- High Court can appoint another arbitrator in the event a person becomes ineligible to act as an arbitrator under the arbitration agreement: Supreme Court of India.
Case Name: Jaipur Zila Dugdh Utpadak Sahkari Sangh Limited & Ors vs. M/S Ajay Sales and Suppliers., decided on September 09, 2021.
Case Citation: 2021 SCC OnLine SC 730, Special Leave Petition (Civil) No.13520 of 2021.
Case Facts: On 31.03.2015, a Distribution Agreement (“Agreement”) was entered into between Respondent and Shakari Sangh for the purpose of distribution of milk and butter milk in certain zones in Jaipur for the term of two years. Clause 13 of the Agreement captured an arbitration clause, which stated that any dispute or differences arising out of the Agreement will be referred to the sole arbitrator, the Chairman, Jaipur Zila Dugdh Utpadak Sahkari Sangh Limited (“Chairman”) and his decision shall be final and binding on the parties. The dispute arose between the parties and the respondent approached the Chairman on 19.10.2019, for settlement of commercial dispute between the parties. During the pendency of the arbitration proceedings before the Chairman, the respondent approached the High Court for appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”). The application was opposed by the petitioner on the grounds that once the respondent have approached the Chairman in accordance with clause 13 of the Agreement it is not open for respondent to approach High Court for appointment of the arbitrator and contested that the Agreement was entered into before insertion of Section 12 (5) of Arbitration and Conciliation (Amendment) Act, 2015 read with Seventh Schedule to the Arbitration Act and the same shall not be applicable and the Chairman continues to be the sole arbitrator in accordance with Clause 13 of the Agreement. The High Court, while relying on the Section 12 (5) of the Arbitration Act allowed the said application and appointed the former District and Sessions Judge to act as an arbitrator. Feeling aggrieved by the order passed by the High court the petitioner approached the Supreme Court.
Case Decision: The Supreme Court of India dismissed the petition and upheld the enforcement of the High Court order. The apex court discussed the relevant provisions of Section 12 (5) of the Arbitration Act and the precedents rendered by the apex court on the object and purpose of this insertion. The court observed that Arbitration Act is a special Act and Section 12 (5) contains a non obstante clause. The Agreement includes a provision for dispute resolution through arbitration and it binds the parties. Despite Section 58 of the Rajasthan Cooperative Societies Act, 2001 (“Society Act”), the parties have agreed to resolve the issue through an arbitrator and hence the provisions of the Arbitration Act will only apply. Further, the real question which is required to be considered in this case, is whether the Chairman who is an elected member of the petitioner Sahkari Sangh can be said to be ‘ineligible’ under Section 12 (5) read with Seventh Schedule of the Arbitration Act.
The apex court relying on the intent and purpose of inserting Section 12 (5) read with the Seventh Schedule to the Arbitration Act which is the neutrality of the arbitrators, observed that, the Chairman of the petitioner sangh is unquestionably ‘ineligible’ to remain as an arbitrator because he is a member and director of the petitioner sangh. Though the word “Chairman” is not expressly stated in the Seventh Schedule, it would come under Clause 1, Clause 2, Clause 5, and Clause 12.
The apex court further held that, the High Court is within its right to appoint a new arbitrator by invoking Section 11 read with Section 14 of the Arbitration Act, if the arbitrator appointed through an agreement becomes ineligible.
2. The jurisdiction of the High Court is wide but pure contractual matters are better adjudicated by the forum agreed by the parties: Supreme Court of India.
Case Name: Union of India Vs. M/S Puna Hinda, decided on September 6, 2021.
Case Citation: MANU/SC/0601/2021, Civil Appeal No. 4981 of 2021.
