From arbitration to act of god arguments, here're the key court orders

Differing arbitration clauses in related contracts

When there are two different arbitration clauses in two related agreements between the same parties, disagreements arise often over the procedure to be followed, appointments to the tribunal and the venue. One contract might suggest one procedure and in the same set of contracts, another might suggest a different procedure. In a recent Supreme Court case, Balasore Alloys Ltd vs Medima LLC , there was one “umbrella” contract between the two parties and a separate one dealing with pricing of ferro chrome for export to Canada and USA. The two clauses differed with each other. One was domestic and the other was international, to be heard and decided under the International Chamber of Commerce (ICC) in London. In such cases, the court stated that the two clauses should be read harmoniously. The Indian company sought the appointment of a second arbitrator as the Canadian firm did not nominate its representative in the pricing dispute. The latter argued that it had already initiated arbitration in London according to the clause in the “umbrella” agreement. Reconciling the difference, the court ruled that the main contract was comprehensive and the arbitration clause in the purchase order was for a limited purpose covering export of the alloy. Therefore, the plea for appointing an arbitrator by the Supreme Court according to the Arbitration and Conciliation Act was dismissed. 

Act of god arguments surface in courts

Disputes over delays in the performance of work contracts due to the current pandemic have started surfacing in courts. The contractor often rushes to the court as the employer threatens to terminate the contract and encash bank guarantees. The Delhi High Court, in last week’s judgment, Crsc Research Institute vs Dedicated Freight Corridor Corporation, allowed the government entity to encash bank guarantees, rejecting the prayer for injunction against encashment. The court reiterated the principle that only if there is fraud of an egregious nature or irretrievable loss to one of the parties can courts stop execution of bank guarantees. The bank guarantee clause is considered to be a separate agreement standing apart from the main contract. The contractor in this case had to build 388 km of electric broad gauge rail line. Extensions of time to complete the project were granted earlier, but the last stage was stalled in May this year due to the pandemic. The corporation did not grant extension this time, despite the Act of God clause in the contract and it threatened to terminate the contract.

Evaluating loss of limbs in accident 

While calculating compensation for loss of limb in a road accident, courts should take into account the profession or business of the victim and the “income generating capacity” of the victim after the mishap. Thus, loss of one leg to a  driver results in loss of total income. Likewise, loss of a functional arm for one involved in a job like a hairdresser or machinist could be disastrous. These observations were made by the Supreme Court while criticising the ruling of the Delhi High Court in a road accident case, Pappu vs Naresh Kumar. The high court had stated that a lawyer’s clerk lost only one arm in an accident and, therefore, he deserved compensation for only one arm. While the medical report stated that his incapacity was 89 per cent, the high court reduced it by half as he had one arm left. The SC found this approach “illogical and unsupportable in law”. It advocated a liberal view. The high court also erred in holding that compensation for loss of future prospects could not be awarded. In addition to loss of future earnings, the victim is also entitled to compensation for loss of future prospects, the court emphasised while directing the insurer to pay Rs 20 lakh.

Bar code on packages protects retailer 

If the bar code on a product discloses essential details like the name of the manufacturer, lot and batch numbers, it is not necessary to print them on the package separately, the Supreme Court ruled in its judgement, Raghav Gupta vs State. The food inspector prosecuted the director of a beverage company on the ground that the fruit juice pack the firm sold in the market did not print the necessary details. He contended that the juice was manufactured by Schweppes International Rye Brook and imported through the customs department. He further submitted that the bar code contained all the details demanded by the Food Adulteration Act and rules. However, the director was prosecuted by the criminal court and his appeal was dismissed by the Delhi High Court. On further appeal, the SC quashed the prosecution stating that the bar code contained the details and prosecuting the director would be an “abuse of the process of law, causing sheer waste of time, causing unnecessary harassment to the director”.