Yearbook 2019 - Arbitration Law in India

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Table of
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Table of
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Preface
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Preface
The Year
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Team
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The Year
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Team
Abbreviations
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Chapter 01
APPOINTMENT, CHALLENGE, AND

SUBSTITUTION OF ARBITRATORS
INTRODUCTION
It is cliched and yet bears repetition that party autonomy is central to
most aspects of arbitration. Arguably, the selection of arbitrators is one
of them. Parties are free to choose their arbitrators or how they will be
selected. But this autonomy is not absolute. It comes with restrictions,
and it is now naturally assumed that an arbitrator must be independent
and impartial.1Why must that be so? Well, ‘justice’ depends on it. Only
that judge who treats parties equally is perceived as capable of giving
each party its due.2
1 There is a good amount of literature on the meaning and relationship among independence,
impartiality and neutrality. Many authors consider them linked but distinct concepts. See,
e.g., N. Blackaby et. al. (eds.), Redfern and Hunter on International Arbitration, pg. 267-
268 (5th ed. 2009) (“It is generally considered that ‘dependence’ is concerned exclusively
with questions arising out of the relationship between an arbitrator and one of the parties,
whether financial or otherwise. This is considered to be susceptible to an objective test, be-
cause it has nothing to do with an arbitrator’s (or prospective arbitrator’s) state of mind. By
contrast the concept of ‘impartiality’ is considered to be connected with actual or apparent
bias of an arbitrator – either in favour of one of the parties or in relation to the issues in dis-
pute. Impartiality is thus a subjective and more abstract concept than independence, in that
it involves primarily a state of mind. The same distinction can be found in Black’s Law
Dictionary, which defines ‘impartial’ as ‘unbiased, disinterested’, and ‘independent’ as ‘not
subject to the control or influence of another”.); Diego M. Papayannis, Independence, im-
partiality and neutrality in legal adjudication, http://journals. openedititon.org/revus/3546,
(“The duty of independence consists of resisting any pressure from any of the parties, or
third parties, involved in the dispute. The duty of impartiality, however, imposes on the ad-
judicator a duty to apply her reasoning while leaving aside all prejudices and interests at-
tached to the object of the litigation – and, where necessary stepping aside. Finally, the duty
of neutrality requires the adjudicator to adopt the point of view of the law in her reasoning
and her decision regarding the case. All three duties are necessary for the law to fulfil its
role as a neutral device for social interaction”). “Neutrality” also relates to nationality.
However, it has been used by some to denote independence and impartiality also. See, e.g.,
Voestalpine Schienen GmbH v. Delhi Metro Rail Corpn. Ltd., (2017) 4 SCC 665.
2 See, e.g., Lockabail v. Bayfield Properties, [1999] EWCA Civ 3004 (“All legal arbiters are
bound to apply the law as they understand it to the facts of individual cases as they find
them. They must do so without fear or favour, affection or ill-will, that is, without partiality
or prejudice. Justice is portrayed as blind not because she ignores the facts and circum-
stances of individual cases but because she shuts her eyes to all considerations extraneous
to the particular case”).
1
Appointment, Challenge and Substitution of Arbitrator
Many cases in 2019 on the appointment of arbitrators involve issues of

independence and impartiality. By and large, they deal with situations
where there was an identity between an arbitrator and a party (e.g., the
arbitrator being a current or former employee of a party).
Let us first briefly see how independence and impartiality figure in the
ACA.
(A) THE GENERAL TEST UNDER MODEL LAW, AND THE ACA WHEN
ENACTED IN 1996
The UNCITRAL Model Law was adopted in 1985. Independence and

impartiality were introduced via Article 12 3 by mainly providing for
two things. Firstly, it required a person who is approached for
appointment as an arbitrator to disclose any circumstances likely to give
rise to justifiable doubts as to his independence and impartiality.
Secondly, it provided that an arbitrator may be challenged if
circumstances exist that give rise to justifiable doubts as to his
independence or impartiality.
But the Model Law neither defined nor contained any understanding as to
the standard to be applied when testing independence and impartiality.
If Article 12 appears to contain too general a test, it was meant to be so.
The test was introduced “in keeping with the policy of setting forth
general tests rather than detailed criteria.”4 It was thought that a general
test might
3 Article 12—Grounds for challenge:

1. When a person is approached in connection with his possible appointment as an arbitra-
tor, he shall disclose any circumstances likely to give rise to justifiable doubts as to his
impartiality or independence. An arbitrator, from the time of his appointment and
throughout the arbitral proceedings, shall without delay disclose any such circumstances
to the parties unless they have already been informed of them by him.
2. An arbitrator may be challenged only if circumstances exist that give rise to justifiable
doubts as to his impartiality or independence, or if he does not possess qualifications
agreed to by the parties. A party may challenge an arbitrator appointed by him, or in
whose appointment he has participated, only for reasons of which he becomes aware af-
ter the appointment has been made.
4 Howard M. Holtzmann & Joesph E. Neuhaus, A Guide to the UNCITRAL Model Law on
International Commercial Arbitration, Legislative History and Commentary, pg. 388-389,
Kluwer Law International (2015).
Chapter 01
be appropriate for a model law since they were likely to be more widely
accepted than any single set of specific criteria. It was also thought that
the “formulation covers many, but probably not all, of the specific
reasons cur- rently set forth in national laws.”
The ACA was modeled on the Model Law when it was enacted in 1996.
Section 12 ACA provided the same general formula (circumstances
giving rise to justifiable doubts as to independence and impartiality)
without containing any definition or elaboration. It read as follows: -
12. Grounds for challenge. —

(1) When a person is approached in connection with his possible
appointment as an arbitrator, he shall disclose in writing any
circumstances likely to give rise to justifiable doubts as to his
independence or impartiality.
(2) An arbitrator, from the time of his appointment and throughout the
arbitral proceedings, shall, without delay, disclose to the parties in
writing any circumstances referred to in sub-section (1) unless they
have already been informed of them by him.
(3) An arbitrator may be challenged only if—
(a) Circumstances exist that give rise to justifiable doubts as to his
independence or impartiality, or
(b) He does not possess the qualifications agreed to by the parties.
(4) A party may challenge an arbitrator appointed by him, or in whose
appointment he has participated, only for reasons of which he
becomes aware after the appointment has been made.
A reference to Section 11 (8) ACA will also figure in the 2019 cases.
When the ACA was enacted, this sub-section required that the Chief
Justice or the person or institution designated by him, in appointing an
arbitrator, shall have due regard to (a) any qualifications required of the
arbitrator by the agreement of the parties; and (b) other considerations as
are likely to secure the appointment of an independent and impartial
arbitrator.
(B) APPLICATION OF INDEPENDENCE AND IMPARTIALITY IN INDIA

(BEFORE 2015 AMENDMENTS)
If a test is general, judges have discretion (not to say they do not have
otherwise). How was the discretion exercised and the issues of
independence and impartiality arising under the ACA resolved in the
Indian courts before the 2015 Amendments?
Rather than examining the prodigious volume of case laws (impossible

here), let us accept what the 246 th Report of the Law Commission of
India noted.5 This report had considered the law of arbitration and
suggested, among a host of amendments, “large-scale amendments … to
address this fundamental issue of neutrality of arbitrators”.6
1. An employee of a Party as Arbitrator
The Report tells us that the Indian Supreme Court has tested the issue of
independence and impartiality in the context of contracts with State
entities, which specify as arbitrator a person associated with that entity. 7
Then, after citing to a host of cases, the Report notes in paragraph 56 that
those cases settled, with minor exceptions, the principle that a serving
employee could be an arbitrator. It said, “the balance between
procedural fairness and binding nature of … contracts, appears to have
been tilted in favour of the latter by the Supreme Court”. It found that
the “position of law is far from satisfactory” for “a sensible law cannot,
for instance, permit appointment of an arbitrator who is himself a party
to the dispute, or who is employed by (or similarly dependent on) one
party, even if this is what the parties agreed.”
5A body constituted by the Government of India to recommend legislative reforms. See

http://lawcommissionofindia.nic.in/reports/Report246.pdf.
6 Paragraphs 53 to 60 of the report.
7 This is a reference to State within the meaning of Article 12 of the Constitution of India and
local or other authorities which are considered State instrumentalities.

Chapter 01
This was a comment on the court’s interpretation of independence and

impartiality since statutory law--Section 12 ACA—did require that
those two ‘values’ (independence & impartiality) be present. It was for
the court to determine their content or determine in what circumstance
they were ab- sent.
Why was an employee of a party considered independent and impartial?

Because that relationship was not considered problematic. For instance,
in Indian Oil Corporation Ltd. v. Raja Transport (P) Ltd., (2009) 8 SCC
520, an often-cited 2-judge bench decision of the Supreme Court,
speaking for the court, Raveendran J said that “the fact that the named
arbitrator is an employee of one of the parties is not ipso facto a ground
to raise a presumption of bias or partiality or lack of independence.” The
reason he gave was that in the absence of any specific evidence, you
could not doubt one’s independence and impartiality if he had nothing
to do with the contractor was not a direct subordinate of a person whose
decision was the subject matter of the dispute.
He, however, drew a distinction “where the person named as the

arbitrator is an employee of a company or body or individual other than
the State and its instrumentalities”. He said, in that case, the “position
may be different” and gave an example where a Director of a private
company is named arbitrator. He said “there may be a valid and
reasonable apprehension of bias in view of his position and interest, and
he may be unsuitable to act as an arbitrator in an arbitration involving
his company” and “if any circumstance exists to create a reasonable
apprehension about the impartiality or independence of the agreed or
named arbitrator, then the court has the discretion not to appoint such a
person.”
He then described a “ground reality”: “contractors in their anxiety to
secure contracts from Government/statutory bodies/public sector
undertakings, agree to arbitration clauses providing for employee
arbitrators. But when subsequently disputes arise, they baulk at the idea
of arbitration by such employee arbitrators and tend to litigate to secure
an “independent” arbitrator.” He suggested that “it will be appropriate
if Governments/statutory authorities/public sector undertaking reconsider
their policy providing for arbitration by employee arbitrators in deference
to the specific provisions of
the new Act [referring to the ACA of 1996, pre-2015 Amendments, as

opposed to the 1940 statute] reiterating the need for independence and
impartiality in arbitrators. A general shift may in future be necessary for
understanding the word “independent” as referring to someone not
connected with either party. That may improve the credibility of
arbitration as an alternative dispute resolution process.”
Raveendran J’s response, it clearly appears, was conscious of the
problem but not yet ready to seize it fully. Also, he considered a logic
that a government department has too many people, and an employee
who is not directly involved in the dispute would be able to exercise his
neutral judgment free from any external influence.
As we noted, however, the Law Commission considered the state of the
law on the issue insensible.
(C) THE 2015 AMENDMENTS
The amendments came on 23 October 2015 via an Ordinance followed

by an ‘Act.’8 Now:
1. There was an introduction of the Fifth Schedule. It contains a list of
circumstances and relationships termed as “grounds.” These grounds
are “guide in determining whether circumstances exist which give
rise to justifiable doubts as to the independence or impartiality of an
arbitrator.” Therefore, if any of the grounds under the Fifth
Schedule applies, the arbitrator can be challenged. Often, the
challenging party will require to establish the arbitrator’ ineligibility
with evidence.
2. The Seventh Schedule was also introduced. It sets forth categories of
relationships. Any person whose relationship, with the parties or
counsel or the subject matter, falls under any of the categories
“shall be ineligible to be appointed as an arbitrator.” This is the
rule of automatic
8 The Arbitration and Conciliation (Amendment) Act, 2015; Act 3 of 2016 dated 31 Decem-
ber 2015 published in the Gazette of India (Extraordinary) on 01 January 2016 (Part II, Sec-
tion 1, Number 3). This enactment “shall be deemed to have come into force on the 23 rd
October 2015”.
Chapter 01
disqualification or de jure ineligibility. But the proviso to that section

provides that the ineligibility can be “waived by an agreement in
writing.”
Let us now see what do the schedules lay down on identity between an
arbitrator and a party?
1. An employee of a Party as Arbitrator: A Ground Both for Challenge
and Ineligibility
Items 1 and 5 of the Fifth and Seventh Schedule are relevant. Under Item
1 of the Fifth Schedule, it is a ground of challenge, and under Item 1 of
the Seventh Schedule, it is an automatic disqualification if “the arbitrator
is an employee, consultant, advisor or has any other past or present
business relationship with a party.”
Under Item 5 of the Fifth Schedule, it is a ground of challenge if “the
arbitrator is a manager, director or part of the management, or has a
similar controlling influence, in an affiliate of one of the parties if the
affiliate is directly involved in the matters in dispute in the arbitration.”
2. Former Employee Within the Past Three Years: A Ground for Chal-
lenge
Item 31 of the Fifth Schedule relates to a former employee “who has
been associated within the past three years with a party or an affiliate of
one of the parties, in a professional capacity, such as a former employee
or partner.”
Why should an employee be disqualified from acting as an arbitrator?
There may be several reasons. The first is the principle that no one can be
a judge in his cause. In an employer-employee relationship, irrespective
of any proof of actual bias or prejudice, the law presumes that the
employee cannot have the impartiality or independence necessary to
judge. It is not possible to investigate the mind of the arbitrator, so the
law does not take any risk. It automatically disqualifies that relationship.
Then again, on the same principle, when an employee is an arbitrator, the
law views the agreement as one in which the party itself is the arbitrator.
How can someone identified with a party also be the judge? “Apart from
outraging public policy, such an
agreement is illusory; for while in form it provides for arbitration, in sub-

stance it yields the power to an adverse party to decide disputes under the
contract.”9
(D) TWO DECISIONS AFTER 2015 AMENDMENTS AND BEFORE 2018:
VOESTALPINE AND TRF
Many cases of 2019 involve a discussion of Voestalpine Schienen GmbH

v. Delhi Metro Rail Corpn. Ltd., (2017) 4 SCC 665 (“Voestalpine”) and
TRF Lim- ited v. Energo Engineering Limited, (2017) 8 SCC 377
(“TRF”).
TRF was a 3-judge bench decision of the Supreme Court (Dipak Misra,
A.M. Khanwilkar, and Mohan M. Shantanagoudar JJ) where the
arbitration agreement (of 2014) provided that any dispute “shall be
referred to sole arbitration of the Managing Director of buyer or his
nominee.”
When the court heard the case, given the 2015 Amendments, it was com-
mon ground that the Managing Director was disqualified to act as an
arbitrator. But, could he nominate another person? The court said he
could not. “Once the arbitrator has become ineligible by operation of
law, he cannot nominate another as an arbitrator.” Speaking for the court,
Misra J gave a metaphor of a building and said when the infrastructure
collapses, the su- perstructure is bound to collapse. Also, there cannot be
a building without a plinth.
He distinguished appointment of a sole arbitrator from appointment by
parties of their respective nominees, he said. There is a subtle distinction,
he added. Though he did not elaborate what that subtle distinction was,
he said, “in this regard our attention has been drawn to” a few authorities.
These were cases from administrative law, where considering some
statutes on tenancy and land laws, the Supreme Court had concluded that
an order passed by a delegate is, for certain purposes, an order passed by
the one who delegated.10
9 In Matter of Cross Brown Company, (1957) 4 A.D.2d 501 [167 N.Y.S.2d 573]
10 See,
e.g. Roop Chand v. State of Punjab, 1963 Supp (1) SCR 539, a 5-judge bench decision
which was referred by Misra J. This involved the government’s power to decide an appeal,
Chapter 01
The court emphasized that it was not concerned with impartiality but
with the authority of the Managing Director. However, it did weigh with
the court that a decision by the nominee is by the one who nominates.
As we will see in Perkins (cited infra), the Supreme Court considered the
TRF principle to say that a party or anyone interested can never select the
sole arbitral tribunal.
Voestalpine also requires a brief mention. The arbitration was to be by a
three-member tribunal. They were to be chosen from a list of five
prepared by Delhi Metro—one each by the parties and the chair by the
two. In the list that Delhi Metro prepared, all were retired or serving
employees of other government organizations. Were they disqualified?
The court said no. The reason was that they were neither employees of
Delhi Metro nor its consultant or advisor. But the court held that the
panel must be broad- based.
(E) THE CASE LAW IN 2019
1. Appointment of Former Employee
In January 2019, a two-judge bench of the Supreme Court (Abhay
Manohar Sapre and Indu Malhotra JJ) in Haryana v. GF Toll Road
decided that the arbitrator, a former employee of the State of Haryana,
ten years ago was not disqualified. This case involved the law before
2015 because the 2015 Amendments were held inapplicable. The
argument run, relying on TRF,
which could under the statute be delegated to an officer. The question was whether an order
deciding an appeal is an order of the officer of the government? The court referred to the
source of the power and noted the power can, therefore, be exercised only in terms of the
statute and not otherwise. “It would follow that an order made in exercise of that power will
be the order of the Government for no one else has the right under the statute to exercise the
power. No doubt the Act enables the Government to delegate its power but such a power
when delegated remains the power of the Government, for the Government can only dele-
gate the power given to it by the statute and cannot create an independent power in the of-
ficer. When the delegate exercises the power, he does so for the Government”. The court
also referred to an English authority and relied on the principle of agency (citing to Wills J.
in Huth v. Clarke, LR (1890) 25 QBD 391 “the word delegate means little more than an
agent”) (“An agent of course exercises no powers of his own but only the powers of his
principal”).
was since “the nominee arbitrator was a retired employee of the appellant
State … there may be justifiable doubts to his independence and
impartiality to act as an arbitrator”.
To show a lack of independence or impartiality, GF Toll asserted
reasonable apprehension of bias. Malhotra J tested that argument and
relied on the English Court of Appeal’s decision in Locabail (U.K.) Ltd.
v. Bayfield Properties Ltd., 2000 QB 45111, which had observed that “the
greater the passage of time between the event relied on as showing a
danger of bias and the case in which the objection is raised, the weaker
(other things being equal) the objection will be.” She also cited another
Court of Appeal decision in Porter
v. Magill (2002) 2 AC 357, where, in his separate opinion, Lord Hope of
Craighead discussed the test of bias formulated in the English courts.
Lord Hope articulated the test as: “The question is whether the fair-
minded and informed observer, having considered the facts, would
conclude that there was a real possibility that the tribunal was biased.” 12
Then stepping into the shoes of a fair-minded and informed observer
Mal- hotra J concluded that “the fact that the arbitrator was in the
employment of the State of Haryana over 10 years ago, would make the
allegation of bias clearly untenable”.
Malhotra J then justified the decision from the standpoint of the 2015
Amendments too. She considered the identically worded Entry I of the
Fifth and Seventh Schedules (“The arbitrator is an employee, consultant,
advisor or has any other past or present business relationship with a
party”) and held that the expression “is an ...” refers only to a current
employee. She then interpreted the expression “any other past or present
business relationship” as referring to a relationship other than of an
employee, consultant, or advisor.
Now, after the 2015 Amendments, an employee of a party is
automatically disqualified. Lack of independence or impartiality is
presumed.
11 Referred in the judgment as a decision of the House of Lords.
10
12 Following
the Court of Appeal decision in In re Medicaments and Related Classes of
Goods (No 2) [2001] 1 WLR 700.
11
Chapter 01
2. Enforcing the Agreement (Pre-2015 Statute)

In the chapter, we discuss four decisions of the Supreme Court, i.e.,
Raja- sthan Small Industries, Parmar Construction, Pradeep Vinod, and
CORE (all cited later)13, all of which involved a tribunal comprising of
either serving and officials retired from the employment of one of the
parties. In each of these, the court enforced the agreement of the parties
rejecting arguments based on independence and impartiality. In all
except CORE, the 2015 Amendments were held inapplicable.
In Rajasthan Small Industries Corporation Limited v. Ganesh
Containers Movers Syndicate, (2019) 3 SCC 282, which arose under the
pre-amended law, a 2- judge bench of the Supreme Court (R. Banumathi
and Indira Banerjee JJ) allowed the Managing Director of the appellant,
the arbitrator specified under the agreement whose mandate was
terminated by the High Court, to arbitrate. The court asked if the
arbitrator had become ineligible under Sec- tion 12 after the amendment,
but concluded that the amendments did not apply (because the arbitration
commenced in 2009). The court also said there was no material to show
that the arbitrator had not acted independently or impartially. It also
relied on Indian Oil (see section B1 above) where Raveendran J had
concluded that “the legislative intent is that the parties should abide by
the terms of the arbitration agreement.”
Union of India v. Parmar Construction Company, 2019 SCC OnLine SC
442 was a bunch of petitions for appointment of arbitrator, where the
court authorized arbitration under the contractual mechanism in which
the tribunal was to consist of a mix of serving and retired Railways
officers.
13 Geo Miller & Co. Pvt. Ltd. v Rajasthan Vidyut Utpadan Nigam Ltd., 2019 SCC OnLine
SC 1137, a 3-judge bench decision in September 2019, also involved an application for ap-
pointment. Here the Chairman of the respondent electricity board had the power to decide
the dispute himself or appoint another person to arbitrate. It does not appear that any argu-
ment as to impartiality and independence was raised. The issue in focus was limitation to
file an application under Section 11 ACA. It is discussed under the chapter Time Limita-
tions.
The standard General Conditions of Contract, which applied to each

case, gave the General Manager of Railways the power to appoint two
arbitrators, including the presiding arbitrator in the following manner:
(i) The tribunal was to consist of three serving railways officers or two
serving railway officers plus one retired officer.
(ii) The Railways had to send a panel of names to the contractor.
(iii) The contractor had to choose at least two names, from which one
was to be appointed by the General Manager, Railways, as the
contractor’s nominee.
(iv) The General Manager was then to appoint the remaining two arbitra-
tors from the panel or outside, also indicating the presiding arbitrator.
The court considered the question of applicability of the 2015
Amendments but held, following Aravali Power Company Private
Limited v. Era Infrastructure Engineering Limited, (2017) 15 SCC 32
that they did not apply. The agreement was upheld because “emphasis
should always be on the terms of the arbitration agreement to be
adhered to or given effect as closely as possible.”
It said where impartiality was in doubt an independent arbitrator could be
appointed under Section 11(6) (pre-2015 Amendments) but “in the
present batch of appeals, independence and impartiality of the arbitrator
has never been doubted.”
Parmar was followed by a 3-judge bench of the Supreme Court in Union
of India v. Pradeep Vinod Construction Company, 2019 SCC Online SC
1467 (R. Banumathi, A.S. Bopanna and Hrishikesh Roy JJ) which too
concerned a contract awarded by Railways. The 2015 Amendments were
held inapplicable, and speaking for the court, Banumathi J emphasized
on the procedure set out in Contract and lack of evidence as to
independence and impartiality.
It will follow from these judgments---the court’s emphasis on the terms
of the agreement and lack of evidence supporting the claim of
dependence and partiality—that the court perceived the contract as
binding and not leaving a choice. These decisions follow the rule stated
12
by Raveendran J.
13
Chapter 01
In these cases, the court wanted evidence of a lack of independence and

impartiality. Did the court have choices? Could the court, for example,
have ascribed content to ‘independence’ and ‘impartiality’ relying on the
Fifth and Seventh Schedule? Even if they were inapplicable, were these
new norms or something which already inhered in those terms?
These matters were not examined. It also does not appear that the court
addressed concerns that are contained in principle “no one can be a judge
in his own cause.” The court also did not examine the effect of Section
12 (5), which “wipes out” all prior contrary agreements if the Seventh
Schedule applies.
CORE is discussed below after Perkins.
3. One Party Choosing the Sole Member Tribunal Not Allowed
Easily, Perkins is one of the most recognized judgments of 2019. In
Perkins, too, just like in TRF, the tribunal was to be of a sole arbitrator.
While in TRF, a party’s Managing Director or his nominee was to act as
the sole arbitrator in Perkins, the Chairman & Managing Director of a
party had the right to appoint/nominate one.
The court said it was a logical deduction from TRF that a person who has
an interest in the outcome or decision of the dispute must not have the
power to appoint a sole arbitrator. The court noted that this was the es-
sence of the 2015 Amendments and recognized by the TRF case.
The basis was that if an employee of a party is the arbitrator, his interest
in the outcome is apparent. He would not be independent or impartial.
How can then a person appointed by that interested person be
independent or impartial? In other words, while a lack of independence
and impartiality of an employee is presumed as a matter of law, Perkins
extended that presumption to someone, no matter who, who is
appointed by that interested party.
In this discussion, the academic reader will perhaps be interested in three
decisions of the Delhi High Court. All involved the question like in
Perkins but had oppositely answered them.
In D. K. Gupta and another v. Renu Munjal, 2017 SCC OnLine Del
12385, Yogesh Khanna J, sitting singly, considered an arbitration clause
that gave
one party the “choice” to appoint an arbitrator. This clause, the court
said, had a “striking difference” with the TRF case. The court concluded
that no bar under the ACA restrained a party from appointing a sole
arbitrator.
In Bhayana Builders v. Oriental Structural Engineers Pvt. Ltd., 2018
SCC OnLine Del 7634, Naveen Chawla J had a similar case before him.
The Managing Director of one party had appointed the sole arbitrator
following the agreement. The mandate was challenged on the ground that
the clause was no longer enforceable after TRF. Chawla J noted D. K.
Gupta's judgment but said he would write his own because it was argued
that D. K. Gupta erroneously relied on TRF’s passage where only what
the judge in the preced- ing court had said was set out.
Chawla J gave nine reasons to conclude that the TRF principle cannot be
extended to suggest that an agreement vesting one party a right to select a
sole member tribunal directly was unenforceable. Among those, he held
that the right of one party to select the tribunal directly has been in exist-
ence and upheld for a long time. He also held that an arbitrator is not the
agent of the party appointing him.
In the end, Chawla J added a cautionary note. He said that, while
upholding right of a party to appoint a sole arbitrator if so agreed, “ I
must emphasize that the burden on ensuring that the person so appointed
shall not fall foul of any of the provisions of the Fifth or Seventh
Schedule of the Act will be even higher and open to a greater scrutiny.
The spirit behind the amendment to the Act shall always have to be
kept in mind while appointing the Arbitrator or considering any
challenge thereto. The Arbitrator so appointed should also remain alive
to the great responsibility being vested on him due to such appointment
and must not even leave an iota of doubt on his neutrality or
impartiality.”
In August 2019, Sanjeev Narula J decided a similar matter in Kadimi
International Pvt. Ltd. v. Emaar MGF Land Limited, 2019 SCC OnLine Del
9857. He referred to both D.K Gupta and Bhayana Builders and the fact that
Bhayana Builders is in a challenge before the Supreme Court in SLP No.
14
7161-7162/2018 (where arbitration proceedings have been stayed) but
considered that ratio of Bhayana Builders had not been unsettled. Narula J
also rejected the argument that the
15
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arbitration clause was unfair and unreasonable and was between the parties
not having equal bargaining powers. Among others, he relied on Section 11
(6A) under which only the question of the existence of arbitration agreement
was to be examined. He also cited to Parmar and noted that if parties had
willingly agreed to confer rights to one, it must be upheld.
He said, “no doubt, Courts have now consistently proceeded to appoint
an independent Arbitrator in situations where the arbitration clause is in
conflict with the amended Arbitration Act. However, the unilateral right
of party to appoint an Arbitrator has not been done away with. By way
of Amendment Act of 2015, the legislature has not denuded or
extinguished a contracting party's right to make an appointment. Only,
the appointment of a person who is ineligible to be an Arbitrator under
Section 12 (5) read with Schedule VII of the Act has been held to be void
and the objections regarding terms of contract being unfair or
unreasonable would have to be gone into during the course of
Arbitration. In TRF Ltd. (supra), the observations of the Court holding
that the Managing Director to be ineligible to act as the Sole Arbitrator,
has to be appreciated in the context of the arbitration clause therein. The
judgment of Supreme Court in TRF Ltd. (supra) cannot be stretched or
expanded so as to include such clauses that purely confer the right of
appointment to one of the contracting parties”.
4. Principles Summarised and Followed
G.S. Patel J of the Bombay High Court summarised in Lite Bite (cited
infra) the principles from TRF, Voestalpine, and Perkins. G.S. Kulkarni J
applied those Supreme Court cases in ITD Cementation (cited infra).
5. Perkins Distinguished and Agreement Followed
Within less than a month from Perkins, in CORE, a 3-judge bench of the
Supreme Court again followed the contractual mechanism of
appointment of an arbitral tribunal. In CORE, the Supreme Court
distinguished TRF and Perkins and allowed the arbitration by a panel of
serving and retired employees.
The discussion on CORE later in this Chapter sets out in detail the
arbitration clause, the matters raised, and the reasoning of the court.
CORE has been distinguished, and Perkins applied in Proddatur Cable

TV Digi Services v. Siti Cable Network Limited., (2020) SCC OnLine
Del 350, a Delhi High Court decision by Jyoti Singh J.
6. Nature of the Seventh-Schedule Ineligibility. Prior Agreements Wiped
Out. Waivable Only by an Express Agreement in Writing after Dispute
Arises.
On 08 April 2019, the Supreme Court heard arguments in Bharat
Broadband Network Ltd. (BBNL) v. United Telecoms Ltd., (2019) 5 SCC
755 (R.F. Nariman and Vineet Saran JJ). The judgment was delivered on
16 April 2019.
The case raised “an interesting question as to the interpretation of”
Section 12(5) ACA.
The agreement in the case conferred on the Chairman & Managing
Direc- tor of BBNL the right to appoint an arbitrator. The CMD
appointed one Mr. K.H. Khan in January 2017. In July 2017, the
judgment in the TRF case was delivered, holding that a person who was
ineligible to act as an arbitrator could not even appoint another.
BBNL now wanted its nominee, sole arbitrator, to step down. It
communicat- ed to him that the TRF principle was a declaration of what the
law already was, and therefore, earlier appointments were not saved. The
request was rejected. BBNL’s petition in the High Court was also rejected
on the ground that the objection had been waived under the proviso to
Section 12 (5) ACA.
R.F Nariman J authoring the judgment in the Supreme Court neatly sum-
marised the “scheme of Sections 12, 13 and 14” as well as the disclosure
and challenge procedure. He gave effect to the non-obstante text of
Section 12 (5) ACA (“notwithstanding any prior agreement to the
contrary …”) and held that any prior agreement to the contrary is wiped
out the moment any person whose relationship with the parties or counsel
or the subject-matter of the dispute falls under the Seventh Schedule. He
considered the nature of waiver under the proviso of Section (5) ACA
and concluded that it must be one expressed in writing with specific
reference to the arbitrator.
16
7. Termination of Mandate
In Jayesh (cited infra), the mandate terminated when extension was not
granted.
17
Chapter 01
GOVERNMENT OF HARYANA PWD HARYANA (B AND R BRANCH) V.

G.F. TOLL ROAD PRIVATE LIMITED AND OTHERS (2019) 3 SCC 505
Supreme Court of India; 2-judge bench, Abhay Manohar Sapre & Indu
Malhotra JJ; decided on 03 January 2019
Former employment (around ten years before) with a party to an arbitration

is not a ground for disqualification of an arbitrator
(A) THE ARBITRATION CLAUSE—ARBITRATION BY BOARD OF THREE;
EACH PARTY TO APPOINT ONE. THE STATE APPOINTED A FOR-
MER EMPLOYEE
The contract between the parties provided a resolution of disputes by a

board of three arbitrators. Both parties were to select one nominee each,
and the “third arbitrator shall be appointed in accordance with the Rules
of Arbitration of the Indian Council of Arbitration (“Council”).
Disputes arose, and both parties nominated one arbitrator each. The State
nominated a former employee who had retired around ten years ago.
Both
G.F. Toll and the Council objected urging there would be “justifiable
doubts with respect to his integrity and impartiality to act as an arbitrator.”
(B) APPOINTMENT BY THE COUNCIL
The State requested thirty days to substitute its nomination, but the
Council informed it had already made an appointment on behalf of the
State (and also appointed the presiding arbitrator).
(C) STATE’S CHALLENGE DISMISSED
The State “filed an application under Section 15 [ACA]” and an
application under Section 16 ACA asking the tribunal to rule on its
jurisdiction.
The District Court rejected the application concluding that the matter
should be raised before the tribunal. The High Court dismissed the
revision petition.
(D) THE SUPREME COURT’S DECISION
The court considered two issues: (i) the manner of substitution of State’s
nominee arbitrator; and (ii) appointment of a former employee.
1. Procedure for Substitution of Arbitrator

The court concluded that the appointment by the Council of State’s nominee
arbitrator was unjustified and contrary to the Rules of the Council itself be-
cause: -
(i) Firstly, the High Court failed to take note of Section 15(2) ACA,
which requires that the procedure for appointment of a substitute
arbitrator must be the same as that of the appointment of the original
arbitrator. This is so even if the agreement does not expressly
provide for it [citing to ACC Ltd. v. Global Cements Ltd., (2012) 7
SCC 71]. But here, in any case, the agreement specifically provided a
procedure.
(ii) Secondly, therefore, the Council could not have filled the vacancy
unless the State showed no intention of doing so. The Council
could not have usurped the State’s jurisdiction to appoint a substitute
arbitrator before thirty days (the time requested by State to make a
substitution).
2. Appointment of a Former Employee—Not Prohibited Under ACA
The court concluded that the State’s former employee was not
disqualified from acting as an arbitrator.
a. The test of bias
First, the court examined the argument of bias and noted the test to be
applied, that is, whether the circumstances are such as would lead to a fair-
minded and informed person to conclude that the arbitrator was, in fact,
biased.
It referred to two judgments: a judgment of “House of Lords” (sic Court of
Appeal) in Locabail (U.K.) Ltd. v. Bayfield Properties Ltd., (2000) 1 All ER
65 (CA), where the court had observed that greater the passage of time
between the event relied on and the objection, the weaker the objection will
be (other things being equal); and, Porter v. Magill, (2002) 2 AC 357,
where while dealing with the “real danger” test for bias it was held that
“[t]he question is whether the fair- minded and informed observer, having
considered the facts, would conclude that there was a real possibility that
the Tribunal was biased.”
18
The court concluded that the fact that the arbitrator was in the
employment of the State of Haryana over ten years ago made the
allegation of bias untenable. It also later said the mere allegation is not
enough.
19
Chapter 01
b. No prohibition under the ACA; interpretation of Item 1 of Fifth/Seventh

Schedule
The court then noted that the ACA does not disqualify a former
employee from acting as an arbitrator if there are no justifiable doubts as
to his independence and impartiality.14
Though the court said pre-2015 Amendments governed the case, it exam-
ined the arguments based on the 2015 Amendments too. It considered
En- try 1 of the Fifth Schedule: -
“Arbitrator’s relationship with the parties or counsel
1. The arbitrator is an employee, consultant, advisor or has any other
past or present business relationship with a party.” (emphasis in the
judgment)
It then concluded that: -
(i) The words “is an” and “any other” in Entry 1 of the Fifth Schedule
indicates that neither should the arbitrator be a present or current em-
ployee, consultant or advisor of the party nor should it have a past or
present business relationship with the party.
(ii) The word “other” used in Entry 1 indicates that it covers a
relationship other than that of an employee, consultant, or advisor,
but cannot be widened to mean former employees.
Eventually, the mandate of the three-member tribunal was terminated be-
cause the parties mutually agreed to have their dispute resolved by a sole
arbitrator.
14 This is a reference to Section 12(3) of the ACA before the 2015 Amendments:
“(1) When a person is approached in connection with his possible appointment as an arbi-
trator, he shall disclose in writing any circumstances likely to give rise to justifiable doubts
as to his independence or impartiality.
(3) An arbitrator may be challenged only if:-
(a) Circumstances exist that give rise to justifiable doubts as to his independence or impar-
tiality, or
(b) He does not possess the qualifications agreed to by the parties”.
RAJASTHAN SMALL INDUSTRIES CORPORATION LIMITED V. GANESH

CONTAINERS MOVERS SYNDICATE (2019)
3 SCC 282
Supreme Court of India; 2-judge bench, R. Banumathi & Indira
Banerjee JJ; decided on 23 January 2019
Appointment of an arbitrator must be following the term of the agreement, and
substitution by the rules by which the arbitrator was originally appointed
(A) THE HIGH COURT TERMINATED THE MANDATE AND APPOINTED

AN ‘INDEPENDENT’ ARBITRATOR
The contract between the parties provided for arbitration by the

Chairman- cum-Managing Director (“CMD”) of RSICL or a person
nominated by him.
Disputes arose, and arbitration by a sole arbitrator appointed by the CMD
commenced in 2005. Since “the progress of the sole arbitrator was not
satisfactory,” he “was removed” in March 2009 at the “joint request of
the parties.”15 Then the CMD began to arbitrate. The records of the case
were reconstructed, and final arguments heard in part. Then Ganesh
wanted to go back to the original arbitrator, but later reposed faith in the
CMD, then was not represented on some dates, and some hearings were
spent on clari- fications. By this time, it was August of 2011.
In July 2013, Ganesh sent a notice saying there was a settlement in April
2011 despite which no award had been passed. RSICL denied there was
any settlement. In May 2015, Ganesh filed an application in the High
Court under Section 11(6) and Section 15 ACA seeking appointment of
an “independent arbitrator.” The CMD then notified the parties of a
hearing, but Ganesh did not appear on the ground that its petition was
pending. An award was passed ex parte while the matter was pending.
15 Itappears RSICL passed an order removing the arbitrator. It is not clear from the judgment
under what procedure was this done.
20
Chapter 01
The High Court allowed the application and appointed a retired judge as
sole arbitrator.16
(B) THE SUPREME COURT
1. Abide by the Terms of the Contract. Cannot Turn Around on the
Agreement
The first question framed by the court was: “[I]n deviation from the
terms of the agreement, whether the respondent was right in filing
arbitration petition under Section 11 of the Arbitration Act?” 17 The
court concluded that
16 According to the Supreme Court, the High Court held “that the respondent contractor had to
approach the High Court due to prolongation of the matter before the sole arbitrator who
kept on changing one after another and only after the notice of the arbitration petition was
served upon the appellant Corporation, the arbitrator speeded up the proceedings and the ex
parte award was passed … without hearing the respondent contractor. The High Court was
of the view that the arbitrator hurried up to conclude the proceedings with a view to frus-
trate the arbitration application”.
A review of the judgment of the High Court, delivered on 22 April 2016, reveals that Mo-
hammad Rafiq J, sitting singly discussed several issues. Among others, he relied on North-
ern Railway Administration, Ministry of Railway, New Delhi v. Patel Engineering Compa-
ny Ltd., (2008) 10 SCC 240 for the proposition that “[I]nvariably the court should first ap-
point the Arbitrators in the manner provided for in the arbitration agreement…but where
the independence and impartiality of the Arbitrator/s appointed/nominated in terms of the
arbitration agreement is in doubt, or where the Arbitral Tribunal appointed in the manner
provided in the arbitration agreement has not functioned and it becomes necessary to make
fresh appointment”. He noted that under Section 11 (8) ACA, it was necessary to “have
“due regard” to the two cumulative conditions relating to qualifications and other consider-
ations as are likely to secure the appointment of an independent and impartial arbitrator”.
He explained what “due regard” meant. He then referred to Union of India v. Uttar
Pradesh State Bridge Corporation Limited, (2015) 2 SCC 52 for the proposition that “when
there is a failure on part of Arbitral Tribunal to act and it is unable to perform its function
either de jure or de facto, it is open to a party to arbitration proceedings to approach the
Court to decide on termination of its mandate and seek appointment of substitute
arbitrator”. He then examined the facts closely and noted nothing happened for a long time
and then proceedings were expedited with whatever material was on record and an ex
parte award passed to ‘frustrate’ the petition. He also noted the 2015 Amendments, the
Fifth Schedule and the Seventh Schedule and ultimately concluded that in the peculiar facts
of the case the arbitrator had lost his mandate.
17 This question was framed at another earlier paragraph as follows: “Whether the respondent
was right in approaching the High Court under Section 11 read with Section 15 ACA for
appointment of a substitute arbitrator under section 11 of the ACA even as the arbitration
was pending”.
“having participated in the entire arbitration proceedings and acquiesced

in the proceedings, Ganesh was estopped from challenging the
competence of the arbitrator.”
These were the court’s reasons: -
(i) First, the court said, “[i]n order to appreciate the points, it is
necessary to refer to the details of various proceedings before the
arbitrator, before the respondent contractor approached the High
Court.” It then closely looked at the facts.
(ii) Then the court referred to a clause in the contract under which: -
“parties have agreed that all disputes and differences arising out of or
in any way concerning the contract, shall be referred to the Managing
Di- rector himself or his nominees for the sole arbitration and that
there will be no objection to any such appointment on the ground that
the person so appointed is an employee of the Corporation and that
he has dealt with the matter to which the contract relates”.
(iii) The court then said that having agreed to this clause consciously and
having participated in the arbitral proceedings for quite some time,
Ganesh “cannot turn round and seek for appointment of an independ-
ent arbitrator.”
(iv) The court cited Indian Oil Corpn. Ltd. v. Raja Transport (P) Ltd.,
(2009) 8 SCC 520. It reproduced two passages from it and
emphasized this sentence “[T]he legislative intent is that the parties
should abide by the terms of the arbitration agreement.”
(v) The court also observed that Ganesh did not place any material to
show that the arbitrator had not acted independently or impartially.
2. The 2015 Amendments Do Not Apply
The question was: “whether by virtue of section 12 as amended by the
2015 amendments, the managing director has become ineligible to act?”
The court did not apply the 2015 Amendments because arbitration had
commenced earlier in 2009 [citing to Aravali Power Company Limited v.
22
Era
23
Chapter 01
Infra Engineering Limited, (2017) 15 SCC 32 and Board of Control for

Cricket in India v. Kochi Cricket Private Limited, (2018) 6 SCC 287].
Similarly, TRF Limited v. Energo Engineering Projects Limited, (2017)
8 SCC 377 was held not applicable as it was based on the amended law.
3. Substitution Can Only be Under the Rules Applicable to Original
Ap- pointment
The court held that delay in passing the award or neglect of an arbitrator
was not a ground of removal, and substitution can only be made only
under the rules applicable to the appointment of the arbitrator being
replaced: -
(i) The court first distinguished Union of India v. Uttar Pradesh State
Bridge Corporation Limited, (2015) 2 SCC 52, which was relied on
by the High Court and cited by Ganesh. It said that the delay in
passing the award, in that case, was found intentional. In this case,
proceedings continued till August 2011, after which it was deferred
because the arbitrator noted that “file regarding arbitration appears
tampered/missing papers are incomplete and therefore the
chronological events need to be ascertained, and reconstitution will
be required.” It is true the court remarked that there was some delay
in passing the award. However, between 2011 and 2013, Ganesh,
too, did not file any application.
(ii) The court then referred to the following passage from Law Relating
to Arbitration and Conciliation, 09th Edn., P.C. Markanda, pg. 620 at-
tributed to Russell on Arbitration, 20th Edn: -
“Mere neglect of an arbitrator to act, as distinct from refusal or inca-
pacity, does not of itself give the court power to appoint another arbi-
trator in his place. It does, however, give the court power to remove
him, whereupon there is a power to replace him.”
(iii) It then referred to two cases on the point that under Section 15 (2)
ACA, the substituted arbitrator must be appointed under terms appli-
cable to the original appointment [SBP & Co. (2) v. Patel Engg. Ltd.,
(2009) 10 SCC 293; Yashwith Constructions (P) Ltd. v. Simplex
Concrete Piles (India) Ltd., (2006) 6 SCC 204]. It concluded
relying on Yashwith that
Section 11 “would come into play only when there was failure to ap-
point an arbitrator in terms of the arbitration agreement”.
4. What Remedy is Available to Ganesh?
The court observed the arbitrator should not have passed the award ex
parte, especially when the matter was pending before the High Court.
Not only was it not clear whether the records had been reconstructed, but
Ganesh had not been given a reasonable opportunity to be heard.
Exercising its powers under Article 142 of the Constitution, the court set
aside the award and ordered that the “present Managing Director” shall
continue the proceedings “and afford sufficient opportunity to both the
parties to adduce further evidence and to make oral submissions and pass
the final award within a period of four months”.
24
Chapter 01
BHARAT BROADBAND NETWORK LTD. V. UNITED TELECOMS LTD.

