Jojy George Koduvath.
PART – I
Introspection
- Will the arbitration clause survive, on the termination of the agreement/contract?
- Will the arbitration clause survive, notwithstanding a declaration of the contract being null and void?
Arbitration clause is treated as an independent contract
Sec. 16(1)(a) of the Arbitration and Conciliation Act, 1996 provides that the arbitration clause forming part of a contract shall be treated as an agreement independent of such a contract. (Enercon (India) Ltd. v. Enercon GMBH, 2014-5 SCC 1).
- Therefore-
- Even on the termination of the agreement/contract, the arbitration clause will survive.
- Even when the agreement/contract comes to an end by efflux of time, the arbitration clause will not come to an end.
- In spite of the declaration that a contract is null and void, the arbitration clause continues to be enforceable.
Sec. 16(1) of the Arbitration and Conciliation Act, 1996 provides as under:
- “16. Competence of arbitral tribunal to rule on its jurisdiction – (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose –
- (a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and
- (b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.”
Sec. 16(1) of the Arbitration and Conciliation Act, 1996 has been enacted in the light of Article 16 of the UNCITRAL Model Law. It reads as under:
- “Article 16 – Competence of arbitral tribunal to rule on its jurisdiction –
- (1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
- (2) …… (3) ……..”
In Everest Holding Limited Vs. Shyam Kumar Shrivastava, 2008 (16) SCC 774, it is held as under:
- “Though the JVA (Joint Venture Agreement) may have been terminated and cancelled as stated but it was a valid JVA containing a valid arbitration agreement for settlement of disputes arising out of or in relation to the subject matter of the JVA. The argument of the respondent that the disputes cannot be referred to the arbitration as the agreement is not in existence as of today is therefore devoid of merit.”
Referring Everest Holding Limited Vs. Shyam Kumar Shrivastava, 2008 (16) SCC 774, it is held in Reva Electric Car Co. Ltd v. Green Mobil, (2012) 2 SCC 93, it is held as under:
- “Section 16(1)(a) presumes the existence of a valid arbitration clause and mandates the same to be treated as an agreement independent of the other terms of the contract. By virtue of Section 16(1)(b), it continues to be enforceable notwithstanding a declaration of the contract being null and void. In view of the provisions contained in Section 16(1) of the Arbitration and Conciliation Act, 1996, it would not be possible to accept the submission of Ms.Ahmadi that with the termination of the MOU on 31st December, 2007, the arbitration clause would also cease to exist.”
In Reliance Industries Limited v. Union of India, 2014-7 SCC 603, referring Sec. 16 of the Arbitration and Conciliation Act, 1996 it is held as under:
- “61. A bare perusal of the aforesaid would show that the arbitration agreement is independent of the other terms of the contract. Further, even if the contract is declared null and void, it would not lead to the foregone conclusion that the arbitration clause in invalid. The aforesaid provision has been considered by this Court in a number of cases, which are as follows-
- Reva Electric Car Company P. Ltd. v. Green Mobil, 2012-2 SCC 93,
- Today Homes and Infrastructure Pvt. Ltd . v. Ludhiana Improvement Trust and Anr., 2013-7 SCALE 327,
- Enercon (India) Ltd. v. Enercon GMBH, 2014-1 ArbLR 257,
- World Sport Group (Mauritius) Ltd . v. MSM Satellite (Singapore) PTC Ltd. [Civil Appeal No. 895 of 2014]”
Arbitration Clause Forms Independent Contract
In Enercon (India) Ltd. v. Enercon GMBH, 2014-5 SCC 1, it is held as under:
- 83. The concept of separability of the arbitration clause/agreement from the underlying contract is a necessity to ensure that the intention of the parties to resolve the disputes by arbitration does not evaporate into thin air with every challenge to the legality, validity, finality or breach of the underlying contract. The Indian Arbitration Act, 1996, as noticed above, under Section 16 accepts the concept that the main contract and the arbitration agreement form two independent contracts. Commercial rights and obligations are contained in the underlying, substantive, or the main contract. It is followed by a second contract, which expresses the agreement and the intention of the parties to resolve the disputes relating to the underlying contract through arbitration. A remedy is elected by parties outside the normal civil court remedy. It is true that support of the national courts would be required to ensure the success of arbitration, but this would not detract from the legitimacy or independence of the collateral arbitration agreement, even if it is contained in a contract, which is claimed to be void or voidable or unconcluded by one of the parties.” (Quoted in: Ashapura Mine -Chem Ltd. v. Gujarat Mineral Development Corporation, 2015-8 SCC 193).
