Cases PART - I

INDIAN ARBITRATION LAW

FOR 2019 BATCH
INTRODUCTION OF AN ISSUE

1. SC held that the third party to the arbitration agreement is not bound by arbitration
clause in the agreement and also made an important observation that in a proceeding
under Sec. 11 of the Arbitration & Conciliation Act, 1996, the High Court is not
permitted to hold that a party is a prima facie party to an arbitration agreement but
has to pass a final decision as to who are the parties to arbitration agreement.

2. The Hon’ble Supreme Court categorically stated that once the High Court renders a
decision under Sec. 11 of the Act holding that there is an arbitration agreement
between the parties, it will not be permissible for the arbitrator to consider or
examine the same issue and record a finding contrary to the finding recorded by the
High Court.
CASE- I

Indowind Energy Ltd. (“Appellant”) vs. Wescare (I) Ltd. (“Respondent no.1”) & Subuthi
Finance Ltd. (“Respondent no.2”)

Civil Appeal No. 3874 of 2010 [ Decided on 27th April 2010]

• FACTS OF THE CASE:

• The Respondent no. 2 was the promoter of Appellant. Respondent no.2 entered into an
Agreement with Respondent no.1 for sale of certain business assets belonging to
Respondent no.1 for consideration partly in cash and partly in shares. Though Appellant was
not a party to the Agreement. Respondent No.2 was described as “promoters of Indowind
Energy Ltd.” in the Agreement.”

• This Agreement consisted of an arbitration clause in reference to disputes arising between

the parties under the Agreement. Certain dispute arose between Appellant and Respondent
no.1 under the Agreement. Respondent no.1 proceeded to file an application for the
appointment of an Arbitrator under Section. 11 of the Act before the Hon’ble Madras High
Court making Appellant a party. Appellant challenged the said application claiming that since
it was not a party to the Agreement therefore it was not bound by any arbitration clause.
• The Hon’ble Madras High Court rejected the contention of the Appellant
inter alia for the following reasons:-
(i) Existence of the Agreement was not in dispute
(ii) Respondent no.2 is one of the promoters of Appellant and
both of them had a common registered office and common
Directors including the same Director who executed the
Agreement on behalf Respondent no.2
(iii) Appellant contemplated purchasing the assets of
Respondent no.1 under the Agreement.
This Judgment of Madras High Court was challenged before the Hon’ble
Supreme Court of India .
DECISION:
• The main issue before the Supreme Court was whether arbitration clause contained in
an arbitration agreement is binding on a ‘third party’ which has not signed the
agreement in question.

• The Supreme Court, by interpreting the definition of “party” contained in Sec. 2 (h) of the Act
read with Section 7 of the Act and also considering the fact that there was no
acknowledgement or statement that the Agreement was authorized to be entered by
Appellant on its behalf nor did the Board of the Appellant ratify or approve the said
Agreement, held that Appellant is not bound by the arbitration Clause contained in the said
Agreement.

• The Hon’ble Madras High Court while allowing the application of Respondent no.1 under
Section. 11 of the Act for the appointment of an Arbitrator, held that even though the
Appellant was not a signatory to the Agreement, it was prima facie a party to the
arbitration agreement.
The Hon’ble Supreme Court disagreed with the observation made by the Madras High Court by categorically
stating that :

• “ …..the learned Chief Justice or his designate is required to decide the issue finally and it
is not permissible in a proceeding under section 11 to merely hold that a party is prima
facie a party to the arbitration agreement and that a party is prima facie bound by it. It is
not as if the Chief Justice or his Designate will subsequently be passing any other final
decision as to who are the parties to the arbitration agreement.

• Once a decision is rendered by the Chief Justice or his Designate under section II of the
Act, holding that there is an arbitration agreement between the parties, it will not be
permissible for the arbitrator to consider or examine the same issues and record a
finding contrary to the finding recorded by the Court.”

• Therefore, the Madras High Court order was set aside

Related cases
1. Chloro Control 2012
2. Ameet Lalchand Shah vs Rishabh Enterprises 2018 15 SCC 678
3. Reckitt Benckiser (India) Private Limited vs
Reynders Label Printing India Private Limited and Anr 2019 7 SCC
62 [ Group of companies doctrine applies]
4. Mahanagar Telephone Nigam Ltd vs Canara Bank 2020 12 SCC 767
CASE II
Kerala State Electricity Board and Anr. (“State Board”) Vs. Kurien E.
Kathilal and Anr. (“Contractor) March 09, 2018
• REFERRING PARTIES TO ARBITRATION? ORAL CONSENT BETWEEN
COUNSELS NOT ENOUGH, HOLDS SUPREME COURT OF INDIA.
INTRODUCTION – Issues to be
decided
1. Whether Jurisdictional pre-condition for reference to arbitration is that the parties
should seek a reference or submission to arbitration? Affirmative / Negative

2. Whether In the absence of an arbitration agreement, a court can refer parties to

arbitration only with written consent of the parties by way of a joint application?
Affirmative / Negative

3. Whether Oral consent given by counsels for parties without a written memo of
instruction does not fulfill the requirements under Section 89 of the Code of Civil
Procedure, 1908? Affirmative / Negative
• The Supreme Court (“Court”) in the case of Kerala State Electricity Board and Anr. (“State
Board”) Vs. Kurien E. Kathilal and Anr. (“Contractor”) had occasion to rule on whether
parties could be referred to arbitration based on mere oral consent given by the
counsels representing parties - without there being any written instructions to that
effect.

• Hearing an appeal against an order of the Kerala High Court (“High Court”) which had
referred the parties to arbitration merely on the counsels’ oral consent, the Court set
aside the said order, inter alia holding that when there was no arbitration agreement
between the parties, the High Court ought not to have referred the parties to arbitration
without a joint memo or a joint application between the parties.
BACK-GROUND

• The State Board entered into an agreement in 1981 with the Contractor for construction
of a dam in the state of Kerala.
• After commencement of work, the Government of Kerala issued a notification in 1983
by which the minimum wages payable to certain categories of workers were revised
upwards with effect from the date of the notification.
• The Contractor accordingly claimed labour escalation charges from 1983 to 1984 as
well as certain claims for additional work done.

• What followed was lengthy and protracted litigation in the High Court of Kerala.
 • So far as the claim on additional work was concerned, with the consent of the counsel for
both parties, and without existence of an arbitration agreement or written instructions
provided by the parties, the High Court referred the parties to arbitration.

• Pursuant to such reference, an arbitral award came to be passed in favour of the Contractor.

• The State Board preferred an appeal against the decisions of the High Court before this
Court.
ISSUE

• Whether the High Court was correct in referring the parties to

arbitration upon the oral consent of the parties’ counsels, in the
absence of any written instructions thereto?
• The Court, in exercise of its powers under Article 136 of the Constitution of India (“Article
136”), chose to re-appreciate all facts and materials on record considering that public money
was involved and that the findings of the High Court would otherwise result in excessive
hardship to the State Board.

• On the High Court’s decision to refer the parties to arbitration (for the Contractor’s claim on
additional work done), the Court observed that the jurisdictional pre-condition for reference
to arbitration under Section 7 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”)
is that parties should seek a reference to arbitration.

• So far as reference of a dispute under Section 89 of the Code of Civil Procedure, 1908 (“CPC”)
is concerned, the Court considered that the same can be done only when parties agree for
settlement of their dispute through arbitration - in contradistinction to other methods of
alternative dispute resolution stipulated under Section 89 of the CPC.
• In light of the above, the Court held that in so far as reference of the parties to
arbitration is concerned, oral consent given by the counsel without a written memo of
instructions does not fulfill the requirement under Section 89 of the CPC. [Read S. 89 of
the CPC]

• Placing reliance on the judgments of the Supreme Court in Afcons Infrastructure Ltd. &
Anr. V. Cherian Varkey Construction Co. (P) Ltd. & Ors [(2010) 8 SCC 24] and Shailesh
Dhairyawan v. Mohan Balkrishna Lulla [ (2016) 3 SCC 619],

it held that in the absence of an arbitration agreement, the court can refer parties to
arbitration only with written consent of parties either by way of a joint memo or a joint
application.
• The Court also observed that the impugned order of the High Court referring parties to
arbitration could not be sustained on other grounds as well as the impugned order
contained adverse observations on the State Board, causing prejudice to the rights of
the State Board in pursuing the matter before the arbitral tribunal.

