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SC limits the scope of interference of court under Sec 34 and Sec 37 of the Arbitration Act, 1996.

Case Title : National Highways Authority of India vs M/s Hindustan Construction Company Ltd.

 Case no :CIVIL APPEAL NO. 4702 OF 2023

 Order no : 7th May, 2024

 Quorum : Hon’ble Mr. Justice Abhay Shreeniwas Oka

 FACTS OF THE CASENATIONAL HIGHWAYS AUTHORITY OF INDIA THROUGH PROJECT DIRECTOR

The appellant- National Highways Authority Of India, Ltd awarded a contract to the respondent i.e, Allahabad bypass project. The project involves construction of a road from 158 to 198 kms and a bridge over the river.

There was a dispute between the parties which was referred to the Arbitration Tribunal. The three claims were Reimbursement of additional expenditure due to increase in royalty rates, Non-payment of executed work and reimbursement of additional costs due to increase in forest transit fees. The Arbitral Tribunal granted an award of reimbursement to respondent with interests and additional costs to respondent with interest and future interests. 

The Appellant filed a petition under sec 34 of Arbitration Act challenging the award. The Single Judge confirmed the majority award Later the appellant appealed under sec 37 of the act before the Division bench in Delhi. The appeal was dismissed

ISSUES

whether the claim for the construction of embankment forms part of the activity of clearing and grubbing and was not payable as embankment work. 

LEGAL PROVISIONS

  1. Section 34 of the Arbitration and Conciliation Act, 1996 : Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with subsection (2) and sub-section (3). (ii) the arbitral award is in conflict with the public policy of India. (iii) it is in conflict with the most basic notions of morality or justice.
  2. Section 37 of Arbitration and Conciliation Act, 1996 : provides for an appeal against orders passed under Sections 9, 34, 16 and 17 of the Act.

CONTENTION OF THE APPELLANT

The learned counsel for Appellant contended that the raised royalty rates for soil, sand, stones as notified should be adjusted as per sub clause 70.3. The appellant accepted this condition while submitting the bid and the division bench had misinterpreted the sub clause 70.8. The counsel also argued that the increased tax was not based on legislation.The counsel even stated that additional costs will not be separately paid if already factored into indexing inputs for price adjustments.

The counsel contended that it was not the sole liability of the appellant under clause 70.8 because the respondent incurred expenditure without clear evidence that it was required by the engineer.

The counsel for appellant finally stressed on the need for strict interpretation of contract by the Tribunal and the Court.

CONTENTION OF THE RESPONDENT

The counsel for the respondents pointed out that there is limited scope of Sec 34 to intervene the jurisdiction of the court and even narrower jurisdiction under sec 37.

The learned Counsel embarked that the majority of the view of the Tribunal was based on expert opinions, warranting non interference.

COURT’S ANALYSIS AND JUDGMENT

The issue relates to interpreting the terms of contract between the parties. Referring to legal precedents the SC limited the scope of interference in Sec 34 and Sec 37 of the Arbitrations Act. According to established legal precedents the courts should generally refrain from overturning the awards by the tribunal unless there is clear violation of public policy or illegal patents.

The Supreme Court here emphasized the authority of the Arbitral Tribunal as a principal party of autonomy and respecting its process.

The Division Bench’s decision aligned with the view of the Arbitral Tribunal, therefore it upheld the decision of the Tribunal indicating consistency in legal interpretation, the court found no fault in the tribunal’s award ultimately leading to dismissal of  the appeal. 

 “PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”

 JUDGMENT REVIEWED BY – Nagashree N M

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Delhi High Court’s Jurisdictional Ruling: Venue vs Seat of Arbitration and Time Extension for Arbitral Proceedings

Title:  Reliance Infrastructure Limited v. Madhyanchal Vidyut Vitran Nigam Limited

Decided on:  14th August, 2023

+  O.M.P.(MISC.)(COMM.) 161/2020 and IA No. 9377/2020

CORAM: HON’BLE MR. JUSTICE SACHIN DATTA

Introduction

The Delhi High Court recently rendered a significant decision regarding the distinction between the ‘venue’ and ‘seat’ of arbitration, as well as the extension of time for completing arbitral proceedings. The case involved a petition seeking an extension of time for issuing an arbitral award under Section 29A(4) and (5) of the Arbitration and Conciliation Act, 1996.

