Arbitral impleading’s, consent of parties for extending Arbitral Period, more..

The Delhi High Court in its latest decision of M/s Arupri Logistics Private Ltd. v. Vilas Gupta and Ors. and Taurus India Limited v. Vilas Gupta and Ors. (“Arupri Logistics”), has ruled that an Arbitral Tribunal does not have the inherent power to implead non-signatory third parties in ad-hoc arbitration proceedings.

1. Inherent powers of Arbitral Tribunal to implead a non-signatory third party.
2. Whether the power to implead is concomitant of Section 17 of the Arbitration Act?
3. Whether the Arbitral Tribunal has the jurisdiction to rule upon its own power to implead under Section 16 of the Arbitration Act?
4. Application of Group of Companies and the alter ego doctrines to implead third parties by Arbitral Tribunal.

Nature of tribunal’s powers

The Court clarified that Arbitral Tribunals, unlike adjudicatory bodies, are created by contracts and derive authority from contractual terms and the law, namely the Arbitration Act. They possess statutory powers but not inherent court powers.

Interim measures under Section 17 of the Arbitration Act

The Court began by examining Section 17(1)(ii)(e) of the Arbitration Act, which empowers Arbitral Tribunals to issue interim measures. Post the 2016 amendments, Tribunal powers were aligned with Section 9, akin to courts. However, this enhancement doesn’t extend to impleadment, per the V.G. Santhosam and Ors. v. Shanthi Gnanasekaran and Ors case:

1. Impleadment isn’t interim but binds parties to award terms.
2. Powers must stay within the Arbitration Act, not invoke inherent court powers (CPC Order I Rule 10).

Respondents, citing SREI case, argued Arbitral Tribunals hold nearly unrestricted court-like powers under Section 19. Supreme Court agreed Tribunals can broadly use these rules within natural justice, referencing CPC principles, but this doesn’t grant extra powers.

Arbitral Tribunal has the jurisdiction to rule upon its own power to implead under Section 16 of the Arbitration Act

Arbitral Tribunals form under Arbitration Act’s Sections 8, 9, or 11. Kompetenz-Kompetenz arises post-reference. Court held impleadment alters reference fundamentally. Madras HC in Abhibus Services India Pvt. Limited and Ors. v. Pallavan Transport Consultancies Services Ltd, echoed this, stating it opposes Tribunal’s intended role.

Application of Group of Companies and the alter ego doctrines

The doctrine is applied exceptionally by courts more widely discussed case of Chloro Controls and Cheran Properties Limited v. Kasturi and Sons Limited. These include inter alia where (i) the non-signatory shares a direct relationship with the party signatory; (ii) the subject matter shares a direct commonality with that of the arbitration; (iii) the agreement between the non-party and party constitutes a composite transaction; and (iv) the ends of justice so dictate a joinder of non-signatories. Applicability hinges on “claiming through or under” interpretation in Arbitration Act Sections 8 and 45, tied to “judicial authority.” In conclusion, the Court held that Tribunal can’t use court’s impleadment power, setting aside Tribunal’s order. Respondents can still seek impleadment in court.

The Himachal Pradesh High Court in its judgement in Balak Ram Vs NHAI 2023 HP 57 has clarified the interpretation of Section 29A(3) of the Arbitration and Conciliation Act and maintained that consent from the parties to extend the arbitral period need not be expressly stated in writing. Instead, consent can be inferred from the parties’ acts and conduct during the arbitration proceedings, it emphasised.

Consent of the parties envisaged under Section 29A(3) of the 2015 Arbitration & Conciliation Act for extending the arbitral period need not necessarily be either express or in writing. There can be a deemed consent, an implied consent of the parties, which can be gathered from their acts and conduct.

Section 29A says that (1)The award in matters other than international commercial arbitration shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23:

(3) The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months.

In the present case, the court noted that both parties continued with the arbitration proceedings beyond the 12-month period without any objections, indicating their implied consent for the extension.

In view of these circumstances, the bench opined that the award passed by the Arbitrator within two months after the expiry of the initial 12-month period was valid under Section 29A(3) since it fell within the extended time limit permitted by the parties’ implied consent.

The Supreme Court has scheduled a curative petition[Bhaskar Raju and Brothers and Anr V. s Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram & Other Charities and Ors, Curative Petition (Civil) No 44 of 2023] concerning its 2020 decision, which held that an arbitration clause in an insufficiently stamped agreement cannot be acted upon by court.

The Supreme Court in its judgment had observed that an arbitration clause in an agreement which is required to be duly stamped, if not sufficiently stamped, cannot be acted upon by the Court.

In the said case, one of the parties to the agreement filed a petition under Section 11(6) of the Arbitration Act before the High Court of Karnataka. The other party, entered appearance and contended that the lease deed being insufficiently stamped had to be mandatorily impounded under Section 33 of the Karnataka Stamp Act, 1957 and it could not be relied upon unless proper duty and penalty was paid. However, the High Court invoked the power under Section 11(6) of the Act, and appointed an Arbitrator to decide the dispute between the parties.

In appeal, the Apex Court noted that admittedly, both the lease deeds are neither registered nor sufficiently stamped as required under the Karnataka Stamp Act, 1957. Held that arbitration agreement in unstamped contract is unenforceable.

[A curative petition, is the final and last option for the people to acquire justice as mentioned and promised by the Constitution of India. A curative petition may be filed after a review plea against the final conviction is dismissed.

Under Article 142 Curative Petition can be filed in the Supreme Court. The concept of the curative petition was evolved by the Supreme Court of India in the case of Rupa Ashok Hurra vs Ashok Hurra,2002. Its objectives are two-fold one is to avoid a miscarriage of justice and another one is to prevent abuse of process.]