Karnataka High Court
Dodballapur Integrated Textile Park ... vs Mrs Premalatha G Jain on 16 March, 2023
Author: M. Nagaprasanna
Bench: M. Nagaprasanna
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 16TH DAY OF MARCH, 2023
R
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
WRIT PETITION No.12783 OF 2020 (GM - RES)
C/W
WRIT PETITION No.12809 OF 2020 (GM - RES)
IN WRIT PETITION No.12783 OF 2020
BETWEEN:
DODBALLAPUR INTEGRATED
TEXTILE PARK LIMITED
SW 51, PHASE II, KIADB,
DODBALLAPUR APPARELS PARK,
DODBALLAPUR - 561 203
REPRESENTED BY ITS
AUTHORISED SIGNATORY,
MR.SUNIL S. PATIL.
... PETITIONER
(BY SRI S.VIVEKANANDA, ADVOCATE)
AND:
1. MR.VINOD G. JAIN
S/O MR.M.GOUTHAM CHAND,
AGED ABOUT 41 YEARS,
RESIDING AT NO.80, BHS ROAD,
RANGARAO ROAD, SHANKARAPURAM,
BENGALURU - 560 004.
2
2. MR.N.N.DHARWADKAR
HON'BLE SOLE ARBITRATOR,
IN AC 53/2020
ARBITRATION AND
CONCILIATION CENTRE,
KHANIJA BHAVAN,
RACE COURSE ROAD,
BENGLAURU - 560 001.
... RESPONDENTS
(BY SRI RAGHURAM CADAMBI A/W
SRI SHYAM HARINDRA, ADVOCATES FOR R1)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA PRAYING TO SET ASIDE AND
QUASH THE ORDER DTD.7.10.2020 AT ANEXURE-A IN AC
NO.53/2020 PASSED BY THE HONBLE SOLE ARBITRATOR R-2;
HOLD THAT THE HON'BLE SOLE ARBITRATOR R-2 HEREIN LACKS
JURISDICTION TILL THE SUB LEASE AGREEMENT DTD.10.11.2016
AT ANNEXURE-G VALIDLY EXISTS IN THE EYES OF LAW BY
PAYMENT OF APPROPRIATE STAMP DUTY.
IN WRIT PETITION No.12809 OF 2020
BETWEEN:
DODBALLAPUR INTEGRATED
TEXTILE PARK LIMITED
SW 51, PHASE II, KIADB,
DODBALLAPUR APPARELS PARK
DODBALLAPURA - 561 203
REPRESENTED BY ITS
AUTHORISED SIGNATORY
MR.SUNIL S. PATIL.
... PETITIONER
(BY SRI S.VIVEKANANDA, ADVOCATE)
3
AND:
1. MRS.PREMALATHA G.JAIN
WIFE OF MR.M.GOUTHAM CHAND
AGED ABOUT 59 YEARS,
RESIDING AT NO.80, BHS ROAD,
RANGARAO ROAD, SHANKARAPURAM
BENGALURU - 560 004.
2. MR.N.N.DHARWADKAR
HON'BLE SOLE ARBITRATOR
IN AC 54/2020
ARBITRATION AND
CONCILIATION CENTRE
KHANIJA BHAVAN,
RACECOURSE ROAD
BENGALURU - 560 001.
... RESPONDENTS
(BY SRI RAGHURAM CADAMBI, ADVOCATE A/W
SRI SHYAM HARINDRA, ADVOCATES FOR R1)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
IMPUGNED ORDER DTD 07.10.2020 VIDE ANNX-A IN AC
NO.54/2020 PASSED BY THE HONBLE SOLE ARBITRATOR, R-2;
HOLD THAT THE HONBLE SOLE ARBITRATOR R-2 HEREIN LACKS
JURISDICTION TILL THE SUB-LEASE AGREEMENT DTD 10.11.2016
VIDE ANNX-G VALIDLY EXISTS IN THE EYES OF LAW BY PAYMENT
OF APPROPRIATE STAMP DUTY.
THESE WRIT PETITIONS HAVING BEEN HEARD AND
RESERVED FOR ORDERS, COMING ON FOR PRONOUNCEMENT THIS
DAY, THE COURT MADE THE FOLLOWING:-
4
ORDER
Both these petitions are preferred by Doddaballapur Integrated Textile Park Limited. The petitions arise out of claims registered before the Arbitrator in two proceedings against the petitioner - one in Arbitration Case No.53 of 2020 which forms the issue in Writ Petition No.12783 of 2020 and the other in Arbitration Case No.54 of 2020 which forms the issue in Writ Petition No.12809 of 2020. The petitioner who is the respondent before the Arbitrator is common in both these cases and claimants are different. Since the issue in both these cases is common, they are taken up together and considered in this order.
2. Brief facts that lead the petitioner to this Court in the subject petitions, as borne out from the pleadings, are as follows:-
The petitioner and the respondents in both these cases who are claimants in the arbitration proceedings generate a dispute between them and did not arrive at a consensus for appointment of an Arbitrator. It is then the claimants approached this Court in C.M.P. No.376 of 2018 and 375 of 2018 respectively, seeking 5 appointment of an Arbitrator. This Court in terms of its order dated 12-12-2019 and 09-01-2020 allows the petition and appoints a sole Arbitrator. The issue does not concern merits of the claim of the claimants or the dissent of the petitioner. In the proceedings before the Arbitrator, applications were filed by the petitioner invoking Section 16 of the Arbitration and Conciliation Act, 1996 ('the Act' for short) read with Sections, 33, 34 and 37 of the Karnataka Stamp Act, 1957 and Section 49 of the Registration Act, 1908.
Applications were filed seeking summoning of a sub-lease agreement dated 10-11-2016 from the possession of claimants which was not relied on by the claimants. The applications came to be rejected by order dated 07-10-2020 and it is this rejection of applications filed by the petitioner that drives the petitioner to this Court in the subject petitions.
3. Heard Sri S.Vivekananda, learned counsel appearing for the petitioner and Sri Raghuram Cadambi, learned counsel appearing for respondent No.1 in both the petitions.
4. The learned counsel appearing for the petitioner would contend that summoning of sub-lease agreement was imperative as 6 the Arbitrator would get jurisdiction only if the said agreement is summoned and if it is inadequately stamped it should be impounded by the Arbitrator, failing which the Arbitrator cannot adjudicate upon the dispute at all. It is therefore, the contention is that the said document was imperative to be summoned and the rejection of the applications is contrary to law.
5. On the other hand, the learned counsel representing the claimants would vehemently refute the submissions of the petitioner to contend that the document is not the one which would be required to arbitrate, as the claimants are not required to prove the claim through the said document. He further contends that a writ petition challenging an interlocutory order passed by the Arbitrator is not maintainable before this Court in the light of judgments of the Apex Court rendered from time to time. He would, therefore, contend that there is a threshold bar qua maintainability of the petition before this Court.
76. I have given my anxious consideration to the submissions made by the respective learned counsel and have perused the material on record.
7. The afore-narrated facts are not in dispute. It is also not in dispute that applications filed under Section 16 of the Act were rejected by the Arbitrator. Therefore, the order becomes interlocutory order during the pendency of proceedings before the Arbitrator. In these circumstances, whether the writ petitions against interlocutory orders would be maintainable or otherwise requires to be gone into, at the outset, as the issue of maintainability would always cut at the root of the matter.
Therefore, the issues that arise for consideration are two fold -
(i) whether writ petitions challenging an interlocutory order of rejection of applications by the Arbitrator in an arbitration proceeding would be maintainable before this Court? and
(ii) if it is maintainable, whether the rejection of applications is tenable in law?
8. The petitioner is constituted for a special purpose pursuant to allotment of 48 acres of land in Doddaballapur. Subsidies were 8 provided by Government of India and Government of Karnataka for establishment of Integrated Textile Park at the Apparel Park Industrial Area, Doddaballapur. The claimants and the petitioner enter into a sub-lease agreement on 10-11-2016 and possession was handed over to the claimants. Though the claimants were not able to pay infrastructure and development charges, they were called upon to pay `18 lakhs towards such development charges which was paid by the claimants, which the claimants, claim to be under compulsion. It is in this way certain disputes generate between the two. It is later a lease and licence agreement is entered into between the petitioner and the claimants on 10-11-2016.
