ARBITRATION ACT — LIST OF CASES

Section 2(1)(b) and Section 7: ARBITRATION AGREEMENT

Bihar State Mineral Development Corporation v. Encon Builders Pvt Ltd

- essential elements arbitration agreement

Jagdish Chander v. Ramesh Chander

- when option exists to refer the dispute to arbitration or not, then it is NOT a
binding agreement

Chloro Controls Pvt Ltd. v. Severn Trent Water Purifier Company

- whether arbitration clause in the Principal agreement makes ancillary
agreements binding to arbitration clause as well? Answered in affirmative

Wellington Assn v. Kirti Mehta

- SC held that section 7 does not cover a situation where parties agree that they
‘may’ file a suit in case of dispute or may file a suit in case of dispute or may
enter in to arbitration proceedings. ‘Arbitration agreement’ under Section 7
means an agreement by the parties to submit to arbitration. It postulates an
agreement, which necessitates or mandates the parties to appoint an arbitrator
and then submit their disputes to arbitration.
- The intention to submit to arbitration in an arbitration agreement must be made
in unequivocal terms. Intention needs to be clear as day and not vague or
optional.

Great Offshore Ltd. v. Iranian Offshore Engineering and Construction

Company
- technical irregularities in an arbitration agreement per se will not make it invalid.
- The intention of the parties to arbitrate is of utmost importance in deciding on
the validity of an arbitration agreement.
- The judgment also lays down that the courts, while deciding on an application for
appointment of an arbitrator, should not go into technicalities of the agreement
in question. The technicalities such as stamping, seals, signatures or production
of original agreement have been described by the Court as ‘red tape that has to
be removed before the parties can get what they really want – an efficient and
potentially cheap resolution of their dispute’ and these technical issues are to be
considered as mere indicators of intent and should not be insisted upon if parties
are able to show intent (to arbitrate) in other ways.

U.P Rajkiya Nirman Nigam Ltd. (U.P State Construction Corporation) v. Indure
Pvt Ltd
- appointment of arbitrator and subsequent challenge to the arbitration
proceedings is valid, the party is not estopped from challenging the existence of
agreement.

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 Section 2 (1) (f)- International Commercial Arbitration & Seat of
Arbitration

Pre BALCO:

Bhatia International v. Bulk Trading-2002

Venture Global Engineering v. Satyam Computers (now Tech Mahindra) -

2008

TDM Infrastructure v. UE Development - 2008

Post BALCO:

Bharat Aluminium Company Ltd v. Kaiser Aluminium Technical Services

2007

Yograj Infrastructure v. Ssang Yong Engineering and Construction Co Ltd

-2011

Enercon India v. Enercon GmBH- 2014

I-MAX Corporation vs E-CITY Entertainment Pvt Ltd

- CHALLENGING FOREIGN ARBITRATION AWARD U/S 34 OF THE ACT
- The Apex Court considered whether to maintain a petition challenging a foreign
award under Section 34 of the Act in India, under the pre-BALCO regime, which
permits challenges to foreign awards in India unless the parties have expressly or
impliedly excluded the operation of Part I of the Act and in its judgment while
setting aside the position taken by the Bombay High Court, has significantly
blurred this categorization and the position which stands out as on date can be
summarized as: "The choice of institutional arbitral rules (ICC Rules in this case)
and the consequent choice of seat by the arbitral institution (London) operated as
exclusion of Part I of the Arbitration and Conciliation Act, 1996, thereby ousting the
jurisdiction of Indian Courts to maintain and entertain a challenge to the foreign
award.."

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 Section 8 - Power of Judicial Authority to refer the case to Arbitration

Haryana Telecom Ltd. v Sterlite Industries India Ltd.

Section 11- Appointment of Arbitrators

Ludhiana Improvement Trust & Anr v Today Homes and Infrastructure

(Pvt) Ltd
- It was contended and upheld that since an arbitration agreement obtained
fraudulently would be void and unenforceable, it would be necessary for the
court to exercise its judicial power under section 11 of the Act, as held in SBP &
Co v Patel Engineering Ltd, and decide on the existence of an arbitration
agreement prior to the appointment of the arbitral tribunal.

