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- Purbasha Panda* Part I of this Article dealing with the Judgment of the Singapore Court of Appeal can be accessed here. part two deals with the final observation of the SGCA and the Indian position of law in this regard. SGCA made the following observations regarding the appropriate position of law with respect to standard of review in these kinds of disputes. (a) Bonafide Prima facie standard of review is the appropriate standard of review The general approach is that in presence of an arbitration clause, the jurisdiction of courts are ousted with respect to dispute which falls within the scope of the arbitration agreement. The prime question that arose in this case was “Whether such an approach can be mirrored while dealing with stay on winding up application because of presence of arbitration clause especially dealing with cross-claim or disputed debts ?” The court relied on the dicta in the case of Pacific Recreation Pte Ltd v. S Y Technology Inc and Another[1] in this case the court has held that tests for both the situation must necessarily mirror each other. The court marked that when one raises a cross claim or a disputed claim one is simply trying to assert that the debt claim doesn’t prove its insolvency and therefore winding up order must not be granted. In the opinion of the author, the court essentially meant that there is no such specialty about a winding up application that a different standard of review must be applied to it, having ruled this the court however did take due consideration of the “bonafide interest test” to move a step ahead from just examining existence of an arbitration agreement and if the dispute falls within the scope of the arbitration agreement. Bonafide test and the Exceptional Circumstance Test: Two Sides of the same coin As discussed in the preceding sections, the exceptional circumstance approach was formulated in the Salford case. The exceptional circumstance test is basically similar to the bonafide prima facie test, what it entails essentially is examination of existence of arbitration agreement, the examination of whether the dispute falls within the purview of the arbitration clause and if there are existence of ‘exceptional circumstances’ the court should then dismiss or stay the winding up application. The existence of “exceptional circumstance” is obviously to prevent abuse of process of court. That is the winding up application based on a debt that is covered by an arbitration agreement will be stayed unless there are exceptional circumstances. These exceptional circumstances might be a situation where a debtor might be disputing the claim amount in the course of the proceeding but in a previous correspondence or transaction between the parties the debtor might have admitted the claim amount. The “exceptional circumstance test” is also aimed towards checking the veracity of the disputed claim. The “bonafide prima facie test” also more or less is similar, aimed towards preventing abuse of process of court. For example, winding up applications are used as litigation strategy to create undue pressure on the opposite party to make payment through the threat of liquidation, which may lead to abuse of process of court and appellate courts generally exercise inherent power to prevent abuse of process of court and the ‘bonafide prima facie test” allows the same. In the instant case, the SGCA essentially found the “bonafide prima facie test” to be more appropriate and more efficient in terms of avoiding abuse of process of court. The court also laid down certain circumstances which can be termed as tests to check if disputing the debt is resulting in abuse of process of court. If the debt has been previously admitted in terms of both liability and quantum. Genuine concern of triggering of insolvency regime. Requirement of independent persons to investigate the company’s assets . (b) The Prima facie standard of review promotes coherence in law The SGCA marked that “coherence in law” with respect to these kind of disputes is extremely crucial because there is a larger tendency of the “abuse of process of courts” to occur in these kind of disputes as coherence a crystal clear position of law to be resorted by courts aids in reducing the abuse of process of court and further promotes coherence. The question that arises here is “How does the prima facie standard of review allows to promote coherence?” The SGCA has marked that a triable standard of review is more extensive. It is mostly a test on touchstone of the merits of the dispute. That is allowing a debtor trying to stay a winding up application more leeway to present its case. The SGCA has held that this approach might encourage debtors to use winding up application as a tool to create undue pressure on parties to pay the debts by the threat of liquidation in contrast to a prima facie. The author has found that a persistent fear expressed by SGCA runs through the entire judgement that is use of winding up application as a tool to create undue pressure on the other party to make payments which is a kind of abuse of process of court. While it is crucial to take care of this but the question that arises here is that “Does an over zealousness towards maintaining coherence to prevent abuse of process of court might cause difficulty for those cases where the factual circumstances might be peculiar, for example cases involving very covert fraudulent references, do those kind of cases mandate a test different than the “bonafide prima facie interest test” ? (c) Insolvency and Arbitration regimes are not in conflict with each other The SGCA has marked that the insolvency and arbitration regime do not intersect and have separate fields of operation. One of the genuine concern with respect to implication of adopting a prima facie standard of review is that such an approach might be detrimental to creditors who are legitimately seeking to wind up insolvent companies, the recovery process might get derailed or delayed, even if the allegations might be unmeritorious. The court relied on “Larsen Oil and Gas Pte Ltd v. Petrtoprod Ltd[2] . It was observed in this case that the nature of an arbitration proceeding is starkly different to that of insolvency proceeding. Arbitration proceedings are private in nature whereas insolvency process is a collective statutory proceeding that involves public centralisation of disputes so as to achieve economic efficiency. Under this case a distinction was drawn between disputes involving an insolvent company that stem from its pre-insolvency rights and obligations as opposed to rights and obligations that stem from rights and obligation after an insolvency application is admitted. The SGCA held that if a dispute stems from rights and obligations after the insolvency regime has been triggered, then dispute would gain a public character and the arbitration clause would be ousted and all the claims of the creditors would be satisfied through insolvency mechanism. (d) Triable standard of review offends party autonomy Party autonomy is one of the prime pillars on which the entire edifice of arbitration proceedings rests, the triable standard of review allows for more leeway for sustenance of winding up petitions ignoring the arbitration clause. Thus, the court keeping in spirit with the pro-arbitration stance rejected the “triable standard of review”. DECISION OF THE SGCA IN THE INSTANT CASE In the instant case, the court found out that the applicable standard of review is the prima facie standard of review. The court also found that the defence raised by AnAn was bonafide. SGCA rejected the argument that AnAn’s delay in particularising the appropriate claim amount and the delay in formation and submission of the other valuation report [ i.e. the Deloitte Report] does not result in abuse of process of court. The court also marked that priorly AnAn had not admitted any debt. The appeal was allowed and the winding up order by the court below was reversed. The SGCA further marked that winding up application would have been dismissed even if the higher triable issue standard was adopted. VTB was endowed with the responsibility of calculating the total claim amount under the terms of GMRA. For, the purposes of this calculation the ‘Net Value of GDRs’ had to be determined. The terms of GMRA had provided for three possible routes for calculation of this net value of GDR.VTB had chosen to go for the third route, however certain pre-conditions which had to be fulfilled before resorting to the third route, were not complied by VTB. The SGCA found that VTB had not fulfilled its contractual obligations under the terms of GMRA. SGCA also found that the reliance placed on third route by VTB was misplaced and therefore the claim amount stated by GTB would be erroneous. However, while resorting to this analysis the court was careful enough to mark that in any case such an analysis of a party’s failure to fulfil a contractual obligation would not just be a mere summary analysis. It would be a ‘triable standard of review’ analysis. Indian position of law with respect to interplay between arbitration and winding up proceedings/ insolvency proceedings · Indian Legal Framework of interplay between winding up and insolvency proceedings One of the major changes which were brought by the “Insolvency and Bankruptcy Code, 2016” was removal of provisions relating to voluntary winding up and winding up due to inability to pay debts from the purview of Companies Act, 2013 to the “Insolvency and Bankruptcy Code, 2016”. Now, under the Companies Act, we have winding up proceedings on ground other than inability to pay debts as mentioned under Section 271 which includes (a) passing a special resolution to wind up (b) winding up when the corporate entity acts against sovereignty or integrity of India (c) winding up when the company is conducting affairs in fraudulent manner (d) any just and equitable ground in opinion of the tribunal. · Interplay between winding up and arbitration proceedings The Indian courts have also come across similar kinds of disputes, where a stay on winding up application was filed taking help of the arbitration clause. Let’s see what are the tests and standard of review that the Indian courts have adopted to decide on these kind of disputes. A landmark case on this regard is Tilok Chand Jain v. Swatika Strips (P) Ltd and Ors[3](Tilok Chand). This case essentially dealt with a stay on winding up application in presence of an arbitration clause. This case dealt with certain payments that had to be made to erstwhile partners upon dissolution of a partnership firm. A private limited company had entered into a partnership agreement with another partnership firm. This partnership ultimately got dissolved due to certain issues and at the time of dissolution, the private limited company undertook to make all due payments in terms of the partnership deed and later on all the partners were allotted equity shares. The petitioners in this case were not allotted any shares however during the course of the case they argued that a certain calculation of amount was made to them on basis of value of goodwill of the firm to be paid to them at the time of dissolution, which they also argued as the admitted claim. The petitioners who were erstwhile partners sent a demand notice for making the payments to the private limited company. When payments were not made even after the demand notice, they filed a winding up application for closing the private limited company. The company resisted the winding up application on several grounds. Firstly, the company argued that the value of goodwill stated as argued by petitioners was overstated. Secondly, they also argued that the partnership deed has an arbitration clause and any dispute with respect to payments falls within its scope. The court undertook a thorough analysis of company accounts, the balance sheet drawn upon dissolution and found that there was no admitted liability and that the value of goodwill was indeed overstated. The court also found that the company was doing fair business and was in position of making its day-today payments. The court also expressed the concern that winding up application cannot be used as a recovery mechanism neither it can be used to create undue pressure on the other party to make payments. They also marked that the disputes can be duly referred to arbitration as there is a bonafide existence of disputed claim. The court went on to hold that [..] “There is not an iota of evidence on the record produced by the creditor to show the incapability of the company to pay its debt. Again, it may be noticed that the winding up cannot be ordered solely on the creditors' claim, but it is only the liability of the company to pay which is the primary consideration. In view of the facts and circumstances stated above, the dispute raised by the company appears to be bona fide and this is not a fit case for the company to be ordered to be wound up.” [..] This judgement delivered by the Punjab and Haryana High Court was significantly relied on in numerous cases. In the case of Prime Century City Development Pvt. Ltd and Ors v. Ansal Buildwell Limited and Ors[4] the prime question that the Delhi High Court delved to analyse in this case was “Whether the presence of arbitration clause ousts the jurisdiction of company courts ?”. The court relied on multiple case laws and held that the mere presence of an arbitration clause cannot oust the jurisdiction of company courts. The court further held that [..] In my analysis of the modus, there is hardly any scope of a clash to occur between the rights to seek arbitration and for the other party to enforce winding-up. This is for the reason that if there is an admission of debt, or a moonshine and malafide defense to the petition has been presented, an Award would be a foregone conclusion and procrastinating and deferring the inevitable end to the dispute would be contrary to and in negation of the expectation of law. Where a bona fide defense to the winding-up petition has been disclosed the petition ought to be dismissed in any case by the Company Court. It cannot enter upon disputed questions, which would either have to be adjudicated upon by means of an ordinary and regular civil suit, or by making Reference, where the parties have contracted with each other to resolve their differences through arbitration. Therefore, the Company Judge will in no circumstances substitute himself for or assume the role of the arbitrator [..]. We take a look at the major case laws in Indian Jurisdiction then it can be found that the Indian courts do not very specifically use the term “prima facie standard of review” or “triable standard of review” however the Indian courts have in spirit adopted the “prima facie standard of review” which exhorts limited judicial intervention, such that the court is merely required to determine “whether it appears on a prima facie basis that there is an arbitration clause and if the dispute is caught by the arbitration clause ?” also Indian courts have also resorted to the ‘bonafide dispute test’ as we saw previously in the case of Tilok Chand . Courts have refrained from going into the merits of the dispute that is adopting a triable standard of review as that would amount to getting into the shoes of the arbitrator. · Interplay between insolvency and arbitration proceedings in India In a recent decision Indus Biotech Private Limited v. Kotak India Venture Fund-I[5] of Mumbai Bench of NCLT this dichotomy was analysed and decided. This question of law essentially cropped up in an interlocutory application which was filed before NCLT in a primary insolvency application. The IA was filed u/s 8 of the A&C Act to refer the parties in the main petition to arbitration. The Kotak Private Equity Group consisting of four entities had showed interest in subscribing to the share capital of “Indus Biotech”. Indus Biotech had entered separate “Share Subscription and Share Purchase Agreement” [‘SSSA’] agreement with each entity, however the terms and conditions of the four SSSA were materially identical. Ultimately, Kotak Group subscribed to certain equity as well ass OCRPS shares issued by Indus Biotech. Later on to fulfil certain requirements under the SEBI Issue of Capital and Disclosure Requirements Regulations, 2018 [‘ICDR Regulations’], the Kotak Group decided to convert OCRPS to equity shares. The Kotak Group also argued that as per SSSA they were entitled to trigger provisions relating to early redemption, to which Indus Biotech denied. Thus, Kotak Group invoked the arbitration agreement concerning three basic disputes, which are (a) Valuation of respondent or financial creditor’s OCRPD (b) Right of redemption with respect to conversion of OCRPS into equity shares (c) Fixing the date for qualified institutional public offering. The prime question before NCLT was in presence of an arbitration clause in the SSSA should the primary insolvency petition filed under Section 7 of the Code has to be admitted which was filed by Indus Biotech. Kotak Group argued that the SSSA contained an arbitration agreement which is wide enough to cover dispute between the parties. Kotak Group further argued that the insolvency application cannot sustain and that Indus Biotech would not be a financial creditor. They further argued that the mandate provided u/s 8 of the A&C Act for reference to arbitration is satisfied in this given case. The requirements are basically existence of an arbitration agreement and singularity of the scope of the arbitration agreement and the scope of the underlying dispute. They also further argued that the Section 7 petition filed by Indus Biotech is essentially a dressed up petition. The case of Rakesh Malhotra v. Rajinder Kumar Malhotra[6] was relied on to establish that any court has power to refer the parties to arbitration if it is found that the company petition is malafide and vexatious in nature. Indus Biotech on the other hand advanced all their arguments in light of one primary question of law that is “Whether the reliefs claimed in the insolvency petition is capable of being referred to arbitration?”. The counsel for Indus Biotech essentially argued that insolvency matters are inherently non-arbitrable. He referred to the Pioneer Case and argued that insolvency petitions usually deal with rights in rem as held in this case. They further relied on Booz Allen to establish that insolvency petitions which essentially deals with rights in rem are non-arbitrable. The NCLT bench analysed the entire dispute and the case laws relied by both parties elaborately and made certain observations. With respect to reliance placed on Booz Allen and the reading of the Booz Allen judgement that certain kind of matters are strictly non-arbitrable. The bench referred to Para 38 of Booz Allen “generally and traditionally, all disputes relating to rights in personam are considered to be amenable to arbitration; and all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration. This is not however a rigid or inflexible rule. Disputes relating to subordinate rights in personam arising from rights in rem have always been considered to be arbitrable.” Thus, the dicta in Booz Allen clearly provides that the analysis to the question “whether a dispute is arbitrable or non-arbitrable” does not merely stop on the strict division of list of arbitrable and non-arbitrable matters, rather the test goes a step ahead. Though, the Bench clarified the extent to which Booz Allen can be relied in these kind of cases, however it did not base its decision in the instant case on this analysis. The Bench marked that to trigger any insolvency application, the first step is occurrence of an default as provided under Section 6 of the Code. The court found out that the Indus Biotech, the “Corporate Debtor” in this case is a financially healthy company and there was no occurrence of default in the instant case. Hence, to drag a financially healthy company to insolvency would not be sustainable. Since, the mandate provided under Section 6 of the Code for admission of an insolvency application was not satisfied in this case, the bench marked that the insolvency petition cannot be admitted and referred the parties to arbitration. On interplay between IBC and arbitration proceedings the court marked that Section 238 of the Code provides for an overriding effect of IBC over any other law, similarly Section 5 of the A&C Act starts with a non-obstante clause and provides for an overriding effect. The court found that when there are two legislations with non-obstante clauses on their operation, then the piece of legislation formulated later overrides the former. However, in the instant case since the requirements to trigger IBC were not fulfilled and the corporate debtor was a financially healthy company, the court referred the parties to arbitration. To summarize the points discussed in this case, a simple approach of relying on the list of arbitrable and non-arbitrable matters enumerated in Booz Allen to clearly rule out the possibility of arbitration of insolvency matters is not entirely correct, sub-ordinate personam rights arising from primary in rem proceedings can be arbitrated. Secondly, section 238 of the code gives an overriding effect to IBC over any other legislation but this overriding effect can be brought to use and IBC can be triggered only when the essentials requirements for an insolvency application is fulfilled and default happens to be one such essential requirements and without the occurrence of it IBC cannot be triggered. * Purbasha is a Staff Writer at the Arbitration Workshop and is a graduate of the 2020 batch of NUSRL, Ranchi. She can be contacted at purbasha.nusrl.13@gmail.com [1] (2008) 2 SLR ( R) 491 [2] [ 2011] 3 SLR 414 [3] [1991] 70 Comp Cas [4] 2003(2) ARBLR 127 (Delhi) [5] CP (IB) No.3077/2019 [6] 2014 SCC OnLine Bom 1146

Anan Group (Singapore) Pte Ltd V. Vtb Bank (Public Joint Stock Company) - Purbasha Panda* A. Introduction One of the prime pillars of common law contractual theory is to hold parties to their bargain. When parties enter into a contract, they bargain rights, obligations and considerations which they intend on fulfilling in form of contractual obligations. It primarily means that formation of the contract necessitates performance of the contract. Simply stated one enters into a contract for fulfillment of one prime objective which is the ‘performance of the contract’. The entire edifice of modern-day contract law rests on this simple yet paramount principle. When parties enter into an arbitration agreement or agree to incorporate an arbitral clause in their contract, it is to essentially refer disputes arising out of the principal contract to arbitration, they essentially aim to resolve their disputes through private settlement and intend to oust jurisdiction of courts with respect to these disputes but in those cases where these disputes intersect with certain statutory rights which leads to invocation of discretionary powers of courts, the question which arises is “ How far can arbitration proceedings survive when they intersect with statutory jurisdiction of a court ?” One such kind of dispute that essentially falls in this category is the “conflict of arbitration with winding up proceedings”, winding up proceedings primarily being creation of a statute. On April 7, 2020 the Singapore Court of Appeal decided on the contentious issue of fate of stay applications on winding up proceedings in presence of an arbitral clause in a contract. The ordinary common law approach is that if disputes are subject to arbitration agreement, courts usually grant a stay on court proceedings to allow parties to fulfill their bargain with respect to the arbitration agreement. In usual cases, courts usually resort to ‘prima facie standard of review’ which is a summary review as opposed to the ‘triable standard of review’ however the question that arises here is “ when courts are posed with the question of stay of winding up applications because of presence of an arbitral clause, will the same ‘standard of review’ would be made applicable? Or courts would have to adopt a different standard of review taking due regard of the distinctive nature of winding up proceedings?” B. Factual background of the case This case essentially deals with a ‘Global Master Repurchase Agreement’ [ ‘GMRA’] entered between AnAn Group Singapore Pte Ltd [‘AnAn Group’], a Singapore holding company and VTB Bank (Public Joint Stock Company), a state-owned Russian Bank on 3 November 2017. Under the terms of the agreement, AnAn Group was required to sell ‘global depository receipts’ [‘GDRs’] of shares in a company called EN+ Group PLC (EN+) and then it would have to repurchase the GDR from VTB at a later date at pre-agreed rates. The pre-agreed rate was essentially original price paid by VTB plus interest and other costs. Under the terms of the agreement, AnAn was also obligated to maintain collateral and a repo rate was used to quantify the condition of the collateral. The Repo rate was essentially price of GDR plus interest rate divided by prevailing value of GDR. The GMRA had obligated AnAn to maintain the repo rate at 60% and in case it exceeds 60%, VTB would be entitled under GMRA to issue a ‘Margin Trigger Event Notice’ requiring AnAn to provide sufficient cash to reduce the repo rate ratio to 50%, if AnAn fails to do so, then that would constitute a ‘Margin Trigger Event’. The GMRA also required AnAn to maintain the repo rate below the liquidation repo rate of 75%. If this repo ratio equaled or exceeded the liquidation repo rate, a liquidation event would be deemed to have occurred, this would constitute another event of default. In the event of default, the non-defaulting party would provide a notice to the defaulting party specifying the relevant event of default and to designate an early termination date. The repurchase date of GDR would then be the early repurchase date. The non-defaulting party would also be endowed with the responsibility of calculating the amount owed by parties to each other. On 7 November 2017, in accordance with GMRA, AnAn sold 35,715,295 GDR of EN+ to VTB worth US $ 249,999,990. On 6 April 2018, the United States Treasury’s Office of Foreign Assets Control (“OFAC”) imposed certain sanctions which caused the value of the GDRs to plummet further leading the repo rate to increase beyond the benchmark. VTB issued a ‘Margin Trigger Event Notice’, informing AnAn that the repo ratio had arisen above the benchmark and demanded AnAn to make the top up payment so as to bring the repo rate to 50% or below. AnAn failed to make the top up payment and as a result of which the repo rate could not be restored within its margin. On 12 April 2018, a default notice was sent by VTB to AnAn, designating 16 April, 2018 as the early termination date of GMRA. According to this notice, two events of default had occurred, firstly the repo rate had exceeded the Margin Trigger Repo Rate of 60% and AnAn had failed