Gujarat High Court
Neeraj Kumarpal Shah vs Manbhupinder Singh Barinder Singh ... on 12 February, 2020
Author: A.Y. Kogje
Bench: A.Y. Kogje
C/SCA/3913/2020 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 3913 of 2020
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NEERAJ KUMARPAL SHAH
Versus
MANBHUPINDER SINGH BARINDER SINGH ATWAL
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Appearance:
MR SN SOPARKAR assisted by M/S GH VIRK and PRASHANTH UNDURTI
for the Petitioner
MR SHALIN MEHTA, SENIOR ADVOCATE assisted by MR PRANAV VYAS
for Respondent No.1
MR ND NANAVATY, SENIOR ADVOCATE assisted by MR MASOOM SHAH
for Respondent No.2
MR PRANJAL BUCH for Respondent No.4
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CORAM: HONOURABLE MR.JUSTICE A.Y. KOGJE
Date : 12/02/2020
ORAL ORDER
1. Learned Senior Advocate Mr.Soparkar for the petitioner and learned Senior Advocate Mr.N.D.Nanavaty for respondent No.2, who is supporting the petitioner, jointly submitted that the Arbitral Tribunal has lost its mandate and therefore, cannot proceed further with the arbitration. He drew attention of this Court to the order of the Apex Court dated 04.12.2027 in MA No.1482 of 2017 in Arbitration Petition No.14 of 2017 and particularly referred to the directions of the Apex Court in connection with Section 29A of the Arbitration and Conciliation Act that the arbitral proceedings will commence on and from the date on which the first sitting Page 1 of 15 Downloaded on : Fri Feb 14 00:27:40 IST 2020 C/SCA/3913/2020 ORDER takes place. According to the petitioner, first date of arbitration was 01.02.2018 and therefore, as provided under Section 29A of the Arbitration and Conciliation Act, the award is to be made within a period of 12 months and therefore, period of 12 months had expired on 31.01.2019.
1.1 Learned Senior Advocate for the petitioner referred to Section 29A(3) of the Act which provides for extension of period by consent of the parties by further period of not exceeding six months. That period was also over by 31.07.2019. It is the case of the petitioner that till such date, the Arbitral Tribunal was not constituted. For this, learned Senior Advocate for the petitioner drew attention of this Court to communication dated 21.01.2019 with regard to terms of each member of Tribunal and categoric mention in such communication by the Principal Arbitrator that upon payment stipulated in the very communication, the Tribunal shall be constituted and will enter into the reference of arbitration and commence work. He referred to various communications on behalf of the petitioner to the Principal Arbitrator about inability of the petitioner to accept the fee structure of arbitration. It is submitted that an application under Section 9 was filed by the petitioner before this Court being MCA No.90 of 2019, which came to Page 2 of 15 Downloaded on : Fri Feb 14 00:27:40 IST 2020 C/SCA/3913/2020 ORDER be disposed of on the basis that the Arbitral Tribunal is constituted. Despite this, it was consistent stand of the respondent, including respondent No.5 that the Arbitral Tribunal is not constituted. He drew attention of this Court to various such communications, where stand of the respondent, including that of respondent No.5 is that the Arbitral Tribunal is not constituted. It is submitted that it was only on 06.10.2019, a communication was issued by respondent No.5 that the Tribunal is constituted.
1.2 It is therefore submitted that the date on which the Arbitral Tribunal was constituted even as per respondent No.5, the Arbitral Tribunal had expired the mandate contemplated under Section 29A of the Act and therefore, the arbitration proceedings are without jurisdiction.
1.3 It is submitted that change of arbitration fees from Rs.50,000/- per arbitrator to exorbitant fees as described by the new Arbitration President and that too without consultation and consent of the petitioner is forcing the petitioner to participate in the arbitration proceedings where the Arbitrators have predecided to reject the counter claim of the petitioner. In communication dated 26.04.2019 has communicated that there will be no counter-claim and only defence can be Page 3 of 15 Downloaded on : Fri Feb 14 00:27:40 IST 2020 C/SCA/3913/2020 ORDER raised by the respondent to claimant's claims and this stand is only because the petitioner is unable to pay to foot cost of newly constituted Arbitral Tribunal.
2. Learned Senior Advocate Mr.Shalin Mehta for respondent No.1 submitted that though caveat is filed, the same is not reflected. He therefore, prays to be heard on behalf of respondent No.1.
2.1 His submissions is on preliminary points, i.e.
(a) the subject will lie before before the Commercial Division of this Court under Section 10 of the Commercial Courts and and (b) this writ is not maintainable in view of Section 16 read with Section 34 of the Arbitration and Conciliation Act.
