Andhra Pradesh High Court - Amravati
M/S B.S.N. Joshi And Sons Limited vs Rashtriya Ispat Nigam Limited on 12 March, 2019
Bench: C.Praveen Kumar, M.Satyanarayana Murthy
IN THE HIGH COURT OF ANDHRA PRADESH
{Special Original Jurisdiction)
TUESDAY ,THE TWELFTH DAY OF MARCH
TWO THOUSAND AND NINETEEN
PRESENT
THE HONOURABLE THE ACTING CHIEF JUSTICE SRI C.PRAVEEN KUMAR
AND
THE HONOURABLE SRI JUSTICE M.SATYANARAYANA MURTHY
WRIT PETITION NO: 46299 OF 2018
Between:
M/s B.S.N. doshi and Sons Limited, rep by its Director Mr. Arvind Joshi
S/o tate Dr. R.K. Joshi, Joshi Chambers, G.K. Towers, Hird Floor, Dwarkanagar,
Vishakapatanam-530016.
PETITIONER
AND
1. Rashtriya Ispat Nigam Limited, rep by its Deputy General Manager (MM),
Visakhapatnam Steel Plant, Visakhapatnam. A.P. 530031
2. Mr. David Macwan, Arbitrator and Technical Constant RINL, 47-7-10, Qwarka
Nagar, Near Nehru bazaar, Visakhapatnam. A.P.
RESPONDENTS
Petition under Article 226 of the Constitution of India praying that in the
circumstances stated in the affidavit filed therewith, the High Court may be pleased to
issue a Writ, Order or direction more particularly in the form of Writ of Mandamus or
any other appropriate Writ, thereby declaring that the action of ithe respondent no.1 to
appoint the arbRrator Respondent No.2 vide proceedings Arb/non-iICA/4.66P.A.
Boiler/102 dated 30.03.2018 inspite of there being bar under the seventh schedule an
legal act and is barred by the principles of law and is contrary fo the established
provisions of the Arbitration and Conciliation Act, 1996 and forbear the Respondents
from proceeding as Arbitrator under the Arbiiration and conciliation Act.
IA NO: 1 OF 2018
Petition under Section 151 CPC praying that in the circumstances stated in the
affidavit filed in support of the petition, the High Court may be pleased to order interim
suspension of the proceedings of the Respondent no. 1 vide proceedings Arb/non-
ICA/4.66P.A. Boiler/102 dated 30.03.2018 appointing the Respondent na.2 as
arbitrater and his entire action in the interest of Justice
Counsel for the Petitioner:SRI. AADESH VARMA
Counsel for the Respondents: SRI. K. SARVA BHOUMA RAO
The Court mace the following: ORDER
THE HON'BLE ACTING CHIEF JUSTICE C.PRAVEEN KUMAR
AND
THE HON'BLE SRI JUSTICE M.SATYANARAYANA MURTHY
WRIT PETITION NO.46299 OF 2018
ORDER:(Per Hon 'hile Sri dustice M.Satyancrayarca Murthy! M/s. B.S.N.Joshi and Sons Limited represented by its Director Mr.Arvind Joshi filed the writ petition under Article 226 of Constilution of India seeking a writ of Mandarnus declaring ihe action of the respondent No.1 in appointing the arbitrator respondent No.2 vide proceedings Arb/non-ICA/4.66P.A. Boiler/102 dated 40.03.2018 in spite of there being a bar under VI schedule as illegal and barred by Ue principles of law and forbear the respondent No.2 as arbitrator under the Arbitration and Conciliation Act (for short "the Act").
The petitioner is a company engaged by the respandent No.1 to provide certain services relating to the loading, transportation and conveying Uhe coal from the coal mines to the prescribed location af the responcdent company. As a part of its business. invited tenders from various agencies for appointment of an agent for transportation af coal trom M/s. Mahanadi Coalfields Limited to Visakhaptnam Steel Plant oF ihe respondent vide reference No. Pir 2.66. PABOILERCOAL/O141, dated 26.10.2012, The respondents issued another open tender notice for appointing an agent for participation in joint sampling analysis ancl loading supervision job of medium cooking coal supplies from M/s. Central Coalfields Ltd. to Visakhaptnam Steel Plant Ltd. of the respondent® vice reference No. Pur.2.66.PAMCC/O142, dated 26.10.2012.