to top up cash margin of approximately US $ 85 million by 10 April 2018, constituting a further event of default. According to the terms of the GMRA, VTB was required to send a calculation notice stating the amount which is actually owed by AnAn which was the defaulting party. According to the terms of GMRA the final claim amount was calculated at US $ 170 million, which AnAn failed to repay within the mandated three-week period. On 17 August 2018, VTB approached the High Court for winding up of AnAn. This winding up application was resisted by AnAn on several grounds. Firstly, AnAn argued that the (“OFAC”) sanction constituted a force majeure event. Secondly, AnAn argued that the claimed sum of about US$ 170 million was overstated, lastly it also argued that the GMRA contained an arbitral clause and any dispute with respect to payment of amount would fall under the scope of the arbitral clause. While, this application was being decided, the main question of law that surfaced was “ When a debtor is seeking to resist a winding up application ordinarily the applicable standard of review would be the “triable standard of review”, the question that arose before the court was whether this standard of review would also be applicable when there is an arbitration clause in the contract and the dispute more or less falls within its purview?” The Judge held that AnAn was required to establish triable standard of review in relation to the debt. This view of the judge was essentially in light of one of the earlier decisions of the Singapore Court of Appeal which is Metal form Asia Pte Ltd v. Holland Lee don Pte Ltd[1] . This decision would be discussed elaborately further in the course of the article. The Judge also held that the dispute raised by AnAn was not bonafide. The Judge also marked that AnAn’s argument with respect to force majeure was unsustainable as the GMRA did not even contain a force majeure clause. AnAn had argued that the calculation of the total claim amount was erroneous however it failed to state what exactly is the claim amount that it considers to be appropriate. The Judge held that AnAn had deliberately omitted to particularize its case on the quantum of the debt as it knew that there would in any case be a substantial debt which would provide a sufficient basis for the court to grant a winding up order. The judge further ordered the winding up of AnAn. AnAn then filed an appeal before the Singapore Court of Appeal (‘SGCA’), pending the hearing of the substantive appeal. AnAn made an application for leave to adduce fresh evidence in form of a valuation report prepared by Deloitte & Touché Financial Advisory Services Pte Ltd (“the Deloitte Report”). This valuation report stated a different claim amount, far less than what was claimed by VTB. This application to adduce fresh evidence was accepted. However, AnAn’s substantive appeal rested on two arguments (i) That the applicable standard of review was the prima facie standard of review. (ii) That this threshold has been crossed by the court below. VTB dropped the ‘force majeure argument’ before the SGCA and took the position that the appropriate standard of review when dispute is subject to the arbitration agreement is the triable standard of review. VTB essentially argued that the dispute raised by AnAn was not bonafide and therefore the winding up order should sustain. The Singapore Court of Appeal decided this matter on two essential questions of law mentioned below- (a) What is the appropriate standard of review with the respect to stay on winding up application, when the same is subject to an arbitration agreement? (b) Whatever might be the ‘appropriate standard of review’, has that been met in this given case? C. ANALYSIS OF THE SINGAPORE COURT OF APPEAL [‘SGCA’] To answer these questions of law, the court took into consideration of case laws across jurisdictions. The Judge in the High Court had ruled in favour of ‘triable standard of review’ as it considered himself to be bound by another case law decided by the SGCA which is Metal form Asia Pte Ltd v. Holland Leedon Pte Ltd[2] (“Metalform”). However, the judge had also held that if he hadn’t considered himself to be bound by Metalform, he would have resorted to the standard adopted by Abdullah JC in BDG v. BDH[3] (“BDG”). The court has also elaborately discussed the common law authority in these kinds of cases which is Salford Estates (No 2) Ltd v. Altomart Ltd (No 2)[4] (“Salford”). In addition to this another case law from Hong Kong jurisdiction was also taken into consideration while deciding this case law which is “In Re South West Pacific Bauxite[5]” (“Lasmos Case”). In the succeeding sections of the article, the author would elaborate extensively on how the SGCA interplayed with the ratio(s) of these case laws to find answer to the questions raised above and also to conclusively determine the dispute raised. · The fault with the dicta in ‘Metalform” As discussed in the preceding sections, the prime reason for holding the ‘triable standard of review’ was because of the fact that the Judges held themselves to be bound by the dicta of Metalform. This case essentially dealt with an undisputed debt. Metalform owed the opposite party an undisputed debt. Metalform made continuous efforts to refinance and pay the undisputed debts by installments, however, the debt still remained unpaid. A demand notice was served on Metalform. Anticipating a winding up application, Metalform then applied for an injunction to restrain the other party from presenting a winding up application. The injunction prayed was mostly in nature of interim injunction to restrain the opposite party from presenting a winding up application till a decision is reached by the arbitrator regarding one of its cross claim. In this case, the interesting fact was that the parties had agreed on the common fact that the disputes need to be adjudicated before the arbitral tribunal. Though the court had resorted to the ‘triable standard of review’ and had allowed the injunction application, SGCA marked that there wasn’t much conflict with respect to intersection of arbitration and winding up disputes in Metalform. Therefore, the reliance on Metalform by the High Court was found to be misplaced by SGCA. · “Salford” and the common law approach with respect to the applicable standard of review The English case law which was widely referred by SGCA on this aspect is a case law called, Salford Estates (No 2) Ltd v. Altomart Ltd (No 2)[6] (“Salford”). The court marked that this decision is extremely authoritative and has been widely relied by numerous English case laws later on. In this case the Court of Appeal of England and Wales had ruled that when there is a question of stay on a winding up application and the subject matter concerns with a disputed debt which also falls within the scope of the arbitration clause, the applicable standard of review has to be lowered except for certain “exceptional circumstances” .The court found that such an approach of a lower standard of review would align more with the principle of holding parties to their bargain honoring the arbitration agreement. That is the court ruled in favour of the “prima facie standard of review” however it also carved out the “exceptional circumstances clause” where one can possibly think about considering a higher standard of review. · The “Exceptional Circumstance Test”, the “Bonafide dispute test” and the reliance on case laws from the Hong Kong jurisdiction Courts in Hong Kong have also taken a pro-arbitration stance and have ruled mostly in favour of the prima facie standard of review. The courts have held that by dismissing the winding up application, the parties would be held to their bargain. The arbitration proceedings would further allow for enforcement of contractual obligations. In the case of “In Re South West Pacific Bauxite (HK) Ltd[7] (“Lasmos Approach”) was widely relied on this aspect. This case law is pertinent to mention here because this case law also ruled on the efficacy of the ‘exceptional circumstance test’ in deciding these kinds of disputes. In this case, Hong Kong Court of Appeal (“HKCA”) ruled that the lowered standard of review would also definitely not bar the courts from invoking the insolvency regime. For example, there might be a situation where there might be an urgent need to appoint independent persons to investigate the company’s assets or there might be a case where there might be substantiated concerns of fraudulent preferences. These are some of the exceptional circumstances where a winding up application would not be dismissed, where the application of the prima facie standard of review would mandate taking due consideration of the underlying exceptional circumstances. This was known as the Lasmos approach. It is not the case that this approach was not subjected to any kind of criticism. For example, in the case of Ka Chon v. Interactive Brokers LLC, the HKCA had expressed reservations regarding the prima facie approach . They had marked that this approach curtails a party’s right to present a winding up application. They had specifically mentioned that in cases where winding up applications are summarily dismissed, it would appear that the arbitration act provides for automatic stay of winding up applications and such an intention cannot be attributed to a piece of legislation that does not expressly provide for the very same thing. It is not the case that the Hong Kong jurisdiction had placed reliance only on the “exceptional circumstance test”. In the case of “Hollmet AG 7 Another v. Merdian Success Metal Supplies Ltd.[8] , HKCA has said that “that if a company wishes to stay a winding up application on basis that the underlying debt upon which the statutory notice is founded is disputed, he must establish how bonafide was that dispute. This test makes the ‘prima facie dispute test’ as not merely the prima facie dispute test rather it makes the prima facie test move a step further to analyze the veracity of the disputed claims raised, so that it doesn’t appear that the jurisdiction of the company courts have been ousted just by mere presence of an arbitral clause in the agreement. The SGCA undertook elaborate analysis of these case laws and compared it with several case laws from the Singapore jurisdiction . · Singapore jurisdiction and the veracity of the prima facie standard of review The Singapore courts have more or less ruled mostly in favour of the “prima facie review”. Some decisions have favored the “exceptional circumstance approach” whereas some other decisions have favored the “bonafide test approach”. Let’s see how these tests have been relied on by the SGCA in deciding the instant case. (a) BDG and reading of the Salford approach under the Singapore jurisdiction In the case of BDG v. BDH[9], the “Salford approach” was adopted by Abdullah JC, the judge gave several reasons for preferring the prima facie standard of review over the triable standard of review. Firstly, it is a prime concern to hold parties to their bargain that is if the parties have entered into an arbitration agreement. The arbitration agreement must be honored. Secondly, if we take a look at the objective of the “triable standard of review test” then it is to ensure that winding up petition is not staved off because of some tenuous reason, further this standard of review ensures that remedies are readily obtained when nothing much can be said against the claim or application. However, when there is an arbitral clause in the contract and if the dispute falls within the scope of the clause then the disputes are to be arbitrated. Courts shouldn’t step in. It is a fact that the parties selected an arbitration process, it may lead to a different assessment from that of courts but whatever that assessment may be, the arbitral proceedings must be exhausted and after this only the court procedure must be resorted. The arbitration agreement must be honored at all costs. Lastly, to avoid the fact that winding up proceedings are not stopped in an ungenuine way the “prima facie standard of review” must entail a test of how bonafide the claim of the party opposing the winding up application is. If there is a prima facie view that issues raised are not bonafide, then the parties must be referred to arbitration. Thus, the prima facie test coupled with the bonafide claim test somehow can possible balance two interests that is (a) Honoring the arbitration agreement (b) Checking the veracity of the disputed claim and checking if the defense raised to stay a winding up application is genuine. The court also relied on the case of BWF v. BWG[10] , this was again a decision delivered by the Singapore High Court, where the court held that the applicable standard of review is the “Bonafide prima facie standard of review” as it coheres with the concept of party autonomy in the field of arbitration. Part II of this article can be accessed here. it deals with the observations of the SGCA regarding the appropriate position of law with respect to standard of review in these kinds of disputes and the Indian Law regarding this issue * Purbasha is a Staff Writer at the Arbitration Workshop and is a graduate of the 2020 batch of NUSRL, Ranchi. She can be contacted at purbasha.nusrl.13@gmail.com [1] [2002] 2 SLR ( R) 268 [2] [2007] 2 SLR (R) 268 [3] [2016] 5 SLR 977 [4] [2015] Ch 589 [5] [2018] HKLRD 449 [6] [2015] Ch 589 [7] [2019] HKCA 873 [8] [1997] HKLRD 828 [9] [2016] 5 SLR 977 [10] [2019] SGHC 81

- Ragini Agarwal[1] and Mayank Udhwani[2] In an application for setting aside parts of the arbitral award under §34 of the Arbitration and Conciliation Act, 1996 [“the A&C Act”], the Delhi High Court in GMR Vijaywada v. NHAI[3] on August 4, 2020, directed that the quantum of compensation be determined by a new court-appointed arbitral tribunal. While the position of law on the correct course of action once an award has been set aside is unclear, respecting party autonomy has always been the fundamental principle on which arbitral proceedings are based. In this post, after delineating the factual matrix of the dispute [A], the authors explain the erroneous nature of suo moto appointment of sole arbitrator by the Delhi High Court [B]. The authors then proceed to discuss the ordinary course of treatment of an award which is set aside by the court, which remains a grey area [C]. A. Brief Facts In 2009, a Concession Agreement was entered between GMR Vijaywada Expressways Ltd. [“GMR”] and National Highways Authority of India [“NHAI”]. Owing to a change in the Sand Mining Policy in 2012 and the bifurcation of Andhra Pradesh into two states in 2014, GMR suffered substantial losses. Consequently, GMR sought compensation from NHAI pursuant to the “change in law” clause under the Concession Agreement. Dispute arose between the parties after NHAI rejected the demand for compensation and a three-member arbitral tribunal [“Tribunal”] was established as per the terms of the Concession Agreement. The Tribunal had to decide two issues. First, whether the aforementioned events, which had caused GMR to suffer losses, amounted to “change in law”. Second, if the answer to the first question is in affirmative, then what would be the quantum of compensation owed by NHAI to GMR. The Tribunal reached a unanimous conclusion with respect to the aforementioned events amounting to a “change in law”, thereby entitling GMR to receive compensation. However, the Tribunal reached a split-verdict in relation to the second issue. The majority award held that the NHAI should determine the compensation owed by it to GMR, whereas the minority award opined that the quantum of compensation should be decided by the Tribunal itself. The decision of the Tribunal was challenged by both the parties under §34 of the A&C Act before the Delhi High Court. GMR challenged the decision of the Tribunal to give discretion to NHAI in the determination of the quantum of compensation whereas NHAI contested the decision of the Tribunal granting a right of compensation in favour of GMR. While the Delhi High Court agreed with the Tribunal on the first issue, it set aside the majority award on the second issue wherein the Tribunal had granted discretion to NHAI to determine the amount of compensation owed by it to GMR. Going a step further, the Delhi High Court appointed a sole arbitrator to decide the issue of quantum of compensation. It is this issue that the authors find particularly contentious. B. Suo Moto Appointment of a Sole Arbitrator Undermines Party Autonomy In ¶65 of the judgment, the Delhi High Court observed that the Tribunal itself could have decided the issue of compensation owed by NHAI to GMR. Furthermore, it was noted that the Tribunal could have taken assistance from a third entity to reach the quantum of compensation owed by NHAI and such an entity would have been an extension of the Tribunal (See §26, A&C Act). Since the majority award had allowed NHAI to determine the quantum of compensation owed to GMR, the High Court had rightly set aside that decision on grounds that NHAI, being a party to a dispute, cannot assume the role of an arbitrator, i.e., become an extension of the tribunal. This was in accordance with §12(5) of the A&C Act. However, the High Court steered in the wrong direction when it proceeded to suo moto appoint a retired judge of the Supreme Court as the sole arbitrator to determine the issue of quantum of compensation owed by NHAI to GMR. The authors contend that such an appointment was bad in law as it undermines party autonomy thereby creating a bad precedent. §11 of the A&C Act, which provides a very limited scope of judicial intervention, provides that an arbitrator is to be appointed by the parties to the contract in a manner agreed upon by the parties themselves. It is only when the parties fail to abide by procedure that they had agreed upon while appointing an arbitrator can the court exercise its jurisdiction to appoint an arbitrator. In the present case, the scenario which warrants intervention of the court in appointment of arbitrators did not exist. GMR had only prayed that an independent firm of Chartered Accountants be appointed to determine the quantum of compensation (¶6). Despite that, the Delhi High Court appointed a sole arbitrator without a prayer to that effect or the consent of the parties, thereby undermining the consecrated principle of party autonomy in arbitration. If fresh arbitration was indeed the appropriate course according to the Court, at the very least, appointment of the arbitrator should have been done in accordance with the provisions of the Concession Agreement between GMR and NHAI which presumably provided for a three-member tribunal to adjudicate upon the disputes between the parties. Therefore, appointing a sole arbitrator is in contravention of the provisions of the Concession Agreement. In this regard, it has been held by the Supreme Court in Central Organisation for Railway Electrification v. M/s ECI-SPIC-SMO-MCML (JV) (2019) that the High Court cannot appoint an independent arbitrator without following the procedure prescribed for appointing an arbitrator under the contract between the parties (¶22). Further, in Union of India v. Parmar Construction Company (2019), the Supreme Court held as follows: “44. To conclude, in our considered view, the High Court was not justified in appointing an independent arbitrator without resorting to the procedure for appointment of an arbitrator which has been prescribed under clause 64(3) of the contract under the inbuilt mechanism as agreed by the parties.” Setting aside the award with liberty to the parties to establish a new tribunal to determine the quantum of compensation or pursue any other appropriate remedy under law would have been the ideal direction. C. Post-Award Treatment of Disputes: A Grey Area §34 of the A&C Act allows the Courts to set aside the award in exercise of its supervisory jurisdiction if the award is faulty on the parameters of any one of the given grounds. However, it is not very clear what happens once an award or part of it is set aside. The ordinary courses of action are a) correction of error or modification of the award by the court; or b) mere setting aside of the award with liberty to the parties to pursue further remedies. Ordinary Courses of Action Under the Arbitration Act, 1940, §15 allowed for modification of the award by the courts and §16 provided for remission of the award back to the tribunal. These provisions were conspicuously missing in the A&C Act that ushered in a new regime of arbitration based on the principles of respecting party autonomy and minimising supervisory jurisdiction of courts. In McDermott International Inc. v. Burn Standard Co. Ltd. (2006), the Supreme Court had held that the jurisdiction of courts under §34 does not extend to correction of awards. Furthermore, it was held that what is permissible is the quashing of the award while leaving the parties free to pursue fresh arbitration if they so desired. The rationale behind this was to respect the party’s conscious choice to exclude court jurisdiction when choosing arbitration. However, a single-judge bench of the Madras High Court in Gayatri Balaswamy v. ISG Novasoft Technologies Ltd.(2014), held that the phrase “recourse against arbitral awards” under §34 would include the power to modify the award for the benefit of the parties (¶¶51,52). This decision was confirmed by the division bench of the Madras High Court wherein modification of compensation by the single-judge bench was upheld (¶44). The holding of the Madras High Court seems to be in conformity with the current trend of modification of the quantum of compensation by the courts. Grant of interest is one of the areas, wherein the courts frequently end up modifying awards instead of setting it aside. Delhi High Court’s V4 Infrastructure Private Limited v. Jindal Biochem Private Limited (2020) and Madras High Court’s J.K. Fenner (India) Ltd. v. Neyveli Lignite Corporation (2013) are cases in point. Even in the McDermott case, the Supreme Court had exercised its jurisdiction under Art. 142 of the Constitution to modify the interest from 10% to 7.5%. In Sterlite Technologies Ltd. v. BSNL (2019), the Madras High Court analysed a conspectus of judgments on the limited power of courts to modify awards and recommended that the Law Commission should revisit the power of courts to modify or correct awards (¶44). At the same time, since the setting aside of the award does not lead to a determination on issues and cannot operate as res judicata, courts often leave the parties to their own devices for the further course of action. In Turner Morrison Ltd. v. Rani Parvati Devi (2020), the Delhi High Court set aside part of the award that reduced interest while allowing parties to seek a fresh reference to arbitration with respect to interest payable. This view of fresh arbitration being the valid course of action is supported by the text of the A&C Act as well. §43(4) for instance, states that limitation period for commencement of proceedings (including arbitration) with respect to a specific dispute would exclude the time between commencement of the previous arbitration and the date of setting aside an arbitral tribunal’s award on the specific dispute by the court. Remission of the Award The A&C Act does not permit revision of the award by the same arbitral tribunal. This was clarified in Radha Chemicals v. Union of India (2018) that §34(4) providing for remitting of the award would not apply to awards that have already been set aside. §34(4) operates on an application by parties as an alternative to setting aside of the award if the defect is a curable one. The idea behind preventing this remission is to prevent the parties from getting a second bite at the cherry to get their award reviewed and rewritten. In the case under analysis presently, the Court in GMR Vijaywada v. NHAI chose to appoint a sole arbitrator to determine the quantum of compensation payable to the party. In the opinion of the authors, this decision was flawed since such an appointment falls beyond the jurisdiction of the Court under §34. The Indian literature on powers of the court to appoint arbitral tribunals in pursuance of post-award remedies is scarce. Since §34(4) of the A&C Act is broadly similar to the Model Law on Arbitration which the Singaporean law is also based on, the authors derive guidance on this point from the Singaporean jurisdiction. Singaporean courts have delineated upon this aspect on a few occasions. In AKN v. ALC (2015), the Singapore Court of Appeals dealt with the issue of whether courts had the power to remit the matter to a new tribunal. Significantly, it noted that both the parties agreed on the aspect that the clear language of Art. 34(4) (pari materia with §34(4) of the A&C Act) did not permit remission of the award to a newly constituted tribunal (¶¶10,11). This view was supported by its previous decision in BLC and others v BLB and another (2014) (¶¶119,120). Since remission is a reconsideration of the issue in dispute, the courts exercise caution in applying this power. If there are additional considerations, however, the matter may be remitted to a new tribunal in a post-award stage. One of such considerations is when there is a specific prayer by a party to that effect. Front Row Investment Holdings v. Daimler South East Asia (2010) is an example of the Singapore High Court appointing a fresh tribunal to determine the counterclaim of one of the parties, when a party prayed for the same. Thus, if the law as interpreted by Singaporean courts is relied upon, it seems clear that to respect the party autonomy in the arbitral process and act within the contours defined under the A&C Act, the Court should have refrained from appointing a new tribunal to determine the dispute after setting aside the award. Concluding Remarks The change in regime of arbitration through the A&C Act, 1996 was welcomed as a step towards speedy and effective resolution of disputes reinforcing respect for party autonomy. The decision of the Delhi High Court in this case, however, undermines the ability of the parties to tailor the arbitration according to their needs. It sets a bad precedent because it suggests that if a tribunal reaches a split-verdict, then the High Court can give a go-by to the rules of appointment of arbitrator under the contract between the parties. Undoubtedly, the post-award treatment of disputes needs more clarity. At the same time, it cannot be gainsaid that the Delhi High Court decision gravely undermines the party autonomy in arbitration. Such a decision falls under the realm of excessive judicial supervision, taking India a step back in its progressive attempts towards making the jurisdiction arbitration-friendly. [1] Ragini Agarwal is a graduate of National Law University, Jodhpur. She can be contacted at: ragini.nluj@gmail.com [2] Mayank Udhwani is a graduate of National Law University, Jodhpur. He can be contacted at: mayank.udhwani@nlujodhpur.ac.in. [3] 2020 SCC Online Del 923.