Case Facts: On 22.10.2008, a notice inviting tender was published under the Special Accelerated Rural Development Programme for the building and upgrading of a road. The offer of M/s. Puna Hinda (“Petitioner”) was accepted. On 15.7.2009, a work order was issued which was further revised on 15.03.2012, resulting in an increased work cost. The work order included the work to be done as well as the projected amount payable for each task. The payment of measurement procedure was established in the General Conditions of Contract. Dispute arose between the parties in relation to payment of amounts specified in the work order. The High Court issued the necessary orders for payment of the amount due to the Petitioner.
Case Decision: The Supreme Court observed that any disagreement in relation to payments under a work order, could not be addressed through a writ petition on the disputed factual issues. Though, the jurisdiction of the High Court is wide but in respect of pure contractual matters in the field of private law, having no statutory flavour, are better adjudicated upon by the forum agreed to by the parties. The dispute as to whether the amount is payable or not and/or how much amount is payable are disputed questions of facts. These set of facts can only be fairly adjudicated upon by the experts of measurements and road constructions and such a process can only be undertaken by the agreed forum, i.e., arbitration, and not by the writ courts.
3. Consolidation of dispute is not permissible if the subject matter of the dispute is arising from a different arbitration agreement: Supreme Court of India.
Case Name: DLF Home Developers Limited Vs. Rajapura Homes Private Limited, decided on September 22, 2021.
Case Citation: 2021 SCC OnLine SC 781.
Case Facts: The DLF Home Developers Limited (“Petitioner”), Rajapura Homes Private Limited (“Respondent No.1”), and Resimmo PCC (“Respondent No.2”) entered into a share purchase agreement dated 08.07.2016 (“Rajapura SPA”) to effect the transfer of entire shareholding of the Petitioner’s in Respondent No.1 to Respondent No.2. Similarly, on 25.01.2017, the Petitioner, the Begur OMR Homes Pvt. Limited (“Begur Company”), and Respondent No.2 entered into a share purchase agreement (“Southern Homes SPA”)( hereinafter Rajapura SPA and Southern Homes SPA collectively be referred as “SPAs”) to transfer the Petitioner’s entire shareholding in the Begur Company to Respondent No.2.
While the transfer of shares was the major focus of the SPAs, certain extra terms were also spelled out in SPAs. Clause 3.1 of the SPAs, read in conjunction with Schedule-II of the SPAs, required the parties to execute a construction management agreement as a “condition precedent” to the closure of the transactions. Clause 9 of the SPAs stated that, at the request of the parties, all disputes resulting from the agreement will be brought to arbitration and shall be governed in accordance with the rules of the Singapore International Arbitration Centre (hereinafter, “SIAC”), with the seat and venue of the arbitration being Singapore.
To give effect to Clause 3.1 of SPA, parties entered into two separate agreements namely, DLFRajapura Homes Construction Management Services Agreement (“RCMA”) and DLF-Southern Homes Construction Management Services Agreement (“SCMA”) (hereinafter RCMA and SCMA collectively be referred to as “CMAs”). Clause 11 of the CMAs contemplated that the seat and venue of arbitration would be New Delhi, and the arbitration would be governed by the Arbitration and Conciliation Act, 1996 (“Act”). As per provisions of CMAs, Petitioner has to do certain construction work on the ongoing project and upon completion of the work, Petitioner will have to take approval from Respondent 1 and Begur Company in accordance with respective CMAs.
The Petitioner alleged that the Respondent No.1 and Begur Company refused to accept the notice of completion sent by the Petitioner in accordance with respective CMAs and have violated terms and condition of CMAs, and that it was intended to avoid Respondent No.2’s obligation to invest Rs. 75 crores in the Begur Company as contemplated by the CMAs. The Petitioner further submitted that, all disputes arising under the CMAs to be referred to a single arbitrator on a common and composite Arbitral Tribunal. The Respondents refused to have the disputes consolidated into a common and composite tribunal and instead asserted that the same would have to be resolved under separate arbitration proceedings. Aggrieved by the refusal of the respondents to appoint an arbitrator under the RCMA and SCMA, the Petitioner approached the Supreme Court.
