be a separate procedure for fixation of fees/expenses to individuals.
An international arbitration has much higher fees value,” says Singhvi.

“Costs should not be read so as to exclude fees in it, My Lord,” he said.

Termination of Section 31(8) remains with Arbitral Tribunal either pre-amendment or post-amendment, he argued.

The proviso 31(a)(5) of Arbitration Act provides that an agreement which has the effect that a party is to pay the whole or part of the costs of the arbitration in any event shall be only valid if such agreement is made after the dispute in question has arisen, such provision was read over in the court by Singhvi.

Singhvi submitted that what is so interesting is that arbitrator panel is deciding their own fees.

Justice Sanjiv Khanna said, “If you look at Section 31(8) originally, it seems different. Deposit has to be made u/s 34 of Arbitration Act.”

In continuation, Attorney General Venugopal appearing for ONGC addressed the three-judge bench of Justices Chandrachud, Sanjiv Khanna and Surya Kant that the arbitrator has control over the proceedings and in international arbitration, international code of conduct prevails, but the actual problem lies in ad-hoc arbitrations.

To this, Justice Chandrachud advised to either set up institutions or govern by existing institutions.

Justice Chandrachud said, “However, there is remedy available under Section 29A of Arbitration and Conciliation Act, 1996, but that does not apply to International Arbitration.”

ONGC has sought the directions to terminate the existing tribunal and substitute it with a new one. In its petition before the Supreme Court, ONGC has claimed that the arbitrators, two former judges of the Supreme Court and one judge of the High Court, had increased the fees mid-way, while the arbitration was going on.

ONGC said that the new fee scale was not just against the contract terms, but also “far from the fees” fixed for the arbitrators under the Fourth Schedule of the Arbitration and Reconciliation Act, 1996 (A&RA), which guides proceedings when disputes arise between contracting parties.

Under the Fourth Schedule of Arbitration and Conciliation Act 1996, there is a ceiling of Rs 30 lakh per arbitrator, if the dispute between two parties is worth more than Rs 20 crore. As per the contract between the ONGC and Afcons, the upper ceiling for an arbitrator’s fee is Rs 10 lakh with a time-limit prescribed to end the arbitration. The Centre contented that the arbitrators fixed Rs 1 lakh per arbitrator for every sitting as the fee and each sitting was for a duration of three hours. Therefore, it has been submitted that there should be some uniformity or certainty in the fees to be paid to the arbitrators, and asked the court to settle and fix a fee scale for the arbitrators.

Case Name- ONGC Vs Afcons Gunanusa JV
EARLIER AFCONS SUBMISSIONS –
Sr. Adv Abhishek Manu Singhvi, for respondent Afcons submits that this court heard about the issue about punctuations, commas and about fixation of fees.

He further submits that kindly see the conduct of ONGC. This would be sufficient enough to dispose of my case. In 2020, tribunal cancelled all dates, then the matter conducted through VC. It was specifically mentioned in the agreement that no interest on the amount shall be paid. ONGC submits that I will not join through Video Conferencing.

After 13 months, 1 lac fees were fixed. There were 120 sittings for cross examination of the witness. The amount of Rs. 30 lacs, if I bifurcate that comes to around 25,000 Rs. per session. In the starting, arbitrator should give some reasonable indication.

Is it practical I would be cross examined in 120 sittings? states Mr. Singhvi, for Afcons. They are judicial arbitrators, not strangers. – Mr. Singhvi.

I have no problem, it should be 30 lacs for each, not at all problem with aggregate amount/fees. (aggregate refers herein to ‘Composite amount’), says Singhvi.

Mr. Singhvi submits that arbitration agreement got invoked in year 2015. Petitioner ONGC proposed the amount to be 30 lacs. I was not privy to this information. I was not consulted for this amount to be fixed. On 22 may 2018, the Tribunal noted that after 20 sittings, one witness examination was not fully completed.

Further cross of Jadhav, expert witness of claimant was not concluded. Even 1.5 lacs got reduced. ONGC filed application for modification of minutes and fixation of fess before tribunal, Respondent challenged this fee structure submits Singhvi.

J. Surya Kant asks the Counsel of Afcons – What do you suggest, to approach under section 34? If not, then Will it come under section 16?

No one can misuse section 14 and 15 of Arbitration Act, urges Mr. Singhvi.
How many interpretations were done on behalf of ONGC with respect to the sections 14, 15 and 16, just because 1.5 fee is inexpedient for them, submits Singhvi.