Mr. Rautray, welcome to the Arbitration Workshop! We appreciate the opportunity to share your perspective with our readers at an exciting moment, where new discernible trends pertaining to arbitration are emerging in the domestic and international sphere. Q.1. Before we delve in, may we request you to kindly introduce yourself and tell us about the origins of your interest in the field of International Arbitration? A.1. I am a practising lawyer for over 25 years and am a Barrister-at-Law (Lincoln’s Inn). I did an LL.M in Corporate and Commercial law from the London School of Economics. I have authored two books published by Wolters Kluwer titled “Master Guide to Arbitration in India” and “Principles of Law of Arbitration in India”. I was one of the arguing counsel in the BALCO matter before the Constitution Bench. I am also the co-founder of the law firm Kachwaha & Partners based out of New Delhi. My father was a Special Class contractor for the State Government of Orissa and was engaged in the construction of several dam projects in the State. He too had contractual disputes with the State leading to arbitration. My involvement with domestic arbitrations early on (even before I became a lawyer) eventually led to exposure to international arbitrations. Q.2. Given your expertise in Construction and Infrastructure Arbitrations, in your opinion, what are the challenges that a counsel has to face in an arbitration against governmental bodies such as NHAI, Oil India, etc.? A.2. The most challenging part is not about the subject matter of the dispute but about the counsel representing the government body. One has to re-think and strategize all the time to overcome the dilatory tactics of the opposite counsel. Ironically, most counsel representing government bodies fail to appreciate that not only it is counter-productive for their clients but to their own practice. It is difficult for any counsel, to act against the fundamentals of arbitration as a speedy alternate dispute resolution mechanism and yet expect to flourish as an arbitration lawyer. Besides one’s adversary, most government bodies approach arbitration with a premeditated notion to appoint an arbitral tribunal who would decide the matter in their favour instead of choosing independence and impartiality (which is also true for private parties). Consequently, they end up compromising on the expertise and of course the independence and impartiality of the arbitral tribunal. Q.3. The BALCO Judgement (2012), in which you appeared as a counsel, established the principle that party autonomy is the grundnorm of International Commercial Arbitration. However, with recent amendments to the Act disallowing a certain category of people from being appointed as arbitrators, what do you think will be the fate of Government agency panels consisting of former employees. Isn’t it necessary to nominate such technical experts to arbitral Tribunals in construction and civil engineering disputes? A.3. The appointment of a former employee from the government panel is not per se a transgression unless done with an objective to achieve a desired result. The recent amendments do not infringe on the principles of party autonomy. Irrespective of the fact that the arbitrator is a former employee and has been so for more than three years or has just retired, parties can still agree to appoint him or her. The parties need to have confidence in the technical expert’s independence and impartiality which in the Indian scenario is difficult considering numerous factors including the nature of their employment with the government body and the duration of their employment. Certainly, the appointment of technical experts is of great significance in construction and civil engineering disputes, but it is also not correct to assume that technical experts can be found only amongst government employees. Unless both parties have the confidence the appointment of an arbitrator from the government panel would be resisted and viewed with suspicion. It is therefore important to create a pool of independent and impartial technical experts for a fair adjudication of disputes and in order to put their expertise to the best use and advantage of both the parties. Q.4. In recent years, Indian arbitral jurisprudence has been progressing towards pro-enforcement. Do you agree with this statement? If yes, could you please share some of your experiences which made you realise the same. A.4. Indian courts have been pro-enforcement ever since the Arbitration and Conciliation Act, 1996 came into force. Of course, there have been times when courts have been influenced by the old jurisprudence under the 1940 Act but that route has been abandoned and the course has been corrected very quickly. One such example is the introduction of the ground of “patent illegality” to set aside the award. This is a very good example of the influence the old jurisprudence under the 1940 Act has had on the 1996 Act. The judicial legislation by the courts should be avoided. Unfortunately, recent judgments of the courts have shown signs of adoption of a regressive approach. For instance, the judgment of the Supreme Court in Ssangyong Engineering & Construction Co. Ltd. v. National Highway Authority of India, 2019 SCC OnLine SC 677, wherein the court upheld a minority award invoking the Article 142 of the Constitution of India. Although this may appear a pro-enforcement approach, on the contrary, it is anti-enforcement. For example, the judgment of the Indian Court upholding a minority award would not be acceptable to a foreign court if one of the parties decided to bring enforcement proceedings based on the minority award in the court of a foreign country under the New York Convention. Secondly, it unnecessarily encourages the courts in India to look at and give weightage to a minority award each time enforcement proceedings are brought before it. This is against the basic tenets of arbitration i.e parties agreement to be bound by a majority award. Q.5. What value does oral evidence have in commercial disputes where the contract and documents exchanged by the parties contain most of the material relevant for deciding the dispute between the parties? A.5. The necessity to lead oral evidence is explained in the Indian Evidence Act. Although, the Arbitration Act explicitly states that the Indian Evidence Act does not apply to arbitration proceedings, the principles of it do apply to an arbitration proceeding. The question of whether to lead oral evidence in commercial disputes is a matter which depends on the nature of disputes between the parties. Where the pleadings of the parties and the issues arising from it are limited to the contents of the documents exchanged between the parties, there should be an extremely good reason for a party to lead oral evidence. If one of the parties still insist on leading oral evidence, then the arbitral tribunal should take cognisance of the wastage of time and award costs against that party. Besides, the arbitral tribunal should give little or no weightage to such evidence. The need to lead oral evidence can be further limited if the parties are required to give proper and cogent reasons for the denial of the contents of the opposite party’s documents. Q.6. In our experience, we have seen that many contracts have exclusionary clauses that state that the contractor will be entitled to extension but not any costs for delay even when the delay is caused by the Employer. Do you believe such clauses can be enforced? A.6. Exclusionary clauses should be given a restrictive meaning and cannot be applied to all kinds of delays. Moreover, the enforceability of such clauses should be restricted to consequential damages arising out of the employer’s delays. If the delay caused by the employer is of a nature that affects the financial viability of the project, then a contractor cannot be forced to stick to its side of the bargain whilst the employer continues to violate the terms of the contract with impunity. The contract should be interpreted to give a commercial meaning. There can be two types of delay. Non-excusable and excusable delay. Non-excusable delay are delays caused by the contractor which would entitle the employer to claim liquidated damages. Excusable delay, on the other hand, are delays caused by the employer which will entitle the contractor to claim additional time and costs. Excusable delays can further be categorised into (a) compensable and (b) non-compensable delays. Compensable delays entitle the contractor to additional compensation and time but non-excusable delay would entitle the contractor to additional time but not additional costs. Non-excusable delay can be caused by force majeure events and events which neither party has control of. Therefore, exclusionary clauses in a contract should be restricted to giving effect to non-compensable delays. Q.7. In our experience as Tribunal Secretaries, we have often witnessed the adversarial nature of arbitration proceedings, which often entail exchanging harsh words between counsel on different sides. How should a relatively less experienced counsel approach such a difficult situation especially when its peer opposing practitioner is a senior in the bar? A.7. The advocacy skills and patience are both put to the extreme test when the opposite counsel displays little or no skill at all in his advocacy. The situation often arises when the opposite counsel shows a lack of finesse and experience in addressing the arbitral tribunal or to the opposite counsel. The selection of words and framing of sentences while addressing puts to test the patience and skill of the opposite side counsel. Hence, for a counsel, it is extremely important to not lose sight of his duty to be polite and courteous not only to the arbitral tribunal but to the opposite counsel. The need for politeness and courtesy is not restricted to advocacy but must also reflect in the pleadings. It is often seen that counsel refer to words, without much thought, such as “malafide”, “fraudulent”, “dishonest”, “frivolous” etc. to in their pleadings. Such adjectives are unnecessary and should be discouraged by the arbitral tribunal. In the event such tactics are used by a senior person at the bar or is his natural style of advocacy, the opposite counsel should continue to be polite and yet respond to the allegations made. The rebuttal can be dignified yet acerbic. Although, it is difficult in practice it is something which each one of us should aim to learn and achieve. Q.8. In your experience and opinion does an academic background in arbitration hold any pivotal importance when it comes to arbitration practice? A.8. An academic background in arbitration does have an important role to play especially in international arbitrations but not so much in domestic arbitrations. However, arbitration practice varies from region to region and country to country. Domestic arbitrations often adopt local court practices and therefore it necessitates gaining of practical experience. Q.9. Do you have any recommendations for parties to consider when opting for an institutional arbitration and ad-hoc arbitration? A.9. Institutional arbitrations are not necessarily the best in India and the rules framed by them reflect the international arbitration culture instead of domestic. In order to grow and consolidate, institutions in India often have favourite arbitrators, retired judges or law firms to promote their cause. Moreover, Indian institutions lack professionalism and bring little value to the entire arbitration experience. This may be true for some of the foreign arbitral institutions as well. However, international institutions such as SIAC or the ICC have a good track record. Parties in India should be best advised to go for ad-hoc arbitrations. Q.10. What are the three steps in your opinion that one should undertake to start a career in international arbitration? Further, what are the three steps that one should undertake to develop an arbitration practitioner’s profile? A.10. Firstly, one should have a keen interest in the field. Secondly, one should pursue an academic course on the subject and thirdly, it is important to train under a good arbitration practitioner and avoid a senior counsel. The aforesaid would help in the development of an arbitration profile. Besides it can be augmented by writing case law notes on the latest decisions, writing articles and participating in arbitration conferences and seminars. The Editorial Team at the Arbitration Workshop would like to thank Mr. Rautray for taking out time from his busy schedule and for sharing his perspectives with us!

- N. Surya Narayanan and S. Teepanjali[1] The purpose of this article is to find out how, and in what context, each of the three words can be, and is generally, interpreted by the courts to mean both ways, i.e., the juridical location and the physical location of the arbitration, and the probable counter-arguments to it. CONCEPT OF ‘SEAT’ In Domestic Arbitrations (“DA”), or International Commercial Arbitrations (“ICA”), an argument which generally (if there is even a very small room for ambiguity) arises either when an award is sought to be enforced, or when an award is challenged, is that the Court which is hearing the case does not have jurisdiction, for it not being the court of the ‘seat’ of arbitration. The concept of the ‘seat’ of arbitration needs no new explanation. With respect to an arbitration, while the main underlying contract might be governed by the law of one country, parties have the right to subject the arbitration clause to the laws of the other country as well (either the seat or that of the countries involved). Generally, the law(s) of the seat of the arbitration is one of the laws which govern the arbitration. The concept of seat is of much prominence and importance in both DAs and ICAs, though in varying degrees. In the case of DAs, since the arbitration law is the same throughout the country and both parties belonging to the same country, the role of the ‘seat’ is limited to conferring supervisory jurisdiction on the courts of the seat (place mentioned), i.e., to supervise the conduct of the arbitration, including matters such as interim reliefs and challenges to the arbitral award (Enercon (India) Limited v. Enercon GMBH) [2]. In the case of ICAs, an agreement on a ‘seat’ not only confers supervisory jurisdiction to the agreed place but also plays a decisive role in determining which law will be the proper law of the arbitration agreement, in addition to various other aspects such as arbitrability, standards for annulment of awards, neutrality, choice of arbitrators and related issues.[3] On the other hand, irrespective of what the seat of the arbitration is, the hearings, meetings and other proceedings of an arbitration can be held anywhere, as agreed to between the parties, and/or with the consultation of the arbitrators, and it is commonly known as the ‘venue’ of arbitration. This is for the sake of convenience of the parties and the arbitrators, in saving time, money and labour. In India, the concept of ‘seat’ has been the core issue of various judicial decisions, from time to time, including the most-spoken-about five-judge Constitution Bench judgment of the Supreme Court in BALCO v. Kaiser Inc.[4] In short, according to the Court, the Arbitration and Conciliation Act, 1996 will apply to an ICA only if the seat of the arbitration is in India. WHAT’S THE GOOD WORD? Before entering into the analysis, it is important to peruse the terminologies used in Conventions and legislations concerning arbitration, with respect to the concepts of seat and venue. Section 20 of the Arbitration and Conciliation Act, 1996 refers to ‘place of arbitration’. While sub-section (1) grants the parties the right to agree on a place of arbitration, sub-section (2) reads that failing such an agreement, the tribunal determines the ‘place of arbitration’ having regard to the circumstances of the case. The word ‘circumstances’ here basically includes the remaining terms of the contract and the conduct of the parties, including the communications exchanged between them. When Sub-Section (3) is considered, the word ‘place’ is used to denote the place where the tribunal is to meet. Therefore, it is clear, also in terms of the SC’s decision in BALCO, that Sub-sections (1) and (2) talks about what we refer to as the seat of arbitration, while (3) talks about what we refer to as the ‘venue’. Unsurprisingly, this provision has been adopted, in toto, from Article 20 of the UNCITRAL Model Law on International Commercial Arbitration. Even the New York Convention, in Article V(1)(d) refers to it as the ‘place’. At the same time, legislations such as the ‘Arbitration Act 1996’ of the United Kingdom, in Section 3 of the Act, uses the word ‘seat of arbitration’, instead of a ‘place’ or a ‘venue’. The approach of the courts towards these three words is as follows: Seat: Whenever the arbitration clause might use the word ‘seat’, it conveys a definitive intention of the parties to refer to the ‘juridical place’ of arbitration. Since there are no possibilities of the usage of the word ‘seat’ being equated to ‘venue’ or the ‘location of the proceedings’, the chance of the ‘seat’ argument being raised as a jurisdictional objection, in a DA does not exist. In an ICA, the rarest exception might be where the terms of the arbitration agreement and the contract clearly indicate that the curial law of the arbitration would be a particular law of a country (mostly either of the parties) and that the courts of the particular country would have exclusive jurisdiction to settle all the disputes (definitely either of the parties). This kind of exception does, almost, not occur in any case, since the parties would not use the word ‘seat’ and simultaneously expressly agree to the curial law being a particular arbitration law. But this exception was how the England and Wales High Court, in Braes of Doune Windfarm (Scotland) Ltd. v. Alfred McAlpine Business Services Limited[5], justified the designation of Glasgow, Scotland, as the seat by the parties, to be an agreement as to the venue of the arbitration. Note: The above exception has to be understood keeping in mind, that in an ICA, the proper law of an arbitration agreement can be different from the curial law, which is the law of the seat, while in a DA, there is no such differentiation since both the seat and curial laws are that of the Arbitration and Conciliation Act, 1996. Place: The usage of the word ‘place’ starts with the presumption[6] that it, in essence, is the juridical seat of arbitration, since even the legislations and the conventions use the word ‘place’. Even in BALCO and various English decisions[7] (Shagang South-Asia (Hong Kong) Trading Co. Ltd. v. Daewoo Logistics), the view that the words ‘place’ and ‘seat’ are interchangeably used, and the usage of the word ‘place’ is an implied choice of the ‘seat’ finds much support. But there might be some arguments put forth about the context or the way the word ‘place’ is used. If there is an initial agreement on a place of arbitration, and no specific mentioning of another place as it’s seat, the place is deemed to be the seat.[8] What is to be keenly observed is in the Arbitration and Conciliation Act, 1996, wherever the intention was to refer to the ‘juridical seat’ the word ‘place’ was never singularly used but was always referred to as the ‘place of arbitration’, signifying the importance of the phrase. For example, the word ‘place’ can be used in an arbitration clause in different ways, Clause 1: The place of arbitration shall be Chennai, India. Clause 2: The arbitration shall take place in Chennai, India. Clause 3: The arbitration shall take its place in Chennai, India. Clause 4: The arbitral proceedings shall take place in Chennai, India. Here Clauses 1 and 3, more or less resonate the same idea of it being the juridical seat, but Clause 2 gives room for the clause to also mean that it refers only to the hearings/proceedings, and was not meant to be the place, the courts of which would supervise/govern the arbitration. Therefore, a comparison of Clauses 1 and 3 would give a view that Clause 2 can also be interpreted to mean the ‘venue’ or the physical location of the arbitral proceedings. One might also find a little support from the ruling of the Supreme Court in Union of India v. Hardy Exploration and Production (India) Inc[9] (3-judge bench) which ruled that the word place by itself cannot be used as seat and it does not ipso facto assume such a status. It can be so only if there are a few concomitant factors to support it being a seat. But even this ruling of the court can be countered since the arbitration clause in the above case incorporated the word ‘venue’ and the court’s discussion was not strictly with respect to the word ‘place’ (even though it unintentionally used the word ‘place’ in the judgment). But what followed in Mankastu Impex Private Limited vs. Airvisual Limited[10] further dilutes the presumption in favour of the word ‘place’. The Supreme Court 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 Supreme Court seems to have erred in ruling so with respect to the term ‘place’, since even though the arbitration clause in this case contained the phrase ‘place of arbitration’, the Court’s discussion is also with respect to the term ‘venue’, but comes to the conclusion as quoted above. Further, even otherwise, reducing a statutory term/phrase to a stage of needing supplementary help from the other terms of the contract does not seem to be right. Of course, if the parties, use both words (‘seat’ and ‘place’) in the arbitration agreement, the city used with the seat can be taken to be the juridical seat and the ‘place’ might be the venue. Now, when Clauses 2 and 4 are compared in order to compulsorily differentiate both, a prima facie view would be that Clause 2 would refer to the seat and Clause 4 would refer to the venue, since the word ‘arbitration’ conveys a more definitive intention to anchor the entire arbitration to the place, and not merely the proceedings, in the words of the English Court in Process & Industrial Developments Limited v. Federal Republic of Nigeria[11]. Venue: While, in both the abovesaid cases of Mankastu and Hardy Exploration, what the court ruled was, in essence, something with respect to ‘venue’, the judgment in BGS SGS Soma JV v. NTPC Limited[12] (which came before Mankastu), further adds confusion to the existing conundrum. “Wherever there is an express designation of a venue and no designation of any alternative place as the ‘seat’, combined with a supranational body of rules governing the arbitration, the inexorable conclusion is that the stated venue is actually the juridical seat”. Even though it might be justifiable for the court to have held so, considering the fact that it is reasonable to expect the parties to agree on the ‘seat’ of arbitration, keeping in mind its importance, than the ‘venue’ of the hearings, in an arbitration agreement, if they have not agreed on both of these, the parties should also consider that when the statutory term specifically being used, and the jurisprudence generally favouring the use of the word ‘seat’ or the phrase ‘place of arbitration’, usage of the word ‘venue’ to refer to the ‘seat’ should be detested from. But when such term has still been used in an arbitration clause, or when clauses incorporating none of the above terms, such as, “The Arbitration shall be held in Chennai, India” are used, the courts/tribunals can then refer to the other terms of the contract, or fall back on the ‘real and most closest connection’ test as followed by the court in Enercon (India) Ltd’s case[13], wherein the court examines as to which place, amongst the ones the parties submit to be the seat, has the closest connection to the arbitration as a whole. OTHER FACTORS TAKEN INTO ACCOUNT: There are various other factors that the courts have taken into consideration and can continue to consider when it is faced with the seat argument/defense. (i) Institution: In the case of DA, the place of the arbitration centre to which the parties have referred the dispute to, can be taken to be as the seat of the arbitration, subject to an express agreement on the seat of the arbitration within India. In the case of International Commercial Arbitrations, the rules of the Institution, such as LCIA (London Court of International Arbitration) Rules or the SIAC (Singapore International Arbitration Centre) Rules, must be given the first glance to see how the tribunal should decide on the question of seat in the absence of an express agreement between the parties on the seat. In such an absence, while Article 16 of the LCIA Rules, 2014 starts with a presumption of England being the seat, and such a presumption is rebuttable in view of the circumstances of the case, the SIAC Rules, 2016, in Rule 21, does not provide for a default seat, as against its previous edition of the Rules. (ii) Neutral Place: An agreement on the seat of arbitration being a country other than the ones to which the parties belong to, can be construed as an expression of their intention to have their disputes decided by a tribunal which they have chosen, commonly on the grounds of expertise and privacy, and the efficiency of its supervisory law.[14] This again is subject to the construction and interpretation of the other terms of the contract, and the court’s conclusion will definitely differ according to which of the triad terms, viz., venue, place and seat, is used in the ‘Seat-Clause’. (iii) Government Contracts: A choice of a neutral place is common, especially those involving government contracts,[15] as the perceived effectiveness of the neutral arbitral process is often a vital condition in the process of negotiation of the contract.