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- 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!

Analysis of Ashwani Minda v. U-Shin - Advait Ghosh[1] INTRODUCTION Institutional Arbitration has gained popularity in the world of arbitration, with institutions like ICC, LCIA, SIAC and JAMS gaining a stellar reputation across the globe for their expertise in administering arbitrations. The concept of an “Emergency Arbitrator” is usually provided for in these institutions and has also gained popularity as a concept. Parties who seek immediate relief move Emergency applications before a temporarily appointed arbitrator for adjudication of urgent interim relief. This article will endeavour to understand whether a party which has sought interim relief before the emergency arbitrator, and has been unsuccessful is entitled to move the National Courts for interim relief under Section 9 of The Arbitration and Conciliation Act, 1996 for the same relief or whether such application will be barred under the “Doctrine of Election”. This article will endeavour to explain this question through a recent judicial pronouncement of the Hon’ble High Court of Delhi in the case of Ashwani Minda vs U-shin. WHAT IS AN EMERGENCY ARBITRATOR/TRIBUNAL? The concept of Emergency arbitrator was first envisaged in the SIAC arbitration rules in 2010. The basic purpose of an emergency arbitrator or tribunal is to adjudicate on urgent interim relief which the parties seek, and which cannot wait for the formal appointment of a sole arbitrator or arbitral tribunal. Emergency applications have now increasingly become a commonplace feature in all arbitral institutions and usually the reliefs which are sought through emergency arbitration are in the nature of preservation orders, freezing orders, Mareva injunctions and general injunctive relief. Indian Arbitral institutions like the Indian Council of Arbitration and Delhi International Arbitration Centre also have provisions for emergency arbitrations in their rules. WHAT IS THE MEANING OF DOCTRINE OF ELECTION? The Doctrine of Election is a branch of the rule of Estoppel, it is essentially an branch of equity jurisprudence. It means that when several remedies are available to a litigant arising out of the same transaction the aggrieved party can choose either of them, but not both. The lectures of Maitland have succinctly described this position by saying as follows:-“election is the obligation imposed by a party by the courts of equity to choose between 2 inconsistent or alternate rights when there is clear intention of persons for whom he derives one, that he should not enjoy both. Case Analysis - Ashwani Minda v. U-Shin (Omp (I) (Comm.) 90/2020)[2] A. INTRODUCTION On 12th May 2020 Justice Jyoti Singh of the Hon’ble Delhi High Court delivered a landmark judgement as to the applicability of the Doctrine of Election to arbitration proceedings. It explains in a very nuanced manner the applicability of this doctrine to arbitration proceedings and makes interesting observations about the Courts power to grant interim relief when the arbitral tribunal has adjudicated on the same interim relief. It also discusses in what circumstances can parties be said to be excluded by conduct from Part-1 of The Arbitration and Conciliation Act, 1996? B. FACTUAL BACKGROUND OF THE CASE The applicant/petitioner in the said instant case entered into a joint venture agreement with the respondent, U-shin Ltd. The respondent is a Japanese corporation with the business of designing, developing and sale of control mechanisms for automotive machines. Respondent No.2 is also a Japanese company. Respondent No.1 is a wholly owned subsidiary of Respondent No.2. As per clause 5.1 and 5.2 of the JVA applicant no.1 was to have majority shareholding in the JV, and thus applicant would have complete control over the JV through day to day management activities as well as majority voting rights at directors and shareholders meetings. As per Article 7 of the said JVA-“Benefits and obligations under the agreement shall not be directly or indirectly transferred by any of the parties hereto without prior consent in writing, providing herein that nothing shall restrict right to transfer or assign benefits and obligations hereunder to any parent company or merged or subsidiary company”. On 10.04.2019 Respondent No.1 informed applicants that business integration has been duly executed, and Respondent No.1 had become the group company of Respondent No.2, which meant that Respondent No.1 was the wholly owned subsidiary of Respondent No.2. Thereafter Respondent No.1 was de-listed from the Tokyo Stock exchange and major changes were brought in Respondent No.1 by Respondent No.2, largely extending its control. On 16.12.2019 Respondent informed applicants that Respondent No.2 was obliged to give an open offer under the provisions of the Takeover Code. The Applicant considered this as a breach of the JVA and sought interim injunctive relief to prevent Respondents from purchasing shares via open offer from the Emergency Arbitrator appointed under Japanese Commercial Arbitration Association rules. The Emergency Arbitrator heard the submissions of the parties in detail and declined to grant interim relief in favour of the applicants/petitioners. The applicants filed a petition under Section 9 of The Arbitration and Conciliation Act, 1996 seeking inter alia the same relief that was sought from the Emergency Arbitrator. C. ISSUES BEFORE THE COURT AND THE DECISION OF THE COURT- 1) Scope of right of party to approach the Court for seeking interim relief when the arbitral tribunal/arbitrator has already declined to give the same interim relief:-The Hon’ble Court said that the parties have consciously chosen to tread on a particular path and they cannot now turn back because they have been unsuccessful. The Court said that the Doctrine of Election will bar the applicant from seeking interim relief as the same issue has been raised before the Emergency Arbitrator. All the issues have been conclusively dealt by the arbitrator vide detailed order and applicants cannot be permitted to take a second bite at the cherry. 