Facts

The petitioner, a participant in Rural Electrification works in Uttar Pradesh, initiated arbitration proceedings due to disputes arising from contracts. The General Conditions of Contract (GCC) mentioned that disputes would be resolved through arbitration, with Delhi having exclusive jurisdiction. Subsequently, the petitioner sought an extension for the Sole Arbitrator to issue the arbitral award.

Analysis

The central issue before the Court was the distinction between the ‘venue’ and ‘seat’ of arbitration and the significance of an exclusive jurisdiction clause. The Court underscored that when an arbitration clause designates a specific ‘venue,’ it essentially anchors the arbitral proceedings to that location, making it the ‘seat’ of arbitration. Thus, the Court exercising supervisory jurisdiction over the designated ‘venue’ becomes the supervisory authority for the arbitral process, even if a general exclusive jurisdiction clause exists for a different court. The Court examined various judgments and legal precedents to establish this principle.

The Court highlighted the fact that the LOA’s ‘exclusive jurisdiction’ clause was general and did not specifically pertain to arbitration, while the GCC Clause 48.1.2 designating Delhi as the ‘venue’ of arbitration took precedence. This reinforced Delhi as the ‘seat’ of arbitration. The Court clarified that the Arbitration Act empowers courts to extend the Arbitrator’s mandate even after the award’s deadline, upon sufficient cause shown.

Held

The Court declared its territorial jurisdiction over the arbitration proceedings and the petition’s maintainability. It granted the petition, allowing an extension of one year from the date of the judgment for completing the arbitration proceedings and issuing the arbitral award. The Court emphasized that the Sole Arbitrator had not shown any lack of expedition in the proceedings.

Conclusion

The Delhi High Court’s ruling highlights the significance of accurately designating the ‘seat’ of arbitration based on the specified ‘venue’ and clarifies that exclusive jurisdiction clauses do not undermine the seat’s authority. The Court’s decision also underscores the flexibility of the Arbitration Act to grant extensions for arbitral proceedings.

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Written by- Ankit Kaushik

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If there’s an admitted liability, a dispute concerning unpaid amounts cannot be directed to arbitration.

PUNJAB & HARYANA HIGH COURT

M/s Simplex Infrastructure Limited and another

 Vs.

 M/s J.P.Singla Engineers and Contractor

CR 6634/2019

Coram HON’BLE MS. JUSTICE NIDHI GUPTA

FACTS:

The current revision petition has been submitted to contest the decision dated 5.9.2019 (Attachment P-5) issued by the Civil Judge (Junior Division) in Chandigarh. This decision pertains to the rejection of the applicants’ petition under Section 8 of the Arbitration and Conciliation Act, 1996 (referred to as ‘the 1996 Act’). The respondent, a sole proprietorship firm engaged in construction, was contracted by the petitioners for road construction via an Agreement/work order from 14.4.2014. The respondent completed the project according to specifications and submitted bills for the period up to 22.8.2016. A final bill for minor patch work on 13.5.2017 was also sent. However, payment was not received despite reminders, leading the respondent to file Civil Suit No. 2207 of 2018 seeking to recover Rs. 27,16,659/- as principal and Rs. 3,79,748/- as 15% per annum interest from 13.5.2017. The petitioners, as defendants, argued the civil suit was improper due to Clause 12 of the Agreement/work order, which mandated arbitration for disputes. They submitted an application under Section 8 of the 1996 Act to this effect, which was rejected by the Civil Judge (Junior Division) on 5.9.2019. The petitioners have lodged the current revision petition to challenge this ruling.

COURT ANALYSIS AND DECISION:

The arbitration clause applies when a dispute falls within the scope of an Arbitration Agreement. In this case, the dispute doesn’t pertain to the execution, completion of work, or the contract itself. Instead, it concerns uncompensated dues. It’s not a dispute “under,” “in connection with,” or “regarding” the contract. Consequently, arbitration isn’t suitable, and the respondent, who is entitled to their dues, has appropriately filed a recovery suit. The respondent attempted to settle amicably, but the petitioners didn’t respond. Given these circumstances, the order dated 5.9.2019, which dismissed the revision petition, is deemed correct and the revision petition is rejected.

“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”

Written by- Srijan Garg

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