Search Results

Hardik Sharma[1] INDIA & INTERNATIONAL COMMERCIAL ARBITRATION It is pertinent to comprehend the very need that stems as a result of rapid globalization and internationalization of traditionally proximal business models that have held themselves confined to territorial boundaries. This need is for systems and mechanisms that are able to swiftly and efficaciously deal with the disputes that arise out of legal contracts between the participating parties. While most of these contracts are bilateral, there are also instances where multilateral agreements may be drawn. The statutory provisions for Arbitration in India can be found under the Arbitration & Conciliation Act of 1996 (hereby referred to as “the Act”). The Act finds itself based on the UNCITRAL Model Law which provides universally accepted and recognized rules for international trade while specifically catering to international arbitral processes. Section 2(1)(f) of the Act defines ‘international commercial arbitration’ as an arbitration relating to disputes arising out of a legal relationship, whether contractual or not, which are considered as commercial under the law in force in India; where one or more of the parties are entities (personal or impersonal) which reside outside India.[2] UNDERSTANDING ‘SEAT OF ARBITRATION’ The appropriate legislation regulating arbitration, including the procedural features, is determined by the seat of arbitration. When the parties choose a relevant legislation for the arbitration agreement, that legislation rules the arbitration. Conversely, if the stakeholders have not directly or by reason of some event chosen the law regulating the conduct and process of the arbitration, the conduct of the Arbitration shall be governed by the law of the seat of arbitration. The courts of the nation in which the seat of arbitration is situated would oversee regulating the conduct of arbitration and challenging an award, as such courts would be the regulatory body with the ability to revoke the judgment. Often it has been observed in the Indian legal system that a literal interpretation of the word ‘seat’ was taken into consideration by lawyers. It has very well been cleared now that there exists a substantial difference between the ‘seat of arbitration’ and the ‘venue of arbitration’. The case of Bharat Aluminium Company Ltd. v. Kaiser Aluminum Technical Service Inc. [3](‘Balco’) has been of primordial importance in understanding this very concept. The Hon'ble Supreme Court ruled that the choice of another nation as the seat of arbitration would mean an acceptance of the fact that the regulations as a part of the law in that particular nation shall serve as abiding principles for the arbitration proceedings. The Supreme Court of India in the case of Enercon (India) Ltd. & Ors v. Enercon GmbH[4] reiterated the same verdict as in Balco and held that the “venue” of arbitration, which is the geographical location chosen based on the convenience of the parties is not similar to “seat” of arbitration, which works as the deciding factor on correct jurisdiction. The judgment in Balco[5] fact went further on to elucidate that even if the arbitration agreements were found to state that Indian Arbitration Act would govern their proceedings, the courts would hold no supervisory powers if the seat of arbitration was found to exist outside India. This judgment meant a momentous shift in the very foundation of the concept of jurisdiction and exercise of judicial power. However, the pronouncement was short-lived. The situation altered, when the Arbitration and Conciliation (Amendment) Act, 2015 (‘2015 Amendment’) came into effect. The 2015 Amendment modified the ratio decidendi established in Balco to a restricted extent, since it specifically states that a party can seek appropriate interim remedy from the Indian courts under Section 9 of the Act, even in international commercial arbitrations with a foreign seat. Section 9 of the Act allows for the protection, preservation, or temporary custody of commodities, assets, and properties, as well as the securing of sums in dispute and the appointment of interim receivers.[6] But the evolution of international commercial arbitration in India did not end there. While the amendment per se was an integral step in arriving at a more liberally held concept of resolving business disputes across borders, it certainly was not the cessation point. VARYING VIEWS IN THE INDIAN SCENARIO Parties registered in the same jurisdiction may seek to have their arbitration held outside of their home country for a variety of reasons. Before the Supreme Court's ruling in PASL Wind Solutions v. GE Power Conversion India Pvt. Ltd.[7], it was uncertain whether an overseas arbitration award between two or more Indian firms would be executable in India, or if the sides could even pursue interim relief in Indian courts. This question of arbitral awards for Indian parties having foreign seats is not new. The high courts of the nation had offered differing views on the issue. The Bombay High Court, for instance in the case of Addhar Mercantile Private v Shree Jagdamba Agrico Exports, held that two Indian parties could not choose a foreign seat because “the intention of the legislature is clear that Indian nationals should not be permitted to derogate from Indian law.”[8] The Bombay High Court relied heavily on the Supreme Court’s decision in TDM Infrastructure v. UE Development India Private Limited[9] to support its decision. On the other hand, we have the judgment of the Madhya Pradesh High Court which ruled in the case of Sasan Power versus North American Coal Corporation[10] that “two Indian Companies are permitted to arbitrate their dispute in a foreign country”[11] Here, a detailed analysis of the judgment made it evident enough that the court had considered the SC’s decision in Atlas Exports Industries v. Kotak & Company[12] of paramount significance where the bench had gone to say that merely because the arbitrators were situated in a foreign country cannot by itself be enough to nullify the arbitration agreement when the parties have with their eyes open willingly entered into the agreement.[13] The Delhi High Court had taken the very same route when it gave its judgment in the case of GMR Energy Limited v. Doosan Power Systems India Private Limited[14] where it relied on the case of Atlas[15] to state that the very instance of choosing a foreign arbitral seat by parties that were legally Indian was “in no way contrary to the public morality of India”, and henceforth in no way violated Sections 23 and 28 of the Indian Contract Act, 1872. While the Delhi High Court case could not lay down a clear precedent by virtue of it being second to the apex court, it surely did lay down a new lane to walk in while pondering the very question of legality and illegality of foreign arbitral seats by parties which were Indian. What is significant to note here is that even the Hon'ble Supreme Court had differed in its judgments. The question which arose was substantial- why were there such drastic differences on the very same issue by the very same court? The answer to the question lies within the formation of the Act itself. The Arbitration and Conciliation Act, 1996 is divided into 4 parts. Part I deals with the arbitrations possessing Indian seats. Essentially, this means that all arbitrations whether domestic or international commercial arbitrations having their arbitral seats in India will be governed under Part I of the Act. Lucidly explaining, Part I of the Act refers to ‘international commercial arbitration’ as overseas arbitrations having their arbitral seats in India or Indian seated arbitrations with a foreign nexus. Part II of the Act on the other hand talks about foreign-seated arbitrations or arbitrations possessing a foreign seat. The qualm which rests here is whether the same foreign arbitral award can be considered as one under the domain of ‘international commercial arbitration’ as defined under Section 2(1)(f) since there exists no mention of the same. Therefore, this interpretation was left to the courts of the country. While there have been some provisions contained in Part I of the Act which do apply to foreign seated arbitration, owing to certain legislative amendments, both Part I and Part II of the Act exist independently of each other. This essentially means that the provisions of Part I wouldn’t apply to foreign-seated arbitration while Part II wouldn’t extend its jurisdiction to foreign arbitration with Indian seats. PASL WIND SOLUTIONS V. G.E. POWER: LAYING FOUNDATIONS OF INDIAN LEGAL FLEXIBILITY The question in the case of PASL Wind Solutions v. GE Power Conversion India Pvt. Ltd. was a little complex. The case first came to the Gujarat High Court which determined Zürich (Switzerland) to be the seat of arbitration. It also ruled that the Indian law, in fact, did not disallow the Indian parties to choose a foreign arbitral seat. As the award maintained its seat in Zürich, Part II of the Act which lays its claim over foreign seated arbitration was invoked. The respondent in the case demanded interim relief under Section 9, the request of which was rejected by the Gujarat High Court. The reason was evident- A provision contained in Part I of the Act could not be invoked for a matter which fell specifically under Part II. PASL then approached the Supreme Court under Article 136 of the Constitution. The special leave petition appealed to the court to overturn the judgement of the high court. There was a tri-fundamental argumentative approach made by PASL here. 1. The seat of arbitration was argued to be Mumbai rather than Zürich; 2. Part II of the Act could only provide for those arbitrations whose awards fell under the criterion of ‘foreign awards, passed in the purview of ‘commercial international arbitration’ as defined under S. 2(1)(f) of the Act; 3. That the very act of two Indian parties choosing a foreign arbitral seat would be against Sections 23 and 28 of the Indian Contract Act, 1872 when read with Sections 28(1)(a) and 34(2A) of the Arbitration and Conciliation Act. THE VERDICT: CHANGING CURRENTS OF INTERPRETATION The Supreme Court gave a verdict which has now started to shape a definitive course for the way bilateral disagreements between international commercial agreements with foreign seats are to be handled. The Court, while giving its verdict, gave special emphasis on the questions raised by PASL and gave the ratio decidendi as follows: 1. The Supreme Court rejected the plea of PASL, which had stated that by the ‘closest connection test’ Mumbai was the arbitral seat. The Court elucidated that the closest connection test could only be applied to cases where the arbitral seat was not decided. Both the agreement and the Arbitration Tribunal designated the seat to be Zürich which was held rightful. 2. PASL laid emphasis on the words “unless the context otherwise requires” as mentioned in Section 44 to argue that the very presence of this phrase allows the definition of ‘international commercial arbitration’ as under Section- 2(1)(f) to be transferred to Section 44. However, the SC rejected this claim as well. The SC relied on its decision in the case of Balco[16] where it had explained the functional differences between Part I and Part II of the Act to make it clear that both of them were mutually exclusive to each other. Part I offered the term a “party-centric” meaning while when viewed under Part II of the Act, a “place-centered” focus was offered. To put it another way, whether the parties choose a foreign arbitral seat is the sole element that matters for the purposes of Part II of the Act, irrespective of whether the parties actually have any international link. 3. The Supreme Court also clarified that there are four elements that must be satisfied for an award to be designated a “foreign award” under Section 44: (i) the dispute must be a commercial dispute as understood under Indian law; (ii) the award must be made pursuant to a written arbitration agreement; (iii) it must be a dispute that arises between “persons” (without regard to their nationality, residence, or domicile), and (iv) arbitration must be conducted in a country that is a signatory to the New York Convention. The Court found that the arbitral award, in this case, satisfied all four elements and was, therefore, a “foreign award” under Part II of the Act. 4. Another argument that had been made by PASL was regarding the public policy of the country, which it alleged, was violated when two Indian parties were allowed to choose a foreign arbitral seat. PASL brought into debate Section 23 and Section 28 of the Indian Contract Act, 1872 (‘ICA’ herein) when read with Sections 28(1)(a) and 34(2A) of the Arbitration and Conciliation Act. The Court, therefore, had two questions to answer: a) Whether choosing a foreign arbitral seat by parties that were Indian was prohibited by Section 28 of the ICA? b) Whether a violation of Section 33 of the ICA would take place if the parties were allowed to do so? The court answered both in negation. The Supreme Court emphasized that Section 28 provides an unequivocal niche for arbitration agreements, based on the wording of the statute. As a result, the clause places no boundaries on the provisions of arbitration agreements, including the selection of arbitral seat. The Supreme Court concluded that there was nothing in India's public policy that prohibited party liberty in selecting a foreign arbitral seat by Indian parties under Section 23 of the Indian Contract Act. It emphasized that contract freedom must be weighed against obvious and unequivocal public damage and that enabling Indian parties to pick a foreign arbitral seat posed no such risk. Indian substantive law is only mandatorily relevant to domestic conflicts located in India, according to statutory interpretation of Section 28(1)(a) of the Act. This does not stop two Indian parties from choosing a foreign arbitral seat. However, the Court stated that if two Indian parties choose a foreign seat on the circumstances of a matter in order to avoid Indian public policy, the implementation of any foreign award issued in those proceedings may be challenged under the Act's public policy exemption, Section 48(2)(b). 5. Another important step included within the judgment was the grant of interim relief to GE India which according to the court was focal. The court responding to the cross-objection filed by GE India against the Gujarat High Court’s refusal to grant interim relief elucidated that relief under Section 9 of the Act was valid even if the seat of arbitration was foreign. Section 9 would apply to both Part I as well as foreign arbitrations that fall under the purview of ‘international commercial arbitration’ under the Act. Contextually, the Court determined that the lack of a foreign nexus, as required by Section 2(1)(f), was not relevant because the concept of "international commercial arbitration" under Section 2(1)(f) of the Act did not apply to foreign seated arbitrations. The court responded by making it clear that on the very basis of place of arbitration, a proceeding could be termed as ‘international commercial arbitration’ and that just because the arbitral seat was foreign, the arbitration fell under the same criterion. COMMERCIAL INTERNATIONAL ARBITRATION: A FUTURE SECURED The Supreme Court's judgment resolved a significant legal issue while preserving party autonomy. It also gave much-needed clarification on these concerns to firms operating in India, especially international enterprises with local subsidiaries. Even though the subject matters of their agreements and counterparties might fully lie within India, these organizations can now pick foreign arbitral seats in their arbitration agreements. The ruling gives much-needed clarification on Indian parties' use of foreign seats. The judgment highlights the significance of party sovereignty, describing it as the "brooding and guiding spirit of arbitration."[18] As a result, Indian parties and Indian subsidiaries of international corporations now have the option of selecting a foreign arbitral seat in agreements with other Indian entities if they so wish. The Indian courts will not have an oversight function over the proceedings in such matters, and any award will not be susceptible to forgo procedures in India. Due to the high number of cases in Indian court registries, arbitration-related judicial processes can be costly and time demanding, causing the issue to be delayed indefinitely. Picking a foreign arbitral seat allows Indian litigants to limit the possibility of concurrent court-actions that might otherwise occur in arbitrations held in India. And while it is true that the enforcement of such contracts might still require approaching the Indian judiciary (an aspect which arguably leads the litigants back to the crowd of registers they were hoping to avoid in the first place), even a single reduced trip to the court is a welcome change. Furthermore, when selecting a foreign seat, Indian parties (and their foreign parent entities) can be certain that the Indian courts would remain accessible and prepared to give interim relief in support of their arbitration. This is significant since the parties are likely to have interests that are mostly situated in India because they hold Indian domiciles. CONCLUSION The judgment is a landmark one. Not just because it provides an added right of having a foreign seat of arbitration, but because of the acceptance of involvement of domestic courts to grant interim relief as well. The decision of the court is nothing short of being monumental. The Supreme Court’s order granting interim relief comes with a formidable explanation. In lucid terms, the fact that two parties existing outside India choose a foreign arbitral seat would not matter as long as one of the parties holds assets in India. If such a case comes to light, courts would be empowered to grant interim relief to one of the parties according to the provisions of Section 9 of the Arbitration and Conciliation Act, 1996. It is a well-understood fact that international commercial transactions demand flexibility which the interpretation behind the court’s decision has duly provided to the arbitration mechanism prevailing in the country. And while the case per se wouldn’t be the end of the evolution of international arbitration in Indian law, it certainly has provided a paved way for the positive interpretation of globalized legal culture. [1] Hardik Sharma is a third-year law student pursuing B.A., LL.B (H) from Amity Law School Noida. Holding keen interest in Commercial International Arbitration and Private International Law along with Copyright Law Hardik has an array of articles and research papers published in various law journals in topics ranging from Refugee Law to IPR and the International Human Rights Law. [2] The definition qua ‘International Commercial Arbitration’ given in Article 1 (Chapter I: General Provisions) of the UNCITRAL Model Law is different from that which is adopted in the Arbitration and Conciliation Act of 1996. Article 1 (3) (a) - lays emphasis on the movement of goods across the national boundaries rather than on the character of parties. Article 1 (3) (b) & Article 1 (3) (c) refer to the occasion when the contract between two local parties can become international. Article 1 (3) (b) (i) and Article 1 (3) (c) contemplate situation wherein two local parties choose a foreign venue of arbitration in respect of a local contract. There is no implication that parties can resort to this, in order to circumvent the municipal law of the country to which they are the subjects. The courts can always refuse the enforcement. [3] Bharat Aluminium Company Ltd. v. Kaiser Aluminium Technical Service Inc. (2012) 9 SCC 552. [4] Enercon (India) Ltd. & Ors v. Enercon GmbH & Anr, (2014) 5 SCC 1. [5] Supra 4. [6] Section 9; Arbitration & Concilliation (Amendment) Act, 2015. [7] PASL Wind Solutions v GE Power Civil Appeal No. 1647 of 2021. [8] Addhar Mercantile Private v Shree Jagdamba Agrico Exports (2015) SCC OnLine Bom 7752 at para 8. [9] TDM Infrastructure v. UE Development India Private Limited (2008) 14 SCC 271. [10] Sasan Power v North American Coal Corporation (2016)(2) ArbLR 179 (MP). [11] Ibid. [12] Atlas Exports Industries v. Kotak & Company (1999) 7 SCC 61. [13] Ibid. [14] GMR Energy Limited v. Doosan Power Systems India Private Limited (2017) SCC OnLine Del 11625. [15] Supra 12. [16] Supra 4. [17] PASL Wind Solutions v. GE Power Conversion India para 60.

