Tag: agreement

-Report by Aditya Jain

In the case of LIFE INSURANCE CORPORATION vs SANJEEV BUILDERS PRIVATE LIMITED & ANR., The lawsuit was initiated for the specific performance of the contract dated June 8, 1979. Alternatively, the plaintiffs also sought damages. Plaintiffs forwarded Panel Summons No. 854 of 2017 to increase the number of damages for the reason outlined in the affidavit filed in support of said Panel Summons. The single judge of the High Court allowed the above summons of the panel by order dated 11th September 2018, leaving open the question of limitation and at the same time allowing the defendant and the petitioner to submit additional written statements. The complainant chose to appeal against the resolution, which was terminated by the contested resolution on 13 December 2018. Aggrieved and dissatisfied with the impugned order passed by the High Court, the appellant approached this Court with the present appeal.

APPELLANT’s CONTENTION

Counsel submitted that the High Court did not consider that the amendment was affected by the provisions of Order II Rule 2 of the Code of Civil Procedure, 1908. He would submit that the amendment could even be said to be affected by the principle of constructive res judicata. Learned counsel pointed out that at the time the suit was instituted, damages amounting to Rs. 1,01,00,000/- were prayed for as an alternative. Through the amendment, the damages
now prayed for are Rs. 4,00,01,00,000/-. In the aforesaid circumstances, the learned counsel appearing for the petitioner (original defendant) prayed that his appeal being meritorious, the same may be allowed.

RESPONDENTS CONTENTION

Counsel contended that the provisions of Order II Rule 2 CPC cannot apply to the application for amendment of the plaint. The question on appeal was whether an assignee could be sued as a plaintiff in an action after the lapse of 27 years from the commencement of the action. Learned counsel appearing for the plaintiff pleads that the appeal lacks merit, and it may be dismissed with costs.

JUDGEMENT

Conclusions may be summed up as:

• Order II Rule 2 CPC functions as a block against a succeeding suit if the necessary conditions for the application are fulfilled and the field of amendment of pleadings is far outside its purview. Plea of the amendment is barred under Order II Rule 2 CPC, consequently misconceived and henceforth negatived.
• All amendments are permitted that are essential for defining the real question in disagreement on condition that it does not cause injustice to the other side. It was observed as:

“(ii) All amendments are to be allowed which are necessary for determining the real question in controversy provided it does not cause injustice or prejudice to the other side. This is mandatory, as is apparent from the use of the word “shall”, in the latter part of Order VI Rule 17 of the CPC”

• When the amendment would allow the court to deliberate the dispute and support in rendering a more suitable verdict, the prayer for amendment should be permitted.
• Where the amendment simply sought after to introduce an extra or new approach without presenting a cause of action which is time-barred, then the amendment is to be permitted even after the expiration of the limitation.
• The amendment might be allowed where it is proposed to correct the absence of substantial details in the plaint.
• Delay in an application for amendment is alone not a ground to cancel the prayer.
• Where the amendment varies the cause of action or nature of suit, in an attempt to set a completely new case, far-off to the case in the plaint, then the amendment must be forbidden.
• Where, nevertheless, the amendment sought after is with respect to relief in the plaint, and established on facts that are pleaded in the plaint, the amendment stands to be allowed.
• When the amendment is required before the beginning of the trial, the court must be liberal in its style.
  In the complete view of the matter, the court was convinced that the impugned order by the High Court is correct. The appeal was dismissed.

-Report by Harshita

The matter of determining the arbitration fee was discussed in detail in the case of ONGC v. Afcons Gunanusa JV.

