memo-a 62- jasman dhanoa & srinjoy bhattacharya

8/21/2019 Memo-A 62- Jasman Dhanoa & Srinjoy Bhattacharya

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MEMORIAL ON BEHALF OF APPELLANTS

GNLU INTRA MOOT COURT COMPETITION (1ST ROUND)

GUJARAT NATIONAL LAW UNIVERSITY

INTRA-MOOT COURT COMPETITION

2014

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

MS.MEERA SINGH OBEROI(APPELLANT)

V.

W.HOTELS AND ORS.(RESPONDENT)

WRITTEN SUBMISSION ON BEHALF OF APPELANTS A-62


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TABLE OF CONTENTS

1. LIST OF ABBREVIATIONS 2

2. INDEX OF AUTHORITIES:

BOOKS REFERRED

STATUTES REFERRED

TABLE OF CASES

3

3. STATEMENT OF JURISDICTION 8

4. STATEMENT OF FACTS 9

5. STATEMENT OF ISSUES 11

6. SUMMARY OF ARGUMENTS 12

7. ARGUMENTS ADVANCED 14

8. PRAYER 34


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LIST OF ABBREVIATIONS

Abbreviation Meaning

& And

(P) Private

AIR All India Reporter

Anr. Another

Arb. L. R Arbitration Law Review

Bom Bombay

Cal Calcutta

Co. Company

Co. Company

Corp. Corporation

Corpn Corporation

Del Delhi

DLT Delhi Law Times

E.g. Example

ed Edition

Etc Etcetera

Honble Honorable

i.e That is

ibid Ibidem

Ker Kerala

Ld Learned

ITR Income Tax Reporter

Ltd. Limited

M/s Messers

MANU Manupatra

MLJ Madras Law Journal

Mr. Mister

Mr. Mister


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Ms. Miss

Nos. Numbers

Q.B.D. Queens Bench Division

Ors Othersp. Page

para. Paragraph

Pvt Private

Raj Rajasthan

Sdn. Bhd. Sendirian Berhad

S. Section

SCC Supreme Court CasesSd. Signed

u/s Under Section

UOI Union of India

v. Versus

V. Versus


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INDEX OF AUTHORITIES

A. BOOKS REFERRED

i. AVTAR SINGH, LAW OF ARBITRATION & CONCILIATION AND

ALTERNATIVE DISPUTE RESOLUTION SYSTEMS (9th ed. Eastern Book

Company 2011)

ii. B. A. GARNER, BLACKS LAW DICTIONARY (9thed. West Publishing

Company 2009)

iii. JUSTICE DR. B.P SARAF, LAW OF ARBITRATION AND CONCILIATION

(4thed. Snow White Publications Pvt Ltd 2006)

iv. JUSTICE R.P. SETHI, LAW OF ARBITRATION & CONCILIATION (1sted.

Ashoka Law House 2007)

v. JUSTICE R.S. BACHAWAT, LAW OF ARBITRATION & CONCILIATION

(5thed. Lexis Nexis 2010)

vi. JUSTICE S.B. MALIK, COMMENTARY ON THE ARBITRATION AND

CONCILIATION ACT (6thed. Universal Law Publishing Co. 2013)

vii. O.P. MALHOTRA, THE LAW AND PRACTICE OF ARBITRATION AND

CONCILIATION(2nded., 2006)

B. STATUTES REFERRED

i. Code of Civil Procedure (Amendment) Act 2002

ii. The Arbitration and Conciliation Act, 1940

iii. The Arbitration and Conciliation Act, 1996

iv. The Contracts Act, 1872

C.

TABLE OF CASES

1. Chloro Controls Pvt. Ltd. V. Severn Trent Water Purification Inc. and Ors

2. Corporate Management Council of India P. Ltd. V. Lonza India P. Ltd.

3. Geojit BNP Paribas Financial Services Ltd. v. Kritika Nagpal]

4. Indian Oil Corporation Ltd. v. M/s. Saibababa Automobiles

5. Indian Oil Corporation v. Langkawi Shipping Ltd

6. McDermott International Inc. vs Burn Standard Co. Ltd.

7. Kwality Mfg. Corpn. v. Central Warehousing Corporation


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8. Maharashtra Small Scale industries Development Corporation vs Snehadeep

Structures (P) Ltd

9. MMTC v. Vicnivaas Agency

10.Renusagar Power Corporation Ltd. v General Electric Ltd

11.ONGC Ltd. V. Saw Pipes

12.Rashtriya Ispat Nigam v. M/s. Dewan Chand Ram Saran

13.S.B.P. & Cov.Patel Engineering Ltd. & Anr

14.SAIL v. Gupta Brothers Steel Tubes Ltd

15.Shri Lal Mahal v. Progetto Grano Spa

16.Sulaikha Clay mines v. M/s. Alpha Clays & Anr.

17.Sumitomo Heavy Industries Ltd. v ONGC


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STATEMENT OF JURISDICTION

The Appellants hereby submit to the jurisdiction of the High Court of Judicature of Bombay,

Appellate side under clause 15 of letters patent1r/w Section 372of Arbitration and

Conciliation Act, 1996.