(2019) 5 SCC 755
Supreme Court of India; 2-judge bench, R.F. Nariman and Vineet
Saran JJ; decided on 16 April 2019
The argument of de jure inability can be brought up for one’s own nominee
arbitrator too. Waiving automatic disqualification of the Seventh Schedule
requires an express agreement in writing with reference to the arbitrator in
ques-
tion.
(A) APPOINTMENT OF THE ARBITRATOR BY BHARAT’S CHAIRMAN
Bharat had floated a tender for a project in which United was the
successful bidder. Under the arbitration clause of their agreement’s
general conditions (“GCC”), the Chairman and Managing Director
(“CMD”) or his nominee was to be the sole arbitrator. Certain disputes
arose, and United invoked arbitration. In January 2017, Bharat’s CMD
appointed one Mr. K.H. Khan as the sole arbitrator.
(B) THE JUDGMENT IN TRF
On 03 July 2017, the Supreme Court’s judgment in TRF Ltd. v. Energo
Engi- neering Projects Ltd., (2017) 8 SCC 377 was delivered in which a
3-judge bench concluded that since the Managing Director of one of the
parties was ineligible to act as an arbitrator, he was ineligible even to
nominate one.
(C) BHARAT REQUESTS MR. KHAN’S WITHDRAWAL. HE REFUSES.
BHARAT GOES TO THE HIGH COURT
Based on TRF, Bharat now applied before the arbitrator seeking his with-
drawal. Mr. Khan rejected the application. Bharat then filed a petition
under Sections 14 and 15 ACA in the High Court of Delhi for the
appointment of a substitute arbitrator on the ground that Mr. Khan had
become de jure incapable of performing his functions.
(D) NAVIN CHAWLA J REJECTS THE PETITION—APPLIES ESTOPPEL,
WAIVER, SPEEDY RESOLUTION CONCEPT
Navin Chawla J, sitting singly, rejected the petition. He held that the
objection had been waived by both parties (by participating in the
proceedings and exchanging pleadings) and that to “allow [Bharat] to
raise issue of eligi-
bility of the arbitrator, having itself appointed him, would clearly run
counter to the object of the Act and, hence, cannot be allowed.” He also
noted that TRF merely applied Section 12 (5) ACA and Bharat could not
claim ignorance of that provision “when it had proceeded to appoint the
arbitrator and then turn around to challenge the appointment once it
finds that the arbitration proceedings are not taking the direction it
would like.”
(E) THE SUPREME COURT’S DECISION18
Firstly, the court started by referring to: -
(i) Sections 4; 11 (8); 12 (1), (2) to (5); 13; 14 ACA post-2015
Amendments.
(ii) Three Supreme Court judgments which earlier dealt with Section 12
(5), viz., Voestalpine Schienen GmbH v. DMRC Ltd., (2017) 4 SCC
665; HRD Corpn. v. GAIL (India) Ltd., (2018) 12 SCC 471; and
TRF.
1. Disclosure and Challenge Procedure
Secondly, the disclosure and challenge procedure was summarised which
the court said was clear “from a conspectus of the above decisions” (that
is, the arbitrator was required to make a disclosure, the appointment may
be challenged before him, arbitrator was required first to decide the
challenge, which if rejected could be a ground taken only at the set-aside
stage).
2. All Prior Agreements Hit by Seventh Schedule Wiped Out Except if
Waived Under Section 12 (5) ACA
Thirdly, the court referred to Section 12 (5) ACA and the scheme of
ineligibility set out in that section and explained the way it could be
waived. It said: -
(i) Any prior agreement to the contrary is wiped out by the non-
obstante
clause in Section 12 (5) the moment any person whose relationship
26
18 The court issued notice in January 2018 but did not stay the arbitration proceedings which
resulted in two awards against Bharat. They were challenged in Section 34 ACA proceed-
ings in the High Court and were pending at the time of this decision. Since the court decid-
ed that the mandate of the arbitrator terminated, the awards were set aside.
27
Chapter 01
with the parties or the counsel or the subject-matter of the dispute

falls under the Seventh Schedule. That person becomes ineligible.
(ii) The ineligibility can be removed only under the proviso, after
disputes having arisen, by waiving applicability of Section 12(5) by
an express agreement in writing. “Express agreement in writing” has
reference to a person who is interdicted by the Seventh Schedule, but
notwithstanding that who is stated by parties (after the disputes have
arisen between them) to be a person in whom they have faith.
Fourthly, the court then referred to the discussion in the Law Commission’s
Report on waiver of ineligibility under the proviso of Section 12 (5) ACA: -
(i) The court said the report “makes it clear that that there are certain
min- imum levels of independence and impartiality that should be
required of the arbitral process, regardless of the parties’ agreement.”
(ii) It extracted two passages where the Commission had reported that
“genuine party autonomy must be respected” but in certain
situations, “parties should be allowed to waive even the categories of
ineligibility as set in the proposed Fifth Schedule.” This, the
Commission had reported, “could be in situations of family
arbitrations or other arbitrations where a person commands the
blind faith and trust of the parties to the dispute.” The court
emphasized on this passage.
3. Scheme of Sections 12, 13, and 14. The Manner of Waiver
Under Section 12 (5) Contrasted with Section 4 ACA.
Fifthly, then, the court summarised the “scheme of Sections 12, 13
and 14” and contrasted the concept of waiver by conduct in Section 4
ACA with a waiver by express agreement in writing in the proviso to
Section 12 (5): -
(i) Where an arbitrator makes a disclosure in writing, which is likely to
give justifiable doubts as to his independence or impartiality, the
appointment may be challenged under Sections 12(1) to 12(4) read
with Section 13.
(ii) However, where such a person becomes “ineligible,” there is no

question of challenge before such arbitrator. In such a case, that is,
a case which falls under Section 12(5), Section 14(1)(a) ACA gets
attracted as the arbitrator becomes unable to perform his functions as
a matter of law (i.e., de jure) and ineligible.
(iii) This being so, his mandate automatically terminates, and another
arbitrator shall then substitute him under Section 14(1) itself. It is
only if a controversy occurs concerning whether he has become de
jure unable, that a party must apply to the court to decide on the
termination of the mandate unless otherwise agreed by the parties.
(iv) A question as to waiver under the proviso to Section 12(5) ACA may
arise. Section 12(5) must be contrasted with Section 4, which deals
with cases of deemed waiver by conduct, whereas the proviso to
Section 12(5) deals with a waiver by express agreement in writing
between the parties only if made after disputes having arisen between
them.
Sixthly, the court then turned to the TRF case and its impact on this case,
and held that the after TRF the appointment of Mr. Khan was void since
inception: -
(i) After TRF, which held that an appointment made by an ineligible
person is itself void ab initio, it became clear beyond doubt that the
appointment of Mr. Khan would be void ab initio since such
appointment goes to “eligibility,” i.e., to the root of the matter.
(ii) TRF nowhere states it will apply only prospectively.
Seventhly, the court rejected the argument that Section 12 (4) ACA
barred Bharat’s application. The court held. Section 12 (4) applies only
when a challenge is made to an arbitrator and has no applicability to an
application made to the court under Section 14 (2) to determine whether
the mandate of an arbitrator has terminated on de jure inability.
4. The meaning of Express Agreement in Writing Under Section 12 (5)
28
Chapter 01
Lastly, the court discussed the “applicability of the proviso to Section

12(5) on the facts of this case” and explained the meaning of “express
agreement in writing”: -
(i) (Rejecting the High Court’s reliance on Section 7 ACA) Section 7
deals with arbitration agreements that must be in writing, and then
explains that such agreements may be contained in documents which
provide a record of such agreements. On the other hand, Section
12(5) refers to an “express agreement in writing.” The expression
“express agreement in writing” refers to an agreement made in words
as opposed to an agreement which is to be inferred by conduct.
(ii) Here, Section 9 of the Contract Act, 1872, becomes important. It
states:
“9. Promises, express and implied. —Insofar as the proposal or ac-
ceptance of any promise is made in words, the promise is said to be
express. Insofar as such proposal or acceptance is made otherwise
than in words, the promise is said to be implied.”
(iii) It is thus necessary that there be an “express” agreement in writing.
This agreement must be an agreement by which both parties, with
full knowledge of the fact that Shri Khan is ineligible to be appointed
as an arbitrator, still go ahead and say that they have full faith and
confidence in him to continue as such.
(iv) The facts of the present case disclose no such express agreement.
The appointment letter is pre-TRF. Mr. Khan's invalid appointment
became clear after TRF on 03 July 2017. Filing statement of claim
would not mean there is an express agreement in words.
UNION OF INDIA V. PARMAR CONSTRUCTION COMPANY 2019 SCC

ONLINE SC 442
Supreme Court of India; 2-judge bench, A.M. Khanwilkar and Ajay
Rasto- gi JJ; decided on 29 March 2019
Appointment of arbitrator must be following the terms of the agreement
(A) APPOINTMENT OF INDEPENDENT ARBITRATOR BY THE HIGH

COURT
This matter concerned construction contracts awarded by the Railways
where the arbitration clause—found in the General Conditions of
Contract (“GCC”) at Clause 64--gave the General Manager of Railways
substantial powers in appointment of the arbitral tribunal which was to
consist of serving and retired employees of Railways. 19
A bunch of petitions was before the Supreme Court in the context of dis-
putes involving payment of escalated costs and delay. The contractors
had first sent a notice to appoint an arbitrator under the arbitration clause.
The Railways resisted in each case the submission of dispute on the
ground that a no-dues/no-claim certificate had already been furnished by
the contractors and accord and satisfaction reached. Each contractor
filed an application under Section 11(6) ACA for appointment of
arbitrator.
The High Court applied the 2015 Amendments and appointed an inde-
pendent arbitrator. It also held that the issue of no-claim was arbitrable.
The contractors approached the Supreme Court.
19 (a) Where the value of claims did not exceed Rupees twenty-five lakh: One Gazetted Of-
ficer of Railway nominated by the General Manager as sole arbitrator. (b) Where the value
exceeded that sum, as presumably in this case: three serving railways officers or 2 serving
railway officers plus one retired officer. Railway to send a panel of names to contractor.
Contractor to choose at least two names, from which one to be appointed (by General Man-
ager, Railways) as contractor’s nominee. The General Manager to appoint the remaining
two from the panel or outside it, also indicating the presiding arbitrator.
30
Chapter 01
(B) IN THE SUPREME COURT

1. The Pre-Amended Provisions Applied Not the 2015 Amendments
The court concluded that the 2015 Amendment, which came into force
on 23 October 2015 shall not apply to the arbitral proceedings which
commenced before that date unless the parties otherwise agree. Here,
“the request was made” before 23 rd October; hence the 2015
Amendments do not apply.20
2. Signing the No-Claim Certificate Did Not Discharge the Arbitration
Agreement
The contractors had furnished no-claim certificate and received payment
of final bills. Did any dispute subsist? The court said yes:
(i) First, it referred to the “plenitude of decisions of this Court” and con-
cluded that “the aforesaid cases fall under two categories,” that is,
where on facts the court found that there was no substance in the
allegations of coercion/undue influence, and where it found that
there was.
(ii) Second, the court cited to National Insurance Company Limited v.
Boghara Polyfab Private Limited, (2009) 1 SCC 267 and reproduced
the illustrations set out at paragraph 52 of that case as to when
claims are ‘arbitrable’ and when they are not.
20 The law on applicability of the 2015 Amendments has been clarified in the 2-judge bench
decision in BCCI v. Kochi, (2018) 6 SCC 287, which was approved in HCC v. Union of India,
2019 SCC OnLine SC 1520, a 3-judge bench case. See, however, Anchit Oswal and Akshay
Mahajan, Supreme Court Rules on the applicability of Amendments to Arbitration and Concil-
iation Act: What is still not Clear?,https://www.mondaq.com/india/Litigation-Mediation-
Arbitration/686352 Supreme-Court-Rules-On-The-Applicability-Of-Amendments-To-
Arbitration-And-Conciliation-Act-What-Is-Still-Not-Clear
(iii) Third, the court on the facts of the case concluded that illustration
(iii) in paragraph 52 of Boghara21 covers the cases of the contractors.
They acted in financial/economic duress.
3. The High Court Was Not Right in Appointing an Arbitrator De Hors
the Agreement.
(i) First, the Court noted Section 11 (6) ACA (before 2015
Amendment)22 and said that under Section 11 (6) (c) the agreed
procedure has to be given its precedence and the terms of the
agreement have to be given its due effect as agreed by the parties to
the extent possible. The cor- rective measures have to be taken first,
and the Court is the last resort.
(ii) Second, the court noted Section 11 (8) ACA under which due regard
must be given to the qualifications required of the arbitrator by the
agreement and other considerations as are likely to secure the
appointment of an independent and impartial arbitrator. The court
said that “to fulfil the object with terms and conditions which are
cumulative in nature,” the court must ensure that the remedy
provided in the agreement is first exhausted.
21
Boghara, paragraph 52 (iii): “A contractor executes the work and claims payment of say
rupees ten lakhs as due in terms of the contract. The employer admits the claim only for ru-
pees six lakhs and informs the contractor either in writing or orally that unless the contrac-
tor gives a discharge voucher in the prescribed format acknowledging receipt of rupees six
lakhs in full and final satisfaction of the contract, payment of the admitted amount will not
be released. The contractor who is hard-pressed for funds and keen to get the admitted
amount released, signs on the dotted line either in a printed form or otherwise, stating that
the amount is received in full and final settlement. In such a case, the discharge is under
economic duress on account of coercion employed by the employer. Obviously, the dis-
charge voucher cannot be considered to be voluntary or as having resulted in discharge of
the contract by accord and satisfaction. It will not be a bar to arbitration.”
22 Pre-2015 Amendment Section 11 (6): Where, under an appointment procedure agreed upon
by the parties,—
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them
under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it
under that procedure, a party may request the Chief Justice or any person or institution
designated by him to take the necessary measure, unless the agreement on the appoint-
ment procedure provides other means for securing the appointment.
32
Chapter 01
(iii) Third, the court cited several judgments in the context of Railways
contracts and the same/similar GCC where appointment of
arbitrator other than under the procedure agreed had been
disapproved.
Fourth, the court distinguished Datar Switchgears Ltd., (2000) 8 SCC
151; Punj Lloyd, 2006(2) SCC 638 and Union of India v. Bharat Battery
Manufacturing Co. (P) Ltd., (2007) 7 SCC 684 holding that the question
in those cases related to forfeiting the right to appoint, whereas in this
case the question related to appointment of an independent arbitrator
without, in the first instance, resorting to agreed procedure.
(iv) Lastly, the court held that an independent arbitrator could be
appointed where the impartiality of the arbitrator is in doubt or where
the tribunal has not functioned or has failed to conclude the
proceedings or to pass an award without assigning any reason. It
distinguished a few cases which fell in this alternative category and
concluded this was not the case here.
UNION OF INDIA V. PRADEEP VINOD CONSTRUCTION COMPA-

NY 2019 SCC ONLINE SC 1467
Supreme Court of India; 3-judge bench, R. Banumathi, A.S. Bopanna

and Hrishikesh Roy JJ; decided on 14 November 2019
Appointment of arbitrator must be following the terms of the agreement
This matter concerned a contract awarded by Railways in which a

standard arbitration clause often found in Railways’ contracts gave their
General Manager power to appoint the arbitral tribunal. The Supreme
Court had already considered such a clause in Union of India v. Parmar
Construction Com- pany, 2019 SCC OnLine SC 442.
In this case, when disputes arose, Pradeep Vinod invoked arbitration. The
Railways claimed that there was no arbitrable dispute 23 , and the General
Manager made no appointment. Pradeep Vinod applied under Section 11
of the ACA. The Delhi High Court appointed an advocate as an arbitrator
ruling that the arbitrator could examine all issues (whether settlement
was under duress or the dispute fell within excepted-matters). The
Railways took the matter to the Supreme Court.
Referring to Parmar, the court first held that pre-amended provisions ap-
plied since the request for an appointment was made before the 2015
Amendments (which were effective from 23 October 2015). It then cited
to three other decisions in addition to Parmar, that is, Union of India v.
M.P. Gupta, (2004) 10 SCC 504, Union of India v. V.S. Engineering (P)
Ltd., (2006) 13 SCC 240, Union of India v. Singh Builders Syndicate,
(2009) 4 SCC 523 and held that when the agreement specifically
provides for appointment of named arbitrators, the appointment should
be in terms of the agreement.
23 Inone case because of the settlement, and in the other on the ground that the issue fell un-
der ‘excepted-matters’.
34
Chapter 01
PERKINS EASTMAN ARCHITECTS DPC AND ANOTHER V. HSCC (IN-

DIA) LTD., 2019 SCC ONLINE SC 1517
Supreme Court of India; 2-judge bench, Uday Umesh Lalit and Indu
Mal- hotra JJ; decided on 26 November 2019
A party to an agreement (or any other interested party) is dis-entitled to select
an arbitral tribunal comprising of a sole arbitrator
(A) BACKGROUND—THE SUPREME COURT’S RULING IN TRF CASE
As has been noted earlier in the introductory passage of this chapter, in
TRF Limited v. Energo Engineering Limited, (2017) 8 SCC 377
(“TRF”)24, the arbitration clause provided that any dispute “shall be
referred to sole arbitration of the Managing Director of buyer or his
nominee.” Given the 2015 Amendments, it was common ground that the
Managing Director was disqualified to himself act as an arbitrator. 25
The question was if he could nonetheless nominate another person? The
court held: “once the arbitrator has become ineligible by operation of
law, he cannot nominate another as an arbitrator.”
(B) THE MAIN QUESTION IN PERKINS—CAN THE CHAIRMAN OF A
PARTY APPOINT A SOLE ARBITRATOR?
A consortium comprising of Perkins Eastman Architects, a New York-
based architectural firm, and Edifice Consultants Private Limited, a
company organized in Mumbai (“Perkins”), was appointed design
consultants by the respondent HSCC, a government of India enterprise.
Like in TRF, parties in Perkins also intended arbitration by a sole
arbitrator. But while in TRF, as we have seen, a party’s Managing
Director or his nominee was to act as the sole arbitrator, in Perkins, the
Chairman & Managing Director (“CMD”) of the respondent just had the
right to nominate one (and not himself be the arbitrator). The CMD was
requested, but the ap-
24 Supreme Court 3-judge bench, Dipak Misra, A.M, Khanwilkar and Mohan M. Shantana-
goudar JJ.
25 Section 12 (5)—Grounds for Challenge; Cf. Items 1, 5 and 12 of the Seventh and Items 1,
22 and 24 of the Fifth Schedule.
pointment made a day after the stipulated time. It was also (allegedly)
made by the Chief General Manager instead of the CMD.
Perkins filed an application under Section 11 ACA for appointment by
the court. It argued that (i) the CMD did not discharge its obligations and
thus lost the right to appoint, and (ii) an independent and impartial
arbitrator was required to be appointed.
The main question was whether the clause giving the right to the respond-
ent’s office26 to nominate a sole arbitrator was enforceable? 27
(C) THE COURT’S ANSWER: A PARTY OR ANYONE INTERESTED IN THE
DISPUTE CANNOT APPOINT THE SOLE MEMBER TRIBUNAL
These were the court’s reasoning: -
(i) There are two categories of cases: –
a. First, like TRF, where the Managing Director himself is named
as an arbitrator with an additional power to appoint any other
person as an arbitrator.
b. Second, the Managing Director is not to act as an arbitrator
himself but is empowered or authorized to appoint any other
person of his choice or discretion as an arbitrator.
(ii) In the first category, the Managing Director was found
incompetent28 because of the interest that he would be said to be
having in the outcome or result of the dispute. The element of
invalidity would thus be directly relatable to and arise from the
interest that he would be having in such an outcome or decision.
(iii) If that be the test, similar invalidity would always arise and spring,
even in the second category of cases. If the interest that he has in the
outcome of the dispute, is taken to be the basis for the possibility
of
26 Itgoes without saying that this right vested with the respondent. The clause just identified
who among the respondent enterprise would make the appointment.
27 The court phrased the question generally, “whether a case has been made out for exercise of
power by the Court for an appointment of an arbitrator”.

28 The incompetency in TRF was with regard to acting as an arbitrator.
36
Chapter 01
bias, it will always be present irrespective of whether the matter

stands under the first or second category of cases.
(iv) We are conscious that if such deduction is drawn from the decision
in TRF, all cases having similar clauses, a party to the agreement
would be disentitled to make any appointment of an arbitrator on its
own and it would always be available to argue that a party of an
official or an authority having interest in the dispute would be
disentitled to appoint an arbitrator.
(v) But that has to be the logical deduction from TRF case: –
a. The ineligibility referred to in TRF was as a result of the opera-
tion of law, in that a person having an interest in the dispute
and its outcome must not only be ineligible to act as an
arbitrator but must also not be eligible to appoint anyone else.
b. TRF case further shows that the situation where both parties
could nominate respective arbitrators was completely different.
Whatever advantage a party may derive by nominating an
arbitrator of its choice would get counterbalanced by equal
power with the other party. But, where only one party has a
right to appoint a sole arbitrator, the choice will always have
an element of exclu- sivity.
c. Naturally, the person who has an interest in the outcome or
decision of the dispute must not have the power to appoint a
sole arbitrator. That is the essence of the 2015 Amendments
recognized by the TRF case.
The court then also concluded that if there are justifiable doubts as to the
independence and impartiality, and if other circumstances warrant the ap-
pointment of an independent arbitrator by ignoring the procedure pre-
scribed, the appointment can be made by the court. This conclusion was
stated: –
(i) Relying on and following Indian Oil Corpn. Ltd v. Raja Transport
(P) Ltd., (2009) 8 SCC 520, where the scope of the then-existing
text of Section 11 was summarised by a 2-judge bench of the
Supreme Court (R.V. Raveendran and D.K. Jain JJ).
(ii) Citing to paragraphs 53 to 60 (under the heading “Neutrality of Arbi-

trators”) of the 246th Law Commission Report of August 2014.
(iii) Following Voestalpine Schienen GmbH v. Delhi Metro Rail Corpn.
Ltd., (2017) 4 SCC 665, a Section 11 proceeding, where the 2-judge
bench of Dr. A.K. Sikri and R.K. Agrawal JJ has explained the
concept of independence and impartiality.
(D) THE POWER UNDER SECTION 11 IS AVAILABLE EVEN IF A PARTY
HAS ALREADY MADE AN APPOINTMENT
The court held this relying on Walter Bau AG v. Municipal Corpn. of

Greater Mumbai, (2015) 3 SCC 800, a decision by the designated judge
(Ranjan Gogoi J) under the old Section 11 provision.29
(E) DELAY BY THE APPOINTING AUTHORITY IN MAKING THE AP-
POINTMENT—HOW RELEVANT?
The contractual time limit for appointment expired on 28 July 2019. The
next day, 29 July, was a working day, but the appointment was made on
the 30 July. It was not within time, but such delay is not an “infraction of
such magnitude” that the court must appoint an arbitrator on that ground
alone.
(F) DEFINITION OF INTERNATIONAL COMMERCIAL ARBITRATION
Perkins Eastman and Edifice were a consortium and thus ‘association’
under Section 2(1)(f) of the ACA. Perkins Eastman was the lead
member. So, the central management and control of the association was
exercised out of India [relying on Larsen and Toubro Limited v. SCOMI
Engineering BHD, (2019) 2 SCC 271, a decision by R.F. Nariman and
Navin Sinha JJ].
29 WalterBau distinguished Antrix, (2014) 11 SCC 560 and Pricol Ltd., (2015) 4 SCC 177. In
both decisions by the designated judge it was said that after appointment of an arbitrator is
made, the remedy of the aggrieved party is not under Section 11(6) ACA.
38
Chapter 01
LITE BITE FOODS PVT. LTD. V. AIRPORTS AUTHORITY OF INDIA,

2019 SCC ONLINE BOM 5163
Bombay High Court; single-judge bench, G. S. Patel J; decided on 04
De- cember 2019
Legal principles on the appointment of a sole arbitrator, as declared by the Su-
preme Court of India in various decisions, summarised
The principle enunciated by the Supreme Court in Perkins Eastman
Architect DPC v. HSSC (India) Ltd., 2019 SCC OnLine SC 1517, was
invoked in this case. In Perkins, taking forward the principle of TRF
Limited v. Energo Engi- neering Limited, (2017) 8 SCC 377, the
Supreme Court had ruled that a party (or any official of the party) or
anyone having an interest in the dispute cannot unilaterally appoint a sole
arbitrator.
Lite Bite had proposed its sole arbitrator; AAI appointed its own. Lite
Bite rejected AAI’s appointment as statutorily impermissible. According
to it, a sole arbitrator could be appointed only (i) by mutual consent of
the parties or (ii) by order of a High Court in a commercial arbitration
petition.
Lite Bite then filed a petition under Section 11 of the ACA for the ap-
pointment. It argued that the choice by AAI of a person from a panel that
it has itself drawn up, and to which Lite Bite never consented, violates
Section 12(5) and the Seventh Schedule of the ACA. Further, the non-
obstante clause in Section 12 overrides any previous agreement
permitting a unilateral appointment by one side.
The court held that the Perkins principle hit the clause: – “I see no means
to separate or distinguish the case at hand from Perkins Eastman at all. It
is entirely within the frame of that decision.”
It rejected the argument that Perkins was per incuriam (as contrary to a
previous two-judge bench decision in Voestalpine Schienen GmbH v.
Delhi Metro Rail Corporation Ltd., (2017) 4 SCC 665.
The court examined the law and summarised the legal principles: –
(i) An officer or employee of one party cannot be the arbitrator or
the person empowered to appoint an arbitrator. This is the TRF
category or rule.
(ii) Where the arbitration clause provides for nomination by each

side, and the appointment of an umpire by the two nominee
arbitrators, of a person from a panel: (i) that panel cannot be
hand-picked by one side; and (ii) it must be broad-based and
inclusive, not narrow- ly tailored to persons from a particular
category. The opponent and the two nominee arbitrators must
have the plenitude of choice. This is the rule in Voestalpine.
Conceivably, a broad-based panel commonly agreed in the
contract by both sides would serve the purpose.
(iii) A clause that confers on one party’s employee the sole right to
appoint an arbitrator, though that employee is himself, not the
arbitrator, is also not valid, and this is a logical and inescapable
extension of TRF. It makes no difference whether this power is
to be exercised by choosing from a panel or otherwise. This is
the rule in Perkins.
The court also then remarked that the guiding principle is neutrality,
independence, fairness, and transparency, even in the arbitral-forum
selection process.
40
Chapter 01
ITD CEMENTATION INDIA LTD. V. KONKAN RAILWAY CORPORA-

TION LTD. 2019 SCC ONLINE BOM 5349
Bombay High Court; single-judge bench, G. S. Kulkarni J; decided on

12 December 2019
Constitution of arbitral tribunal comprising of serving officers of the
respondent party is illegal and of no consequence; Voestalpine, TRF,
Bharat Broadband
and Perkins applied
Under the arbitration clause, a “Standing Arbitral Tribunal” had to be
formed within three months of the execution of the contract. The
petitioner’s nominee arbitrator had to be from a panel of serving
railway officers; the respondent’s nominee arbitrator was also to be from
this panel. The Chairman and Managing Director of the respondent was
to appoint the presiding member of the tribunal.
The tribunal was constituted on 25 February 2015. One arbitrator was
substituted in February 2016. Disputes arose in 2017, and ITD applied
to the court for appointment of the tribunal under Section 11 of the ACA.
The court struck down the tribunal constitution provisions of the contract
as wholly illegal and of no consequence. It held: –
(i) There can be no manner of doubt that Section 12 ACA, as
amended by the 2015 Amendments read with the Fifth and
Seventh Schedule squarely have become applicable, and a
neutral, impartial and independent arbitral tribunal was required
to be constituted.
(ii) The standing arbitral tribunal lost its validity and would stand
wiped out, considering the clear position in law as laid down by
the Supreme Court in Voestalpine Schienen GmbH v. Delhi
Metro Rail Cor- poration Ltd. (2017) 4 SCC 665, TRF Ltd. v.
Energo Engineering Projects Ltd., (2017) 8 SCC 377, Bharat
Broadband Network Ltd. v. United Tele- coms Ltd., (2019) 5
SCC 755 and Perkins Eastman Architects DPC v. HSCC (India)
Ltd., 2019 SCC OnLine SC 1517.
The Court necessarily would have to exercise jurisdiction under
Section 11(6) read with Sections 14 and 15 of the ACA.
CENTRAL ORGANISATION FOR RAILWAY ELECTRIFICATION V.

ECI- SPIC-SMO_MCML (JV) 2019 SCC
ONLINE SC 1635
Supreme Court of India; 3-judge bench, R. Banumathi, A.S. Bopanna
and Hrishikesh Roy JJ; decided on 17 December 2019
When the agreement specifically provides for the appointment of an

arbitral tribunal from a panel of serving or retired Railway Officers, the
appointment should be in terms of the agreement; TRF case and Perkins
case distinguished
A. THE BACKGROUND
Several provisions relating to independence and impartiality of
arbitrators were introduced in the ACA in 2015. The Seventh Schedule
provides for “arbitrator’s relationship with the parties or counsel.” Under
Section 12 (5) ACA, a person whose relationship with the parties or
counsel falls under the Seventh Schedule is ineligible to act as arbitrator.
But the parties, after the dispute has arisen, may waive the applicability
of Section 12 (5) by an express agreement in writing.
We saw that in TRF Limited v. Energo Engineering Limited, (2017) 8
SCC 377, a 2-judge bench of the Supreme Court held that a person
ineligible to be an arbitrator (like officer or employee of one party) could
not be the person empowered to appoint another. Another 2-judge bench
in Perkins Eastman Architect DPC v. HSSC (India) Ltd., 2019 SCC
OnLine SC 1517 extending the TRF principle held that a party (or any
official of the party) or anyone having an interest in the dispute could not
unilaterally appoint a sole arbitrator.
B. THE ARBITRATION CLAUSE—SERVING AND RETIRED OFFICIALS
This case involved the Indian Railways’ Standard General Conditions of
Contract (“GCC”)30, revised after the 2015 Amendments, which provides
the following appointment mechanism of the arbitral tribunal: –
30 The petitioner, CORE, is an organisation set up under the Ministry of Railways to carryout
railway electrification over the entire network of Indian Railways.
42
Chapter 01
(i) where the applicability of Section 12 (5) has been waived, but the
claim is below one crore [Clause 64 (3) (a) (i)]: –
a. Serving Railways officer as sole arbitrator to be appointed by
Gen- eral Manager, Railways.
(ii) where the applicability of Section 12 (5) has been waived, but the
claim is more than one crore [Clause 64 (3) (a) (ii)]: –
a. Three serving railways officers or 2 serving railway officers plus
one retired officer. Railway to send a panel of names to the con-
tractor. Contractor to choose at least two names, from which one
to be appointed (by General Manager, Railways) as contractor’s
nominee. The General Manager to appoint the remaining two
from the panel or outside it, also indicating the presiding
arbitrator.
(iii) where Section 12 (5) of the ACA has not been waived [Clause 64 (3)
(b)]31: –
a) Three retired officers. Railways to send a panel of names to the
contractor. Contractor to choose at least two names, from which
one to be appointed by General Manager, Railways as
contractor’s nominee. The General Manager to appoint the
remaining two from the panel or outside it, including the
presiding arbitrator.32
When disputes arose, the respondent JV (“JV”) was sent by the
petitioner CORE a list of names of serving officers (under the
clause which applied if Section 12 (5) was waived). The JV did
not make the waiver. Then, CORE sent a list of names of retired
officers (under the clause which applied in case of non-waiver).
The JV did not make its selection from this list either and applied
to the court under Section 11 of the ACA for an appointment of
a sole arbitra-
31 This clause too had a segregation depending on the claim amount of 50 lakhs and more.
32As will be seen, the court does not specifically address the legality of a clause which requires
waiver under Section 12 (5) in advance. It will be recalled that in Bharat Broadband, 2018
SCC OnLine SC 3276, the Supreme Court held that this waiver must be express in writing and
with reference to the arbitrator in question. This clause was not directly at issue because the no
waiver was granted. It also does not appear from the judgment that any argument with respect
to the power of the General Manager to even appoint the presiding arbitrator was at issue.
tor. The High Court appointed a retired judge of that court. 33

CORE approached the Supreme Court.
The question was if the appointment of an arbitrator independent of the
GCC provisions was right? In the course, other questions arose around
the independence and impartiality provisions and applicability of
previous judgments of the Supreme Court.
C. APPOINTMENT OF AN INDEPENDENT ARBITRATOR WITHOUT
REFERENCE TO THE CLAUSES OF THE GCC—WHETHER COR-
RECT?
The court first noted the parties’ arguments.