In May 2009, Oil and Natural Gas Corporation Limited(ONGC) and Afcons Gunanusa entered into a contract for the construction of an ICP-R Platform. The Platform was completed in October 2012. Due to some disparities between the parties, Afcons invoked arbitration in the case in July 2015. In August of the same year, ONGC appointed Justice Gyan Sudha Mishra as their arbitrator with Afcons appointing Justice Mukul Mudgal. Both the arbitrators appointed Justice GN Ray as the guiding arbitrator. In a preliminary meeting of the tribunal in November 2015, the members agreed that the fee schedule for the arbitration fee suggested in the contract was impractical. ONGC was not agreeing to the revision in the schedule whilst the arbitrators and Afcons agreed. In a letter to ONGC by the council, it was suggested to revise the fee schedule according to the fourth schedule of the Arbitration and Conciliation act 1996. The fee given was Rs. 30 lakhs for cases above the jurisdiction of Rs. 20 crores which were Rs. 900 crores here. Again, the tribunal informed ONGC on the matter that they would no longer bargain for this amount if ONGC would agree to the amount in the fourth schedule and also provide a reading fee of Rs. 6 lakhs each. ONGC could not agree on providing a reading fee. In August 2016, The tribunal fixed a fee of Rs 1.5 lakhs for every arbitrator for sitting for three hours. Thus, after not agreeing to the set arbitration fee, ONGC filed a petition in the Bombay High Court u/s 14 and 15 of the Arbitration Act. They filed for a termination of the current tribunal and a substitution. In October 2021, the Bombay High Court bailed out of the case claiming that it doesn’t fall under their jurisdiction as the tribunal was on an international level. That is when ONGC filed for a new arbitration petition.

While ONGC argued, with a letter in August 2020, let the arbitration tribunal know that the executives of the institute did not approve of the change in fees. They stood by the same throughout the situation. The respondents contended that the tribunal wanted to fix the correct amount of fees and suggested following the fourth schedule of the Arbitration Act, also an exclusive reading fee for the sessions was requested.

COURT’S DECISION

A fee schedule was already prescribed in the LSTK contract, which was rejected by the tribunal in a preliminary meeting. And the tribunal by itself decided on the fee of Rs. 1.5 lakh for a 3-hour sitting at the end. It was observed

“In view of our directives in Section C.2.4, we exercise our powers under Article 142 of the Constitution of India and direct the constitution of a new arbitral tribunal in accordance with the arbitration agreement. For this purpose, Arbitration Petition (C) No. 5 of 2022 would be listed for directions before this Court on 21 September 2022. The above directions should not be construed as a finding on the conduct of the arbitration proceedings. These directions are an attempt to ensure that the arbitral proceedings are conducted without rancour which may derail the proceedings. In consonance with our findings, the fee payable to the earlier arbitral tribunal PART G 135 would be the fee payable in terms of the Fourth Schedule of the Arbitration Act. Though the Fourth Schedule is per se not applicable to an international commercial arbitration, since ONGC had indicated (following the suggestion of the arbitral tribunal) that it would be agreeable to pay the fee payable in terms of Schedule, it cannot now take recourse to the arbitration agreement between the parties to pay a lesser fee. We further clarify that if the fee in excess of the amount payable under the Fourth Schedule has been paid to the members of the arbitral tribunal, such amount will not be recovered from them.”

The court took a look at the comparison of India’s situation in this matter and the international views. India lacks jurisdiction on the matter of arbitration fees. Usually, when a tribunal is constituted, the fee is determined by the institution or discussed with and finalized by the presiding arbitrator. The parties are not a part of such discussions but in ad hoc arbitrations the parties can discuss such fees with the members of the tribunal on their own. The issues that arose in these cases have been concluded by giving the following decisions:

● Arbitrators cannot be the sole judges in the determination of the arbitration fees. They cannot issue any binding orders on this matter. Even though they have the power to apportion the cost between the parties u/s 31(8) and 31A of the Arbitration Act.
● It has been held that the arbitration fee should be fixed at the establishment for the avoidance of matters arising including conflicts between the parties and arbitrators.
● The terms of the fourth schedule refer to claim and counterclaim differently. Thus, arbitrators can charge fees in both situations in an ad hoc case and the ceiling will be applied to both the claim and counterclaim fee.
● The price ceiling given as Rs. 30 lakhs applies to the sum of Rs. 19,87,500 and the variable amount. The highest fee is to be Rs. 30 lakhs.
● The fee applies to each arbitrator on the bench and not the tribunal as a whole. Although, a sole arbitrator is to be paid 25 percent above this amount.

