Karnataka High Court
Tecpro Systems Ltd vs M/S Mangalore Refinery And ... on 30 August, 2023
Author: B M Shyam Prasad
Bench: B M Shyam Prasad
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NC: 2023:KHC:30931
CMP No. 669 of 2022
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 30TH DAY OF AUGUST, 2023
BEFORE
THE HON'BLE MR JUSTICE B M SHYAM PRASAD
CIVIL MISC. PETITION NO. 669 OF 2022
BETWEEN:
TECPRO SYSTEMS LTD.,
THROUGH ITS OFFICIAL LIQUIDATOR
REGISTERED OFFICE AT
TECPRO TOWERS, 11-A-17,
5TH CROSS ROAD
SIPCO IT PARK
SIRUSERI-603103
CHENNAI
...PETITIONER
(BY SRI. C.VINAY SWAMY, ADVOCATE)
AND:
M/S MANGALORE REFINERY AND
PETROCHEMICALS LIMITED
Digitally REGIONAL OFFICE AT
signed by MANGALORE REFINERY AND
NARASIMHA
MURTHY PETROCHEMICALS LTD
VANAMALA KUTHETHOOR POST
Location:
HIGH VIA KATIPALLA
COURT OF MANGALORE-575030
KARNATAKA
KARNATAKA
[email protected]
ALSO AT MANGALORE REFINERY AND
PETROCHEMICALS LTD PLOT A1
OPP KSSIDC A O BUILDING
INDUSTRIAL ESTATE
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NC: 2023:KHC:30931
CMP No. 669 of 2022
RAJAJINAGAR
BANGALORE-560010
KARNATAKA
...RESPONDENT
(BY SRI. M.S.RAJENDRA, ADVOCATE)
THIS CIVIL MISC. PETITION IS FILED UNDER
SEC.11(5) OF THE ARBITRATION AND CONCILIATION
ACT 1996, PRAYING TO EXECUTE ITS JURISDICTION
AND POWER UNDER SECTION 11(5) OF THE
ARBITRATION AND CONCILIATION ACT, 1996 AND TO
APPOINT AN ARBITRAL TRIBUNAL AS PER LETTER OF
ACCEPTANCE DATED 29.04.2010 AS PER ANNEXURE C
(COLLY) AND IN TERMS OF CLAUSE 9.0.2.0 OF THE
GCC DATED 19.11.2009 AS PER ANNEXURE-B TO
ADJUDICATE UPON THE DISPUTES, WHICH HAVE
ARISEN BETWEEN THE PETITIONER AND
RESPONDENT.
THIS PETITION, COMING ON FOR ADMISSION,
THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
This petition is filed for constitution of an arbitral Tribunal in terms of Clause 9.0.2.0 in "the General Conditions of Contract" [GCC] dated 19.11.2009 [Annexure-B']. The petitioner contends that the respondent has issued a "Detailed Letter of Acceptance" dated 26.08.2010 consequent to issuance of the "Letter of Acceptance" dated 29.04.2010 [Annexure-C] entrusting certain contract work with definite milestones for completion, and the -3- NC: 2023:KHC:30931 CMP No. 669 of 2022 respondent has en-cashed bank guarantee contrary to the terms and as such, the respondent is liable to pay in excess of Rs.180 Crores.
2. It is seen that the petitioner has caused legal notice in the year 2017 for constitution of an arbitral Tribunal, but with the initiation of proceedings under the Insolvency and Bankruptcy Code, 2016 [for short, 'the IBC, 2016 '], the same is not continued. The proceedings under the IBC, 2016 has culminated with the order dated 16.01.2020 appointing the Official Liquidator, who has commenced these proceedings on behalf of the petitioner. The issuance of the Detailed Letter of Acceptance, the Letter of Acceptance and the exchange of notices in the year 2017, the appointment of the Official Liquidator, and even the exchange of notices in the year 2021 are not disputed.
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NC: 2023:KHC:30931 CMP No. 669 of 2022
3. This Court must also observe that though the petitioner had not obtained prior approval as contemplated under proviso to Section 33(5) of the IBC, 2016 as of the date of the petition, such approval is accorded on 23.12.2022. The respondent's objection to the constitution of arbitral Tribunal is in the light of this fact.
4. Sri. M.S.Rajendra, the learned counsel for the respondent, submits that even for commencement of arbitral proceedings as contemplated under Section 21 of the Arbitration and Conciliation Act 1996, 'prior approval' as contemplated in terms of the above provision would be necessary, and because it cannot be disputed that the petitioner has not obtained such 'prior approval' as of the date of the commencement of the arbitral proceedings, the petition must fail.
5. In fact, Sri. M.S.Rajendra proposes to rely upon a decision of the Hon'ble Supreme Court in -5- NC: 2023:KHC:30931 CMP No. 669 of 2022 Union of India and Others Vs. Vinod Kumar and Others1, which is rendered in the context of the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 to contend that 'ex post facto approval' cannot substitute for 'prior approval' when the statue mandates the same, and he further canvases that the entire proceedings would stand vitiated.
6. The respondent's objection is considered, and this Court is of the considered view that the respondent's objections based on the provisions of Section 33(5) of the IBC, 2016 would touch upon the final outcome of the dispute and cannot impede the constitution of arbitral Tribunal. If the respondent can demonstrate that the 'ex post facto approval' granted by the adjudicating authority on 23.12.2022 cannot inure to the petitioner's advantage, it may succeed in defeating the petitioner's claim. Therefore, 1 (1996) 10 Supreme Court Cases 78 -6- NC: 2023:KHC:30931 CMP No. 669 of 2022 this Court is of the considered view that the arbitral Tribunal must be constituted leaving open all questions, including the respondent's defense based on the provisions of Section 33(5) of the IBC, 2016 to be decided in the arbitral proceedings.
7. The petitioner's claim is in excess of Rs.1,00,00,000/-, and it is undisputed that where the claim exceeds Rs.1,00,00,000/-, the resolution of the dispute must be by arbitral Tribunal comprising of three [3] Arbitrators with both the petitioner and the respondent appointing their respective nominee Arbitrators and those arbitrators appointing the third Arbitrator. However, when queried the learned counsels for the parties, after some discussion and instructions from their respective parties, submit that a former Judge of this Court could be appointed as the sole Arbitrator and in fact, they submit that Hon'ble Mr. Justice P. Krishna Bhat, a former Judge of this Court could be appointed as the sole -7- NC: 2023:KHC:30931 CMP No. 669 of 2022 Arbitrator leaving all contentions open for adjudication in such proceedings. Hence, the following:
ORDER [a] The petition is allowed. [b] Hon'ble Mr. Justice P. Krishna Bhat, a former Judge of the High Court of Karnataka is appointed as the sole Arbitrator to enter reference of the dispute between the petitioner and the respondent and conduct the proceeding at the Arbitration and Conciliation Centre (Domestic and International), Bengaluru according to the Rules governing the Centre. [c] The Registry is directed to communicate this order [by E-mail] to the Arbitration and Conciliation Centre (Domestic and International), Bengaluru and also to -8- NC: 2023:KHC:30931 CMP No. 669 of 2022 Hon'ble Mr. Justice P. Krishna Bhat, a former Judge of the High Court of Karnataka, Address: "Vasishta", No.41, Near Ganesh Emerald, Judicial Layout 3rd Phase, Hejjala, Bidadi, Bengaluru-562 109 [[email protected]] as required under the Appointment of Arbitrators by the Chief Justice of Karnataka High Court Scheme, 1996.
Sd/-
JUDGE RB