2.2 It is submitted that the petition is ill-timed. Tomorrow, second tranche of arbitration sitting is to commence. All concerned have flew down to Ahmedabad, incurring very heavy expenditure and that too at the cost of respondent No.1 alone as the petitioner has not contributed a single farthing.
2.3 It is submitted that conduct and communications from the petitioner would indicate that he has really and in fact, participated in the arbitral proceedings, but probably fearing an outcome against him, has filed the petition. The Court was cursorily taken through Page 4 of 15 Downloaded on : Fri Feb 14 00:27:40 IST 2020 C/SCA/3913/2020 ORDER compilation provided and attention was drawn to certain e-mail communications to substantiate participation of the petitioner in arbitral proceedings. 2.4 It is submitted that the petitioner has prayed for writ of quo warranto, which essentially would not lie against an Arbitral Tribunal as the same is not any public body.
3. For the purpose of understanding the controversy, it may be necessary to refer and reproduce relevant portion of pleadings and documents. Order dated 04.12.2017 passed by the Apex Court in MA No.1482 of 2017 reads as under:-
"By our Order dated 24.07.2017, we appointed Hon'ble Mr.Justice C.K.Thakker, former Judge of this Court, to be the presiding Arbitrator. Justice Thakker has since stated that it would not be possible for him to take up the assignment.
In this view of the matter, we now appoint Hon'ble Mr.Justice M.B.Shah, former Judge of this Court to be the Chairman of the Arbitarl Tribunal.
Considering the fact that Justice Thakker was unable to accept the assignment, the period within which the award is to be delivered under Section 29A of the Arbitration and Conciliation Act will commence on and from the date on which Page 5 of 15 Downloaded on : Fri Feb 14 00:27:40 IST 2020 C/SCA/3913/2020 ORDER the first sitting takes place."
4. In communication dated 28.11.2016 addressed on behalf of respondent No.1 to the then existing Arbitral Tribunal, it is stated as under:-
"31. In view of the above circumstances and since this Hon'ble Tribunal will not be in a position to complete the present arbitration proceedings within the specified period of twelve months under the Act, there exists no reason for the Claimant to give his consent for an extension of the time period for existing Tribunal. The Claimant therefore wishes to place on record that this Hon'ble Tribunal has failed to dispense justice in a fair and timely manner. Further, the Claimant does not give his consent for any extension of the time period for this Hon'ble Tribunal as contemplated under Section 29A(3) of the Act or otherwise.
35. In view of the above said, the Claimant urges the Hon'ble Presiding Arbitrator to consider the aforesaid submissions on behalf of the Claimant and withdraw from the present arbitration proceedings as the Presiding Arbitrator."
4.1 The aforesaid is the categoric stand of respondent No.1 to an ongoing arbitration proceedings under the order of the Apex Court.
4.2 The relevant portion of the response by the Page 6 of 15 Downloaded on : Fri Feb 14 00:27:40 IST 2020 C/SCA/3913/2020 ORDER Presiding Arbitrator Hon'ble Mr.Justice M.B.Shah, former Judge, Supreme Court of India dated 01.12.2018 reads as under:-
"2. It appears that it might be your habit to make such baseless statements and allegations to get the Order in your client's favour. Be sure that such baseless statements and allegations would not count much before the Tribunal consisting of three retired Judges of the Honourable Supreme Court. It is, therefore, quite possible that because of such behaviour, Ex. Presiding Arbitrator Mr.Justice C.K.Thakker (Former Judge, Supreme Court of India) was required to withdraw his consent to continue as Presiding Arbitrator. This led the Honourable Supreme Court to appoint the undersigned to be the Presiding Arbitrator vide Order dated 04th December, 2017....
But before Order could be passed, on various grounds, the matter was adjourned and that is not required to be narrated here. However, that can be verified by referring to various minutes, orders and e-mails sent by this Tribunal. However, the oral evidence of the Claimant's four witnesses was recorded at length during the meetings held from 27th to 31st August, 2018; 05th, 29th & 30th October, 2018.
Recording of the oral evidence of the Claimant's fifth witness was partly recorded on 30th October, 2019 which was to be continued on 16th December, 2018.
Page 7 of 15 Downloaded on : Fri Feb 14 00:27:40 IST 2020 C/SCA/3913/2020 ORDER It is to be highlighted that the Order Prepared below the application filed by the Claimant under Section 17 of the Act is ready and is approved by the learned Co-Arbitrator, Justice Nanavati. Copy of the said Order was also delivered to Justice Panchal's residence on 29th November, 2018 at about 08:30 PM. However, on the same day, at 10:15 PM, Brother Justice Panchal arranged to e-mail resignation letter which was addressed to me with a copy to all and he withdrew from the Tribunal with immediate effect. Further, he has stated in the resignation letter that, "I have received and gone through the letter dated 28/11/2018 addressed by the Claimant's Counsel to the Arbitral Tribunal. IN paragraph 31 of the said letter, the Claimant has shown disinclination for an extension of time to make award.
