Allahabad High Court
Worlds Window Infrastructure And ... vs Central Warehousing Corporation on 31 May, 2018
Equivalent citations: AIRONLINE 2018 ALL 4096
Author: Vivek Kumar Birla
Bench: Vivek Kumar Birla
HIGH COURT OF JUDICATURE AT ALLAHABAD AFR Reserved Court No. - 30 Case :- MATTERS UNDER ARTICLE 227 No. - 2580 of 2018 Petitioner :- Worlds Window Infrastructure And Logistrics Pvt. Ltd. Respondent :- Central Warehousing Corporation Counsel for Petitioner :- Udayan Nandan,Sri Shashi Nandan Sr. Advocate Counsel for Respondent :- Adarsh Bhushan Connected with Case :- MATTERS UNDER ARTICLE 227 No. - 3108 of 2018 Petitioner :- Worlds Window Infrastructure And Logistics Pvt. Ltd. Respondent :- Central Warehousingh Corporation Counsel for Petitioner :- Udayan Nandan,Sr. Advocate Shashi Nandan Counsel for Respondent :- Adarsh Bhushan,Adarsh Bhushan Hon'ble Vivek Kumar Birla, J.
1. Heard Sri Shashi Nandan, learned Senior Counsel assisted by Sri Udayan Nandan, learned counsel for the petitioner and Sri Ashok Khare, learned Senior Counsel assisted by Sri Adarsh Bhushan, learned counsel for the respondent and perused the record.
2. At the very outset, learned counsel for the petitioner stated that he does not want to file any rejoinder affidavit.
3. The relief as claimed in the present petition being Matter Under Article 227 No. 2580 of 2018 is quoted as under:
"I. Issue a suitable order or direction quashing the impugned order dated 24.02.20018 passed by the Ld. District Judge in Civil Appeal No. 136/2016 arising out of Original Suit No. 120/2016.
II. Issue a suitable order or direction commanding/directing the respondent not to take any coercive action against the petitioner in pursuance to the order dated 24.02.2018 passed by the Ld. District Judge in Appeal No. 136 of 2016.
III. Issue a suitable order or direction directing the respondents not to proceed with the purported Arbitration proceedings as initiated by Respondent in pursuance to the impugned order dated 24.02.2018.
IV. Pass such other further orders which this Hon'ble Court may deem fit and proper in the facts and circumstances of the case."
4. The relief as claimed in the connected petition being Matter Under Article 227 No. 3108 of 2018 is also quoted as under:
"(a) issue a suitable order or direction setting aside the order dated 24.02.2018 as passed by the learned District Judge in Appeal No. 135/2016;
(b) issue a further suitable order or direction restraining the respondents from taking any coercive steps against the petitioner or proceed with the purported arbitration proceedings in pursuance to the impugned order;
(c) Any other relief which this Hon'ble Court deem just and proper in the circumstances of the case may also be awarded to the petitioners;
(d) Award the cost of the petition to the petitioner."
5. From perusal of the aforesaid, it is clear that two appeals were filed before the Court below: one, appeal being Misc. Appeal No. 135 of 2016 filed by the defendant-respondent Central Warehousing Corporation (hereinafter referred to as the 'CWC') against the plaintiff-petitioner Worlds Window Infrastructure And Logistics Pvt. Ltd. (hereinafter referred to as the 'WWILPL') under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act of 1996') as amended by the Arbitration and Conciliation (Amendment) Act, 2005 (Act 3 of 2016) read with Order 41 Rule 1 and Section 151 of the Code of Civil Procedure, 1908 (hereinafter referred to as the 'CPC') against the order dated 15.03.2016 passed by the Court of Civil Judge (Senior Division) on application (paper No. 23 Ga) under Section 8 read with Section 5 of the Act of 1996 (as amended) in Civil Suit No. 120/2016 and second, appeal being Misc. Appeal No. 136 of 2016 filed by CWC against WWILPL under Order 43 Rule 1(r) read with Section 151 of CPC challenging the order of Civil Judge (Senior Division), Ghaziabad dated 15.03.2016 on respondent's application (paper no. 6 Ga) under Order 39 Rule 1 & 2 read with Section 151 of the CPC and appellant's application (Paper no. 25 Ga) under Order 39 Rule 4 read with Section 151 of CPC in Civil Suit No. 120/2016.
6. Since, both the petitions have been filed under Article 227 of the Constitution of India invoking supervisory jurisdiction of this Court and Petition no. 2580 of 2018 was filed and argued earlier in point of time but was deferred on request as other petition was under preparation and subsequently connected Petition no. 3108 of 2018 was filed, therefore, with consent of learned counsel for the parties, present Petition no. 2580 of 2018 is being taken up as a leading case with specific liberty to refer to the documents annexed with connected petition as and when required. It is also not in dispute that fate of the present Petition no. 2580 of 2018 (leading petition) would be dependent on the fate of the connected Petition no. 3108 of 2018 whereby the judgement of the lower appellate court whereby, while setting aside the order of trial Court allowing the application filed under Section 8 of the Act of 1996, is under challenge. Therefore, if that order is upheld, there will be no necessity to go into the merits of the order passed by the appellate Court rejecting the injunction application filed by WWILPL.
7. Both the parties agree that since common arguments are to be advanced in both the petitions and the leading petition has been heard for some time on the earlier dates, making Petition no. 2580 of 2018 as a leading case, wherein order rejecting interim injunction application by the lower appellate Court is under challenge, would not make any difference. Accordingly, for the purpose of convenience and argument, Petition no. 2580 of 2018 is taken as a leading case.