1 (3). Appeal to be placed before Division Bench for admission. Appeals under clause 15 of the Letters

Patent shall be placed for admission before a Division Bench.

2 Appealable orders.

(1) An appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear

appeals from original decrees of the Court passing the order, namely:

(a) granting or refusing to grant any measure under section 9;

(b) setting aside or refusing to set aside an arbitral award under section 34.

(2) An appeal shall also lie to a Court from an order granting of the arbitral tribunal.

(a) accepting the plea referred in sub-section (2) or sub-section (3) of section 16; or

(b) granting or refusing to grant an interim measure under section 17.

(3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall

affect or take away any right to appeal to the Supreme Court.


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STATEMENT OF FACTS

1. The Respondent (W Hotels) leased a premises situated at 100, Nariman Point on a

leave and license basis from the Common Respondent Ms. Meera Singh Oberoi(Ms.

Oberoi) to set up its flagship hotel, The W.

2. The Leave and License Agreement was for a period of 25 years and was it was

executed and duly registered on 14 September 2004. Under the Agreement the

property at Nariman Point was to be handed over only after maintenance work was to

be completed as per the specifications as set out by W Hotels.

3. The maintenance work was to be carried out by the Petitioner in Arbitration Petition

No. 31 of 2011, Tamaara Hospitality Pvt. Ltd. (Tamaara Hospitality).

4. W Hotels prematurely vacated the premises on 10 November 2009 and discontinued

paying the license fee as stipulated within the agreement.

5. This was allegdly in violation of the 7 year lock in period as mentioend in the contract

clause 3.1.

6. A dispute arose and the appellant filed under sec. 11 for the appointment of an

arbitrator, as the method of dispute redressal as per the arbitration clause was

arbitration.

7. The CJI of the Bombay High Court appointed an arbitrator on 26thFebruary.

8. One of the respondents, Tamaara Hospitality, filed a petition to the that it was

wrongly impleaded and the award was patently illegal.

9. The two issues which arose before the arbitrator were that of a) impleadment of

Tamaara Hospitality b) the award, whether is should be equal to the debt due or to


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unliquidated damages as compensation. The arbitrator adjudicated against the

respondents and held the award as debts and opined that Tamaara has waived its right

as it petitioned later.

10.This was appealed by the respondent in the High Court under S. 34, challenging the

order of the arbitrator and the award, holding the order to be patently illegal.

11.The basis of the award, as debts and not as liquidated damages as compensation, was

held to be wrong and the order that the arbitral tribunal did not have the jurisdiction to

rule upon the impleadment of Tamaara was wrong, as the tribunal has competent

jurisdiction. It is not affected by the adjudication by the Chief Justice under s.11.

12.The matter has then been again appealed by the appellants in front of this Honble

division bench of the Bombay High Court.


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STATEMENT OF ISSUES

1. Whether the Ld. Single Judge was correct in setting aside the award dated 4th

October 2010

a) Whether the tribunal was correct in dismissing the Section 16 application of

the Respondent (Tamaara Hospitality).

b) Whether the Ld. Single Judge has exceeded his scope of review as stipulated

by Section 34 of the Arbitration and Conciliation Act, 1996

c) If not, whether the Ld. Sole Arbitrator was correct in concluding that the

amount due under lock-in period is in the nature of consideration and not liquidated

damages or penalty.

2. Whether the Arbitration and Conciliation Act, 1996, permits the Court to

remand the matter back to the Arbitral Tribunal for fresh consideration, once the award

has been set aside.


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SUMMARY OF ARGUMENTS

1a): Whether the tribunal was correct in dismissing the S. 16 application of the

Respondent (Tamaara Hospitality).

The Ld. Single judge was not correct in setting aside the award dated 4th October 2010 as it

made application of mind over its lack of jurisdiction on the Chief Justice of the High Court

under S.11 which deals with appointment of arbitrators. The SC judgement had ruled power

of the Chief Justice under s.11 is a judicial order and not an administrative order. The

Tribunal, however, was correct in dismissing the S.16 application of the Respondents.

1b): Whether the Ld. Single Judge has exceeded his scope of review as stipulated by

Section 34 of the Arbitration and Conciliation Act, 1996.

Section 34 provides the grounds for setting aside an arbitral award. Section 34(2)(b)(ii)

stipulates violation of public policy as a ground for setting aside an award. The Respondents

claimed the defence of the award being patently illegal, and thus being violative of public

policy, before the Ld. Single Judge, which was upheld and the award was set aside. It is the

humble submission of the appellants that the present case is does not meet the conditions for

the Court to interfere and rule on its legality, and thus, cannot be set aside on the ground of

public policy. The Ld. Single Judge exceeded his scope of review under Section 34.

Alternatively, it is our submission that there are more than one possible interpretations of the

contract. In such a situation, the Supreme Court has held in a plethora of cases that the award

of the arbitrator should not be set-aside by the Courts, even if they disagree with the views of

the arbitrator.

1(c):If not, whether the Ld. Sole Arbitrator was correct in concluding that the amount

due under lock-in period is in the nature of consideration and not liquidated damages

or penalty.