9. Dispute arose between the two and in terms of Clause 9 of the agreement which dealt with resolution of disputes by way of arbitration was sought to be invoked by the claimants. There was no consensus arrived at with regard to appointment of an Arbitrator. The claimants were driven to this Court in C.M.P.Nos.
376 and 375 of 2018. A co-ordinate Bench of this Court allows applications and directs appointment of a sole Arbitrator. It is then 9 Arbitration Case Nos. 53 of 2020 and 54 of 2020 were instituted. In those proceedings, the petitioner file applications invoking Section 16 of the Act for summoning of sub-lease agreement dated 10-11-2016 to determine whether it was an unregistered agreement or an agreement that was improperly stamped. Decision on that only would give jurisdiction for the Arbitrator to arbitrate upon the dispute. The Arbitrator in terms of his order dated 07-10-2020 rejects both the applications filed by the petitioner seeking summoning of the aforesaid sub-lease agreement.
10. The Arbitrator holds that the petitioner has not brought out any good ground to summon the document which is alleged to be in possession of the claimants and which is not relied on by the claimants. Therefore, this forms an interlocutory order on an interlocutory application. Whether writ petitions would become maintainable on the said interlocutory order is what requires consideration at the hands of this Court. The issue as to whether the parties to the arbitration should await the final decision of the Arbitrator and then call in question the said proceedings under Section 34 of the Act and writ petition on an interlocutory order 10 would not be maintainable is no longer res integra. The issue was brought up before seven Judge Bench of the Apex Court in the case of SBP & CO v. PATEL ENGINEERING LIMITED AND ANOTHER1. In the said case the Apex Court has held as follows:
"7. Section 12 sets out the grounds of challenge to the person appointed as arbitrator and the duty of an arbitrator appointed, to disclose any disqualification he may have. Sub- section (3) of Section 12 gives a right to the parties to challenge an arbitrator. Section 13 lays down the procedure for such a challenge. Section 14 takes care of the failure of or impossibility for an arbitrator to act and Section 15 deals with the termination of the mandate of the arbitrator and the substitution of another arbitrator. Chapter IV deals with the jurisdiction of Arbitral Tribunals. Section 16 deals with the competence of an Arbitral Tribunal, to rule on its jurisdiction. The Arbitral Tribunal may rule on its own jurisdiction, including ruling on any objection with respect to the existence or validity of the arbitration agreement. A person aggrieved by the rejection of his objection by the Tribunal on its jurisdiction or the other matters referred to in that section, has to wait until the award is made to challenge that decision in an appeal against the arbitral award itself in accordance with Section 34 of the Act. But an acceptance of the objection to jurisdiction or authority, could be challenged then and there, under Section 37 of the Act. Section 17 confers powers on the Arbitral Tribunal to make interim orders. Chapter V comprising Sections 18 to 27 deals with the conduct of arbitral proceedings. Chapter VI containing Sections 28 to 33 deals with making of the arbitral award and termination of the proceedings. Chapter VII deals with recourse against an arbitral award. Section 34 contemplates the filing of an application for setting aside an arbitral award by making an application to the Court as defined in Section 2(e) of the Act. Chapter VIII deals with finality and enforcement of arbitral awards. Section 35 makes the award final and Section 36 provides for its enforcement under the Code of Civil Procedure, 1908 in the same manner as if it were a decree of court.1
(2005) 8 SCC 618 11 Chapter IX deals with appeals and Section 37 enumerates the orders that are open to appeal. We have already referred to the right of appeal available under Section 37(2) of the Act, on the Tribunal accepting a plea that it does not have jurisdiction or when the Arbitral Tribunal accepts a plea that it is exceeding the scope of its authority. No second appeal is contemplated, but the right to approach the Supreme Court is saved. Chapter X deals with miscellaneous matters. Section 43 makes the Limitation Act, 1963 applicable to proceedings under the Act as it applies to proceedings in the Court.
... ... ...
45. It is seen that some High Courts have proceeded on the basis that any order passed by an Arbitral Tribunal during arbitration, would be capable of being challenged under Article 226 or 227 of the Constitution. We see no warrant for such an approach.
Section 37 makes certain orders of the Arbitral Tribunal appealable. Under Section 34, the aggrieved party has an avenue for ventilating its grievances against the award including any in-between orders that might have been passed by the Arbitral Tribunal acting under Section 16 of the Act. The party aggrieved by any order of the Arbitral Tribunal, unless has a right of appeal under Section 37 of the Act, has to wait until the award is passed by the Tribunal. This appears to be the scheme of the Act. The Arbitral Tribunal is, after all, a creature of a contract between the parties, the arbitration agreement, even though, if the occasion arises, the Chief Justice may constitute it based on the contract between the parties. But that would not alter the status of the Arbitral Tribunal. It will still be a forum chosen by the parties by agreement. We, therefore, disapprove of the stand adopted by some of the High Courts that any order passed by the Arbitral Tribunal is capable of being corrected by the High Court under Article 226 or 227 of the Constitution. Such an intervention by the High Courts is not permissible.
46. The object of minimising 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 12 Constitution against every order made by the Arbitral Tribunal. Therefore, it is necessary to indicate 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.
47. We, therefore, sum up our conclusions as follows:
(i) The power exercised by the Chief Justice of the High Court or the Chief Justice of India under Section 11(6) of the Act is not an administrative power. It is a judicial power.
(ii) The power under Section 11(6) of the Act, in its entirety, could be delegated, by the Chief Justice of the High Court only to another Judge of that Court and by the Chief Justice of India to another Judge of the Supreme Court.
(iii) In case of designation of a Judge of the High Court or of the Supreme Court, the power that is exercised by the designated Judge would be that of the Chief Justice as conferred by the statute.
(iv) The Chief Justice or the designated Judge will have the right to decide the preliminary aspects as indicated in the earlier part of this judgment. These will be his own jurisdiction to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators. The Chief Justice or the designated Judge would be entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified in terms of Section 11(8) of the Act if the need arises but the order appointing the arbitrator could only be that of the Chief Justice or the designated Judge.
(v) Designation of a District Judge as the authority under Section 11(6) of the Act by the Chief Justice of the High Court is not warranted on the scheme of the Act.13
(vi) Once the matter reaches the Arbitral Tribunal or the sole arbitrator, the High Court would not interfere with the orders passed by the arbitrator or the Arbitral Tribunal during the course of the arbitration proceedings and the parties could approach the Court only in terms of Section 37 of the Act or in terms of Section 34 of the Act.
(vii) Since an order passed by the Chief Justice of the High Court or by the designated Judge of that Court is a judicial order, an appeal will lie against that order only under Article 136 of the Constitution to the Supreme Court.
(viii) There can be no appeal against an order of the Chief Justice of India or a Judge of the Supreme Court designated by him while entertaining an application under Section 11(6) of the Act.
(ix) In a case where an Arbitral Tribunal has been constituted by the parties without having recourse to Section 11(6) of the Act, the Arbitral Tribunal will have the jurisdiction to decide all matters as contemplated by Section 16 of the Act.
(x) [Ed.: Paras 47(x) & (xii) corrected vide Official Corrigendum No. F.3/Ed.B.J./103/2005 dated 9-11-
2005.] Since all were guided by the decision of this Court in Konkan Rly. Corpn. Ltd. v. Rani Construction (P) Ltd. [(2002) 2 SCC 388] and orders under Section 11(6) of the Act have been made based on the position adopted in that decision, we clarify that appointments of arbitrators or Arbitral Tribunals thus far made, are to be treated as valid, all objections being left to be decided under Section 16 of the Act. As and from this date, the position as adopted in this judgment will govern even pending applications under Section 11(6) of the Act.