8. Shorn of unnecessary details, brief facts of the case necessary for disposal of the present petition are that in the year 2004 CWC floated an open tender for appointment of Strategic Alliance Management Operator (SAMO) for equipping marketing, operation and maintenance of its Inland Container Depot at Loni, Ghaziabad. Ultimately, on 16.2.2005 the parties entered into the Strategic Alliance Management Agreement. With passage of time, certain disputes arose between the parties and several attempts were made to resolve the dispute as per the terms of the agreement and the parties tried to resolve the dispute as per clause 20.0 of the agreement. Subsequently Board of Directors including the Managing Director and the Chairman passed a resolution authorizing the Chairman to act as Adjudicator to adjudicate the dispute. The Chairman submitted its report dated 20.11.2014 after meeting with the representative of both the parties. The case of WWILPL is that WWILPL altered its position pursuant to the aforesaid Chairman's report dated 20.11.2014. However, according to WWILPL, CWC illegally issued a notice dated 4.1.2016 invoking the arbitration clause 21.0 of the agreement. Another notice dated 18.1.2016 was issued to WWILPL to submit their claim by 4.2.2016. The same was replied vide letter dated 22.1.2016 claiming that the award dated 20.11.2014 has already been passed by the Chairman. On 4.2.2016 WWILPL instituted Original Suit No. 120 of 2016 in the Court of Civil Judge (Senior Division), Ghaziabad praying for decree of permanent injunction restraining CWC from proceedings for arbitration proceedings. On receiving notice, CWC filed an application under Section 8 of the Act of 1996 that the suit is not maintainable in view of the arbitration clause and the matter has to be referred to the arbitrator. Two orders were passed by the trial Court on 15.3.2016; one order was passed on the application of CWC filed under Section 8 read with Section 5 of the Act of 1996 rejecting the same and another order on the same date was passed allowing the interim injunction application filed by WWILPL and rejecting the application filed by CWC under Order 13 Rule 4 CPC. Both the orders were challenged before the appellate Court under different provisions of law as already noted above. The appeals were connected and decided together by a common judgement. Since two orders were under challenge before the appellate Court in two different appeals, the judgement and order of the lower appellate Court is under challenge in two different petitions as already taken note of.
9. It may be further noticed that a suit being Original Suit No. 120 of 2016 was filed by WWILPL for permanent injunction, relief clause whereof is quoted as under:-
"(a) Pass a decree of permanent injunction till the currency of agreement in favour of the plaintiff and against the Defendant restraining the Defendant from acting upon the letters dated 24.11.2015, 3.02.2016 or any such similar letter or action of the Defendant;
(b) Pass a decree of permanent injunction in favour of Plaintiff and against Defendant thereby restraining the Defendant from taking any coercive steps qua the agreement dated 16.02.2005, till the currency of the said Agreement including initiation of any proceedings against the plaintiff company;
(c) Pass a decree of permanent injunction in favour of the Plaintiff company and against the Defendant thereby restraining the Defendant from raising any fresh demand contrary to the terms of the Contract from the Plaintiff company;
(d) Pass a decree of permanent injunction in favour of the plaintiff company and against the defendant thereby restraining the Defendant from interfering with the smooth functioning of the business by the Plaintiff company at the facility i.e. ICD, Loni, including but not limited to the interference by the defendant through any other agency and/or departments.
(e) pass such other and further order/orders as may be deemed fit and proper on the facts and in the circumstances of this case."
10. The prayer made in the application filed by CWC under Section 8 read with Section 5 of the Act of 1996 for rejection of the suit is also quoted as under:-
"In view of the above stated facts/circumstances and in accordance with Section 8 read with Section 5 of the Act, it is humbly prayed by the Defendant/Applicant herein that this Hon'ble court may be pleased to:
a) dismiss the Civil Suit No. 120 of 2016 along with the application under Order 39 Rule 1 & 2 of Civil Procedure Code, with costs;
(b) or in the alternative, refer the matter and the parties to the arbitration that has already commenced before the sole arbitrator Ms. Sheila Sangwan, Flat No. 22, Dakshineshwar, 10 Hailey Road, Delhi- 110001;
(c) and/ or pass any other or further Order(s) as this Hon'ble Court may deem fit and proper."
11. Main contention of WWILPL before the trial Court was that since the award dated 20.11.2014 has already been passed by the Chairman, therefore, the application filed under Section 8 of the Act of 1996 is liable to be rejected. A question was framed by the trial Court as to whether the Court has jurisdiction to hear the case or not. For this purpose, the trial Court, after considering the unamended provisions of Section 8 of the Act of 1996, held that the Court has jurisdiction to decide the same and held that since the suit has not been filed for deciding the issue that has arisen due to breach of contract but has been instituted for seeking permanent injunction for staying the arbitration proceedings, therefore, subject matter of the permanent injunction does not relate to the arbitration clause and since the suit for mandatory injunction is maintainable before the Civil Court, therefore, the Court has jurisdiction to decide the same. It was the case of WWILPL that since the order/report dated 20.11.2014 passed by the Chairman is an award and therefore, the same operates as res judicata on CWC. It was held by the trial Court that the order/report of Chairman dated 20.11.2014 is an arbitral award and therefore, the dispute that is being sought to be referred to the arbitrator is barred by principles of res judicata. Ultimately, it was held that the order/report of Chairman dated 20.11.2014 is an arbitral award and reference of the same dispute to the arbitration is barred by res judicata and that WWILPL has also altered its position pursuant to the aforesaid order and there is no arbitrable dispute existing between the parties. Hence, the application under Section 8 of the Act of 1996 was rejected.
