Gujarat High Court
Kamal Sevaram Jadhwani vs Manbhupinder Singh Atwal on 11 March, 2020
Author: A.Y. Kogje
Bench: A.Y. Kogje
C/SCA/3913/2020 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 3913 of 2020
With
R/SPECIAL CIVIL APPLICATION NO. 4441 of 2020
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE A.Y. KOGJE Sd/-
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1 Whether Reporters of Local Papers may be allowed to Yes
see the judgment ?
2 To be referred to the Reporter or not ? Yes
3 Whether their Lordships wish to see the fair copy of the No
judgment ?
4 Whether this case involves a substantial question of law No
as to the interpretation of the Constitution of India or any
order made thereunder ?
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NEERAJ KUMARPAL SHAH
Versus
MANBHUPINDER SINGH BARINDER SINGH ATWAL
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Appearance: - SCA No.3913 of 2020
MR SN SOPARKAR, SENIOR ADVOCATE assisted by M/S.GURSHARAN H VIRK (7392)
and PRASHANTH UNDURTI for the Petitioner(s) No. 1
for the Respondent(s) No. 3,5
MR SHALIN MEHTA, SENIOR ADVOCATE assisted by M/S. KIRIT NAGRA, PARTH
CONTRACTOR(7150) and PRANAV VYAS for the Respondent(s) No. 1
MR ND NANAVATY, SENIOR ADVOCATE assisted by M/S.MASOOM K SHAH(6516) and
NEHA M SHAH (9218) for the Respondent(s) No. 2
P M BUCH(7383) for the Respondent(s) No. 4
Appearance: - SCA No.4441 of 2020
MR ND NANAVATY, SENIOR ADVOCATE assisted by NEHA M SHAH (9218) for the
Petitioner
MR SHALIN MEHTA, SENIOR ADVOCATE assisted by M/S. KIRIT NAGRA, PARTH
CONTRACTOR(7150) and PRANAV VYAS for the Respondent(s) No. 1
MR SN SOPARKAR, SENIOR ADVOCATE assisted by M/S.GURSHARAN H VIRK (7392) for
the Respondent No.2
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CORAM: HONOURABLE MR.JUSTICE A.Y. KOGJE
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Date : 11/03/2020
ORAL JUDGMENT
1. RULE. Learned Advocates Mr.Parth contractor waives service of Rule on behalf of respondent No.1, learned Advocate Mr.Masoom Shah waives service of Rule on behalf of respondent No.2 and learned Advocate Mr.P.M.Buch waives service of Rule on behalf of respondent No.4 in Special Civil Application No.3913 of 2020 and learned Advocate Mr.Parth contractor waives service of Rule on behalf of respondent No.1 and learned Advocate Mr.Gursharan H.Virk waives service of Rule on behalf of respondent No.2 in Special Civil Application No.4441 of 2020.
2. Special Civil Application No.3913 of 2020 is filed with following prayers:-
"A. Issue of Writ of Quo Warranto or Writ in the nature of Quo Warranto, quashing and setting aside the mandate, constitution and authority of the Respondent No.5 Tribunal (comprising of Hon'ble Shri Vinayak Pradhan, Hon'ble Shri Andre Yeap and Hon'ble Justice G.T.Nanavati);
B. Alternatively, direct the Respondent No.5 Tribunal (comprising of Hon'ble Shri Vinayak Pradhan, Hon'ble Shri Andre Yeap and Hon'ble Justice G.T.Nanavati) to peremprotily and without any delay Page 2 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT disclose, in writing and by a reasoned order, the date on which the said Respondent No.5 Tribunal claims that it entered into reference and got mandate to arbitrate the disputes between the parties; and, thereafter, accord at reasonable period of 10 working days (or any such other period as may be deemed reasonably by this Hon'ble Court) to the Petitioners to seek appropriate legal recourse in accordance with law, before proceeding further with the arbitral process;
C. Alternatively, direct the Respondent No.5 Tribunal (comprising of Hon'ble Shri Vinayak Pradhan, Hon'ble Shri Andre Yeap and Hon'ble Justice G.T.Nanavati) to peremptorily and without proceeding with the arbitration any further, hear the applications dated 22.11.2019, 06.01.2020, 13.01.2020 and 20.01.2020 filed by the Petitioner and pass a written, reasoned orders on the said applications of the Petitioner; and, thereafter, accord at reasonable period of 10 working days (or any such other period as may be deemed reasonably by this Hon'ble Court) to the Petitioner to seek appropriate legal recourse in accordance with law, before proceeding further with the arbitral process;
D. Pending the admission, hearing and final
disposal of this Petition, restrain the
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Respondent No.5-Tribunal (comprising of
Hon'ble Shri Vinayak Pradhan, Hon'ble Shri Andre Yeap and Hon'ble Justice G.T.Nanavati) from proceeding further with the arbitral process /hearings, particularly the hearings scheduled on 13.02.2020 onwards;"
2.1 While issuing notice in SCA No.3913 of 2020, this Court passed order on 12.02.2020, which was subject matter of challenge before the Apex Court in SLP (Civil) No.5800 of 2020. In the aforesaid SLP, the Apex Court passed order on 14.02.2020, which is as under:-
"Issue notice.