(xi) Where District Judges had been designated by the Chief Justice of the High Court under Section 11(6) of the Act, the appointment orders thus far made by them will be treated as valid; but applications if any pending before them as on this date will stand transferred, to be dealt with by the Chief Justice of the High Court 14 concerned or a Judge of that Court designated by the Chief Justice.
(xii) [Ed.: Paras 47(x) & (xii) corrected vide Official Corrigendum No. F.3/Ed.B.J./103/2005 dated 9-11- 2005.] The decision in Konkan Rly. Corpn. Ltd. v. Rani Construction (P) Ltd. [(2002) 2 SCC 388] is overruled."
(Emphasis Supplied) Later, the Apex Court in the case of DEEP INDUSTRIES LIMITED v. OIL AND NATURAL GAS CORPORATION LIMITED AND ANOTHER2 following the judgment in the case of SBP (supra) has held as follows:
"19. In SBP & Co. [SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] , this Court while considering interference with an order passed by an Arbitral Tribunal under Articles 226/227 of the Constitution laid down as follows: (SCC p. 663, paras 45-46) "45. It is seen that some High Courts have proceeded on the basis that any order passed by an Arbitral Tribunal during arbitration, would be capable of being challenged under Article 226 or 227 of the Constitution. We see no warrant for such an approach. Section 37 makes certain orders of the Arbitral Tribunal appealable. Under Section 34, the aggrieved party has an avenue for ventilating its grievances against the award including any in- between orders that might have been passed by the Arbitral Tribunal acting under Section 16 of the Act. The party aggrieved by any order of the Arbitral Tribunal, unless has a right of appeal under Section 37 of the Act, has to wait until the award is passed by the Tribunal. This appears to be the scheme of 2 (2020) 15 SCC 706 15 the Act. The Arbitral Tribunal is, after all, a creature of a contract between the parties, the arbitration agreement, even though, if the occasion arises, the Chief Justice may constitute it based on the contract between the parties. But that would not alter the status of the Arbitral Tribunal. It will still be a forum chosen by the parties by agreement. We, therefore, disapprove of the stand adopted by some of the High Courts that any order passed by the Arbitral Tribunal is capable of being corrected by the High Court under Article 226 or 227 of the Constitution. Such an intervention by the High Courts is not permissible.
46. The object of minimising 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. Therefore, it is necessary to indicate 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."
... ... ...
21. It is true that in Punjab Agro Industries Corpn. Ltd. [Punjab Agro Industries Corpn. Ltd. v. Kewal Singh Dhillon, (2008) 10 SCC 128], this Court distinguished SBP & Co. [SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] stating that it will not apply to a case of a non-appointment of an arbitrator. This Court held: (Punjab Agro Industries Corpn. Ltd. case [Punjab Agro Industries Corpn. Ltd. v. Kewal Singh Dhillon, (2008) 10 SCC 128], SCC p. 132, para 9) "9. We have already noticed that though the order under Section 11(4) is a judicial order, having regard to Section 11(7) relating to finality of such orders and the absence of any provision for appeal, the order of the Civil Judge was open to challenge in a writ petition under Article 227 of the Constitution. The decision in SBP & Co. [SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] does not bar such a writ petition. The observations of this 16 Court in SBP & Co. [SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] that against an order under Section 11 of the Act, only an appeal under Article 136 of the Constitution would lie, is with reference to the orders made by the Chief Justice of a High Court or by the designate Judge of that High Court. The said observations do not apply to a subordinate court functioning as designate of the Chief Justice."
(emphasis in original) What is important to note is that the observations of this Court in Punjab Agro Industries Corpn. Ltd. [Punjab Agro Industries Corpn. Ltd. v. Kewal Singh Dhillon, (2008) 10 SCC 128] were for the reason that no provision for appeal had been given by statute against the orders passed under Section 11, which is why the High Court's supervisory jurisdiction should first be invoked before coming to this Court under Article 136. Given the facts of the present case, this case is equally distinguishable for the reason that in this case the Article 227 jurisdiction has been exercised by the High Court only after a first appeal was dismissed under Section 37 of the Act.
22. One other feature of this case is of some importance. As stated hereinabove, on 9-5-2018, a Section 16 application had been dismissed by the learned arbitrator in which substantially the same contention which found favour with the High Court was taken up. The drill of Section 16 of the Act is that where a Section 16 application is dismissed, no appeal is provided and the challenge to the Section 16 application being dismissed must await the passing of a final award at which stage it may be raised under Section 34. What the High Court has done in the present case is to invert this statutory scheme by going into exactly the same matter as was gone into by the arbitrator in the Section 16 application, and then decided that the two-year ban/blacklisting was no part of the notice for arbitration issued on 2-11-2017, a finding which is directly contrary to the finding of the learned arbitrator dismissing the Section 16 application. For this reason alone, the judgment under appeal needs to be set aside. Even otherwise, as has been correctly pointed out by Mr Rohatgi, the judgment under appeal goes into the merits of the case and states that the 17 action of putting the Contractor and his Directors "on holiday" is not a consequence of the termination of the agreement. This is wholly incorrect as it is only because of the termination that the show-cause notice dated 18-10-2017 proposing to impose a two-year ban/blacklisting was sent. Even otherwise, entering into the general thicket of disputes between the parties does not behove a court exercising jurisdiction under Article 227, where only jurisdictional errors can be corrected. Therefore to state that the ban order was passed under a General Contract Manual and not Clause 18 of the agreement, besides being incorrect, would also be incorrect for the reason that the General Contract Manual does not mean that such order was issued as an administrative order invoking the executive power, but was only as an order which emanated from the contract itself. Further to state that "serious disputes" as to jurisdiction seem to have cropped up is not the same thing as saying that the Arbitral Tribunal lacked inherent jurisdiction in going into and deciding the Section 17 application. In point of fact, the Arbitral Tribunal was well within its jurisdiction in referring to the contract and the ban order and then applying the law and finally issuing the stay order. Even if it be accepted that the principle laid down by Section 41(e) of the Specific Relief Act was infracted, in that damages could have been granted, as a result of which an injunction ought not to have been issued, is a mere error of law and not an error of jurisdiction, much less an error of inherent jurisdiction going to the root of the matter. Therefore, even otherwise, the High Court judgment cannot be sustained and is set aside.
23. We reiterate that the policy of the Act is speedy disposal of arbitration cases. The Arbitration Act is a special Act and a self-contained code dealing with arbitration. This Court in Fuerst Day Lawson Ltd. [Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2011) 8 SCC 333 : (2011) 4 SCC (Civ) 178] , has specifically held as follows: (SCC p. 371, para 89) "89. It is, thus, to be seen that Arbitration Act, 1940, from its inception and right through to 2004 (in P.S. Sathappan [P.S. Sathappan v. Andhra Bank Ltd., (2004) 11 SCC 672] ) was held to be a self-contained code. Now, if the Arbitration Act, 1940 was held to be a self-contained code, on matters pertaining to arbitration, 18 the Arbitration and Conciliation Act, 1996, which consolidates, amends and designs the law relating to arbitration to bring it, as much as possible, in harmony with the UNCITRAL Model must be held only to be more so. Once it is held that the Arbitration Act is a self-contained code and exhaustive, then it must also be held, using the lucid expression [S.N. Srikantia & Co. v. Union of India, 1965 SCC OnLine Bom 133 : AIR 1967 Bom 347] of Tulzapurkar, J., that it carries with it '19. ... a negative import that only such acts as are mentioned in the Act are permissible to be done and acts or things not mentioned therein are not permissible to be done. ...' (S.N. Srikantia & Co. case [S.N. Srikantia & Co. v. Union of India, 1965 SCC OnLine Bom 133 : AIR 1967 Bom 347] , SCC OnLine Bom para 19) In other words, a letters patent appeal would be excluded by the application of one of the general principles that where the special Act sets out a self-contained code the applicability of the general law procedure would be impliedly excluded."
