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Arbitration Supreme Court Digest 2021 :

Major Judgments
Shruti Kakkar 29 Dec 2021 7:21 PM

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1/12/22, 5:24 PM Arbitration Supreme Court Digest 2021 : Major Judgments

1. High Court's Power Under Article 226/227 To Interfere With Arbitration Process

Needs To Be Exercised In Exceptional Rarity

The Supreme Court in Bhaven Construction v. Executive Engineer Sardar Sarovar

Narmada Nigam Ltd. has observed that the power of the High Courts under Article

226/227 of the Constitution of India to interfere with an arbitration process needs to

be exercised in exceptional rarity, wherein one party is left remediless under the

statute or a clear 'bad faith' shown by one of the parties.

Also Read - All Supreme Court 2021 Digests & Round-Up Reports In One Place

"If the Courts are allowed to interfere with the arbitral process beyond the ambit of the
enactment, then the efficiency of the process will be diminished," the bench

comprising Justices NV Ramana, Surya Kant and Hrishikesh Roy observed while

setting aside a judgment of Gujarat High Court allowing a writ petition challenging the

jurisdiction of the sole arbitrator.

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2. Whether Non-Payment Of Stamp Duty On Commercial Contract Will Invalidate

Arbitration Agreement? Supreme Court Refers Issue To Constitution Bench

Also Read - 'Blame Game Between Centre & Punjab, Questions Can't Be Left To

One-Sided Enquiries': Supreme Court On PM Security Lapse

A three judge bench of the Supreme Court in N.N. Global Mercantile Pvt. Ltd Vs. Indo

Unique Flame Ltd. has observed that non-payment of stamp duty on the commercial

contract will not invalidate the arbitration agreement.

Disagreeing with two earlier judgments in this regard, the bench comprising Justices

DY Chandrachud, Indu Malhotra and Indira Banerjee referred the following question to

the Constitution Bench,

Also Read - Sub-Lessee Can't Acquire Status Of Tenure Holder Under UP Land

Ceiling Act If Sub-Lease Was Contrary To Conditions: Supreme Court

"Whether the statutory bar contained in Section 35 of the Indian Stamp Act, 1899
applicable to instruments chargeable to Stamp Duty under Section 3 read with the

Schedule to the Act, would also render the arbitration agreement contained in such an

instrument, which is not chargeable to payment of stamp duty, as being non-existent,

unenforceable, or invalid, pending payment of stamp duty on the substantive contract

/ instrument ? "

Also Read - Return Money To Homebuyers By Jan 17 Or Face Jail : Supreme Court

Warns Supertech Directors

3. Is Appointment Of Arbitrator By Ineligible Person Valid? Supreme Court Refers

Issue To Larger Bench

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In Union of India v. M/S Tantia Constructions Ltd, a bench comprising Justices RF

Nariman, Navin Sinha and KM Joseph doubted the correctness of the decision in

Central Organisation for Railway Electrification v. M/s ECI-SPIC-SMO-MCML (JV) A

Joint Venture Company and referred to larger bench the issue whether the

appointment of an arbitrator by a person, who is disqualified to be an arbitrator as per

Section 12(5) of the Arbitration Act, is valid.

In the Central Organization of Railway Electrification, a division bench had held that

such appointments by an authority who is disqualified from being an arbitrator can be

valid depending on the facts. On the other hand, an earlier decision delivered by a 2-

judge bench headed by Justice Nariman in the case Bharat Broadband Network Ltd v.

United Telecoms Ltd (April 2019) had held that the appointment of arbitrator by a

person who himself is ineligible to be an arbitrator as per Section 12(5) of the

Arbitration and Conciliation Act 1996 is void ab initio.

4. Section 12(5) Of Arbitration & Conciliation Act Which Deals With Ineligibility Of

Appointment As Arbitrator Is A Mandatory & Non-Derogable Provision

In Haryana Space Application Centre v. Pan India Consultants Pvt. Ltd, the bench of

Justices L. Nageswara Rao, Indu Malhotra and Ajay Rastogi observed that the

Section 12(5) of the Arbitration and Conciliation Act read with the Seventh Schedule,

which deals with ineligibility of a person to be appointed as an Arbitrator, is a

mandatory and non-derogable provision of the Act.

