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Business Recorder
3 days ago
- Business
- Business Recorder
Section 30 of 1940 Act: SC explains court's jurisdictional extent
ISLAMABAD: The arbitration is an autonomous and final forum, and judicial interference is permissible only in narrow and clearly defined circumstances envisaged by Section 30 of the 1940 Act; i.e., jurisdictional error, proven misconduct, or a patent legal mistake visible on the face of the record. A three-judge bench, headed by Chief Justice Yahya Afridi and comprising Justice Muhammad Shafi Siddiqui and Justice Miangul Hassan Aurangzeb, rendered this verdict on Pakistan Railways' petition against Lahore High Court (LHC) judgment dated 04.03.2024. The disputes between the petitioner (Pakistan Railways) and the respondent (CRRC Ziyang Co Limited) arose from a contract executed on 01.11.2017 were referred to arbitration by a two-member arbitral tribunal, which rendered the award on 02.07.2021 and filed it before the civil court. The petitioner on 01.09.2021 filed objections to the said award praying for the award to be set aside and the disputes to be remitted back to the arbitrators. The civil court on 23.11.2022 under amended provisions of the Code of Civil Procedure, 1908, framed the issues requiring the parties to submit the list of witnesses for the production of evidence within a period of seven days. The respondent under Section 30 of the Arbitration Act, 1940, assailed the civil court's order dated 23-11-2022 before the LHC, which on 04-03-2024 set aside the said order and remanded the case to the civil court for a decision afresh on the basis of available record. The petitioner approached the apex court against the LHC verdict. The nine-page judgment authored by Justice Miangul Hassan Aurangzeb, upholding the LHC order, dismissed the petition. It said objections to arbitration awards, ought to avoid framing issues and record evidence unless absolutely necessary. 'The framing of issues and recording of evidence; however, undermines the core objectives of the 1940 Act, which are efficiency, finality, and minimal judicial intervention.' The judgment noted that arbitration offers several time-related advantages compared to traditional court litigation. Arbitration typically takes less time because the process is more streamlined, with fewer procedural steps and less formality than court proceedings. Justice Hassan wrote that the Courts are expected to pronounce judgment and decree in terms of the award, intervening only on narrow grounds such as misconduct or invalidity of the award, without re-opening factual issues through evidence recording. It is now well settled that arbitrators are entitled to regulate their own procedure and are not governed by the strict procedure prescribed by the CPC and the rules regarding evidence contained in the Qanun-e-Shahadat Order, 1984. Arbitrators decide disputes based on evidence presented during arbitration proceedings. They are under no obligation to frame issues as provided in the CPC. The judgment said that courts recording fresh evidence disregard the procedural safeguards in arbitration, such as the Arbitrator's exclusive jurisdiction to assess evidence and apply law. This may lead to inconsistent outcomes and procedural unfairness. If the court frames issues and records evidence after objections to an award are filed, parties may use this as an opportunity to re-litigate the entire dispute, leading to multiple proceedings on the same issues besides undermining both the legislative intent and the integrity of the arbitral process. The framing of issues, recording of evidence and hearing arguments post the filing of the award in the court is bound to increase litigation costs for parties and add to the already heavy workload of courts. This again defeats the purpose of arbitration as an economical and efficient alternative dispute resolution mechanism. The recording of evidence and conducting a trial effectively converts the court into an appellate or fact-finding forum, which would be contrary to the statutory scheme envisaged by the 1940 Act. Copyright Business Recorder, 2025
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Business Standard
20-05-2025
- Business
- Business Standard
RIL moves SC against HC ruling in $1.5 bn gas dispute with Centre
