Delhi District Court
Arsh Associates Pvt. Ltd vs Ahluwalia Contracts (I) Limited on 11 December, 2023
IN THE COURT OF SH. SANDEEP YADAV,
DISTRICT JUDGE (COMMERCIAL)-03, SOUTH,
SAKET COURTS, NEW DELHI
OMP (Comm) No. 4/2022
Arsh Associates Pvt. Ltd.
150, Second Floor
Sarai Jullena
South Delhi
New Delhi-110025 .... Petitioner
Versus
1. Ahluwalia Contracts (I) Ltd.
(Through its Director)
2. M.K. Hingorani
AVP (Contracts)
3. R.P. Singh
GM (Project)
4. Jyoti Suhag
Manager Legal
All at :
A-177, Okhla Industrial Area
Phase-I, New Delhi-110020 .... Respondents
Date of institution of petition : 14.01.2022
Date of reserving judgment : 21.09.2023
Date of pronouncement : 11.12.2023
JUDGMENT
1. This petition u/s. 34 of Arbitration & Conciliation Act has been filed by Arsh Associates Pvt. Ltd. through its director challenging the arbitral award dated 27.02.2021.
OMP (COMM) 4/22 1/11Arsh Associates Pvt.Ltd. Vs. Ahluwalia Contracts (I) Ltd. & Anr.
2. I have heard K.B. Sharma, ld. counsel for petitioner, as well as Mr. Biswajit Kumar Patra, ld. counsel for respondents, at length. Written submissions filed by both parties have also been gone through.
3. Background facts are that respondent Ahluwalia Contracts (I) Ltd. had entered into a contract with Arsh Associates Pvt. Ltd. (claimant company) as per LOI dated 26.10.2015 read with work order No. ACIL/PNB/2014/65 dated 27.11.2015 for work of wooden door/gypsum partition/false ceiling at PNB, Dwarka, New Delhi. Arbitral proceedings were initiated as per clause 12 of the work order no. ACIL/PNB/2014/65. Respondent filed an application before the Arbitral Tribunal seeking dismissal of statement of claim of claimant. Respondent in the application raised the following objections amongst others :
(i) Statement of claim was filed by Sh. Dalip Kumar Singh, one of the directors of Arsh Associates Pvt. Ltd. without authorisation and/or jurisdiction and as such claimant company is not duly represented in law to present its claim.
(ii) There is no privity of contract between Sh. Dalip Kumar Singh, one of the directors of claimant company, and respondent company and as such continuation of arbitral proceedings are completely without jurisdiction.
4. Thus, the basic question for adjudication before the Arbitral Tribunal was whether statement of claim was maintainable on behalf of claimant company filed by director in his individual capacity without any authorisation/board resolution from claimant company and particularly OMP (COMM) 4/22 2/11 Arsh Associates Pvt.Ltd. Vs. Ahluwalia Contracts (I) Ltd. & Anr. when the company has on record refused to grant such authorisation/board resolution. The Arbitral Tribunal allowed the aforesaid application and the statement of claim filed by Sh. Dalip Kumar Singh under the name and banner of claimant company in his individual capacity was dismissed on the ground that there was no privity of contract between the parties to the proceedings for any nature of adjudication and that Sh. Dalip Kumar Singh in his individual capacity has no locus to continue the arbitral proceedings and that the company has to be represented by an authorized person as a company has its own separate and distinct legal entity which is independent and distinguishable from the acts and conduct of its respective directors done in their individual capacity.
5. Section 34 of Arbitration and Conciliation Act is extracted below as under :
" Application for setting aside arbitral award. --
(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub- section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if--
(a) the party making the application furnishes proof that--
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or OMP (COMM) 4/22 3/11 Arsh Associates Pvt.Ltd. Vs. Ahluwalia Contracts (I) Ltd. & Anr.
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that--
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation. --Without prejudice to the generality of sub-clause (ii) it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81.
(3) 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 OMP (COMM) 4/22 4/11 Arsh Associates Pvt.Ltd. Vs. Ahluwalia Contracts (I) Ltd. & Anr. under section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.
