20 July, 2017
Designation of the Seat of Arbitration is Akin to an Exclusive Jurisdiction Clause
In Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited ,4 the SC held that an arbitration clause, pursuant to which a place has been determined as the ‘seat’, would vest the Courts of such place with exclusive jurisdiction for the purpose of regulating the arbitral proceedings. This is irrespective of the fact that such a venue may not, in the classical sense, have jurisdiction over the dispute at all, in that no part of the cause of action may arisen at such venue. Pursuant to this decision, the SC distinguished arbitral law from the law contained in the provisions of the Code of Civil Procedure, 1908 (‘CPC ’) and observed that while under CPC , jurisdiction is closely linked to the place at which the cause of action of arises, under
arbitral law, the courts having jurisdiction over the place designated as the seat of the arbitration would have exclusive jurisdiction for the purposes of regulating arbitral proceedings arising out of the agreement between the parties.
Courts have no Power to Relegate Parties before the Arbitral Tribunal after having set aside the Arbitral Award and on its Own Motion
In Kinnari Mullick v. Ghanshyam Das Damani ,5 the SC held that Section 34(4) of the Arbitration and Conciliation Act, 1996 (‘Arbitration Act ’) does not allow the Court to suo motu relegate the parties back to the arbitral tribunal after having set aside the arbitral award. It held that the limited discretion available to the Court under Section 34(4) of the Arbitration Act to relegate the parties back to the arbitral tribunal can be exercised only upon a written application made by a party to the arbitration proceedings and not suo motu.
Scope of the term ‘dispute’ under Section 5 (6) of the IBC
In Kirusa Software Private Limited v. Mobilox Innovations Private Limited ,6 the National Company Law Appellate Tribunal (‘NCLAT ’) held that the term ‘dispute ’ has to be given a wide meaning, for the purpose of Sections 8 and 9 of the IBC , which deal with applications made by an operational creditor. In the instant case, NCLAT held that the term ‘dispute ’ has to be given an inclusive meaning and not an exhaustive one, provided it is relatable to the existence of the amount of the debt, quality of good or service or breach of a representation or warranty as provided under Section 5(6) of the IBC . The term should thus cover all disputes on debt, default etc.
without being limited to only two ways of disputing a demand made by an operational creditor, i.e. a pending suit or an arbitration.
The NCLAT however also cautioned against an illusory dispute being raised for the first time while replying to the notice under Section 8 of the IBC as a tool to reject an application under Section 9 of the IBC .
Applicability of Section 9 of the Arbitration and Conciliation Act, 1996 to Foreign Awards Prior to Enforcement under Section 48
On April 28, 2017, Bombay HC , in the case of Aircon Beibars FZE v. Heligo Charters Pvt. Ltd held that Section 9 of the Arbitration Act, as amended by the Arbitration (Amendment) Act, 2015, can be invoked in relation to a foreign award prior to the enforcement of such award under Section 48 of the Arbitration Act.
The Petitioners, Aircon Beibars FZE (‘Aircon ’), made an application under Section 9 of the Arbitration Act for an order of injunction to protect the assets of the respondent company, Heligo Charters Pvt. Ltd. (‘Heligo ’), in order to secure the amount of a final award dated January 25, 2017, made by an arbitral tribunal seated in Singapore in favour of Aircon. An ad-interim order in these terms had already been passed by the Bombay HC on April 17, 2017. The primary issue before the Bombay HC was whether Section 9 of the Arbitration Act as amended by the Amendment Act would apply to a foreign seated arbitration which commenced after the Amendment Act came into force, and where the award had not yet been enforced under Section 48 of the Arbitration Act. The Bombay HC therefore allowed the respondent’s petition and confirmed the ad-interim order dated April 17, 2017, to come to its finding that the amended Section 9 of the Arbitration Act would be applicable to awards pending recognition under Section 48 of the Arbitration Act.
4 Civil Appeal Nos. 5370-5371 of 2017.
5 Civil Appeal No. 5172 of 2017 (Arising out of SLP (Civil) no. 2370 of 2015).
6 Company Appeal (AT) (Insolvency) 6 of 2017.
For further information, please contact:
Zia Mody, Partner, AZB & Partners
zia.mody@azbpartners.com
