Case Commentary

Case Commentary: Ratnam Sudesh Iyer Vs Jackie Kakubhai Shroff
 INTRODUCTION.
The Arbitration and Conciliation Act, 1996 ("Arbitration Act") was adopted to
consolidate and revise the legislation governing domestic arbitration, international
commercial arbitration, and the execution of foreign arbitral awards, as well as to
define the law governing conciliation. In order to achieve the aforementioned goal,
the Arbitration Act underwent two important amendments in the years 2015 and 2019,
respectively, in order to bring about relevant changes in the country's arbitration
landscape with the express purpose of making India an arbitration friendly country.
In the present case, the challenge before the High Court of Bombay was to an award
made by a learned solitary arbitrator on 10 November 2014 in an international
commercial arbitration ("Award") under the unamended section 34 of the Arbitration
and Conciliation Act, 1996. While setting aside the Award, the HC stated
categorically that it does not pass the minimal judicial review within the limited
parameters of Section 34 of the Act. The High Court stated that, “It is completely
unreasonable, impossible, and perverse. It is partly based on no evidence, partly on
non-application of mind, and partly, by a wholesale misapplication of law resulting
into miscarriage of justice.” Overall, the Award jars the court's conscience and cannot
be upheld since it violates important parts of Indian law's fundamental policy.
 OVERVIEW
On 3.01.2011, the appellant and respondent engaged into a Deed of Settlement to