6. It is clear from plain reading of Section 34 of Arbitration and Conciliation Act that certain grounds are enumerated therein and arbitral award can be challenged only on those grounds. In other words, for deciding objections u/s. 34 of Arbitration and Conciliation Act, the Court has to see if challenge to the award is covered by one or more of grounds mentioned in Section 34. The Court cannot go beyond the purview of Section 34 while deciding objections against an arbitral award.
7. Petitioner has not specified as to on which of the grounds enumerated in Section 34 of Arbitration & Conciliation Act, the impugned award is being challenged.
8. It is stated in the petition that the impugned award is in breach of and against the public policy and is patently illegal. However, petitioner has not OMP (COMM) 4/22 5/11 Arsh Associates Pvt.Ltd. Vs. Ahluwalia Contracts (I) Ltd. & Anr. specified as to how the impugned award is against the public policy or is patently illegal.
9. In Jupiter Rubber Pvt. Ltd. Vs. Union of India - 2023 SCC Online Del 5861 it was held as under :
" Patent illegality should be illegality which goes to the root of the matter. In other words, every error of law committed by the Arbitral Tribunal would not fall within the expression "patent illegality".
Likewise, erroneous application of law cannot be categorised as patent illegality. In addition, contravention of law not linked to public policy or public interest is beyond the scope of the expression "patent illegality"
What is prohibited is for Courts to reappreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as Courts do not sit in appeal against the arbitral award. The permissible grounds for interference with a domestic award under Section 34(2 - A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair- minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them."
10. In the present case, it is an admitted position that statement of claim was filed before the Arbitral Tribunal on behalf of petitioner through Sh. Dalip Kumar Singh in his individual capacity without any authorization or board resolution. One of the contentions of petitioner before the Arbitral Tribunal as well as before this Court is that the board resolution or authorization is required only for filing of suit and not for statement of OMP (COMM) 4/22 6/11 Arsh Associates Pvt.Ltd. Vs. Ahluwalia Contracts (I) Ltd. & Anr. claim. On this issue, the Arbitral Tribunal relied upon SREI Infrastructure Finance Limited Vs. Tuff Drilling Private Limited- (2018) 11 SCC 470 herein it was held that the word "Arbitral Tribunal shall not bound" are words of amplitude, and not of restriction. These words do not prohibit the Arbitral Tribunal from drawing sustenance from the fundamental principles of the CPC or the Evidence Act. The Tribunal is bound to observe the underlying principles based on fundamental jurisprudence, which ensure justice and fair play, must be followed by the Arbitral Tribunal.
11. Petitioner has not been able to convince the Court that reliance placed on SREI Infrastructure Finance Limited (supra) by the Arbitral Tribunal was misplaced. In other words, petitioner has not been able to explain as to how the impugned award suffers from patent illegality or is against public policy.
12. Petitioner further states in these objections that as per record, other director namely Shah Alam Khan made his appearance before the Arbitral Tribunal as is reflected from the order dated 19.09.2020. It is further stated that during proceedings petitioner prayed to the Arbitral Tribunal to take on record authorization/board resolution passed by other directors on 15.01.2021 in favour of petitioner but the Arbitral Tribunal did not take the same on record for curing the procedural defects and hence, the impugned award is against the principle of natural justice.
13. Presence of other director before the Arbitral Tribunal will not lead to an inference that authorisation or board resolution by all directors of OMP (COMM) 4/22 7/11 Arsh Associates Pvt.Ltd. Vs. Ahluwalia Contracts (I) Ltd. & Anr. petitioner company has been passed in favour of Sh. Dalip Kumar Singh to file statement of claim before Arbitral Tribunal.
14. Perusal of arbitral record would show that there is a certified copy of resolution dated 15.01.2021 therein. The said resolution is signed only by one of the directors of claimant company and hence, it is a not proper resolution. Petitioner has also relied upon acceptance and confirmation for appointment of authorised person namely Sh. Dalip Kumar Singh given on 15.01.2021 through e-mail by another director namely Aman Shah.