Then, it referred to the clauses of the GCC, and concluded as follows (in
one paragraph, broken into two sentences below for convenience): –
1. After the 2015 Amendments when Clause 64 of the General Condi-
tions of Contract has been modified inter alia providing for
constitution of a tribunal consisting of three arbitrators either serving
or retired railway officers;
2. The High Court is not justified in appointing an independent sole
arbitrator without resorting to the procedure for appointment as
prescribed under Clause 64(3)(b) of the General Conditions of
Contract [the clause applicable if Section 12 (5) had been waived].
Secondly, the court referred to the fact that the JV itself in its application
under Section 11(6) prayed for appointment of a sole arbitrator in terms
of the clauses of the tender and Clause 64 of the GCC, and had identified
a name (which CORE did not agree to since he was not empaneled). 34
33 In its short order the High Court noted that the list was not made available at an earlier
point in time, and in any case since no agreement could be reached, the court’s jurisdiction
had clearly arisen. It also said that court can appoint an arbitrator de hors parties’ contract.
From the facts set out in the Supreme Court’s judgment, it appears the lists were sent before
the petition was filed.
34 The court does not state any legal principle applicable to this fact. It appears to be that of
44
acquiescence.
44
Chapter 01
Thirdly, the court referred to and applied its earlier 2-judge decision in
Un- ion of India v. Parmar Construction Company, 2019 SCC OnLine
SC 442.35 In Parmar, the Supreme Court set aside the appointment of an
independent arbitrator and directed the General Manager of Railways to
appoint the tribunal in terms of the agreement. The court in CORE also
referred to Union of India v. Pradeep Vinod Construction Company,
2019 SCC Online SC 1467 (a 3-judge bench presided by Banumathi J),
where relying on Parmar it was held that the appointment should be in
terms of the agreement.
D. THE RETIRED RAILWAYS OFFICERS ARE NOT STATUTORILY INEL-
IGIBLE
The court held: –

(i) As held in Voestalpine Schienen Gmbh v. Delhi Metro Rail
Corporation Lim- ited, (2017) 4 SCC 665, the very reason for
empanelling retired railway officers is to ensure that technical
aspects of the dispute are suitably resolved by utilizing their
expertise. Merely because they are retired does not make them
ineligible.
(ii) The same view was reiterated in Government of Haryana v. PWD
Haryana (B and R) Branch G.F. Toll Road Private Limited, (2019) 3
SCC 505 where the Supreme Court held that there is no bar under
Section 12(5) of the ACA for appointing a retired employee as
arbitrator.
E. THOUGH INELIGIBLE BY OPERATION OF LAW TO BE APPOINTED
AS ARBITRATOR, THE GENERAL MANAGER COULD NOMINATE
ANOTHER PERSON
The JV argued, relying on TRF and Perkins that the General Manager
was ineligible to nominate any other person to be an arbitrator; “that
which cannot be done directly, may not be done indirectly.”
The court rejected the argument and held as follows: –
45
35 A.M. Khanwilkar and Ajay Rastogi JJ, decided on 29 March 2019
46
(i) In TRF, though the court observed that one who is ineligible to act as
an arbitrator could not nominate another, the court also discussed, at
paragraph 50 (SCC version), another situation “where both the
parties could nominate respective arbitrators of their choice and that
it would get counter-balanced by equal power with the other party.”36
(ii) In Perkins, after referring to paragraph 50 of TRF, the court referred
to the situation where both parties have the advantage of nominating
an arbitrator of their choice and observed that the advantage of one
party in appointing an arbitrator would get counter-balanced by equal
power with the other party.37
(iii) In this case, CORE sent a panel of four names of retired Railways of-
ficers to act as arbitrators requesting the JV to select any two [from
which the General Manager would have appointed the JV’s
nominee]. Since the JV has been given the power to select two
names from out of the four names of the panel, the power of CORE
in nominating its arbitrator gets counterbalanced by the power of
choice given to the JV. Thus, the power of the General Manager to
nominate the arbitrator is counter-balanced by the power of JV to
select any of the two nominees.38
36 Paragraph 50 of TRF (SCC Online version) “50 We are singularly concerned with the
issue, whether the Managing Director, after becoming ineligible by operation of law, is he
still eligible to nominate an arbitrator. At the cost of repetition, we may state that when
there are two parties, one may nominate an arbitrator and the other may appoint another .
That is altogether a different situation. If there is a clause requiring the parties to nominate
their respective arbitrator, their authority to nominate cannot be questioned . What really in
that circumstance can be called in question is the procedural compliance and the eligibility
of their arbitrator depending upon the norms provided under the Act and the Schedules ap-
pended thereto….” (emphasis of CORE judgment).
37 The expression “counter-balanced” was used in Perkins while explaining paragraph 50 of
TRF.
38 The court does not discuss the General Manager’s power in the GCC to also appoint the
presiding arbitrator.
Chapter 01
(iv) Because of the modified Clauses 64(3)(a)(ii) and 64(3)(b) of GCC, it

cannot be said that the General Manager has become ineligible to act
as the arbitrator.39 TRF is not applicable.
(v) When the agreement specifically provides for the appointment of the
tribunal consisting of three arbitrators from out of the panel serving 40
or retired41 Railway Officers, the appointment of the arbitrators
should be in terms of the agreement as agreed by the parties.
F. THE RIGHT TO APPOINT WAS NOT FORFEITED
The JV had argued that the request for an appointment was made on 27
July 2018, but no steps were taken within thirty days by CORE, thus, for-
feiting the right.
Rejecting the argument, the court first noted Punj Lloyd Ltd. v. Petronet
MHB Ltd., (2006) 2 SCC 638 (and Union of India v. Bharat Battery
Manufacturing Co.
(P) Ltd. (2007) 7 SCC 684 which followed Punj Lloyd Ltd.) where it was
held that if the opposite party has not made an appointment within 30
days of demand, the right to make appointment is not forfeited but
continues, but an appointment has to be made before the former files an
application under Section 11 seeking appointment of an arbitrator. Only
then the right of the opposite party ceases.42
39 The court here possibly means to refer to the General Manager’s power under the GCC to
nominate an arbitrator since the clause did not empower her to be an arbitrator. Or, the
court may be referring to the General Manager’s ability to act as an arbitrator where Claus-
es 64(3)(a)(ii) applies (that is where Section 12 (5) has been waived).
40 Where Section 12 (5), ACA has been waived.
41 Where Section 12 (5), ACA has not been waived.
42 The court cited Punj Lloyd, and reproduced the relevant passages, but when summarizing its
holding, expressed it in the following words: “if the opposite party has not made any appli-
cation for appointment of the arbitrator within thirty days of demand, the right to make ap-
pointment is not forfeited but continues; but the appointment has to be made before the
former files application under Section 11 of the Act seeking appointment of an arbitrator”.
47
Then it noted the following dates: –

(i) The JV requested to refer the dispute to arbitration on 27 July 2018.
On 24 September 2018 (which is within sixty days provided under
the agreement), CORE sent a panel of names as the contract required
(the applicable clause if Section 12 (5) had been waived).
(ii) On 26 September 2018, the JV respondent conveyed it was not
waiving Section 12(5) of the ACA.
(iii) On 25 October 2018, in terms of Clause 64(3)(b) of GCC (the
applicable clause if Section 12 (5) had not been waived), CORE
sent a panel of names and requested the respondent to make its
selection.
The court then concluded, when without responding to the letter (com-
municating of a panel of names), the JV filed the petition, it cannot
contend that CORE’s right extinguished.
Chapter 02
EXISTENCE, FORM, VALIDITY AND LEGALITY

OF ARBITRATION AGREEMENTS
INTRODUCTION
What is the ‘existence’ of an arbitration agreement? What is validity? Is
there a distinction between the two? How is nonarbitrability related, if at
all, to existence and validity? How are these issues involved in an
application for appointment of arbitrator, or an application to refer the
parties to arbitration? In 2019, the Indian courts continued, and in some
cases started, wrestling with a few of these and related questions.
(A) BEFORE 2015 AMENDMENTS, COURTS EXAMINED VALIDITY, EX-

ISTENCE, ARBITRABILITY, ETCETERA IN APPLICATION FOR AP-
POINTMENT OF ARBITRATOR OR TO REFER PARTIES TO ARBITRA-
TION1
When enacted in 1996, Section 11 ACA 2 vested the power of

appointment of arbitrator(s) with the Chief Justice or any person or
institution designated by him. A question often arose whether this power
is judicial or administrative. 3 The answer was ‘settled’ six to one in a 7-
judge bench decision in SBP & Co. v. Patel Engineering Limited, (2005)
8 SCC 618.
The court concluded that it is a judicial power and unless the Chief
Justice was satisfied that the conditions for its exercise existed, the
appointment could not be made. The majority then read into Section 11
those condi-
1 We do not consider Section 9 ACA in this chapter

2 Article 11 of the Model Law and Section 11 ACA provides for the procedure for the ap-
pointment of arbitrator. If the parties do not agree without involvement of the court, the
court is required to appoint arbitrator(s) (following the guidelines with respect to independ-
ence, impartiality and nationality).
3 See, for a brief history, O.P. Malhotra, Opening the Pandora’s Box: An Analysis of the Su-
preme Court’s Decision in S.B.P. v. Patel Engineering, 19 Student B. Rev 69 (2007).
Existence, Form, Validity and Legality of Arbitration Agreements
tions, namely (i) whether there is a valid arbitration agreement in terms

of Section 7 ACA4; (ii) whether the applicant is party to the arbitration
agreement; (iii) whether the dispute was arbitrable; (iv) whether the
claim was dead, or time-barred.
The court identified and segregated the preliminary issues that may arise
for consideration in an application under Section 11 ACA into three
categories, that is, (i) issues which the Chief Justice or his designate is
bound to decide;
(ii) issues which he can also decide, that is, issues which he may choose
to decide; and (iii) issues which should be left to the Arbitral Tribunal to
decide”.
In National Insurance Company Limited v. Boghara Polyfab Private

Limited, (2009) 1 SCC 267, a 2-judge bench of the Supreme Court (R.V.
Raveendran and L.
S. Panta JJ), following SBP, explained these categories.5
Thus, the question of validity, existence, maintainability, and arbitrability

of the claims of the arbitration agreement and arbitrability (in the wider
sense of the term, which includes the question if the dispute is covered by
the arbitration agreement) were considered jurisdictional questions.
4 Which mainly deals with the written form requirements of an arbitration agreement.
5 22.1. The issues (first category) which the Chief Justice/his designate will have to decide are:
(a) Whether the party making the application has approached the appropriate High Court.
(b) Whether there is an arbitration agreement and whether the party who has applied under
Section 11 of the Act, is a party to such an agreement.
22.2. The issues (second category) which the Chief Justice/his designate may choose to
decide (or leave them to the decision of the Arbitral Tribunal) are:
(a) Whether the claim is a dead (long-barred) claim or a live claim.
(b) Whether the parties have concluded the contract/transaction by recording satisfaction of
their mutual rights and obligation or by receiving the final payment without objection.
22.3. The issues (third category) which the Chief Justice/his designate should leave
exclusively to the Arbitral Tribunal are:
(i) Whether a claim made falls within the arbitration clause (as for example, a matter which
is reserved for final decision of a departmental authority and excepted or excluded from
arbitration).
(ii)Merits or any claim involved in the arbitration.
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(B) THE SAME QUESTIONS WERE CONSIDERED IN APPLICATION TO

REFER THE DISPUTE TO ARBITRATION ALSO
To enforce an arbitration agreement in cases of domestic or international

arbitration also required proof of existence, validity, arbitrability, et.al. 6
Before the 2015 Amendments, Section 8 required a judicial authority

before which an action is brought in a matter which the subject of an
arbitration agreement to refer the parties to arbitration on a timely
application by a party. It read: “a judicial authority before which an
action is brought in a matter which is the subject of an arbitration
agreement shall, if a party so applies not later than when submitting his
first statement on the substance of the dispute, refer the parties to
arbitration.”
Since the enactment of the ACA, Section 45 requires the court to refer
parties to an international commercial arbitration unless it finds the
agreement is “null and void, inoperative or incapable of being
performed.” Thus, the question if the arbitration is valid is required to be
considered by the courts in an application under Section 45 also. That
apart, the courts have always considered the issue of arbitrability within
the meaning of this Section.7
(C) THE 2015 AMENDMENTS
The 246th Law Commission Report discussed amendments to Section 8,

11, and 45 under the heading “Pre-Arbitral Judicial Intervention.” 8 It was
of the view that the same test should apply to Sections 8, 11, and 45.
Amendments
6 You have an arbitration agreement with another person but when disputes arise that person
backs off from the arbitration agreement and goes to the court to litigate. What is your
remedy? You can request the court to refer the dispute to arbitration. If all parties are
‘domestic’, the request is made under Section 8 ACA and in cases involving ‘international’
parties, under Section 45 ACA. This ability to enforce the arbitration agreement is “of
fundamental importance to the efficacy of international arbitral process”.
7 See Chapter on nonarbitrability for a discussion on validity and the difference between
validity and arbitrability.
8 It also discussed Section 9 ACA which gives the court the power to grant interim measures.
to Sections 8 and 11 were recommended to restrict to an examination if

the arbitration agreement existed or is null and void.
However, the test brought into Section 8 was “notwithstanding any judg-
ment, decree or order of the Supreme Court of any Court, refer the
parties to arbitration unless it finds that prima facie no valid arbitration
agreement exists.” (emphasis added)
The one brought into Section 11 via the introduction of sub-section (6A)
was “the Supreme Court or, the case may be, the High Court, shall, not-
withstanding any judgment, decree or order of any court, confine to the
examination of the existence of an arbitration agreement”.
So, when you apply under Section 8 to refer the matter to arbitration, the
question before the court will be if a “valid arbitration agreement exists.”
If you apply for the appointment of an arbitrator, the question will be
“examination of existence of arbitration agreement.”
(D) ISSUES OF EXISTENCE, VALIDITY, ARBITRABILITY, AND OTHERS

IN 20199
1. Does ‘Existence’ Include Nonarbitrability? Referred to a 3-judge bench.
Earlier, in 2017 in Duro Felguera, S.A. v. Gangavaram Port Limited,

(2017) 9 SCC 729 decided on 10 October 2017 a 2-judge bench of the
Supreme Court (Kurian Joseph and R. Banumathi JJ) said that in an
application under Section 11 ACA after the 2015 Amendments “all that
the Courts needs to see is whether an arbitration agreement exists –
nothing more, nothing less.”
Two days later on 12 October 2017, another 2-judge bench of R. K.

Agrawal and Abhay Manohar Sapre JJ in Himangni Enterprises v.
Kamaljeet Singh Ahluwalia, (2017) 10 SCC 706 decided that a tenant’s
application under
9 See Chapter 3 on nonarbitrability.

Chapter 02
Section 8 ACA to refer the dispute to arbitration could not be allowed be-
cause a tenancy dispute governed by the Transfer of Property Act, 1882
was not arbitrable. The landlord had filed a suit for eviction, and the
tenant had applied to refer the matter to arbitration.
Both these cases came up for discussion in Vidya Drolia and others v.
Durga Trading Corporation, 2019 SCC OnLine 358, before another 2-
judge bench of
R.F. Nariman and Vineet Saran JJ in February 2019. This concerned a
tenancy dispute where an application under Section 11 was allowed by
the pre- ceding court and an arbitrator appointed. The decision in
Himangni came later based on which a review application was filed
(presumably on the ground that arbitrator should not have been appointed
because the dispute was inarbitrable) but dismissed. That is how the
matter traveled to the Su- preme Court.
Speaking through Nariman J, the court noted (i) the Law Commission’s
recommendations (of including in Section 11 the requirement to examine
existence and validity); (ii) the eventual amendment to Section 11 ACA
(confining examination to existence); and (iii) Section 16 ACA (which
gives the tribunal the competence to rule on existence and validity of an
arbitration agreement).
After noting these, the court said a question that needs to be

authoritatively decided by a bench of three learned judges is whether
existence would include weeding out non-arbitrable matters.
The issue of whether a tenancy dispute was arbitrable or not was also re-
ferred to arbitration after an analysis of Himangni. Nariman J. concluded,
after a sharp discussion on arbitrability, that the reasoning in Himangni
did not hold good.
2. A 2-Judge Bench Says ‘Existence’ Includes Arbitrability (In the

Sense Whether the Dispute Survived). Overruled By A 3-Judge
Bench Which Said Confine Only To Existence
Another 2-Judge bench of the Supreme Court considering a matter under
Section 11 (6A) decided in United India Insurance Company Limited v.
Antique
Art Exports Private Limited, (2019) 5 SCC 362 that the court could still
see if the dispute was arbitrable. This was in the context of the argument
that the claim had been settled (and therefore involving the wider facet of
arbitrability). It also attempted to distinguish Duro Felguera.
A few days later, on 05 September 2019, in Pradyuat Deb Burman, 2019

SCC OnLine SC 1164, a 3-Judge bench (R. F. Nariman, R. Subhash
Reddy, and Surya Kant JJ) overruled United India and upheld Duro
Felguera. It said the examination under Section 11 is confined only to
the existence of an arbitration agreement.
3. Effect of Omission of Section 11 (6A) in 2019 Amendments
Pradyuat also considered the effect of omission of Section 11 (6A) on

the 2019 Amendments (not yet brought into force as on the date of this
publi- cation). The court examined why Section 11 (6A) was omitted and
concluded that the omission is not to resuscitate the law.
4. Issue as to Limitation—If Can Be Examined in a Section 11 Applica-

tion
Geo Miller & Co. Pvt. Ltd. v. Rajasthan Vidyut Utpadan Nigam Ltd.,
2019 SCC OnLine SC 1137, a 3-judge bench decision in September
2019, also involved an application for appointment. The Chairman of
the respondent electricity board had the power to decide the dispute
himself or appoint another person to arbitrate. The issue in focus was the
limitation to file an application under Section 11 ACA. The court held
the application was time- barred.10
In December, a 2-judge bench in Uttrakhand Purv Sainik noted Duro

Felguera and concluded that the question of limitation could not be
examined after the 2015 Amendments. However, the court also referred
to several situations where the appointment of an arbitrator may be
refused. These, the
10 For a discussion on reasoning of this case see the chapter on Time Limitations.
Chapter 02
court said, included cases of fraud, deception, the validity of arbitration

agreement, dispute beyond the scope of an arbitration agreement.
It should be noted here that in 2020 in Shamsuddin v. Now Realty

Ventures LLP, 2020 SCC OnLine Bom 100 (decided on 14 January
2020) an argument was run before G. S. Patel J in the Bombay High
Court that Purv Sain- ik was decided contrary to Geo Miller. The
argument was rejected noting Geo Miller was a case under the
unamended statute.
5. Does an Unstamped or Insufficiently Stamped Arbitration

Agreement Exist Within the Meaning of Section 11 or Section 9
ACA?
On 04 April 2019, a 3-judge bench of the Bombay High Court in

Gautam Landscapes Pvt. Ltd. v. Shailesh S. Shah and Another, 2019
SCC OnLine Bom 563 decided two questions referred by two separate
single-judge benches on a preliminary issue of stamping. One matter
from which the reference arose was a Section 9 petition in Arbitration
Petition No. 466 of 2017 (Gautam Landscapes Pvt. Ltd. v. Shailesh S.
Shah)11 and the other was a Section 11 application in Arbitration
Application No. 300 of 2018 (Vijay Sharma v. Vivek Makhija).
The 3-judge bench (also called a full-bench) held that an application

under Section 9 or Section 11 of the ACA could be considered, and relief
granted, even if a document containing an arbitration clause is unstamped
or insufficiently stamped.12 The matters were sent back to the respective
single-judge benches for further consideration.
11 In Gautam too a Section 9 petition was filed with a Section 11 application. The order
referring the matter to the full bench was on the point of Section 9 petition, though the
cause title of that order (06 September 2018, S.J. Kathawalla J) suggests that the Section 9
petition and 11 application were taken up together.
12 Bench comprising of Naresh H. Patil, CJ and R.D. Dhanuka and G.S. Kulkarni JJ Several
reasons were given, including that even if an instrument is required to be stamped, which is
not otherwise stamped at all or insufficiently stamped, such defect is curable on payment of
requisite amount of penalty. Postponing an application for consideration, filed under
Section 11 or Section 9, to indefinite period till the final decision on the issue of stamping,
would not
At paragraph 120 (SCC OnLine version) the two questions framed

in Gautam were answered as follows:
(i) Question number 1: “Whether a Court, under the Arbitration and

Con- ciliation Act, 1996, can entertain and grant any interim or ad-
interim relief in an application under Section 9 of the said Act when
a document containing an arbitration clause is unstamped or
insufficiently stamped? Answer: In the affirmative.”
(ii) Question number 2: “Whether, inter alia, in view of Section 11(6A)

of the Arbitration and Conciliation Act, 1996, inserted by Arbitration
and Conciliation (Amendment) Act, 2016, it would be necessary for
the court before considering and passing final orders on an
application under Section 11(6) of the Act to await the adjudication
by the stamp authorities, in a case where the document objected to,
is not adequately stamped? Answer: In the negative.”
Then, on 10 April 2019, in Garware Wall Ropes Limited v. Coastal

Marine Con- structions & Engineering Ltd., (2019) 9 SCC 209, a 2-judge
bench of the Su- preme Court (R.F. Nariman and Vineet Saran JJ)
decided in the specific context of a Section 11 application that an
arbitration agreement does not exist as a matter of law unless the
document which contains it is sufficiently stamped. The court in
Garware then over-ruled Gautam’s answer of question number 2 (which
related to Section 11 application). It said: “Question (2), having been
answered contrary to our judgment, is held to be incorrectly decided”
[para 30, Garware, SCC version].
Garware noted that Section 11 (6A) requires only an examination as to

the existence but considered that the arbitration clause did not exist as a
matter of law until stamped. It relied on a 3-judge bench decision in
United India Insurance Co. Ltd. v. Hyundai Engineering and
Construction Company Limited, (2018) 17 SCC 607 (Dipak Misra, A.M.
Khanwilkar and Dr. D.Y. Chandra-

be in conformity of the legislative policy and intent to provide speedy remedy under
Section 11 or Section 9 of the ACA.
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chud JJ). The arbitration clause in Hyundai applied if the insurer

admitted or accepted liability. On facts, it was found that the insurer
repudiated the claim. The court in Garware considered this ‘existence’ in
the insurance policy and yet not ‘existence’ as a matter of law.
Likewise, it said the arbitration clause did not exist unless duly stamped.
Getting back to Gautam, the decision there was taken in appeal to the Su-
preme Court in Special Leave Petition (C) No(s). 10232-10233/2019. On
29 April 2019, the court issued notice but said that “the Section 9
proceeding, however, may continue in the meanwhile and judgment
delivered thereon shall not be implemented without the leave of this
Court”. This matter is still pending and will likely ‘settle’ the issue.
In Saifee Developers Pvt. Ltd. v. Shanklesha Constructions, Commercial

Arbitra- tion Petition No. 1060 of 2019, a single-judge bench of the
Bombay High Court (G.S. Kulkarni J) had a Section 9 petition before
him. It was argued based on Garware that no ad-interim relief could be
granted because the agreement was not sufficiently stamped.
Kulkarni J held that the submission could have no bearing on the petition
under Section 9. He relied on Gautam, referred to Garware, and the
Supreme Court’s order in appeal against Gautam, and concluded that the
full-bench decision in Gautam, not having been stayed by the Supreme
Court, continued to bind. Kulkarni J accordingly granted ad-interim
reliefs.
The decision in Saifee was followed in IREP Credit Capital Pvt. Ltd. v.
Tapaswi Mercantile Pvt. Ltd. and another, 2019 SCC OnLine Bom 5719,
by G.S. Patel J sitting singly (decided on 20 December 2019).
G.S. Patel J followed Garware in West Quay (cited infra) and held that
an agreement with an arbitration clause, stamped elsewhere if brought in
Ma- harashtra, will have to be stamped again even if arbitration is the
only thing to happen in Maharashtra. He said arbitration is a thing done
or to be done under Maharashtra Stamp Act.
6. Arbitrary Arbitration Agreement
The Supreme Court’s decision in Icomm where it struck down an

arbitration agreement as arbitrary, is discussed in the Chapter on Extent
of Judicial Intervention.
7. Formal Validity of Arbitration Agreement—Written Form Require-

ment
In Mahanagar Telephone Nigam Limited v. Canara Bank and others,

2019 SCC OnLine SC 995, the Supreme Court considered the written
form requirements under Section 7 ACA and emphasized that
arbitration agreement can exist in the form of exchange of statement of
claims and defense, in which the existence of the agreement is asserted
by one party, and not denied by the other (see the Chapter on Parties to
an Arbitration Agreement).
In Inspira I.T. v. Tata, 23019 SCC OnLine Bom. 2716, the question
where parties had a written arbitration agreement arose in an interesting
fact situation. The arbitrator had been appointed by the court, with the
consent of the parties, while hearing a company petition. He resigned
mid-way of the arbitral proceedings. When Inspira, the claimant in
arbitration, filed an application for his substitution, Tata Consultancy
used the opportunity to argue that there was no (written) arbitration
agreement within the meaning of Section 7 of the ACA. The court held
that the form requirements were satisfied in the pleadings.
Chapter 02
VIDYA DROLIA AND OTHERS V. DURGA TRADING CORPORATION

2019 SCC ONLINE SC 358
Saran JJ; decided on 28 February 2019
Does existence include arbitrability and is a tenancy dispute under the

Transfer of Property Act arbitrable?
(A) PREFACE
This 2-judge bench has referred two questions to a larger bench of 3-
judges. This piece looks at the court’s reasons for the referral.
When someone requests the court’s assistance for the appointment of an
arbitrator under Section 11 of the ACA, the court must, under Section 11
(6A), confine itself to the “existence of an arbitration agreement.” 13
Does the examination of ‘existence’ of arbitration agreement include
arbitrability of the subject-matter?
In Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC
532, the 2-judge bench explained the meaning of “arbitrability” and in
paragraph 36 set out well-recognized examples of non-arbitrable
disputes. The list included “eviction or tenancy matters governed by
special statutes …”.
In Himangni Enterprises v. Kamaljeet Singh Ahluwalia, (2017) 10 SCC
706 (another 2-judge bench case) the Supreme Court applying Booz
Allen and Natraj (cited infra) held that the tenant’s application to refer
the dispute to arbitration was rightly dismissed as an arbitrator did not
have jurisdiction to decide eviction/rent dispute. Further, even if the
Delhi Rent Act, 1995, a special law, did not apply to the facts, it did not
ipso facto mean that the dispute be-
13 “Section 11. Appointment of arbitrators. —…(6A) The Supreme Court or, as the case may
be, the High Court, while considering any application under sub-section (4) or sub-section
(5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any court,
confine to the examination of the existence of an arbitration agreement”. This sub-section
has been omitted in the 2019 Amendments, but not yet notified. The question might
become academic once the omission comes into effect.
came arbitrable and the ACA applied. In such a case, the court said,
parties’ rights would be governed by the Transfer of Property Act, 1882
(“TPA”), and a civil suit would be triable in a civil court.
Was Himangni wrongly decided? Should a tenancy dispute governed by
the TPA be arbitrable? Does TPA exclude arbitration?
(B) THE VIDYA DROLIA CASE
This was a tenancy dispute. The landlord sought eviction, but the tenant
did not vacate. The landlord invoked the arbitration clause of the tenancy
agreement and filed an application in the High Court seeking
appointment of an arbitrator under Section 11 ACA. The tenant objected,
saying that the dispute was not arbitrable, but the High Court rejected the
objections and, in September 2016, ordered the appointment of
arbitrators. Several “sittings” of the arbitration were conducted. But
then on 12 October 2017, the Supreme Court delivered its judgment in
Himangni. 14 Now, based on Himangni, the landlord petitioned the High
Court for review of its order of appointment, but the petition was
dismissed. The matter thus came to the Supreme Court on the landlord’s
appeal.15
1. Court’s Reasons in Sending the Issue of Existence v. Arbitrability to
Larger Bench
First, the court noted the 246th Law Commission Report which “led to the
enactment of Section 11 (6A)” and which recommended a “two-step pro-
cess” to be adopted by a judicial authority: to look not only at
“existence” but also if the arbitration agreement was null and void. But
when eventually enacted, Section 11 (6A) “retained the aspect of
existence.”
Then the court reproduced Section 16 ACA under which an arbitral tribu-
nal has the competence to rule on its jurisdiction, including the existence
or validity of the arbitration agreement. The court noted, therefore, that
the “validity” of an arbitration agreement is apart from its “existence.”
14 2-judge bench, R.K. Agrawal and Abhay Manohar Sapre JJ.
15 The petition was first heard on 13 August 2018.
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With this short discussion that the court observed “one moot question
that therefore, arises, and which needs to be authoritatively decided by a
Bench of three learned Judges, is whether the word “existence” would
include weeding-out arbitration clauses in agreements which indicate that
the subject-matter is incapable of arbitration.” 16
2. Court’s reasoning in sending Arbitrability of Tenancy Disputes under
the Transfer of Property Act, 1882 to a Larger Bench
First, the court examined the provisions of the TPA. It referred to Section
111 of the TPA (determination of lease); Section 114 (relief against
forfeiture for non-payment of rent); and Section 114A (relief against
forfeiture in certain other cases).
The court concluded that there is nothing in the TPA to show that the dis-
pute as to the determination of a lease arising under Section 111, TPA
cannot be decided by an arbitrator.
It then turned to the argument that Sections 114 and 114A (which
provide statutory reliefs against forfeiture and non-payment of rent) were
based on public policy in favor of tenants as a class which can be decided
only by the courts. The court concluded that Section 114 and Section
114A cannot be said to be provisions conceived for relief of tenants as a
class as a matter of public policy and every one of the grounds stated in
Section 111, whether read with Section 114 and/or 114A, are grounds
which can be raised before an arbitrator.
Having examined the matter from the point of the principle (“so far so
good on principle”), the court turned to “to refer to certain decisions of
this Court.”
The categories of non-arbitrable dispute set out in Booz Allen was then
noted which included “eviction or tenancy matters governed by special
statutes where the tenant enjoys statutory protection against eviction and
only the
16 Thenafter the question was articulated, the court noted Duro Felguera, S.A. v. Gangavaram
Port Ltd., (2017) 9 SCC 729, where in his concurring judgment Kurian Joseph J held that
after the 2015 Amendments, “all that the courts need to see is whether an arbitration
agreement exists— nothing more, nothing less”.
specified courts are conferred jurisdiction to grant eviction or decide the

disputes.”
Then the court proceeded to “the sheet anchor of the appellants case,”
i.e., the decision in Himangni Enterprises. The court in Himangni had
given two reasons to say that a tenancy dispute under the TPA is not
arbitrable. First- ly: it was said that the issue was no longer res integra
and stood answered by Natraj Studios (P) Ltd. v. Navrang Studios,
(1981) 1 SCC 523, and Booz Allen. Secondly: it was said that the Delhi
Rent Act does not apply to certain premises; no sooner the exemption is
withdrawn or ceases to have its application, the Delhi Rent Act would
become applicable. So, it cannot be said that the ACA applies ipso facto
if the Rent Act does not apply; in such a situation, the matter would be
governed by the TPA and be triable by the civil court only.
As to Himangni’s reliance on Natraj and Booz, the court in Drolia
reasoned that neither Natraj nor Booz Allen stands for the proposition
that TPA tenancy disputes are not arbitrable: -
(i) Natraj was a dispute under the Bombay Rents Act, 1947, that is, a spe-
cial statute for which there was a specialized forum for adjudication.
(ii) Booz Allen too, made it clear that only those tenancy matters which
are governed by special statutes where the tenant enjoys statutory
protection against eviction and where only specified courts are
conferred jurisdiction are cases where the dispute between landlord
and tenant can be said to be non-arbitrable.
(iii) Therefore, “a Transfer of Property Act situation between a landlord
and tenant … cannot possibly be said to have been answered by the
two decisions of this Court”.
As to the point in Himangni about the exemption, and the matter being
triable only under the TPA by a civil court the court in Drolia reasoned:
-
(i) The mere fact that an exemption from the Rent Act is available does
not mean that the matter becomes non-arbitrable.
(ii) Persons may be exempt from a Rent Act not merely for a certain
period but also because the rent contained in the agreement between
the landlord and tenant is above a certain amount. When the rent is
fixed
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above, in the normal course, such rent can only be increased. Further,
the exemption based on a rent payable may continue for many years
to come.
For all these reasons, the Drolia court held that this reasoning of Himangni
also does not hold good.
Lastly, the Drolia court distinguished Vimal Kishor Shah v. Jayesh
Dinesh Shah, (2016) 8 SCC 788. In that case, the Supreme Court, after
referring to Dhula- bhai v. State of M.P., (1968) 3 SCR 662, concluded
that disputes which arose under the Indian Trusts Act, 1882, which
applies only to private trusts, were also not arbitrable as this was
excluded by necessary implication. The Drolia Court added that-
(i) Indian Trusts Act, 1882, provides an excellent instance of how
arbitration is excluded by necessary implication. The statute,
considered as a whole, must lead necessarily to the conclusion
that the disputes which arise under it cannot be the subject matter
of the arbitration.
(ii) But, in the TPA or the Specific Relief Act, 1963, no such thing
exists as has been held by Olympus Superstructures Pvt. Ltd. v.
Meena Vi- jay Khetan, (1999) 5 SCC 651 and Booz Allen.
GARWARE WALL ROPES LIMITED V. COASTAL MARINE CONSTRUC-

TIONS AND ENGINEERING LIMITED
(2019) 9 SCC 209
Supreme Court of India; 2-judge bench, R. F. Nariman and Vineet
Saran JJ; decided on 10 April 2019
Unstamped or insufficiently stamped arbitration agreement
does not exist as a matter of law
(A) PREFACE
Can a court appoint an arbitrator under Section 11 of the ACA if the
agreement containing the arbitration clause is not duly stamped?
On 20 July 2011, this question was decided by the Supreme Court in
SMS Teas Estates (P) Ltd v. Chandmari Tea Co (P) Ltd, (2011) 14 SCC
66. It was held that the provisions of the Indian Stamp Act, 1899 require
the court to impound the unstamped agreement and proceed with the
appointment of an arbitrator only after the necessary stamp duty is paid.
Later, in 2015, Section 11 (6A) was inserted in the ACA, which states as
follows:
The Supreme Court or, as the case may be, the High Court, while
considering any application under sub-section (4) or sub-section (5) or
sub-section (6), shall, notwithstanding any judgment, decree or order of
any Court, confine to the examination of the existence of an arbitration
agreement.
(B) THE GARWARE CASE
1. The Decision of the Bombay High Court
Dispute arose between Garware Wall Ropes and Coastal Marine
Construc- tions concerning a sub-contract for installation of geotextile
pipes. Coastal Marine Constructions filed an application under Section
11 of the ACA seeking appointment of an arbitrator before the Bombay
High Court.
Garware Ropes challenged the Section 11 application, among other
things, based on the decision in SMS Tea Estates. It contended that the
sub-contract was unstamped, and by appointing an arbitrator, the court
would be acting
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in violation of Sections 33 and 34 of the Maharashtra Stamp Act, 1958

(“Maharashtra Stamp Act”).
The Bombay High Court, however, proceeded with the appointment of an
arbitrator. It rejected Garware’s challenge for the following reasons:
(i) SMS Tea Estates had lost its efficacy after the 2015 Amendment,
which inserted Section 11 (6A) ACA.
(ii) Section 11 (6A) makes it clear that while appointing an arbitrator, the
court must restrict itself to examination of the existence of the agree-
ment.
(iii) The provisions of the Stamp Act are a fiscal measure intended
merely to collect revenue. Non-stamping of the document, if at all,
will go, to affect the validity of the agreement and not its existence.
(iv) The arbitration agreement is independent of the agreement in which
it is contained. So long as it is in writing, and therefore, exists in fact,
the court hearing Section 11 application is to appoint an arbitrator.
(v) Whether the document is properly stamped or not is an issue that can
certainly be decided by the arbitrator once the matter is referred to
arbitration.
(vi) Further, Section 11 (13) makes it clear that a Section 11 application
must be disposed within 60 days from the date of the notice, and this
would not be possible if questions relating to Stamp Act were to be
decided at the Section 11 stage.
Garware Ropes appealed.
2. The Question Before the Supreme Court
Whether the introduction of Section 11 (6A) had removed the basis of the
judgment in SMS Tea Estates so that the stage at which the unstamped
instrument was to be impounded was not the court hearing the
Section 11 application, but the arbitrator appointed?
3. Supreme Court’s Decision and Reasoning
The court held that the decision in SMS Tea would continue to apply
even after the 2015 Amendments. Section 11 (6A) of the ACA did not, in
any manner, deal with or remove the basis of SMS Tea. Its reasons:
(i) The 246th Law Commission Report shows that Section 11 (6A) was
introduced in the ACA because of judgments in SBP & Co. v. Patel
Engineering Ltd., (2005) 8 SCC 618 and National Insurance Co.
Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267. These two
decisions had opened the door, under Section 11, too wide.
Therefore, a large number of preliminary issues that would
otherwise be left to be decided by the arbitrator under Section 16,
were being decided by the court hearing the Section 11 application.
(ii) Neither the Statement of Objects and Reasons appended to the 2015
Amendments nor the 246th Law Commission Report mention SMS
Tea Estates. This is for the “very good reason” that the Supreme
Court or the High Court, in examining if an agreement is stamped or
not, does not decide any preliminary question that arises between
the parties. They only give effect to the provisions of Stamp Law,
a mandatory enactment to protect revenue.
(iii) SMS Tea Estates has taken account of mandatory provisions
contained in the Stamp Act and held them applicable to judicial
authorities, which would include the Supreme Court and High Court
acting under Section 11. When the Supreme Court or High Court
considers an application under Section 11 and come across an
arbitration clause in an unstamped document, it is enjoined by the
provisions of the Stamp Act to first impound the document and see
that stamp duty and penalty is paid before the agreement, as a
whole, can be acted upon.
(iv) The Stamp Act applies to the agreements as a whole. It is not
possible to bifurcate the arbitration clause contained in an
agreement which must be compulsorily stamped.
(v) The first part of Section 7(2) ACA provides that the arbitration
agreement may be in the form of an arbitration clause in a contract.
According to Section 2(h) of the Indian Contract Act, 1872, an
agreement becomes a contract only if it is enforceable by law.
Under the Stamp Act, an agreement does not become a contract,
namely, that it is not enforceable in law unless it is duly stamped.
Therefore, a plain reading of these provisions makes it clear that an
arbitration clause in an agreement would not exist when it is not
enforceable by law.
Chapter 02
(vi) The argument that Section 11 (6A) deals with “existence,” as

opposed to Section 8, Section 16 and Section 45, which deal with
the validity of an arbitration agreement is answered by the court’s
understanding of the expression “existence” in United India
Insurance Co. Ltd v. Hyundai Constructions. Ltd. 2018 (10)
SCALE 72. In this judgment, what was specifically under
consideration was an arbitration clause that would get activated only
if an insurer admits or accepts liability. Since on the facts it was
found that the insurer repudiated the claim, though an arbitration
clause did “exist” so to speak, in the policy, it did not exist in law,
when one important fact is introduced, namely, that the insurer has
not admitted or accepted liability.
(vii) Bombay High Court’s decision in Gautam Landscapes Pvt. Ltd. v.
Shailesh Shah and Ors., Arb. Pet. No. 466 of 2017 in so far as it
held that, because of Section 11 (6A) courts need not await
adjudication by stamp authorities before the appointment of
arbitrator, was incorrect.
(viii)A harmonious construction needs to be given to the provisions of
the Maharashtra Stamp Act which is a general statute insofar as it
relates to safeguarding revenue, and Section 11(13) ACA, which
applies specifically to speedy resolution of disputes by
appointment of an arbitrator expeditiously. A reasonable way of
harmonizing the provisions is as follows:
a. The High Court must impound the instrument which has not
borne stamp duty and hand it over to the authority under the
Maharashtra Stamp Act.
b. The stamp authority will then decide on the payment of stamp
duty and penalty (if any) as expeditiously as possible and
prefera- bly within 45 days from the date on which it receives
the instrument.
c. As soon as stamp duty and penalty (if any) are paid on the in-
strument, any of the parties can bring the instrument to the no-
tice of the High Court, which will then proceed to
expeditiously hear and dispose of the Section 11 application.
This will also ensure that once a Section 11 application is
allowed and an arbitrator is appointed, the arbitrator can then
proceed to decide the dispute within the time frame provided
by Section 29A ACA.
MAYAVATI TRADING PVT. LTD. V. PRADYUAT DEB BURMAN; 2019

SCC ONLINE SC 1164
Supreme Court of India; 3-judge bench, R.F. Nariman, Subhash Reddy
and Surya Kant JJ; decided on 5 September 2019
Scope of Section 11 (6A) does not extend to examining if there is an

arbitrable dispute
A petition was filed by Mayavati Trading in the High Court of Calcutta

under Section 11 ACA for appointment of arbitrator. The High Court
applied Section 11 (6A) of the ACA, which requires that the court while
considering any application under Section 11 “shall, notwithstanding any
judgment, decree, or order of any court, confine to the examination of
the existence of an arbitration agreement.” It found that no arbitration
agreement existed and dismissed the application.
In the Supreme Court, on Mayavati Trading’s petition for special leave to
appeal, after hearing the matter, the court noted that it did not propose to
interfere with the High Court’s order. However, during argument, a
“recent decision of this Court was pointed out, namely, United India
Insurance Co. Ltd. v. Antique Art Exports (P) Ltd., (2019) 5 SCC 362”.
In United India, a 2-judge bench of A.M. Khanwilkar and Ajay Rastogi JJ : -
(i) Noted 17 the decision in Duro Felguera, S.A. v. Gangavaram Port
Ltd., (2017) 9 SCC 729 in which the court had held that the Section
11 court had only to look at the existence of the arbitration
agreement, “nothing more and nothing less”;
(ii) But held that the “appointment of an arbitrator is a judicial power
and is not a mere administrative function leaving some degree of
judicial intervention”; also “when it comes to the question to
examine the existence of a prima facie arbitration agreement, it is
always necessary to en-
17 The court in Mayavati Trading said, in United India case the decision in Duro was “purportedly”
followed.
Chapter 02
sure that the dispute resolution process does not become unnecessarily
protracted.”
(iii) Then, examined if in the facts of that case, any arbitrable dispute
existed.
It is not clear what argument was advanced based on United India. The
court examined the current state of law and its legislative history and
considered two main questions.
(A) WHAT IS THE SCOPE OF INQUIRY UNDER SECTION 11 OF THE
ACA? WAS UNITED INDIA CORRECTLY DECIDED?
Overruling United India the court held: -
(i) Before the introduction of Section 11 (6A), the law laid down by the
Supreme Court, apart from examination of the existence of
arbitration agreement, included going into preliminary questions
whether accord and satisfaction had taken place or not, whether the
claim is a dead or a live claim. 18
(ii) The 246th Law Commission Report dealt with some of these
judgments and felt that at the stage of Section 11(6) application, only
“existence” of an arbitration agreement ought to be looked at and no
other preliminary issues [citing to and reproducing several passages
from Garware Wall Ropes Ltd. v. Coastal Marine Constructions &
Engg. Ltd., (2019) 9 SCC 209 where the issue was discussed].
(iii) This being the position, it is clear that the law prior to the 2015
Amendments that has been laid down by this court has been
legislatively overruled. Therefore, “it is difficult to agree with the
reasoning of the court” in United India, as Section 11 (6A) is
confined to the examination of the existence of an arbitration
amendment and is to be understood in the narrow sense as held in
Duro Felguera, SA v. Gangavaram Port Ltd., (2017) 9 SCC 729.
18 Citing to SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618
(B) WHAT IS THE EFFECT OF THE (PROPOSED) OMISSION OF SEC-

