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Legal Updates - December 2024

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The case arose from a dispute regarding the enforceability of an arbitration clause in a partnership deed executed on July 16, 2016, between the appellant, Tarun Dhameja, and the respondents, Sunil Dhameja and another party.
India Litigation, Mediation & Arbitration

NOTABLE JUDGEMENTS DECEMBER 2024

ARBITRATION LAW

I. Case Title: Tarun Dhameja v. Sunil Dhameja
Citation: 2024 SCC OnLine SC 3715
Court: Supreme Court
Decided on: 06.12.2024

Brief Facts:

The case arose from a dispute regarding the enforceability of an arbitration clause in a partnership deed executed on July 16, 2016, between the appellant, Tarun Dhameja, and the respondents, Sunil Dhameja and another party. The partnership deed included a clause for resolving disputes through arbitration, stating that disputes or differences between partners, their heirs, or successors could be referred to arbitration. Arbitration was described as "optional", and the arbitrator was to be appointed by mutual consent. Jurisdiction of Indore Civil Court was specified for disputes. After the demise of Yeshwant Boolani, a partner in the firm, his legal representative (the appellant) sought to invoke the arbitration clause to resolve a dispute. The respondents argued that arbitration could only occur with the mutual consent of all parties and that the clause lacked mandatory enforceability.

Issue:

Whether the arbitration clause in the partnership deed was mandatory and enforceable, given the l14anguage describing arbitration as "optional" and requiring mutual consent for appointing an arbitrator.

Judgement:

The Supreme Court, while interpreting the arbitration clause, noted that the term "optional" in the clause did not render it unenforceable or entirely dependent on mutual consent to initiate arbitration. Instead, it implied that any aggrieved party had the option to invoke arbitration. Mutual consent was only necessary for selecting the arbitrator, not for initiating arbitration itself. Under Section 11(6) of the Arbitration and Conciliation Act, 1996, if parties fail to agree on an arbitrator, the Court can appoint one. The clause's language did not nullify the right to arbitrate or override the Act's provisions.

The Court emphasised that arbitration clauses are meant to provide a neutral, efficient forum for dispute resolution. Such clauses should be interpreted liberally, favouring their enforceability unless the language explicitly indicates otherwise.

The Supreme Court set aside the impugned judgment and allowed the appeal. The petition was allowed. The Court directed the Madhya Pradesh Arbitration Centre or the Arbitration Centre attached to the High Court of Madhya Pradesh at Indore to appoint an arbitrator. The Court clarified that its decision was limited to the procedural and enforceability aspects of the arbitration clause and did not address the merits of the parties' claims or defenses. [Click Here]

II. Case Title: Dushyant Janbandhu v. Hyundai Autoever India (P) Ltd.
Citation: 2024 SCC OnLine SC 3691
Court: Supreme Court
Decided on: 11.12.2024

Brief facts:

The appellant, Dushyant Janbandhu, was employed as an Assistant Manager by the respondent, M/S Hyundai Autoever India Pvt. Ltd., starting March 15, 2019. During the COVID-19 pandemic, he was asked to work from home but refused to resume physical attendance at the office in August 2020, despite company instructions. This led to disciplinary proceedings and an eventual termination of his employment on January 6, 2021. Subsequently, the appellant sought remedies under statutory frameworks, including the Payment of Wages Act, 1936, for unpaid wages and the Industrial Disputes Act, 1947, challenging the legality of his termination. Meanwhile, the respondent initiated arbitration proceedings based on the employment agreement, appointing an arbitrator unilaterally. The respondent sought the High Court's intervention under Section 11(6) of the Arbitration and Conciliation Act, 1996, to appoint an arbitrator. The High Court granted the request, which led to the present appeal.

Issue:

Whether the disputes between the appellant and the respondent, particularly those related to unpaid wages, termination legality, and alleged violations of non-disclosure obligations under the employment agreement, were arbitrable.