• The Court thus proceeded to set aside the Judgment of the High Court as well as the
arbitral award passed pursuant to its directions.
For reference
• 89. Settlement of disputes outside the Court.(1) Where it appears to
the Court that there exist elements of a settlement which may be
acceptable to the parties, the Court shall formulate the terms of
settlement and give them to the parties for their observations and
after receiving the observations of the parties, the Court may
reformulate the terms of a possible settlement and refer the same
for:--
• Arbitration, Conciliation, Judicial Settlement including settlement
through Lok-Adalat, or Mediation
CASE III
Garware Wall Ropes v. Coastal Marine Constructions &
Engineering Ltd., Civil Appeal No. 3631 of 2019 arising out
of SLP(C) No. 9213 of 2018.
• ARBITRATION CLAUSE IN AN UNSTAMPED AGREEMENT? SUPREME COURT LAYS DOWN THE LAW
INTRODUCTION
1. Whether the agreement which prescribes the arbitration clause is sufficiently
stamped, the court cannot appoint an arbitrator ? Affirmative / Negative

2. Whether the court must impound the agreement on which adequate stamp duty has
not been paid and hand it over to the relevant stamp authority for rectification ?
Affirmative / Negative

3. Whether the stamp authorities should resolve the issues relating to stamp duty and
penalty (if any) as expeditiously as possible, and preferably within a period of 45 days
from the date on which the authority receives the agreement as SC has ordered?
Affirmative / Negative
• The Supreme Court of India in a recent judgment has considered the validity of an
arbitration clause and the arbitral appointment made thereunder, when such arbitration
clause formed part of an unstamped agreement.

• More specifically, in case of Garware Wall Ropes v. Coastal Marine Constructions &
Engineering Ltd., the Supreme Court had to consider an appeal arising out of the
decision of the Bombay High Court, wherein an arbitrator was appointed pursuant to an
arbitration clause arising out of an unstamped agreement.

• The Supreme Court set aside the Bombay High Court decision and remitted the same for
a fresh determination.
FACTS
• Disputes arose out of a sub-contract between the Appellant and the Respondent (“Contract”),
following which the Appellant terminated the Contract. The Contract contained an arbitration
clause for the resolution of the disputes. The Respondent invoked the arbitration clause and
appointed an arbitrator.

• However, the Appellant disputed such appointment. Thereafter, the Respondent filed an
application under Section 11 of the Arbitration and the Conciliation Act, 1996 (“Act”) before
the Bombay High Court seeking the appointment of an arbitrator.

• The Bombay High Court allowed the application and appointed an arbitrator to adjudicate the
disputes between the parties.
ISSUE BEFORE THE SUPREME
COURT
• The Supreme Court had to consider the effect of an arbitration clause
contained in an agreement which is not stamped.

• Existence v. Validity of the Arbitration Agreement

JUDGMENT OF THE SUPREME
COURT
• The Supreme Court referred to its earlier decision in SMS Tea Estates v. Chandmari Tea
Co. P. Ltd., wherein it had held that if an arbitration clause is contained in an unstamped
agreement, the Judge would be required to impound the agreement and ensure that
stamp duty and penalty (if any) are paid before proceeding with the appointment of the
arbitrator.

• Subsequent to this judgment, in 2015, Section 11(6A) was introduced to the Act [Now
repealed by 2019 amendment Act], which states that while appointing an arbitrator,
courts should confine themselves to the examination of the existence of an arbitration
agreement and no more. Relying on the introduction of Section 11(6A), it was contended
that the judge appointing an arbitrator should not impound the agreement for being
insufficiently stamped, rather the arbitrator appointed pursuant to Section 11 may do
so if deemed necessary.
• The Supreme Court observed that under the Maharashtra Stamp Act, 1958 (“Stamp
Act”), an agreement becomes enforceable in law only when it is duly stamped.

• The Respondent attempted to draw a distinction between the “validity” and the
“existence” of an arbitration agreement, and argued that the provisions of the Stamp
Act are fiscal measures which will be covered under a determination of the “validity” of
an arbitration clause and not its “existence”, and thereby, the court should be permitted
to appoint arbitrators even in cases where the agreement is unstamped.
• However, the Supreme Court was not impressed with such submissions and observed that an
arbitration clause cannot be bifurcated entirely from the agreement it is contained in, as the Stamp
Act applies to the entire agreement.

• Consequently, an arbitration clause would not ‘exist’ when the underlying agreement is not
enforceable under law. Accordingly, the Supreme Court held that under Section 11 of the Act, the
court can impound an agreement if it is not stamped in accordance with the mandatory provisions
of the Stamp Act.
• Interestingly, a full-judge bench of the Bombay High Court had rendered a judgment just a few
days prior to the Supreme Court’s finding in the present case on a similar question of law.

• In the case of Gautam Landscapes Pvt. Ltd. v. Shailesh Shah, the Bombay High Court held
that for appointment of arbitrators under Section 11 of the Act, it was not necessary for
courts to await the adjudication of stamp duty by stamp authorities in cases where a
document was not adequately stamped.

• After considering this judgment, the Supreme Court held that the Bombay High Court in the
aforementioned case had incorrectly decided the question of law.
Practicality of Impounding an
Unstamped Agreement
• The Respondent further argued that impounding an unstamped agreement would not be
practically feasible at the Section 11 stage as the amended Act prescribes strict timelines
to courts for disposing applications for appointment of arbitrator(s).

• Under Section 11(13) of the Act, an application for appointment of an arbitrator must be
disposed of as expeditiously as possible, and in any event within a period of 60 days
from the date of service of notice on the other party.

• However, the Supreme Court held that the doctrine of harmonious construction should
be adopted to read Section 11(13) of the Act with Sections 33 and 34 of the Stamp Act
(which provide for impounding of unstamped instruments).
CASE IV
Magic Eye Developers Pvt. Ltd. (“Plaintiff”) v. Green
Edge Infra Pvt. Ltd. & Ors. (“Defendants”) – Decided on
MAY 21, 2020
• SIGNATORY OR NOT – A GROUP OF COMPANIES CAN BE REFERRED TO ARBITRATION, RULES DELHI HIGH
COURT
INTRODUCTION

• The High Court of Delhi considered whether non-signatories to an arbitration

agreement are amenable to arbitration under Section 8 of the Arbitration &
Conciliation Act, 1996 ,by applying the group of companies doctrine.
FACTS
• The Plaintiff entered into a business relationship with the Defendant No. 1 through execution
of several agreements namely a Shareholders Agreement dated 4th July 2012, (“SHA”), Share
Purchase Agreement dated 24th July 2013 (“SPA”) and Memorandum of Understanding
(“MOU”).

• The Defendant No. 1 was required to render services to the Plaintiff, including but not limited
to arrangement of necessary and applicable licenses for launching a real estate project in
Gurgaon.

• As part of the composite transaction, the Plaintiff company advanced a sum of INR
8,00,00,000 to the Defendant No. 1. Of the said amount, an amount of INR 5,20,00,000 was
advanced as a short term loan to Mr. S.K. Hooda (the erstwhile managing director of the
Defendant No. 1 company).
• Breach of contractual obligations by Defendant No.1 resulted in delays in launch of the
project. The Plaintiff filed a commercial suit in the High Court of Delhi, claiming
recovery of loan, along-with damages for breach of contract, loss of reputation and loss
of business opportunity.

• Additionally, the Plaintiff alleged that Defendant No. 1 was a company used by Mr. S.K.
Hooda’s family, along with other front companies namely Defendants Nos. 2 and 3, to
launder and siphon away money advanced by way of loan and other borrowings from
companies such as that of the Plaintiff and members of the public.

