NOTABLE JUDGEMENTS OCTOBER 2024
ARBITRATION LAW
I. Case Title: Central Warehousing Corporation. v. Sidhartha Tiles & Sanitary (P) Ltd.
Citation: 2024 SCC OnLine SC 2983
Court: Supreme Court
Decided on: 21.10.2024
Brief facts:
The case involved a dispute between Central Warehousing Corporation (Appellant) and Sidhartha Tiles & Sanitary Pvt. Ltd. (Respondent) over storage space. The appellant, a statutory body, leased warehouse space to the respondent. During the lease, which was from 2012 to 2015, the appellant revised storage charges, which the respondent disputed. After the lease expired, the respondent did not vacate immediately, leading the appellant to invoke the Public Premises (Eviction of Unauthorized Occupants) Act, 1971 ("Public Premises Act"). The respondent subsequently vacated, but the appellant continued with proceedings under the Public Premises Act. The respondent, citing an arbitration clause in the lease, sought arbitration under Section 11 of the Arbitration and Conciliation Act, 1996, to resolve disputes about renewal and revised rates. The High Court appointed an arbitrator, which led the appellant to challenge this decision in the Supreme Court.
Issue:
- Whether the Public Premises Act, 1971, overrides the Arbitration and Conciliation Act, 1996, and precludes arbitration in cases involving unauthorised occupation of public premises. 2. Whether the High Court erred in appointing an arbitrator for disputes under the lease, particularly regarding rate revision and renewal.
- Whether the High Court erred in appointing an arbitrator for disputes under the lease, particularly regarding rate revision and renewal.
Judgment:
The Supreme Court dismissed the appeal, holding that:
- The Public Premises Act does not override the Arbitration and Conciliation Act. The disputes about rate revision and lease renewal arose within the lease period and were governed by the lease's arbitration clause, making them Adarsh Kumar Agrahari/Intern arbitrable. The Public Premises Act, which covers eviction, was inapplicable since the lease had expired.
- The High Court acted within its jurisdiction in appointing an arbitrator, as the disputes fell within the scope of the arbitration clause. The Supreme Court emphasized that the role of the court at this stage was limited to confirming the existence of an arbitration clause, not evaluating the claims. The court directed the arbitration to resume promptly and imposed costs on the appellant for unnecessary litigation. [Click Here]
II. Case Title: International Air Transport Association vs. Spring Travels Pvt. Ltd
Citation: O.M.P.(EFA)(COMM.) 1/2023
Court: Delhi High Court
Decided on: 29.10.2024
Brief facts:
This petition seeks the enforcement of a foreign arbitral award dated 21.04.2022, issued by the Sole Arbitrator in arbitration between the International Air Transport Association (IATA) and Spring Travels Pvt. Ltd. (STPL), conducted under the ICC International Court of Arbitration with its seat in Singapore.
IATA, a global trade association for airlines, accredits travel agents, including STPL, under a Passenger Sales Agency Agreement (PSA) established on 18.01.2005, allowing STPL to sell airline tickets. STPL allegedly breached the PSA by failing to remit funds from ticket sales amounting to Rs. 1,24,31,69,623, leading IATA to initiate arbitration on 29.03.2018. STPL contested the tribunal's jurisdiction, which was rejected in a partial award on 16.05.2019, and subsequently upheld by the Singapore International Commercial Court on 25.03.2020. Following the final award on 21.04.2022, IATA has filed the present enforcement petition.
Issue:
- Whether STPL was denied a fair opportunity to present its case during the arbitration p roceedings.
- Whether the costs associated with the arbitration proceedings were excessively high, i mpacting STPL's ability to participate.
- Whether there are valid grounds under Section 48 of the Arbitration and Conciliation Act, 1996, to refuse enforcement of the foreign award.
Judgment:
- The court found that STPL had been given ample opportunity to present its case, including access to virtual hearings and necessary documentation.
- The high costs of arbitration, while noted, did not constitute a valid ground for refusal of enforcement under Section 48, particularly as STPL had participated in the proceedings.
- The court held that poor reasoning by the arbitral tribunal does not provide grounds for refusing enforcement, and STPL's failure to challenge the award in the seat court further undermined its position.
- The court concluded that STPL did not establish that the enforcement of the award would violate public policy.
- The Court further observed that the enforcement Court U/S 48 of the Arbitration Act Can Refuse to Enforce Foreign Award but Cannot Set It Aside. [Click Here]
III. Case Title: Sultan Chand & Sons (P) Ltd. v. Kartik Sharma
Citation: 2024 SCC OnLine Del 7281
Court: Delhi High Court
Decided on: 18.10.2024
Brief facts:
Sultan Chand and Sons Pvt. Ltd. (Appellant) entered into a publication agreement with Kartik Sharma (Respondent), which included an arbitration clause, covering two books. The Appellant later published a third book without a formal agreement. After allegations of plagiarism surfaced, the Appellant withdrew the books and filed a suit for damages against the Respondent for breach of warranty and misrepresentation. The Respondent initially sought arbitration under Section 8 of the Arbitration and Conciliation Act, 1996, but later withdrew this request, leading the Appellant to appeal, insisting that the dispute be referred to arbitration.