The Supreme Court today heard a plea of Essar House Private Limited and Essar Steel India Limited, who allegedly did not refund back the security amount to Arcellor Mittal Nippon Steel India Ltd, even after ArcellorMittal Nippon Steel vacated the premises and handed over peaceful possession back to Essar Steel India Limited. 

The Petitioners failed to comply with the order of Bombay High Court as the Bombay High Court while dismissing the appeals filed by Essar House and Essar Steel ordered them to refund back the amount or to furnish bank guarantee within the four weeks from today.

The Bench of Justice Indira Banerjee and Justice A.S. Bopanna granted protection in favour of Essar House and Essar steel that no coercive action should be taken against them and further adjourned the proceedings which is pending before Bombay High Court. 

Essar House Private Limited and Essar Steel India Limited preferred to file appeal before apex court against the judgment of Bombay High Court, wherein their appeals got dismissed. 

Sr. Adv. Neeraj Kishan Kaul appeared for both Essar House Private Limited and Essar Steel India Limited made submissions that – ‘ It is wrong to say I have committedcontempt immediately and false to state that I have not deposited money & false allegation that I have received money and siphoned it of. 

Further Senior Counsel Kaul reiterated section 9 of Arbitration Act. 

In 2014, Essar Steel India Limited disbursed an amount of Rs.47,41,00,000/- towards the security deposit to the appellant. They say another company called Equinox which is a group company of Essar, & both Essar Steel & Essar House at different point of time in diff transaction have taken loans from HDFC Bank & Essar steel paid the loan to HDFC bank which Essar was supposed to pay, contentions of Essar House and Essar Steel.

On behalf of Arcelor Mittal Nippon Steel India Pvt. Ltd made submission that allthese occurred prior to the initiation of CIRP and Essar Steel term loan recovery was of Rs. 28 Crores. 

The counsel of Respondent further relied u pon judgment ofAdhunik Steels Ltd. vs. Orissa Manganese & Minerals (P) Ltd. (2007) 7 SCC 125 wherein the Court held that under section 9(i) (ii) (b) of the Arbitration Act, the Court is empowered to pass interim measure to secure the amount in dispute in arbitration which may be in the form of bank guarantee or deposit of money in Court. Such powers of Court can be exercised not only in the hands of the parties to arbitration but also in the hands of third party who has to admittedly pay any amount to the party to the arbitration agreement by directing such third party to deposit the amount on behalf of a party to arbitration agreement in Court.

The Bombay High court, in its finding held that the Essar House and Essar Steel did not argue on merits and it was proved that the Petitioner did not pay back the security amount to Arcellor. 

The contentions put by the Petitioners Company before Bombay High court that they had disclosed about not having the asset other than one asset which is fully encumbered, before Ld. Single Judge.  The Bombay High Court held in this regard that nothing holds court under section 9 to pass equitable order by securing the claim of the Petitioners in arbitration by directing the opponent to deposit such amount to furnish a bank guarantee once having rendered a prima-facie finding that the Petitionerswould have good chances of succeeding in the arbitration and if the claim made by the Petitioners are not secured, he would not be able to enjoy fruits of the arbitral award on its execution.

In the impugned judgment of High court passed by Division Bench held that ‘If the Court is required to dismiss the petition under section 9 of the Arbitration Act on the ground that the opponent has no assets at all or the assets of the opponent are fully encumbered, it will be against the principles of equitable justice required to be exercised by the Court while exercising powers under section 9 of the Arbitration Act so as to secure the claim of the applicant/Petitionersin the arbitral proceedings though he may have prima-facie good chances of succeeding in arbitration.’

The Facts of the case are that on 1st April, 2016, Essar Steel India Limited entered into a Rental Agreement with the appellant to occupy the ground floor, podium and twenty upper floors at 11 Keshavrao Khadye Marg, Opp. Race Course, Mahalaxmi, Mumbai – 400 034 on leave and license basis. The said Essar Steel India Limited paid the Essar House an amount of Rs.25,80,00,000/- toward security deposit under the said Rental Agreement. On 2nd August, 2017, the Ahmedabad bench of the National Company Law Tribunal (NCLT) admitted the Company Petitions filed by Standard Chartered Bank and State Bank of India against Essar Steel India Limited under Section 7 of the Insolvency and Bankruptcy Code, 2016. 100% shareholding of Essar Steel India Limited was acquired by Arcelor Mittal India Pvt. Ltd. (AMIPL).

