"I realise that some of my criticisms may be mistaken; but to refuse to criticize judgements for fear of being mistaken is to abandon criticism altogether... If any of my criticisms are found to be correct, the cause is served; and if any are found to be incorrect the very process of finding out my mistakes must lead to the discovery of the right reasons, or better reasons than I have been able to give, and the cause is served just as well." -Mr. HM Seervai, Preface to the 1st ed., Constitutional Law of India.

Thursday, December 8, 2016

Arbitration in India: New Developments

We've not been blogging for some time but the period of lull is over. In this post, we intend to bring to the readers a few developments in Indian arbitration law and provide link comments on those developments.

Raffles Design Intl. India Pvt. Ltd v. Educomp Professional Education (Del HC: Oct. 2016): Non-applicability of Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 to arbitration related court proceedings; whether Part I has been excluded?; Non-availability of relief under Section 9 to enforce orders of the arbitral tribunal; power of the court to award interim relief under S. 9 independent of the tribunal's orders; non-availability of relief under S. 27(5) (purportedly contempt) for disobedience of interim relief awarded by a Singapore seated arbitral tribunal.  

Comments: here and here

Ayyasami v. Paramasivam (SC: Oct. 2016): Disputes involving fraud are non-arbitrable; But allegations of such fraud should not only be serious and in normal course constitute a criminal offence but also that they "are also complex in nature and the decision on these issues demand extensive evidence for which civil court should appear to be more appropriate forum than the Arbitral Tribunal." The court later held: "It is only in those cases where the Court, while dealing with Section 8 of the Act, finds that there are very serious allegations of fraud which make a virtual case of criminal offence or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by civil court on the appreciation of the voluminous evidence that needs to be produced, the Court can sidetrack the agreement by dismissing application under Section 8 and proceed with the suit on merits."

The blogger still thinks N Radhakrishnan is based on shaky foundations and is liable to be overruled. If at all disputes of the nature mentioned in Ayyasami have to be made non-arbitrable, it could be only for the purposes of bringing such disputes tainted by serious allegations of fraud to the public domain rather than deciding it in arbitration, which is private and confidential. Unfortunately, N. Radhakrishnan and Ayyasami are based on the misconceived basis that "the principle of common law that certain disputes which are of public nature, etc. are not capable of adjudication and settlement by arbitration and for resolution of such disputes, Courts, i.e. public for a, are better suited than a private forum of arbitration." This is totally misconceived considering that English law abandoned the legal position, as has been argued in this paper.

Comments: here and here

[Note: The links are just one of many comments on the topic and there is no particular reason for providing only those links and not others. Readers may please provide links to more comprehensive analyses in the comment section of this blog post.]

Monday, November 14, 2016

Symposium Alert: 10th Annual NLSIR Symposium on Regulating E-Commerce in India

Symposium Announcement:

The National Law School of India Review (NLSIR), the flagship journal of the National Law School of India University (NLSIU), Bangalore is pleased to announce the 10th Annual NLSIR Symposium on Regulating E-Commerce in India scheduled to be held on 26-27 November, 2016 at the International Training Centre, National Law School of India University, Bangalore. 

The E-commerce sector in India has seen tremendous growth in recent years. However, the legal environment has imposed one of the biggest challenges to the growth of the sector, with the development of law seldom keeping pace with business innovation. The Symposium puts these issues in the spotlight with four sessions discussing various aspects such as foreign investment, taxation, and liability.

Confirmed speakers for the Symposium include Mr. Chetan Nagendra, Partner, AZB Partners, Ms. Ashwini Vittalchar, Partner, Samvaad, Mr. Mahesh Murthy, Founder, Pinstorm, Mr. Suhaan Mukerji, Partner, PLR Chambers, Mr. Samsuddha Majumder, Partner, Trilegal, Mr. Rajesh Simhan, Partner, Nishith Desai, Mr. Promod Jain, Tax-Director, Flipakrt, Ms. Nisha Uberoi, Partner, AZB Partners, Mr. Manas Chaudhary, Partner, Khaitan & Co., Mr. Ramji Srinivasan, Senior Advocate, Mr. Yaman Verma, Senior Associate, Shardul Amarchand, Prof. Rahul Singh, NLSIU, Bangalore, Mr. Pranav Mehra, Snapdeal and Ms. Pratibha M. Singh, Senior Advocate, and more are yet to confirm.