- Gaurav Rai[1] and Abhijeet Kumar[2] PDF Version of the Article Background 1. Section 36 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) deals with enforcement of the arbitration award. Section 36(2), Arbitration Act also grants discretion to the Court to stay the enforcement of an award based on a separate application made for the purpose. Moreover, the Section also provides that there would not be an automatic stay merely based on the admission of an Application for setting aside the award under Section 34, Arbitration Act. 2. Further, Section 36(3), Arbitration Act states that while dealing with an application for stay of the award, the court can exercise it discretion to stay the enforcement of the award and give reasons for the same in writing. Finally, the proviso to Section 36(3), Arbitration Act provides that in case the Court is dealing with an arbitration award which includes payment of money, the Court “shall” “have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908”. Order 41 of the Code of Civil Procedure, 1908 (“CPC”) deals with stay of execution of money decrees and specifically provides for mandatorily depositing before the court, the amount awarded under the decree, to empower the executing Court to hear an application for stay of execution. 3. This paper shall discuss the dichotomy between the two conflicting provisions of the Arbitration Act and the CPC and attempt to answer the question whether in an application for stay of enforcement of an arbitral award, the enforcing court has the discretion to stay the award unconditionally or by payment of an amount less than 100% when the provisions of CPC, which needs to be followed under the section, do not give the Court such liberty. Evolution of Section 36 – Stay of Enforcement 4. Prior to 2015 there existed an automatic stay on the enforcement of an arbitral award as soon as the petition under Section 34 challenging the award was admitted by the Court. The Hon’ble Supreme Court in National Aluminum Co. Ltd. v. Pressteel & Fabrications, (2004) 1 SCC 540 held that an automatic stay on the enforcement of the award was a burden on the award creditor and that such a mischief must be rectified. 5. The Law Commission in its 246th Report recommended amendment of Section 36 of the Arbitration Act. The law was amended in 2015 and post the 2015 amendment, an automatic stay is no more available when the petition for challenge of the award is admitted by the court under the Arbitration Act, rather a separate application is to be filed under Section 36(2), Arbitration Act for stay of enforcement of the award. Whether Special protection exists for Government instrumentalities / entities 6. In PAM Developments v. State of West Bengal (2019) 8 SCC 112, the Hon’ble Supreme Court was dealing with the issue of whether a government entity would get the protection of not providing security or depositing the decretal amount before the court for stay of enforcement of an arbitral award on a combined reading of the provisions of Order 27 Rule 8-A and Order 41 of the CPC. 7. The Court while analysing the provisions held that Order 27 Rule 8-A, CPC exempts the government from furnishing any security, thus government while making an appeal against a decree is exempted from the mandatory requirements of Order 41 Rule, 5 CPC of furnishing security. The court further observed that Order 27 Rule 8-A, CPC only exempts the government from furnishing security, and the court has full power to seek deposit of full or partial decretal amount. Therefore, even if Order 27 Rule 8-A, CPC applied, it would not forbid the court from seeking deposit of money awarded. 8. The Hon’ble Supreme Court held that the Arbitration Act is a self-contained code and does not need to be bound by the Code of Civil Procedure to grant stay of execution of a money decree. It also concluded that the Arbitration Act did not grant any special treatment to government entities for protection against deposit of awarded amount or grant of security in order to stay enforcement of the arbitral award. 9. The court further held that the expression “having due regard to” the provisions of CPC in Section 36(3), Arbitration Act is only guiding or directory, had the expression been “in accordance with” the provisions of CPC, then it would have been mandatory. Extent of effect of CPC on Arbitration Act – Stay of enforcement of money decree 10. This dictum of the Supreme Court in PAM Development becomes relevant as the Court has held that the provisions of the CPC are not binding as long as they are inconsistent with the Arbitration and Conciliation Act. This should lead to the obvious conclusion that since the Arbitration and Conciliation Act, 1996 allows for the Court to have discretion in such matters, hence the provisions of Order 41 of the CPC which states that such matter cannot be heard without deposit of the decretal amount, would not be applicable to a court hearing an application under Section 36. However, that does not seem to be the case as the jurisprudence seems to have been muddied by conflicting opinions of the courts regarding their powers under Section 36. Examples of exercise of Discretion by the Courts under Section 36(2) 11. In December 2019, Reliance Infrastructure Limited (part of the Anil Dhirubhai Ambani Group) was awarded damages worth INR 875 Crores (excluding interest) under a contract with and in an arbitration against Damodar Valley Corporation. While the challenge of the award is still pending before the Calcutta High Court, in December 2021, the application for stay of enforcement of the award was heard by a single judge bench of the Calcutta High Court in the case of Damodar Valley Corporation v. Reliance Infrastructure Limited. 12. The Hon’ble Calcutta High Court has exercised its discretion to stay the award on the condition that 50% of the award amount is to be deposited in cash before the Court and to be converted into a fixed deposit by the Registrar General of the Court. The remaining 50% to be deposited as bank guarantee before the Court and to be kept alive until the disposal of the application for setting aside the award. 13. While passing this order in the case, Court has encapsulated the entire position regarding the powers of the court hearing applications for stay of execution of the arbitral award. The Calcutta High Court in this case (Damodar Valley Corporation v. Reliance Infrastructure Limited), based on the submissions made by the parties, came to the prima facie view that the award may be stayed on the deposit of 50% of the amount in cash and the remaining 50% to be deposited as bank guarantee. The observations which led to this decision are encapsulated in para 14 of the order which is extracted hereunder: 14. Both parties had also made submissions on the merits of the award. I am well aware that any finding or observation pertaining to the merits of the challenge under section 34 of the Act which is still pending before this Court is premature at this stage. However, on a perusal of the award it appears that the award is a unanimous award of the Arbitral Tribunal comprising of three members. It ex facie appears that the Tribunal has taken into consideration the pleadings filed by the parties. Issues had also been framed. The award is a speaking award and prima facie deals with the contentions of both the parties elaborately. The Arbitral Tribunal has gone into each of the claims and the counterclaim made by the parties and has adjudicated upon the same. At least, at this prima facie stage, there is nothing in the award which shocks my conscience nor indicates that the award is either without jurisdiction of has been obtained by fraud or corruption or is contrary to law. I reiterate that these are all prima facie findings on the merits of the award and for the limited purpose of adjudication of this application. Accordingly, I am of the view that the petitioner has been unable to make out an exceptional case for unconditional stay of the award. 14. The issue regarding the powers of the Court to stay enforcement of award under the Act, 1996 was also discussed by the Hon’ble Bombay High Court(“BHC”) in the case of PFS Shipping (India) Limited v V.K. Gupta and Ors. 2016 SCC OnLine Bom 10048.The court in this case held that Section 36(3) clearly indicates that the court has been granted discretion to consider security required to be furnished by the petitioner seeking stay or whether stay has to be granted unconditionally, or on furnishing such security so as to secure part of the claim depending on the facts and circumstances of each case. 15. The court further held that although Section 36 requires the court to give due regard to the provisions for grant of stay of money decree under the CPC, "in appropriate cases, the court can grant stay even on the petitioner furnishing security to secure part of the awarded amount or may grant unconditional stay depending upon the facts and circumstances of each case". The Court observed that if the award is prima facie perverse and contrary to law, the petitioner need not be directed to deposit the entire amount stated in the award. 16. A similar issue came up before a division bench of the BHC in the case of Ecopack India Paper Cup Pvt. Ltd. v Sphere International, 2018 SCC OnLine Bom 540 wherein the BHC held that when the Court considers an application for stay of the arbitral award for payment of money, no doubt the Court would be required to consider the principles under the provisions of Order 41 Rule 5. Section 36, however, shows that the jurisdiction conferred on the court is a discretionary one, and would be required to be exercised after taking into consideration the facts and circumstances of the case. It is pertinent to note that the BHC exercised its discretion and granted an unconditional stay in execution of the interim award as they were prima facie convinced that the award was improper. 17. The prime example of the Court encountering situations to exercise its discretion in requiring parties to deposit the award amount before the court became relevant during the times of COVID-19, wherein parties suffered serious cash flow issues. It is pertinent to note that such discretion was exercised not under any extra-ordinary inherent power of the High Court but under the powers available under Section 36 of the Act. Reference may be made to the judgment of the Steel Authority of India Limited v. Tata Projects Limited. 18. The Calcutta High Court (“CHC”) in Kolkata Metropolitan Development Authority v. South City Projects held that the proviso to Section 36(3) of the Arbitration Act stipulates that the court shall, while considering the application for grant of stay in the case of an arbitral award for the payment of money, have due regard to the provisions of the CPC. It also held that while exercising powers under Section 36(3) of the Arbitration Act, the court is not bound by the provisions of order 41 Rule 5 of the CPC. It further held that under Section 36(3) of the Arbitration Act, the court can require a party to furnish such security as it deems appropriate. However, the court must give reasons for such orders.[3] 19. The Court also made an interesting note that Order 41 Rule 5 would be applicable in principle to an appeal preferred under Section 37 of the Arbitration Act i.e. when a Section 34 challenge has been dismissed. In this case the respondent not only prayed for deposit of money in accordance with CPC but also sought relief for withdrawal of amount out of such deposit. The Court rejecting this contention held that such withdrawal can be permissible at Section 37 of the Arbitration Act, appeal stage but not when a section 34 challenge is pending. The CHC while referring to the dictum of Allahabad HC in Kanpur Jal Sansthan v. M/s Bapu Construction wherein the withdrawal of 50% out of the deposit money at the stage of Section 37 of the Arbitration Act, was permitted held that once a challenge under section 34 of the Arbitration Act fails, the award becomes enforceable as decree. Appeals against order rejecting Section 34 of the Arbitration Act application lies to appellate Court under Order 41 CPC and therefore withdrawal out of deposit amount may be permitted at Section 37 stage but not at Section 34 stage. The Court further held that while considering an application under Section 36(3) of Arbitration Act, the court is still examining challenge to the award under Section 34 of the Arbitration Act. However, under Section 37 of the Arbitration Act, the award has already become a decree of Court. 20. It is pertinent to note that the Delhi High Court even at the stage of hearing the application under Section 34, allows the award creditor to withdraw the amount deposited by the award debtor on the submission of a bank guarantee to the equivalent amount. This is a common practice allowed by the Delhi High Court and reference may be made to the judgment of the DHC in Steel Authority of India Limited v. Tata Projects Limited and also has been recognized by the Hon’ble Supreme Court in the case of SAIL vs. M/s Seaspray Shipping Co. Ltd. Examples of Court not exercising discretion under Section 36 since an award is a money decree 21. The Supreme Court in Manish v. Godawari Marathawada Irrigation Development Corporation(“Godawari case”) stated that in cases of money decrees, orders for 100% deposit of awarded amount has to be passed and hence the order of BHC for deposit of 60% of the awarded amount, pending an appeal under Section 37, Arbitration Act was set aside. The dictum of SC in Godawari Case has been relied upon by Delhi High Court to order 100% deposit in Power Mech Projects Ltd. v. Sepco Electric Power Construction Corporation. 22. The Sikkim High Court in Sikkim Power Development Corporation Ltd. and Ors. V. Amalgamated Transpower (India) Ltd. held that in view of Section 36(2) and (3), Arbitration Act, in order to put stay on operation of the Arbitral Award, a party may file a separate application. The court in turn has discretion to grant such stay subject to conditions. Further the court observed that in light of section 36(3), Arbitration Act in cases of money decree, the court has to consider the provision under Order 41 CPC. While negating the argument of discretion of court in following the principles of Order 41 CPC, the court while relying on Godawari case ordered deposit of entire award money. 23. The Supreme Court in Toyo Engineering Corporation & Anr. v. Indian Oil Corporation Ltd. heldthat Order 41 Rule 5 CPC has to be followed in application for stay of award involving money. The court further held that because large public corporations have obligation to pay large amount awarded, therefore discretion of the court is limited to determination of amount of money to be deposited for the stay on execution of award. However, the court in this case raised the deposit amount to a 100% of award against 20% as ordered by the Delhi High Court. 24. In this case the court negated the exercise of discretion by the court for application of principles of Order 41 CPC rather made it mandatory by implication and the court limited the scope of discretion to quantum of the deposit amount. 25. It is interesting to note that the before the Toyo Engineering case reached the Supreme Court the orders of High Court were in stark contrast to the judgment and were more on lines of the exercise of discretion as discussed in the other cases above. In the DHC, the Toyo Engineering case then titled as Indian Oil Corporation v. Toyo Engineering Corporation, the DHC ordered deposit of 20% of the awarded amount taking into consideration the allegation of Petitioner that the Arbitral Tribunal did not take into account a letter issued by the Petitioner whereby extension of time was granted subject to 10% price reduction of Contract Value as per one of the clauses of Contract. The court found this contention prima facie valid and ordered 20% deposit. 26. Subsequently an application was filed by Toyo Engineering for modification of the order for deposit of only 20% of the amount The Court in Indian Oil Corporation Ltd. v. Toyo Engineering Corporation held that it has the discretion to determine the quantum of deposit in view of the facts and circumstances prevailing. The court further held that there being no change in circumstances from the time of passing of the earlier order, no modification can be allowed in deposit amount. Since the court has already exercised its discretion on the facts and circumstances of case, the discretion on the same facts and circumstances cannot be applied. Analysis and Conclusion 27. The conflicting decisions have created a gray area in the law regarding deposit of award amount for stay of execution of an arbitration award. The authors are of the opinion that the correct law in this regard is that the Courts under the Arbitration Act do have the discretion to decide the amount of deposit for stay of execution of the award as opposed to the position under the CPC. Under the CPC, the Courts do not have any discretion while hearing an appeal under a civil suit to allow stay of execution of the decree if the appellant has not made a deposit of the decretal sum or furnished security as the case maybe. However, under Section 36, of Arbitration Act the Court has the discretion to even allow an unconditional stay of execution i.e. without the requirement of furnishing a security or depositing the awarded amount before the Court. Even in PAM Developments it was held that the provisions of CPC will apply only insofar as they are inconsistent with the spirit of the provisions of the Arbitration Act, 1996. 28. The reason for apparent conflict is because of passing of non- speaking orders by the Hon’ble Supreme Court in the case of Toyo Engineering and Godawari and the lower courts being bound by such judgments following them without due application of mind. Whereas the true import of the powers and functions of the Court under Section 36 of the Arbitration Act was discussed by the Supreme Court in PAM Developments case and has rightfully been applied by the Court of Bombay, Calcutta and Delhi. 29. The authors are of the opinion that while hearing an application for stay of arbitral award, it is the duty of the Court to exercise their discretion and apply their mind before ordering the applicant to deposit the entire amount of the award before the Court as a pre-condition for grant of stay of award. Further, the Courts cannot without application of mind order the entire amount awarded to be deposited as a matter of principle. The discretion needs to be exercised based on the facts and circumstances of each case. The parameters as discussed in the Damodar Valley Corporation v. Reliance Infrastructure should serve as a guideline as to the aspects to be taken into consideration while exercising such discretion. Further, it is also pertinent to note that in the process of exercising discretion, the Bombay High Court in Ecopack India Paper Cup Pvt. Ltd. v Sphere International, 2018 SCC OnLine Bom 540 granted unconditional stay of the award as prima facie the interim award did not seem valid. 30. The court may prima facie examine the validity of award before granting a stay on the execution of award, and once the validity or invalidity of award is ascertained then conditional or unconditional stay can be granted. Therefore, so far as an award on the face of it is not perverse and prima facie appears valid, the deposit of awarded amount becomes significant so as to not deprive the award holder of fruits of award once a Section 34 application is dismissed. However, in case a prima facie view is taken that the award is patently erroneous or prima facie suffers from any other infirmities covered under Section 34 of the Arbitration Act, such an award should be stayed either unconditionally or by deposit of a lesser amount based on a prima facie analysis of the award and application of mind by the judge. [1] Gaurav is a Senior Associate at Legafin Law Associates and Editor in Chief of The Arbitration Workshop. He can be contacted at gaurav@thearbitrationconsultant.in [2] Abhijeet Kumar is a 4th Year, B.B.A., LL.B. (Hons.) student at Chanakya National Law University, Patna. He can be contacted at abhijeetcnlu23@gmail.com [3]Nihal Shaikh, ‘Conditional or Unconditional Stay in Enforcement of an Arbitral Award?’ (Lexology, 3 August 2021) accessed 12 January 2022.

-Ajay* & Shreya Nair** UNDERSTANDING “BASEBALL ARBITRATION” Baseball arbitration is the kind of arbitration that lacks investment in terms of time and the primary focus is to arrive at a conclusion based on the offers put up on the table by both parties. Baseball Arbitration or Pendulum Arbitration is also termed as FOA (Final Offer Arbitration). The basic idea is to put an end to the dispute in the shortest period of time, just like a home run in Baseball. The proceedings are conducted in summary wherein the parties put up their final offers and the arbitrator has to choose one of those offers as the final decision. It is quite efficient on record, because of which it is gaining popularity, especially in the United States, from where it has originated. Its suitability in terms of the nature of the dispute can however be disputed. While it is appropriate for disputes where the conflict in issue is the quantum, the ground is shaky when it comes to disputes where there is a decision regarding liability being taken. Another interesting aspect lies in the fact that the general norm is to not accept a complete offer from one party as that could render the award one-sided and absurd. Therefore, arbitrators tend to merge their findings with the issue-wise determination of the better award and take the final call. While this concept is unexplored to the Indian subcontinent and its arbitration regime, it is imperative to focus on the international position of the practice and understand the effect it can have on the Indian arbitration practices. BASEBALL ARBITRATION IN THE INTERNATIONAL CONTEXT The practice originated out of the constant settlement of disputes regarding salaries of baseball players in the U.S. and the same became a source from where it derived its popular name. The shift from the US legal sphere has taken place over the course of the last decade, where baseball arbitration has been employed in disputes involving royalty rate settlements in FRAND agreements[i] & also in international tax disputes in the 2016 OECD Multilateral Tax Convention.[ii] The big picture behind the increasing incorporation of baseball arbitration in multi-billion dollar tax disputes is to accentuate the “Winner takes it all” scenario.[iii] There is no doubt that there are various concerns regarding baseball arbitration in the international context. The issues can range from curtailing the arbitral tribunal’s powers, with extreme, controlled and impractical offers to the problem of appeal against the enforcement of the award. However, the law has the power to regulate such practices, owing to the flexible nature of baseball arbitration. For example, Japanese baseball arbitration clauses do not limit the tribunal with only the choices offered by the parties.[iv] Presently, it would not be extreme to say that, globally every dispute which deals with rates, salaries or rent negotiations, is being resolved through baseball arbitration. The focus is to elaborate the practice in the global market and its utility will be a testament to the potential of the practice to gain momentum even in India in the coming years. POSITION OF LAW IN INDIA If we consider the recent developments, it would not be wrong to say that there have been constant endeavors in the direction of making arbitral proceedings more cost-efficient and effective. These attributes are a necessary part of any popular arbitration regime across the globe. Specifically in India, there has been the insertion of Section 29A and Section 29B to the Arbitration and Conciliation Act, 1996 (hereinafter “the Act”) by the amendment of 2015. These provisions ensure fast-track arbitration in a specified time. However, the problem lies in the fact that the time limits provided are not uniform and hence, cannot be considered adequate for various types of disputes. In simple terms, time limits for any arbitration proceeding can be too short or at the same time, it can be too long, all depending on the nature of the dispute and many other factors which cannot be anticipated by the parties at the start of the arbitral proceedings. Therefore, in order to deal with a situation like this, baseball arbitration can be quite effective as one of the main characteristic advantages of it is, time-saving. Even if we go by the letters of the law, there is no express bar in the Act regarding the usage of baseball arbitration in India. The same can be inferred from the provision of Section 19 of the A&C Act, 1996 which expressly allows the involved parties to decide for themselves the procedure that they are willing to follow during the arbitral proceedings. Also, Section 24(1) of the A&C Act, 1996 allows the involved parties as well as appointed arbitral tribunal, to waive off their obligation of conducting the proceedings by an oral hearing. At the same time, baseball arbitration can never be suitable for determining all types of disputes. It can be a successful model in the disputes wherein quantum of liability is the primary issue of conflict and liability of all the parties have already been determined. Ms. Samira Varanasi and Mr. Sriram Govind are of the opinion that such a model can be useful in resolving DTAA disputes in India.[v] On the same lines, Baseball Arbitration can be useful in deciding insurance arbitral disputes wherein the quantum of claim is under conflict and the liability of the insurer has already been settled. REQUIREMENT OF REASONING While dealing with baseball arbitration, one of the points that might attract conflicts is the need to have a reasoned award. However, Section 31(3)(a) of the Act permits the parties to waive off the need of having reasoned award. Another option can be the adoption of baseball arbitration only for certain issues in the entire dispute and in that case, the parties will not be abandoning the requirement of having a reasoned arbitral award entirely as the arbitrator will still have to give a well-reasoned award and at the same time, he will be bound to accept the awarded figures proposed by involved parties of the dispute. The apex court has clearly distinguished an unreasoned award and unintelligible award. Unintelligible awards are those awards which are clearly contradicting the provisions of Section 31(3) of the Act, whereas unreasoned awards are judged on the threshold of whether the reasons were even required or not, in the particular award.[vi] Taking the same into consideration, there is always a possibility that the Indian courts are not open to enforcing such awards emerging out of baseball arbitration in the absence of any existing clause for the same. In order to rule out all such possibilities, it is very important to have a properly drafted clause for the enforcement of the arbitration award. For example, the following addendum clause can be inserted in the dispute resolution clause of any Insurance Contract: “Each party shall submit to the arbitrator and exchange with each other an advance of the hearing their last, best offer. The arbitrator shall be limited to awarding only one or other of the two figures submitted. The parties further agree that the figure so awarded by the arbitrator shall not be challenged on the grounds of lack of reasoning, unreasoned award or otherwise.”[vii] If added, such a clause would be helpful in two ways. Firstly, it would not take away the right from either of the parties to challenge the substantive part of the award. Secondly, the latter part of the clause would be taken as the consent of the parties involved, to waive off the requirement of disclosing the reason behind the award, in accordance with the provision laid down under Section 31(3)(a) of the Act. CONCLUSION Baseball arbitration, if adopted in an appropriate manner, has the potential of bringing many long disputes to an end in a time-bound manner. It cannot be negated that, in the present times, it would be really hard to predict the attitude with which the Indian courts will act when it comes to enforcing such baseball arbitration awards. At the same time, it is an undisputed fact that the adoption of efficiently drafted arbitration clauses can facilitate the path of baseball arbitration in India. Considering the number of cases that are pending right now in Indian courts and the average duration in which any case reaches to decision, it would not be wrong to say that ADR mechanisms such as arbitration proceedings are big positives. However, we will have to regularly check that even such arbitration proceedings do not turn out to be time-consuming and costly for the parties involved. In order to ascertain the same, it is important for each arbitration regime to keep on evolving in a better way. Baseball arbitration can be a big leap in the same direction, provided the Indian legal system adopts it in a manner that is in accordance with its core principles. We cannot fail to acknowledge that there are thousands of disputes pending in sectors like Insurance and DTAA. Baseball Arbitration, if implemented in its right sense, can be a revolution in the direction of effective resolution of all such pending cases. * Ajay is a final year law student pursuing a five-year integrated undergraduate B.A. LL.B course from Damodaram Sanjivayya National Law University, Visakhapatnam. He can be reached at: ajay.guel1999@dsnlu.ac.in ** Shreya Nair is a final year law student pursuing a five-year integrated undergraduate B.A. LL.B course from Damodaram Sanjivayya National Law University, Visakhapatnam. He can be reached at:shreya.nair.in@gmail.com [i]Joost Pauwelyn, Baseball Arbitration to Resolve International Law Disputes: Hit or Miss?, 22 FLO’ TAX REV. 40 (2018). [ii]Development of a Multilateral Instrument to Implement the Tax Treaty related BEPS Measures, 15, OECD BEPS Action, 8, 20 (2016) https://www.oecd.org/ctp/treaties/public-comments-received-discussion-draft-Development-of-MLI-to-Implement-Tax-Treaty-related-BEPS-Measures.pdf. [iii] Patrick Temple West, International arbitration for tax disputes, 'baseball' style, THOMAS REUTERS (Sept. 14, 2021, 5:40 PM), https://www.reuters.com/article/usa-tax-arbitration-idUSL1E8MGA6U20121125. [iv]David L. Snyder, Automatic Outs: Salary Arbitration in Nippon Professional Baseball, 20 MARQ. SPORTS L. REV. 79, 87 (2009). [v] Sriram Govind & Samira Varanasi, Dispute Resolution in Tax Matters: An Indian-UK Comparative Perspective, 9 INTL’ TAX’ 313, 321 (2013). [vi]Dyna Technologies v. M/s Crompton Greaves, 2019 SCC Online SC 1656. [vii]Drafting Dispute Resolution Clauses: A Practical Guide, AMERICAN ARBITRATION ASSOCIATION, 5, 30 (2013), http://www.arbiter.com.sg/pdf/rules/AAA%20Drafting%20Dispute%20Resolution%20Clauses.pdf.

