Category Archives: Litigation

Arbitrator Law Appointment of Independant Arbitrator India

Posted on January 20, 2012 by admin| Leave a comment

The Supreme Court (“SC”) in the case of Denel (Proprietary Limited) vs. Govt. of India, Ministry of Defence exercising its powers under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (“Act”) reiterated that right to appointment of an Arbitrator does not get automatically forfeited after expiry of 30 days as prescribed under Section 11(4) & 11(5) of the Act unless petition is filed for appointment of Arbitrator under Section 11(6) of the Act prior to appointment by opposite party. The SC appointed an independent Sole Arbitrator due to apprehensions of bias and impartiality, contrary to the clauses of the contract necessitating appointment of DGOF or government servant, as the Sole Arbitrator.

The parties entered into a contract for supply of 42,000 base bleed units. However, the quantity was later increased to 52,000 units as per clauses of the contract. Denel (“Petitioner”) supplied substantial amount of the goods by January, 2005 though some were rejected by the Government (“Respondent”). The Petitioner was ready and willing to supply the remaining units however, received no response from the Respondent with regard to its dispatch leading to losses and damage being suffered by them. The Petitioner after a series of discussions with the Respondent later became aware that units rejected earlier were owing to usage of improper fuzes by the Respondent. Thereafter, the Respondent kept on hold all contracts and sent a notice seeking refund of amounts to the extent of US $ 23,20,240. Non-refund of the said amounts led to dispute between the parties.

The appointment of the said Arbitrator was objected to by the Petitioner on the grounds of apprehension of bias and terminated the appointment by Notification under Section 14 of the Act. The Arbitrator continued with the proceedings despite the passing of the said Notification dated January 23, 2009. The Petitioner filed application before the District Court, Chandrapur for termination of the mandate of the Arbitrator. The Hon’ble Court passed orders terminating mandate of the earlier Arbitrator and provided for appointment of Director General, Ordnance Factory (“DGOF”) as the Arbitrator or any other government servant appointed by him, as per the terms of the contract.  The DGOF did not commence arbitration proceedings or appoint anyone else within 30 days of the passing of the abovementioned Order leading to the present petition being filed under Section 11 before the SC on March 2, 2011.

The SC hearing both the parties held that the petition filed in the present case is maintainable as the same was filed prior to appointment of a new Arbitrator by the Respondent. The SC relying on the precedents of Datar Switchgears Ltd. vs. Tata Finance Limited and Punj Lloyd Limited vs. Petronet MHB Ltd. held that non-appointment of an Arbitrator within 30 days does not amount to forfeiture of rights under Section 11(6) of the Act. Unlike Section 11(4) and 11 (5) which prescribes a period of 30 days for appointment of an Arbitrator, there is no time limit for filing petition under Section 11 (6) of the Act. The right to appointment continues provided the same is made prior to the other party filing petition. In the instant case, the mandate of the earlier Arbitrator was terminated owing to him not acting in a fair and impartial manner but appointment of a new Arbitrator by the Respondent was delayed and not done prior to filing of the present petition. As a result, the Respondent’s right was forfeited as they failed to appoint an Arbitrator prior to the filing of the petition.

With regard to the second issue on appointment of DGOF or a government servant as an Arbitrator, the SC relying on its previous ruling held that it is settled law that arbitration agreements in government contracts providing that an employee of the department (usually a high official unconnected with the work or the contract) will be the arbitrator are neither void, nor unenforceable. These officers are expected to act independently and impartially. Further, it is not mandatory to appoint the named arbitrator but at the same time, due regard has to be given to the qualifications required by the agreement and other considerations. Referring the disputes to the named arbitrator shall be
the rule. Ignoring the named arbitrator and nominating an independent arbitrator shall be the exception to the rule, which is to be resorted to for valid reasons.  However, the SC in the present case, declined to appoint an Arbitrator as per the terms of the contract as the apprehensions putforth by the Petitioner had merits as established through correspondences and attitude towards resolving the dispute. The same issue has been dealt earlier in the case of Denel (Proprietary) Limited v. Bharat Electronics Ltd & Anr.

The SC held that under Section 11(6) of the Act, if the circumstances demand, an independent Arbitrator can be appointed as per Section 11(8) (b) contrary to the procedure provided under the terms of the contract. A new and independent Arbitrator was appointed considering the prior approach and attitude of the DGOF towards the dispute.

