Karnataka High Court
The Cotton Corporation Of India Ltd vs Meenakshi Sundaram Textiles Ltd on 10 April, 2023
Bench: G.Narendar, Shivashankar Amarannavar
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MFA No. 7992 of 2022
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 10TH DAY OF APRIL, 2023
PRESENT
THE HON'BLE MR JUSTICE G.NARENDAR
AND
THE HON'BLE MR JUSTICE SHIVASHANKAR AMARANNAVAR
MISCELLANEOUS FIRST APPEAL NO. 7992 OF 2022 (AA)
BETWEEN:
THE COTTON CORPORATION OF INDIA LTD.,
HAVING ITS REGISTERED OFFICE AT MUMBAI
AND BRANCH OFFICE AT HUBBALLI
REPRESENTED BY ITS ASSISTANT
GENERAL MANAGER
SRI SANJAY DWIVEDI
II FLOOR, W.B. PLAZA, NEW COTTON MARKET
HUBBALLI -580 029.
...APPELLANT
(BY SRI. S V PRAKASH, ADVOCATE)
Digitally signed by AND:
LAKSHMINARAYANA
MURTHY RAJASHRI
Location: HIGH 1. MEENAKSHI SUNDARAM TEXTILES LTD.,
COURT OF
KARNATAKA COMPANY INCORPORATED UNDER THE
PROVISIONS OF COMPANIES ACT, 1956
REPRESENTED BY ITS MANAGING DIRECTOR
C.S. SUBRAMANIAN, BELATHUR VILLAGE
K.R. NAGARA ROAD, HUNASURU - 571 105
MYSURU DISTRICT.
2. P.N. GUDDAKAR
B.A . L.L.B
(RETIRED DISTRICT JUDGE )
ARBITRATOR
SANGOLLIRAYANNA NAGAR
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MFA No. 7992 of 2022
NEAR GANAPATHI TEMPLE
DHARWAD - 580 001.
...RESPONDENTS
(BY SRI. SANJAY KRISHNA V, ADVOCATE FOR R1
R2 - SERVED AND UNREPRESENTED)
THIS MFA IS FILED UNDER SECTION 37(1)(C) OF THE
ARBITRATION AND CONCILIATION ACT AGAINST THE ORDER
DATED 20.07.2022 PASSED IN A.S. NO. 1/2014 ON THE FILE OF
THE PRINCIPAL DISTRICT AND SESSIONS JUDGE, MYSURU,
ALLOWING THE APPLICATION FILED UNDER SECTION 34 OF
ARBITRATION AND CONCILIATION ACT 1996.
THIS APPEAL, COMING ON FOR ADMISSION THIS DAY,
SHIVASHANKAR AMARANNAVAR J, DELIVERED THE
FOLLOWING:
JUDGMENT
1. This appeal is filed under Section 37(1)(C) of the Arbitration and Conciliation Act, 1996 (for short hereinafter referred to as 'the Act'), seeking setting aside the judgment dated 20.07.2022 passed by the learned Principal District and Sessions Judge, Mysuru in A.S.No.1/2014 and consequently, rejecting the application filed by respondent No.1 in A.S.No.1/2014.
2. The appellant got appointed respondent No.2 as a sole Arbitrator in respect of the dispute between the appellant and respondent No.1 for recovery of Rs.36,91,655.37 from -3- MFA No. 7992 of 2022 respondent No.1 with interest and respondent No.2 allowed the claim of the appellant for recovery of this amount with interest at the rate of 9% per annum from 16.08.2000, till the date of recovery of the amount under the award dated 24.01.2014 passed in CVASC No.1/2011.
3. Respondent No.1 had filed a petition against the appellant and respondent No.2 under Section 34 of the Act r/w Rule 4 of the High Court of Karnataka, Arbitration (Proceedings before the Courts) Rules, 2001 challenging the said Arbitral award dated 24.01.2014 in A.S.No.1/2014 before the Principal District and Sessions Judge, Mysuru. The said A.S.No.1/2014 came to be allowed and consequently, the award passed by respondent No.2 dated 24.01.2014 has been set-aside. The same is challenged in the present appeal.
4. Heard the arguments of the learned counsel for the appellant and learned counsel for respondent No.1. -4- MFA No. 7992 of 2022
5. Learned counsel for the appellant would contend that the learned District Judge has failed to appreciate that if the Arbitral Tribunal has failed to follow the Rule with regard to fee of the Arbitrator, the claim of the respondent - Corporation cannot be rejected on that ground. He contends that if the Arbitrator has failed to follow the Rule, the appellant could not be penalized for the same.
6. He contends that respondent No.1 is a Company having entered into contract with the appellant - Corporation, has failed to honour the terms and conditions of the contract, due to which the appellant - Corporation has incurred huge loss. The money to be recovered from respondent No.1 - Company is public money. The learned District Judge ought to have seen that atleast the liberty has been reserved to the appellant - Corporation to initiate the Arbitral Proceedings afresh.