Case Decision: The apex court observed that when an arbitration agreement exists, it would not prevent the Court from declining a prayer for reference if the dispute in question does not correlate to the said agreement. The SPAs and CMAs are still in effect and have not been terminated by the Parties. Both sets of agreements have arbitration terms that are distinct from one another. The court found it difficult to believe that the respective SPAs are the primary agreements regulating the transaction between the parties or that the current issues may be addressed simply under the arbitration clause included therein. Arbitration Clause 9 of the SPAs has no overriding effect and is not any larger or wider than Clause 11 of the CMAs. The arbitration clause in SPAs is confined to matters pertaining to the principal subject matter of the agreement, namely any dispute arising out of the transaction of sale and purchase of shares. As a logical corollary, the provisions of the CMAs, and the arbitration clause therein, would then be applicable to any dispute/difference concerning the performance of construction related obligations and deposit of agreed-upon amount by Respondent No.2 or payment thereof to the Petitioner.
The court further observed that when neither party has pleaded infringement of the SPAs core provisions, it is difficult to accept outright that the subjectcontroversy falls within the ambit of Clause 9 of the SPAs and can be adjudicated only under the rules of SIAC, with seat and venue in Singapore. The court refer the matter to the sole arbitrator.
4. While dealing with Section 34 of Arbitration and Conciliation Act 1996, this Court cannot sit as an appellate court and reappreciate all of the evidence: Madras High Court
Case Name: Rattha Holding Company Pvt. Ltd. v. Global Talent Tract Pvt. Ltd. and Ors., decided on September 16, 2021.
Case Citation: O.P. No. 936 of 2015, MANU/TN/7033/2021
Case Facts: The Rattha Holding Company Pvt. Ltd. (“Appellant”) filed the petition to set aside the award passed by the Arbitral Tribunal. The Respondent (Lessee) and Appellant (Lessor) entered into a lease deed dated 25.11.2010 (“Lease Deed-1”) for office space, car parking slots, as well as a fully furnished airconditioned cafeteria space in the basement of the building. Apart from the Lease Deed, the parties also entered into a maintenance agreement.
Respondent in need of additional space entered into another lease deed dated 29.09.2011 with Appellant (“Lease Deed-2”) (hereinafter Lease Deed-1 and Lease Deed-2 collectively be refereed as “Lease Deeds”) for office space along with 1,000 sq.ft area at the basement to be used as Cafeteria Food Court. As per Lease Deed-2, the lease was for a term of five years with a lock-in of 36 months from the lease start date. The remaining terms related to termination, arbitration, rights and obligations of both parties were all the same as stated in the Lease Deed-1. Furthermore, for the time being, the Appellant has allocated room for a café on the sixth level, however, no cafeteria area was offered as per the Lease Deed-2.
As a result, the Respondent wrote a letter to the Appellant on 30.11.2012, requesting that all outstanding concerns be resolved, including the supply of furnished cafeteria space, by December 2012. The Petitioner issued a reply notice on 11.12.2012, acknowledging the default and delay in providing cafeteria space and citing technical reasons such as seepage of water in the basement, and promising to fix the situation and have it ready by the end of January, 2013. On 08.01.2013, the Respondent was issued notice to the Appellant, terminating the Lease Deeds immediately and notified the Appellant that they will be leaving the premises effective from 12.01.2013. The Appellant contested such termination and refused to return the security deposit of the Respondent. Hence, the matter was referred to the Arbitration Tribunal, which gave the decision in favour of the Respondent.