-Report by Reyanshi Bansal

It has been held by the hon’ble Supreme court of India in the case of Brij Raj Oberoi v. The Secretary that the refusal of the renewal of leave was an arbitrable dispute.

FACTS

The state of Sikkim, the absolute owner of the Norkhill Hotel, had registered a deed of lease with the petitioner on December 9, 1997, with certain terms and conditions. One of such terms under clause 4 (xiii) directed that if the lessee communicates his interest in extending the lease for a further period in the last year of the lease tenure and if the proposal is accepted by the lessor, then the lease shall be renewable as is mutually agreed.

Following this, the appellant addressed a letter to the state through the secretary of the Tourism department proposing the terms and conditions for the renewal of said property along with the annual rent. This was rejected by the state to use the hotel as a heritage site for the purpose of increasing tourism, revenue and employment opportunities.

Brij Raj Oberoi filed an application under section 9 of the 1996 Act (Arbitration Act) so that disputes and differences could be decided through arbitration. In response, the respondent State contended that since the offer made by the petitioner had not been accepted, there was no case for arbitration. The contract only provides for reference to arbitration to discuss the rent and period of renewal. The commercial court directed that there would be no interference with the possession of the property till the matter is decided by Arbitration. While the respondent filed an appeal against the order before the High Court, the appellant filed an application for the appointment of an arbitrator.t The division bench of the High Court came to the conclusion stating that the clause for arbitration could not be invoked since there was a refusal of offer and not a dispute in the rent or terms and conditions. Hence, the application was rejected by the division bench of the High court. The appellant filed an appeal before the Supreme Court of India.

COURT’S DECISION

The Court observed that the division bench fell in error by interpreting the clause alone. The lease deed had to be analyzed wholly. Prima facie, the expression “shall” is used in the deed which connotes a command. As the offer terms and conditions were expressed, the proposal was to be accepted, and if it was not mutually agreed, the matter became arbitrable. It was observed that

“The arbitration clause cannot be rendered otiose by refusal of the Respondent State to renew the lease. The Respondent State may have formulated a policy for encouraging self-employment of local youth who are duly qualified and competent to run the hotel. Such policy decision cannot impact an existing agreement with a renewal clause. All disputes between the parties to the lease with regard to renewal and/or non-renewal, the period of renewal and the quantum of rent would have be decided by the Arbitrator, as observed above. The issue of arbitrability of the dipsute over non-renewal of the lease is within the realm of the Arbitral Tribunal/Arbitrator.”

Therefore, the appeals were allowed and the Former Chief Justice of Sikkim High Court, Justice Bhaskar Bhattacharya, was appointed as an arbitrator to adjudicate the disputes among the parties.

-Report by Apurva Jain

Twitter has employed a prime house to take legal action against Tesla and SpaceX CEO Elon Musk for terminating a $44 billion takeover deal. Wachtell, Lipton, Rosen & Katz LLP, an oversized New York-based house has been hired to sue Musk, according to the Hill. Twitter has filed a lawsuit in Delaware. Musk has hired Quinn Emanuel Urquhart & Sullivan for his defense.

Musk had proclaimed the termination of a $44 billion Twitter purchase via a letter sent by Musk’s team to Twitter. The reason for the suspension was multiple breaches of the purchase agreement.

In April, Musk entered into a purchase agreement with Twitter at $54.20 per share in a deal worth $44 billion. This transaction was, however, put on hold by Musk in May to permit his team to review the truthfulness of Twitter’s claim that less than five% of accounts on the platform are bots or spam.

Musk had threatened to walk away from the agreement for not being provided with the data on spam and pretend accounts in the month of June. He even alleged that his right to information was being violated and all he demands is the information proving that bots and pretend accounts represent less than 5% of the platform’s active user base.