This year, the discussions will be divided into four panels:
Session I: Business Models and Regulation of Foreign Investment
(Forenoon, 26th November, 2016)
Session II: Indirect Taxation: Challenges and Concerns
(Afternoon, 26th November, 2016) 
Session III: Interplay between E-Commerce and Competition Law
(Forenoon, 27th November, 2016)
Session IV: Liability Regimes: Ensuring Compliance
(Afternoon, 27th November, 2016)

Registration charges are Rs. 500 for Students and Rs. 1000 for Professionals. To register for the event, please fill out this form - goo.gl/S5qkhm

For more details visit our Facebook page at https://www.facebook.com/nlsir/

For further information, please contact Akshat Agarwal (Chief Editor): +91-9731390988 ; Sharwari Pandit (Deputy Chief Editor) : +91-9619439861 or email us at mail.nlsir@gmail.com

Gary B. Born Essay Writing Competition: Results

Message from CARTAL, NLU Jodhpur:

The NLU Jodhpur Centre for Advanced Research and Training in Arbitration Law (CARTAL) is pleased to announce the results of the Gary B. Born National Essay Writing Competition on International Arbitration. The name of the winners can be accessed from here.

Friday, October 21, 2016

Indian Parties Agreeing on Foreign Seat: Sasan Power v North American Coal: Part II

In the previous post on this topic, we had given an introduction to Sasan Power Ltd. v. North American Coal Corporation India Private Limited, a recent ruling of the Supreme Court on an interesting issue. Readers not familiar with the facts are advised to have a look at the previous post. For those who don't want to do so, we'll try to touch upon facts as and when they become relevant for the discussion.

In this post, we provide a descriptive comment of the decision of the Madhya Pradesh High Court:

Proceedings before the District Court, Singrauli:

Readers would recollect that an Indian Company ("Sasan Power Ltd." or "Sasan") and an American company ("North American Coal Corp." or "NACC" or "American Coal") entered into an Agreement in January 2009 for mine development ("Agreement I"). Article XII of the Agreement provided that the Governing Law would be the laws of the United Kingdom" (whatever it meant!- England & Wales, North Ireland or Scotland?) and that dispute resolution would be by ICC Arbitration in London as seat. American Coal established a full owned Indian subsidiary which, for the sake of convenience can be referred to as "American Indian". Sasan, American Coal and American Indian entered into an Agreement ("Agreement II") whereby North American purported to assign all its rights and obligations with the consent of Sasan to American Indian. Agreement II also provided that American Coal was not relieved of its obligations and liabilities although Sason agreed to the transfer and assignment of the rights of American Coal to American Indian. These facts were noted in the previous post itself. 
When disputes arose, American Coal wrote to Sasan terminating Agreement I (July 2014) and made a request to the ICC for arbitration (August 2014). Sasan approached the District Court seeking several reliefs against American Indian (not American Coal). Sasan sought the relief of declaration holding Article XII of the Agreement as null, void, inoperative and unenforceable. There was absolutely no relief claimed in respect of Agreement II. The District Court passed an ex-parte order in November 2014 injuncting the ICC from proceeding with the arbitration. This was intimated by Sasan to ICC. Interestingly, American Coal wrote to the ICC in December 2014 requesting arbitration and stating that Sasan's letter about the ex pare injunction should be seen as a reply to the request for arbitration.

Subsequently, the District Court extended the injunction. American Indian filed two interlocutory applications, one for rejection of plaint on the ground that the suit was barred by law, and the other for vacating the interim injunction. Meanwhile American Indian filed an appeal to the High Court against the grant of injunction. The High Court directed (January 2015) the District Court to dispose of the applications within a month. 

The District Court passed an order (March 2015) allowing the Interlocutory applications of American Indian. As can be deciphered from the judgement of the Supreme Court and the High Court of MP, it appears that the District Court held that the court was bound by a decision of a two-judge Bench of the Supreme Court in Atlas Exports Industries v. Kotak & Company and not by the decision of a Single Judge of the Supreme Court in TDM Infrastructure (P) Ltd. Vs. UE Development India (P) Limited. The District Court relied on Section 45 of the Arbitration and Conciliation Act, 1996 and held that it was bound to refer the dispute to arbitration and therefore rejected the Plaint. It appears that the District Court also held that Agreement II was a tripartite agreement and that therefore the arbitration was an international commercial arbitration. It also appears that the District Judge held that the decision of the Supreme Court in Enercon and Chloro Controls bound the court to refer the dispute to arbitration.

Proceedings before the High Court

Against the decision of the District Court, Sasan appealed to the High Court. 

Contentions of behalf of Sasan: Sasan, the appellant contended:
  • Once under the Assignment Agreement all the rights and liabilities were transferred from American Coal to American Indian, the agreement was between two Indian parties. Therefore, there was no question of agreeing to have their dispute seated abroad and that therefore, the arbitration agreement was null and void.
  • The District Court could not have rejected the plaint under Order VII Rule 11(d) since Section 45 was not a bar for maintainability of the suit. Section 45 did not bar a suit as such and a court if it finds the conditions in Section 45 satisfied can only refer the parties to arbitration.
  • Section 45 was applicable only in case of a foreign award or agreement and did not concern a case where there was an agreement between two Indian parties.
  • Agreement II was not a tripartite agreement but only a bipartite agreement, between Sasan and American Indian. 
  • Further, Section 12  of Agreement I was null and void as it provided for foreign arbitration between two Indian parties and allowed two Indian parties to agree on a foreign substantive law. 
On behalf of American Indian the following were argued:

  • The Appeal was not maintainable in view of Section 50 of the 1996 Act against the decision under Section 45 of the said Act.
  • Since the matter came under Part II of the 1996 Act, Section 45 created a bar against a suit.
  • Atlas Export will apply since there is not much of difference between the relevant provisions of the 1996 Act and the law as it stood before.
  • Section 28 of the Act is in Part I and is not applicable where Part II is applicable.
  • TDM Infrastructure was decided by a Single Judge while Atlas Export was a two-judge Bench decision. Therefore, Atlas Export will prevail over TDM infrastructure.
  • An order passed under Section 11 is not an order of the Court and therefore is not law declared by the Supreme Court for the purposes of Article 141 of the Constitution of India.
  • The District Court has correctly rejected the Plaint.
  • However, Agreement II is not a tripartite agreement but is a bipartite agreement. However, even if it is a bipartite agreement, the same will not affect the end result of the District Court.
  • The arbitration agreement under Agreement II imports the arbitration agreement found in Agreement I and therefore it is an agreement between two Indian Companies agreeing to resolve all their disputes though arbitration with London as the seat of arbitration.
(certain other contentions were made by American Indian which are either referred to subsequently whenever relevant or not referred to)

Decision of the Madhya Pradesh High Court

The High Court's decision is summarised below:

  • The decision of the Supreme Court in Bharat Aluminium v. Kaiser Aluminium (as contained in Para 118 thereof) that if the arbitration is not an International Commercial Arbitration as per Section 2(1)(f), the court does not have any choice but to decide the dispute as per Indian substantive law is not applicable in case of arbitrations seated outside India. In such a case, the conflict of laws rules of the seat will apply. The converse interpretation would amount to extra-territorial operation of Part I of the 1996 Act.  In fact, Supreme Court in the same paragraph has said that Section 28 r/w 2(1)(f) modifies the conflict of laws rule as applicable when the place (seat) of arbitration is in India.
  • TDM Infrastructure, although contains observations contra to the eventual decision of the Court, is a proceeding under Section 11 of the 1996 Act and also provides that the observations contained therein pertained only to determining the jurisdiction of the court and not for any other purpose. However, in Atlas Exports case, the Supreme Court held that an agreement providing for arbitration between two Indian parties by foreign arbitrators is valid. Thus, from the case, it appears that an agreement providing for arbitration between two Indian companies in a foreign seat is valid. Given that the provisions of the 1940 Act and 1996 Act are similar, there is no reason why Atlas Exports, a decision by a Bench larger than TDM Infrastructure, and under the 1940 Act, should apply. Besides, a corrigendum was added in TDM Infrastructure subsequent to its pronouncement that the observations in the decision would apply only for the determining the court's jurisdiction. Therefore, the decision is not law declared by the Supreme Court for the purpose purposes of Article 141 of the Constitution.
  • Atlas Exports has held valid a contract between Indian parties agreeing to a foreign seat. Such an arbitration is governed by Section 44 of the 1996 Act. For such an arbitration, it has to be established under Section 45 that the arbitration agreement is null & void or inoperable or incapable of being performed. The question on nationality of the parties is to be considered only for the purposes of Part I and not for the purposes of Part II as applicability of Part II is determined based solely on the seat of arbitration.
  • Once it is determined that Section 45 is applicable, the judicial authority has no other choice but to refer the matter to arbitration.
  • The contention that a plaint cannot be rejected under Order VII Rule 11 CPC on the ground of Section 45 of the 1996 Act is not correct. Once Section 45 is attracted, the suit is not maintainable. Under Section 9 CPC, the suit is not maintainable if it is expressly or impliedly barred. The suit in such a case has to be dismissed even as per the Madras High Court in Adam & Coal Resources case. An appeal from such a decision would be hit by Section 50 of the 1996 Act. 
  • The crucial test as per Enercon case is whether the parties intended to arbitrate. If the parties intended to arbitrate, then it is the "bounden duty" of the judicial authority to refer the parties to arbitration.
  • As regards the two agreements, although Agreement II permitted American Indian to step into the shoes of American Coal, Agreement I between Sasan and American Coal still subsisted. Therefore, the contention that the entire Agreement I stood novated by Agreement II is incorrect. The nature of the transaction itself is akin to Section 43 which contemplates two joint promisors making a promise. In such a case, any of the parties can compel performance of the agreement.
  • Once parties themselves have chosen a foreign seat, Section 2(2) of the 1996 Act is inapplicable. In such a case, Part I of the 1996 Act will not apply. Part II will come into play since the agreement complies with Section 44 of the 1996 Act and therefore Section 45 will bar the suit.
On the basis of the aforesaid reasoning, the High Court dismissed the appeal by Sasan. The decision of the High Court can be accessed from here.

In the next posts, we will look at the decision of the Supreme Court and our take on the entire case.