2) Whether Part 1 of the Arbitration and Conciliation Act, 1996 has been consciously excluded by the agreement of the parties? The Court considered the arbitration clause entered into between the parties which provided for disputes to be resolved by arbitration as per rules of the Japanese Commercial Arbitration Association with seat in Tokyo. It is settled Law that when seat of Arbitration is situated in a particular country, only that particular countries courts can grant interim relief, as designation of seat is akin to an exclusive jurisdiction clause. The Court contended that it was conclusively held in the BALCO case that when seat of arbitration is held to be outside India, then Part- I of the Arbitration and Conciliation Act,1996 will stand excluded, and subsequently petition under Section 9 cannot be made in India. This position was somewhat altered by 2015 amendment to the arbitration act by virtue of Section 2(2) was amended and the applicability of certain provisions of the Arbitration Act like Section 9 was extended even to foreign seated arbitration, unless the parties have consciously decided to exclude Part 1 of The Arbitration and Conciliation Act,1996 by express or implied conduct. The Hon’ble Court after analysing the facts in the present case held that parties have consciously decided to conduct arbitration as per the Japanese Commercial Arbitration Association rules, with arbitration seated in Tokyo. The Hon’ble Court opined that the Dispute Resolution Mechanism in the present case envisages conduct of arbitration in Japan as per JCAA rules. JCAA rules provide a detailed mechanism for seeking interim and emergency measures, which was known to the parties when entering into the agreement. A perusal of the arbitration clause clearly expresses the intention of the parties to exclude applicability of Part-1 of the Act. Article 77(5) of the JCAA rules deem emergency measures to be interim measures granted by the arbitral tribunal when it is constituted. Justice Jyoti Singh further noted that applicants on 13.03.2020 filed an application for emergency measures and on 19.03.2020, the Emergency Arbitrator was appointed. After hearing both the parties the Arbitrator passed a very detailed order on 02.04.2020, wherein the interim relief which was sought was declined. The Hon’ble Court remarked-“when the Petitioner has already invoked the mechanism of the emergency arbitrator and invited a detailed and well-reasoned order by the Emergency Arbitrator, it is not for them to take a second bite at the cherry. Therefore Part-I of the Act has been ousted by the action of the parties themselves, and this petition is sans merit. 3) CONCLUSION Arbitration has become the preferred mode of dispute resolution amongst the business community. International Commercial Arbitration administered by institutions like SIAC, JAMS, LCIA have gained prominence for their effectiveness in governing these arbitrations and giving timely and effective resolutions. Parties to the arbitration clause or agreement often seek appointment of Emergency Arbitrator or tribunal for seeking urgent interim relief. The question which arises is whether the parties can seek interim relief before the Court under Section 9 of The Arbitration and Conciliation Act, 1996 when such relief has already been adjudicated by the Emergency Arbitrator or will it be barred under the Doctrine of Election? This question has to some extent been answered in the above mentioned case of Ashwin Minda where the Court declined to entertain the application for relief as the Court said the emergency arbitrator has comprehensively dealt with the relief sought, and the Court concluded that the subsequent petition under Section 9 would be barred as being stymied by the Doctrine of Election, and the Petitioner cannot be allowed to “take a second bite at the cherry”. There is another aspect herein which merits consideration, that is if the arbitral institution has rules which do not deem the emergency arbitrator or the tribunal to be the permanent tribunal, and purely deems it to be an “ad-interim” mechanism, then a subsequent application under Section 9 of The Arbitration and Conciliation Act, 1996 can be maintainable. It can also be put forth that if the emergency arbitrator or tribunal has adjudicated on interim reliefs which are wholly different from the one sought before the National Court or if such reliefs cannot be adjudicated effectively by the emergency arbitrator or tribunal, then despite the parties already having agitated their rights before the emergency arbitrator, a subsequent application under Section 9 of The Arbitration and Conciliation Act, 1996 would be maintainable before the National Courts and the Doctrine of Election would not be applicable. [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 [2] Available at http://164.100.69.66/jupload/dhc/JIS/judgement/14-05-2020/JIS12052020OMPICOMM902020_074007.pdf

- Kartikey Sanjeev Bhalotia[1] I. Introduction Section 7 of the Arbitration and Conciliation Act, 1996 (‘Act’) lays down the base of the Act by defining an ‘arbitration agreement’. Sub-section (5) to the said provision statutorily recognises the concept of ‘incorporation by reference’, i.e., incorporation of an arbitration clause into a contract by reference to a secondary document. The sub-section reads: “(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.” A perusal of the above shows that there are two requirements that need to be fulfilled before an arbitration clause can be said to have been incorporated in a contract by reference: a) the contract under consideration should be a written contract b) the reference made, i.e., the words used for referring to the document containing the arbitration clause should be such that it has the effect of making the arbitration clause contained in the said document a part of the contract While it might not be difficult to prove the first requirement, the Supreme Court of India has taken upon itself to lay down the various facets of what reference can be considered “such as to make that arbitration clause part of the contract”. This article analyses some of the landmark judgments of the Supreme Court which has delved into the aspect of ‘incorporation by reference’ in the Indian arbitration law jurisprudence. The article would then highlight how the existing standards laid down by the Supreme Court go beyond the statutory provision and therefore, requires a reconsideration for a push towards a more arbitration-friendly regime under the Indian jurisprudence. II. M.R. Engineers & Contractors Pvt. Ltd. v. Som Datt Builders Ltd. The Supreme Court in the case of M.R. Engineers & Contractors Pvt. Ltd. v. Som Datt Builders Ltd.