What becomes clear is that had the High Court itself disposed of the first appeal in the present case, no Article 227 petition could possibly lie -- all that could perhaps have been done was to file an LPA before a Division Bench of the same High Court. This, as we have seen, has specifically been interdicted by Fuerst Day Lawson Ltd. [Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2011) 8 SCC 333: (2011) 4 SCC (Civ) 178] Merely because, on the facts of this case, the first appeal was disposed of by a court subordinate to the High Court, an Article 227 petition ought not to have been entertained."
(Emphasis supplied) Both these judgments are considered in a later judgment by the Apex Court in the case of N.N. GLOBAL MERCANTILE PRIVATE 19 LIMITED v. INDO UNIQUE FLAME LIMITED AND OTHERS3 wherein it is held as follows:
"28. In our view, the decision in SMS Tea Estates [SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd., (2011) 14 SCC 66 : (2012) 4 SCC (Civ) 777] does not lay down the correct position in law on two issues i.e. : (i) that an arbitration agreement in an unstamped commercial contract cannot be acted upon, or is rendered unenforceable in law; and (ii) that an arbitration agreement would be invalid where the contract or instrument is voidable at the option of a party, such as under
Section 19 of the Contract Act, 1872.
29. We hold that since the arbitration agreement is an independent agreement between the parties, and is not chargeable to payment of stamp duty, the non-payment of stamp duty on the commercial contract, would not invalidate the arbitration clause, or render it unenforceable, since it has an independent existence of its own. The view taken by the Court on the issue of separability of the arbitration clause on the registration of the substantive contract, ought to have been followed even with respect to the Stamp Act. The non-payment of stamp duty on the substantive contract would not invalidate even the main contract. It is a deficiency which is curable on the payment of the requisite stamp duty.
... ... ...
31. We overrule the judgment in SMS Tea Estates [SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd., (2011) 14 SCC 66 : (2012) 4 SCC (Civ) 777] with respect to the aforesaid two issues as not laying down the correct position in law.
32.Garware [Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209 : (2019) 4 SCC (Civ) 324] judgment has followed the judgment in SMS Tea Estates [SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd., (2011) 14 SCC 66 : (2012) 4 SCC (Civ) 777] . The counsel for the appellant has placed reliance on para 22 of the judgment to contend that the arbitration clause would be non-existent in 3 (2021) 4 SCC 379 20 law, and unenforceable, till stamp duty is adjudicated and paid on the substantive contract. We hold that this finding is erroneous, and does not lay down the correct position in law.
We have already held that an arbitration agreement is distinct and independent from the underlying substantive commercial contract. Once the arbitration agreement is held to have an independent existence, it can be acted upon, irrespective of the alleged invalidity of the commercial contract.
33. We notice that the judgment in Garware Wall Ropes Ltd. [Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209 : (2019) 4 SCC (Civ) 324] has been cited with approval by a coordinate Bench of this Court in Vidya Drolia v. Durga Trading Corpn. [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] Paras 146-47 of the judgment reads thus : (Vidya Drolia case [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 :
(2021) 1 SCC (Civ) 549] , SCC pp. 115-16) "146. We now proceed to examine the question, whether the word "existence" in Section 11 merely refers to contract formation (whether there is an arbitration agreement) and excludes the question of enforcement (validity) and therefore the latter falls outside the jurisdiction of the court at the referral stage. On jurisprudentially and textualism it is possible to differentiate between existence of an arbitration agreement and validity of an arbitration agreement. Such interpretation can draw support from the plain meaning of the word "existence". However, it is equally possible, jurisprudentially and on contextualism, to hold that an agreement has no existence if it is not enforceable and not binding. Existence of an arbitration agreement presupposes a valid agreement which would be enforced by the court by relegating the parties to arbitration.
Legalistic and plain meaning interpretation would be contrary to the contextual background including the definition clause and would result in unpalatable consequences. A reasonable and just interpretation of "existence" requires understanding the context, the purpose and the relevant legal norms applicable for a binding and enforceable arbitration agreement. An 21 agreement evidenced in writing has no meaning unless the parties can be compelled to adhere and abide by the terms. A party cannot sue and claim rights based on an unenforceable document. Thus, there are good reasons to hold that an arbitration agreement exists only when it is valid and legal. A void and unenforceable understanding is no agreement to do anything. Existence of an arbitration agreement means an arbitration agreement that meets and satisfies the statutory requirements of both the Arbitration Act and the Contract Act and when it is enforceable in law.
147. We would proceed to elaborate and give further reasons:
147.1. (i) In Garware Wall Ropes Ltd. [Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg.
Ltd., (2019) 9 SCC 209 : (2019) 4 SCC (Civ) 324] , this Court had examined the question of stamp duty in an underlying contract with an arbitration clause and in the context had drawn a distinction between the first and second part of Section 7(2) of the Arbitration Act, albeit the observations made and quoted above with reference to "existence" and "validity" of the arbitration agreement being apposite and extremely important, we would repeat the same by reproducing para 29 thereof : (SCC p. 238) '29. This judgment in Hyundai Engg. case [United India Insurance Co. Ltd. v. Hyundai Engg. & Construction Co. Ltd., (2018) 17 SCC 607 : (2019) 2 SCC (Civ) 530] is important in that what was specifically under consideration was an arbitration clause which would get activated only if an insurer admits or accepts liability. Since on facts it was found that the insurer repudiated the claim, though an arbitration clause did "exist", so to speak, in the policy, it would not exist in law, as was held in that judgment, when one important fact is introduced, namely, that the insurer has not admitted or accepted liability. Likewise, in the facts of the present case, it is clear that the arbitration clause that is contained in the sub-contract would not "exist" as a matter of law until the sub-contract is duly stamped, as has been held by us 22 above. The argument that Section 11(6-A) deals with "existence", as opposed to Section 8, Section 16 and Section 45, which deal with "validity" of an arbitration agreement is answered by this Court's understanding of the expression "existence" in Hyundai Engg. case [United India Insurance Co. Ltd. v. Hyundai Engg. & Construction Co. Ltd., (2018) 17 SCC 607 : (2019) 2 SCC (Civ) 530] , as followed by us.' Existence and validity are intertwined, and arbitration agreement does not exist if it is illegal or does not satisfy mandatory legal requirements. Invalid agreement is no agreement."
34. We doubt the correctness of the view taken in paras 146 and 147 of the three-Judge Bench in Vidya Drolia [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1: (2021) 1 SCC (Civ) 549] . We consider it appropriate to refer the findings in paras 22 and 29 of Garware Wall Ropes Ltd. [Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209 : (2019) 4 SCC (Civ) 324] , which has been affirmed in paras 146 and 147 of Vidya Drolia [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1: (2021) 1 SCC (Civ) 549], to a Constitution Bench of five Judges."
The aforesaid judgments are followed by a Division Bench of the High Court of Bombay in the case of TAGUS ENGINEERING PRIVARTE LIMITED AND OTHERS v. RESERVE BANK OF INDIA AND ANOTHER4. The Division Bench has held as follows:-
".... .... ....
4. We believe it is wholly impermissible for this Court to exercise its jurisdiction under Article 226 of the Constitution of India even on questions of jurisdictional competence except perhaps where the arbitral tribunal is 4 W.P.No.3957 OF 2021 Decided on 21-02-2022 23 itself a statutory tribunal i.e. one created by a statute. The decision of the Supreme Court in Deep Industries Ltd v Oil And Natural Gas Corporation Ltd & Another1 is unambiguous. In paragraph 19, the Supreme Court referred to SBP & Co v Patel Engineering Ltd2 and reaffirmed paragraph 14 of that decision. Paragraph 19 of Deep Industries reads thus:
"19. In SBP & Co., this Court while considering interference with an order passed by an Arbitral Tribunal under Articles 226/227 of the Constitution laid down as follows: (SCC p.663, paras 45-46)
45. It is seen that some High courts have proceeded on the basis that any order passed by an Arbitral Tribunal during arbitration, would be capable of being challenged under Article 226 or 227 of the Constitution. We see no warrant for such an approach. Section 37 makes certain orders of the Arbitral Tribunal appealable. Under Section 34, the aggrieved party has an avenue for ventilating its grievances against the award including any inbetween orders that might have been passed by the Arbitral Tribunal acting under Section 16 of the Act. The party aggrieved by any order of the Arbitral Tribunal, unless has a right of appeal under Section 37 of the Act, has to wait until the award is passed by the Tribunal. This appears to be the scheme of the Act. The Arbitral Tribunal is, after all, a creature of a contract between the parties, the arbitration agreement, even though, if the occasion arises, the Chief Justice may constitute it based on the contract between the parties. But that would not alter the status of the Arbitral Tribunal. If will still be a forum chosen by the parties by agreement. We, therefore, disapprove of the stand adopted by some of the High Courts that any order passed by the Arbitral Tribunal as capable of being corrected by the High Court under Article 226 or 227 of the Constitution. Such an intervention by the High Courts is not permissible.24
46. The object of dismissing 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. Therefore, it is necessary to indicate 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."
