Bangalore District Court
M/S Shivsu Canadian Clear Waters ... vs Union Of India on 28 March, 2024
1
Com.A.P.No.24/2022
KABC170007492022
IN THE COURT OF LXXXII ADDL. CITY CIVIL & SESSIONS
JUDGE, AT BENGALURU (CCH.83)
THIS THE 28th DAY OF MARCH 2024
PRESENT:
SUMANGALA S BASAVANNOUR., B.COM, LL.M.,
LXXXII ADDL. CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.A.P.No.24/2022
BETWEEN:
M/s Shivsu Canadian Clear
Waters Limited, Current
Known as Canadian
Crystalline Water India Ltd.,
Rep. by C. Murgan, Vice
President Marketing,
"Eashwaran Towers",
No.149, Poonamalle High
Road, Kilpauk, Chennai -
600 010.
: PETITIONER
(represented by
Priyanka Ajjannavar-
Advocates)
AND
1. Union of India, Rep. by
Chief Engineer Chennai
Zone, Island Grounds,
Chennai - 600 009.
2
Com.A.P.No.24/2022
2. Commander Works
Engineer (Army),
No.101, Dickenson Road,
Bengaluru - 560 042.
3. Garrison Engineer
(Central) Agram Post,
Bengaluru - 560 007.
4. V.K. Gupta, Engineer
in Chief, Integrated HQ
of MOD (Army), Kashmiri
House, Rajaji Marg, New
Delhi - 110 011.
: RESPONDENTS
(Represented by P.R.K .
-Advocate)
Date of Institution of the suit 10.03.2022
Nature of the suit (suit on
pronote, suit for declaration & Petition for setting aside
Possession, Suit for injunction Arbitral Award
etc.)
Date on which judgment was 28.03.2024
pronounced
Total Duration Year/s Month/s Day/s
02 00 18
(SUMANGALA S BASAVANNOUR),
LXXXII Addl. City Civil & Sessions Judge,
Bengaluru.
3
Com.A.P.No.24/2022
JUDGMENT
This is a Petition filed under Section 34 of the Arbitration & Conciliation Act, 1996 praying to set aside the impugned award dated 04.06.2019 passed by the learned counsel arbitrator.
2. The Brief facts of the Plaint are as follows:-
The respondent No.1 vide letter CA No.CECZ/BAN/02 of 2012-2013 dated 17.05.2012 communicated to the petitioner that their tender has been accepted and the contract is awarded to the petitioner. Accordingly, both the parties entered into an agreement namely, "Augmentation of Water Supply by recycling of waste water and sewage at ASC Centre and College, Bangalore bearing CA No.CEC/BAN/02 of 2012-2013 (Contract)". The scope of the work mentioned in contract is to carry out works for augmentation of water supply by recycling waste water and sewage at the ASC Centre and College. As per the said contract, the progress of the project was divided in three phases, with Phase-I commencing from 01.06.2012, Phase-II from 01.06.2013 and Phase III from 01.06.2015. The project was scheduled to be completed by 01.01.2018. Immediately in May 2012, the petitioner deployed a team of engineers and other specialized persons at the project site to carry out the project related work. At that time, respondent No.2 4 Com.A.P.No.24/2022 informed the petitioner that the residents from the quarters which were situated next to the project site are objecting to the establishment of sewage treatment next to their residential quarters. Therefore, it was informed to the petitioner that the respondent No.2 would be providing an alternate site after discussion and approval from the Board. However, the respondent No.2 did not confirm the project site to carry out the work.
On 19.01.2013, the petitioner approached respondent No.3 and requested to clear the site to dump the excavated earth materials, to provide the water/ power facility and to seek approval from the Karnataka State Pollution Control Board "KSPCB". Further, petitioner informed respondent No.3 that they would not be able to commence the work until the above issues are dealt with. For the said request of the petitioner, the respondent No.3 failed to take any steps. In spite of several letters dated 25.02.2013, 07.03.2013, 08.03.2013 for site clearance and also for extension of delivery time of the project as per the contract, the respondent No.1 has neither given the site clearance nor extended the delivery time for the project. Thereafter, on 04.04.2013, the respondent No.3 issued a letter asking the petitioner to commence the work at the site, the petitioner was shocked upon receiving such a letter and immediately approached respondent No.3 and highlighted as to 5 Com.A.P.No.24/2022 non-completion of work was due to delay in site clearance.
Abruptly, without assigning any reasons, through letter dated 06.07.2013 respondent No.3 terminated the contract. Having no other alternative, the petitioner approached the Hon'ble Civil Court, Chennai seeking to declare the letter dated 06.07.2013 null and void. In the said case, the respondents filed application under Sec.8 of the Arbitration and Conciliation Act, 1996 to refer the matter to arbitration tribunal. The said application was allowed and matter was referred to arbitrator.
By Hon'ble Court's order Mr. A.K. Singh was appointed as sole arbitrator. Since Mr. A.K. Singh rescued himself to be an arbitrator, Mr. V.K. Gupta came to be appointed as sole arbitrator in the matter. After the arguments of both parties, award was passed on 04.06.2019. Aggrieved by the impugned award, the petitioner herein approached Hon'ble High Court of Madras challenging the impugned award dated 04.06.2019. The Hon'ble High Court of Madras returned the petition for want of jurisdiction on 31.01.2021. Due to prevailing pandemic condition, the Hon'ble Supreme Court has extended the limitation from time to time. In view of the same, the said petition is within the period of limitation.