Coty HAC & MSMG WH 46200 2OE8 The respondent issued another open tender notice for appointing an agent for participation ba joint sampling analysis and loacing supervision job of medium cooking coal supplies from M /s. Central Coallields Ltd. to Visakhaptnam Steel Plant Lid. of the respondent vide reference No. Pur2.86.PAMCC/O142, dated 26.10.2012.
The petitioner collpairy participated in the tender precess in respect of these two jobs and became successful bidder for both the tenders. In pursuance of the same, the petitioner issued the fetter of acceptance detailing the terms and conditions of the contract relating io bofler coal and medium cooking coal supply from ihe two coalfields. The tenure for both the contract is twa years. They entered into the contract and the scope of work was elaborately described im the centract. As per the contract in case of any dispute. etc. the same shall be resolved by both the parties through arbitration in accordance with the provisions of the Arbitralion and Conciliation Act. 1996 and the same was accepted by letter of acceptance, dated 24.08.2018 vide reference No.2.86.PABOILERCOAL/ OOG1 ane reference No. 2.66.PMCC/0063.
In terms of the contract, the petitioner performed his pari of contract strictly in terms and conditions. The petitioner was not granted time for mobilization etc. Du ring the pendency of the contract, the respondent issued a notice dated 09.11.2013 vide reference No. BSN/BC/MCC/1432. whereby the respondent pointed aut certain failures on part of the petitioner, more particularly, fathure ia discharge the number of obligations envisaged under the contrart. Without atlording an opportunity to the petitioner. the respondent sent communication dated 07.02.2014 terminating the contract of the petiioner aad reply was issued by the pelilioner for the allegect A TEAC de MSM) WH dOQ200 BUTS communication terminating the contract. As the termination was egal, the petitioner invoked arbitration clause as per the terms and conditions of the cantract and Justice Vaman Rag was appointed as sole arbitrater to decide all the disputes between the parties vide Communication reference No .RINL/PA/BSN/BC/MCC/151_-- dated OF 02.20 ba.
The sole arbitrator Justice Vamari Rao directed both parties Lo pursue with their claim in accordance with law established under the Arbitration and Conciliation Act, 1996. The petitioner Mled a claim statement for termination of contract and claimed a sum of Rs. 1,.33.92,000/- along with interest @ 24% p.a., a further sum of Rs. 63.000/- was also claimed towards costs and expenses. The respondent No.l Alect their reply/counter denying the avermenis in the statement of claim. The respondent company by way of communication to the Arbitrater fled memo reporting mo counter- claim. Accordingly, arbitral Tribunal framed issues and decided disputed in the arbitration proceedings and passed an award on 19.04.2016 in A.C.No.03 of 2014.
During the pendency of the Arbitration proceedings, the respondent issued a letter dated 06.01.2015 bearing reference no. PUR.A.66.PA MCC/Q6. The respondent referred to clause 5.03 of the contract and requested the petitioner to remit an amount of Rs. 7.67. 34,980.028 & 6,81,444.824 by way of demand drafi on account of penalties/counter claim, ete, copies of the award vide reference No. 4.56. PAMCC /O6 | and reference No, 4.66. BOILERCOAL/05 respectively. -
Reply was sent or 20.01.2015 denying the contents and informed the respondents to follow the procedure of arbitration which HAC A MSM WP 4a 3ou 2 Was already under process before the learned Sole Arbitrator vide relerence no, BSNJ/VSKP/2014-15/63 dated 20.01.2015.
On receipt of reply, the respondent No.l sent a mail dated N9.02.2015 to the Arbitrator thereby Stating that. "we the respondent i.e., M/s. Rashtriya Ispat Nigam Litd., Visakhapatnam Steel Plant do not intent filing counter claim in the above subject matter. This is for your kind information."
The award passed by the sole arbitrator attained finality since no application was filed under Section 34 of the Arbitration and Conciliation Act. 1996 for setting aside of the Award.