5. This view was even more emphatically reasserted by the Supreme Court in Bhaven Construction Through Authorised Signatory Premjibhai K Shah v Executive Engineer Sardar Sarovar Narmada Nigam Ltd & Anr.3 Some of the observations in this context are important and we quote paragraphs 18 to 23, 26 and 27 of Bhaven Construction.
"18. In any case, the hierarchy in our legal framework, mandates that a legislative enactment cannot curtail a constitutional right. In Nivedita Sharma v COAI [ (2011) 14 SCC 337 : (2012) 4 SCC (Civ) 947] , this Court referred to several judgments and held: (SCC p. 343, para 11) "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: 1997 SCC (L&S) 577]. However, it is one thing to say that in exercise of the power vested in it under Article 226 of the Constitution, the High Court can entertain a writ petition against any order passed by or action 25 taken by the State and/or its agency/instrumentality or any public authority or order passed by a quasi-judicial body/authority, and it is an altogether different thing to say that each and every petition filed under Article 226 of the Constitution must be entertained by the High Court as a matter of course ignoring the fact that the aggrieved person has an effective alternative remedy. Rather, it is settled law that when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation."
(emphasis supplied) It is therefore, prudent for a Judge to not exercise discretion to allow judicial interference beyond the procedure established under the enactment. This power needs to be exercised in exceptional rarity, wherein one party is left remediless under the statute or a clear "bad faith" shown by one of the parties. This high standard set by this Court is in terms of the legislative intention to make the arbitration fair and efficient.
19. In this context we may observe Deep Industries Ltd v ONGC [Deep Industries Ltd. v. ONGC, (2020) 15 SCC 706], wherein interplay of Section 5 of the Arbitration Act and Article 227 of the Constitution was analysed as under:
"16. Most significant of all is the non obstante clause contained in Section 5 which states that notwithstanding anything contained in any other law, in matters that arise under Part I of the Arbitration Act, no judicial authority shall intervene except where so provided in this Part. Section 37 grants a constricted right of first appeal against certain judgments and orders and no others. Further, the statutory mandate also provides for one bite at the cherry, and interdicts a second appeal being filed [see Section 37(2) of the Act].26
17. This being the case, there is no doubt whatsoever that if petitions were to be filed under Articles 226/227 of the Constitution against orders passed in appeals under Section 37, the entire arbitral process would be derailed and would not come to fruition for many years. At the same time, we cannot forget that Article 227 is a constitutional provision which remains untouched by the non obstante clause of Section 5 of the Act. In these circumstances, 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 hereinabove so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction."
20. In the instant case, Respondent 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 Respondent 1 in a separate Section 34 application, which is pending.
21. Viewed from a different perspective, the arbitral process is strictly conditioned upon time limitation and modelled on the "principle of unbreakability". This Court in P Radha Bai v P Ashok Kumar, (2019) 13 SCC 445 : (2018) 5 SCC (Civ) 773] , observed:
27"36.3. Third, Section 34(3) reflects the principle of unbreakability. Dr Peter Binder in International Commercial Arbitration and Conciliation in UNCITRAL Model Law Jurisdictions, 2nd Edn., observed:
"An application for setting aside an award can only be made during the three months following the date on which the party making the application has received the award. Only if a party has made a request for correction or interpretation of the award under Article 33 does the time- limit of three months begin after the tribunal has disposed of the request. This exception from the three month time-limit was subject to criticism in the working group due to fears that it could be used as a delaying tactics. However, although "an unbreakable timelimit for applications for setting aside" was sought as being desirable for the sake of "certainty and expediency" the prevailing view was that the words ought to be retained "since they presented the reasonable consequence of Article 33."
According to this "unbreakability" of time-limit and true to the "certainty and expediency" of the arbitral awards, any grounds for setting aside the award that emerge after the three month time-limit has expired cannot be raised.
37. Extending Section 17 of the Limitation Act would go contrary to the principle of "unbreakability" enshrined under Section 34(3) of the Arbitration Act."
(emphasis supplied) 28
21. If the courts are allowed to interfere with the arbitral process beyond the ambit of the enactment, then the efficiency of the process will be diminished.
22. The High Court did not appreciate the limitations under Articles 226 and 227 of the Constitution and reasoned that the appellant had undertaken to appoint an arbitrator unilaterally, thereby rendering Respondent 1 remediless. However, a plain reading of the arbitration agreement points to the fact that the appellant herein had actually acted in accordance with the procedure laid down without any mala fides.
23. Respondent 1 did not take legal recourse against the appointment of the sole arbitrator, and rather submitted themselves before the tribunal to adjudicate on the jurisdiction issue as well as on the merits. In this situation, Respondent 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 Respondent 1 has already preferred a challenge under Section 34 to the same. Respondent 1 has not been able to show any exceptional circumstance, which mandates the exercise of jurisdiction under Articles 226 and 227 of the Constitution.
26. It must be noted that Section 16 of the Arbitration Act, necessarily mandates that the issue of jurisdiction must be dealt first by the tribunal, before the court examines the same under Section 34. Respondent 1 is therefore not left remediless, and has statutorily been 29 provided a chance of appeal. In Deep Industries case [Deep Industries Ltd. v.
ONGC, (2020) 15 SCC 706] , this Court observed as follows : (SCC p. 718, para 22) "22. One other feature of this case is of some importance. As stated hereinabove, on 9-5-2018, a Section 16 application had been dismissed by the learned arbitrator in which substantially the same contention which found favour with the High Court was taken up. The drill of Section 16 of the Act is that where a Section 16 application is dismissed, no appeal is provided and the challenge to the Section 16 application being dismissed must await the passing of a final award at which stage it may be raised under Section
34."
(Emphasis supplied)
27. In view of the above reasoning, we are of the considered opinion that the High Court erred in utilizing its discretionary power available under Article 226 and 227 of the Constitution herein. Thus, the appeal is allowed and the impugned Order of the High Court is set aside. There shall be no order as 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."
(Emphasis added)
6. According Mr Doctor for the Petitioner in the IDFC First Bank Limited petition, there are exceptional circumstances. Specifically, the arbitration is contrary to the law laid down by the Supreme Court in Vidya Drolia & Ors v Durga Trading Corporation, 4 as it forbids a recourse to arbitration where one 30 of the parties has remedies under the SARFAESI Act, RDDBI Act and DRT law. But this is not, in our view, "an exceptional circumstance." What the argument overlooks is that the intent and purpose of arbitration law, and our Arbitration & Conciliation Act, 1996 is to limit the scope for judicial interference, and to provide a quick mechanism for dispute resolution, extending through enforcement. The Arbitration Act specifically recognizes the possibility of jurisdictional challenges and bars, and has an in-built mechanism to address those, inter alia under Section 16 of that Act. There is no doubt that in both cases the Petitioners have filed applications questioning jurisdiction under Section 16 of the Arbitration Act. They may not like the outcome of those applications. But their remedies against those Section 16 orders lie elsewhere and not in mounting Writ Petitions claiming 'exceptional circumstances'.