15. The authorization/resolution in favour of director of a company to file any pleadings before the Arbitral Tribunal/judicial authority cannot be passed in a piecemeal manner. The resolution is to signed by all the directors of concerned company which has not been done in the present case and hence, there is no escape from the conclusion that there was no proper authorization in favour of Sh. Dalip Kumar Singh to file statement of claim.
16. The Court also finds substance in the contention of ld. counsel for respondent that there was no arbitration agreement between Sh. Dalip Kumar Singh in his individual capacity and respondent. Even the present petition has been filed by petitioner through its director without any authorisation on behalf of claimant company. In the affidavit accompanying/supporting the petition, petitioner has not specified as to in which capacity he has filed the present petition.
OMP (COMM) 4/22 8/11Arsh Associates Pvt.Ltd. Vs. Ahluwalia Contracts (I) Ltd. & Anr.
17. Ld. counsel for petitioner during the course of arguments relied upon on the following judgments :
(i) Palmview Investments Overseas Limited Vs. Ravi Arya & Ors. - MANU/MH/1694/2023.
(ii) Mcdermott International Inc. Vs. Burn Standard Co. Ltd. & Ors. - (2006) 11 SCC 181.
18. In Palmview Investments Overseas Limited (supra), it was held in para 26 as under :
" The Arbitral Tribunal in our view, had not acted contrary to the law or disregarded the law but has applied the correct position in law. The Arbitral Tribunal has applied the principles of Order 29 Rule 4 read with Order 6 Rule 14 of the CPC and as noted earlier, there was no fetter in the Arbitral Tribunal in doing so. The Arbitral Tribunal has acted in accordance with the fundamental policy and Indian Law and granted appellant its right to cure the defect. At the cost of repetition, the Arbitral Tribunal, as held in catena of judgments, has held that when a proceeding is filed by company with defective board resolution or even without any board resolution at all, is not fatal and must be permitted to be cured. Procedural defect which do not go to the root of the matter should not be permitted to defeat a just cause. There is sufficient power in the Arbitral Tribunal to ensure that injustice is not done to any party who has a just case. As far as possible a substantive right should not be allowed to be defeated on account of a procedural irregularity which is curable. If we take away that power then no arbitrator will have power to OMP (COMM) 4/22 9/11 Arsh Associates Pvt.Ltd. Vs. Ahluwalia Contracts (I) Ltd. & Anr. ensure injustice is not done. This is the law and it is this law which had been applied by the Arbitral Tribunal."
19. In the present case, it transpired from the record that petitioner attempted to file resolution authorising Sh. Dalip Kumar Singh to file the petition but the said resolution was signed only by one director and was not a valid resolution. Petitioner also placed on record letter dated 15.01.2021 through e-mail giving acceptance and confirmation for appointment of Sh.Dalip Kumar Singh are authorised person. This letter also does not constitute valid authorization or resolution as required under the law. Hence, this judgment will not advance the case of petitioner.
20. In Mcdermott International Inc. (supra) it was held in para 35 as under:
"The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it. However, this Court, as would be noticed hereinafter, has the occasion to consider the matter in great detail in some of its decisions. "OMP (COMM) 4/22 10/11
Arsh Associates Pvt.Ltd. Vs. Ahluwalia Contracts (I) Ltd. & Anr.
21. It is clear that petitioner cannot draw any assistance from this judgment.
22. From the above discussion, it is clear that petition filed by Arsh Associates Pvt. Ltd. through its director u/s. 34 of Arbitration & Conciliation Act is without any merit and same is accordingly dismissed.
File be consigned to Record Room.
Announced in the open court today on 11.12.2023.
(Sandeep Yadav) District Judge (Commercial)-03 South, Saket Courts, New Delhi OMP (COMM) 4/22 11/11 Arsh Associates Pvt.Ltd. Vs. Ahluwalia Contracts (I) Ltd. & Anr.