While the matter stood thus, the respondent No.1 sent a letter dated 06.02.2018 vide reference No. PUR2.66.PABOILERCOAL and Pur.2.66/PAMCC/21 stating that due to unsatisfactory performance al the petitioner, respondent No.1] sustained loss and the same needs to be recavered from the petitioner and quantified the penalty at Rs.7.74.16.424.85 called upon the petitioner to pay the same with a threatened action to treat the letter for invocation of the arbitration clause. The petitioner by letier dated 15.02.2018 and 21.02.9018 informed that already the Arbitration proceedings were terminated and afler four years. giving up of the counter claim, the counter-claim of the respondent cannot be entertained vide reference dated 15,02.2018 No.BSNJI/VSKP/2017-1 8/334 and reference dated 21.02.2018 No. BSNJI/VSKP/2017-18/347, Later, the respondent No.l sent a letter dated 30.03.2018 informing that Mr. David Macwan, Technical Consultant is appoinied as Sole Arbitrator for deciding the disputes as regards the counter Claim oof the respondent, Immediately, the petitioner sent a cormunication dated 04.04.2018 reference no. BSN /VSKP/2018- 19/001 that the appointment of Mr. David Macwan is not binding on 5S it. However, the arbitrator called for a meeting om 28.04.2018 at Visakhapatnam. The petitioner inforrmed the concerned Arbitrator that the petitioner does not accept his appointment and Arbitral Tribunal is seized of the powers. Similarly, the Arbitral Tribunal 'annot be constituted since the Arbitration proceedings have already terminated. The petitioner also filed an application for termination of arbitration proceedings along with objections under Schedule -V and contended that once the arbitration proceedings are held, no further proceedings can be held and that the arbitral tribunal is seized of the powers to proceed in the matter. The respondent No.1 Med reply to the same and accordingly the issue was supposed to be adjudicated by the learned Arbitrator. The learned Arbitrator obtained legal opinion of one Advocate Sri V.K.R.Rao and based on that opinion held that in spite of the fact that arhitration proceedings have taken place earlier, the Tribunal has power to go ahead with the process of arbitration. This procedure adopted by the respondent No.2 is vitiated as the learned Arbitrator (now appointed and so referred for brevity and is mot to be construed as accepted) could not have obtained an opinion on his jurisdictional powers. Such an action is patently opposed to the scheme and spirit of the Arbitration and Conciliation Act.
li is specifically contended that once the arbitration proceedings have already been initiated im which the respondent filed memo stating that it does not want to prefer any counter claim and came to be recorded by the earlier Arbitrator, appointment of second arbitrator afler the ,amendmert in ihe year 2015 to the Arbitration and Conciliation Act, 1996 is without jurisdiction. It is in violation of the provisions of Arbitration and Conciliation Act, 1996. 'Similarly. it is a eross iliegality being committed by a State agency as en shrined under Peed HACI& MEM! We degge Sire Article 12 of the Constitution of India. The Chairman of the respondent No.l has no authority to appoint any person as Arbitrator as itis egal and net in accordance with law and contrary to law.
it is further contended that the respondent No.2 is trying to proceed with the arbitral proceedings ard such atlemmpt to proceed is nol only illegal but without jurisdiction and contrary to the principles of law and prayed for relief as state above.
The petitioner further stated in the affidavit that Arbit 'ator who has been now appointed by the r sspondent No.l ais a consultant and is associated to the respondent No.1 and as such cannot be appointed as Arbitrator as per Section 12 (5) and the Seventh sched ule of the Arbitration and Conciliation Act, 1996 as amendment Act 2015 (3 of 2016), which clearly prohibits any person being appointed as Arbitrator having any kind of relationship with the parties.
The petitioner earlier filed Writ Petition No. 36081 of 2018. which was withdrawn with Nberty to avail other remedies available under the Arbitration and Conciliation Act, 1996. Therelore, approached this Court having no other alternative remedy under Article 226 of Constitution of India and prayed for the relief stated Supra, At the stage of admission heard both counsel Sri Aadesh Varma. learned counsel for the petitioner and Sri K.Sarva SBhoumea Rag, learned counsel for the respondent at length, Sr Aadesh Varma, learned counsel for the pelilioner contended that making reference claiming an amount of Rs.7.74,16,.494.85 ps.. appointing second arbitrator is an abuse of process of the Court. The respondent No.l herein already filed a memo before the Arbiiral Tribunal earlier waiving fis right to file counter-claim and when the respondent No.l fled such memo waiving its right ta file covnter-
HACE & SSMS WP 45200 DOES claim, they cannot now claim such relief again by appointing another arbitrater. lt is further contended that in case the petitioner has to wait till passing of the award to challenge the award in view the amended provisions of the Arbitration and Conciliation Act, 1996 by amendment Act 2015 (8 of ZOl6}. the petitioner has to pay 50% of the amount arid it would cause serious loss to the petitioner and ta avoid such coriingency, this Court can interfere with such proceedings pending before the Arbitrator, the respondent No.2 herein.
