Bombay High Court
Municipal Corporation Gr Mumbai vs R V Anderson Associates Limited on 4 July, 2025
2025:BHC-OS:10262-DB
Neeta Sawant ARBITRATION APPEAL-4339-2024 -FC
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION APPEAL (L.) NO. 4339 OF 2024
WITH
INTERIM APPLICATION (L) NO. 7312 OF 2024
(For Stay)
Municipal Corporation of Greater Mumbai ....Appellant
: Versus :
M/s. R.V. Anderson Associates Ltd. ....Respondent
Mr. Kevic Setalwad, Senior Advocate with Mr. Yashodeep Deshmukh,
Ms. Pooja Yadav, and Ms. Reshaya Malhotra i/by. Mr. Sunil Sonawane, for
the Appellant.
Mr. Naushad Engineer, Senior Advocate with Ms. Shreya Jha and
Ms. Tanjul Sharma i/by. Dhruve Liladhar & Co., for the Respondent.
CORAM : ALOK ARADHE, CJ. &
SANDEEP V. MARNE, J.
DATED : 4 JULY 2025.
ORDER :(Per Sandeep V. Marne, J.)
1) This is an Appeal filed under the provisions of Section 37 of the Arbitration and Conciliation Act, 1996 (the Act) challenging the judgment and order dated 19 and 20 October 2022 passed by the learned Single Judge of this Court dismissing the petition filed by the Page No.1 of 14 4 July 2025 ::: Uploaded on - 08/07/2025 ::: Downloaded on - 01/08/2025 22:49:28 ::: Neeta Sawant ARBITRATION APPEAL-4339-2024 -FC Appellant under Section 34 of the Act, in which the Award of the learned sole Arbitrator dated 5 June 2010 was under challenge.
2) Briefly stated, facts of the case are that Appellant-MCGM had invited Request for Proposals for consultancy services required for upgrading the sewerage operations and maintenance services. On 6 May 1994, the Respondent submitted its proposal. On 18 September 1995, parties executed the contract. The Respondent apparently completed the work by 30 June 2001. There appears to be no dispute about the quantity or quality of work. However, MCGM withheld certain payments during the contract which led to raising of claims by the Respondent. The Appellant-MCGM accepted some of Respondent's claims while rejecting the others. To the extent of non- disbursal of the remaining payments, the Respondent invoked arbitration by letter of 9 August 2005.
3) During the course of arbitration, MCGM raised the objection of jurisdiction under Section 16 of the Act, which was rejected vide Part-I Award dated 17 July 2009. The final Award was delivered on 5 June 2010 allowing various claims made by Respondent-Anderson by directing MCGM to pay Anderson USD 2,078,349.25 and also Rs.14,76,736/- with interest calculated on USD 1,089,926.88 and Rs.1,51,596/- at 14% p.a. from 16 June 2004. Additionally, MCGM has been directed to pay Respondent-Anderson costs of arbitration quantified at Singapore Dollars 55,217 and Rs.15,57,500/-. Additionally, MCGM is also directed to pay Anderson, Singapore Dollars 42,815 and Rs.4,07,500/- in addition to costs which appears to be the fees of one of the Arbitrators.
4) MCGM challenged the Award of the Arbitral Tribunal by filing Arbitration Petition No.84/2012 under Section 34 of the Act. By Page No.2 of 14 4 July 2025 ::: Uploaded on - 08/07/2025 ::: Downloaded on - 01/08/2025 22:49:28 ::: Neeta Sawant ARBITRATION APPEAL-4339-2024 -FC judgment and order dated 19 and 20 October 2024, the learned Single Judge has proceeded to dismiss the Appeal preferred by MCGM. Accordingly, MCGM has filed the present Appeal under the provisions of Section 37 of the Act.
