2022 (2) TMI 88 - SC - Indian Laws

Failure to adhere to the principles of natural justice - validity of Emergency Arbitrator s Award - order passed under Section 17(2) of the Arbitration Act, in enforcement proceedings, is appealable under Section 37 of the Arbitration Act or not - HELD THAT - The serious procedural errors were committed by the learned Single Judge. Natural justice is an important facet of a judicial review. Providing effective natural justice to affected parties, before a decision is taken, is necessary to maintain the Rule of law. Natural justice is usually discussed in the context of administrative actions, wherein procedural requirement of a fair hearing is read in to ensure that no injustice is caused. When it comes to judicial review, the natural justice principle is built into the rules and procedures of the Court, which are expected to be followed meticulously to ensure that highest standards of fairness are afforded to the parties. It is well known that natural justice is the sworn enemy of unfairness. It is expected of the Courts to be cautious and afford a reasonable opportunity to parties, especially in commercial matters having a serious impact on the economy and employment of thousands of people. Coming to the facts herein, the opportunity provided to the appellants herein was insufficient, and cannot be upheld in the eyes of law - Whenever an order is struck down as invalid being in violation of the principles of natural justice, there is no final decision of the case and fresh proceedings are left open. All that is done is to vacate the order assailed by virtue of its inherent defect. Such proceedings are not terminated and are usually remitted back. The contempt of a civil nature can be made out under Order XXXIX Rule 2A CPC not when there has been mere disobedience , but only when there has been wilful disobedience . The allegation of wilful disobedience being in the nature of criminal liability, the same has to be proved to the satisfaction of the court that the disobedience was not mere disobedience but wilful and conscious . A disconcerting aspect wherein the interim order enforcing the Emergency Award has adopted a standard beyond prima facie view , as required under law. It is expected of Courts to be cautious while making observations on the merits of the case, which would inevitably influence the Arbitral Tribunals hearing the matters on merit. The order dated 09.09.2021, imposed no bar on the High Court to adjudicate the issue concerning legality of the vacate application order by the Arbitral Tribunal. In our opinion, adjudication of the applications under Section 37(2), Arbitration Act filed by the appellants before the Delhi High Court are distinct from the earlier appeals filed before this Court - certain important questions of law concerning the effect of the award of an Emergency Arbitrator and the jurisdiction of an Arbitral Tribunal qua such awards arise in the present matter. Therefore, these matters need to be remitted back for adjudication on its own merits. Appeal allowed by way of remand.

Summary

Issues Involved:

1. Validity of orders dated 02.02.2021 and 18.03.2021 passed by the learned Single Judge in OMP (ENF) (COM) No.17 of 2021.
2. Validity of orders dated 29.10.2021 passed by the learned Single Judge in Arb. A (Comm.) No. 64 and 63 of 2021.

Detailed Analysis:

Issue I: Validity of orders dated 02.02.2021 and 18.03.2021 passed by the learned Single Judge in OMP (ENF) (COM) No.17 of 2021

The appeals challenge the orders passed by the learned Single Judge on grounds of procedural unfairness and lack of opportunity to file a counter. The appellants argued that they were not given sufficient time to respond, with only a brief note of submission allowed within twenty-four hours before the orders were passed. The court observed that serious procedural errors were committed by the learned Single Judge, emphasizing the importance of natural justice and fair hearing, especially in commercial matters impacting the economy and employment.

The court highlighted that natural justice requires providing a reasonable opportunity to the affected parties before making a decision. The orders were found invalid due to the lack of sufficient opportunity provided to the appellants, rendering them procedurally unfair. The court noted that the punitive directions ordered by the learned Single Judge, including costs and asset attachment, were inappropriate due to the lack of sufficient mental element for willful disobedience. The court set aside these punitive directions, noting that Amazon was not interested in pursuing them.

The court also noted that the interim order enforcing the Emergency Award had adopted a standard beyond the 'prima facie view' required under law, which could influence the Arbitral Tribunals hearing the matters on merit. Therefore, the court set aside the orders dated 02.02.2021 and 18.03.2021 passed by the learned Single Judge in OMP (ENF) (COMM.) No.17 of 2021.

Issue II: Validity of orders dated 29.10.2021 passed by the learned Single Judge in Arb. A (Comm.) No. 64 and 63 of 2021

The court noted that both parties agreed that the impugned order dated 29.10.2021 in IA No. 14285/2021 moved in Arb. A (Comm.) No. 64 of 2021 needed to be set aside for non-consideration of the orders of the Supreme Court in the proper perspective. The court's order dated 09.09.2021 imposed no bar on the High Court to adjudicate the issue concerning the legality of the vacate application order by the Arbitral Tribunal.

The court emphasized that the adjudication of the applications under Section 37(2) of the Arbitration Act filed by the appellants before the Delhi High Court is distinct from the earlier appeals filed before the Supreme Court. The court noted that certain important questions of law concerning the effect of the award of an Emergency Arbitrator and the jurisdiction of an Arbitral Tribunal qua such awards arise in the present matter. Therefore, the matters need to be remitted back for adjudication on their own merits.

Conclusion:

The court ordered the setting aside of the impugned orders dated 02.02.2021 and 18.03.2021 in OMP (ENF)(Comm.) No. 17 of 2021 and the impugned order dated 29.10.2021 in Arb. A. (Comm.) No. 64 and 63 of 2021. The learned Single Judge is directed to reconsider the issues and pass appropriate orders on their own merits, uninfluenced by any observations made in this judgment.