5. Refusal To Condone Delay For Appeal Under Section 34 Of Arbitration Act

Appealable Under Section 37

In Chintels India Ltd v. Bhayana Builders Pvt Ltd, bench of Justices RF Nariman, Navin

Sinha and KM Joseph held that an order refusing to condone the delay in filing an

appeal under Section 34 of the Arbitration and Conciliation Act 1996 is appealable

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under Section 37 of the Act. It observed that the expression "setting aside or refusing

to set aside an arbitral award" does not stand by itself. The expression has to be read

with the expression that follows-"under section 34".

6. Presence Of Arbitration Clause In Contract Between State Instrumentality &

Private Party Does Not Oust Writ Jurisdiction Under Article 226

In UNITECH Limited v. Telangana State Industrial Infrastructure Corporation, bench of

Justices DY Chandrachud and MR Shah observed that presence of an arbitration

clause within a contract between a state instrumentality and a private party is not an

absolute bar to availing remedies under Article 226 of the Constitution. It held that the

State and its instrumentalities are not exempt from the duty to act fairly merely

because in their business dealings they have entered into the realm of contract.

7. NHAI v. Progressive Construction: Supreme Court Appoints Justice (Rtd.) GS

Singhvi As Sole Arbitrator

In NHAI v. Progressive Construction Ltd, division bench of Justices Indu Malhotra and

Ajay Rastogi while allowing an appeal filed by National Highways Authority of India

(NHAI), directed the parties to the arbitral proceedings to approach the Indian Council

of Arbitration within 2 weeks for the adjudication of the disputes in accordance with

ICA Rules of Domestic Commercial Arbitration & Conciliation, 2016.

8. Proceedings Under Section 34 Of Arbitration Act Also Covered By Moratorium

Under Section 14 IBC

The Supreme Court in P Mohanraj and others v M/s Shah Brothers Ispat Ltd. observed

that an application under Section 34 of the Arbitration and Conciliation Act to set

aside an award is covered by moratorium under Section 14 of the Insolvency and

Bankruptcy Code.

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"Section 34 proceeding is a proceeding against the corporate debtor in a court of law

pertaining to a challenge to an arbitral award and would be covered just as an

appellate proceeding in a decree from a suit would be covered," the bench of Justices
RF Nariman, Navin Sinha and KM Joseph observed.

9. Limitation Period For Filing 'Section 34' Petition Commences From Date Of Receipt

Of Signed Copy Of Arbitral Award By Parties

In Dakshin Haryana Bijli Vitran Nigam Ltd. v. M/S Navigant Technologies Pvt. Ltd, the

Supreme Court bench Justices Indu Malhotra and Ajay Rastogi observed that the

period of limitation for filing the Petition under Section 34 of the Arbitration and

Conciliation Act would commence from the date on which the signed copy of the

award was made available to the parties.

10. Sole Proprietorship Will Fall Under International Commercial Arbitration If

Proprietor Is Foreign Resident

In Amway India v. Ravindranath Rao & Anr, bench of Justices RF Nariman and BR

Gavai held that a sole proprietorship will fall under international commercial

arbitration if the proprietor is a habitual resident of a foreign country, notwithstanding

the fact that the proprietary concern is carrying out business in India. The Bench set

aside an order of the Delhi High Court appointing an arbitrator in the case Amway

India v. Ravindranath Rao, holding that the High Court had no jurisdiction as the

dispute was an international commercial arbitration within the meaning of Section

2(1)(f) of the Arbitration and Conciliation Act.

11. Supreme Court Suggests Amendments To Sections 11(7), 37 To Bring Section 8

& 11 At Par On Appealability

In Pravin Electricals Pvt. Ltd. v. Galaxy Infra and Engineering Pvt. Ltd., bench of

Justices RF Nariman, BR Gavai and Hrishikesh Roy observed that the amendments to

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Section 11(7) and 37 of the Arbitration and Conciliation Act, 1996 might be necessary

so that the orders passed under Section 8 and 11 are brought on par as far as

appealability is concerned.