• It was also alleged that there were several FIRs and criminal investigations filed against
Mr. S.K. Hooda and that he had been arrested by the Economic Offences Wing.
• The Defendant No. 1 filed an application under Section 8 of the A&C Act, and prayed for
reference of disputes to arbitration under the SHA, SPA and MOU.

• It was averred that the said agreements are interconnected and cover the subject matter of
the suit.

• Defendant Nos. 2 and 3 filed written statements and objected to being impleaded in the
commercial suit.
ISSUES
The High Court dealt with the following issues:

1. Whether or not the claim is capable of settlement by arbitration in light of the

Plaintiff’s twin-claim for recovery and damages?

2. Whether Defendant Nos. 2 & 3 can be made amenable to arbitration despite being
non-signatories to the arbitration agreement(s)?
Observation of the DHC &
JUDGMENT
• Bifurcation of Reliefs

• The Plaintiff contended that in addition to recovery of the loan, the Plaintiff had also
claimed damages for which there was no arbitration agreement between the parties.

• The Plaintiff relied on the decision in Sukanya Holdings Pvt. Ltd. vs. Jayesh H.
Pandya and stated that since the reliefs claimed under the suit could not be bifurcated,
the parties could not be referred to arbitration.
• The Court rejected the argument and held that the claim for
damages was based on the failure of Defendant No.1 to perform its
contractual obligations under the various agreements.

• This was an arbitrable dispute duly governed by arbitration clauses

under the various agreements. As such, the two reliefs were not
required to be bifurcated and could be decided by arbitration.
Group of Companies Doctrine
• The Plaintiff claimed that since the disputes involved third parties such as Defendant
Nos. 2 and 3 who were not signatory to the various agreements, the disputes could not
be referred to arbitration.

• The Court referred to the seminal decision of the Supreme Court of India on the group
of companies doctrine, in the case of Chloro Controls India (P) Ltd. Vs. Severn Trent
Water Purification Inc. It reiterated that a non-signatory or third party could be
subjected to arbitration without their prior consent, but this would only be in
exceptional cases.
• The court will examine these exceptions from the touchstone of direct
relationship to the party signatory to the arbitration agreement, direct
commonality of the subject matter and the agreement between the parties
being a composite transaction.
• The Court also relied upon the Supreme Court’s decision in Cheran Properties Limited
vs Kasturi & Sons Limited wherein the Supreme Court acknowledged that there may be
transactions within a group of companies.

• The circumstances in which they have entered into them may reflect an intention to
bind both signatory and non-signatory entities within the same group.

• The Court stated that the evolving body of academic literature as well as adjudicatory
trends indicated that in certain situations, an arbitration agreement between two or
more parties may operate to bind other parties as well.
• Relying on the requirement of an arbitration agreement to be in writing, the
Court quoted from legal authorities such as Redfern and Hunter on
International Arbitration, to state that the requirement of an agreement to
arbitrate in writing inter alia does not exclude the possibility of an arbitration
agreement concluded in proper form between two or more parties also
binding other parties.

• This could be by operation of the group of companies doctrine, or by

operation of law such as agency, assignment, agency or succession.
• After expounding on the above principles, the Court considered the Plaintiff’s averments to
the effect that Defendant Nos. 1, 2 and 3 belonged to the Hooda family. As such, the Plaintiff
had itself averred that the Defendants formed a group of companies. Additionally, the Court
noted the pleadings of Defendant Nos. 2 and 3.

• In response to the cause of action in the Plaint (whereby the Plaintiff stated that the subject
matter of the suit cannot be referred to arbitration as there is no provision for splitting the
cause or the parties), the Defendant Nos. 2 and 3 had simply rebutted the said paragraph as
‘denied for want of knowledge and that it did not pertain to defendant Nos.2 and 3’.

• Further, during the course of arguments, the Defendant Nos.2 and 3 did not oppose the plea
of Defendant No.1 to the effect that disputes should be referred to arbitration.
• The Court held that from the intent of the parties as noticed from the various agreements, as
also the averments in the plaint and the arguments, it was evident that not only would
Defendant No.1 but also the Defendant Nos. 2 and 3 were amenable to arbitration.

• The Court accordingly referred all parties to arbitration.

CASE V
(Blue Coast Infrastructure Development v Blue Coast Hotels) –
10/6/2020

• BASIC ISSUE: DHC revisits the law on granting interim relief to non-signatories in
arbitration.

• Arbitration analysis:

• The Delhi High Court refused to grant interim relief under section 9 of the Arbitration
and Conciliation Act, 1996 (ACA 1996) against a non-signatory to the arbitration
agreement on the facts and circumstances of the case.

• However, the Delhi High Court held that it was possible to award interim relief against a
non-signatory in certain circumstances. For instance, the property of a third party
holding property on behalf of a party to the arbitration may be attached pursuant to ACA
1996, s 9.
What are the practical implications
of this decision?
• The Delhi High Court interpreted ACA 1996, s 9, which provides courts the power to award
interim measures to parties before, during or after the arbitral proceedings and prior to the
enforcement of an arbitral award.

• The court contrasted these powers against the powers of the arbitral tribunal under ACA
1996, s 17 to award interim measures during arbitral proceedings.

• The court held that while under ACA 1996, s 17, the arbitral tribunal can award interim
measures only to the parties to the arbitration agreement, this limitation is not applicable to
a court under ACA 1996, s 9
• Thus, the court held that in certain situations, interim measures can be awarded by the
court against even non-parties to an arbitration agreement. Particularly, the court
observed that it is possible to pass an order to attach a property held by a third party if
it is being held on behalf of a party to the arbitration.

• However, on the facts of the present case, the court held that the third party, the
second respondent, ie, IFCI Ltd. (IFCI), cannot be said to be holding the property on
behalf of the first respondent, ie Blue Coast Hotels Ltd. (Blue Coast Hotels), thereby, the
question of awarding interim relief to the applicant against IFCI did not arise.
What was the background to this
decision?
• The applicant, Blue Coast Infrastructure Development Pvt. Ltd. (the Applicant) had
entered a Joint Development Agreement (JDA) with Silver Resort Hotel India Private
Limited (Silver Resort).

• Silver Resort was a special purpose vehicle floated by Blue Coast Hotels to develop a
commercial space in the New Delhi International Airport (Aerocity Project).

• An Infrastructure Development and Service agreement had been executed between

Delhi International Airport Limited (DIAL) and Silver Resort.
22/8/2022
• Pursuant to the JDA, the Applicant had been authorized by Silver Resort to raise and
collect funds from investors for allotting commercial shops to the investors in the
Aerocity Project.

• The JDA between the Applicant and Silver Resort contained an arbitration clause. It is
pertinent to note that Blue Coast Hotels and IFCI were not party to the JDA.

• However, the Applicant filed the present application before the court pursuant to the
arbitration clause contained in the JDA. Further, Silver Resort was not joined as a
respondent in the present proceedings.
• The Applicant filed a petition under ACA 1996, s 9 against Blue Coast Hotels and IFCI seeking
interim orders from the Delhi High Court.

• The Applicant requested the court to order IFCI to deposit certain amounts with the registry of
the court or alternatively, not to release these amounts to Blue Coast Hotels or otherwise
without the permission of the court.
• Blue Coast Hotels had issued letters of comfort to the Applicant that, inter alia, the monies
collected by the Applicant for the Aerocity Project would not be used for any other purpose.

• Further, Blue Coast Hotels assured the Applicant that in the event the Aerocity Project was not
completed a stipulated time, Blue Coast Hotels would refund the monies collected by the
Applicant and indemnify the Applicant to the extent of refunding the funds collected by the
Applicant.

• Due to certain disputes between Silver Resort and DIAL, the Aerocity Project could not be
completed. Subsequently, there were multiple proceedings that were initiated in various fora.

• In the present proceedings, the Applicant prayed for interim measures to protect the amount of
INR 85 crores which was allegedly in the custody of IFCI on behalf of Blue Coast Hotels.