The petitioner being aggrieved by the impugned award has preferred the present petition on the following;
6Com.A.P.No.24/2022 GROUNDS
1. Fast track procedure adopted by the arbitral tribunal is not in consonance with the statutory procedure enumerated under Sec.29B of the Act. To adopt the fast track procedure under Sec.29B of the Act, the parties to the arbitration agreement should mandatory agree in writing to have their dispute resolved by fast track procedure. However, in the present case the parties to the agreement neither at the time of appointment of an arbitrator nor at the time of proceedings have agreed to adopt the fast track procedure Under such circumstances, the adoption of the fast track procedure by the tribunal is in violation of Sec.29B of the Act. An award which violates any statutory provision is in conflict with public policy of India and is therefore liable to be set aside.
2. Fast Track procedure adopted by learned counsel arbitrator deprived petitioner's right to elicit the truth from the respondent. The petitioner herein filed an application under Sec.19 of the Act seeking an opportunity to lead the evidence and to conduct the cross-examination to elicit the truth from the respondent. However, the said application has been 7 Com.A.P.No.24/2022 rejected by the learned arbitrator without assigning any valid reasons whatsoever. It is settled principle of law, in case of Associate Builders Vs Delhi Development Authority (2015) 3 SCC 49 the Hon'ble Supreme Court held that the tribunal has to adopt a judicial approach. The right to elicit the truth is a vital right of every litigant, the tribunal ought to have adopted a judicial approach and provided a right to the petitioner herein to elicit the truth. The tribunal's failure to provide such a right would result in failure to adopt a judicial approach, thus warranting interference of this court.
3. Irreparable damage has been caused due to loss of opportunity to cross-examine the respondent's witnesses. If petitioner was allowed to cross examine by the learned arbitrator the petitioner would have brought out the essential components through cross examination, which would have guided learned arbitrator to pass justifiable award. The petitioner inter alia claimed Rs.37,32,700/- from the respondent. The petitioner in its counter claim and rejoinder has asserted that due to want of approvals, site clearance, clear instructions from the respondents, amongst other things the petitioner was unable to proceed with work despite being ready and willing to execute the work in 8 Com.A.P.No.24/2022 terms of the contract. With reference to the above pleadings, the respondents have contended that there is no evidence in regard to the submissions made by the petitioner. Further, the respondents have disputed the documents produced by the petitioner and has also denied several allegations made by the petitioner. Hence, it is just and vital in such event the truth be elicited from the parties by conducting cross- examination. Since, the arbitral tribunal being final adjudicator on issues of facts, it is imperative and essential that the arbitrator would have given an opportunity to lead the evidence and to cross examine the witness. Also both the parties have claimed breaches and lapses on each other and failure to take necessary action. Under such circumstances, it is imperative to test the parties on oath on veracity of their claims and facts that are claimed to be true, especially when the alleged facts and claims are disputed by the parties. However, even after respectful submission of the learned arbitrator did not provide the opportunity to adduce the evidence and to cross- examine, which has caused irreparable damage to the petitioner. The said act of learned arbitrator is against the principle established by the law. The said award to 9 Com.A.P.No.24/2022 be set aside as same is unfair, unreasonable and shocks the conscience of the court.
4. Delay is caused due to reasons attributable to the respondents. The learned arbitrator failed to analyze the documents produced by the petitioner along with its statement of defense, statement of counter claim and rejoinder. In the letter dated 19.01.2013, 25.03.2013 and 07.03.2013, the petitioner had requested respondents for approval of alternate site and clearance of site. However, respondents failed approve the said reasonable demands of the petitioner, due to which the petitioner failed to carry out the work on project site. The learned arbitrator in para 52 of the impugned award erroneously observed that the petitioner has not deployed the labours at the site and also failed to procure the materials required in connect with project work. However, in actual, the respondents failed to clear the site and get necessary approvals from the Government authority, due to which work on site was hampered. The respondent had produced necessary documents to this effect before the learned arbitrator. The primary responsibility of learned arbitrator was to first decide 'who is responsible for the delay' and then proceed decide 'whether the 10 Com.A.P.No.24/2022 respondents are entitled for compensation claimed for delay, if proved that the delay is attributable to the petitioner. To utter shock and surprise of the petitioner, despite placing materials on record, learned arbitrator ignored the same and passed an award granting compensation to the respondent for the delay which was solely caused due to ignorance of respondents. It is established principle of law that a finding on no evidence at all or an award which ignores vital evidence in arriving as its decision would be perverse and is liable to be set aside on the ground of patent illegality. In the present case the learned arbitrator has arbitrarily ignored the vital materials and crucial evidence placed on record and erroneously held that the respondents are entitled for compensation.
5. Violation of principle of "nemo debet esse judex in propria causa". The learned arbitrator is disqualified under schedule VII of Arbitration and Conciliation Act to adjudicate the matter as learned arbitrator is an employee of the 1st respondent. Hence, award passed by the learned arbitrator has to be set aside.