Note: It is beyond doubt that the intention of Sec. 16(1) the Act is not-
- to resurrect an arbitration clause that cannot be invoked in cases (i) where the period of limitation provided for suits is elapsed; or (ii) where there is a rescission or alteration of contract under Sec. 62 of the Contract Act, and thereby the parties need not have performed the original contract (as shown below).
PART – II
Sea Change by 2015 Amendment on Arbitration and Conciliation Act, 1996
- There is a sea change by 2015 Amendment on Arbitration and Conciliation Act, 1996 (i) as regards reference for arbitration under Sec. 8, and (ii) for appointment of arbitrator under Sec. 11.
- After 2015 Amendment, for referring parties to arbitration and for appointing arbitrator, the courts should have “FOND“ ‘PRIMA FACIE’ –
- (i) the EXISTENCE of the arbitration agreement and
- (ii) the VALIDITY thereof
- (in short, legitimacy of arbitrability).
- Sec. 8(1), as amended, reads as under:
- “A judicial authority …. shall … refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.”
- The arbitration agreement should be a ‘binding’ and ‘subsisting’ one, for qualifying it to be “valid” and “existing”.
- Referral proceedings are preliminary and summary and not a “mini trial”. But, there are certain cases where the prima facie examination may require a deeper consideration. This prima facie examination is to make a “check” and to protect parties from being forced to arbitrate when the matter is demonstrably “non-arbitrable” (See: Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1).
- The limited scrutiny, “through the eye of the needle”, is necessary and compelling. “If there is the slightest doubt, the rule is to refer the dispute to arbitration” (NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389).
Expiry of Contract by Efflux of Time – Can Arbitration Clause be Invoked?
It is beyond doubt that the arbitration clause cannot be invoked in a case where the period of limitation provided for suits is elapsed.
If the period fixed in a contract for sale of a property (where time is essence of contract) is over and the vendor alleges breach from the part of purchaser, there will not be a valid and subsisting contract from the viewpoint of the vendor. In such a case –
- if a dispute arises (even within the limitation period for taking legal action), the “existence or validity of an arbitration agreement” has to be decided by the Court.
Existence of Contract – Necessary Condition for Operation of Arbitration Clause
It was held by the Supreme Court, in Union of India v. Kishorilal Gupta and Bros., AIR 1959 SC 1362 (a case on rescission or alteration of contract under Sec. 62 of the Contract Act – where the parties to need not have performed the original contract), as under:
- “10. The following principles relevant to the present case emerge from the aforesaid discussion:
- (1) An arbitration clause is a collateral term of a contract as distinguished from its substantive terms; but nonetheless it is an integral part of it;
- (2) however comprehensive the terms of an arbitration clause may be, the existence of the contract is a necessary condition for its operation; it perishes with the contract;
- (3) … (4) … (5) … (6) …..”
- (The aforestated passage in Union of India v. Kishorilal Gupta is quoted in: Indian Drugs and Pharmaceuticals Limited v. Indo Swiss Synthetics Gem Manufacture Company Limited, 1996-1 SCC 54; Sanjiv Prakash v. Seema Kukreja, 2021-9 SCC 732; Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1)
Dispute Mut have been covered by the arbitration clause
It is held by the Supreme Court, in Zenith Drugs & Allied Agencies Pvt. Ltd. v. Nicholas Piramal India Ltd., AIR 2019 SC 3785, 2020-17 SCC 419, that for appointment of an arbitrator, there must have been an arbitration agreement, and the existence of the arbitration dispute must have been covered by an arbitration clause.
Effect of Fraud on Arbitration Agreement
In A. Ayyasamy v. A. Paramasivam, (2016) 10 SCC 386, it was held as under:
- “25. ……..It is only in those cases where the court, while dealing with Section 8 of the Act, finds that there are very serious allegations of fraud which make a virtual case of criminal offence or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by the civil court on the appreciation of the voluminous evidence that needs to be produced, the court can sidetrack the agreement by dismissing the application under Section 8 and proceed with the suit on merits. It can be so done also in those cases where there are serious allegations of forgery/fabrication of documents in support of the plea of fraud or where fraud is alleged against the arbitration provision itself or is of such a nature that permeates the entire contract, including the agreement to arbitrate, meaning thereby in those cases where fraud goes to the validity of the contract itself of the entire contract which contains the arbitration clause or the validity of the arbitration clause itself…….”. (Quoted in: Zenith Drugs & Allied Agencies Pvt. Ltd. v. Nicholas Piramal India Ltd., AIR 2019 SC 3785, 2020-17 SCC 419)
It was pointed out in Zenith Drugs & Allied Agencies Pvt. Ltd. v. Nicholas Piramal India Ltd., AIR 2019 SC 3785, 2020-17 SCC 419, that the plea of fraud being raised in entering the compromise, the merits of such a plea could be decided only by the Civil Court upon consideration of the evidence adduced by the parties.
