Memo-A 62 - Jasman Dhanoa & Srinjoy Bhattacharya

MEMORIAL ON BEHALF OF APPELLANTS
GNLU INTRA MOOT COURT COMPETITION (1ST ROUND)

1
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


2
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


3

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

4
Ms. Miss
Nos. Numbers
Q.B.D. Queens Bench Division
Ors Others
p. Page
para. Paragraph
Pvt Private
Raj Rajasthan
Sdn. Bhd. Sendirian Berhad
S. Section
SCC Supreme Court Cases
Sd. Signed
u/s Under Section
UOI Union of India
v. Versus
V. Versus


5
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 (9
th
ed. West Publishing
Company 2009)
iii. JUSTICE DR. B.P SARAF, LAW OF ARBITRATION AND CONCILIATION
(4
th
ed. Snow White Publications Pvt Ltd 2006)
iv. JUSTICE R.P. SETHI, LAW OF ARBITRATION & CONCILIATION (1
st
ed.
Ashoka Law House 2007)
v. JUSTICE R.S. BACHAWAT, LAW OF ARBITRATION & CONCILIATION
(5
th
ed. Lexis Nexis 2010)
vi. JUSTICE S.B. MALIK, COMMENTARY ON THE ARBITRATION AND
CONCILIATION ACT (6
th
ed. Universal Law Publishing Co. 2013)
vii. O.P. MALHOTRA, THE LAW AND PRACTICE OF ARBITRATION AND
CONCILIATION(2
nd
ed., 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

6
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. & Co v. 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


7

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 patent
1
r/w Section 37
2
of 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.


8
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 26
th
February.

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

9
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.


10
STATEMENT OF ISSUES
1. Whether the Ld. Single Judge was correct in setting aside the award dated 4
th

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.


11
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.

12

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.


13
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. &
Anr
3
had 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 India
4
.

3 AIR 2006 SC 450
4 Ibid.

14
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 arbitrator
5
.
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 the
Act, 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 him
7
.
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.

15
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 common
object 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

16
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 as No 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
judicata which 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 as
stated 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 arbitrator
12
.
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.

10 Ibid.
11 CK Thakkar, Code of Civil Procedure
12 Section 11(2), Arbitration and Conciliation Act, 1996

17
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 Pipes
13
(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 Ltd
15
(Renusagar hereinafter). 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 2629
14 Ibid
15 AIR 1994 SC 860

18
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.
16
It 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 in Renusagar. 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 subject to 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 Spa
19
, 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 1
18 Supra Note 1
19 2013 (3) Arb.LR 1 (SC)

19
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 of McDermott 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 with the Saw Pipes judgment, 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 Pipes ratio 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 Saran
23
, 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 175
22 (2006) 2 ArbLR 498
23 (2012) 5 SCC 306

20
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 of
breach 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
ONGC
26
, 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 63
25 Ibid
26 (2010) 11 SCC 296

21
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.


22
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)
28 Ibid.

23
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 Tax
32
held 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.

29 Ibid.
30 Ibid.
31Webb v. Stenton 1883.11 Q.B.D. 518
32[1966] 59 ITR 767 (SC)

24

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 in IBA 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

25

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).
35
Section 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).

26
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 Agency
37
, 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

27
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 Nagpal
39
, which was
upheld in the case of Indian Oil Corporation Ltd. v. M/s. Saibababa Automobiles
40
, 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)BomCR51
40 MANU/MH/1681/2013


28
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

Загружено:

Сведения о документе

Оригинальное название

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Memo-A 62 - Jasman Dhanoa & Srinjoy Bhattacharya

Загружено:

Авторское право:

Доступные форматы

MEMORIAL ON BEHALF OF APPELLANTS

GNLU INTRA MOOT COURT COMPETITION (1ST ROUND)

Вам также может понравиться