[2] in the year 2009, was faced with the question whether in a contract where the Appellant was a sub-contractor of the Respondent, a general reference to the principal contract between the Respondent and the Public Works Department of Kerala, would be sufficient to be such as to have the effect of incorporating the arbitration clause contained in the principal contract. The court primarily tried to differentiate between “reference to another document in a contract” and “incorporation of another document in a contract, by reference”, and observed: “In the first case, the parties intend to adopt only specific portions or part of the referred document for the purposes of the contract. In the second case, the parties intend to incorporate the referred document in entirety, into the contract. Therefore when there is a reference to a document in a contract, the court has to consider whether the reference to the document is with the intention of incorporating the contents of that document in entirety into the contract, or with the intention of adopting or borrowing specific portions of the said document for application to the contract.” The Supreme Court in coming to its decision heavily relied on Russell on Arbitration (23rd edn, Sweet & Maxwell 2007) while analysing various English courts judgements and summarised the English law on the point. The court held that a general reference to a document in a contract does not automatically lead to the incorporation of the arbitration clause contained therein, the parties while incorporating terms of a document, say another contract, need to refer to the arbitration clause ‘specifically’. The Supreme Court, like the English Courts, laid down one exception to the rule and held that a general reference may be sufficient in cases where the document referred is a ‘standard form contract’ of some recognised trade associations or regulatory institutions. However, in laying down such a law, the court completely ignored their preceding analysis of the difference between “reference to another document in a contract” and “incorporation of another document in a contract, by reference”. Therefore, in relying on the English authorities the Supreme Court missed an opportunity towards laying down a simple test under Section 7(5). To put this into perspective, let us assume that there exists a contract wherein the parties have referred to another document which contains an arbitration clause. Further, the document which has been referred to is not a ‘standard form contract’ issued by a recognised trade association or regulatory institution. In such a scenario, there might arise two possibilities, firstly, the reference made by the parties is to some specific parts of the said document; secondly, the reference is of such wide import that it has an unequivocal effect of incorporating that whole document in the contract, i.e., any person referring to such a contract would be of the opinion that the parties have intended to incorporate each and every clause of the referred document in their contract. Now, if one was to apply the test of “reference to another document in a contract” and “incorporation of another document in a contract, by reference” which formed part of the obiter of the Supreme Court’s decision in M.R. Engineers the answer to the question whether the reference made by the parties have the effect of incorporating the arbitration clause contained in the said document would be simple, i.e., under the first case where a reference was made to a specific part, the incorporation would be limited to that specific part and no other part, while in the second case, as the reference was so general that it had the effect of incorporating that another document in the contract it would be held that it amounted to incorporating the arbitration clause like any other terms under that document. However, the Supreme Court went on to lay down a general law that placed a complete bar on general references, except in case of a standard form contract. Therefore, applying the same under the above scenario the document not being a standard form contract the courts would hold such reference as not having the effect of incorporating the arbitration clause. This poses certain problems, especially because the reasoning is based primarily based on the technical aspect of an arbitration clause that though it might be a part of a contractual document, it is a contract in itself. This misnomer about an ‘arbitration clause’ may be known to corporate lawyers, however, it will not be rational to assume that the same is the case for a business person. “All terms of the contract are hereby incorporated” does not usually mean “all terms but the arbitration clause, are hereby incorporated” for contracting parties. III. M/S. Inox Winds Ltd. v. M/S. Thermocables Ltd. The Supreme Court in the case of M/S. Inox Winds Ltd. v. M/S. Thermocables Ltd.[3] was again faced with a similar question of deciding whether the arbitration clause stood incorporated in the absence of a specific reference to the same. The Supreme Court in coming to its decision made reference to an English judgment in Sea Trade Maritime Corporation v. Hellenic Mutual War Risks Association (Bermuda) Limited (The “Athena”) and introduced to the Indian arbitration law jurisprudence the concepts of ‘single contract’ and ‘two contract’ cases. The Supreme Court in making reference to the above decision laid down the meanings of these terms as follows: “If there is a reference to a secondary document in a contract between two parties and that secondary document is a contract to which at least one party is different from the parties to the contract in question, it would be a two contract case… In such a contract general reference to the earlier contract would not be sufficient to incorporate the arbitration clause. However, if the reference is to standard terms in a contract that would be a case of ‘single contract’ and the use of general words to incorporate the arbitration agreement by a reference is permissible.” The above explanation was observed to be similar to what the Supreme Court had held in M.R. Engineers. However, the Court chose not to rely on the said judgements completely. The Supreme Court took reliance on 2010 English judgement Habas Sinai Ve Tibbi Gazlar Isthisal Endustri AS v. Sometal S.A.L.