9911796707
TMI Blog2021 (3) TMI 1391X X X X Extracts X X X X X X X X Extracts X X X X ..... on as to what constitutes Courts and Tribunals as The term Courts refers to places where justice is administered or refers to Judges who exercise judicial functions. Courts are established by the state for administration of justice that is for exercise of the judicial power of the state to maintain and uphold the rights, to punish wrongs and to adjudicate upon disputes. Tribunals on the other hand are special alternative institutional mechanisms, usually brought into existence by or under a statute to decide disputes arising with reference to that particular statute, or to determine controversies arising out of any administrative law. The following principles are well settled, in respect of the scope of interference under Article 226/227 in challenges to orders by an arbitral tribunal including orders passed under Section 16 of the Act:- (i) An arbitral tribunal is a tribunal against which a petition under Article 226/227 would be maintainable; (ii) The non-obstante clause in section 5 of the Act does not apply in respect of exercise of powers under Article 227 which is a Constitutional provision; (iii) For interference under Article 226/227, there have to be exceptional circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal could consider framing a preliminary issue and deciding the same as soon as possible. iii. If the Tribunal is of the opinion that objections under Section 16 would require evidence to be led then the Tribunal could direct limited evidence to be led on the said issue and adjudicate the same. iv. If the Tribunal is of the opinion that detailed evidence needs to be led both written and oral, then after the evidence is concluded, the objections under Section 16 would have to be adjudicated first before proceeding to passing of the award. The manner in which the Arbitral Tribunal, considered the objections/application under Section 16 in the present case - HELD THAT:- The ld. Arbitrator has fully applied his mind and given reasons as to why the application of Petitioners (Respondent No. 5 to 10 in the arbitration) under Section 16 of the Act is not to be adjudicated at this stage. The ld. Arbitrator observes that the property in question which was purchased by the Petitioners was subject matter of the reference which was made by the ld. Single Judge of this Court on 9th January, 2018. Ld. Arbitrator, further observes that the Petitioners may be genuine purchasers of the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h. Gopal Kumar Bhalotia was filed before this Court, in which an application was moved by Respondent No. 5 (Sh. Gopal Kumar Bhalotia) under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter 'the Act'). 4. Vide order dated 9th January, 2018, the ld. Single Judge of this Court, referred the disputes to Arbitration by a sole Arbitrator. The relevant portion of the said order reads as under: "1. After hearing the counsels for the parties, this suit is disposed of by referring the disputes in the present suit as also disputes which may arise in any manner with respect to or connected with the family settlement/partition dated 15.7.2009, to the Arbitration of Shri B.B. Chaudhary, District & Sessions Judge (Retired) Mobile No. 9910384611. 2. Counsels for the parties also agree that irrespective of the wording of the arbitration clause in the family settlement/partition dated. 15.7.2009, the Arbitrator hereby appointed to determine the disputes between the parties connected to or with respect to the family settlement/partition dated 15.7.2009 will proceed in accordance with the procedure and other aspects as specified under the Arbitration &Conciliation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initial stage, parties like the Petitioners would be saddled with arbitral proceedings for several years and incur huge costs and this is contrary to the spirit of section 16(5) of the Arbitration and Conciliation Act, 1996 itself. 8. The submission of Mr. Arjun Garg, ld. counsel for the Petitioners is that there has been a complete failure by the Arbitral Tribunal in exercising jurisdiction and deciding the application under Section 16. Insofar as the maintainability of the petition is concerned, it is urged by him that the provisions of the Act cannot oust the jurisdiction of the High Courts and under Article 227, the said power ought to be exercised sparingly, the jurisdiction of High Courts ought not to be ousted especially when there is a manifest error by the Arbitral Tribunal or abdication of duty, the High Courts ought to exercise jurisdiction under Article 227. He further argues that the objection under Section 16 has to be decided at the outset and cannot be simply postponed by the Arbitrator without any decision as the language in Section 16(5) is that the Arbitrator "shall decide on a plea" as to jurisdiction. Reliance is placed on the following judgments: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .P.