Arbitral Award Suffering From Illegalities Can Be Set Aside: Delhi HC


In the case of National Highways Authority of India v. Trichy Thanjavur Expressway Limited, [2023 SCC OnLine Del 5183], decided on August 21, 2023, the High Court of Delhi dealt with two cross petitions which were filed under Section 34 of the Arbitration and Conciliation Act, 1996. The appellant in one petition was the National Highways Authority of India (NHAI) and in the other, it was Trichy Thanjavur Expressway. The petitions were brought to set aside certain parts of an Arbitral Award dated August 7, 2022. Trichy Thanjavur Expressway sought the quashing of a part of the award to the extent that claims amounting to Rs. 30, 27, 33, 01, 844/- had been rejected. NHAI sought the setting aside of the award to the extent of findings on certain claims and additionally sought elimination of the grounds for setting aside the award under Section 34(4) of the Act.


  1. Whether parts of an award could be severed and whether an award could be partially set aside.
  2. Whether the grant of such relief is contrary to the decision of the Supreme Court in NHAI v. M. Hakeem [(2021) 9 SCC 1].


The Court noted that the proviso placed in Section 34(2)(a)(iv) of the Arbitration and Conciliation Act, 1996 shows that partial setting aside is not a concept that is foreign to the power of setting aside. The proviso itself envisages parts of an award being distinct and capable of severance since an award may consist of a decision rendered on multiple claims. Therefore, according to the Court, the principle of severance is something that has received statutory recognition, especially in cases where the award suffers from illegalities or irregularities in the nature specified under Section 34(2) of the Act and in the opinion of the Court, wielding such power would still be covered under the power of ‘setting aside’.

Regarding whether exercising this power would be against the precedent set in NHAI v. M. Hakeem [(2021) 9 SCC 1], wherein it was held that the power to set aside does not include the power to modify. The Court observed that exercising the power to partially set aside an award would not amount to a modification or variation of the award when the parts of an award are found to be clearly unsustainable and severable. The Court also noted that the wielding of this power would only be warranted in situations where the award relates to a claim that is found to stand on its own and its setting aside would not affect any other part of the award.

Further, looking into the intent of Section 34(4), the Court observed that it was solely for the purpose of removing manifest defects which could be remedied without affecting the foundation of the award or the various findings and conclusions recorded.  Therefore, the Court held that Section 34(4) of the Act, could not save an award that suffers from any illegalities under Section 34(2) (a) or (b), from being set aside.


PMLA Amendment Rules: Threshold for Beneficial Ownership Lowered to 10%

On September 4, 2023, the Ministry of Finance notified the Prevention of Money-laundering (Maintenance of Records) Second Amendment Rules, 2023 bringing about major changes pertaining to beneficial ownership in partnership firms, trustee disclosures, etc. thereby widening its ambit.

The changes under the amendment rules are as follows: –

  • Only officers at the management level can be designated by reporting entities as Principal Officers.
  • If the client is a partnership firm, the natural person who owns more than 10% of capital or profits in the partnership, or exercises control through other means would be the beneficial owner for the purposes of due diligence by reporting entities. Here, “control” would include the right to control the management or policy decision. Earlier, the threshold for determining beneficial ownership in a partnership firm was set at 15% of capital or profits in the partnership.
  • When it comes to trusts, the reporting entities would be required to make sure that the trustees disclose their status at the time of commencement of an account-based relationship or when carrying out transactions of an amount equal to or exceeding INR 50,000, or any international money transfer operations.
  • The records of the identity of clients must be maintained by the reporting entities, including the “result of any analysis undertaken” as per client due diligence (under Rule 9) or maintenance of transaction records (under Rule 3).


Draft Guidelines on ‘Dark Pattern’ Released

To curb misleading users from unintentionally doing something through deceptive UI/UX design patterns, the Department of Consumer Affairs has issued draft Guidelines on Prevention and Regulation of ‘Dark Patterns’ that prohibit persons, including platforms, from indulging in specified unethical practices.