Reliance Industries Limited (RIL) has moved the Supreme Court, challenging the Delhi high court (HC) order which upheld the Centre's claim that the Mukesh Ambani-led company and its consortium partners had siphoned gas from deposits of ONGC block in the Krishna-Godavari (KG) Basin, off the coast of Andhra Pradesh. RIL's allocated gas block was next to the one being operated by ONGC. Sources said RIL has, in its plea, contended that the division bench of the Delhi HC should not have gone into the merits of the case since the matter had been heard and decided by a three-member tribunal headed by Singapore-based arbitrator Lawrence Boo. RIL has also pleaded that the order passed by the international tribunal was binding on the parties under the terms of the production-sharing contract (PSC). In arbitration disputes, courts generally do not delve into the merits of the case and their role is to ensure the existence of an arbitration agreement, and that the arbitration process itself was conducted fairly and lawfully, a senior advocate said. RIL has also said in its plea that the Delhi HC division bench order had mixed up the relief granted under Section 34 and Section 37 of the Arbitration Act, sources said. Section 34 of the Arbitration and Conciliation Act, 1996, in India, deals with the setting aside of an arbitral award. Section 37 of the Act outlines the scope of appeals against orders of the arbitral tribunal or the court in an arbitration proceeding. The division bench of the Delhi HC had earlier this year overturned a single-judge bench order of 2023 upholding the ruling of the arbitration tribunal in RIL's favour in 2018. The tribunal had rejected the government's contention and said that the PSC doesn't prohibit the contractor from producing gas, irrespective of its source, as long as the producing wells were located inside the contract area. In its ruling, the division bench of Justices Rekha Palli and Saurabh Banerjee had also said that the arbitration award of July 24, 2018, in favour of the RIL-led consortium, was 'contrary to public policy'. The consortium includes UK-based BP Plc and Niko Resources of Canada. BP and Niko have filed separate but related pleas contesting the findings of the Delhi HC. The Dispute In April 2000, the RIL-led consortium entered into a PSC with the Centre for the exploration and extraction of natural gas from the KG Basin. But in 2013, state-owned ONGC shot off a letter to the Directorate General of Hydrocarbons (DGH), claiming that gas pools in the RIL and adjoining ONGC blocks were connected and that RIL has been siphoning huge amounts of gas from its block. The Ministry of Petroleum and Natural Gas (MoPNG) accused RIL and its partners of an 'unjust enrichment of over $1.729 billion' by siphoning gas from deposits they had no right to exploit. It was then that ONGC filed a writ petition in the Delhi HC in which the petroleum ministry, DGH and RIL were made parties. The petition was disposed of by the court, which directed MoPNG to consider the upcoming report by the expert agency by the name of DeGolyer & MacNaughton (D&M) — a petroleum consulting company based in Dallas, Texas. The agency was to undertake an independent third-party study to verify the claimed continuity and migration of gas from the ONGC block to the Reliance block. On November 19, 2015, D&M said that 'the integrated analyses indicated connectivity and continuity of the reservoirs across the blocks operated by ONGC and RIL', validating the central government and ONGC's stand. The MoPNG also appointed a one-man committee of former Chief Justice of Delhi HC Justice A P Shah on December 15, 2015, to consider the D&M report and recommend a future course of action in light of the findings contained in the report. Based upon the Shah Committee report, the MoPNG raised a demand for $1.5 billion and $174 million in interest from RIL for 'unjust enrichment' made by the company. Reliance then approached the three-member tribunal headed by Singapore-based arbitrator Lawrence Boo. The tribunal rejected the government's contention and said that the PSC doesn't prohibit the contractor from producing gas, irrespective of its source, as long as the producing wells were located inside the contract area. The government then approached the Delhi HC against this order. When the single-judge bench of the HC ruled in favour of RIL, the Centre appealed before the division bench. The government had contended that RIL was guilty of fraud and unjust enrichment totalling over $1.5 billion. 'It is contended that the migrated gas alone was valued at about $1.5 billion as of June 30, 2016,' the Centre had then told the Delhi HC. It had further argued that though RIL had claimed there was no connectivity between their block and the government's, they had consciously siphoned gas from the ONGC block without the government's knowledge. The Centre also argued that the arbitral award it challenged was 'against India's public policy'. The division bench sided with the central government and set aside the arbitral award after which RIL approached the Supreme Court.