5) Mr. Setalwad, the learned Senior Advocate appearing for the Appellant-MCGM has sought to challenge the findings recorded by the learned Single Judge on three aspects of (i) jurisdiction, (ii)limitation and (iii)interest. He would contend that the Arbitral Tribunal was improperly constituted vitiating the Award. Reliance is placed on Clause-8.3(b) of the Agreement under which the third Arbitrator was initially required to be jointly appointed by the two Arbitrators nominated by the parties and in the event of failure to nominate the third Arbitrator by the nominee Arbitrator within 30 days, the third Arbitrator was to be appointed by the Secretary General of International Centre for Settlement of Investment Disputes, Washington D.C. It is submitted that the period of 30 days had expired and the two Arbitrators had failed to appoint the third Arbitrator and therefore the third Arbitrator could only have been appointed by International Centre for Settlement of Investment Disputes, Washington D.C. That therefore appointment of the third Arbitrator by the two Arbitrators was clearly contrary to Clause-8(b) of the Arbitration Agreement. That therefore since the appointment of the Third Arbitrator itself is contrary to the agreement, the same would result in improper constitution of the Arbitral Tribunal vitiating the Award. That the learned Judge has erred in holding that the parties resorted to conciliation before expiry of period of 30 days and that therefore the said period of 30 days got extended until pendency of the conciliation proceedings. He would rely on provisions of Section 62 of the Act in support of his contention that conciliation proceedings can commence only when other party consents in writing the invitation to conciliate. That MCGM never consented for Page No.3 of 14 4 July 2025 ::: Uploaded on - 08/07/2025 ::: Downloaded on - 01/08/2025 22:49:28 ::: Neeta Sawant ARBITRATION APPEAL-4339-2024 -FC conciliation in writing. Therefore, the conciliation did not commence within the meaning of Section 62 of the Act. He would therefore submit that the period of alleged conciliation cannot be excluded while computing the period of 30 days and therefore the appointment of the third Arbitrator by the two nominee Arbitrators after expiry of period of 30 days was clearly contrary to the Arbitration Agreement thereby vitiating the Award. Continuing with his submissions qua the first aspect of jurisdiction, he would submit that the learned Single Judge has erroneously applied the provisions of Section 13 of the Act while deciding challenge of MCGM to constitution of the Arbitral Tribunal. That what is applicable to the present case are provisions of Section 16 of the Act as what was essentially challenged was the jurisdiction of the Tribunal and therefore the application was maintainable under Section 16 of the Act.
6) So far as the second aspect of limitation is concerned, Mr. Setalwad would contend that the work was completed on 30 June 2001 and therefore the cause of action for filing claim arose on 1 July 2001 and that therefore the claim of Anderson was clearly time barred. That the alleged act of MCGM in withholding payment of invoices is irrelevant for determining the cause of action. Referring to the provisions of Section 21 of the Act, he would submit that the arbitration proceedings commenced on the date of invocation of arbitration which in the present case is 14 September 2005. That since the cause of action arose on 1 July 2001, commencement of arbitration proceedings on 14 September 2005 was clearly hit by limitation.
7) On the last aspect of interest, Mr. Setalwad would submit that Arbitral Tribunal has erred in awarding interest in favour of Anderson from the date of each individual invoice. That even if any interest is held to be payable, the same ought to have been directed to be Page No.4 of 14 4 July 2025 ::: Uploaded on - 08/07/2025 ::: Downloaded on - 01/08/2025 22:49:28 ::: Neeta Sawant ARBITRATION APPEAL-4339-2024 -FC paid from the date of accrual of cause of action i.e. 1 July 2001. That Anderson cannot conveniently claim interest from the dates of raising of invoices but seek to save the claim from limitation by indicating subsequent date for accrual of cause of action. That if the date of refusal of payment is taken as the date of accrual of cause of action, the interest liability must also be determined with respect to that date alone and not from the date of each individual invoice. That since the date of 24 October 2002 is taken as the date of accrual of cause of action, no interest could have been awarded prior to 24 October 2002. On following broad submissions, Mr. Setalwad would pray for setting aside the impugned judgment passed by the learned Single Judge, as well as the Award of the learned Arbitrator.