12. Limitation Period For Filing 'Section 11' Application Seeking Appointment Of

Arbitrator Governed By Article 137 Limitation Act

In Bharat Sanchar Nigam Ltd. v. Nortel Networks India Pvt. Ltd., Supreme Court

observed that the period of limitation for filing an application under Section 11 of the

Arbitration and Conciliation Act would be governed by Article 137 of the First

Schedule of the Limitation Act, and will begin to run from the date when there is failure

to appoint the arbitrator, the Supreme Court held.

In rare and exceptional cases, where the claims are ex facie time barred, and it is

manifest that there is no subsisting dispute, the Court may refuse to make the

reference, the bench comprising Justices Indu Malhotra and Ajay Rastogi held.

The court also suggested amendment of Section 11 of the Act to provide a period of

limitation for filing an application under this provision, which is in consonance with the

object of expeditious disposal of arbitration proceedings.

13. Supreme Court Overrules 'NV International' Verdict Which Held Delay Beyond 120

Days For Arbitration Appeal Under Section 37 Can't Be Condoned

In Government of Maharashtra v. Borse Brothers Engineers and Contractors Pvt Ltd, a

two-judge bench comprising Justices RF Nariman and S Ravindra Bhat overruled its

2019 verdict in the case M/s NV International v. State of Assam which had strictly

held that a delay of more than 120 days in filing of appeals under Section 37 of the

Arbitration and Conciliation Act 1996 cannot be condoned.

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The Top Court has now held that delay beyond 90, 60 or 30 days for filing appeals

under Section 37, depending on the forum, can be condoned. But the Court added a

rider that such condonation of delay should be an exception and not the norm, having

regard to the objective of the Arbitration Act for expeditious settlement of claims.

14. Arbitration Reference Not Maintainable If Filed After Admission Of Insolvency

Resolution Petition U/s 7 IBC

In Indus Biotech Private Limited v. Kotak India Venture (Offshore) Fund, the Supreme

Court bench headed by then CJI SA Bobde observed that in any proceeding which is

pending before the Adjudicating Authority under Section 7 of Insolvency and

Bankruptcy Code, if such petition is admitted upon the Adjudicating Authority

recording the satisfaction with regard to the default and the debt being due from the

corporate debtor, any application seeking reference to arbitration under Section 8 of

the Arbitration and Conciliation Act made thereafter will not be maintainable.

15. High Court Under Article 226 Should Not Entertain A Dispute Which Is Arbitrable

Unless There Is An Issue Of Public Interest

In Rapid MetroRail Gurgaon Limited v. Haryana Mass Rapid Transport Corporation, a

bench comprising Justices DY Chandrachud, MR Shah and Sanjiv Khanna observed

that ordinarily a High Court in its jurisdiction under Article 226 of the Constitution has

to decline to entertain a dispute which is arbitrable, unless there is a fundamental

issue of public interest. In this case the High Court had entertained the writ petition

even though there was an arbitration clause between the parties. In appeal, the Apex

Court noted that the High Court was concerned over a fundamental issue of public

interest, which was the hardship that would be caused to commuters who use the

rapid metro as a vehicle for mass transport in Gurgaon.

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16. Question Of Novation Of Contract Cannot Be Considered In A Petition Under

Section 11 Arbitration Act

In Sanjiv Prakash v. Seema Kukreja, bench comprising Justices RF Nariman, BR Gavai

and Hrishikesh Roy observed that the question of novation of contract containing an

arbitration clause cannot be considered by the Court in a petition filed under Section

11 of the Arbitration and Conciliation Act. The court said that a Section 11 court would

refer the matter when contentions relating to non-arbitrability are plainly arguable, or

when facts are contested. The court cannot, at this stage, enter into a mini trial or

elaborate review of the facts and law which would usurp the jurisdiction of the arbitral

tribunal.

17. High Court Under Article 226 And 227 Should Be Extremely Circumspect In

Interfering With Orders Passed Under Arbitration Act

In Navayuga Engineering Company v. Bangalore Metro Rail Corporation Limited, bench

comprising Justices RF Nariman and BR Gavai reiterated that a High Court while

exercising jurisdiction under Article 226 and 227 should be extremely circumspect in

interfering with orders passed under the Arbitration and Conciliation Act. The bench

held that such interference can be made only in cases of exceptional rarity or cases

which are stated to be patently lacking in inherent jurisdiction.