Sri K.Sarva Bhouma Rao, learned counsel for the respondents comended that the petitioner earlier filed W.P.No.S6081 af 2018 before this Court, which was withdrawn giving liberty to the petitioner to redress his grievance under the provisions of Arbitration and Conciliation Act. thereby the petitioner is disentitled to claim relief in this petition and that judicial interference in arbitration proceedings is minimized except as permitted by the Act in view of Section 5 of the Act. Wher judicial interference is not permitted against the order passed under Section 13 of the Act, this Court cannot exercise power under Article 226 of Constitution of India and requested to dismiss the petition.
Considering rival contentions, perusing the material available on record, the point that arises for consideration is:
"Whether this Court can exercise extraordinary jurisdiction under Article 226 of Constitution of India against the order passed under Section 13 of Arbitration and Conciliation Act and quash the proceedings pending before the Arbitrator?"
nmReP OIN fT.
The object behind enacting the Arbitration and Conciliation Act is to minimize the litigation and settle the disputes between the & HACT & MSMY WP 462u0 CNIYX parties at low cost and in minimum Gime. Legislature adopted a new Act in 1996 only to make it more convenient to reseri to settlement belore the arbitral Tribunal and to avoid judicial intervention ai every stage. Section 89 of CLP.c. suggested mode of settlement. conciliation and reference ta Legal services authority to settle the pending disputes by alternative disputes resolution system. Instead of making the parties lo wait years together due to procedural fetters in the C.P.C. before the Civil Court, The Arbitration and Conciliation Act, 1986 is a complete code, ihe Act itself providing remedies to the agerieved parties at different stages either after or during pendency of the proceedings before the Arbitral tribunal minimizing the judicial imitervention. Limited Jurisdiction calling for juclicial interference is cireumseribed by section 5 of the Aet, which reads thus:
"seciion 5 ~ Extent of Judicial inlervention:- Notwithstanding aeythirig ceoulained i any other ke for the tone being in. foree. inoanatters governed ly this Part. ne juclicial authority shell intervene except where so provicled in this eat. [Part 1° Part 1 deals with appointment of Arbitrator. powers of the arbitrator and role of the arbitrator and passing of award ec.
In view of the limited Jurisdiction to interfere with the proceedings under the Act, the question before us is "Whether the order passed by the Arbitrator under Section 43 of the Act is subject to Judicial review under Article 226 of the Constitution of India by this Court?"
In the staternent of objects and reasons of the Arbitration and Conciliation Bill, 1995 presented to Parliament one of the main abjectives was proclaimed ta be "to minimize the supervisory role of courts in the arbitral, process". This was an euphemism. What is prohibited is 'intervention' in arbitration proceedings. Assistance af Q ACT A MAMI WP aici 201s Courts may be sought under Sections 8. 9 and 27 equivalent ta Old Sections 31, 32 and 33 which permitted interventions have been omitted.
in "BHEL V. C.N.Garg'", Division Bench of Delhi High Court observed that Section 5 was inserted to discourage 'Judicial intervention' and repelled the argument that a party having grievance against an. arbitrator on aceourt of 'bias' or 'prejudice' is without remedy by stating he has to wait for action under Seetion 34 of the Aet.
Thus, in view of the object of the Act and observations made by Division Bench of Delhi High Court, though not binding precedent', the scope of judicial intervention is limited.
There are two dclilferent views. One view permits fuclictal intervention since Section & of the Act did not take away the jurisdiction of the High Court or any other Constitutional Court to interfere with the arbitral proceedings since the power under Article 226 of Constitution of India is extraordinary and such power can be exercised ta prevent abuse of process of the Court or do complete justice to the parties.