[4] (‘Habas Sinai’) that expanded the ambit of ‘single contract’ cases by including within its meaning even the standard form contracts of one of the parties. This essentially meant that ‘single contract’ cases were no more restricted to standard form contracts by trade associations or regulatory institutions, but also included standard forms of one of the parties to the contract. Therefore, the Supreme Court expanded the exception of general reference as laid down by it in M.R. Engineers. A reference to the observation made in Habas Sinai is relevant for our discussion: “A commercial lawyer would probably understand that an arbitration clause is a separate contract collateral to another substantive contract and that the expression ‘arbitration clause’ is, on that account, something of a misnomer for ‘the arbitration contract which is ancillary to the primary contract’. But a businessman would have no difficulty in regarding the arbitration clause (as he would call it) as part of a contract and as capable of incorporation, by appropriate wording, as any other term of such a contract; and it is, as it seems to me to a businessman's understanding that the court should be disposed to. give effect. A businessman who had agreed with his counterparty a contract with 10 specific terms under various headings and then agreed with the same counterparty terms 1-5 under the same headings as before and, as to the rest, that all the terms of the previous contract should apply, would, I think, be surprised to find that ‘all’ should be interpreted so as to mean ‘all but the arbitration clause’.” The reference to the above observation by the Supreme Court clearly highlights a more pragmatic and arbitration-friendly approach. The same has been reiterated by the Supreme Court again in a 2019 judgement of Giriraj Garg v. Coal India Ltd & Ors.[5] However, the point still remains is that how do these observations take different forms in cases of different documents referred to, i.e., why does the difference of ‘single contract’ and ‘two contract’ even exists? Why is it that the intention of the parties is not judged on similar standards in references to all types of documents containing an arbitration clause? The reason that the courts throughout have given for these difference in standards is that when the reference is made to a standard form of contract of a trade association or regulatory authority or one of the parties to the contract the parties can be expected to be familiar with the terms of such contract including the arbitration clause contained therein. However, in case of a ‘two contract’ case where the reference is made to a contract of one of the parties or any other document, not being a standard form contract, the parties have to be given a reasonable leeway of not being aware of all the terms of such contracts. The status quo of the law in India on the incorporation of an arbitration clause by reference to some document may be simply summarised as follows: a. The courts have laid down different standards for holding an arbitration clause successfully incorporated on the basis of the document being referred to and not on the intention of the parties in using the language they used for referring to the said document. b. The courts have differentiated the cases of references in two categories, i.e., ‘single contract’ or ‘two contract’ case. c. A ‘single contract’ case is such wherein, the reference is made to a ‘standard form contract’ of some recognised trade association or a regulatory institution or one of the parties to the contract. In such a case the courts have found a general reference (i.e not specifically making reference to the arbitration clause contained in the document) would be sufficient to be such as to have the effect of incorporating the arbitration clause contained in the principal contract. d. A ‘two contract’ case is such wherein, the reference is made to a document which is not a standard form contract but any other contract may it be of one of the parties to the contract or among third parties, or any other document containing an arbitration clause. In such a case the courts have found that general reference to the terms of such a document would not be held to have incorporated the arbitration clause. It basically means that even if it is found that reference is so general that parties have intended to incorporate all the terms of the contract, but the arbitration clause. IV. Conclusion The author believes that the reasoning given by the courts in differentiating between a ‘single contract’ and ‘two contract’ cases, creates a difference when there is a need for none. This only leads to complicating the interpretation of the statutory terms of Section 7(5). The only criteria laid by the statutory provision are that the contract should be written, and the reference made should have the effect of making the arbitration clause a part of the contract. It is therefore argued that, if the words used to refer to the contract are such that they do not qualify the reference to some specific parts of the document containing the arbitration clause, and are of such wide amplitude that it a reasonable business person would consider it to cover all terms, the courts have to imply the intention on the part of the contracting parties to incorporate even the arbitration clause. It has to be noted that Section 7(5) in itself does not differentiate between the types of the document referred to by the parties, it only requires for the reference (irrespective of the type of the document) to be such that it has the effect of incorporating the arbitration clause in the contract under consideration. The standard to test the intention of the contracting parties should be on the basis of a ‘reasonable-business-person’ standard and not a ‘well-informed-commercial-lawyer’ standard. In the opinion of the author, this is the correct interpretation of the statutory provision, and can substantially add to the evolution towards an arbitration-friendly regime of the Indian jurisprudence. [1] The author is a 5th Semester student of B.B.A. LL. B (Hons.) at the National Law University Odisha (Cuttack). He can be contacted on his email address: Kartikey.bhalotia2@gmail.com [2] M.R. Engineers & Contractors Pvt. Ltd. v. Som Datt Builders Ltd. (2009) 7 SCC 696 [3] M/S. Inox Winds Ltd. v. M/S. Thermocables Ltd. (2018) 2 SCC 519 [4] Habas Sinai Ve Tibbi Gazlar Isthisal Endustri AS v. Sometal S.A.L. [2010] EWHC 29 (Comm) : [2010] 1 Lloyd's Rep 661 : [2010] 1 All ER (Comm) 1143 : [2010] Bus LR 880 [5] Giriraj Garg v. Coal India Ltd & Ors. (2019) 5 SCC 192