• IFCI, inter alia, raised an objection that the court cannot grant any relief against it as it was not a
signatory to the arbitration agreement under the JDA.
What did the court decide?

• Relying on various case law, the Delhi High Court noted that the scope of ACA 1996, s 9
is not limited to parties to an arbitration agreement, and that it is possible to extend it
to third parties as well.

• Thus, the court dismissed IFCI’s objection, and held that the court can pass interim
directions against a non-party to the arbitration agreement under ACA 1996, s 9.

• Relying on the case of Value Advisory Services v ZTE Corporation and Ors, OMP No.
65/2008, the court indicated that a party would have the right to seek attachment
against a third party if the third party holds the property in its possession on behalf of a
party to the arbitration agreement.
• After considering the law, the court noted that the representative suit filed by investors
was still pending before the Delhi High Court, to which the Applicant is a party. In those
proceedings, SEBI/PACL had acquired a right to claim the sum of INR 85 crores and their
charge is yet to be satisfied. Thus, any direction by the court in the present proceedings
would be in conflict with the court’s earlier orders in the representative suit.

• Considering this, the court held that it is not correct to state that IFCI is holding the sum
of INR 85 crores as a custodian of, or on behalf of, Blue Coast Hotels. Therefore, the
reliefs sought by the Applicant cannot be granted.

• In light of these facts, the Court held that the objection by IFCI that it was not a
signatory to the arbitration agreement was irrelevant. Consequently, the Court
dismissed the petition for interim relief.
CASE VI
Gemini Bay v Integrated Sales
• Arbitration analysis:

• The Supreme Court of India refused to interfere with an award issued by a sole
arbitrator in an arbitration seated in the USA, holding that a foreign award could be
enforced against non-signatories to the arbitration agreement under the Arbitration and
Conciliation Act 1996.

• The Supreme Court also narrowed down the scope of resistance under section 48 of
the Act (akin to Article V of the New York Convention) by award-debtors to the
enforcement of a foreign award.

• The judgment is consistent with the pro-arbitration approach taken by Indian courts in
the last decade.
What are the practical implications
of this case?
• The ability to arraign non-signatories in an arbitration remains the subject of debate, and the
Supreme Court and several High Courts in India have allowed arraignment of non-signatories to
an arbitration agreement.

• Following the decision of the Supreme Court in this case, parties can now anticipate that it will
be extremely difficult to resist enforcement of a foreign award in India against a non-signatory
where the tribunal has held that the non-signatory is liable under the award.

• The ability of a non-signatory to be bound by the arbitration agreement can be certainly raised
before the arbitral tribunal, or such award can be challenged at the seat of arbitration; but at the
enforcement stage, the Indian courts will not look into such aspects.

• The judgment of the Supreme Court is particularly relevant for complex transactions involving
group entities since the enforceability of a foreign award on non-signatories has now been settled
by the Supreme Court.
• While holding that a foreign award is binding and can be enforced against a non-
signatory, the Supreme Court also discussed the scope of the limited grounds to resist
enforcement under section 48 of the Act and opined that such grounds must be
construed narrowly.
What was the background?
• Integrated Sales Services (ISS), a Hong Kong based company had entered into a
representation agreement (Agreement) with an Indian company, DMC Management
Consultants Ltd (DMC) on 18 September 2020, under which, ISS assisted DMC in the
sales of DMC’s goods and services against a fixed amount of commission.

• At the time of entering into the Agreement, Mr Rattan Pathak signed the Agreement as
the managing director of DMC.
• The Agreement provided for dispute resolution by way of arbitration seated in Kansas City,
Missouri before a sole arbitrator. The governing law of the Agreement was laws of the State of
Missouri, USA. The Agreement was amended twice and was executed by Mr Arun Dev
Upadhyaya on behalf of DMC. In the second amendment, the governing law of the
Agreement was amended to ‘laws of the State of Delaware’.

• Disputes arose between the parties pursuant to which ISS initiated arbitration and raised a
claim that DMC transferred monies payable to ISS under the Agreement to Gemini Bay
Transcriptions Pvt Ltd (GBT), a company owned and controlled by Mr Arun Upadhyay (Arun),
by terminating its contracts with certain customers introduced by ISS and subsequently,
executing the same contracts through GBT.

• Arun, DMC, DMC Global, Gemini Bay Consulting Ltd (GBC) and GBT were all arrayed as a
party to the arbitration proceeding by ISS.
• The sole arbitrator held that Arun used the corporate forms of sister concerns like
DMC Global Inc (DMC Global) GBC to cover-up unjust results of eliminating ISS as well as
refused to pay commissions payable to ISS under the Agreement.

• Therefore, the arbitrator directed all the group entities and Arun to jointly and
severally pay ISS a sum of US$6,948,100 along with administrative fees and expense
borne by ISS (Award).

• Only DMC participated before the sole arbitrator and addressed the issue of
applicable law governing the arbitration, but the other issues framed by the sole
arbitrator, such as the jurisdiction of the tribunal over non-signatory parties, piercing
the corporate veil of certain corporations, whether certain non-signatory parties to the
original agreement should be excluded from the arbitration were not addressed by
DMC.

• The other parties impleaded in the arbitration, ie DMC Global, GBC, GBT and Arun, did
not enter appearance before the sole arbitrator
• The Single Judge of the Bombay High Court (Nagpur Bench) held that the Award was
only enforceable against DMC and not against the group entities as they were ‘non-
signatories’ to the arbitration agreement.

• On appeal, the Division Bench of the Bombay High Court (Division Bench) overturned
the decision of the Single Judge holding the Award was enforceable against the group
entities.

• Thereafter, GBT filed an appeal before the Supreme Court against the order of the
Division Bench.
What did the court decide?
• The appellant group (DMC, DMC Global, GBC, GBT and Arun) submitted their arguments
under the following heads, and the Supreme Court held as under:

• Section 47(1)(c) of the Act [such evidence as may be necessary to prove that the award is
a foreign award. ] : The provision is limited to adducing evidence by the award holder to
establish that the three pre-requisites for enforcement of a foreign award are met (see
section 47 (Evidence) of the Act).

• An award holder is not required to establish that a non-signatory is bound by the

foreign award at the stage of enforcement
• section 48(1)(a):

• A challenge to the enforcement of foreign award on the ground of nonsignatory is

outside the scope of section 48(1)(a) (see section 48 (Conditions for enforcement of
foreign awards) of the Indian Act).

• Moreover, such a question is likely to involve an analysis into the merits of the
case which further renders it outside the scope of enquiry under Section 48 of the
Act

• (relying on Aloe Vera of America, Inc v Asianic Food (S) Pte Ltd and
another [2006] -the Supreme Court observed that similar to the New York
Convention, the Act promotes a pro-enforcement bias, therefore, the
court must not reopen the case on merits especially when the burden
lies on an award debtor to establish the grounds under section 48; para
[57] of the judgment)
• section 48(1)(c) (see section 48 (Conditions for enforcement of foreign awards) of the
Act):

• This provision only covers circumstances wherein the foreign award covers a dispute
that is outside the scope of the arbitration agreement between the parties

(relying on Olympus Superstructures (P) Ltd v Meena Vijay Khetan, (1999) 5 SCC 651;
Ssangyong Engg. & Construction Co Ltd v NHAI, (2019) 15 SCC 131; Aloe Vera of America,
Inc v Asianic Food (S) Pte Ltd and another, [2006] SGHC 78 (Singapore High Court). Para [60]
of the judgment)
• section 48(1)(b) (see section 48 (Conditions for enforcement of foreign awards) of the
Act):

• The scope of this provision is restricted to instances prior to making of the award, such
as notice of appointment of the arbitrator or of the arbitral proceedings, etc

(relying on Vijay Karia v Prysmian Cavi E Sistemi SRL, (2020) 11 SCC 1). Therefore, an
absence of reasons or perfunctory reasons in a foreign award is not included as a ground
under Section 48(1)(b) (para [63] of the judgment)
• Torts outside the scope of arbitration agreement:

The words ‘differences arising out of legal relationships, whether contractual or not’ under
section 44 make it clear that tort claims can be decided by an arbitrator provided that the
dispute arises in connection with the agreement (paras [66]–[67] of the judgment).