(C) 4886/2013 decided on 8th November, 2013 by Delhi High Court. (v) ATV Projects India Ltd. v. Indian Oil Corporation Ltd. & Anr. 2013 (136) DRJ 720 (DB). (vi) Lalitkumar v. Sanghavi (Dead) Through LRs & Anr. v. Dharamdas V. Sanghavi & Ors. (2014) 7 SCC 255. (vii) M/s. Evolve Marketing Services Pvt. Ltd. v. M/s. Aircel Ltd. & Anr. bearing W.P. (C) 2839/2015, decided by Delhi High Court on 7th September, 2015. (viii) Rajeev Gupta v. DMRC bearing W.P.(C) No. 8085/2015 decided by Delhi High Court on 15th September 2015. (ix) United Electrical Industries Ltd. v. Micro and Small Enterprises &Ors (2017) 238 DLT 9 (DB). (x) Business India Exhibitions Pvt. Ltd. v. Arvind V. Savant(DB). (xi) Indore Municipal Corporation v. Simplex Infrastructure Ltd. bearing W.P.(C) No. 20485/2018, decided by Madhya Pradesh High Court on 04th October, 2018. (xii) Tangirala Srinivasa Gangadhara Baladitya v. Sanjay Aggarwal, Sole Arbitrator and Others (DB) (xiii) Space Wood Office Solution Pvt. Ltd. v. Anupam Rai Construction through its partner Ritesh. (xiv) M/s. HM Constructions v. M/s. Century Silicon City bearing W.P. (C) No. 21404-21405, decided by Karnataka High Court on 17th Jun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her submissions on 29th January, 2021. Submissions on recent decisions 13. Ld. counsel for the Petitioners - Mr. Garg referred to the judgment in Deep Industries Ltd. v. Oil and Natural Gas Corporation Ltd. & Anr. and Bhaven Construction through Authorised Signatory Premjibhai K. Shah v. Executive Engineer Sardar Sarovar Narmada Nigam Ltd. & Anr. Civil Appeal No. 14665 of 2015, decided on January 6, 2021. Relying upon the judgment in Deep Industries (supra) his submission was that in the said case, also, the Supreme Court categorically held that the jurisdiction of the writ court under Article 227 would not be barred. However, the High Court would be extremely circumspect in interfering. The jurisdiction would be exercised where the Arbitrator patently lacks inherent jurisdiction. In the said case, according to Mr. Garg, ld. counsel, Section 16 was dismissed by the Arbitrator and there was a remedy available to the aggrieved under Section 34 of the Act. 14. Insofar as Bhaven Construction (supra) is concerned, he relied upon paragraphs 10, 12, 13, 16, 19, 22 and 25. The test laid down by the Supreme Court was that if there is an exceptional circumstance which would justify exerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs to Judges who exercise judicial functions. Courts are established by the state for administration of justice that is for exercise of the judicial power of the state to maintain and uphold the rights, to punish wrongs and to adjudicate upon disputes. Tribunals on the other hand are special alternative institutional mechanisms, usually brought into existence by or under a statute to decide disputes arising with reference to that particular statute, or to determine controversies arising out of any administrative law. Courts refer to Civil Courts, Criminal Courts and High Courts. Tribunals can be either private Tribunals (Arbitral Tribunals), or Tribunals constituted under the Constitution (Speaker or the Chairman acting under Para 6(1) of the Tenth Schedule) or Tribunals authorized by the Constitution (Administrative Tribunals under Article 323A and Tribunals for other matters under Article 323B) or Statutory Tribunals which are created under a statute (Motor Accident Claims Tribunal, Debt Recovery Tribunals and consumer fora). Some Tribunals are manned exclusively by Judicial Officers (Rent Tribunals, Motor Accidents Claims Tribunal, Labour Courts and Industrial Tribunals). Other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nals, though, a number of judgments have been cited by both parties, recent decisions of the Supreme Court and of this Court have settled the issue. 