- Raghav Bhargava, Rhea Sampat[1] Online Dispute Resolution (“ODR”) is a mechanism that primarily focuses on resolving disputes online, through the use of technology. The advent of ODR began in the early 2000s, wherein it was primarily used to address disputes arising out of e-commerce. However, with the onset of COVID-19, ODR has become a focal question in legal regimes across the globe. One such important aspect is the use of ODR in arbitration. At the outset, it is imperative to clarify that ODR does not refer to holding virtual hearings but rather looks at moving the entire arbitral process online. This article aims to first analyze prominent ODR mechanisms across the globe. Second, address issues in India and finally recommend changes to make it more lucrative within the country. ODR around the world European Union (“EU”)– EU’s reliance on ODR was first witnessed in its E-Commerce Directive of 2000, wherein it included a clause that stated, “to amend any legislation which is liable to hamper the use of schemes for the out-of-court settlement of disputes through electronic channels”.[2] This clause was the beginning point for ODR in the EU. The growing popularity of ODR led to the enactment of the Directive for Consumer ODR, 2016.[3] The highlight of the directive is the establishment of an ‘ODR Platform’ that facilitates the independent, impartial, effective, fast and fair out-of-court resolution of disputes between consumers and traders online. Additionally, it provides a platform to file a complaint through an ODR entity that shall offer a solution and shall mediate between the two parties. The Directive has gone one step ahead in ensuring the protection of personal data and confidentiality by prescribing various thresholds to be met by all parties involved. United Nations Commission on International Trade Law (“UNCITRAL”)– UNCITRAL had recognized the possibility of including online dispute resolution in its future work programme[4] as early as 2000. Since then, the Commission over multiple sessions from 2010 through 2016, considered the working of ODR and in 2017, published the ‘UNCITRAL Technical Notes on Online Dispute Resolution’ (“Notes”).[5] Although non-binding, the Notes are comprehensive and lay down the scope, stages, roles and responsibilities during an ODR process, which act as a stepping stone for nations to build on and enact. Transparency, independence, expertise and consent are the principles identified by the UNCITRAL in conducting ODR proceedings. Based on the EU and the UNCITRAL model, various jurisdictions across the world such as Mexico[6], British Columbia[7], Philippines[8] and Netherlands[9] have sanctioned the use of ODR for quick resolution of disputes. Current Status in India The majority of dispute resolution in India occurs in courts and offline alternative mechanisms. However, the ODR process has begun to evolve with various online and institutional frameworks having been established to facilitate the process. The most notable one is the Centre for Online Dispute Resolution (“CODR”)[10] which was established as an institution that aims at providing a fast, cheap and fair way of dispute resolution. As of January 2020, CODR had managed to resolve over 30 disputes, within a mere time frame of 25-30 days! Similarly, another platform providing this service is Legal Referee[11]. The Construction Industry Arbitration Council[12] also has a provision for online settlement of construction disputes. Unfortunately, there is currently no government regulated ODR mechanism. Recently, the Vice President of India had termed ODR as a ‘laudable initiative’ which saves time and effort and must be promoted more. Additionally, the Department of Justice has released a circular[13] permitting individuals to choose from a set of ODR contact points for dispute settlement, including State Legal Service Commissions. Problems The primary problem with arbitration through ODR is the existing economic and technological divide within the country. The divide places an undue advantage over a particular strata. Further, a greater emphasis is placed on face-to-face legal proceedings. Thus, a lack of trust and faith in the online regime exists. Another key issue arising from ODR proceedings is that of jurisdiction. Proceedings take place over the internet thus, challenging the traditional notions of jurisdiction. For national arbitration, issues of court’s jurisdiction would lead to situations of forum shopping or delays in the conclusion of proceedings. The seat of the arbitration that determines the substantive law would remain unclear causing further delays in the resolution process. Moreover, arbitral proceedings are premised on the confidentiality and secrecy of proceedings. The 2019 amendment to The Arbitration and Conciliation Act, 1996 has made confidentiality statutorily mandated except when it is necessary to publish the arbitral award. In such circumstances, sharing data over the internet to other parties via third-party websites causes serious confidentiality concerns. Lack of protection of sensitive information and confidential documents shared to supplement claims of parties, often privileged communication also undermines the process. The current ODR regime in India hinges on independent entities providing a dispute resolution facility with no relation to the judicial system. There is no registration process required for these service providers. Additionally, they function in a paradigm that is devoid of any checks and balances. Ergo, there is a lack of authenticity and accountability of the existing ODR providers. The ODR medium determines who the arbitrator is, as a result, often there is lack of knowledge of the credentials of the arbitrator and competence, hence adding further apprehensions. Lastly, but most importantly is the issue with the current mechanism in itself. By virtue of being independent bodies/institutions, the existing ODR providers are self-regulated. The parties availing such services are mandated to follow their rules and regulations. With no governing body regulating them, there is a clear absence of due process and