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Litigation and Dispute Resolution
Cases
Dolphin Drilling Ltd. v. Oil and Natural Gas Corporation Ltd.
In the present case the issue before the SC was whether an arbitration clause in a contract is a one-time recourse available to the parties to the contract or whether the parties can invoke the arbitration clause repeatedly for different disputes. The respondent raised an objection with regard to the repeated invocation of the arbitration clause on the ground that the financial burden cast by the arbitration proceedings was quite onerous. The SC while considering the said question in the facts of the case answered the question in negative
Certain important and recent case laws in this area are set out below.
Cases
Dolphin Drilling Ltd. v. Oil and Natural Gas Corporation Ltd.
In the present case the issue before the SC was whether an arbitration clause in a contract is a one-time recourse available to the parties to the contract or whether the parties can invoke the arbitration clause repeatedly for different disputes. The respondent raised an objection with regard to the repeated invocation of the arbitration clause on the ground that the financial burden cast by the arbitration proceedings was quite onerous. The SC while considering the said question in the facts of the case answered the question in negative and held that unless the arbitration clause or arbitration agreement expressly provides so, it cannot be held that once the arbitration clause is invoked the remedy of arbitration is no longer available in regard to other disputes that might arise in future. The SC expressed its opinion that the process of arbitration had become a time-consuming and expensive mode of resolution of disputes and suggested that the problem of financial burden cast upon the parties resorting to arbitration should be remedied at the earliest by proper drafting of arbitration clauses. The SC expressed that the arbitration clauses should be drafted in such manner that the remedy could be used only at the conclusion of the work or on termination of the agreement.
Karan Dileep Nevatia v. Union of India & Ors.
The Petitioner in the present case challenged certain notifications on grounds of being violative of Article 253 of the Constitution of India (“Constitution”) (dealing with powers conferred on Parliament to make laws for the whole or any part of the territory of India for implementing Treaty, Agreement or Convention as provided under Entries 10 and 14 of List I of the Seventh Schedule) and the provisions of the General Agreement on Trade and Tariffs (“GATT”). The Bombay HC discussed the constitutional provisions at length to establish that treaties duly ratified by GOI do not by virtue of the treaties alone have the force of law and for provisions of such treaties to have a binding force on the Indian Nationals, Parliament has to enact a law under Article 253 of the Constitution for implementation of the provisions of said treaties.
The Bombay HC held that the Maharashtra Government had the legislative competence to issue notifications imposing additional taxes on imported wine. Further, the correspondence between the Central and State Government clearly established that the duty structure imposed on imported wines were in conformity with the WTO Guidelines and the provisions of GATT. Since the said International treaties affected the rights of the Indian Nationals and were in conflict with the said notifications issued by the state government, the notifications were held to prevail over the international treaties. It was further held that since no law had been made by the Parliament on the said issue, the notification being a delegated legislation passed by the State, could not be struck down on grounds of being contrary to the provisions of GATT, as the entity making the policy was different from the one making the delegated legislation.
It was challenged that the notifications were arbitrary and discriminatory and passed without any valid classification. The Bombay HC reiterating the principles laid down by the SC in several cases held that State Government had the power to levy higher taxes or duty on certain objects depending on the fiscal policy. In this light it was held that imposition of higher duty/tax on foreign liquor by the State Government was permissible as such classification was based on intelligible differentia.
Vijay Kumar Sharma v. Raghunandan Sharma
The present case considered whether a unilateral declaration by a father that any future disputes among the sons would be settled by an arbitrator named by him could be considered as an arbitration agreement between his children. The appellant contended that the sons of the deceased father had not entered into an arbitration agreement and there is no arbitration agreement in existence as contemplated under Section 7 of the Arbitration and Conciliation Act 1996 (“Arbitration Act”) and no arbitrator could have been appointed under Section 11 of the Arbitration Act. The SC while considering the facts of the case in detail, discussed the provisions of Section 7 of the Arbitration Act and held that the subsections of section 7 of the Arbitration Act require that an arbitration agreement shall be in writing whether contained in a documents signed by the parties or contained in exchange of letters, telex, telegrams etc or contained in an exchange of statements of claim and defence in which existence of arbitration is alleged by one party and not denied by the other party. In the said case, neither of the parties had signed any documents, letters, telex or telegram for referring the disputes to arbitration. The SC held that a unilateral declaration by the testator that disputes arising out of the will should be settled by an arbitrator cannot be construed to be an arbitration agreement in writing between the parties to the dispute. The SC held that in the absence of an arbitration agreement by mutual consent in terms of section 7 of the Arbitration Act, the appointment of an arbitrator is not permissible.
Central Warehousing Corporation v. Fortpoint Automotive Pvt. Ltd.
The issue for consideration before the Bombay HC was whether in view of the provision of section 5 of the Arbitration Act, an insertion of an arbitration clause in a Leave and License Agreement would result in the ousting of the jurisdiction of the Small Causes Court under the Presidency Small cause Courts Act, 1882. The provisions of the Presidency Small Causes Courts Act, 1882 vest exclusive jurisdiction with the Small Causes Court to deal with all suits and proceedings between Licensor and Licensee in relation to recovery of possession or license fees in connection with any immovable property situated in Greater Bombay.
The Bombay HC assessed whether section 5 of the Act could be read in isolation, as it being a non-obstante clause had wide operation notwithstanding anything contained in any other law. However, the Bombay HC held that Section 41(1) of the Presidency Small Causes Courts Act, 1882 fell within the ambit of Section 2 (3) of the Act wherein Part I of the Act could not affect those laws created solely for dealing with certain specific disputes inspite of non-obstante provisions under Section 5 of the Arbitration Act. The Bombay HC held that exclusive jurisdiction of the Small Causes Court to deal with the disputes arising between Licensor and Licensee will be unaffected by any arbitration agreement or arbitration clause inserted in the Leave and License Agreement and enforcing such agreements would be invalid and against public policy. The Bombay HC held that the jurisdiction under section 41 of the Presidency Small Causes Courts Act, 1882 is not ousted by the provisions of section 5 of the Act as the Presidency Small Causes Courts Act, 1882 is a special law enacted for the specific purpose of adjudicating disputes between licensor and licensee and hence excluded under the provisions of section 2(3) of the Arbitration Act.
Authors
Atul Dua (atul.dua@sethdua.com) is a Senior Partner with Seth Dua & Associates, Solicitors & Advocates, India.