Having heard learned senior counsel for both sides at great length, we pass the following order, which is not on the merits of the dispute:
1. The Arbitral Tribunal may continue with the hearing that is being fixed from 13th to 18th February, 2020. It may resume the hearing from tomorrow.
2. The Arbitral Tribunal will, for the time being, confine itself to taking evidence and hearing the parties.
3. The Gujarat High Court is requested to take up the matter on 26.02.2020. All parties assure us that they will not take any adjournment on that date. The High Court will endeavour to complete the hearing as soon as is practically possible and deliver judgment.
This order substitutes the order that has been Page 4 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT passed on 12.02.2020.
To come up on 16.03.2020."
3. When the matters are taken up on 28.02.2020, learned Senior Advocate for the petitioner (hereinafter to be referred to as "the opposite party") submitted that he has been served with rather lengthy affidavit in reply one day back and therefore, reserves liberty to file rejoinder while arguments would proceed. Learned Senior Advocate for respondent No.1 has no objection to such proposition.
4. Learned Senior Advocate for the opposite party has proposed draft amendment with regard to prayer clause and a separate affidavit in reply is filed against draft amendment opposing the same.
5. Learned Senior Advocate for contesting respondent (hereinafter to be referred to as "the claimant") raised preliminary contention of maintainability. However, upon agreement of both the sides, the preliminary contention will also be heard and decided along with other issues raised by learned Senior Advocate for the opposite party.
6. Special Civil Application No.4441 of 2020 is filed raising identical issues with prayer clause as under:-
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"A. Be pleased to issue a writ of quo warrant
or writ of mandamus or any other writ,
order or direction, quashing and setting aside the constitution / working of Arbitral Tribunal i.e. Respondent no.5;
AB. That this Hon'ble Court in light of this
application under article 227 of the
Constitution of India, be pleased to quash and set aside the working / constitution /operation / continuation of the Respondent no.5 Arbitral Tribunal in light of the termination of the mandate under s.29A."
B. Alternatively, Be pleased to issue a writ of mandamus or writ of certiorari or any other writ, order or direction, directing the Respondent No.5 Tribunal to pass a reasoned order, indicating the date on which the said Respondent No.5 Tribunal claims that it entered into reference and got mandate to arbitrate the disputes between the parties; and, thereafter, accord at reasonable period of 10 working days (or any such other period as may be deemed reasonably by this Hon'ble Court) to the petitioner to seek appropriate legal recourse in accordance with law, before proceeding further with the arbitral process;
C. Alternatively, Be pleased to issue a writ of mandamus or writ of certiorari or any to writ, order or direction, directing the Page 6 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT Respondent no.5 to decide the application preferred by the Petitioner in November 2019 in accordance with law by passing reasoned order and, thereafter, accord at reasonable period of 10 working days (or any such other period as may be deemed reasonably by this Hon'ble Court) to the Petitioner to seek appropriate legal recourse in accordance with law, before proceeding further with the arbitral process;
D. Pending hearing and final disposal, be pleased to stay the further proceedings pending before the Respondent no.5 i.e. Arbitral Tribunal in the case between the petitioner and Respondent no.1 to 3"
7. In both the petitions the parties are common hence With consent of all the parties, both these petitions are taken up for joint hearing and disposal. The facts are taken from SCA No.3913 of 2020. {for convenience the parties are referred to by the original position in arbitration proceedings, petitioner is ref. To as opposite party and respondents are ref.to as claimant}
8. Learned Senior Advocate for the opposite party submitted that in view of the order passed by the Apex Court, alternative prayer clauses-B and C would not survive and therefore, only prayer that can be pressed is Page 7 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT prayer clause-A and upon this development, learned Senior Advocate for the opposite party has proposed draft amendment, where the opposite party has prayed for issuance of writ of mandamus or in the nature of mandamus or prohibition or in the nature of prohibition or any other writ, order or direction to quash and set aside the mandate, constitution and authority of respondent No.5- Tribunal. It is submitted that by the amendment, complexion of the petition does not change and only change is in the nomenclature. Otherwise, ultimate object of the petition remains the same which is known to claimant as well. It is submitted that by grant of such amendment, no prejudice is likely to be caused as the contentions and arguments of the opposite party are going to remain the same, which the claimant side is well aware and has also responded to the same. It is submitted that objection to the prayer clause is hyper-technical and in any case, in the cognate petition, amendment is already granted and the amendment is identical to the amendment prayed for in the present petition and therefore, contentions would be the same.
