Tag Archives: Arbitral Tribunal

Arbitral Tribunal – Powers Under Section 17 of the Act

 

Under Section 17, the Arbitral Tribunal has the power to order interim measures of protection, unless the parties have excluded such power by agreement. Section 17 is an important provision, which is crucial to the working of the arbitration system, since it ensures that even for the purposes of interim measures, the parties can approach the Arbitral Tribunal rather than await orders from a court. The efficacy of Section 17 is however, seriously compromised given the lack of any suitable statutory mechanism for the enforcement of such interim orders of the Arbitral Tribunal.

In Sundaram Finance Ltd. v. NEPC India Ltd. [Sundaram Finance Ltd.v. NEPC India Ltd., (1999) 2 SCC 479], the Hon’ble Supreme Court observed that though Section 17 gives the Arbitral Tribunal the power to pass orders, the same cannot be enforced as orders of a court and it is for this reason only that Section 9 gives the court power to pass interim orders during the arbitration proceedings. Subsequently, in Army Welfare Housing Organisationv. Sumangal Services (P) Ltd. [Army Welfare Housing Organisation v. Sumangal Services (P) Ltd., (2004) 9 SCC 619] , the Court had held that under Section 17 of the Act no power is conferred on the Arbitral Tribunal to enforce its order nor does it provide for judicial enforcement thereof.

In the face of such categorical judicial opinion, the Hon’ble Delhi High Court attempted to find a suitable legislative basis for enforcing the orders of the Arbitral Tribunal under Section 17 in Sri Krishan v. Anand [Sri Krishan v. Anand, 2009 SCC OnLine Del 2472 : (2009) 112 DRJ 657 : (2009) 3 Arb LR 447] [followed in Indiabulls Financial Services Ltd. v. Jubilee Plots & Housing (P) Ltd. [Indiabulls Financial Services Ltd. v. Jubilee Plots & Housing (P) Ltd., 2009 SCC OnLine Del 2458] ]. The Delhi High Court held that any person failing to comply with the order of the Arbitral Tribunal under Section 17 would be deemed to be “making any other default” or “guilty of any contempt to the Arbitral Tribunal during the conduct of the proceedings” under Section 27(5) of Act. The remedy of the aggrieved party would then be to apply to the Arbitral Tribunal for making a representation to the court to mete out appropriate punishment. Once such a representation is received by the court from the Arbitral Tribunal, the court would be competent to deal with such party in default as if it is in contempt of an order of the court i.e. either under the provisions of the Contempt of Courts Act or under the provisions of Order 39 Rule 2-A of the Code of Civil Procedure, 1908. Alka Chandewar v. Shamshul Ishrar Khan, (2017) 16 SCC 119 

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Valid Arbitration Agreement – Pre-Requisites of

Para 22 of the judgment in P. Dasaratharama Reddy Complex v. State of Karnataka, (2014) 2 SCC 201 is important and sets out from K.K. Modi v. K.N. Modi, (1998) 3 SCC 573 as to what are the valid pre-requisites for a valid arbitration:

“One of the questions formulated by the Court was whether clause 9 of the memorandum of understanding constituted an arbitration agreement and whether the decision of the Chairman, IFCI constituted an award. It was held as under:

“(1) The arbitration agreement must contemplate that the decision of the tribunal will be binding on the parties to the agreement,

(2) That the jurisdiction of the tribunal to decide the rights of the parties must derive either from the consent of the parties or from an order of the court or from a Statute, the terms of which make it clear that the process is to be an arbitration,

(3) The agreement must contemplate that substantive rights of parties will be determined by the agreed tribunal,

(4) That the tribunal will determine the rights of the parties in an impartial and judicial manner with the tribunal owing an equal obligation of fairness towards both sides,

(5) That the agreement of the parties to refer their disputes to the decision of the tribunal must be intended to be enforceable in law and lastly,

(6) The agreement must contemplate that the tribunal will make a decision upon a dispute which is already formulated at the time when a reference is made to the tribunal.

The other factors which are relevant include, whether the agreement contemplates that the tribunal will receive evidence from both sides and hear their contentions or at least give the parties an opportunity to put them forward; whether the wording of the agreement is consistent or inconsistent with the view that the process was intended to be an arbitration, and whether the agreement requires the tribunal to decide the dispute according to law.

In Bihar State Mineral Development Corporation v. Encon Builders (India) (P) Ltd., (2003) 7 SCC 418, it was held that a clause which is inserted in an agreement for the prevention of a dispute, will not be an arbitration agreement. Shyam Sunder Agarwal v. P. Narotham Rao, (2018) 8 SCC 230.

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Arbitral Award – Includes Interim Award

As can be seen from Section 2 (c) and Section 31 (6), except for stating that an arbitral award includes an interim award, the Act is silent and does not define what an interim award is. Section 31(6) of the Act delineates the scope of interim arbitral awards and states that the arbitral Tribunal may make an interim arbitral award on any matter with respect to which it may make a final arbitral award.

The language of Section 31(6) is advisedly wide in nature. A reading of the said sub-section makes it clear that the jurisdiction to make an interim arbitral award is left to the good sense of the arbitral Tribunal, and that it extends to “any matter” with respect to which it may make a final arbitral award. The expression “matter” is wide in nature and subsumes issues at which the parties are in dispute. It is clear, therefore, that any point of dispute between the parties which has to be answered by the Arbitral Tribunal can be the subject matter of an interim arbitral award. However, by dealing with the matter in a piecemeal fashion, what must be borne in mind is that the resolution of the dispute as a whole will be delayed and parties will be put to additional expense. The Arbitral Tribunal should, therefore, consider whether there is any real advantage in delivering interim awards or in proceeding with the matter as a whole and delivering one final award, bearing in mind the avoidance of delay and additional expense.