Allegations are against the whole Tribunal." 4.3 In the letter dated 29.11.2018 addressed by the Co-Arbitrator Hon'ble Mr.Justice J.M.Panchal, former Judge, Supreme Court of India to the Presiding Arbitrator Hon'ble Mr.Justice M.B.Shah, former Judge, Supreme Court of India, it is stated as under:-
"I have received and gone through the letter dated 28/11/2018 addressed by the Claimant's Counsel to the Arbitral Tribunal. In paragraph 31 of the said letter, the claimant has shown disinclination for an extension of time to make award. Allegations are against the whole Tribunal.Page 8 of 15 Downloaded on : Fri Feb 14 00:27:40 IST 2020 C/SCA/3913/2020 ORDER
The record would demonstrate that respondent No.1 and respondent No.2 have delayed the matter at every juncture. Despite best efforts, the Tribunal has not been able to decide claimant's application filed u/s 17 of Act of 1996. There is no likelihood of main matter being disposed of within stipulated period. These proceedings are hotly contested and are only likely to get more intense and taxing in the days to come.
In view of the above, I hereby tender my resignation and withdraw from the Tribunal with immediate effect."
5. The issue of roster raised by learned Senior Advocate for the respondent pertains to Section 10(1) of the Commercial Courts Act, which provides that in an international commercial arbitration, all applications or appeals arising out of such arbitration under the provisions of the Arbitration and Conciliation Act, 1996 have to be filed in High Court and to be heard and disposed of by Commercial Division. Prima facie, when the contention before the Court to invoke Article 226 is on the basis of jurisdiction, to proceed with the Arbitral Tribunal after lapse of mandate, the contentions which are raised on basis of Section 29A of the Arbitration and Conciliation Act to invoke Article 226 cannot be said to be an application under Section 29A before the Arbitral Tribunal or petition before this Page 9 of 15 Downloaded on : Fri Feb 14 00:27:40 IST 2020 C/SCA/3913/2020 ORDER Court to be an application arising out of the Arbitration and Conciliation Act.
6. To counter the submission of alternative remedy provided under the Arbitration and Conciliation Act in terms of Section 16 read with Section 34, reliance is placed by learned Senior Advocate for the petitioner to a judgment of this Court in case of HEIRS OF LEGAL OF SIDHRAJSINHJI PRAGRAJSINHJI & ORS. Vs. BENGAL CYNOSURE DEVELOPMENT PRIVATE LIMITED & ORS., reported in 2019(3) GLH, 406 wherein, it was held that in gross facts, the Court can exercise powers under Article 226.
7. Since the notice is being issued for the respondents to respond, the issue of writ of co warranto raised by respondent No.1 is kept open.
8. The issue that goes to the root of the matter is jurisdictional issue. The Arbitral Tribunal, whose mandate stands extinguished by operation of Section 29A whether can be permitted to arbitrate, especially in given facts and circumstances of the case. As observed in the presiding paragraphs, the Arbitral Tribunal constituted upon the orders of the Apex Court. Reference will have to be made to the terms and conditions which were stipulated by the new Presiding Arbitrator in his communication dated 24.01.2019, which are as under:- Page 10 of 15 Downloaded on : Fri Feb 14 00:27:40 IST 2020 C/SCA/3913/2020 ORDER
"(i) The parties are to pay each member of the Tribunal sum of SGD (Singapore Dollars) 50,000 prior to the constitution of the Tribunal.
(ii) In addition, for work done the parties are to pay SGD 1,200 an hour.
(iii) For meetings and hearing which are fixed for the whole day the Parties are to pay each member of the Tribunal SGD 6,500 a day.
Travelling time will be charged at SDG 600 per hour.
(iv) Four items (ii) and (iii) above, the Parties are to pay prior to the constitution of the Tribunal, to each member of the Tribunal, a further sum of SGD 50,000 as a deposit to be drawn down against bills to be rendered from time to time. If the sum drawn down reduces the deposit remaining to SGD 18,000, the Parties will top up each deposit to SGD 50,000/- within 10 days of being given notice to do so. This will continue until the arbitration award is delivered.
(v) Further, the Parties are to pay each member of the Tribunal's expenses to be calculated in accordance with the SIAC's practice at the time the expenses are incurred. A separate sum of SGD 10,000 is to be paid to each member of the Tribunal as an advance deposit for expenses. This may need to be topped up as the arbitration progresses with payment of the sum required to be made within 10 days of notice to do so.