[16] (iv) Commercial Purpose: The common commercial purpose, the context of the contract, circumstances of the parties and the background of the parties have to be taken into account.[17] For example, a contract for procurement of goods to be used in a country can be interpreted to have its seat in the subject country as it is not only territorially closely related to the contract but also forms the centre of the purpose of the contract. SOLUTION TO RESOLVE THE AMBIGUITY: The 246th Law Commission Report, in fact, suggested amendments to Section 20 of the Act wherein, the provision would read ‘Seat and Venue of Arbitration’, Sub-sections (1) and (2) would carry the terms ‘seat and venue’ while Sub-section (3) refers only to ‘venue’.[18] But due to the existing judgment in BALCO, the recommendations seems to have not been incorporated as an amendment to the act. It is the right time for a Constitution Bench of the Supreme Court, to consider, analyse and solve its conflicting decisions in Hardy, BGS SGS Soma and Mankastu, and set down a standard for all these three terms, in a definitive manner, unlike its previous attempts. Further, parties when entering into arbitration agreements, must make sure to use the term ‘seat’/’juridical place’, as it almost leaves no room for differing interpretations or arguments of ambiguity. It is also advisable for the parties to add a separate clause on ‘venue’ of arbitration, to the effect that it might either be a specific place(s) or an agreement to agree on a venue later, so that it becomes assured as to what the seat and the venue might be. Until then, the arguments can go either way, depending on contrary indications in the rest of the terms of the contract, with respect to all the three terms. [1] The authors are 4th year students pursuing B.A. LL. B (Hons) in the School of Excellence in Law, The Tamilnadu Dr. Ambedkar Law University, Chennai. They can be reached at mailme_surya@yahoo.in and teepanjali.7@gmail.com, respectively. [2] Enercon (India) Limited v. Enercon GMBH, (2014) 5 SCC 1 (India). [3] Chapter 14: Selection of Arbitral Seat in International Arbitration', in Gary B. Born, International Commercial Arbitration (Second Edition), 2nd edition (© Kluwer Law International; Kluwer Law International 2014) pp. 2055 – 2063. [4] Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 (India). [5] Braes of Doune Windfarm (Scotland) Ltd. v. Alfred McAlpine Business Services Limited, [2008] 1 Llyod’s Rep 608 (United Kingdom). [6] Shagang South-Asia (Hong Kong) Trading Co. Ltd. v. Daewoo Logistics, [2015] EWHC 194 (Comm) (United Kingdom). [7] Ibid. [8] Naviera Amazonica Peruana S.A. v. Compania International de Seguros del Peru, 1988 1 Llyod’s Rep 116 (United Kingdom). [9] Union of India v. Hardy Exploration and Production (India) Inc., (2019) 13 SCC 472 (India). [10] Mankastu Impex Private Limited vs. Airvisual Limited, 2020 SCC OnLine SC 301, ¶21. [11] Process & Industrial Developments Limited v. The Federal Republic of Nigeria, [2019] EWHC 2241 (Comm) (United Kingdom). [12] BGS SGS Soma JV v. NHPC Ltd., 2019 SCC OnLine SC 1585, ¶48 (India). [13] Refer Endnote 2. [14] Premium Nafta Products Ltd. & Ors v. Fili Shipping Company Ltd & Ors, [2007] UKHL 40 (United Kingdom). [15] Sulamérica Cia Nacional De Seguros S.A. v. Enesa Engenharia S.A., [2012] EWCA Civ 638 (United Kingdom). [16] STEPHEN M. SCHWEBEL, INTERNATIONAL ARBITRATION: THREE SALIENT PROBLEMS 1-60 (1 ed. Grotius Cambridge 1987). [17] Mitsubishi Heavy Industries Ltd v. Gulf Bank K.S.C, [1996] EWCA Civ 1281 (United Kingdom). [18] Indus Mobile Distribution Pvt. Ltd. vs. Datawind Innovations Private Limited, (2017) 7 SCC 678 (India).

- ADVAIT GHOSH[1] I. INTRODUCTION Arbitration arise out of contractual disputes, and arbitrators usually have to decipher the underlying contract between the parties to adjudicate the claims and counter claims filed before them. These contracts are often “double-barrelled”, that is in a contract one promise cannot be performed without the performance by the other party, in other words the Contract contains reciprocal promises. This article will attempt to elucidate in what manner reciprocal contracts are interpreted by the arbitral tribunal, and will attempt to understand the manner in which they shape the arbitration award, and also how in some cases they lead to the arbitration award being successfully challenged under Section 34 of The Arbitration & Conciliation Act, 1996. II. The meaning of Reciprocal Promise/ Contract Reciprocal promises are defined in Section 2 (f) of The Indian Contract Act, 1872 and it is reproduced verbatim as follows-“Promises which form the consideration or part of the consideration for each other, are called reciprocal promises”. III. Approach of the National Courts when dealing with interpretation of reciprocal contracts We shall analyse the approach of the National Courts in Section 34 Petitions preferred under The Arbitration and Conciliation Act, 1996 in case of reciprocal contracts through Judgments of the High Courts and Apex Court as enumerated below. A) MMTC LTD VS ANGLO AMERICAN METALLURGICAL SOCIETY (FAO(OS) 532/2015) - In this the Petitioner and the Respondent had entered into a long term agreement as per which the Appellant agreed to purchase a certain amount of freshly mined and cooked coal from the Respondent over 8 delivery periods between 2004 and 2007. Disputes arose between the parties vis a vis the 5th delivery period of coal. On 2.7.2009 Appellant wrote to the Respondent that they had arranged a cargo ship for lifting of the coal, referable as “stem”. Appellants had categorically requested for 2 stems, keeping in mind the backlog incurred. Respondent acknowledged the request via e-mail and asked for some time to enquire about the availability of coal. Appellants send numerous requests to the Respondents, however Respondent failed to arrange a cargo ship for the same, due to which the Appellant was unable to perform their end of the contract. Respondent terminated the contract and send a notice invoking the arbitration clause contained in the contract, for alleged breaches suffered by them. The Arbitral Tribunal upheld the claim of the Respondents (Claimants therein), stipulating that the Appellants (Respondents therein) had committed a breach of agreement by not supplying coal. The Ld. Single Judge of the Delhi High Court agreed with the findings of the arbitral tribunal and declined to interfere in the said award. Appeal under Section 37 of The Arbitration & Conciliation Act was preferred to the Division Bench of the Delhi High Court. The Hon’ble Bench concluded that the contract envisaged between the parties was a “reciprocal promise”, it was the Respondents duty to nominate the stem, only subsequent to which the Appellant would supply coal. The Hon’ble Court referred to Section 51 of The Indian Contract Act as per which, a contract which consists of reciprocal promises to be simultaneously performed, the promisor need not perform his promise, unless the promise is ready and willing to perform his part of the reciprocal promise. The Hon’ble Court also referred to Section 54 of The Indian Contract Act as per which a contract which consists of reciprocal promises, one party prevents the other from performing their contract, the contract becomes voidable at the instance of the party which was prevented from performing their end of the contract, and that party is entitled to seek compensation from the other party. In light of these provisions the Hon’ble Court concluded that the Appellant was not bound to dispatch coal, until the “stem” had been nominated by the Respondent, the action of the Respondent in not nominating the stem make the contract voidable at the instance of the Appellant, and thus there was no breach on the part of the Appellant. The Hon’ble Court said that the findings of the Arbitral Tribunal and Ld. Single Judge were erroneous, and set aside the arbitral award holding it against the “public policy” of the country, as it contravenes the fundamental policy of Indian Law. Thus, this recent judgement of the High Court of Delhi explains the importance of reciprocal promises in a contractual manner, and how the interpretation of these contracts is of prime importance. B) STATE TRADING CORPORATION VS M/S MARPO LTD 86 (2000) DLT 361 RECIPROCITY KEEPS A CONTRACT ALIVE - The Respondent offered to sell to Petitioner 20,000 tonnes of soya bean oil, and accordingly contract was drawn up. In the terms of the contract there was a 20% counter trade commitment as well. It was agreed that shipment would be affected by 31.8.1987, Respondent was also required to open a performance bank guarantee within one week of contract, subsequent to which the Petitioner was to open Letter of Credit in favour of Respondent. After the execution of the contract Respondent failed to supply the soya beans and also failed in its duty to open the performance bank guarantee. The Appellant was entitled to treat the contract as having been terminated, however they chose to keep the contract alive and even opened the Letter of Credit as envisaged in the contract. The Appellant did not terminate the contract till 30.04.1987, and after this invoked the arbitration clause to seek reference to arbitration. The arbitral Tribunal returned a finding that the contract had come to an end on 31.3.1987 and not on 30.4.1987, and thus disallowing their claim of difference in market price of soya bean in that one month. When appeal under Section 30 of The Arbitration and Conciliation Act 1940 was made before the Hon’ble High Court of Delhi the Court concluded that the contract was one of reciprocal promises, and even though the Respondent had abdicated their duty in not opening the bank guarantee, and even though the said contract being voidable at the instance of the appellant as per Section 54 of The Indian Contract Act , the Petitioner kept the contract alive till 30.4.1987. The Hon’ble Court also referred to Section 62, and held that the contract, consisting of reciprocal promises till 30.4.1987 had been kept alive and subsisting by the conduct of the contracting parties. The award was annulled on this account as the Court held that the contract was kept alive till 30.4.1987 due to its reciprocity. C) RAM CHANDRA NARAYAN NAYAK VS KARNATAKA NEERAVARI NIGAM (2013) 15 SCC 140) (IMPORTANCE OF RECIPROCAL CONTRACTS) – The Petitioner/contractor was awarded a contract to build irrigation canals in Belgaum, Karnataka. The Petitioner deposited earnest money in the form of bank guarantee as well. The Petitioner mobilized men & machinery and completed a portion of the awarded contract. It is the case of the Petitioner that he required cement for completion of rest of the construction work and accordingly made repeated demands to the Respondent for the same. It is also the Petitioners case that cement could not be procured from the open market, without the permission of the Respondent, which was never given, and hence the Petitioner was unable to execute the contract. The Respondent forfeited the earnest money, subsequent to which the Petitioner invoked the arbitration clause. The Sole Arbitrator held that the contract had been unlawfully terminated and awarded damages to the Petitioner. The Single Judge of the Karnataka High Court did not make the award the rule of the court and held that the forfeiture of the earnest money by the Respondent was correct; this finding was upheld by the Division Bench also. The matter was appealed to the Supreme Court of India. The Hon’ble Court referred to Section 51 of the Indian Contract Act and held that the contractor was not bound to complete his end of the work, unless and until the Respondent supplied the raw materials to them. The Court referred to the case of Muhammed vs Pushpalata (Civil Appeal No.4581 of 2008) wherein the Supreme Court interpreted Section 51 of the Indian Contract Act to conclude that tenant would not be liable to pay higher rent to the landlord, unless and until the landlord handed over peaceful possession of the repaired bathroom to such tenant. The Court also referred to Section 52 of the Indian Contract as per which reciprocal promises are to be performed in manner stipulated in the contract, and if not specified as per usual industry practise. The Hon’ble Court said it is part of ordinary business common sense also that first cement must be supplied to the contractor, subsequent to which only work can be completed by the contractor. The Court referred to the case of Nathulal vs Phoolchand (1970 AIR SC 546) wherein the Apex Court had held that full payment of the property would only be effected when seller changed the land records in favour of the purchaser, that being as per Section 52 of The Indian Contract Act, and the natural course of business transaction. CONCLUSION- The above-mentioned Case Laws help us understand the judicial intricacies which the Courts grapple in regard to contracts containing reciprocal promises. Contractual relationships being essentially in nature of a barter system often entail these kinds of reciprocities. The National Courts have set aside arbitral awards on the grounds on erroneous interpretation of reciprocity of contracts, signifying their seminal importance. It is also pertinent to mention herein that after the 2015 Amendment to the Arbitration & Conciliation Act, 1996 erroneous interpretation of contract will fall under patent illegality under Section 34 of The Arbitration & Conciliation Act, 1996. In the recent case of South East Asia Marine vs Oil India Limited (Civil Appeal No. 900/2012) the Supreme Court held that “erroneous interpretation of contract will be considered to be a patent illegality under Section 34(2) of The Arbitration & Conciliation Act, 1996, which will result in the arbitral award being set aside. A similar view was taken by the Supreme Court in Patel Engineering Ltd vs NEEPCO (SPECIAL LEAVE PETITION (C) NOS. 3438-3439 of 2020) wherein also the Court held that “erroneous interpretation of contract is a Patent Illegality, which goes to the very root of the dispute. ” The test for Patent Illegality was elucidated by Justice Nariman in the celebrated case of Ssangyong Engineering vs NHAI (Civil Appeal No. 4779 of 2019) where Justice Nariman said “Patent Illegality is something which goes to the very root of the dispute, shocking the conscience of the Court”. [1] Advait is an Advocate working in the litigation team at Kesar Dass Batra. He deals in matter related to Arbitration, Civil Suits and Criminal. He has argued matters before the District Courts of Delhi and the Delhi High Court. He can be reached at advaitgh@gmail.com

Vikash Kumar & Saksham Shrivastav[1] Introduction Perhaps of all the protocols under an Infrastructure Arbitral Proceeding, computation of damages is the most vital for both, the parties as well as the arbitrators. It is a reflection of how judiciously the arbitrator has acted. Infrastructure arbitral proceedings are mostly built around big and complex transactions, wherein the computation of damages is usually done through the use of mathematical formulas which are primarily – Hudson, Emden and Eichleay. These are the most frequently used and widely applicable formulas as they are recognised and accepted by various International Arbitration Institutions and FIDIC (International Federation of Consulting Engineers). Despite of such formulas for calculating damages there are limited options when it comes to formulas to calculate compensation, as the arbitrators are independent of their application, varying from the facts and circumstances of the cases. It is an accepted position that different formulas can be applied in different circumstances and the question as to whether damages should be computed by taking recourse to one or the other formula, depending on the facts and circumstances of a particular case, would eminently fall within the domain of the Arbitrator. If the learned Arbitrator, therefore, applied the Emden Formula in assessing the amount of damages, he cannot be said to have committed an error warranting interference by this Court. This, however, gives rise to a lacuna. On one hand, there is no binding law that specifies the usage of any particular formula and on the other hand, the arbitrator cannot act whimsically as he is expected to act judiciously. So what happens if the arbitrator applies a new formula, not recognised by any arbitration institution, in order to balance the interest of both the parties? Recently Hon’ble Delhi High Court while determining the validity of an award in the case of MS SMS Ltd. v. Konkan Railways Corporation Ltd. dealt with similar circumstances. Background of the Case In the aforesaid case, the North Eastern Railway was implementing the Construction of the Udhampur-Srinagar Baramula Rail Link (“USBRL”) project in the State of Jammu and Kashmir. The construction of this project was to be done by the Konkan Railway Corporation Limited (“Respondent”) on behalf of the Northern Eastern Railway. The construction of the project ‘Kotli Tunnel’ was awarded by Respondent to M/s SMS Infrastructure Ltd. (“Petitioner”) vide contract agreement dated 23.01.2004 at the cost of Rs. 133.07 Cr. The completion period as given under the contract was supposed to be of 36.5 (thirty-six and a half) months i.e. it was expected to be completed till 26.12.2006. However, upon reaching the said deadline, only 10% of the work was completed. An extension was granted up to 31.12.2008 without levying any penalty, despite the Petitioner contending that it would require a minimum of 4 years to complete the project i.e. by December 2012. Petitioner suspended the work in May 2007 due to financial crisis, and unsafe conditions. Later Respondent foreclosed the contract vide letter dated 05.10.2007 citing technical impossibility. Disputes were raised by both the parties and thereafter an Arbitral Tribunal was constituted to adjudicate the disputes. In the arbitration proceedings, Claimant-Petitioner prayed for compensation for idling of Machinery and Manpower, loss of overheads, loss of profits for the balanced work, loss due to the damage and non-capitalization of material due to delay, claim on interest and cost of Arbitration Proceeding. The Petitioner claimed Rs. 75.66 Cr. vide letter dated 31.12.2008. This was followed by Respondent submitting a counterclaim for Rs 21.65 Cr. against the claimant during the Arbitral proceeding. Award by Learned Arbitrator The Learned Tribunal held that no joint/agreed records were available to prove the idling, and therefore it worked out a “notional proportionate loss” that would have resulted due to underutilization. The Learned Arbitral Tribunal applied this formula after taking the following factors into account. Firstly, The Claimant was expected to work off 85% of its machinery cost of approximately Rs. 16 crores over a period of 96 months. If the contract had not been foreclosed, it was expected to complete the work by December 2011, as per the letter dated 16.4.2007. Secondly, since both parties contributed to the delays at various stages, the Tribunal deemed it to be fair if the loss on account of under-utilization of machinery was shared by both parties. Thirdly, as per the Tribunal, the Respondent could only be held liable for a delay of 10 months, in arriving at the decision to foreclose the contract. Finally, after considering the cost of machinery as Rs.16 Crores (as per joint note), 50% of the “notional idling cost” for 10 months was worked out to Rs.70.83 lacs (i.e. 16 crores x 85/100 x (10/96) x 5) and was awarded by the Learned Tribunal for idling machinery. Similarly, Arbitral Tribunal also awarded Rs.6 lakh to the Claimant for the idling of manpower following the above method. Claimant-Petitioner challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 before Delhi High Court for being illegal and alternatively praying for the amount of the compensation to be enhanced. Issue Whether the use of “Notional proportionate loss” formula for the computation of damages is valid in the eyes of law? An Erroneous Formula: Court’s View The court after taking into account the arguments of both the parties and careful perusal of the award of the learned arbitrator observed that the formula of “Notional proportionate loss” applied by the learned Tribunal suffered from three fundamental flaws in the assumptions that it relied upon: a) The Tribunal took into consideration a period of only 10 months i.e. time taken by the Respondent to foreclose the contract on 05.10.2007 after the Claimant suspended the project work and applied this period in its formula. This was done despite the specific finding by the learned Tribunal that on encountering the shear zone at Portal 1, from April 2005 to December 2006, both the Claimant and Respondent were grappling with the situation and trying to find methods to control it. Thus, the period to be taken into consideration to compensate the Claimant for the idling on its resources should at the very least run from April 2005 from when, admittedly, the shear zone was encountered and the work under the contract had to cease; b) The Tribunal held that the Claimant could only utilise 85% of its machinery, cost of which was approximately Rs.16 crores, over a period of 96 months i.e. till December 2011 when the Claimant was expected to complete the Contract work as per letter dated 16.04.2007. This period of 96 months was completely arbitrary and hypothetical as the period of the contract was clearly stipulated in the contract as 36.5 Months. c) The Tribunal then observed that as both the parties have contributed to the delays at various stages, the loss on account of under-utilization of machinery should be shared by both the parties. The Court weighed in on the aforesaid parameters and held they were wholly unfounded in law. It further held that for the purpose of computing the damages suffered from idleness, the only inquiry that was relevant was an inquiry as to the extent to which the contract remained idle i.e. un-operated and, the resource deployment that thus remained idle. Admittedly, the works contract could not be operated to the extent of 93% on account of shear zone etc. Resultantly, the Claimant was denied their contracted right to recover the cost through contractual realizations to the extent of 93%. The Court declared that the Tribunal had applied completely misplaced, ad-hoc and perverse concept of “notional idling cost” to determine the compensation to be paid to the Claimant. Analysis Firstly, since the Arbitral Tribunal concluded that the foreclosure of the contract cannot be attributed to the Claimant-Petitioner, it should have awarded the compensation claimed by the Petitioner on the account of idling of machinery and manpower in a reasonable manner. Secondly, in the opinion of the authors, the approach of the Tribunal is totally flawed as the Respondent had made no investment towards the machinery and therefore multiplying the entire amount of compensation by ½ is completely unsustainable. Therefore, the final conclusion drawn by the arbitral Tribunal is perverse and incorrect. Also, the compensation awarded by the arbitral Tribunal is highly inadequate for Petitioner given the investment made for the project. Since the circumstance of the idling of manpower and machinery was not disputed by the Respondent during the arbitral proceedings, the learned Arbitrator should have taken a more practical and feasible approach while awarding the quantum claimed on the amount of idling of machinery and manpower. Given the circumstances, ideally, the Arbitral Tribunal should have awarded the amount asked by the claimant in this issue. The Hon’ble Court also set aside the award on the grounds of ‘Patent Illegality’ as expounded in the landmark judgment of Ssangyong Engineering & Construction Co. Ltd. v. NHAI. Patent Illegality stems from an award that is found to be based on no evidence at all or an award that ignores vital evidence in arriving at its decision. On such grounds, the award is said to be perverse and liable to be set aside. This also suggests that a grave blunder was done by the arbitrator by using imaginary and impermissible parameters, like in the present case, application of the Notional Proportional Loss formula that did not have any known precedent. Conclusion After analysing the facts, the line of reasoning of both the Tribunal as well as the Court, and the legal precedents, the authors conclusively put that Arbitrator should not have deviated from the standard formulas for computation of damages. This not only deprived the parties of the proper remedies but also trapped them in pursuit of the justice system. Such irregularities on behalf of the Arbitrators while computing the damages can result in unnecessary litigation and wastage of resources. This can be inferred from the fact that in this case, since the court does not have the power to remand the parties to go back to the arbitral Tribunal, now the Petitioners need to again initiate a fresh arbitration proceeding. [1] Vikash Kumar is a final year student at National University of Study and Research in Law, Ranchi and can be contacted at vkbairagi23@gmail.com. Saksham Shrivastav is a third year student at National University of Study and Research in Law, Ranchi and can be contacted at saksham.shrivastav@nusrlranchi.ac.in.