The Ld. Sole arbitrator was correct in concluding that amount due under the lock in period is

in the nature of consideration and not liquidated damages as it was a leave and license

agreement which specifically ascertained the amount of money that was to be paid if the

respondents quit the premises within the lock in period. There was no case made out for

liquidated damages as it was already ascertained between the parties what sum had to be paid

in case of quitting during the lock in period.


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2: Whether the Arbitration and Conciliation Act, 1996, permits the Court to remand

the matter back to the Arbitral Tribunal for fresh consideration, once the award has

been set aside.

It is the submission of the Appellants that under the 1996 Act, the award cannot be set

aside and pursuant to it, remanded back for arbitration. Section 34, which stipulates the

grounds for setting aside an award, also provides under sub-section 4, that where the Court

feels it is appropriate and with the consent of atleast one of the parties, it can adjourn the

case before it and remand the matter back to the arbitral tribunal for removal of the errors

or insufficiencies which had rendered the ground for challenge. However, the award can be

remanded to the tribunal only in a case where it has not already been set aside. In the

present case, the Ld. Single Judge has remanded the matter for fresh consideration after

setting it aside, which cannot be done under the law for the time being in force. Hence, the

order of the Ld. Single judge is erroneous in this regard and must be set aside.


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ARGUMENTS ADVANCED

1 (a) Whether the Tribunal was correct in dismissing the S.16 application of the

Respondent (Tamaara Hospitality).

Section 16 of the Arbitration and Conciliation Act, 1996 (Hereinafter referred to as the Act)

deals with competence of an arbitral tribunal to rule on its jurisdiction.

Sec. 16 is said to be the recognition of principle Kompetenz-Kompetenz. The fact that the

arbitral tribunal has the competence to rule on its own jurisdiction and to define the contours

of its jurisdiction only means that when such issues arise before it, the Tribunal can and

possibly, ought to decide them.

A 7 seven judge bench of the Apex Court in S.B.P. & Co v. Patel Engineering Ltd. &

Anr3had held that the Appointment of arbitrator by Chief Justice is a judicial decision and

not an administrative one. Also the scheme of section 11 of the Act required Chief justice or a

person designated by him to decide whether there is an arbitration agreement in terms of S. 7

of the Act before exercising power under Section 11(6) of the Act and its implications.

The apex court also laid down that it will be the Chief Justice or a person designate own

jurisdiction, to entertain the request, the existence of a valid arbitration agreement, the

existence or otherwise of a live claim, the existence of the condition for the exercise of his

power and on the qualifications of the arbitrator or arbitrators. If the conditions for exercise

of power by Chief Justice under section 11(6) of the act exist in the case. A decision on these

aspects is a prelude to the Chief Justice considering whether the requirements of sub-

section(4), sub-section(5) or sub-section(6) of section 11 are satisfied when approached with

the request for appointment of an arbitrator. Decision on these matters is fundamental for

appointment of arbitrator. The decision on all these aspects rendered by the Chief Justice

would attain finality. Since the order of the Chief Justice of a High Court appointing an

arbitrator is a judicial order, it would be final under section 11(7) of the Act and the only

avenue open to a party feeling aggrieved by the order of the Chief Justice would be to

approach to the Supreme Court under Article 136 of the Constitution of India4.

3 AIR 2006 SC 450

4Ibid.


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There are only two types of issues which are in the exclusive domain of arbitral tribunal, i.e.,

whether a claim made falls within the arbitration clause and merits or any claim involved in

the arbitration.

The Patel engineering case laid down the principle that once the Chief Justice has appointed

the arbitrator it cannot be challenged on the grounds of jurisdiction, as the appointment of the

Arbitrator is a judicial decision and not an administrative one.The immediate implication of

such a decision is that the Court, when asked to appoint an arbitrator, must go into the

questions of arbitrability of the claim, validity of the arbitration agreement, existence of

arbitration agreement and other jurisdictional matters. Therefore there can be no doubt that

the issue ought to have been decided by the Chief Justice or his learned designate and could

not have been left to arbitrator5

.

It was also pointed out that Section 16 of the Act only makes explicit what is even otherwise

implicit, namely, that the arbitral tribunal constituted under the Act has the jurisdiction to rule

on its own jurisdiction, including ruling on objections with respect to the existence or validity

of the arbitration agreement.6

Section 16 has full play only when an arbitral tribunal is constituted without intervention

under Section 11(6) of the Act is one way of reconciling that provision with Section 11 of theAct, especially in the context of sub-section (7) thereof. We are inclined to the view that the

decision of the Chief Justice on the issue of jurisdiction and the existence of a valid

arbitration agreement would be binding on the parties when the matter goes to the arbitral

tribunal and at subsequent stages of the proceeding except in an appeal in the Supreme Court

in the case of the decision being by the Chief Justice of the High Court or by a Judge of the

High Court designated by him7.