12. While allowing injunction application filed by the WWILPL under Order 39 Rules 1 and 2 CPC, interim injunction was passed by the Court below on 15.3.2016 virtually granting final relief by providing that during the pendency of the suit till the currency of agreement dated 16.2.2005 the CWC or its agency or department are restrained from pursing any arbitration process and no new attempt shall be raised by CWC against WWILPL and CWC was restrained from taking any coercive action against WWILPL. It was specifically provided that CWC shall not create any hindrance in functioning of WWILPL as per agreement dated 16.2.2005. The operative portion of the order dated 15.3.2016 passed by the trial Court is quoted as under:
"oknh dk izkFkZuki= 6x vUrxZr vkns'k 39 fu;e 1 o 2 rFkk /kkjk 151 flfoy izfdz;k lafgrk Lohdkj fd;k tkrk gS] vkSj izfroknh dh vkifRr [kkfjt dh tkrh gSA izfroknh dks vLFkk;h O;kns'k ds }kjk vknsf'kr fd;k tkrk gS fd okn ds ycau ds nkSjku og djkj fnukWfdr 16-02-05 dh vfLrRokof/k esa vius i= fnukWfdr 24-11-15] 30-02-16 rFkk leku izdkj ds vU; i= ds }kjk vkfcZVs'ku dh dk;Zokgh djus rFkk izfroknh Lo;a ;k vius fdlh ,tsalh ;k foHkkx ds }kjk oknh ls dksbZ vU; ubZ ekWx u djs rFkk oknh ds fo:) dksbZ vU; mRihMd dk;Zokgh u djs] vkSj oknh dks djkjk fnukWafdr 16-02-05 ds vuqlkj dk;Z O;kikj ds lqpk: lapkyu esa vojks/k iSnk u djsA"
13. In appeal, a question/point of determination in both the appeals was framed, which is quoted as under:-
"Whether the adjudication order passed by the Chairman of CWC on the direction of the Board of Directors is an award in terms of the Arbitration & Conciliation Act in view of clause 21 of the agreement entered into between the parties or it is simply an effort by the Chairman of CWC to amicably resolve the issue between the parties?"
14. The lower appellate Court, finding that the fate of order passed on interim injunction application is dependent on the fate of the application filed under Section 8 read with Section 5 of the Act of 1996, proceeded to decide the aforesaid question. After going through the provisions of the Act including Sections 5, 8 and 16 of the Act of 1996 and the rulings cited by both the sides, it was found that the order of the Chairman dated 20.11.2014 is, in fact, a report submitted by the Chairman before the Board of Directors and was not an award as it was placed before the Board of Directors of CWC for perusal and appropriate action and on which several deliberations have taken place on different dates and this was only an attempt by the Board of Directors to resolve the dispute amicably and there was no intention on part of CWC to appoint any arbitrator because there was no such reference order containing the intention as well as specific words of the appointment of any arbitrator under the Act. It was noticed that report was submitted to the Board of Directors of CWC for perusal and it was left on the Board of Directors either to accept the report or to take any other action as per the agreement. It was further noticed that the matter was carried by the parties to the Ministry of Law & Justice wherein it was advised by the Ministry of Law & Justice, Department of Legal Affairs that an effort to amicably resolve the dispute should be made and if such resolution is not possible, then unresolved disputes may be referred to arbitration as prescribed under clause 21.0 of the agreement as per the provisions of Act of 1996.
15. In view of the aforesaid, a finding was recorded by the lower appellate Court that the report of the Chairman dated 20.11.2014 was not an arbitration award and as such, in view of amended Section 8 of the Act of 1996, the jurisdiction of the Civil Court is ousted. A bare minimum extract of the finding recorded by the lower appellate Court is quoted as under:-
"Thus, on the basis of foregoing discussions finding support of the case law, the question framed for determination in these Miscellaneous Civil Appeals, is decided in the form that the adjudication order passed by the Chairman, CWC on the initiation of the Board of Directors of CWC, was simply an effort to resolve the issues between the two Companies amicably. Despite the use of word 'adjudication', it cannot be termed as an 'award of Adjudicator/Arbitrator' because there was no specific reference under the Arbitration & Conciliation Act in a proper manner. Also appointment of arbitrator was not by the Managing Director who was only authorized under the agreement to appoint arbitrator. The adjudication order is also not in the form of an award prescribed under the Arbitration & Conciliation Act. It was stated to be placed before the Board of Directors with the result that the person passing the order himself did not attach finality to this order. So, it cannot be said to be an award by an arbitrator appointed under the Arbitration & Conciliation Act. On scrutiny, the Ministry of Law also opined on the same lines and finally asked the CWC to resort to Clause 21 of the contract, fi some disputes remain unresolved.
Thus, the point set for determination in these Miscellaneous Civil Appeals is decided with the finding that the adjudication order passed by the Chairman CWC on the direction of the Board of Directors is not an award in terms of the Arbitration & Conciliation Act in view of clause 21 of the agreement. It was simply an effort by the Chairman CWC to amicably resolve the issues between the parties.
The consequences of this proposition are that the dispute between the parties exists and the dispute was arbitrable. The arbitration clause is available in the agreement. The person duly empowered to appoint arbitrator has now appointed Arbitrator Ms. Sheila Sangwan. So, on the question of arbitrability and existence of the dispute, the position is clear and once existence of these allegations are established in view of Sections 5 & 8 of the Arbitration & Conciliation Act, ouster of jurisdiction of Civil court, comes in the way. In view of the findings of the Hon'ble Apex court in the cases of " P. Anand Gajapathi Raju & Ors. Vs. P.V.G. Raju" & Hindustan Petroleum Corpn. Ltd. Vs. Pinkcity Midway Petroleums", "SBP & Co. Vs. Patel Engineering Ltd. & Anr.", & "Sundaram Finance Limited Vs. T. Thankam (2015) 14 SCC 444/AIR 2015 SC 1303", whenever these things come on picture, the Court is to scrutinize its jurisdiction from the basic principle of ouster of jurisdiction. Hence, on the basis of it, the application under Section 8 of the Arbitration & Conciliation Act which was rejected by the learned court below, was not properly dealt with and it was wrongly rejected."
16. Consequently, the injunction application filed under Order 39 Rules 1 and 2 CPC was also rejected by setting aside both the orders of the trial Court. Reasoning given for passing the order is also quoted as under:-
" Next consequence of it flows that once jurisdiction of Civil Court is ousted, no question arises of entertaining the application under Order XXXIX Rule 1 & 2 C.P.C. because Special Laws are operative over general Laws. The Arbitration & Conciliation Act is a Special Law and its provisions (Sections 5, 8, 16) will operate and will be given precedence over the general Law. All discussions of the Court below are without merit and are not sustainable. Consequently the order passed by the learned court below on ad interim injunction application is also a bad order in the eye of law without jurisdiction. Both these orders dated 15.3.2016 of the Court below deserve to be set aside."