• Moreover, in the present case, the arbitration agreement itself included the phrase
dispute ‘in connection with this Agreement’ (para [66] of the judgment)

• Award violate the substantive law of the agreement:

The enforcement of a foreign award cannot be refused on the ground that the foreign
award violates substantive law of the agreement (paras [71]–[73] of the judgment). Such
a question can only be considered by the seat court, and not by an enforcing court.
• Damages:

• Nothing under Section 48(1) permits resisting the enforcement of a foreign award
on the ground that damages were awarded without basis or reason (para 74 of the
judgment).

• The only possible avenue for such a challenge is under section 48(2) and that too
only when there is gross injustice that shocks the conscience of the court

(relying on Ssangyong Engg. & Construction Co Ltd v NHAI, (2019) 15 SCC 131; Section
48 (Conditions for enforcement of foreign awards) of the Act)
CASE VII
Messer Griesheim GmbH (now Air Liquide Deutschland GmbH) (“Appellant”) v.
Goyal MG Gases Pvt. Ltd. (“Respondent”)

• DISTRICT COURTS V. HIGH COURTS HAVING ORIGINAL CIVIL JURISDICTION:

• SUPREME COURT’S VERDICT ON COURTS HAVING JURISDICTION TO EXECUTE FOREIGN

DECREES
INTRODUCTION
1. Where there is a split jurisdiction between High Courts exercising original jurisdiction
and District Courts based on pecuniary value, such High Courts would be competent to
execute a foreign decree of the superior court of a reciprocating territory.

2. By virtue of Section 5(2) of the Delhi High Court Act 1966, the Delhi High Court is
vested with ordinary original civil jurisdiction and holds exclusive jurisdiction to
execute a foreign decree under Section 44A of the CPC if it falls within its pecuniary
jurisdiction.
• One of the many concerns which haunts parties in cross-border dispute resolution is locating
the jurisdiction and forum for execution of the decree of a foreign court. Section 44A (1) of
the Code of Civil Procedure 1908 (“CPC”) provides that “Where a certified copy of a decree of
any of the superior Courts of any reciprocating territory has been filed in a District Court,
the decree may be executed in India as if it had been passed by the District Court.”

• While a decree-holder may initiate execution proceedings in a jurisdiction where the

judgment-debtor or its properties are located, the question remained – would an execution
petition be maintainable before High Courts having ordinary original civil jurisdiction or only
before the district courts?
• SC clarified that a High Court with original civil jurisdiction can entertain a petition for
execution of a foreign decree under Section 44A of the Civil Procedure Code, 1908 (“CPC”),
provided it is within its pecuniary jurisdiction. The Supreme Court arrived at this conclusion
by holding that the definition of District Court under Section 2(4) of the CPC would include
High Courts having original jurisdiction.

• This gained significance in view of certain High Courts having ordinary original civil
jurisdiction. Ordinary original civil jurisdiction of a court is when it has the power to hear a
fresh case.

• In India, five High Courts (i.e., High Courts of Delhi, Bombay, Calcutta, Madras and Himachal
Pradesh) have original jurisdiction in civil cases of certain monetary value. For example, the
Delhi High Court can exercise original civil jurisdiction with respect to Delhi, in every suit
where the value exceeds rupees two crores. In other jurisdictions, it is the district court which
has original jurisdiction in all civil suits.
FACTUAL BACKGROUND

• The Appellant had initiated proceedings against the Respondent before the High Court of
Justice, Queen’s Bench Division, Commercial Court of the United Kingdom (“English High
Court”) for a money decree. The Appellant was awarded a decree for a principal sum of US $
5.8 million (appx.) on 07 February 2006.

• The English High Court had been notified as a superior court of a reciprocating territory for
the purpose of execution of foreign decrees in India under Section 44A of the CPC.

• Since the decretal amount fell within the pecuniary jurisdiction of the Delhi High Court, the
Appellant filed an execution petition under Section 44A of the CPC before the Delhi High
Court on 27 April 2006.
• The Respondent raised an objection that the Delhi High Court does not have jurisdiction to
entertain the execution petition in view of Section 44A of the CPC. It was the Respondent’s
case that Section 44A(1) of the CPC refers to “District Court”; therefore, only the district
court(s) in Delhi would have jurisdiction over the execution petition and not the Delhi High
Court.

• Distinguishing suits from execution proceedings, the Respondent argued that Section 5(2) of
Delhi High Court Act 1966 refers to ‘suit’; therefore, the High Court would be a principal civil
court only for suits exceeding the pecuniary limit and not for any other purpose.
• The Single Judge of the Delhi High Court rejected such objections and upheld the jurisdiction
of the Delhi High Court.

• On appeal, the division bench of the Delhi High Court (“Division Bench”) overruled the Single
Judge’s judgment and observed that Section 44A of the CPC was an independent right
conferred on the decree-holder/Appellant for enforcement of a foreign decree in India.

• It is a fresh cause of action and has no co-relation with jurisdictional issues. It further held
that the Delhi High Court was not a ‘District Court’ in terms of Section 44A of the CPC.
DECISION OF THE SUPREME
COURT
• The issue before the Supreme Court was –

• whether the Delhi High Court in exercise of its original jurisdiction was a competent
court to entertain a petition for executing a money decree (in excess of INR
20,00,000/-) of a foreign court which is notified as a ‘superior court’ of reciprocating
territory under Section 44A of the CPC.

• The Supreme Court referred to the definition of ‘District Court’ under Section 2(4) of the
CPC which “refers to the local limits of the jurisdiction of a principal civil Court of original
jurisdiction (provisions of the Code called a “District Court”) and it includes the local
limits of the ordinary original civil jurisdiction of a High Court.”
• It observed that in cases where there is a split jurisdiction between High Courts exercising
original jurisdiction and District Courts based on pecuniary value, such High Courts would be
competent to execute a foreign decree of the superior court of a reciprocating territory.

• While exercising such power, the conditions under Section 44A of CPC would have to be
satisfied in addition to the fact that the underlying decree exceeds the pecuniary limits of
the district court.
• Coming to the issue at hand, the Supreme Court set aside the judgment of the Division
Bench and observed that execution is always in continuation of the proceedings.

• In view of Section 5(2) of the Delhi High Court Act 1966, the Delhi High Court is vested
with ordinary original civil jurisdiction and holds exclusive jurisdiction to execute a
foreign decree under Section 44A of the CPC if it falls within its pecuniary jurisdiction.
CASE VIII
Zostel Hospitality Private Ltd. v. Oravel Stays Private Ltd & Anr

• INTERIM PROTECTION AVAILABLE ONLY AGAINST THE “FRUITS” OF

THE ARBITRAL AWARD

1. Application for interim protection at the post arbitral award stage must be confined to
only the “fruits” of the arbitral award;
2. Complete consensus ad idem is required in all parts of a contract before specific
performance can be directed;
3. Granting a part entitlement to take measures for specific performance of a contract
does not amount to directing specific performance of the contract itself.
• DHC held that a right to specific performance of the underlying agreement (under which
the arbitration was invoked) in an arbitral award does not necessarily imply that specific
performance is itself granted. It opined that the enforcement of such performance may
still be subject to condition precedents and following the due process of law.

• The Delhi HC has also elaborated on the scope of an interim protection under Section 9
of the Arbitration and Conciliation Act, 1996 (“Act”) at the post-award stage and held
that only the “fruit” of an arbitral award can be protected by way of interim measures.
BACKGROUND

• Zostel Hospitality Pvt Ltd (“Zostel”) and one of its investor shareholders, Orios, entered
into a contract with Oravel Stays Pvt Ltd (“Oravel/OYO”), whereunder, essentially, Zostel
agreed to transfer its hotel business to OYO and Orios, against which OYO was required
to transfer to Zostel, “identified assets” which included 7% of OYO’s shareholding.