7. In any case, as Bhaven Constructions points out, it was always open to the Petitioner to even invoke this point in its application under Section 16 of the Arbitration Act. If it has not done so it cannot invoke our jurisdiction under Article 226. If it has already done so, and not been successful in that endeavour, its remedy lies elsewhere."
(Emphasis supplied) A Division Bench of Madhya Pradesh High Court in M.P. ROAD DEVELOPMENT CORPORATION v. THE MINISTRY OF ROAD, TRANSPORT AND HIGHWAYS AND ANOTHER5 considers the very issue whether an order passed under Section 16 of the Act would permit a challenge before the High Court under Article 226 of the Constitution of India. The Division considers the entire spectrum of law and holds as follows:
52021 SCC OnLine MP 1599 31 "12. We have given our anxious consideration to rival submissions, perused the material on record and studied the cited precedents.
13. Let us first of all begin with analyzing Clause 44 of the agreement executed between the parties which provides for dispute resolution. Parties are at variance with regard to interpretation of this clause and also on the question whether Clause 44. 3 would be attracted or Clause 44. 4 would apply. While the learned Advocate General by heavily relying on Clause
44. 4 has contended that since it makes specific reference to a statutory Regulatory Authority or Commission with powers to adjudicate upon disputes between the Concessionaire and the Authority, the Arbitration Tribunal constituted under the Adhiniyam of 1983 shall be the only forum having power to arbitrate upon the disputes between the parties. Learned Senior Counsel appearing for the respondent No. 2 has however on the contrary submitted that Clause 44. 4 is meant to be applicable for a future situation which is evident from its wordings that "in the event of constitution of a statutory Regulatory Authority or Commission", "all disputes arising after such constitution" shall be referred to it. The intention of the parties was thus never intended to submit to the jurisdiction of the arbitral tribunal constituted under the Adhiniyam of 1983. If that were to be so, nothing prevented them from specifically mentioning so.
According to him, Clause 44. 3 which specifically provides for reference of dispute for arbitration under the aegis of ICADR, the arbitral tribunal has rightly been constituted. In order to meaningfully appreciate the rival submissions, we deem it appropriate to reproduce Clause 44 of the concession agreement executed between the parties, which reads as under:--
"ARTICLE 44 DISPUTE RESOLUTION 44.1 Dispute resolution 44.1.1 Any dispute, difference or controversy of whatever nature howsoever arising under or out of or in relation to this Agreement (including its interpretation) between the Parties, and so notified in writing by either Party to the other Party (the "Dispute") shall, in the first instance, be attempted 32 to be resolved amicably in accordance with the conciliation procedure set forth in Clause 44. 2.
44.1.2 The Parties agree to use their best efforts for resolving all Disputes arising under or in respect of this Agreement promptly, equitably and in good faith, and further agree to provide each other with reasonable access during normal business hours to all non-privileged records, information and data pertaining to any Dispute.
44.2 Conciliation In the event of any Dispute between the Parties, either Party may call upon the Independent Engineer to mediate and assist the Parties in arriving at an amicable settlement thereof. Failing mediation by the Independent Engineer or without the intervention of the Independent Engineer, either Party may require such Dispute to be referred to the Managing Director, MPRDC, Bhopal of the Authority and the Chairman of the Board of Directors of the Concessionaire for amicable settlement, and upon such reference, the said persons shall meet no later than 7 (seven) days from the date of reference to discuss and attempt to amicably resolve the Dispute. If such meeting does not take place within the 7 (seven) day period or the Dispute is not amicably settled within 15 (fifteen) days of the meeting or the Dispute is not resolved as evidenced by the signing of written terms of settlement within 30 (thirty) days of the notice in writing referred to in Clause 44. 1. 1 or such longer period as may be mutually agreed by the Parties, either Party may refer the Dispute to arbitration in accordance with the provisions of Clause 44. 3.
44. 3 Arbitration 44.3.1 Any Dispute which is not resolved amicably by conciliation, as provided in Clause 44. 2, shall be 33 finally decided by reference to arbitration by a Board of Arbitrators appointed in accordance with Clause 44. 3. 2. Such arbitration shall be held in accordance with the Rules of Arbitration of the International Centre for Alternative Dispute Resolution, New Delhi (the "Rules"), or such other rules as may be mutually agreed by the Parties, and shall be subject to the provisions of the Arbitration Act. The venue of such arbitration shall be Bhopal (Madhya Pradesh), and the language of arbitration proceedings shall be English.
44.3.2 There shall be a Board of three arbitrators, of whom each Party shall select one, and the third arbitrator shall be appointed by the two arbitrators so selected, and in the event of disagreement between the two arbitrators, the appointment shall be made in accordance with the Rules.
44.3.3 The arbitrators shall make a reasoned award (the "Award"). Any Award made in any arbitration held pursuant to this Article 44 shall be final and binding on the Parties as from the date it is made, and the Concessionaire and the Authority agree and undertake to carry out such Award without delay.
44.3.4 The Concessionaire and the Authority agree that an Award may be enforced against the Concessionaire and/or the Authority, as the case may be, and their respective assets wherever situated.
44.3.5 This Agreement and the rights and obligations of the Parties shall remain in full force and effect, pending the Award in any arbitration proceedings hereunder.
44.4 Adjudication by Regulatory Authority or Commission In the event of constitution of a statutory Regulatory Authority or Commission with powers to adjudicate upon disputes between the 34 Concessionaire and the Authority, all Disputes arising after such constitution shall, instead of reference to arbitration under Clause 44. 3, be adjudicated upon by such Regulatory Authority or Commission in accordance with the Applicable Law and all references to Dispute Resolution Procedure shall be construed accordingly. For the avoidance of doubt, the Parties hereto agree that the adjudication hereunder shall not be final and binding until an appeal against such adjudication has been decided by an appellate tribunal or High Court, as the case may be, or no such appeal has been preferred within the time specified in the Applicable Law."
14. The contention that according to Clause 44. 4 of the Agreement, in the event of situation of a statutory Regulatory Authority or Commission with powers to adjudicate upon disputes between the Concessionaire and the Authority, all Disputes arising after such constitution shall, instead of reference to arbitration under Clause 44. 3, be adjudicated upon by such Regulatory Authority or Commission in accordance with the law, is noted to be rejected as undeniably, the very same agreement contains Clause 44. 3. 1 which provides that any dispute, which could not be resolved amicably by conciliation, as provided in Clause 44. 2, shall be finally decided by reference to arbitration by a Board of Arbitrators appointed in accordance with Clause 44. 3. 2, in accordance with the Rules of Arbitration of the International Centre for Alternative Dispute Resolution, New Delhi, subject to the provisions of the Arbitration Act and that the venue of such arbitration shall be at Bhopal. If despite existence of the Arbitration Tribunal under the Adhiniyam of 1983, the parties have agreed for arbitration under the aegis of ICADR in accordance with the ICADR Rules and the Arbitration Act and consciously did not mention about existence of the arbitration tribunal established under the Adhiniyam of 1983, which then was already in existence, the petitioner cannot be permitted now to raise this plea. Clause 44. 4 in any case, can be interpreted to cover a future situation as is evident from its wordings that "in the event of constitution of a statutory Regulatory Authority or Commission with powers to adjudicate upon disputes between the Concessionaire 35 and the Authority, all Disputes arising after such constitution". Had the parties while entering into the agreement wanted to refer their future disputes to the Arbitration Tribunal constituted under the Adhiniyam of 1983, they would have most certainly mentioned about the same in Clause 44.3 or Clause 44. 4 rather than wording these clauses in the manner they have been formulated.