8.1 The first and foremost argument of learned Senior Advocate for the opposite party is of extinguishing of the mandate as per Section 29A of the Arbitration and Conciliation Act, 1996 ("the Act" for Page 8 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT
short) and therefore, the arbitral tribunal has lost its jurisdiction to arbitrate. The proceedings therefore cannot be permitted to be continued.
8.2 Learned Senior Advocate for the opposite party invited attention of this Court to the order of the Apex Court in MA No.1482 of 2017 in Arbitration Petition No.14 of 2017, wherein the Apex Court has made new appointment of former Judge of the Supreme Court to be the Chairman of the arbitral tribunal. The Court also observed with regard to period within which the award is to be delivered under Section 29A of the Act to commence on and from the date on which the first sitting takes place. Therefore, the first sitting of the arbitral tribunal has taken place on 01.02.2018 and the period of one year is to expire on 31.01.2019. It is submitted that period of one year can only be extended by the consent of both parties and that too for additional period of six months or further period under the orders of the Court. It is submitted that in the facts of this case, there is no consent of both parties for extending the period nor is there any order of the Court for such extension. Therefore, the arbitral tribunal has lost its mandate on 31.01.2019. The proceedings thereafter are without jurisdiction.
8.3 It is submitted that between 01.02.2018 to Page 9 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT 01.11.2018, the arbitral tribunal had undertaken four sittings. An application was moved under Section 17 of
the Act by the claimant herein for interim directions. However, when the tribunal was on the verge of deciding such application, claimant, sensing possibility of adverse order, wrote letter dated 21.11.2018 to the arbitral tribunal, wherein sort of allegations were made with regard to functioning of the tribunal and specifically not consenting to granting extension of period. It is submitted that pursuant to such allegations, one of the Arbitrators as well as the Presiding Arbitrator chose to resign by addressing independent communications, however, making it very clear that the claimant has made wild allegations and observing negatively about conduct on the part of claimant and his Advocate.
8.4 It is submitted that stand of claimant had always been of not granting any extension to the arbitral tribunal to complete arbitration and hence, there was no consent to extension of period of arbitral tribunal as provided for under Section 29A(2) of the Act. It is submitted that as the arbitration was in progress under the provisions of Section 29A, unamended, therefore, limitation of 12 months would still be applicable and therefore, even when new Arbitrator came into arbitral Page 10 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT tribunal, still, the arbitral tribunal will be bound by the time period. It is submitted that it is only with effect from 30.08.2019 that international commercial arbitration was excluded from the period of 12 months for passing award in arbitration.