17. Sri Shashi Nandan, learned Senior Counsel appearing for the petitioner-WWILPL has raised three arguments: (1) the order passed by the Chairman dated 20.11.2014 is an arbitral award; (2) without prejudice even it is assumed the said order is only a settlement, still the dispute could not have been referred to the arbitration as any reference to arbitration pre- supposes existence of a dispute; and (3) by referring the dispute to the Chairman, CWC waived off its right to refer the same matter to the arbitration and since CWC did not raise any dispute, therefore, they have waived off their right of raising any such dispute subsequently and submitted that in this view of the matter, the trial Court has passed perfectly just and legal order, which was illegally reversed by the lower appellate Court and thus, the impugned orders are liable to be set aside.
18. Elaborating the argument, Sri Shashi Nandan, learned Senior Counsel for the petitioner-WWILPL referred to clause 20.0 and 21.0 of the agreement dated 16.2.2005 between the parties, wherein clause 20.0 of the agreement provides for internal mechanism for dispute resolution. He further referred to resolution passed by the Board of Directors authorizing the Chairman, CWC to adjudicate the matter amicably between the parties in tune with the advice of Ministry of Law & Justice, Department of Legal Affairs dated 1.4.2004. He pointed out that pursuant to the order passed in 309th meeting of the Board of Directors held on 30.4.2004, the Chairman was authorized to adjudicate. He has drawn attention to the report of the Chairman dated 20.4.2014, which is on the adjudication of the dispute between the parties and submitted that the report contains the order of the Chairman appointed by the Board of Directors, which included the Managing Director also, who had the authority to nominate a person to act as an arbitrator also and this report contains in order of Chairman, therefore, this is an arbitral award. He submitted that vide letter dated 4.1.2016 the arbitration clause 21.0 was wrongly and illegally invoked by CWC. Much emphasis was given to the words 'to adjudicate' used in the Board's resolution dated 30.4.2014. He submitted that this resolution overrides clause 21.0 of the agreement as Managing Director was also one of the members who attended the Board of Directors' meeting and this change was accepted by WWILPL and that pursuant to the order of Chairman dated 20.11.2014 WWILPL also altered its position. It was highlighted that some of the issues in dispute were settled amicably before the Chairman, however, the disputes, which remained to be settled, were settled by the Chairman by passing order. Thus, it was an arbitral award and trial Court has rightly held that since the order of the Chairman dated 20.11.2014 was an award, therefore, invocation of arbitration clause is barred by res judicata. It was submitted that pursuant to clause 20.0 of the agreement, the Joint Committee and Advisory Committee have failed to resolve the dispute to amicable process. It is only thereafter the Chairman was appointed, therefore, whether he is addressed as 'adjudicator' or 'arbitrator', the nomenclature is immaterial. Since the Managing Director also attended the meeting of Board of Directors, therefore, for all practical purposes, he became the arbitrator and applied its discretion to resolve the unresolved dispute. It was further submitted that no objection was filed by CWC to challenge the order of the Chairman and since status of the Chairman vis-a-vis agreement is not disclosed, his role can only be referable to arbitration clause 21.0 of the agreement. It was argued that after decision is taken to appoint Chairman in place of nominee of Managing Director by Board of Directors, now CWC cannot claim that the Chairman has not acted as arbitrator. It was further argued that after Advisory Committee had failed, it is only the provision to approach the arbitrator comes into play and therefore, appointment of Chairman by the Board of Directors, which can only be taken as nominee of the Managing Director as the Managing Director himself attended meeting of the Board of Directors, the appointment of Chairman was an appointment of arbitrator, to which WWILPL had agreed. It is submitted that the resolution of the Board has not been properly appreciated by the lower appellate Court. The use of word 'adjudication' will not change the nature of the authority i.e. arbitration and therefore, once CWC agreed to the same, they have waived off their right to raise any objection. In alternative, it was submitted that even if the order of the adjudicator is not an award, even then if WWILPL has changed its position while making huge investment, the same issue cannot be re-opened. During argument reference was made to Sections 4, 6, 8, 21, 30, 34(3) of the Act of 1996.
19. In support of his submissions, learned Senior Counsel has placed reliance on the judgements rendered in New India Assurance Company Ltd. vs. Genus Power Infrastructure, (2015) 2 SCC 424; Union of India (UOI) and Ors. vs. Master Construction Co., (2011) 12 SCC 349; State of Kerala vs. Joseph Anchilose, AIR 1990 Ker 101; M.S. Ramaiah vs. The State of Mysore, AIR 1971 Kant 17; P.K. Ramaiah and Company vs. Chairman & Managing Director, National Thermal Power Corporation, 1994 Supp (3) SCC 126; A. Kothandapani & Ors. vs. Sampathkumar and Anr., AIR 1987 MP 204; Ramakrishna Theatre Limited, Rep. by Chairman vs. General Investments and Commercial Corporation Limited, Rep. by its Director, AIR 2003 Kant 502; C.G. Holdings Private Limited, Rep. by its Director and Kangeyam Chenniappa Palanisamy and Ors. Etc. etc. vs. Ramasamy Athappan and Nandakumar Athappan and Ors. Etc. etc., (2012) 170 Compcas 93 (Mad.); Smt. Sudershan Chopta and Ors. vs. Company Law Board, Principal Bench and Ors., 2003 (3) ARBLR 14 (P&H); Sneh Gupta vs. Devi Sarup and Ors., (2009) 6 SCC 194; State of Punjab and Ors. vs. Gurdev Singh and State of Punjab and Ors. vs. Ashok Kumar, (1991) 4 SCC 1; Sultana Sadik vs. Sanjay Raj Subba and Ors. (2004) 2 SCC 377; Krishnadevi Malchand Kamathia and Ors. vs. Bombay Environment Action Group and Ors., (2011) 3 SCC 363; Satish Kumar and Ors. vs. Surinder Kumar and Ors., AIR 1970 SC 833; S.B.P. and Co. vs. Patel Engineering Ltd. and Anr., (2005) 8 SCC 618; Central Warehousing Corporation vs. Fortpoint Automotive Pvt. Ltd., 2010 (1) ALLMR 497; Alstom Hydro France vs. Tehri Hydro Development Corporation and Anr., AIR 2009 Utr 61; Sukumar Ghosh vs. Tulsi Charan Ghosh, AIR 1980 Cal 134; Booz Allen and Hamilton Inc. vs. SBI Home Finance Ltd. and Ors., (2011) 5 SCC 532; Wander Ltd. and Anr. vs. Antox India P. Ltd., 1990 (2) ARBLR 399 (SC); Ramesh Ramaji Akre and Ors. vs. Smt. Manglabai wd/o Pralhad and Ors., 2002(3) MhLj 579; Fenner (India) Ltd. vs. Brahmaputra Valley Fertilizer Corporation Ltd., 227 (2016) DLT 285; GTL Limited and Ors. vs. IFCI Ltd. & Anr. CS (OS) No. 2278/2011; Gammon India Ltd. vs. VVR Crushers and Constructions, Arbitration Appeal No. 23 of 2017 (High Court of Bombay); TRF Ltd. vs. Energro Engineering Projects Ltd., SLP (C) No. 22912 of 2016 (Supreme Court); Ramesh Ramaji Akre and Ors. vs. Smt. Mangalabai wd/o Pralhad and ors., AIR 2002 Bom 487; Arjun Singh vs. Mohinder Kumar and Ors, AIR 1964 SC 993; Oil and Natural Gas Commission vs. Western Company of North America, (1987) 1 SCC 496; Sunil High Tech Engineering vs. Suryavanshi Construction Co. & Anr., Manu/SCOR/46334/2013; MBL Infrastructure Ltd. vs. Telecommunication Consultants India Ltd., SLP (C) No. 7708/2015; Ahuja Builders vs. Donnvalley Technopolis Pvt. Ltd., 2017 (5) Arb. L.R. 146 (Delhi) ; and State of Orissa & Ors. vs. Commissioner of Land Records & Statement, Cuttack and ors., (1998) 7 SCC 162.