The guidelines define ‘Dark patterns’ as “any practices or deceptive design patterns using UI/UX (user interface/user experience) interactions on any platform; designed to mislead or trick users to do something they originally did not intend or want to do; by subverting or impairing the consumer autonomy, decision making or choice. “The guidelines also provide a list of specified dark patterns with explanations and examples, including:

  • False Urgency: Implying urgency or scarcity to deceive users into making an immediate purchase or any other action. Example: ‘Only 2 rooms left’.
  • Basket Sneaking: Inclusion of additional items, charity money etc. However, free samples and complimentary services are allowed. Also, ‘necessary fees’ such as delivery charges etc. are allowed. Example: Adding travel insurance while booking flights.
  • Confirm Shaming: Using phrases or other means to shame, guilt, ridicule etc. to nudge the user to act in a certain way. Example: “I will stay unsecured”.
  • Forced Action: Forcing a user to buy additional items to continue using the contracted items. Example: Download a separate app to access services originally advertised in one app.
  • Subscription Trap: Making paid subscription too complicated to discontinue or hiding the cancellation option or making instructions cumbersome.
  • Interface Interference: Designs manipulating user interface to highlight certain information and obscure other relevant information.
  • Bait and Switch: Advertising a particular outcome based on the user’s action but deceptively serving an alternate outcome.
  • Drip Pricing: Elements of prices are not revealed upfront or are revealed surreptitiously within the user experience.
  • Disguised Advertisement: Practice of posing, masking advertisements as other types of content such as user generated content or new articles or false advertisements. The onus shall be on the advertisers or sellers and not on the platform.
  • Nagging: Overload of requests, information, options, or interruptions; unrelated to the intended purchase.

The guidelines shall apply to all platforms offering goods and services in India, including advertisers and sellers. Comments may be shared by October 5, 2023.


Secured Creditor Free to Choose Remedy under SARFAESI Act


In the case of Diamond Entertainment Technologies (P) Ltd. v. Religare Finvest Ltd., [2023 SCC OnLine Del 4905] decided by the High Court of Delhi on August 14, 2023, the petitioners challenged an order passed under Section 14 of the SARFAESI Act, 2002 which deals with the possession of the secured asset. The respondent in the case, a Non-Banking Financial Corporation (NBFC) had sanctioned a loan of Rs. 10 Crores against mortgaged property. This loan account was restructured, a supplementary agreement was executed, and a payment schedule was given. On June 7, 2021, the sister of Diamond Entertainment (Petitioner no.1) filed for a suit of partition of the mortgaged property, and in this suit, the Court passed an order to maintain the status quo in respect of title possession of the suit property until the next date of hearing. However, due to payment default, this account was classified as a non-performing asset. The respondent, being a secured creditor instituted proceedings under Section 13(2) of the Act demanding the payment of the outstanding amount along with interest. Finally, on September 12, 2021, the respondent took constructive possession of the mortgaged property under Section 13(4) following which the application under Section 14 was filed wherein a receiver was appointed by the Magistrate. This is the order that was challenged in this case on the contention that it was an abuse of the process of law.


Whether there is a bar/restraint in law against the secured creditor to directly proceed under Section 14 of the SARFAESI Act, 2002 after withdrawing measures taken under Section 13(4) of the Act.


It was the argument of the petitioners in the present case that there was a stay operating with respect to the mortgaged property in the partition suit which continued till the date of the application filed under Section 14 by the respondents. Further, they claimed that since the respondent had already sought a remedy under Section 13(4) of the Act, they could not at a later stage invoke proceedings under Section 14 by withdrawing the notice under Section 13. This, according to the petitioners, was an abuse of the process of law.

