All Important Judgments

Whether a counter-claimant who did not participate in pre-institution mediation under Section 12A of Commercial Courts Act, 2015 and the mediation process was declared as non-starter, can lodge counter-claim in a commercial suit? | Whether Section 12A is also applicable to any counter-claim? – Adity A Birla Fashion and Retail Ltd. Vs. Mrs Saroj Tandon – Delhi High Court

In this important judgment, Hon’ble Delhi High Court held that

(i) The Commercial Courts Act 2015 and Civil Procedure Code (CPC) do not contain any provision providing for different treatment for any counter-claim.
(ii) The opposite party in counter-claim, thus, gets an ‘indefeasible legal right to participate in mediation’ prior to the institution of counter-claim.
(iii) Merely because, such option was availed/ attempted to be availed in the initial stage and proved to be unsuccessful or returned non-starter, would not suggest and signify that any counter-claimant can straightaway file a commercial suit, not contemplating any urgent relief.
(iv) Process of pre-institution mediation is mandatory for every suit involving a commercial suit and no distinction can be drawn when it comes to a counter-claim involving a commercial dispute and not contemplating any urgent relief. As per the mandate of Patil Automation Pvt. Ltd. (2022) ibclaw.in 101 SC, any such suit, which has been filed without taking recourse of Section 12-A of Commercial Courts Act, needs to be rejected under Order VII Rule 11 CPC.

Whether a counter-claimant who did not participate in pre-institution mediation under Section 12A of Commercial Courts Act, 2015 and the mediation process was declared as non-starter, can lodge counter-claim in a commercial suit? | Whether Section 12A is also applicable to any counter-claim? – Adity A Birla Fashion and Retail Ltd. Vs. Mrs Saroj Tandon – Delhi High Court Read Post »

Whether the arbitration clause contained on the reverse of the delivery challan can be a basis for seeking reference of the dispute to arbitration? – Goyal MG Gases Pvt. Ltd. Vs. EDAC Engineering Ltd. – Delhi High Court

Hon’ble Delhi High Court held that in this case, the respondent raised purchase orders on the petitioner, against which the petitioner supplied goods under invoices. Delivery of the goods was taken by the respondent under delivery challans. The purchase orders raised on the petitioner by the respondent did not contain any arbitration clause. The petitioner seeks to invoke the arbitration clause contained in the terms and conditions of the delivery challans.

Whether the arbitration clause contained on the reverse of the delivery challan can be a basis for seeking reference of the dispute to arbitration? – Goyal MG Gases Pvt. Ltd. Vs. EDAC Engineering Ltd. – Delhi High Court Read Post »

Whether an Arbitral Tribunal can add/ join or delete parties to arbitration proceeding or the jurisdiction to do so vests only with the referral Court? – Indraprastha Power Generation Company Ltd. Vs. Hero Solar Energy Pvt. Ltd. – Delhi High Court

Hon’ble Delhi High Court held that the Section 11 Court should leave, to the Arbitral Tribunal, the decision as to whether a non-signatory to the arbitration agreement should be bound by it. The corollary would obviously be that if the Arbitral Tribunal were to find that a non-signatory is bound by arbitration agreement, it would necessarily have to include such non-signatory in the arbitration proceedings. Following Cox and Kings-II, therefore, it may be possible to argue that an Arbitral Tribunal does possess the jurisdiction to implead non- signatories who may be bound by the outcome of the arbitral proceedings.

However, a party cannot be impleaded merely to support the stand taken by the litigant before the Arbitral Tribunal. It is always open to a party before the Arbitral Tribunal to lead the evidence of a non-signatory, if it so desires to support its stand. The non-signatory does not have to be made a party in the arbitral proceedings merely for that purpose.

Whether an Arbitral Tribunal can add/ join or delete parties to arbitration proceeding or the jurisdiction to do so vests only with the referral Court? – Indraprastha Power Generation Company Ltd. Vs. Hero Solar Energy Pvt. Ltd. – Delhi High Court Read Post »

The power of the Arbitrator to grant pre-reference interest, pendente lite interest, and post-award interest under Section 31(7) of the Arbitration and Conciliation Act, 1996 – Pam Developments Pvt. Ltd. Vs. The State of West Bengal and Anr. – Supreme Court

The Hon’ble Supreme Court has summarised the law on interest under Arbitral awards considering various judgments.