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Confidentiality Provision in Arbitration Proceeding

Posted on November 18, 2011 by admin| Leave a comment

The Company may be inclined to seek the shelter of confidential arbitration. The impetus for such a strategy lies in the twin goals of obtaining a fair adjudication on the merits while avoiding unwanted, and perhaps, misguided criticism in the court of public opinion that has the potential not only to tarnish a corporate’s image, but to encourage other potential litigants. Company considering confidential alternatives to litigation, however, need to be aware of several pitfalls that can lead to the public disclosure of arbitration proceedings, evidence, and results, as well as the use of the same by other litigants in non-confidential proceedings.

A ruling by the Massachusetts Superior Court highlights the difficulty company face in relying on private arbitration as a means to keep sensitive information confidential. In Dever v. Oppenheimer, the court ruled that a blanket confidentiality agreement imposed by the arbitration panel to protect sensitive documents was contrary to public policy. There, the arbitration centered on Dever’s claim that Oppenheimer fired him for cooperating with the Massachusetts Securities Division that was investigating an ex-broker accused of defrauding an elderly couple. After the arbitration panel awarded Dever $73,000, Dever sought to confirm and modify the award by striking the confidentiality provision. In support of his request that the arbitration award be stripped of its confidentiality provisions, Dever argued that the subject documents should be made public to clear his name of any wrong doing. Oppenheimer argued that the confidentiality provision was necessary to protect sensitive documents that contained embarrassing personal information.

In confirming and modifying the award, Judge McIntyre struck the confidentiality provision, concluding that it was contrary to public policy which favors open access to information, especially in the securities industry. As a result of the ruling in Dever, several sensitive documents were made public, including a draft settlement offer that Oppenheimer submitted to the Massachusetts Securities Division in which it admitted several email policy violations as well as several oversights in its handling of the broker’s case.

The Dever decision underscores the courts’ aversion to treating arbitration awards as confidential and demonstrates the potential for “public policy” arguments to unravel protections that may have been the primary motivation for entering into a “confidential” arbitration to begin with. Care needs to be taken to structure confidentiality provisions narrowly so that they will better withstand judicial scrutiny and to consider adding provisions to arbitration agreements on the front end that attempt to prohibit or limit a party’s ability to seek to have the confidential proceedings made public.

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Foreign Judgment Enforcement India

Posted on July 3, 2011 by admin| 2 Comments

A foreign Court is defined as a court situate outside India and not established or continued by the authority of the Central Government. And a Foreign Judgment means a judgment of a foreign court. Sections 13 and 14 of CPC enact a rule of res judicata in case of foreign judgments. These provisions embody the principle of private international law that a judgment delivered by a foreign court of competent jurisdiction can be enforced by an Indian court and will operate as res judicata between the parties thereto except in the cases mentioned in Section 13 of CPC and subject to the other conditions mentioned in Sec. 11 of C.P.C. The rules laid down in this section are rules of substantive law and not merely of procedure. The fact that the foreign judgment may fail to show that every separate issue, such as, the status of the contracting parties, or the measure of damages, was separately framed and decided, is irrelevant unless it can be shown that failure brings the case within the purview of one of the exceptions to Section 13 of CPC.

The judgment of a foreign court is enforced on the principle that where a court of competent jurisdiction has adjudicated upon a claim, a legal obligation arises to satisfy that claim. The rules of private international law of each State must in the very nature of things differ, but by the comity of nations certain rules are recognized as common to civilized jurisdictions. Through part of the judicial system of each State these common rules have been adopted to adjudicate upon disputes involving a foreign element and to effectuate judgments of foreign courts in certain matters, or as a result of international conventions. Such recognition is accorded not as an act of courtesy but on considerations of justice, equity and good conscience. An awareness of foreign law in a parallel jurisdiction would be a useful guideline in determining our notions of justice and public policy. We are sovereign within our territory but “it is no derogation of sovereignty to take account of foreign law.”

Jurisdiction to Foreign Courts

The following circumstances would give jurisdiction to foreign courts: 1. Where the person is a subject of the foreign country in which the judgment has been obtained;
2. Where he was a resident in the foreign country when the action was commenced and the summons was served on him;
3. Where the person in the character of plaintiff selects the foreign court as the forum for taking action in which forum he issued later;
4. Where the party on summons voluntarily appeared; and
5. Where by an agreement, a person has contracted to submit himself to the forum in which the judgment is obtained.