Section 11 (8) - Disclosure by Arbitrators in writing

National Insurance Company Ltd. v. Boghara Polyfab Pvt. Ltd., (2009) 1

SCC 267
(see SBP v Patel Engineering case)
Facts:
- The respondent (Insured) obtained a standard Fire and Special Perils (with a
floater) Policy from the appellant (Insurer) to cover its goods in its godowns
situated at Surat.
- The appellant issued an additional endorsement increasing the sum insured.
- The respondent reported loss/damage to their stocks on account of heavy rains
and flooding.
- The appellant informed the surveyor that the insured sum was less than what he
had taken into account.
- On this, dispute arouse between the parties as to the amount to be paid.
Judgment:
- The CJ, in exercising his powers under Section 11, does not have to decide all the
preliminary questions set out in Patel Engineering. The Court segregated the
preliminary issues into three categories, that is, “(i) issues which the Chief
Justice or his designate is bound to decide; (ii) issues which he can also decide,
that is, issues which he may choose to decide; and (iii) issues which should be
left to the Arbitral Tribunal to decide.”
- The first category included the CJ’s territorial jurisdiction as well as the issue of
whether there was an arbitration agreement and whether the Section 11
applicant is indeed a party to the agreement.
- The second, optional category included issues of whether claim is a dead
(barred by limitation) claim or a live claim and whether the parties have
concluded their contract by recording satisfaction of their mutual rights and
obligation or by receiving the final payment without objection. If the Chief Justice
did decide to rule on these optional issues, his decision would be final and
cannot be reopened by the tribunal. However, the court urged the Chief Justice
to exercise caution in exercising this option and to be guided by the objective of

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 the Act of “expediting the arbitration process with minimum judicial
intervention”.
- The last category of issues which the Chief Justice should not decide included
issues of “(i) Whether a claim made falls within the arbitration clause (as for
example, a matter which is reserved for final decision of a departmental
authority and excepted or excluded from arbitration)” or “(ii) Merits or any claim
involved in the arbitration.”

Picasso v. Pick-a-Cet Consultancy Services

- Picasso and Pick-A-Cent had entered into a Memorandum of Understanding
(“MoU”) on July 1, 2009 in terms of which Picasso was to grant Pick-A-Cent a
franchisee of the ‘Picasso Animation College’ in Bangalore. The MoU provided
for disputes arising from the agreement to be referred to a sole arbitrator.
Neither party contested the existence of a valid MoU or arbitration agreement.
However, Pick-A-Cent alleged that Picasso had made certain misrepresentations
regarding ownership of intellectual property transferred between the parties.
Pick-A-Cent relied on a case to argue that allegations of fraud must be settled in
Court and not through arbitration.
- Denying the claim, the Court noted that the decision cited had been passed prior
to the amendments to the Act, which has changed the law significantly. Under
the amended Act, sub-section 6A of Section 11 requires that the court confine its
examination of petitions under Section 11 to the existence of an arbitration
agreement. The Court observed that at this stage of proceedings, it could not
examine whether Pick-A-Cent has a justified claim of fraud against Picasso which
would be a question to be determined by the arbitrator in the arbitration
proceedings. Thus, as long as the parties agreed about the existence of an
arbitration agreement, the Court was bound to appoint an arbitrator.
- Where a valid arbitration agreement has been entered into by the parties, the
Court would necessarily have to appoint an arbitrator. Any allegations as to
arbitrability of the dispute or the jurisdiction of the tribunal would be examined
by the arbitrator in the arbitral proceedings and not by the court.

Datar Switchgear v. Tata Finance

- If the parties to an arbitration agreement have agreed upon procedure for
arbitration and they do not act according to that consented procedure, the in
such a case, the opposite party may move the Court U/S 11 of the Act.
- 30 day statutory period is to be provided as U/S 11 Cl. (4) and (5)
Reliance, PB and NIKO v UOI

Is appointment of an Arbitrator by the Sc/ HC’s an Administrative or Judicial Act?

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(refer to book)
Before: Appointment of Arbitrator by the SC/ HC’s is an Administrative Act