• Pursuant to the commercial understanding, a term sheet (“Term Sheet”) was executed
which stated that upon closing, Zostel’s shareholders would be entitled to acquire
shares in OYO not exceeding 7% of Oravel’s diluted shareholding, and that upon
completion of post-closing obligations, the founders would be entitled to a payout of
US$ 1 million.

• The Term Sheet also entailed that closing would require finalizing multiple definitive
agreements regarding the exact terms of the transfer, which were to be negotiated
subsequently by Zostel and Oravel.
• Zostel began taking steps to fulfil its obligations1 under the Term Sheet, however, when Zostel
attempted to finalize the definitive agreements, Oravel delayed citing dissent from a particular
shareholder of OYO. Subsequently, owing to alleged defaults on the part of OYO, Zostel was
unable to acquire its assets, and initiated arbitration proceedings.

• The arbitral award (“Arbitral Award”) held that Zostel was entitled to specific performance
of OYO’s obligations under the Term Sheet.

• Given that OYO was in the process of filing for an Initial Public Offer (IPO), Zostel filed a
petition under Section 9 of the Act seeking a restraint on the IPO, so that the execution of
the Arbitral Award in relation to the specific performance of the Term Sheet is not rendered
unenforceable.
THE ARBITRAL AWARD

• In the arbitration, the arbitrator (“Arbitral Tribunal”) had formulated multiple issues to
adjudicate, including questions regarding bindingness of the Term Sheet, whether there was
consensus ad idem between the parties regarding the definitive agreements, and whether the
Zostel was entitled to a specific performance as per the terms of the Term Sheet.

• The Arbitral Tribunal held that: First, on consideration of the Term Sheet as a whole, it
could not be said to be a mere exploratory document. Even though the recital mentioned
that the Term Sheet was not binding, clauses 42 and 73 of the Term Sheet clarified that
the definitive documents were not independent of the Term Sheet. Second, OYO’s
acceptance of communication from Zostel regarding performance of acts mentioned in
the Term Sheet also pointed towards its binding value.
• Third, there could not have been complete consensus ad idem on the draft definitive
agreements, on the premise that Zostel had forwarded multiple draft definitive agreements to
OYO, and negotiations on the same were still underway.

• Finally, Zostel was entitled to specific performance of the Term Sheet, noting that Zostel had
performed all its obligations under the Term Sheet successfully. However, as the definitive
agreements were yet to be executed, the Arbitral Tribunal held that Zostel is entitled to file
appropriate proceedings for specific performance and execution of definitive agreements as
envisaged under the Term Sheet.
SUBMISSIONS OF PARTIES
BEFORE DELHI HC
• Submissions for Zostel:

• First, as the Arbitral Tribunal had held that Zostel is entitled to specific performance of
the Term Sheet, OYO’s IPO should not be allowed as it would frustrate the enforcement
of the award.
• Second, the arbitral tribunal had specifically found OYO to be in default and in breach of
its obligations under the Term Sheet, by failing to execute definitive agreements and
transfer 7% of its shares to Zostel.
• Third, the only hurdle in execution of the definitive agreements was the dissent of a
particular shareholder of OYO, and but for that, the draft agreements were all but
finalized.

• Fourth, the Term Sheet did not envision a situation where OYO did not transfer 7% of its
share to Zostel, and hence claimed it to be a foregone inevitable conclusion.

• Fifth, the draft shareholders agreement between the parties granted Zostel the rights to
7% equity shares of OYO, resultantly, disqualifying OYO from issuing IPO under
Regulation 5(2) of the SEBI (ICDR) Regulations.
• Sixth, the “proceedings for specific performance” mentioned in the Arbitral Award
referred to the petition for enforcement of the arbitral award, as it is impossible to
conclude that the Arbitral Tribunal would have intended Zostel to again seek specific
performance of the Term Sheet separately.
• Submissions for OYO

• First, the Arbitral Award does not offer Zostel substantive rights, and
contended that Zostel was relying on observations made within the Arbitral
Award, while the operative part of the Award did not direct specific
performance of the Term Sheet. There was no consensus ad idem between
Zostel and OYO on the particulars of the Term Sheet, and hence, there
remained no question of directing a specific performance.
• Second, the draft agreements relied upon by Zostel, including the draft
definitive agreements and shareholders agreement, were but drafts and
could not be shown to be an indicator of consensus between the parties.
• Third, the act of transferring 7% of OYO’s shares to Zostel, which Zostel
claimed OYO was in default of performing, was contingent upon the “closing”
of the contract between the two parties, as envisioned in the Term Sheet.
• Fourth, the issuing of IPO would not directly impact the agreement between
Zostel and OYO, and submitted that the only relief Zostel might be able to
claim is the difference in value of the 7% shareholding that OYO is to transfer
to Zostel i.e., prior to and post the IPO.
JUDGMENT

• The Delhi HC primarily relied on two rulings: Dirk India Pvt Ltd v. Maharashtra State
Power Generation Co. Ltd5(“Dirk India”) in relation to the scope of an interim protection
under Section 9 of the Act at a post-award stage; and Mayawanti v. Kaushalya
Devi6 (“Mayawanti”) in relation to the requirement of consensus ad idem as a necessary
condition for specific performance of the contract.
• Scope of Section 9 when invoked at post-award stage:
• The Delhi HC re-affirmed the position of law set out by the Bombay High Court in Dirk India,
which clarifies that if the petition is filed at the post-award stage, it only serves to protect the
“fruits” of the arbitral award. The Delhi HC thereafter analysed what “fruits” can be derived
from the Arbitral Award in question and observed that the Arbitral Award provided Zostel
with a mere entitlement to specific performance of OYO’s obligations under the Term Sheet,
and nothing further.

• The Delhi HC further observed that the Arbitral Award did not direct OYO to immediately
hand over the properties it was to transfer to Zostel on the closing of the Term Sheet, but
merely directed Zostel to take steps towards making OYO fulfil its obligations as per the Term
Sheet.
• Requirement of complete consensus ad idem for specific
performance:
• The Delhi HC restated the position in Mayawanti regarding the requirement of complete
consensus ad idem for securing the remedy of specific performance. The Supreme Court
in Mayawanti had held that if the terms of an agreement are uncertain, and the parties
are not at ad idem, the contract does not exist in the first place, and consequently, there
can be no scope for claiming the remedy of specific performance.

• It observed that, contrary to Zostel’s claim that the parties were on the cusp of
agreement, in the present case the terms of the definitive agreements were clearly not
agreed upon.
CASE IX
Amazon.com Investment Holdings LLC (“Amazon”) v. Future Retail Limited &
Ors. (“Future Group”)

• The Supreme Court allowed the appeal filed by Amazon against the order of the Division
Bench of the Delhi High Court dated March 22, 2021 (“Impugned Order”), and recognized the
validity of an emergency award passed in an India-seated arbitration under Section 17 of the
Arbitration and Conciliation Act, 1996 (“A&C Act”)
INTRODUCTION
1. Emergency Awards in India-seated arbitrations are enforceable under
Section 17 of the Indian A&C Act.
2. An appeal is not maintainable against an order of enforcement of an
emergency award under Section 17(2) of the A&C Act.
3. Depending on the circumstances, parties will need to evaluate whether
emergency arbitration will provide a more effective remedy than seeking
interim reliefs before courts in Section 9 of the A&C Act.
BACKGROUND

• To encapsulate the facts, Amazon initiated arbitration against Future Coupons Pvt, Ltd.
(“FCPL”) and Future Retail Ltd. (“FRL”) under the Rules of Singapore International
Arbitration Centre (SIAC Rules), pursuant to a shareholders’ agreement (“FCPL SHA”).

• As per the FCPL SHA, the seat of arbitration was New Delhi, India. An emergency award
was rendered on October 25, 2020. Since FRL and FCPL did not comply with the
emergency award, Amazon initiated proceedings in the Delhi High Court to enforce the
emergency award. A Single Judge of the Delhi High Court recognized the emergency
award and passed orders to enforce the emergency award.