Case Decision: Madras High Court observed that, it is widely established that the extent of High Court’s jurisdiction under Section 34 of the Act is extremely limited. Similarly, it is well known that when the learned Arbitrator has adopted a position and offered adequate reasons for making a finding, the award cannot be overturned just because another point of view is equally available. It should also be emphasised that, while dealing with Section 34 of Arbitration and Conciliation Act 1996 (“the Act”), this Court cannot sit as an appellate court and re-appreciate all of the evidence. The Court cannot operate as an appellate or revisional court and can only determine whether the award is void on any of the reasons specified in Section 34 of the Act. According to the Lease Deed-2, there is no time restriction for handing off the cafeteria area; nonetheless, it should have been delivered within a fair time. When no application is filed and no deadline is indicated, the learned Arbitrator relies on Section 46 of the Indian Contract Act, 1872 and after analysing all contractual elements, records a conclusion based on the factual examination of the materials brought before him. As a result, once the learned Arbitrator has reached a reasonable conclusion, it cannot be reversed under Section 34 of the Arbitration and Conciliation Act, 1996. The knowledgeable Arbitrator’s findings are without perversity. The Court cannot reappreciate the full evidence since the learned Arbitrator has factually documented the conclusions after examining the oral and documentary evidence. As a result, the Court concluded that none of the reasons set out in Section 34 of the Act was established to interfere with the learned Arbitrator’s wellreasoned judgment.
5.The grievances of contractual employees engaged through contractors, to be addressed by the contractor and not the principal employer: Bombay High Court
Case Name: Mahindra and Mahindra Ltd. vs. Satish S/o Tulshiram Burile and Ors., decided on September 20, 2021.
Case Citation: Writ Petition (WP) NO.668 OF 2020, 2021 SCC Online Bom 3003.
Case Facts: Mahindra and Mahindra Limited (“Petitioner”) outsourced certain works to several contractors and registered itself as the principal employer under Section 7 of the Contractual Labour (Regulation and Abolition) Act, 1970 (“the Act”). Government Labour Officer (“GLO”) declared the election programmer for conducting elections under Section 27 of the Maharashtra Industrial Relations Act, 1946 (“MIR Act””), for electing 5 representatives of the employees of the Petitioner. Around 301 contractual workers submitted a representation to add their names to the voters list and to give them the right to vote.
The management of the Petitioner informed the contractual workers to approach the GLO or the Labour Commissioner. Contractual workers submitted their representation, however, it was rejected by the commissioner citing the decision in Sunflag Iron & Steel Co. Ltd. Vs. State of Mahrastra, 2008 III CLR 983, wherein it was held that contractual workers are not directly employed by the principal employer, and hence, their names cannot be included in the voters list.
Aggrieved by the decision, Respondent then approached the Industrial Court and contested that Petitioner and GLO has committed unfair labour trade practice and seeks to include the names of the Respondents and other contractual employees in the voters list. The Petitioner opposed the said allegation stating that there was no employer and employee relationship between them hence they are not allowed to participate and vote in the election. The Industrial Court rejected the application, however held that the complaint of the Respondent is maintainable and it has jurisdiction to entertain it. The Petitioner contested observations and submitted that since there is no employer and employee relationship between the parties, Industrial Court does not have power or jurisdiction to entertain the matter and the same is liable to be rejected summarily. The Industrial Court after hearing both the Parties rejected that application filed by the Petitioner. Hence, the Petitioner approached the High Court of Bombay (Nagpur Bench).
Case Decision: The High Court allowed the petition and held that Industrial Court has misread and misconstrued the provision of MIR Act and the Maharastra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 (“MRTP and PUPL Act”). The Industrial Court does not have the jurisdiction to entertain such matter and it can only be admitted if there is admitted employer and employee relationship between the parties. The Court further observed that the contractual employee being the workers of the contractor and not of the principal employer cannot file a complaint under MRTP and PUPL Act.
The contractual employees are engaged through contractors, their service conditions are governed by the contracts between them. The appointment orders to the contractual employees are not given by the principal employer, but are given by the contractor. They work with the principal employer through contractor during the contract period. After the contract period is over, their contractor may enter into a contract with another establishment and shift them to work there. As a result of which, they cannot be treated like permanent employees of the principal employer, and therefore, they cannot claim voting rights at par with the permanent employees.