The power of judicial review vested In the superior Courts undoubtediy has wide amplitude but the same should not he exercised when there exists an arbitration clause. But the Court should not use discretion where it is pure disputed question of fact. The Court can exercise such power under Sections & 9. 1] and 34 of the Act sirice these provisions perrnit judicial intervention at different Stuges, "2AM yA? DRI 1S4 (Del DB) HEACG A. MSM WP 46200 218 In "Sanjana M.Wig v. Hindustan Petroleum Corporation?"
the Apex Court while answering the principal question which arises lor consideration is as to whether discretionary jurisdiction would be refused to be exercised solely on the ground of existence of ar allemative remedy which is more efficacious. Ordinarily. when a dispute between the parties requires adjudication of disputed question of facts wherefore the parties are required to lead evidence:
both oral and documentary which can be determined by a damestic forum chosen by the parties, the Court may not entertain a writ application.
Relying on some of the earlier decisions, the Apex Court. in the said case, further held as follows:
"Ki may be true that in a given case when an action of the party is de hors the terms and conditions contained in an agreement as alse beyond the scope and ambit af domestic forum created therefore the writ petition may be held to be maintainable: but indisputably therefore such a case has to be made out. It may also be true, as has been held by this Court in Indian Oil Corporation Ltd. ». Amritsar Gas Service (1991 SCCHIS) and E. Venkatakrishna wv. Indian Oil Carporation (2000/7SCC764) that the arbitrator may not have the requisite Jurisdiction to direct restoration of distributarship having regard to the provisions contained in Section 14 of the Specifie Relief Act, 1963; but while entertaining a writ petition even in such a case, the court may nat loose sight af the fact that Uf a serious disputed question of fact is involved arising out of a contract qua contract, ordinarily a writ petition would not be entertained. A writ petition, however, will be entertained when it involves a public law character or invalues a question arising out of public law functions on the part of the respondent."
In "Empire Jute Co. Lid. v. Jute Corporation of India' the Apex Court had an occasion to deal with similar question and held as follows:
"As the disputed facts and also the law are required to he determined by the Arbitrator, we are af the opinion that all disputes "2G05) 8 SOC B42 'APR 2007 SOW 4830 between the parties should' be directed to be resolved upon taking recourse to the arbitration agreement contained in clause 9.0 of the Sale Order."
Thus. Section 5 of the Act created fetter an the judicial interference /intervention in the Arbitration proceedings except as provided in part-f of the Act.
The main endeavour of the learned counsel for the petitioner is that respondent No.2 herein is incompetent to act as Arbitrator as he is consultant of the respondent No.1 and it is hit by Section 12 of the Act. According to sub-section (8) {a} and {b)} of Section L232. an io justifiable doubts as to his independence or impartiality, or he does riot possess the qualifications agreed to by the parties.
Sub-section (4) further permits any party may challenge an arbitrator appointed by him. or in whose appointment he has participated. only for reasons of which he becomes aware after the appointment has been mace.
Further sub-section {1} permits to challenge the Arbitrator when the Arbitrator failed disclose in writing any circumstances likely to sive rise to justifiable doubts as to his independence or impartiality. As such the petitioner expressed justifiable doubt as lo the independence or impartiality of the Arbitrator on the ground that the respondent No.2 is the consultant of respondent No.l.
Admittedly, the petitioner Hed writ petition No.36081 of 2018 claiming following relief:
"ta iasue a Writ, Oreer or direction more particularly in the form of Writ. of Prohibition or any other appropriate Writ thereby declaring that the action of ibe respencent No.l" te appoint the arbitrator Respondent No 3 victe proceedings Arb/non-ICA/4.86 P.A. Boiler/ 102 dated 50.03.2015 is am egal act ancl is barred by the principles of jaw and is contrary toy the established pravisions of the Arbitration anc Conciliation Act, 1Q86 wand forbear the Respondents from proceeding as Arbitrator under the Arbitration and Soneiliation Act. This Hon'ble Court may i siecessary further declare that HACI ON WE 462 once the arbitration proceecirgs hewe been helel and i pursuance of the same an award bas been passed and thereafter the arbitralion proceecings have heen terminated. fresh arbitration. proceedings cannot be invoked at the whims sod merey of the Respondent ane the secure be termed as dlegal and arbitrary accel this Hornble Court may pass any other order deemed to be fit anc necessery in the facts and circumstances of the case."
The said writ petition was dismissed as withclrawn granting liberty to avail appropriate legal remedies under the provisions olf the Arbitration and Conciliation Act.