The power of the Arbitrator to grant pre-reference interest, pendente lite interest, and post-award interest under Section 31(7) of the Arbitration and Conciliation Act, 1996 – Pam Developments Pvt. Ltd. Vs. The State of West Bengal and Anr. – Supreme Court Read Post »

If an Arbitral Tribunal constituted by the High Court under Section 11(6), an application under Section 29A(4) of the Arbitration Act would lie to the High Court and if an Arbitral Tribunal constituted as per Section 11(2), the application under Section 29A(4) would lie to the principal Civil Court of original jurisdiction in a district and includes the High Court in exercise of its ordinary original jurisdiction – Sheela Chowgule Vs. Vijay V. Chowgule and Ors. – Bombay High Court

The Larger Bench of Hon’ble Bombay High Court held that the term “Court” for the purpose of Section 29A(4) would be the “Court” which appointed the Arbitrator(s) under Section 11(6) of the Arbitration Act i.e. the High Court in the present case and therefore, answer the reference thus :

(i) In the event an Arbitral Tribunal constituted by the High Court under Section 11(6) fails to complete the proceedings within the stipulated period/extended period, then an application under Section 29A(4) would lie to the High Court in case of a domestic arbitration.

(ii) In answer to the second question, we opine that in the event an Arbitral Tribunal consisting of three Arbitrators is constituted as per Section 11(2) i.e. with agreement and consent of the parties, fails to complete the proceedings within the stipulated period/extended period, the application under Section 29A(4) would lie to the principal Civil Court of original jurisdiction in a district and includes the High Court in exercise of its ordinary original jurisdiction.

If an Arbitral Tribunal constituted by the High Court under Section 11(6), an application under Section 29A(4) of the Arbitration Act would lie to the High Court and if an Arbitral Tribunal constituted as per Section 11(2), the application under Section 29A(4) would lie to the principal Civil Court of original jurisdiction in a district and includes the High Court in exercise of its ordinary original jurisdiction – Sheela Chowgule Vs. Vijay V. Chowgule and Ors. – Bombay High Court Read Post »

What is the date to determine the Foreign Exchange Rate for converting the Arbitral award amount expressed in foreign currency to Indian rupees? | What would be conversion date, when the Award Debtor deposits some amount before the court during the pendency of proceedings challenging the award? – DLF Ltd. (Formerly Known as DLF Universal Ltd.) and Anr. Vs. Koncar Generators and Motors Ltd. – Supreme Court

Hon’ble Supreme Court held that:

i. The statutory scheme of the Act makes a foreign arbitral award enforceable when the objections against it are finally decided. Therefore, as per the Act and the principle in Forasol v. ONGC, the relevant date for determining the conversion rate of foreign award expressed in foreign currency is the date when the award becomes enforceable.
ii. When the award debtor deposits an amount before the court during the pendency of objections and the award holder is permitted to withdraw the same, even if against the requirement of security, this deposited amount must be converted as on the date of the deposit.
iii. After the conversion of the deposited amount, the same must be adjusted against the remaining amount of principal and interest pending under the arbitral award. This remaining amount must be converted on the date when the arbitral award becomes enforceable, i.e., when the objections against it are finally decided.

What is the date to determine the Foreign Exchange Rate for converting the Arbitral award amount expressed in foreign currency to Indian rupees? | What would be conversion date, when the Award Debtor deposits some amount before the court during the pendency of proceedings challenging the award? – DLF Ltd. (Formerly Known as DLF Universal Ltd.) and Anr. Vs. Koncar Generators and Motors Ltd. – Supreme Court Read Post »

Applicability of section 36(2) of Arbitration and Conciliation Act, 1996 to Execution Proceeding initiated under section 36(1) and power of Executing as well as Appellate Court to stay the Execution Proceeding during pendency of an Appeal preferred under Section 37 – Birla Institute of Management & Technology (BIMTECH), Gothapatna, Bhubaneswar Vs. Fiberfill Interiors & Constructions, U.P. – Orissa High Court

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Applicability of section 36(2) of Arbitration and Conciliation Act, 1996 to Execution Proceeding initiated under section 36(1) and power of Executing as well as Appellate Court to stay the Execution Proceeding during pendency of an Appeal preferred under Section 37 – Birla Institute of Management & Technology (BIMTECH), Gothapatna, Bhubaneswar Vs. Fiberfill Interiors & Constructions, U.P. – Orissa High Court Read Post »