Gautam Mohanty* & Yasaschandra Devarakonda** The Hon’ble High Court of Delhi [the “Court”] on 20th April 2020, in the case of M/s Halliburton Offshore Services Inc. [“Petitioner”] vs Vedanta Limited and Anr [“Respondent”], [this “Case”] delivered its Order adjudicating a petition under Section 9 of the Arbitration and Conciliation Act, 1996 [“Act, 1996”]. Notably, the aforesaid petition was filed by the Petitioner seeking interim protection by way of restraint against Respondent, thereby injuncting it from encashing the eight bank guarantees furnished by the Petitioner as part of the contract executed between the parties for the development of three petroleum fields. The Court, upon considering the existing legal jurisprudence pertaining to the circumstances and scenarios in which interim injunctions, restraining the invocation of unconditional bank guarantees could be granted ruled in favour of the Petitioner. The present case comment begins with a brief narration about the facts of the case including a summary of the arguments advanced by both the parties. The second part of the case comment explores the limitations and exceptions on invocation of bank guarantees, and the related judicial precedence relied upon by the Court. The third and final part of the case comment thereafter deep dives into the Court’s observations in its Order and attempts to critique the judgment vis-à-vis the legislative intent of the Act, 1996. I. Facts of the case The genesis of the present dispute emanates from an international tender floated by the Respondent in 2018 for the integrated development of three-block fields via the building of oil wells and rigs in the State of Rajasthan. Pursuant to the bidding process, the Petitioner was awarded the contract in April 2018. The Contract executed between the Parties mandated submission of eight bank guarantees which were issued by ICICI Bank, Respondent No.2 and submitted by the Petitioner. The relevant chronology of facts which led to the present dispute is that while the project was nearing completion the project could not be completed owing to restrictions imposed by the Government of India vide its Circular dated 26.03.2020 due to Covid-19. Accordingly, the Petitioner invoked the Force Majeure Clause of the Contract. In essence, the case of Petitioner was that it was unavoidably handicapped in performing the contract as the performance of the contract required travel of person from overseas, as well as workmen from various parts of the country. In reply, the Respondent countered the contentions of the Petitioner by arguing that the production of petroleum was an “essential commodity” and therefore was exempted from various orders relating to the restrictions imposed owing to Covid-19. Accordingly, the Petitioner with an intention to arbitrate the above dispute approached the Hon’ble Delhi High Court under Section 9 of the Act, 1996 apprehending the termination of the Contract by Respondent and subsequent invocation of the bank guarantees. During the course of the Court proceedings, the Petitioner informed the Court that Respondent had terminated the contract and had written to the Bank for invocation of the eight bank guarantees.[i] II. Restraint on Invocation - conditions set by judicial precedence The main bone of contention before the Hon’ble Delhi High Court was to ascertain as to whether the present case merited an injunction restraining Respondent from invoking the eight bank guarantees furnished by the Petitioner. On a thorough analysis of the legal jurisprudence pertaining to the law with respect to injunction of encashment, or invocation, of unconditional bank guarantees the Court opined that there existed three circumstances, in which unconditional bank guarantees cannot be invoked. Firstly, the presence of egregious fraud, as enunciated in Bolivinter Oil SA v. Chase Manhattan Bank[ii], wherein the concerned bank is aware that any demand for payment already made or which may be made will be fraudulent. In the above scenario, there must exist cogent evidence of fraud and the bank cannot restrain invoking the bank guarantee solely premised on the statements of the customer. The second circumstance is irreparable or irretrievable injury which according to the Court is an elastic ground as it is often open to interpretation vis-à-vis the circumstances surrounding the case. The aforesaid ground was discussed in great detail in the case of U.P. State Sugar Corporation v. Sumac International Ltd[iii] and Himadri Chemicals Industries Ltd v. Coal Tar Refining Co[iv]. In U. P. State Sugar Corporation v. Sumac International Ltd[v]the Hon’ble Supreme Court of India while relying on Svenska Handelsbanken v. Indian Charge Chrome[vi] and Itek Corporation v. First National Bank of Boston[vii] observed as below: 14. On the question of irretrievable injury which is the second exception to the rule against granting of injunctions when unconditional bank guarantees are sought to be realised the court said in the above case that the irretrievable injury must be of the kind which was the subject-matter of the decision in the Itek Corpn. case [566 Fed Supp 1210]. In that case an exporter in USA entered into an agreement with the Imperial Government of Iran and sought an order terminating its liability on stand by letters of credit issued by an American Bank in favour of an Iranian Bank as part of the contract. The relief was sought on account of the situation created after the Iranian revolution when the American Government cancelled the export licences in relation to Iran and the Iranian Government had forcibly taken 52 American citizens as hostages. The US Government had blocked all Iranian assets under the jurisdiction of United States and had cancelled the export contract. The Court upheld the contention of the exporter that any claim for damages against the purchaser if decreed by the American Courts would not be executable in Iran under these circumstances and realisation of the bank guarantee/letters of credit would cause irreparable harm to the plaintiff. This contention was upheld. To avail of this exception, therefore, exceptional circumstances which make it impossible for the guarantor to reimburse himself if he ultimately succeeds, will have to be decisively established. Clearly, a mere apprehension that the other party will not be able to pay, is not enough. In Itek case [566 Fed Supp 1210] there was a certainty on this issue. Secondly, there was good reason, in that case for the Court to be prima facie satisfied that the guarantors i.e. the bank and its customer would be found entitled to receive the amount paid under the guarantee. (Emphasis supplied) The above view was reiterated in the case of Himadri Chemicals Industries Ltd v. Coal Tar Refining Co[viii] wherein the Apex Court summarised the six principles, governing injunction of invocation of unconditional bank guarantees.[ix] The third circumstance is the existence of special equities which was propounded in the case of U. P. Cooperative Federation Ltd v. Singh Consultants and Engineers (P) Ltd[x] wherein the Hon’ble Supreme Court of India observed that “in order to restrain the operation either of irrevocable letter of credit of confirmed letter of credit or bank guarantee, there should be serious dispute and there should be good prima facie case of fraud and special equities in the form of preventing irretrievable injustice between the parties.” Succinctly stated, the law regarding the invocation of bank guarantees has been recently summarised and clarified in the case of Standard Chartered Bank Ltd v. Heavy Engineering Corporation Ltd.[xi] wherein the Apex Court has stated as below: The settled position in law that emerges from the precedents of this Court is that the bank guarantee is an independent contract between bank and the beneficiary, and the bank is always obliged to honour its guarantee as long as it is an unconditional and irrevocable one. The dispute between the beneficiary and the party at whose instance the bank has given the guarantee is immaterial and is of no consequence. There are, however, exceptions to this Rule when there is a clear case of fraud, irretrievable injustice or special equities. The Court ordinarily should not interfere with the invocation or encashment of the bank guarantee so long as the invocation is in terms of the bank guarantee. III. The factual implications of the legal jurisprudence on the case In light of the above legal exposition, the Hon'ble Delhi High Court at the outset clarified that the Petitioner in the present case cannot plead fraud as a ground to seek injunction as the conditions for the application of the ground of fraud were clearly not met in the present case. Accordingly, as per the Court, the only condition that was required to be tested was whether irretrievable justice or special equities existed which justified the grant of injunction as prayed for by the Petitioner. To that extent, the Court observed that the country-wide lockdown imposed on 24.03.2020 was a force majeure event as the same was unprecedented and incapable of being predicted by either party. Further, the Court taking a prima facie view remarked that in the present case, special equities did exist which justified the grant of injunction till the expiry of a period of one week from 03.05.2020 i.e., the date until which lockdown was imposed. Notably, the Court opined that the circumstances of the present case where the Respondent has terminated the contract and written to the Bank for invocation of the eight bank guarantees merit the grant of injunction as otherwise allowing the bank guarantees to be encashed while the lockdown is in place would cause irreparable harm and prejudice to the Petitioner. In the last limb of its analysis, the Court stated that even though it was no doubt true that petroleum was an essential commodity, and the production of petroleum was exempted from the rigours of the lockdown, it could not be said that the Petitioner was engaged in the production of petroleum. According to the Court, the Petitioner was engaged in the drilling of petroleum wells which did not stricto sensu qualify within the ambit of production of petroleum and thus, the completion of the project was in fact impeded as a result of the imposition of the lockdown. IV. Pushing the limits, punishing the legislation In principle, the Order of the Hon’ble Delhi High Court must be hailed in all its fairness for empathising with COVID hit contractual obligations and non-performance of Contract. However, there are three aspects of the Order that are particularly noteworthy. (1) Firstly, the Court in its Order in paragraph 20 noted: “Prima facie, in my view, special equities do exist, as would justify grant of the prayer, of the petitioner, to injunct the respondent from invoking the bank guarantees of the petitioner, forming subject matter of these proceedings, till the expiry of a period of one week from 3rd May 2020, till which date the lockdown has been imposed.” The Court resorted to justifying the injunction on the ground of the existence of special equities. However, the Court failed to highlight the exact contours of the special equities existing in the present case thereby leaving ample of room for a wide interpretation. Further, to the extent of the reliance placed by the Hon’ble Supreme Court of India on the ratio decidendi of the cases of Svenska[xii] and Itek Corporation[xiii], it can be argued that the Hon’ble Delhi High Court erred in the application of the Itek Corporation test i.e., ascertaining irretrievable injury/irreparable harm. Pertinently, the test as postulated in the case of Itek Corporation v. First National Bank of Boston[xiv] is as below: Because I find that Itek has demonstrated that it has no adequate remedy at law, and because I find that the allegations of irreparable harm are not speculative, but genuine and immediate, I am satisfied that Itek will suffer irreparable harm if the requested relief is not granted. It culminates from the above that while the harm envisaged was real and genuine, there existed alternative remedies in law for the Petitioner - namely, the arbitration proceedings via which a favourable interim order restraining the invoking of bank guarantees or even a final award could be obtained at a later stage. The only distinction between the two limbs of irreparable harm or injury and special equities is the existence of an alternative remedy in law since the absence of a remedy in law is what prompts common law jurisprudence to find a remedy in equity. The second aspect of the judgment that merits attention is the judicial precedence relied upon by the Court vis-à-vis Order XXXIX of the Code of Civil Procedure, 1908 [“CPC”]. Under the O. XXXIX of CPC, a temporary injunction can be granted if: (1) there exists a prima facie case and the balance of convenience is in favour of the petitioner or against the respondent, (2) if there is irreparable injury likely to be caused to the petitioner which cannot be compensated in money, and (3) there is a bona fide dispute raised. The courts in Himadri Chemicals Industries Ltd v. Coal Tar Refining Co., U. P. State Sugar Corporation v. Sumac International Ltd, and Svenska Handelsbanken v. Indian Charge Chrome, ruled in favour of injunction after having conducted the tests of O. XXXIX of CPC for temporary injunction. In the present case, the Court, in its order, failed to follow the procedure laid down in O. XXXIX of CPC before granting the interim injunction against the invocation of bank guarantee. No analysis was undertaken to investigate if there was a prima facie case and balance of convenience in favour of the Petitioner. Even if an argument were to be made, that the order was merely passed as an immediate remedy for the Petitioner, pending a final judgment from the Court, which likely might include an analysis of the tests under O. XXXIX of CPC, such an outcome is undesirable as per the scheme of the 1996 Act. Thirdly, Section 9 of the Act, 1996 has been at the forefront of polarised debates about the extent of judicial interference in the arbitral procedure. Under Section 9 of the Act, 1996, an interim relief under Section 9 can be filed before, during or after the completion of arbitral proceedings before the award is enforced. After the 2015 Amendment to Section 9, petitions during the arbitral proceedings are limited to instances only when Section 17 interim reliefs provided by the tribunal are not efficacious. To a large extent, the 2015 amendment arrested judicial interference during the arbitration process. The conundrum, however, continues to exist in a pre-arbitration stage, where courts analyse cases on merits to determine whether interim injunctions could be granted. For example, the Hon’ble Delhi High Court in the present case indulged in the exercise of ascertaining the merits of the extension of time issue which was unwarranted as the same could have serious implications on the subsequent arbitral process as in all likelihood the Petitioner will place reliance on this particular observation of the Court while arguing its case. Such analysis can seriously jeopardise the consequent arbitration proceedings due to a potential inherent bias that may creep into the minds of the tribunal owing to the existence of a favourable injunction order. Courts must therefore refrain from analysing Section 9 petitions on merits of the case, which unfortunately is an inevitable outcome before the determination of whether injunctive relief can be granted or not. V. Key takeaways In principle, the injunction on the invocation of the bank guarantees was an appropriate remedy in the given context. However, the fact that there was no analysis on the requirements of an interim injunction under CPC is a major lacuna of the judgment. The relief of injunctions are a useful tool under section 17 of the Act, 1996 under which the tribunals are empowered to provide the relief. Since tribunals are not bound by the procedures of CPC as per Section 19 (1) of the 1996 Act, interim injunctions as a relief are most appropriate at a Section 17 application stage. In this case, by way of example, an interlocutory order to maintain the status quo as against an interim injunction to restrain invocation of bank guarantees would have solved the riddle. Alternatively, the advent of emergency arbitrations in India as an interim relief under Section 17 of the Act, 1996 could be a recourse as well. The failure or the non-efficaciousness of this remedy however would lead to a Section 9 (1) petition under Section 9 (3) of the 1996 Act, a situation which is bereft of any certainty at least insofar as foreign seated emergency arbitrations are concerned. At the end of the day, the only reliable recourse that appears to exist is a Section 9 petition which is seemingly inseparable with the Court’s unfortunate intervention and judicial overreach via a substantive analysis on the merits of the case. *Gautam Mohanty is currently a doctoral student at Kozminski University, Warsaw, Poland. He is also an advocate enrolled at the bar in India and an Assistant Professor (on leave) at Jindal Global Law School India (JGLS) and an arbitration consultant with Arbitrator Justice Deepak Verma, Former Judge of Supreme Court of India. He can be reached at gautam.mohanty1414@gmail.com. **Yasaschandra Devarakonda is a final year law student pursuing a five-year integrated undergraduate B.A. LL.B course from National Law University Odisha, India. He can be reached at: yasaschandra.devarakonda@outlook.com. [i] Halliburton Offshore Services Inc. v. Vedanta Limited and Anr., p 21. [ii] Bolivinter Oil SA v. Chase Manhattan Bank (1984) 1 All ER 351. [iii] U. P. State Sugar Corporation v. Sumac International Ltd (1997) 1 SCC 568. [iv] Himadri Chemicals Industries Ltd v. Coal Tar Refining Cov (2007) 8 SCC 110. [v] ibid (n iii). [vi] Svenska Handelsbanken v. Indian Charge Chrome (1994) 1 SCC 502. [vii] Itek Corporation v. First National Bank of Boston 566 Fed Supp 1210. [viii] ibid (n iv). [ix] ibid (n i) p15. [x] U. P. Cooperative Federation Ltd v. Singh Consultants and Engineers (P) Ltd, (1988) 1 SCC 174. [xi] Standard Chartered Bank Ltd v. Heavy Engineering Corporation Ltd., 2019 SCC Online SC 1638. [xii] ibid (n vi). [xiii] ibid (n vii) [xiv] ibid.

Tanish Gupta[1] & Aditi Shah[2] Introduction In the dispute resolution clause of an agreement, parties often contemplate negotiation or other amicable forms of settlement of the dispute as a precondition for referring the dispute to arbitration. In case of failure to comply with these preconditions, an important question of law arises as to whether such non-compliance is an issue of jurisdiction or one of admissibility. Though the two may seem similar, their distinction has relevant implications. In various jurisdictions like England, Switzerland, United States and as also enunciated in UNCITRAL Model Law, while a challenge to jurisdiction forms a ground for appeal, the decision of the arbitral tribunal on the question of admissibility is decisive and is not a ground for appeal. Recently, in C v D, the Hong Kong Court of First Instance (HKCFI) gave a ruling on the said issue. In this article, the authors attempt to accentuate the judgment of the court; highlight the distinction between the question of jurisdiction and admissibility by relying on judicial decisions from different jurisdictions; and lastly, discern the nascent jurisprudence in India. Brief Facts Company C (“Plaintiff”) and Company D (“Defendant”) entered into an agreement to build and develop a satellite that was to continue till the lifetime of the satellite or until repudiation in accordance with the agreement. Whilst the laws of Hong Kong were the governing law, the parties also agreed to certain pre-conditions prior to making a reference to arbitration. The dispute resolution clause (Clause 14.2) stated that in the event of any dispute “the Parties shall attempt in good faith promptly to resolve such disputes by negotiation. Either Party may, by written notice to the other, have such dispute referred to the Chief Executive Officers of the Parties for resolution.” The arbitration clause (Clause 14.3) further stated that “If any dispute cannot be resolved amicably within sixty (60) Business days of the date of a Party’s request in writing for such negotiation, or such other time period as may be agreed, then such dispute shall be referred by either Party for settlement exclusively and finally by arbitration in Hong Kong…” A dispute arose between the parties and on December 24, 2018, the CEO of the defendant issued a letter to the Chairman of the Board of Directors (and not the CEO) of the plaintiff expressing material breach on part of the plaintiff, and that it is issuing the letter in a final effort to solve the dispute and further avoid any legal proceedings. There was no further correspondence. Thereafter, the matter was referred to arbitration. The arbitral tribunal rejected the objection raised by the plaintiff on the issue of jurisdiction and held that while it was mandatory for the parties to attempt to resolve the dispute in good faith, referring the dispute to the CEO was optional. Consequently, the arbitral tribunal held that the defendant had fulfilled the pre-condition in Clause 14.3 of requesting in writing for negotiation and is entitled to damages. Pertinently, it was against this interpretation by the arbitral tribunal that Company C had preferred an appeal contending that the partial award was made without jurisdiction and is liable to be set aside under Article 34(2)(a)(i) and (iv) of UNCITRAL Model Law. The court was faced with two important questions: first, whether non-compliance with the prerequisites in the dispute resolution clause constitutes an issue of admissibility of a claim or an issue of jurisdiction of the tribunal; and second, whether that the question of non-compliance falls within the purview of Section 81 of the Arbitration Ordinance, the law governing arbitration in Hong Kong. Section 81 prescribes the grounds on which application for setting aside an arbitral award can be made. It is only when the first question was answered as a question of jurisdiction will the court interpret the agreement and decide on its compliance. The Court’s Judgment Article 34 of the UNCITRAL Model Law which is incorporated as Section 81 of the Arbitration Ordinance sets out the grounds on which an arbitral award may be set aside. The objective is to limit the interference in the award by the courts. An award may be set aside under Article 34(2)(a)(i) of the model law when the award deals with issues not submitted to arbitration and under Article 34(2)(a)(iv) when the arbitration procedure was not in accordance with the arbitration agreement. The court relied on foreign cases and prominent academic work to reach its decision. There was an overwhelming consensus among the academic scholars that the non-fulfillment of precondition to arbitration is an issue of admissibility and not of jurisdiction. The issue of admissibility concerns whether the arbitral tribunal should exercise its power to judge the claim on merits. However, if the tribunal lacks jurisdiction, it cannot proceed with issuing an award on merits. The challenge to jurisdiction is concerned with the power of the tribunal to decide and the challenge to admissibility interrogates “whether this is a claim which can be properly brought” before the tribunal. Gary Born, in his International Commercial Arbitration, stated a better approach would be to presume that the pre-arbitration procedural requirement is an issue of admissibility unless the parties have otherwise agreed. The test to ascertain whether the issue pertains to jurisdiction or admissibility would be the inquiry where if the reason for the challenge is that “the claim could not be brought to the particular forum seized, the issue is ordinarily one of jurisdiction”, however, if the issue is that “the claim should not be heard at all (or at least not yet), the issue is ordinarily one of admissibility.” Plaintiff relied on Emirates Trading Agency LLC v Prime Mineral Exports Pte Ltd (Emirates Case) and HZ Capital International Ltd v China Vocational Education Co Ltd (HZ Capital Case) to contend that non-fulfillment of a precondition to arbitration is an issue of jurisdiction. The court distinguished these cases and observed that the distinction of admissibility and jurisdiction was not raised or debated upon by the parties in the Emirates case and HZ Capital case, and hence, the judgments did not buttress the argument of the Plaintiff. The court opined that the case of Plaintiff was not related to the lack of consent to arbitration, rather only limited to claiming that prerequisites to arbitration were not followed. Therefore, the court concluded that complying with the dispute resolution clause is an issue of admissibility and not jurisdiction. Accordingly, it was held that the said question does not fall under Article 34(2)(a)(i) or (iv) of UNCITRAL Model Law, subsequently, failing to fall under Section 81 of the Arbitration Ordinance. Birds Eye View of Other Jurisdictions The view of the HKCFI in C v D was affirmed in Kinli Civil Engineering v Geotech Engineering wherein the HKCFI was concerned with the usage of ‘may’ as opposed to ‘shall’ or ‘must’ in the arbitration agreement. Kinli had challenged the application for stay in litigation proceeding in favour of arbitration on the ground that firstly, use of “may” in dispute resolution clause show that arbitration was not mandatory and secondly, the precondition in the dispute resolution clause to the effect that arbitration cannot be commenced til the contract is executed has not been met. The court held that in absence of clear wording, the presumption is in favour of arbitration being mandatory. Further, granting a stay on litigation proceedings, the court held that a matter pertaining to the stage at which an arbitration can be commenced is for the tribunal to decide and the court cannot interdict when the prima facie existence of an arbitration agreement is established. In BG Group v Republic of Argentina, the investment treaty between the United Kingdom and Argentina provided that to resolve the dispute, the party has to refer the dispute to the local court of another party and can thereafter prefer arbitration when the court has not decided within 18 months of reference of the dispute to it. As against the actions taken by Argentina during the economic collapse in 2001, BG Group initiated an arbitration proceeding seated in Washington DC. After the arbitral tribunal gave an award, the Republic of Argentina sought to set aside the award by arguing that the arbitral tribunal lacked jurisdiction as BG Group has not complied with the requirement of instituting litigation under the treaty. Settling the position, the United States Supreme Court ruled that the said issue is of admissibility and not of jurisdiction since the question is “when the contractual duty to arbitrate arises, not whether there is a contractual duty to arbitrate at all”. The Singapore Court of Appeal (SGCA) distinguished between admissibility and jurisdiction in BBA v BZA by applying the ‘tribunal v. claim’ test. The test asks at whom the challenge is targeted. When the objection is essentially at tribunal due to some defect in consent to arbitrate, it is a jurisdictional challenge. However, when the objection is that the claim should not be raised or is defective, the challenge is of admissibility. The SGCA held that the issue of whether the claim is time-barred or not is an issue of admissibility and not jurisdiction since it questions raising the said claim rather than questioning the consent to arbitrate. In BTN v BTP, the court ruled that the issue, whether the tribunal should arbitrate on a claim as it is res judicata, is an admissibility issue that the court cannot review on merit. A similar approach has been adopted by the England and Wales High Court (Commercial Court) in the Republic of Sierra Leone v SL Mining Ltd, wherein the court, while refusing to set aside an arbitral award, held that failure to comply with certain pre-arbitration conditions is an issue of admissibility rather than of jurisdiction. Nascent Jurisprudence in India The two-judge bench of the Supreme Court of India in BSNL v Nortel Networks India Private Limited, relying upon BBA v BZA held that the question of limitation is one of admissibility, which must be decided by the arbitral tribunal, and not of jurisdiction. The court applied the ‘tribunal v. claim’ test which says that if the objection is aimed at the tribunal, the issue is of jurisdiction, but, if the objection is aimed at the claim, the issue is of admissibility. However, since the judgment was not directly concerned with the distinction between a jurisdictional or admissibility challenge, it is an indicator of the inadequate Indian jurisprudence on the subject matter. Given this inadequacy and the position of law in other jurisdictions, it is hoped that the Supreme Court will mirror the approach adopted in other jurisdictions and not take two steps backward. Conclusion With parties prescribing preconditions to arbitration in dispute settlement or escalation clause of the agreement, the question of admissibility and jurisdiction is becoming increasingly pertinent. The Chartered Institute of Arbitrators, one of the leading arbitration institutions in the world, has also, in the Preamble, §6 of its International Arbitration Practice Guideline on Jurisdictional Challenges, cautioned arbitrators to distinguish between a challenge to jurisdiction and admissibility. The Guidelines lay down the best practices for international commercial arbitration. To this issue, the ‘tribunal v. claim’ test offers a useful guide. The test asks the judge to ascertain the target of the objection to determine whether the issue is of admissibility or of jurisdiction and subsequently, determine whether an application to set aside the award can be allowed on the raised grounds. A clear inclination of courts towards considering the question of compliance with preconditions set out in dispute settlement clause as that of admissibility rather than of jurisdiction, by applying ‘tribunal v. claim’, across various jurisdictions, is visible. The decision of the tribunal on the issue of admissibility is considered final. Therefore, by delimiting the grounds for challenge, this trend furthers the principle of least judicial intervention which suggests courts of law to intervene with the arbitral award to the minimum extent possible. Perceiving the arbitration law in India, an existing lacuna on the said issue can be found. However, given the judgments in above-discussed jurisdictions and that in BSNL v Nortel Networks India Pvt Ltd, it is hoped that when the said issue is brought before the Supreme Court of India, it will decide the question of non-compliance as one of admissibility and not jurisdiction. Such ruling would be in consonance with pro-arbitration approach and “overarching” principle of least intervention which is enunciated in Arbitration and Conciliation Act, 1996. [1] Tanish Gupta is a third year student at Dharmashastra National Law University, Jabalpur. She can be reached at tanishgupta584@gmail.com. [2] Aditi Shah is a third-year student at the Institute of Law, Nirma University, Ahmedabad. She can be reached at aditii.shah08@gmail.com.

