Arbitration Concialiation

Honorable Supreme Court in N. N. Global Mercantile (P.) Ltd. v .Indo Unique Flame Ltd has held that a) An Arbitration Agreement, within the meaning of Section 7 of the Act, which attracts stamp duty and which is not stamped or insufficiently stamped, cannot be acted upon, in view of Section 35 of the Stamp Act, unless following impounding and payment of the requisite duty, necessary certificate is provided under Section 42 of the Stamp Act. b) Further, the provisions of Sections 33 and the bar under Section 35 of the Stamp Act, applicable to instruments chargeable to stamp duty under Section 3 read with the Schedule to the Stamp Act, would render the Arbitration Agreement contained in such instrument as being non-existent in law unless the instrument is validated under the Stamp Act.

Contra- Proferentem places the cost of losses on the party who was in the best position to avoid the harm. In essence, the doctrine of Contra-Proferentem puts an added responsibility on framer, checkers and approvers of tender documents and emphasizes additional efforts on their part to avoid ambiguities and to make contract documents clear, explicit and unambiguous in nature. Further, it requires tender documents to be complete ones so as to take care of not only foreseeable but unforeseen circumstances also.

Delhi HC quashes proceedings since Pre-Notice Consultation was mandatory for Demands above Rs. 50 LakhsAMADEUS INDIA PVT. LTD. versus PRINCIPAL COMMISSIONER, CENTRAL EXCISE, SERVICE TAX AND CENTRAL TAX COMMISSIONERATE A two-judge bench of the Delhi High Court, while annulling the Service Tax proceedings, held that since the demand is above Rs. 50 lakhs, a pre-notice consultation was mandatory as per the Master Circular issued by the Central Board of Excise and Customs (CBEC). The Petitioner provides computer data processing software, which is used by travel agents and ticket booking entities in the Airline industry. In consequent to a search conducted by the Anti-evasion Unit of the Service Tax Commisionerate, the departmentsaid that the said services are subject to Service Tax. A show cause notice was issued by the department alleging that the tax was not paid on taxable services rendered by the Petitioner.The petitioner claimed that as per a Master Circular issued by the CBEC on 10th March, 2017, a pre-show cause notice consultation was mandatory in cases involving demand of duty above Rs. 50 Lakhs.A reminder was again sent by the Petitioner on 13th November, 2018. When no response was received, the petitioner approached the High Court for relief.The bench comprising of Justice S Muralidhar and Justice Prateek Jalan found that it was necessary in terms of para 5.0 of the Master Circular for the Respondent to have engaged with the Petitioner in a pre SCN consultation, particularly, since in the considered view of the Court neither of the exceptions specified in para 5.0 were attracted.

ARBITRATION AND CONCILIATION (AMENDMENT) ACT, 2021-IMPACT. Arbitration Act is a full-fledged, self-containedCode by itself. Arbitral Courts very rarely interfere in arbitral awards, unless and until the arbitral award on the face of it is perverse orprima faciehit by one of the grounds of challenge under Section 34(2) of the Arbitration Act. Arbitral Courts have exercised their discretion to allow an application granting stay of Arbitral Awards under Section 36(3)of the Act,by imposing conditions as the Arbitral Courts deems fit and appropriate.The Arbitration and Conciliation (Amendment) Act, 2021 has now added a proviso under section 36(3) wherein: If the arbitral courts areprima faciesatisfied by the case made out of either (i)The arbitration agreement or contract, which is the basis of the award.(or)(ii)The making of the awardwas induced or affected by fraud or corruption. The Arbitral Court shall stay the arbitral award unconditionally pending disposal of the challenge.New Proviso under Section 36(3) of the Act has a retrospective effect and deemed to be effective from October 23, 2015.Given the fact that Section36(3) of the Act has a retrospective effect, it is now open for parties, whose application under 36(2) of the Act are pending adjudication before a courtto make renewed applications based on the grounds listed inthe new The Arbitration and Conciliation (Amendment) Act, 2021.

DO ALLEGATIONS OF FRAUD VITIATE THE ARBITRATION AGREEMENT?Hon’ble Supreme Court in the case of Avitel Post StudiozLtd. & Ors. Versus HSBC PI Holdings (Mauritius) Ltd(2020(4)ArbLR1(SC)) has held that cases involving serious and specific allegation of fraud, fabrication of documents, forgery, impersonation coercion etc and the cases involving prosecution for criminal offences shall fall outside the purview of Arbitrationif the specific, serious allegations of fraud fulfil either of the following tests: 1)Does the plea of fraud permeate the entire contract andas a result there of the entire contract/arbitration is void ipso facto?; or 2)Whether the allegations of fraud touch upon the internal affairs of the parties inter se having no implication in the public domain.The first testwill be satisfied only when the Agreement/Arbitration clause cannot be said to exist when the Court finds the agreement itself was void in the first instance (either by way of fraudulent inducement or misrepresentation as defined in Sections 17 and 18 ofthe Indian Contract Act, 1872)The second test can be said to have been met in caseswhere theallegations are made against the State or its instrumentalities are of arbitrary, fraudulent, or malafide conduct, thus necessitating the hearing of the case bya writ court in which questions are raised which are not predominantly questions arising from the contract itself or breach thereof, but questions arising in the public law domain.The aforesaid judgment in Avitel Post Studioz Ltd. & Ors. Versus HSBC PI Holdings (Mauritius) Ltd(2020(4)ArbLR1(SC))makes it clear that: a)if the contract is found to be void in the first instance, the arbitration clause would cease to exist; b)that parties cannot avoid arbitration merely be making allegations that are fraud simpliciter; and c)where there are serious allegations of fraud have a bearing on public law domain, arbitration clause would cease to exist.