Issue:
- Whether the appellant could demand arbitration after the respondent withdrew their Section 8 application.
- . Whether the dispute, particularly regarding the third book (for which no agreement existed), falls under the arbitration clause in the original agreement.
Judgment:
The High Court dismissed the appeal, holding that: -
- The right to seek arbitration under Section 8 of the Act lies solely with the defendant, and it is waivable. Since the respondent withdrew the application, the appellant cannot insist on arbitration.
- The original agreement's arbitration clause did not govern the third book, and the appellant's own statements in the suit confirmed that the dispute did not fall within the scope of the arbitration agreement.
Thus, the court upheld the respondent's decision to submit to the Civil Court's jurisdiction rather than proceed with arbitration [Click Here]
IV. Case Title: Airports Authority of India v. Delhi International Airport Ltd.
Citation: 2024 SCC OnLine Del 7284
Decided on: 18.10.2024
Brief facts:
The Airports Authority of India (AAI) entered into Operation, Management, and Development Agreements (OMDAs) with Delhi International Airport Ltd. (DIAL) and Mumbai International Airport Ltd. (MIAL) for operating the Delhi and Mumbai airports. Disputes emerged over the interpretation of "Revenue" used to calculate annual fees payable to AAI. The Joint Venture Companies (JVCs), DIAL and MIAL, contended that "Revenue" should exclude capital costs (e.g., depreciation, interest on debt, and equity returns) and certain other incomes. AAI, however, argued that "Revenue" included all pre tax gross revenue. The arbitration panel ruled in favour of AAI, leading to petitions under Section 34 of the Arbitration and Conciliation Act, 1996, to set aside the arbitral award.
Issues:
- Can the High Court set aside the arbitral award based on its interpretation of contractual terms, or should it defer to the arbitral tribunal's findings?
- Does the scope of "Revenue" for calculating the annual fee permit exclusions claimed by DIAL and MIAL, or should it include all pre-tax gross revenue as defined in the OMDA?
- Does the arbitral award contravene Indian public policy or exceed the tribunal's scope under Section 34?
Judgment:
1. Deference to Arbitral Interpretation: In line with Section 34, the High Court limited its role to reviewing procedural fairness and adherence to legal principles, rather than revisiting contractual interpretations. The court upheld that the arbitral tribunal's construction of "Revenue" as including all pre-tax gross Adarsh Kumar Agrahari/Intern revenue was a plausible interpretation under the OMDA.
2. Public Policy Grounds: Under Section 34(2)(b)(ii), an award can be set aside if it conflicts with Indian public policy. The High Court found no contravention of public policy, as the arbitral award followed due process and did not unjustly impact the parties' rights or contractual terms.
3. Arbitrability of Financial Disputes: The court affirmed that the dispute over "Revenue" was arbitrable and did not involve non-arbitrable issues. The arbitral tribunal had authority under the OMDA and Arbitration Act to interpret and rule on financial terms within the agreement.
Conclusion: The High Court respected the autonomy of the arbitral process, upholding the arbitral award as per Section 34. It emphasized that judicial intervention in arbitral decisions should be minimal and reserved for cases of procedural irregularities or violations of public policy. The court's decision reaffirmed the Act's objective of minimizing court interference and bolstering the finality of arbitral awards in India.
INSOLVENCY AND BANKRUPTCY
I. Co-Borrower Shares Similar And Equal Responsibility Under Loan Agreement: NCLAT New Delhi
Case Title: Amit Narang v. Aditya Birla Finance Ltd. and Anr.
Case Citation: Company Appeal (AT) (Insolvency) No. 684 of 2024
Court Name: National Company Law Appellate Tribunal, New Delhi
The loan amount to the tune of Rs. 11.50 crores was advanced by financial creditor to corporate debtor with NDPL acting as a co-borrower. The terms and conditions of the loan were enumerated in the letters sanctioned on September 19, 2016, December 4, 2018. Subsequently, a facility agreement and a supplementary facility agreement were also executed on September 29, 2016 and December 7, 2018 respectively. An indenture of mortgage was executed on October 17, 2016 in which a security interest over its assets was created by the NDPL in favour of the financial creditor. Account of the corporate debtor was classified as Non-Performing Assets (NPA) on June 16, 2019 when it defaulted in paying the loan amount. Thereafter a demand notice under section 13(2) of the SARFAESI Act was sent on July 5, 2019. The financial creditor moved an application under section 7 of the IBC before the NCLT and CIRP was initiated against the corporate debtor on March 28, 2024. This decision of the NCLT was challenged by the suspended director of the NDPL before the NCLAT on the ground that the loan was provided directly to Csango Industries Pvt. Ltd and Pacific Link Pvt Ltd. and not to NDPL therefore the NDPL was not responsible for any default.
Hon'ble NCLAT dismissed the Appeal and observed that the obligation of the Co-Borrower is co-extensive and coterminous with that of the Primary Borrower and hence a right or cause of action becomes available to the financial creditor to proceed against the primary borrower, as well as the Co-Borrower in equal measure in case they commit default in repayment of the amount of debt. [Click Here]
To view the full article click here
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
