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We are delighted to share this month's AKP Dispute Resolution Monthly Digest. Please feel free to write to us with your feedback at info@akandpartners.in.
1. Arbitration Law
1.1 Real Estate and Construction
1.1.1. Supreme Court Held Party Filing Statement of Claim First Is the "Claimant" Mere Absence of Notice Does Not Invalidate Proceedings
The Supreme Court has held that in arbitral proceedings, the "Claimant" is the party that files the Statement of Claim first in point of time, regardless of the nomenclature used in prior court proceedings or the absence of a formal notice invoking arbitration under Section 21 of the Arbitration and Conciliation Act, 1996 ("A&C Act"). This ruling was delivered in an appeal by M/s Bhagheeratha Engineering Ltd. against the State of Kerala, challenging a High Court judgment that set aside an arbitral award on the technical ground that the State could not be treated as a claimant as it had not issued a statutory notice invoking arbitration. The dispute arose from a construction contract where the State, after terminating the agreement, sought to recover costs and filed its claim before the Arbitrator first. The Court clarified that since the State filed the Statement of Claim first, it was rightly treated as the Claimant. It further ruled that the High Court erred in invalidating the proceedings solely due to the lack of a Section 21 notice, emphasising that such procedural lapses cannot defeat the substantive outcome when the tribunal has not travelled beyond the scope of the reference. Consequently, the Supreme Court set aside the High Court's order and restored the arbitral award dated June 29, 2006, in its entirety.
2. Consumer Protection Law
2.1. Real Estate
2.1.1. Supreme Court Rules Decree Against Company Cannot Be Executed Against Non-Party Directors
The Supreme Court has held that a decree passed by the National Consumer Disputes Redressal Commission ("NCDRC") against a corporate entity cannot be executed against its directors or officers personally if they were not arrayed as parties in the original complaint and no liability was fastened upon them in the final judgment. This ruling was delivered in appeals filed by Ansal Crown Heights Flat Buyers Association and individual homebuyers against M/s Ansal Crown Infrabuild Pvt. Ltd. ("ACIPL") and its directors. The appellants sought to enforce NCDRC orders directing refunds and possession against the company's directors arguing they were the nerve centre of the business. The NCDRC had declined to issue recovery certificates against these individuals, noting they were not parties to the substantive litigation. The Court ruled that an executing court cannot travel beyond the decree; since the original order imposed liability solely on the company (ACIPL), the decree holders could not unilaterally expand its scope in execution proceedings to target non-parties. The Court clarified that while remedies under the Companies Act or IBC might be available to lift the corporate veil, the execution mechanism under the Consumer Protection Act cannot be used to bypass the requirement of adjudicating personal liability during the trial phase.
3. Environmental Law
3.1. Real Estate and Infrastructure
3.1.1. Delhi High Court Rules Arbitrator Cannot Rewrite Contract or Award Damages on Equity Without Express Consent
The Supreme Court has held that proceedings before the National Green Tribunal ("NGT") regarding environmental violations must be kept in abeyance when a substantive writ petition challenging the legality of the land acquisition and usage is already pending before the High Court to avoid conflicting rulings. This ruling was delivered in appeals filed by Raj Singh Gehlot & Ors. against Amitabha Sen & Ors., challenging the NGT's directive to constitute a Joint Expert Committee and its subsequent report recommending the demolition of a commercial complex and the imposition of fines comprising INR 138.83 Crore (Indian Rupees One Hundred Thirty Eight Crore and Eighty Three Lakhs) and INR 10.33 Crore (Indian Rupees Ten Crore Thirty Three lakhs) for allegedly constructing on a water body/forest land. The Court observed that the fundamental question of whether the land was lawfully acquired or constituted a water body was sub-judice before the High Court. Consequently, the Supreme Court stayed the operation of the NGT's orders and the Expert Committee's recommendations, directing that the tribunal proceedings remain in abeyance until the High Court renders its decision, after which parties may revive the environmental concerns if applicable.
4. Negotiable Instruments
4.1 Banking and Finance
4.1.1 Supreme Court Rules High Court Cannot Quash Section 138 N.I. Act Complaint at Threshold if Prima Facie Case Exists
The Supreme Court has held that the High Court cannot invoke its inherent powers under Section 482 of the Code of Criminal Procedure, 1973 ("CrPC") to quash a complaint under Section 138 of the Negotiable Instruments Act, 1881 ("NI Act") at the threshold if the complaint discloses the necessary ingredients of the offence. This ruling was delivered in appeals filed by Sumit Bansal against M/s MGI Developers and Promoters and another, challenging the Delhi High Court's decision to quash the summoning orders and the underlying complaints. The dispute arose from a real estate transaction where the respondents allegedly issued cheques to refund money after a deal failed, which were subsequently dishonoured. The High Court had quashed the proceedings, characterizing the dispute as purely civil in nature. The Court ruled that the complaints prima facie disclosed the ingredients of Section 138 and that the High Court erred in stalling the trial by pre-judging the validity of the debt. Consequently, the Supreme Court set aside the High Court's order and restored case for trial.
5. Company law
5.1 Banking and Finance
5.1.1 Supreme Court Dismisses UV Asset's Insolvency Plea, Deed of Undertaking Not a Guarantee
The Supreme Court has dismissed the appeal filed by UV Asset Reconstruction Company Limited, thereby affirming the rejection of its application under Section 7 of the IBC against Electrosteel Castings Limited. The central issue was whether a "Deed of Undertaking" executed by the respondent (the erstwhile promoter) constituted a "Contract of Guarantee" under Section 126 of the Indian Contract Act, 1872, so as to qualify as a financial debt. While the Court dismissed the appeal finding no infirmity in the NCLAT's judgment, it explicitly clarified the law regarding third-party liability. The Court held that unless the Resolution Plan specifically settles such third-party claims at nil value, the independent liability of the surety survives . However, despite this legal clarification favoring creditors generally, the specific appeal was dismissed, implying that the underlying instrument in this case did not satisfy the requirements of a financial guarantee to trigger insolvency proceedings.
[1] COMMERCIAL IP SUIT NO. 231 OF 2015
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