20. Per contra, Sri Ashok Khare, learned Senior Counsel appearing for the respondent-CWC has argued that it is a case of ouster of Civil Court in view of clause 21.0 of the agreement and therefore, as per amended Section 8 of the Act of 1996 if any suit is filed, only option with the Civil Court is to refer the dispute to the arbitrator and the suit is clearly not maintainable. He further submits that any other question or objection can only be seen by the arbitrator as per Section 16 of the Act of 1996. His next argument is that in fact the Chairman had only submitted its report dated 20.11.2014 for perusal, which, under no circumstances, can be said to be an award as it clearly provided for amicable solution and it was specifically provided that if a dispute is not resolved through this amicable process, the parties can invoke arbitration clause as clearly advised by the Ministry of Law & Justice, Department of Legal Affairs. It was further claimed that Section 37 (3) of amended Act of 1996 clearly provides that no second appeal shall lie from an order passed in appeal under this section but nothing in this section shall affect or take away any right to appeal to the Supreme Court, therefore, the present petition under Article 227 of the Constitution of India would not be maintainable.
21. Elaborating the arguments, Sri Ashok Khare, learned counsel for the respondent-CWC, denying the assertions of the learned counsel for the petitioner-WWILPL that the adjudicator had acted as an arbitrator, the role of Ministry of Law & Justice, Department of Legal Affairs was highlighted and it was pointed out that both the parties have submitted to the Ministry for amicable solution and submitted that the Chairman's report dated 20.11.2014 clearly takes into account the advice of the Ministry, which in unambiguous terms provided that an attempt to solve the dispute by amicable settlement be made and in case the dispute remains unresolved, under that circumstances unresolved dispute may be referred to arbitration as prescribed under clause 21.0 of the agreement as per provisions of the Act of 1996. It was pointed out that in fact the Advisory Committee was never formed and therefore, by taking to various documents including the documents annexed to the counter affidavit, it was pointed out that both the parties were trying to settle the dispute amicably and it is only for this purpose the Chairman was appointed to act as an adjudicator. It was highlighted that the Boards' resolution clearly provided that the Chairman is authorized to adjudicate in the matter for 'amicable resolution with WWILPL'. Therefore, submission is that the provisions of clause 21.0 of the agreement was never invoked until the notice dated 4.1.2016 was issued to WWILPL. It is submitted that clearly, Boards' resolution was not referring to clause 21.0 of the agreement and thus, clause 21.0 was admittedly never replaced between the parties. By drawing attention to the minutes of 310th meeting of the Board of Directors held on 2.6.2014, annexed as Annexure 2 to the counter affidavit, it was pointed out that regarding the approval sought for settlement, the Board desired that the Chairman may settle it in consultation with the Managing Director and WWILPL and report to the next Board. It was also highlighted that the Chairman's report clearly provided that the order should be placed before the Board of Directors for perusal. Submission is that had it been an award, there was no occasion to place the same for perusal for one of the parties in dispute, therefore, clearly this was not an award and was merely an attempt to settle the dispute amicably and hence, the question of operating the aforesaid report as res judicata does not arise and the order of the trial Court was patently illegal and was rightly set aside by the lower appellate Court. In support of his argument, attention was drawn to the letters dated 24.12.2015, 30.12.2015 and 31.12.2015 written by WWILPL, which clearly indicate that even WWILPL has also not taken the adjudicator's report (Chairman's report) as an award and it was being claimed that the Advisory Committee was not formed as per clause 21.0 of the agreement. Submission, therefore, is that once the Advisory Committee was not formed, there was no occasion to take the matter to the arbitrator. It was pointed out that admittedly, the notice invoking the arbitration clause was given on 1.1.2016 and objections to the jurisdiction of the arbitrator were raised during morning hours at 11 AM on 4.2.2016, Section 21 of the Act of 1996 comes into operation and thus, the suit filed on the same date was not at all maintainable. It was highlighted that the trial Court has passed its order based on unamended Section 8 of the Act of 1996 whereas in view of amended Section 8 of the Act of 1996, once there exists arbitration clause, the jurisdiction of the Civil court is clearly ousted and that the law is well settled on this issue. Submission is that it is now no longer open to the Civil court to entertain the suit under any circumstances when the existence of arbitration clause is not disputed. It was submitted that law is well settled that it is not a question as to whether the Civil Court has jurisdiction to entertain the suit but the question, in fact, is as to whether the jurisdiction of the Civil Court is ousted or not. It is submitted that the issue is well settled that it is a question of ouster of the jurisdiction of the Civil Court and has to be tested on those parameters only and once the existence of arbitration clause is not in dispute, the jurisdiction of Civil Court is ousted. The question regarding status of the report of Chairman dated 20.11.2014 could have been agitated by WWILPL before the arbitrator only under Section 16 of the Act of 1996. Submission is that the question of status of the Chairman's order/report dated 20.11.2014 has been illegally tested by the trial Court by considering the provisions of unamended Section 8 of the Act of 1996 and as such, the same was patently illegal and has been rightly set aside by the lower appellate Court and therefore, no interference is warranted with the orders impugned herein. During arguments reference was made to Sections 13(2), 16, 21 and 30 of the Act of 1996.