fairness in the proceedings. Often, these arbitral proceedings are not referred to by courts nor is there any supervision of courts over these arbitral proceedings. This makes the system susceptible to exploitation, corruption and biasness. No further recourse is available for parties thereafter. Recommendations i. National ODR Governing Body In order to make ODR more lucrative and efficient in India, first and foremost, it is essential to create a national body governing ODR proceedings. It is recommended this body be multi-functional. First, this body should serve as an accreditation provider to ODR platforms. This will supplement in distinguishing between bodies whose work is legitimate and recognized from those acting independently. Second, this body must enable the creation of a uniform system of procedural and substantive rules governing ODR in India. In this regard, reference may be made to the Technical Notes adopted by UNCITRAL which outline suggestions to govern ODR on an international level. Third, this body would serve is providing credibility to the arbitral award. The award rendered would attain legitimacy and make it binding. Finally, the body will also help regulate all ODR proceedings and act as a bridge between alternative settlements and the judicial process. It would enable judicial recourse pre and during arbitral proceedings and post rendering of the award. ii. Enforcement Mechanism Another concern that needs to be addressed is with respect to the enforcement and the mandatory nature of the award. By virtue of being independent of the judicial system, questions would arise with respect to whether the parties would consider this mandatory and whether the successful party is able to enforce such an award? A curious example is WIPO’s UDRP Process[14] which is one of the most famous existing ODR mechanisms. The parties not only consider it binding upon themselves, judicial enforcement across jurisdictions is also provided to the parties. This could serve as a reference point while drafting regulations. Thus, an impending need arises for a central legislation to govern this mechanism. iii. Definition of ODR Finally, the starting point for any change whether it be a central governing body or legislation would be a standard definition of what ODR would entail in India and the rules and regulations that would govern it. This would be quintessential to ensure that further litigation does not arise challenging the interpretations and contours of the ODR process. In a country like India where the pending number of cases in superior and subordinate judiciary goes over 3.5 crores, the growing popularity of ODR would only seem beneficial and go a long way in the timely resolution of disputes. CONCLUSION The purpose of arbitral proceedings is to not only de-stress courts but also to create a more litigant friendly regime leading to a quick resolution of disputes. Irrespective of a world with or without COVID-19, ODR has the potential to make arbitration more friendly, effective and efficient. However, at the same time is also essential to regulate is well to preemptively eradicate issues which may prove to be detrimental in the long run. It will be interesting to observe how the government takes this forward. Nevertheless, there is no doubt that ODR and arbitration must become focal points of legal policy in India. [1] Raghav Bhargava is a final year student at Gujarat National Law University and can be contacted at bhargavaraghav700@gmail.com. Rhea Sampat is also a final year student at Gujarat National Law University and can be contacted at rheasampat.5@gmail.com [2] Clause 51 of the DIRECTIVE 2000/31/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (Directive on electronic commerce). [3] REGULATION (EU) No 524/2013 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 21 May 2013 on online dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC (Regulation on consumer ODR). [4] Paragraph 390 of the Report of the United Nations Commission of International Trade Law, Thirty-third session held between 12 June and 7 July, 2000. [5] Technical Notes on Online Dispute Resolution, United Nations Commission on International Trade Law. [6] Concilianet, Government of Mexico. [7] Civil Resolution Tribunal, Government of British Columbia. [8] Alternative Dispute Resolution Services, Bureau of Legal Affairs, Republic of Philippines. [9] Online Dispute Resolution, European Consumer Centre, Netherlands. [10] Centre for Online Dispute Resolution, accessible at: https://www.codr.co.in/#/home. [11] Legal Referee Services, accessible at: http://legalreferee.com/pricing/. [12] Online Dispute Resolution is a laudable initiative and saves times and cost,Press Information Bureau, accessible at: https://pib.gov.in/PressReleasePage.aspx?PRID=1529821. [13] Online Dispute Resolution, Department of Justice, accessible at: https://doj.gov.in/page/online-dispute-resolution-through-mediation-arbitration-conciliation-etc. [14] WIPO Guide to Uniform Domain Name Dispute Resolution Policy, accessible at: https://www.wipo.int/amc/en/domains/guide/.

- Balaji Harish Iyer[1] I. Introduction In earlier posts, we discussed the benefits of online arbitration[2] and concluded that conducting arbitrations online will not affect the seat of arbitration[3]. The third and final in this series, this article will examine whether online arbitral awards or e-awards are enforceable. To quote, “One of the qualities of arbitration that makes it the most popular A.D.R. method … is the finality and enforceability of the arbitral award due to the strong enforcement network in the New York Convention.”[4] The discussion on the enforceability of arbitral awards overlaps with the discussion on the grounds of challenges to awards, since they are more or less the same. Further, an award that has been annulled after a challenge is no longer enforceable in another jurisdiction. An online arbitral award or e-award can be defined as an arbitral award that is signed digitally by the arbitral tribunal and emailed to the parties directly, or if an institution is involved for transmission to the parties by the institution. The losing party must comply with the e-award, and the winning party can seek recognition and enforcement of the e-award in the domestic courts of all those countries where the losing party has assets that can be attached.