8) The Appeal is opposed by Mr. Engineer, the learned Senior Advocate appearing for the Anderson. On the aspect of jurisdiction, he would submit that the learned Single Judge has made a detailed analysis about the aspect of validity of appointment of the third Arbitrator. He has interpreted the contract clauses providing for appointment of the third Arbitrator. That the interpretation placed by the learned Single Judge is plausible interpretation not warranting any interference in exercise of jurisdiction under Section 37 of the Act. He would submit that the learned Single Judge has rightly held that either of the parties were required to approach the Secretary General of International Centre for Settlement of Investment Disputes, Washington D.C. That MCGM itself not having approached the Secretary General, it cannot seek to take benefit of its own wrong. That in any case, the Arbitration Agreement cannot be read to mean as if there was any bar on appointment of Arbitrator after expiry of the period of 30 days. So far as the debate between Sections 13 and 16 of the Act is concerned, Mr. Engineer would submit that no finding is recorded by the learned Judge against MCGM on this aspect and even if the application is to be Page No.5 of 14 4 July 2025 ::: Uploaded on - 08/07/2025 ::: Downloaded on - 01/08/2025 22:49:28 ::: Neeta Sawant ARBITRATION APPEAL-4339-2024 -FC considered as the one under Section 16 of the Act, still the same deserved rejection.
9) He would further submit that MCGM had actually consented for conciliation vide letter dated 7 January 2006 and cannot now turn around and contend that conciliation proceedings did not commence on account of provisions of Section 62 of the Act. So far as the aspect of limitation is concerned, Mr. Engineer would submit that there is indivisible contract between the parties and it is impermissible to divide the same by each invoice. That the cause of action would obviously arise from the date on which MCGM refused to pay the invoices and the date of completion of work of 30 June 2001 has no relation to the aspect of limitation. On the aspect of interest, Mr. Engineer would submit that the Arbitral Tribunal has rightly awarded interest from the date of each individual invoices. If the act of withholding the invoice amount is held to be erroneous, the payment of interest from the date of withholding such payment must follow. That MCGM cannot be permitted to take benefit of its own wrong in wrongfully withholding payment of invoices and then claim immunity from payment of interest. Lastly Mr. Engineer would submit that the scope of interference by Appeal Court under Section 37 of the Act is more circumscribed than the one which can be exercised by Court under Section 34. He would pray for dismissal of the Appeal.
10) We have considered the submissions canvassed by the learned counsel appearing for the parties and have gone through the records of the case filed alongwith the Appeal. From the submissions canvassed by Mr. Setalwad, MCGM's challenge to the order of the learned Single Judge is essentially restricted only to three aspects of -
(i) jurisdiction relating to constitution of Arbitral Tribunal,
(ii) limitation and
(iii) interest.
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Neeta Sawant ARBITRATION APPEAL-4339-2024 -FC
Otherwise, no submissions are canvassed about merits of claim awarded by the Arbitral Tribunal, though the said issue was also raised before the learned Single Judge under Section 34 petition. We accordingly confine our consideration only to the three aspects of jurisdiction, limitation and interest while deciding the present Appeal.
11) So far as the first aspect of jurisdiction is concerned, the same is essentially linked to the argument of improper constitution of the Arbitral Tribunal. According to MCGM, the contract permitted the two nominated Arbitrators to appoint the third Arbitrator only within a period of 30 days and that upon expiry of period of 30 days, nomination of the third Arbitrator could only be done by a designated institute in Washington D.C. However, the appointment of the third Arbitrator is done in the present case by the two nominated Arbitrators after expiry of period of 30 days resulting in improper constitution of the Arbitral Tribunal. It is therefore contended that the Award is vitiated. We proceed to decide the contention. After Anderson invoked arbitration on 9 August 2005, it nominated Mr. Justice S.M. Jhunjhunwala, former Judge of this Court as its nominee Arbitrator. On 7 October 2005, MCGM appointed by Mr. Sharad Upasani, Ex IAS Officer as its nominee arbitrator. On 8 November 2005, Anderson enquired with MCGM about is willingness to go for conciliation and proposed that the arbitral proceedings be held in abeyance in the meantime. On 7 January 2006 MCGM agreed to go for non-binding mediation/conciliation. On 12 February 2006, MCGM was called upon by Anderson to participate in mediation/conciliation proceedings. Again on 27 February 2006, Anderson requested MCGM to initiate conciliation proceedings. However, nothing happened in the conciliation proceedings till 15 December 2006 when MCGM wrote to its nominee arbitrator, Mr. Sharad Upasani that conciliation was not taking place. On 8 January 2007, Anderson also confirmed with MCGM that since no Page No.7 of 14 4 July 2025 ::: Uploaded on - 08/07/2025 ::: Downloaded on - 01/08/2025 22:49:28 ::: Neeta Sawant ARBITRATION APPEAL-4339-2024 -FC conciliation/mediation could take place, the arbitration should proceed. Thereafter, on 30 April 2007, the two nominee arbitrators appointed Mr. Justice D.R. Dhanuka, former Judge of this Court as the Presiding Arbitrator.