Whether the Court can extend the mandate of an Arbitrator after its termination if the application under Section 29A of Arbitration and Conciliation Act, 1996 is filed post-termination – Ashok Kumar Gupta Vs. M.D. Creations and Ors. – Calcutta High Court

In this judgment, Hon’ble Kolkata High Court clarifies following issues:

(i) Whether section 29A of the Arbitration Act debars an application from being filed after the termination of mandate of the Arbitrator?
(ii) Whether the court’s powers to extend the mandate is taken away if the application for extension is filed post-termination?
(iii) Whether the Rohan Builders ratio operates as a binding precedent on this Court?
(iv) The effect of the 176th Report of the Law Commission of India on the Arbitration and Conciliation (Amendment)Bill, 2001, which ultimately resulted in introduction of Section 29-A, by the Amending Act of 2016, to the 1996 Act
(v) The purpose of Section 29-A of the Arbitration Act.

Whether the Court can extend the mandate of an Arbitrator after its termination if the application under Section 29A of Arbitration and Conciliation Act, 1996 is filed post-termination – Ashok Kumar Gupta Vs. M.D. Creations and Ors. – Calcutta High Court Read Post »

Only when a pending suit relating to a commercial dispute is transferred to the Commercial Division, the provisions of Commercial Courts Act, 2015 will apply and till such time, the mandatory time period of 120 days for filing written statement would not apply – Dish TV India Ltd. Vs. Gulf DTH FZ LLC and Ors. – Delhi High Court

Hon’ble Delhi High Court held that:

(i) Only when a pending suit relating to a ‘commercial dispute’ is transferred to the Commercial Division, the provisions of Commercial Courts Act will apply and till such time, the mandatory time period of 120 days for filing written statement would not apply.
(ii) Till the time the present suit was converted into a commercial suit, it continued to be an ordinary civil suit.
(iii) Once, the suit pertaining to a ‘commercial dispute’ has not been filed as a commercial suit before the commercial division, the said suit cannot automatically be treated as a commercial suit unless a competent court declares the same to be a commercial suit and directs conversion of the suit into a commercial suit.
(iv) The provisions of the Commercial Courts Act, including the time period for filing of the written statement, would apply from the date on which the suit was converted to a commercial suit.
(v) The present suit would qualify as a pending suit and in terms of Section 15 of the Commercial Courts Act, was required to be transferred to the Commercial Division of this Court.

Only when a pending suit relating to a commercial dispute is transferred to the Commercial Division, the provisions of Commercial Courts Act, 2015 will apply and till such time, the mandatory time period of 120 days for filing written statement would not apply – Dish TV India Ltd. Vs. Gulf DTH FZ LLC and Ors. – Delhi High Court Read Post »

Framework for Revival and Rehabilitation of MSMEs [Notification dated 29.05.2015] is binding to Banks/ Secured Creditors under SARFAESI and the entire exercise of the framework is required to be carried out by Banking Companies before the accounts of MSMEs turn into NPA – Pro Knits Vs. The Board of Directors of Canara Bank and Ors. – Supreme Court

Hon’ble Supreme Court has set aside the decision of Bombay High Court and has held that:

(i) The Instructions for the Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises as notified by the Central Government vide the Notification dated 29.05.2015 having statutory force, are binding to all Scheduled Commercial Banks, licensed to operate in India by the Reserve Bank of India, as stated in the said Directions.
(ii) The whole process of enforcement of security interest under the SARFAESI Act, could be initiated only when the borrower makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, in view of Section 13(2) of the said Act.
(iii) The Banking companies though may be ‘secured creditors’ are bound to follow the same, before classifying the loan account of MSME as NPA.

The Hon’ble Court also held that when it is mandatory or obligatory on the part of the Banks to follow the Instructions/Directions issued by the Central Government and the Reserve Bank of India with regard to the Framework for Revival and Rehabilitation of MSMEs, it would be equally incumbent on the part of the concerned MSMEs to be vigilant enough to follow the process laid down under the said Framework, and bring to the notice of the concerned Banks, by producing authenticated and verifiable documents/material to show its eligibility to get the benefit of the said Framework.

Framework for Revival and Rehabilitation of MSMEs [Notification dated 29.05.2015] is binding to Banks/ Secured Creditors under SARFAESI and the entire exercise of the framework is required to be carried out by Banking Companies before the accounts of MSMEs turn into NPA – Pro Knits Vs. The Board of Directors of Canara Bank and Ors. – Supreme Court Read Post »

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