6. Violation of principles enumerated Sec.52 to 54 of Indian Contract Act, 1872. The learned arbitrator failed 11 Com.A.P.No.24/2022 to appreciate the principles imbided in Sec.52-54 of the Contract Act. When the order in which reciprocal promises are to be performed is expressly fixed by the contract, they have to be performed in that order. In the present contract, the arbitrator failed to appreciate that the handing over of the site and clearance of the site was delayed by the respondent No.2. The learned arbitrator failed to appreciate the priority and order of performance of reciprocal promises which is contrary to settled principles. Hence, petitioner prays to allow the petition.
3. The respondent filed objections to the petition stating that this petition is barred by limitation It is to note that Hon'ble arbitrator respondent No.4 passed an award on 04.06.2019 and this petition came to be filed on 10.03.2022. Hence, this court has no jurisdiction to try the subject matter, since this claim is barred by limitation. The arbitrator after considering the available documents, pleading and after giving sufficient opportunity passed an award. From the inception of the work itself, the contractor has shown lack of interest in commencing the work and no work was carried out even after lapse of ten months (approx) from date of handing over the site except certain quantity of earth work as could be seen in inventory of completed works which was later filled back to avoid land 12 Com.A.P.No.24/2022 sliding of adjoining area. The petitioner has not responded the reminders, ultimately final notice issued to contractor. Even after the final notice contract did not put any efforts to restart and to speed up the work. Hence, department with no other alternative, since project is of prime importance, canceled the contract. The cancellation of of the contract agreement was also intimated to the petitioner.
Further, the Respondent contended that to complete the work, new tender was invited and work was awarded accordingly. Subsequent to allotment of the work to other agency, the petitioner filed a suit before the Hon'ble City Civil Court at Chennai seeking revocation of the cancellation of contract vide O.S.No.7005/2014. The Hon'ble Civil Court appointed an arbitrator to settle the dispute. After hearing matter in details sole arbitrator published award on 04.06.2019, thereby directing the contractor to pay Rs.14,59,269.12/- in favour of the Union of India (respondents herein) plus interest of Rs.2,52,255.34/-. The said award was duly served to the petitioner on 04.06.2019. However, the same was received back undelivered and finally received by them on 20 th September 2019. Since the petitioner failed to comply with the arbitration award, Government has initiated proceeding for filing execution petition before Chennai High Court, however this arbitration proceedings came to be filed seeking relief from setting aside 13 Com.A.P.No.24/2022 an arbitration award with other consequential relief on various grounds. It is clear that complainant failed to honour the agreement thereafter to shirk responsibility on the shoulder of the respondent No.1 to 3 with oblique and sinister purpose this claim petition came to be filed. Looking from any angle, subject petition is liable to be dismissed.
The Respondent further contended that there was no opportunity to cross examine the respondent witness, further delay in completion of work due to the reason attributable to the respondent, the averments have no legal leg to stand. Further grounds urged that the arbitrator violated the principle of natural justice in which the petitioner took shelter under the Supreme Court decision is far from the truth. The language used in the judgment is very clear. Further name of the arbitrator is listed in the arbitrators list. Looking from any angle the claim of the petitioner is liable to be dismissed. Hence, he prays to dismiss the petition.
4. I have heard the arguments for the Advocate for the both parties. The Advocate for the petitioner relied upon a following decisions:
14Com.A.P.No.24/2022 a. Suo Motu W.P. No. 3/2020 - Extension of Limitation period due to Covid.
b. 2020 (20) SCC 760- Perkins Eastmen Architects DPC and Another vs. HSCC Limited.
c. 2019 (5) SCC 755 - Bharat Broadband Network Limited vs. United Telecoms Limited.
d. 2017 (8) SCC 377- TRF Limited vs. Energo Engineering Projects Limited.
e. 2023 (8) SCC 226 - Glock Asia Pacific Limited vs. UOI.
f. 2008 (7) SCC 169 - Consolidated Engineering Enterprises vs. Principal Secretary Irrigation Department and Others.
g. 2019 (2) SCC 455 - Simplex Infrastructures Limited vs. UOI.
h. 2020 SCC Online Del 228 - Sukhbir vs. Hindustan Petroleum Corporation Limited.
i. 1971 (2) SCC 617 - M/s Bareilly Electricity Supply Limited vs. The Workmen and others.
j. 2009 (4) LW 573 - M/s ADV Consultant vs. Pioneer Equity Trade Private Limited.
k. Civil Appeal No. 73/2023 (Supreme Court) M/s Alpine Housing Development corporation Private Limited vs. Ashok Dhariwal and Others.15
Com.A.P.No.24/2022 l. 2010 (13) SCC 336 - Sant Lal Gupta vs. Modern Cooperative Housing Society and Others.
m. Associate Builders vs. Delhi Development Authority.
n. 2015 (7) SCC 58 - M.P. Steel Corporation vs. Commissioner of Central Excise.
o. NHPC Limited vs. BGS-SGS-SOMA JV.
p. 2014 (1) SCC 648 - ONGS Limited vs. Modern Constructions and Company.
q. 2021 (6) SCC 460 Government of Maharashtra (Water Resources Department) represented by Executive Engineer vs. Brose Brothers Engineers and Contractors Private Limited.
