Welcome to the July 2017 edition of our Indian International arbitration e-bulletin. In this Issue we review a number of recent arbitration-related decisions of the Indian courts that have cross-border impact, and provide an update on domestic and international developments in India-related arbitration.  

CASES  

  • Supreme Court holds that allegations of fraud are arbitrable - unless serious and complex in nature

​We had previously reported on the conflicting approaches taken by the High Courts in India on the arbitrability of fraud claims (see here). The Supreme Court has now clarified the position to a significant extent, although some uncertainty lingers, and it remains to be seen whether this will be significant in practice.

A division bench of the Supreme Court has held in A. Ayyasamy v A. Paramasivam & Ors1 that allegations of simple fraud shall not preclude a reference to arbitration where there is a valid arbitration clause. However in cases where there are "serious allegations of fraud" which make out a criminal offence or which are so complex and would require analysis of extensive evidence, the Supreme Court held that it would be inappropriate for the case to be referred to arbitration and that such complex fraud cases should be adjudicated upon by the Courts. Read more here.

  • Delhi High Court allows enforcement of arbitral awards despite foreign exchange regulations

    Two recent judgments from the Delhi High Court affirm the court's pro-enforcement stance on foreign arbitral awards and offer welcome guidance on the exit rights of foreign investors in Indian companies, an important subject for many companies looking to invest in India. In the dispute between Tata Sons and Tata Teleservices and NTT Docomo Inc, the court ruled that the Reserve Bank of India did not have standing to prevent enforcement of a foreign award between two private parties on grounds of Indian public policy. In a similar case (Cruz City 1 Mauritius Holdings v Unitech Limited), the court dismissed a challenge to enforcement by an award debtor arguing that a foreign award was contrary to Indian foreign exchange regulations. Read more here.

  • Delhi High Court rules that the amended Arbitration Act will not be applicable to awards made in proceedings commenced prior to 23 October 2015

    The Arbitration Act was amended by the Arbitration and Conciliation (Amendment) Act 2015 ("Amending Act") with retrospective effect from 23 October 2015 (together the "Amended Act"). Prior to the amendment coming into force, the application of sections 34 read with section 36 of the Arbitration Act resulted in an automatic stay of the enforcement of an arbitral award upon filing of an application to set aside that award. Under the amended provisions, however, filing an application to set aside an award no longer automatically results in a stay of enforcement of the award. If one wanted to obtain a stay under the Amended Act, it required an application to the Court, prompting the Court to consider such conditions as it deems fit to determine whether to grant a stay.

    In Ardee Infrastructure Pvt. Ltd v Ms. Anuradha Bhatia & Ors.2 ("Ardee"), the Court held that the Amended Act would not apply to substantive provisions and rights if the arbitral proceedings were commenced prior to 23 October 2015 i.e. the date when the Amended Act came into force. Therefore, in awards obtained in cases which were commenced prior to 23 October 2015, the automatic stay under section 36 of the Arbitration Act applied and the enforcement of the award would be stayed until the challenge proceedings had completed. Read more here.

  • Delhi High Court refuses to enforce arbitration clause in an unsigned agreement

    The Delhi High Court has refused to enforce a foreign award, citing section 44 of the Arbitration Act as well as Article II of the Convention on the Recognition and Enforcement of Awards 1958 (the "New York Convention"). In Virgoz Oils and Fats Pte Ltd.("Virgoz") v. National Agricultural Marketing Federation of India ("NAFED")3 the Court refused to enforce a foreign award on the ground that there was no valid arbitration agreement between the parties. It held that in order for an arbitration agreement to be valid and binding, it needs to be in writing and signed by all the parties. Read more here.

  • Delhi High Court begins implementing Amended Arbitration Act

    In two recent decisions, the Delhi High Court has begun giving effect to the new amendments to the Arbitration Act.

    In Dream Valley Farms v Religare Finvest, the Court allowed the petition for appointment of an arbitrator as it found that the arbitrator appointed by the party was disqualified – he had given a misleading declaration in relation to his independence and impartiality and had been appointed in 20 arbitrations by the same party.

    In Picasso Digital Media v Pick-a-Cent Consultancy, the Court refused to consider allegations of fraud at the stage of appointment of the arbitrator and held that that issue was within the jurisdiction of the arbitrator. Read more here. 

  • Supreme Court holds that trust disputes are not arbitrable under Indian law

    The Supreme Court has held that an arbitration clause in a trust deed was not effective as between beneficiaries to the trust, and has gone on to declare that trust disputes falling within the ambit of the Indian Trust Act are not arbitrable under Indian law. Read more here.