-Rohan Gulati* Introduction & Factual Background Recently, in Kanodia Infrastructure Ltd. v. Dalmia Cement (Bharat) Ltd.[1], the Hon’ble Delhi High Court (“High Court”) ruled that challenging the unilateral appointment of an arbitrator at the stage of setting aside the arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996 (“1996 Act”) is not the right stage for doing so. The High Court opined that the scope of interference with the arbitral award is relatively narrow and it is permitted only when the arbitral tribunal exceeds its jurisdiction or travels beyond the scope of the contract. Insofar as the conspectus of the case was concerned, Kanodia Infratech Ltd. (“Petitioner”) and Dalmia Cement (Bharat) Ltd. (“Respondent”) agreed on a Memorandum of Understanding for the use of cement grinding plant at Bihar (“Plant”) by the Respondent. Due to conditional delays in the execution of the share purchase agreement, it was agreed that the Respondent could commence the operations at the Plant. Accordingly, multiple agreements were executed between the Petitioner and Respondent. For efficient functioning of the Plant, the entire gamut of operations and control was entrusted to the Respondent. Allegedly, the Petitioner was kept in the dark about the day-to-day operations and decisions made by the Respondent, which was troublesome for the Petitioner. One of the key obligations of the Respondent was to procure a clinker for the Plant, which it failed to fulfill. Thus, due to the lack of proper equipment, the Respondent was found to be running into losses and unable to run the Plant. Distraught, the Petitioner intended to terminate the commercial relationship with the Respondent. To further restrict the access of the Respondent, the Petitioner approached the High Court under Section 9 of the 1996 Act. However, the Respondent had invoked arbitration and appointed a sole arbitrator only a day prior to this petition. The Petitioner withdrew the petition with the liberty to approach the sole arbitrator under Section 17 of the 1996 Act. After hearings were concluded, the sole arbitrator passed an award in favor of the Respondent. Troubled with the decision, the Petitioner filed an application for setting aside the arbitral award. Judgment of the High Court Firstly, the Petitioner challenged the arbitral award on the premise that the Respondent held a unilateral power in the appointment process of the learned sole arbitrator. However, the High Court’s ruling goes to show that it considered the active participation of the Petitioner in the arbitration as a waiver to challenge the unilateral appointment of the arbitrator. The High Court highlighted multiple instances of the Petitioner’s participation: (i) Withdrawal of Section 9 petition (for interim measures from the court) from the High Court with the liberty to approach the sole arbitrator under Section 17 (interim measures from the tribunal) of the 1996 Act; (ii) Filing an application under Section 16 of the 1996 Act that challenged the composite reference of the disputes to arbitration (but not the appointment of the arbitrator); (iii) Filing of counterclaims during the arbitral proceedings; (iv) The Petitioner had also given consent for an extension of time under Section 29A(iii) of the 1996 Act for the completion of the proceedings. In view of the High Court, the abovementioned instances sufficiently established that the Petitioner had submitted to the jurisdiction of the sole arbitrator. Secondly, the High Court opined that despite the judgment of the Hon’ble Supreme Court of India in Perkins Eastman Architects DPC v. HSCC (India) Ltd.[2] (“Perkins”), the Petitioner did not object to the unilateral appointment of the arbitrator. Further, the learned single judge concluded by stating that since the award did not favor the Petitioner, it has approached the High Court at a belated stage. Thirdly, the High Court distinguished the authoritative judgments of the Supreme Court in Perkins and TRF Ltd. v. Energo Engineering Projects Ltd.[3] (“TRF Ltd.”) from the present matter on the basis of the stage of the proceedings. It categorically noted that the Supreme Court precedents were dealing with petitions filed under Section 11 at the pre-arbitral stage, whereas the present petition, being under Section 34, permitted only a narrow range of court interference. The High Court distinguished all the relevant precedents on this point alone. Fourthly, and significantly, the High Court set aside one claim involving compensation of Rs. 4 Crores that was granted in favor of the Respondent as it was considered to be distinct from all other claims. The High Court opined that this claim was wrongly granted by the learned sole arbitrator since it dealt with issues not contemplated by the parties in the arbitration. In view of the four-prongs discussed hereinabove, the High Court refused to set aside the arbitral award on the ground that the appointment of the sole arbitrator was unilateral and ruled that it was not open to the Petitioner to have challenged the same at the belated stage i.e., under Section 34 of the 1996 Act. Analysis Having dissected the judgment in four broad points, the stage is now set to first, explore the legislative avenues that are likely to entertain a challenge to the unilateral appointment even at a belated stage of Section 34; second, succinctly trace the judicial discourse on unilateral appointments so far; third, critically examine the decision of the High Court and critique it frame by frame. A. Legislative Avenues and Beyond It is trite to mention that the scope of interference exercised by the courts under Section 34 of the 1996 Act is relatively narrow and limited. Notwithstanding the scope of interference under Section 34, the doors must be left open in cases that challenge the unilateral appointment at the stage of setting aside the arbitral award. The reason for the same is founded on dual fronts viz., (i) an arbitration conducted by an ineligible arbitrator is non-est in law, and (ii) Section 34, though limited in its scope, would be open to burying the award in case of procedural irregularity that is clear as noonday. To elaborate on the first front, it is significant to note that in case an arbitrator lacked jurisdiction since the outset due to their unilateral appointment, any decision rendered by him would essentially be bereft of jurisdiction.[4] This would render the entire arbitral proceedings null and void, including the award. Therefore, if an award rendered by an ineligible arbitrator was to be challenged, it would be more susceptible to being set aside rather than being upheld. Significantly, in Bharat Broadband Network Ltd. v. United Telecoms Ltd.[5], the Supreme Court had observed that the de jure ineligibility of the arbitrator appointed by a person who is himself ineligible would render the appointment void ab initio. Consequently, the judgment reflects that any decision of the ineligible arbitrator would also be void regardless of the stage at which it has been passed by an ineligible arbitrator. On the second front, the phrase ‘procedural irregularity’ has been applied to expressly rely upon Section 34(2)(a)(v). A meticulous reading of this provision would reflect that where the composition of the arbitral tribunal, with or without the agreement of the parties, goes against the non-derogable provisions of Part I of the 1996 Act, the arbitral award may be set aside. Bearing this in mind, if the arbitration agreement conflicts with such non-derogable provisions, the former will cease to operate due to being invalid, thus opening the doors for the courts to set aside the arbitral award. It is further argued that a party is not precluded from raising the ground of unilateral appointment for the first time under Section 34 where there is an absence of an express agreement in writing that waives off the right to object.[6] This is in light of Section 12(5) of the 1996 Act, whose proviso sets a high standard of requirement – it mandates an express written agreement that would waive any reservation of the parties apropos any justifiable doubt about the arbitrator’s eligibility. It would also be safe to mention that there is nothing that precludes the courts from invalidating the arbitration agreement that conferred a unilateral right to one party alone at the stage of setting aside the arbitral award. After all, having a valid arbitration agreement is one of the basic and foremost tenets of any and every arbitration. In sum, there is nothing that precludes the courts from setting aside an award where the sole arbitrator was appointed unilaterally by one party alone. Despite being a belated stage, Section 34 should not withstand any procedural irregularity that goes against the letter and spirit of the 1996 Act. B. The Chronicles of Unilateral Appointment The judgment in Perkins is the most authoritative decision regarding unilateral appointments wherein the Supreme Court had unequivocally ruled that arbitration clauses that provide for the unilateral appointment of a sole arbitrator could not withstand the objectives of the 1996 Act i.e., to promote fairness and impartiality in arbitration. It also categorically held that if only one party has the right to appoint a sole arbitrator, its choice will always have an element of exclusivity in charting the course of dispute resolution.[7] Thus, unilateral appointment was held to be impermissible. Relevantly, in TRF Ltd. (a judgment before Perkins), the Supreme Court had gone one step ahead to observe that an appointment made by an ineligible arbitrator is also void ab initio. In other words, if an arbitrator was ineligible due to his past/present relationship with one of the parties in the dispute, even he could not appoint another arbitrator since his nomination is likely to reflect the individual’s interest in the outcome of the dispute. Notably, in Proddatur Cable TV Digi Services v. SITI Cable Network Ltd.[8], the Delhi High Court relied extensively on Perkins and ruled that even a company could not be a unilateral appointing authority in an arbitration agreement. It was further noted that despite party autonomy being a cornerstone of arbitration, the same could not override the principles of impartiality and fairness in arbitral proceedings.[9] C. Examining the Judgment of the High Court Reverting to the analysis of the High Court judgment, it is significant to point out that one of the primary reasons for refusing to set aside the award was perhaps the stage at which the Petitioner portrayed the challenge to the unilateral appointment. Bearing the same in mind, it is pertinent to move frame by frame. Firstly, the High Court erred in construing that the active participation of the Petitioner in the arbitral proceedings could be equated with a waiver to challenge the eligibility of the sole arbitrator. As discussed, Section 12(5) sets a high threshold criterion by requiring a written agreement that waives the reservations. In fact, it can be discerned from the factual matrix that the Petitioner at no point agreed to waive their reservation concerning the lack of consensus in appointing the sole arbitrator. Thus, merely filing applications before the sole arbitrator certainly does not indicate a waiver. On the contrary, the Petitioner showed a fair understanding of the process by withdrawing the Section 9 petition after becoming aware that the arbitral tribunal had been constituted which is precisely in accordance with Section 9(3) of the 1996 Act. Secondly, the High Court erroneously based its reasoning on the stage at which the Petitioner had challenged the unilateral appointment since any arbitral proceedings conducted by an ineligible arbitrator would be non-est in law. Additionally, by strictly following the observations of the Supreme Court in Perkins and TRF Ltd., any decision rendered by an ineligible arbitrator would fail to pass the muster of the law. Incidentally, in Ace Pipeline Contracts Pvt. Ltd. v. Bharat Petroleum Corp.[10], the Supreme Court had observed that where one party feels that the arbitrator has not acted independently and impartially, it would always be open for the aggrieved party to make an application under Section 34 praying for setting aside the award on the ground that the arbitrator acted with bias or malice in law or fact.[11] This is relevant as one of the core concerns surrounding unilateral appointment is the doubt of impartiality. However, even if we were to briefly assume that the Petitioner had raised the challenge to the unilateral appointment at a belated stage, it did not preclude the High Court from setting aside the award. The practice of unilateral appointment is such that it goes to the very root of the matter and poses a very high probability that the party making such appointment was conferred with an upper hand in charting the course for dispute resolution. Moreover, a challenge that is mounted against the unilateral appointment would not even warrant the courts to look into the merits of the case which would also keep the court within the bounds of Section 34. Thirdly, it can be discerned on merits that the High Court was well versed with the award and the claims submitted by the Respondent since an additional claim that was granted by the sole arbitrator was set aside. Bearing this in mind, the High Court erred in observing that the Petitioner was challenging the award since it was not granted in their favor. It is submitted that the Petitioner had raised valid grounds of challenging the arbitral award since it suffered from an element of bias due to the unilateral appointment. Therefore, there was no reason for the High Court to cast blame on the Petitioner when the arbitral award suffered from certain vices and possibly an element of bias. The thin line of difference between genuine award-debtors and frivolous ones must be appreciated and respected - even though the Petitioner might have arrived late did not mean that the doors of justice are closed on his face. Conclusion It is imperative to note that this judgment has conveyed something more than what meets the eye. One of the key takeaways from the present judgment lies in the adoption of a more active approach towards challenging the unilateral appointment and not waiting until the award is passed. A more pragmatic and appropriate avenue for challenging the unilateral appointment is by raising an objection via filing an application before the concerned court during the pendency of the arbitration itself. Whilst the 1996 Act does not prescribe any particular stage, the party must challenge the appointment of the arbitrator at the earliest stage and first possible instance to prevent any more wastage of time and resources. Implementing a pro-active approach by filing the application in a timely manner would also bolster the good faith nature of the suit and negate arguments of delaying the enforcement of the arbitral award. To conclude on the critique of the present judgment, the High Court was faced with a unique opportunity to expound and chart a better jurisprudence on this point of law. However, the High Court severely erred in its findings whilst it adopted a hands-off approach, which may prove to be counter-intuitive moving forward. It would also restrict the parties from challenging the unilateral appointment at the stage of setting aside the award despite the presence of appropriate legislative avenues and the absence of any specific restrictions (apart from the present judgment). To end, Jan Paulsson, one of the foremost practitioners to argue against the very concept of unilateral appointments had opined as follows: “…why should not every appointment be joint, or at least made from a list of individuals proposed by a similarly reliable institution? Above all, this attractive model is simply unrealistic with respect to the run of the mill of arbitration. And if arbitration cannot produce run of the mill quality, it will be condemned to function as an enclave of limited relevance.”[12] * Rohan Gulati is a Junior Staff Editor for the Arbitration Workshop Blog. He is currently a final-year student pursuing B.B.A. LL.B at Symbiosis Law School, Hyderabad. He can be contacted at rohan.gulati@student.slsh.edu.in [1] 2021 SCC OnLine Del 4883. [2] 2019 SCC OnLine SC 1517. [3] (2017) 8 SCC 377. [4] Shashank Garg, ‘Arbitrators’ under Distress: The Fate of Unilateral Appointments, (Bar and Bench, Jan 2020) accessed 15 November 2021. [5] (2019) 5 SCC 755. [6] Ramkishore Karanam and Mahasweta M., What is the Appropriate Stage to Challenge Unilateral Appointment (SCCOnline.com, Oct 2021) accessed 15 November 2021. [7] Supra note 2 at ¶ 16. [8] 2020 SCC OnLine Del 350. [9] Id., at ¶ 24. [10] (2007) 5 SCC 304. [11] Id., ¶ 21. [12] Jan Paulsson, Must We Live with Unilaterals? 1 ABA 5, 7 (2013).

Arnav Doshi[1] INTRODUCTION The arrival of the significant ruling in Delhi Airport Metro Express Private Limited v. Delhi Metro Rail Corporation Limited[2] (“Delhi Airport”) established the extent and scope of perversity or patent illegality as a ground available for annulment of an award granted by an arbitral tribunal. Section 34(2) of the Arbitration and Conciliation Act, 1996 (“the Act”) sets out grounds for setting aside of a domestic award whereas Section 48(1) and 57(1) embedded in Part II of the Act state the grounds for refusal of enforcement of a foreign award. However, a broad interpretation of patent illegality has led to its perfunctory use. In this recent Supreme Court judgment, the scope of patent illegality is revisited and revised to limit the scope of judicial intervention in the enforcement of awards as well as the extent of exercising patent illegality as a ground for setting aside arbitral awards. I. PATENT ILLEGALITY: GROUND FOR ANNULMENT The ground of patent illegality developed with the expansion of public policy exceptions for setting aside awards. Under Part I of the Act, Section 34(2)(b)(ii) states the refusal of a domestic award (Indian-seated arbitration) due to being in conflict with the public policy of India. Similarly, under section 48(2)(b)(ii) in Part-II(A) of the Act (for foreign-seated arbitrations under the New York Convention) and section 57(1)(e) in Part-II(B) (foreign seated-arbitrations under the Geneva Convention), the enforcement of the award could be refused by a judicial authority on the ground that it conflicted with the public policy of India.[3] The landmark case of Renusagar Power Co. Limited. v. General Electric Company[4]paved the way for the public policy exception prior to the enactment of the Act. Interpreting the doctrine of public policy, a three-pronged test was applied for refusal of an award contrary to public policy if such enforcement would be contrary to (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality.[5] Scaffolding on the broadened understanding of public policy, it was ONGC v. Saw Pipes Limited[6] (“Saw Pipes”) that through purposive interpretation associated “patent illegality” as a subset of the public policy exception under Section 34 of the Act. The Division Bench explained that an award suffers from patent illegality when it was firstly against the provisions of the Act, secondly conflicting with statutory provisions of substantive law applicable to the parties to the dispute, or thirdly, when against the terms of the contract.[7] Thereafter, ONGC v. Western Geco International Limited (“Western Geco”) reaffirmed and upheld Saw Pipes, and added that illegality of the award must go to the root of the matter,[8] precluding illegality of trivial nature as a ground for contravening public policy. The 246th Report of the Law Commission based on the decision in Saw Pipes recommended the addition of section 34 (2A) to deal with purely domestic awards which may also be set aside by the Court if the Court finds that such award is vitiated by patent illegality appearing on the face of the award.[9] In finality, the Arbitration and Conciliation (Amendment) Act, 2015 (“2015 Amendment”) introduced Section 34(2A) whereby an award under Part I could be set aside on the grounds of “patent illegality appearing on the face of the award”. Post amendment, Ssangyong Engineering and Construction Company Limited v. National Highway Authority (NHAI) (“Ssangyong”) cabined the broad ground of patent illegality, as laid in Saw Pipes and 2015 Amendment, to postulate that the contravention of a statute not linked to public policy or the public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.[10] Ssangyong partly statutorily superseded the judgments in Saw Pipes and Western Geco. Subsequently, the notable case of Patel Engineering Limited v. North Eastern Electric Power Corporation Limited[11] (“Patel Engineering”) further followed Ssangyong to hold that the expansive interpretation to “public policy” in Saw Pipes and Western Geco to be no longer good law due to the 2015 Amendment. Narrowing the scope of patent illegality, Patel Engineering established two important points relating to the enforcement of awards in India. Firstly, pursuant to the recommendations of the Law Commission, the ground of “patent illegality” cannot be invoked in international commercial arbitrations seated in India.[12] Thus, foreign-seated arbitral awards cannot be annulled under the ground of patent illegality. Secondly, it crystallized a test for the application of patent illegality: “The ground of patent illegality is a ground available under the statute for setting aside a domestic award, if the decision of the arbitrator is found to be perverse, or, so irrational that no reasonable person would have arrived at the same; or, the construction of the contract is such that no fair or reasonable person would take; or, that the view of the arbitrator is not even a possible view.” Inching towards a pro-enforcement regime, Ssangyong and Patel Engineering acted as an integral step in ensuring a reasonable and prudent application of patent illegality as a ground for refusal of domestic award enforcement and thereby preventing its broad interpretation from opening a Pandora’s box of non-enforcement tendency. The subsequent step towards India’s pro-enforcement stance came with the Supreme Court’s judgment in Delhi Airport. II. FACTUAL MATRIX Delhi Metro Rail Corporation Limited (“DMRC”) proposed the implementation of the Airport Metro Express Line (“the Line”) from New Delhi Railway Station to Dwarka Sector 21 via Indira Gandhi International Airport, New Delhi. It was decided to develop the project by engaging a concessionaire for financing, design, procurement, installation of all systems. On 25.08.2008, a Concession Agreement was entered between DMRC and Delhi Airport Metro Express Private Limited (“DAMEPL”) for design, installation, commissioning, operation and maintenance of the project. The dispute originated when DAMEPL vide a letter wrote to DMRC regarding issues relating to the design and quality in the installation of viaduct bearings in the Line. However, DMRC responded with a letter stating that upon carrying out inspections, no bearings were found to be damaged. A notice was issued by DAMEPL on 09.07.2012, asking DMRC to cure the defects in DMRC’s works within a period of 90 days from the date of the notice, failing which it shall be treated as a breach having Material Adverse Effect on the Concessionaire under the Concession Agreement.[13] Additionally, a ‘non-exhaustive list of defects’ was stated in the aforementioned notice. Thereafter, DAMEPL issued a notice terminating the Concession Agreement under the reason that the defects highlighted were not cured. DMRC invoked arbitration under Article 36 of the Concession Agreement which refers to the dispute resolution mechanism to be adopted. The main issue of determining the validity of the termination of the Concession Agreement arose before the Tribunal. In turn, DAMEPL filed a counterclaim on the ground that DMRC did not cure the defects pursuant to the notice dated 09.07.2012. The Tribunal, in so far as the defects are concerned, concluded that 72 % of the girders were affected by such cracks,[14] and held that DMRC was in breach of the Concession Agreement. Ergo, the termination notice issued by DAMEPL was valid. As compensation for the upheld counterclaim, the Tribunal Tribunal worked out ‘Adjusted Equity’ at Rs.983.02 crore and awarded a total amount of Rs.2782.33 crore, along with further interest, as Termination Payment to be made to DAMEPL.[15] Pursuant to the arbitral award, DMRC filed an application under Section 34 of the Act for setting aside the award, which the Single Judge of the Delhi High Court dismissed. DMRC filed an appeal under Section 37 of the 1996 Act read with Section 13 of the Commercial Courts Act, 2015 challenging the correctness of the judgment passed by the learned Single Judge. In the appeal and via an SLP, the Division Bench reversed the impugned judgment, and the arbitral award was partly set aside. DAMPEL filed an SLP challenging the intervention of the Division Bench in setting aside the award. The primary reason for the reversal was that the Tribunal had based its reasoning on the validity of the termination notice on two different dates leading to confusion and ambivalence as to the termination notice and the date of termination. III. OUTCOME The main issue before the Supreme Court was whether the Division Bench of the Delhi High Court had erred in their exercise of power under Section 37 of the Act and thereby setting aside the Tribunal’s award. The Supreme Court examined the contours of the court's power to review arbitral awards and held that the Act and the 2015 Amendment was enacted to limit judicial interference vis-à-vis setting aside of domestic awards to the grounds under Section 34 of the Act,[16] emphasizing on the decision in Ssangyong. The Court held that every error of law committed by the Arbitral Tribunal would not fall within the expression ‘patent illegality’. Likewise, erroneous application of law cannot be categorised as patent illegality.[17] That apart, several judicial pronouncements of this Court would become a dead letter if arbitral awards were set aside by categorising them as perverse or patently illegal without appreciating the contours of the said expressions.[18] Therefore, the Court set aside the decision of Division Bench and upheld the Rs. 2,782 crore arbitral award to make DMRC compensate DAMEPL. CONCLUSION Having emerged from the stable of public policy, patent illegality is now a separate and self-sufficient tool for challenging domestic awards under Section 34 of the Arbitration and Conciliation Act.[19] The Apex Court, at the present instance, reinforced the well-settled application of the ground of patent illegality under Section 34(2A). Moreover, it addressed the “disturbing tendency” of courts setting aside arbitral awards. The jurisprudential development evidenced a discernible trend of courts setting aside awards owing to the broad ambit of patent illegality with Saw Pipes and Western Geco. However, following the principles set in a series of judgments- from Associate Builders, Ssangyong to Patel Engineering, the Supreme Court in Delhi Airport steered the course towards a pro-enforcement regime by establishing the scope of judicial intervention in enforcement proceedings and limiting the corrosive appeal to patent illegality as a ground for annulment of domestic awards. [1] Arnav Doshi is a Junior Staff Editor for the Arbitration Workshop. He is a third-year student pursuing B.B.A. LL.B. (Hons.) at O.P. Jindal Global Law School. He can be reached at 19jgls-arnav.jd@jgu.edu.in. [2] Civil Appeal No. 5627 of 2021. [3] Abhijeet Shrivastava and Anujay Shrivastava, Scope of ‘Patent Illegality’ in Refusing Enforcement of Arbitral Awards, IndiaCorpLaw (September 30, 2020), https://indiacorplaw.in/2020/09/scope-of-patent-illegality-in-refusing-enforcement-of-arbitral-awards.html. [4] (1994) Supp (1) SCC 644. [5] Renusagar Power Co. Ltd. v. General Electric Company and Another, (1994) Supp (1) SCC 644, ¶66. [6] (2003) 5 SCC 705. [7] ONGC v. Saw Pipes Limited, (2003) 5 SCC 705, ¶74. [8] ONGC Limited v. Western Geco International Limited, (2014) 9 SCC 263, ¶34. [9] Law Commission of India, Amendment to the Arbitration and Conciliation Act, 1996, Report No. 246, 21 (Aug, 2014). [10] Ssangyong Engineering and Construction Company Limited v. National Highway Authority (NHAI), (2019) 15 SCC 131, ¶37. [11] (2020) 7 SCC 167. [12] Patel Engineering Limited v. North Eastern Electric Power Corporation Limited, (2020) 7 SCC 167, ¶19. [13] Delhi Airport Metro Express Private Limited v. Delhi Metro Rail Corporation Limited, Civil Appeal 5267 of 2021, ¶6. [14] Ibid at ¶11. [15] Ibid at ¶13. [16] Ibid at ¶22. [17] Ibid at ¶25. [18] Ibid at ¶24. [19] Khaitan & Co., Patent Illegality: Supreme Court Travels a Long Road To Tame a Herd of Unruly Horses, Lexology (July 16, 2020), https://www.lexology.com/commentary/arbitration-adr/india/khaitan-co/patent-illegality-supreme-court-travels-a-long-road-to-tame-a-herd-of-unruly-horses.