22. In support of his submissions, learned Senior Counsel has placed reliance on A.Ayyasamy vs. A. Paramasivam and others, (2016) 10 SCC 386; Ouseph Mathai and others vs. M. Abdul Khadir, (2002) 1 SCC 319; Essen Deinki vs. Rajiv Kumar, (2002) 8 SCC 400; and Sameer Suresh Gupta through PA Holder vs. Rahul Kumar Agarwal, (2013) 9 SCC 374.
23. I have considered the rival submissions and perused the record.
24. Before proceedings further, it would be appropriate to take note of relevant provisions of Section 5, Section 8 (unamended), Section 8 (amended) and Section 16 of the Act of 1996, which are quoted as under:
"Section 5. Extent of judicial intervention.- Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part."
"Unamended Section of 8 of the Act:
Section 8. Power to refer parties to arbitration where there is an arbitration agreement.- (1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.
(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.
(3) Notwithstanding that an application has been made under sub-section (1) and that the issue pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made."
"Amended Section of 8 of the Act:
Section 8. Power to refer parties to arbitration where there is an arbitration agreement.- (1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgement, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.
(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof:
Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application alongwith a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that court.
(3) Notwithstanding that an application has been made under sub-section (1) and that the issue pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made."
"Section 16. Competence of arbitral tribunal to rule on its jurisdiction.- (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,--
(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and
(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award.
(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34."
(Emphasis supplied)
25. Arbitration clause 20.0 and 21.0 of the agreement are also quoted as under:
"20.0 A Joint Committee with equal number of representatives (those not directly involved in the day to day business operations of either party at the Facility) from CWC and the World's Window shall be constituted for the administration of the Management Contract. Any disputes arising out of the implementation of the contract shall be looked into by this committee for resolution.
The Joint Committee comprising three authorized representatives including Regional Manager of Central Warehousing Corporation and equal number of authorized representatives of the World's Window concerned shall be authorized, after going into all pros and cons without jeopardizing the financial interest of CWC, as contained in the agreement to amend the terms and conditions for smooth and hassle free operation so long as the overall structure of the contract does not change.
21.0 It is understood by both the parties that any dispute arising out of this contract, not resolved by the Joint Committee, shall be referred to an advisory committee to be jointly appointed by the parties.
In case the parties fail to arrive at any satisfactory resolution, the dispute arising out of any matter relating to this contract shall be governed by the Arbitration and Conciliation Act, 1996. It is also a term of this contract that no person other than a person appointed by MD, Central Warehousing Corporation, New Delhi should act as an arbitrator."
(Emphasis supplied)
26. Relevant extract of minutes of the 309th meeting of the Board of Directors held on 30.4.2014 is also quoted as under:
"AGENDA ITEM NO. 309.26 RESOLUTION OF DISPUTES WITH M/S. WORLDS WINDOW INFRASTRUCTURE AND LOGISTICS PVT. LTD. (WWILPL) IN RESPECT OF STRATEGIC ALLIANCE MANAGEMENT CONTRACT AT ICD-LONI The agenda regarding dispute between CWC and M/s. Worlds Window Infrastructure and Logistics Pvt. Ltd. (WWILPL) was discussed in detail with reference to the agreement and advice of the Ministry of Law & Justice, Department of Legal Affairs dated 01.04.2014.
After detailed deliberation, the Board authorized the Chairman, CWC to adjudicate in the matter for amicable resolution with M/s. Worlds Window Infrastructure and Logistics Pvt. Ltd. (WWILPL) in tune with the advice of the Ministry of Law & Justice, Department of Legal Affairs dated 01.04.2014."
(Emphasis supplied)
27. Relevant extract of one paragraph at page 199 of the Chairman's report dated 20.11.2014 is also quoted as under:
"The Administrative Ministry vice letter dated 6-10/2012-SG (Part) dated 02.04.2014 has informed that the case has been examined in the department in consultation with Deptt. of Legal Affairs, Ministry of Law and Justice who informed that there appears no relevant provision in the RFP document as well as agreement relating to the three disputes mentioned in the CWCs letter dated 21.06.2013. Accordingly, Ministry of Law & Justice has advised to take an such administrative decision to resolve the disputes amicably by mutual consultation. If such resolution is not possible then unresolved disputes may be referred to an arbitration as prescribed under clause 21.0 of the Agreement as per the provisions of Arbitration and Conciliation Act, 1996. The Ministry has requested CWC to take further action in the matter accordingly."