- Ragini Agarwal[1] An Analysis of the Delhi High Court judgment of MMTC Ltd. v. Anglo-American Metallurgical Coal Pty. Ltd. (Mar. 2, 2020) **1st Runner Up Case Summary Writing Competition June 2020** In an interesting take on the scope of judicial interference in arbitral awards, a Division Bench of the Delhi High Court in MMTC Ltd. v. Anglo-American Metallurgical Coal Pty. Ltd.[2] hearing an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (“the Act” or “the Arbitration Act”) set aside an arbitral award on the grounds that it conflicted with the public policy of India. Five years ago, in an application under Section 34 for the same award, J. Muralidhar had ruled that no grounds for interference could be found.[3] This contrast raises debatable questions on how the spread of ‘public policy’ is construed by different judges in the same factual matrix. It also raises concerns about the threshold of ‘perversity’ and grant of interest by the arbitrators. However, before delving into the questions that this judgment raises, it shall be useful to have a look at the facts that gave rise to this case. Brief Facts MMTC Ltd. (“the Appellant”) had entered into a Long Term Agreement (“LTA” or “the Agreement”) with Anglo-American Metallurgical Coal Pty. Ltd. (“the Respondent”) for the purchase of freshly mined and washed coking coal for three delivery periods of a year each starting July 2004 and ending in June 2007. The Appellant exercised the option of extending the agreement for a further period of two years in 2007. On account of the global financial crisis in 2008, the fifth delivery period was extended to September 2009 and the price for the coal was USD 300/MT. Thereafter, by an ad hoc one time supply agreement, a second shipment was sent during the fifth delivery period in which part of the coal was to be delivered at USD 300/ MT whereas the other part was to be delivered at USD 128.25/MT. The LTA prescribed a procedure for delivery which included nomination of vessel by the Appellant and the acceptance of the same by the Respondent. The Appellant was responsible for taking delivery of the coking coal at the port of delivery. To facilitate the same, the Respondent was responsible for informing the Appellant about lay days and quantities six weeks in advance. These obligations became relevant in the Arbitral Tribunal’s decision when dispute arose. Averments of Each Side The Appellant contended that in July, 2009 it had written to the Respondent informing about receiving certain quantities of coal along with a request for additional deliveries in August and September 2009 taking into consideration the pending backlog of the fifth delivery period. The Respondent acknowledged the request with respect to the July 2009 delivery but as regards “revert shortly.” Subsequent failure to revert caused the Appellant to request for confirmation for August 2009 which the Respondent was again, unable to confirm. A similar pattern was repeated in September 2009. Since the fifth delivery period ended then, the Appellant issued a letter to the Respondent stating that the LTA has come to an end. When the Respondent submitted proposal for fresh delivery of balance quantity that was the backlog of the fifth delivery period, the Appellant considered the terms onerous. The exchanges between the parties could not fructify into a fresh contract. In March 2010, the Respondent issued notice seeking USD 78,720,414.92 along with interest @12% on account of alleged breach of the Appellant’s obligation to lift the desired quantity of coal as envisaged under the LTA. The damages were based on the calculation of difference between the allegedly prevailing market price and the contracted price. The Respondent contended that the contracted quantities were available for supply and that it was the Appellant who had failed to lift the quantities as agreed under the LTA. This allegation was denied by the Appellant. In November 2010, the Respondent reiterated its demand. More than three years after the termination of the Agreement, in September 2012, the Respondent appointed an arbitrator to decide the claims. Procedural History The Arbitral Tribunal decided by a 2:1 majority that the Appellant was liable for breach of the Agreement. On appeal under Section 34 to set aside the award, the Single Judge Bench of the Delhi High Court refused to set aside the Award. On the issue of limitation raised before it, the Court stated that the Appellant’s statement terminating the agreement was merely to convey that the delivery period was coming to an end.[4] In no way did it denote that the obligation of the parties under the LTA had come to an end and that was clear from the future correspondences as well.[5] On the question of repudiation of contract, the majority Award had examined the correspondences between the parties with letters by the Appellant stating “in short, we are not denying our obligation. The request is only for staggering the time frame for lifting...” as well as the testimonies to arrive at the conclusion that that there was no repudiation of the contract by the Respondent. On account of the same, it could not be said that the Appellant was released of its obligations thereunder. The Single judge thus, dismissed questions of ‘perversity’ and of bias vitiating the Award and concluded that there were no grounds made out under Section 34 of the Arbitration Act. It was against this order that the Appellant appealed before the Division Bench of the Delhi High Court under Section 37. Analysis of the Issues Raised · Scope of a Section 37 Interference The scope of interference under Section 37 is narrower than Section 34 since as an appellate forum, the Court under Section 37 can only intervene if the judge’s decision exceeds jurisdiction or is manifestly contrary to Indian law or substantive provisions.[6] On the general principles of the said Section, the Division Bench recognised that it is to forbear from interfering in conclusions of fact arrived at by the Arbitral Tribunal.[7] This forbearance, however, in the opinion of the Court was not an absolute restriction, since in the very next paragraph it deemed it fit to interfere with the Arbitral award on grounds of correcting an infirmity that went to the root of the award and rendered the award perverse. The court was cognizant that it could not re-appreciate evidence, however, when the award was based on ‘no evidence’, interference under Section 37 would be justified.[8] · Threshold of Perversity ‘Perversity’ as a ground for interference was under the umbrella of public policy and not ‘patent illegality’, prior to the Arbitration and Conciliation (Amendment) Act, 2015[9] (the Amendment Act). The award having been rendered prior to the Amendment Act was not covered by the ground of patent illegality as defined under Section 34(2A) of the Arbitration Act. Notably, perversity as a ground for setting aside awards was present even under the Arbitration Act, 1940.[10] In ONGC Ltd. v. Saw Pipes[11] and subsequently, ONGC v. Western Geco International Ltd.,[12] (“Western Geco”) it was held that ‘public policy’ under Section 34(2)(b)(ii) of the Arbitration Act was given an expansive interpretation with ‘perversity’ as a ground within public policy being tested on the Wednesbury principles of reasonableness. Further, an award must be as per the terms of the contract, otherwise it is liable to be set aside.[13] In the instant case, the Division Bench stated: “(I)t is also our understanding that if the court finds that a conclusion or inference drawn by the Arbitral Tribunal, even if upheld in proceedings under section 34, is not supported by a plain, objective and clear-eyed reading of documents, this court would not flinch in correcting such conclusion or inference, especially if it goes to the root of the matter.”[14] (emphasis supplied). In the opinion of the Court, the Arbitral Tribunal had read irrelevant imaginary words into the communication between the parties. The Court looked at the three e-mails upon which the decision of the Arbitral Tribunal hinged and stated that on a plain reading, the Respondent had not stated anywhere that it did not have the coal at a specified price. Instead, it had stated that it did not have coal for the remainder period of 2009 and in such a circumstance it could not be said that the Appellant was in breach of the terms of the Contract.[15] Essentially basing the award on evidence constructed from existing evidence or “imaginary interpolations” could not be allowed and such an interpretation would be liable to be set aside as perverse. The first rule of interpretation would be to look at plain text and if any ambiguity is found within, to look at the intendment of the parties.[16] Such a definition of perversity is supported by the decision of the Supreme Court in Associate Builders v. DDA[17] wherein the juristic principle that an award would be perverse if it ignores vital evidence in decision making or bases its finding on ‘no evidence’. After the Amendment Act of 2015, however, as held in Ssangyong Engg. & Construction Co. Ltd. v. NHAI,[18] and later approved in Vijay Karia v. Prsymian Cavi E Sistemi SRL[19], Western Geco is no longer considered good law. Reliance on the same would have been per incuriam had the award not been rendered prior to the 2015 Amendment. Irrespective, in the opinion of the author, the interpretation of the Delhi High Court seems to give another possible view of the case scenario. It is an established principle on the ruling on ‘perversity’ that the standard of ruling is very strict and there have been instances such as the Rashtriya Ispat Nigam Limited v. Dewan Chand Ram Saran[20] wherein despite not agreeing with the opinion of the Tribunal, the Court refused to interfere since the view was a ‘possible’ one, even if not ‘plausible’. · Quantum of Damages and Grant of Interest The Appellant had contended that Respondent had not produced any evidence to prove the market price but had instead relied upon the negotiation letters and correspondence related to nearly a year before the alleged date of breach to arrive at the market price through some averages. The Division Bench ruled that the award of the claim of USD 78,720,414.92 as damages along with interest pendent lite and interest on principle sum for the future @15% amounting to a total of approximately INR 748 crores was unjustified as it was based on incorrect factual footing.[21] Interestingly, on the question of damages, J. Muralidhar had ruled in 2015 that the Arbitral Tribunal had given adequate reasons on the issue of quantum of damages. Author’s Comment This judgment presents an interesting take on the recourse that the parties have against arbitral awards. While on the one hand, it is an accepted position that Section 34 was introduced to limit the scope of interference of the court in decisions so as to ensure that the arbitral awards have finality and the commercial wisdom of opting for arbitration does not fail; on the other hand, the widening scope of the interpretation of the Courts’ in analysing such awards flies in the face of such rationale. The decision of the Court in the above case seems to cross the thin balance that separates the boundaries of interpretation that is reasonably possible and not at all possible. What the Single judge bench of J. Muralidhar considered a reasonable appreciation of evidence, the Division Bench in the instant case considered not at all possible. The Division Bench failed to contextually interpret the emails as the Tribunal had done and instead ruled that a plain, and only plain approach would be reasonable. Such a ruling seems to be faulty approach to providing recourse against arbitral awards on limited grounds and smacks of judicial entitlement. The Bench did not even consider if the view was a ‘possible’ one, even if not entirely plausible. A better approach would have been to investigate whether the Respondent could have been referring to availability under the ad hoc arrangement in the emails, as had been considered by the Tribunal and the Single Judge Bench. The arbitrator is the ultimate master of quantity and quality of evidence to be relied upon. At the same time, an interpretation of perversity is also an interpretative exercise. A detailed examination on considering the evidence is not warranted in an application for setting aside awards. A fine balance between the scope of two interpretations must be found with established principles for deciding the same. Role of courts in ensuring that the arbitral awards do not interfere with established principles of justice cannot be gainsaid. Courts in exercise of their power should ensure that in dealing with cases of perversity, the scope of interpretation does not become akin to a Matryoshka doll with each case revealing new aspects considering which awards can be interfered with. [1] Ragini Agarwal is a law student pursuing B.A. LL.B. (Business Law Hons.) at National Law University Jodhpur. She can be reached at raginiadm@gmail.com. [2] FAO(OS) 532/2015 & CM.APPL 20560/2015 dt. Mar. 2, 2020 (GS Sistani and Anup Jairam Bhambhani JJ.) available at http://164.100.69.66/jupload/dhc/AJB/judgement/02-03-2020/AJB02032020FAOOS5322015_175403.pdf. [3] O.M.P. 790/2014 dt. Jul. 10, 2015 available at https://indiankanoon.org/doc/94251561/. [4] Supra, n. 3 at ¶34 - 35. [5] Id., at ¶36. [6] Morepen Laboratories Limited v. Phafag AG, 2013 (136) DRJ 668. [7] Supra, n. 2 at ¶19. [8] Id., ¶29. [9] W.e.f. Oct. 23, 2015 available at http://www.adrassociation.org/pdf/acact2015.pdf. [10] Arosan Enterprises Ltd. v. Union of India, (1999) 9 SCC 449. [11] (2003) 5 SCC 705, ¶30,31,64,74. [12] (2014) 9 SCC 263, ¶39, 40. [13] National Thermal Power Corporation v. Siemens, 2012 SCC OnLine Del 5686, ¶47. [14] Supra, n. 2, at ¶20. [15] Id., at ¶25. [16] Id., at ¶27,34, relying upon observations of Supreme Court’s decision in Smt. Kamala Devi vs. Seth Takhatmal & Anr., (1964) 2 SCR 152. [17] (2015) 3 SCC 49, ¶31. [18] (2019) 15 SCC 131. [19] 2020 (3) SCALE 494. [20] (2012) 5 SCC 306. [21] Supra, n. 2 at ¶35.