Abhijeet Kumar[1] Introduction 1. In works contract, delays and prolongation are inevitable which are entered into for long projects. Prolongations often result in economic hardships. If the terms of the contract provide for recourses or alternatives to address such hardships, then the reliefs are accordingly availed by the affected party. However, if the contract doesn't explicitly provide for recourse in event of such prolongation, then uncertainty and a complex dispute arises for ascertaining the breach, the damage and compensation thereof. Such projects have an arbitration clause for the resolution of disputes. This piece shall attempt to highlight the claims which arise in the event of prolongation of works contract, with a specific focus on construction contracts, and the extent to which an arbitral tribunal can decide upon the damages in the event of prolongation. Loss of Profit Claims 2. As the term signifies loss of profit is a reduction in profit earning of an entity. In a works contract reduction of profit can occur due to several reasons. For instance, the cost of input of the contractor may increase from what has been anticipated when the contract was entered into, such expenditure is a direct expenditure of the contractor towards the contract. Similarly, the allied expenses of the contractor which are called overhead expenses may also increase during the working of the contract. Each of these will result in lesser profit generated by the contractor if the consideration of the contract has been fixed during the time the contract was entered into. If the terms of the contract do not provide for additional payment to the contractor on account of varied input cost (escalation), the contractor does not have the right to get his losses mitigated even if he incurs a loss in the contract owing to the fluctuation in input cost either on direct input costs or indirect input costs during the term as agreed in the contract. 3. However, if the contract is breached by the owner and thereby the contractor is unable to carry out the work as agreed in the contract this would result in the contractor losing his profit margin in the contract. This would be damage caused to the contractor against which he can claim compensation. 4. In A. T. Brij Paul Singh v. State of Gujarat, (1984) 4 SCC the Hon’ble Supreme Court held that “When a contractor bids for a tender, he expects to earn some profit if his bid is accepted and thereon a works contract is entered into. If the upon execution of such a work contract, the owner/parties entrusting the work commits a breach of contract, the contractor would be entitled to claim damages for loss of profit against the profit he expected to earn in the contract. For evaluation of loss to contractor, minutest details need not be examined a broad evaluation would be sufficient.” 5. Thus, in the event of breach by the owner a contractor is entitled to get his damages mitigated in terms of compensation against the profit which he would have gained had the contract been performed. Effect of Prolongation of Contract. 6. However, the position of law changes in event of prolongation of the contract i.e. if the contract could not be completed within the time stipulated in the terms of the contract. When the contract is prolonged by the owner, the capacity of the contractor to undertake other projects/ventures is diminished and thereby his profit-earning capacity is affected as well. Further, owing to the prolongation, expenditure on inputs increases and thus profit decreases. Remedies in cases of prolongation in terms of compensation are available against damage suffered. 7. If the prolongation of a Contract is on account of delay by the contractor, generally the contract explicitly provides for damages to be claimed by the owner/employer in such an event. However, if the delay is caused due to faults of the owner case law jurisprudence for damages due to prolongation of work contract comes into the picture. 8. Following are the heads of damages which are generally sought on account of prolongation of contract beyond the agreed period of the contract; a. Loss of profit b. Compensation for increased overhead expenses c. Compensation for escalation of price d. Compensation for loss due to idle machinery or reduction in productivity. a. Loss of profit. 9. This loss of profit is not the same as the loss of profit mentioned above in event of a breach of contract. In cases of prolongation of works contract, i.e. breach of the term of the contract to completion within the stipulated time, the prolongation itself doesn't give a rise to claim. To establish the claim for loss of profit due to prolongation of contract, the existence of opportunity is to be established to say that had the contract been timely acted upon the claimant would have earned additional profits given its available resources. In NHAI v. IJM Gayatri Joint Venture 2020(3) Arb LR 463 (Delhi), the Hon’ble Delhi High Court held that “A party should prove, existing opportunity, and that it could not avail the said opportunity due to prolongation which resulted in loss to such the party. The loss would have to be quantified and proved.” 10. For the claim of loss of profit, the certainty of existing opportunity and quantified losses suffered shall be proved. On these lines, the Hon’ble Supreme Court in Bharat Coking Coal Ltd. v. L.K. Ahuja, (2004) 5 SCC 109 has held that "It is not unusual for the contractors to claim loss of profit arising out of diminution, in turn, over on account of delay in the matter of completion of the work. What he should establish in such a situation is that had he received the amount due under the contract, he could have utilized the same for some other business in which he could have earned profit. Unless such a plea is raised and established, a claim for loss of profits could not have been granted. In this case, no such material is available on record. In the absence of any evidence, the arbitrator could not have awarded the same." 11. To assess the quantum of loss of profit, reliance is placed on formulas that are recognized in construction contracts namely: Hudson, Emden Formula, Eichleay Formula. These formulas are also relied upon to assess the quantum of increased expenditure on overhead expenses during the period of prolongation. The same was approved by the Hon’ble Supreme Court in McDermott International Inc. Burn Standard Ltd. and Ors. (2006) 11 SCC 181 (“McDermott case”). b. Compensation for increased overhead expenses 12. When the arbitral tribunal rejects the claim for increased overhead expenses during the prolongation period on account of no evidence then the Courts tend to uphold such decisions of the Tribunal. The Hon’ble Delhi High Court in Indo Nabin Projects Ltd. v. Powergrid Corporation of India Ltd., 2018 SCC OnLine Del 8405 held that “Standard formulae is an essential tool for computing loss of profit and overhead expenses. However the Arbitral Tribunal is not bound to apply these formulae in every case and absolve the claimant form producing any other material to establish the claims of loss on account of overheads/loss of profit. A claimant should also establish that it incurred overhead expenses on account of prolongation of works contract.” 13. With respect to claim against increased overhead the burden on the claimant of proving enhanced overhead expenses is limited to establishing prolongation of the contract period. If prolongation is proved then the formulas may be applied and thereon compensation can be claimed. Though no statute explicitly provides for applying such formulas but in absence of any impediment, it is acceptable as held by the Hon’ble Supreme Court in McDermott International Inc. Burn Standard Ltd. and Ors (2006) 11 SCC 181. The Supreme Court in this case held that it is left to the discretion of Arbitral Tribunal to determine which formula shall be applied taking into account the facts and circumstances of the case. But the formula for ascertaining increased overhead should be a standard formula one of 3 mentioned in McDermott case. The Hon’ble Delhi High Court in SMS Ltd. v. Konkan Railway Corporation Ltd. MANU/DE/1023/2020, when an unknown formula namely “notional proportionate loss” was applied for ascertaining loss on account of increased overhead and idleness of machinery, set aside the award on account of patent illegality. 14. However, if Arbitral Tribunal denies overhead expenses on account of lack of evidence and states that owing to the lack of evidence of overhead expenses the standard formulas itself cannot be applied. Such refusal of the award has been upheld in the case of Essar Procurement Services Ltd. vs. Paramount Constructions MANU/MH/2511/2016. The Court held that “the award for overhead expenses merely based on the Hudson Formula and not based on any evidence is patently illegal and in conflict with public policy.” c. Compensation for escalation of prices. 15. In event of prolongation if the prices of direct inputs of the contractor escalates then in such an event if there is any term in the contract concerning such escalation that would prevail. If the contract provides that "the above price is firm and is not subject to any escalation under whatsoever ground till the completion of the work, Then in such a contract, the arbitral tribunal cannot award any compensation despite the escalation beyond the term stipulated as was held by the Supreme Court in New India Civil Erectors (P) Ltd. v. Oil & Natural Gas Corporation, (1997) 11 SCC 75 (“Erectors case”). The Hon’ble Supreme Court recently in NTPC Ltd. v. Deconar Services Pvt. Ltd. AIR 2021 SC 2588 while referring to Erectors case held that construction of the contract is in the domain of Arbitrator and in the view of the said clause arbitrator had rightly denied price escalation in Erectors case. 16. However, the Hon’ble Supreme Court in Food Corporation of India v. A.M. Ahmed & Co. and Anr., (2006) 13 SCC 779 has held that when there is no escalation clause in the contract and the performance of the contract is delayed, then in such a situation, the Arbitral Tribunal upon determination of delay and determination of the escalation of price during the delayed period, can grant compensation for such escalation, if the delay has been caused by the Respondent. 17. It is evident from the abovementioned precedents that if the intent of fixed price for the entire work in a works contract regardless of time taken can be ascertained from the terms of the said contract, then price escalation cannot be granted even if the performance of contract is delayed. On the contrary, if the Contract is silent with respect to price escalation and the performance is delay, then despite the absence of any escalation clause, the aggrieved party can be granted compensation for price escalation on account of delay in performance of the Contract. 18. In another, interesting set of circumstances, the original contract did not provide for price escalation, however, the supplement agreement extending the time for execution provided a prohibition on any claim of price escalation. The Supreme Court of India in K.N. Santhyaapalan (Dead) by Lrs. v. State of Kerala and Ors., 2006 (4) ArbLR275 held that when the owner couldn’t provide necessities for the execution of work as agreed in the contract. The court upheld the award of arbitrator granting claims against price escalation despite there being express prohibition in the supplementary agreement. The reason appears to be that the intention of any legal obligation of the party entering into the first contract and a subsequent one in order to save the first one cannot be the same. In the sense that the parties to a contract would certainly be free in terms of the influence of losing something on their decision-making w.r.t. entering into a new contract but once the contract has prolonged the parties might already be losing and thus to save it, they entered into a supplementary agreement. This ingredient of compulsion appears to have played a role in the decision of the Court to uphold the award. 19. Thus, the takeaway from the aforesaid discussion is that, in absence of any bar on price escalation in the contract, the Arbitral Tribunal will have jurisdiction to grant compensation to the Claimant against damages suffered due to prolongation of the contract. However, an explicit bar on such a claim until the completion of the contract would prohibit this claim. In such instances of delay, the intent of keeping the prices fixed can be ascertained as understood by the dictum of the apex court in Erectors case. 20. Such strict interpretation of a clause barring price escalation in event of delay can often go significantly detrimental to the interest of the aggrieved party. For instance, if the performance of the works contract is delayed on account of the fault of the owner even for a decade then also the clause fixing the price until completion of the contract would be effective against price escalation. The contractor might not have anticipated such inordinate delay while agreeing to such a term but will have to face the consequences thereof. Thus the dictum of the apex court in Erectors case might need a reconsideration if peculiar facts of a case crop up wherein the bar on price escalation is used to exploit the interest of the contractor for a prolonged period of time. d. Compensation for loss due to idle machinery or reduction in productivity. 21. In M/s National Highways Authority of India v. M/s Hindustan Construction Company, MANU/DE/0438/2016, the Hon’ble Delhi High Court has held that Reliance on the Ministry of Road Transport & Highway's Standard Data Book is an accepted mechanism for assessing the loss due to idle machinery. Against the underutilization of machinery during the prolongation of the contract, the contractor can claim damages to the tune of underutilization. For allowing this claim the Arbitrator only need to ensure that there was idleness of the machinery and the owner is responsible for prolongation. Even if actual damages in terms of money cannot be ascertained in such situation the Standard Data Book of the Ministry of Road Transport & Highways can be relied upon which provides for rates of several types of machinery deployed in construction activities. However, the Delhi High Court in Union of India v. Om Construction Co., 2019 SCC OnLine Del 9037 has held that if the contractor also equally prolonged and the prolongation is attributable to both the parties equally then the damages under this head cannot be awarded. Thus it can be said that once the contractor has mobilized its machinery and brought it on to the site, then his losses due to idleness of such machinery on account of prolongation by owner’s fault will be compensated. Overlapping of Claims of loss of profit and extra expenses incurred 22. There can be a loss of profitability on account of various factors in event of prolongation of the contract. However, the recourse to seek damages against all such losses if brought under the purview of loss of profit will result in overlapping of claims. Moreover, for the loss of profit claim to be awarded, the burden of proof is relatively higher as opposed to the other claims such as increased overhead, price escalation, losses due to idle machinery. The proof of alternative venture in claims of loss of profit is mandatory. 23. In M/s National Highways Authority of India v. M/s Hindustan Construction Company, MANU/DE/0438/2016, the Hon’ble Delhi High Court has distinguished the claim for loss of profit and loss of earning capacity as “The court distinguished loss of profit and earning capacity, loss of earning capacity means the loss suffered by contractor due to his inability to deploy his manpower, plant, machinery at another venture deployed at the site during the extended period.” 24. Thus, it can be said that the claims of loss of profit as discussed above is essentially loss of earning capacity and the rest are losses suffered to profitability on account of enhanced expenses due to prolongation. 25. Similarly, in NHAI v. IJM Gayatri Joint Venture 2020(3) Arb LR 463 (Delhi) the Delhi High Court held that when the compensation for delay in payment and extra work was paid, additional claim of loss of profit is to be denied. 26. Therefore, if the claims in any manner are encroaching upon ingredients of each other to the extent of such overlapping the awards of the arbitral tribunal will be set aside under Section 34 of A&C, Act. Conclusion 27. While claiming account of losses suffered due to prolongation of contract certain things shall be kept in mind. The requirement of evidence for claims under the head of loss of profit is relatively higher given it requires an existing opportunity. As far as the requirement of evidence against claims of overhead expenses, idle/underutilized machinery is concerned prolongation on account of fault of other party i.e. the owner shall be proved by the contractor. Accordingly, if the counsel for such aggrieved contractor shall in an arbitration decides to proceed with claim under head of overhead expenses, idle/underutilized machinery burden of proof would be relatively lesser as against under the head of loss of profit. At the same time the Arbitrators are required to be cautious that claims of loss of profit are not sought under the guise of overhead expenses or idle machinery in order to escape the requirement of evidence. 28. Overlapping of claims before a tribunal can subsequently be set aside. Thus, even though increased expenses on idle machinery, price escalation, increased overhead expenses might result in decreased profit. It shall not be claimed under the head of "loss of profit". Moreover, overlapping of claims shall be avoided. 29. Further in the light of Ssangyong Engineering and Construction Co. Ltd v. NHAI (2019) 15 SCC 131 (“Ssangyong case”), which states that an award arrived at without any evidence would be liable to set aside, it would be interesting to see whether the evidence of delay for claims of increased overhead expenses, losses due to idle machinery owing to the prolongation of works contract is sufficient or actual damages will have to be established. Presently it appears that if the Arbitral Tribunal awards claim under heads of increased overhead expenses, idle machinery either only on the evidence of prolongation or deny on account of non-availability of the alternative venture, both kinds of awards are not interfered by the court and Arbitral Tribunal's discretion is allowed to prevail. This position of law appears to have created an anomaly because virtually both of the views of Arbitral Tribunal stands approved by the courts. The necessity of evidence as envisaged in Ssangyong case may be incorporated in claims of damages on account of overhead expenses & idle machinery, this would give a certainty to the jurisprudence of these claims. The extent to which evidence is essential if defined by the court would also be fruitful in bringing certainty with respect to claims on account of overhead expenses and idle machinery. [1] 4th Year, 7th Semester B.B.A., LL.B.(Hons.) student at Chanakya National Law University. Email – abhijeetcnlu23@gmail.com