TION 11(6A)? DOES IT TAKE US BACK TO THE PRE -2015 AMEND-
MENTS POSITION?
It was pointed to the court that “by an Amendment Act of 2019, which
has since been passed, this sub-section has now been omitted. Section 3
of the Amendment Act of 2019 insofar as it pertains to this omission has
not yet been brought into force”. What is the effect of this proposed
omission?
The court said: -
(i) The proposed omission has been made as per the recommendations
of a high-level committee headed by Justice B. N. Srikrishna.
(ii) The omission of the sub-section is not so as to resuscitate the law
that was prevailing prior to the Amendment Act of 2015.
(iii) The omission is because the appointment of arbitrators is to be done
by the newly recognized mechanism, i.e., institutionally, in which
case the Supreme Court or the High Court under the old statutory
regime are no longer required to appoint arbitrators and consequently
to determine whether an arbitration agreement exists.
Chapter 02
NATIONAL ALUMINIUM COMPANY LIMITED V. SUBHASH INFRA EN-

GINEERS PVT. LTD. AND ANOTHER, 2019
SCC ONLINE SC 1091
Supreme Court of India; 2-judge bench, Abhay Manohar Sapre and R.
Subhash Reddy JJ; decided on 23 August 2019
To rule on existence or validity of the arbitration agreement is the arbitrator’s
domain and not of the civil court
National Aluminum Company Limited (“NALCO”), an enterprise of the
Government of India had issued a tender for certain construction in the
State of Odisha. Subhash Infra Engineers Pvt. Ltd. (“SIE”) submitted its
offer, which NALCO accepted and issued a work order. SIE wanted
some changes in the work order and later informed that the order was not
ac- ceptable. Later, SIE expressed its inability to carry out the work and
disputes arose. NALCO took the position that some other agency will
complete the work at the risk and cost of SIE. It later raised a claim of
around five crores and demanded payment failing which it said
arbitration would be invoked. SIE disputed that there was any binding
contract. NALCO went ahead and sent a panel of three names to SIE to
select an arbitrator. When SIE disputed the existence of an arbitration
agreement, NALCO appointed one of its former Chairman as sole
arbitrator.
The arbitrator initiated arbitral proceedings. In response, SIE filed a civil
suit for a declaration that the appointment was null and void, and also a
permanent injunction restraining the arbitrator from carrying on the
arbitral proceedings. SIE also sought a temporary injunction.
The trial court refused the temporary injunction, but on SIE’s appeal
against that refusal, the appellate court granted it. NALCO challenged
that order before the High Court, which dismissed the petition.19
19 NALCO v. Subhash Infra Engineers, CR No.2471 of 2016(O&M) decided on 22 October

2016 by Raj Mohan Singh, J. A review of this judgment on the High Court’s website
shows that the High Court made a detailed examination of the facts. It found that there was
no arbitration agreement within the meaning of Section 7, ACA. The court recognized that
the arbitral tribunal had the power to rule on the existence and validity of an arbitration
agreement, but said
NALCO approached the Supreme Court, which set aside the High Court’s
judgment and appointed another
arbitrator. Its reasoning was as follows: -
1. Competence of Arbitral Tribunal to Rule on its Own Jurisdiction
In Kvaerner Cementation India Limited v. Bajranglal Agarwal, (2012) 5
SCC 214 the Supreme Court examined a similar issue and held that any
objection concerning existence or validity of the arbitration agreement
can be raised only by way of an application under Section 16 of the ACA
and a Civil Court cannot have jurisdiction to go into such question. 20
If SIE wants to object about the existence or validity of the arbitration
agreement, it is open for it to move an application before the arbitrator,
but with such plea, it cannot maintain a suit for declaration and
injunction.
2. On Appointment of Arbitrator
NALCO appointed a former Chairman-cum-Managing Director of the
company itself as an arbitrator, who has commenced arbitration proceed-
ings. But he cannot act as an arbitrator having regard to the Fifth
Schedule21 introduced by Act 3 of 2016 (that is, the 2015 amendments
with effect from 23 October 2015).
The court appointed a former judge as an arbitrator.
that “for the applicability of the same, there must be a concluded document and lawful
arbitration agreement”.
20 A 3-judge bench of G.B. Pattanaik, S.N. Phukan and B.N. Agrawal JJ , decided on 21 March
2001. The court had held: “There cannot be any dispute that in the absence of any
arbitration clause in the agreement, no dispute could be referred for arbitration to an
Arbitral Tribunal. But, bearing in mind the very object with which the Arbitration and
Conciliation Act, 1996 has been enacted and the provisions thereof contained in Section
16 conferring the power on the Arbitral Tribunal to rule on its own jurisdiction, including
ruling on any objection with respect to existence or validity of the arbitration agreement,
we have no doubt in our mind that the civil court cannot have jurisdiction to go into that
question”.
21 Several provisions relating to independence and impartiality of arbitrators were introduced
by the 2015 Amendments. It included introduction of Section 12 (Grounds for Challenge);
the Fifth Schedule, and the Seventh Schedule. The Fifth Schedule sets out grounds which
give rise to justifiable doubts as to the independence or impartiality of arbitrators.
Chapter 02
INSPIRA I.T. PRODUCTS PVT. LTD. V. TATA CONSULTANCY SERVICES

LTD.,2019 SCC ONLINE BOM. 2716
Bombay High Court; single-judge bench, G.S. Kulkarni J; decided on
14 October 2019
An arbitration agreement is in writing if contained in an exchange of

statement of claim and defense
Section 7 ACA deals with the formal validity of the arbitration

agreement. Sub-section 3 prescribes that the arbitration agreement “shall
be in writing.” Did parties have a written arbitration agreement? This
was the question in the present case in an interesting fact situation.
The arbitrator had been appointed by the court, with the consent of the
parties, while hearing a company petition. He resigned mid-way of the
arbitral proceedings. When Inspira, the claimant in arbitration, applied
his substitution, Tata Consultancy used the opportunity to argue that
there was no (written) arbitration agreement within the meaning of
Section 7 of ACA.
By this time, as the court noted: –
(i) The statement of claim and defense had been filed.
(ii) Tata had filed an interim application for rejection of Inspira’s claim
on the ground of limitation.
(iii) Claimant Inspira had examined its witnesses who were cross-
examined by Tata.
(iv) The matter was at the stage where Tata applied filing additional evi-
dence.
The court concluded that Tata’s argument was “not well-founded” and it
had “wholeheartedly accepted reference of the disputes to arbitration.” It
then held the requirement that arbitration agreement be written was
fulfilled because: –
(i) Under Section 4 (c) ACA, an arbitration agreement is in writing also
if it is contained in an exchange of statements of claim and
defense in
which the existence of the agreement is alleged by one party and not
denied by the other.
(ii) In its statement of claim, Inspira referred to the fact that the disputes
were referred to arbitration by consent. Tata Consultancy did not (of
course) take any specific objection.
Kerala State Electricity Board v. Kurien E. Kalathil, 2018 4 SCC 793,
cited by Tata, was distinguished because that was a case of counsel
giving consent but the parties objecting later, unlike here where the
parties participated in the arbitration.
Tata’s alternative argument that it no longer continued to give the
consent was rejected as “wholly misconceived.” The court ruled that
after recogniz- ing the arbitration agreement, once the arbitrator was
appointed, the substitute arbitrator would be required to be appointed in
the same fashion [citing to Shailesh Dhairyawan v. Mohan Balkrishna
Lulla, (2016) 3 SCC 619].
Chapter 02
SATYANARAYANA & CO. V. WEST QUAY MULTIPORT PRIVATE LIM-

ITED, 2019 SCC ONLINE BOM 4595
Bombay High Court; single-judge bench, G.S. Patel J.; decided on 22

No- vember 2019
An agreement with an arbitration clause, stamped elsewhere, if brought in
Ma- harashtra, will have to be stamped again even if arbitration is the only
thing to happen in Maharashtra; arbitration is a thing done or to be done
under Maha-
rashtra Stamp Act
An agreement between the petitioner and the respondent, stamped in An-
dhra Pradesh, had an arbitration clause. Based on this, the petitioner
made an application for the appointment of an arbitrator in Maharashtra
in the High Court of Bombay.
The respondent argued that the agreement should be stamped again in
Ma- harashtra under the Maharashtra Stamp Act, 1958 (“MSA”), and, as
held by the Supreme Court in Garware Wall Ropes Limited v. Coastal
Marine Construc- tions, (2019) 9 SCC 209, in the absence of stamping,
the court cannot act upon the arbitration agreement.
The provision of MSA in question stipulates that an instrument executed
outside but when received in Maharashtra is chargeable with duty if it re-
lates “to any matter or thing done or to be done in Maharashtra” [Section
3 (a) (b)].
Interpreting this provision, the petitioner disputed the premise that the
agreement was chargeable to stamp duty in Maharashtra at all. It argued
that Section 3 (a) (b) of MSA must be restricted to mean only the
contract works that were required to be done by the contractor and
cannot include arbitration. Further, arbitration is a dispute redressal
mechanism, when there arises a dispute about a thing “done or to be
done.”
Rejecting the petitioner’s submissions, G.S. Patel J held: –
(i) He “should have the greatest difficulty in accepting … [the argument]

… without running seriously afoul of the Supreme Court decisions in
Garware Wall Ropes and SMS Tea Estates Private Limited. 22 The
petitioner’s argument involves severing the arbitration clause from
the rest of the agreement,23 which was simply impermissible given
the two judgments.
(ii) If stamp duty has been paid elsewhere, of course, there will be an ad-
justment and credit given for the amount already paid, that will,
however, not exempt the document from payment of stamp duty
under the Maharashtra Stamp Act.24
(iii) The other reason is purely linguistic. It is difficult, without doing
some very serious violence to the language, to conclude that
arbitration is not a thing done or to be done.
(iv) Finally, the petitioner’s argument overlooks a cardinal principle of
arbitration law. Arbitration is founded in contract and such a
contract is one and indivisible at least to the extent of its arbitration
agreement.
The court also then observed that ordinarily (following Garware) it
would have impounded the document and sent it to the Collector of
Stamps for adjudication. But the petitioner undertook to submit the
document, or a copy of it, for adjudication and proceed further. Because
of the adjudication, the petition was kept pending.
22 (2011) 14 SCC 66.

23 Because, the court said, accepting the petitioner’s submissions would require the court to
make a finding that while the rest of the contract may be required to be stamped,
arbitration agreements are themselves not assessable to stamp, therefore no stamp is
payable.
24 It appears that there may be a provision for adjustment in the MSA.
Chapter 03
NONARBITRABILITY
INTRODUCTION
(A) WHAT IS ARBITRABILITY
Some areas are reserved for adjudication only by courts. Those matters
are not arbitrable. The question of arbitrability (or nonarbitrability)
mainly is: what disputes can be resolved by arbitration (the private
process) and what disputes are only for the courts to decide (the state
process)?
In India (and other countries also) the term has been used to signify
more. A 2-judge bench of the Supreme Court in Booz Allen and
Hamilton Inc. v. SBI Home Finance Limited and others, (2011) 5 SCC
532 considered the following two also as part of arbitrability: whether the
arbitration agreement covers the disputes, and whether the parties have
referred the dispute to arbitration? 1 The court also considered these
"three facets of arbitrability" as questions of jurisdiction of the arbitral
tribunal.
(B) THE VALIDITY OF AN ARBITRATION AGREEMENT VERSUS ARBI-
TRABILITY
Many authors and commentators, including Mr. G.B. Born, distinguish

between the validity of an arbitration agreement and nonarbitrability.
Validity refers to contractual rules. For example, is the arbitration
agreement induced by undue influence? Arbitrability refers to rules
prevailing in a coun-
1 See N. Blackaby, et al. (eds.), Redfern and Hunter on International Arbitration, pg. 24,
(5th ed. 2009) (Using the term ‘arbitrable’ to signify these is criticized: “In a confusing use
of language, some writers (and indeed some judges, particularly in the US) will describe a
dispute as being not ‘arbitrable’ when what they mean is that it falls outside the jurisdic-
tion of the tribunal, because of the limited scope of the arbitration clause or for some other
reason…(reference being made after the relevant time) … [T]his unfortunate misuse of the
term ‘arbitrable’ is so deeply entrenched that it cannot be eradicated: all that can be done is
to watch out for the particular sense in which the word is being used”.) The underlying
principle on which Booz’s conception of arbitrability is based on (the much criticized) pub-
lic policy ground and rights in rem. Its analysis is, for space limitations, outside the scope
of this Yearbook
Nonarbitrability
try, whether set out in statute or case laws, which make a dispute or a
class of disputes non-arbitrable. Also, an arbitration agreement may be
validly made (under contract) and yet maybe about a non-arbitrable
matter.2 Or, the same arbitration agreement may involve both types of
matters.
Many authors similarly also caution that arbitration is a condition
precedent for the tribunal to assume jurisdiction (a jurisdictional
question) rather than a condition of validity of an arbitration agreement
(a contractual requirement).3
But there is also a view in which arbitrability relates to the validity of the
arbitration agreement. For example, in his frequently quoted paper, 'The
law applicable to arbitrability,' Bernard Hanotiau notes, "[A]rbitrability is
indeed a condition of validity of the arbitration agreement and,
consequently, of the arbitrators' jurisdiction."4
(C) ARBITRABILITY UNDER THE NYC
Article II (1) of the Convention requires each contracting State to
recognize an agreement in writing concerning a subject-matter capable of
settlement by arbitration. Article V (2) (a) provides that recognition and
enforcement of an arbitral award may also be refused if the competent
authority finds that the subject-matter of the difference is not capable of
settlement by arbitration under the law of that country.
Mr. Born notes, "together, these provisions permit the assertion of

"nonarbitrability" defenses to the recognition and enforcement of
otherwise valid
2 See, Gary B. Born, International Commercial Arbitration, pg. 949 (2nd. ed.), Kluwer Law
International.
3 L Mistelis and S Brekoulakis (eds), Arbitrability: International & Comparative Perspec-
tives, 2009, Kluwer Law International. See, Chapter 2, Stavros L. Brekoulakis, On Arbi-
trability: Persisitng Misconceptions and New Areas of Concern.
4 Arbitration International, Volume 12, Issue 4, 1 December 1996, Pages 391–404. The
example is cited by Brekoulakis too.
Chapter 03
and binding international arbitration agreements and awards under the

Convention."5
(D) ARBITRABILITY UNDER THE MODEL LAW AND ACA
Article 1 (5) provided that the Model Law shall not affect those laws of
the State by which certain disputes may not be submitted to arbitration.
The legislative history suggests that it was discussed to limit the number
of nonarbitrable subject matter or at least list them. But this was deemed
un- necessary, primarily because it was thought that in many, if not all,
jurisdictions such agreements would be null and void and therefore not
enforceable under the terms of Article 8.
Article 8 of the Model Law contains presumptive validity of the

arbitration agreement and requires a court before which an action is
brought in a matter, which is the subject matter of an arbitration
agreement, to refer it to arbitration unless it finds that the agreement is
null and void, inoperative or incapable of being performed. 6
Section 8 ACA, which requires the court to refer the parties to a domestic
arbitration, when enacted in 1996, did not have this latter language of
"null and void, inoperative or incapable of being performed."
After the 2015 Amendments, Section 8 ACA requires the court to find
prima facie that a valid arbitration agreement exists.
Section 45 ACA, which requires a court to refer the parties to an interna-

tional arbitration, contained from the start the requirement that the court
investigates if the agreement was null and void, inoperative or incapable
of being performed. Arbitrability has always been an issue within this
section.
5 See Gary B. Born, International Commercial Arbitration, pg. 946 vol. 1 (2nd ed.), Kluwer
Law International.
6 Howard M. Holtzmann & Joesph E. Neuhaus, A Guide to the UNCITRAL Model Law on
International Commercial Arbitration, Legislative History and Commentary, pg. 38,
Kluwer Law International (2015).
Nonarbitrability
Under Article 34 of the Model Law, which provides for "application for
setting aside as exclusive recourse against arbitral awards" one of the
grounds is that the subject matter of the dispute is not capable of
settlement by arbitration [Article 34 (2) (b) (i)]. It will be useful to bear
in mind that in that Article 34 (2) (b) (ii) is the ground of public policy.
Section 34 ACA has similar wording.
Section 11 ACA relates to the appointment of arbitrators. Before 2015

Amendments, though there is some authority to suggest that examination
of the issue of "arbitrability" is not a matter in the scope of this section
and instead is arbitrator's domain under Section 16 ACA 7, there are a
host of other authorities which examined arbitrability (in its wider sense)
under the provision.
Irrespective of the specific section of the ACA, whenever the issue of

arbitrability comes up, Booz Allen is referred to as the leading authority.
(E) ARBITRABILITY IN 2019
Several cases in 2019 involved the question of arbitrability. Many, as set

out later in this Chapter, involved an application for the appointment of
an arbitrator under Section 11. Some of these cases also involved the
question of the existence of an arbitration agreement.
We noted in the Chapter on the appointment of arbitrators that in Vidya

Drolia, a 2-judge bench of R.F. Nariman and Vineet Saran JJ has
referred to a larger bench of three judges the question if an inquiry that
the arbitration agreement exists includes arbitrability. Another question if
a tenancy dispute under the TPA is arbitrable has also been referred.
In Rashid Raza, a 3-judge bench speaking through Nariman J while

considering an appeal from a matter under Section 11 referred the
matter to arbitration. The question involved if, given the allegations of
siphoning funds,
7 See, e.g., Booz Allen at para 32 (SCC).

Chapter 03
cheating, creating fake agreements (frequently referred under the rubric

of 'fraud'), the matter was arbitrable. On the same facts the High Court
considered that the matter was not arbitrable because the dispute was
complex; the Supreme Court though they could be decided by the
arbitrator. Both relied on Ayyasamy's principle.
The court in Rashid did not refer either to Section 11 (6A) or Vidya Drolia
or
Mayavati Trading (discussed in Chapter 2).
Mitr Guha is a judgment of a 3-judge bench of September 2019 which

arose out of setting aside of an award because the matters decided were
"excepted matters" under the agreement and hence not arbitrable. The
Supreme Court affirmed the finding. One of the grounds of setting aside
under Section 34 is that the "arbitral award deals with a dispute not
contemplated by or not falling within the terms of the submission to
arbitration, or it contains decisions on matters beyond the scope of the
submission to arbitration …".
The 3-judge bench did not directly refer to the specific ground under Sec-
tion 34 the decision was based on but it is clear from the judgment that
the "excepted matter" was considered a part of arbitrability.
Nonarbitrability
RASHID RAZA V. SADAF AKHTAR 2019 SCC ONLINE SC 1170
Supreme Court of India, R. F. Nariman, R. Subhash Reddy and Surya

Kant JJ, decided on- 04 September 2019
Arbitrability of fraud; working test contained in Ayyasamy's case
(A) CRIMINAL ACTION (FIR) BY ONE PARTY AND APPLICATION TO

APPOINT AN ARBITRATOR BY ANOTHER
Rashid Raza was a partner in a partnership firm by the name of S.R.
Coating. Another Partner, Sadaf Raza initiated criminal action against
Rashid by filing a first information report (in November 2017) under
Section 406, 467, 468, 471, 472, and 420 of the Indian Penal Code. The
allegations revolved around siphoning funds, cheating, creating fake
agreements.
Rashid invoked the arbitration clause of the partnership deed and applied to
the High Court of Jharkhand for appointment of an arbitrator under Section 11
ACA.
(B) THE HIGH COURT—PRINCIPLES LAID IN AYYASAMY DISCUSSED
(INCLUDING PARAGRAPH 25), BUT FACTS OF AYYASAMY (APPLIED
HERE AT PARAGRAPH 26) DISTINGUISHED AND APPLICATION TO
APPOINT ARBITRATOR DISMISSED
The High Court considered the principles set out in Swiss Timing v.
Common- wealth Games, (2014) 6 SCC 677 and A. Ayyasamy v. A.
Paramasivam, (2016) 10
SCC 386. It set out paragraphs 14, 15, 18, 23 and 25 of the Ayyasamy
case. Then it observed referring to paragraph 26 of Ayyasamy that
according to its ratio, mere allegation of fraud is not a ground to nullify
the effect of arbitration agreement between the parties. The court then
reproduced the circumstances set in Ayyasamy's case when the
arbitration clause "can be ignored by the Court."
The High Court then concluded that the allegations of fraud are
complicated and can be decided only by a civil court on appreciation of
voluminous evidence. Also, it was not a case of mere allegation of fraud
simpliciter which could not be a ground to nullify the effect of arbitration
agreement between the parties.
The High Court then said: "In … Ayyasamy, the Apex Court has after
laying down the principles of law, at para 25 applied these principles to
the fact of
Chapter 03
the case and concluded8 that it did not involve any complex issues which
could nullify the arbitration agreement". The High Court then
distinguished the facts from Ayyasamy's case and held that the present
facts "are much more complex" and "may require voluminous evidence …
which can be only properly undertaken by a civil court of competent
jurisdiction".
Rashid now approached the Supreme Court.
(C) THE SUPREME COURT: DISPUTE WAS ARBITRABLE (CONFUSION
ABOUT AYYASAMY'S REFERENCE)
The Supreme Court:
(i) Noted firstly that the High Court cited Ayyasamy and in its holding
extracted para 26 of Ayyasamy.
(ii) Then secondly said the law laid down in Ayyasamy is in para 25 and
not in para 26.
(iii) Thirdly, explained Ayyasamy and held that "two working tests laid
down in para 25 are: (1) does this plea permeate the entire contract
and above all, the agreement of arbitration, rendering it void, or (2)
whether the allegations of fraud touch upon the internal affairs of
the parties inter se having no implication in the public domain.
(iv) Fourthly, concluded that judging by these two tests, the case fell on
the side of "simple allegations" as there is no allegation of fraud,
which would vitiate the partnership deed or the arbitration clause.
Also, all the allegations pertain to the affairs of the partnership and
siphoning off funds and not to any matter in the public domain.
8 In Ayyasamy, the court’s conclusion, after applying the principles laid down at paragraph 25 to
the facts of the case, was set out at paragraph 26 as follows: “26. When we apply the aforesaid
principles to the facts of this case, we find that the only allegation of fraud that is levelled is that
the appellant had signed and issued a cheque of Rs 10,00,050 dated 17-6-2010 of “Hotel
Aruna- giri” in favour of his son without the knowledge and consent of the other partners i.e.
the respondents. It is a mere matter of accounts which can be looked into and found out even
by the arbitrator. It does not involve any complex issue. If such a cheque is issued from the
hotel account by the appellant in favour of his son, it is easy to prove the same and then the
onus is upon the appellant to show as to what was the reason for giving that amount from the
partnership firm to his son and he will have to account for the same. Likewise, the allegation of
the respondents that daily collections are not deposited in the bank accounts is to be proved by
the respondents which is again a matter of accounts.”
Nonarbitrability
MITRA GUHA BUILDERS (INDIA) COMPANY V. OIL AND NATURAL

GAS CORPORATION LIMITED 2019 SCC
ONLINE SC 1442
Supreme Court of India, 3-judge bench, R. Banumathi, A.S. Bopanna
and Hrishikesh Roy JJ, decided on 08 November 2019
If the agreement provides a named adjudicator for deciding certain matters,

those matters are “excepted matters”, and not arbitrable
In the construction contract that Mitra Guha had with ONGC, a clause
empowered the Superintending Engineer ("SE") of ONGC to levy com-
pensation if Mitra Guha delayed performance. That clause also set out a
mechanism for determination of the compensation, and also specified
that the determination would be final.
When disputes arose, Mitra Guha initiated arbitration and got an award in
its favor. ONGC's set-aside application was dismissed. ONGC went to
the Supreme Court.
Accepting on facts that the award was on "excepted matters", the court
made the following decision: –
(i) Once the parties decided that certain matters are to be decided by
the S.E. and his decision would be final, they cannot be the
subject matter of the arbitration. Any other meaning to the
finality clause would make the agreed provisions meaningless
and redundant. [relying on Vishwanath Sood v. Union of India
(1989) 1 SCC 657, Su- preme Court, Sabyasachi Mukharji and S.
Ranganathan JJ]
(ii) "Excepted matters" do not require a further adjudication. The
remedy, if any, will arise in the ordinary course of law. [relying
on Food Corporation of India Sreekanth Transport (1999) 4
SCC 491, Supreme Court, V. N. Khare and Umesh C. Banerjee
JJ]
(iii) Bharat Sanchar Nigam Limited Motorola India (P) Ltd. (2009) 2
SCC 337 is distinguishable. Adjudication of delay was arbitrable
in that case. Here it is not.
Chapter 04
EXTENT OF JUDICIAL INTERVENTION AND

CONSTITUTIONAL COURTS
INTRODUCTION
(A) EXTENT OF JUDICIAL INTERVENTION: ARTICLE 5 OF MODEL
LAW AND SECTION 5 OF ACA
Article 5 of the Model Law provides that "in matters governed by this
Law, no court shall intervene except where so provided in this Law."
It "states a simple, but very important, principle. Its purpose is to oblige

the draftsmen of the law to state the instances in which court control is
envi- sioned, in order to increase certainty for parties and arbitrators and
further the cause of uniformity".
Section 5 ACA provides that "notwithstanding 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."
(B) JUDICIAL REVIEW CANNOT BE TAKEN AWAY

The non-obstante language of Section 8, ACA, however, does not affect
the power of judicial review the High Court under Article 226 and 227 or
of the Supreme Court under Article 32 of the Constitution of India. This
jurisdiction cannot be limited or fettered by any Act of the Legislature.
They form part of the basic structure of the Constitution.
The State's contract with a private party is also subject to judicial review
(on self-imposed narrow or broad standards depending on the authority
you are reading) on constitutional law and administrative law principles.
A purely contractual dispute is usually outside the self-imposed
limitations of the court's discretionary jurisdiction because the
extraordinary remedy under these provisions is not intended to be used
for declaration of private rights.
Extent of Judicial Intervention and Constitutional Courts
But, for example, if the State discriminates, or acts unfairly, or

unreasonably, or arbitrarily the public law remedy can be invoked.
One foremost basis for challenging either the formation of a contract or a

State action during the contract1 is Article 14 of the Constitution of India
"[T]he State shall not deny to any person equality before the law or the
equal protection of the laws within the territory of India." "When an in-
strumentality of the State acts contrary to the public good and public
interest, unfairly, unjustly and unreasonably, in its contractual,
constitutional or statutory obligations, it really acts contrary to the
constitutional guarantee found in Article 14 of the Constitution".2
(C) 2019 CASES: JUDICIAL REVIEW OF ARBITRATION AGREEMENT IN

ICOMM AND APPLICABILITY OF ARTICLE 227 IN DEEP INDUSTRIES
1. ICOMM
Icomm Tele Limited v. Punjab State Water Supply and Sewerage Board
and others, (2019) 4 SCC 401 is an example of the involvement of
constitutional rights in arbitration (with a State instrumentality). Here,
the question of the validity of the arbitration agreement arose outside of
the ACA in a petition Arti- cle 226 of the Constitution of India before the
High Court.
The matter involved a pre-deposit requirement before the non-state party

could invoke arbitration. The refund of the pre-deposit, in case the State
1 See Shrilekha Vidyarthi (Kumari) v. State of U.P., (1991) 1 SCC 212 (“The State cannot
be attributed the split personality of Dr. Jekyll and Mr. Hyde in the contractual field so as
to impress on it all the characteristics of the State at the threshold while making a contract
requiring it to fulfil the obligation of Article 14 of the Constitution and thereafter permit-
ting it to cast off its garb of State to adorn the new robe of a private body during the sub-
sistence of the contract enabling it to act arbitrarily subject only to the contractual obliga-
tions and remedies flowing from it. It is really the nature of its personality as State which
is significant and must characterize all its actions, in whatever field, and not the nature of
function, contractual or otherwise, which is decisive of the nature of scrutiny permitted for
examining the validity of its act. The requirement of Article 14 being the duty to act fairly,
justly and reasonably, there is nothing which militates against the concept of requiring the
State always to so act, even in contractual matters”).
2 ABL International Limited v. Export Credit Guarantee Corporation of India Limited,
(2004) 3 SCC 553.
Chapter 04
party lost in arbitration, was to be not of the whole amount. The High
Court rejected the petition.
A 2-judge bench of the Supreme Court (R.F. Nariman and Vineet Saran
JJ) struck down the clause. They applied Article 14 and held that the
clause was arbitrary.
A passage from Central Inland Water Transport Corpn. v. Brojo Nath

Ganguly, (1986) 3 SCC 156, a leading authority on the principle of
contract of adhesion, was cited. But the court rejected the argument that
the clause amounted to a contract of adhesion and could be set aside on
the grounds of unconscionability. It referred to paragraph 89 of Central
Inland and said the principle does not apply where both parties are
businessmen, and the contract is a commercial transaction.
This is what the court had said at paragraph 89 in Central Inland: -
"This principle is that the courts will not enforce and will, when
called upon to do so, strike down an unfair and unreasonable
contract, or an unfair and unreasonable clause in a contract,
entered in- to between parties who are not equal in bargaining
power. It is difficult to give an exhaustive list of all bargains of
this type. No court can visualize the different situations which
can arise in the affairs of men. One can only attempt to give
some illustrations. For instance, the above principle will apply
where the inequality of bargaining power is the result of the great
disparity in the economic strength of the contracting parties. It
will apply where the inequality is the result of circumstances,
whether of the creation of the parties or not. It will apply to
situations in which the weaker party is in a position in which he
can obtain goods or services or means of liveli- hood only upon
the terms imposed by the stronger party or go without them. It
will also apply where a man has no choice, or rather no
meaningful choice, but to give his assent to a contract or to sign
on the dotted line in a prescribed or standard form or to accept a
set of rules as part of the contract, however unfair, unrea-
sonable and unconscionable a clause in that contract or form or
rules may be. This principle, however, will not apply where the
bargaining
power of the contracting parties is equal or almost equal. This

principle may not apply where both parties are businessmen and
the contract is a commercial transaction. In today's complex
world of giant corporations with their vast in- frastructural
organizations and with the State through its instrumentalities
and agencies entering into almost every branch of industry and
commerce, there can be myriad situations which result in unfair
and unreasonable bargains between parties possessing wholly
disproportionate and unequal bargaining power. These cases
can neither be enumerated nor fully illustrated. The court must
judge each case on its own facts and circumstances (emphasis
added)".
It will be useful to note here that unconscionability claims to an

arbitration agreement has been recognized in many jurisdictions across
the world, as noted by Mr. Born.3 Such an argument goes to the
substantive validity of an arbitration agreement 4, which "concerns its
contractual validity in general," for instance, fraud, mistake, undue
influence, lack of consideration, etcetera.
The question of substantive validity can arise in the ACA in several pro-
ceedings. For example, one of the grounds of setting aside an arbitral
award is that the "arbitration agreement is not valid under the law to
which the parties have subjected it …" [Section 34 (2) (a) (ii)].
Icomm might make it difficult for parties to apply unconscionability

claims in a similar situation.
2. Deep Industries
Under Article 227, the High Courts have judicial and administrative
powers of superintendence over all courts and tribunals throughout its
territory.
Can or should a High Court exercise its jurisdiction under Article 227 in
matters decided under the ACA? This was the question before a 3-judge
3 Gary B. Born, International Commercial Arbitration, pg. 856-866, vol. 1, 2nd ed.
4 Formal validity of an arbitration agreement on the other hand relates to the written form
requirements (under Section 7 ACA).
Chapter 04
bench presided by Nariman J in Deep Industries Limited v. Oil and

Natural Gas Corporation and another, 2019 SCC OnLine SC 1602.
The arbitral tribunal made an interim order under Section 17 of the ACA
(which provides for interim measures by the tribunal). An appeal was
filed before the City Civil Court but rejected. Since no appeal lies from
such an order under the ACA, a petition under Article 227 of the
Constitution was filed challenging the City Court's order.
The court held that though High Courts can exercise jurisdiction under
Ar- ticle 227 against judgments allowing or dismissing first appeals
under Sec- tion 37 of the ACA, this must be with extreme
circumspection, considering the statutory policy of the ACA so that
interference is restricted to orders that are passed which are patently
lacking in inherent jurisdiction.
ICOMM TELE LTD. V. PUNJAB STATE WATER SUPPLY AND

SEWERAGE BOARD AND ANR., 2019 4 SCC 401
Saran, JJ; decided on 11 March 2019
Article 14 of the Constitution and arbitration clauses
The arbitration clause provided that to avoid frivolous claims, the party
invoking arbitration shall furnish a "deposit-at-call" for ten percent of
the amount claimed. Further, the deposit was to be refunded in
proportion to the amount awarded with reference to the amount claimed,
and the balance, if any, shall be forfeited.
Icomm challenged this clause. The challenge failed in the High Court and
reached the Supreme Court.
Icomm argued: -
(i) The arbitration clause was a contract of adhesion, and since there is
unfair bargaining strength between the parties, it ought to be struck
down following Central Inland Water Transport Corpn. Ltd. v.
Brojo Nath Ganguly, (1986) 3 SCC 156.
(ii) A 10 percent deposit would amount to a clog on entering the arbitral
process. Claims may ultimately be found to be untenable but need
not be frivolous. Heavy costs can compensate frivolous claims.
(iii) Further, the refund mechanism was arbitrary and high-handed.
The Supreme Court struck down the clause as violative of Article 14 of
the Constitution of India: -
(i) Firstly, it said the terms of tender are not open to judicial scrutiny, as
they are in the realm of contract unless they are arbitrary,
discriminatory, or actuated by malice. [citing to Directorate of
Education v. Educomp Datamatics Ltd., (2004) 4 SCC 19; Global
Energy Ltd. v. Adani Exports Ltd., (2005) 4 SCC 435].
(ii) Secondly, it rejected the argument regarding the contract of adhesion
holding that it does not apply where both parties are businessmen,
and the contract is a commercial transaction and [following
paragraph 89 of Central Inland Water Transport Corpn. v. Brojo
Nath Ganguly, (1986) 3 SCC 156, which is otherwise an authority on
contract of adhesion].
Chapter 04
(iii) Thirdly, it distinguished the decision in S.K. Jain v. State of Haryana,

(2009) 4 SCC 357 where an arbitration clause requiring security
deposit for invoking arbitration was upheld holding that the concept
of unequal bargaining power has no application in the case of
commercial contracts. The court said the plea that the arbitration
clause was violative of Article 14 Constitution of India was not at
issue. It also found the clause, in this case, is "materially different."
(iv) Fourthly, then the court referred to ABL International Ltd. v. Export
Credit Guarantee Corpn. of India Ltd., (2004) 3 SCC 553 for the
proposition that even within the contractual sphere, the requirement of
Article 14 to act fairly, justly and reasonably by persons who are
"State" authorities or instrumentalities continues. Thus, said the court,
it needs to be examined "whether the aforesaid Clause 25(viii) can be
said to be arbitrary or discriminatory and violative of Article 14 of
the Constitution of India".
(v) Fifthly, in that examination, the court: -
a. Rejected the argument that the clause was "discriminatory" ("the
aforesaid clause cannot be said to be discriminatory in that it
applies equally to both parties").
b. Cited to A.L. Kalra v. Project & Equipment Corpn. of India Ltd.,
(1984) 3 SCC 316 where the court had rejected the proposition
that arbitrariness is only a facet of discrimination and discussed
the concept of equality.5
c. Discussed the stated rationale of the "deposit-at-call" clause, that
is, to avoid frivolous claims and noted, "it is well settled that a
frivolous claim can be dismissed with exemplary costs" [relying on
Dnyandeo Sabaji Naik v. Pradnya Prakash Khadekar, (2017) 5
SCC 496].
d. Cited General Motors (India) (P) Ltd. v. Ashok Ramnik Lal Tolat,
(2015) 1 SCC 429 noting that "punitive damages follow when a
court is approached with frivolous litigation." The court also
noted an "important principle established by [General Motors]
is that unless it is
5 3-judge bench, D.A. Desai, O. Chinnappa Reddy and A. Varadarajan, JJ.
first found that the litigation that has been embarked upon is
frivolous, exemplary costs or punitive damages do not follow."
e. Held that, therefore a "deposit-at-call" of 10 percent of the amount
claimed, is obviously without any direct nexus to the filing of
frivolous claims, as it applies to all claims (frivolous or
otherwise) made at the very threshold. It said this is also one
important aspect of the matter to be kept in mind in deciding that
such a clause would be arbitrary in the sense of being something
which would be unfair and unjust and which no reasonable man
would agree to. Indeed, a claim may be dismissed but it need not
be frivolous.
f. Noted that further, even where a claim is found to be justified and
correct, the amount that is deposited need not be refunded to the
successful claimant (examining the clause). This would render the
entire clause wholly arbitrary, being not only excessive or
disproportionate but leading to the wholly unjust result of a party
who has lost an arbitration being entitled to forfeit such part of the
deposit as falls proportionately short of the amount awarded as
compared to what is claimed.
g. Also noted that arbitration is an important alternative dispute
resolution process which is to be encouraged because of the high
pendency of cases in courts and the cost of litigation. Any
requirement as to deposit would certainly amount to a clog on this
process.
h. Observed it is easy to visualize that often a deposit of 10 percent
of a huge claim would be even greater than court fees that may be
charged for filing a suit in a civil court [citing to State of J&K v.
Dev Dutt Pandit, (1999) 7 SCC 339].
i. Primary object of arbitration is to reach a final disposal of disputes
in a speedy, effective, inexpensive and expeditious manner [citing
to Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd.,
(2017) 2 SCC 228, and Union of India v. Varindera
Constructions Ltd., (2018) 7 SCC 794].
Deterring a party to arbitration from invoking this alternative dispute
resolution process by a pre-deposit of 10 percent would discourage
arbitration, contrary to the object of de-clogging the court system, and
would render the arbitral process ineffective and expensive.
Chapter 04
DEEP INDUSTRIES LIMITED V. OIL AND NATURAL GAS CORPORA-

TION AND ANOTHER 2019 SCC ONLINE SC 1602
Supreme Court of India; 3-judge bench, R. F. Nariman, Aniruddha Bose

and V. Ramasubramanian, JJ; decided
on 28 November 2019
High Courts can exercise jurisdiction under Article 227 in certain arbitral
matters, but with extreme circumspection, considering the statutory
policy of the ACA, so that interference is restricted to orders that are
passed which are pa-
tently lacking in inherent jurisdiction
The arbitral tribunal had made an interim order under Section 17 of the
ACA (which provides for interim measures by the tribunal) in favor of
Deep Industries6. An appeal was filed before the City Civil Court,
Ahmeda- bad7, but rejected. Now a petition under Article 227 of the
Constitution was filed challenging the City Court's order.
The court held that though High Courts can exercise jurisdiction under
Ar- ticle 227 against judgments allowing or dismissing first appeals
under Sec- tion 37 of the ACA, this must be with extreme
circumspection, considering the statutory policy of the ACA so that
interference is restricted to orders that are passed which are patently
lacking in inherent jurisdiction.
The court's reasoning was as follows: –
(i) Policy of the ACA–speedy disposal and minimal intervention of
courts: the court reproduced the text of Sections 5 8 and 379 of the
ACA. It then said it is also important to note that: –
6 ONGC had blacklisted Deep Industries. The arbitrator stayed the backlisting order on the
condition that it will operate only if Deep Industries ultimately loses in the arbitration pro-
ceedings.
7 Under Section 2 (1) (e) (i) of the ACA, in cases of an arbitration other than an international
commercial arbitration, the principal Civil Court of original jurisdiction in a district also
has jurisdiction.
8 Section 5. Extent of judicial intervention. -Notwithstanding 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.
a. Under Section 29A of the ACA (which was inserted by the