Malaysian Reserve
19-05-2025
- Business
- Malaysian Reserve
Azalina: Malaysia-Japan continue to strengthen legal cooperation in the field of arbitration
TOKYO — The Asian International Arbitration Centre (AIAC) and the Japan Commercial Arbitration Association (JCAA) have signed a Memorandum of Understanding (MoU) to strengthen legal cooperation in the field of arbitration, according to the Legal Affairs Division of the Prime Minister's Department (BHEUU). BHEUU, in a statement, informed that the signing of the MoU was witnessed by Minister in the Prime Minister's Department (Law and Institutional Reform) Datuk Seri Azalina Othman Said during a high-impact official working visit to Japan for three days starting from May 15. The signing of the MoU, among other things, formalises cooperation in the areas of commercial arbitration, capacity building, and joint training initiatives between AIAC and JCAA, which will be further strengthened at the ministerial level during the Special Malaysia-Japan Dialogue on Legal Cooperation next August. 'This dialogue, which brings together several government-recognised arbitration institutions from both countries, aims to create deeper cooperation in the MADANI Government's efforts to translate the outcomes of the dialogue into actual implementation,' the statement said here last night. Azalina was quoted in the statement as saying that Malaysia and Japan agree that the real success in legal cooperation is determined through action. She said that through knowledge sharing within institutions, Malaysia is moving towards creating a regional legal ecosystem that supports the commercial sector, enhances investor confidence, and promotes sustainable regional development to serve the people and regional economic development. 'Malaysia and Japan have deep bilateral ties, especially in legal cooperation. In conjunction with Malaysia's ASEAN chairmanship in 2025, this visit reflects Malaysia's continued commitment to strengthen legal institutions that support sustainable development and regional integration,' she said. BHEUU informed that the visit also demonstrated the international community's confidence and recognition regarding Malaysia's legal and institutional reform agenda, as Azalina was invited to present Malaysia's comprehensive legal reform agenda, which garnered interest from stakeholders in Japan. Among the matters presented were the Drafting of the Online Safety Act (2024), Amendments to the Arbitration Act (2024), Amendments to the Mediation Act 2012, Ratification of the Singapore Convention on Mediation, Reinstatement of the Parliamentary Services Act (2025), and efforts to implement the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency. The statement also informed that the Malaysian delegation discussed the MADANI Government's plan to establish a Special Mediation Task Force, with an emphasis on mediation as a core for dispute resolution, improving access to justice, reducing the burden of litigation, and providing cost-effective alternatives. 'Discussions with the Japan International Mediation Center (JIMC) in Kyoto and a visit to the Faculty of Law at Doshisha University further reinforced this strategic priority,' the statement said. The strategic mission to Japan builds on the momentum of broader ASEAN-Malaysia legal diplomacy efforts, as a continuation of Azalina's recent visits to Indonesia, Thailand, Cambodia, and Vietnam. In addition, Azalina held a bilateral meeting with the Japanese Minister of Justice, Keisuke Suzuki, where both sides discussed shared priorities, including the legal reform agenda, digitalisation of the justice system, and capacity building in alternative dispute resolution (ADR) mechanisms. She also met several key Japanese legal and parliamentary figures, legal practitioners, and arbitration experts to strengthen Malaysia's ties with Japan, especially in the areas of law and justice. 'This mission marks an important step towards translating shared commitments into effective implementation, strengthening mutual trust, and laying the foundation for a resilient and future-ready legal architecture across the region,' the statement said. — BERNAMA
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Business Standard
13-05-2025
- Business
- Business Standard
Delhi HC sets aside arbitral tribunal order entitling Zostel stake in OYO
The court allowed OYO's plea under Section 34 of the Arbitration Act, setting aside the 2021 tribunal ruling that Zostel could seek up to 7% stake in Oravel Stays BS Reporter Listen to This Article The Delhi High Court on Tuesday set aside an arbitral award that had entitled Zostel to up to a 7 per cent stake in Oravel Stays, the parent company of OYO. A single-judge Bench of Justice Sachin Datta passed the order in response to a petition filed by OYO under Section 34 of the Arbitration and Conciliation Act, 1996. Section 34 outlines the procedure for challenging an arbitral award in court. The arbitral award, passed on 6 March 2021, had ruled that Zostel was entitled to specific performance of OYO's obligations under a term sheet but did not direct the
