In Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705 it was observed as under:
“Therefore, in our view, the phrase “public policy of India” used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence in addition to the narrower meaning given to the term “public policy” in Renusagar Power Company Ltd. v. General Electric Company, (1994) Supp (1) SCC 644, it is required to be held that the award could be set aside if it is patently illegal. The result would be – award could be set aside if it is contrary to:
- Fundamental policy of India law; or
- The interest of India; or
- Justice or morality; or
- In addition, if it is patently illegal.
Illegality must go to the root of the matter and if the illegality is of trivial nature, it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable, that it shocks the conscience of the Court. Such award is opposed to public policy and is required to be adjudged void.” Uttar Haryana Bijli Vitran Nigam Ltd. v. M/s P.M. Electronics Ltd., 2020 (140) ALR 852.
In Dharma Pratisthanam v. Madhok Construction (Pvt.) Ltd., (2005) 9 SCC 686, a three Judge Bench of the Hon’ble Supreme Court had the occasion to consider the effect of acquiescence on appointment of arbitrator. In that regard, the Hon’ble Supreme Court examined the difference between the unilateral appointment and unilateral reference. While both were termed to be illegal, at the same time, it was observed that it would make a difference if in respect of unilateral appointment and reference, other party submits to the jurisdiction of the arbitrator and waives its rights which it had under the agreement. In that situation, the arbitrator was held entitled to proceed with reference and the party submitting to his jurisdiction and participating in the proceedings precluded and estopped from raising any objection in that regard, at a later stage. If, however, that party had failed to act when called upon, it could not lead to an inference of implied consent or acquiescence being drawn. Thus, the appellant in that case was found to have not responded to the proposal by the other side to join in the appointment of the sole arbitrator. Such an act was not construed as its consent. Meerut Development Authority v. Civil Engineering Construction Corporation, 2020 (3) AWC 2532.
Sub-Section (5) of Section 11 clearly provides that if the parties fail to agree upon any procedure for appointment of an arbitrator, then the party has to call upon other with a request regarding the appointment of an arbitrator requested and in case if the other person declines or the appointment procedure fails, then it gives a cause of action to the person so concerned to file a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996. Invocation of Section 11(6) of the Arbitration and Conciliation Act, 1996 is squarely based on a default of a party.
Under Section 11(6) of the Arbitration and Conciliation Act, 1996 the Court has jurisdiction to make the appointment only when the person including an institution, fails to perform any function entrusted to it under that procedure. Deepak Goel v. Avinash Chandra, 2020 (4) AWC 3720 (LB).
Under Section 15(2) of the Arbitration and Conciliation Act, 1996, in a situation where the mandate of an arbitrator terminates, a substitute arbitrator is required to be appointed according to the rules that were applicable to the appointment of the arbitrator who is replaced. In Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd., (2006) 6 SCC 204, the term “rules” appearing in Section 15(2) of the Act has been understood to be referring to the provisions for appointment contained in the arbitration agreement or any rules of any institution under which the disputes are to be referred to arbitration.
The Hon’ble Apex Court in Government of Haryana v. G.F. Toll Road Pvt. Ltd., (2019) 3 SCC 505, it was held as under:
“The High Court while considering the appointment under Section 15 failed to take note of the provisions of Section 15(2) of the Arbitration and Conciliation Act. Section 15(2) provides that a substitute arbitrator must be appointed according to the rules that are applicable for the appointment of the arbitrator being replaced. This would imply that the appointment of a substitute arbitrator must be according to the same procedure adopted in the original agreement at the initial stage. Deepak Goel v. Avinash Chandra, 2020 (4) AWC 3720 (LB).
The seat of arbitration is a vital aspect of any arbitration proceedings. Significance of the seat of arbitration is that it determines the applicable law when deciding the arbitration proceedings and arbitration procedure as well as judicial review over the arbitration award. The situs is not just about where an institution is based or where the hearings will be held. But it is all about which court would have the supervisory power over the arbitration proceedings. In Enercon (India) Ltd. v. Enercon GmbH, (2014) 5 SCC 1, it was held as under:
“The location of the seat will determine the courts that will have exclusive jurisdiction to oversee the arbitration proceedings. It was further held that the seat normally carries with it the choice of that country’s arbitration/curial law.”
It is well settled that “seat of arbitration” and “venue of arbitration” cannot be used interchangeably. It has also been established that mere expression “place of arbitration” cannot be the basis to determine the intention of the parties that they have intended that place as the “seat” of arbitration. The intention of the parties as to the “seat” should be determined from other clauses in the agreement and the conduct of the parties.” Mankastu Impex Pvt. Ltd. v. Airvisual Ltd., (2020) 5 SCC 399.
When both the purchase order as also the pricing agreement subsists and both the said documents contain the arbitration clauses which are not similar to one another, in order to determine the nature of the arbitral proceedings the said two documents will have to be read in harmony or reconciled so as to take note of the nature of the dispute that had arisen between the parties which would require resolution through arbitration and thereafter arrive at the conclusion as to whether the application filed under Section 11 of the Arbitration and Conciliation Act, 1996 would be sustainable so as to appoint an Arbitrator by invoking Clause 7 of the purchase order; more particularly in a situation where the Arbitral Tribunal has already been constituted in terms of Clause 23 of the agreement.