12) In the light of the above factual position, it is seen that appointment of the third Arbitrator by the two nominee arbitrators got withheld on account of agreement for conciliation expressed by both the parties. The appointment of MCGM's nominee had taken place on 7 October 2005 and within a period of 30 days, Anderson had proposed conciliation proceedings for which willingness was shown by MCGM on 7 January 2006. After considering this factual position, the learned Judge has arrived at the findings that the time taken in attempting conciliation ought to be excluded while computing the period prescribed in Clause-8.3(b) for appointment of third Arbitrator.
13) It would be relevant to extract Clause-8.3(b) of the Agreement, which reads as under :-
b) Where the Parties do not agree that the dispute concerns a technical matter, the Client and the Consultants shall each appoint one arbitrator, and these two arbitrators shall jointly appoint a third arbitrator, who shall chair the arbitration panel.
If the arbitrators named by the Parties do not succeed in appointing a third arbitrator within thirty (30) days after the latter of the two arbitrators named by the Parties has been appointed, the third arbitrator shall, at the request of either Party, be appointed by Secretary General of International Centre for Settlement of Investment Disputes, Washington D.C.
14) Perusal of the above contractual clause would indicate that in the event of the two arbitrators failing to appoint the third arbitrator, either MCGM or Anderson were required to request the designated institute in Washington D.C. to appoint third arbitrator. MCGM, Page No.8 of 14 4 July 2025 ::: Uploaded on - 08/07/2025 ::: Downloaded on - 01/08/2025 22:49:28 ::: Neeta Sawant ARBITRATION APPEAL-4339-2024 -FC though vehemently challenges the constitution of Arbitral Tribunal, itself never requested appointment of third arbitrator by the designated institute in Washington D.C. Therefore, if MCGM's contention is accepted, the same would have resulted in absurdity where no arbitration between the parties could have taken place. Upon construction of Clause-8.3 of the Contract, the learned Single Judge has interpreted that the said Clause merely provided for another alternative for the parties, in the event of the two nominee Arbitrators not agreeing on the Presiding Arbitrator within 30 days. The learned Judge has refused to accept that upon expiry of 30 days, the only option available to one of the parties was to go to the designated institute in Washington D.C. The learned Judge took into account the conduct of MCGM in not approaching the said designated institute. The learned Judge has held that interpretation to the clause by MCGM would lead to an absurdity as the two nominee arbitrators would remain powerless and had to wait indefinitely till either of the parties approached the Secretary General in Washington D.C. In our view, the interpretation made by the learned Judge to Clause-8.3(b) of the contract is a plausible one and therefore no case is made out for interference in exercise of jurisdiction under Section 37 of the Act.
15) Mr. Setalvad has relied on the judgment of the Apex Court in Indian Oil Corporation Limited through its Senior Manager Versus. Shree Ganesh Pertroleum Rajgurunagar through its Proprietor Laxman Dagdu Thite1 in support of the contention that appointment of arbitrator can only be done in the manner provided for in the agreement. The Apex Court held in paras-31, 32 and 33 as under :-
31. As observed above, the lease agreement and the dealership agreement are distinct agreements, independent of each other.