18. Indian Parties Can Choose A Foreign Seat For Arbitration

In PASL Wind Solutions Private Limited v. GE Power Conversion India Pvt. Ltd, three-

judge bench comprising Justices Rohinton Fali Nariman, BR Gavai and Hrishikesh

Roy held that parties to a contract who are Indian nationals or Companies

incorporated in India can choose a forum for arbitration outside India.

"Nothing stands in the way of party autonomy in designating a seat of arbitration

outside India even when both parties happen to be Indian nationals," it observed.

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"Freedom of contract needs to be balanced with clear and undeniable harm to the

public, even if the facts of a particular case do not fall within the crystallised principles

enumerated in well-established 'heads' of public policy. The question that then arises
is whether there is anything in the public policy of India, as so understood, which

interdicts the party autonomy of two Indian persons referring their disputes to

arbitration at a neutral forum outside India," the Court said.

19. Existence Of Arbitration Clause Does Not Debar Court From Entertaining A Writ

Petition In Contractual Matter

In Uttar Pradesh Power Transmission Corporation Ltd. v. CG Power And Industrial

Solutions Limited, the Supreme Court bench of Justices Uday Umesh Lalit and Indira

Banerjee observed that the existence of an arbitration clause does not debar the court

from entertaining a writ petition. It reiterated that relief under Article 226 of the

Constitution of India may be granted in a case arising out of contract.

"It is well settled that availability of an alternative remedy does not prohibit the High

Court from entertaining a writ petition in an appropriate case. The High Court may

entertain a writ petition, notwithstanding the availability of an alternative remedy,

particularly (1) where the writ petition seeks enforcement of a fundamental right; (ii)

where there is failure of principles of natural justice or (iii) where the impugned orders
or proceedings are wholly without jurisdiction or (iv) the vires of an Act is under

challenge," the Court held.

20. Limitation Act Provisions Will Apply To Arbitration Proceedings Initiated Under

Section 18(3) MSMED Act

In M/s. Silpi Industries v. Kerala State Road Transport Corporation, bench comprising

Justices Ashok Bhushan and R. Subhash Reddy held that the provisions of the

Limitation Act will apply to arbitration proceedings initiated under Section 18(3) of

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Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act). It also

observed that counterclaim is maintainable before the statutory authorities under

MSMED Act.

21. Section 34 Arbitration Act Gives No Power To Modify Arbitral Award; Appellate

Court Can Only Set Aside Or Remand

In Project Director, National Highways vs. M. Hakeem the Supreme Court held that a

court, under Section 34 of the Arbitration and Conciliation Act, cannot modify an

award.

"If one were to include the power to modify an award in Section 34, one would be

crossing the Lakshman Rekha," Justices RF Nariman and BR Gavai observed.

22. Arbitration Award Which Ignores Vital Evidence Or Rewrites The Contract Is

Liable To Be Set Aside

In PSA Sical Terminals Pvt. Ltd. v. Board Of Trustees Of V.O. Chidambranar Port Trust

Tuticorin, the Supreme Court observed that an arbitration award which ignores vital

evidence in arriving at its decision or rewrites a contract is liable to be set aside under

Section 34 of the Arbitration and Conciliation Act on the ground of patent illegality.

The Bench comprising Justices RF Nariman and BR Gavai observed that a finding

based on no evidence at all or an award which ignores vital evidence in arriving at its

decision would be perverse. Re­writing a contract for the parties would be breach of

fundamental principles of justice, the court remarked.

23. Emergency Arbitration Award Enforceable In Indian Law: Supreme Court Rules In

Favour Of Amazon In Case Against Future Retail

In Amazon.com NV Investment Holdings LLC v. Future Retail Limited, the Supreme

Court had ruled in favour of e-commerce giant Amazon in its dispute with Future

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Retail Limited(FRL) over the latter's merger deal with Reliance group. The top court

held that that Emergency Award passed by Singapore arbitrator stalling FRL-Reliance

deal is enforceable in Indian law. "It is wholly incorrect to say that Section 17(1) of the

Act would exclude an Emergency Arbitrator's orders", the Court said in the judgment.