In that view of the matter, when admittedly the parties had entered into an agreement and there was no consensus ad idem to the terms and conditions contained therein which is comprehensive and encompassing all terms of the transaction and such agreement also contains an arbitration clause which is different from the arbitration clause provided in the purchase order which is for the limited purpose of supply of the produce with more specific details. In that view, it would not be appropriate for the applicant to invoke clause 7 of the purchase order more particularly when the arbitration clause contained in the agreement has been invoked and the Arbitral Tribunal has already been appointed. Balasore Alloys Limited v. Medima LLC, (2020) 9 SCC 136.
In Nathani Steels Ltd. v. Associated Constructions, 1995 Supp (3) SCC 324, it was held as under:
“Even otherwise we feel that once the parties have arrived at a settlement in respect of any dispute or difference arising under a contract and that dispute or the difference is amicable settled by way of a final settlement by and between the parties, unless that settlement is set aside in proper proceedings, it cannot lie in the mouth of one of the parties to the settlement to spurn it on the ground that it was a mistake and proceed to invoke the arbitration clause. If this is permitted the sanctity of contract, the settlement also being a contract, would be wholly lost and it would be open to one party to take the benefit under the settlement and then to question the same on the ground of mistake without having the settlement set aside.” WAPCOS Ltd. v. Salma Dam Joint Venture, (2020) 3 SCC 169.
In Gangotri Enterprises Ltd. v. Union of India, (2016) 11 SCC 720, it was held that the demand of the Government is crystallised or adjudicated upon, the Government cannot withhold the money of the contractor. This judgment is primarily based on the judgment of the Hon’ble Apex Court in Union of India v. Raman Iron Foundry, (1974) 2 SCC 231. In this case it was held that the Government had no right to appropriate the amount claimed without getting it first adjudicated. It was held as under:
“But here the order of interim injunction does not expressly or by necessary implication, carry any direction to the appellant to pay the amounts due to the respondent under other contracts. It is not only in form but also in substance a negative injunction. It has no positive content. What is does is merely to injunct the appellant from recovering, suo motu, the damages claimed by it from out of other amounts due to the respondent. It does not direct that the appellant shall pay such amounts to the respondent. The appellant can still refuse to pay such amounts if it thinks it has a valid defence and if the appellant does so, the only remedy open to the respondent would be to take measures in an appropriate forum for recovery of such amounts where it would be decided whether the appellant is liable to pay such amounts to the respondent or not. No breach of the order of interim injunction as such would be involved in non-payment of such amounts by the appellant to the respondent. The only thing which the appellant is interdicted from doing is to make recovery of its claim for damages by appropriating such amounts in satisfaction of the claim. That is clearly within the power of the court under Section 41(b) of the Arbitration Act, 1940 because the claim for damages forms the subject-matter of the arbitration proceedings and the court can always say that until such claim is adjudicated upon, the appellant shall be restrained from recovering it by appropriating other amounts due to the respondent.” State of Gujarat v. Amber Builders, (2020) 2 SCC 540.
Given the fact that an appellate proceeding is a continuation of the original proceeding as has been held in Lachmeshwar Prasad Shukul v. Keshwar Lal Chaudhuri, AIR 1941 FC 5, and repeatedly followed in various judgments, any delay beyond 120 days in the filing of an appeal under Section 37 from an application being either dismissed or allowed under Section 34 of the Arbitration & Conciliation Act, 1996 should not be allowed as it will defeat the overall statutory purpose of arbitration proceedings being decided with utmost dispatch. N.V. International v. State of Assam, (2020) 2 SCC 109. (See also Union of India v. Varindera Constructions Ltd., (2020) 2 SCC 111.)
In Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd. [Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532 the following has been laid down:
“ The Arbitral Tribunals are private fora chosen voluntarily by the parties to the dispute, to adjudicate their disputes in place of courts and tribunals which are public fora constituted under the laws of the country. Every civil or commercial dispute, either contractual or non-contractual, which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of the Arbitral Tribunals is excluded either expressly or by necessary implication. Adjudication of certain categories of proceedings are reserved by the legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not expressly reserved for adjudication by public fora (courts and tribunals), may by necessary implication stand excluded from the purview of private fora. Consequently, where the cause/dispute is inarbitrable, the court where a suit is pending, will refuse to refer the parties to arbitration, under Section 8 of the Act, even if the parties might have agreed upon arbitration as the forum for settlement of such disputes.
The well-recognised examples of non-arbitrable disputes are: (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding-up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes.
It may be noticed that the cases referred to above relate to actions in rem. A right in rem is a right exercisable against the world at large, as contrasted from a right in personam which is an interest protected solely against specific individuals. Actions in personam refer to actions determining the rights and interests of the parties themselves in the subject-matter of the case, whereas actions in rem refer to actions determining the title to property and the rights of the parties, not merely among themselves but also against all persons at any time claiming an interest in that property. Correspondingly, a judgment in personam refers to a judgment against a person as distinguished from a judgment against a thing, right or status and a judgment in rem refers to a judgment that determines the status or condition of property which operates directly on the property itself.
Generally and traditionally all disputes relating to rights in personam are considered to be amenable to arbitration; and all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration. This is not however a rigid or inflexible rule. Disputes relating to subordinate rights in personam arising from rights in rem have always been considered to be arbitrable.” Emaar MGF Land Ltd. v. Aftab Singh, (2019) 12 SCC 751