The Advocate for the Respondents relied upon a following decisions:
a. M/s N.V. International vs. The State of Assam and others.
b. Writ Petition No. 50806 of 2019
5. Based on the above contentions of both parties, following Points arise for my consideration:-
1. Whether the petitioner has made out any grounds which enumerated under Sec.34 of the Arbitration and Conciliation Act to set aside the award dated 04.06.2019 passed by the sole arbitrator?16
Com.A.P.No.24/2022
2. What Order?
6. My findings on the above points are as follows:-
Point No.1:- In the Affirmative.
Point No.2:- As per the final Order for the following reasons.
REASONS
7. Point No. 1: - The petitioner has challenged the award on the ground that the learned arbitrator is disqualified under schedule VII of the arbitration and conciliation Act, 1996 to adjudicate the matter as learned arbitrator is an employees of the Respondent No.1. Hence, the award passed by the learned arbitrator has to be set aside. In this regard, the petitioner relied upon a decision in 1987 (2) SCC 160 State of Karnataka vs. Sri. Rameshwara Rice Mills wherein the Hon'ble Supreme court held that if any clause in the contract would have an such effect from the language used, such a clause would be void. In the present case, it is clear from the bare perusal that the respondent No.4 is employee of the Respondent No.1 and hence debarred to hear the case.
17Com.A.P.No.24/2022
8. The learned arbitrator in para No.3 of the award held that, the respondent had approached the Hon'ble City Civil Court Chennai (OS No. 7005/2014) for direction to revoke the cancellation of contract. The UOI in reply (IA NO. 3648/2015) had submitted in the court that in accordance with Section 8 of Arbitration and Conciliation Act, 1996 the parties may be referred to arbitration in writing between the parties to contract. The court combined order dated 25.03.2015 had ordered to refer the matter to arbitration in accordance with arbitration clause forming part of contract. The Hon'ble court order Sh AK Singh, ADG (Arbitration) was appointed as sole arbitrator by Engineer in chief, integrated HQ of MOD (Army), Kashmir House, Rajaji Marg, New Delhi vide letter No. 13600/SC/ 1233/22/E8 dated 16.09.2015 to adjudicate the dispute between the parties in terms of conditions 70 of General conditions of contract (IAFW-2249) forming part of the said contract between the parties. Sh AK Singh, ADG (Arbitration) had recused himself as arbitrator. They have been appointed as sole arbitrator by Engineer in chief, integrated HQ of MOD (Army), Kashmir House, Rajaji Marg, New Delhi vide letter No. 13600/SC/1233/22/E8 dated 27.02.2017 to adjudicate the dispute between the parties in terms of conditions 70 of General conditions of contract (IAFW-2249) forming part of the said contract between the parties.
18Com.A.P.No.24/2022
9. On perusal of the records, the letter dated 27.02.2017 discloses that the Engineer-in-chief's Branch, integrated HQ of MOD (Army) Kashmir House, Rajaji Marg, New Delhi. Sri.V.K Gupta i.e., Respondent No.4 arbitrator in this case by stating that the contract agreement was entered into between the Chief Engineer Chennai Zone and M/s Shivsu Canadian Clear International Limited, Chennai. The said contract includes an arbitration agreement vide condition 70 of IAFW-2249 forming part of the contract which, interalia, provides that all disputes between the parties to the contract (other than those for which the decision of the CWE or any other person is by the contract expressed to be final and binding) shall, after written notice by either party to the contract to other of them, be referred to the sole arbitration of a serving officer to be appointed by the Engineer-in-chief. Shri A.K. Singh, ADG (Arbitration), who was appointed as arbitrator on 15.10.2015 has recused himself as arbitrator and did not enter into reference. Now therefore, by virtue of the aforesaid and provisions contained in condition 70 of the IAFW-2249, i hereby appoint you as sole arbitrator to adjudicate upon the disputes pertaining to the above contract and request you to enter upon the reference and publish your findings and award in respect of dispute between the parties.
10. The learned counsel for the petitioner argued that it is an India's Policy that no person can be judged in its own cause has 19 Com.A.P.No.24/2022 been held by the Supreme Court in State of Karnataka Vs Marrakesh Rice Mills, 1987 2 SCC 160 and if any clause is in the contract would have an such effect from the language used, such a clause to be void. In the present case, it is clear from the bare perusal that respondent No.4 is an employee of the respondent No.1 and hence, debarred to hear the case.