The Court observed that on withdrawal of the notice under Section 13 of the Act, any right of the petitioners which may have accrued to them under Section 17 was extinguished and therefore, the petitioners could not object against the respondent’s withdrawal of notice and initiation of proceedings under Section 14. As per precedent set in the cases of Standard Chartered Bank v. V. Noble Kumar (2013) 9 SCC 620] and Hindon Forge (P). Ltd. v. State of U.P. [(2019) 2 SCC 198], it is the right of the respondent, as a secured creditor, to decide the remedy that they wish to adopt, and the borrower or guarantor has no say in the manner or mode in which recourse is opted to be taken by the secured creditor. There was nothing in law that restrained the respondent from moving under Section 14 of the Act once he had taken measures under Section 13(4). Further, the rights of the petitioners under Section 17 would only accrue once possession was taken and they could not invoke Article 226 of the Constitution to frustrate the object of the recovery proceedings.


Cessation of LOI due to Change in the Business Structure Without Prior Permission is Valid


In the case of Md. Musir Ahmed v. Indian Oil Corporation. Ltd [WPA 17594] decided on August 16, 2023, by the High Court of Calcutta, the first petitioner was selected for the distributorship of LPG cylinders by the Indian Oil Corporation through a draw of lots, and the Letter of Intent (LOI) was also issued in his favour on April 24, 2019. After the issue of the Letter of Intent, the first petitioner entered into a partnership with the second petitioner to run the LPG distributorship and the partnership deed between the petitioners was executed on February 9, 2021, without obtaining the requisite approval from the Indian Oil Corporation. This was in direct violation of Clause 5.4 of the Letter of Intent which stated that prior approval was required for any change in the nature of the distributorship from that which existed at the time of application. Consequent to the withdrawal of the LOI via a rejection of the petitioner’s representation made on July 19, 2022, the petitioners filed a writ petition. In the petition, a Co-ordinate Bench directed the Indian Oil Corporation to consider the representation of the petitioners and to pass a reasoned order after giving the petitioners an opportunity to be heard. Following this order, the Indian Oil Corporation rejected the representation of the petitioners after due consideration and recalled the LOI. Aggrieved by this rejection the petitioners filed the present petition before the High Court of Calcutta.


Whether the change in the distributorship structure from a proprietorship to a partnership without prior approval as stipulated in the LOI is a mere irregularity or a substantial illegality leading to the cessation of the LOI?


In deciding the matter, the Court noted that under Clause 5.4 of the LOI, it was explicitly stated that the petitioner was not permitted to induct anyone as their partner or make a change in the constitution of the proposed distributorship without obtaining prior approval of the Corporation. The Court also observed that the restrictive clause in the LOI stipulates that if the distributor wanted to change the nature of his business from proprietorship to partnership, prior approval of the Corporation was necessary. Thus, the partnership deed which was executed before even making a representation of the same to the Corporation, was in clear violation of this Clause.

Further, the Co-ordinate Bench directed that the decision taken by the Corporation should be grounded in the existing policy of the Indian Oil Corporation which dealt with the reconstitution of partnership deeds. This existing policy is what is laid down in the conditions of the Letter of Intent and therefore the decision of the Indian Oil Corporation in rejecting the representation of the petitioners was carried out in the manner specified by the order.

Thus, the High Court of Calcutta held that the change in the nature of distributorship from a proprietorship to a partnership without obtaining prior approval from the Indian Oil Corporation was a violation of the terms laid down in the LOI and therefore, the cessation of the LOI was valid.


Unstamped Arbitration Agreement must be Filed in Original: Delhi HC

On August 22, 2023, the Delhi High Court rendered a common order holding that if a petition under Section 11 of the Arbitration and Conciliation Act, 1996, has been filed on the basis of an unstamped or insufficiently stamped arbitration agreement, the original instrument must be filed along with the petition. On the other hand, if the arbitration agreement is duly stamped, the filing of true copy or certified copy of the instrument will suffice.

The Single Judge Bench of Justice Sachin Datta heard multiple matters concerning arbitration agreements that were admittedly unstamped and/ or were incorporated in an unstamped agreement. In the case of Pearson India Education Services Pvt Ltd v. Mr Gautam Barkataki son of Late Mr Sashi Kanta Barkataki (ARB.P. 1307/2022), Adv. Saurabh Bindal, Partner at Fox Mandal & Associates appeared for the petitioner.