• However, the Division Bench of the Delhi High Court granted stay on the operation of the
order of the Single Judge.
• In appeal against the order of the Division Bench of the Delhi High Court, the
Supreme Court considered the following questions in the present matter:

• Whether an emergency arbitrator’s award is contemplated under the A&C Act, and
whether an emergency arbitrator’s award is an order under Section 17 of the A&C Act.

• Whether an appeal against an order enforcing an emergency arbitrator’s order under

Section 17(2) is maintainable under Order 43, Rule 1(r) of the Civil Procedure Code.
Parties have the autonomy to
choose emergency arbitration
• The Supreme Court noted that while the A&C Act does not contain the words
“emergency award”, the freedom granted to parties under the A&C Act to agree to
arbitral institutional rules implies that parties have a right to make use of the emergency
arbitration provisions in the institutional rules chosen by the parties.

• By virtue of Section 2(6), Section 2(8), and Section 19(2) of the A&C Act, parties can (a)
agree to authorize an arbitral institution to determine issues that arise between the
parties, (b) agree to include any arbitration rules in their arbitration agreement, and (c)
agree on the procedure to be followed by an arbitral tribunal in conducting its
proceedings.
• The Supreme Court noted that the parties have an indefeasible right to exercise party
autonomy in respect of choosing institutional rules which can include emergency
arbitrators.4 The Supreme Court further stated that the parties, while exercising such a
right to party autonomy, do not bypass any mandatory provision of the A&C Act, as there
is nothing under the A&C Act which prohibits parties from agreeing on a set of rules
providing for the appointment of an emergency arbitrator.
Arbitral tribunal’ under the A&C
Act includes an ‘emergency
arbitrator’
• The Court then considered whether the definition of “arbitral tribunal” contained in
Section 2(1)(d) should so constrict Section 17(1), making it apply only to an arbitral
tribunal that can give final reliefs by way of an interim or final award, and not to an
emergency arbitrator that passes an emergency award.

• Section 2(1)(d) of the A&C Act defines ‘arbitral tribunal’ to mean a sole arbitrator or a
panel of arbitrators. The Supreme Court noted that the definition of ‘arbitral tribunal’
under Section 2(1)(d) of the A&C Act does not include an “emergency
arbitrator”.6 However, it stated that Section 1 opens with the words “unless the context
otherwise requires”.
• When read with Section 2(1)(a) [that provides for “any” arbitration, whether or not
administered by a permanent arbitral institution]and Sections 2(6) and 2(8) [which
permit incorporation of rules of arbitral institutions], it is clear that interim orders
passed by emergency arbitrators under the rules of an arbitral institution would be
included within the ambit and context of orders passed by an ‘arbitral tribunal’
under Section 17(1).

• Therefore, the Court held that when Section 17(1) is concerned, the “arbitral
tribunal” would, when institutional rules apply, include an Emergency Arbitrator, the
context of Section 17 “otherwise requiring” – the context being interim measures
that are ordered by arbitrators.
Recommendation of the
246th Law Commission Report
• The 246th Law Commission Report had suggested that the definition of ‘arbitral tribunal’
be amended to include an emergency arbitrator. The Supreme Court noted that the
mere fact that a recommendation of a Law Commission Report was not followed by the
Indian Parliament, would not necessarily lead to the conclusion that the suggestion of
the Law Commission can never form part of the interpretation of the statute.

• The Supreme Court also referred to the report of the High-Level Committee constituted
by the Government of India under the chairmanship of Justice B.N. Srikrishna (Retd.) to
review the institutionalisation of arbitration mechanism in India (“Srikrishna Committee
Report”).

• The Srikrishna Committee Report stated that it is possible to interpret Section 17(2) of
the A&C Act to enforce emergency awards for India seated arbitrations and
recommended that the A&C Act be amended so that it comes in line with international
practice in favour of recognising and enforcing an emergency award.
Emergency arbitration occurs
‘during arbitral proceedings’
• Remedy under Section 17 of the A&C Act is available to a party only ‘during the arbitral
proceedings’. FRL argued that Section 17 provides for interim reliefs only during the
arbitral proceedings i.e. after the arbitral tribunal is constituted. Hence, emergency
arbitration that occurs prior to arbitral proceedings or prior to the constitution of the
arbitral tribunal, is not covered by Section 17 of the A&C Act.

• The Court disagreed. It relied on Section 21 of the A&C Act, which provides that arbitral
proceedings in respect of a dispute commence on the date on which a request for that
dispute to be referred to arbitration is received by the respondent. Similarly, Rule 3.3 of
the SIAC Rules provides for the commencement of the arbitration as the date of receipt
of the complete ‘Notice of Arbitration’ by the registrar. Taking into account these
provisions, the Supreme Court noted that arbitral proceedings commence when a notice
of arbitration is issued, which is prior to the constitution of an arbitral tribunal
• Since a remedy under Section 17 is available to a party ‘during the arbitral proceedings’, the
powers of a tribunal in granting such a remedy would include powers exercisable by an
emergency arbitrator soon after arbitral proceedings commence. 9 Further, the Supreme Court
also stated that the words ‘arbitral proceedings’ under Section 17 are not limited by any
definition and thus encompass proceedings before an emergency arbitrator.
Emergency Arbitration furthers
the object of the A&C Act
• The Supreme Court further noted that the provision of an emergency award furthers
multiple objectives, including, decongesting the court system and giving parties urgent
interim relief in cases which deserve such relief.

• Considering that party autonomy is respected by the A&C Act and that there is no
prohibition under the A&C Act against the appointment of an emergency arbitrator, the
Supreme Court concluded that an emergency arbitrator’s award, which is exactly like an
order of an arbitral tribunal once constituted, falls within the institutional rules to which
the parties have agreed. As a result, the same is validly covered under Section 17(1) of
the A&C Act.
• Moreover, the Court stated that a party having agreed to institutional rules, cannot
thereafter argue that it is not bound by an emergency arbitrator’s ruling. Such orders are
valid and are made under Section 17(1) of the A&C Act.
CASE X
PASL Wind Solutions Private Ltd. v. GE Power Conversion India Private Ltd.

• PARTY AUTONOMY TRUMPS! SC ALLOWS TWO INDIAN PARTIES TO

CHOOSE FOREIGN SEAT OF ARBITRATION
INTRODUCTION
• Two Indian parties are entitled to elect a seat of arbitration outside India;
• The expression “International Commercial Arbitration” in Part I of the Arbitration Act is
party-centric, whereas, when used in the context of Part II signifies a place-centric
approach;
• Resultantly, a foreign seated arbitration between two Indian parties would qualify as
“International Commercial Arbitration” under Part II of the Arbitration Act, and
enforcement of a foreign award arising thereunder will have to be filed before the High
Court;
• Two Indian parties are entitled to interim reliefs before Indian Courts, even if their
arbitration is seated outside India;
• SC held that two Indian parties are entitled to elect a foreign seat of arbitration. The
Supreme Court further clarified that the arbitral award passed in such cases would be
considered as a foreign award enforceable under the provisions of Part II of the
Arbitration Act, 1996 (“Arbitration Act”).

• Although it has not been expressly ruled by the Supreme Court, a careful review of the
judgment suggests that there may not be any prohibition in two Indian parties electing a
foreign law as the substantive law of the contract, provided the seat of arbitration is
outside India.
FACTUAL BACKGROUND
• Arbitration Proceedings:

• Certain disputes arose between two companies incorporated in India, namely PASL Wind
Solutions Private Ltd. (“Appellant”) and GE Power Conversion India Private Limited
(“Respondent”), in relation to purchase of convertors. The Respondent was a 99%
subsidiary of General Electric Conversion International SAS, France, which in turn was a
subsidiary of the General Electric Company, United States.