In light of the Patel Engineering case, where there is constitution of tribunal without any

intervention by the Chief justice, then arbitral tribunal is empowered to decide the entire

dispute between the concerned parties including all the preliminary issues. If parties have

5Container Corporation of India v. DR Sood, (2005) 3 Arb LR 448, 449,: (2005) 4 RAJ 279 (Del-DB)

6Justice S.B. Malik, Commentary on the Arbitration and Conciliation Act, 1996 (6th ed. Universal Law

Publishing Co. 2013)

7 Ibid.


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gone to arbitral tribunal without taking recourse to s. 8 or 11 of the act, then the tribunal has

the competence to rule on its own jurisdiction.8

Where there is a constitution of tribunal on the intervention of Chief Justice, then arbitral

tribunal cannot decide on its own jurisdiction as recourse to s. 8 to 11 has been taken.

The respondents ought to have filed a special leave petition under Article 136 challenging the

order of the Chief Justice. The question of the Chief Justice entertaining the application under

s. 11 cannot be decided by the very same tribunal constituted by him on the account of such

an application. Appointment of an arbitrator by the Chief Justice could not have been

possible without the existence of an arbitration agreement.

In Chloro Controls Pvt. Ltd. V. Severn Trent Water Purification Inc. and Ors.9

,the apex

court held that a non-signatory or third party could be subjected to arbitration without

their prior consent, but this would only be in exceptional cases. The Court will examine

these exceptions from the touchstone of direct relationship to the party signatory to the

arbitration agreement, direct commonality of the subject matter and the agreement between

the parties being a composite transaction. The transaction should be of a composite nature

where performance of mother agreement may not be feasible without aid, execution and

performance of the supplementary or ancillary agreements, for achieving the commonobject and collectively having bearing on the dispute. Besides all this, the Court would

have to examine whether a composite reference of such parties would serve the ends of

justice. Once this exercise is completed and the Court answers the same in the affirmative,

the reference of even non-signatory parties would fall within the exception afore-

discussed.

In a case like the present one, where origin and end of all is with the Mother or the

Principal Agreement, the fact that a party was non-signatory to one or other agreement

may not be of much significance. The performance of any one of such agreements may be

quite irrelevant without the performance and fulfillment of the Principal or the Mother

Agreement. Besides designing the corporate management to successfully complete the

joint ventures, where the parties execute different agreements but all with one primary

object in mind, the Court would normally hold the parties to the bargain of arbitration and

not encourage its avoidance. In cases involving execution of such multiple agreements,

8 Supra Note 1

9 (2013) 1 SCC 641


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two essential features exist; firstly, all ancillary agreements are relatable to the mother

agreement and secondly, performance of one is so intrinsically inter-linked with the other

agreements that they are incapable of being beneficially performed without performance of

the others or severed from the rest. The intention of the parties to refer all the disputes

between all the parties to the arbitral tribunal is one of the determinative factors.10

Sec. 11 of the Code of Civil Procedure, 1908 describes the rule of re-judicata asNo Court

shall try any suit or issue in which the matter directly and substantially in issue has been

directly and substantially in issue in a former suit between the same parties, or between

parties under whom they or any of them claim, litigating under the same title, in a Court

competent to try such subsequent suit or the suit in which such issue has been subsequently

raised' and has been heard and finally decided by such Court.11

The respondents had filed no objections when the Chief Justice was in the process of

adjudicating upon the matter under S.11 of the act. Moreover, the doctrine of constructive res

judicatawhich implies that when the respondents had the right to put up a claim of file a

defence before the Chief Justice but failed to do so.

Section 11 of the Arbitration and Conciliation Act, 1996 discusses the Appointment of the

Arbitrator, and is enforced when there is an Arbitration Agreement between various parties asstated under Section 7 of the Arbitration and Conciliation Act, 1996.

It is well settled principle according to this section of the Act that parties to an Arbitration

agreement are free to appoint arbitrator12.

The finality given to the order of the Chief justice on the matters within his competence

under Sec. 11 of the Act, are incapable of being reopened before the arbitral tribunal.

In the light of aforementioned arguments made and judgements cited, it is submitted before

the Honble Court that the Tribunal was correct in dismissing the Sec. 16 application of the

Respondents.

10Ibid.11 CK Thakkar, Code of Civil Procedure

12 Section 11(2), Arbitration and Conciliation Act, 1996


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1(b) Whether the Ld. Single Judge has exceeded his scope of review as stipulated by

Section 34 of the Arbitration and Conciliation Act, 1996

Section 34 of the Arbitration and Conciliation Act, 1996 ( the Act, hereinafter) pertains to the

setting aside of a domestic arbitral award by a Court having necessary jurisdiction.

Section 34(2) of the stipulates the grounds on which an award can be set aside. Section

34(2)(a) puts the onus on the applicant party to furnish evidence before the Court as to the

existence of the five grounds mentioned therein. Under Section 34(2)(b), the award may be

set aside if the Court finds that-i) the subject-matter of the dispute is not capable of

settlement by arbitration under the law for the time being in force, or ii) the arbitral award is

in conflict with the public policy of India.

