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TMI Blog2022 (12) TMI 1526X X X X Extracts X X X X X X X X Extracts X X X X ..... Order dated July 22, 2022 [hereinafter referred to as the 'Impugned Order'] passed by the learned arbitral tribunal consisting of three arbitrators [hereinafter referred to as 'the Tribunal']. An application for stay of the Impugned Order [IA NO. GA 1 of 2022 in A.P.O. No. 74] has also been filed. Both the applications are being conjointly decided. Relevant Facts 4. The petitioner entered into a 'Contract for supply of Gainwell High Wall Mining System' dated May 10, 2019 [hereinafter referred to as 'the Agreement'] with the respondent. The petitioner was to supply a High Wall Mining System [hereinafter referred to as 'HWM System'] together with a cutter module. 5. As per the Agreement, the consideration for the HWM System was Rs. 60,12,93,000/- (plus taxes) and was to be paid tranches as indicated in Clause 4 of the Agreement. The tranches are indicated below: a) Rs. 6,00,00,000/- to be paid along-with signing of the Agreement. b) Rs. 6,00,00,000/- to be paid within 30 days from the date of signing of the Agreement against the receipt of the initial component packages of TRAM frames and Plantaris, Track Column etc., at Asansol from Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite and is made ready for reassembly and testing, the Special Officer would be informed of the same and re-assembly and testing should commence in his presence. 11. The petitioner filed an application for clarification of the order dated February 14, 2022. The Tribunal vide order dated February 18, 2022 stated that the Special Officer would oversee the re-assembly and testing of the HWM System, during which time the representatives of the petitioner would be present at the site as per Clause 7.5 of the Agreement. 12. The Tribunal, upon oral representation of the parties, vide order dated March 7, 2022 modified orders dated December 22, 2021 and February 14, 2022. Instead of depositing the entire residual amount in the escrow account, the Tribunal directed the respondent to open an interest bearing fixed deposit account comprising 50% of the basic contract value plus 100% of taxes and duties payable on the HWM System in favour of the petitioner's advocate, Mr. Nand Gopal Khaitan. The Tribunal re-iterated that the entire amount will be paid only after satisfactory performance of the HWM System for a continuous period of 96 hours, as per the Agreement. The Tribunal further state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation v. Shree Ganesh Petroleum (2022 [4] SCC 463) for the said proposition. b. The respondents have not displayed circumstances which suggest that the petitioner will not be able to meet its alleged liability that may arise. c. The Impugned Order was passed on the basis of allegations made in the application of the respondent dated July 13, 2022, which was never moved or heard. The said application was not even recorded in the minutes of the hearing of the same date. d. The Impugned Order has been passed without giving the petitioners a chance of dispelling the allegations made in the application dated July 13, 2022 filed by the respondent. This is in gross violation of the fundamental principle of fair play and/or natural justice. e. Adequate reasons have not been given for placing the additional requirement of securing the said amount by way of furnishing a bank guarantee, as the Agreement required such payment without any security, but merely on despatch of the HWM System. f. Such a requirement could not be placed considering that the respondents had not complied with their contractual obligation of making the reassembly and mining site ready. g. Grave injust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed by me to resolve the dispute between the parties: A. Whether the Tribunal has acted dehors the Agreement while passing the Impugned Order? B. Whether the Impugned Order deserves to be set aside? Analysis of Submissions 20. Preliminarily, the scope of interference with orders of the Tribunal under Section 37 of the Act, even if passed under Section 17, is very limited. The Delhi High Court in Sanjay Arora v. Rajan Chadha and Ors. [2021 SCC OnLine Del 4619] has noted that: "19. This Court has already opined, in Dinesh Gupta v. Anand Gupta and Augmont Gold Pvt. Ltd. v. One 97 Communication Ltd. that the considerations guiding exercise of appellate jurisdiction under Section 37(2)(b) are, fundamentally, not really different from those which govern exercise of jurisdiction under Section 34 of the 1996 Act. 20. It is only, therefore, where the order suffers from patent illegality or perversity that the court would interfere with the order of the learned Arbitral Tribunal, under Section 37(2)(b). This is because, unlike appeals under other statutes or under the CPC, appeals against orders of arbitral tribunal are subject to the overarching limitations contained in Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant has approached the court with reasonable expedition." 22. Mr. S.N. Mitra, learned senior advocate, argued during the hearing that the Impugned Order is intended to secure the amount in dispute in the arbitration, therefore the rigours of Order XXXVIII Rule 5 are attracted, but have not been strictly satisfied. Nothing has been proved to indicate that the petitioner would not be able to meet its alleged liability, if any arises in the future owing to non-functionality of the HWM System. However, such submissions are misguided. Asa corollary to the Apex Court's judgment discussed in the above paragraph, the arbitrators/arbitral tribunals, while exercising their power under Section 17 do not have to strictly confine their arms to the technicalities of CPC. The arbitral tribunal has to be guided by the basic principles followed while granting interim relief. 23. In Army Welfare (supra), the arbitrator had passed an interim order without a claim and a counter-claim filed before itself. The said interim order, after giving possession and right to construct on the said property to one of the parties, effectively rendered the arbitration proceedings infructuous. The order also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ractual obligations (pre-despatch testing, organization of dispatch, post arrival re-assembling and testing, etc.). The Tribunal also directed the Respondent to deposit the entire amount into an escrow A/C held in the joint names of advocates of both sides. This was to be paid to Supplier after post-despatch performance testing for 96 hours. Even these modalities were not followed in terms of their respective timelines, but a certain portion of the transaction is complete (despatch is complete). 27. The order dated December 22, 2021 was modified vide order dated March 7, 2022 wherein instead of depositing the entire residual amount in the escrow account, the Tribunal directed the respondent to open an interest bearing fixed deposit account comprising 50% of the basic contract value plus 100% of taxes and duties payable on the HWM System in favour of the petitioner's advocate, Mr. Nand Gopal Khaitan. The Tribunal re-iterated that the entire amount will be paid only after satisfactory performance of the HWM System for a continuous period of 96 hours, as per the Agreement. Both these orders were accepted by both parties and though not in strict conformity with the agreement, were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cost of repetition, the aspect of delay has not been decided by the Tribunal. On a prima facie view, it is not possible to ascertain blame. Neither has the tribunal done so yet. It has merely prodded the parties to proceed with the Agreement. Delays seem to be attributable to both. The quality of the HWM System is uncertain. Given the facts and circumstances, while in the respondent's application dated July 13, 2022, there was no prayer for furnishing of bank guarantee, the Tribunal has directed for the same in order to balance the convenience and to protect against the future award becoming a mere paper award. The exercise of power seems to be adept and reasonable. Such exercise has not gone against the agreement, but facilitated it. Furthermore, earlier facilitations which were not in strict compliance with the agreement were accepted by the parties (orders dated December 22, 2022 and March 7, 2022) as it imposed obligations upon the respondent. Simply because the Impugned Order imposes a similar facilitating requirement upon the petitioner (furnishing of a bank guarantee), the petitioner's objections seem hypocritical. 32. The petitioner has contended that the applica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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