The contentions of Arcellor Mittal were that despite sending several mails regarding refund of security amount under said Business centre Agreement, the security payment was not paid by Essar Steel. 

Thereafter, an application u/s 9 seeking interim relief was filed by Arcellor before Ld. Single Judge. Various interim measures wasgranted in favour of Arcellor.

The Supreme Court on Friday upheld the Delhi High Court Single-Judge order on Amazon’s petition against the Future-Reliance deal and held that Singapore’s Emergency Arbitrator Award, restraining Future Retail from going ahead with its merger deal with Reliance Retail, is valid under Indian law and can be enforced.

A Divisional Bench of Justice R.F. Nariman and Justice B.R. Gavai stated, “The emergency arbitrator’s award under section 17(1) and the single judge’s order is upheld.”

Amazon had moved the top court against the Delhi High Court’s Division Bench order, which paved the way for the Reliance-FRL deal. Amazon’s plea stated, “The group had earlier unequivocally stated that they will continue to take steps to complete the impugned transaction. The greater the progress made towards the completion of the transaction, the harder it will be to unravel it. Over time, the interests of additional third parties may also become entwined with the impugned transaction and be subsequently compromised. Further, irreparable harm will be caused to the petitioner.”

The apex court bench had raised two crucial issues with regards to the matter:

1.       Whether section 17(1) of the Arbitration and Conciliation Act, 1996 covers an Emergency Arbitrator’s award, and

2.       Whether the same can be enforced under section 17(2)

A division bench of the High Court presided by Chief Justice D.N. Patel and Justice Jyoti Singh while passing the order had observed that since Future Retail Limited (FRL) is not a party to Arbitration Agreement, prima facie, group of companies doctrine can’t be invoked. The High Court further noted that in preliminary findings there was no reason to seek a status quo order from a single judge. “Statutory authorities like SEBI cannot be restrained from proceeding in accordance with law,” the bench said. The division bench had also stated that the observations made by it are only prima facie and the single judge shall not be influenced by it while passing its order.

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On the last date on hearing, Senior Advocate Gopal Subramanium appearing for Amazon submitted, “the Biyanis of Future Group had negotiated with it to enter into certain agreements and are bound by Singapore’s Emergency Arbitrator award restraining FRL from going ahead with its merger deal with Reliance Retail. It reiterated that EA’s Award was enforceable.”

Whereas, Senior Advocate Harish Salve appearing for FRL submitted, “There was no provision for EA under the Indian Law” and “it cannot be done by the process of construction” while referring to the single judge order of the Delhi High Court which had held the award of the EA to be valid.

Read order below:

By Shivam Sharma

On December 6, the Supreme Court said: “If the Courts are allowed to interfere with the arbitral process beyond the ambit of the enactment, then the efficiency of the process will be diminished.” This observation was made after an appeal was allowed against an order of the Gujarat High Court which had quashed the appointment of an arbitrator by one of the parties in a case.

On February 13, 1991, an executive engineer of Sardar Sarovar Narmada Nigam (Respondent No 1) entered into a contract with Bhaven Construction (appellant) to manufacture and supply bricks. The contract had an arbitration clause. When a dispute arose regarding payment in the manufacturing and supplying of bricks, Bhaven issued a notice on November 13, 1998, seeking the appointment of an arbitrator as per the agreement. But the engineer did not agree with this request.

Despite this, Bhaven appointed an arbitrator. The engineer put an application under Section 16 of the Arbitration and Conciliation Act of 1996 disputing the jurisdiction of the arbitrator. On October 20, 2001, the arbitrator rejected the application of the engineer and held that he had jurisdiction to adjudicate the dispute.

Aggrieved by this, the engineer filed a Special Civil Application under Articles 226 and 227 of the Constitution before the High Court of Gujarat. But the single-judge bench dismissed it. Aggrieved, the engineer preferred a Letters Patent Appeal. The High Court on September 17, 2012, allowed the appeal and observed: “Provision of Indian Arbitration Act, 1940 and any statutory modification thereof will be applicable.” It said that the respondent cannot appoint a sole arbitrator and cannot contend that now he had already exercised power under the provisions of the Arbitration and Conciliation Act, 1996. Aggrieved by the order, Bhaven moved the Supreme Court.

Their counsel argued that the High Court erred in interfering with the order of the single-judge under Articles 226 and 227 of the Constitution. The fact that the final award was passed by the arbitrator and is now challenged under Section 34 of the Arbitration Act clearly shows the attempt of the engineer to bypass the Act. He said that Section 16(2) of the Arbitration Act mandates that the arbitrator had the jurisdiction to adjudicate the preliminary issue of jurisdiction, which can only be challenged under Section 34 of the Act.