Amendment Act, 201610, a time limit of 12 months from the
date of reference was set within which arbitral awards must be
made.
b. Under Section 34 (6) of the ACA (added by the same amend-
ment), the set-aside applications are to be disposed of expedi-
tiously, and in any event, within one year from the date of
service of notice.
(ii) The court then noted that "given the aforesaid statutory provision"
and "given the fact that the 1996 Act repealed three previous enact-
ments," speedy disposal is the statutory policy of the ACA.
(iii) Union of India v. Varindera Const. Ltd., disposing of SLP (C) No.
23155/2013 (R.K. Agrawal and Ashok Bhushan, J.J.) was then
noted where the Supreme Court "imposed the self-same limitation
on first appeals under Section 37 so that there be a timely
resolution of all matters which are covered by arbitration awards".
(iv) Then the court referred to the non-obstante clause in Section 5 of
the ACA as the "most significant of all." 11 It then noted that
"Section 37 grants a constricted right of first appeal against certain
judgments and orders and no others. Further, the statutory
mandate also provides
9 Section 37. Appealable orders. – (1) An appeal shall lie from the following orders (and
from no others) to the Court authorized by law to hear appeals from original decrees of the
Court passing the order, namely: —
(a) refusing to refer the parties to arbitration under section 8;
(b) granting or refusing to grant any measure under section 9;
(c) setting aside or refusing to set aside an arbitral award under section 34.
(2) An appeal shall also lie to a Court from an order granting of the arbitral tribunal. –
(a) accepting the plea referred in sub-section (2) or sub-section (3) of section 16; or
(b) granting or refusing to grant an interim measure under section 17.
(3) No second appeal shall lie from an order passed in appeal under this section, but noth-
ing in this section shall affect or take away any right to appeal to the Supreme Court.
10 Which came into effect from 23 October 2015.
11 Which states that notwithstanding anything contained in any other law, in matters that arise
under Part I of the Arbitration Act, no judicial authority shall intervene except where so
provided in this Part.
Chapter 04
for one bite at the cherry, and interdicts a second appeal being filed
(See Section 37(2) of the Act)".
(v) This being the case, the court concluded, “there is no doubt
whatsoever that if petitions were to be filed under Articles
226/227 of the Constitution against orders passed in appeals under
Section 37, the entire arbitral process would be derailed and would
not come to frui- tion for many years".
(vi) Balancing High Court's extraordinary constitutional power: – But
at the same time, the court continued, Article 227 is a constitutional
provision that remains untouched by the non-obstante clause of
Section 5 of the Act.
(vii) The court then referred to a 2-judge bench decision in Nivedita
Sharma
v. Cellular Operators Association of India, (2011) 14 SCC 337 (G.
S. Singhvi and S.J. Mukhopadhaya, JJ) where the Supreme Court
referred to several authorities for the proposition that it is one
thing that the court has jurisdiction under Article 226 (by analogy
Article 227 too—both basic features of the Constitution), it is quite
another to exercise it without regard to the policy of the relevant
statute.
(viii) The court then referred to SBP & Co. v. Patel Engineering Ltd.,
(2005) 8 SCC 618 where the 7-judge bench "referred to the object
of the Act is that of minimizing judicial intervention and that this
important object should always be kept in the forefront when a
227 petition is being disposed of against proceedings that are
decided under the Act".
(ix) ACA is a special enactment and a self-contained code: – The court
referred to Fuerst Day Lawson Limited v. Jindal Exports Limited,
(2011) 8 SCC 333 noting it was specifically held that where the
special act sets out a self-contained code the applicability of the
general law procedure would be impliedly excluded—thus, a letters
patent appeal under the general law would not lie where no appeal
is provided under the ACA.
(x) If the High Court itself had disposed of the first appeal, no Article
227 petition could lie. Perhaps only a letter patent appeal before a
di-
vision bench of the same High Court would lie, but Fuerst Day
Lawson has specifically interdicted that. Merely because the first
appeal was disposed of by a Court subordinate to the High Court,
an Article 227 petition ought not to have been entertained.
(xi) Effectively deciding an appeal against Section 16 12 order: -The
arbitrator also dismissed a Section 16 application on the same
contention which the High Court took up 13. This was inverting the
statutory scheme.
(xii) Decisions on merit does not behoove a court exercising
jurisdiction under Article 227, which is only for correction of
jurisdictional errors: – The High Court's decision that the ban
order was passed under a General Contract Manual and not under
the agreement would be incorrect. Also, to say that "serious
disputes" as to jurisdiction seem to have cropped up is not the same
thing as saying that the tribunal lacked inherent jurisdiction. It
had jurisdiction.
(xiii) Legislative policy qua the general revisional jurisdiction: – The
legislative policy is that no revision lies if an alternative remedy
of appeal is available. Even when a revision does lie, it lies only
against a final disposal of the entire matter and not against
interlocutory orders. Even otherwise, revisional jurisdiction is to
be exercised to correct jurisdictional errors only.
12
Competence of arbitral tribunal to rule on its own jurisdiction.
13 The question was whether the blacklisting was an issue covered by the notice of arbitration.
An application under Section 16 had been filed challenging arbitrator’s jurisdiction suggest-
ing it was not covered. The arbitrator rejected that contention. The recourse against such an
order is to take the point up in the set-aside proceedings. The High Court, which was con-
cerned with an order of the arbitrator granting interim measure, went into the question no-
tice/blacklisting too, and decided that blacklisting was not part of the notice—a finding di-
rectly contrary to the arbitrator’s ruling in the Section 16 application.
Chapter 05
SEAT OF ARBITRATION
INTRODUCTION
(A) THE CONCEPT OF ‘SEAT’ OR ‘PLACE’ OF ARBITRATION; THE LEX
ARBITRI
If an international arbitration is held in India, the laws of India will

govern (or control, if you prefer) the arbitration. This position is
recognition of what is known in the world of international arbitration
scholarship as the ‘territoriality principle’ or the territorial link between
arbitration and law of the place where it is held. 1
What exactly is meant when it is said the laws of India will govern the
arbitration? Simply that those Indian laws which relate to governance
and conduct of arbitration will mandatorily apply (except if the law
itself says something can be waived or excluded). In India, this type of
law is contained in
1 This theory “is based on the general principle of international law that a state is a sover-
eign within its own borders and that its law and its courts have the exclusive right to de-
termine the legal effect of acts done … within those borders”. Another basis for the terri-
torial principle is that arbitration must be connected to a system of law, it cannot hang in
air and “requires a legal framework to give it legitimacy, to permit judicial assistance …
and to provide a degree of judicial supervision”.
Dr. Francis Mann is often cited as the proponent of this territorial doctrine from an essay
‘Lex Facit Arbitrum’ published in 1967. On the other side of the theoretical model are
proponents of “delocalised” or “a-national” arbitration. This theory advocates an arbitra-
tion unconnected with any system of law in accordance with a set of universal rules (so to
speak, a “universal lex arbitri”).
The New York Convention and the Model Law adopted the territorial principle. The Su-
preme Court of India declared in Bharat Aluminium Co. v. Kaiser Aluminium Technical
Services Inc., (2012) 9 SCC 552 that India clearly adopted the territorial principle and un-
der the ACA the seat of the arbitration is the centre of gravity.
Seat of Arbitration
the ACA. That is why Section 2 of the ACA says, “this Part shall apply
where the place of arbitration is in India.” 2
The expression place in Section 20 ACA is synonymous with ‘seat.’ ‘Place’
is often used internationally to signify the same concept of the seat. 3
The law of the ‘place of arbitration’ or the ‘seat of arbitration’ is called the
lex arbitri.
A confusion must be avoided. The lex arbitri may not necessarily be the
same as the substantive law of the main contract or the law governing the
arbitration agreement.
The substantive law of the main contract governs the substantive rights
and obligations of the parties are determined. In an arbitration seated in
India, the substantive law of the main contract may be of another
country. In an arbitration seated in, say, England or Singapore, the
substantive law of the main contract maybe Indian.
Lex arbitri must also not be confused with the law governing the arbitration
agreement. These two may be different.
(B) THE CONTENT OF LEX ARBITRI
What is the practical consequence? In other words, in what way does the
lex arbitri govern the arbitration? The answer is that it depends on the
content of the national laws. Let us see what laws India has laid down to
govern an arbitration within its territory4: -
(i) The definition and form of an agreement to arbitration (Section 7);
(ii) The constitution of the arbitral tribunal and the grounds for the
challenge (Sections 10-15)
2 The expression place in Section 20 is synonymous with ‘seat’. The expression ‘place’ is
often used internationally to signify the same concept. There may be confusing exceptions
like Section 20 (3) ACA.
3 There may be confusing exceptions like Section 20 (3) ACA.
4 Classification borrowed from N. Blackaby, et al. (eds.), Redfern and Hunter on Interna-
tional Arbitration, (5th ed. 2009).

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(iii) The entitlement of the tribunal to rule on its jurisdiction (Section 16);
(iv) Equal treatment of the parties (Section 18);
(v) Freedom to agree upon detail rules of procedure (Section 19);
(vi) Interim measure of protection (Section 9 & 17);
(vii) Statements of claim and defense (Section 23);
(viii) Hearings (Section 24);
(ix) Form and contents of the arbitration award (Section 31);
(x) The fee of the arbitrators (Section 31A);
(xi) Right to challenge the arbitration award (Section 34).
(C) SIGNIFICANCE OF SEAT
One significance of the seat of arbitration is that it is widely recognised

that the court at the seat will have exclusive jurisdiction over the conduct
of the arbitration. “The seat of an arbitration is analogous to an exclusive
jurisdiction clause.” “Courts at the seat are competent (usually
exclusively competent) to entertain actions to annul or set aside the
award.”
We can also usefully refer to this observation from a recent decision
from the Singapore Supreme Court in [2019] SGCA 65, ST Group Co.
Ltd. and others v. Sanum Investments Limited: -
The choice of the seat in and of itself represents a choice of
forum for remedies. In PT Garuda Indonesia v Birgen Air,
[2002] 1 SLR (R) 401, this court recognised that a Singapore
court only has the power to set aside an arbitration award if that
arbitration was seated in Singapore. As a collorary, in Hilton
International Manage (Maldives) Pvt Ltd v. Sun Travels &
Tours Pvt Ltd, [2018] SGHC 56, Belinda Ang Saw Ean J held
that an agreement to arbitrate gives rise to a negative obligation
not to set aside or otherwise actively attack an arbitral award in
jurisdictions other than the seat of the arbitration.
(D) SEAT IN INDIA
Seat of Arbitration
1. Jurisdiction of Court
Because India is a Union of several States and each state has its own
courts’ hierarchy with limited territorial jurisdiction, the question which
court has jurisdiction over the arbitral process has arisen often.
The 5-judge bench in Bharat Aluminium Company and Ors. v. Kaiser
Aluminium Technical Service, Inc. and Ors. (2012) 9 SCC 552, which
declared the law on several key issues had considered the aspect of
court’s jurisdiction too. It enunciated a theory of concurrent-jurisdiction
of the seat-court as well as the cause-of-action-court. At paragraph 96,
the court held that under the ACA: –
“The legislature has intentionally given jurisdiction to two
courts i.e. the court which would have jurisdiction where the
cause of action is located and the courts where the arbitration
takes place.”
An example was also given in the same paragraph: –
“For example, if the arbitration is held in Delhi, where neither
of the parties are from Delhi, (Delhi having been chosen as a
neutral place as between a party from Mumbai and the other
from Kolkata) and the tribunal sitting in Delhi passes an
interim order Under Section 17 of the Arbitration Act, 1996,
the appeal against such an interim order under Section 37
must lie to the Courts of Delhi being the Courts having
supervisory jurisdiction over the arbitration proceedings and
the tribunal. This would be irrespective of the fact that the
obligations to be performed under the contract were to be
performed either at Mumbai or at Kolkata, and only
arbitration is to take place in Delhi. In such circumstances,
both the Courts would have jurisdiction, i.e., the Court within
whose jurisdiction the subject matter of the suit is situated and
the courts within the jurisdiction of which the dispute
resolution, i.e., arbitration is located”.
Some latter cases (Enercon, Reliance, and Indus–cited infra) focused on
the principle that the designation of the seat is akin to conferring
exclusive jurisdiction on the seat-court.
A Delhi High Court judgment (Antrix, cited infra), relying on a Bombay
High Court judgment, struck “discordant notes.” It said that since
BALCO “unmistakably” outlined the concurrent-jurisdiction principle
both in the
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“substantive holding” of paragraph 96 “as well as the example …”, the

ratio in Indus will have to be “restricted” considering BALCO.
Was there an internal conflict in the BALCO judgment? What was its true
ratio? Was the Delhi High Court in Antrix right in its reading of
BALCO? Again, which court has jurisdiction over the arbitral process?
These were the matters discussed and decided in BGS SGS Soma JV v.
NHPC Ltd., SCC OnLine SC 1585, as noted below.
2. Determination of Seat
In Union of India v. Hardy Exploration, 2018 SCC OnLine 1640, the
arbitration clause had provided that the “arbitration proceedings shall be
conducted in accordance with the UNCITRAL Model Law …”.
Further, the venue of arbitration proceedings shall be Kuala Lumpur. The
court had concluded that Kuala Lumpur was not the seat or place of
arbitration. Hardy was a decision by a bench of 3-judges.
In BGS, it was argued that the 3-judge bench decision in Hardy was
contrary to BALCO. The BGS court, a 3-judge bench, therefore, was
“exhorted” to consider the “correctness of the judgment in Hardy
Exploration …”, another 3-judge bench?
The BGS court concluded that: –
1. Read properly, BALCO stands for the proposition that the seat court
has exclusive jurisdiction. Only when the parties do not choose the
seat, or it has not been determined, the court where the cause of
action arises will have jurisdiction.
2. Wherever:
(i) There is an express designation of a “venue”, no designation of any
alternative place as the “seat”, supranational body of rules governs
the arbitration (in an international context), and, there are no other
significant contrary indicia—that venue is the seat.
(ii) Venue is designated with the words “arbitration proceedings” (that
is, not just one or two hearings but proceedings as a whole), that
venue is the seat.
Seat of Arbitration
(iii) A clause says arbitral proceedings “shall be held” at a particular

venue; that venue is the seat in the absence of significant contrary
indicia.
The court also addressed the question if Hardy was decided contrary to
BALCO and concluded it was. The court did not examine its authority to
comment on the correctness of another co-ordinate bench.
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BGS SGS SOMA JV V. NHPC LTD. SCC ONLINE SC 1585

Supreme Court of India; 3-judge bench, RF Nariman, Aniruddha Bose
and V. Ramasubramanian JJ; decided on 10 December 2019
Which court has jurisdiction over an arbitral process clarified; BALCO’s

concurrent-jurisdiction theory is not its real ratio; seat v. venue debate
discussed;
Hardy held to be contrary to BALCO
(A) THE BACKGROUND FACTS AND PROCEEDINGS IN BGS
1. Award in favor of BGS. NHPC’s Set-Aside Application Sent to
Anoth- er Court on the point of Territorial Jurisdiction
The agreement between BGS and NHPC was signed in the State of
Harya- na at Faridabad.5 It stipulated that the “arbitration proceedings
shall be held at New Delhi / Faridabad”. Notices under the agreement
were sent by the petitioner BGS to the respondent NHPC’s Faridabad
office.
After arbitration commenced, the tribunal held seventy-one sittings at New
Delhi. The award, in favor of BGS, was delivered in New Delhi.
NHPC filed in a Faridabad court an application under Section 34 of the
ACA to set the award aside. In turn, BGS objected to the Faridabad
court’s territorial jurisdiction by filing an application under Order VII
Rule 10 of the CPC6 and seeking the return of the Section 34 application
to an appropriate court in New Delhi and/or Assam. This application
was allowed7 to return the set-aside application for presentation before a
court in New Del- hi.
2. NHPC Appeals the Transfer Order in The High Court. Was Such an
Appeal Maintainable Under the ACA? Which Court Had
Jurisdiction?
5 Construction contract relating to a hydropower project in Assam and Arunachal Pradesh.

6 This provision empowers the court to return a plaint to be presented to the court in which
the suit should have been instituted.
7 This application was considered by a commercial court at Gurgaon. The case was trans-
ferred intra-state from Faridabad to Gurgaon, where a commercial court had been set up.
Seat of Arbitration
NHPC filed an appeal under Section 37 ACA8 read with Section 13(1) of
the Commercial Courts Act, 20159 before the High Court of Punjab and
Haryana.
The High Court had to consider two questions: –
(i) which court had jurisdiction to decide the set-aside application; and
(ii) a question on maintainability–whether Section 37 of the ACA
permitted to appeal against an order, made in a Section 34
proceedings, deciding territorial jurisdiction?
Let’s first see what the High Court said on maintainability. It examined
the provisions of the ACA, referred to several authorities which had
discussed the scope of Section 37 of the ACA,10 and concluded that: –
8 Section 37 Appealable orders. (1) Notwithstanding anything contained in any other law for
the time being in force, an appeal shall lie from the following orders (and from no others)
to the Court authorised by law to hear appeals from original decrees of the Court passing
the order, namely: —
(a) refusing to refer the parties to arbitration under section 8;
(b) granting or refusing to grant any measure under section 9;
(b) setting aside or refusing to set aside an arbitral award under section 34.
9 13. Appeals from decrees of Commercial Courts and Commercial Divisions.—(1) Any
person aggrieved by the judgment or order of a Commercial Court below the level of a
District Judge may appeal to the Commercial Appellate Court within a period of sixty days
from the date of judgment or order.
(1A) Any person aggrieved by the judgment or order of a Commercial Court at the level of
District Judge exercising original civil jurisdiction or, as the case may be, Commercial Di-
vision of a High Court may appeal to the Commercial Appellate Division of that High
Court within a period of sixty days from the date of the judgment or order:
Provided that an appeal shall lie from such orders passed by a Commercial Division or a
Commercial Court that are specifically enumerated under Order XLIII of the Code of Civil
Procedure, 1908 (5 of 1908) as amended by this Act and Section 37 of the Arbitration and
Conciliation Act, 1996 (26 of 1996).
(2) Notwithstanding anything contained in any other law for the time being in force or
Letters Patent of a High Court, no appeal shall lie from any order or decree of a Commer-
cial Division or Commercial Court otherwise than in accordance with the provisions of
this Act.
10 Including Kandla case (cited infra).
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1. No doubt, there is a statutory bar under Section 37 to hear appeals

arising out of an arbitral award except when the court has ‘set
aside’ or ‘refused to set aside’ such award under Section 34.
2. However, a refusal to enter the merits of the set-aside grounds (and
not entertaining it on jurisdictional grounds) would amount to
‘refusing to set aside’ the award.
3. The argument that a party cannot complain of being remediless if the
statute does not provide appeal is untenable because of the maxim
‘ubi jus ibi remedium’ (where there is a right there must be a
remedy).
On the question of court’s jurisdiction vis-a-vis the seat, the High Court
(in the words of the Supreme Court) concluded that the arbitration
agreement does not refer to the “seat” of arbitration, but only to the
“venue.” It then held that since part of the cause of action arose in
Faridabad, and then Fa- ridabad court was approached first, it alone and
not the Delhi court would have jurisdiction over the arbitral process.
(B) THE SUPREME COURT’S DECISION IN BGS V. NHPC
BGS went to the Supreme Court in September 2018 some days before the
judgment in Hardy (cited infra) came out (on 25 September 2018).11
Again, the two questions before the High Court were before the Supreme
Court, too—maintainability of appeal and jurisdiction of the court.
1. On Maintainability—What Appeals are Permitted Under the ACA,
Specifically Section 37?
The Supreme Court held that an order passed in a set aside proceeding,
by which a court concludes it does not have jurisdiction and returns the
set- aside application to an appropriate court does not amount to refusing
to set
11 On 28 November 2018, a 2-judge bench (R. F. Nariman and Indu Malhotra JJ) granted
stay on the judgment of the High Court. Hearing concluded on 27-28 November 2019, and
the judgment was reserved on 28 November 2019. It was pronounced on 10 December
2019.
Seat of Arbitration
aside and hence is not appealable. Closely looked, this conclusion was
reached via a five-pronged reasoning process: –
(i) Firstly, the court discussed the scope of Section 37. It referred to a 2-
judge bench decision in Kandla Export Corporation and another v.
OCI Cor- poration and another, (2018) 14 SCC 715 (RF Nariman
and Navin Sinha JJ) and reiterated that: –
a. there is no independent right of appeal under Section 13(1) of the
Commercial Courts Act, 2015. It merely provides the forum of
filing appeals.
b. Section 37, which alone must be looked at to determine whether
the appeal is maintainable, makes it clear that appeals shall only
lie from the orders set out in sub-clauses (a), (b) and (c) and from
no others.
(ii) Secondly, the court specifically examined if the order in question
amounts to “refusing to set aside an arbitral award under Section
34”.12 Concluding that it is not the court reasoned: –
a. An order under Order VII, CPC returning a plaint to be
presented to a proper court is appealable under Order XLIII,
CPC. A provision like this is conspicuous by its absence under
Section 37 of the ACA, which alone can be looked at.
a. The High Court missed the words “under section 34”. This expres-
sion means that the refusal to set aside an arbitral award must be
under Section 34, that is, after the grounds set out in Section 34
have been applied to the arbitral award and turned down.
(iii) Thirdly, the court cited with approval the Delhi High Court’s
judgment in Hamanprit Singh Sidhu v. Arcadia Shares & Stock
Brokers Pvt. Ltd., 2016 234 DLT 30 (DB) (Badar Durrez Ahmed &
Ashutosh Kumar JJ) where the High Court had concluded that an
appeal against an order
12 TheHigh Court had recognised that an appeal was maintainable only under Section 37 but
held that this appeal came within the purview of Section 37 (1) (c) of the ACA.
Chapter 05
condoning delay (in filing the set-aside proceedings) was not

maintainable because such an order is neither setting aside nor
refusing to set aside. This reasoning of the High Court, the Supreme
Court said, “commends itself to us.”
(iv) Fourthly, the court noted those judgments where a “well-settled
proposition was elucidated, i.e., that an appeal is a creature of
statute, and must either be found within the four corners of the statute
or not be there be at all.”13 The Delhi High Court’s judgment in
South Delhi Mu- nicipal Corporation v. Tech Mahindra, EFA (OS)
(Comm.) 3 of 2019, was particularly noted in which the Delhi High
Court had concluded that an order directing deposit of 50% of the
awarded amount was not appealable.14
(v) Fifthly, the court disagreed with the division bench judgment of the
Delhi High Court in Antrix Corporation Ltd. v. Devas Multimedia
Pvt. Ltd., 2018 SCC OnLine Del 9338, 15 which was cited by the
respondent
13 Municipal Corporation of Delhi v. International Security & Intelligence Agency Ltd.,

(2004) 3 SCC 250; Arcot Textile Mills Ltd. v. Regional Provident Fund Commissioner,
(2013) 16 SCC 1.
14 S. Ravindra Bhat and Prateek Jalan JJ; on the concept of right to appeal the Delhi High
Court in Tech Mahindra cited to Supreme Court’s Ganga Bai v. Vijay Kumar, (1974) 2
SCC 393 in which the court had “explained pithily”. that right to sue is inherent. Anyone
can sue anyone unless the statute bars it. But right to appeal inheres in no one, it is a crea-
ture of statute.
15 S. Ravindra Bhat and Yogesh Khanna JJ decided on 30 May 2018 (reserved on 06 De-
cember 2017).
Seat of Arbitration
NHPC, and said it “would have no application”16 and is “also distin-

guishable.”17
2. Which Court Has Jurisdiction? What Did BALCO Really Hold?
As discussed below, the court considered this central issue in four parts: –
(i) Firstly, the court considered the existing Indian law position. It
examined BALCO, subsequent decisions, the Antrix case and
concluded that BALCO had an internal inconsistency and properly
read the court of the arbitral seat (if specified or determined) has
exclusive jurisdiction.
(ii) Secondly, the court considered the test for the determination of seat.
(iii) Thirdly, the court considered the decision in Hardy and concluded it
was decided contrary to BALCO.
(iv) Fourthly, the court then determined that in the facts of the BGS case,
New Delhi was the arbitral seat.
3. BALCO and its Concurrent Jurisdiction Theory.
The court concluded that the concurrent jurisdiction theory of BALCO is
not its real ratio because if the seat is designated or determined (even as
per the dominant BALCO principle), only the seat court has exclusive
jurisdiction. The court arrived at this conclusion via a seven-pronged
reasoning: –
(i) Firstly, the court noted the provisions of the Arbitration Act, 1940,
the UNCITRAL Model Law and of the ACA to set a background
noting that: –
16 Antrix was directed in a Section 9 proceedings (for interim measure) to disclose its financials so
that the court could make consequential orders. The Supreme Court noted that the High Court
(in appeal) considered this itself as an order granting a measure under Section 9 which was ap-
pealable. The further reasoning of the High Court’s appellate bench was that this order also was
in aid of an interim order. The BGS court disagreed with this reasoning and held that a step to-
wards an interim order would not amount to granting, or refusing to grant, any measure under
Section 9.
17 One effect of the order of the single judge was that another court in which too proceedings
were filed under the ACA could not proceed with those proceedings. This was a final or-
der (thus presumably, granting, or refusing to grant, any measure under Section 9”.
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a. The Arbitration Act, 1940, did not refer to the “juridical seat” of
arbitral proceedings at all. The UNCITRAL Model Law
introduced the concept of “place” or “seat” of the arbitral
proceedings. The ACA adopted the UNCITRAL Model Law.
b. Different provisions in Part 1 of the ACA refer to the “place” of
arbitration and indicate which court would have jurisdiction in
relation to arbitral proceedings. For example, “Court” is
defined in Section 2 (1) (e); Section 20 (1) and (2) refers to the
“place” (or seat) of arbitration.
c. Though the ACA gives importance to the new concept of
juridical seat, the relationship of “seat” with the jurisdiction of
courts was unclear and had to be developed in accordance with
international practice on a case by case basis by the Supreme
Court.
(ii) Secondly, the BGS court then referred to the BALCO judgment, and
how it made a proper distinction between the concept of “seat.” But,
on the point of court’s jurisdiction, the BGS court said, there were in-
ternal contradictions in BALCO: –
a. There is a contradiction in the BALCO judgment in paragraph 96
(SCC version).
b. A reading of paragraphs 75, 76, 96, 110, 116, 123 and 194 of
BALCO (SCC version) would show that where parties have
selected the seat of arbitration, the selection would amount to
an exclusive jurisdiction clause (that is, only the court where
the seat would have jurisdiction). The example given in
paragraph 96, buttresses this proposition. Read as a whole,
BALCO applies the concept of “seat” (following English
judgments) by harmoniously construing Section 20 with Section
2(1)(e), to broaden the definition of “court” and bring within its
ken courts of the “seat” of the arbitration.
c. However, this proposition is contradicted when paragraph 96
speaks of the concurrent jurisdiction of courts.
Seat of Arbitration
(iii) Thirdly, after having noted that there was a contradiction in the judg-
ment, the BGS court referred to the principles as to how a court’s
judgment and its ratio discerned/interpreted: –
a. Judgments of courts are not to be construed as statutes; neither
are they to be read as Euclid’s theorems. All observations made
must be read in the context in which they appear. [citing to Amar
Nath Om Prakash v. State of Punjab, (1985) 1 SCC 345; Union
of India v. Amrit Lal Manchanda, (2004) 3 SCC 75 and several
English authorities].
b. In any case, a judgment must be read as a whole, so that
conflicting parts may be harmonized to reveal the true ratio of
the judgment. However, if this is not possible, and it is found that
the internal conflicts within the judgment cannot be resolved,
then the first endeavor that must be made is to see whether a
ratio decidendi can be culled out without the conflicting portion.
If not, then the binding nature of the precedent on the point on
which there is a conflict in judgment comes under a cloud
[citing to Lord Denning’s opinion in Harper National Coal
Board, (1974) 2 All ER 441. The quite interesting facts of
Harper and Lord Denning’s relevant re- marks are footnoted in
the BGS judgment].
(iv) Fourthly, then, the BGS court held, if paragraphs 75, 76, 96, 110,
116, 123 and 194 of BALCO are to be read together, it will be clear
that the definition of “Court” in Section 2(1)(e) has to be construed
keeping in view Section 20 of the ACA. 18 As to the approach to such
construction, the court added a preface that a narrow construction of
Section 2(1)(e) was expressly rejected by BALCO (that is, the
construction should be broad).
(v) Fifthly, then, the court’s analysis segued into “the effect Section 20
would have on Section 2 (1) (e) of the [ACA]”. In this course, the
court
110
18 Which the court noted gives recognition to party autonomy having accepted the territori-
ality principle in Section 2(2), following the UNCITRAL Model Law.
110
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referred to Indus Mobile Distribution Private Limited v. Datawind

Innovations Private Limited, (2017) 7 SCC 678, the Law
Commission’s Report of 2014, amendments made to the ACA in
2015, and concluded that if “the conflicting portion of the
judgment of BALCO in paragraph 96 is kept aside for a
moment, the very fact that parties have chosen a place to be the
seat would necessarily carry with it the decision of both parties
that the Courts at the seat would exclusively have jurisdiction
over the entire arbitral process”.
(vi) Sixthly, the BGS court then noted that “subsequent Division Benches
of this Court (that is after Indus) have understood the law to be that
once the seat of arbitration is chosen, it amounts to an exclusive
jurisdiction clause for courts at that seat. The following judgments
were referred (in addition to referring to Indus again): –
a. Enercon (India) Ltd. v. Enercon GmbH, (2014) 5 SCC 1: “Once
the seat of arbitration has been fixed in India, it would be in the
nature of exclusive jurisdiction to exercise the supervisory
powers over the arbitration.”
b. Reliance Industries Ltd. v. Union of India, (2014) 7 SCC 603: “it
is too late in the day to contend that the seat of arbitration is not
analogous to an exclusive jurisdiction clause.”
(vii)Seventhly, the BGS court overruled the judgment of a 2-judge bench
of the Delhi High Court in Antrix. 19 Antrix had distinguished Justice
Nariman’s authored judgment in Indus. It reasoned that under the
BALCO principle, two courts have concurrent jurisdiction: the seat
court and the court within whose jurisdiction the cause of action
arises. Antrix then gave “a restricted meaning to Indus by stating that
in Indus parties had designated seat and also specified that seat court
would have exclusive jurisdiction (therefore, excluding by
agreement jurisdiction of the cause-of-action court, which otherwise
had jurisdiction). Lastly, Antrix also held that Section 42 of the
ACA would be ineffective and
111
19 S. Ravindra Bhat and Yogesh Khanna JJ.
112
Seat of Arbitration
useless if the seat were equal to exclusive jurisdiction clause, as that

section presupposes there is more than one court of competent juris-
diction.20
(viii) The BGS court held that the view taken in Antrix, which followed
the Bombay High Court judgment, “does not commend itself to us.”
It overruled Antrix and the Bombay High Court judgment for the
following reasons: –
a. First and foremost, it is incorrect to state that the example given
in paragraph 96 of BALCO reinforces the concurrent jurisdiction
aspect of the said paragraph. The conclusion that the Delhi, as
well as the Mumbai or Kolkata Courts, would have jurisdiction
in the example given in the said paragraph is wholly incorrect,
given the sentence:-“This would be irrespective of the fact that
the obligations to be performed under the contract were to be
performed either at Mumbai or at Kolkata, and only arbitration
is to take place in Delhi.”
b. Thus, BALCO does not “unmistakably” hold that two Courts
have concurrent jurisdiction.
c. What is missed by these High Court judgments is the
subsequent paragraphs in BALCO, which clearly and
unmistakably state that the choosing of a “seat” amounts to the
choosing of the exclusive jurisdiction of the Courts at which the
“seat” is located.
d. What is also missed are the judgments of the Supreme Court in
Enercon (India) Ltd. v. Enercon GmbH,21 (2014) 5 SCC 1, and
Reliance Industries Ltd. v. Union of India,22 (2014) 7 SCC 603.
20 Antrix also noted that “only those few situations where parties do not actually designate
any seat (and thus no exclusive competence is conferred on one forum) would Section 42
have any role”.
21 S. S. Nijjar and F.M. Ibrahim Kalifulla JJ decided on 14 February 2014.
22 S.S. Nijjar and Dr. A.K. Sikri JJ decided on 28 May 2014.
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e. Equally, the ratio in Indus is contained in paragraphs 19 and 20.

Two separate and distinct reasons are given for concluding that
courts at Mumbai alone would have jurisdiction. The first
reason was that the seat was designated as Mumbai. The second
was that in any case where more than one court can be said to
have jurisdiction, parties could choose one over the other and
in this case, parties made the choice by saying Mumbai has
exclusive jurisdiction. Both are independent reasons and it is
wholly incorrect to say that Indus has a limited ratio decidendi
contained in paragraph 20 alone and that paragraph 19 if read by
itself, would run contrary to BALCO.
f. Equally incorrect is the finding in Antrix that Section 42 of the
ACA would be rendered ineffective and useless. Where a seat is
designated in an agreement, it would require that all applications
under part I be made only in the court where the seat is located.
So read, Section 42 is not rendered ineffective or useless.
g. Also, where either no “seat” is designated, or the so-called
“seat” is only a convenient “venue,” or before the tribunal
determines seat, there may be several courts where a part of the
cause of action arises that may have jurisdiction. In both these
situations, the earliest application having been made to a court
in which a part of the cause of action arises would then be the
exclusive court under Section 42, which would have control
over the arbitral proceedings.
4. Tests for Determination of Seat
The court then addressed the issue of tests of determination of seat. It
started by noting that the “the judgments of the English Courts have
examined the concept of the “juridical seat” of the arbitral proceedings,
and have laid down several important tests in order to determine whether
the “seat” of the arbitral proceedings has, in fact, been indicated in the
agreement between the parties”.
It relied on a host of authorities, primary among them being the English
judgment in Roger Shashoua & others v. Mukesh Sharma [2009] EWHC
957
Seat of Arbitration
(Comm). It repeated the English Shashoua principle and said “it will thus
be seen that wherever there is an express designation of a “venue,” and
no designation of any alternative place as the “seat,” combined with a
supranational body of rules governing the arbitration, and no other
significant contrary indicia, the inexorable conclusion is that the stated
venue is actually the juridical seat of the arbitral proceeding.”
The court then indicated the presence or absence of what language in the
arbitration agreement would determine the issue one way or the other:
(i) Whenever there is the designation of a place of arbitration in an arbi-
tration clause as being the “venue” of the arbitration proceedings, the
expression “arbitration proceedings” would make it clear that the
“venue” is the “seat” of the arbitral proceedings. This is so because
the expression “arbitration proceedings” does not include just one or
more individual or particular hearing, but the arbitration proceedings
as a whole, including the making of an award at that place.
(ii) The language above has to be contrasted with language such as
“tribunals are to meet or have witnesses, experts or the parties”
where only hearings are to take place in the “venue”, which may
lead to the conclusion, other things being equal, that the venue so
stated is not the “seat” of arbitral proceedings, but only a convenient
place of meeting.
(iii) The fact that the arbitral proceedings “shall be held” at a particular
venue would also indicate that the parties intended to anchor arbitral
proceedings to a particular place, signifying thereby, that that place
is the seat of the arbitral proceedings. This, coupled with there being
no other significant contrary indicia that the stated venue is merely a
“venue” and not the “seat” of the arbitral proceedings, would then
conclusively show that such a clause designates a “seat” of the
arbitral proceedings.
(iv) In an international context, if a supranational body of rules is to
govern the arbitration, this would further be an indicia that “the
venue”, so stated, would be the seat of the arbitral proceedings. In a
national context, this would be replaced by the Arbitration Act,
1996, as applying to
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the “stated venue,” which then becomes the “seat” for the purposes of
arbitration.
5. The Judgment in Hardy Exploration was Incorrect
The petitioner BGS had argued that the 3-judge bench decision in Union
of India v Hardy Exploration 2018 SCC Online 1640 was contrary to
BALCO, and because of the confusion created by Hardy, the High Court
concluded that New Delhi was not the “seat,” but the venue.
The court, therefore, was “exhorted” to consider the “correctness of the
judgment in Hardy Exploration …”. In Hardy, the arbitration clause had
provided that the “arbitration proceedings shall be conducted in
accordance with the UNCITRAL Model Law …”. Further, the venue of
arbitration proceedings shall be Kuala Lumpur. The Hardy court had
concluded that Kuala Lumpur was not the seat or place of arbitration.
The BGS court accepted the argument that Hardy was contrary to BALCO
and held: –
(i) The fact that BALCO had expressly approved the principle laid down
in the English Shashoua was stated in Roger Shashoua v. Mukesh
Sharma, (2017) 14 SCC 722.
(ii) The Hardy court did not apply the English Shashoua. By failing to
do so, Hardy did not follow the law as to determination of seat of
arbitration, as laid down in BALCO.
(iii) Therefore, the decision in Hardy was incorrect in its conclusion that
the stated venue of arbitration need not be the juridical seat unless
there are concomitant factors that indicate that the parties intended
for the venue also to be the seat. Had the English Shashoua principle
been applied, the answer in Hardy would have been that Kuala
Lumpur, which was stated to be the “venue” of arbitration
proceedings, was the juridical “seat” of the arbitration.
(iv) Instead, by allowing Indian law to apply, the result in Hardy is that a
foreign award delivered in Kuala Lumpur, would now be liable to be
challenged both in the Courts at Kuala Lumpur, and also the courts
in India under Section 34 of Part I of the ACA. This is exactly the
chaos
Seat of Arbitration
contemplated in paragraph 143 of BALCO because of which

Venture Global Engineering case was overruled.
6. The Seat in the BGS Case and the Court’s Jurisdiction
The court concluded that New Delhi / Faridabad had been designated as
seat of arbitration under the contract. However, given the fact that the
proceedings were finally held at New Delhi, and the awards were signed
in New Delhi, and not at Faridabad, both parties had chosen New Delhi
as the “seat” of arbitration under Section 20(1) of ACA.
Chapter 06
PARTIES TO ARBITRATION
INTRODUCTION
A common issue in arbitration is the effect of arbitration agreements on
non-signatories. “Once it is determined that a valid arbitration agreement
exists, it is a different step to establish which parties are bound by it. The
third parties, who are not explicitly mentioned in an arbitration
agreement made in writing, may enter into its ratione personae scope”. 1
Indian courts have taken the position that arbitration between a signatory
and a third party is permissible. Chloro Controls India Private Limited v.
Severn Trent Water Purification Inc. and others, (2013) 1 SCC 641 is a
leading authority where the subject matter was an application under
Section 45 ACA. A joint venture agreement was involved in Chloro
which contemplated other ancillary agreements. While the mother
agreement and two ancillary agreements contained separate arbitration
clauses, four agreements had no arbitration clause. All parties to the
proceedings, except two, were parties either to one or more of the several
agreements.
When a dispute arose, Chloro filed a suit, and some respondents applied
Sec- tion 45 ACA to refer the matter to arbitration. The court applied the
“group of companies” doctrine, which it said has been developed and ap-
plied by courts internationally.
The following approach for the application of the doctrine was set out: (i)
intention to be bound by the arbitration agreement is a very significant
fea- ture. (ii) the court will examine the matter from the touchstone of a
direct relationship, direct commonality of the subject matter, and the
composite nature of the transaction.
1 Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. and others,
(2013) 1 SCC 641
Parties to Arbitration
Another three-judge bench decision on 24 April 2018 was Cheran