Disputes under the lease agreement were referrable to the arbitration of the Managing Director of the appellant who was to 1 (2022) 4 SCC 463 Page No.9 of 14 4 July 2025 ::: Uploaded on - 08/07/2025 ::: Downloaded on - 01/08/2025 22:49:28 ::: Neeta Sawant ARBITRATION APPEAL-4339-2024 -FC be the sole arbitrator, and only if the Managing Director was unable or unwilling to act as sole arbitrator the disputes were to be referred to the sole arbitrator designated or nominated by the Managing Director in his place. If the disputes could not be referred to the Managing Director for any reason, the matter was not to be referred to arbitration at all.
32. In the instant case, the respondent invoked the arbitration clause under the dealership agreement and approached the Director (Marketing) of the appellant who appointed Mr B.L. Parihar as the sole arbitrator. The arbitrator, Mr B.L. Parihar, nominated by the Director (Marketing) of the appellant had no authority and/or jurisdiction to adjudicate any dispute pertaining to the lease agreement.
33. The arbitral award is liable to be set aside insofar as the same deals with disputes with regard to the lease agreement which are not contemplated by the arbitration clause in the dealership agreement and/or in other words, do not fall within the terms of the submission to arbitration. The arbitral award is thus liable to be set aside under Section 34(2)(a)(iv) of the 1996 Act. The decision enhancing the lease rent is patently beyond the scope of the submission to arbitration. Moreover, the composition of the Arbitral Tribunal or the arbitral procedure was not in accordance with the lease agreement dated 20-9-2005.
16) In our view, the judgment has no application to the facts of the present case as the appointment of arbitrator is found to be as per the provisions of Clause-8.3(b) of the Agreement. Infact, on the other aspect of interpretation of contractual provision, the judgment turns against MCGM in the light of findings recorded in para-35 which reads thus :-
35. To my question as to why this was not more properly an application under Section 13 of the Arbitration Act, the answer from Mr. Sakhare was that the challenge was not to the identity or the qualification of the person named as a presiding arbitrator. There was no case of bias being made by the MCGM.
What was being canvassed was purely a jurisdictional question on an interpretation of the contract, i.e., whether the two nominee Arbitrators had contractual jurisdiction after 30 days following the appointment of the second nominee arbitrator to appoint or nominate a presiding arbitrator. Mr Sakhare therefore submits that this is not an application that could be sustained Page No.10 of 14 4 July 2025 ::: Uploaded on - 08/07/2025 ::: Downloaded on - 01/08/2025 22:49:28 ::: Neeta Sawant ARBITRATION APPEAL-4339-2024 -FC under Section 13 at all but could only be brought under Section 16 of the Arbitration Act. He, too, is careful to separate the question of jurisdiction of nominee Arbitrators to appoint a presiding arbitrator from the question of jurisdiction of the arbitral tribunal as a whole over the subject matter of the contract. Even if there is a challenge to the first, Mr. Sakhare maintains it can be brought only under Section 16.
17) The learned Single Judge has interpreted Clause-8.3 of the Agreement to mean that the two nominated Arbitrators can appoint the third arbitrator even after expiry of period of 30 days. We cannot sit in Appeal over the said interpretation made by the learned Arbitrator merely because another interpretation of the said Clause in the Agreement is also possible.
18) So far as the submission of Mr. Setalwad about learned Judge erroneously treating MCGM's application of jurisdiction under Section 13 of the Act is concerned, we find that though the debate is noted in para-35 of the judgment, the learned Judge has not held that the application filed by MCGM under Section 16 of the Act was not maintainable because the same could not have been filed under Section
13. The learned Judge has considered the objection of jurisdiction raised by MCGM on merits and has not closed the doors of the Court by adopting hypertechnical approach by holding that the application could be filed only under Section 13 of the Act. In that view of the matter, we need not go into the exact provision of the Arbitration Act, under which objection to Arbitral Tribunal could have been raised. We therefore find that the first objection of jurisdiction raised by MCGM has rightly been rejected by the learned Judge.
