Bombay High Court
Ritz Fashions And 3 Others vs Bhagyashri Textiles Pvt. Ltd on 11 March, 2020
Author: G. S. Kulkarni
Bench: G. S. Kulkarni
Vina khadpe/Nikita Gadgil 1 sr.14.arbp.803.2017.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO.803 OF 2017
M/s. Ritz Fashions & ors. ...Petitioners
Versus
M/s. Bjagyashri Textiles Pvt. Ltd. ...Respondent
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Mrs. Punita Arora a/w. Mr.Puneet Arora, Ms. Avadhi Jain i/b. Arora &
Co. for the petitioners.
None for the respondent.
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CORAM : G. S. KULKARNI, J.
DATE : 11th March 2020. P.C. :
. Heard learned counsel for the petitioners. Although a reply is filed, none appeared for the respondents.
2. The challenge in this petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, is to an Arbitral award dated 5th October 2015, of an arbitral tribunal constituted by the Hindustan Chamber of Commerce.
3. In paragraph 32 of the petition, the petitioners in regard to the delivery of the award by the arbitral tribunal has made the following statements:-
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Vina khadpe/Nikita Gadgil 2 sr.14.arbp.803.2017.doc "32. The petitioners state that the Petitioners have not been served with a certified copy of the impugned award dated 5 th October 2015 till date, however, the Petitioners have received the certified copy of the Execution Application No.1751 of 2016 on 29th September 2017, and a copy of the impugned award is annexed thereto. Therefore, the present Petition is being filed in time within the statutory period of 3 months as per Section 34(3) of the Arbitration and Conciliation Act, 1996."
4. Learned counsel for the petitioners submits thus that till date the award is not delivered/served on the petitioners. It is only when the respondents filed an execution application, the petitioners received knowledge of the Award.
5. Learned counsel for the petitioners has drawn my attention to the affidavit-in-reply filed by the respondent at Paragraph 32. The contents in paragraph 41 at page 73 read thus :
"41. With reference to para 21 to para 34 of the petition, I say that the same are repetitions of what is stated herein above and therefore they are not replied again as the same will be repetition of what is stated herein above.
6. Referring to the above reply of the respondents, learned counsel for the petitioner would contend that the respondents have not denied the petitioner's specific contention of non delivery of the award in a manner known to law.
7. The next contention of the learned counsel for the petitioner is that ::: Uploaded on - 16/03/2020 ::: Downloaded on - 08/06/2020 17:55:19 ::: Vina khadpe/Nikita Gadgil 3 sr.14.arbp.803.2017.doc there is no arbitration agreement between the parties. She submits that it is clear from the award that the arbitration is invoked on the basis of an alleged agreement as contained in the invoices. She submits that under the original contract (purchase order), there is no arbitration agreement between the parties. She would contend that the arbitration clause contained in the invoice can never be construed as the arbitration agreement between the parties as it is an unilateral act on part of one of the contracting party. Her contention is that an arbitration agreement in terms of Section 7 of the Act is what is necessary for an agreement to be construed as a valid Arbitration agreement between the parties. In support to these contentions, learned counsel for the petitioner has relied on the decision of the learned Single Judge of Madras High Court in NSK India Sales Company Private Ltd Vs. Proactive Universal Trading Company Private Ltd.
8. Having heard the learned counsel for the petitioner, prima facie it appears to be not in dispute that the knowledge of the award is received by the petitioner only when the execution proceedings as adopted by the respondents were served on the petitioner. The arbitral award is required to be served in a manner as provided under ::: Uploaded on - 16/03/2020 ::: Downloaded on - 08/06/2020 17:55:19 ::: Vina khadpe/Nikita Gadgil 4 sr.14.arbp.803.2017.doc Section 31 (5) of the Act which provides that after the arbitral award is made, its signed copy shall be delivered to each party. This court had an opportunity to deal with the similar situation in the case of Sachin Dilipkumar Nahar and Ors Vs. Shantilal Nemichand Nahar and Ors (Arbitration Appeal no. 24 of 2018 decided on 16 October 2019), wherein considering the position in law it was held that mere knowledge of the award on receiving copy of the same in the execution proceeding is not sufficient, as Section 31 (5) provides that an award be delivered to parties to arbitration. Following are the observations as made by the court;
"7....(a)There cannot be any quarrel on the propositions these decisions lay down. The question however would be as to whether there was delivery of the award on the appellants after the arbitral award was made, and in a manner known and recognized Section 31 of the Act. Section 31(1), (4) and (5) read thus:-
"31. Form and contents of arbitral award.-- (1) An arbitral award shall be made in writing and shall be signed by the members of the arbitral tribunal. (4) The arbitral award shall state its date and the place of arbitration as determined in accordance with section 20 and the award shall be deemed to have been made at that place. (5) After the arbitral award is made, a signed copy shall be delivered to each party."
