2015 (2) TMI 482 - HC - Companies Law

Maintainability of petition - Whether the present petition ought to be entertained in view of the alternate dispute resolution mechanism as provided under OM dated 22.01.2004 (i.e. the PMA). And, whether the petitioner can be permitted to challenge the jurisdiction of the Appellate Authority after participating in proceedings before the said authority without protest or any reservation. - Held that - SAIL preferred an appeal before the Appellate Authority and pursued its appeal before Shri T.K. Vishwanathan. The contention that SAIL was not aware of the designation of Shri T.K. Vishwanathan cannot be accepted as the same was clearly indicated in the communications issued by the said Authority for holding hearings. A notice for hearing before the Appellate Authority that was issued on 23.02.2010, has been produced by EPIL which conspicously mentions that the hearing is before T. K. Vishwanathan, Adviser to Minister of Law and Justice, Ministry of law and Justice . It is also not disputed that Shri T.K. Vishwanathan held a rank equivalent to a Secretary, Government of India. It is also clear that SAIL pursued its remedy before the said Appellate Authority willingly and without any reservation. SAIL filed an appeal against the award of the Sole Arbitrator on 07.04.2008 and the appellate award was passed on 17.02.2011. Notably, SAIL preferred the present petition on 18.12.2012, that is, twenty two months after the appellate award and more than four and a half years after filing its appeal before the Appellate Authority. SAIL s challenge to the jurisdiction of the Appellate Authority has to be viewed in this factual context. SAIL cannot be permitted to impugn the jurisdiction of the Appellate Authority in these circumstances. It would be manifestly unfair to EPIL, if SAIL is permitted to do so after having availed of its chance before the Appellate Authority. The principle that the jurisdiction cannot be vested by consent of parties has limited application to alternate dispute resolution mechanisms, principally for the reason that such mechanisms are consensual and aquire their validity from agreement between parties. - Decided against Petitioner.

Summary

Issues:
1. Challenge to appellate award by Steel Authority of India Ltd. (SAIL) against an award passed by the Sole Arbitrator.
2. Interpretation of arbitration clause in the contract between SAIL and Engineers Project India Ltd. (EPIL).
3. Jurisdiction of the Appellate Authority and the validity of the appellate award.
4. Applicability of the Permanent Machinery of Arbitrators (PMA) mechanism and the Arbitration and Conciliation Act, 1996.
5. Consideration of the principle that jurisdiction cannot be vested by consent of parties in alternate dispute resolution mechanisms.

Issue 1: Challenge to Appellate Award
The petition filed by SAIL challenged an appellate award dated 17.02.2011 dismissing SAIL's appeal against an award passed by the Sole Arbitrator under the Permanent Machinery of Arbitrators (PMA) mechanism. The contract between SAIL and EPIL contained an arbitration clause, triggering the dispute resolution process. SAIL contended that the Appellate Authority lacked jurisdiction due to the designation of the adjudicator, Shri T.K. Vishwanathan, not meeting the criteria specified in the Office Memorandum (OM) dated 22.01.2004.

Issue 2: Interpretation of Arbitration Clause
The contract's arbitration clause mandated resolving disputes in accordance with the Government of India guidelines if amicable resolution failed. Being Central Public Sector Enterprises, SAIL and EPIL were bound by the PMA mechanism for arbitration. The dispute arose when EPIL filed a claim before the Sole Arbitrator, leading to the subsequent appeal by SAIL challenging the award.

Issue 3: Jurisdiction of the Appellate Authority
The core issue revolved around whether SAIL could challenge the jurisdiction of the Appellate Authority after participating in the proceedings without protest. The timeline of events, including SAIL's awareness of the adjudicator's designation and the subsequent delay in challenging the jurisdiction, played a crucial role in determining the validity of the appellate award.

Issue 4: Applicability of PMA Mechanism and Arbitration Act
The court considered the applicability of the Arbitration and Conciliation Act, 1996, in cases governed by the PMA mechanism for dispute resolution. The judgment referenced a previous case to emphasize that parties cannot exclude the application of the Arbitration Act through their agreements, highlighting the limited intervention of courts in such matters.

Issue 5: Principle of Jurisdiction in Alternate Dispute Resolution
The judgment discussed the principle that jurisdiction cannot be vested by consent of parties in alternate dispute resolution mechanisms. It underscored that SAIL's participation in the appeal process without reservation precluded it from challenging the Appellate Authority's jurisdiction post-award.

In conclusion, the court dismissed the petition and application, emphasizing that SAIL's conduct in pursuing the appeal without objection barred it from challenging the jurisdiction of the Appellate Authority. The judgment underscored the importance of parties adhering to the agreed dispute resolution mechanisms and highlighted the limitations on challenging jurisdiction after participating in the process.