7. He contends that the Hon'ble Apex Court in the case of Project Director, N.H.No.45-E and 220 NHA of India Vs. Hakeem reported in AIR 2021 SC 3471 held that the -5- MFA No. 7992 of 2022 Civil Court cannot correct the errors of the Arbitrator and only can quash the award leaving the parties free to begin arbitration proceedings afresh, if they so desire.
8. The learned District Judge without considering the law declared by the Hon'ble Apex Court has set-aside the order passed by the Arbitral Tribunal on the technical ground as the Arbitrator had struck off the defence of respondent No.1, which is not permissible in law and against the Rules framed for the Arbitration.
9. He contended that there is no fault on the part of the appellant - Corporation in striking off the defence of respondent No.1. Respondent No.1 had challenged the award passed by the Arbitral Tribunal on the ground that it has not given ample opportunity of hearing. Under the circumstances, the learned District Judge ought to have reserved liberty to the appellant - Corporation to initiate the Arbitral Proceedings afresh.
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10. He also placed reliance on the decision of the Hon'ble Apex Court in the case of Kinnari Mullick and Another Vs. Ghanshyam Das Damani reported in (2018) 11 SCC 328, wherein the Hon'ble Apex Court has upheld the liberty granted to the parties to pursue their remedies in accordance with law, by the learned Single Judge.
11. Learned counsel for respondent No.1 would contend that he has raised the objection on jurisdiction and filed application in that regard under Section 16(1) of the Act and also under Section 12(3) of the Act. He contended that in view of the said contention of respondent No.1, no liberty can be granted to the appellant for initiating Arbitration Proceedings afresh.
12. Respondent No.1 had filed an application before the learned Arbitrator under Section 16(1) of the Act contending that since the appellant had already approached the Civil Court and submitted to the jurisdictional Civil Court, the appellant cannot invoke once again for redressal of any dispute before the Arbitrator. The said application came to -7- MFA No. 7992 of 2022 be dismissed by the Arbitrator. Respondent No.1 did not challenge the said order and therefore, the said order has reached finality.
13. Respondent No.1 had filed another application under Section 12 of the Act, challenging the jurisdiction of the Arbitral Tribunal on the ground that the jurisdiction of the Arbitral Tribunal is barred under Section 22 of the Sick Industrial Companies Act, 1985. The Arbitrator has dismissed the said application also, vide order dated 26.04.2003. Respondent No.1 had challenged the said order before this Court in W.P.No.29518/2003 (GM-RES) and the said writ petition also came to be dismissed on 23.02.2007. So, the said order passed under Section 12 of the Act has attained finality. The said aspect has been considered by the learned District Judge in the impugned judgment affirming the rejection of the applications filed by respondent No.1 under Section 16(1) and also under Section 12 of the Act. Respondent No.1 has not preferred any appeal challenging the said findings of the learned District Judge. -8- MFA No. 7992 of 2022 Therefore, the learned counsel for respondent No.1 cannot urge that as he has raised point on jurisdiction, liberty as sought by the appellant cannot be granted.
14. The award passed by the Arbitrator came to be set-aside by the learned District Judge on the ground that the Arbitrator had unilaterally and erroneously struck off the defence of respondent No.1 and as such, it was under some incapacity to present his case, particularly before the Arbitral Tribunal. Therefore, there is no adjudication of the claim of the appellant on merit.
15. Learned District Judge has considered the provision of Rule 28 of the Arbitration Centre, Karnataka (Domestic and International) Bangalore Rules, 2012. As per Rule 28 of the said Rules, in case of respondent No.1 failing to deposit the fee, ought to have ordered for including the same in the Arbitral Award and the said procedure has not been followed by the Arbitrator and the Arbitrator has also violated the principles of natural justice in striking off the defence of respondent No.1 in not allowing him to participate in the -9- MFA No. 7992 of 2022 Arbitral Proceedings and not considering the case of respondent No.1.
16. Learned District Judge also considered the provision of Section 34(2)(iii) of the Act and held that respondent No.1 was unable to present his case in view of striking off the defence of respondent No.1 by the Arbitrator. On that ground, the award passed by the Arbitrator came to be set-aside by the learned District Judge. We do not find any ground to interfere with the impugned judgment passed by the learned District Judge.
17. In view of the decision of the Hon'ble Apex Court in the case of Kinnari Mullick and Another Vs. Ghanshyam Das Damani reported in (2018) 11 SCC 328, and in the case of Project Director, N.H.No.45-E and 220 NHA of India Vs. Hakeem reported in AIR 2021 SC 3471, the learned District Judge ought to have granted liberty to the appellant to pursue their remedies, in accordance with law.
18. In view of the above, we proceed to pass the following;
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MFA No. 7992 of 2022ORDER
(i) The appeal stands disposed of.
(ii) The appellant is at liberty to pursue its remedies, in accordance with law.
Sd/-
JUDGE Sd/-
JUDGE GH List No.: 1 Sl No.: 19