Judgement:

The Supreme Court ruled in favour of the appellant, holding that the disputes were non-arbitrable as they were governed by statutory frameworks providing exclusive remedies. The Court emphasised that the jurisdiction of statutory authorities under the Payment of Wages Act and the Industrial Disputes Act is to the exclusion of civil courts and arbitration. The Court set aside the High Court's order appointing an arbitrator and dismissed the Section 11(6) petition filed by the respondent, labeling it an abuse of process. It also awarded costs of ₹5 lakhs to the appellant, to be paid by the respondent within three months. [Click Here]

III. Case Title: Shri Guru Gobind Singhji Institute of Engineering & Technology v. Kay Vee Enterprises
Citation: 2024 SCC OnLine Bom 3808
Court: Bombay High Court
Decided on: 09.12.2024

Brief facts:

The petitioner, Shri Guru Gobind Singhji Institute of Engineering and Technology, filed a writ petition before the High Court challenging the interlocutory orders issued by the arbitral tribunal in an ongoing arbitration dispute. The arbitration arose due to disagreements over payments for construction work, as stipulated in the agreement between the parties. The petitioner alleged bias and procedural irregularities in the conduct of the tribunal. The writ petition sought judicial intervention under Articles 226 and 227 of the Indian Constitution, contesting the fairness of the arbitration process, especially due to claims of bias against the arbitrator.

Issue:

The main issue in this case revolves around the maintainability of the writ petition.

Judgment:

The court observed that, according to the Arbitration and Conciliation Act, 1996, interim orders issued by an arbitral tribunal are generally not subject to judicial review until the final award is made. The court also noted the precedent set in M/s. SBP & Co., which discourages interference by the High Court during arbitration proceedings in order to preserve the integrity of the arbitration process. However, the court acknowledged that allegations of bias or misconduct by the arbitrator, which fall under Section 14 of the Arbitration Act, require special attention. These claims could be considered within the High Court's supervisory jurisdiction.

The court reserved its decision on whether the writ petition was maintainable, balancing the autonomy of the arbitration process with the supervisory role of the High Court. This ensures that the judiciary remains independent and capable of upholding constitutional rights, including the review of actions taken by tribunals. The court emphasised that while alternative remedies may exist, they do not eliminate the constitutional courts' power of judicial review. [Click Here]

IV. Case Title: M/s Grandslam Developers Pvt Ltd v. Akshay Gandhi Proprietor of Praxis Design Solutions
Citation: 2024 SCC OnLine Del 9089
Court: Delhi High Court
Decided on: 10.12.2024

Facts:

The appellant, M/s Grandslam Developers Pvt. Ltd., filed an appeal under Section 37(1)(a) of the Arbitration and Conciliation Act, 1996 (A&C Act), challenging an order passed by the Commercial Court on November 13, 2024. The order rejected the appellant's application under Section 8 of the A&C Act, which sought to refer the dispute between the parties to arbitration. The dispute arose out of a contract between the appellant and the respondent, Akshay Gandhi (Proprietor of Praxis Design Solutions), who was engaged in interior design work for the appellant. The respondent claimed outstanding payments amounting to ₹81,73,378.15, while the appellant contended that the respondent had failed to complete the work and had made improper claims for payment. The appellant sought to have the dispute resolved through arbitration, as provided for in the contract, but the Commercial Court ruled that there was no dispute to refer, as the amount due was acknowledged by the appellant in an email.

Issue:

Whether the dispute between the appellant and respondent, which was subject to an arbitration agreement, should be referred to arbitration, given that the appellant had acknowledged the outstanding amount in an email.

Judgment:

The High Court, while considering the appeal, clarified that the existence of an arbitration agreement between the parties required the dispute to be referred to arbitration, regardless of whether the amount due was acknowledged or not. The Court held that the mere acknowledgment of the amount by the appellant did not negate the existence of a dispute, as the arbitration agreement encompassed all matters related to the contractual relationship. The Court noted that the scope of Section 8 of the A&C Act required only a prima facie examination of the validity of the arbitration agreement, and once a valid agreement was found, the matter had to be referred to arbitration. The High Court overruled the Commercial Court's decision, which had erroneously held that there was no dispute to be adjudicated. The impugned order was set aside, and the appeal was disposed of accordingly. [Click Here]

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