28. An objection was raised by the learned Senior Counsel appearing for the respondent-CWC regarding maintainability of the present petition under Article 227 of the Constitution of India. Suffice to note that Constitutional Bench of Hon'ble Apex Court in L. Chandra Kumar vs. Union of India, (1997) 3 SCC 261, has held that the power of judicial review is a part of the basic structure of Constitution of India and cannot take away. Section 37(1)(a) of the Act of 1996 provides for appeal in case of refusal to refer the parties to arbitration under Section 8 of the Act of 1996. Sub-section 3 of Section 37 provides that no second appeal shall lie from an order passed in appeal under this Section, therefore, from the appellate order passed under Section 37 of the Act of 1996 no second appeal would lie. It does not restrict the power of the High Court of judicial review as provided under Article 227 of the Constitution of India, which is a part of the basic structure of the Constitution. More so, when there is no provision of revision in the Act, therefore, present petition challenging the aforesaid order under Article 227 of the Constitution of India would be maintainable.
29. It is not in dispute that the trial Court has passed the order rejecting the application under Section 8 of the Act of 1996 filed by CWC taking into account the unamended provisions of Section 8 of the Act of 1996. After the amendment carried out in the Act of 1996 by Act 3 of 2016, reliance placed by the trial Court on unamended provisions was clearly not only misplaced, misconceived but also was patently illegal in nature. Amended Section 8 of the Act of 1996 clearly provides that scope of examination by judicial authority is restricted to a finding whether "no valid arbitration agreement exists" and the nature of examination by judicial authority is clarified to be on "prima facie" basis. The language of Section 8, as it now stands, would require the non-applicant (i.e. the party that has initially approached the judicial authority), in answer to an application under Section 8 to simply demonstrate that prima facie "no valid arbitration agreement exists" in order to defend such an application. A reference may be made to Law of Arbitration & Conciliation by Justice R.S. Bachawat, Sixth Edition 2018 Volume 1), relevant extract whereof is quoted as under:
"(ii) scope of examination by judicial authority is restricted to a finding whether "no valid arbitration agreement exists" and the nature of examination by judicial authority is clarified to be on "prima facie" basis;"
..........................
...........................
"The language of Section 8, as it now stands, would require the non-applicant (i.e. the party that has initially approached the judicial authority), in answer to an application under Section 8 to simply demonstrate that prima facie "no valid arbitration agreement exists" in order to defend such an application...."
30. The same view was reiterated in a recent judgement of Three Judges Bench of Hon'ble Apex court in the case of A. Ayyasamy vs. A. Paramasivam and ors., (2016) 10 SCC 368, paragraphs 12.2, 12.4 and 44 whereof are quoted as under:-
"12.2. When arbitration proceedings are triggered by one of of the parties because of existence of an arbitration agreement between them,Section 5 of the Act, by a non-obstante clause, provides a clear message that there should not be any judicial intervention at that stage scuttling the arbitration proceeding on the ground that there is no arbitration agreement or validity of the arbitration agreement clause or competence of the Arbitral Tribunal is challenged. Section 16 in clear terms, stipulates that such objections are to be raised before the Arbitral Tribunal itself which is to decide, in the first instance, whether there is any substance in questioning the validity of the arbitration proceedings on any of the aforesaid grounds. It follows that the party is not allowed to rush to the Court for an adjudication.....
12.4 Aforesaid is the position when the Arbitral Tribunal is constituted at the instance of one of the parties and the other party takes up the position that such proceedings are not valid in law.
44. In a more recent judgement of two judges of this Court in Sundaram Finance Ltd. v. T. Thankam (2015) 14 SCC 444, the same position in regard to the mandate of Section 8 has been reiterated. The earlier decisions in Anand Gajapathi Raju (2000) 4 SCC 539, Pink City (2003) 6 SCC 503 and in Branch Manager, Magma Leasing and Finance Ltd. v. Poltluri Madhvilata (2009) 10 SCC 103, emphasizing the mandate of Section 8, have been reaffirmed. This Court has held (Sundaram Case, SCC p. 449, paragraph 13):
13. Once an application in due compliance of Section 8 of the Arbitration Act is filed, the approach of the civil court should be not to see whether the court has jurisdiction. It should be to see whether its jurisdiction has been ousted. There is a lot of difference between the two approaches. Once it is brought into the notice of the court that its jurisdiction has been taken away in terms of the procedure prescribed under a special statute, the civil court should first see whether there is ouster of jurisdiction in terms or compliance of the procedure under the special statute. The general law should yield to the special law-generalia specialibus non derogant. In such a situation, the approach shall not be see whether there is still jurisdiction in the civil court under the general law. Such approaches would only delay the resolution of disputes and complicate the redressal of grievances and of course unnecessarily increase the pendency in the court."
(Emphasis supplied)
31. Under such circumstances, the trial Court while placing reliance on unamended Section 8 of the Act of 1996 has clearly circumvented the aforesaid legal position and the drastic change in Statute brought into effect by amending Section 8 of the Act of 1996 by further restricting the judicial authority to go into the question of arbitrable dispute. There is no dispute between the parties that arbitration clause being clause 20.1 exists in the contract.
32. While considering the application under Section 8 of the Act, jurisdiction of the judicial authority or the Court is confined to see as to whether there exists arbitration clause or not. The question is not as to whether the Court has jurisdiction to decide the dispute but the question is that as to whether the jurisdiction of the Court is ousted or not. The amended Section 8 of the Act of 1996 clearly provides that once there is an arbitration clause in the agreement, the jurisdiction of the Civil Court stands ousted. The probe into the question as to whether the Civil Court has jurisdiction to entertain the suit or not is clearly not permissible. Section 5 and Section 8 are in Part I of the Act and Section 5 clearly provides that 'notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part. Therefore, once the existence of arbitration clause/agreement is not in dispute, and as per Sections 5 and 8 the jurisdiction of the Civil Court is clearly ousted, whether any arbitral dispute is involved in the case or not could not have been gone into by the Civil Court and such objection can only be considered by the arbitrator under Section 16 of the Act of 1996.
33. From perusal of the record, it is clear that the stand of WWILPL was that the Directors' report dated 20.11.2014 is an award, which was the basis for contending that the invocation of arbitration clause was barred by res judicata and it is only for this reason the Courts below have discussed the same in detail. Once the trial Court has incorrectly decided this question by placing reliance on unamended Section 8 of the Act of 1996, it is understandable that it became obligatory on the part of the lower appellate Court to frame a question on that issue and decide the same.