Properties Limited v. Kasturi and Sons Limited and others, (2018) 16
SCC 413, a case involving enforcement of a domestic award on a non-
signatory based on the language of Section 35 ACA which states that
arbitration award “shall be final and binding on the parties and persons
claiming under them respectively.”
The court concluded that the test under Section 35 ACA was fulfilled. It
referred to Chloro, commented on the group of companies doctrine, and
referred to a few commentaries which discuss the theoretical foundation
of this principle. The court heavily relied and follow Chloro and rejected
the argument that Chloro should be read to be a decision in the context of
a mother agreement and ancillary agreements.
In R. V. Solutions Private Limited v. Ajay Kumar Dixit and others, 2019
SCC OnLine Del 6531 a suit before a single-judge bench of Delhi High
Court involved former employees of the plaintiff and a company the
employees had joined. The allegations were a breach of the employment
agreement, breach of confidentiality, and solicitation of clients. Two of
the respondent parties were non-signatories but had no objection if the
matter was referred to arbitration. The plaintiff R V Solutions objected
the court found that there was a clear commonality of the facts, parties
and interest “which would warrant that the matter be referred to
arbitration”. In another case before single-judge bench of Delhi High
Court (Sanjeev Narula J) the court had an application under Section 45 to
refer the matter to arbitration and a host of arguments as to why it should
not be referred to arbitration. Among others, the argument that one
defendant was non-signatory was rejected following Chloro Controls.
The court also rejected an argument on Forum Non-Conveniens (on the
ground of financial burden) and said that it did not make the subject
matter arbitrable.
Chloro and Cheran were referred to in a two-judge bench in Reckitt
Benckiser (India) v. Reynders Label Printing India, (2019) 7 SCC 62 to
say that the legal position on binding a non-signatory to arbitration “is no
more res integra”. The court said the crucial question was whether
“indisputable circumstances” showed the “mutual intention of the
parties” to bind the non-signatory. The fact was assessed, and it was
concluded that the burden to establish
Chapter 06
that the non-signatory had an intention to consent to the arbitration

agreement was not discharged.
The group of companies doctrine has been discussed and applied in MTNL
v. Canara Bank, 2019 SCC OnLine SC 995 by a 2-judge bench.
Sanjeev Narula J also applied Chloro in the Delhi High Court in Jes and
Ben,
2019 SCC OnLine Del 10225 (not part of this yearbook)
RV SOLUTIONS PVT. LTD. V. AJAY KUMAR DIXIT AND OTHERS 2019

SCC ONLINE DEL 6531
Delhi High Court; single-judge bench, Jayant Nath J; decided on 15
January 2019
Referring third parties to an arbitration
The plaintiff R V Solutions had brought a suit against its former
employees and another company those employees had joined. One of the
employees was now the Chief Executive Officer of the other company.
The suit was founded on the allegation that four defendants were
employed by the plaintiff at different points of time and were working at
senior managerial positions. But they colluded and breached their
agreements causing damages, misused private and confidential
information to solicit clients, vendors, and staff of the plaintiff.
There was an arbitration clause in the employment agreement of three
defendants. Each of them filed an application under Section 8 of the
ACA to refer the dispute to arbitration.
There was one defendant, a former employee whose contract had no arbi-
tration clause. There was no agreement with another defendant. These
two defendants said they had no objection if the matter was referred to
arbitration.
The plaintiff itself objected relying on Sukanya Holdings Pvt. Ltd. v.
Jayesh H. Pandya, (2003) 5 SCC 531.
The court first reproduced several passages from three cases were Ameet
Lalchand Shah & Ors. v. Rishabh Enterprises & Ors., 2018 SCC Online
SC 487, Cheran Properties Limited v. Kasturi & Sons Limited and Ors.,
2018 SCC Online SC 431 and Chloro Controls India Private Limited v.
Severn Trent Water Purification Inc.& Ors., (2013) 1 SCC 641.
It then again referring to Cheran observed that— as held by the Supreme
Court in that case, the existence of a relationship between the parties, the
commonality of the subject matter and whether the agreement between
120
the parties is a part of a composite transaction have to be seen.
120
Chapter 06
The court then found that there was “clearly commonality of facts which
bind the defendants together.” Further, it was the plaintiff’s argument
“that the defendants have in collusion with each other in a mala fide, and
unlaw- ful manner acted to cause loss and damages to the plaintiff.”
Noting that the defendant were former employees of the plaintiff, who
had allegedly together caused loss to the plaintiff, the court held it is
“manifest that there is commonality of parties, commonalities of interest
which would warrant that the matter be referred to arbitration.”
121
RECKITT BENCKISER (INDIA) V. REYNDERS LABEL PRINTING INDIA

(2019) 7 SCC 62
Supreme Court of India; 2-judge, A. M. Khanwilkar and Ajay Rastogi
JJ; decided on 01 July 2019
Binding non-signatory to arbitrator; burden of proof
A contract was executed between Reckitt Benckiser (“Reckitt”) and
Reynders Label, India (“Reynders India”).
When disputes arose, Reckitt filed an application under Section 11 ACA

for the appointment of arbitrator, in which it also impleaded Reynders
Ttiket- ten, Belgium (“Reynders Belgium”).2
Reckitt argued that Reynders Belgium, a non-signatory, was bound by

the arbitration agreement because it was an ‘integral party’; that the
agreement was negotiated and executed by one Fredrick Reynders on
behalf of Reckitt Belgium. It was common ground that Reynders
Belgium was one of the “constituents” of the Reynders group of
companies, but disputed that Reynders Belgium had anything to do with
the agreement.
The Supreme Court dismissed the application and appointed an arbitrator

to conduct a domestic arbitration between Reckitt and Reynders India.
This is how the court reached its conclusions: -
(A) WHEN CAN A NON-SIGNATORY BE SUBJECTED TO ARBITRATION

PROCEEDINGS?
The court first considered the legal position and said it is “no more res inte-
gra.”
2 An application for appointment lies directly to the Supreme Court if the arbitration is an
international commercial arbitration. The application was filed by Reckitt on the premise
that Reynders Belgium would be party to the arbitration proceedings making it an interna-
tional arbitration.
Chapter 06
First, it referred to Chloro Controls (India) (P) Ltd. v. Severn Trent

Water Purifi- cation Inc., (2013) 1 SCC 6413 and said that the 3-judge
bench in that case held that “an arbitration agreement entered into by a
company, being one within a group of corporate entities, can, in certain
circumstances, bind its non-signatory affiliates.”
Then the court referred to Cheran Properties Ltd. v. Kasturi & Sons Ltd.,
(2018) 16 SCC 4134 and reproduced paragraph 23 from that judgment
saying that the paragraph contained the court’s conclusions “after
analysing the earlier decisions and including the doctrine expounded in
Chloro.”
The court then posed the “crucial question” which arose “keeping in
mind the exposition” in Chloro and Cheran: namely, whether it was
“manifest from the indisputable correspondence exchanged between the
parties, culminating in the agreement” that the transactions between
Reckitt and Reynders were essentially with the Reynder group of
companies”? The court said, in other words, the question was whether
the “indisputable circumstances” show that the “mutual intention of the
parties” was to bind Reynders Bel- gium as well to the arbitration
agreement.
The question having been posed, the court turns to the facts of the case.
(B) ASSESSMENT OF THE FACTS OF THE CASE
The court examined the pleadings and the correspondence and concluded
that Reckitt could not establish that Fredrick Reynders acted on behalf of
Reynders Belgium, or Reynders Belgium had “given assent to the
arbitration agreement.” The court observed that “in absence thereof”
even if Reynders Belgium “happens to be a constituent of the group of
companies of which [Reynders India] is also a constituent, that will be of
no avail.”
3 S.H. Kapadia C.J. and A.K. Patnaik, Swatanter Kumar JJ decided on 28 September 2012.
4 Dipak Misra C.J. and A.M. Khanwilkar, Dr. D.Y. Chandrachud JJ decided on 24 April
2018.
The court concluded that the burden was on the applicant Reckitt to
establish that Reynders Belgium had an intention to consent to the
arbitration agreement, which was not discharged.
(C) CONDUCT OF PARTIES AFTER THE EXECUTION OF THE INSTRU-

MENT
Reckitt had also relied on some post-contract negotiations. They were

held to be “no basis to answer the matter in issue” because “post-
negotiations in law would not bind … qua arbitration agreement” [citing
to Godhra Elec- tricity Co. Ltd. v. State of Gujarat, (1975) 1 SCC 1995].
This argument was rejected also because in any case this too assumed
that Fredrick Reynders had the authority to negotiate on behalf of
Reynders Belgium.
(D) EXISTENCE OF THE ARBITRATION AGREEMENT
The court also made an ancillary observation on Section 11(6A) of the

ACA, which was introduced by the 2015 Amendment. The enquiry, the
court said, “must confine itself to the examination of existence of an arbi-
tration agreement. No more and no less”.
5 2-judge bench, A.N. Ray C.J, and K.K. Mathew J.

Chapter 06
MAHANAGAR TELEPHONE NAGAM LIMITED V. CANARA BANK AND

OTHERS 2019 SCC ONLINE SC 995
Supreme Court of India; 2-judge bench, Abhay Manohar Sapre & Indu
Malhotra JJ; decided on 08 August 2019
Form of the arbitration agreement; its construction and group of companies
doctrine
CANFINA was set up as a subsidiary of Canara Bank. The dispute arose
from a transaction of subscription by CANFINA of bonds floated by
MTNL which CANFINA later transferred to its holding Company –
Cana- ra Bank. MTNL claimed CANFINA did not pay the entire sale
consideration and canceled the bonds.
The matter came to the Supreme Court with two issues: – (i) the first was
raised by the appellant MTNL, whether an arbitration agreement existed
between the three parties; (ii) the second issue was raised by respondent
Canara Bank, whether CANFINA, not a party to the arbitration
agreement, could be impleaded?
(A) WHAT SHOULD BE THE FORM OF THE ARBITRATION AGREE-
MENT?
It need not be in any form, and there need not be a formal contract. What
is required to be ascertained prima facie is that parties were ad idem in
settling disputes through arbitration expressly or impliedly spelled out
from a clause in an agreement, separate agreement, or documents
exchanged between the parties. It can be, under Section 7(4)(c) ACA,
like in this case, an agreement in the form of exchange of statement of
claims and defense, in which the existence of the agreement is asserted
by one party and not denied by the other.
(B) HOW SHOULD AN ARBITRATION AGREEMENT BE CONSTRUED?
It should be construed: -
(i) According to the general principles of construction of statutes,
statutory instruments, and other contractual documents, the
intention must be inferred from the terms, conduct, and
correspondence. By adopting a common-sense approach not
thwarted by a pedantic and legalistic interpretation.
(ii) To give effect to the intention of the parties, to make it workable, ra-
ther than to invalidate it on technicalities.
(C) WHEN CAN A NON-SIGNATORY BE BOUND BY AN ARBITRATION
AGREEMENT BASED ON THE “GROUP OF COMPANIES” DOC-
TRINE?
Where: –
(i) Conduct establishes a clear intention (even if implied) of the parties
to bind the non-signatory. For example, where the non-signatory
entity among the group-company has been engaged in the
negotiation or performance of the commercial contract or made
statements indicating its intention to be bound by the contract.
(ii) The non-signatory was, by reference to the common intention of the
parties, a necessary party to the contract.
(iii) There is a direct relationship with the signatory, direct commonality
of the subject matter, and a transaction of composite or inter-linked
nature.
(iv) The group structure with strong organizational and financial links
con- stitutes a single economic unit or a single economic reality. For
example, particularly when funds of one company are used to
financially support or re-structure other members of the group.
The court also referred to examples where the group of companies
doctrine has been applied:
(i) By the Supreme Court in international arbitration–Chloro Controls
India
(P) Ltd. v. Severn Trent Water Purification Inc.,(2013) 1 SCC 641
(ii) By the Supreme Court in a domestic arbitration– Ameet Lal Chand
Shah
v. Rishabh Enterprises,(2018) 15 SCC 678
(iii) By the Madras High Court in a foreign seated arbitration– SEI
Adhavan Power Pvt. Ltd. v. Jinneng Clean Energy Technology Ltd.,
2018 (4) CTC 46.
Chapter 06
In the facts, the court held CANFINA is a necessary and proper party to
the arbitration proceedings.6 Given the tripartite nature of the transaction,
there can be a final resolution of the disputes, the court said, only if all
three parties are joined in the arbitration proceedings.
6 CANFINA participated in several proceedings earlier. In a draft arbitration agreement

circulated CANFINA was joined as respondent. The court said there was a clear intention
of the parties to bind both Canara Bank, and its subsidiary – CANFINA to the proceed-
ings.
Chapter 07
PROCEDURES IN ARBITRATION
INTRODUCTION
Section 19 ACA provides for determination of rules of procedure and
says the parties are free to agree on the procedure to be followed by the
arbitral tribunal (subject to mandatory provisions of ACA) and failing an
agreement the tribunal can conduct the proceedings in the manner as
considered appropriate.
Jagjeet Singh Lyallpuri (cited infra) reiterates the statutory law where the
parties had agreed that the witnesses would not be cross-examined. The
set-aside application on the ground of ‘inability to present’ the case was
rejected. But the appellate court remanded the matter back to the tribunal.
The Supreme Court assessed the matter and overturned the High Court’s
decision observing that having consented to the procedure, the
respondent could not turn around and challenge.
It will be useful to note here that the question of whether an award can be
set aside and then remanded has been discussed in Kinnari Mullick v.
Ghanshyam Das Damani, (2018) 11 SCC 328 (Dipak Misra, A.M.
Khanwilkar,
M.M. Shantanagoudar JJ). The court held that remand and set-aside are
al- ternatives. Once it is set aside, there is nothing to remand. Then, in
Radha Chemicals v. Union of India, Civil Appeal Number 10386 of 2018
decided on 10 October 2018 (R.F. Nariman and Navin Sinha JJ), the
court noted “in a series of judgments culminating in Kinnari Mullick and
Another v. Ghanshyam Das Damani, (2018) 11 SCC 328 held that the
court while deciding a Section 34 petition has no jurisdiction to remand
the matter to the arbitrator for a fresh decision. This was in a context
where in a Section 34 petition, the court found that the point of limitation
had not been decided correctly and, therefore, remanded the matter to the
arbitrator in order that the point be decided afresh.
It does not appear from Jagjeet that any issue on set aside v remand based
on
Kinnari or Radha Chemicals was raised.
Chapter 07
In Sai Babu v. Clariya Steel Pvt. Ltd., 2019 (5) SCJ 503, the court held
that no application for recall would lie in a case covered under Section 32
(3) ACA.
Procedures in Arbitration
SAI BABU V. CLARIYA STEEL PVT. LTD. 2019 (5) SCJ 503
Saran JJ; decided on 1 May 2019
No recall application would lie in cases covered under Section 32 (3) ACA
Section 32 (1) ACA provides for termination of proceedings and states

that the arbitral proceedings shall be terminated by the final award or by
order of the tribunal under Section 32 (2).
Section 32 (2) ACA sets out under clauses (a) to (c) situations where the
“arbitral tribunal shall issue an order for the termination.”
The arbitrator, in this case, terminated proceedings under Section 32 (2)
(c). But, later on, allowing an application for recall, he said that “good
reasons had been made out in the affidavit for recall, [and] he was
inclined to recall the order even though under the Act, in law, it may be
difficult to do so.”
The High Court dismissed a revision filed against the order.
The Supreme Court said the “matter is no longer res integra” and
referred to Srei Infrastructure Finance Ltd. v. Tuff Drilling (P) Ltd.,
(2018) 11 SCC 470. The court said that in Srei:
(i) A distinction was made between termination under Section 32 ACA
and termination under Section 25 ACA for the default of a party.
(ii) And it was held that no recall application would lie in cases covered
under Section 32 (3) ACA.
In Srei the court had based its reasoning on a comparative analysis of the
language of Section 32(2)(c) ACA with that of Section 25(a) ACA. It
first considered Section 25 and said: -
(i) Under Section 25 the tribunal shall terminate the proceedings if the
claimant fails to communicate his claim in a timely fashion without
showing sufficient cause.
(ii) Both sections provide grounds for termination of arbitral
130
proceedings. While if Section 32 applies, the tribunal “shall issue an
order for the termination”. The court said that Section 25 includes no
such language.
130
Chapter 07
The Supreme Court held that the omission of such language from
one provision and its inclusion in the other must be “treated with
purpose and objective.” So, an order of termination of arbitral
proceedings under Section 32(2)(c) cannot be recalled since the
mandate of the arbitration terminates with the proceedings.
131
Procedures in Arbitration
JAGJEET SINGH LYALLPURI (THROUGH LEGAL REPRESENTATIVES)

AND OTHERS V. UNITOP APARTMENTS & BUILDERS LTD. 2019
SCC ONLINE SC 1541
Supreme Court of India; 3-judge bench, R. Banumathi, A. S. Bopanna,
Hrishikesh Roy JJ; decided on 03 December 2019
Arbitrator has flexibility in determining procedure; a decision with parties’

consent to do away with cross-examination is okay; remand/remission of an
arbitral award
This 3-judge bench of the Supreme Court affirmed that the rules of
procedure to be followed by an arbitral tribunal are flexible and can be
agreed upon by the parties as provided under Section 19 of the ACA.
The arbitrator had decided, with the consent of parties, that witnesses
whose affidavits had been filed would not be cross-examined. He
declared the evidence closed on 28 November 2009 and noted that the
parties will rely on affidavits and documentary evidence.
The award was passed on 13 January 2010. Unitop filed a set-aside
application that was rejected. It appealed under Section 37 of the ACA.
The High Court set the award aside and remanded the matter to the
arbitrator concluding that the parties were not granted appropriate
opportunity by the arbitrator to present evidence and cross-examination.
The Supreme Court assessed the matter to determine if the High Court
was right in examining the merits and remanding the matter to the
tribunal. The court concluded in the negative and set aside the High
Court’s judgment. It held: –
(i) When a challenge is raised on that ground (not allowing the
opportunity to cross-examine), it would at best fall under Section
34(2) (a) (iii) (inability to present one’s case).
(ii) The rules of procedure to be followed by an arbitral tribunal is
flexible and can be agreed upon by the parties as provided under
Section 19 of the ACA. The arbitrator is not bound by the CPC or
the Indian Evi- dence Act, 1872.
Chapter 07
(iii) Having consented to the procedure, it would not be open for the re-
spondent to approbate and reprobate to raise a different contention at
this point. Estoppel applies. “It is intriguing … such a contention has
not only been permitted to be raised but also accepted … to remand
the matter, which is wholly unjustified”.
Chapter 08
AWARD OF INTEREST
JAIPRAKASH ASSOCIATES LTD V. TEHRI HYDRO DEVELOPMENT
CORPORATION INDIA LTD. 2019 SCC ONLINE SC 143
Supreme Court of India; 3 judge bench, A.K. Sikri, S. Abdul Nazeer, and
M.R. Shah JJ; decided on 07 February 2019
Grant of pendente lite interest when the agreement barred it; award set
aside on that point
The agreement between the parties had an arbitration clause. Two claims
raised by Jaiprakash were referred to arbitration under the ACA. By
majority, the tribunal allowed the claims to a certain extent, and also
granted interest at the rate of 10% per annum from the date of
invocation of arbitration till 60 days after the award. Future interest at the
rate of 18% per annum till the date of payment was also awarded.
The clauses on interest were as follows:
“Clause 50.0 Interest on money due to the contractor
No omission on the part of the Engineer in charge to pay the amount due
upon measurement or otherwise shall vitiate or make void the contract,
nor shall the contractor be entitled to interest upon any guarantee or
payments in arrears nor upon any balance which may on the final
settlement of his account, be due to him.
Clause 51.0 No claim for delayed payment due to dispute etc.
No claim for interest or damage will be entertained or be payable by the
corporation in respect of any amount or balance which may be lying with
the corporation owing to nay (sic any) dispute, different or
misunderstand- ing between the parties or in respect of any delay or
omission on the part of the Engineer in charge in making intermediate or
final payments on in any other respect whatsoever.”
Chapter 08
The tribunal concluded that the agreement did not authorize interest but
granted it nonetheless relying on the Board of Trustees for the Port of
Calcutta v. Engineers-De-Space-Age, (1996) 1 SCC 516 [A.M. Ahmadi
CJ and S.C. Sen J]. A single-judge bench of the High Court quashed the
award on the point of interest. A 2-judge bench upheld that order in an
intra-court appeal.
The dispute came to the Supreme Court, which upheld the decision of the
High Court’s single-judge order. This is how the Supreme Court arrived
at its conclusions: -
(i) The court “deduced from the various judgments” the principles. In
the course, the court also referred to “a recent judgment” Reliance
Cellulose Products Limited v. Oil and Natural Gas Corporation
Limited (2018) 9 SCC 266 (R.F. Nariman and Indu Malhotra JJ)
where “the entire case law on the subject is revisited and legal
position reemphasised”. The court said that in Reliance Cellulose, a
case under the Arbitration Act, 1940:
a. It was held that under the Arbitration Act, 1940, an arbitrator
has the power to grant pre-reference interest under the Interest
Act, 1978 as well as pendente lite and future interest. But this is
“constricted only by the fact that an agreement between the
parties may contain an express bar.”
b. A test of strict construction of such clauses was evolved and it
was held that the bar must be clear and express.
c. Further, “unless a contractor agrees that no claim for interest
will either be entertained or payable by the other party owing to
dispute, difference, or misunderstandings between the parties
or in respect of delay on the part of the engineer or in any other
respect whatsoever, leading the Court to find an express bar
against payment of interest, a clause which merely states that
no interest will be payable upon amounts payable to the
contractor under the contract would not be sufficient to bar an
arbitrator from award- ing pendente lite interest”.
d. Further, “pendente lite interest depends upon the phraseology
used in the agreement, clauses conferring power relating to
arbitration, the nature of claim and dispute referred to the
arbitrator, and on
Award of Interest
what items the power to award interest has been taken away and
for which period.”
e. The position under Section 31(7) ACA is wholly different
because this provision “sanctifies agreements between the
parties and states that the moment the agreement says
otherwise, no interest becomes payable right from the date of
the cause of action until the award is delivered.”
(ii) The court looked at the agreement and held that clauses 50 and 51 of
General Conditions of Contract (“GCC”) put a bar on the arbitral tri-
bunal to award interest. It noted that right from the stage of
arbitration proceedings till the High Court, the clauses were
interpreted to contain a bar. Even the majority award recognized
that.
(iii) The court referred to Board of Trustees for the Port of Calcutta case
relying on which the tribunal had nonetheless granted interest. It
held that that case was inapplicable because:
a. It was a judgment under the Arbitration Act, 1940.
b. The “legal position in this behalf have (sic has) taken a
paradigm shift” under the ACA which is clarified in Sayeed
Ahmed & Co. v. State of U.P. (2009) 12 SCC 26 [a 2-judge
bench of R.V. Raveendran and P. Sathasivam JJ considered
Section 31 (7) (a) ACA and crystallised the legal position that
under the ACA, an arbitrator could not award pendente lite
interest when there was an express bar in the agreement].
(iv) The court agreed with the High Court’s reasoning that clauses 50
and 51 of GCC are pari materia with the clauses in Tehri Hydro
Development Corporation (THDC) Limited v. Jai Prakash
Associates Limited (2012) 12 SCC 10 where “they have been
interpreted by holding that no interest is payable on claim for
delayed payment due to the contractor.”
(v) The court examined whether “such a construction is contrary” to the
judgment in State of U.P. v. Harish Chandra & Co. [(1999) 1 SCC
63, 3- judge bench of S.B. Majumdar, S. Saghir Ahmad and K.
Venkatasami JJ]. The court held that “the judgment in Sayeed
Ahmed and Company dis-
Chapter 08
tinguishing the restrictive wording in Harish Chandra, a case under

the 1940 Act, has been consistently followed by this Court in
number of cases thereafter”. Thus, the court found no reason to
deviate from the construction that the agreement did not authorize
the grant of interest.
(vi) The court rejected an argument based on the principle of ejusdem
generis.
Chapter 09
SETTING ASIDE ARBITRAL AWARD

INTRODUCTION
(A) SETTING ASIDE APPLICATION IN INDIA IN A FOREIGN SEATED
ARBITRATION
Challenge to an arbitral award is made in India under Section 34 which is

placed in Part I of the ACA. Part II deals with enforcement of foreign
awards.
In Bhatia International v. Bulk Trading SA, (2002) 4 SCC 105, a 3-judge
bench of the Supreme Court ruled that even in an international
commercial arbitration held outside India, Part I compulsorily applied
unless excluded by the parties either expressly or impliedly.1
The courts were following Bhatia, often requested to intervene in foreign
seated arbitrations mainly to make an interim measure or in enforcement
proceedings. The question would then be: is Part I excluded?
A 5-judge bench considered Bhatia in Bharat Aluminium Co. v. Kaiser
Aluminium Technical Services Inc., (2012) 9 SCC 552 and overruled on
06 September 2012 but prospectively. BALCO discussed the concept of
‘seat’ and recognized
1 In NTPC v. Singer (1992) 3 SCC 551, an interim award made in arbitration seated at Lon-
don was challenged in Delhi court under the Arbitration Act, 1940. It would be recalled
that in 1961 India had enacted the Foreign Awards (Recognition and Enforcement) Act,
1961 (FARE) to implement the New York Convention. But FARE had a sui generis provi-
sion. Section 9 (b) provided that FARE will not apply to an award made on an arbitration
agreement governed by laws of India. That is, such award would be domestic award and
be treated under the Arbitration Act, 1940 Act. But the Singer court did not base its deci-
sion on that provision alone. It went on to hold that courts of seat of arbitration will have
jurisdiction in respect of procedural matters concerning the conduct of arbitration but also
that that there is an “overriding principle”, namely, that courts of country whose substan-
tive law governs the arbitration agreement are the competent courts in respect of all mat-
ters under the arbitration agreement, and the jurisdiction exercised by the courts of the seat
is merely concurrent and not exclusive and strictly limited to matters of procedure. This is
the concurrent jurisdiction theory which was “resurrected” in Bhatia.
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that the ACA accepted the territorial principle where seat was the center
of gravity. Indian courts, it said, had no jurisdiction over a foreign seated
arbitration (even in cases where the agreement stated that the ACA
applied).
Later, even in cases governed by the Bhatia principle, conscious of the
BALCO ruling, the courts read exclusion of Part I in many cases because
either the seat was outside, or foreign laws governed the arbitration
agreement.2
(B) SETTING ASIDE AND PUBLIC POLICY; ENFORCEMENT OF THE
AWARD AND PUBLIC POLICY
The public policy defense to an arbitral award either in a set-aside

proceedings under Section 34 ACA or under Section 48 when resisting
enforcement of a foreign award rankles and interests the most. The
defense is set up in almost every application. Its history is summarised in
the Law Commission of India’s Supplementary to its 246 th report3 on the
amendments to the ACA.4
Relevant to this context:
1. Section 34 (2) (b) (ii) of the ACA now provides that an arbitral
award may be set aside by the court only if the court finds that the
arbitral award is in conflict with the public policy of India.
2. Explanation 1 Section 34 (2) (b) (ii) clarifies for the avoidance of
any doubt that an award is in conflict with the public policy of India,
only if:
2 These cases do not discuss what matters are governed by the law governing the arbitration
agreement or if they had anything to do with the court’s jurisdiction on the arbitral pro-
cess.
3 Law Commission of India’s Supplementary to its 246th report, 2015 available at
http://lawcommissionofindia.nic.in/reports/Supplementary_to_Report_No._246.pdf
4 Also, see https://www.linkedin.com/pulse/oops-did-again-indian-supreme-courts misad-
venture-interfering-sen/, Krishnayan Sen, criticising Vedanta Ltd. v. Shenzhen Shandong
Nuclear Power Construction Co. Ltd., (2019) 11 SCC 465 where the interest awarded by
the arbitral tribunal was modified by the 2-judge bench of R.F. Nariman and Indu Mal-
hotra JJ
Setting Aside Arbitral Award
a. The making of the award was induced or affected by fraud or

cor- ruption or was in violation of Section 75 or Section 81; or
b. Is in contravention with the fundamental policy of Indian law; or
c. It is in conflict with the most basic notions of morality or justice.
3. Explanation 2 clarifies for the avoidance of doubt that the test as to
whether there is a contravention with the fundamental policy of
Indian law shall not entail a review on the merits of a dispute.
The public policy defense for resisting enforcement of an arbitral award
is textually almost the same under Section 48 (2) (b).
The ground that an arbitral award may also be set aside for “patent
illegality”, which for long was Part of the public policy defense, has
been made an additional ground in cases of awards arising out of
arbitrations other than international commercial arbitrations (therefore
awards like a domestic award involving domestic parties). A proviso
cautions that “an award shall not be set aside merely on the ground of an
erroneous application of the law or by reappreciation of evidence”.
(C) THE 2019 CASES
Ssangyong Engineering & Construction Co. Ltd. v. National Highway
Authority of India, 2019 SCC OnLine SC 677 contains the history,
assessment, and current state of the law on public policy defense to both
setting aside and enforcement proceedings.
It also contains an assessment of ground contained in Section 34 (2) (a)
(iii) and Section 34 (2) (a) (iv) as well as the meaning of the expression
“most basic notions of morality or justice”, which again is part of the
public policy defense.
National Highways Authority of India & Another v. Subhash Bindlish &
Others, Special Leave Petition (Civil) Diary No(s). 17812/2019, 2-judge
bench decision of the Supreme Court considered the time limitation to
apply to set aside. It notes that the period is a maximum of 120 days,
which is a bit erroneous. The period is three months plus thirty days.
This may or not be 120 days in a given case (see the chapter on time
140
limitations).
140
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Again, Oriental Insurance Co. Ltd. v. M/s Tejparas Associates &

Exports Pvt. Ltd., 2019 SCC OnLine SC 1281, another 2-judge bench of
the Supreme Court is on time-limitation and discussed in that Chapter.
Hindustan Petroleum Corporation Ltd. v. M3nergy Sdn. Bhd., 2019 SCC
OnLine Bom 2915, a Bombay High Court case, discussed what standard
of review applies in a set aside proceeding while determining the
question of lack of jurisdiction of the arbitral tribunal.
The State of Jharkhand and others v. M/s HSS Integrated SDN and
another, Spe- cial Leave to Appeal (sic Special Leave Petition) (C) No.
13117 of 2019, discussed standards for setting aside the award and
emphasized that the grounds under Section 34 are not attracted if the
tribunal’s findings are plausible, neither perverse nor contrary to
evidence.
Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd., 2019 SCC
OnLine SC 1656, discussed in detail the facets of a reasoned award.
Ssangyong also had held that not giving reasons attracts the ‘patent
illegality’ ground.
141
SSANGYONG ENGINEERING V. NATIONAL HIGHWAYS AUTHORITY

OF INDIA, 2019 SCC ONLINE SC 677

Saran JJ; decided on 08 May 2019
The law on public policy
(A) BACKGROUND
The contract was: -
(i) executed on 12.04.2006 between Korean company Ssangyong
and National Highway Authority of India (NHAI), an authority
which functions under the Ministry of Road Transport, Union of
India
(ii) for construction of highways
The dispute involved calculation of the price adjustment:
(i) the price adjustment clause specified a formula for adjustment of the
contract price in cases of increase or decrease in rates and price of
la- bor, materials, fuels, and lubricants. Ssangyong was paid a price
adjustment every month in terms of the agreed formula.
(ii) The formula was Vc = 0.85 × Pc/100 × Ri × (C1 - C0)/C0. The indices
C0 represented the all India average WPI for cement as on a date
(that is, 29 September 2005). The indices C 1 represented WPI,
which is an index of the price of a representative basket of
wholesale goods. It is now published from time to time by the
Ministry of Commerce and Industry (“Ministry”).
(iii) The Ministry launched a new series of WPI on 14.09.2009, but the
base year taken in this new series was 2004-2005. The new series
(with a base year of 2004-2005) came into effect in September
2010.
(iv) Ssangyong raised several invoices based on the price adjustment
clause. From December 2005 to August 2010, the old series of
WPI was used for calculation. For three years during this period
payments were disbursed too by NHAI. After September 2010
till Feb- ruary 2013, bills were raised applying the WPI of the
new series.
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(v) Later NHAI took the position that an anomaly had crept in due to
change in the WPI Series during the tenure of the contract.
(vi) In 2013 NHAI issued a circular to provide a linking factor
(expressed in a number), the purpose of which was to link the old
series to the new series. Applying the linking factor, NHAI sought
recovery of certain payments already made.
(vii)Ssangyong did not accept this circular and raised a dispute. It
wanted to be paid based on the new series without applying the
linking factor. An application for interim relief was filed under
Section 9 of the ACA in May 2013 in Delhi High Court. On 31
May 2013, Justice Manmo- han Singh restrained NHAI from
implementing the circular retrospectively. Later, the interim relief
matter was transferred to the arbitral tribunal.
(viii) Under the dispute resolution clause, the matter went to the Disputes
Review Board (DRB). The majority members of the DRB recom-
mended a certain linking factor and calculated the figures for price
adjustment. One member dissented and recommended that in view
of the express terms of the contract, the circular could not be applied
for price adjustment. Ssangyong referred the matter to arbitration.
The arbitration was invoked on 19 November 2013 (that is before
the 2015 Amendment): -
(ix) The dispute before the arbitral tribunal “was a narrow one”—
“whether price adjustment would continue under the terms of the
contract, or whether the Circular dated 15.02.2013, applying the
linking factor, would have to be applied”.
The award was made by a three-member tribunal on 02 May 2016: -
(i) The majority held the circular could be applied as it was within
contractual stipulations and rejected Ssangyong’s claim. While
doing so, the majority award relied on a guideline of the
Ministry of Commerce and Industry, which stated that the
establishment of a linking factor to connect the old Series with
the new Series is required. This guideline was not Part of the
pleadings.
(ii) The minority third arbitrator dissented and concluded that neither
the circular nor the guidelines applied as they were de hors the
contract.
Ssangyong’s application to set aside the award under Section 34: dismissed:-
(i) application by Vibhu Bakhru J of Delhi High Court on 09 August
2016;
(ii) On reasoning that the view of the majority arbitrators was a possible
view, therefore, cannot be interfered with.
Ssangyong’s appeal under Section 37: dismissed by the 2-judge appellate
bench: -
(i) The Appeal under Section 37 [FAO. (OS) COMM- 82/2016] filed
against the order of the single-judge dated 09.08.2016 in Delhi High
Court was dismissed by Indira Banerjee and Anil Kumar Chawla JJ
on 03.04.2017.
(ii) The court accepted the reasoning of the single judge and said that the
view taken by the majority arbitrators is plausible.
(B) THE SUPREME COURT’S DECISION
1. Applicability of 2015 Amendments Set Aside Proceedings
The court held that the amended Section 34 ACA will apply only to those
applications under Section 34 which have been made to the court on or
after 23 October 2015. This would be irrespective of the commencement
of arbitration proceedings before 23 October 2015.
2. “Public Policy” in Section 34 and Section 48 Are Now the Same
After 2015 Amendments, “public policy of India,” in both Sections 34
and 48 would mean:
(i) The “fundamental policy of Indian law,” as explained in paragraphs
18- 27 of Associate Builders v. Delhi Development Authority [(2015)
3 SCC 49], i.e., its meaning would be relegated to the understanding
of the ratio in Renusagar Power Co. Ltd. v. General Electric Co.
(“Renusagar”) [1994 Supp (1) SCC 644].
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(ii) Conflict with morality and justice would mean conflict with the
“most basic notions of morality and justice”, to be construed in line
with para 36-39 of Associate Builders. A conflict of this kind would
be one that shocks the conscience of the court and can only be
invoked in excep- tional circumstances.
(iii) “Interest of India” would no longer remain a ground for interference
as the 2015 Amendment has deleted it.
(iv) Post-2015 amendment, the expression “public policy of India” under
Sections 34 and 48 of the ACA would be as it was interpreted in
Renus- agar.
(v) Expansion of fundamental policy of Indian law in ONGC Ltd. v.
West- ern Geco International Ltd. (2014) 9 SCC 263, has been done
away with (including its interpretation in paras 28 and 29 of
Associate Builders).
(vi) The ground of “patent illegality”, as explained in ONGC Ltd. v. Saw
Pipes Ltd., is now a separate ground under Section 34.
(vii) Insofar the principles of natural justice, contained in Sections 18
and 34(2)(a)(iii), para 30 of Associate Builders would remain to be
the law.
(viii)A mere contravention of the substantive law of India would not be
considered a ground to set aside an arbitral award; therefore para
42.1 of Associate Builders will not obtain.
3. Patent Illegality-
Interpretation Patent illegality
would mean:
(i) Illegality appearing on the face of the award and one which goes to
the root of the matter but not an erroneous application of law.
(ii) When an arbitrator does not give reasons for an award and
contravenes Section 31(3) of the ACA [to be construed as per para
42.2 of Associated Builders]
(iii) Perversity, as explained in para 31 and 32 of Associate Builders,
including a finding based on no evidence or on documents taken
behind the back of the parties or ignoring vital evidence in making an
award.
(iv) Construction of the contract done by the arbitrator is not a possible

view to take.
(v) Dealing with matters outside of the arbitrator’s jurisdiction. [to be
construed as per paras 42.3 to 45 of Associate Builders]
Patent illegality would not mean
(i) contravention of a statute not linked to “public policy”;
(ii) Reappreciation of evidence.
Ground of patent illegality will not apply for setting aside arbitral awards
in international commercial arbitrations.
4. Review on Merits
The scope of challenge under Section 34(2)(a) does not include a review
of the merits of the award by the court.
5. Right to Present the Case Under Section 34(2)(A)(iii)
The court explained the interplay of Sections 18, 24(3) and 26 of the
ACA to state that the ground under Section 34(2)(a)(iii) can be invoked if
any of the parties have not been given an opportunity to present its case.
Under Section 18 each party is to be given full opportunity to present its
case. Section 23(3) provides for communication to the other party of-
(i) necessary information and documents by one party to the tribunal, and
(ii) supply of any expert report or document on which the tribunal is
relying.
Section 26 points that when an expert report is relied upon by the
tribunal, the said report and all material with the expert must be first
made available to any party who requests such things. Also, if requested,
parties are to be given the opportunity to put questions to the expert and
to present their own expert witness.
Section 34(2)(a)(iii) can be invoked where materials are taken behind the
back of the parties by the arbitral tribunal without affording opportunity
to comment.
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6. Decision on Matters Beyond The Scope of Submission to

Arbitration- Interpretation
The arbitral award deals with decision on matters beyond the scope of the
submission to arbitration when an arbitral tribunal has rendered an award
which decides matters:
(i) Beyond the scope of the arbitration agreement, or
(ii) Beyond the disputes referred to the arbitral tribunal.
However, an arbitral award would not be beyond the scope of the
submission to arbitration if the contractual interpretation therein,
including going beyond the terms of the contract, could be said to have
been construed as “disputes” within the arbitration agreement.
Decision on matters outside this scope could be corrected on the ground
of “patent illegality” but will not apply to international commercial
arbitrations under Part II.
7. Relief
The court set aside the majority award but held that under the scheme of
Section 34, the dispute would have to be referred afresh to another
arbitration.
However, such reference would cause considerable delay and could go
against the objectives of the ACA, i.e. speedy resolution of the disputes.
Hence, the minority award was upheld.
HINDUSTAN PETROLEUM CORPORATION LTD. V. M3NERGY SDN.