21. While there is no doubt that the arbitral tribunal is a tribunal over which writ jurisdiction can be exercised, the said interference by a writ court is limited in nature. Recently, in Deep Industries (supra) decided on 28th November, 2019, the Supreme Court considered S.B.P. & Company v. Patel Engineering Ltd. and Anr. (2005)8 SCC 618 and Fuerst Day Lawson Limited v. Jindal Exports Limited (2011) 8 SCC 333 and observed as under: "15. Given the aforesaid statutory provision and given the fact that the 1996 Act repealed three previous enactments in order that there be speedy disposal of all matters covered by it, it is clear that the statutory policy of the Act is that not only are time limits set down for disposal of the arbitral proceedings themselves but time limits have also been set down for Section 34 references to be decided. Equally, in Union of India v. M/s. Varindera Const. Ltd., dated 17.09.2018, disposing of SLP (C) No. 23155/2013, this Court has imposed the self-same limitation on first appeals Under Section 37 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to our judgment in Deep Industries Ltd. and dismiss the 227 petition on the ground that there is no such perversity in the order which leads to a patent lack of inherent jurisdiction. The High Court ought to have discouraged similar litigation by imposing heavy costs. The High Court did not choose to do either of these two things. In any case, now that Shri Vishwanathan has argued this matter and it is clear that this is not a case which falls under the extremely exceptional category, we dismiss this special leave petition with costs of Rs. 50,000/- to be paid to the Supreme Court Legal Services Committee within two weeks." 23. In Bhaven Constructions (supra), the Supreme Court was dealing with a similar situation where an order passed by the arbitrator under Section 16(2) of the Act was assailed in a petition under article 226/227. In the said case, the ld. Arbitrator held that he had jurisdiction to adjudicate the dispute. The Supreme Court considered the question of maintainability of the writ petition and held: "....10. Having heard both parties and perusing the material available on record, the question which needs to be answered is whether the arbitral p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovides for a mechanism of challenge under Section 34. The opening phrase of Section 34 reads as 'Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3)'. The use of term 'only' as occurring under the provision serves two purposes of making the enactment a complete code and lay down the procedure. 17. In any case, the hierarchy in our legal framework, mandates that a legislative enactment cannot curtail a Constitutional right. In Nivedita Sharma v. Cellular Operators Association of India, (2011) 14 SCC 337, this Court referred to several judgments and held: "11. We have considered the respective arguments/submissions. There cannot be any dispute that the power of the High Courts to issue directions, orders or writs including writs in the nature of habeas corpus, certiorari, mandamus, quo warranto and prohibition under Article 226 of the Constitution is a basic feature of the Constitution and cannot be curtailed by parliamentary legislation - L. Chandra Kumar v. Union of India, (1997) 3 SCC 261. However, it is one thing to say that in exercise of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances, what is important to note is that though petitions can be filed under Article 227 against judgments allowing or dismissing first appeals under Section 37 of the Act, yet the High Court would be extremely circumspect in interfering with the same, taking into account the statutory policy as adumbrated by us herein above so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction." 19. In the instant case, Respondent No. 1 has not been able to show exceptional circumstance or 'bad faith' on the part of the Appellant, to invoke the remedy under Article 227 of the Constitution. No doubt the ambit of Article 227 is broad and pervasive, however, the High Court should not have used its inherent power to interject the arbitral process at this stage. It is brought to our notice that subsequent to the impugned order of the sole arbitrator, a final award was rendered by him on merits, which is challenged by the Respondent No. 1 in a separate Section 34 application, which is pending. 20. Viewed from a different perspective, the arbitral process is strictly conditioned upon time limitation and modeled on the ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent No. 1 has to endure the natural consequences of submitting themselves to the jurisdiction of the sole arbitrator, which can be challenged, through an application under Section 34. It may be noted that in the present case, the award has already been passed during the pendency of this appeal, and the Respondent No. 1 has already preferred a challenge under Section 34 to the same. Respondent No. 1 has not been able to show any exceptional circumstance, which mandates the exercise of jurisdiction under Articles 226 and 227 of the Constitution. 