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Business Standard
30-04-2025
- Politics
- Business Standard
Courts have the power to modify arbitral awards but with limitations: SC
The Supreme Court ruled on Wednesday that courts have the authority to modify arbitral awards, but only within narrow confines. A five-judge Constitution Bench, in a 4-1 majority decision -- by Chief Justice Sanjiv Khanna, and Justices B R Gavai, Sanjay Kumar and A G Masih -- held that courts may exercise powers under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, to alter arbitral awards in certain situations. The majority judgment emphasised that courts should intervene only sparingly -- such as correcting clerical or calculation mistakes, adjusting interest, or making similarly limited changes -- without nullifying the entire award. In extraordinary cases, the Bench said, Article 142 of the Constitution, which allows the Supreme Court to pass orders to do 'complete justice', may be invoked. Justice K V Viswanathan dissented with the majority verdict and held that under Section 34 of the Act, courts cannot modify the award unless expressly authorised by the law, since it amounts to exercising a merits review. 'If there is any need for modification of interest, the matter has to be remitted back to the Tribunal as this can lead to uncertainties and difficulties in enforcing foreign awards,' said Justice Viswanathan. 'Courts exercising Section 34 power cannot change, vary or modify arbitral awards as it strikes at the core and the root of the ethos of the arbitration exercise,' he added. While Section 34 talks about the mechanism to challenge an arbitral award in court, Section 37 outlines which arbitration-related orders are appealable. Justice Viswanathan also disagreed with the view that Article 142 of the Constitution can be used to modify awards, saying if such a power is recognised, it will lead to uncertainties in the arbitration litigation. However, he agreed that clerical or typographical mistakes can be corrected under Section 34. According to experts, parties opting for arbitration will now need to reverse-plan their approach to avoid the chances of interference under the Arbitration Act. 'The judgment affirms that the court has powers to modify awards even though subject to certain circumstances. This is bound to impact the principle of party autonomy as the foundation of arbitration. Courts have refrained from interfering with awards unless warranted by exceptional circumstances. This is expected to change,' said Shiv Sapra, partner at law firm Kochhar & Co. Indranil D Deshmukh, partner (head-disputes) at law firm Cyril Amarchand Mangaldas, argued that the majority decision undermined the integrity of the award and the arbitral process. 'The significant dissenting opinion of Justice Viswanathan is the voice of the future -- perhaps a future where the arbitration landscape is much more evolved and imbibed and institutionalised within its framework internal mechanism to prevent egregious errors from appearing in arbitral awards,' he said. Kunal Vyas, a partner at Gandhi Law Associates, on the other hand, welcomed the majority's judgment, saying it's a step in the right direction. 'The courts would now be required to consider modification of awards without the application under Section 34 or Section 37 being treated like regular appeals and rendering the awards unenforceable,' Vyas said. For parties currently involved in litigation over modified awards, Deshmukh noted that the onus will now lie in demonstrating that any alteration falls within the defined boundaries of the judgment. The ruling is expected to have an impact on ongoing high-stakes arbitration cases, such as the Oil and Natural Gas Corporation (ONGC) vs Reliance Industries Limited (RIL), said Sapra of Kochhar & Co. The Delhi High Court earlier this year overturned a 2018 international arbitral award that favoured the Mukesh Ambani-led company and its foreign partners in a dispute over gas migration from fields operated by state-owned ONGC in the Krishna-Godavari basin. 'This was a significant modification in the absence of the clarifications now available. Today's verdict creates the potential for even further modifications and empowers courts to go beyond the erstwhile albeit salient boundaries of interference,' Sapra said. Last year, in the Delhi Metro Rail Corporation Limited v Delhi Airport Metro Express Private Limited decision, the Supreme Court exercised its extraordinary curative powers to annul an award of approximately ₹3,000 crore plus interest, on the ground of patent illegality. Along with interest, the amount totalled around ₹7,600 crore on the date of the decision. This was against the strict mandate laid down in its own decision in Rupa Ashok Hurra vs Ashok Hurra and Anr (2002).