In the present case, the Respondents before this Honble Court had challenged the award of

the arbitrator on the ground of it being patently illegal. Patent illegality interpreted by the

Supreme Court to be one of the grounds under the public policy defence available under

Section 34 to set aside an award, in the case of ONGC Ltd. V. Saw Pipes13(Saw Pipes

hereinafter). It is pertinent at this juncture to delve into the details of the scope of public

policy vis-a-vis arbitration in India.

At the outset, it is imperative to mention that the concept of public policy is a dynamic one,which metamorphoses continually with the varying socio-cultural notions of the society.14

The Act does not define public policy. The explanation to Section 34(b)(ii) merely states that

(w)ithout prejudice to the generality of sub-clause(ii) it is hereby declared, for the avoidance

of any doubt, that an award is in conflict with the public policy of India if the making of the

award was induced or affected by fraud or corruption or was in violation of Section 75 or

Section 81. The jurisprudence in this regard is mostly in the nature of Court-made law. The

first position in this regard was settled in the case of Renusagar Power Corporation Ltd. v

General Electric Ltd15(Renusagarhereinafter). While deciding the scope of public policy

under the Foreign Awards(Recognition and Enforcement) Act, 1961, the Supreme Court held

that an award would be considered as opposed to the public policy of India if it was shown to

be contrary to i) the fundamental policy of Indian law, ii) the interests of India or iii) justice

or morality. Thus, narrow interpretation was given to the term public policy, thereby

limiting the intervention of the Courts. The Apex Court stated : it is obvious that since the

13 AIR 2003 SC 262914 Ibid

15 AIR 1994 SC 860


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Act is calculated and designed to subserve the cause of facilitating international trade and

promotion thereof by providing for speedy settlement of disputes arising in such trade

through arbitration. Any expression or phrase occurring therein should receive, consistent

with its literal and grammatical sense, a liberal construction. 16It held that the award which

is, on the face of it, patently in violation of statutory provisions cannot be said to be in public

interest.17

This position continued to be the law in this regard until the judgment of the Supreme Court

in Saw Pipes, wherein public policy was given a much wider interpretation.While deciding a

challenge to the validity of an award under Section 34 of the Act, the Court added the ground

of patent illegality to those already propounded by the Court inRenusagar. The Court

further stipulated as follows: Illegality must go to the root of the matter and if the illegality

is of trivial nature it cannot be held that award is against the public policy. Award could also

be set aside if it is so unfair and unreasonable that it shocks the conscience of the Court. Such

award is opposed to public policy and is required to be adjudged void.18

The view taken by the Supreme Court in Saw Pipes has been subjectto much criticism and it

has been said that it sets the clock back to the pre-1996 era. It defeats one of the primary

objectives behind the enacting of the 1996 Act i.e., to reduce interference of Courts, by

expanding the scope for interference of Courts in arbitration awards. In spite of the criticism,

this judgment continues to be good law as far as challenges to domestic arbitrations are

concerned. This has been held by the Supreme Court in the case of Shri Lal Mahal v.

Progetto Grano Spa19, wherein it has also held that Saw Pipes will not apply to challenges

under Section 48 i.e., to enforcement of foreign awards. (The Court held in this case that the

ground of patent illegality as propounded in Saw Pipes cannot be a ground to refuse

enforcement of a foreign award under Section 48. )

Thus, in spite of calls for the constitution of a higher bench for reconsidering the Saw Pipes

judgment, it still remains valid and applicable to challenges to awards under Section 34 of the

Act. However, the conditions as set out in Saw Pipes to invoke patent illegality as a

defence to enforcement of an award must be met. In the case of Indian Oil Corporation v.

16 Ibid

17 Supra Note 118 Supra Note 1

19 2013 (3) Arb.LR 1 (SC)


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Langkawi Shipping Ltd.20, the Bombay High Court was of the opinion that strict construction

of the Saw Pipes judgment would radically alter the limits set by statutes and the judiciary

with regards to interference with arbitral awards.In the case of Maharashtra Small Scale

industries Development Corporation vs Snehadeep Structures (P) Ltd.21, it has been held that

it is not for the Court under Section 34 to correct the error of the arbitrator or grant relief in a

dispute which is to be decided in the arbitration.

Further, in the case ofMcDermott International Inc. vs Burn Standard Co. Ltd.22, it was held

as follows:

The 1996 Act makes a provision for the supervisory role of courts, for the review of the

arbitral award only to ensure fairness. Intervention of the court is envisaged in few

circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural

justice, etc. the court cannot correct error of the arbitrator again if it is desired. So, scheme

of the provisions aims at keeping the supervisory role of the court at minimal level and this

can be justified as parties to the agreement make a conscious decision to exclude the courts

jurisdiction by opting for arbitration as they prefer the expediency and finally offered by it.

Thus, Courts, while balancing the objectives of the Act withtheSaw Pipesjudgment, have

sought to put a check on the patent illegality defence so that it is not used indiscriminately.