Arbitration Clause in a Perished/Expired Contract, Arbitrator Not Appointed
Relying on Union of India v. Kishorilal Gupta and Bros., AIR 1959 SC 1362 it is held in Eigen Technical Service Pvt. Ltd. v. Vatika Limited, 2013-172 Pun LR 27: 2013-4 Arb LR 367, that arbitration clause in a redundant and perished contract by efflux of time, cannot be invoked. The court relied on an Allahabad decision stating as under:
- “ High Court of Allahabad in a judgment dated 10.11.2006 passed in Writ Petition No. 21275 of 2006 titled as Union of India Thru’ Secry., Ministry of Postal v. Jagdish Kaur has also observed that arbitration clause contained in an expired agreement is also deemed as expired and is no more valid.”
Read Blogs:
- What are Non-Arbitrable Disputes? When a Dispute is Not Referred to Arbitration in spite of Arbitration Clause
- Expiry of Contract by Efflux of Time – Arbitration Clause Cannot be Invoked
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Book No, 1 – Civil Procedure Code
- Civil Rights and Jurisdiction of Civil Courts
- Res Judicata and Constructive Res Judicata
- Order II, Rule 2 CPC – Not to Vex Defendants Twice
- Pleadings Should be Specific; Why?
- UNDUE INFLUENCE and PLEADINGS thereof in Indian Law
- PLEADINGS IN ELECTION MATTERS
- Declaration and Injunction
- Law on Summons to Defendants and Witnesses
- Notice to Produce Documents in Civil Cases
- Production of Documents: Order 11, Rule 14 & Rule 12
- Sec. 91 CPC and Suits Against Wrongful Acts
- Remedies Under Sec. 92 CPC
- Mandatory Injunction – Law and Principles
- INJUNCTION is a ‘Possessory Remedy’ in Indian Law
- Interrogatories: When Court Allows, When Rejects?
- Decree in OI R8 CPC-Suit & Eo-Nomine Parties
- Pecuniary & Subject-Matter Jurisdiction of Civil Courts
- Transfer of Property with Conditions & Contingent Interests
- INJUNCTION is a ‘Possessory Remedy’ in Indian Law
- Doctrine of Substantial Representation in a Suit by or against an Association
- Who are Necessary Parties, Proper Parties and Pro Forma Parties in Suits
- What is Partnership, in Law? How to Sue a Firm?
- ‘Legal Representatives’, Not ‘Legal Heirs’ to be Impleaded on Death of Plaintiff/Defendant
- Powers and Duties of Commissioners to Make Local Investigations, Under CPC
- Is it Mandatory to Set Aside the Commission Report – Where a Second Commissioner is Appointed?
- Can a Commission be Appointed to Find Out the Physical Possession of a Property?
Power of attorney
- No Adjudication If Power of Attorney is Sufficiently Stamped
- Notary Attested Power-of-Attorney Sufficient for Registration
- Permission when a Power of Attorney Holder Files Suit
- If Power of Attorney himself Executes the Document, S. 33 Registration Act will NOT be attracted
- Is Registered Power of Attorney Necessary for Registration of a Deed? No.
Title, ownership and Possession
- Recovery of Possession Based on Title and on Earlier Possession
- Title and Ownership in Indian Law
- Does ‘Abandonment’ Give rise to a Recognised Right in Indian Law?
- POSSESSION is a Substantive Right in Indian Law
- How to Plead Adverse Possession? Adverse Possession: An Evolving Concept
- Adverse Possession: Burden to Plead Sabotaged
- When ‘Possession Follows Title’; ‘Title Follows Possession’?
- Ultimate Ownership of All Property Vests in State; It is an Incident of Sovereignty.
- ‘Mutation’ by Revenue Authorities & Survey will not Confer ‘Title’
- Preemption is a Very Weak Right; For, Property Right is a Constitutional & Human Right
- Transfer of Property with Conditions & Contingent Interests
- INJUNCTION is a ‘Possessory Remedy’ in Indian Law
- Kesar Bai v. Genda Lal – Does Something Remain Untold?
Principles and Procedure
- Will – Probate and Letters of Administration
- Best Evidence Rule in Indian Law
- Declaration and Injunction
- Pleadings Should be Specific; Why?
- Does Alternate Remedy Bar Civil Suits and Writ Petitions?
- Void, Voidable, Ab Initio Void, and Sham Transactions
- Can Courts Award Interest on Equitable Grounds?
