2022 (5) TMI 975 - HC - Indian Laws

Termination of proceedings under Section 25(a) of the Arbitration and Conciliation Act, 1996 - HELD THAT - The Arbitrator has failed to exercise the jurisdiction vested in her, inasmuch as she has passed no order on the applications filed by the Union for recall of the orders dated 19.02.2021. The factual position pleaded in these petitions, to the effect that the applications were taken up for hearing before the Arbitrator on 08.03.2021 and returned without any order been passed thereupon, has not been controverted by the respondent. There is an additional factual circumstance which also persuades me that the impugned orders of the Arbitrator in the present cases, suffer from perversity of approach. As noted, prior to the impugned orders, the last order of the Arbitrator was passed on 06.01.2021. By that order, the case was fixed for hearing on 22.01.2021 and the Union was given time to file the Statement of Claims on the next date of hearing . It is the admitted position that no hearing was, in fact, held on 22.01.2021, and none was fixed thereafter. The Arbitrator, in the impugned orders, has lost sight of this position and has referred only to the earlier order passed by her on 16.10.2020. It would be appropriate to allow the Union s alternative prayer for a direction upon the Arbitrator to consider the applications presented by it for recall of the impugned orders dated 19.02.2021. It may be noted that, whether or not the Union is able to show sufficient cause for its delay in submitting the Settlement of Claims, is a matter for the Arbitrator to consider. The Arbitrator is directed to consider the applications presented by the Union for recall of the orders dated 19.02.2021 terminating the arbitral proceedings under Section 25(a) of the Act. As the proceedings have been unduly prolonged, the Arbitrator is directed to dispose of the applications after hearing the parties, within three months from today. It is made clear that this Court has not made any comment on the merits of the said applications - the writ petitions are partly allowed.

Issues Involved:
1. Termination of arbitration proceedings under Section 25(a) of the Arbitration and Conciliation Act, 1996.
2. Maintainability of petitions under Article 227 of the Constitution against arbitral orders.
3. Arbitrator’s failure to consider applications for recall of termination orders.

Detailed Analysis:

I. Termination of Arbitration Proceedings under Section 25(a)

Facts:
The Union of India initiated 24 arbitration proceedings against the Delhi State Consumers Co-operative Federation Limited (DSCCFL) regarding the supply of pulses. Each contract contained an identical arbitration clause. The Union failed to file the Statement of Claims within the stipulated time, leading the Arbitrator to terminate the proceedings under Section 25(a) of the Arbitration and Conciliation Act, 1996.

Analysis:
The Arbitrator issued several orders directing the Union to file its Statement of Claims, but the Union repeatedly failed to comply, citing delays in the appointment of government counsel. Eventually, the Arbitrator terminated the proceedings on 19.02.2021, stating that the Union had not shown sufficient cause for its failure to file the Statement of Claims.

II. Maintainability of Petitions under Article 227

Submissions:
- Union's Argument: The Arbitrator failed to exercise jurisdiction by not considering the applications for recall of the termination orders. The Union cited the Supreme Court judgment in *Srei Infrastructure Finance Limited vs. Tuff Drilling Private Limited* to argue that an order for termination should be preceded by notice and is subject to review.
- DSCCFL's Argument: The petitions under Article 227 are not maintainable. They relied on judgments such as *Bhaven Construction vs. Executive Engineer, Sardar Sarovar Narmada Nigam Limited* and *Deep Industries Limited vs. Oil and Natural Gas Corporation Limited* to support this contention.

Analysis:
The High Court held that the petitions are maintainable under Article 227. The Supreme Court in *Srei Infrastructure* affirmed the exercise of Article 227 jurisdiction in similar circumstances, holding that the Arbitral Tribunal has jurisdiction to recall termination orders if sufficient cause is shown. The High Court emphasized that the supervisory jurisdiction is available to ensure that a tribunal performs its duty and does not neglect to exercise its jurisdiction.

III. Arbitrator’s Failure to Consider Applications for Recall

Facts:
Upon receiving the termination orders, the Union applied to the Arbitrator for recall, but the Arbitrator returned the applications without passing any orders.

Analysis:
The High Court noted that the Arbitrator's failure to consider the recall applications was a jurisdictional error. The Arbitrator’s last order on 06.01.2021 had fixed a hearing for 22.01.2021, but no hearing was held on that date. The abrupt termination without a show cause notice to the Union was deemed unsustainable. The High Court directed the Arbitrator to consider the recall applications, emphasizing that whether the Union can show sufficient cause for its delay is a matter for the Arbitrator to decide.

IV. Judgment in Awasthi Construction Cited on Behalf of DSCCFL

Analysis:
The High Court distinguished the present case from *Awasthi Construction*, noting that the Supreme Court in *Srei Infrastructure* endorsed the view that arbitral proceedings can be recommenced if sufficient cause is shown. The High Court held that the interference of the writ court is justified when the Tribunal fails to exercise its jurisdiction.

Conclusion

The High Court allowed the petitions, directing the Arbitrator to consider the Union’s applications for recall of the termination orders within three months. The decision emphasized that the exercise of Article 227 jurisdiction is justified to ensure the proper functioning of the arbitral process and to correct jurisdictional errors. The High Court did not comment on the merits of the recall applications, leaving it to the Arbitrator to decide.

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