In the present case, no ground is made for the challenge of the award. The Ld. Single Judge

went beyond the scope of his powers by going into the merits of the Award and setting aside

the decision of the arbitrator. The Saw Pipesratio clearly mandates the requirement of an

illegality which is goes to the root of the matter and is of such a nature that it shocks the

conscience of the Courts. This is clearly not the position in the present case. It is merely a

case where the interpretations of the arbitrator and Ld. Single Judge differ. In the case of

Rashtriya Ispat Nigam v. M/s. Dewan Chand Ram Saran23, it has been held by the Supreme

Court that if there are two possible( if not plausible) interpretations of a contractual provision

and the Arbitrator has gone with one, it does not provide a ground for setting aside the award

even if the Ld. Single Bench, who has to adjudicate upon the Section 34 application, differs

with that interpretation. The following paragraphs of the judgment of the Supreme Court in

20 (2004) 3 Arb.LR 508

21 (2008) 2 Arb.LR 17522 (2006) 2 ArbLR 498

23 (2012) 5 SCC 306


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SAIL v. Gupta Brothers Steel Tubes Ltd.24(supporting the aforementioned case) is also

pertinent in this regard:

It is not necessary to multiply the references. Suffice it to say that the legal position that

emerges from the decisions o this Court can be summarised thus:

(i) In a case where an arbitrator travels beyond the contract, the award would be without

jurisdiction and would amount to legal misconduct and because of which the award would

become amenable for being set aside by a court.

(ii) An error relatable to interpretation of the contract by an arbitrator is an error within

his jurisdiction and such error is not amenable to correction by courts as such error is not

an error on the face of the award.

(iii) If a specific question of law is submitted to the arbitrator and he answers it, the fact

that the answer involves an erroneous decision in point of law does not make the award

bad on its face.

(iv) An award contrary to substantive provision of law or against the terms of contract

would be patently illegal.

(v) Where the parties have deliberately specified the amount of compensation in express

terms, the party who has suffered by such breach can only claim the sum specified in the

contract and not in excess thereof. In other words, no award of compensation in case ofbreach of contract, if named or specified in the contract, could be awarded in excess

thereof.

(vi) If the conclusion of the arbitrator is based on a possible view of the matter, the court

should not interfere with the award.25

A similar view has been taken by the Supreme Court in Sumitomo Heavy Industries Ltd. v

ONGC26, which is reproduced as follows:

The umpire has considered the fact situation and placed a construction on the clauses of

the agreement which according to him was the correct one. One may at the highest say that

one would have preferred another construction of Clause 17.3 but that cannot make the

award in any way perverse. Nor can one substitute one's own view in such a situation, in

place of the one taken by the umpire, which would amount to sitting in appeal. As held by

this Court in Kwality Mfg. Corpn. v. Central Warehousing Corporation [(2009) 5 SCC

142]. The Court while considering challenge to arbitral award does not sit in appeal over

24 (2009) 10 SCC 6325 Ibid

26 (2010) 11 SCC 296


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the findings and decision of the arbitrator, which is what the High Court has practically

done in this matter. The umpire is legitimately entitled to take the view which he holds to

be the correct one after considering the material before him and after interpreting the

provisions of the agreement. If he does so, the decision of the umpire has to be accepted as

final and binding.

Thus, in the light of the submissions as stated above, it is the humble contention of the

appellants before the Honble Division Bench that the Ld . Single judge has exceeded his

scope of review under Section 34 and his order is thus liable to be set aside.


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1(c)Whether the Ld. Sole Arbitrator was correct in concluding that the amount due

under the lock in period is in the nature of consideration and not liquidated damages or

penalty.

The arguments put forward by the claimants that consideration could only be for the goods

supplied and services provided, any amount payable as a consequence of a breach would

necessarily be in the nature of compensation and not consideration, and therefore requiring

evidence of loss is without any legal basis. In Corporate Management Council of India P.

Ltd. V. Lonza India P. Ltd. 27, the Bombay High court has categorically stated-The

agreements of leave and licence cannot be equated with agreements for the sale of goods or

properties. In an agreement for sale it is normally easy to ascertain the damages, if any. In

the case of leave and licence agreements, it is not so.

The court also laid down definitively the consideration taken into account when executing a

leave-license agreement and agreement for sale. It opined that whereas, a party may be

willing to sell an asset to anyone, a party would be particular about the person with whom he

enters into a leave and licence agreement. In an agreement for sale it would not normally

matter who pays the consideration so long as it is paid or payment is secured. On the other

hand, a party may understandably and justifiably insist on several terms in a leave and licence

agreement other than the term as to the price/compensation.28

Also the judgement placed great emphasis on the fact that the choice of the licensee itself is

of crucial importance to any licensor. The mere fact that a particular licensor offers a better

price is not the sole consideration. The licensee may well refuse to enter into the agreement

with a particular licensor for a variety of reasons, including his reputation, his financial

capacity to honour the terms of the agreement throughout the tenure of the agreement and the

purpose for which the premises are to be used. On the contrary, a licensor may well agree to a

lower license fee for a particular licensee for a variety of very valid reasons including the

licensees reputation. Even if the purpose is common for, e.g., commercial, the licensor may

not agree to let the premises for certain types of commercial activities. Again, the other terms

and conditions would play a significant part in a leave and license agreement. For example, a

27 [2009]150CompCas898(Bom)

28Ibid.