- Natural Justice – Not an Unruly Horse
- ‘Sound-mind’ and ‘Unsound-Mind’
- Can a Party to Suit Examine Opposite Party, as of Right?
- Forfeiture of Earnest Money and Reasonable Compensation
- Doctrine of ‘Right to be Forgotten’ in Indian Law
- Who has to fix Damages in Tort and Contract?
- Admission, Relevancy and Proof
- Relevancy, Admissibility and Proof of Documents
- Proof and Truth of Documents
- Production, Admissibility & Proof Of Documents
- Modes of Proof – Admission, Expert Evidence, Presumption etc.
- Marking Documents Without Objection – Do Contents Proved
- Substantive Documents, and Documents used for Refreshing Memory and Contradicting
- Oral Evidence on Contents of Document, Irrelevant
Land Laws/ Transfer of Property Act
- Does ‘Pandaravaka Pattom’ in Kerala Denote Full-Ownership?
- Transfer of Property with Conditions & Contingent Interests
- Vested Remainder and Contingent Remainder
- Vested interest and Contingent Interest
- Ultimate Ownership of All Property Vests in State; It is an Incident of Sovereignty.
- Land Acquired Cannot be Returned – Even if it is Not Used for the Purpose Acquired
- ‘Mutation’ by Revenue Authorities & Survey will not Confer ‘Title’
- FERA, 1973 And Transfer of Immovable Property by a Foreigner
- Marumakkathayam – A System of Law and Way of Life Prevailed in Kerala
- Relevant provisions of Kerala Land Reforms Act in a Nutshell
- Land Tenures, and History of Land Derivation, in Kerala
- Government is the OWNER of (Leasehold) Plantation Lands in Kerala.
- Law on Acquisition of Private Plantation Land in Kerala
- Law on SUCCESSION CERTIFICATE and LEGAL HEIRSHIP CERTIFICATE
Evidence Act – General
- Evidence in Court – General Principles
- Expert Evidence and Appreciation of Evidence
- How to Contradict a Witness under Sec. 145, Evidence Act
- Rules on Burden of proof and Adverse Inference
- Best Evidence Rule in Indian Law
- Modes of Proof – Admission, Expert Evidence, Presumption etc.
- Significance of Scientific Evidence in Judicial Process
- Polygraphy, Narco Analysis and Brain Mapping Tests
- What is Section 27 Evidence Act – Recovery or Discovery?
- How ‘Discovery’ under Section 27, Evidence Act, Proved?
- Sec. 65B
- Sec. 65B, Evidence Act: Arjun Paditrao Criticised.
- Sec. 65B Evidence Act Simplified
- ‘STATEMENTS’ alone can be proved by ‘CERTIFICATE’ u/s. 65B
- Sec. 65B, Evidence Act: Certificate for Computer Output
- Certificate is Required Only for ‘Computer Output’; Not for ‘Electronic Records’: Arjun Panditrao Explored.
- How to Prove ‘Whatsap Messages’, ‘Facebook’ and ‘Website’ in Courts?
- Law on Documents
- Production, Admissibility & Proof Of Documents
- Relevancy, Admissibility and Proof of Documents
- Admission of Documents in Evidence on ‘Admission’
- Time Limit for Registration of Documents
- Registration of Documents Executed out of India
- Are RTI Documents Admissible in Evidence as ‘Public Documents’?
- Oral Evidence on Contents of Document, Irrelevant
- Marking Documents Without Objection – Do Contents Stand Proved?
- Proof of Documents & Objections To Admissibility – How & When?
- Notary-Attested Documents: Presumption, Rebuttable
- Presumptions on Registered Documents & Collateral Purpose
- Notice to Produce Documents in Civil Cases
- Production of Documents: Order 11, Rule 14 & Rule 12
- Modes of Proof – Admission, Expert Evidence, Presumption etc.
- Presumptions on Documents and Truth of its Contents
- Proof and Truth of Documents
- Secondary Evidence of Documents & Objections to Admissibility – How & When?