- Shagun Singhal and Khushbu Turki[1] **Best Entry Case Summary Writing Competition June 2020** INTRODUCTION On 2 March 2020, the Delhi High Court, in the case of MMTC v. Anglo American Metallurgical interpreted the scope of perversity as per the pre-2015 amendment law. While doing so, the Court considered the scope of “imaginary” evidence in perverse decisions. The authors contend that the interpretation given by the Courts has cautioned the arbitrators to solely deduce their reasoning based on plain evidences, thereby minimising the chances of judicial errors from taking place in the upcoming disputes. To establish this, the authors have divided the paper into four parts - Part I explains the origination of perversity and its interpretation by the Courts over the years; Part II highlights the facts and decisions of the arbitral tribunal and the Courts in the current case; Part III analyses the decision of the Court and also comments on its relevance in the current position of law and finally, in Part IV, the authors conclude by affirming that the principle of “imaginary evidence” as enunciated in the current case, if applied to the existing law, shall make the ground of “perversity” extremely lucid and uncomplicated for Courts to understand and interpret. This summary is premised on the fact that the principles enumerated by the Court while relying on the pre-2015 amendment law is applicable to the present scenario i.e. the post 2015 amendment law. ORIGINATION OF THE “PERVERSITY” PRINCIPLE In Renusagar Power Co. Ltd v. General Electric Co.[2] (‘Renusagar’) the Supreme Court dealt with the issue of setting aside an award on the ground of public policy, for the first time. Since the term itself appears to be vague and ambiguous, the Court adopted a narrow approach and stated that this defence should be invoked only in exceptional circumstances. The Court further elaborated that such exceptional circumstances would include – “a contravention of the fundamental policy of India law, public interest of India, and justice and morality.”[3] This defence was thereafter incorporated in the Arbitration and Conciliation Act, 1996 (‘the Act’), under Section 34(2)(b)(ii). However, the restriction affirmed in Renusagar was revised in the case of Oil & Natural Gas Corporation Ltd v. Saw Pipes Ltd. (‘Saw Pipes’), wherein the Court introduced “patent illegality” as a new ground under public policy. It concluded that an award passed in contravention to the substantive law of India could be set aside under patent illegality in Section 34, provided the illegality goes to the root of the matter.[4] Widening the horizon of public policy further, the ground of “fundamental policy of Indian law”, as mentioned in Renusagar was interpreted in the case of Oil & Natural Gas Corporation Ltd. v. Western Geco International Ltd. (‘Western Geco’) The juristic principles of judicial approach, natural justice, and the Wednesbury principle of Reasonableness were included in the concept.[5] Adopting a judicial approach essentially meant that the Court must have acted in an impartial manner, without being influenced by any extraneous considerations. The duty of the Court to decide the matter in accordance with the principles of natural justice implies that the Court must apply its mind while arriving at a decision i.e. it should record the reasons behind the decision. The Wednesbury principle asserted that decisions that are unreasonable will deemed to be perverse in nature.[6] Thereafter, in Associate Builders v. Delhi Development Authority (Associate Builders’), the Supreme Court held that a decision would be vitiated by perversity if it was found to be based on no evidence or on evidence which was so unreliable that no reasonable person would depend on it.[7] ‘PERVERSITY’ POST THE 2015 AMENDMENT IN THE ACT The numerous judgements delivered (Saw Pipes, Western Geco and Associate Builders), the increasing uncertainty amongst investors regarding the potential for judicial interference with arbitral awards, and the possible erosion of faith in arbitration proceedings in India prompted an amendment of the Arbitration and Conciliation Act, 1996 (‘the Act’).[8] Section 34(2) was amended to include "Explanation 2", as well as sub-section 2A. The amendment had a two-fold impact: Explanation 2 stipulated that the evaluation of an award on the ground of violation of the fundamental policy of Indian law, would not entail a review on its merits. Further, “patent illegality appearing on the face of the award” was incorporated as a ground for setting aside awards arising out of domestic arbitrations under sub-section 2A.[9] The amendment, therefore effectively curtailed the scope of interpretation given in the previous judgements, thereby ensuring that arbitral awards would no longer be reviewed on the merits of the dispute. After the modification of Section 34 through the 2015 Amendment Act, the Supreme Court further clarified that the post amendment law shall apply only to cases filed after 23 October, 2015.[10] For the petitions filed prior to that date, the pre-amendment law was to be applicable. In Ssangyong Engineering and Construction Co. Ltd. v. NHAI[11] (Ssangyong) the Supreme Court observed that the amendment had in a way overruled the Wednesbury principle laid down in Western Geco. Therefore, the Court found it fit to bring perverse and irrational decisions within the ambit of “patent illegality”. While the Court in Ssangyong upheld the validity of the “no evidence test” of perversity stipulated in Associate Builders, it did not elaborate on what other situations might fall within the ambit of the perversity rule The authors shall now establish how the interpretation given by the Court in the present case of MMTC v. Anglo American adds to the scope of perversity of an arbitral award. FACTS OF THE CASE MMTC and Anglo American were parties to a long-term contract, pursuant to which MMTC was to purchase coking coal from Anglo American, at a price of USD 300 per metric tonne, over five delivery periods. Following a slump in the industry, the parties agreed to a one-time ad-hoc arrangement under which coal would be supplied at a discounted price of USD 128.25 per metric tonne. The obligation under the original contract continued separately. Sometime after the execution of the ad-hoc arrangement, MMTC requested Anglo American to supply the coal due in the fifth delivery period while referring to certain backlogs in the supply. Anglo American responded by stating that there was no coal available for supply for the rest of the year. Subsequently, Anglo American initiated arbitration proceedings against MMTC for breaching the contract by failing to lift the coal as per the existing agreement. The entire matter revolves around the interpretation of certain correspondence between the parties to determine whether MMTC can be held liable for breaching the contract. THE TRIBUNAL’S AWARD Based on the analysis of the testimonies and the e-mails exchanged between the parties, the Tribunal concluded that Anglo American’s statement regarding the non-availability of coal had been made in the context of the ad-hoc arrangement. The non-availability had been communicated for supplying coal at the ad-hoc price, and Anglo American had always been willing to supply coal at the price mentioned in the long-term agreement.[12] Although the e-mails made no specific mention of the ad hoc price, the tribunal stated that the same could not be interpreted literally, and had to be read in context of the parties’ previous dealings. It therefore held MMTC responsible for breaching the contract, and awarded Anglo American damages of USD 78,720,414.92 pendente lite and future interest and cost.[13] DECISION OF THE COURTS When the award was challenged by MMTC in the Delhi High Court, the single judge upheld the validity of the award and refused to set it aside under Section 34 of the Arbitration and Conciliation Act (‘the Act’). MMTC then preferred an appeal under Section 37 of the Act before the Division Bench.[14] The Bench observed that while requesting for coal, MMTC had clearly referred to backlogs and requested for the supply due in the fifth delivery period. Moreover, since there was no mention of any specific or reduced price in the e-mail, there was no reason for Anglo American to assume that the coal was being demanded at a reduced price, especially when the entire correspondence was clearly in relation to the original contract between the parties. The Bench concluded that the arbitral tribunal had acted in an arbitrary and capricious manner by reading words into written communications between the parties, and omitting to read what had been written in plain and unambiguous terms.[15] Relying heavily on the reasoning given in Associate Builders, the bench held that the tribunal had made a perverse award, and therefore, set it aside. REASONING GIVEN BY THE COURT Since the 2015 amendment is applicable only to the cases filed after 23 October, 2015,[16] the Court in the present case relied entirely on Associate Builders while evaluating the validity of the Tribunal’s award. The Tribunal concluded that the non-availability of coal had been communicated with reference to the ad-hoc price, by relying solely on the testimony of the Respondent’s witness, which appeared to be directly contravening the textual evidence presented before the Tribunal. It further refused to acknowledge the plain and unambiguous text of the e-mail, in which the appellant had clearly referred to the supply of coal under the original contract and mentioned certain backlogs as well. By acting in this manner, the arbitrators tried to read words into the parties’ correspondence in order to cull out some imaginary context in which the correspondence had been made. The Tribunal thus adopted an approach which could not be accepted as an alternate or possible view of interpreting the factual matrix. Accordingly, the Division Bench was completely justified in concluding that the award made by the Tribunal was perverse in nature. CONTRIBUTION TO THE CURRENT JURISPRUDENCE The Court in Ssangyong had held that while perversity of the award can no longer be an independent ground for setting aside the award, it would be subsumed within the ambit of patent illegality. Therefore, the authors submit that even though the High Court relied entirely on the principle of perversity to set aside the award in MMTC v. Anglo American, the judgement significantly adds to the existing jurisprudence on perversity and patent illegality in arbitral awards by expanding the scope of the perversity principle. This has been done in two ways as First, the Court held that any deduction of the arbitrators based on imaginary evidence constructed by them from the existing evidence shall be deemed to be perverse. Second, while placing reliance on Section 94 to 98 of the Evidence Act, the Court asserted that the reasoning given by the arbitral tribunal should be assisted by a plain, objective and clear-eyed reading of the documentary evidence, in order for it to not be considered as perverse in nature.[17] This essentially implies that the dealings or the communication between the concerned parties may be evaluated on the basis of the circumstantial evidence only when such an interpretation does not disregard a plain and objective reading of the other evidence. The Court while interpreting patent illegality under Section 34, has repeatedly stated that the error apparent on the face of the award should not be trivial in nature and must go to the root of the matter.[18] This implies that in order to set aside a perverse award, the perversity must go to the root of the matter. When an arbitrator relies on imaginary or constructed evidence to decide a matter, such an approach drastically changes the entire context in which the rights and liabilities of the parties are determined. The perversity in such cases clearly goes to the root of the matter and can thus lead to the setting aside of the patently illegal award. Thus, the authors assert that even though the current case relied entirely on pre-amendment laws to arrive at the conclusion, the findings of the Court are relevant in the post amendment scenario as well. Such an interpretation of perversity, shall caution the arbitrators against interpreting evidences based on their psyche and to rely only on plain readings. Further, this interpretation along with reasoning given in Associate Builders, shall also aid Courts in recognising unreasonable and irrational decisions that rely on imaginary evidences, thereby ensuring that the wide latitude given to arbitrators while interpreting the facts, does not lead to the miscarriage of justice. CONCLUSION It is now an established principle that the arbitral awards cannot be interfered with in a casual and cavalier manner, that is solely based on an alternate view of the facts of a case.[19] While it may be contended that the Court’s interpretation in the current case is an alternate view, it is pertinent to examine the tribunal’s reasoning before arriving at such a conclusion. The tribunal in the current case, by relying on made-up evidences rendered a decision based on its own psyche, making its analysis to be subjective in nature. This prompted the Courts in rectifying the error committed by the tribunal by adjudging it’s reasoning to be ‘perverse’ and ‘irrational’. Moreover, the Court put forth the difference between an impossible view based on a fictional evidence and an alternate view based on a contrasting interpretation. It is therefore concluded that the inclusion of “imaginary” evidences within the ground of perversity has made it extremely cogent for the Courts to revise similar errors, provided an arbitrator commits an alike mistake. This case is also an exhibition on how the contemporary law regarding perversity is still developing in spite of recurrent changes over the years. Since Court intervention in arbitration is a highly debated topic, the judges are coming up with possibilities of minimal intervention by laying down all circumstances under which a decision rendered by an arbitral tribunal can be erroneous. The authors therefore conclude that this progression of interpretation of perverse decisions in the current case will aid Courts in setting aside irrational awards diligently and thereby minimise the occurrence of judicial errors in the upcoming disputes. [1] Shagun Singhal & Khusbu Turki, second year law students of National Law Institute University, Bhopal, can be reached at shagunsinghal023@gmail.com & khushbuturki14@gmail.com. [2] AIR 1994 SC 860. [3] Id. [4] (2003) 5 SCC 705. [5] (2014) 9 SCC 263. [6] Id. [7] (2015) 3 SCC 49. [8] Law Commission of India, “246th Report on Amendment to the Arbitration and Conciliation Act, 1996” (August, 2014). [9] Id. [10] BCCI v. Kochi Cricket Pvt Ltd. (2018) 6 SCC 287. [11] (2019) 15 SCC 131. [12] MMTC v. Anglo American Metallurgical Pvt. Ltd., FAO(OS) 532/2015 & CM. APPL 20560/2015, MANU/DE/0664/2020. [13] Id. at 1. [14] Id. [15] Supra note 12 at 43. [16] Supra note 10. [17] Supra note 12 at 47. [18] Supra note 11. [19] Dyna Technologies Pvt. Ltd. v. M/S Crompton Greaves Ltd. (2019) SCC OnLine SC 1656.

-Malcolm Katrak[1] Recently, the Supreme Court of India, in the case of Patel Engineering Ltd. v. North Eastern Electric Power Cooperation Ltd. (Special Leave Petition (C) No. 3584 of 2020) (Patel Engineering), affirmed the position taken in Ssangyong Engineering & Construction Co. Ltd. v. National Highways Authority of India [(2019) 15 SCC 131] (Ssangyong). Even though Ssangyong has been discussed previously here and here, it is necessary that the ‘public policy’ aspect of Ssangyong’s decision be analyzed. This analysis would be specific in nature, dealing only with the aspect of ‘patent illegality’ under the public policy head. For this reason, understanding the arguments and decision in Patel Engineering is important. Primarily, Patel Engineering deals with the issue of an arbitral award being set aside under Section 34 of the Arbitration and Conciliation Act, 1996, (“the Act”) on the grounds of patent illegality or perverseness. Facts The respondent and original applicant had filed three applications, under Section 34 of the Act, before the Additional Deputy Commissioner (Judicial) Shillong (ADC), to set aside three arbitral awards passed against it in respect of certain packages. Through a common judgment, the ADC rejected the respondent’s applications for setting aside the three arbitral awards under Section 34 of the Act. Aggrieved by the said judgment, the respondent filed three appeals, under Section 37 of the Act, in the High Court of Meghalaya. Pertinently, the High Court allowed the respondent’s appeals and set aside the common judgment passed by the ADC on the ground that the awards were patently illegal. Thereafter, the petitioner filed special leave petitions (SLPs) before the Supreme Court, all of which were dismissed by the Supreme Court. After the dismissal of the SLPs, the petitioners filed multiple review petitions on the ground that the judgment of the High Court, allowing the respondent’s appeals, suffered from error apparent on the face of the record as it had not taken into consideration the amendments made to the Act of 1996 by the Arbitration and Conciliation (Amendment) Act of 2015 (“the Amendment Act, 2015”). The High court dismissed all the review petitions, which resulted in the petitioners filing another SLP in the Supreme Court. Analysis of the judgment The main contention of the petitioner was that the High Court relied upon the decisions of ONGC Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 605 (Saw Pipes) and ONGC Ltd. v. Western Geco International Ltd. (2014) 9 SCC 263 (Western Geco), which were no longer good law due to the Amendment Act, 2015. Essentially, Saw Pipes laid the foundation for the concept of ‘patent illegality’ under the expansive interpretation of ‘public policy of India’. Simply put, the ground of patent illegality is available under the statute for setting aside a domestic award if the decision of the arbitrator is found to be perverse or irrational (judging on general standards of reasonableness), the construction of the contract is such that no fair or reasonable person would take that view, or the view taken by the arbitrator is not even possible. On the same footing, the decision in Western Geco expanded the concept even further by providing a broad definition of ‘public policy of India’. The Amendment Act, 2015, provided statutory force to the concept of patent illegality as a ground for setting aside of arbitral awards by inserting Section 34 (2A) in the Act. However, this ground was not to be invoked in an international commercial arbitration seated in India nor could it be invoked to resist the enforcement of a foreign award. Interestingly, the Supreme Court, in Ssangyong, noted that the expansive interpretation given to the term ‘public policy of India’ in the Saw Pipes and Western Geco cases had been done away with and that a new ground of ‘patent illegality’ had been introduced, which would apply to applications under Section 34 filed after October 2015. The petitioner, in the present case, argued that since the Ssangyong decision enumerated that Saw Pipes and Western Geco are no longer good law, the High Court, by relying on the said decisions, had erred. However, rejecting this contention, the Supreme Court relied on its own interpretation of Ssangyong, stating that the ground of patent illegality, under Section 34, would be applicable to domestic awards. This means that the ground of patent illegality, to set aside an award, would be applicable only when the two parties are Indian entities. Therefore, the High Court, while setting aside the award on the ground of patent illegality, has considered the principles of the Ssangyong even though it may have quoted Saw Pipes and Western Geco to reach the said decision. Relying on Ssangyong, the Supreme Court rejected the contention of the Petitioner and concluded that if the award passed by the arbitrator suffers from the vice of irrationality, patent illegality could be applied as a ground for setting it aside. Ssangyong and beyond In my opinion, Ssangyong has cleared the air regarding the scope of public policy as a ground for setting aside of arbitral awards. It has brought the essential elements of Associate Builders v. DDA [(2015) 3 SCC 49] and BCCI v. Kochi Cricket Pvt. Ltd. & Ors.[(2018) 6 SCC 287] under its aegis. The former deals with interpretation of basic morality and justice arguments for setting aside an arbitral award and the latter deals with applicability of the 2015 Act, specifically, section 34. It seems that post Ssangyong, the Supreme Court has adopted a positive approach towards ‘minimal judicial interference’ policy. This can be witnessed through the Supreme Court’s reliance on Ssangyong in the decision of Vijay Karia & Ors. v. Prysmian Cavi E Sistemi SRL &Ors. (Civil Appeal No. 1544 of 2020), wherein the Court stated, “the foreign award must be read as a whole, fairly, and without nit-picking. If the said award has addressed the basic issues raised by the parties and has, in substance, decided the claims and counter-claims of the parties, then the enforcement must follow.” The Supreme Court, further, stated that the appeal ought to be rejected if the appellants indulge in a speculative litigation with the fond hope that by flinging mud on a foreign arbitral award, some of the mud so flung would stick. There is no doubt that there are several issues with Ssangyong, specifically, the problem with the minority decisions (which has been dealt with here). Another issue is that the judgment has been pronounced by a division bench (two judges), which always casts a shadow over the precedential value of the decision. Nonetheless, the decision has played an important role in streamlining the ‘minimal judicial interference’ principle. Moreover, by consolidating all the previous definitions of public policy and the applicability of same in varied instances, the judgment has already made a mark in the arbitral jurisprudence of India. The reliance of Patel Engineering on Ssangyong is just another feather in its cap. NAFED an anomaly If consistency is the cornerstone of the administration of justice, the Supreme Court, occasionally, tends to fiddle with its alignment. The case of National Agricultural Cooperative Marketing Federation of India v. Alimenta S.A.(Civil Appeal No. 667 of 2012) (NAFED) is an example of deviating from the charted path of Ssangyong. NAFED had an award passed against it by an arbitral tribunal, which was later upheld by the High Court of Delhi. Further, the High Court allowed for its enforcement and converted it into a decree, resulting in the appeal to the Supreme Court by NAFED. NAFED’s main submission before the Court was that it was unable to fulfil its contractual obligations in view of government’s refusal to permit it to export its commodity, and, therefore, the contract was void, resulting in no damages being awarded to the respondent. Accepting this contention, the Supreme Court, even after considering Ssangyong and Vijay Karia, held that the award was ex facie illegal, and in contravention of fundamental law of the country. The Supreme Court also ignored the decision of the Delhi High Court in Cruz City 1 Mauritius Holdings v. Unitech (2017) 239 DLT 649, which was referred to with approval in Vijay Karia, and which held that violation of “any particular provision or a statute” would not satisfy the “narrow width” of the public policy defence, particularly when the allegation was made with a view to set aside a foreign award. Conclusion In recent years, the Supreme Court has taken a pro-arbitration stance and, therefore, laid down decisions in the hopes of achieving the rule of finality. One such decision is Ssangyong, which is on the path to becoming the panacea for all public policy cases. There may be situations where judicial pronouncements tend to take a different path as seen in NAFED. However, such instances should be the exceptions rather than the norm. As Harish Salve, QC, in his latest conversation with Mr. John Beechey, mentioned, “Consistency must be there in all forms”. If a precedent has been set, there is no need to chop and change it; it must be given some time to stabilize and achieve finality. Ssangyong is one such judgment that creates confidence in the system and this confidence cannot be achieved without respect to the rule of finality. [1] Malcolm Katrak is an Assistant Lecturer at Jindal Global Law School. He has a joint LL.M. from Erasmus University, Rotterdam, and University of Hamburg as well as an M.Sc. in Law and Economics from the Indira Gandhi Institute of Development Research, Mumbai. Previously, he worked as a Law Clerk to Justice (Retd.) S.N.Variava, Former Judge, Supreme Court of India. The author can be contacted on this ID- mkatrak@jgu.edu.in