11. Further, the learned counsel for the petitioner relied upon the decision of Hon'ble Supreme Court, 2020 SCC 760 Perkins Estmen Architect DPC & Anr. Vs H.S.C.C. (India) Ltd., wherein Hon'ble Supreme Court held that:
"It was thus held that as the Managing Director became ineligible by operation of law to act as an arbitrator, he could not nominate another person to act as an arbitrator and that once the identity of the Managing Director as the sole arbitrator was lost, the power to nominate someone else as an arbitrator was also obliterated. The relevant Clause in said case had nominated the Managing Director himself to be the sole arbitrator and also empowered said Managing Director to nominate another person to act Arbitration application No. 32 of 201 Perkins Eastman Architects DPC and Another vs. HSCC (India) Limited, as an arbitrator. The Managing Director thus had two capacities under said Clause, the first as an arbitrator and the second as an appointing authority. In the present case we are concerned with only one capacity of the Chairman and Managing Director and that is as an appointing authority.20
Com.A.P.No.24/2022 We thus have two categories of cases. The first, similar to the one dealt with in TRF Limited where the Managing Director himself is named as an arbitrator with an additional power to appoint any other person as an arbitrator. In the second category, the Managing Director is not to act as an arbitrator himself but is empowered or authorised to appoint any other person of his choice or discretion as an arbitrator. If, in the first category of cases, the Managing Director was found incompetent, it was because of the interest that he would be said to be having in the outcome or result of the dispute. The element of invalidity would thus be directly relatable to and arise from the interest that he would be having in such outcome or decision. If that be the test, similar invalidity would always arise and spring even in the second category of cases. If the interest that he has in the outcome of the dispute, is taken to be the basis for the possibility of bias, it will always be present irrespective of whether the matter stands under the first or second category of cases. We are conscious that if such deduction is drawn from the decision of this Court in TRF Limited, all cases having clauses similar to that with which we are presently concerned, But, in our view that has to be the logical deduction from TRF Limited. Paragraph 50 of the decision shows that this Court was concerned with the issue, "whether the Managing Director, after becoming ineligible by operation of law, is he still eligible to nominate an Arbitrator" The ineligibility referred to therein, was as a result of operation of law, in that a person having an interest in the dispute or in the outcome or decision thereof, must not only be ineligible to act as an arbitrator but must also not be eligible to appoint anyone else as an arbitrator and that such person cannot and should not have any role in charting out any course to the dispute resolution by having the 21 Com.A.P.No.24/2022 power to appoint an arbitrator. The next sentences in the paragraph, further show that cases where both the parties could nominate respective arbitrators of their choice were found to be completely a different situation. The reason is clear that whatever advantage a party may derive by nominating an arbitrator of its choice would get counter balanced by equal power with the other party. But, in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the application No. 32 of 201 Perkins Eastman Architects DPC and Another vs. HSCC (India) Limited, course for dispute resolution. Naturally, the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (amendment) Act, 2015 (Act 3 of 2016) and recognised by the decision of this Court in TRF Limited
12. The Arbitration application No. 32 of 2019 Perkins Eastman Architects DPC and Another vs. HSCC (India) Limited.
a party to the agreement would be disentitled to make any appointment of an Arbitrator on its own and it would always be available to argue that a party or an official or an authority having interest in the dispute would be disentitled to make appointment of an Arbitrator.
22Com.A.P.No.24/2022
13. Admittedly, the arbitrator has not appointed under Section 11 of the Arbitration and Conciliation Act. As per Section 11 (4) in sub section 3 proviso reads as under:
the appointment shall be made, upon request of a party, by the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court.
14. In the present case arbitrator has not appointed by the Hon'ble High court of Karnataka or appointed mutual consent of the both parties. It is also admitted fact that since the A.K. Singh was appointed as a Director by City Civil Court, Chennai.
But, A.K. Singh rescued himself to be an arbitrator, Mr. V.K. Gupta came to be appointed as sole arbitrator. Indipsuted facts are the sole arbitrator Mr. V.K. Gupta is employee of the Respondent No.1.
15. The Respondent No.4 V.K. Gupta/Sole Arbitrator, admittedly employee of the Respondent who had an interest in the out come or decision of the dispute. In view of the decision of TRF Limited and Perkins. The A.K. Singh has no authority to appoint the Respondent No.4 as a sole arbitrator in this case. Even appointment of A.K. Singh as a sole arbitrator is disqualified under Schedule 7 of the Arbitration and Conciliation Act to adjudicate the matter, since both are employees of the 23 Com.A.P.No.24/2022 Respondent No.1. Hence award passed by the learned arbitrator is conflict with the public policy of India as per Section 34 (2)(ii) of Arbitration and Conciliation Act, has to be set aside.
16. The Petitioner has challenged the award on the ground that the Fast track procedure adopted by the arbitral tribunal is not in consonance with the statutory procedure enumerated under Sec.29B of the Act. To adopt the fast track procedure under Sec.29B of the Act, the parties to the arbitration agreement should mandatory agree in writing to have their dispute resolved by fast track procedure. However, in the present case the parties to the agreement neither at the time of appointment of an arbitrator nor at the time of proceedings have agreed to adopt the fast track procedure Under such circumstances, the adoption of the fast track procedure by the tribunal is in violation of Sec.29B of the Act. An award which violates any statutory provision is in conflict with public policy of India and is therefore liable to be set aside.
17. Section 29 B of the Arbitration and Conciliation Act 1996 provides that the parties who are members to an arbitral proceeding or who have decided to refer their dispute to an arbitral tribunal, may at any time, even before the arbitral tribunal has been appointed, decide that their dispute be 24 Com.A.P.No.24/2022 resolved through the process of fast track arbitration as mention in subsection (3) of the Section.