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licensor may insist on a lock-in period as in this case. He may not agree to a short duration at

all.29

The court concluded by stating that, It is thus not always possible or easy to assess the loss

in the case of a breach of a leave and licence agreement by the licensee. Indeed, for these

reasons, it is not always necessary for a licensor to mitigate loss in the case of a breach of a

leave and licence agreement by the licensee. Unlike in the case of a sale it would not always

be permissible to compel a licensor to let the premises to another with a view to mitigating

the loss.30

A debt is a sum of money which is now payable or will become payable in the future by

reason of a present obligation, debitum inpraesenti, solvendum in future.31

The Supreme Court in Kesoram Industries v. Commissioner of Wealth Tax32held that the

word 'debt' is as applicable to a sum of money, which has been promised at a future day as

to a sum now due and payable. If we wish to distinguish between the two, we say of the

former that it is a debt owing, and of the latter that it is debt due.

In the present case, W Hotels had explicitly agreed to a 7 year lock-in period during which it

was obliged to pay a monthly license fees and other related dues. It was bound by the

contract to pay the leftover amount in case it quit before the completion of the 7 year lock-in

period.

The seven-year lock-in period is a claim for unpaid consideration and in no way in the

nature of damages. But for that agreement, the leave and license agreement would never

have been executed. The fact that Ms. Oberoi had agreed not to increase the rent during the

seven year lock in period is definitely a consideration. It was agreed between the parties

that at the time of the execution of the agreement, the amount would be payable only on

the occurrence of a contingency. However, since that contingency has taken place

happened, the debt payable is clearly ascertained and thus is payable. The obligation was

ever eoinstanti; it was only, at the time of the execution of the agreement, solvendum in

futuro. Now that the contingency contemplated by the contract has occurred, it is

solvendum in praesenti.

29Ibid.

30Ibid.31Webb v. Stenton 1883.11 Q.B.D. 518

32[1966] 59 ITR 767 (SC)


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The Division Bench of the Delhi High Court then considered the Supreme Court decision

in ONGC v Saw Pipes Ltd.33:

But if the compensation named in the contract for such breach is genuine pre-estimate of loss

which the parties knew when they made the contract to be likely to result from the breach of

it, there is no question of proving such loss or such party is not required to lead evidence to

prove actual loss suffered by him. Burden is on the other party to lead evidence for proving

that no loss is likely to occur by such breach.

It must assess and weigh in the balance the quality of the defence raised. If that be found to

be lacking in substance, the consequences must follow. The test, as the Supreme Court tells

us inIBA Health (India) Pvt. Ltd. vs. Info-Drive Systems Sdn. Bhd.34, is whether the defence

is bona fide.

In light of the cases cited and arguments advanced, it is humbly submitted that the Ld. Sole

Arbitrator was correct in concluding that the amount due under the lock in period is in the

nature of consideration and not liquidated damages or penalty.

33AIR 2003 SC 2629

34 (2010) 10 SCC 553


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2) Whether the Arbitration and Conciliation Act, 1996, permits the Court to remand

the matter back to the Arbitral Tribunal for fresh consideration, once the award has

been set aside.

The provisions for remission of award back to the arbitral tribunal for reconsideration are

found scattered in various provisions of the Arbitration and Conciliation Act of 1996, as

opposed to the 1940 Act, where the grounds are found under Section 16(1). The grounds

found in both the Acts, however, continue to be the same. Section 16(1) of the 1940 Act

states as follows:

The Court may from time to time remit the award or any matter referred to arbitration to the

arbitrators or umpire for reconsideration upon such terms as it thinks fit-

(a)Where the award has left undetermined any of the matters referred to arbitration, or where

it determines any matter not referred to arbitration and such matter cannot be separated

without affecting the determination of the matters referred; or

(b)Where the award is so indefinite as to be incapable of execution; or

(c) Where an objection to the legality of the award is apparent upon the face of it.

In other words, the grounds mandated that if the Court felt that there was a certain issue

which had not been adjudicated upon by the tribunal even though it was within the

tribunals jurisdiction or it has gone beyond its jurisdiction to rule on a particular issue, or

if the award was vague in nature and was not capable of enforcement, or if the legality of

the award was prima facie objectionable, it could remand the matter back to the arbitral

tribunal for re-adjudication. The first ground is provided in two sections of the 1996 Act-

Section 33(4) and Section 34(a)(iv).35Section 33(4) provides as follows:

Unless otherwise agreed by the parties, a party with notice to the other party, may request

within 30 days from the receipt of the arbitral award, the arbitral tribunal to make an

additional award as to claims presented in the arbitral proceedings but omitted from the

arbitral award.

The only difference in the positions in the 1940 Act and the 1996 Act are that in the latter the

application has to be made to the tribunal itself, whereas in the former case, the application

had to be made to the Court.

35 Justice R.S Bachawat,Law of Arbitration & Concilitation, (5th Edition Lexis Nexis 2010).


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Section 34(2)(iv) contemplates a situation where the tribunal has deals with on a dispute

which was not submitted to arbitration or has ruled on an issue not beyond the scope of

submission . Under these circumstances, the aggrieved party may approach the Court to

remand the matter back to the arbitral tribunal for re-adjudication to remove the excessive

portion of the ruling. This can happen only at the option of either of the parties.