A Bench comprising Justices RF Nariman and BR Gavai opined, "We declare that full

party autonomy is given by the Arbitration Act to have a dispute decided in

accordance with institutional rules which can include Emergency Arbitrators delivering

interim orders, described as "awards". Such orders are an important step in aid of
decongesting the civil courts and affording expeditious interim relief to the parties.

Such orders are referable to and are made under Section 17(1) of the Arbitration Act."

24. 'Perversity' Or 'Patent Illegality' Not Grounds To Refuse Enforcement Of Foreign

Arbitration Award

In Gemini Bay Transcription Pvt. Ltd. v. Integrated Sales Service Ltd, the Supreme

Court has observed that perversity of an award is not a ground to refuse enforcement

of a foreign award under Section 48 of the Arbitration and Conciliation Act, after the

2015 amendment.

The Court held that the ground of "patent illegality" is only available to set aside

domestic arbitration awards made under Part 1 of the Arbitration and Conciliation Act

and will not apply to international commercial awards.

"The ground of "patent illegality appearing on the face of the award" is an independent

ground of challenge which applies only to awards made under Part I which do not

involve international commercial arbitrations," the bench comprising Justices RF

Nariman and BR Gavai observed.

25. Contravention Of A Statute Not Linked To Public Policy Or Public Interest Cannot

Be A Ground To Set Aside An Arbitral Award

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The Supreme Court in Delhi Airport Metro Express Pvt. Ltd. vs. Delhi Metro Rail

Corporation Ltd observed that contravention of a statute which is not linked to public

policy or public interest cannot be a ground to set aside an arbitration award.

"There is a disturbing tendency of courts setting aside arbitral awards, after dissecting

and reassessing factual aspects of the cases to come to a conclusion that the award

needs intervention and thereafter, dubbing the award to be vitiated by either perversity

or patent illegality, apart from the other grounds available for annulment of the award,"

the bench of Justices L. Nageswara Rao and S. Ravindra Bhat observed.

26. Bar U/s 9(3) Arbitration Act Not Applicable If Application Was Taken Up By Court

Before Constitution Of Arbitration Tribunal

In Arcelor Mittal Nippon Steel India Ltd v. Essar Bulk Terminal Ltd, the Supreme Court

has observed that the bar under Section 9(3) of the Arbitration and Conciliation Act

operates only when the application under Section 9(1) had not been entertained till the

constitution of the Arbitral Tribunal.

"Once an Arbitral Tribunal is constituted the Court cannot take up an application under

Section 9 for consideration, unless the remedy under Section 17 is inefficacious.

However, once an application is entertained in the sense it is taken up for

consideration, and the Court has applied its mind to the Court can certainly proceed to

adjudicate the application", the bench comprising Justices Indira Banerjee and JK

Maheshwari observed.

27. Chairman Of Company In Arbitration Ineligible To Be Arbitrator; Disqualification

Conditions Have To Be Read As A Whole

The Supreme Court in Jaipur Zila Dugdh Utpadak Sahkari Sangh Limited vs. M/s Ajay

Sales & Suppliers observed that non­-independence and non-impartiality of an

arbitrator would make him ineligible to conduct arbitration.

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The bench of Justices MR Shah and Aniruddha Bose observed that the ineligibility of

an arbitrator can be removed only by an 'express agreement'.

The issue to be considered was whether the Chairman who is an elected member of

the petitioner Sahkari Sangh can be said to be 'ineligible' under Sub­-section (5) of

Section 12 read with Seventh Schedule to the Act or not? The Sangh's contention was

that, in the Seventh Schedule to the Act 'Chairman' is not mentioned and only

Manager, Director or part of the Management can be said to be ineligible.

Rejecting the said contention, the bench observed that the Chairman of the Sangh can

certainly be held to be 'ineligible' to continue as an arbitrator. Referring to Voestalpine

Schienen GMBH vs. Delhi Metro Rail Corporation Limited, (2017) 4 SCC 665, the court

said, "Sub­-section (5) of Section 12 read with Seventh Schedule has been inserted

bearing in mind the 'impartiality and independence' of the arbitrators. It has been

inserted with the purpose of 'neutrality of arbitrators'. Independence and impartiality

of the arbitrators are the hallmarks of any arbitration proceedings as observed in the

case of Voestalpine Schienen (Supra). Rule against bias is one of the fundamental

principles of natural justice which apply to all judicial proceedings and quasi-judicial

proceedings and it is for this reason that despite the contractually agreed upon, the

persons mentioned in Sub­section (5) of Section 12 read with Seventh Schedule to the

Act would render himself ineligible to conduct."