To complete the scheme of the Act, Section 32(1) is also material. It goes on to state that the arbitral proceedings would be terminated only by the final arbitral award, as opposed to an interim award, thus making it clear that there can be one or more interim awards, prior to a final award, which conclusively determines some of the issues between the parties, culminating in a final arbitral award which ultimately decides all remaining issues between the parties. M/s IFFCO v. M/s Bhadra Products, 2018 (129) ALR 927.

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Power of Arbitrator – To grant interest pendente lite

In Irrigation Department v. G.C. Roy, (1992) 1 SCC 508, the Hon’ble Apex Court thoroughly considered the question of power of the arbitrator to award interest pendente lite and held that when the agreement between the parties does not prohibit grant of interest and where the party claims interest and that dispute has been referred to an arbitrator does have the power to award interest pendente lite.

Subsequently in Port of Calcutta v. Engineers-De-Space-Age, (1996) 1 SCC 516 and Madnani Construction Corporation (P) Ltd. v. Union of India, (2010) 1 SCC 549 held that according to the view taken in Irrigation Department v. G.C.Roy, (1992) 1 SCC 508, the arbitrator does have the power to award interest pendente lite. The Court observed that it essentially depends upon the ouster in each clause, which means that unless there is an express bar that provides that the arbitrator cannot award interest pendente lite, the grant of interest pendente lite will predominantly be based on the arbitrator’s discretion to award the same.

In Sayeed Ahmed and Co. v. State of U.P., (2009) 12 SCC 26, the Hon’ble Apex Court referred to the decision in Superintending Engineer v. B.Subba Reddy, (1999) 4 SCC 423 and observed thus:

“Two more decisions dealing with cases arising under the Arbitration Act, 1940 require to be noticed. In Superintending Engineer v. B.Subba Reddy, (1999) 4 SCC 423 the Hon’ble Apex Court held that interest for pre-reference period can be awarded only if there was an agreement to that effect or if it was allowable under the Interest Act, 1978. Therefore, claim for interest for pre-reference period, which is barred as per the agreement or under the Interest Act, 1978 could not be allowed. The Court however held that the arbitrator can award interest pendente lite and future interest.”

A three Judge Bench of the Hon’ble Apex Court in Union of India v. Ambica Contsruction, (2016) 6 SCC 36, held that the power of an arbitrator to grant pendente lite interest will depend upon several factors such as; phraseology used in the agreement clauses conferring power relating to arbitration, nature of claim and dispute referred to arbitrator, and on what items power to award interest has been taken away and for which period. It was observed:

“Thus, our answer to the reference is that if the contract expressly bars the award of interest pendente lite, the same cannot be awarded by the arbitrator. We also make it clear that the bar to award interest on delayed payment by itself will not be readily inferred as express bar to award interest pendente lite by the arbitral Tribunal, as ouster of power of the arbitrator has to be considered on various relevant aspects referred to in the decisions of this Court, it would be for the Division Bench to consider the case on merits.”

Further, the Hon’ble Apex Court considered an identical clause in the contract in Ambica Construction v. Union of India, (2017) 14 SCC 323, wherein it observed that the clause of GCC did not bar the arbitrator from awarding interest pendente lite and affirmed the award passed by the arbitrator. The three Judge Bench of the Court held that the contention raised by the Union of India based on the clause of GCC that the arbitrator could not award interest pendente lite was not a valid contention and the arbitrator was completely justified in granting interest pendente lite. Relying on the three Judge Bench judgment in Union of India v. Ambica Contsruction, (2016) 6 SCC 36 and Irrigation Department v. G.C.Roy, (1992) 1 SCC 508, the Court held that the bar to award interest on the amounts payable under the contract would not be sufficient to deny the payment of interest pendente lite. Raveechee and Company v. Union of India, (2018) 7 SCC 664.

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Appointment of Arbitrator – Limitation

The time limit for filing a petition for appointment of an Arbitrator under Section 11 of the Act has not been provided either under the Act or under the Limitation Act specifically. The request to the Chief Justice or his designate by way of application would fall within the definition of “application” contained in Section 2(b) of the Limitation Act, 1963. Therefore, the Article 137 of the Limitation Act comes into play and the limitation for seeking appointment of an Arbitrator under Section 11 would be three years from the date when the right to apply accrues.
The observations of the Hon’ble Apex Court in S.B.P. and Company v. Patel Engineering Limited, (2005) 8 SCC 618, as explained and clarified in Indian Oil Corporation Ltd. V. S.P.S. Engineering Limited, (2011) 3 SCC 507, makes it clear that the Chief Justice or his designate is competent to decide if the claim sought to be resolved by arbitration is stale or dead or is long time barred though it is not imperative upon him to enter into the said exercise. It can be left to be decided by the Arbitral Tribunal if it appears to be slightly overtime. However, where the claim is evidently and patently dead or long time barred and does not involve entry into disputed questions of fact or evidence, the court may refuse it to refer to arbitration. Thus, it is only in case where there is a genuine dispute regarding limitation and the claim is slightly beyond time that the matter should be left to be adjudicated by the Arbitral Tribunal but not where the claim is apparently barred by limitation. Sureka International v. Union of India, 2014 (5) AWC 5106.

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