[5] This article will not entertain a debate as to the “seat” or “place of signing” of the award;[6] this will be taken to have been determined either by the parties or by the arbitral tribunal at the commencement of the arbitration since, as had been stated earlier, “seat” in arbitrations nowadays is a non-issue. [7] II. Formal Requirement in Arbitration Law Many curial laws have form requirements for an award:[8] The (Indian) Arbitration & Conciliation Act, for example, provides that an award shall be in writing and shall be signed by the members of the arbitral tribunal;[9]it further provides that the signed copy of the award shall be delivered to the parties.[10] Some domestic laws impliedly allow arbitral awards written and signed digitally; section 52 of The Arbitration Act 1996 of England, parties are free to agree on the form of an award. The implication is that an e-award is upheld, recognized and enforceable under English law, as though it is a traditional paper award. These laws can be interpreted with a degree of modernity that upholds an e-award and permits its enforcement, in favour of admitting alternative forms of writing.[11] A “written” award does not necessarily mean an award printed on paper and signed physically by the arbitrators. Most jurisdictions have laws that regulate and recognize the use of electronic or digital signatures. Since many national laws recognize the validity of arbitration agreements concluded electronically, there is no room to assume that a similar logic will not apply to e-awards. An arbitral award that is signed with a digital signature[12] by an arbitrator should be considered as valid.[13] For instance, the United Nations Convention on the Use of Electronic Communication in International Contracts provides that where the law requires a communication to be made in writing, the requirement is satisfied if the communication is made electronically and is accessible later for reference.[14] Domestic courts can apply this standard to ensure that an e-award complies with the writing requirement under domestic law. An e-award can be considered as a functional equivalent to a traditional, paper award and meet the standards required for enforcement or to be upheld at the seat. Even where there are no such laws, domestics courts should not consider the absence of a physical place of arbitration or the absence of an award “written” on paper to impede upholding an award or denying enforcement. Interpretative principles must be applied to broaden the formal requirements of an award to include e-awards that are digitally signed by the arbitral tribunal. Article IV of the New York Convention requires that a party seeking recognition and enforcement of an award produces duly authenticated originals or certified copies of the award and the arbitration agreement. A party can printout and produce the printed copy of the award, with the covering email of the arbitral tribunal or institution to satisfy this requirement. Delivery of the award to the parties triggers time limits for challenging the award by the losing party and seeking enforcement by the winning party. Delivery of the award either by the tribunal or the institution to the parties by email may be an appropriate method of communicating and delivering the award to the parties. When a party receives the award by email and proof of delivery are not issues that affect the delivery of an award in today’s day and age with mailing clients such as Apple Mail or Microsoft Outlook having features such as “delivery notifications” or “read receipts”. No jurisdiction, as such, imposes strict formal requirements for delivery of the award to parties.[15] As an evidentiary matter,[16] it is suggested that the party seeking enforcement or the party challenging the award simply produces a printout of the e-award with the covering email of the tribunal or institution, as the case may be. Thus, there is no reason to state that an award that is made and communicated to the parties electronically is not “authentic”[17]. Recently, the Andhra Pradesh High Court was moved to obtain security under section 9 of The Arbitration & Conciliation Act in a post-award action; in this case, the Petitioner (a Korean trader) had obtained an award under the I.C.C. Rules of Arbitration. The arbitration was conducted entirely through video conferencing and an e-award was issued, which was communicated to the parties by the I.C.C. through an official email. The Petitioner sought to attach a cargo of sulphuric acid that the Respondent (an Indian acid trader) had loaded at Visakhapatnam Port under section 9, to ensure security for enforcement of the e-award under section 48 of The Arbitration & Conciliation Act. The Andhra Pradesh High Court ordered the attachment of the sulphuric acid as security for the Petitioner’s award-debt.[18] III. Article V Requirements for Annulment, Recognition & Enforcement The United Nations Convention on the Recognition & Enforcement of Foreign Arbitral Awards 1958 (“New York Convention” or “N.Y.C.” or “Convention”) permits the cross-border recognition of arbitral awards. The Convention standardizes the requirements and empowers a national court to scrutinize whether an arbitral award meets them for annulment and/or enforcement in its territory;[19] most countries nowadays have adopted the requirements for enforcement set out in the New York Convention in their domestic arbitration laws.[20] In principle, as long as an award meets these requirements, it is quite possible to uphold, recognize and enforce an e-award under the Convention standards.[21] IIIA. Due Process Requirements Long has it been settled that an arbitration must follow due process through following procedural rules that ensure the impartiality and fairness of proceedings and the decision-making. A violation of due process is a ground that justifies not recognizing or enforcing an arbitral award.[22] A swift and fair process is indispensable in online arbitration, as much as it is indispensable to traditional arbitrations. The fundamentals of due process should be observed by institutions and tribunals.[23] A party must be given proper notice of arbitral proceedings; nowadays, emails are an accepted mode of giving notice; while there are issues such as being unable to prove when a party receives an email, email software such as Microsoft Outlook have made it simpler for a sender to be notified if the receiver of the email opens a particular email by creating provisions for “read receipts”. A High Court in India has held that a notice sent on WhatsApp is good service.