Therealter, the petitioner filed objections before the arbitrator dated 30.03.2018 and the same was reeeived by the Arbiirator on 04.04.2018. wherein it is contended in paragraph Na.3 as follows:
"M/s BSN Joshi has. invekec arbitratian agains! RUNDL cliallenging the termination af ihe two contracts ancl submitted a claim: for Ra.1.G6.92,000/ -, OMO. KINL appointed Justice Vaman rao (Rete). Parmer Justice A.PUHigh Court. as sele Arbitrator and PINT cletencecl the said claims. In the Awarel dated 19.04.2016 passed by the LcLArbitrator, the Claims of BSN Joshi were refected. Consequentiv, RINLS termination was upheld. Thereby Ure action of RINL against BSN Joshi for nor perfosmance ancd damages arising out of risk suit cost action were alsa upheld. Herice the igsses incurred ly RUNL due to the said breach of cortract and risk and cest operation through alternate agency are being claimed im this arbitration."
But the same was rejected by the respondent No.2 by letter dated 01.09.2018. Therefore, the petitioner invoked Section 13 betore Arbitrater, which conferred power on the arbitrator ~ respondent No.2 ta decide such challenge. However. when the petitioner is unsuccesslul in challenge under Section 13 (2) of the Act, the remedy open to him is under sub-section (4) of Section 13 of the Act, which says that Hoa challenge under any procedure agreed upon by the parlies or under the procedure under sub-section (2) is not successiiul the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award.
Sub-section (5) of Section 13 of the Act made it clear that when an arbitral awa rd is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an.
FLACT & MANU WP a fo 20PS arbitral award in accordance with section 34 of the Act. Thus, it is lear from sub-section (5) of Section 13. when a chailenge was made under sub-section (2) of Section 13, the remedy open to him is to file an application under Section S34 but not otherwise. Thus, the elcacious remedy under the Act is available to the petitioner, who is unsuccessiul in the challenge to Arbitrator under Section 13 (2) of the Act and such order is not amenable to the extraordinary juriscietion under Article 226 of Constitution of India in view of cateena of judgments of Apex Court and other Courts, few such judgments are noted below, The Apex Court in "S.B.P. and Co. v, Patel Engineering Lid." held that the object of minimizing judicial intervention while the matter is in the process of being arbitrated upon, will certainty be defeated, if, the High Court could be approached under Article 227 of the Constitution of India or under Article 226 of the Constitution of India 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 ever: at an earlier stage.
Cis important to note that the 1996 Act was enacted ta replace the 1940 Arbitration Act in order to provide for an arbitral procedure which is fair, efficient and capable of meeting the needs of arbitration:
alsa to provide Uiat the tribunal gives reasons for an arbitral award:
lo ensure that the tribunal remains within the Hmits of its jurisdiction: and to minimise the supervisory roles of courts in the set net NC AS0 'f a TAL oe ?
HACT& MSM Wi dogg BOER arbitral process (Vide: "Associate Builders Vs. Dethi Development Authority') Similar view as above is further taken by the Apex Court in "M/s. Voestalpine Schienen GMBH Vs. Delhi Metro Rail Corporation Ltd." relying on the earlier judgment in "Deptt. oF Economic, Policy and Development of the City of Moscow Vs. Bankers Trust Co. [2005 QB 207] and held as follows:
"Ol Parliament has set out. in the Arbitration Act, LOQ6, to Snorage and facilitate a reformed and more independent, as well as private andl cotilidential, systern of consensual dispute resolution. with ornly limites! possibilities of court invealvernent where necessary in the interest of the rruiblic:
aad of basic fairness,"
In "Cadre Estate Put. Ltd. v. Salochna goyal and Others*" High Court of Delhi while following the judgment in "S.B.P. and Co. v. Patel Engineering Lid." (referred supra) held that the Arbitration Act restricts the scope of interference by judicial authorities with arbitral proceedings and discussed about the extent of judicial interference tn such arbitral proceedings with reference io Section 5 and concluded Unat under Part I of the Act. interference by the Court is only to the extent permissible thereunder. Section 8 enables the Court before which an action is brought to refer parties to arbifration, A&A court can pass orders of an interim nature even before the commencement of arbitral proceedings. This is envisaged in the circumstances outlined in Section 9 of the Act. The power of the Chief Justice to appoint an arbitrator where any of the parties fails to appoint one despite an arbitration agreement is contained in section Ll. The grounds for challenging the appointment of an "£90 1.5) Ne S SOc. £9 os ale OnLine SQ Lee SOTO CEiSy DR EAS?
