TMI Blog2021 (11) TMI 458X X X X Extracts X X X X X X X X Extracts X X X X ..... the interim arrangement by the High Court was extended and after grant of leave, arguments were concluded on 28.09.2021. Nature of the award - appellant claims that it is an award arising out of an international commercial arbitration - HELD THAT:- While the plea of the award being vitiated by patent illegality is available for an arbitral award, such an award has to be a purely domestic award, i.e. the plea of patent illegality is not available for an award which arises from international commercial arbitration post the amendment. Whether the amendment would apply in the facts of the present case? - HELD THAT:- It is not in dispute that the Section 34 proceedings commenced prior to 23.10.2015, which is the crucial date. As to when the amendment would apply is an aspect that is no longer res integra. The arbitrator s conclusions are not in accordance with the fundamental policy of Indian law, and can thus be set aside under the pre-2015 interpretation of S. 34 of the said Act. It is also noted that clause 6 of the Deed of Settlement could not have been relied on to award liquidated damages in favour of the appellant, we agree with the observations of the Single Judge a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause reads as under: 3..........It is farther agreed that in future Jackie shall not write any letter or communication or complaint to any police authority/ies and/or any other judicial, quasijudicial authority or statutory authority or any person or entity complaining about the subject matter of the present Deed. (sic) c. As a monetary incentive to the respondent to bring the complaints to an end, an amount of US$ 1.5 million was to be paid to the respondent as per clause 4.1. This amount vide banker s cheque was to be held in an Escrow by M/s. D.M. Harish Co., to be handed over to the respondent on confirmation by the EOW of the appellant having withdrawn his complaint dated 19.04.2010. The respondent was also required to give further assurance to ensure that if any quashing proceedings are initiated, he would cooperate in the same. d. As per Clause 4.2, US$ 2 million was to be paid to the respondent within seven (7) days of the receipt of the proceeds from the sale of MSM s shares. e. The respondent was put to terms for committing any breach of the Deed of Settlement in clause 6, the consequence of which would be the termination of the Deed of Settlement an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Settlement through the e-mail sent by the respondent s wife on 15.06.2011. In the said proceedings, being Petition No.853/2012, a consent order was passed on 06.08.2012 in terms whereof the respondent s wife was dropped from the array of parties as she was not a party to the Deed of Settlement. The disputes were referred by consent to the sole arbitration of a former Judge of the Supreme Court of India. It was further directed that the escrow agent would hand over the cheque for US$ 1.5 million only after the direction of the arbitrator. 5. The appellant lodged a claim before the arbitrator seeking a refund of US$ 1.5 million (₹ 8.49 crore) with 18 per cent interest per annum w.e.f. 07.07.2011 till the date of payment. A statement of claim was filed before the arbitrator dated 2.11.2012 in the following terms: 52. The Claimant therefore prays: (a) that this Hon ble Tribunal be pleased to hold and declare that the Respondent has breached the Deed of Settlement dated January 3, 2011 and severely harmed and damaged the hardearned reputation of the Claimant. (b) that this Hon ble Tribunal be pleased to hold and declare that as a result of the breach of said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... $ 1.5 million which the respondent was to receive as his share of the said proceeds. That application was rejected and further proceedings in respect of the same also met the same fate in the High Court. That being the position, the respondent filed a petition under Section 9 of the said Act seeking directions to the escrow agent to hand over US$ 2 million on account of sale of MSM s shares. However, the same was dismissed on 02.04.2014 inter alia on the ground that the appellant was resisting the payment and seeking a refund, and the appeal against the same was dismissed as withdrawn. 8. The learned arbitrator made the final award on 10.11.2014, awarding a claim for liquidated damages of US$ 1.5 million in favour of the appellant, as set out in clause 6 of the Deed of Settlement. The award also held that the respondent would not be entitled to the second cheque of US$ 2 million held in escrow, on account of the respondent s breach of the Deed of Settlement. 9. The respondent moved a petition under Section 34 of the said Act on 24.01.2015 before the Bombay High Court as Arbitration Petition No.167/2015, while the appellant filed for execution of the award. Consequently, the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For domestic awards, Chapter 7 of the said Act provides recourse against the arbitral award. Section 34 of the said Chapter provides for application for setting aside an arbitral award and specifies the ground available for the same. The Arbitration and Conciliation (Amendment) Act, 2015 (for short 2015 Amendment Act ) amended the said Act w.e.f. 23.10.2015; inter alia by inserting Explanations to Section 34(2) of the said Act as well as by inserting Sub-Section 2A to Section 34. There is no doubt that the scope of interference by the Court became more restrictive with the amendments coming into force. The preamendment position with respect to expression in conflict with public policy of India was enunciated by this Court in Ssangyong Engineering and Construction Company Ltd. v. National Highways Authority of India (NHAI) (2019) 15 SCC 131, which referred to the judgment of this Court in Associated Builders v. Delhi Development Authority (2015) 3 SCC 49. 13. A distinction is sought to be carved out between a domestic award arising from an international commercial arbitration and a purely domestic award. The test for interference was sought to be made more stringent by the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be sustained. Thus far as to the nature of the award. Whether the amendment would apply in the facts of the present case: 19. It is the say of the appellant that the award has to be scrutinised in the post amendment scenario and, thus, both the forums below fell into error by applying the test applicable in the pre-amendment scenario. It is, thus, the appellant s say that patent illegality has no application as a test to the award in question. 