28. Arbitration Reference Can Be Declined If Dispute In Question Does Not Correlate

To Arbitration Agreement

In DLF Home Developers Limited vs. Rajapura Homes Private Limited, the Supreme

Court observed that prayer for reference to Arbitration under Section 11 of the

Arbitration and Conciliation Act can be declined if the dispute in question does not

correlate to the arbitration agreement.

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The bench of Chief Justice of India NV Ramana and Justice Surya Kant observed that

it is not expected to act mechanically merely to deliver a purported dispute raised by

an applicant at the doors of the chosen Arbitrator.

29. Retirement Will Not Terminate Mandate Of Dept Officer Appointed As Sole

Arbitrator : Supreme Court Restores 1998 Award

In M/s Laxmi Continental Construction Co v. State of UP, while deciding an appeal

arising out of the Arbitration Act 1940, the Supreme Court has held that a department

officer, who was appointed as the arbitrator, can continue to preside over the

arbitration proceedings even after his retirement.

A bench comprising Justices MR Shah and AS Bopanna was considering the question

"whether once an officer of the department is appointed as an Arbitrator considering

the arbitration clause, whether his mandate to continue the arbitration proceedings

shall come to an end on his retirement?".

30. Arbitrator Cannot Grant Pendente Lite Interest If Contract Contains A Specific

Clause Expressly Barring Payment Of Interest

In Garg Builders v. Bharat Heavy Electricals Limited, the Supreme Court observed that

an arbitrator cannot grant pendente lite interest if the contract contains a specific

clause which expressly bars payment of interest. Such a contractual clause will not be

a violation of Section 28 of the Indian Contract Act, 1872, the bench of Justices S.

Abdul Nazeer and Krishna Murari observed.

The court said that the Arbitration and Conciliation Act, 1996, categorically restricts

the power of an arbitrator to award preference and pendente lite interest when the

parties themselves have agreed to the contrary.

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31. Pre-Deposit Of 75% Of Awarded Amount U/s 19 MSMED Act Mandatory While

Preferring Application To Set Aside Arbitration Award

In Gujarat State Disaster Management Authority v. Aska Equipments Limited, the

Supreme Court observed that the requirement under Section 19 of the Micro, Small

and Medium Enterprises Development Act of deposit of 75% of the awarded amount

as a pre deposit while preferring the application/appeal for setting aside the award, is

mandatory.

The bench comprising of Justices MR Shah and AS Bopanna observed, 'On a

plain/fair reading of Section 19 of the MSME Act, 2006, reproduced hereinabove, at

the time/before entertaining the application for setting aside the award made under

Section 34 of the Arbitration & Conciliation Act, the applicant/appellant has to deposit

75% of the amount in terms of the award as a pre-deposit. The requirement of a

deposit of 75% of the amount in terms of the award as a pre-deposit is mandatory.

However, at the same time, considering the hardship which may be projected before

the appellate court and if the appellate court is satisfied that there shall be undue

hardship caused to the appellant/applicant to deposit 75% of the awarded amount as

a pre deposit at a time, the court may allow the pre-deposit to be made in

installments."

32. Arbitrator Has Substantial Discretion In Awarding Interest U/Sec 31 (7) (a)

Arbitration Act

In Punjab State Civil Supplies Corporation Limited (Punsup) v. Ganpati Rice Mills, the

Supreme Court observed that an Arbitrator has substantial discretion in awarding

interest under Section 31(7)(c) of the Arbitration and Conciliation Act, 1996. In this

case, the Arbitrator had granted interest at the rate of 18% per annum from

01.01.2003 till the date of realization. Disposing the petition under Section 34 of the

Arbitration and Conciliation Act, 1996 (Arbitration Act), the rate of interest was
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reduced by the District Court to 12% per annum. In an Arbitration appeal, the High

Court further reduced the rate of interest to 9% per annum.