Harshvardhan Tripathi [1] Introduction The readers of arbitration law would be well aware that consent is considered the “cornerstone” of international arbitration. However, arbitrators are often presented with cases involving individuals and entities that did not intend to be bound by the arbitration agreement. This is sometimes referred to as “extending the arbitration clause”, “joining non-signatories” or simply as “joinder” of the non-signatories. When faced with such cases, the arbitral tribunals rely upon theories developed by courts and tribunals across jurisdictions that justify binding non-signatories in certain circumstances, such as when the fact of the case demonstrates that the non-signatory intended to be a party to the arbitration agreement. These theories have emanated from the contract law jurisprudence of countries of both civil law and common law tradition. While the theoretical bases of involving non-signatories has received a varying degree of support across jurisdictions, their application remains fact-specific and their frontier continues to expand as more and more novel fact situations are encountered. In his commentary on International Commercial Arbitration (3rd edn, Wolters Kluwer 2020), Professor Gary Born has neatly categorized the more prevalent theories into purely consensual and non-consensual theories. The purely consensual theories include the theory of agency, implied consent, assumption, assignment and a third-party beneficiary. On the other hand, the non-consensual theories include the theory of estoppel and alter ego. Without delving into the particulars of each theory, it should be noted at this point that the underlying purpose of these theories is to achieve the pragmatic end of bringing together all such parties that are closely connected, and therefore, relevant to the dispute before the Arbitral Tribunal. The Tribunal is better positioned to dispense a just award when the relevant entities and individuals are involved in the arbitration proceeding. Besides the legal aim of attaining just outcomes, joinder of relevant entities or individuals also enhances commercial efficiency by saving time, limiting costs, preventing parallel litigations in various forums and subsequent conflicting decisions by different forums etc. Enforcement of foreign arbitral award against Non-signatories If a third party either wishes to join the arbitration proceedings or avoid being joined to the arbitration proceedings, it can approach the Courts of the seat of arbitration. These Courts would apply the lex arbitri and determine if there is any legal and factual basis for allowing or refusing such a joinder[2]. However, the situation is different in those cases where an arbitral award has been issued against the non-signatory and it has not challenged the award in the courts of primary jurisdiction. Now, the non-signatory is resisting the enforcement of the foreign award before the enforcing court because it did not consent to be bound by the arbitration agreement. The enforcing court is then faced with several puzzling questions, such as whether it should defer to the arbitral tribunal's decision with respect to whether the non-signatory was or became, in fact, or by operation of law, a party to the arbitration agreement. Or should the court conduct an independent review to satisfy itself that the non-signatory legitimately became a party to the arbitration agreement? Does the burden of proof rest with the non-signatory to demonstrate to the enforcing court that it was not a party to the arbitration agreement? Or should the enforcing party affirmatively prove before the enforcing court that the non-signatory was, or should be treated as, a party to the arbitration agreement? These questions inter alia other intriguing issues were discussed by the Supreme Court of India in the 2021 decision of Gemini Bay Transcription Pvt. Ltd. v. Integrated Sales Service Ltd. &Anr. (‘Gemini Bay’) By examining the decision in Gemini Bay in light of the legislative framework of the Arbitration and Conciliation Act, 1996 (‘Indian Arbitration Act’) and legal position in England, Australia, and Singapore, the author intends to take a deeper look into the vexatious position surrounding enforcement of foreign awards against non-signatories in India in this article. So far, the commentary on Gemini Bay has lauded it as another instance of the ‘pro-enforcement’ stance of the Indian Courts because it facilitated speedy enforcement of foreign arbitral awards in India and minimized intervention of the domestic courts in this regard. However, the author in this article wishes to highlight that Gemini Bay has exposed a glaring loophole in the Indian Arbitration Act. The provisions concerning enforcement of a foreign award in Part II of the Act leave the non-signatories in a precarious condition by not allowing them an opportunity to resist enforcement in Indian Courts. While parties to the arbitration agreement are provided with an opportunity to resist enforcement, it is unfair that the individuals and entities that did not even intend to be bound by the arbitration agreement are not accorded the opportunity to do the same. Furthermore, it is highlighted how Gemini Bay diverges from the consistent interpretation of the New York Convention (‘NYC’) globally and makes India a convenient forum for claimants to easily target non-signatories because of the mechanistic approach of the Indian Courts in enforcing foreign awards against non-signatories. Gemini Bay: An introduction A Hong Kong-based company named ‘Integrated Sales Services Limited’ (‘ISS’) signed a Representation Agreement (‘RA’) on 18th September 2012 with an Indian company based in Nagpur named ‘DMC Management Consultants Limited’ (‘DMC’). This agreement was signed by Mr. Rattan Pathak on behalf of DMC. Later during a subsequent amendment, one Mr. Arun Dev Upadhyaya, signed the agreement on behalf of DMC. As per the RA, ISS was obligated to assist DMC in its efforts to sell its goods and services to prospective customers. Furthermore, ISS was also obligated to identify potential investors and assist DMC in negotiating contracts. Under the RA, ISS was to receive a commission for its services. The RA stipulated that the agreement was subject to the laws of Delaware, USA and that every dispute arising in connection with the agreement was to be resolved by referring the dispute to a Sole Arbitrator in Kansas City, Missouri, USA. Disputes arose between the parties and ISS alleged that as per the terms of the RA, it had introduced two customers- MedQuist Transcription Ltd. based in New Jersey USA, and AssistMed Inc. based in California USA, to DMC. But Mr. Upadhyaya had diverted the business of these two customers away from DMC and directed it to other companies owned by him and his family members- Gemini Bay Consulting Ltd. (“GBC”) and Gemini Bay Transcription Private Ltd. (“GBT”). This act of diversion by Mr. Upadhyaya deprived ISS of the commission it was owed as per the terms of the RA. ISS initiated Arbitration proceedings on 22nd June 2009 against DMC and DMC Global and impleaded Mr. Upadhyaya, GBC and GBT as respondents. ISS contended that Mr. Upadhyaya was a proper party to the arbitration and his joinder was justified because Mr. Upadhyaya personally controlled the overall operations of DMC and other respondent companies. GBC and GBT were companies owned by the relatives of Mr. Upadhyaya and the Board of directors of these companies acted as per the instructions of Mr. Upadhyaya. Procedural History The Foreign Arbitral Award At the conclusion of the Arbitration proceedings, an award was passed in favour of ISS to the quantum of USD 690 million, which was to be paid jointly by DMC, DMC Global, Mr.Upadhayay, GBC and GBT. The primary justification behind including Mr.Upadhayay, GBC and GBT as appropriate parties in the arbitration proceeding and putting an obligation on them to pay ISS the abovementioned sum of the award was the application of the ‘alter ego’ doctrine. Motion for enforcement in the Indian Courts 1. Judgment of the Single Judge of the Bombay HC ISS moved an application under Section 48 of the Indian Arbitration Act in the Bombay High Court for the enforcement of the foreign award. The Single Judge ruled that in the present case, the foreign award is enforceable only against DMC and not other respondents because they were non-signatories to the arbitration agreement and therefore not bound by the enforcement award. 2. First Appeal: Judgement of the Division Bench of the Bombay HC ISS appealed the ruling of the Single Judge. When the matter came before the Division bench, it reversed the judgment and held that the enforcement of the foreign award could only be resisted under Section 48 if the Arbitrator had not applied the Delaware Law on the alter ego principle correctly. After examining the veracity of the application of Delaware Law, the Division bench was convinced that it was applied correctly and therefore the award was enforceable not only against DMC but also other Gemini entities. 3. Second Appeal: Judgement of the division bench of the Supreme Court Now, GBT, GBC and Mr. Upadhyaya moved to the Supreme Court by a special leave petition (SLP) and appealed against the decision of the Division bench of the Bombay High Court. An overview of the Supreme Court’s verdict: The Supreme Court heard the contentions of both sides and observed the following with respect to the provisions of the Arbitration Act: 1. Section 47(1) (c): (Paragraph 37) This provision is strictly procedural in nature and the award creditor needs to satisfy only the three pre-requisites for the enforcement of the foreign award. The award creditor does not have to adduce evidence to prove that the foreign award binds the non-signatory at the stage of enforcement before the Indian Courts. 2. Section 48(1) (a): (Paragraph 42 and 57) Non-signatory’s challenge to the enforcement of foreign awards does not fall within the ambit of this provision. If such a challenge were to be allowed to be raised, it would require revisiting the merits of the case which is not permitted in light of the pro-enforcement bias of the New York Convention and the Indian Arbitration Act. 3. Section 48(1) (b): (Paragraph 58 and 63) This provision concerns instances that occur before the making of the award and does not include the ground of absence of reasons or perfunctory reasons given in the foreign award. 4. Section 48(1) (c): (Paragraph 60) This provision is strictly concerned with situations where the foreign award has determined issues beyond the scope of the arbitration agreement and does not apply to the present case. 5. In light of the phrasing in Section 44 which mentions ‘differences arising out of legal relationships, whether contractual or not’ even tort claims can be determined by the arbitrator. (Paragraph 66 and 67) 6. Appellants cannot raise the ground of the foreign award being violative of the substantial law of the agreement before the enforcing court. Only the Courts at the seat of the arbitration have the jurisdiction to determine such questions. (Paragraph 71) 7. Section 48(1) cannot be invoked in instances where damages have been awarded without forwarding any reason. It is possible to invoke Section 48(2) but the scope of such invocation would be very narrow and will only apply to cases of gross injustice that shocks the conscience of the court. (Paragraph 74) Refusing the objection of non-signatories with respect to enforcement of the foreign award against them: In line with the global trend or a divergent approach? In the present case, the appellant sought to convince the Court that the judicial trend with respect to enforcement of foreign awards against non-signatories globally has been that the enforcing court conducts an independent review of the findings of the arbitral tribunal. The enforcing court confirms the conclusion of the tribunal that the non-signatory is indeed a party to the arbitration agreement before allowing for enforcement of a foreign award against it. The decision by the Supreme Court of the UK in Dallah Real Estate and Tourism Co v Ministry of Religious Affairs of the Government of Pakistan and the decision of the Supreme Court of Victoria in IMC Aviation Solutions Pty Ltd. v AltainKhuder LLC was cited to support the approach of scrutiny. Although this approach did not find favour with the Indian Supreme Court because it distinguished these case laws from Gemini Bay based upon the facts and the law, it is pertinent to note that the overwhelming majority of case laws in different civil and common law jurisdictions support the ‘Dallah principle’. Besides Dallah and IMC Aviation, a Norwegian case by the Halogaland Court of Appeal [3] (“the Halogaland case”), the decision of the Irish Supreme Court in Peter Cremer Gmbh& Co. v Co-operative Molasses Traders Ltd, decision of the British Columbia Supreme Court in Javor v Francoeur, decision of the Second Circuit Court of Appeals in Sarhank Group v Oracle Corporation, and decision of the English Court of Appeal in Svenska Petroleum Exploration AB v Government of the Republic of Lithuania lend credence to the position that instead of echoing the Arbitrator’s finding on the issue, the enforcing court should conduct an independent inquiry on whether the non-signatory intended to be bound by the arbitration agreement. Similar to the Indian Supreme Court’s opinion, it can be argued that these case laws are not of persuasive value before Indian courts because of the difference between the Indian Arbitration Act with the Arbitration Acts in other jurisdictions. The Indian Supreme Court correctly distinguished the difference in the provisions surrounding enforcement of foreign awards in the Indian Arbitration act from the statutes in England and Australia. However, it interpreted the provisions in the Indian Arbitration Act sui generis and did not consider the fact that the national arbitration legislations are not strictly national in their essence and rather give effect to the principles and provisions of the New York Convention. Moreover, it is not uncommon for the Indian Courts to look at other advanced arbitration-friendly jurisdictions and their burgeoning case laws for direction and place reliance upon them whenever necessary. For instance, in the 2014 landmark ruling of the Supreme Court of India in Enercon (India) Ltd and Ors v Enercon Gmbh and Anr the Court heavily relied on the ratio of Naviera Amazonica Peruana S.A. v Compania Internacional De Seguros Del Peru, a landmark ruling of the English Court of Appeal, to incorporate the principle of ‘close and intimate connection test’ in determining the seat of arbitration. Therefore, even in Gemini Bay the Indian Supreme Court should not have shied away from looking at the international practice and should have strived towards adopting a uniform interpretation of the law. Although the Indian Supreme Court was interpreting provisions of Part II of the Indian Arbitration Act, in effect they were engaged in an interpretive exercise of Article III (Binding nature of NYC award), Article IV (Conditions for application of enforcement of an NYC award) and Article V (Conditions for resisting enforcement of an NYC award) of the NYC. While interpreting an international instrument like the New York Convention, Articles 31 and 32 of the Vienna Convention on the Law of Treaties come into play. These articles require that a plain meaning should be accorded to the words of the treaty and the prevailing international practice must also be kept in mind. As evident from the array of the case laws derived from varying jurisdictions of both civil and common law tradition, the consistent global interpretation of NYC demands strict scrutiny of the foreign awards made against a non-signatory by the enforcing court. The Indian Supreme Court adopted an incorrect approach by failing to take into account this global practice and consistent interpretation of the NYC and interpreting the provisions of the Indian Arbitration Act in isolation. Excessive hardship for the non-signatories in resisting enforcement of foreign awards in India It is submitted that the decision in Gemini Bay serves a valuable purpose of highlighting the disadvantageous position that the Arbitration and Conciliation Act 1996 places the non-signatories during the stage of enforcement. The disadvantage is primarily in terms of: 1. While an award can be made against a non-signatory, grounds of resisting its enforcement in India under Section 48 are only available to the parties. According to the interpretation forwarded by the Supreme Court in Gemini Bay, a foreign award defined under Section 44 can be passed on the difference between “persons” which being a broader term includes not just the parties but also the non-signatories. Furthermore, the award is binding not just on the parties alone but on “persons” as per Section 46. Glaringly, however, while the Act recognizes the possibility of a foreign award being passed against a non-signatory, only a “party” can invoke the grounds under Section 48 to resist the enforcement of the award. Allowing an award debtor who is a party to take recourse to Section 48 and resist enforcement of the foreign award against him but disallowing the same opportunity to a non-signatory who also happens to be an award debtor is unreasonable and causes unnecessary prejudice to non-signatories. In Gemini Bay , the Supreme Court denied the arguments made by GBT, GBC and Mr. Upadhyaya inter alia on the ground that they were not parties and hence could not rely on Section 48. This raises an important question- what are the recourses the non-signatories have to resist enforcement of a foreign award against them in India if they have earlier been unsuccessful before the curial court? Unfortunately, after the Supreme Court’s interpretation of Section 48 in Gemini Bay, the non-signatories seem to have no recourse left to resist enforcement. This puts them in a severely disadvantaged position vis-a-vis parties to the arbitration agreement. In this regard, later in this article, it is submitted that there is an urgent need for amendment in the Indian Arbitration Act to account for the plight of the non-signatories. 2. Excess cost and burden on the non-signatories in moving the curial court The proponents of the approach adopted in Gemini Bay would argue that even though the non-signatory cannot rely on Section 48 to resist enforcement of the foreign award against it in India, the option to approach the curial court (i.e., the courts at the seat of the arbitration) is always available to the non-signatory from the time the award is passed. They can further argue that if the non-signatory does not agree to being made part of the arbitration proceedings, then the non-signatory should obtain an anti-suit injunction from the court of primary jurisdiction. The obvious conclusion to this line of argument is that if the non-signatory fails to get such relief from the court of primary jurisdiction, then the non-signatory must face the consequence of the enforcement of the foreign award against him in the secondary jurisdiction. Placing such a burden on a party who has not consented to participate in the arbitration proceedings is harsh, unnecessarily expensive and unjustified. A non-signatory who finds herself roped into an arbitration proceeding would be required to seek expensive legal representation to get it annulled before a foreign court. Further challenges can arise if the limitation period to appeal against the foreign award at the seat of arbitration has expired. By closing the opportunity of resisting enforcement at the court of secondary jurisdiction, the non-signatory is put in a tight spot and is virtually deprived of any substantial legal recourse. How can the non-signatories strategize in the light of Gemini Bay? The question which then arises is that similar to Gemini Bay,if a non-signatory finds herself under the scope of jurisdiction of an arbitral tribunal to which it did not consent to, what should be the best course of action? The first course of action would be a combination of moving the Courts at the seat of arbitration for setting aside the award and moving the courts in the enforcing states for resisting enforcement. The benefit of this approach is that it ensures that recourses to all legal forums are exhausted. However, this would require the client to seek legal advice in the jurisdiction of the seat of arbitration and other jurisdictions where the enforcement is likely to be sought which would substantially add to the expenditure of the client. The second course of action is to abstain from participating in the arbitration proceeding and challenge it before the enforcing court after the final award is passed. This approach has the advantage of making it clear that the party does not accede to the jurisdiction of the arbitral tribunal. However, the risk associated with this course of action is that the non-signatory might lose the valuable opportunity of resisting the joinder before the arbitral tribunal on merits. Participation in arbitration proceedings is advisable because it allows the non-signatories to adduce evidence and rebut allegations such as the application of the ‘alter ego’ doctrine in Gemini Bay. However, if the client is determined to not participate in the arbitral proceedings, it would be advisable to approach the Curial courts and seek either a declaration or an injunction against the arbitral tribunal's jurisdiction on the non-signatories. The third course of action for the non-signatory would be to challenge the finding of the arbitral tribunal that the non-signatory is a proper party to the arbitration proceeding through an appeal to the curial court. This strategy ensures that the non-signatory decisively battles it out in the curial courts and does not have to engage in a long drawn round of litigation in other jurisdictions where enforcement is sought. This strategy is further useful if the client is worried that the enforcing court in jurisdictions such as India might adopt a mechanistic approach in enforcing the foreign award and echo the findings of the arbitral tribunal without scrutinizing them. If it is likely that the award creditor will seek enforcement in a jurisdiction where the enforcing courts do not strictly scrutinize foreign awards against non-signatories, or in such jurisdictions where the rules and the laws surrounding enforcement of a foreign award against non-signatories is less developed, the client would be well advised to seek a definitive determination from the courts at the seat of the arbitration itself rather than taking the risk of resisting enforcement of the award in the courts of secondary jurisdictions. Conclusion The decision in Gemini Bay has highlighted the kafkaesque results that can emerge as a result of non-uniform drafting of provisions in Part II of the Arbitration and Conciliation Act 1996. While the foreign award under Section 44 can be made between ‘persons’ and it is ‘binding on all persons as between whom it is made’ under Section 45, the opportunity to resist enforcement of a foreign award under Section 48 is available only to the ‘parties’. There seems to be no intelligible rationale behind bringing non-signatories within the binding scope of a foreign award but not allowing them the opportunity to resist its enforcement. This calls for the creation of an adequate statutory framework to prevent undue prejudice to the interests of the non-signatories. It is submitted that ‘parties’ in Section 48 should be replaced with ‘persons’. This would be crucial in updating the Indian Arbitration Act’s focus from the traditional notion of involvement of ex facie parties towards the modern reality of increasing involvement of ‘non-obvious parties’ such as non-signatories and other third parties in international commerce and associated arbitration proceedings. However, this in itself will not be sufficient in providing adequate opportunity to the non-signatories to resist enforcement. The Courts will then have to interpret ‘the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made” in Section 48(1)(a) in line with the global interpretation of the New York Convention to hold that it includes within its ambit the case where a non-signatory claims that the arbitration agreement is not binding on her because she was never a party to the arbitration agreement. Such interpretation would align the Indian position with the consistent global practice and at par with the interpretation forwarded in advanced arbitration jurisdictions such as England, Australia and Singapore. In conclusion, although Gemini Bay interprets the law correctly, it does not lead the Indian jurisprudence on the issue in the right direction. It is understandable that because in this case, the foreign award had been passed in 2010 but its enforcement was mired in rounds of litigation before the Indian Courts, the Indian Supreme Court placed emphasis on speedy enforcement. While the Indian Supreme Court strived to demonstrate a ‘pro-enforcement approach’, unfortunately, it cannot be achieved by adopting a mechanistic approach of giving approval to all foreign arbitral awards by reading Section 48 of the Indian Arbitration Act in isolation. Therefore, it is emphatically suggested that the Indian Courts in subsequent cases, should reassess the conceptual tussle between swift enforcement and upholding consent of the parties to be bound by arbitration proceedings and awards. [1] Harshvardhan Tripathi, Junior Editor ‘The Arbitration Workshop’, Class of 2022 NALSAR University of Law, Hyderabad. [2] For instance, see Arab Republic of Egypt v. Southern Pacific Properties Ltd. & Southern Pacific Properties (Middle East) Ltd. [3] Yearbook Comercial Arbitration XXVII (2002) p 519.

