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Browse Law School Education ADR: Arbitration Important Arbitration Cases

READ FULL CASE

Now let’s start with our first case— Emkay Global Financial Services Ltd. v. Girdhar Sondhi.

BRIEF FACTS: 

 Now let me explain the brief facts of this case to you.

M/s Emkay Global Financial Services Ltd. was a registered broker with the National Stock Exchange (NSE) and Mr Girdhar Sondhi was M/s. Emkay’s client. The Respondent (Giridhar Sondhi) had initiated arbitration proceedings against Appellant (M/s Emkay Global Financial Services Ltd.) and claimed an amount of approximately Rs 7,36,000 (Rs 7,36,620). The arbitration was held under an Agreement dated 3 July 2008 and under the NSE Byelaws. Exclusive jurisdiction was granted to the courts of Mumbai, in Maharashtra (India), under both the Agreement as well as the NSE byelaws. 

The byelaws go on to prescribe regulations for creation of seats of arbitration for different regions, or prescribing geographical locations for conducting arbitrations, and prescribing the courts which shall have jurisdiction for the purpose of the Depositories Act, 1996. Accordingly, the NSE referred the dispute to a sole arbitrator, who conducted the arbitration proceedings in Delhi, and delivered an award on 8 December 2009, whereby the respondent’s claim was rejected. The respondent filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 before the District Court of Delhi. The District Court dismissed the application under Section 34 on the grounds that it would not have jurisdiction in light of the exclusive jurisdiction clause. In an appeal filed before the Delhi High Court, the Court held that since the impugned judgment decides the disputed question of facts without allowing parties to lead any evidence, it is necessary that the disputed questions of fact as regards the existence of territorial jurisdiction of the courts at Delhi are decided by the District Court after framing of the issue to the effect and permitting parties to lead evidence on the same. The order was then challenged before the Supreme Court.

ISSUES:

Now let’s discuss the issues.

  1. Whether the "seat" in the context of arbitration proceedings is akin to an exclusive jurisdiction clause and would it vest the “seat” courts with exclusive jurisdiction? 
  2. Whether Courts can look beyond the record presented before an Arbitral Tribunal to set-aside the arbitral awards or not? 

HELD:

Now what did the Court hold in this case?

  1. The Supreme Court held that since in the present case, the courts in Mumbai were given the exclusive jurisdiction by virtue of the Arbitration Agreement as well as by the NSE byelaws, it is clear that Mumbai courts alone would have jurisdiction to the exclusion of all other courts in the country, as the juridical seat of arbitration is at Mumbai, before which an application under Section 34 of the Arbitration and Conciliation Act, 1996 can be filed. 
  2. The Supreme Court also held that the arbitration that was conducted at Delhi was only a convenient venue that was recognised by the NSE for the purpose of conducting the proceedings, which was in accordance with its byelaws. 
  3. The Court, while considering this issue, relied on its recent judgement in the case of Indus Mobile Distribution Pvt. Ltd. v. Datawind Innovations Pvt. Ltd. and Ors.,(2017) 7 SCC 678, in which case it was opined that the moment a seat is designated in arbitration, it is akin to an exclusive jurisdiction clause. 
  4. The Supreme Court considered the then proposed amendment to Section 34 in the 2018 Amendments to the Act (now Arbitration and Conciliation (Amendment) Act, 2019), which aims at substituting the words “furnishes proof that” with “establishes on the basis of the record of the Arbitral Tribunal that” thereby indicating that the matter is required to proceed on the basis of the documents and evidence on record and that fresh evidence would not be taken at that stage. 
  5. In the case of Fiza Developers & Inter-Trade Pvt. Ltd. v. AMCI (India) Pvt. Ltd. and Anr, (2009) 17 SCC 796,the Supreme Court had considered the questionwhether issues are required to be framed in Section 34 proceedings as they are required in a normal suit as per Order XIV Rule 1 of the CPC. The Supreme Court in this case, had clearly held that Section 34 proceedings are summary proceedings and framing of issues was not an integral process of the proceedings under Section 34 of the Act. In the light of the above things, the SC in the present case, held as followsan application for setting aside an arbitral award will not ordinarily require anything beyond the record that was before the Arbitrator. However, if there are matters not contained in such record, and are relevant to the determination of issues arising under Section 34(2)(a), they may be brought to the notice of the Court by way of affidavits filed by both parties. Cross-examination of persons swearing to the affidavits should not be allowed unless absolutely necessary, as the truth will emerge on a reading of the affidavits filed by both parties."

RATIO

So finally what was decided is that:

  • Seat of arbitration is akin to an exclusive jurisdiction clause in the arbitration agreement.
  • An application for setting aside an arbitral award will not ordinarily require anything beyond the record that was before the arbitrator. However, fresh evidence can be taken at this stage under certain circumstances. 

Please NOTE: The interplay between “seat” and “venue” of arbitration, in the context of domestic arbitration, has been considered by the Supreme Court in the case of Brahmani River Pellets Ltd. v. Kamachi Industries Ltd., (2019) SCC Online SC 929, which is the latest 2019 Supreme Court case.

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