The parties also have the discretion to decide while deciding for fast track arbitration that the arbitration proceedings shall be carried on only by a sole arbitrator. As per subsection (3) of section 29B, in a fast track arbitration the arbitration tribunal comes to a conclusion based on written documents and pleading without going through the stage of oral hearings. The arbitrator would be free to seek the parties for the submission of clarifications or additional information apart from the written documents that are submitted by the parties.
Oral hearings are not forbidden, there can be oral hearings too on the request of the parties, and depending upon the nature of the dispute and its necessity.
The Arbitral tribunal may take expeditious steps for coming to an amicable conclusion in minimum time. The arbitral tribunal may skip the technicalities in a situation where oral hearings are being held. The time period within which the arbitral tribunal has to conclude in 6 months.
If the arbitration could not be completed under the given period the provisions of Section 29 A of the Arbitration Act shall apply which provides that under certain circumstances the time period can be extended.
Section 29(B), an effective provision added by the 2015 amendment mentions the provisions regarding fast track arbitration.
25Com.A.P.No.24/2022 The parties to an arbitration agreement may adopt this procedure at any point in time and such an agreement shall be in writing.
The arbitration proceedings generally do not include oral proceedings and the decision is reached based on written documents submitted by the parties. But if the parties request and the arbitrator see it as a necessity oral hearings may take place.
The arbitrator has the power to get additional information and clarifications regarding the written documents submitted by the parties.
18. Fast track procedure under Section 29 (b) (1) Notwithstanding anything contained in this Act, the parties to an arbitration agreement, may, at any stage either before or at the time of appointment of the arbitral tribunal, agree in writing to have their dispute resolved by fast track procedure specified in sub-section (3).
19. Constitution of Fast Track Arbitral Tribunal
1. (1) For the purposes of Fast Track Arbitration under sub- section (1) of section 43 A, the Fast Track Arbitral Tribunal shall be deemed to be constituted with effect from the date on which the parties after obtaining the consent of the sole arbitrator , agree in writing that the sole arbitrator shall be the Fast Track Arbitral Tribunal under subsection (1) of section 43A.
(2) Parties shall communicate the said agreement to the sole arbitrator on the same day.
26Com.A.P.No.24/2022
20. In view of the above provisions, the fast track procedure adopted by the arbitral tribunal is not in consonance with the statutory procedure enumerated under Section 29 B of the Act. The parties to the arbitration agreement should mandatorily agree in writing to have their dispute resolved by fast track procedure. However, in the present case the parties to the agreement neither at the time of appointment of an arbitrator nor at the time of proceedings have agreed to adopt the fast track procedure. Under such circumstances, the adoption of the Fast Track Procedure by the tribunal is in violation of Section 29- B of the act. An award, which violates any statutory provisions is in conflict with public policy of India, and is therefore liable to be set aside.
21. The Petitioner has challenged the award on another ground that the petitioner filed an application under Section 19 of the Act seeking an opportunity to lead the evidence and to conduct the cross-examination to elicit the truth from the respondent. However, the said application has been rejected by the learned arbitrator without assigning any valid reasons. In this regard, he replied upon a decision of Hon'ble Supreme Court in Associate Builders vs. Delhi Development Authority (2015) 3 SCC 49 the Hon'ble Supreme Court held that the tribunal has to adopt a judicial approach.
27Com.A.P.No.24/2022
22. The learned arbitrator in para 36 of the award held that "I considered submission made by both the parties. There was inordinate delay in submission of arbitration documents on the part of respondent as brought out here in before and thus i held that there is no merit in ibid application filed by the Respondent at the belated stage and passed order dismissing the application vide letter no VKG/Arb/SHIVSU dated 27.02.2019.
23. As per the Fast Track Procedure Section 29 (b) arbitral tribunal shall decide the dispute on the basis of written the pleading, documents and submission filed by the parties without any oral hearing. Since, the arbitrator has adopted the Fast Track procedure. So, he has rejected the application. Hence, I do not find any illegality in the findings of the learned arbitrator.
24. The learned arbitrator held that in para 29 of the award that the contract in question was cancelled on 06.07.2013 the present cause of action for this arbitration, the City Civil Court, Chennai in combined order dated 25.03.2015 had referred the matter to arbitration under Section 8 of the Arbitration and conciliation Act, 1996, and in pursuance to above court order the appointing authority had appointed Shri AK Singh as sole Arbitrator on 16.09.2015 and all the above actions were prior to coming into force amendment Act, 2015 thus provisions of 28 Com.A.P.No.24/2022 arbitration and Conciliation Act, 1996 would only be applicable, the present arbitration is only the continuation from previously appointed arbitrator this the provisions of amendment Act, 2015 is not attracted. Hence, the given findings by the learned arbitrator is no perverse and illegal.
25. The learned counsel for the Respondent argued that this petition is barred by limitation. The Respondent No.4 passed an award on 04.06.2019 and this petition came to be filed on 10.03.2022. Hence, this court has no jurisdiction to try the subject matter, since this claim is barred by limitation.
26. On perusal of the award, it is clear that the arbitral tribunal passed an award on 04.06.2019 and admittedly this petition was filed on 10.03.2022.