23. The Division Bench further opined that the contract between the parties was in the nature of a works contract as it held that the manufacturing of bricks, as required under the contract, was only an ancillary obligation while the primary obligation on the Appellant was to supply the bricks. The Division Bench therefore held that the Gujarat Act holds the field, and not the Arbitration Act. 24. The Gujarat Act was enacted in 1992 with the object to provide for the constitution of a tribunal to arbitrate disputes particularly arising from works contract to which the State Government or a public undertaking is a party. A works contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to costs. Before we part, we make it clear that Respondent No. 1 herein is at liberty to raise any legally permissible objections regarding the jurisdictional question in the pending Section 34 proceedings." 24. A perusal of the above-mentioned decisions, shows that the following principles are well settled, in respect of the scope of interference under Article 226/227 in challenges to orders by an arbitral tribunal including orders passed under Section 16 of the Act. (i) An arbitral tribunal is a tribunal against which a petition under Article 226/227 would be maintainable; (ii) The non-obstante clause in section 5 of the Act does not apply in respect of exercise of powers under Article 227 which is a Constitutional provision; (iii) For interference under Article 226/227, there have to be 'exceptional circumstances'; (iv) Though interference is permissible, unless and until the order is so perverse that it is patently lacking in inherent jurisdiction, the writ court would not interfere; (v) Interference is permissible only if the order is completely perverse i.e., that the perversity must stare in the face; (vi) High Courts ought to discourage litigatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award. (6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34." 26. Can the arbitral tribunal, in the light of Section 16(5) postpone the decision in the plea is the question. In McDermott International Inc. (supra), the Supreme Court held as under: "51. After the 1996 Act came into force, under Section 16 of the Act the party questioning the jurisdiction of the arbitrator has an obligation to raise the said question before the arbitrator. Such a question of jurisdiction could be raised if it is beyond the scope of his authority. It was required to be raised during arbitration proceedings or soon after initiation thereof. The jurisdictional question is required to be determined as a preliminary ground. A decision taken thereupon by the arbitrator would be the subject-matter of challenge under Section 34 of the Act. In the event the arbitrator opined that he had no jurisdiction in relation thereto an appeal there against was provided for under Section 37 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator. (3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. (6) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral in proceedings and make an arbitral award." 20. Arbitration proceeding is nothing but an alternative dispute redressal forum and the general people should not lose faith in this alternative dispute redressal forum. In ordinary situation, the court should not exercise its power under article 227 of the Constitution, but in exceptional circumstances, when the statutory authority like the arbitrator did not exercise his power vested on him, then a petition under article 227 of the Constitution should not be thrown away. 21. Having considered the rival submissions of the learned counsel of the parties and the law reports, the question arises for decision is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the object of the minimizing judicial intervention while the matter is in the process of being arbitrated upon, will certainly be defeated if the High Court could be approached under article 227 or under article 226 of the Constitution against every order made by the arbitral Tribunal. The Apex Court also indicated that once the arbitration has commenced in the arbitral Tribunal, parties have to wait until the award is pronounced unless, of course, a right of appeal is available to them under section 37 of the Act even at an earlier stage, meaning thereby the parties are not fully debarred from approaching the High Court under article 227 of the Constitution when the arbitrator failed to act under sub-section (5) of section 16 of the Act, which is an obligatory to him as intended by the Legislature. Section 16 is self-contained clause as regards to challenge the jurisdiction of the arbitral tribunal/arbitrator before passing the award. 