BHD., 2019 SCC ONLINE BOM 2915
Bombay High Court; 2-judge bench, Pradeep Nandrajog, CJ and
Bharati Dangre J; decided on 16 October 2019
Arbitral tribunal’s jurisdiction–Standard of review applied by courts
(A) THE QUESTION

The tribunal may rule on its own jurisdiction if a party raises a plea that
the arbitral tribunal lacks jurisdiction. If the plea is rejected, the party
aggrieved may, after the award is made, file an application to set aside
the award per Section 34 of the ACA.
What is the standard of review to decide a jurisdictional question in set
aside proceedings? Can the court, like an appellate court does, again
evalu- ate the evidence which was presented before the tribunal?
(B) OBJECTION ON TRIBUNAL’S JURISDICTION BEFORE THE TRIBU-
NAL, AND LATER IN SET ASIDE PROCEEDINGS BEFORE THE SIN-
GLE-JUDGE
The arbitral tribunal’s jurisdiction was challenged by the respondent in

an application under Section 16 of the ACA on the ground that there was
no (concluded) contract. The tribunal rejected the challenge, continued
with the arbitral proceedings, and made an award.
The award was challenged and the ground that the tribunal did not have
jurisdiction was raised again. The single-judge bench, SC. Gupte J
concluded that it is for the court to scrutinize (independently) the
objections to arbitrator’s jurisdiction based on the jurisdictional facts
pleaded by the parties irrespective of what the arbitrator ruled. He
decided that the “yardstick applied” when deciding a challenge to the
award under Section 34 of the ACA cannot be deployed to examine the
question of arbitrator’s jurisdiction. For instance, an erroneous finding of
fact cannot be corrected in a set aside proceeding, but an erroneous
finding on jurisdiction should be because the tribunal cannot confer on
itself jurisdiction it does not possess. He evaluat- ed the evidence in
detail, accepted the argument that the underlying con-
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tract (in which the arbitration agreement was located) had not been con-
cluded, and set the award aside.
HPCL appealed.
(C) THE DECISION OF THE DIVISION BENCH IN FAVOUR OF APPEL-
LANT [BASED ON DALLAH (CITED INFRA) CASE CITED BY RE-
SPONDENT]
Two cases were cited by HPCL to argue that even on the jurisdiction of
the arbitral tribunal, the same principles of law otherwise concerning a
challenge to arbitral awards apply. 5 The respondent cited a decision of
the Su- preme Court of the United Kingdom–Dallah Real Estate and
Tourism Holding Company v. The Ministry of Religious Affairs,
Government of Pakistan 2010 UKSC 46–to argue that the correct
approach is for the court to appraise the evidence again like an appellate
court.
The court first held that the two cases cited by HPCL were
distinguishable. However, it found that in the Dallah case cited by the
respondent M3nergy, there was a passage that was good authority in
favor of HPCL’s position. Relying on that passage in Dallah, the court
held that on an issue concerning the jurisdiction of the arbitral tribunal,
the court is bound to examine, both carefully and with interest, the
reasoning and conclusion of an arbitral tribunal (and therefore not make
an independent analysis without regard to the decision of the tribunal).
The court concluded that Dallah applied the same on the issue of
tribunal’s jurisdiction which are applied to other issues in a set-aside
proceeding. It held that the position in India is the same.
5 VFC Securities Pvt. Ltd. v. Rashesh N. Shah Shares & Brokers Pvt. Ltd., 2005 (2) Mah.
L.J. 386, 2-judge bench of Bombay High Court and Supreme Court’s decision in Kvaerner
Cementation India Ltd. v. Bajranglal Agarwal, (2012) 5 SCC 214.
THE STATE OF JHARKHAND AND OTHERS V. M/S HSS INTEGRATED

SDN AND ANOTHER, (2019) 9 SCC 798
Supreme Court of India; 2-judge bench, Arun Mishra and M.R. Shah JJ;
decided on 18 October 2019
Standard for setting aside award; Grounds under section 34 to set aside an
award is not attracted if the tribunal’s finding is
plausible, neither perverse nor contrary to evidence
HSS Integrated (“HSS”) and VKS Infra Tech Management Pvt. Ltd. en-
tered into a consultancy agreement with the State of Jharkhand relating to
construction of the road. Dispute arose and the State terminated the con-
tract. HSS commenced arbitration, contending that the termination was
illegal. It claimed Rs. 5,17,88,418/- for work already executed, loss of
profit, overhead charges, and other consequential items. The State
counterclaimed for reimbursement for certain costs.
The three-member arbitral tribunal unanimously found the termination
illegal. Individual claims were addressed, and an award was made on 15
Febru- ary 2015 for Rs. 2,10,87,304/-. The counterclaim was altogether
rejected.
The State filed an application under Section 34 of the ACA to set the
award aside on the ground that findings in the award were perverse, the
tribunal failed to take into account the contractual clauses, and the award
was contrary to public policy. The High Court’s Commercial Court
Bench rejected the application. An appeal filed by the State under
Section 37 of the ACA was also dismissed by the appellate court on 30
January 2019 (Aniruddha Bose and Ratnaker Bhengra JJ).
The State now filed a special leave petition. The Supreme Court 6 dismissed
the petition on the following ground and reasoning:
(i) In NHAI v. Progressive MVR, (2018) 14 SCC 688, after considering
several decisions, the Supreme Court held that grounds set out
under Sec-
150
6 Notice was issued on 03 July 2019. Adjournment was sought and granted twice observing
on the second occasion (on 06.09.2019) that no further adjournment shall be granted. The
case was decided on 18 October 2019.
150
Chapter 09
tion 34 of the ACA will not apply if the view taken by the arbitrator
is plausible. Those grounds will not also apply when two reasonable
views are possible, and the tribunal takes one view than the other.7
(ii) In Maharashtra State Electricity Distribution Co. Ltd. v. Datar
Switchgear Ltd., (2018) 3 SCC 133, the Supreme Court has held that
an arbitral tribunal is the master of evidence and their findings of
facts arrived based on the evidence on record cannot be scrutinized
as if in appeal.
(iii) In proceedings under Sections 34 and 37 of the ACA, the award can
be interfered with where the finding is perverse and/or contrary to
the evidence and/or the same is against the public policy [citing to
“Associate Builders v. DDA (2015) 3 SCC 49, etc.”].
(iv) The tribunal found in this case that the contract was terminated with-
out following the provisions of the contract. This finding was neither
perverse nor contrary to the evidence on record.
(v) The tribunal gave cogent reasons while allowing/partly allowing the
respective claims. So, there is a proper application of mind by the
tribunal.
(vi) Once the termination was held bad and the claims allowed (some
partly), the counterclaim was liable to be rejected.
7 In Progressive the court noted that when an arbitral tribunal takes a plausible view, given
the parameters of judicial review under Section 34 of the ACA, normally the court would
not interfere, even if another view was possible. However, the court was mainly concerned
with conflicting awards by different tribunals involving interpretation of identical provi-
sions in separate agreements. The court gave its own interpretation to achieve finality. It
held that the plausible-view principle may lead to very anomalous situation. The view tak-
en by a particular tribunal in favour of the contractor would be upheld in one case, and in
another, the view taken in favour of NHAI.
151
NOBEL RESOURCES LTD. V. DHARNI SAMPDA PRIVATE LTD., 2019

SCC ONLINE BOM 4415
High Court of Bombay; single-judge bench, R. I. Chagla J, decided on 18
November 2019
The fundamental policy of Indian law includes drastic serious policy

matters; inadmissible evidence, not a ground covered under the public
policy exception
Nobel applied for enforcement of a SIAC award, which the respondent

Dharni Sampda resisted on the ground that the award contravenes the
public policy of India. This argument revolved around the testimony of
one Mr. Anurag Bhatnagar (“Bhatnagar”). He was an ex-employee of
Nobel, but his name figured in the list of witnesses filed by Dharni.
Later, he presented Nobel’s witness and presented testimony in favor of
Nobel’s position.
Broadly, Dharni Sampda argued: –
(i) Bhatnagar became a witness for Nobel because he was intimidated
and threatened with criminal prosecution. His cross-examination (by
Dhar- ni’s counsel) was an empty formality.
(ii) The arbitrator had earlier said he would but did not really decide the
admissibility of Bhatnagar’s testimony.
(iii) Admission of tainted evidence given under intimidation is so unfair
and unreasonable that it shocks the conscience and is liable to be set
aside under Section 48 of ACA.
Chagla J rejected all arguments, and enforcement was allowed. He first
held that the objection was nothing but a challenge to the admissibility of
the evidence and then gave the following reasons for rejecting the
objection: –
(i) Inadmissibility of evidence is merely a challenge to the procedural
defects, which is not a ground to refuse enforcement under Section
48 of the ACA. Moreover, Section 48 does not permit “second look”
at the award or reappreciation of evidence during enforcement
[citing to Shri Lal Mahal Ltd. v. Progetto Grano SpA, (2014) 2 SCC
433]. The arbitral tribunal is the sole judge of weight, materiality,
and credibility of the evidence.
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(ii) The objection on the ground of public policy must be such that the
foreign award offends the core values of a member’s national policy,
which it cannot be expected to compromise [citing Cruz City 1
Mauri- tius Holdings v. Unitech Ltd. 239 (2017) DLT 649].
(iii) Public policy includes drastic serious national policy matters such as
trading in elephant tusks from India and the sale of peacock meat
from India. Mere improper admission of evidence is no violation of
public policy.
(iv) The arbitrator’s finding on inadmissibility–“there is nothing in those
assertions” of Bhatnagar being threatened–would be a finding of fact
after appreciation of evidence, which cannot be reopened at an en-
forcement stage.
(v) Nonetheless, dealing with the allegation that the matter was one
which shocked the conscience, the court found that the allegation of
intimidation, tutoring etcetera was an afterthought.
(vi) Objections as to violation of natural justice and bias of the arbitrator
were also rejected.
DYNA TECHNOLOGIES PVT. LTD. V. CROMPTON GREAVES LTD.,

2019 SCC ONLINE SC 1656
Supreme Court of India; 3- judge bench, NV
Ramana, Ajay Rastogi, Mohan M. Shantanagoudar
JJ; decided on 18 December 2019
Standard of setting aside; facets of a reasoned award; the power of remission

et. al.
The Supreme Court re-emphasized in this case that under the ACA the
award must be reasoned.
The matter arose out of a dispute about the termination of a contract and conse-
quent losses. A three-member arbitral tribunal accepted Dyna’s claims.
Crompton’s application to set aside the award was rejected. Its appeal was
allowed partly by a division bench of the High Court, which concluded that the
tribunal had not given enough reasons. Now Dyna was before the Supreme
Court.
Firstly, the court examined its jurisdiction “under Section 34 of the
Arbitration
Act” before it “devolve[ed] into the contractual issues” and concluded:
(i) Arbitral awards should not be interfered with in a casual and cavalier
manner unless the court concludes that the perversity of the award goes to
the root of the matter without there being a possibility of alternative
interpretation which may sustain the arbitral award.
(ii) Section 34 cannot be equated with a normal appellate jurisdiction and the
mandate is to respect the finality of the arbitral award and party
autonomy.
(iii) The courts need to be cautious and should defer to the view taken by the
arbitral tribunal even if the reasoning in the award is implied unless such
an award portrays “perversity unpardonable” under Section 34 of the
ACA.
Secondly, the court turned to “the analysis of the case” and examined the argu-
ment that the award was perverse for want of reasons: –
(i) Like the position under the Model Law, India also adopts a default rule to
provide for reasons unless the parties agree otherwise [referring to
Section 31 (3) ACA].
(ii) Under the Arbitration Act, 1940, there was no obligation to give reasons
as held in Raipur Development Authority v. Chokhamal Contractors and
Ors., (1989) 2
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SCC 721, but the ratio of that case “has not found the favor of the
[l]egislature,” and accordingly Section 31 (3), ACA was enacted.
(iii) The mandate under Section 31(3) of the ACA is to have reasoning, which
is intelligible and adequate, even if inappropriate cases implied (from
documents and award).
(iv) Three characteristics of a reasoned order are: proper, intelligible and
adequate.
(v) Improper reasoning reveals a flaw in the decision-making process. If the
challenge to an award is based on impropriety or perversity in the
reasoning, then it can be challenged strictly on the grounds provided
under Section 34 of the ACA. If the challenge to an award is based on the
ground that the same is unintelligible, the same would be equivalent to
providing no reasons at all.
(vi) Courts are required to be careful while distinguishing between the
inadequa- cy of reasons in an award and unintelligible awards. The degree
of particular- ity of reasons required, in a given case, cannot be stated in a
precise manner. Even if the court concludes there are gaps in the
reasoning, the court needs to have regard to the documents and the
contentions so that awards with in- adequate reasons are not set aside in
casual and cavalier manner.
(vii) On the other hand, ordinarily unintelligible awards are to be set aside.
Thirdly, the court discussed the power of remission under Section 34 (4)
ACA: –
(i) Section 34 (4) cannot be brushed aside. The legislative intention behind it
was “to make an award enforceable, after giving an opportunity to the
tribunal to undo the curable defects.”
(ii) The power under Section 34 (4) ACA to cure defects can be utilized in
cases where the arbitral award does not provide any reasoning or if the
award has some gap in the reasoning or otherwise which can be cured.
(iii) The High Court concluded that there was no reasoned award. The award
then ceased to exist, and the court was functus officio for hearing the
challenge to the award. In such a case, the High Court ought to have
considered remanding the matter to the tribunal in the usual course.
The court finally concluded that the award was confusing and jumbled the
contentions, facts, and reasoning, without appropriate distinction. However,
given that the litigation continued for twenty-five years, the court made an
order of full and final settlement.
Chapter 10
TIME LIMITATIONS
NATIONAL HIGHWAYS AUTHORITY OF INDIA & ANOTHER V. SUB-
HASH BINDLISH & OTHERS, SPECIAL LEAVE PETITION (CIVIL) DIA-
RY NO(S). 17812/2019
Supreme Court of India; 2-judge bench, Uday Umesh Lalit and Vineet
Sa- ran JJ; decided on 14 August 2019
Limitation for filing an application to set aside an award
You can file an application to set aside an award within the period set out
under Section 34 (3) of the ACA. The limitation is: –
(i) “three months” [either from the date when the award is received by
the party filing the application, or, from the date when the tribunal
disposed a request under Section 33, if such a request was made,
for correction, interpretation or additional award]; plus
(ii) an additional “thirty days, but not thereafter”. This additional period
is on court’s discretion, upon the applicant showing it was prevented
by “sufficient cause” from making the application within three
months.
In this case, as the Supreme Court noted, the application was filed
beyond the period and the courts below had found it barred by
limitation.1 In a very brief order, the Supreme Court also concluded,
“[w]hat is provided under Sec- tion 34(3) is the “outer limit” within
which the application can be preferred for setting aside of an arbitral
award,” and “the law laid down on the point by this Court is very clear.”
A somewhat grasping-at-straws argument suggesting that “a relaxation of
the regime under Section 36 must have some reflection” on the
expression “but not thereafter” under Section 34 (3) was rejected
concluding “both these provisions stand on different footings.”
1 The court noted the period to be 120 days. This is wrong. The period is “three months”
plus “thirty days”. It may or may not be 120 days in a given case.
Chapter 10
UTTARAKHAND PURV SAINIK KALYAN NIGAM LIMITED V. NORTH-

ERN COAL FIELD LIMITED 2019 SCC
ONLINE SC 1518
Supreme Court of India; 2-judge bench, Ajay Rastogi and Indu
Malhotra
JJ; decided on 26 November 2019
An issue as to jurisdiction like limitation should be decided by the

arbitrator, not court considering an application under Section 11 to appoint
an arbitrator
The petitioner invoked arbitration in September 2016 and later applied to
the Madhya Pradesh High Court for the appointment of an arbitrator
under Section 11 of the ACA. The High Court rejected the application on
the ground of limitation.
The matter reached the Supreme Court, and in answer, the court first re-
marked that amendments made to the ACA in 2015 would apply since
arbitration was invoked after 23 October 2015, the date when the
amendments came into effect.2 It then examined Section 11 (as amended
in 2015) and came to the following conclusions:
(i) The 2015 amendments significantly changed the appointment
process under Section 11 that is the court’s jurisdiction under sub-
section (6A) of Section 11 was now confined to “examination of the
existence of the arbitration agreement.”
(ii) Before the 2015 amendments:
a. The Chief Justice was required to decide all threshold issues
with respect to jurisdiction (existence of the agreement, whether
the claim was time-barred, whether there was settlement, etc.)
[citing
2 Sub-section 6A to Section 11 was inserted with effect from 23 October 2015. The sub-
section states: “The Supreme Court or, as the case may be, the High Court, while consider-
ing any application under subsection (4) or sub-section (5) or sub-section (6), shall, not-
withstanding any judgment, decree or order of any Court, confine to the examination of
the existence of an arbitration agreement”. This provision has been omitted in the 2019
amendments to the ACA, but the omission has not come into effect as of 20 February
2020.
Time Limitations
to SBP & Co. v. Patel Engineering Ltd., (2005) 8 SCC 618;

National Insurance Co. v. Boghara Polyfab (P) Ltd. (2009) 1
SCC 267; Union of India v. Master Construction Co., (2011) 12
SCC 349].
b. The 246th Law Commission Report recommended an amendment
to Section 11 envisaging parties will not be referred to
arbitration only if the arbitration agreement did not exist. Based
on these recommendations, Section 11 was substantially
amended, and sub- section 6A was inserted to overcome all
previous judgments to re- inforce the kompetenz-kompetenz
principle enshrined in Section 16 of the ACA.
c. This non-obstante clause legislatively overruled Patel
Engineer- ing and Boghara Polyfab and confined Section 11
only to the existence of the arbitration agreement and nothing
more [citing to Duro Felguera S.A. v. Gangavaram Port
Limited, (2017) 9 SCC 729].
d. The legislative intent underlying the ACA is party autonomy and
minimal judicial intervention in the arbitral process. The
legislative policy behind Section 16 is to restrict judicial
intervention at the pre-reference stage. It is an inclusive
provision, within which all preliminary issues touching upon the
jurisdiction of the arbitral tribunal falls. Therefore, once the
existence of the arbitration agreement is not disputed, all issues,
including jurisdictional objections are to be decided by the
arbitrator.
e. Limitation is a mixed question of fact and law. It involves a
question of jurisdiction, which must be decided by the arbitral
tribunal [citing to ITW Signode India Ltd. v. Collector of
Central Excise, (2004)
3 SCC 48; NTPC v. Siemens Atkein Gesell Schaft, (2007) 4
SCC 451; Indian Farmers Fertilizers Cooperative Ltd. v.
Bhadra Products, (2018) 2 SCC 534].
f. However, the court also referred to situations where the appoint-
ment of an arbitrator may be refused:
 Fraud or deception, which the court said is an exception to
kompetenz-kompetenz.
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 If the arbitration agreement is not valid.

 If the disputes are beyond the scope of the arbitration agree-
ment.
An interesting fact may be noted here- the High Court had rejected the
application for appointment of arbitrator saying that the application was
limitation-barred. The issue before the Supreme Court, therefore, was
whether a Section 11 court could consider the question of limitation?
This is noted in the opening paragraph of the judgment: “The issue which
has arisen for consideration is whether the High Court was justified in
rejecting the application filed under Section 11 for reference to
arbitration, on the ground that it was barred by limitation”.
But the remaining part of the judgment is confusing because it proceeds
on the premise that the High Court rejected the application for
appointment because the claim itself was limitation barred. At paragraph
11, the Supreme Court notes: “[T]he High Court vide the impugned
Order held that the claims of the Petitioner – Contractor were barred by
limitation, and therefore an arbitrator could not be appointed under
Section 11 of the 1996 Act”. Nonetheless, this analysis is outside the
scope of this piece, and it focuses on what the court said.
Time Limitations
ORIENTAL INSURANCE CO. LTD. V. M/S TEJPARAS ASSOCIATES &

EXPORTS PVT. LTD. 2019 SCC
ONLINE SC 1281
Supreme Court of India; 2-judge bench, R. Bhanumathi and A. S.
Bopan- na JJ; decided on 03 October 2019
Section 14 of the Limitation Act applies to set-aside proceedings
Section 14 of the Limitation Act, 1963 (“Limitation Act”) provides for

the exclusion of time of proceeding bona fide in court without
jurisdiction. Does it apply to an application under Section 34 of the
ACA?
Yes, if the Section 34 application was in the first instance filed in time.
This is what this 2-judge bench has reiterated following an earlier 3-
judge bench decision in Consolidated Engineering Enterprises v.
Principal Secretary, Irrigation Department and others (2008) 7 SCC
169.
The facts are somewhat one-off and are summarised here for the
interested reader. Oriental Insurance had filed within limitation a Section
34 application at Jaipur, but the court there concluded it did not have
jurisdiction and sent the matter to the court at Jodhpur. It also fixed a
date for parties to appear. But there was a delay of 8 days by Oriental in
the re-presentation of its application. Since the respondent objected to
limitation, Oriental filed an application under Section 14 of the
Limitation Act to exclude the time con- sumed at Jaipur. The Jodhpur
court rejected the application and the High Court affirmed that rejection.
The Supreme Court was of the view that the Section 14 application was
not necessary in the first place (“a knee jerk reaction”) and since the
actual issue was delay in re-presenting the application, the correct course
was to make an application (under CPC) to the Jaipur court to extend the
time fixed by it to appear in court at Jodhpur. The Su- preme Court
nonetheless made its observations on the Section 14 aspect.
160
It is interesting to note that the Limitation Act, 1963 is a general law with
respect to the limitation of suits and other proceedings. Section 5 is one
of the frequently invoked general provisions under which a court can
extend
160
Chapter 10
the period of limitation for sufficient cause. But Section 29 excludes the
applicability of several provisions of the enactment in a case where a
special law prescribes a different period of limitation. For example,
Section 34 of the ACA prescribes a limitation of its own (of three
months, plus, at the court’s discretion, additional thirty days). Several
cases have ruled that Sec- tion 5 of the Limitation Act does not apply to
set aside proceedings under Section 34 of the ACA. Among these is
Union of India v. Popular Construction Co. (2001) 8 SCC 470 and,
following Popular, Simplex Infrastructure Limited v. Union of India
(2019) 2 SCC 455. But, according to Consolidated Engineering, Section
5 is fundamentally different from Section 14, and there is no reason why
the benefit of Section 14 should not be attracted to set aside proceed-
ings.
161
Time Limitations
NV INTERNATIONAL V STATE OF ASSAM 2019 SCC

ONLINE SC 1584
Supreme Court of India; 2-judge bench, R. F. Nariman and S Ravindra
Bhat JJ; decided on 6 December 2019
Limitation to file an appeal under Section 37 from a Section 34 proceedings
is a
maximum of 120 days
(A) LIMITATION UNDER SECTION 34 AND ITS EFFECT ON LIMITA-
TION UNDER SECTION 37 AS DECIDED BY THE SUPREME COURT IN
VARINDERA CONSTRUCTION
Section 37 of the ACA provides for an appeal against several orders, one
of which is an order made in a set aside application under Section 34.
The limitation to file a Section 34 application is three months plus a
further grace period of thirty days, but not thereafter. 3
In Union of India v. M/s Varindera Construction Ltd., SLP No.
23155/2013 (decided on 17 September by a bench of RF Nariman and
Indu Malhotra JJ), the Supreme Court said “any delay beyond 120 days”
in filing an appeal under Section 37 from allowing or rejecting an
application under Section 34 ACA should not be allowed.
How did the court arrive at this period of 120 days?
The court below (Delhi High Court) had said that 120 days, including
even the grace period of 30 days, 4 is the maximum period in which a
Section 34
3 Section 34 (3)- An application for setting aside may not be made after three months have
elapsed from the date on which the party making that application had received the arbitral
award or, if a request had been made under Section 33, from the date on which that request had
been disposed of by the arbitral tribunal: provided that if the court is satisfied that the applicant
was prevented by sufficient cause from making the application within the said period of three
months it may entertain the application within a further period of thirty days, but not thereafter.
(emphasis added)
4 The period under Section 34 ACA is three months plus 30 days. The court erroneously
equated three months with 90 days.
Chapter 10
application can be filed. So, an appeal from Section 34 proceeding

should also “carry the same drill.”5
The Supreme Court in Varindera affirmed the Delhi High Court’s
finding. First, it said an appeal is a continuation of the original
proceedings.6 Then it added that allowing delay beyond 120 “will defeat
the overall statutory purpose of arbitration proceedings being decided
with utmost despatch.”
(B) THE NV INTERNATIONAL DECISION—LIMITATION REMAINS THE
SAME (120 DAYS), REASONING ATTUNED A BIT
In this case, an award was challenged under Section 34 of the ACA but
rejected. From that rejection, an appeal was made under Section 37 of
the ACA. Taking the limitation as 90 days under Article 116 of the
Limitation Act, 1963, an application to condone the delay of 189 days
had also been filed under Section 5 of the Limitation Act, 1963. 7 The
High Court did not condone the delay.
NV International’s argument in the Supreme Court was that the
application for condonation of delay should have been decided on its
merits regardless of the length of the delay.
The court dismissed the appeal. It first said that “the matter was no
longer res integra”, and reproduced the order made in Varindera
Construction (cited supra).
5 This is the expression the Supreme Court used while describing the order the High Court had
passed, that is, in FAO (O.S) 178 of 2013 decided on 10 April 2013 (Sanjay Kishan Kaul and
In- dermeet Kaur JJ). A copy of this order could not be accessed on the Delhi High Court’s
website (search via daily orders & case history) nor obtained from any other resource. It is not
apparent from the description of the Supreme Court if what the High Court said was that the
limitation under Section 37 (against a Section 34 order) is the same as Section 34, or that
limitation though is governed by Article 116 of the Limitation Act, 1963, any delay beyond what
was prescribed for a Section 34 application should not be condoned.
6 Relying on Lachmeshwar Prasad Shukul and Others v. Keshwar Lal Chaudhuri and Oth-
ers, AIR 1941 Federal Court 5.
7 Under Section 5 of the Limitation Act, 1963 the court has power to extend the period of
limitation on being satisfied that there was sufficient cause for delay.
Time Limitations
Then it explained that what the court had done in Varindera

Construction was to add to the period of 90 days, provided by statute for
filing of appeals under Section 37 of the ACA, a grace period of 30 days
under Section 5 of the Limitation Act, 1963.
Therefore, the net conclusion that follows from NV International (on the
face of it and as it stands) is that if an appeal under Section 37, ACA is
filed from a Section 34 proceeding, there should not be a delay beyond
120 days.8
8 The basis of the calculation is problematic. If it was Section 34, the court confused three
months with ninety days. So, a party may argue that it should not be 120 days but three
months plus 30 days. There are other unclear matters. Can the reasoning process in Varin-
dera Construction be conciled with B.V. International? What will be the limitation for ap-
peals under Section 37 from proceedings other than Section 34 proceeding? Will the same
grace period of 30 days apply? If not, will there be different standards for limitation in a
Section 37 appeal depending on the underlying proceeding?
Chapter 10
GEO MILLER & CO. PVT. LTD. V. RAJASTHAN VIDYUT UTPADAN NI-
GAM LTD. 2019 SCC ONLINE SC 1137
Supreme Court of India; 3-judge bench, N. V. Ramana, Mohan M. Shan-

tanagourdar & Ajay Rastogi JJ, decided on
03 September 2019
Limitation for filing an application under Section 11 or referring dispute to

arbitration; When does right to apply accrue; Effect on limitation of time
spent on settlement talks; Standard of Pleading to get the benefit of
settlement talks period in the computation of limitation
To get payment for final bills raised in 1983 and 1989, Geo Miller
invoked arbitration in 2002 and, since the respondent did not appoint its
nominee arbitrator, filed an application under Section 11 (6) of the ACA.
The High Court dismissed the application as time-barred. The Supreme
Court con- firmed the High Court’s decision and dismissed the special
leave petition.
The questions considered and answered were the following.
(A) WHICH ENACTMENT APPLIED—THE ARBITRATION ACT, 1940 OR
THE ACA?
The Arbitration Act, 1940 would apply only if notice of arbitration was
sent before 25 January 1996, which is the cut-off date [citing to Fuerst
Day Law- son Ltd. v. Jindal Exports Ltd. (2001) 6 SCC 356 and 3 rd
edition of O.P. Mal- hotra’s commentary on arbitration, page 1915].
Here, the notice was sent later. The court had jurisdiction to entertain
application under Section 11 ACA.
(B) IS THE LIMITATION TO FILE AN APPLICATION UNDER SECTION
11 ACA THREE YEARS?
It is three years from the date on which the cause of action or the claim
which is sought to be arbitrated first arises. Limitation was/is governed:
a. In the Arbitration Act, 1940 by Sections 37 (1) and (4)
Time Limitations
b. In the ACA of 1996 by the similarly worded Sections 43 (1) and (3).9
Article 137 of the First Schedule to the Limitation Act, 1963 10 applies
both to the Arbitration Act, 1940 [per State of Orissa v. Damodar Das
(1996) 2 SCC 216] and to the ACA [per Grasim Industries Limited v.
State of Kerala (2018) 14 SCC 265].
(C) WHEN DOES THE RIGHT TO APPLY ACCRUE UNDER ARTICLE 137
OF THE LIMITATION ACT? MEANING OF ‘DISPUTE’.
The court held that in this case, it arose on the date when final bills were
raised (in 1983 and 1989). It distinguished Inder Singh Rekhi v. DDA,
(1988) 2 SCC 338 on facts, but cited it on principle and held that the
claim in Inder Singh was delayed because the bills were not finalized. It
was held that the existence of a dispute is essential (for the right to apply
to accrue). ‘Dispute’ entails a positive element, and mere inaction to pay
does not lead to the inference that dispute exists. Where a party does not
finalize the bills, cause of action arises not from the date on which the
payment became due, but on the date when the first communication was
made requesting finalization.
Moreover, the court said, in a commercial dispute, while mere failure to
pay may not give rise to a cause of action, once the applicant has asserted
claim and the respondent fails to respond, such failure will be treated as
denial of the applicant’s claim giving rise to a dispute, and therefore the
cause of action for reference to arbitration. Merely writing
representations and remind- ers do not extend limitation.
(D) WHAT IS THE EFFECT OF PERIOD OF SETTLEMENT TALKS ON
LIMITATION? STANDARD OF PLEADING TO GET THE BENEFIT OF
SETTLEMENT TALKS IN THE COMPUTATION OF LIMITATION
9 Section 43 (1) makes the Limitation Act, 1963 applicable to arbitrations and sub-section
(3) bars a claim unless some step to commence arbitration has been taken in time contrac-
tually fixed. The bar is subject to court’s discretion to extend the limitation as the justice
of the case may require.
10 Residuary clause. Limitation of three years from when the right to apply accrues.
Chapter 10
The court concluded that on a certain set of facts and circumstances, the
period during which parties bonafidely negotiated a settlement may be
excluded when computing limitation [citing to but distinguishing Hari
Shankar Singhania v. Gaur Hari Singhania (2006) 4 SCC 658 and Shree
Ram Mills v. Utility Premises (2007) 4 SCC 599].
However, in such cases, the entire negotiation history must be
specifically pleaded and placed on the record. The court, upon careful
consideration of such history, must find out what was the ‘breaking
point’ at which any reasonable party would have abandoned efforts at
arriving at a settlement and contemplated referring the dispute to
arbitration.
This ‘breaking point,’ the court said, would be the date on which the
cause of action arises. The threshold for determining when the ‘breaking
point’ will be lower in commercial disputes (where the party’s primary
interest is in securing the payment due) than in family disputes (where it
may be said that parties have a greater stake in settling the dispute
amicably).
The court finally concluded that in this case, the pleading requirements
are not met. They were silent on the specific actions taken for several
years to recover the payments. The court also applied Section 114(g) of
the Indian Evidence Act, 1872 under which “this court can presume that
evidence which could be and is not produced would, if produced, be
unfavourable to the person who withholds it.”
Chapter 11
RECOGNITION AND ENFORCEMENT

INTRODUCTION
We noted in the chapter on setting aside of arbitral awards that the public
policy defense is the most used—in almost every case—in resisting en-
forcement.
Public policy in enforcement of arbitral awards is a narrow doctrine—
Renusagar Power Co. Ltd. v. General Electric Co. 1994 Supp (1) SCC
644 considered both broad and narrow views and held that it is the
narrow version that applies to enforcement actions.
In the line of authorities that guard against using public policy
Richardson v. Mellish1 is one of the earliest. Parties were warned against
relying on public policy. Best J noted that contravention of public policy
must be “unques- tionable.”2 Burrough J’s observations became more
famous: “it is a very unruly horse …It may lead you from the sound law.
It is never argued at all but when other points fail”. 3
One of the earliest Indian cases which deal with public policy is a 3-
judge bench judgment in Gherulal Parakh v. Mahadeodas, 1959 Supp.
(2) SCR 406. The doctrine is summarised at paragraphs 23 and 28 of the
judgment as follows:- (a) public policy is an elusive concept,
untrustworthy guide, of variable quality, uncertain one, an unruly horse;
(b) the paramount public policy is freedom of trade and contract and
courts will not interfere lightly with the freedom of contract; (c) The
doctrine is to be applied in clear and incontestable cases.
1 Richardson v. Mellish, (1824) 2 Bing. 231

2 see paragraph 241 of Richardson v. Mellish, (1824) 2 Bing. 231
3 see paragraph 252 of Richardson v. Mellish, (1824) 2 Bing. 231
Chapter 11
The amendments in 2015 have narrowed the scope further. Two explana-
tions have been introduced: - (i) an award would be contrary to public
policy of India “only if it is contravention with the fundamental policy
of Indi- an law”4; and (ii) “the test as to whether there is a contravention
with the fundamental policy of Indian law shall not entail a review on the
merits of the dispute.”
The origin of the expression “fundamental policy of Indian law” is in Re-
nusagar. The court considered several foreign cases and commentators 5.
It also relied on the commentary of Cheshire and North on Private
Interna- tional Law, 12th edition where they set out the categories of cases
in which the English courts refuse to enforce a foreign acquired right on
the ground that it would affront some moral principle maintenance of
which admits of no possible compromise.6
In Cruz City v. Unitech Limited,7 Vibhu Bakhru J of the Delhi High
Court held that the expression “fundamental policy” connotes the basic
and substratal rationale, values, and principles that form the bedrock of
laws in our country.8 The objections to enforcement on the ground of
public policy must be such that offend the core values of a member
State’s national policy and which it cannot be expected to compromise.
The expression “fundamental policy of law” must be interpreted in that
perspective and must mean only the fundamental and substratal
legislative policy and not a provision of any enactment.9
Renusagar also established something which is part of the statute now
that the review of the award on merits is not permissible. The first
question formulated was, “what is the scope of enquiry in proceedings
for enforce-
4 Section 48 (2) (b), Explanation 1 (ii). The other two clauses of Explanation 1 are not ap-
plicable in this case, since they have not been invoked.
5 Discussing the question as to meaning of public policy at paragraphs 46 to 66.
6 See in particular paragraph 44 onwards. Also see Municipal Corporation of Greater Mum-
bai v. Jyoti Construction Company, 2003 (4) Mh.L.J.
7 Cruz City v. Unitech Limited, 2017 SCC Online Del 7810.
8 see paragraph 97 of Cruz City v. Unitech Limited, 2017 SCC Online Del 7810.
9 see paragraph 98 of Cruz City v. Unitech Limited, 2017 SCC Online Del 7810.
Recognition and Enforcement
ment …?10. It was answered in paragraphs 31 to 37. See in particular para

32, “… foreign judgment which is final and conclusive cannot be im-
peached for any error either of fact or of law”. Also, see para 33, “the
English courts would not refuse to recognize or enforce a foreign award
merely because the arbitrators (in its view) applied the wrong law to the
dispute or misapplied the right law”; further, para 35, “Albert Jan van
den Berg … has expressed the view … a national court should not
interfere with the substance of the arbitration”; then, at para 37, the
afore-stated principles were approved.
Even in Shri Lal Mahal Ltd. v. Progetto Grano SpA (2014) 2 SCC 433,
the court reiterated, “Section 48 of the 1996 Act does not give an
opportunity to have a “second look” at the foreign award in the award
enforcement stage. The scope of inquiry under Section 48 does not
permit review of the foreign award on merits”.11
Section 48 now expressly bars a review on the merits of a foreign award
in enforcement proceedings when considering the public policy defense.
Also, what must be seen in Section 48 proceedings is the disposition of
the award. Section 48 plainly states, “enforcement of an arbitral award
may also be refused if the court finds that … the enforcement of the
award would be contrary to public policy of India”. Thus, it is the
disposition of the award which is relevant in a Section 48 proceeding.
(A) THE 2019 CASES
Ssangyong Engineering & Construction Co. Ltd. v. National Highway
Authority of India 2019 SCC OnLine SC 677, already considered in the
chapter on setting aside, considered the law on Section 48 also and
identified the scope of the provision.
10 see paragraph 30 of Renusagar Power Co. Ltd. v. General Electric Co., 1994. Supp. (1)
644.
11 see paragraph 45 of Shri Lal Mahal Ltd. v. Progetto Grano SpA, (2014) 2 SCC 433
170
Chapter 11
In Glencore International AG v. Indian Potash Limited and Another

(2019) 263 DLT 663, Rajiv Shakdher J of the Delhi High Court
emphasized that there was no requirement to stamp a foreign award. He
was also concerned with an agreement that specified a wrong arbitral
institution (and therefore a non-existent one). The tribunal read that
clause, relying on extrinsic evidence, to mean that the parties intended
SIAC Rules to apply. The court found no fault with the approach. It also
concluded it caused no prejudice.
There was another issue. Should a jurisdictional issue be decided ahead of
others? Not necessary. The court said.
Kakade Construction Company Ltd. v. Vistra ITCL (India) Ltd. 2019
SCC OnLine Bom 152, a Bombay High Court decision, was concerned
with appealable orders.
Imax Corporation v. E-City Entertainment (I) Pvt. Ltd. and others 2020
(1) ABR 82, another Bombay High Court decision considered the
limitation to enforce a foreign award. It said the period is 12 years. It
distinguished, on what appears to be weak logic, another coordinate
bench on the issue which after considering everything in detail had held
it is three years.
171
GLENCORE INTERNATIONAL AG V. INDIAN POTASH LIMITED AND

ANOTHER (2019) 263 DLT 663
Delhi High Court; single-judge bench, Rajiv Shakdher J; decided on 9
Au- gust 2019
Stamping of an award, natural justice, notions of justice, arbitral procedure,

the fundamental policy of Indian law et. al.
Enforcement of two foreign awards–final award and cost award–passed
in a Singapore seated arbitration was resisted under Section 48 of the
ACA claiming:
(i) The awards were not stamped.
(ii) Section 48 (1) (d) of the ACA was attracted because:
a. There was no agreement between the parties on procedural rules.
Therefore, the composition of the tribunal and arbitral
proceedings should have been in accordance with the
International Arbitration Act of Singapore (“IAA”) and the
Model Law, which govern international commercial
arbitrations conducted in Singapore. However, erroneously, the
rules of SIAC were applied.
b. Although both under IAA/Model law and SIAC Rules, SIAC
Chairman was the authority competent to appoint the arbitrator
in the event of disagreement between parties, SIAC had assumed
jurisdiction on the wrong premise that rules framed by it
applied to the arbitration.
c. Had the tribunal been validly constituted, the procedure laid
down under the Model law would have applied. But, instead, the
expedited procedure under Rule 5 of SIAC Rules was applied.
(iii) Sections 48 (1) (b) and 48 (2) (b) were attracted. The tribunal
violated principles of natural justice and the award conflicted with
most basic notions of justice because:
a. The tribunal did not rule on its jurisdiction as a preliminary
matter but at the time of pronouncing the final award, depriving
IPL of an opportunity to appeal under the IAA.
Chapter 11
b. The tribunal permitted Glencore to amend its opening statement

at the stage of final hearing.
The court dismissed all objections:
(A) MUST A FOREIGN AWARD BE STAMPED?
The court held no–as decided by the Supreme Court in Shriram EPC
Limited
v. Rioglass Solar SA.12 Besides, it could not be the legislative intent
(behind the ACA) to insist stamping of a foreign award in India as stamp
duty (often) differs from state to state. It would be impossible for the
enforcer to pay stamp duty in every state.
(B) ON THE COMPOSITION OF THE TRIBUNAL AND ARBITRAL PRO-
CEDURE: SIAC V. IAA
The arbitration agreement referred to the rules of “Singapore