The second ground for remission under the 1940 Act, that is, an award which is indefinite or

vague in nature, can be brought up during enforcement either under the provisions of the

Code of Civil Procedure or, one or both parties may approach the tribunal under Section

33(1) to clarify a specific point or aspect of the award.36

The third ground of remission as provided under the 1940 Act pertains to an illegality which

is prima-facie conceivable in the award. Section 34 (2)(b)(ii) of the 1996 Act provides that an

award can be set aside if it is contravention of the public policy of India( patent illegality was

included under public policy and made a ground for setting aside an award under 1996 Act

pursuant to the Saw Pipes judgment). Section 28 of the 1996 Act mandates that the tribunal

must adjudicate on the basis of the substantive law in force in India. An exception can be

made if the parties expressly agree, under Section 28(2) , to allow the party to rule ex aequo

et bono or as amiable compsiteur.

One can infer from the difference between Section 34(4) of the 1996 Act and S. 16 of the

1940 Act that the award in question can either be set aside or remanded- but once it is

remanded it cannot be set aside. In the case of MMTC v. Vicnivaas Agency37, the Madras

High Court held that Section 34(4) allows the Court to adjourn proceedings and remand the

matter back to the arbitral tribunal, so that the latter can remove the infirmities in the award

that make it liable to be set aside.

Thus, under the 1996 Act, the Court has two distinct sets of powers after the award is

pronounced: it can set aside the award under Section 34(2); or it can adjourn the proceedings

before it and, at the option of the parties and where it feels it is appropriate, remand the

matter back to the tribunal to resume the proceedings or take any other appropriate steps

which will lead to removal of the grounds for setting aside the award.

The power of modification or correction of an award conferred to the Court under Section 15

of the 1940 Act has been removed and the same power has now been conferred upon the

36 Ibid

37 (2009) 1 MLJ 199


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arbitral tribunal itself to correct computation, clerical, typographical or any other similar

errors under Section 33 of the 1996 Act.

Section 34(4) is the provision of the 1996 Act which allows the Courts to remand matters

back to the tribunal where it feels it is appropriate and at the option of the parties. It can

adjourn the proceedings before it and do so. The Court cannot remove the errors itself-the

same can be done by the arbitral tribunal itself. The tribunal has to do away with the

infirmities which led to the setting aside application being filed in the first place. This power

can only be exercised by the Court before it has set aside the award. In the case of Sulaikha

Clay mines v. M/s. Alpha Clays & Anr.38, the Kerala High Court held that it had the power to

remand the back to the arbitral tribunal in the interest of justice but that could be done only in

case there was a procedural discrepancy during the arbitration. It was also held by the Court

that the same could be done only with the consent of both parties and in case of disagreement

between parties, other legal remedies could be resorted to. However, in the present case, the

award is set aside on the ground of patent illegality, which is does not entail any procedural

infirmity.

In the case of Geojit BNP Paribas Financial Services Ltd. v. Kritika Nagpal39, which was

upheld in the case of Indian Oil Corporation Ltd. v. M/s. Saibababa Automobiles40, the

Bombay High Court observed as follows:

"Under sub-section 4 of Section 34, the Court is vested with the discretion, where it is

appropriate and where the court is requested by a party, to adjourn the proceedings for a

period of time. An adjournment is granted in order to furnish the arbitral tribunal with an

opportunity to resume the arbitral proceedings or to take such other action as in the opinion

of the Tribunal will eliminate the grounds for setting aside the award. Sub- section 4 of

Section 34, therefore, does not contemplate a situation where the proceedings are remanded

back to the arbitrator after setting aside the arbitral award.

Thus, if we consider the case in the light of the aforementioned submissions, the Appellants

humbly contend that the Arbitration Act of 1996 does not permit the Court to remand a

matter back to the once it has set aside the matter. Thus, the ruling of the Ld. Single Judge in

this regard is liable to be set aside.

38 (2005) 1 RAJ 121 (Ker)

39 2013(7)BomCR5140 MANU/MH/1681/2013


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PRAYER

Wherefore, it may please the Honourable Bombay High Court, in the light of the facts stated,

issues raised, arguments advanced to adjudge and declare the following:

1. The Ld. Single Judge was wrong in setting aside the arbitral award.

2. The Tribunal was correct in dismissing the Section 16 application of the Respondent

(Tamaara)

3. The Ld. Single Judge had exceeded his scope of review under Section 34 of the

Arbitration Act, 1996,

4. The Ld. Sole Arbitrator was correct in concluding that the amount due under the

lock-in period is in the nature of consideration

5. The Arbitration Act doesnt allow the Court to remand the matter back to the Arbitral

Tribunal for fresh consideration after the award has been set aside.

OR

Pass any other order which the court may deem fit in the interest of Justice, Equity and Good

Conscience.

Place: The Bombay High Court

Date:

Signature

Counsel for the Appellant

memo-a 62- jasman dhanoa & srinjoy bhattacharya

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