15. The Arbitration and Conciliation Act, 1996 was brought into effect on 16-8-1996. This Act repealed the Arbitration Act, 1940, the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961. These Acts were replaced by the Arbitration and Conciliation Act, 1996 which is based on the United Nations Commission on International Trade Law (UNCITRAL) the Model Law on International Commercial Arbitration, which is broadly in conformity with the Rules of Arbitration of International Chamber of Commerce. This Act is a self contained code dealing with every aspect of arbitration. The legislative policy in consolidating all the laws relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards is aimed at ensuring not only speedy disposal of arbitration cases but also timely execution of the awards. The Supreme Court in Fuerst Day Lawson Ltd. (supra) while highlighting that the Arbitration Act is a self contained code, held that since section 37(2) of the Act explicitly interdicted second appeals, the appeals filed under Letters Patent would also be so interdicted, policy of the legislature being speedy disposal of the arbitration cases. The following observations of the Supreme Court in para 89 are apt to quote:--
"89. It is, thus, to be seen that Arbitration Act, 1940, from its inception and right through 2004 (in P.S. Sathappan) was held to be a self- contained code. Now, if Arbitration Act, 1940 was held to be a self- contained code, on matters pertaining to arbitration, the Arbitration and Conciliation Act, 1996, which consolidates, amends and designs the law relating to arbitration to bring it, as much as possible, in harmony with the UNCITRAL Model must be held only to be more so. Once it is held that the Arbitration Act is a self-contained code and exhaustive, 36 then it must also be held, using the lucid expression of Tulzapurkar, J., that it carries with it "a negative import that only such acts as are mentioned in the Act are permissible to be done and acts or things not mentioned therein are not permissible to be done". In other words, a Letters Patent Appeal would be excluded by the application of one of the general principles that where the special Act sets out a self-contained code the applicability of the general law procedure would be impliedly excluded."
16. The seven-Judge Constitution Bench of the Supreme Court in SBP and Co. (supra) while reversing earlier five-Judge Constitution Bench judgment in Konkan Railway Corpn. Ltd. v. Rani Construction (P) Ltd., 2002 MPLJ Online (S.C.) 8 : (2002) 2 SCC 388 held that the power exercised by the Chief Justice of the High Court or the Chief Justice of India under section 11(6) of the Arbitration Act is not an administrative power but is a judicial power. The Supreme Court in this judgment disapproved the practice adopted by some of the High Courts in entertaining challenge to any order passed by an Arbitral Tribunal in exercise of power under Article 226 or 227 of the Constitution of India by observing that the legislative object of enacting the consolidated Act is to minimize judicial intervention while the matter is in the process of arbitration. We are tempted to quote the following weighty observation of the Constitution Bench in paras 45 and 46 of the report:--
"45. It is seen that some High Courts have proceeded on the basis that any order passed by an arbitral tribunal during arbitration, would be capable of being challenged under Article 226 or
227 of the Constitution. We see no warrant for such an approach. Section 37 makes certain orders of the arbitral tribunal appealable. Under section 34, the aggrieved party has an avenue for ventilating its grievances against the award including any in- between orders that might have been passed by the arbitral tribunal acting under section 16 of the Act. The party aggrieved by any order of the arbitral 37 tribunal, unless has a right of appeal under section 37 of the Act, has to wait until the award is passed by the Tribunal. This appears to be the scheme of the Act. The arbitral tribunal is, after all, a creature of a contract between the parties, the arbitration agreement, even though, if the occasion arises, the Chief Justice may constitute it based on the contract between the parties. But that would not alter the status of the arbitral tribunal. It will still be a forum chosen by the parties by agreement. We, therefore, disapprove of the stand adopted by some of the High Courts that any order passed by the arbitral tribunal is capable of being corrected by the High Court under Article 226 or 227 of the Constitution. Such an intervention by the High Courts is not permissible.
46. The object of 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. Therefore, it is necessary to indicate 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."
(Emphasis supplied)
17. The Supreme Court in Deep Industries Limited (supra) was examining challenge to judgment passed by the Gujarat High Court under Articles 226 and 227 of the Constitution of India, whereby the judgment of the City Civil Court, Ahmedabad passed in appeal filed under section 37 of the Act of 1996, upholding Arbitrator's order, who while deciding the application of the claimant under section 17 of the Act of 1996 stayed the operation of the order of its blacklisting for two years holding that the same will operate only if the appellant ultimately loses in final arbitration proceedings, was reversed. Reiterating that the policy of the legislation is to ensure timely 38 adjudication of the disputes under the Arbitration and Conciliation Act specially after the Amendment Act, 2016, the Supreme Court in para 14 and 15 of the judgment observed thus:--
"14. What is also important to note is that under section 29-A of the Act which was inserted by the Amendment Act, 2016 a time limit was made within which arbitral awards must be made, namely, 12 months from the date the arbitral tribunal enters upon the reference. Also, it is important to note that even so far as section 34 applications are concerned, section 34(6) added by the same amendment states that these applications are to be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in subsection (5) is served upon the other parties.
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 84 references to be decided. Equally, in Union of India v. Varindera Constructions Ltd, (2020) 2 SCC 111, dated 17-9-2018, disposing of SLP (C) No. 23155/2013, this Court has imposed the selfsame limitation on first appeals under section 37 so that there be a timely resolution of all matters which are covered by arbitration awards."
18. Taking note of the non-obstante clause contained in section 5 of the Act of 1996, which provided that "notwithstanding anything contained in any other law, in matters that arise under Part I of the Arbitration Act, no judicial authority shall intervene except where so provided in this Part"' and keeping in view the above intendment of legislature behind this, the Supreme Court in Deep Industries Limited (supra) in paras 16 and 17 of the report had the following observations to make:--
39"16. Most significant of all is the non-obstante clause contained in section 5 which states that notwithstanding anything contained in any other law, in matters that arise under Part I of the Arbitration Act, no judicial authority shall intervene except where so provided in this Part. Section 37 grants a constricted right of first appeal against certain judgments and orders and no others. Further, the statutory mandate also provides for one bite at the cherry, and interdicts a second appeal being filed (See section 37(2) of the Act).
17. This being the case, there is no doubt whatsoever that if petitions were to be filed under Articles 226/227 of the Constitution against orders passed in appeals under section 37, the entire arbitral process would be derailed and would not come to fruition for many years. At the same time, we cannot forget that Article 227 is a constitutional provision which remains untouched by the non-obstante clause of section 5 of the Act. In these circumstances, 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. Section 16(2) of the Act of 1996 stipulates that a plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator. Sub-section (5) of section 16 provides that 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 proceedings and make an arbitral award. The language employed by the Parliament in this sub-section thus makes its intention clear that once if the arbitral 40 tribunal takes a decision to reject the plea, it shall continue with the arbitral proceedings and make an arbitral award. It cannot however be said for this that the aggrieved party has been left remediless against the rejection of its objection as to the jurisdiction of the arbitral tribunal. The only thing is that its remedy has been deferred till the stage of section 34 of the Act of 1996 arises as is evident from sub-section (6) of section 16 of the Act of 1996 which inter alia provides that the parties aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34.
20. Moreover, intention of the legislature in not providing the appeal against the rejection of the application under section 16(2) is also evident from sub-section (2) of section 37, which, vide its sub-clause (a), while providing for an appeal to a Court from an order of the arbitral tribunal accepting the plea referred to in sub-section (2) or sub-section (3) of section 16, purposely does not provide for an appeal against an order of the arbitral tribunal rejecting the plea referred to in sub-section (2) or sub- section (3) of section 16. Therefore, argument of the petitioner that the arbitral tribunal does not have the jurisdiction or for that matter, its argument that it was not given proper notice of appointment of the Arbitrator, may only be available to it as ground of challenge to the award if eventually the same were to be passed against it. The Supreme Court in Deep Industries Limited (supra) while adverting to this aspect of the matter made the following useful observations:
"22. One other feature of this case is of some importance. As stated herein above, on 9-5-2018, a section 16 application had been dismissed by the learned Arbitrator in which substantially the same contention which found favour with the High Court was taken up. The drill of section 16 of the Act is that where a section 16 application is dismissed, no appeal is provided and the challenge to the section 16 application being dismissed must await the passing of a final award at which stage it may be raised under section 34. What the High Court has done in the present case is to invert this statutory scheme by going into exactly the same matter as was 41 gone into by the arbitrator in the section 16 application, and then decided that the two year ban/blacklisting was no part of the notice for arbitration issued on 2-11-2017, a finding which is directly contrary to the finding of the learned Arbitrator dismissing the section 16 application. For this reason alone, the judgment under appeal needs to be set aside"
21. The Supreme Court in Deep Industries Limited (supra), while approvingly quoting para 11 to 16 of the report from the earlier judgment in Nivedita Sharma v. COAI, 2011 MPLJ Online (S.C.) 40 : (2011) 14 SCC 337, has found the remedy of challenge under section 34 to the aggrieved party against the rejection of application Under section 16(2) of the Act of 1996 to be efficacious, which paras for the facility of reference, are again reproduced hereunder:--
"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 power vested in it under Article 226 of the Constitution, the High Court can entertain a writ petition against any order passed by or action taken by the State and/or its agency/instrumentality or any public authority or order passed by a quasi judicial body/authority, and it is an altogether different thing to say that each and every petition filed under Article 226 of the Constitution must be entertained by the High Court as a matter of course ignoring the fact that the aggrieved person has an effective alternative remedy. Rather, it is settled law that when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation.