27. Section 34 (3) of Arbitration and Conciliation Act reads as under:
"An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal"29
Com.A.P.No.24/2022
28. The Petitioner filed additional affidavit by stating that the award copy was received on 20.09.2019 within the period of 90 days of receiving of an arbitral award, the petitioner approached the Hon'ble High court of Madras seeking to set aside the arbitral award dated 04.06.2019. The said petition under Section 34 of the Arbitration and Conciliation Act, 1996 was filed on 13.01.2020. However, the above petition was returned on 31.01.2020 by the Registry of the Hon'ble High court due to want of jurisdiction. Hence the period of limitation starts from 01.03.2022 and ends on 13.04.2020. Due to prevailing pandemic conditions the central government and State Government had imposed lockdown starting from 21.03.2020. In view of the same, the Hon'ble Supreme Court has extended the limitation from time to time. The Hon'ble Supreme court has extended the limitation period till 28.02.2022. Hence, the limitation period must be computed from 01.03.2022. Based on which, the 90 days period starts from 01.03.2022 and ends on 01.06.2022. The present petition is filed on 08.03.2022, which is within the period of limitation granted by Hon'ble Supreme court.
29. The Plaintiff also produced the photo copy of the order sheet and he has produced e-court fee certificate issued by the Government of Tamil Nadu dated 13.01.2020.
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30. In this regard the petitioner has relied upon decision reported in 2021 (6) SCC 460, Government of Maharashtra (Water Resources Department), represented by Executive Engineer vs. Borse Brothers Engineers and Contractors Private Limited where in Hon'ble Supreme Court held that "Arbitration and Conciliation Act, 1996- S.37 - S.5 of the Limitation Act, held, is applicable for condonation of delay in filing appeals under Section 37 of the Arbitration and Conciliation Act, 1996 where specified value is not less than three lakh rupees i.e., the limitation period is governed by S. 13 (1-A) of the commercial Courts Act- Scheme of Commercial Courts Act does not exclude applicability of Section 5 of the limitation Act to such appeals under Section 37- Commercial Courts Act, 2015 - Sub section 13 and 21- limitation Act, 1963, Sub Section 5 and 29 (2) and Articles 116 and 117".
The Hon'ble Supreme Court held that " Given the aforesaid and the object of speedy disposal sought to be achieved both under the Arbitration Act and the Commercial Courts Act, for appeals filed under section 37 of the Arbitration Act that are governed by Articles 116 and 117 of the Limitation Act or section13(1A) of the Commercial Courts Act, a delay beyond 90 days, 30days or 60 days, respectively, is to be condoned by way of exception and not by way of rule. In a fit case in which a party has otherwise70 acted bonafide and not in a negligent manner, a short delay beyond such period can, in the discretion of the court, be condoned, always bearing in mind that the other side of the picture is that the opposite party may have acquired both in equity and justice, what may now 31 Com.A.P.No.24/2022 be lost by the first party's inaction, negligence or laches.
In the Civil Appeal arising out of SLP (C) No. 15278 of 2020, the impugned judgment of the High Court of Madhya Pradesh dated27.01.2020 relies upon Consolidated Engg. (supra)and there by states that the judgment of this Court in N.V. International (supra)would not apply. The judgment of the High Court is wholly incorrect in as much as Consolidated Engg. (supra) was a judgment which applied the provisions of section 14 of the Limitation Act and had nothing to do with the application of section 5 of the Limitation Act.N.V. International (supra) was a direct judgment which applied the provisions of section 5 of the Limitation Act and then held that no condonation of delay could take place beyond 120 days. The High Court was bound to follow N.V. International (supra), as on the date of the judgment of the High Court, N.V. International (supra) was a judgment of two learned judges of the Supreme Court binding upon the High Court by virtue of Article 141 of the Constitution. On this score, the impugned judgment of the High Court deserves to be set aside.
31. The Respondent No. 1 to 3 relied upon a Judgment in Civil Appeal No. 6810 of 2022, Bhimashankar Sahakari Sakkare Karkhane Niyamits vs. Walchandnagar Industries Limited where in Hon'ble Supreme Court referred the judgment State of 32 Com.A.P.No.24/2022 Maharashtra vs. Hindustan Construction Co. Ltd reported in 2010(4) SCC 518 and has observed and held in paragraph 6 to 9 as under
6. Section 34(3) of the 1996 Act provides that an application for setting aside an award may be made within three months of the receipt of the arbitral award. The proviso that follows sub-section (3) of Section 34 provides that on sufficient cause being shown, the court may entertain the application for setting aside the award after the period of three months and within a further period of 30 days but not thereafter.
7. In Popular Construction Co.1, this Court has held that an application for setting aside an award filed beyond the period mentioned in Section 34(3) would not be an application "in accordance with sub-section (3) as required under Section 34(1) of the 1996 Act" and Section 5 of the 1963 Act has no application to such application. In para 12 of the Report, it was held in Popular Construction Co.1 thus: (SCC pp.474-75) "12. As far as the language of Section 34 of the 1996 Act is concerned, the crucial words are "but not thereafter" used in the proviso to sub-section (3). In our opinion, this phrase would amount to an express exclusion within the meaning of Section 29(2) of the Limitation Act, and would therefore bar the application of Section 5 of that Act. Parliament did not need to go further. To hold that the court could entertain an application to set aside the award beyond the extended period under the proviso, would render the phrase "but not thereafter" wholly otiose. No principle of interpretation would justify such a result".