HATS & MSM WE fou fore Arbitrator are set out in Section 12 and the challenge procedure is in Section 12 of the Act. However, Section 134) makes it clear that ifa challenge procedure is not successful. the Arbitral Tribunal shall eontinue the arbitral proceedings and make an arbitral award. [If is further held as follows:
"It may be observed. that as regards the Petitioners challenge to the Jurisdiction of the learned Arbitrator it is not as if it has no remedy. If its application under Section 16 of the AC Act is allowed by the learned Arbitrator it ull have no grievance left. If not, the Petitioner has ta abide by the legislative scheme outlined in Section 16/5) read with Section 16{6) AC Act and await the passing of the Award. If the Award goes against the Petitioner, it can challenge the Award on the grounds available to it under Section 34 of the AC Act. The mere fact that this may cause it the inconvenience of having to await the conclusion of the arbitral proceedings is no ground to entertain a writ petition at an intermediate stage in a manner contrary toe the legislative scheme under Section 16 AC Act. The AC Act being @ conmmplete code in itself and with Section & of the AC Aet Limiting interference by judicial authorities, any attempt to expand the scope for interference by the High Court in exercise of its powers under Article 226 of the Constitution would defeat the ohject and purposes af the AC Act."
In the case of "Commercial and Ors. v. Calicut Engineering Works Limited', the petitioner, i.e. Commercial filed an application dated 2.7.2003 ta the Arbitrator for setting aside the repert of hand writing expert in respect of the question as to whether the petitioner has signed the document which purportedly contained arbitration Clause and another hand writing expert be appointed. The said application was rejected by the Arbitrator. The Apex Court in Commercial and Ors. v. Calicut Engineering Works Limited" (referred supra) held that the said rejection by the Arbitrator would be a ground of challenge under Section 34 of the Act. In "Rajinder Krishna Khanna and Ors. v. Union of India and Ors." a copy of "iado4a) 10 SCL ABE * AIR FINISHES iy HACL& MSM WP 4G 2088 inspection report basing on which the impugned arbitration award was made, was net available to the secand respondent, as such, the second respondent had been unable to presemt ifs case thereon and principles af natural justice had been violated. 'The Apex Court in Rajinder Krishna Khanna (supra) held that denial of opportunity to present Hs case in the arbitration proceedings, would be ane of the ground mentioned in Seetion 84(2)fiii) of the Act for setting aside the award made by the Arbitral Tribunal in such proceedings. In "Punj Sons Put. Lid. v. National Aluminium Co. Ltd and Anr.''". the arbitrator had denied to consider the counter claim which was led before him on the ground that the party should secure a fresh reference, regarding the dispute. which are the subject matter of the counter claim and both the original reference and second reference could be consolidated and decided together, and as the counter claim was net included in the reference. it cannot be adjudicated upon. The Apex Court in para-3 of ADR in Punj Sons Pvt. Lid. (supra) held as under:
"We have heard learned Counsel for the purties. It appears to us that the learned Arbitrator had. in the facts and circumstances of this case, rightly apined that whereas respondent Na. 1 was not justified to raise a "counter claim" in the manner in which it was raised, but it could seek adjudication af the disputes involved in the "counter chain" by asking for a second reference and that as and when the second reference is made, bath the references could be heard together. Respandent No. 1 could have sought a reference thereafter in respect of the disputes which were covered by the "counter claim" but he choose not te do so and in the bargain, almast ten years have gone by. According te Mr. Nariman, the view af the arbitrator was correct because the "counterclaim" was outside the scape of the reference made orn 10.32.1986."
in "HIRD Corporation (Marcus Oil and Chemical Division) v.
GAIL (india) Limited (Formerly Gas Authority of India Ltd.}i" the ALE LQG SCL 1647 a0rs} 40 SCALE AF?