12. In Thansingh Nathmal v. Superintendent of Taxes, AIR 1964 SC 1419, this Court adverted to the rule 42 of self-imposed restraint that the Writ petition will not be entertained if an effective remedy is available to the aggrieved person and observed : (AIR p. 1423, para 7) "7... The High Court does not therefore act as a Court of appeal against the decision of a Court or tribunal, to correct errors of fact, and does not by assuming jurisdiction under Article 226 trench upon an alternative remedy provided by statute for obtaining relief. Where it is open to the aggrieved petitioner to move another tribunal, or even itself in another jurisdiction for obtaining redress in the manner provided by a statute, the High Court normally will not permit by entertaining a petition under Article 226 of the Constitution the machinery created under the statute to be bypassed, and will leave the party applying to it to seek resort to the machinery so set up."
13. In Titaghur Paper Mills Co. Ltd. v. State of Orissa, (1983) 2 SCC 433, this Court observed:
"11. It is now well recognised that where a right or liability is created by a statute which gives a special remedy for enforcing it, the remedy provided by that statute only must be availed of. This rule was stated with great clarity by Willes, J. in Wolverhampton NewWaterworks Co. v. Hawkesford, (1859) 6 CBNS 336 :
141 ER 486 in the following passage : (ERp. 495) "...There are three classes of cases in which a liability may be established founded upon a statute.... But there is a third class viz. where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it The remedy provided by the statute must be followed, and it is not competent to the party to pursue the course applicable to cases of the second class. The form given by the statute must be adopted and adhered to."43
The rule laid down in this passage was approved by the House of Lords in Neville v. London Express Newspapers Ltd., [1919] A.C. 368 and has been reaffirmed by the Privy Council in Attorney General of Trinidad and Tobago v. Gordon Grant and Co. Ltd., [1935] A.C. 532 and Secy, of State v. Mask and Co., AIR 1940 PC 105. It has also been held to be equally applicable to enforcement of rights, and has been followed by this Court throughout. The High Court was therefore justified in dismissing the writ petitions in limine."
14. In Mafatlal Industries Ltd. v. Union of India, (1997) 5 SCC 536, B.P. Jeevan Reddy, J. (speaking for the majority of the larger Bench) observed: (SCC p. 607, para 77) "77.... So far as the jurisdiction of the High Court under Article 226 - or for that matter, the jurisdiction of this Court under Article 32 - is concerned, it is obvious that the provisions of the Act cannot bar and curtail these remedies. It is, however, equally obvious that while exercising the power under Article 226/Article 32, the Court would certainly take note of the legislative intent manifested in the provisions of the Act and would exercise their jurisdiction consistent with the provisions of the enactment."
15. In the judgments relied upon by Shri Vaidyanathan, which, by and large, reiterate the proposition laid down in Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad, AIR 1969 SC 556, it has been held that an alternative remedy is not a bar to the entertaining of writ petition filed for the enforcement of any of the fundamental rights or where there has been a violation of the principles of natural justice or where the order under challenge is wholly without jurisdiction or the vires of the statute is under challenge.
16. It can, thus, be said that this Court has recognised some exceptions to the rule of alternative 44 remedy. However, the proposition laid down in Thansingh Nathmal v. Superintendent of Taxes (supra) and other similar judgments that the High Court will not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for rederssal of grievance still holds the field."
22. The Supreme Court in Bhaven Construction (supra) was dealing with somewhat identical case in which a similar stand was taken by the respondents that the State of Gujarat has enacted the Gujarat Public Works Contracts Disputers Arbitration Tribunal Act, 1992 with the object to provide for the constitution of a tribunal to arbitrate disputes arising from works contract to which the State Government or a public undertaking is a party. The objection under section 16(2) of the Act of 1996 raised by the respondents questioning jurisdiction of the sole arbitrator on that basis was rejected in that case too. Aggrieved thereby, the respondent preferred Special Civil Application under Articles 226 and 227 of the Constitution before the Single Bench of Gujarat High Court. While the Single Bench dismissed the Special Civil Application, the Division Bench revered that judgment and allowed the Letters Patent Appeal. The Supreme Court relying on the judgment in Deep Industries Limited (supra) and Nivedita Sharma (supra) held that "the non-obstante clause is provided to uphold, the intention of the legislature as provided in the Preamble of to adopt UNCITRAL Model Law and Rules, to reduce excessive judicial interference which is not contemplated under the Arbitration Act". The Supreme Court also held that "the Arbitration Act itself gives various procedures and forums to challenge the appointment of an arbitrator. The framework clearly portrays an intention to address most of the issues within the ambit of the act itself, without there being scope for any extra statutory mechanism to provide just and fair solutions."' The Supreme Court further held that it would be "prudent for a Judge to not exercise discretion to allow judicial interference beyond the procedure established under the 45 enactment. This power needs to be exercised in exceptional rarity, wherein one party is left remediless under the statute or a clear 'bad faith' shown by one of the parties. This high standard set by this Court is in terms of the legislative intention to make the arbitration fair and efficient".
23. Even though the learned Advocate General, in the present case, has argued that the present matter falls within the exceptions to the general rule that this Court under Article 226 and 227 of the Constitution of India can interfere with orders "patently lacking in inherent jurisdiction" and also if it suffers from 'bad faith' but neither of the arguments has been brought home inasmuch as, as has rightly been argued, the petitioner appears to have coined the argument of "patent lack of inherent jurisdiction" and the "bad faith" only during the course of arguments as none of them find mention either in the application under section 16(2) filed before the Arbitral Tribunal or in the memorandum of writ petition challenging rejection thereof or even in the rejoinder to the reply of the respondent No. 2. As regard various orders of the Supreme Court and this Court cited by the learned Advocate General, transferring the proceedings pending before the arbitrator to the arbitral tribunal under the Adhiniyam of 1983, suffice it to say that in none of these orders, sections 16, 34 and 37 of the Act of 1996 were analyzed and the precedents referred to supra, were considered."
(Emphasis supplied) In the light of the judgments rendered by the Apex Court and as followed by the Division Benches of Bombay and Madhya Pradesh High Courts, the writ petitions challenging an interlocutory order of the Arbitrator would not be maintainable. It is open to the 46 petitioner to urge all the grounds that are urged in the present petition while calling in question the award of the Arbitrator once it is passed.
11. Reserving such liberty, the petitions which being neither maintainable nor entertainable, would necessarily meet their dismissal and are accordingly dismissed.
At the time of pronouncement of the matter, both the learned counsel for the petitioner and respondent No.1 submits that the period for conclusion of the arbitral proceedings which has to be one year is long over, and therefore, the period be extended.
In the light of the passage of time, I deem it appropriate to direct that the arbitral proceedings to be concluded within six months from the date of receipt of a copy of the order.
Sd/-
JUDGE bkp CT:MJ