[24] Any apprehension of “virtual inequality” in terms of both parties being able to access internet and having an equal opportunity to present their respective cases[25] is easily dispelled in this age of 4G internet. Even if it could not be dispelled in this manner, it is not far removed to say that a party is as responsible for the quality of its internet connection as it is responsible for the strength of its lawyers. Equality in the treatment of the parties can be ensured by using technology only up to the lowest common denominator.[26] Technical safeguards can easily be implemented to ensure that there are no interruptions to online arbitral proceedings that can potentially jeopardize the due process of an e-award.[27] IIIB. Public policy requirements Is rendering an e-award against public policy? Without reiterating the earlier discussion on formal requirements, it is safe to say that rendering an e-award is not against the public policy of either the seat (for annulment) or against the public policy of the enforcing territory. In either case, whether there is an implication or not, the law can be liberally interpreted to permit online arbitration awards. It should be noted that while online arbitration may be novel, “novelty” is an insufficient answer to annul or refuse to recognize and enforce e-awards.[28] There is no direct nexus between an electronic award and its violation of public policy for being electronic. IV. Conclusion The formal requirements of an arbitral award can be liberally interpreted by domestic courts and arbitrators alike, to permit e-awards, uphold their validity and enforce them against losing parties in jurisdictions across the world. There seems to be no specific prohibition or impediment. Rapidly evolving technology and internet capabilities are also answering to due process requirements of arbitrations. It is quite safe to say that e-awards cannot be challenged on formal or due process grounds. Traditional principles that exist in this regard are sufficient to answer the apparent challenge of a shift from traditional (physical) arbitration to online arbitrations. Online arbitration appears to have unique issues in the application of traditional principles of international commercial arbitration; in reality however, this is not the case. As discussed in previous articles, there are definitely benefits to online arbitration. These benefits far outweigh the apparent issues. In a technology-driven world, arbitrations too must adopt a technological platform. [1] Balaji Harish Iyer is an advocate practising before the Bombay High Court. His focus is on arbitration and alternate dispute resolution. Balaji obtained his Master’s degree in law (International Dispute Resolution) from Humboldt University of Berlin and Bachelor’s degree (with Honours) from National Law University, Delhi. Mobile: +917349360143. [2] Balaji Harish Iyer, Arbitration vs The World (Article Series) Part I: International Arbitration in the Time of Covid-19, The Arbitration Workshop(2020), https://www.thearbitrationworkshop.com/post/arbitration-vs-the-world-article-series-part-i-international-arbitration-in-the-time-of-covid-19 (last visited Apr 24, 2020). [3] Balaji Harish Iyer, Arbitration vs. The World (Article Series) Part II: Making a Mountain Out of a Molehill, The Arbitration Workshop (2020), https://www.thearbitrationworkshop.com (last visited May 25, 2020). [4] Hong-Lin Yu & Motassem Nasir, Can Online Arbitration Exist Within the Traditional Arbitration Framework?, 20 Journal of International Arbitration 455–473, 470 (2003). [5] Ihab Amro, Online Arbitration in Theory and in Practice: A Comparative Study in Common Law and Civil Law Countries, Kluwer Arbitration Blog (2019), http://arbitrationblog.kluwerarbitration.com/2019/04/11/online-arbitration-in-theory-and-in-practice-a-comparative-study-in-common-law-and-civil-law-countries/ (last visited Apr 8, 2020). [6] See the discussion in, Hong-Lin Yu and Motassem Nasir, supra note 4 at 471. [7] Balaji Harish Iyer, supra note 3. [8] United Nations Convention on the Recognition & Enforcement of Foreign Arbitral Awards, 3 & 4 (1958); Ihab Amro, supra note 5. [9] The Arbitration and Conciliation Act, 31(1) (1996). [10] Id. at 31(4). [11] Haitham A. Haloush, The Authenticity of Online Alternative Dispute Resolution Proceedings, 25 Journal of International Arbitration 355–364, 359 (2008). [12] See specifically on “digital signatures”, Id. at 362–364. [13] Lars Markert & Jan Burghardt, Navigating the Digital Maze - Pertinent Issues in E-Arbitration, 27 J. Arb. Stud. 3–31, 24–25 (2017). [14] United Nations Convention on the Use of Electronic Communication in International Contracts, 9(2) (2013). [15] Id. at 26. [16] See for e.g., Indian Evidence Act, 65B (1872). [17] See, Hong-Lin Yu and Motassem Nasir, supra note 4 at 472. [18] Sulphide Corporation v. New Way Vyapaar Pvt. Ltd., ICOMAOA No. 2 of 2020, High Court of Andhra Pradesh at Amaravati. [19] United Nations Convention on the Recognition & Enforcement of Foreign Arbitral Awards, supra note 8 at 5; See the relevant section in Sami Kallel, Online Arbitration, 25 Journal of International Arbitration 345–353, 349 (2008). [20] See for e.g., The Arbitration and Conciliation Act, supra note 9 at 48. [21] See, Ihab Amro, Enforcement of Cross-Border Online Arbitral Awards and Online Arbitration Agreements in National Courts, Young ICCA Blog (2016), http://www.youngicca-blog.com/enforcement-of-cross-border-online-arbitral-awards-and-online-arbitration-agreements-in-national-courts/ (last visited May 24, 2020). [22] See, United Nations Convention on the Recognition & Enforcement of Foreign Arbitral Awards, supra note 8 at 5(1)(b). [23] Mohamed S. Abdel Wahab, The Global Information Society and Online Dispute Resolution: A New Dawn for Dispute Resolution, 21 Journal of International Arbitration 143–168, 160 (2004). [24] SBI Cards & Payments Services Pvt. Ltd. v. Rohidas Jadhav, 2018 S.C.C. Online Bom. 1262. [25] Lars Markert and Jan Burghardt, supra note 13 at 14–15; See also, Mohamed S. Abdel Wahab, supra note 21 at 160–161. [26] Lars Markert and Jan Burghardt, supra note 13 at 15. [27] Id. at 16. [28] Mohamed S. Abdel Wahab, supra note 21 at 166.