Defective Petitions to Challenge Arbitral Awards: Delhi High Court Settles the Law

 There have been numerous judgments on whether particular classes of defects in petitions under Section 34 of the Arbitration and Conciliation Act, 1996 (1996 Act) for challenging arbitral awards make the petitions "non-est" in the eyes of law. Consequence of holding a petition invalid in the eyes of law means that time specified for filing challenge petitions in S. 34 would continue to run, notwithstanding filing of such incurably defective petitions. 

A Full Bench of the Delhi High Court has, on 07.02.2025, settled the law in Pragati Construction Consultants v UoI, 2025:DHC:717-FB. Para 97 of the judgment summarises the decision of the Full Bench on points of law and is quoted below:

"97. We summarise our answer to the Reference, as under:

a) Non-filing of the Arbitral Award alongwith an application under the Section 34 of the A&C Act would make the said application liable to be treated and declared as non-est, and the limitation prescribed under Section 34(3) of the A&C Act shall continue to run in spite of such filing;

b) Mere non-filing of the Statement of Truth or a defect in Statement of Truth being filed, that is, including with blanks or without attestation, would not ipso facto, make the filing to be non-est. However, if accompanied with other defects, the Court may form an opinion, based on a cumulative list of such defects, that the filing was nonest;

c) Similarly, non-filing or filing of a defective Vakalatnama; the petition not being signed or properly verified; changes in the content of petition being made in form of addition/deletion of facts, grounds, or filing of additional documents from arbitral record, or filing with deficient court fee, each of these defects, individually would not render to filing of an application under Section 34 of the A&C Act to be treated and declared as non-est. However, presence of more than one of such defects may, in the given set of facts involved in a case, justify the conclusion of the Court that filing of the application was never intended to be final and therefore, is liable to be declared non-est."   

LIBOR Cessation, Implied Terms & Alternative Reference Rate: English High Courts Decides

LIBOR cessation is one of the most important issues in commercial law in the recent times. With trillions of dollars with contracts indexed to LIBOR and its recent cessation, it is important that courts world over deal with it in a fair manner. This article may be looked at for how international arbitral tribunals have dealt with LIBOR cessation.

Recently, the English Court in Standard Chartered plc v. Guaranty Nominees Limited, [2024] EWHC 2605 (Comm) has dealt with the issue. As has been noted in the aforementioned Some jurisdictions provided legislative solutions by prescribing the alternative reference rate through statute or delegated legislation. In some jurisdictions, courts read in an implied term of alternative reference rate. Standard Chartered plc v. Guaranty Nominees Limited decided by the English High Court is an example of the latter approach. Here, the English Court decided that where the three month USD LIBOR ceased or was incapable of operation, a reasonable alternative rate to it was an implied term.

The crucial question is how should courts (and arbitral tribunals) arrive at the alternative reference rate. Standard Chartered provides some guidance on the criteria:

• such rate is to be based on “robust underlying market”;
• while determining such alternative reference rate, courts should “have regard to the liquidity of that underlying market over time, market functioning issues, usefulness to all market participants and the ability to produce and maintain the alternative rates…”
• Such rate should “be able to test the rate by reference to historical data…”;
• It should “consider resilience to changing market conditions, structures and regulations; placing weight on the diversity of market participants, the stability of their participation and their credit quality over time; how changes in participation could affect the benchmark; the transparency of the benchmark and the need for an ongoing ability to assess the rate’s quality…”According to the court, such a rate was the “CME Term SOFR and adding the ISDA Spread Adjustment”.

The decision of the English High Court provides important guidance on two aspects. One, on the legal basis for implying a term on alternative reference rate to 3 months USD LIBOR, and two, determination of the alternative reference rate. 

In House Counsels as Judicial Members in Tribunals such as NCLT and NCLAT

 Please refer to the recent decision of the Hon'ble Supreme Court of India in SBI v. The Consortium of Mr. Murari Lal, 2024 INSC 852, where it has been held:

"183. The Members often lack the domain knowledge required to appreciate the nuanced complexities involved in high-stake insolvency matters in order to properly adjudicate such matters. It has been noticed that the benches of NCLT(s) and NCLAT don’t have the practice of sitting for the full working ours. They are particularly lacking in the capacity to manage the growing number of cases and giving undivided attention required in such matters. There are serious issues in the manner in which the insolvency matters are listed. There is no effective system in place before the NCLTs for urgent listings."

Since liberalisation and globalisation, and after the advent of national law schools, there has been a considerable expansion in the legal profession. One such set of legal professionals are the in house counsels. They are not just legal professionals but also combine as excellent management professionals.

Unfortunately, the Indian legal system has not been able to tap this excellent resource for selection in tribunals and courts. On the one hands higher courts such as High Courts and Supreme Court keep complaining about the lack of professionalism in the tribunal members but on the other hand, excellent and well-qualified professionals are, it is understood, not eligible for being appointed as judicial members of tribunals. It appears as per the current state of law that they are at the most eligible for appointment as technical members.

In this background, the following two solutions could possibly be considered: One, In house counsels could be considered for selection as technical members, in the short run, so that the tribunals are equipped with people who understand not only the mechanics of law but also of business, and two, in the long run, the relevant statutes/ rules can be amended to enable appointment of in house counsels as judicial members of such tribunals.

Govt. Tries to find a Way Around the Atomic Energy Act

In two previous posts in this blog, here and here, we discussed the exclusivity provided by the Atomic Energy Act, 1962 to the Central Government and Central Government Companies to harness atomic energy in India. In the Budget Speech for the FY 2024-25, the finance minister announced that the Union Government would partner with the private sector for establishing Bharat Small Reactors (BSR), which are basically SMRs or Small Modular Reactors. The relevant portion of the budget speech reads as under:

“75. Nuclear energy is expected to form a very significant part of the energy mix for Viksit Bharat. Towards that pursuit, our government will partner with the private sector for (1) setting up Bharat Small Reactors, (2) research & development of Bharat Small Modular Reactor, and (3) research & development of newer technologies for nuclear energy. The R&D funding announced in the interim budget will be made available for this sector.” (emphasis added).

This announcement comes in the wake of Section 14(1) of the Atomic Energy Act which prohibits a direct role by the private sector in the Indian atomic energy industry.

The Government seems to have worked a way out for allowing private participation: the nuclear plant will be operated by the Nuclear Power Corporation of India (NPCIL) but the funding and the land will be provided by private players. It remains to be seen whether the private players will have a share of the revenue. These plants, it has been suggested, could replace or substitute captive power plants. A news item about this development can be accessed from here.