Page 11 of 15 Downloaded on : Fri Feb 14 00:27:40 IST 2020 C/SCA/3913/2020 ORDER
Upon the payments sated in paras. 3(i), (iv) and (v) being made, the Tribunal shall be constituted and will enter into the reference to arbitration and commence work."
8.1 These fees were objected by the petitioner- another party to arbitration, especially with regard to exorbitant cost as against the cost stipulated by the previous Arbitral Tribunal. The new Presiding Arbitrator in communications dated 15.08.2019 and 19.08.2019 has stated as under:-
Communication dated 15.08.2019 "(vii) In the event that any payment is not made on time, the Tribunal may suspend the arbitration in whole or in part or terminate it.
(viii) In the event that any Party does not make its payment of its share of the deposit on time, the Tribunal will stay that Party's claim.
(ix) Upon the payments sated in paras. 3(i),
(iv) and (v) being made, the Tribunal shall be constituted and will enter into the reference to arbitration and commence work.
(x) In this connection, please note that the Tribunal has not been properly constituted and entered into the reference as yet. This will happen when the deposits are paid or a Party has paid its share with the other Party's claim Page 12 of 15 Downloaded on : Fri Feb 14 00:27:40 IST 2020 C/SCA/3913/2020 ORDER suspended for non payment.
(xi) The payments are to reach the respective arbitrators' bank accounts by 6 September 2016."
Communication dated 19.08.2019 "The Tribunal has taken cognizance of Mr.Gursharan Virk's email and reconsidered its directions and directs as follows:
The Hearings will take place in Ahmedabad and not in Singapore. All other directions except for the references to Maxwell Chambers and Singapore stand.
It Parties are to be note that the Tribunal has not been constituted and will not be constituted until the deposits are paid. This does not appear to have been pointed out to the learned Judge."
9. It was for the first time by communication dated 06.10.2019 the Presiding Arbitrator of the newly constituted Arbitral Tribunal conveyed about constitution of the Tribunal. Considering the order of the Apex Court and mandate of Section 29A, prima facie period of one year had lapsed on 31.01.2019. Even if consent of the parties is to be presumed (which is not the fact in this case), the extended period of six months had also lapsed and there is no order of the Court which has extended the period of mandate. In that eventuality, prima facie, Page 13 of 15 Downloaded on : Fri Feb 14 00:27:40 IST 2020 C/SCA/3913/2020 ORDER mandate of the Arbitral Tribunal stood terminated.
10. In the facts of this case, as reproduced in the presiding paras, the stand of respondent No.1 was against extension of period for Arbitral Tribunal beyond period of one year and the and making 'U' turn in extending the mandate period on its own creating Arbitral Tribunal beyond period of mandate and then in hot haste to conduct arbitration proceedings, the reasons are not far to imagine.
11. A simple fact of ascertaining date on which the arbitration started, there is no clarity, prima facie leading this Court to believe the contention of the learned Senior Advocate for the petitioner that international arbitration is foisted upon the petitioner with a forgone conclusion of resisting the claim of the petitioner on his inability to pay the somewhat exorbitant arbitration costs, little remains to arbitrate. The manner in which arbitration is proceeding, the outcome is also not far to imagine. In background of the peculiar facts of the case, the Court finds that the petitioner has made a ground to interfere.
12. The shifting stand of the newly appointed Presiding Arbitrator is evident even from the communication as late as of 15.01.2020, wherein the Page 14 of 15 Downloaded on : Fri Feb 14 00:27:40 IST 2020 C/SCA/3913/2020 ORDER Presiding Arbitrator communicates that the issue relating to Section 29A will be dealt with by the Tribunal in its final award. At the same time, in communication dated 07.02.2020, the Presiding Arbitrator informs the parties that, "All the other matters raised by Mr.Sarkar have been dealt with by the Tribunal in its previous Order(s). Notwithstanding this, the Tribunal reiterates that the Parties will be notified of the date the Tribunal entered into reference on 13 February 2020".
13. This, in the opinion of the Curt, creates doubt about the jurisdiction of the Tribunal to arbitrate beyond the period during which mandate is operational. Prima facie, no amount concession or participation of the petitioner in the arbitration proceedings can confer jurisdiction and similarly, no amount of expenditure incurred in the present arbitration proceedings can also confer jurisdiction.
14. NOTICE returnable on 26.02.2020. In the meantime, respondent No.5 shall not undertake proceedings further with the arbitral process /hearings, particularly scheduled from 13.02.2020 onwards.
(A.Y. KOGJE, J) SHITOLE Page 15 of 15 Downloaded on : Fri Feb 14 00:27:40 IST 2020