At the outset, the Court stated that the judgment pronounced in M/s NN Global Mercantile Private Limited vs. M/s Indo Unique Flame Ltd. & Ors. (CA No. 3802-03/ 2020) applied to the case at hand.

The issues framed in May 2023 pertained to the filing of the original arbitration agreement, manner of payment of deficient stamp duty, adjudication by the Collector under the Indian Stamp Act, 1899, and State law applicable for stamping.

While observing that it would be consistent with the Apex Court’s decision in NN Global, for the Court itself to collect the deficient stamp duty along with the penalty (instead of sending the impounded agreement to the Collector of Stamps), the Court held that tasks such as preparation of report, impounding of document, etc. can be delegated to its officer or the Registrar.

In situations where the Court decides to send the original impounded instrument to the Collector of Stamps for adjudication as to the stamp duty and penalty payable (i.e., instead of the Court itself collecting the deficient stamp duty and penalty), the Court may issue time-bound directions to the Collector.

With respect to the State law applicable for stamping, the Court extracted relevant paragraphs from the Supreme Court judgment in New Central Jute Mills Co. Ltd. v. State of W.B.[1] wherein it was observed as follows:

“…if an instrument after becoming liable to duty in one State on execution there becomes liable to duty also in another State on receipt there, it must first be stamped in accordance with the law of the first State and it will not require to be further stamped in accordance with the law of the second State when the rate of that second State is the same or lower; and where the rate of the second State is higher, it will require to be stamped only with the excess amount and that in accordance with the law and the rules in force in the second State.”

The matters have been listed for individual consideration and further directions on September 1, 2023.

[1] AIR 1963 SC 1307


SEBI Amends Online Dispute Resolution Framework

The Securities and Exchange Board of India (SEBI) issued a circular on August 4, 2023, amending the guidelines for the online resolution of disputes in the Indian securities market. The same was done considering the public feedback received in this regard.

To streamline the dispute resolution mechanism in the Indian securities market, the Board came out with a circular on July 31, 2023, which provided for the setting up of a common Online Dispute Resolution (ODR) portal by Market Infrastructure Institutions (MIIs). The MIIs and Market Participants have been urged to provide a link to the said portal on their websites and mobile apps. As per the circular, the investor or client has to first approach the Market Participant for redressal of their grievances and if the outcome is not satisfactory, the SCORES portal can be availed of. In case the grievance is still not redressed, the investor or client can initiate dispute resolution through the ODR portal. Also, dispute resolution through the ODR portal can be initiated by the Market Participant provided that a 15-day notice is given to the investor or client.

Some of the changes made to the ODR framework are as follows: –

  • The Market Participants will be deemed to have been enrolled on the ODR portal at the end of the timeline prescribed in the circular.
  • One cannot initiate dispute resolution through the ODR portal during the moratorium period under the Insolvency and Bankruptcy Code, 2016 or if the liquidation or winding up process against the Market Participant has been initiated.
  • If the dispute is not resolved through conciliation within 21 calendar days, and the Market Participant wishes to opt for online arbitration, then 100% of the admissible claim value must be deposited by the Market Participant with the MII and the applicable fee must be paid for online arbitration.
  • Before challenging the award issued through online arbitration, the Market Participant must deposit the entire amount payable under the arbitral award, with the MII.


Govt Launches Scheme to Settle Pending Contractual Disputes

The Ministry of Finance has launched a scheme to settle the pending contractual disputes of government and government undertakings with contractors. Under the “Vivad se Vishwas II (Contractual Disputes)” scheme, disputes where the award issued by the Court or Arbitral Tribunal is only for monetary value would be considered. However, settlement through this scheme will not be possible if awards involve specific performance of the contract.

This decision was taken to clear the backlog of pending litigation cases which were responsible for holding back fresh investment, reducing the ease of doing business with the government, etc.