- Samarth Kapoor[1] and Pranshi Gaur[2] Abstract The act governing arbitration in India, i.e., Arbitration and Conciliation Act, 1996 (“Arbitration Act”) have gone through many much-needed amendments from time to time. Also, the judiciary has played a key role in interpreting the important provisions of the Act, be it the issue related to applicability of Part – I of the Act to foreign seated arbitration or the arbitrability of fraud claims, the judiciary has through its timely interventions guided the growing jurisprudence of arbitration in India. The one issue which is still a topic of debate is the determination of Seat and Venue in arbitration. The judiciary has tried to resolve the confusion and contradiction but there still appears room for uncertainty. This article will provide a comprehensive overview of the judgments on this issue and look into the difference between Seat and Venue with regards to the approach taken by the judiciary. Further, the article will delve deeper into the concept of the jurisdiction of the Courts concerning the Seat of arbitration, principles defined by courts to determine the Seat of arbitration and lastly will conclude in terms of the confusion created by different judgments and the way ahead to deal with this issue. Introduction The concepts of Seat and Venue under the regime of Indian arbitration law are different. There is no exclusive mention of “Seat” and “Venue” under the Arbitration Act however, both these terms are governed under the same provision of the Arbitration Act.[3] The concept of Seat and Venue in Arbitration is of utmost importance, where “Seat” defines the jurisdiction of the Court and laws applicable to the Arbitration proceedings and “Venue” defines the place, the location where the Arbitration proceedings are conducted.[4] The significance of the Seat of arbitration can be determined by referring to the provision of the Act, which distinguishes both the terms by referring to a Seat as a place of arbitration and a Venue as a place of meeting. The selection of a Seat will have some consequence as such selection of the Seat of arbitration will determine the supervisory jurisdiction of the court over the arbitral process, which means any issue pertaining to that arbitration proceedings will be taken care of by that court only. The Seat also determines what laws are applicable upon arbitral proceedings and which in turn will govern jurisdiction selected as the Seat, but this will be the case when the parties didn’t select the governing law while selecting the Seat of arbitration and therefore, the law of the Seat becomes the law governing the arbitration proceedings.[5] Seat and Venue: Distinguished The concept and context will not be clear if we go simply by reading the bare provision of the Act. The term Seat and Venue might be sound synonymous but the Supreme Court has demarcated the line between these two concepts. In the case of Bharat Aluminum Co. v. Kaiser Aluminum Technical Service Inc.[6] (“BALCO”), the Supreme Court observed that choosing the Seat of arbitration reflects the intentions of the parties to accept the law of that country relating to conduct and supervisory jurisdiction of the courts over the arbitration. Similarly, in the case of Enercon (India) Ltd. v. Enercon GmBH,[7] the Supreme Court expressed its view regarding the Seat and Venue and held that seat of arbitration is a crucial aspect and to be decided carefully as it decides the applicable law and arbitration procedure for deciding the disputes between the parties. Similarly, the Supreme Court in the case of Mankastu Impex Pvt. Ltd. v. Airvisual Ltd.[8], observed that, “The Seat of arbitration is a vital aspect of any arbitration proceedings. Significance of the Seat of arbitration is that it determines the applicable law when deciding the arbitration proceedings and arbitration procedure as well as judicial review over the arbitration award.” Hence, it is important to note that to reduce the confusion and contradiction while adjudicating the matter between the parties, the Seat should be selected with due caution and deliberation. Through the Seat of arbitration parties impliedly choose the curial or applicable law and arbitration procedure while the Venue of arbitration is merely a geographical location for conducting the meeting/ arbitration. Complicated position of Law with regards to Jurisdiction of Courts Considering the importance of these two terms in arbitration proceedings, the first judgment was the BALCO judgment, where the Supreme Court resolved the issue and confusion revolving around the concept of Seat and Venue. The Hon’ble Supreme Court in this judgment distinguished between the two terms and clarified that the term “place of arbitration” u/s 20 can be used interchangeably as a Seat under sub-section (1) and Venue under sub-section (3). Further while demarcating the line between the two crucial concepts, the Hon’ble Supreme Court held that when the Seat of arbitration is decided then that attains the permanent status and the Courts of such Seat will have the exclusive jurisdiction over the arbitration proceedings and the issues arising in connection with that Arbitration.[9] In an interesting turn of events the Supreme Court upheld the concept of party autonomy and held that the two courts have concurrent jurisdiction under the Act, i.e., the courts having the supervisory jurisdiction over the arbitration and the courts within whose jurisdiction the cause of action arises. The confusion created in the BALCO judgment was later stretched forward in some judgments of the High Courts and Supreme Court. In the case of Enercon (India), the Supreme Court held that, “Once the Seat of arbitration has been fixed in India, it would be in the nature of exclusive jurisdiction to exercise the supervisory powers over the arbitration” A similar instance was taken by the Supreme Court in the case of Reliance Industries Ltd. v. Union of India,[10] where the Supreme Court pressed the exclusive jurisdiction principle and deviated from the concept of concurrent jurisdiction as laid down in the BALCO judgment. On the similar lines of interpretation, the Supreme Court in the case of Indus Mobile Distribution Pvt. Ltd. v. Datawind Innovations Pvt. Ltd. (Indus Mobile),[11] analyzed the entire legal concept of Seat and Venue and held that only the courts within whose jurisdiction the Seat lies will have jurisdiction over the arbitration to exercise its powers and no other court will have the jurisdiction including the courts within whose jurisdiction the cause of action arose. In the case of Brahmani River Pellets Ltd. v. Kamachi Industries Ltd.,[12] the issue revolved around the dispute and difference between the concepts of “Seat” and “Venue”. The case has many folds where the Madras High Court assumed jurisdiction according to the arbitration clause in the agreement and held accordingly. However, in an appeal filed before the Supreme Court against the impugned judgment of Madras High Court. The Hon’ble Supreme Court reversing the judgment held that, “Where the contract specifies the jurisdiction of the court at a particular place, only such court will have the jurisdiction to deal with the matter and parties intended to exclude all other courts.” Similarly, in the case of Union of India v. Hardy Exploration and Production (India) Inc.,[13] the Supreme Court held that a Venue can be considered as a Seat of arbitration if the alone Venue is mentioned in the arbitration clause and some associated factors are added to it. However, the Court in the same case didn’t mention the preconditions according to which the place of arbitration can be considered as the seat of arbitration and that will be done on case to case basis. The same can be done by the holistic reading of the arbitral clause in light of the surrounding circumstances. Ultimately in Brahmani, the Supreme Court held that a Venue can be considered as a Seat until otherwise is mentioned in the Agreement. Unfortunately, the precedent settled, in this case, was not in line with the previous ruling of the Supreme Court on the same issue. Brahmani followed the exclusive jurisdiction principle but deviated from the ultimate conclusion.[14] The Supreme Court in the above-noted cases deferred from the “Concurrent Jurisdiction principle” evolved in the BALCO judgment and concluded the confusion according to the “Exclusive Jurisdiction principle” but High Courts did follow the same principle as set out in BALCO and as according to exclusive jurisdiction principle. The Delhi High Court in the Case of Antrix Corp. Ltd. v. Devas Multimedia Pvt. Ltd.,[15] applied the BALCO judgment and its interpretation concerning supervisory jurisdiction over the arbitration and held that even the courts where the cause of action arose will have the supervisory jurisdiction over the arbitration. Similarly, in the case of Konkola Copper Mines v. Stewarts and Lloyds of India Ltd.,[16] the Bombay High Court held that, “The judgment of the Supreme Court is declaratory of the position of law that the Court having jurisdiction over the place of arbitration can entertain a proceeding in the exercise of its supervisory jurisdiction as indeed the Court where the cause of action arises.” Also, in the case of Hinduja Leyland Finance Ltd. v. Debdas Routh,[17] the Calcutta High Court while interpreting the “Exclusive Jurisdiction” principle propounded in Indus Mobile and exclusive forum selection clause relied on BALCO judgment and Section 2(1)(e) which gave jurisdiction to two courts held that, “…nomination of a Seat does not oust the courts in other places where part of the cause of action has arisen, of their jurisdiction, as such a proposition would be contrary to the five-judge bench decision of the Supreme Court in BALCO. Hence, in choosing a Court under Section 2(1)(e)(i) we have now an additional forum, that is, the courts at the Seat of arbitration.” With regards to these judgments heavily relying on BALCO and terming Concurrent jurisdiction as the principle applying to govern the jurisdiction of the Courts. However, the Supreme Court in the case of BGS SGS SOMA JV v. NHPC Ltd. (BGS SOMA)[18] has relied upon the judgments of Indus Mobile, Reliance Industries, Enercon, and Brahmani River Pellets and held that the operative part of the BALCO judgment relied on Roger Shashoua v. Mukesh Sharma[19] should be read constructively which devised the exclusive jurisdiction principle. Also, the Supreme Court in the same case overruled the judgments of Antrix Corp. and Hardy Exploration and held these judgments and their interpretation as bad in law. Exclusive Jurisdiction of the Courts will also change with the change of place of Seat As already discussed above the concept of exclusive jurisdiction of Courts with regards to the Seat of Arbitration, the Supreme Court has categorically held that the Seat of Arbitration will be the determining factor for deciding the jurisdiction of the Court. But the question here arises is whether changing the Seat of arbitration will affect the jurisdiction of the courts? The Supreme Court in 2021 got the opportunity to settle this issue in the case of Inox Renewables v. Jayesh Electricals.[20] This issue of determining the jurisdiction of the Court with respect to the Seat of Arbitration has already been dealt with by the Supreme Court in BALCO and Indus Mobile by relying on the principle enshrined u/s 20 of the Act where the Supreme Court has held that irrespective of the fact that the part of the cause has arisen in the jurisdiction of some other court, it will not affect the jurisdiction of the Court where the Seat of the arbitration is placed. However, the present case has differed on grounds of facts as the Seat of the arbitration was mutually changed by the parties and the question proposed was “whether the change of the Seat of arbitration will also change the jurisdiction of the court?” The Hon’ble Supreme Court after relying on BGS SOMA and the judgment of Videocon Industries Ltd. v. Union of India[21] observed that the courts at the Seat of Arbitration specifically designated in the Arbitration Clause between the parties would have exclusive jurisdiction to resolve the disputes arising out of the arbitration and upheld the mutual agreement of changing the Seat of arbitration that too without writing.[22] The Supreme Court concluded and settled the proposition and held that in the case where the parties have mutually agreed to change the Seat of the arbitration the exclusive jurisdiction of the court will also shift and would accordingly vest with the Courts at the replaced Seat of Arbitration agreed by the parties. This judgment upheld the party autonomy which is the ultimate objective of the Arbitration Act. The Principles for Determining a Seat As stated above, the concept of Seat and Venue is governed by the same provision of the Act, while the Supreme Court has iterated its intention that the term “place” of arbitration can be used interchangeably as Seat and Venue of arbitration as per the intention reflected out of the arbitration clause of the agreement. The principle for determining a Seat for arbitration has been evolved through many cases and taking reference to foreign judgments.[23] However, the principles set out in different judgments found out to be contradictory in other judgments which fire up the confusion and controversy related to the concept. Shashoua Principle In the first instance, the Shashoua principle was discussed in the BALCO judgment where the Supreme Court relied on Roger Shashoua v. Mukesh Sharma and re-iterated the principle of determining the Seat of arbitration. The Shashoua principle states that if the parties have only clarified the Venue, combined with a supranational body of laws, and no other contrary provision available then that Venue can be considered as the Seat of arbitration. However, with regards to the jurisdiction of the courts, the Shashoua principle clarified that the courts having a Seat of arbitration will have exclusive jurisdiction with regards to any dispute that arose. The same Shashoua principle was re-iterated in the case of Enercon India, but in the agreement, there was a certain contrary provision available which fall under the garb of “contrary indicia” as set out in the Shashoua principle. Hence, according to this principle, a Venue can be considered as a Seat if it does not go against any of the provisions of the agreement. The “Closest Connection” Test When the arbitration clause lacks specificity with regards to the Seat of arbitration then courts turn down to check the intention of the parties through that agreement. In these cases, Courts apply the closest connection test to determine the Seat in cases where there is no intent is shown or specified in the agreement.[24] The Court of appeal in Sulamerica Cia National De Seguros S.A. v. Enesa Engenharia S.A.[25] suggests and pointed out a three-stage enquiry to cull out the Seat of arbitration, first is the express choice, second is the implied choice, and third is by applying the closest and most real connection test. Same in the case of C v. D,[26] where the Court of appeal states that, “…an arbitration agreement will have the closest connection with the place where parties have chosen to arbitrate than with the place of the underlying contract, in cases where the parties have deliberately chosen to arbitrate, in one place, disputes which have arisen under a contract governed by the law of another place.” Recently the UK Supreme Court in the case of Enka Insaat v. OOO “Insurance Company Chubb”[27] tried to simplify the Sulamerica ruling wherein the UKSC observed that in absence of any express choice of governing law, the general rule will be to consider the law governing the underlying contract. However, the SC was of the view that the choice of a different country as the seat of arbitration cannot be ignored which was considered/ intended to apply to the arbitration agreement. Even the closest connection test is established, the law of the Seat (intention of the parties) will be preferred to govern the arbitration agreement. In the Indian context the Supreme Court the case of Enercon (India) Ltd. v. Enercon GmBH discussed the cases of Sulamerica and C v. D and by ultimately relying on the principle set out in Naviera Amazonica Peruana S.A. v. Compania Internacional De Seguros Del Peru[28] held that since the parties have not decided the Seat of arbitration hence court should apply closest and most real connection to determine the Seat. The principle laid down in Hardy Exploration and deviation from Shashoua principle. Supreme Court earlier clarified there is no confusion with regards to the concept of Seat and Venue of arbitration as they can be used interchangeably as per the intent shown in the agreement. The Supreme Court in Hardy Exploration, went on to clarify the doubt regarding the consideration of Venue as a Seat of arbitration. Supreme Court relied on the UNCITRAL Model law to determine the Seat of arbitration in the case where parties have agreed for the Venue but not for the Seat and held that the courts should look for other factors that can be included to determine the Seat of arbitration and for that purpose the arbitration agreement should be read holistically. Supreme Court clarified that Venue cannot be considered as a Seat until some other factors have been adduced to it and some condition precedent is satisfied. The reasoning and principle in hardy exploration are considered to be a deviation from the Shashoua principle as it sets out some more considerable factors to lead the confusion while selecting a Seat of arbitration. The principle set out in BGS SOMA After the setback in Hardy Exploration judgment which deviates from the Shashoua principle, Supreme Court was faced with the same question that whether the Venue or place can be considered as the juridical Seat of arbitration. The Hon’ble Supreme Court in the case of BGS SGS SOMA JV v. NHPC Ltd., while dealing with the same question held that a place of arbitration regardless of its designation as Seat or Venue can be considered as juridical Seat of arbitration until something contrary is specified in the agreement by the parties. The judgment went ahead to reaffirm the Shashoua principle and record that “contrary indicia” shown in the agreement is the only factor to determine whether a Venue can be considered as a Seat or not. The Supreme Court through this judgment overruled the interpretation given by the Courts in Hardy Exploration and Antrix judgment and held these judgments as contrary to BALCO judgment and bad in law. Mankastu Impex Principle In the recent development regarding the issue about Seat and Venue, Supreme Court got the opportunity to decide and revisit the issue in the case of Mankastu Impex Pvt. Ltd. v. Airvisual Ltd. and held that, “It has also been established that mere expression “place of arbitration” cannot be the basis to determine the intention of the parties that they have intended that place as the “Seat” of arbitration. The intention of the parties as to the “Seat” should be determined from other clauses in the agreement and the conduct of the parties.” “…..The agreement between the parties that the dispute “shall be referred to and finally resolved by arbitration administered in Hong Kong” clearly suggests that the parties have agreed that the arbitration is seated at Hong Kong and that laws of Hong Kong shall govern the arbitration proceedings as well as have the power of judicial review over the arbitration award.” The finding in Mankastu seems contrary to that of BALCO and Shashoua principles as it deviates from the territoriality principle to determine the seat of arbitration. Also, Mankastu concluded that Seat and Venue u/s 20 cannot be used interchangeably. If the court would have considered the test laid down in Hardy Exploration and BGS SOMA JV, the result would be the same, i.e., Hong Kong to be the juridical Seat of arbitration. However, the view taken by the Supreme Court with regards to the place and Venue of arbitration seems to have confused the concepts and in the end deferred from that of BALCO.[29] Concluding Remarks and the Way Ahead The Seat of arbitration may well be quite independent of the Venue where the proceedings of arbitration or other parts of the arbitral process take place. The Seat of arbitration is vital, as it will decide the applicable law and procedure for conducting the arbitration process. Also, the courts having the Seat in their jurisdiction will have supervisory jurisdiction over the arbitral process. Identification of the Seat of arbitration post BALCO judgment has become one of the most important features of an arbitration clause. The selection of the Seat determines the law governing the Arbitration procedure and often, more importantly, the process and rights relating to the enforcement of the arbitration award. In an attempt to make the wording of the Act consistent with the international usage of the concept of a “Seat” of arbitration, and for that purpose the 246th Law Commission Report[30] inter alia proposed an amendment to Section 20(1) of the Act. In its recommendation, the law commission focuses on substitution of the word “place” with “Seat and Venue” in Section 20. However, the suggestion was not implemented and did not see the light of the day. In this context, the Court in Indus Mobile Distribution Pvt. Ltd. v. Datawind Innovations Pvt. Ltd. & Ors., succinctly observed that “… the BALCO judgment in no uncertain terms has referred to ‘place’ as ‘juridical Seat’ for the purpose of Section 2(2)[31]of the Act. It further made it clear that Section 20(1) and 20(2) where the word ‘place’ is used, refers to ‘juridical Seat’, whereas, in Section 20(3), the word ‘place’ is equivalent to ‘Venue’. This being the settled law, it was found unnecessary to expressly incorporate what the Constitution Bench of the Supreme Court has already done by way of construction of the Act.” As in the judgments stated above, the Supreme Court tried to resolve the confusion revolving around the concept of Seat and Venue by demarcating a line between them but in doing so in some of the judgments the concept of party autonomy has been given a go by. However, the Supreme Court has given the much-needed clarity on the aspect of Seat, Venue, place, and jurisdiction of courts. The link that was missing between the Seat, Venue, and place of arbitration was founded in BALCO and other judgments delivered by the Supreme Court. However, the different stance taken by different constitutional courts has added more confusion to the concepts. While one of the reasons for the problem and contradiction is poor drafting of arbitration clauses in the agreement, the lack of an express provision in the Act cannot be overlooked. Hope the recent judgment of Mankatsu will serve the purpose as of now and the recent ruling of the Supreme Court in Inox Renewables will be considered as a set-out principle until a new confusion is raised in this conundrum. [1] Samarth is a 4th year student at Maharashtra National Law University Aurangabad. [2] Pranshi is a 4th year student at Maharashtra National Law University Aurangabad. [3] The Arbitration and Conciliation Act, 1996, No. 26 of 1996, Acts of Parliament, 1996, §20. [4] Prerona Banerjee and Rajvansh Singh, Indian Supreme Court revisits the distinction between Seat and Venue of arbitration, Young ICCA Blog, (August 29, 2021, 7:20 PM), https://youngicca-blog.com/indian-supreme-court-revisits-the-distinction-between-seat-and-venue-of-arbitration/. [5] Hiroo Advani and Others, Seat v. Venue in Contemporary Arbitral Jurisprudence, The SCC Online Blog, (September 2, 2021, 8:14 PM), https://www.scconline.com/blog/post/2021/05/06/seat-v-venue-in-contemporary-arbitral-jurisprudence/. [6] Bharat Aluminium Co. v. Kaiser Aluminium Technical Service Inc., (2012) 9 SCC 552. [7] Enercon (India) Ltd v. Enercon GmbH, (2014) 5 SCC 1. [8] Mankastu Impex Pvt. Ltd. v. Airvisual Ltd., 2020 (3) Arb LR 63 (SC). [9] Anjali Anchayil and Ashutosh Kumar, Choice of Seat or Venue: Supreme Court of India Dithers, Kluwer Arbitration Blog, (August 30, 2021, 02:30 AM), http://arbitrationblog.kluwerarbitration.com/2020/05/13/choice-of-seat-or-venue-supreme-court-of-india-dithers/. [10] Reliance Industries Ltd v. Union of India, (2014) 7 SCC 603. [11] Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited, (2017) 7 SCC 678. [12] Brahmani River Pellets Ltd v. Kamachi Industries Ltd., AIR 2019 SC 3658. [13] Union of India v. Hardy Exploration and Production (India) Inc., AIR 2018 SC 4871. [14] Daksh Trivedi, Abhijnan Jha and Sourya Donkada, Brahmani River Pellets Judgment: Reigning The Seat vs. Venue Debate, Mondaq (September 4, 2021, 12:50 AM), https://www.mondaq.com/india/arbitration-dispute-resolution/852332/brahmani-river-pellets-judgment-reigniting-the-seat-vs-venue-debate?type=mondaqai&score=85. [15] Antrix Corp. Ltd. v. Devas Multimedia Pvt. Ltd., 2018 SCC Online Del. 9338. [16] Konkola Copper Mines v. Stewarts and Lloyds of India Ltd., 2013 (3) Arb LR 329 (Bom.). [17] Hinduja Leyland Finance Ltd. v. Debdas Routh, 2018 (1) CHN (CAL) 561. [18] BGS SGS SOMA JV v. NHPC Ltd., 2019 (6) Arb LR 393 (SC). [19] Roger Shashoua v. Mukesh Sharma, [2009] EWHC 957 (Comm). [20] Inox Renewables v. Jayesh Electricals, 2021 SCC OnLine SC 448. [21] Videocon Industries Ltd. v. Union of India, (2011) 6 SCC 161. [22] Nishant Menon and Niharica Khanna, Change of Seat of Arbitration By Mutual Agreement, (August 29, 2021, 12:05 PM), https://www.mondaq.com/india/arbitration-dispute-resolution/1086852/change-of-seat-of-arbitration-by-mutual-agreement. [23] Roopadaksha Basu, The Seat v/s. Venue Debate – A continuing Saga, Mondaq (September 5, 2021, 01:30 AM), https://www.mondaq.com/india/arbitration-dispute-resolution/957918/the-seat-vsvenue-debate-a-continuing-saga. [24] Payal Chawla, Seat of Arbitration and its communion to lex – larger bench to decide: Part I, II & III, Bar & Bench, (August 31, 2021, 8:00 PM), https://www.barandbench.com/columns/seat-arbitration-communion-to-lex-larger-bench-part-i. [25] Sulamerica Cia National De Seguros S.A. v. Enesa Engenharia S.A., [2013] 1 WLR 102. [26] C v. D, [2007 EWCA Civ 1282 (CA)]. [27] Enka Insaat Ve Sanayi AS v. OOO “Insurance Company Chubb”, [2020] UKSC 38 (Enka). [28] Naviera Amazonica Peruana S.A. v. Compania Internacional De Seguros Del Peru, 1988 (1) lloyd’s Rep 116. [29] Rishabh Dheer, Mankastu Impex Private Limited v. Airvisual Limited: The Juridical Seat Place-d in Muddier Waters, The Arbitration Workshop, (August 30, 2021, 12:50 PM), https://www.thearbitrationworkshop.com/post/mankastu-impex-private-limited-v-airvisual-limited-the-juridical-seat-place-d-in-muddier-waters. [30] Law Commission of India, 246th Report on Amendments to the Arbitration and Conciliation Act, 1996, 52 (August, 2014), available at: https://lawcommissionofindia.nic.in/reports/Report246.pdf. [31] The Arbitration and Conciliation Act, 1996, No. 26 of 1996, Acts of Parliament, 1996, §2(2).