19) Coming to the second aspect of limitation, it is MCGM's contention that all the claims arose prior to three years of invocation of arbitration on 14 September 2005 and were therefore barred by Page No.11 of 14 4 July 2025 ::: Uploaded on - 08/07/2025 ::: Downloaded on - 01/08/2025 22:49:28 ::: Neeta Sawant ARBITRATION APPEAL-4339-2024 -FC limitation. MCGM contended before the learned Single Judge that non- payment of each singular invoice created distinct cause of action in favour of Anderson. Alternatively, it is canvassed before us that the cause of action in any case arose before 1 July 2001 when the work got completed on 30 June 2001. The learned Single Judge has refused to accept the case of MCGM of each singular invoice giving rise to distinct cause of action by holding that the contract was a single indivisible contract for the full spectrum of contractual services. We do not find any serious error on the part of the learned Judge in holding so. Anderson was not expected to invoke arbitration on multiple occasions in respect of each of the invoices.
20) The learned Judge has taken into consideration the entire correspondence between the parties and has thereafter accepted the case of Anderson that the cause of action arose on 24 October 2002. In our view, the period of limitation cannot begin to run either from the date of each invoice in respect single indivisible contract and the same would arise only after MCGM communicated refusal to pay the invoices. The learned Judge has recorded a finding on fact that refusal on the part of MCGM did not occur until 24 October 2002. We find no reason to interfere in this finding of fact recorded by the learned Single Judge after going through the correspondence that ensued between the parties. We are therefore not inclined to interfere in the findings recorded by the learned Judge on the issue of limitation.
21) Coming to the last aspect of interest, the case of MCGM is that the interest could not have been awarded from the date of each invoice and the same could have been awarded either from the date of completion of work of 30 June 2001 or from the date of accrual of cause of action i.e. 24 October 2002 but seeking interest from the date of raising of invoice. It is contended that the Arbitral Tribunal ought to Page No.12 of 14 4 July 2025 ::: Uploaded on - 08/07/2025 ::: Downloaded on - 01/08/2025 22:49:28 ::: Neeta Sawant ARBITRATION APPEAL-4339-2024 -FC have been consistent and if the argument of limitation raised by MCGM from the date of each invoice was rejected, it was inconceivable that interest can be awarded from each date of the invoice. Perusal of the findings recorded by the learned Single Judge under the heading 'Point No.4 : The various claims in arbitration' does not show that any serious objection was raised to the aspect of interest before the learned Single Judge on account of which no findings are recorded while rejecting MCGM's petition filed under Section 34 of the Act. It is therefore difficult to comprehend as to how the issue of interest can be raised directly in Appeal filed under Section 37 of the Act. It is also seen that the Arbitral Tribunal has awarded interest at the rate of 14% p.a. from 16 June 2004 on amount of USD 1,089,926.88 and Rs.1,51,596/-. Thus, the interest appears to have been awarded from 16 June 2004. Even otherwise, if the amounts due to Anderson under the invoices was wrongfully withheld, MCGM would be liable to pay interest on such wrongfully withheld amount on the principle of impermissibility to take benefit of its own wrong by MCGM.
22) Considering the overall conspectus of the case, we are of the view that no case is made out for interference in the findings recorded by the learned Single Judge while dismissing Arbitration Petition filed by MCGM under Section 34 of the Act. While exercising jurisdiction under Section 37 of the Act, the Appeal Court would be bound by same limitations as are applicable to Section 34 Court. In fact, Section 37 jurisdiction is even more circumscribed. Reference in this regard can be made to the recent judgment of the Apex Court in Punjab State Civil Supplies Corporation Limited and another Versus. Sanman Rice Mills and others2. The Appellant has failed to make any valid ground to interfere in the order passed by the learned Single Judge in exercise of Jurisdiction under Section 37 of the Act, we are unable to 2 2024 SCC OnLine SC 2632 Page No.13 of 14 4 July 2025 ::: Uploaded on - 08/07/2025 ::: Downloaded on - 01/08/2025 22:49:28 ::: Neeta Sawant ARBITRATION APPEAL-4339-2024 -FC grant any relief to MCGM in the present Appeal. The Appeal must fail. It is accordingly dismissed.
23) With dismissal of the appeal, Interim Application taken out for stay does not survive. The same also stands disposed of.
[SANDEEP V. MARNE, J.] [CHIEF JUSTICE] Page No.14 of 14 4 July 2025 ::: Uploaded on - 08/07/2025 ::: Downloaded on - 01/08/2025 22:49:28 :::