- Purbasha Panda[1] Staff Writer, The Arbitration Workshop A. INTRODUCTION Party autonomy is the plinth on which the entire edifice of arbitration proceeding rests. The concept of party autonomy allows a party to determine the nature of arbitral clauses as well as choice of procedure of arbitration subject to such safeguards which are necessary in public interest. With increasing complexity of contractual disputes, parties are incorporating varied kinds of arbitral clauses in their contracts. For example, some commercial contracts provide for arbitral clauses mandating a condition precedent of compulsory mediation or negotiation to resolve contractual disputes before invocation of arbitration or in case of construction contracts a hierarchical form of arbitral clause can be found which provides for tiers of arbitral proceedings for disputes arising out of a single contract. These kinds of arbitral clauses are often referred to as ‘multi-tier arbitral clauses’ or ‘escalation clause’. On 2nd June, 2020, a three judge Bench of the Apex Court comprising of Rohinton Fali Nariman J., S. Ravindra Bhat J. and V. Ramasubramanian J. finally decided on validity of such clauses and enforceability of awards arising out of such hierarchical arbitral proceedings. B. FACTUAL BACKGROUND OF THE CASE The instant case essentially dealt with a contract for sale entered between an U.S based corporation M/s Centrotrade Minerals and Metals Inc. [‘Centrotrade’] and Hindustan Copper Ltd. [‘HCL’] for delivery of 15,500 DMT of copper concentrate to be delivered at the Kandla Port in the State of Gujarat to be used by HCL for one of its plants situated at Khetri, Rajasthan. The consignments were delivered, post which disputes arose with respect to the quality of the goods delivered and subsequent to which the arbitration clause was invoked which provided for a two-tier dispute resolution clause. The dispute resolution clause provided that the disputes arising out of the contract has to be first referred to an arbitration seated in India to be presided by the arbitration panel of the Indian Council of Arbitration and to be conducted in accordance with the ‘Rules of Arbitration of the Indian Council of Arbitration’, in case the parties disagree with the arbitral award rendered through this arbitration then either would have a right to appeal to a second arbitration seated in London to be conducted in accordance with ‘Rules of Conciliation and Arbitration of the International Chamber of Commerce [‘ICC Arbitration Rules’]. Centrotrade invokes the arbitral clause and the arbitration proceedings seated in India rendered a Nil award, after which ‘Centrotrade’ invoked the second part of the arbitral clause as a result of which ‘ Mr. Jeremy QC’, was appointed as the arbitrator in accordance with ICC Arbitration Rules, while this arbitration proceeding was going on HCL filed a suit at a lower court at Khetri, Rajasthan challenging the arbitration clause, further a revision petition was filed on this order before a Division Bench of the High Court of Rajasthan restraining the appellant from proceeding further with the arbitration proceedings, and an ad-interim ex-parte order was passed by the High Court of Rajasthan to this effect. HCL refused to participate in the arbitration proceedings taking aid of this order. This order was finally vacated by the Apex Court. The arbitrator ‘Jeremy QC’ referred the matter of stay of arbitration to the ICC court which then allowed the arbitrator to continue with arbitral proceedings. An arbitral award was delivered as a result of these arbitration proceedings in favour of Centrotrade. The arbitral award adjudged that HCL would have to a pay a particular sum inclusive of interest for purchase price of the first and second shipment, in addition to this HCL would also have to pay a certain sum inclusive of interest in respect of demurrage due on first shipment. When Centrotrade was trying to enforce this award in India, HCL filed objections to the enforcement application filed by Centrotrade before a Single Judge Bench of High Court of Calcutta, which rejected the objections and as a result of which the award became executable in India. However, this order was brought to challenge before a Division Bench of Calcutta High Court and the court firstly held that the award passed by the arbitration proceedings seated in London is a ‘foreign award’. Further, it held that both the arbitrators seated in India and London had concurrent jurisdiction and both the awards rendered through these arbitrations are mutually destructive of each other, as a result of which neither can be enforced. The Division Bench of Calcutta High Court set aside the judgements of the Single Judge Bench. Further, Centrode went on to file a ‘Special Leave Petition’ before the Apex Court and the matter finally came before a Division Bench of the Apex comprising of S.B Sinha J. and Tarun Chatterjee J. Two separate judgements were delivered by S.B Sinha J. and Tarun Chatterjee J. which was reported in ‘Centrotrade Minerals & Metals Inc. v. Hindustan Cooper Ltd.[2] S.B Sinha J. in his judgement held that multi-tier arbitration clauses are not enforceable under the legislative framework in India and would be violative of Section 23 of the Indian Contract Act, 1872 and therefore, he went on to dismiss the appeal filed by Centrotrade. However, Tarun Chatterjee J. had a drastically different take on this issue. Tarun Chatterjee J. essentially decided the entire matter in light of four issues which are (a) Enforcement of a multi-tier arbitration clause under the legislative framework of India. (b) Whether the award rendered by the arbitrator seated in London would be considered to have arisen out of an appeal from the award rendered by the arbitrator in India? (c) If the ICC award was a ‘foreign award’? (d) Whether HCL was given proper opportunity to present its case during the course of arbitral proceedings? Tarun Chatterjee J. held that a multi-tier arbitral clause is permissible under the legal framework of India. The award rendered through the second tier of the arbitral clause is in nature of an appeal. The ICC award is indeed a foreign award. However, he held that HCL was not given proper opportunity to present its case and therefore, he went on to dismiss the appeal filed by Centrotrade. In light of the fact there was disagreement in opinions of both the judges, the matter was then referred to a three judge Bench of the Apex Court comprising of Madan B. Lokur J., R.K Agarwal J. and Dr. D.Y Chandrachud J. This case was reported as Centrotrade Minerals and Metals Inc v. Hindustan Copper Ltd.[3]. The three-judge bench confined themselves only to the question of enforceability and validity of a multi-tier arbitration clause under legal framework in India. The other questions relating to enforceability of such an award and if proper opportunity was given to HCL to present its case before the arbitrator in the arbitration proceedings seated at London was decided by another bench of the Apex Court comprising of R.F Nariman J., S. Ravindra Bhat J. and V. Rama Subramanian J. in a judgement delivered on 2.06.2020 reported as M/S Centrotrade Minerals & Metals v. Hindustan Copper Ltd.[4] C. PRIMARY ISSUES BEFORE THE COURT · Validity of a multi-tier arbitration clause under the legal frame work in India The validity of the two-tier arbitration clause was brought before the three-judge Bench of the Apex Court in 2017. The Bench comprising of Lokur J., R.K Agarwal J. and Dr. D.Y Chandrachud J. upheld that multi-tier arbitration clauses are valid under the legal framework in India. Various underlying questions also cropped up while the Bench delved into deciding enforceability of the two-tier arbitration clause like (a) Form and conclusiveness of an ‘arbitral award’, (b) Difference or similarity between the term ‘arbitration result’ and ‘arbitral award’(c) Scope of party autonomy in formulating the nature of an arbitration clause. The court firstly aimed to verify the scope of appellate arbitration procedure within the confines of the A&C Act. The counsel for HCL relied on Section 34(1), Section 35 and Section 36 of the A&C Act and formulated an argument that a combined reading of all the three Sections points towards an interpretation that an arbitral award can be set aside only through an application made to the court, thereby excluding a two-tier arbitration clause. The court rejected such an interpretation and held that the use of word ‘only’ in Section 34(1) of the A&C Act has been misinterpreted by the counsel for HCL. The court marked that the import of Section 34(1) of the A&C Act nowhere suggests that only recourse of a court has to be taken to set aside an arbitral award. The court held that the fact that recourse to a court is available to a party for challenging an award does not ipso facto prohibit the parties from mutually agreeing to have a second look at an award with the intention of an early settlement of disputes and differences. The court further marked that the intention behind Section 34(1) of the Act is to avoid subjecting to stop a party from challenging an award at multiple forums. Further, the court held that the term ‘final and binding’ in Section 35 of the A &C Act does not mean final for all intent and purposes. The finality is subject to any recourse that an aggrieved party might have under a statute or an agreement providing for arbitration in second instance. The court also delved into Article 34(1) of the UNCITRAL Model Law and marked that the sole recourse against an arbitral award is definitely through an application for setting aside to be a made to a court, however this does not preclude a party to have a procedure of appeal of second instance to an arbitral tribunal. This analysis led the court to decide on another question of law which is, in the instant case ‘Whether the arbitral award rendered by the first tier of arbitration is final and binding?” The counsel for HCL contended that the award rendered through first tier is final and binding and an appeal cannot arise from it to another arbitral tribunal, it can only be set aside under Section 34 of the A&C Act, shedding light on ‘finality of an award’ the court relied on ‘Uttam Singh Duggal & Co v. UOI[5] and held that once an award is made on a subject matter, no action can be started on original claim which has been subject matter of reference , also the fact that arbitration proceedings occur in two steps, the first step involves arbitration proceedings giving rise to an award, the second step involves enforcement of an award. However, though relying on this case the Apex Court marked that an arbitral award does not have to be enforced to attain finality, it can be final when it conclusively determines substantive rights and claims of the parties. In the instant case, the arbitration clause provided that in case the award rendered by the first-tier process is not agreeable by any of the parties, then the parties can appeal against such an award. In the instant case a NIL award was delivered by the first-tier arbitration. The court held that the arbitral award rendered by the first tier of arbitration is not final and binding and such conclusiveness of an arbitral award was made a function of the party autonomy with respect to the nature and form of the arbitration clause. This brought the court to another question which is, ‘How far can party autonomy be stretched to define nature of an arbitration clause, can it possibly be extended to include an appellate procedure in an arbitration clause?’ The court while examining the scope of party autonomy in defining an appellate procedure in an arbitration clause held that party autonomy is the backbone of arbitration procedure. The concept of party autonomy does not only extend to determining the (a) proper law of contract (b) proper law of arbitration agreement or (c) law of arbitration proceeding, otherwise known as curial law but it also extends to determining nature of an arbitral clause. It further relied on Reliance Industries Ltd v. UOI[6] which marked that [..] The terms of a contract have to be understood in a way that parties want or intend for the terms to be understood or interpreted. In agreements of arbitration, party autonomy is the grund norm. Another question that stemmed from this analysis is ‘Whether incorporation of such a clause in the principal contract and an arbitral award arising out of such an arbitral clause violates public policy’. While deciding on this question, the two-tier arbitration clause was also put to test by the Apex Court on touchstone of violation of public policy. The court made the following observation in this regard-: If terms of contract would be violative of public policy. If the terms affect (a) substantive content of the award (b) terms in a contract which purport to exclude or restrict the supervisory jurisdiction of the court (c) terms which require the arbitrator to conduct reference in an unacceptable manner (d) terms which purport to empower arbitrator to carry forward procedures or exercise power which lie exclusively with the courts (e) terms which require an arbitrator to make reference in an unacceptable manner (f) terms which purports to empower the arbitrator to carry forward procedures. The Apex Court held that the implication of a two-tier arbitration and an award arising out of such a clause does not fall into any of the categories defined for the purposes of testing violation of public policy. The court marked that it does not find anything fundamentally objectionable in preferring and accepting a two-tier arbitration system. Thus, the court fundamentally upheld an appellate arbitration procedure. The court also marked it was not the first time in this case that a multi-tier arbitration clause had come before the court. It marked that in case of commodity trade arbitration multi-tier arbitration had become the norm. It also relied on ‘Report on Working Group on International Contract Practices: On work of its third session’ [ 1982]. India happened to be one of state members of the UNCITRAL Working Group. It was mentioned in the report that ‘Parties are free to agree that the award may be appealed before an arbitral tribunal of second instance and that model law should not exclude such practice although it was not used in all countries. However, they did not include a specific provision in this regard.’ In the instant case, it was observed by the Apex Court that India was a state party of the ‘Working Group’ in 1982. The framers of the A&C Act who legislated and drafted the Act during the nineties must have been aware of this very fact and therefore there is no such provision in the Act that exclusively prohibits a two-tier arbitration from the scope of the act. The court also recognized the fact that the award delivered by the arbitrator seated in London was a ‘foreign award’. · Enforcement of an arbitral award arising out of a multi-tier arbitral clause Before, we delve into this issue it is imperative to have a preliminary idea on how a foreign award is enforced in India. In case, a party receives a foreign award from a country which is signatory to the ‘Convention on the Recognition and Enforcement of Foreign Awards, 1958’ [‘New York Convention’] and the award is made in a territory which has been notified as a convention country by the Government of India, the award would then be enforceable in India. A foreign award is defined under the A&C Act under Section 44(1). The enforcement of such foreign award is initiated by filing an execution petition, such an execution petition is filed under Section 47, 48 and 49 of the A&C Act. In the instant case, it is at this stage that HCL had filed objections with respect to enforcement of the foreign award, post which the Single Judge Bench of Calcutta High Court rejected the objection raised by HCL, after which an appeal was preferred before a Division Bench of Calcutta High Court which had held that the award was liable to be set aside on the ground mentioned under Section 48(1)(b) of the Act. This particular question came before the Supreme Court by way of an SLP before a Division Bench comprising of S.B Sinha J. and Tarun Chatterjee J., post which the matter was referred to a three judge Bench comprising of Lokur J., DY Chandrachud J. and R, K Agarwal J. This Bench primarily dealt with the question of validity of a tier-arbitration clause and further ordered the question of enforcement of the foreign award must be put before another Bench. Hence the question ‘Whether the award passed by the ICC arbitrator was liable to be set aside under Section 48(1)(b) of the A&C Act?’ Three primary arguments were made by HCL in this matter (a) Setting aside of the arbitral award on ground of Section 48(1)(b) of the Act. (b) The applicability of the stay order by the Rajasthan High Court on the arbitration proceedings at London (c) The duty of the arbitrator at London to determine the question of jurisdiction as a preliminary position. Before deciding on the veracity of HCL’s first argument, the court ventured to draw distinction between provision under A&C Act for setting aside a domestic arbitral award and a foreign award under the confines of the Act and the legislative policy behind this distinction. This was primarily important as later the court went to define the scope of interference with enforcement of an arbitral award in light of this distinction. With respect to interference with a foreign arbitral award, relying on the case of Vijay Karia vs Prysmian Cavi E Sistemi Srl[7] (Vijay Karia Case) which was also decided by the same bench, the court marked that in case of domestic arbitrations, once an award is passed, the award would be in operation, there is no requirement to get the award enforced. However, in case of ‘foreign arbitrations’, once an award is passed an enforcement application has to be filed. The legislative intent behind drawing this distinction is to ensure that a person who belongs to a convention country and who has gone through a challenge procedure of the said award in its country of origin must then be able to recognize or enforce this award. In light of this legislative policy, the court ventured out to define the scope of challenge to a foreign arbitral award under Section 48 of the Act. In the instant matter, Article 136 of the Constitution of India was invoked by the parties, hence the question that arose before the court was ‘Whether Article 136 should be used to circumvent this legislative policy?’. The court observed that keeping the abovementioned legislative policy in mind, the Supreme Court’s jurisdiction under Article 136 to interfere with a foreign award should be narrowly and specifically defined. To determine if a party has been given proper opportunity to present its case. The Apex Court relied on two foreign judgements and the recent ‘Ssangyong Case’. In the case of Minmetals Germany Gmbh v. Ferco Steel Ltd.[8] , it was held that the test to determine if a party has been given proper opportunity to present its case is to check if the procedure adopted by the arbitrator is contrary to rules of natural justice, also the fact that the enforcee has been prevented to present its case owing to matters outside its control. Further the court has also referred to the case of Jorf Lafar Energy Co. v. AMCT Export Corp. herein the test laid down was that the conduction of arbitral proceedings should not violate due process. The court further relied on the ‘Sangyong Case’ to define the object of Section 48(1)(b) of the Act. The court held that the expression ‘was otherwise unable to present its case’ occurring in Section 48(1)(b) cannot be given an expansive meaning and would have to be read in context and colour of words preceding the said phrase. The court marked that this expression is a facet of natural justice principles which would be breached only if a fair hearing was not given by the arbitrator to the parties. The court further ruled that if no opportunity is given to deal with an argument that goes to the root of a matter or evidence then this might result in denial of justice. The court held that a narrow meaning has been given to Section 48(1)(b) in light of pro-enforcement approach led down in ‘Vijay Karia Case’. The court took an assessment of the sequence of events in the arbitration proceedings to decide if HCL was provided proper opportunity to present its case. The court found that on 03. 05. 2001, the arbitrator had directed HCL to serve submission along with documents, a time table was set out for this but by 30.07.2001 no defense submission or supporting evidence were filed. Until August 2001, respondents did not participate in arbitral proceedings. On 09.08.2001, the arbitrator informed the parties via fax that it is going to pass the award. It is after this point that HCL requested for extension of a month to put forward their defense. HCL was granted time till 31.8.2001, during this time HCL had also sought extension till 12.9.2001, however on 13.9.2001 the arbitrator received the arguments of HCL via fax. These submissions were taken into consideration in the award even after the deadline as the 9/11 attacks had happened during that time, hence considering this precarious situation and the implication of this incident on communication services the arbitrator took into account all these submissions made by HCL. The court marked that the arbitrator had been extremely fair in conduction of arbitral proceedings and the rejected the ground raised by HCL under Section 48(1)(b) of the Act for setting aside the arbitral award. The second argument put forward by the counsel for HCL was that the effect of stay order of the Rajasthan High Court on conduction of arbitration proceedings needs to be taken into consideration in light of its refusal to become part of the arbitral proceedings even after repeated invite to participate. The court rejected this argument and held that the order of Rajasthan High Court was directed against the parties and not against the arbitrator. This stay order was also vacated by the Apex Court subsequently. The court marked that the arbitrator had proceeded in light of green signal received by the ICC Court. The third argument which was put forward by the counsel of HCL was that the London arbitrator ought to have determined the question of jurisdiction as a preliminary question. Firstly, this plea was rejected by the court on the ground that it was taken before the Apex Court in the instant matter for the first time. Secondly, the court marked that there was no mandate to support the fact that arbitrator had sought to take up the plea as to jurisdiction as a preliminary objection which should be decided over other matters. Thus, this plea of HCl was also rejected by the Apex Court In light of all these arguments, the Apex Court held that the judgement of Tarun Chatterjee J. which had held that HCL was not given a proper opportunity to present its case cannot be sustained in law and the appeal filed by Centrotrade should be allowed and that the foreign award should be enforced. D. ANALYSIS AND CONCLUDING REMARKS Before, we understand the implication of upholding the validity of a multi-tier arbitration clause. Let us try to understand the object of a multi-tier arbitration clause. Multi-tier arbitration clauses are incorporated in contracts to provide for a dispute resolution framework wherein escalation in tiers of the arbitral clauses are provided for increasing complexity in a contractual dispute. There are different kinds of escalation clauses incorporated in contracts. For example, some escalation clauses provide that the parties must undergo a pre-mediation or negotiation process before they start the arbitration proceedings so as to exhaust all opportunities of amicable settlement of dispute before arbitration. These kind of escalation clauses can provide for an opportunity for resolution of disputes in a more informal setting, thus it can prove to be cost effective to the parties to the extent that it can possibly avoid an arbitral proceeding. In case of governmental construction contracts, we often find that there are tiers of dispute resolution. In these, kind of contracts it is usually seen that a party has to approach a departmental authority for redressal for his grievance before approaching an arbitral tribunal. These clauses are aimed at avoiding a possible arbitration proceeding and providing preliminary means to settle the dispute. In light of all this, the crux of the ratio upholding these clauses is that party autonomy as an essential feature of arbitration does not only extend to determining the nature of arbitral proceedings but also extends to formulating the nature of the arbitral clause. If we take a look at the arbitral clause in this instant case, then we can find that the arbitral clause is two tiered. The first tier provides for an arbitration in India and in case the parties disagree with the award arising out of this arbitration proceeding then they can go for an arbitration seated in London which would deliver the final award. It is imperative to note that both these arbitral proceedings are of the same nature and intensity. There is no escalation in terms of the intensity of the arbitration proceeding in the clause, there is no informal or non-adversarial methods provided for amicable settlement or resolution of disputes before arbitration proceedings are commenced, hence it is dubious as to how this clause allows for dispute prevention, moreover such an appellate procedure also allows for the arbitration proceedings to continue for a greater interval of time as opposed to a single tier arbitration clause, which again is clearly in conflict with one of the primary objectives of the A&C Act which is speedy resolution of disputes. This analysis again brings us to the question that “Can party autonomy be exercised to formulate a kind of arbitral clause which might not be in spirit of one of the basic objectives of the Act?”. These questions are again before the courts to answer. [1] Purbasha is a Staff Writer at the Arbitration Workshop. She can be reached at purbasha.nusrl.13@gmail.com. [2] (2006) 11 SCC 245 [3] (2017) 2 SCC 228 [4] Civil Appeal No. 2562 of 2006 decided by the Supreme Court of India on available at https://main.sci.gov.in/supremecourt/2004/19375/19375_2004_34_1501_22350_Judgement_02-Jun-2020.pdf [5] 72 (1998) DLT 798 [6] (2014) 7 SCC 603 [7] 2020 SCC OnLine SC 177 [8] (1999) 1 All ER (Comm) 315 : (1999) C.L.C. 647