34. The question before this Court is as to whether lower appellate Court has committed any jurisdictional error or has committed any illegality in allowing the application filed by CWC under Section 8 of the Act of 1996 so as to attract exercise of powers under Article 227 of the Constitution of India. The scope of judicial review, as per the settled law, is very limited. It is only for this purpose I have noted the arguments of learned Senior Counsel for the parties at length in the earlier part of this judgment so that while recording the findings, they may not be repeated as I have already noticed the facts of the case.
35. Before proceeding further, it may be noticed that it is because of the stand taken by WWILPL, the question, as already quoted in the earlier part of the judgement, as framed by the lower appellate Court, came into consideration. The order/report submitted by the Chairman dated 20.11.2014 clearly notices the Board of Directors' resolution, which authorized the Chairman to adjudicate in the matter "for amicable solution." It is noticeable that in the Boards' resolution there is no mention of arbitration clause 21.0 of the agreement. On the contrary, at page 119 of the paper book the advice of Ministry of Law & Justice, Department of Legal Affairs that an administrative decision to resolve the dispute amicably by mutual consideration should be made and if such resolution is not possible, then unresolved dispute may be referred to an arbitration as prescribed under 21.0 of the agreement as per the provisions of the Act of 1996 has been noted. Therefore, WWILPL were clearly aware of this fact that this was an attempt to settle the issue amicably. As already noticed, the order/report dated 20.11.2014 further clearly mentions that the Director has reached to logical conclusions after thoroughly studying the issues through documents and submission and verbal discussions with both parties and claims of both parties should, therefore, be regulated accordingly. It was, however, directed that the order should be placed before the Board of Directors for perusal.
36. It is also not in dispute that this report was considered in subsequent Boards' meeting of CWC. The same was discussed in subsequent Board of Directors' meeting and thereafter it was decided to invoke arbitration clause. It need not be highlighted that had it been an award, the same could not have been directed to be placed before the Board of Directors of either of the Company in dispute. On this issue, I have already noticed various documents referred to by both the parties. The subsequent correspondence of WWILPL also indicates that as a matter of fact till the filing of the suit the same was not treated by them as an award. Though, not necessary to mention but still if WWILPL was treating the same as award and CWC was not complying with the same, the same was never put to enforcement by WWILPL under the provisions of the Act.
37. Further, it is not in dispute that apart from the arbitration clause, it may be also noticed that even if there is an arbitration clause in the agreement, still the parties are still free to go into mediation, conciliation or any other procedure whatsoever at any time and as per Section 30 of the Act of 1996 even during the arbitral proceedings to settle the issue. Clause 20 of the agreement clearly provides for internal mechanism for resolution of dispute amicably before invoking arbitration clause. In Section 89 of the Code of Civil Procedure also apart from arbitration, different modes, namely, mediation, conciliation or Lok Adalat have been used.
38. From the record, it is clear that the stand of WWILPL that after Joint Committee, the Advisory Committee was formed is different on different occasions obviously to serve their own purpose. Therefore, clearly the internal mechanism for the amicable solution for arriving at a conclusion was not exhausted and the Chairman was appointed to adjudicate for amicable solution only, which was clearly prior to invoking arbitration clause, as also reflected from the advice of Ministry of Law & Justice, Department of Legal Affairs and placing of the report before the Board of Directors of one of the company in dispute i.e. CWC.
39. Since even before this Court the stand of WWILPL is that the Directors' report dated 20.11.2014 is an award and entire argument of learned Senior Counsel for the petitioner was in support of this stand, therefore, it was necessary for this Court to discuss the same on merits.
40. In the light of the aforesaid discussions, I do not find force in the arguments of learned counsel for the petitioner-WWILPL that the Chairman acted as arbitrator. Of course, nomenclature may be at times immaterial, however, it is very much clear from the entire record that he was acting under the internal mechanism provided for amicable solution of the dispute between the parties. It may also be noticed that as per Section 21 of the Act, unless otherwise agreed between the parties, arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. The record clearly indicates that a notice dated 4.1.2016 invoking the arbitration clause was issued to WWILPL, which was admittedly received and replied. The arbitrator has also issued a notice to WWILPL on 18.1.2016 and the original suit was filed on 4.2.2016. WWILPL has put in appearance before the arbitrator on 4.2.2016 and also filed the suit on the same date.
41. In view of the above noted discussions, no fruitful purpose would be served by dealing with the rulings cited by the learned Senior Counsel for the petitioner and other rulings cited by the learned Senior Counsel for the respondent individually.
42. In my view, all such questions could have been considered by the arbitrator under Section 16 of the Act but the same were raised by WWILPL before the trial Court as well as before the appellate court for self-serving purpose. For the convenience purposes and reference, I have already noticed the reasoning given by the appellate Court for deciding the issue that was being agitated by WWILPL tooth and nail, therefore, I have to put it on record that I do not find any legal infirmity in the findings recorded by the lower appellate court. The question before this Court in the advisory jurisdiction is as to whether the lower appellate Court has committed any jurisdictional or grave mistake of law. As per discussions made hereinabove, in view of provisions of Sections 5, 8, 13, 16, 21 of the Act of 1996 I do not find that any mistake of law or jurisdictional error has been committed by the lower appellate Court.
43. Under such circumstances, it is very much clear that since admittedly there is an arbitration clause (clause 21.0) in the agreement, jurisdiction of the Civil Court was ousted and the lower appellate Court has rightly allowed the application filed under Section 8 of the Act of 1996 by setting aside the trial Court's order. Once it is held that the jurisdiction of the Civil Court is ousted, the question of grant of any interim injunction does not arise. Consequently, the order granting interim injunction was also rightly set aside by the lower appellate Court. As such, I find no legal infirmity or jurisdictional error in the judgement and orders impugned herein. However, parties may raise their objections before the arbitrator as may be available to them under the law.
44. Both the petitions are devoid of merit and are accordingly dismissed.
45. No order as to costs.
Order Date :- 31.5.2018 Abhishek