8. It is not the case of the respondents that as per the said provisions the award was delivered/served on the appellants. The respondents also have not placed any material that the original award on record to indicate that the award was actually delivered immediately and in a manner known to Sub-Section (5) of Section 31 of the Act. In my opinion, this vital aspect which would go to the root of the matter, was clearly overlooked by the learned ::: Uploaded on - 16/03/2020 ::: Downloaded on - 08/06/2020 17:55:19 ::: Vina khadpe/Nikita Gadgil 5 sr.14.arbp.803.2017.doc Principal District Judge in passing the impugned order. Knowledge of the party to an arbitral award is required to be attributed only after delivery of the award as per the clear provisions of Section 31.
9. In the present case, the appellants became aware about the award from the execution proceedings. Merely the appellants becoming aware of the award on receiving a copy of the same in the execution proceedings, is not sufficient to recognize the award being delivered to a party to arbitration as provided under Sub-Section (5) of Section 31 of the Act.
10. The Supreme Court in State of Maharashtra & Ors. Vs. ARK Builders (P.) Ltd. (supra), in recognizing this statutory position, and referring to an earlier decision in Union of India Vs. Tecco Trichy Engineers & Contractors , (2005) 4 SCC 239 has held thus:-
"12. We are supported in our view by the decision of this Court in Union of India v. Tecco Trichy Engineers & Contractors, (2005) 4 SCC 239; in paragraph 8 of the decision it was held and observed as follows:
"8. The delivery of an arbitral award under sub-section (5) of Section 31 is not a matter of mere formality. It is a matter of substance. It is only after the stage under Section 31 has passed that the stage of termination of arbitral proceedings within the meaning of Section 32 of the Act arises. The delivery of arbitral award to the party, to be effective, has to be "received" by the party.
This delivery by the Arbitral Tribunal and receipt by the party of the award sets in motion several periods of limitation such as an application for correction and interpretation of an award within 30 days under Section 33(1), an application for making an additional award under Section 33(4) and an application for setting aside an award under Section 34(3) and so on. As this delivery of the copy of award has the effect of conferring certain rights on the party as also bringing to an end the right to exercise those rights on expiry of the prescribed period of limitation which would be calculated from that date, the delivery of the copy of award by the Tribunal and the receipt thereof by each ::: Uploaded on - 16/03/2020 ::: Downloaded on - 08/06/2020 17:55:19 ::: Vina khadpe/Nikita Gadgil 6 sr.14.arbp.803.2017.doc party constitutes an important stage in the arbitral proceedings."
(emphasis added )"
9. In regard to the petitioner's contention that there is no arbitration agreement between the parties, also prima facie appears to have substance. I have perused the invoice and the invoice contains an arbitration agreement. Perusal of the award also shows that invocation of the arbitration and the consequent adjudication is in the context of the arbitration agreement as set out in the invoice. In the event there is no arbitration agreement in the principal contract, then surely the respondents cannot invoke arbitration clause in the invoice, which is certainly a unilateral act on the part of the respondents, being foisted on the petitioners. Such action on the part of the respondents prima facie would not stand the test of a valid arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996.
12. These are the issues which have arisen for the consideration before the Court in the present petition. Hence, admit.
13. Put up for final hearing on 27 March 2020 (FOB).
14. In the meantime, ad-interim relief granted by this Court in order dated 2 November 2017 shall continue to remain in operation till the final disposal of this petition.
[G. S. KULKARNI, J.] ::: Uploaded on - 16/03/2020 ::: Downloaded on - 08/06/2020 17:55:19 :::