The Office Memorandum dated May 29, 2023, which provides the scheme’s guidelines specifies the implementation date as July 15, 2023, and states that claims under the scheme can be submitted by October 31, 2023.

As per the scheme, the settlement award offered to the contractor would be up to 85% of the net amount awarded by the Court, in case of awards passed by the Court on or before April 30, 2023. In case of arbitral awards passed on or before January 31, 2023, the settlement amount offered would be up to 65% of the net amount awarded.

For the implementation of this scheme, a dedicated webpage has been developed by the Government e-Marketplace (GeM) and all claims would be processed exclusively through this portal. Regarding non-GeM contracts of the Ministry of Railways, contractors may register their claims on the Indian Railways E-Procurement System (IREPS) platform.


Citizen’s Right to Travel Cannot be Curtailed on Account of Loan Default

In an order dated June 16, 2023, the Karnataka High Court in the case of Farooq Ali Khan v. Bureau of Immigration & Ors.(WP No.1235 of 2023) held that the fundamental right of the petitioner to travel cannot be curtailed on account of default in the repayment of loans by the company he is a guarantor for.

Since there were defaults in the repayment of the loans advanced to the company, Associate Décor Limited, the loans were declared as NPAs. Subsequently, recovery proceedings (before the Debt Recovery Tribunal) and insolvency proceedings (before the National Company Law Tribunal) were initiated against the said company. In addition to these proceedings, Look Out Circulars were sought to be issued to the personal guarantors of the company, including the petitioner.

A writ petition was filed by the petitioner before the Karnataka High Court, challenging the Look Out Circular issued against him which prevented him from travelling outside the country. It was highlighted that the petitioner is neither an accused in any crime nor is sought to be arrayed as an accused in any crime.

The Single Judge Bench of Justice M Nagaprasanna observed that even “if it is assumed that the petitioner is indeed the director of the company, it must be clarified that a bank cannot restrict the travel of a citizen solely on the basis of loan default”. Relying on case laws, the court reiterated that a person cannot be prevented from travelling abroad through a Look Out Circular or other means for the purpose of recovering outstanding debts owed to the banks.

Finally, the court held that the petitioner is authorized to travel abroad for a brief period provided that an affidavit of undertaking is filed stating that he would complete his work and come back to the country within 12 weeks from the date he starts his journey.



Criminal Complaint Against Samsung India Set Aside

In an order[1] dated May 31, 2023, the Karnataka High Court set aside the criminal proceedings instituted against the petitioner, M/s Samsung India for violation of packaging rules.

A complaint was filed before the jurisdictional Magistrate based on an inspection of one of the distributors of the petitioner company. During the inspection, it was discovered that the maximum retail price (MRP) printed on one of the petitioner’s products, a pre-packed Samsung Galaxy Tab-4 was in violation of the provisions of the Legal Metrology Act, 2009 and the Legal Metrology (Numeration) Rules, 2011. Another allegation levelled against the petitioner is that one of the pre-packed wholesale package products containing 20 individual packages does not have the qualifying symbol ‘N’ indicating the quantity in violation of the Legal Metrology (Packaged Commodities) Rules, 2011. Pursuant to the complaint, a show cause notice and subsequently a summons was issued to the petitioner.

With respect to the first allegation, the court held that the Numeration Rules apply only to weight, measure or number and not to the price or MRP of packaged goods. Concerning the second allegation, the court opined that the offence alleged relates to retail packages and not to wholesale packages. Further, attention was drawn to Rule 24 of the Packaged Commodities Rules which applies to wholesale packages and states that only the number of quantities must be specified without necessarily adding the prefix ‘N’ or ‘U’.

Holding that the provisions of the said Act and the rules made thereunder have been misinterpreted and the offences alleged are not made out, the court allowed the criminal petition and set aside the proceedings pending before the Metropolitan Magistrate, Traffic Court-I, Bengaluru.

[1] M/s Samsung India vs. State of Karnataka (CRL.P 9771/2017)