settle their conflict. The respondent was to be paid US$ 1.5 million, according to
clause 4.1 of the deed. This sum was to be held in escrow by M/s. D.M. Harish & Co.
and handed over to the respondent once it was established that he had dropped his
complaint. Clause 6 stated that if the respondent violated the conditions of the
agreement, the Deed of Settlement would be terminated and the US$ 1.5 million held
in escrow would be released to the appellant. In clause 9, the deed also included an
arbitration clause for resolving disputes. Following the initiation of the arbitral
proceedings by certain occurrences, the arbitrator issued the final award on November
10, 2014, awarding the appellant's claim for damages. On January 24, 2015, the
respondent petitioned the Bombay High Court under Section 34 of the Arbitration and
Conciliation Act, 1996. The learned single counsel set aside the award in accordance
with the judgement dated 20.04.2021, as well as interim protection against withdrawal
of the sum stated in the settlement deed for a limited time. The Division Bench
dismissed the respondents' appeal filed under section 37 of the Act.
 ISSUE
Is it possible that the 2015 amendment to Section 34 will apply to applications filed
prior to the amendment?
 JUDGMENT ANALYSIS
The appellant contended that, because Section 34 of the Act was amended in 2015,
the Award could no longer be challenged on the basis of patent illegality, and that this
could no longer be used to challenge verdicts in international commercial arbitration
disputes. Concerning the nature of the award, the court stated that it is a "international
commercial arbitration" under section 2(f) of the Act, and that the award in question
would be a domestic award arising out of an international commercial agreement. The
court stated in the Arbitration and Conciliation (Amendment) Act, 2015 that by
inserting Explanations to Section 34(2) of the said Act as well as Sub-Section 2A to
Section 34, the extent of the court's involvement became narrower. A distinction is
intended between solely domestic awards and awards deriving from arbitrations other
than international commercial arbitrations, as set out in sub-section 2A of Section 34
of the aforementioned Act, which reads as follows:
“(2A) An arbitral award arising out of arbitrations other than international commercial
arbitrations, may also be set aside by the Court, if the Court finds that the award is
vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous
application of the law or by reappreciation of evidence.”
The heart of the matter is that, while the plea of patent illegality is eligible for an
arbitral award, such an award must be entirely domestic, i.e. the plea of patent
illegality is not viable for an award arising from international commercial arbitration
after the amendment.
The court remarked that it is undisputed that Section 34 proceedings in this case
began prior to the 2015 Amendment Act. The court cited the case of Board of
Control for Cricket in India v. Kochi Cricket Pvt Ltd &Ors 1, in which it was
determined that the 2015 Amendment Act is prospective in nature and would only
apply to arbitral proceedings initiated after the 2015 Amendment Act. The court also
cited the case of Ssangyong Engineering and Construction Company Ltd. v.
National Highways Authority of India2, in which it was determined that Section 34
as amended will only apply to Section 34 applications filed after or on October 23,
2015.
Moreover, in the case of Electro Steel Casting Limited v. Reacon (India) Private
Limited 3, The relevant award was issued on July 30, 2015, according to the Calcutta
High Court, through Hon'ble Justice I.P Mukerji. On November 26, 2015, an
application to set aside the award was filed. The problem occurred because of the
altered provision, Section 36 of the amended 1996 Act, which eliminated the
automatic stay of the arbitral award pending a challenge under Section 34 of the Act.
The Court ruled that the 2015 Amendments did not apply to the subject arbitration
because it began long before the 2015 Amendments went into effect. The Court made
its ruling based on the date the arbitral procedures began.
In the case of Jumbo Bags Limited v. The New India Assurance Company Limited 4,
The Madras High Court, talking through Hon'ble Justice Sanjay Kishan Kaul in
relation to a question regarding the applicability of the 2015 Amendments in relation
to Section 11(6) of the 1996 Act for appointment of an independent arbitrator, held
that the arbitration proceedings had commenced prior to the 2015 Amendments
coming into force, and the Section 11 petition would be governed by the un-affected
Section 11 petition. The Court noted that the new Section 11 requires the Court to
limit its function to simply examining the subject if there is a valid arbitration clause.
Also, in the case of M/s Reliance Capital Limited v. Chandana Creations & Others
5
, in deciding whether the award could be enforced pending a Section 34 proceeding
filed in 2013, the Calcutta High Court ruled that because the Section 34 proceeding
1
Board of Control for Cricket in India v. Kochi Cricket Pvt Ltd & Ors, 2017 (2) Bom CR 113.
2
Ssangyong Engineering and Construction Company Ltd. v. National Highways Authority of India, 2019 SCC
OnLine SC 677.
3
Electro Steel Casting Limited v. Reacon (India) Private Limited, 2016 SCC OnLine Cal 1257.
4
Jumbo Bags Limited v. The New India Assurance Company Limited, 2016 SCC OnLine Mad 9141.
5
M/s Reliance Capital Limited v. Chandana Creations & Others, 2016 SCC OnLine Cal 9558.
was filed prior to the 2015 Amendments, enforcement could not be pursued. The
question of whether Section 36 of the 2015 Amendments applied prospectively or
retrospectively also emerged. The Court found that retrospective application of the
2015 Amendments was also not the legislature's intention, as stated by the Division
Bench in Electrosteel Casting and Shri Nitya Ranjan Jena v. Tata Capital Financial
Services Limited regarding the retrospective application of the 2015 Amendments for
proceedings that were admittedly initiated prior to 23 October 2015.
 CONCLUSION
In the present case, the court explained that Section 34 procedures had already begun
when the 2015 Amendment Act went into effect. The court proceedings were already
subject to the pre-2015 legal position, and a generically written provision such as
Clause 9 of the Deed of Settlement cannot be construed as an agreement to modify the
course of law that the Section 34 procedures were subject to a conspectus of the
aforementioned. It was also stated that, “Section 34 as amended will apply only to
Section 34 applications that have been made to the Court on or after 23.10.2015,
irrespective of the fact that the arbitration proceedings may have commenced prior to
that." The Court then evaluated the Arbitration Award and determined that the
arbitrator's conclusions are not in line with the fundamental policy of Indian law and
should thus be set aside in accordance with the pre-2015 interpretation of Section 34
of the Act. The court upheld the Single Judge's and Division Bench's judgments to the
extent that they interfered with the award and sets it aside.

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Case Commentary: Ratnam Sudesh Iyer Vs Jackie Kakubhai Shroff

On 3.01.2011, the appellant and respondent engaged into a Deed of Settlement to

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