*Abhay Raj & Ajay Raj Keywords: Section 9, Section 11, Section 4 Party autonomy is an intrinsic facet of arbitration that enables parties to opt for the seat of arbitration.[1] Resultantly, the courts at the seat have exclusive supervisory jurisdiction over the dispute. This is evident from the Supreme Court’s decision in Indus Mobile Distribution Pvt. Ltd. v. Datawind Innovations Pvt. Ltd. and Ors., wherein it was observed that parties’ designation of a seat of arbitration is akin to agreeing upon an exclusive jurisdiction clause. Herein, the term ‘exclusive’ signifies that one or more parties are obliged to only resort to the stated jurisdiction for disputes falling within the agreement. Despite including an express clause on exclusive jurisdiction/seat of arbitration, at times, parties tend to deviate from the selected jurisdiction and initiate proceedings before a different court altogether. As such, a deviation can occur when the party, for a Section 9 application or for challenging an award obtained, initiates the said proceedings in a court which is different from the one mentioned in the exclusive jurisdiction clause. Prima facie, this is untenable owing to the inclusion of an exclusive jurisdiction clause, which as the word suggests, ousts the jurisdiction of all other courts. In other words, a party should ideally not, per that party’s whims, opt for a jurisdiction where they believe that the adjudication would be convenient. For the purpose of analysing the said scenario, the following legal issues ought to be assessed: i. Whether the parties’ failure to assert an exclusive jurisdiction clause amounts to a waiver of the clause and acceptance of that court’s jurisdiction; and ii. Whether making an application under Section 9 of the Arbitration and Conciliation Act 1996 (“Arbitration Act”) before court A would bar the jurisdiction of any or all other courts to entertain a Section 11 application arising out of the same arbitration agreement. In this post, the author attempts to address both these issues. In order to do so, this piece first analyses how exclusive jurisdiction clauses have been perceived by the Indian courts over time, and assuming that a party initiates proceedings by ousting the exclusive jurisdiction clause and no objection is raised by the other party, whether that clause is waived off by the other party. The answer to it is ‘yes’. Thereafter, the authors specifically assess the jurisprudence vis-à-vis Section 9 and Section 11 of the Arbitration Act in order to identify whether these two applications—one pertaining to interim relief and the other to the appointment of arbitrator—in two different courts, disregard the exclusive jurisdiction clause. As will be demonstrated, the answer is not clear and warrants further scrutiny. To strengthen the regime, the authors propose certain amendments, thereby concluding the piece. Exclusive jurisdiction clause and objection to another court’s jurisdiction Section 4 of the Arbitration Act expressly provides that if a party is aware that the arbitration agreement has not been complied with and yet, it does not object to such non-compliance without undue delay, such would be deemed to have waived its right to object to such non-compliance. The effect of a party’s failure to object to a seat or venue of arbitration was discussed in the decision of Quippo Construction Equipment v. Janardhan Nirman, wherein the Court held that if an objection is not raised during the arbitral proceedings, a subsequent objection would be barred. Based on Section 4, the Delhi High Court observed in AAA Landmark Pvt. Ltd. v. AKME Projects Ltd.& Ors., that where the parties agree to not insist upon the exclusive jurisdiction clause in an agreement or raise such objection, it amounts to waiver by the conduct of such condition. Thus, if the parties to an arbitration agreement neglect the exclusive jurisdiction clause contained therein by not objecting to the jurisdiction of another court, the parties will be deemed to have waived their right to object. Separately, pursuant to Section 21 of the Code of Civil Procedure 1908 (“CPC”), no objection in respect of the “place of suing” can be allowed unless it was taken in the court of the first instance. This settles that a party may waive objections to the jurisdiction of a court by conduct. Taking a cue from this principle, the Supreme Court in Harshad Chiman Lal Modi v. DLF Universal Ltd., laid down that lack of territorial jurisdiction is a mere irregularity which may be remedied by the parties by a waiver of any objections thereto, but the lack of subject matter jurisdiction would ipso facto make the proceedings a nullity. In Seth Hiralal Patni v. Sri Kali Nath,[2] the petitioner had filed a suit in the Bombay High Court for recovery of certain monies. The dispute was referred to arbitration. In execution proceedings, the respondent contended that the Bombay High Court had no jurisdiction as the cause of action did not arise in Mumbai. The court held that the respondent’s failure to object to the Bombay High Court’s jurisdiction amounted to its waiver of any right to objection at a later stage. Therefore, it is amply clear, that apart from subject matter jurisdiction, an objection to the territorial jurisdiction of the court, can be made only before the court of the first instance. Very recently, the United Arab Emirates (UAE) also enacted the ‘UAE Arbitration Law’ based on the Model Law. Under Article 25 of the UAE Arbitration Law, it has been provided that “a party’s failure to make objections to jurisdiction within the prescribed date is evidence of the party’s consent to the counterparty’s actions.” Thus, taking a cue from the UAE in addition, the author submits that an objection to the jurisdiction of the court can be only made before the court of the first instance and otherwise, the parties would be deemed to have waived their right to object. Thus, while exclusive jurisdiction is regarded as paramount and ought to be necessarily adhered to by parties, the conduct of acquiescence from either party’s end would deem to effectuate a waiver of the said exclusive jurisdiction clause. The conundrum surrounding Section 9 vs Section 11 It is conspicuous that parties are vested with the competence to opt for an exclusive jurisdiction clause, which is regarded paramount while deciding jurisdiction. This brings us to analyse whether it is imperative to initiate proceedings/ relief under Section 9 and Section 11 of the Arbitration Act in the same ‘court’ as similar to the exclusive jurisdiction clause and whether that clause or for that matter any other court in case the exclusive jurisdiction clause has been waived, requires parties to file the applications in the same court. In AAA Landmark Pvt. Ltd. v. AKME Projects Ltd.& Ors., a similar question arose where the court held that only the authority which has been conferred the exclusive jurisdiction would have the jurisdiction to entertain an application under Section 11 of the Arbitration Act. This would not be barred by an application under Section 9 of the Arbitration Act in another court. However, still, a question has been raised about whether a Section 11 application is one preferred before a “court”. Ex-facie, the designation of ‘seat’ is analogous to an exclusive jurisdiction clause and ousts the jurisdiction of all other courts. However, interestingly, in the case of Brahmani River Pellets Ltd. v. Kamachi Industries Ltd., the court has held that only the court exercising jurisdiction over the ‘venue’ of arbitration can appoint an arbitrator under Section 11(6) of the Arbitration Act. Thus, it can be construed that notwithstanding Section 20 of the CPC, the parties’ consent to decide on a place of arbitration would oust the jurisdiction of all other courts. For understanding whether the position adopted is in conformation to the arbitration jurisprudence in India, it is imperative to analyse it in light of the statutory provisions. Section 42 of the Arbitration Act expressly provides that where an application has been made under Part I of the Arbitration Act in any court, only that court would have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings. The provision is preceded by a non-obstante clause that gives priority to the section over other provisions of Part I and any other laws in force. “Court” is defined under Section 2(1)(e) of the Arbitration Act to mean “a civil court of original jurisdiction in a district or a High Court having ordinary original civil jurisdiction to decide the questions forming the subject-matter of the suit” in case of domestic arbitration. Under Section 11, an application is to be preferred before the Chief Justice of the court. As per a literal interpretation of this, an application under Section 11 would not fall within the purview of Section 42. This approach was followed in State of West Bengal v. Associate Contractor, where the court held “Section 42 would not apply to applications made before the Chief Justice or his delegate for the simple reason that the Chief Justice or his delegate is not “court” as defined by Section 2(1)(e).” The same view was taken in Pandey & Co. Builders (P) Ltd. v. State of Bihar & Another. The 176th and 238th Law Commission Reports suggested a change in this approach and the section was amended in 2015 to replace “Chief Justice” with “the Supreme Court” or the “High Court” or the “institution designated by such court”. Thus, an application under Section 11 would also have been an application to the court. However, the section was further amended by the Arbitration and Conciliation (Amendment) Act, 2019 to provide that the appointment would be made by the arbitral institution designated by the Supreme Court in case of international commercial arbitration or by the High Court in case of other arbitrations. This further raises concerns as an institution appointed by the court is not a court. Section 11(6B) of the Arbitration Act expressly provides that the designation of any institution by the court shall not be regarded as a delegation of judicial power. Hence, now if an application for appointment of arbitrators is made under Section 11, it should not attract Section 42. A conjoint reading of these provisions and precedents provide that a Section 9 application before court A would not require a Section 11 application to be in the same court. It is noteworthy that the stated position seems to have been affected by the Brahmani Pellets case. But, at the same time, it is also imperative to note that in Brahmani Pellets case, the Supreme Court did not determine the ‘seat’ of the arbitration and placed reliance only on the ‘venue’ of the arbitration. Moreover, it failed to appreciate the precedents such as Indus v. Datawind. This is, thus, an aspect that certainly needs to be considered in the context of the issue at hand as Section 11 is not essentially in coincidence with Section 42 of the Act, whereas the Section 9 is. Concluding remarks In view of the aforesaid analysis, it can be deduced that an exclusive jurisdiction clause ousts the jurisdiction of all other courts. However, in case the parties seek to assert an exclusive jurisdiction clause, such assertion must be made in a timely manner. As seen, Indian courts are unlikely to allow parties to raise a challenge based on jurisdiction if they fail to object at the first instance. An exclusive jurisdiction clause cannot, therefore, be used as a tool for disruption and delay if it is not asserted at the earliest by the objecting party. Such an approach would help in achieving the speedy resolution of the dispute and would further assist in escalating the ethical obligation on the parties, i.e., to always act in good faith. Moreover, the jurisprudence post the Section 11 amendment, in particular, seems to be blemished. In order to strengthen the regime, the author recommends the following- Firstly, taking the cue from UAE, Section 4 of the Arbitration Act should be amended to specifically include within its ambit automatic waiver of objection to the jurisdiction of a court where such objection is not taken without undue delay. Secondly, ex facie, Section 42 of the Act does not include the amended Section 11 of the Arbitration Act. However, in the context of future amendments to the Arbitration Act, an attempt must be made to determine if Section 42 of the Arbitration Act needs to be amended to include Section 11 applications within its ambit and restrict the scope of forum shopping. *Abhay Raj is a 3rd Year Student of Jindal Global Law School (a constituent of O.P. Jindal Global University) and Ajay Raj is a 4th Year Student of Symbiosis Law School, Pune, India. [1] Robert Merkin and Louis Flannery, Arbitration Act 1996 (5th edn, Informa Law from Routledge 2014) 234 [2] Seth Harilal Patni v Sri Kali Nath [1961] 1962 SCR (2) 747

-Pratik Raj & Prasidhi Agrawal[1] I. INTRODUCTION Arbitration is opted as a suitable adjudication process because of its intrinsic quality of being confidential. Arbitration is informally considered to be confidential because unlike traditional courts, where information related to proceedings is easily accessible to a lot of people, in case of arbitration, subject to certain conditions, only the adjudicator and the parties are allowerd to be present during the proceedings which happens in a closed room, therefore, arbitration is rather a private affair. Therefore, given safeguarding the company's reputation and avoiding the inconvenience that may result from disclosure of trade secrets and other sensitive information, arbitration is a suitable choice. However, until very recently, active confidentiality provision was not a part of a statutory framework for arbitration. Confidentiality provision was introduced as Section 42-A by way of Arbitration and Conciliation (Amendment) Act, 2019 to the Arbitration and Conciliation Act, 1996 (‘the Act’). It is imperative to understand that confidentiality exists in a very restricted atmosphere because it imposes the obligation of maintain confidentiality on a very few people and the Section also encompasses just one exception, which has been highlighted later in this research work. Therefore, the provision is certainly not comprehensive. Section 42-A imposes a duty upon arbitrator(s), parties to the dispute, and counsels representing the parties to not disclose any information concerning the arbitration proceedings. The only exception which has been accounted for, is the disclosure of arbitral awards in order to facilitate its implementation. Consequently, in more than one instance, this provision can come into direct conflict with other provisions of the act and the nature of Section 42-A being non-obstante, other provisions of the act will have to be undermined. At this point, a pertinent question that arises is that what will be the case when the Act itself provides for the interference of any other person other than the parties to the dispute, their respective counsels and arbitrator(s), in arbitration proceedings? This question can be raised with respect to the problems that will be faced in the application of Section 26 of the Act that deals with the involvement of an expert in arbitration proceeding. This provision provides a legal framework for the systematic interference of such other people in arbitration proceedings as held by the apex court in the case of Ramesh Chandra Agrawal v. Regency Hospital Ltd.[2] However, a problem associated with the implementation of this provision is that confidentiality provisions will have to be breached to effectuate these provisions. This is because the involvement of such other persons in arbitration proceedings would mean disclosing information related to the arbitration proceedings with these people. This research work specifically aims at (i) The analysis of Section 26 of the act (ii) Its effect on the newly introduced confidentiality clause,and (iii) An attempt has also been made in order to formulate suitable solutions for overcoming this problem. II. SECTION 26: AN OVERVIEW Section 26 of the Act facilitates the appointment of a neutral party as an expert in order to assist the arbitral tribunal on a technical point and it has also been substantiated in the case of Ramnathan v. State of Tamil Nadu.[3] This is also in compliance with Section 45 of Indian Evidence Act, 1872 which states that those facts which are otherwise not relevant become relevant when expressed by an expert.[4] Section 26(1)(b) states that the parties are required to furnish any relevant information or provide access to any documents, accounts, etc. to the expert, for the purpose of inspection. Further, Section 26(2) states that such an expert can also participate in oral hearings of the arbitration proceedings if the need arises. There is nothing inherently wrong with these provisions as it is both, developed on lines of UNCITRAL Model Law and also in consonance with Section 45 of Indian Evidence Act, 1872. Further, these provisions do not undermine the authority of arbitral tribunal or the stand of complete arbitration proceeding because the opinion of an expert is not binding in nature, as highlighted by the Supreme Court in a plethora of judgments which include Fakhruddin v. State of Madhya Pradesh, Sultan Singh v. State of Haryana, Ramesh Chandra Agarwal v. Regency Hospital Ltd. among many others.[5] It is advisory in nature and completely depends on the will of the arbitral tribunal to accept it or to reject it. Therefore, the role of an expert is limited to only technical assistance and not the delivery of judgment. Further, the act is only concerned with the relevance of the expert's opinion as evidence and not its substance or merit which has also been the opinion of the Supreme Court in the case of Murari Lal v. State of Uttar Pradesh.[6] There is no requirement of corroboration in case of expert evidence. Therefore, the arbitral tribunal can conveniently seek the help of an expert without having its authority challenged, as also laid down in the landmark judgment of Vishnu v. State of Maharashtra.[7] However, the primary issue is regarding the coexistence of Section 26 with the confidentiality clause in a mutually inclusive environment. III. THE BONE OF CONTENTION Arbitration is a more suitable choice for technical disputes. Technical disputes, such as those that require knowledge about a specific field or those disputes that require deep assessment of accounts, are not preferred for being adjudged by traditional court setups. This is because it requires long hours of discussion and getting into extensive details, which cannot be afforded by the courtsas they are already overburdened with a large number of pending suits. Here arbitration becomes a suitable option for such issues because it makes the adjudication a private affair,[8] and is not as burdened as traditional court setup.It has expressed provisions for the appointment of an expert to discuss a technical matter,[9] and has the authority to make awards that can be implemented as decrees of courts.[10] Accordingly, Courts and Arbitral Tribunals have often opted for the opinion of an expert in cases where specific technical knowledge is required, which is not usually possessed by the courts (as has been the established precedent ever since the judgment in Folokes v. Chadal).[11] For instance, a dispute between companies which requires a proper assessment of accounts of the companies by a competent person where the arbitral tribunal cannot fit into the shoes of such a "competent person". Clause (2) of Section 42-A enables such an expert to attend the oral hearings where the parties can put questions to the expert with respect to his technical advice. A direct implication of this provision is that the parties would be required to disclose important information to the expert. Some information like trade secrets, intellectual property, etc. would naturally be disclosed if the expert is allowed to be present in the oral hearings of the dispute. This provision is in direct conflict with the confidentiality clause as provided for in Section 42-A of the Act. Ultimately hindering the application of confidentiality provision and one of the very fundamental purposes of Alternative Dispute Resolution mechanism for which it is often opted for. This is because- parties tend to avoid adjudication through a traditional court setup. After all, arbitration provides a more cost and time-effective mechanism. Further, in the case of arbitration, accessibility is allowed to a very limited number of people and thus, maintaining the confidentiality of the proceeding. As a result, parties are not required to disclose any sensitive information like trade secrets, books of account, contracts, etc. This not only enables the parties to prevent Intellectual Property Rights’ infringement but also enables the parties to maintain the reputation of their company in the eyes of the public. However, Section 26(1)(b) of the Act specifically grants power to the arbitral tribunal to order the party to give the expert any relevant information or to produce, or provide access to any relevant information, or goods or other property for inspection by the expert. Therefore, this leads to a conflict between Sections 42-A and 26 of the Act. On the face of it, the solution to this problem is quite simple. Section 42-A invokes a non-obstante clause and therefore it will have an overriding effect, in case, it comes into conflict with other provisions of the same act or any other act(s). Therefore, there is a requirement of proper assessment in order to determine which provision should enjoy an upper hand because once the importance of both Sections 42-A and 26 have been highlighted, one can understand that neither of them can be given less importance. IV. SUGGESTIONS For the uncertainty surrounding the appointment of experts and the scope of the confidentiality in the arbitration proceedings, the situations demand a comprehensive and straightforward measure that needs to be adopted in order to avoid the risk of fragmentation of the backbone of arbitration proceedings. 1. Undertaking for Non-Disclosure One of the measures to deal with the conflict can be that the experts must be directed to sign a confidentiality undertaking and declare expressly that they wouldn't disclose any information, documents, and files concerning the arbitration proceeding to an outsider, in order to uphold the confidentiality of the proceeding. Otherwise, such person/s would be charged with penal consequences like fines and imprisonment in accordance with specifically instituted law, which is expected be the international practice, as also laid down in Guyana v. Suriname.[12] This way it can be ensured that Sections 42-A and 26 can co-exist in a mutually inclusive environment. This model has already been successfully incorporated in 2021 Arbitration Rules of International Chamber of Commerce in the form of Article 1(6) of the Appendix. However, a preliminary question that may arise in the present instance is that what will be the course of action when the undertaking or any of its laid terms as signed and agreed upon by the expert is breached? The answer to this can only be given when a substantial change is brought in the legal system by introducing certain comprehensive new rules of arbitration expressly providing for a judicial recourse ensuring strict penal action against any such offender who misuses his position. This will not only ensure that the concerned expert is well within their boundaries but would also ensure no risk to the parties and best exhibit the party-friendly and proactive attitude of the legal system in supporting this backbone of arbitration. 2. Amendment of Section 42-A An alternative to undertaking for confidentiality would be an amendment to Section 42-A of the Act. The Section 42-A in its present form imposes an obligation upon the arbitrator(s), parties to the dispute, and their counsels to not disclose any information to outsiders (in consonance with the arbitration proceeding). However, if this obligation of non-disclosure can be extended to any other party which in the course of the arbitration proceeding, became a part of it, then it can be ensured without the aid of any additional provision, that experts appointed under Section 26 do not become the source for breach of confidentiality. This would also be a replication of 2021 Arbitration Rules of ICC, the Article 1 of Appendix II of which expresses the provision that any person who receives any information regarding arbitration proceeding has a legal obligation to keep it confidential and not publish it. Article 1 also mandates seeking permission of Secretary General of Arbitral Tribunal before handing over any document or information to an outsider. Since if the same is incorporated in the Indian Act, it would be a replication of International Model, and thus, would have more authority. This is a more concrete and less frivolous solution as compared to other solutions because it will not require the signing of the undertaking, which essentially is a contract in form of a Confidentiality Undertaking or a Non-Disclosure Agreement. The legality of such agreements is determined by provisions of the Indian Contract Act, 1872. However, owing to the nature of Non-Disclosure Agreements, there cannot be general forms of contract to effectuate these agreements. It requires separate agreements for different purposes, with different terms of agreements. Not only this process will be more cumbersome, but invoking sanctions will also become subject to the terms of the agreement. 3. Taking Inspiration from International Model Law Article 34.5 of UNCITRAL Model Law on International Commercial Arbitration has an indirect provision for confidentiality. The Article states that arbitral awards can be made public by consent of both the parties to the dispute. However, this provision is also not comprehensive in dealing with the issue of confidentiality and it merely states that an award can be made public subject to the consent of parties to the dispute. The model law places reliance on a plethora of international judgments, discarding the need for active provisions for confidentiality. This includes the Australian High Court’s judgment (Esso & Ors. v. Plowmann) that confidentiality is not an essential attribute of arbitration.[13] It also includes the United States' judgment (U.S. v. Panhandle et. Al) that there cannot be a uniform law for confidentiality in arbitration.[14] United Kingdom also does not have absolute provision for confidentiality which has been similarly held in a plethora of judgments, including Ali Shipping Corp. v. Shipyard Troggir and Emmott v. Michael Wilson & Partners Ltd[15] and the stand is similar in Singapore as well by virtue of judgment in the case of Yaung Chi Oo Co. Ltd. v. Win Win Nu.[16] Therefore, there is a general worldwide acceptance of the fact that there cannot be uniform objective rules for confidentiality in arbitration proceedings, because of the sheer amount of implications that may result from it. Further there are other provisions as well which states appointment of experts for technical assistance in arbitration. This includes Article 27 of UNICTRAL Arbitration Rules, 2010, which only gives evidentiary value to expert witness. Further, Article 39 of the 2015 SHIAC Arbitration Rules also provides opportunity to arbitral tribunal to appoint an expert at its own discretion. Appointment of expert for witness is also warranted by 2021 ICC Arbitration Rules by virtue of its Section 25(2). All these provisions coexist with confidentiality clause in a mutually inclusive environment and their applicability can be assessed in order to develop a tailor-fit provision for the Indian arbitration regime where confidentiality and expert witness can peacefully coexist. Co-relating the Indian law with various international model laws, a conclusion can be drawn that the Indian law is loosely based on various international provisions and more specifically is an embodiment of Article 26 of UNCITRAL Model. Even though this is not a very concrete solution and mostly suggestive in nature, nonetheless, the conceptualization of domestic framework on lines of international model law can ensure better applicability of the provisions. This can be used for the realization of the importance of provisions for the appointment of expert and how it cannot be undermined for the facilitation of a superfluous provision of confidentiality. 4. Redaction of Confidential Information This is again not a very concrete solution however in many cases; it can be relied upon to ensure that Sections 42-A and 26 can peacefully coexist. If an expert is allowed only access to some information, which is necessary in order to obtain his technical assistance the question that arises is regarding the accuracy of the redaction as against the original document. ICC’s 2021 Arbitration Rules’ Article 1(6) of Appendix II provides for a similar arrangement wherein any information provided to an outsider is required to be returned or destroyed after its ‘limited use’ is over. This can be an inspiration for the Indian model as well. However, this suggestion only has limited applicability. This is because Section 26 has extensive provisions which also allow such an expert to attend the oral proceedings of the arbitration, therefore allowing the greater risk of exposure to sensitive information. Thus, if any arbitration proceeding requires the expert to be present during the oral proceedings, then allowing redacted access to the expert will give rise to two new problems. Firstly, that there would be a breach of confidentiality and the other problem would be that even after breaching of confidentiality, an expert would be of no-good use as he had been provided redacted access to information in the first place. Secondly, this would seriously disable his application of knowledge to deal with an issue as an expert. V. CONCLUSION The watertight nature of the confidentiality provision under Section 42-A has made the applicability of this provision very limited, and many important provisions have been overlooked in the process of drafting of Section 42-A. As a result, this confidentiality clause fails to consider many exceptions and result in conflicting provisions. Section 42-A can be considered to be a visionary step rather than taken in haste. The principle of confidentiality undoubtedly is and will be the backbone of arbitration proceedings. Confidentiality is a fundamental principle to avoid the peril that can be caused if the trade secrets and other sensitive information of parties are not well-protected and maintained during the adjudication process. The issue of confidentiality is gaining international recognition and significant developments have been made. However, it is pertinent to mention that effective practical implementation has remained a vital challenge because in the Indian legal setup, the provision for confidentiality under the Arbitration and Conciliation Act, 1996, comes into direct conflict with other provisions of the act. The issue of convergence of Section 26 and Section 42-A as an individual legal right to confidentiality illustrates some important lessons. Given the escalation of use of arbitration for the purpose of settlement of disputes and the deficient attention to the parties right to confidentiality in the statute highlights to deal with this outstanding issue by the presence of a better and comprehensive textual provision is the need of the hour in order to do away with the stress of rules incertitude. The absence of this would pose a big question mark on the legal system and completely frustrate the objective of resorting to this mode of dispute settlement. The amendment regrettably did little to progress in the realm of confidentiality. It did recognize the issue of confidentiality. However, the provision in order to deal with it has been designed in such a way (Non-obstante clause and limited exceptions) that instead of dealing with the crisis, it has started another crisis on its own. At last, it can be said that the benefit of the confidentiality clause under the Arbitration and Conciliation Act, 1996 can be elucidated upon in a variety of ways. It can also be considered a remarkable step and a ray of light in the hope of achieving the status of the hub of International Commercial Arbitration for India. However, it comes with its own set of problems, primarily because of its conflicting nature with other provisions of the same act. With that, once this provision is customized to such an extent that it can have greater applicability without hindering the applicability of other provisions; the vision behind the conceptualization of confidentiality provision could be achieved. [1] Pratik Raj and Prasidhi Agrawal both are 4th year students of B.A., LL.B. (Hons.) at Chanakya National Law University Patna. They can be reached at rajpratik229000@gmail.com and agrawalprasidhi16@gmail.com respectively. [2] AIR 2010 SC 806. [3] AIR 1978 SC 1204. [4] Indian Evidence Act, 1872, § 45, No. 1, Acts of Parliament, 1872 (India). [5] Fakhruddin v. State of Madhya Pradesh, AIR 1967 SC 1326; Sultan Singh v. State of Haryana, (2014) 14 SCC 664; Ramesh Chandra Agarwal v. Regency Hospital Ltd., AIR 2010 SC 806. [6] AIR 1980 SC 531. [7] AIR 2006 SC 508. [8] Arbitration and Conciliation Act, 1996, § 42-A, No. 26, Acts of Parliament, 1996 (India). [9] Arbitration and Conciliation Act, 1996, § 26, No. 26, Acts of Parliament, 1996 (India). [10] Arbitration and Conciliation Act, 1996, § 36, No. 26, Acts of Parliament, 1996 (India). [11] (1782) 3 Doug. K.B. 157. [12] ICGJ 370 (PCA 2007). [13] (1995) 128 A.L.R. 391. [14] (1998) 118 F.R.D. 346. [15] Ali Shipping Corp. v. Shipyard Troggir, [1998] 2 All. E.R. 136; Emmott v. Michael Wilson & Partners Ltd., [2008] E.W.C.A. Civ. 184. [16] [2003] S.G.H.C. 124.