International Arbitration of the Chambers of Commerce.” Since no such
arbitral institution existed, the tribunal relied on extrinsic evidence
(drafting history) to construe that parties intended SIAC Rules to apply.
In adopting this inter- pretive route, the tribunal applied the lex arbitri,
i.e., the Singaporean law, as laid down in Zurich Insurance (Singapore)
Pte Ltd. v. B-Gold Interior Design & Construction Pte Ltd.13
This approach was also in consonance with the Indian law on the
interpretation of written contracts. Even if it were different, the court
would be very slow in interfering with the enforcement of the final award
because the lex arbitri was Singapore law. Even assuming there was a
procedural defect, enforcement could not be refused because no prejudice
was caused to IPL. Whether SIAC Rules applied or IAA/ Model Law, the
competent authority to appoint arbitrators if parties disagreed was the
same (SIAC’s Chairman).
Courts ought to enforce an award if the procedural defect had not led to
the failure of justice.
12 (2018) 18 SCC 313
13 (2008) 3 SLR(R) 10293.
If Pricol Ltd. v. Johnson Controls (2015) 4 SCC 177 had a precedential

value or not required no discussion because the lex arbitri was
Singaporean law.14 But, it is relevant to emphasize that decisions that are
not binding prece- dents can have persuasive value.
(C) ON NATURAL JUSTICE AND NOTIONS OF JUSTICE
There is no fundamental policy in Indian law that adjudicating authorities
should mandatorily render decision on jurisdictional issues before
hearing the matter on merits. The judge has discretion. Section 10 (2) of
the IAA is in sync and provides that an arbitral tribunal may rule on a
plea of jurisdiction at any stage of the arbitral proceedings.
Order XIV Rule 2 of the CPC would take to the same conclusion. If the
question is mixed, of both fact and law, the court would ordinarily deal
with it at the final stage. The issue of whether SIAC had jurisdiction was
a mixed question of fact and law.
Rule 17.5 of the SIAC Rules empowers the tribunal to allow amendment
of pleadings. The overarching principle is that the amendment should not
fall outside the scope of the arbitration agreement. There is nothing in
that rule barring an amendment on the date of the final hearing. While
exercising its discretion to allow an amendment to pleadings, the
arbitrator allowed IPL to respond, which it failed to avail.
14 Glencore cited to Pricol’s case in which the contract referred to an institution not in exist-
ence. IPL contended that Pricol was decided by the delegate of the Chief Justice of India,
a judicial authority not a court of record, while exercising powers under Section 11 of
ACA and, therefore, would have no precedential value.
Chapter 11
KAKADE CONSTRUCTION COMPANY LTD. V. VISTRA ITCL (INDIA)

LTD. 2019 SCC ONLINE BOM 152
Bombay High Court; 2-judge, Pradeep Nandrajog, CJ and Nitin Jamdar
J; decided on 09 August 2019
Order appointing a receiver in the execution of award is not appealable?
From a judgment or order passed by the Commercial Division of a High
Court, an appeal lies to the Commercial Appellate Division. 15 But appeal
lies only from such orders, which are specifically enumerated under
Order XLIII of CPC and Section 37 of the ACA.
Here, an arbitral award was being executed under Section 36 of the ACA
before the Commercial Division of the High Court. A single judge passed
an order appointing a receiver. An appeal was filed before the
Commercial Appellate Division contending that the order appointing
receiver was made under Order XL Rule 1 of CPC and thus was
appealable Order XLIII Rule 1(s).
Was the order made under CPC, or, under the ACA? And, if it was under
the ACA, was it appealable?
Answering that the order was under the ACA and not appealable the
court held:
(i) A division bench of the High Court of Bombay in Jet Airways
(India) Ltd. v. Subrata Roy Sahara 2012 (2) AIR Bom 855 relying
on Supreme Court’s decision in Paramjeet Singh Patheja v. ICDS
Ltd. (2006) 13 SCC 322 already has held that execution proceedings
under the ACA are not proceedings under CPC.
(ii) What Jet Airways considered was a final order but, whether final or
not, is not a material distinction for the position of law.
15 Section13 of Commercial Courts and Commercial Appellate Division of the High Courts
Act, 2015.
(iii) The Supreme Court’s decision in Sundaram Finance Ltd. v. Abdul

Samad (2018) 3 SCC 62216 has not diluted the ratio of Jet Airways.
The Su- preme Court analyzed the fiction contained under Section
36 and held it is an enforcement mechanism akin to the enforcement
of a decree, but the award itself is not a decree of the Civil Court.
(iv) In Kandla Export Corporation v. OCI Corporation (2018) 14 SCC
715, the Supreme Court has clarified that the ACA is a self-
contained code on arbitration, and in arbitration matters, only the
appeals mentioned in Section 37 are maintainable before
Commercial Appellate Division.
(v) It cannot be the legislative intent to provide a speedy remedy of arbi-
tration only till the award is passed, with no priority when the award
is to be put to execution. The purpose of the arbitral process is not
only to expedite the declaration of an award on paper but the actual
receipt of the claim.
(vi) What if the appellant was not a party to the arbitration is a
hypothetical question which need not be decided.
16 An award under Section 36 of the ACA is decree of the court by way of fiction and only
for the purposes of execution. Enforcement of an award through its execution can be filed
anywhere in the country where such decree can be executed and there is no requirement
for obtaining a transfer of the decree from the court, which would have jurisdiction over
the arbitral proceedings.
Chapter 11
IMAX CORPORATION V. E-CITY ENTERTAINMENT (I) PVT. LTD. AND

OTHERS 2020 (1) ABR 82
High Court of Bombay; single-judge bench, G. S. Kulkarni J; decided on

13 November 2019
Limitation to enforce a foreign award is twelve years
When the court is satisfied that a foreign award is enforceable, 17 it

becomes a decree of the court and can be executed. As per Fuerst Day
Lawson Ltd. v. Jindal Exports Ltd. (2001) 6 SCC 356, the ACA
contemplates a single proceeding for deciding enforceability, and then
its execution in that proceeding.
What is the limitation to file such a single proceeding was the main
question in this case–three years under Article 137 of the Limitation Act,
1963, or twelve years, under Article 136?
This question arose mainly because of these facts:
(i) The awards were of the years 2006, 2007 and 2008, in favor of Imax.
(ii) On 27 July 2008, with some delay, E-City applied to the High Court
of Bombay to set these foreign awards aside.
(iii) The court condoned delay on 10 June 2013 and also ruled that the
set- aside applications were maintainable.
(iv) Imax went to the Supreme Court, which first stayed the set-aside
proceedings, but on 10 March 2017, dismissed the set-aside
applications ruling that the High Court of Bombay had no
jurisdiction.
(v) Imax then filed the petition to enforce and execute the awards on 02
April 2018. No application to condone delay was filed.
Also, a single judge of the High Court of Bombay in Noy Vallesina
Engineer- ing Spa v. Jindal Drugs Limited 2006 SCC OnLine Bom 545
(D. R. Deshmukh J), after reconsidering the issue of limitation in detail
had already ruled that
17 That
is, when the court is of the view that none of the grounds set out in Section 48 of the
ACA are attracted.
if the court is yet to record its satisfaction that the award is enforceable,
limitation for enforcement would be governed by Article 137 (that is,
three years from the date when the right to apply accrues).
In these facts, and based on law set out in Noy Vallesina, E-City argued that:
(i) Article 137 applied.
(ii) The right to apply accrued and the limitation started to run, as soon
as the awards were published (for even after proceedings are filed to
challenge the foreign awards, the decree-holder can file
proceedings for enforcement).
(iii) Imax ought to have filed an application seeking condonation of
delay, which it did not.
This is how the court dealt with the arguments.
It first set out an underlying tone observing that the ACA requires
broader interpretation, particularly in cases of enforcement of foreign
award.
It then took up in the judgment the alternative argument, that is, was the
petition within limitation even assuming that Article 137 applied? It an-
swered yes and reasoned that:
(i) Even if the delay in filing the Section 34 application had not been
condoned from 27 June 2008 until 10 June 2013, it cannot be said
that this application was not pending. This is so because once the
delay was condoned, it would relate to the day the petition was filed,
that is, 27 June 2008 [citing to Delhi Development Authority v.
Amita Nand Aggarwal 2008 (1) Arb. LR 588 (Delhi), where the
Delhi High Court ruled that the date of filing was the original date,
and not the date when it was re- filed after removing the objections].
(ii) Considering the provisions of the ACA before the 2015 amendment
(with effect from 23 October 2015), filing a set-aside application
under Section 34 of the ACA amounted to the stay of the award.
(iii) The substantive cause of action, therefore, arose only on 10 March
2017 when the Supreme Court held the set aside application as not
maintainable.
Chapter 11
After dealing with the alternative argument, the court then considered as
to which provision of the Limitation Act, 1963 applied for enforcing a
foreign award, Article 136 or Article 137?
It ruled that Article 13618 applies. It said that a foreign award is stamped
as a decree19 and is enforced and executed in the same proceeding in two
stag- es– first enforcement and then execution. 20 Therefore, “Article 136
… would surely become applicable”.
The court also cited two decisions of a single-judge bench of the Madras
High Court, which had ruled that Article 136 would apply [Compania
Naviera
v. Bharat Refineries Ltd., OSA No. 52 of 2008 dated 01/08/2008;
Compania Naviera ‘SODNOC’ v. Bharat Salt Refineries Ltd., AIR 2007
Mad. 251]
The court distinguished Noy Vallesina by reasoning that:
(i) Even by applying Article 137, the petition is not barred by limitation.
(ii) Applying the law laid down in Fuerst, and Shriram EPC, the court
cannot overlook the prayers which are combined for enforcement
and execution.
(iii) A broader view is required to be taken to advance the object and
intention of the ACA and not a technical approach that the petition
is time- barred because the application for condonation of delay was
not filed, and the delay was not condoned.
The Supreme Court has further clarified in Shriram EPC that the
expression foreign award is “stamped as a decree” used in Fuerst, which
means “regarded as a decree.”
18 (Excerpted) The limitation is twelve years for the execution of any decree (other than a
decree granting a mandatory injunction) or order of any civil court. Limitation starts to run
when the decree or order becomes enforceable.
19 Citing to Shriram EPC Ltd. v. Rioglass Solar SA, (2018) 18 SCC 313.
20 Citing to Thyseen Stahlunion v. Steel Authority of India, (1999) 9 SCC 334 and Fuerst
Day Lawson Ltd. v. Jindal Exports Ltd., (2001) 6 SCC 356.
Chapter 12
2019 AMENDMENTS
INTRODUCTION
The ACA was first amended by the 2015 Amendments with the
objective to make the arbitration process cost-effective, speedy and
having a mini- mum judicial intervention. The 2015 Amendments did not
specifically provide for institutional arbitration. To review the
institutionalization of the arbitration mechanism in India and suggest
reforms, the Central Govern- ment 1 set up a high-level committee
(“Committee”) under the Chairman- ship of Justice (Retd.) B.N.
Srikrishna, former Judge, Supreme Court of India. Based on the report 2
submitted by the Committee, the Arbitration and Conciliation
(Amendment) Bill, 2018, was introduced, which was passed by both the
Houses of Parliament. On 9 August 2019, the Arbitra- tion and
Conciliation (Amendment) Act, 2019 (“2019 Amendments”), received
the assent of the President.
The main features of the 2019 Amendments are:

(A) ARBITRAL COUNCIL OF INDIA: PART 1A
(i) Part 1A has been inserted, which is titled ‘Arbitration Council of
India’ (Sections 43A to 43M). A national-level-body called the
‘Arbitration Council of India’ (“Council”) will be established and
incorporated by the Central Government for performing duties and
functions under the
1 Set up by the Ministry of Law and Justice, Government of India by an office order dated
13 January 2017.
180
2 ‘Report of the High-Level Committee To Review the Institutionalization of Arbitration
Mechanism in India’ dated 30 July 2017.
180
Chapter 12
Act.3 The Council shall be a body corporate with its head office at
Delhi.4
(ii) Composition of the Council5
Chairperson Retired Judge of the Supreme Court/ High Court;

or Retired Chief Justice of a High Court ; or
An eminent person having special knowledge and
experience in the conduct or administration of the
arbitration.
Members (2) An eminent arbitration practitioner having substantial

knowledge and experience in institutional arbitration
(both domestic and international); and
An eminent academician having experience in research
and teaching of arbitration and alternative dispute
resolution laws.
Ex officio Secretary, Department of Legal Affairs, Ministry of Law

members (2) and Justice;
Secretary, Department of Expenditure, Ministry of Fi-
nance; and
Chief Executive Officer- Member-Secretary
Part-time Representative of recognized body of commerce and in-

member dustry
(1)
The term of the Chairperson and Members of the Council shall be three
years.
(iii) Duties and functions of the Council6: The Council will promote
and encourage alternative dispute resolution mechanism and
perform vari-
3 Section 43B (1) inserted in ACA by Section 10 of the 2019 Amendments.

4 Section 43B (3) inserted in ACA by Section 10 of the 2019 Amendments.
5 Section 43C inserted in ACA by Section 10 of the 2019 Amendments.
181
2019 Amendments
ous duties and functions including framing policies governing

grading of arbitral institutions, providing accreditation of
arbitrators,7 conduct- ing training, workshops, and courses related to
arbitration, establishing and maintaining depository of arbitral
awards,8 and promoting institutional arbitration.
(iv) Grading of arbitral institutions and arbitrators9: The Council
will grade arbitral institutions based on criteria relating to
infrastructure, quality, and caliber of arbitrators, performance and
compliance of time limits for disposal of domestic or international
commercial arbitrations in the manner specified by the regulations.
(v) The Council is also empowered to make regulations and rules, in
con- sultation with the Central Government, for discharging its
functions and duties under the Act.10
(B) APPOINTMENT OF ARBITRATORS: SECTION 11 (THE AMENDMENT
TO SECTION 11 HAS NOT BEEN BROUGHT INTO FORCE AS ON 20
FEBRUARY 2020)
(i) The appointment of arbitrator(s), under the default procedure, shall
be done exclusively by the ‘arbitral institutions’ designated by the
Supreme Court (in case of international commercial arbitration) and
the High Court (in case of all other arbitrations).
(ii) The Supreme Court and the High Court are empowered to designate
arbitral institutions from time to time, which have been graded by
the Council11, and such designation will not be regarded as
delegation of judicial power.12
6 Section 43D inserted in ACA by Section 10 of the 2019 Amendments.

7 Section 43J inserted in ACA by Section 10 of the 2019 Amendments.
8 Section 43K inserted in ACA by Section 10 of the 2019 Amendments.
9 Section 43-I inserted in ACA by Section 10 of the 2019 Amendments.
10 Section 43L inserted in ACA by Section 10 of the 2019 Amendments.
11 Section 11(3A) inserted in ACA by Section 3 of the 2019 Amendments.
12 Section 11(6B) omitted in ACA by Section 3 of the 2019 Amendments.
Chapter 12
(iii) An application for appointment of arbitrator(s) will be filed before

an ‘arbitral institution,’ and such application has to be disposed of by
the arbitral institution within thirty (30) days from the date of service
of notice on the opposite party.13
(iv) In case where graded arbitration institutions are unavailable, the
Chief Justice of the concerned High Court may maintain a panel of
arbitrators for discharging the functions and duties of arbitral
institutions.
(v) The fees of the arbitral tribunal and the manner of its payment shall
be determined by the arbitral institution as per the rates specified in
the Fourth Schedule.
Arbitral Council of India
Graded ArbitralDesignated
Institution Arbitral Institution
Appointed
by SC/HC
Arbitrator (30 days)
(C) INTERIM MEASURES ORDERED BY ARBITRAL TRIBUNAL: SECTION

17
(i) Section 17 (1) has been amended to provide that an application for
interim measure can be filed by a party only during the arbitral pro-
ceedings as the words “or at any time after the making of the arbitral
award but before it is enforced in accordance with section 36” have
been omitted.14
(D) TIME PERIOD FOR FILING OF STATEMENT OF CLAIM AND DE-
FENSE: SECTION 23
(i) Section 23 (4) has been added which requires the parties to complete
the statement of claim and defense within six months from the date
the
13 Section 11(13) substituted in ACA by Section 3 of the 2019 Amendments.

14 Please note that as per Section 32 of the ACA, the office of arbitral tribunal becomes func-
tus officio after the making of award. Thus, an application for interim measure “at any
time after the making of the award but before enforcement under section 36” could not lie
before the arbitral tribunal.
2019 Amendments
arbitrator or all the arbitrators (as the case may be) receive notice, in
writing, of their appointment.
(E) TIME LIMITS FOR ARBITRAL AWARD: SECTION 29A
(i) The time limit for the passing of the arbitral award has been
modified in domestic arbitrations. Section 29A (1) provides that the
arbitral tribunal shall pass an award within twelve months from the
date of com- pletion of pleadings under Section 23(4).
(ii) The proviso to Section 29A (1) states that in international
commercial arbitrations, an award may be passed expeditiously, and
an endeavor has to be made to adhere to the time limit as provided
for the matter in domestic arbitrations.
(iii) Second proviso to Section 29A (4) has been inserted which states
that if an application for extension of the period is filed before a
Court under Section 29A (5), the mandate of the arbitrator shall
continue till the application is disposed of.
(iv) The arbitrator shall be given an opportunity of being heard before an
order of reduction in the fees of the arbitrator is passed by the Court
under Section 29(4).
Reference Pleadings 12 Award

6 months
months
6 months
Extension by Consent
proceedings continue
Extension by Court
184
6 months + 12 months + 6 months = 18 months
185
Chapter 12
(F) APPLICATION FOR SETTING ASIDE ARBITRAL AWARD: SECTION 34

(i) Section 34 (2) (a) has been amended, to clarify that a party applying to
the Court for setting aside of arbitral award has to rely only on the
record of the arbitral tribunal, by substituting the words “furnishes
proof that” with “established on the basis of the record of the arbitral
tribunal”.
(G) APPEALABLE ORDERS: SECTION 37
(i) In sub-section (1) of section 37 of the ACA, the words “Notwithstand-
ing anything contained in any other law” has been added before the
words “An appeal shall lie”.
(H) CONFIDENTIALITY OF INFORMATION: SECTION 42A
(i) An express provision i.e. Section 42A has been inserted providing for
confidentiality of arbitral proceedings. It casts an obligation upon the
arbitrator, the arbitral institution and the parties to the arbitration
agreement to maintain the confidentiality of all arbitral proceedings
with the exception that award can be disclosed for the purposes of
enforcement and implementation.
(I) PROTECTION OF ACTION TAKEN IN GOOD FAITH: SECTION 42B
(i) Section 42B has been added which grants immunity to arbitrators. It
states that a suit or any other legal proceedings shall not lie against
the arbitrator for anything which is done or intended to be done by
him or her in good faith in course of arbitration proceedings.
(J) POWER OF JUDICIAL AUTHORITY TO REFER PARTIES TO ARBI-
TRATION: SECTION 45
(i) In Section 45 the words “unless it finds” have been substituted with
the words “unless it prima facie finds” to clarify that the Court shall
refer the parties to arbitration on the basis of only prima facie
conclusion that the
2019 Amendments
arbitration agreement is not null and void, inoperative or incapable

of being performed15.
(K) APPLICABILITY OF 2015 AMENDMENTS: SECTION 87
(i) Section 87 has been inserted to clarify the applicability of the 2015
Amendments. It states that unless the parties otherwise agree, the
2015 amendments are not applicable to
a) the arbitral proceedings which commenced before 23 October
201516; and
b) to court proceedings that arise out of or in relation to such
arbitration proceedings.
(ii) Thus, the 2015 amendments have been made prospective in nature
and applicable to the arbitral proceedings and related court
proceedings which commenced on or after 23 October 2015.
(iii) However, the Supreme Court of India in Hindustan Construction
Company Ltd. & Anr. v. Union of India & Ors. 2019 SCC OnLine
SC 1520, has struck down Section 87 reviving the BCCI v. Kochi
Cricket Pvt. Ltd., (2018) 6 SCC 287 ruling.
(L) QUALIFICATIONS AND EXPERIENCE OF THE ARBITRATOR: EIGHT
SCHEDULE (THIS AMENDMENT HAS NOT BEEN BROUGHT INTO
FORCE AS ON 16 FEBRUARY 2020)
(i) Eight Schedule has been inserted which provides for qualifications
required for a person to be appointed as an Arbitrator. A person
shall not be qualified to be an arbitrator unless he is or has been:
a. an advocate under the Advocates Act, 1961 having ten years of
practice experience;
15 Section 45 of the Act corresponds with section 8 of the Act (applicable to arbitrations
seated in India) which provides that a judicial authority can only make a prima facie find-
ing on whether a valid arbitration agreement exists.
16 23rd October 2015 is the commencement date of the Arbitration and Conciliation
(Amendment) Act, 2015
Chapter 12
b. a chartered accountant under Chartered Accountant Act, 1949

having ten years of practice experience;
c. a cost accountant under Cost and Works Accountants Act, 1959
having ten years of practice experience;
d. a company secretary under the Company Secretaries Act 1980
having ten years of practice experience;
e. an officer of Indian Legal Service;
f. an officer with law degree having ten years of experience in the
legal matters in the Government, Autonomous Body, Public
Sector Undertaking or at a senior level managerial position in
the private sector;
g. an officer with engineering degree having ten years of
experience as an engineer in the Government, Autonomous
Body, Public Sec- tor Undertaking or at a senior level
managerial position in the private sector or self-employed;
h. an officer having senior-level experience of administration in the
Central Government or State Government or having experience
of senior-level management of a public sector undertaking or a
Government company or a private company of repute; or
i. a person having educational qualification at degree level with
ten years of experience in a scientific or technical stream in the
fields of telecom, information technology, intellectual property
rights or other specialized areas in the Government, autonomous
body, public sector undertaking or a senior-level managerial
position in a private sector, as the case may be.
(ii) The Eight Schedule also prescribes the ‘General norms applicable to
Arbitrator’ which includes the following:
a. The arbitrator must have a general reputation of fairness,
integrity and must be capable of applying objectivity in arriving
at a settlement of disputes;
2019 Amendments
b. The arbitrator must be impartial and neutral and avoid entering

in- to any financial business or other relationship that is likely to
affect impartiality or financial business or other relationship
that is likely to affect impartiality or might reasonably create an
appear- ance of partiality or bias amongst the parties;
c. The arbitrator shall be conversant with the Constitution of India,
principles of natural justice, equity, common and customary
laws, commercial laws, labour laws, the law of torts, making
and enforcing the arbitral awards;
d. The arbitrator should be capable of suggesting, recommending,
or writing a reasoned and enforceable arbitral award in any
dispute which comes before him for adjudication.
Who can be an Arbitrator?
ate/ CA/ CS/Cost Ac- countant (10

Legal
years)
Officer/ Engineer (10Person
years) in Scien- tific/ Technical Field (10 years)
Indian Legal Services Officer

Officer having Senior Level Experience of Administration
Chapter 12
HINDUSTAN CONSTRUCTION COMPANY LTD. AND ANOTHER V. UNION

OF INDIA AND OTHERS 2019 SCC ONLINE SC 1520
Supreme Court of India; 3-judge bench, R. F. Nariman, Surya Kant and
V. Ramasubramanian JJ; decided on 27 November 2019
The 2019 Amendments, introducing Section 87 into the Arbitration and

Con- ciliation Act and deleting Section 26 of the 2015 Amendment Act,
violate Arti- cle 14 of the Constitution
(A) BACKGROUND— THE AMENDMENTS IN 2015 AND 2019

The ACA was amended in 2015 with effect from 23 October 2015.
Section 26 of the Amendment Act, 2015, indicated whether the
amendments were prospective or retrospective, but Section 26 received
more than one interpretation in the High Courts across the country. The
government- appointed Justice B.N. Srikrishna Committee gave a report
on 30 July 2017 referring to the uncertain position. Eventually, on 15
March 2018, the Su- preme Court in BCCI v. Kochi Cricket Pvt. Ltd.
(2018) 6 SCC 28717 declared the law concluding that the 2015
Amendments were prospective and will apply (a) only to those arbitral
proceedings which commenced on or after 23 October 2015, and (ii) to
all court proceedings commenced on or after 23 October 2015
(irrespective of when the underlying arbitral proceedings commenced).
The ACA was amended again in 2019. Two amendments are relevant to
this context: –
(i) Section 26 of Amendment Act, 2015 was omitted with effect from
23 October 2015 itself.
(ii) A new provision, Section 87, was introduced in the ACA which pro-
vided that the 2015 amendments will apply: (a) only to those arbitral
proceedings which commenced on or after 23 October 2015; (b)
and
17 R.F. Nariman and Navin Sinha JJ
2019 Amendments
only to those court proceedings where the underlying arbitration

commenced after 23 October 2015.
(B) WHY EXACTLY WERE THE PETITIONERS AGGRIEVED WITH THE
2019 AMENDMENTS?
Under the pre-amended law, as declared by the Supreme Court in several
judgments while interpreting Section 36 of the ACA (which relates to en-
forcement), applying to set aside an award amounted to an automatic stay
on enforcement of that award. The 2015 amendments did away with the
automatic stay regime by amending Section 36 and providing that filing a
set-aside application does not by itself amount to stay of enforcement un-
less the Court by an order stays the operation of the award.
Another ancillary provision was inserted—while considering the
application for grant of stay, the court “shall…have due regard to the
provisions for grant of stay of a money decree” set out under the Code of
Civil Procedure, 1908 (“CPC”). The CPC provisions contemplate that the
applicant who seeks the stay furnishes security for the due performance
of such decree as may ultimately be binding upon him.
The petitioner in the lead petition was a construction company. The main
respondents were government bodies/companies. The government bod-
ies/companies owe huge sums of money to the petitioner(s) under various
awards. Their main grievance was that in the ‘automatic-stay’ regime
they suffered a “double-whammy,” that is, due to automatic-stay, award-
holders like them may become insolvent by defaulting on payment to
their suppliers when such payments would be forthcoming from arbitral
awards in cases where there is no stay, or even in cases where conditional
stays are granted. 18 Additionally, the award-holder may not bear the
fruits of undergoing a long litigation as a result of the automatic stay.
18 How would such petitioners/award-holders benefit monetarily (unless permitted to with-

draw the money deposited as pre-condition to stay of enforcement) is not specifically ar-
ticulated.
190
Chapter 12
(C) THE COURT’S DECISION19
1. The Law: Does Section 36 Contemplate Automatic Stay?

Though the challenge was related to the 2019 amendments, the Court
first considered Section 3620 of the ACA and those judgments which had
ruled that the section impliedly and automatically prohibited enforcement
if a set- aside application is filed.
The Court held that there is no such implied prohibition in Section 36
ACA. It added that the previous Supreme Court judgments on this point
wrongly read the provision and ignored Sections 9, 35, and the second
part of Section 36 ACA.
The following previous judgments were held per incuriam:-National
Aluminum Company Ltd. (NALCO) v. Pressteel & Fabrications (P) Ltd.,
2004 1 SCC 540; National Buildings Construction Corporation Ltd. v.
Lloyds Insulation India Ltd. (2005) 2 SCC 367; Fiza Developers and
Inter-Trade Pvt. Ltd. v. AMCI (India) Pvt. Ltd. (2009) 17 SCC 796].
The Court’s reasoning was as follows: –
(i) The UNCITRAL Model Law is important in understanding the
provisions of the ACA since the ACA is explicitly based upon it
[also citing to Chloro Controls (I) Pvt. Ltd. v. Seven (sic Severn)
Trent Water Purification Inc. (2013) 1 SCC 641].
19 The court also considered (i) the constitutionality of the Insolvency and Bankruptcy Code,
and (ii) the validity of NITI Aayog’s Office Memorandum No. 14070/14/2016-PPPAU of
05 September 2016. Both challenges were rejected.
20 36. Enforcement.—Where the time for making an application to set aside the arbitral
award under section 34 has expired, or such application having been made, it has been re-
fused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in
the same manner as if it were a decree of the Court.” The courts earlier read the provision
to mean that pre-conditions for enforcement (unless the time to make a set-aside applica-
tion expires, or unless it is refused) indicated there was an implied prohibition on en-
forcement till the Section 34 application was pending. Hence, an automatic stay on en-
forcement on mere filing of that application.
191
2019 Amendments
(ii) The Model Law provides for “two bites at the cherry” doctrine
(referring to Articles 34 and 35 of the UNCITRAL Model Law)
[The award-debtor can challenge the award in a set-aside
proceeding, and also resist enforcement on permitted grounds].
(iii) Section 36 ACA does not follow that doctrine. It is only to make
clear that when an award made in India becomes final and
binding– either because the time for making a set-aside
application has expired, or the application was filed but
rejected–it shall straightaway be enforced in accordance with the
provisions of CPC. This becomes clear when Sections 35 and
36 are read together.21
(iv) To state that an award when challenged under Section 34
becomes inexecutable because of the language of Section 36, and
to infer something negative from that section, is plainly incorrect
[disagree- ing with NALCO, National Buildings, and Fiza cases].
(v) Also, this construction omits to consider the rest of Section 36,
which deals with applications under Section 34 that have been
dismissed, which leads to an award being final and binding and
thus enforceable as a decree.
(vi) Such construction also does not consider the opening words of
Section 9 of the ACA, which specifically enables a party to apply
to a Court for reliefs “…after the making of the arbitration award
but before it is enforced in accordance with Section 36”. NALCO
case where the Court ruled that once a Section 34-application is
filed the Court has no discretion to pass any interlocutory order,
flies in the face of these opening words.
(vii) Thus, the reasoning of the judgments in NALCO and Fiza
Develop- ers is per incuriam in not noticing Sections 9, 35 and
the second part
21 35.Finality of arbitral awards. – Subject to this Part an arbitral award shall be final and
binding on the parties and persons claiming under them respectively.
Chapter 12
of Section 36 ACA. NALCO has been followed in National

Build- ings, but in following a per incuriam judgment, it also
does not state the law correctly.
(viii) Given the fact that the judgments in NALCO, National
Buildings, and Fiza Developers have laid down the law
incorrectly, it is also clear that the amended Section 36 is
clarificatory in nature, and merely restates the position that the
unamended Section 36 does not stand in the way of the law as to
grant of stay of a money decree under CPC.
2. Removal of the Basis of the BCCI Judgment by the 2019
Amendment Act of 2019
One of the challenges to Section 87 was that it was enacted without even
a mention of the BCCI judgment. Further that, the basis of a judgment of
the Supreme Court can only be removed if there is a pointed reference to
that judgment, which was not the case here. Rejecting this argument, the
Court held:
(i) The 2019 Amendment Act removes the basis of BCCI by
omitting from the very start Section 26 of the 2015 Amendment
Act.
(ii) Since this is the provision that has been construed in the BCCI
judgment, there can be no doubt that one fundamental prop of
BCCI has been removed by retrospectively omitting Section 26.
3. Constitutional Challenge to the 2019 Amendment Act
The Court then examined the “constitutional validity” of the introduction
of Section 87 into the ACA and deletion of Section 26 (of the 2015
Amendment Act) against Articles 14, 19(1)(g), 21, and Article 300-A of
the Constitution of India.
2019 Amendments
It held that the introduction of Section 87 and the deletion of Section 26

violated Article 14 of the Constitution of India 22 , and it was, therefore,
un- necessary to examine the challenge based on Articles 19(1)(g), 21
and 300-A of the Constitution of India.
In conclusion, it held that the BCCI judgment, and thus the 2015 amend-
ments too, will continue to apply to all court proceedings initiated after
23 October 2015.
Its reasons were these: –
Firstly, bringing the 2019 amendments based on the Srikrishna
Committee Report, but not referring to the BCCI judgment, latter in time,
is manifestly arbitrary, unreasonable and against public interest:
(i) The Srikrishna Committee Report (which forms the basis of the
2019 amendments) is of 30 July 2017, which is long before this
Court’s judgment in BCCI. Whatever uncertainty there may have
been because of the interpretation by different High Courts
disap- peared after the BCCI judgment.
(ii) To thereafter delete Section 26 (of the 2015 Amendment Act)
and introduce Section 87 in its place would be wholly without
justifica- tion and contrary to the object sought to be achieved by
the 2015 Amendment Act, which was enacted pursuant to a
detailed Law Commission Report which found various
infirmities in the working of the original 1996 statute. One of the
objects of the ACA and the 2015 Amendment Act was to ensure
speedy proceedings and minimal interference of courts. Section
87 however, would result in a completely opposite reaction as it
would increase court interference and delays in the disposal of
arbitration proceedings.
22 Equality before law: “The state shall not deny to any person equality before the law.
Chapter 12
(iii) Also, it is not understood as to how “uncertainty and prejudice

would be caused, as they may have to be heard again”, resulting
in an ‘inconsistent position’ 23 (the reference in quotes is to Law
Commission’s observations).
(iv) To refer to the Srikrishna Committee Report without at all refer-
ring to the BCCI judgment even after it pointed out the pitfalls of
following such provision, would render Section 87 and the
deletion of Section 26 of the 2015 Amendment Act manifestly
arbitrary, having been enacted unreasonably, without adequate
determining principle, and contrary to the public interest sought
to be sub- served by the ACA and the 2015 amendments.
(v) A key finding of the BCCI judgment is that the introduction of
Sec- tion 87 would result in a delay of disposal of arbitration
proceedings, and an increase in the interference of courts in
arbitration matters, which defeats the very object of the ACA,
which was strengthened by the 2015 Amendment Act.
Secondly, Section 87 turns the clock backward, places the well-
considered 2015 amendments on a backburner, and therefore is contrary
to the object of ACA and 2015 amendments, and arbitrary too: –
(i) Section 87 places the amendments made in 2015, particularly
Sec- tion 36, on a backburner. It leads to an anomaly. For this
reason, too, Section 87 must be struck down as manifestly
arbitrary under Article 14.
23 This is what the Srikrishna Committee Report had said: “The committee feels that permit-
ting the 2015 Amendment Act to apply to pending court proceedings related to arbitrations
commenced prior to 23 October 2015 would result in uncertainty and prejudice to parties,
as they may have to be heard again. It may also not be advisable to make the 2015
Amendment Act applicable to fresh court proceedings in relation to such arbitrations, as it
may result in an inconsistent position. Therefore, it is felt that it may be desirable to limit
the applicability of the 2015 Amendment Act to arbitrations commenced on or after 23
October 2015 and related court proceedings.”
2019 Amendments
(ii) Order XLI Rule 5 of the CPC applies in a civil court in an

ordinary full-blown appeal.24 Those appeals are a re-hearing of
the original action. But it would not apply to review of arbitral
awards under Section 34 in cases of the automatic stay, which is
a summary proceeding where a review on merits is not
permissible.25
(iii) When the mischief of the misconstruction of Section 36 was cor-
rected after more than 19 years by legislative intervention in
2015, to now work in the reverse direction and bring back the
mischief itself results in manifest arbitrariness.
(iv) Retrospective resurrection of the automatic-stay regime not only
turns the clock backward contrary to the object of the ACA but
also results in payments already made under the amended
Section 36 to award-holders in a situation of no-stay or
conditional-stay now being reversed.
Thirdly, the Srikrishna Committee Report did not refer to the provisions of
the Insolvency Code: –
(i) The award-holder may become insolvent by defaulting on its
payment to its suppliers when such payments would be
available from arbitral awards if there is no stay, or even in cases
where conditional stays are granted.
24 Under Order XLI, among others, an appeal shall not operate as a stay of proceedings under
a decree or order appealed from except so far as the Appellate Court may order, nor shall
execution of a decree be stayed by reason only of an appeal having been preferred from
the decree; but the Appellate Court may for sufficient cause order stay of execution of
such decree. Also, conditions of grant of stay are strict—the court must be satisfied that
substantial loss may result to the party applying for stay of execution unless the order is
made; the application for stay has to be made without unreasonable delay; and security has
to be given by the applicant for the due performance of decree or order as may ultimately
be binding upon him.
25 For the summary proceeding point, citing to Canara Nidhi Ltd. v. M. Shashikala 2019
SCC OnLine SC 1244; for the review on merits point, citing to Ssangyong Engineering &
Construction Co. Ltd. v. NHAI 2019 SCC OnLine SC 677.
Chapter 12
(ii) It would take several years of litigation for the award-holder to

real- ize its fruits, but as a result of the automatic-stay, it would
be faced with immediate payment to its operational creditors.
Non-payment would expose the award-holders to the rigors of
the Insolvency Code.

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17

APPOINTMENT, CHALLENGE, AND

Many cases in 2019 on the appointment of arbitrators involve issues of

The UNCITRAL Model Law was adopted in 1985. Independence and

3 Article 12—Grounds for challenge:

12. Grounds for challenge. —

(B) APPLICATION OF INDEPENDENCE AND IMPARTIALITY IN INDIA

Rather than examining the prodigious volume of case laws (impossible

1. An employee of a Party as Arbitrator

5A body constituted by the Government of India to recommend legislative reforms. See

local or other authorities which are considered State instrumentalities.

This was a comment on the court’s interpretation of independence and

Why was an employee of a party considered independent and impartial?

He, however, drew a distinction “where the person named as the

the new Act [referring to the ACA of 1996, pre-2015 Amendments, as

The amendments came on 23 October 2015 via an Ordinance followed

disqualification or de jure ineligibility. But the proviso to that section

agreement is illusory; for while in form it provides for arbitration, in sub-

Many cases of 2019 involve a discussion of Voestalpine Schienen GmbH

11 Referred in the judgment as a decision of the House of Lords.

2. Enforcing the Agreement (Pre-2015 Statute)

The standard General Conditions of Contract, which applied to each

In these cases, the court wanted evidence of a lack of independence and

CORE has been distinguished, and Perkins applied in Proddatur Cable

GOVERNMENT OF HARYANA PWD HARYANA (B AND R BRANCH) V.

Former employment (around ten years before) with a party to an arbitration

The contract between the parties provided a resolution of disputes by a

1. Procedure for Substitution of Arbitrator

b. No prohibition under the ACA; interpretation of Item 1 of Fifth/Seventh

RAJASTHAN SMALL INDUSTRIES CORPORATION LIMITED V. GANESH

(A) THE HIGH COURT TERMINATED THE MANDATE AND APPOINTED

The contract between the parties provided for arbitration by the

“having participated in the entire arbitration proceedings and acquiesced

Infra Engineering Limited, (2017) 15 SCC 32 and Board of Control for

BHARAT BROADBAND NETWORK LTD. V. UNITED TELECOMS LTD.

with the parties or the counsel or the subject-matter of the dispute

(ii) However, where such a person becomes “ineligible,” there is no

Lastly, the court discussed the “applicability of the proviso to Section

UNION OF INDIA V. PARMAR CONSTRUCTION COMPANY 2019 SCC

(A) APPOINTMENT OF INDEPENDENT ARBITRATOR BY THE HIGH

(B) IN THE SUPREME COURT

UNION OF INDIA V. PRADEEP VINOD CONSTRUCTION COMPA-

Supreme Court of India; 3-judge bench, R. Banumathi, A.S. Bopanna

This matter concerned a contract awarded by Railways in which a

PERKINS EASTMAN ARCHITECTS DPC AND ANOTHER V. HSCC (IN-

power by the Court for an appointment of an arbitrator”.

bias, it will always be present irrespective of whether the matter

(ii) Citing to paragraphs 53 to 60 (under the heading “Neutrality of Arbi-

The court held this relying on Walter Bau AG v. Municipal Corpn. of

LITE BITE FOODS PVT. LTD. V. AIRPORTS AUTHORITY OF INDIA,

(ii) Where the arbitration clause provides for nomination by each

ITD CEMENTATION INDIA LTD. V. KONKAN RAILWAY CORPORA-

Bombay High Court; single-judge bench, G. S. Kulkarni J; decided on

CENTRAL ORGANISATION FOR RAILWAY ELECTRIFICATION V.

When the agreement specifically provides for the appointment of an

tor. The High Court appointed a retired judge of that court. 33

The court first noted the parties’ arguments.

The court held: –

(iv) Because of the modified Clauses 64(3)(a)(ii) and 64(3)(b) of GCC, it

Then it noted the following dates: –

EXISTENCE, FORM, VALIDITY AND LEGALITY

(A) BEFORE 2015 AMENDMENTS, COURTS EXAMINED VALIDITY, EX-

When enacted in 1996, Section 11 ACA 2 vested the power of