8.5 It is submitted that the arbitral tribunal itself was not clear as to the date on which the arbitration is to commence. He referred to various e- mail communications between the Advocate for the opposite party and the Presiding arbitrator and also to the proceedings of arbitration so as to ascertain the date on which the arbitration has commenced. It is submitted that the date of commencing of the arbitration would be relevant as the arbitral tribunal was under obligation to pass award within a period of 12 months of the first sitting of the arbitral tribunal, which was 01.02.2018 and the period of one year would lapse on 31.01.2019. It is submitted that for the first time, appointment of Presiding Arbitrator is 24.01.2019 and on 24.01.2019, newly appointed Presiding Arbitrator communicated to all parties to arbitration about the schedule of fees. It was also categorically stated that upon payment being made as per the schedule of fees, only thereafter, the arbitral tribunal shall be constituted and will entered into the reference and commence work. It is submitted Page 11 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT that the opposite party objected to appointment of new Presiding Arbitrator on the ground of huge fees for arbitration. Similarly, another party to arbitration (respondent No.2 herein) also raised similar objections. These communications are of 01.02.2019 and 04.02.2019 respectively and to which the Presiding Arbitrator has replied by e-mail on 25.02.2018 standing by his earlier communication regarding fees.
8.6 It is submitted that flipflop of the Presiding Arbitrator with regard to date of duly constituted arbitral tribunal continued and a petition was filed by claimant under Section 17 before this Court being MCA No.90 of 2019, where it was brought to the notice of the Court that Presiding arbitrator of the arbitral tribunal in his communication dated 26.04.2019 has conveyed to the parties that the arbitral tribunal has been validly constituted upon receipt of their fees from the claimant. However, the tribunal would not deal with the counter claim of the opposite party having failed to pay arbitration fees. It is submitted that this stand of the arbitral tribunal was accepted even by this Court and in great detail, an order came to be passed by which application of the claimant was rejected with a specific finding that the arbitral tribunal is now constituted and that remedy under Section 9 would be available to the Page 12 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT claimant before such constituted tribunal. It is submitted that when such order was placed on record of the arbitral tribunal, in communication by the Presiding Arbitrator dated 15.08.2019 contrary stand is taken by the Presiding Arbitrator that the arbitral tribunal is not properly constituted and has not entered into reference yet and hearings were directed to be undertaken at Singapore. This communication was objected to by the opposite party on the ground of high charges and also on the ground of arbitration proceedings to be conducted at Singapore. Therefore, by e-mail dated 19.08.2019, Presiding Arbitrator conveyed that the hearings of the arbitration would take place at Ahmedabad and not at Singapore, however, maintained that the Tribunal was not constituted and would not be constituted until deposits are paid.
8.7 It is submitted that in the meantime, with effect from 30.08.2019, there was amendment in Section 29A of the Act, wherein time period of 12 months for international commercial arbitration has been done away with. However, as the period of 12 months after first constitution of the Tribunal in this case had lapsed on 01.02.2019 and extended period of six months had lapsed on 01.08.2019, the present arbitration would be covered under the unamended Section 29A and therefore, period of Page 13 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT 12 months for completing the arbitration proceedings would apply. In the instant case, when even as per the Presiding Arbitrator, the arbitral tribunal was constituted on 06.10.2019, there was no mandate for continuing with the arbitration proceedings. The conditional extension given by the Presiding Arbitrator vide communication dated 20.10.2019 was also not fulfilled and therefore, it cannot be said that the extension of period to arbitration proceeding was consented to by the parties, especially by the opposite party.
8.8 Learned Senior Advocate for the opposite party referred to page No.421 of the paper book which are arbitration proceedings and submitted that the issue of Section 29A was very much before the tribunal and the tribunal has recorded inappropriately that the issue of Section 29A is required to be addressed on account of the decision of the Supreme Court which the tribunal finds "slightly dichotomous, because it says 29A is mandatory and, at the same time, it gives the tribunal time to carry on with the proceedings".
8.9 Learned Senior Advocate for the opposite party has thereafter taken this Court through the proceedings of the arbitral tribunal with regard to Section 29A and the date on which the arbitration is said to have Page 14 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT commenced. It is submitted that the opposite party was compelled to give a separate application on 22.11.2019 with prayer to specify the date of commencement of newly constituted arbitral tribunal and also to convey the reasons to raise issue under Section 29A of the Act and hear the parties on that issue. He referred to other such applications on such issue. It is submitted that as the arbitration has proceeded wholly without jurisdiction, writ can be invoked and alternative remedy will not act as a bar. It is submitted that by e-mail communication and attending arbitral tribunal, cannot be treated as acquiescence on the part of the opposite party and such participation cannot be deemed to be consent under Section 29A and grant extension to the mandate of the tribunal.