The Delaware judge has agreed to fast-track the case by giving a date in the month of October much to the disappointment of Elon Musk who had asked for a date in February. Twitter’s lawyer claimed that Musk is obligated to finalize the agreement within two days of all closing conditions which will be met in September. It was further contended that Twitter only needs 4 days to prove that Musk needs to honor the agreement. The shares of Twitter that had fallen in May when the agreement was kept on hold saw a rise after the order of the court. Elon Musk’s advocates stood on the argument that Twitter had breached the agreement and there was no need to fast forward the trial. The court decided that the trial will be held during the fall.

A 3 judge bench of the Supreme Court has held that the expression “existence of arbitration agreement” which is included in Section 11 of the Arbitration Act shall also include the aspect of validity of arbitration agreement.

The Supreme Court also explained that at the stages that are included in Section 8 and 11 of the Arbitration Act the courts should undertake a prima facie examination to determine the validity of the arbitration agreement.

SECTION 8 AND SECTION 11 OF THE ARBITRATION AND CONCILIATION ACT

Section 8 of the Arbitration and Conciliation Act actually obligates any judicial authority to refer the dispute to arbitration where there was a valid arbitration agreement. A clear reading of Section 8 of the Act would give you an idea about what it says. It clears the fact that when it is compared to the UNCITRAL Model Law it differs from the Article 8 of the model law The Article 8 actually enables a court to decline to refer parties to arbitration in case the arbitration agreement is found to be void or null or in capable of being performed. In this aspect Section 8 has made a departure which indicates that it has a wider ambit and reach. Section 8 uses the expansive expression judicial authority instead of the term court.

Section 11 of the Arbitration and Conciliation Act deals with the appointment of arbitrators.

While answering a reference made to it by a division bench on the issue of whether landlord tenant disputes under the transfer of property act are arbitrable  the Apex court held that such disputes could become the subject matter of the arbitration if they are not covered by rent control laws.

The court also went on to discuss the issues relating to the stages when the question of arbitrability can be decided and the scope of examination under section 11 and section 8 of the act.

OBSERVATIONS MADE IN THE JUDGMENT-

The judgement also observed that during the reference stage the courts do not perform ministerial functions and they exercise and perform judicial functions whenever they take decisions on objections in terms of Section 8 and 11 of the Arbitration Act.

While discussing prima facie examination under Section 8 the Court was of the opinion that Section 8(1) after the 2016 amendment has enjoined the court to undertake prima facie examination when it comes to the validity of an agreement.

The Judgement went on to clarify that prima facie case in the context of Section 8 of the Arbitration Act should not be confused for the merits of the case that have been put up by the parties which has to be established before the arbitral tribunal. Its restriction lies in the subject matter of the being prima facie arbitrable when it falls under a valid arbitration agreement. Here prima facie case would mean that the  assertions on these aspects are bonafide.

The code explained how prima facie examination is not full review but is actually a primary first review in order to manifestly weed out invalid arbitration agreement sand non arbitrable disputes. The review at the reference stage in terms of prima facie is done in order to cut the dead wood  and trim the branches in terms of straight forward cases where the dismissal is quite evident and where the law and facts dealing with the litigation must stop at the first stage.

Everything depends upon the certainty of the court that there is no valid arbitration agreement that exists or the subject matter of the disputes are not arbitrable and only then an application under Section 8 could be rejected.

The judgement also had in opinion about Section 11 subsection 6A that had been inserted with the coming in off the 2016 amendment and prescribe that the court at the stage of appointing an arbitrator should confine itself to examine whether there was the existence of an arbitration agreement. However this subsection was later removed in the 2019 amendment. The court however made it noted that the existence of an arbitration agreement would mean an arbitration agreement that is able to satisfy the statutory requirements of the Arbitration Act as well as the contract act and also to meet ends and be enforceable in law.

The apex court thus made it clear that section 8 and 11 are indeed complementary provisions and the court also made it clear that it can read the mandate of a valid arbitration agreement in Section 8 into the mandate of section 11 which would include the existence of an arbitration agreement.