8. Recently, in State of Maharashtra v. Hindustan Construction Company Limited2, a two-Judge Bench of this Court speaking through one of us (R.M. Lodha, J.) 33 Com.A.P.No.24/2022 emphasised the mandatory nature of the limit to the extension of the period provided in proviso to Section 34(3) and held that an application for setting aside arbitral award under Section 34 of the 1996 Act has to be made within the time prescribed under sub-section (3) of Section 34 i.e., within three months and a further period of 30 days on sufficient cause being shown and not thereafter.
9. Section 43(1) of the 1996 Act provides that the 1963 Act shall apply to arbitrations as it applies to proceedings in court. The 1963 Act is thus applicable to the matters of arbitration covered by the 1996 Act save and except to the extent its applicability has been excluded by virtue of the express provision contained in Section 34(3) of the 1996 Act." Before this Court there existed, similar facts like in the present case. In the case before this Court, the arbitral awards were received by the appellants on 26.08.2003. No application for setting aside the arbitral award was made before elapse of three months from the receipt thereof. Three months from the date of receipt of the award expired on 26.11.2003. The District Court had Christmas vacation for the period from 25.12.2003 to 01.01.2004. On reopening of the Court i.e. on 02.01.2004, the appellants made application for setting aside the award under Section 34 of the Arbitration Act. Considering the aforesaid facts and thereafter considering Sections 2(j) and 4 of the Indian Limitation Act, 1963, Aditya Khaitan and Others vs. IL and FS Financial Services Limited where in the Hon'ble Supreme court held that in Civil Appeal No. 6411/2023 wherein held that:
As has been set out herein above, while summons was served on 07.02.2020, the 30 days period expired on 34 Com.A.P.No.24/2022 08.03.2020 and the outer limit of 120 days expired on 06.06.2020. The application for taking on record the written statements and the extension of time was filed on 20.01.2021. Applying the orders of 08.03.2021 and the orders made thereafter and excluding the time stipulated therein, the applications filed by the applicants on 19.01.2021 are well within time. The judgment passed by the High court, for the reasons set out herein above, needs to be set aside. The principle underlying the orders of this court dated 08.03.2021, 27.04.2021 and 23.09.2021 in the re:congnizance for extension of limitation, albeit those orders being passed, subsequent to the impugned order, would entire to the benefit of the applicants-defendants.
32. The Petitioner relied upon decision of the Hon'ble Supreme Court vide its Orders passed in Misc.Application No.21/2022 and in Misc.
Application No.665 of 2021 in Suo Moto Writ Petition © No. 3/2020 has held that 'in cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022 notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply.
It is further clarified that the period from 15.03.2020 till 28.02.2022 shall also stand 35 Com.A.P.No.24/2022 excluded in computing the periods prescribed under Sections 23(4) and 29A of the Arbitration and Conciliation Act, 1996, Sec.12A of the Commercial Courts Act, 015 and provisos (b) and (C) of Sec.138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for institution proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings.
33. In this case, it is an indisputed fact that the Section 34 of the Arbitration and Conciliation Act filed earlier before the High court of Chennai to set aside the award dated 04.06.2019 the said petition under Section 34 of the Arbitration and conciliation Act, 1996 was filed on 13.01.2020. The above petition was returned on 31.01.2020 by Registry of the Hon'ble High court due to want of jurisdiction. In the above decision the Hon'ble Supreme Court held that the limitation period must be computed from 01.03.2022, based on which, the 90 days period starts from 01.03.2022 and ends on 01.06.2022 this suit is filed on 08.03.2022, which is within the period of limitation granted by the Hon'ble Supreme Court.
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34. In view of the above decisions, I hold that this petition is filed within limitation. Since, the Hon'ble Supreme court discussed above appeal filed under Section 37 is not regard under Section 34 of the Arbitration and Conciliation Act.
35. In view of my above discussions, observations and findings, I am of the opinion that the Award of the Learned Arbitrator is liable to be set aside on the ground that the same is contrary to the Public Policy and also there is patent illegality in the findings of the learned Arbitrator. Further, I make it clear that I have discussed only about the findings given by the learned Arbitrator in the light of the contentions taken by the petitioner without re-appreciating the oral or documentary evidence placed before the Learned Arbitrator. All my findings are based on the legal aspects and the development of case law on the said subject. When such being the case, I have no other option except to set aside the entire Award passed by the learned Arbitrator. Therefore, I answer this Point in the "Affirmative".
36. Point No. 2:- For the discussion made on above point, following order is passed:
37Com.A.P.No.24/2022 ORDER The Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, is allowed.
The Arbitral Award dated 04.06.2019 is hereby set aside.
The Office is directed to send copy of this judgment to both parties to their email ID as required under Order XX Rule 1 of the Civil Procedure Code as amended under Section 16 of the Commercial Courts Act.
(Dictated to the Stenographer, typed by her directly on the computer, verified and pronounced by me in open Court on this the 28th day of March 2024).
(SUMANGALA S BASAVANNOUR), LXXXII Addl. City Civil & Sessions Judge, Bengaluru