Mr. Panda, welcome to the Arbitration Workshop! We appreciate the opportunity to share your perspective with our readers at an exciting moment, where new discernible trends pertaining to arbitration are emerging and particularly when online dispute resolution is finally establishing itself as a credible option in this COVID Era. Q.1. Before we delve in, may we request you to kindly introduce yourself and tell us about the origins of your interest in the field of International Arbitration? A.1. I have been working in the litigation field since I started working as a lawyer in the year 2008 after graduating from the first batch of Hidayatullah National Law University, Raipur, Chhattisgarh. Prior to that, I completed my Secondary schooling from DAV Public School, Cuttack, Odisha and High Secondary from Stewart Science College, Cuttack, Odisha. I started my career in the Kolkata Office of the Firm (Khaitan & Co) and extensively practiced in the Original Side jurisdiction of the Calcutta High Court amongst other courts/ forums. This provided me good exposure to trial and final arguments on some very interesting legal issues involved in commercial civil suits, some of which were filed even before my birth. I recollect that arbitration then was considered secondary to litigation and was more popular for the high tea menu of the arbitration venue (mostly a colonial club or a five-star hotel) which lawyers and arbitrators enjoyed at client’s expenses after court hours. We have indeed come a long way since then. Arbitration emerged as an area of alternate dispute resolution over the second half of the last decade and today, you are unlikely to come across a commercial contract without arbitration being designated as the course for dispute resolution under the contract. I found that arbitration provided space for in depth and detailed argumentation with the undivided attention of the panel to the matter at hand and allowed a lot more leeway for technical argumentation. I found this appealing both from the perspective of my clients as well as from my perspective in terms of development of my advocacy skills of how to approach a matter. Specifically, in the case of international arbitration, I have found that parties are a lot more comfortable resolving dispute through arbitration and are apprehensive of taking part in proceedings before the domestic courts. With my developing interest in arbitration over the years, and work involving international clients, I also began working in the field of international arbitration in addition to commercial litigation and employment, which are my other areas of focus. Q.2. In recent years, the issue of impartiality of party appointed arbitrators has come into sharp scrutiny, how valid is the criticism in the context of due process in International Arbitration. Could you also elaborate a little upon the thought process and deliberations that take place between Counsels and Parties while selecting an arbitrator in domestic, international arbitrations? A.2. As it is rightly said, “With great power comes great responsibility.” With arbitrators acting as a substitute to courts and with reduced judicial intervention to arbitral awards, the role of arbitrators has assumed significance like never before. There is a lot at stake for the parties who repose faith and trust on the arbitrators, that they will adjudicate their matters efficiently and will dispense justice fairly, reasonably and in accordance with the rule of law. Needless to mention, the independence and impartiality are the key hallmarks of an arbitral tribunal. It is also important to keep in mind that an arbitrator’s reputation is of utmost importance for him/ her to be selected by parties to resolve high stake disputes between them. Given the significance that the notion of impartiality carries in the career of an arbitrator, it is unlikely that too many persons shall choose to act in a manner that is biased or impartial. The increasing dependency on arbitration as a means to facilitate the adjudication of commercial disputes, has bestowed upon the courts the responsibility to give sanctity to this institution, by promoting independence and impartiality in the appointment of arbitrators. Having said this, there have been instances where questions of impartiality of the arbitrators have been raised in the recent past. However, given that the parties to an arbitration have the autonomy to appoint the tribunal, they also have the autonomy to remove an arbitrator if it can conclusively be shown that there is reason for such apprehension. Another issue I have seen is the inclusion of unilateral clauses in contracts. In this regard, the legislature has notably inserted Schedule V and VII into the Arbitration and Conciliation Act, 1996 (“1996 Act”), via its 2015 Amendment, to restrain the parties having a higher bargaining position, from influencing the adjudication process. These two Schedules, read with Section 12(5) of the 1996 Act, essentially lay down the qualifications of an arbitrator, viewed from the test of independence and impartiality. In simpler terms, if an arbitrator has an interest in the outcome of dispute, then his appointment will not be permitted in law. The judiciary has additionally complimented the legislative changes by taking a pro-active approach to promote the legislative intent. I was privileged to have advised and strategized the first case on the subject after the 2015 amendment was the Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Limited (Voestalpine case) reported in (2017) 4 SCC 665, wherein the Supreme Court ordered deletion of the arbitration clause that vested, in one party, the right to constitute a panel of persons out of which the arbitrator was to be appointed. It further directed the constitution of a broad-based panel, so that no party is given the charge to chart the process. Subsequently, in the case of Perkins Eastman Architects DPC & Anr v. HSCC (India) Ltd. (Perkins) reported in 2019 SCC OnLine SC 1517, the Supreme Court laid down a much welcomed principle, originating from the Voestalpine judgment, by holding that any person, having a substantial interest in the outcome of the dispute, shall have no authority to appoint the sole arbitrator, as it will hamper the rights of the other party to the dispute. However, a three judge bench of the same court, in the case of Central Organisation for Railway Electrification v. M/S ECI-SPIC-SMO-MCML (JV) reported in 2019 SCC OnLine SC 1635, has yet again opened the debate as regards validity and enforceability of unilateral clauses and appointment of arbitrators, which was answered previously in the Perkins judgment. In my view, it is high time that such obsolete clauses be done away with if we intend to demonstrate India as an arbitration friendly country. Q.3. What new technology or method could be introduced to assist arbitration lawyers in their practice especially given that in light of COVID-19 arbitration hearings have moved online? A.3. In my opinion we already have several available platforms to enable the smooth conduction of arbitrations virtually. For instance, various documents sharing platforms are already available for electronic bundles, like, video-conferencing platforms, ranging from customized hearing solutions offered by some providers (such as Opus, Transperect and Xbundle) to licensed publically available platforms to free-to-use platforms. Some organisations like the ICC, SCC, JAMS, AAA-ICDR and the LMAA, are using or proposing the use of commercially available services like FaceTime, Skype, Vidyocloud, Microsoft Team, Zoom, while others are offering more bespoke services – examples being SIAC, in collaboration with Maxwell Chamber’s Virtual platform, JAM’s EndisputeTM mediation platform, IDRC’s collaboration with Opus 2. One of the few impediments I foresee, however, is at certain stages of proceedings such as the recording of evidence. For instance, a party might, during the examination, feign a technical glitch, terminate the call and seek clarification from his/ her lawyer to guide him as to how best to answer the question. Alternatively, a third party may be prompting the witness being questioned, through another device, or by simply being physically outside the line of sight of the camera. In such a situation, despite having the best of technology, like AI proctored system, the entire process will fail. The Supreme Court of India, taking suo motu cognizance of the above issue but not in relation to arbitration particularly, vide its order dated 06 April 2020, directed the suspension of conduction of evidence through online mode. A possible solution to the same can be envisioned through the appointment of a Local Commission, who could be present to monitor the situation. All of the above can be explored and are useful for online hearings during COVID-19. Having said this, practically speaking, there is still a lot of reluctance to adopt, adapt and embrace technology amongst arbitrators (particularly adhoc ones) even for conducting procedural and other stages of an arbitration which are comparatively easier to conduct through virtual medium and with the prevalent situation, I am hopeful that slowly but steadily use of technology will help achieve the larger objective of efficient, inexpensive and expeditious adjudication through arbitration. Q.4. In recent years, Indian arbitral jurisprudence has been progressing towards pro-enforcement. Do you agree with this statement? If yes, could you please share some of your experiences which made you realise the same. A.4. Yes, I agree with the statement. This has been the recent trend barring a few exceptions here and there. There has been a move to make India a preferred destination for arbitration as is evidenced by the various amendments of the 1996 Act and laudable efforts of the judiciary to minimize interference and, particularly, the adoption of the principles enshrined in the Convention on Recognition and Enforcement of Foreign Arbitral Awards, 1958. The principle of reduced judicial interference imbibed in the New York Convention has been adopted both in letter and spirit by the Indian Courts now. These limited grounds of objections have also been incorporated in the Act under Section 48. Under the pre-amendment era, the Courts were sceptical about enforcement of foreign awards and usually preferred delving into merits of the case, consequently, interfering with its findings. This gathered a lot of criticism globally, specifically in terms of the judgment rendered in the case of Phulchand Exports v. OOO Patriot reported in (2011) 10 SCC 300. Later, steps were taken to slowly venture into a pro-enforcement regime with the Supreme Court’s decision (Bharat Aluminium Co. v. Kaiser Aluminium Technical Service reported in (2016) 4 SCC 126) settling the applicability of Part I to only Indian seated arbitrations. This is a celebrated decision as it cleared the air regarding the limited jurisdiction of Indian Courts with respect to foreign awards under Part II. Recently, the Supreme Court (Vijay Karia v. Prysmian Cavi E Sistemi Srl, reported in 2020 SCC OnLine SC 177) re-affirmed the pro-enforcement regime by delineating the scope of “due-process” objections that are available to a party under Section 48. It also held that courts have a discretion to enforce a foreign arbitral award even if certain grounds objecting to the same are made out. However, it is important that the judiciary proceed with its pro-enforcement outlook keeping in mind the sanctity of public policy and certain basic principles of law. International arbitral awards which are contrary to these basic tenets shall cause chaos and pave the way for judicial adventurism. Even in case of an application for setting aside an arbitral under Section 34 of the 1996 Act, the amendments to Section 34 and Section 36 of the 1996 Act in particular come as a welcome change with the intent of reduced judicial interference on very limited grounds and also doing away with the automatic stay the moment a challenge was filed, as was the case prior to the 2015 Amendment. The requirement of a mandatory application for stay of execution of the arbitral award and consideration and grant thereof subject to imposition of conditions like – pre-deposit of a percentage of the awarded sum is a good deterrent for the judgment debtors filing a challenge against arbitral awards as a matter of course. The courts have also taken a pro-active role where I have personally witnessed the reluctance of courts to interfere with arbitral awards and in some cases, do not even hesitate to dismiss frivolous and vexatious applications even in the admission hearing stage. Therefore, it can safely be stated that we have come a long way since what the position used to be particularly in the pre-2015 Amendment era. Q.5. In your experience, how prevalent are dissenting awards? Does it help to have a dissenting award in case of a challenge to the majority award? A.5. Speaking of international commercial arbitration, dissenting opinions are essentially unheard of. The sample size is so negligible that it does not warrant discussion. They are not very prevalent on the whole. They usually arise when there is a staunchly pro-State or pro-Investor arbitrator on the tribunal and either one of the State or investor has made a decent argument in an otherwise losing case. Usually, it is only in instances where it is almost impossible to find a middle ground that a decision will be unanimous. However, in fact, in most cases the decision is unanimous because a strong argument cannot be made for the losing side. Having said this, an award does not become more or less enforceable/ easy to challenge in view of it being a majority award as opposed to a unanimous award. It is a recognized principle that if there are two possible and legally tenable views on an issue, an award cannot be set aside on the basis that the majority award adopted one view, but the Court before which such an award is being challenged may have adopted the other. However in cases of apparent illegalities/ abnormalities in the majority award, it cannot be denied that a majority award does give the Court before which such an award is being challenged, an insight into the rationale of the arbitrator that forms the minority opinion, providing a more complete picture to the deciding Court. 2. As far as domestic arbitration is concerned, an “arbitral award” has always been construed as an award passed by the majority members of an arbitral tribunal (Section 31 of the Act provides for the same). Implying, a dissenting opinion, does not qualify as an award. In fact, it has been held time and again that a minority award is in the nature of an opinion and is not binding in nature and hence cannot be relied upon in proceedings under Section 34 of the 1996 Act. It is a settled position of law that it is not permissible to look into at the minority award while considering a petition to set aside a majority award. [Chowgule Brothers v. Rashtriya Chemicals & Fertilizers Limited reported in 2006 (3) Arb. LR 457 and Fertilizer Corporation of India Ltd., New Delhi v. I.D.I. Management (U.S.A.) reported in AIR 1984 Delhi 333 (DB) and National Highways Authority of India v. Som Datt Builders- NCC- NEC (JV) reported in 2014 SCC Online Del 2733] In fact, there are plethora of judgements which affirm the position that the courts while hearing a Section 34 application, can only quash the award and not correct it. Therefore, the position is clear, courts cannot replace the majority award with minority opinion, but they can very well refer to it, while deciding a Section 34 application. Be that as it may, dissenting opinions can always be relied upon by parties while making their submissions and Courts may refer to the minority opinion while considering the Section 34 application, though the same is not binding as stated above. Q.6. In our experience as Tribunal Secretaries, we have often witnessed the adversarial nature of arbitration proceedings, which often entail exchanging harsh words between counsel on different sides. How should a relatively less experienced counsel approach such a difficult situation especially when its peer opposing practitioner is a senior in the bar? A.6. An arbitral proceeding is expected to be a less formal set-up as compared to a typical litigation in a court room. Like the judges regulate the conduct of proceedings in a court, the arbitral tribunal regulate the conduct of arbitration proceedings. Usually, the arbitrators are seasoned professionals in their respective field and do interject to ensure that the proceedings are conducted in a manner by which the counsel do not go personal and are not disrespectful to one another. I have always believed that if you are well prepared for the matter, you can take on any counsel on merits irrespective of his/ her seniority. In my experience, the arbitral tribunal can see through and gauge your preparation levels and noise levels and drama do not help the cause. However, in case one is faced with such scenarios, one could resort to preliminary discussion on the code of ethics that a lawyer is expected to follow, be it courtroom or an arbitral proceeding. Moreover, one should, through their demeanour, indicate to the other counsel that cases are won on merits and not by employing profane language. As a key rule, one should always maintain their calm before the arbitral tribunal as one’s composed attitude is critical in such situations. Additionally, taking assistance of the arbitral tribunal may be advisable to regulate the conduct of the proceedings. In most cases, harsh words are only aimed at derailing or misleading a counsel and if one can ignore without losing focus, that would be the ideal course to follow. Q.7. In your experience and opinion does an academic background in arbitration hold any pivotal importance when it comes to arbitration practice? A.7. Yes, an academic background that is arbitration centric certainly gives one an edge. In my opinion, there are two essential aspects of an arbitration proceeding (similar to court proceedings)- understanding of law and the presentation. The former gets strengthened by having a strong academic background, which ensures that one is thorough with the basics of Arbitration. This background will definitely provide one a head-start in their research work, which would be of great help in urgent matters. However, I strongly believe that personal interest and temperament of learning and exploring the subject with interest is of greater significance than academic background. Practical experience in handling matters in the original side of courts, particularly the trial/ evidence stage gives much needed exposure for effectively handling arbitration proceedings. This coupled with strong first principles and domain knowledge of substantive laws like – Contract, Specific Relief, etc helps in breaking down complex legal issues involved in voluminous arbitration claims into smaller propositions which are easier to address in pleadings, evidence and arguments. Q.8. Moving ahead, the issue of costs involved in Arbitration has also come under sharp criticism, with practitioners often complaining that the costs involved in arbitration are extravagant. Do you agree and to what extent? What possible legislative and practical innovations, in your opinion, counter the issue of rising costs? A.8. The problem of costs is undeniably prevalent but has significantly reduced in the recent times. Costs are fundamentally viewed in terms of the (i) advocate’s and tribunal’s fees (ii) legal costs. The Legislature has been proactive in addressing the issue at hand and for the same, inserted Schedule IV to the 1996 Act, which provides for the calculation of the arbitrator’s fees. Uncertainty regarding the calculation of cost in the case of a sole arbitration, still prevails despite the amendment. Though in reality, most of the arbitrators in adhoc arbitration give it a go-by and propose their own schedule of fees which is often imposed upon parties in the procedural hearing itself. However, the imposition of statutory timelines, promotion of institutional arbitration over adhoc arbitration and arbitration as a preferred mode of dispute resolution has brought in a lot of discipline and has ensured reduction of costs to a lot extent. The imposition of costs in favour of the successful party by arbitral tribunals has also been an effective deterrent against parties trying to delay the arbitral process. The large number of sittings, hearings spread over long time span, shorter duration of hearings (rather than having full day hearings for evidence and final argument stage), non-availability of dates of all the members of the tribunal, etc have been addressed to a lot extent and there is a lot more discipline in the arbitrators, counsel and the parties which has resulted in expeditious disposal of matters and in turn, reduced costs. In case of institutional arbitration, though at the first instance, various heads of expenses look alarming but the professionalism and efficiency with which the proceedings are administered and conducted saves substantial costs in the longer run. The entire process, despite being expensive, pales in comparison to the costs involved in seemingly eternal litigations. However, to uphold the efficacy of the process, certain measures must be resorted to in order to reduce the costs and the way forward in this regard could be mandating a percentage of arbitration fees in institutional arbitrations. Even though the legislature and judiciary refrain from interfering in private arbitration agreements, measures should be taken to rein in the unfettered discretion of arbitrators in charging fees, and adherence of the same to the model structure proposed in the Act. This system will ensure that parties are given an opportunity to choose arbitrator that suits their pocket and will go a long way in making the process friendlier and efficient. In fact, parties may also consider going for arbitral tribunals comprising of sole arbitrator rather than three member tribunals which increases the costs significantly. This would also save on time and costs as in case of a three-member arbitral tribunal getting mutually convenient dates for the members of the tribunal becomes an issue which defeats the purpose of arbitration as an alternative remedy. On a cost benefit analysis between an arbitration (through virtual medium) and a litigation (particularly in the prevalent times with suspended functioning of most courts), in my view the pros outweigh the cons of arbitration and therefore, should be a preferred mode of dispute resolution. In terms of practical innovations, the adoption and use of technology at most stages of the arbitration and promoting hearings through virtual medium would save on substantial costs and expenses usually incurred towards travel, venue and related incidental expenses in case of physical hearings at different cities/ countries. Q.9. Based on your experiences, do you have any recommendations for parties to consider when drafting an arbitration clause to include in their contract? A.9. Essential Check-list for drafting an arbitration clause: Must convey the intention to arbitrate; Must specify “Seat” and “Place” of arbitration. It should be, explicitly made clear that, the same is non-negotiable; Must contain the manner in which proceedings are to be carried out – institutional or adhoc – in the event that the parties opt for institutional arbitration, it is important to identify the arbitral institution; Must not contain unilateral clauses for appointment of arbitrators Must specifically set out the number of arbitrators and the procedure for appointment of the tribunal (in cases of adhoc arbitration); Must provide for language to be adopted for proceedings; In case of international arbitration, it must provide the law which would govern the proceedings. Q.10. What are the three steps in your opinion that one should undertake to start a career in international arbitration? Further, what are the three steps that one should undertake to develop an arbitration practitioner’s profile? A.10. To be able to start a career in international arbitration, following steps must be kept in mind: a) Be a scholar of international law, as much of international arbitration involves expertise in Private International Law. Specifically, for commercial arbitration, a person should be well attuned to Private International Law and Conflict of Laws Rules; b) International arbitration requires having the ability to network, especially with people outside of your country and having a culture very different from yours. Being able to deal with that becomes important; c) If one plans to work in investment arbitration in India specifically, it is important to understand that the government is not adept at knowledge about Bilateral Investment Treaties and the law surrounding it. Hence, one will need to know how to manage expectations and spoon feed them every step of the way. I believe that the latter part of the question has already been covered earlier. Just to sum it, careful observation of the under noted will definitely help one build a rich arbitration practitioner’s profile: a) One should first try and practice in the original side of the courts and then delve into arbitration as this will provide them great insights to the process of trial and final arguments; b) The above coupled with good domain knowledge on the first principles is a pre-requisite to become an intellectual practitioner. Importantly, having great command over Procedural laws and the nitty-gritties of contractual relations, will definitely help one, step-up their profile. c) The most crucial aspect which often gets overlooked – the adoption of a meticulous approach, must always be observed. In order to be a great practitioner, one should always pay attention to each and every detail; which can be achieved by reading voraciously. I have seen that matters which involve bulky correspondences are often lost owing to adoption of a non-meticulous approach, therefore adopting an attention-based meticulous approach becomes important, as, it is a game-changer. The Editorial Team at the Arbitration Workshop would like to thank Mr. Panda for taking out time from his busy schedule and for sharing his perspectives with us!