- 30 Years Old Documents and Presumption of Truth of Contents, under Sec. 90 Evidence Act
- Unstamped & Unregistered Documents and Collateral Purpose
- Adjudication as to Proper Stamp under Stamp Act
- Marking Documents Without Objection – Do Contents Proved
- Cancellation of Sale Deeds and Settlement Deeds & Powers of Sub-Registrar in Registering Deeds
- Substantive Documents, and Documents used for Refreshing Memory and Contradicting
- How to Contradict a Witness under Sec. 145, Evidence Act
- Visual and Audio Evidence (Including Photographs, Cassettes, Tape-recordings, Films, CCTV Footage, CDs, e-mails, Chips, Hard-discs, Pen-drives)
- No Adjudication Needed If Power of Attorney is Sufficiently Stamped
- Can an Unregistered Sale Agreement be Used for Specific Performance
- Impounding of Documents – When Produced; Cannot Wait Till it is Exhibited
Contract Act
- ‘Sound-mind’ and ‘Unsound-Mind’ in Indian Civil Laws
- Forfeiture of Earnest Money and Reasonable Compensation
- Who has to fix Damages in Tort and Contract?
- UNDUE INFLUENCE and PLEADINGS thereof in Indian Law
- Can an Unregistered Sale Agreement be Used for Specific Performance
Easement
- What is Easement?
- Does Right of Easement Allow to ‘Enjoy’ After Making a Construction?
- What is “period ending within two years next before the institution of the suit”?
- Is the Basis of Every Easement, Theoretically, a Grant
- Extent of Easement (Width of Way) in Easement of Necessity, Quasi Easement and Implied Grant
- Can an Easement-Way be Altered by the Owner of the Land?
- Village Pathways and Right to Bury are not Easements.
- Custom & Customary Easements in Indian Law
- ‘Additional Burden Loses Lateral Support’ – Incorrect Proposition
Stamp Act & Registration
- Cancellation of Sale Deeds and Settlement Deeds & Powers of Sub-Registrar in Registering Deeds
- Time-Limit For Adjudication of Unstamped Documents, before Collector
- Time Limit for Registration of Documents
- Registration of Documents Executed out of India
- LAW ON INSUFFICIENTLY STAMPED DOCUMENTS
- Adjudication as to Proper Stamp under Stamp Act
- Unstamped & Unregistered Documents and Collateral Purpose
- Impounding of Documents, When Produced; Cannot Wait Till it is Exhibited
- No Adjudication Needed If Power of Attorney is Sufficiently Stamped
- Notary Attested Power-of-Attorney Sufficient for Registration
Will
- Interpretation of Inconsistent Clauses in a Will
- Will – Probate and Letters of Administration
- Executors of Will – Duties & their Removal
Arbitration
- What are Non-Arbitrable Disputes? When a Dispute is Not Referred to Arbitration in spite of Arbitration Clause
- Termination or Nullity of Contract Will Not Cease Efficacy of the Arbitration Clause
Divorce
- Validity of Foreign Divorce Decrees in India
- Is ‘Irretrievable Brake-down of Marriage’, a Valid Ground for Divorce in India?
- Foreign Divorce Judgment against Christians having Indian Domicile
Book No. 2: A Handbook on Constitutional Issues
- Judicial & Legislative Activism in India: Principles and Instances
- Can Legislature Overpower Court Decisions by an Enactment?
- Separation of Powers: Who Wins the Race – Legislature or Judiciary?
- Kesavananda Bharati Case: Never Ending Controversy
- Mullaperiyar Dam: Disputes and Adjudication of Legal Issues
- Article 370: Is There Little Chance for Supreme Court Interference
- Maratha Backward Community Reservation: SC Fixed Limit at 50%.
- Polygraphy, Narco Analysis and Brain Mapping Tests
- CAA Challenge: Divergent Views
- FERA, 1973 And Transfer of Immovable Property by a Foreigner
- Doctrine of ‘Right to be Forgotten’ in Indian Law
- Religious issues
- Secularism and Art. 25 & 26 of the Indian Constitution
- Secularism & Freedom of Religion in Indian Panorama
- ‘Ban on Muslim Women to Enter Mosques, Unconstitutional’
- No Reservation to Muslim and Christian SCs/STs (Dalits) Why?
- Parsi Women – Excommunication for Marrying Outside
- Knanaya Endogamy & Constitution of India
- Sabarimala Review Petitions & Reference to 9-Judge Bench
- SABARIMALA REVIEW and Conflict in Findings between Shirur Mutt Case & Durgah Committee Case
- Ayodhya Disputes: M. Siddiq case –Pragmatic Verdict
Book No. 3: Common Law of CLUBS and SOCIETIES in India
- General
- Property & Trust
- Juristic Personality
- Suits
- Amendment and Dissolution
- Rights and Management
- Election
- State Actions
Book No. 4: Common Law of TRUSTS in India
- General Principles
- Dedication and Vesting
- Trustees and Management
- Breach of Trust
- Suits by or against Trusts
- Law on Hindu Religious Endowments
- Temples, Gurudwaras, Churches and Mosques – General
- Constitutional Principles
- Ayodhya and Sabarimala Disputes
- General