20. It is not in dispute that the Section 34 proceedings commenced prior to 23.10.2015, which is the crucial date. As to when the amendment would apply is an aspect that is no longer res integra. We may refer to relevant judicial pronouncements in this regard. 21. In Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd. Ors. (2018) 6 SCC 287 a reference was made to Section 26 of the 2015 Amendment Act which had bifurcated proceedings into arbitral proceedings and court proceedings. The said provision reads as under: 26. Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of Section 21 of the principal Act, before the commencement of this Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eel Authority of India Limited (1999) 9 SCC 334, which are relevant for the purposes of this discussion. While opining that the provisions of the Old Act would apply in relation to arbitral proceedings which had commenced before the coming into force of the said Act, this Court referred to the Repeal and savings provision in Section 85(2)(a) of the said Act. It was observed that the phrase in relation to arbitral proceedings cannot be given a narrow meaning so as to mean only pendency of arbitration proceedings before the arbitrator, but would also cover proceedings before the court. The appellants cited two judgments of the Bombay High Court in support of their case, i.e., Padmini Chandran Menon v. Vijay Chandran Menon (2018) 2 AIR Bom R 108 and Board of Trustees of the Pot of Mumbai v. Afcons Infrastructure Limited, 2016 SCC Online Bom 10037 which in turn rely on Thyssen Stahlunion Gmbh(supra). 28. However, the general observations aforesaid cannot come to the aid of the appellant in view of a number of judicial pronouncements by this Court which deal with a similar issue. 29. In S.P. Singla Constructions Pvt. Ltd. v. State of Himachal Pradesh Anr. (2019) 2 SCC 488, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 34 proceedings were subject to. We may also note that a learned single Judge of the Delhi High Court in ABB India Ltd. v. Bharat Heavy Electricals Ltd. OMP (T) (Comm) No.48/2020, while referring to the judgment in Parmar Construction Company supra case, has proceeded in accordance with this Court s observations while distinguishing the judgment in Thyssen Stahlunion Gmbh supra .In the context of anticipating new enactments that may come into operation, it was opined that while Thyssen Stahlunion Gmbh supra dealt with Section 85(2)(a) of the said Act, this provision is dissimilar to Section 26 of the 2015 Amendment Act. Section 26 starts with a negative covenant which is subject to an exception in the case of an agreement between the parties, whereas the observations in Thyssen Stahlunion Gmbh supra were coloured by Section 85(2)(a) of the said Act which is structured differently. We refer to the same only to give our imprimatur. The relevant portion of ABB India Ltd. (supra) reads as follows: 71. Besides, in Thyssen Stahlunion GMBH, there was no provision, similar to Section 26 of the 2015 Amendment Act, which is crucial to adjudication of the dispute in the present case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] , this Court added three other distinct and fundamental juristic principles which must be understood as a part and parcel of the fundamental policy of Indian law. The Court held : (SCC pp. 278-80, paras 35 38-40) [ ] 29. It is clear that the juristic principle of a judicial approach demands that a decision be fair, reasonable and objective. On the obverse side, anything arbitrary and whimsical would obviously not be a determination which would either be fair, reasonable or objective. 30. The audi alteram partem principle which undoubtedly is a fundamental juristic principle in Indian law is also contained in Sections 18 and 34(2)(a)(iii) of the Arbitration and Conciliation Act. These sections read as follows: 18. Equal treatment of parties.-The parties shall be treated with equality and each party shall be given a full opportunity to present his case. *** 34. Application for setting aside arbitral award.-(1) * * * (2) An arbitral award may be set aside by the court only if- (a) the party making the application furnishes proof that- *** (iii) the party making the applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. Thus, the necessary conditions of the Deed of Settlement stood satisfied. It is in this context that we have to consider whether clause 6 would come into play, so as to deprive the respondent of the benefits which were two fold, i.e., monetary benefit to cease and desist on complaints and litigations, and the proceeds from the sale of shares that were owned by him. Clause 6 provided for the return of the amount of US$ 1.5 million in case the representations/assurances of the respondent turn out to be false or incorrect. That was not the case. The only aspect emphasised by the appellant as a cause for denying the respondent his dues are the two e-mails sent by his wife. We may note here that though the wife was initially impleaded in the proceedings under Section 9 of the said Act, she was later dropped from the arbitration proceedings as she was not a party to the agreement vide consent order dated 06.08.2012. In a sense the agreement accepted that the wife of the respondent had no role to play and the respondent could not be penalised for her conduct. 36. We may note that what has weighed with the Courts below is the fact that the respondent did nothing to ratify the e-mail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r or Atlas or Grandway of their shareholders by the Petitioner. And after all that is done, he even gets back his entire money of USD 3,500,000. And that because the Petitioner s wife calls him a forger in a private communication made to a couple of acquaintances or associates. Can such award be ever sustained as something a fair and judiciously minded person could have made. In my humble opinion, it is the very opposite of justice; it would be a travesty of justice to uphold such award. 38. The aforesaid scenario cannot be countenanced and this is what has been responsible for interference with the award of the learned arbitrator in the context of the legal position applicable to the award pre the amendment. We find that the arbitrator s conclusions are not in accordance with the fundamental policy of Indian law, and can thus be set aside under the pre-2015 interpretation of S. 34 of the said Act. We may also note that clause 6 of the Deed of Settlement could not have been relied on to award liquidated damages in favour of the appellant, we agree with the observations of the Single Judge and the Division Bench in this regard. In fact, the consequences are so inappropriate ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