In appeal, the bench of Justices Sanjiv Khanna and Bela M. Trivedi noted "Per contra,

Section 31 (7) of the Arbitration Act, 1996 grants substantial discretion to the

arbitrator in awarding interest. No reason and grounds have been given to reduce the

rate of interest."

33. Party Not Barred From Raising New Grounds To Set Aside Award In An Sec 37

Appeal

In State of Chhattisgarh v. Sal Udyog Private Limited, the Supreme Court has observed

that a party is not barred from raising an additional ground for setting aside an

arbitration award in arbitration appeal under Section 37 of the Arbitration Conciliation

Act,1996, merely because the said ground was not raised in the petition under Section

34 to set aside the Arbitration award.

A Bench comprising CJI NV Ramana, Justices Surya Kant and Hima Kohli observed,

"We are afraid, the plea of waiver taken against the appellant-State on the ground that

it did not raise such an objection in the grounds spelt out in the Section 34 petition

and is, therefore, estopped from taking the same in the appeal preferred under Section

37 or before this Court, would also not be available to the respondent-Company

having regard to the language used in Section 34(2A) of the 1996 Act that empowers

the Court to set aside an award if it finds that the same is vitiated by patent illegality

appearing on the face of the same."

34. 2015 Amendment Won't Apply To Section 34 Applications Filed Prior To It

The Supreme Court in Ratnam Sudesh Iyer v Jackie Kakubhai Shroff has held that the

2015 amendment to Section 34 of the Arbitration and Conciliation Act 1996 will apply

only to Section 34 applications that have been made after the date of the amendment.

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"Section 34 as amended will apply only to Section 34 applications that have been

made to the Court on or after 23.10.2015, irrespective of the fact that the arbitration

proceedings may have commenced prior to that," bench of Justices SK Kaul and MM

Sundresh observed.

35. Jurisdiction Of High Court Hearing An Arbitration Appeal Is Distinct From That Of

First Appellate Court In A Civil Suit

In Punjab State Civil Supplies Corporation Ltd v. Ramesh Kumar and Company, the

Supreme Court observed that the jurisdiction in a first appeal arising out of a decree in

a civil suit is distinct from the jurisdiction of the High Court under Section 37 of the

Arbitration and Conciliation Act arising from the disposal of a petition challenging an

arbitral award.

"While considering a petition under Section 34 of the 1996 Act, it is well-settled that

the court does not act as an appellate forum. The grounds on which interference with
an arbitral award is contemplated are structured by the provisions of Section 34. The

District Judge had correctly come to the conclusion that there was no warrant for

interference with the arbitral award under Section 34. The High Court seems to have

proceeded as if it was exercising jurisdiction in a regular first appeal from a decree in

a civil suit. The jurisdiction in a first appeal arising out of a decree in a civil suit is
distinct from the jurisdiction of the High Court under Section 37 of the 1996 Act

arising from the disposal of a petition challenging an arbitral award under Section 34

of the 1996 Act," the Bench comprising Justices DY Chandrachud and AS Bopanna

observed.

36. Arbitrator Cannot Modify Award On An Application Under Section 33 Arbitration

Act

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In Gyan Prakash Arya vs Titan Industries Limited, Supreme Court observed that an

Arbitrator cannot modify an Arbitration award on an application filed under Section 33

of the Arbitration and Conciliation Act.

Only in a case of arithmetical and/or clerical error, the award can be modified and

such errors only can be corrected, the bench comprising Justices MR Shah and BV

Nagarathna said.

37. If Conciliation Not Successful, Arbitration Proceedings Must Be Resorted To

In Jharkhand Urja Vikas Nigam Limited v. The State of Rajasthan & Ors., the Supreme

Court bench of Justice Indira Banerjee and Justice Subhash Reddy, while dealing

with a matter pertaining to delayed payment of dues by Jharkhand electricity board to

a Conductors supplier held that Section18 of The Micro Small and Medium Enterprise

Development Act 2006 [MSMED Act] and noted that "Under S. 18(3), when conciliation

fails and stands terminated, the dispute between the parties can be resolved by

arbitration. The council is empowered either to take up arbitration on its own or to

refer the arbitration proceedings to any institution as specified in the said section."

TAGS ARBITRATION AND CONCILIATION ACT 

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