On the other hand, the counsel for the engineer contended that since the enactment of the Gujarat Act, the Arbitration Act was substituted with respect to disputes arising out of work contracts. It was contended that under Articles 226 and 227, the engineer could invoke the writ jurisdiction of the High Court to set aside an arbitration which was a nullity as it was in conflict with the state enactment.

The Supreme Court bench comprised Justices NV Ramana, Surya Kant and Hrishikesh Roy and the issue they considered was whether the arbitral process could be interfered with under Article 226/227 of the Constitution and under what circumstance.

The Court noted that the Arbitration Act was a code in itself. This phrase is not merely perfunctory, but has definite legal consequences. One such consequence is spelled out under Section 5 of the Arbitration Act, which says: “Not with standing anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.”

It further said:

“Any party can enter into an arbitration agreement for resolving any disputes capable of being arbitrable. Parties, while entering into such agreements, need to fulfill the basic ingredients provided under Section 7 of the Arbitration Act. Arbitration being a creature of contract, gives a flexible framework for the parties to agree for their own procedure with minimalistic stipulations under the Arbitration Act. If parties fail to refer a matter to arbitration or to appoint an arbitrator in accordance with the procedure agreed by them, then a party can take recourse for court assistance under Section 8 or 11 of the Arbitration Act.”

The Court placed reliance on its 2014 judgment in Nivedita Sharma vs Cellular Operators Association of India and the 2019 judgment in M/s Deep Industries Limited vs Oil and Natural Gas Corporation Limited. In M/s Deep Industries Limited vs Oil and Natural Gas Corporation Limited, the Court analysed the interplay between Section 5 of the Arbitration Act and Article 227 and held that High Courts should be extremely circumspect while interfering in judgments allowing or dismissing first appeals. “It is therefore, prudent for a Judge to not exercise discretion to allow judicial interference beyond the procedure established under the enactment. This power needs to be exercised in exceptional rarity, wherein one party is left remediless under the statute or a clear ‘bad faith’ shown by one of the parties. This high standard set by this Court is in terms of the legislative intention to make the arbitration fair and efficient,” the Court further observed.

The appellant in this case acted in accordance with the procedure laid down under the agreement to unilaterally appoint a sole arbitrator, without the engineer mounting a judicial challenge at that stage. He then appeared before the arbitrator and challenged his jurisdiction in terms of Section 16(2) of the Arbitration Act. Thereafter, he chose to impugn the order passed by the arbitrator under Section 16(2) of the Arbitration Act through a petition under Article 226/227 of the Constitution.

The Arbitration Act provides for a mechanism of challenge under Section 34. It reads: “Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with subsection (2) and subsection (3).” The use of the term “only” serves two purposes of making the enactment a complete code and laying down the procedure, it was held in the judgment.

The bench further said the contract between the parties was in the nature of a works contract as it held that the manufacturing of bricks was only an ancillary obligation, while the primary obligation on the appellant was to supply the bricks. It, therefore, held that the Gujarat Act holds primacy rather than the Arbitration Act.

The Court said that the engineer was not successful in showing exceptional circumstance or “bad faith” on the part of the appellant to invoke a remedy under Article 227. “No doubt the ambit of Article 227 is broad and pervasive, however, the High Court should not have used its inherent power to interject the arbitral process at this stage. If the Courts are allowed to interfere with the arbitral process beyond the ambit of the enactment, then the efficiency of the process will be diminished,” the Court remarked.

The top court said that the High Court had erred in utilising its discretionary power under Articles 226 and 227. Thus, the Court allowed the appeal and the impugned order of the Gujarat High Court was set aside.

In 2019, the Supreme Court in Hin­dus­tan Construction Company Limited & anr vs Union of India settled the issue of automatic stays on the enforcement of arbitral awards. It struck down Section 87 of the Arbitration and Conciliation Act 1996 as being “manifestly arbitrary”.

Arbitration is most commonly used for the resolution of commercial disputes, particularly international commercial transactions, and is sometimes used to enforce credit obligations. It is also used in some countries to resolve other types of disputes such as labour, consumer or family and for certain disputes between states and between investors and states.

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As fundamental changes are made in the law governing arbitration in India, it is necessary for the highest court to adopt, interpret, clarify and elucidate the scope of public policy for setting aside arbitral awards.

—The writer is an advocate in the Lucknow bench of the Allahabad HC