HACH & MSM WEP SHAD DDT SN Apex Court while discussing with the amended provisions of the Act observed as follows:
"After the 2016 Amendment Act. a dichotomy is made by the Act between persons who become "ineligible" to be appointed as arbitratars, and persons abeut whom justifiable doubts exist as to their independence or impartiality. Since ineligibility goes ta the root of the appointment. Section 12{5} read with the Seventh Schedule makes it clear that if the arbitrator falls in any one of the categories specified in the Seventh Schedule, he becomes "ineligible" to act as arbitrator. Once he becomes ineligibie, it is clear that, Under Section 14{1Na}, he then becomes de jure unable to perform his functions inasmuch as, in law, he is regarded as "ineligible". In order ta determine whether an arbitrator is de jure unable ta perform his functions, it is not necessary to ga te the Arbitral Tribunal Under Section 13. Since such a person would tack inherent jurisdiction te proceed any further, an application may be filed Under Section 14({2) to the Court to decide an the termination of his/her mandate on this grownd: As opposed ta this, in a challenge where grounds stated in the Fifth Schedule are disclosed, which give rise to justifiable doubts as te the arbitrator's independence ar impartiality, such doubts as to independence or impartiality hawe to be determined as a matter of fact in the facts of the particular challenge by the Arbitral Tribunal Under Sectian 13. If a challenge is not successful, and the Arbitral Tribunal decides that there are no justifiable doubts as to the independence or impartiality of the arbitrator/arbitrators, the Tribunal must then continue the arbitral preceedings Under Section 13f4) and make an award. It is only after such award is made, that the party challenging the arbitrator's appointment on grounds contained in the Fifth Schedule may make an application for setting aside the arbitral award in accordance with Section 34 on the aforesaid grounds. It is clear, therefore, that ary challenge contained in the Fifth Schedule against the appointment of Justice Doabta and Justice Lahoti cannot be gone inte at this stage, but will be gone into only after the Arbitral Tribunal has given an award. Therefore, we express no opinion on items contained in the Fifth Schedule under which the Appellant may challenge the appointment of either arbitrator. They will be free toe do so only after an award is rendered by the Tribunal."
As per the caw declared itn long line of perspective pronouncemerits, the jurisdiction of this Court under Article 226 of Constitution of India, after cormmencement of arbitration proceedings, is limited and more particularly against an order passed under HACTA MSM! Wet 46209 201K Section 13 (2) of the Act, as such the Court cannot exercise power under Article 226 of Constitution of India to issue any order in this writ petition.
Learned counsel for the petitioner mainly contended that in case the Court did not exercise its extraordinary jurisdiction under Article 226 of Constitution of India, it will cause serious prejudice to the petitioner, as he will be forced to face the Arbitration proceedings, has to wait till passing of award to challenge the same under Section 34 of the Act, he has to comply with the amended provisions by depositing the amount prescribed therein, which would cause serious inconvenience to the petitioner personally and also to face some financial troubles. To obviate such difficulties, the Court can exercise such power under Article 226 of Constitution of India ica nip the proceedings at the stage of bud. But this view merits no consideration, as the judicial intervention is limited to certain cases in view of Section 5 of the Act. Unless the provisions of the Act permits such judicial intervention or interference in the arbitration proceedings. the Court cannot exercise such power irrespective of prejudice or inconvenience being caused to the parties and if such power is exercised, it amounts to illegal exercise of jurisdiction and contrary to the very intention of legislature in enacting Arbitration and Conciliation Act. Therefore. this Court cannot exercise power under Article 226 of Constitution of India in arbitration proceedings wiess such interference is permitied by any of the provisions af the Act, On this aspect, the law laid down by the Apex Court is consisteni more particularly the recent judgment of the Apex Court rendered in "HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (india) Limited [Formerly Gas Authority of India Ltd} (referred supral. Therefore. this Court cannot interfere with the arbitral 190 HAC o& MSAU WP de200 A018 proceedings pending before the sole arhitrator in view of the specific bar contained in the Act referred above. Consequently, the petition is liable to be dismissed at the stage of admission.
In the result, the writ petition is dismissed. No casts, Consequently, miscellancous applications pending if any, shall also star closed.
Sd/- CH. VENKATESWAR ASSISTANT REGISTRAR TRUE COPY! ca SECTION OFFICER Fo, @LR Copies The Under Secretary, Union of India Ministry of Law, Justice and Company Affairs, New Delhi.
The Secretary, Advocate Association Library, High Court of Andhra Pradesh. One CC to Sri. Aadesh Varma, Advocate (OPUC} One CC to Sri. K. Sarva Bhouma Rao, Advocate (OPUC) Two CB Copies.
PM ws Ah 8 Ne HIGH COURT DATED: 12/03/2019 ORDER WP.No.46299 of 2018 Dismissing the WP Without costs.