• A settlement agreement was executed between the parties on 23 December

2014 (“Settlement Agreement”). The dispute resolution clause therein provided for
arbitration in accordance with the International Chamber of Commerce (“ICC”)
Arbitration Rules with Zurich as the seat of arbitration.
• Disputes arose between the parties under the Settlement Agreement. The Appellant
issued a request for arbitration before the ICC. The Respondent challenged the
jurisdiction of the Tribunal on the ground that two Indian parties cannot elect a foreign
seat of arbitration. Notably, the Appellant opposed the Respondent’s objection on the
ground that Indian law did not bar Indian parties from electing a foreign seat of
arbitration.

• The Tribunal dismissed the Respondent’s objection. However, on Respondent’s

application, the venue of the arbitration was decided as Mumbai in order to save costs.
Subsequently, an arbitral award was passed against the Appellant.
Enforcement Proceedings before
Gujrat High Court:
• The Respondent filed for enforcement of the award under Sections 47 and 49 of the
Arbitration Act before the Gujarat High Court. The Appellant resisted the enforcement
proceedings on the premise that the seat of arbitration was at Mumbai, and that choice
of foreign seat by two Indian parties is against public policy of India (contrary to their
previous stand in the arbitration proceedings).

• The Gujarat High Court upheld the enforcement of the arbitral award. However, it denied
the availability of interim relief to the Respondent under Section 9 of the Arbitration Act
on the ground that the term “international commercial arbitration” in the proviso to
Section 2(2) has the meaning ascribed by Section 2(1)(f) of the Arbitration Act, i.e., in the
context of such arbitration taking place in India.
• The Appellant preferred the present appeal before the Supreme Court, while the
Respondent filed cross-objections challenging the finding of the Gujarat High Court on
the maintainability of petition under Section 9 of the Arbitration Act.
JUDGMENT OF THE SUPREME
COURT
• (i) Seat of arbitration:
• The Appellant raised an objection on the maintainability of the enforcement proceedings
filed under Part II of the Arbitration Act and contended that by applying the ‘closest
connection test’, the seat of arbitration was Mumbai. The Supreme Court disagreed and
observed that the Tribunal had explicitly recorded in the Procedural Order that the seat
of arbitration was Zurich, and the venue was shifted to Mumbai only to save costs to the
parties.

• The Supreme Court also noted that parties had not challenged the Procedural Order. On
this basis, the Supreme Court clarified that the closest connection test applies where the
designation of the seat of arbitration is unclear, which is not applicable in the facts of the
case
• (ii) International Commercial Arbitration and Foreign Awards:
• The Respondent asserted that the arbitral award was a ‘foreign award’ and accordingly
filed for enforcement of the award under Part II of the Arbitration Act. However, the
Appellant contended that the expression “unless the context otherwise requires”
appearing in Section 44 permitted it to import the context of Section 2(1)(f) of the
Arbitration Act into Section 44.
• Simply put, Section 44 of the Arbitration Act applied only when the arbitration involved “(i) an
individual who is a national of, or habitually resident in, any country other than India; or (ii) a body
corporate which is incorporated in any country other than India; or (iii) an association or a body of
individuals whose central management and control is exercised in any country other than India; or
(iv) the Government of a foreign country” as defined in Section 2(1)(f) in Part I of the Arbitration
Act.

• To substantiate the above submission, the Appellant also submitted that the proviso to Section 2(2)
of the Arbitration Act acted as a bridge that connected Part I and Part II of the Arbitration Act.
Hence, definition of international commercial arbitration under Section 2(1)(f) from Part I could be
imported into Section 44 of Part II by virtue of this connection.
• The Supreme Court held that Part I is a completed code that dealt with arbitrations seated in
India, including appointment of arbitrators, commencement of arbitration, making of an
award, challenges and execution of the award. Therefore, it had no application to a foreign-
seated arbitration. Similarly, Part II only prescribes for the enforcement of a foreign award,
with the only exception being Section 45 that deals with referring the parties to arbitration.
Accordingly, the Supreme Court concluded that Part I and II of the Arbitration Act are mutually
exclusive.
• The Supreme Court further held that the context of the term “International Commercial
Arbitration” as used in Part I, i.e., Section 2(1)(f)) of the Arbitration Act is different from Part II
i.e., Section 44. Under Section 2(1)(f), the definition of the expression “International
Commercial Arbitration” is party-centric wherein at least one of the parties to the arbitration
agreement should be a person who is a national of or habitually resident in any country other
than India.

• However, the term “International Commercial Arbitration” under Section 44 signifies a place-
centric approach.

• Thus, if an arbitration is convened between any two parties in a territory outside India, the
New York Convention would apply, and the arbitration will get classified as an “International
Commercial Arbitration”.4 Resultantly, an arbitral award made in such arbitrations would be
considered to be ‘foreign awards’ which are enforceable and recognized under Part II of the
Arbitration Act.
(iii) Contract Act and Public Policy:
• Contrary to their previous stand, the Appellant submitted that two Indian parties
electing a foreign seat of arbitration would be contrary to Sections 23 and 28 of the
Indian Contract Act, 1872 (“Contract Act”).
• With respect to Section 28 of the Contract Act, Exception 1 expressly exempts an
arbitration agreement from being in restraint of legal proceedings.

• The Court relied on the Supreme Court’s ruling in Atlas Exports Industries v. Kotak &
Company (“Atlas”) under the Arbitration Act, 1940 to the effect that Exception 1 to
Section 28 of the Contract Act specifically saves the arbitration of disputes between
two persons, without reference to the nationality of persons who may resort to
arbitration.
• With respect to Section 23 of the Contract Act, the question framed by the Court was
whether the public policy of India interdicts the party autonomy of two Indian persons
referring their disputes to arbitration at a neutral forum outside India.

• The Supreme Court held that for “public policy” under Section 23 of the Contract Act to
be triggered, explicit harm to the public has to be proved.

• Additionally, the Supreme Court held that the freedom of contract had to be balanced
with a clear and undeniable harm to the public, and that there was no public harm in
permitting two Indian parties from getting their disputes arbitrated at a neutral forum
outside India.
• (iv) Section 28(1)(a) of the Arbitration Act:
• The Appellant submitted that two Indian parties electing a foreign seat of arbitration would be
contrary to Sections 28(1)(a) of the Arbitration Act. The Supreme Court held that Section 28(1)
(a), when read with Sections 2(2), 2(6) and 4 of the Arbitration Act, made it clear that the
restriction to adjudicate the dispute in accordance with the substantive law of India was only for
cases where the arbitration was situated in India.

• The Court observed that Section 28(1)(a) of the Arbitration Act makes no reference to an
arbitration being conducted between two Indian parties in a country other than India, and
cannot be held, by some tortuous process of reasoning, to interdict two Indian parties from
resolving their disputes at a neutral forum in a country other than India.

• The Supreme Court observed, “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.
(v) Section 10 of Commercial Courts Act, 2015:
• The Appellant placed reliance on Section 10(3) of the Commercial Courts Act, 2015 (“CC Act”)
which states that in all applications or appeals that arise out of arbitrations other than
International Commercial Arbitrations, the principal civil court of original jurisdiction in a
district would have the jurisdiction.

• Since, two Indian parties electing a foreign seat of arbitration cannot be termed as an
International Commercial Arbitration, Section 10(3) would apply, consequently, the Gujarat
High Court did not have the requisite jurisdiction to adjudicate the case.

• However, the Supreme Court rejected the contention and noted that since the arbitral
award is a foreign award, it has to be enforced under Part II of the Arbitration Act. The
explanation to Section 47 of the Arbitration Act provides that only the High Court would
have jurisdiction to enforce a foreign award
(vi) Ability to secure interim reliefs under Section 9 of the Arbitration Act:
• The Supreme Court categorically observed that when two Indian parties elect a foreign seat of
arbitration, it would be classified as an international commercial arbitration by relying on the
place-centric approach. Accordingly, it ruled that the interim application under Section 9
should be heard in terms of Section 2(e)(ii) of the Arbitration Act, and was therefore
maintainable before the Gujrat High Court.
• Query?