28. In Shri Pankaj Arora (supra)., a Ld. Single Judge of this Court dealing with a similar fact situation observed as under: "13. Be that as it may, I am of the opinion that the present petition cannot succeed, even otherwise, as no case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat stage is the objection to be decided. As per McDermott International Inc. (supra), the jurisdictional question is to be decided as a preliminary ground. This obviously means that the objection has to be decided at the earliest. However, there cannot be a hard and fast rule. Depending on the facts and circumstances of each case, the Tribunal ought to decide the objection under Section 16 of the Act as soon as possible, as a preliminary ground. The following factors can be borne in mind when objections are raised under Section 16 of the Act: i. If the issue of jurisdiction can be decided on the basis of admitted documents on record then the Tribunal ought to proceed to hear the matter/ objections under Section 16 of the Act at the inception itself; ii. If the Tribunal is of the opinion that the objections under Section 16 of the Act cannot be decided at the inception and would require further enquiry into the matter, the Tribunal could consider framing a preliminary issue and deciding the same as soon as possible. iii. If the Tribunal is of the opinion that objections under Section 16 would require evidence to be led then the Tribunal could direct limited evidence to be led ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding today's hearing have taken place in the campus of the high court or at the present venue. The expenses of Rs. 1500/- per hearing shall be borne by Claimant and the Respondent No. 1 to 4 in equal proportion. Come up for reply to be filed by Respondent No. 5 to 10 at 07.08.2019 at 2 PM at the above-mentioned venue. In case the counsel for the Respondent No. 5 to 10 files the reply well before 07.08.2019 and supply the copies to the claimant and Respondent No. 1 to 4, then they may file the counter reply to the same on the next date of hearing." 33. An application was moved by the Petitioner herein seeking recall of the above order dated 8th July, 2019 before the arbitrator. In the said application, the ld. Arbitrator heard the submissions of the parties and rejected the prayer for recall vide order dated 7th August, 2019. Extracts from the said order are reproduced herein below: "Arguments heard to decide the application. It is correct that the respondents No. 5 to 10 are not signatories to the settlement/partition deed dated 15.07.2019. That deed was executed between the claimants and the respondents No. 1 to 4. However, the deed is in respect to various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objections of the respondents No. 1 to 4 against the request to issue notice to the respondents No. 5 to 10 and also any objection which the respondents No. 5 to 10 may raise, will be taken care of at an appropriate stage. The Ld. Counsel for the respondents No. 5 to 10 has argued that since the respondents have put appearance and have filed an application u/s. 16 of the Arbitration and Conciliation Act, therefore, their request to recall the order of issuing notice of the arbitration may be allowed. He has further submitted that it is the appropriate stage to decide their application. The respondents No. 5 to 10 have derived their rights in the property at Vrindavan but it is also subject matter of settlement/partition deed dated 15.7.2009. The subject matters of that deed and all other related matters are subject to the arbitration as per order of the Hon'ble High Court. The arbitration in respect to the disputes is only at the stage of completion of the pleadings and admission and denial of the documents by the parties and also to decide the application to refer documents to the CFSL for an expert opinion. The appropriate stage to decide the matters, including the applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, the sale consideration qua the said property was to be decided between the parties. Thus, notice was issued to the Petitioners so that their rights are not jeopardized in any manner. An application to recall notice of arbitration under Section 16 cannot, therefore, in the opinion of the ld. Arbitrator, be decided at this stage and would rightly have to await completion of pleadings and admission and denial. According to the ld. Arbitrator, the matters are complicated and would require evidence and the Petitioners arguments cannot be adjudicated in isolation since the claimants have asked for declaration of the sale deed in favour of the Petitioners as null and void. The property which the Petitioners have purchased is squarely in dispute in the arbitration and, therefore, the Ld. Arbitrator was of the view that the appropriate stage will only be the final stage and the application of the Petitioners was kept on file. 35. Applying the settled legal position to the facts of the present case, the approach of the ld. Arbitrator cannot be set out as either perverse or patently lacking in jurisdiction. The fact situation does not present an 'exceptional rarity' requiri ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