Binding Nature of Foreign Judgments:

The Code of Civil Procedure provides that a foreign judgment shall be conclusive as to any matter thereby directly adjudicated upon between the same parties or between parties under whom they or any of them claim litigating under the same title except -
a) Where it has not been pronounced by court of competent jurisdiction;
b) Where it has not been given on the merits of the case;
c) Where it appears on the face of the proceeding to be founded on an incorrect view of international law or a refusal to recognize the law of India in cases in which such law is applicable;
d) Where the proceeding in which the judgment was obtained or opposed to natural justice;
e) Where it has been obtained by fraud;
f) Where it sustains a claim founded on a breach of any law in force in India

The leading case on the point is Gurdayal Sigh v. Rajah of Faridkot. In this case, A filed a suit against B in the court of the Native State of Faridkot, claiming Rs. 60,000 alleged to have been misappropriated by B, while he was in A’s service at Faridkot. B did not appear at the hearing, and an ex parte decree was passed against him. B was a native of another Native State Jhind. In 1869, he left Jhind and went to Faridkot to take up service under A. But in 1874, he left A’s service and returned to Jhind. The present suit was filed against him in 1879; when he neither resided at Faridkot nor was he domiciled there. On these facts, on general principles of International Law, the Faridkot court had no jurisdiction to entertain a suit against B based on a mere personal claim against him. The decree passed by the Faridkot court in these circumstances was an absolute nullity. When A sued B in a court in British India, against B on the judgment of the Faridkot court, the suit was dismissed on the ground that Faridkot court has no jurisdiction to entertain the suit. The mere fact that the embezzlement took place at Faridkot, was not sufficient to give jurisdiction to the Faridkot court would have had complete jurisdiction to entertain the suit and to pass a decree against him.

However, the mere fact of a decree being ex parte will not necessarily justify a finding that it was not on merits. The real test for deciding whether the judgment has been given on merits or not is to see whether it was merely formally passed as a matter of course, or by way of penalty for any conduct of the defendant, or is based upon a consideration of the truth or falsity of the plaintiff’s claim, notwithstanding the fact that the evidence was led by him in the absence of the defendant.

 

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Arbitration Law India

Posted on June 25, 2011 by admin| 6 Comments

Arbitrator is a technically name of a person selected with reference to an established system for friendly determination of controversy which, though not judicial, yet is regulated by law; so that the powers and duties of the arbitrator, when once he is chosen, are prescribed by law, and his doings may be judicially revised if he has exceeded his authority.
Thus, the arbitrator is a private, disinterested person, chosen by the parties
to a disputed question, for the purpose of hearing their contentions, and giving judgment between them, to whose decision, called “award”, the litigants submit themselves either voluntary, or, in some cases, compulsorily, by order of court.

The Indian arbitral system was governed by the Code of Civil Procedure 1908 until the Arbitration Act of 1940 came into force and it was later replaced by the Arbitration and Conciliation Act 1996 to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral award as also to define the law relating to conciliation. There was also the Arbitration (Protocol and Convention) Act 1937 and the Foreign Awards (Recognition and Enforcement) Act 1961. The Act is largely based on the model law of United Nations Commission for International Trade Law (UNCITRAL).  The Arbitration and Conciliation Act 1996 is largely based on the model law of United Nations Commission for International Trade Law (UNCITRAL).

The arbitration proceeding are governed by the agreement signed between the parties to the agreement and the Indian Courts have a very limited role in the arbitration proceedings.  Section 11 of the Arbitration and Conciliation Act 1996 deals with the appointment of arbitrator by the court when the other party fails to appoint the arbitrator in terms of the arbitration agreement.

Section 9 of the Arbitration and Conciliation Act 1996 deals with the interim relief where any party to the arbitration may approach the High Court for the seeking urgent and interim relief even though the arbitration proceeding has not started.

Section 34 of the Arbitration and Conciliation Act 1996 deals with application to the Court for setting aside an award. The grounds are very limited and generally courts in India do not interfere with the award passed by the arbitrator unless there is a gross error of facts and law.

Part II of the Act deals with the enforcement of foreign award in India.  The foreign award means an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India. Any foreign award which would be enforceable under this Act shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India.

 

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