Konkan Railway v. Mehul Construction

Konkan Railway v. Rani Engineering

After: Appointment of Arbitrator by the SC/ HC’s is a Judicial Act

SBP Ltd v. Patel Engineering - 7 Judge Bench, SC - (2005) 8 SCC 618

• The power exercised by the Chief Justice of the High Court or the Chief
Justice of India under S. 11(6) of the Act is not an administrative power. It is
a judicial power.
• The power under S. 11(6) of the Act, in its entirety, could be delegated, by
the Chief Justice of the High Court only to another judge of that court and by
the Chief Justice of India to another judge of the Supreme Court.
• In case of designation of a judge of the High Court or of the Supreme Court,
the power that is exercised by the designated, judge would be that of the
Chief Justice as conferred by the statute.
• The Chief Justice or the designated judge will have the right to decide the
preliminary aspects as indicated in the earlier part of this judgment. These
will be, his own jurisdiction, to entertain the request, the existence of a valid
arbitration agreement, the existence or otherwise of a live claim, the
existence of the condition for the exercise of his power and on the
qualifications of the arbitrator or arbitrators. The Chief Justice or the judge
designated would be entitled to seek the opinion of an institution in the
matter of nominating an arbitrator qualified in terms of S. 11(8) of the Act if
the need arises but the order appointing the arbitrator could only be that of
the Chief Justice or the judge designate.
• Designation of a district judge as the authority under S. 11(6) of the Act by
the Chief Justice of the High Court is not warranted on the scheme of the Act.
• Once the matter reaches the arbitral tribunal or the sole arbitrator, the High
Court would not interfere with orders passed by the arbitrator or the arbitral
tribunal during the course of the arbitration proceedings and the parties
could approach the court only in terms of Section 37 of the Act or in terms of
S. 34 of the Act.
- SC held that the appointing function in Section 11 is a judicial function where the
Chief Justice should examine certain jurisdictional questions like the existence and
validity of the arbitration agreement. The exact scope of enquiry of the Chief
Justice was set out by the Supreme Court as follows:
“It is necessary to define what exactly the Chief Justice, approached with an
application under Section 11 of the Act, is to decide at that stage. Obviously, he
HAS TO DECIDE his own jurisdiction in the sense, whether the party making
the motion has approached the right High Court. He has to decide whether there
is an arbitration agreement, as defined in the Act and whether the person
who has made the request before him, is a party to such an agreement. It
is necessary to indicate that he CAN ALSO DECIDE the question whether the
claim was a dead one; or a long barred claim that was sought to be resurrected
and whether the parties have concluded the transaction by recording
satisfaction of their mutual rights and obligations or by receiving the final payment
without objection. CANNOT DECIDE: It may not be possible at that stage, to
decide whether a live claim made, is one which comes within the purview

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of the arbitration clause. It will be appropriate to leave that question to
be decided by the arbitral tribunal on taking evidence, along with the
merits of the claims involved in the arbitration. The Chief Justice has to
decide whether the applicant has satisfied the conditions for appointing an
arbitrator under Section 11(6) of the Act…”

Chloro Controls Pvt Ltd. v. Severn Trent Water Purifier Company (2013) 1
SCC 641
- A three-judge bench of the Supreme Court said that “it is only for the purpose of
finding out whether the arbitral procedure has to be started that the Chief Justice
has to record satisfaction that there remains a live issue in between the parties.
- … The Chief Justice only has to record his satisfaction that prima facie the issue
has not become dead by the lapse of time or that any party to the agreement has
not slept over its rights beyond the time permitted by law to agitate those issues
covered by the agreement….”
- Thus, “…the Chief Justice may not decide certain issues finally and upon
recording satisfaction that prima facie the issue has not become dead even leave
it for the Arbitral Tribunal to decide.”
- The Court also upheld the categorisation laid down in Boghara Polyfab Private
Limited: “We have no reason to differ with the classification carved out in National
Insurance Co. as it is very much in conformity with the judgment of the
Constitution Bench in SBP.”

Section 12: Grounds of Challenge of Appointment of an Arbitrator

Dream Valley Farms Pvt Ltd v Religare (2016 SC)

- The SC entertained a petition seeking an appointment of an arbitrator, on the
ground that the arbitrator presiding over the arbitral proceedings had made
misleading disclosures.
- Dream Valley and Religare started arbitration proceedings and appointed a sole
arbitrator in pursuance of the same.
- The arbitrator made the declaration in the format of the Sixth Schedule of the
amended Act, stating that he had been presiding over 20 arbitrations out of
which a majority formed a part of disputes in connection with group companies
without mentioning whether these group companies were connected to Religare.
- After the proceedings had commenced, a further disclosure by the arbitrator
revealed that the arbitrator had been appointed by Religare in twenty matters
and was in fact, serving as an arbitrator in twenty seven matters related
to Religare. Interestingly, instead of initiating a process of challenging the
appointment of the arbitrator under Section 13 of the Act, Dream Valley filed the
present petition under Section 11 for appointment of a new impartial arbitrator.
- The Court held that had misled Dream Valley – suppressing facts that ought to
have been disclosed in the first instance. Thus noting, the Court held that the
arbitrator had become de jure disqualified from continuing in his position
in terms of Section 14(1)(a) of the Act, and his mandate accordingly
stood terminated.
- The Court emphasised on the amendments made to Section 12 and 13 of the
Act- which impose a mandatory obligation on a person approached in connection
with appointment as an arbitrator to disclose any circumstances which are likely
to give rise to justifiable doubts as to his/her impartiality or independence.

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