8.10 It is also submitted that even from the proceedings before the arbitral tribunal, it is clear that the arbitration was proceeding one sided and that entire proceedings were reduced to empty formality. The opposite party apprehended that arbitral tribunal is already pre-decided.
8.11 It is vehemently submitted that the claimant has misled the Apex Court by producing only portion of the interim order in his pleadings and did not produce entire text of the interim order of this Court to Page 15 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT prejudice the Apex Court.
9. Learned Senior Advocate Mr.N.D.Nanavaty for the opposite party in SCA No.4441 of 2020 supports contentions and arguments made by learned Senior Advocate for the opposite party in SCA No.3913 of 2020. It is submitted that the present arbitration is prolonged since 2017 till 2020, thereby frustrating the very purpose and object of arbitration. Citing certain dates with regard to initiation of the arbitration proceedings, it is submitted that an order under Section 11 for international arbitration was passed on 20.07.2017, whereby Hon'ble Mr.Justice C.K.Thakker (retired Supreme Court Judge) was appointed as the Presiding Arbitrator. Thereafter, in place of Hon'ble Mr.Justice C.K.Thakker (retired Supreme Court Judge), Hon'ble Mr.Justice M.B.Shah (retired Supreme Court Judge) was appointed on 04.12.2017 and the first sitting of the arbitral tribunal took place on 01.02.2018. The mandate was to complete arbitration within one year, i.e. to say 31.01.2019 and today, even after two years, the arbitration is not concluded.
9.1 It is submitted that the provision made for time for completing arbitration referring to Section 29A by the Supreme Court in its order dated 04.12.2017 is to be treated as a direction under Article 142 and Page 16 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT therefore, period of one year is to be construed accordingly. It is submitted that during entire proceedings, there is no order of the Court either to extend such period of one year nor there is an order for reconstitution of another tribunal. It is submitted that since the proceedings before the arbitral tribunal are quasi judicial proceedings, writ of prohibition is maintainable and insofar as this petition is concerned, the Court has granted prayer for amendment to amend the prayer clause.
10. Learned Senior Advocates jointly for the opposite party relied upon judgment of the Apex Court in case of M/s.Deep Industries Limited Vs. Oil and Natural Gas Corporation Limited & Anr. in Civil Appeal No.9106 of 2019 dated 28.11.2019, to contend that interference, though restricted, can be made under Article 226 /227 in arbitration process where there is patent lack of inherent jurisdiction.
10.1 Reliance is also placed on judgment of the Apex Court in case of U.P.State Cooperative Land Development Bank Ltd. Vs. Chandra Bhan Dubey & Ors., reported in (1999) 1 SCC, 741. He drew attention of the Court to para-27 to contend that the Constitution is a fountainhead of all the statutes and language of Article 226 is very clear and no shackles can be put on the High Page 17 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT Courts to limit their jurisdiction. When any citizen or person is wrong, the High Court will have to step in. 10.2 He next relied upon judgment of the Apex Court in case of Harbanslal Sahnia & Anr. Vs. Indian Oil Corpn. Ltd. & Ors., reported in (2003) 2 SCC, 107, where relying on the judgment of the Apex Court in case of Whirlpool Corpn. Vs. Registrar of Trade Marks, reported in (1998) 8 SCC, 1, it was held that the High Court can exercise writ jurisdiction in at least three contingencies (i) where the writ petition seeks enforcement of any of the fundamental rights, (ii) where there is failure of principles of natural justice and (iii)n where the orders or proceedings are wholly without jurisdiction or the vires of an Act is challenged. In the present case, due to lack of mandate or extension, the arbitration proceedings are wholly without jurisdiction. 10.3 He next relied upon judgment of the Apex Court in case of Binny Ltd. & Anr. Vs. V.Sadasivan & Ors., reported in (2005) 6 SCC, 657 and submitted that Article 226 is couched in a manner that a writ of mandamus could be issued even against private authority, but must be discharging public function. It is submitted that the arbitral tribunal constituted under a statute would be discharging public function and for that matter, any tribunal would be discharging public function including Page 18 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT the arbitral tribunal.
10.4 He next relied upon unreported judgment of this Court in case of N.G.Projects Limited Vs. Backbone Projects Limited & Ors. in SCA No.12993 of 2016 with SCA No.12834 of 2016 dated 21.09.2016. He drew attention of the Court to para-25 to contend that the jurisdiction of the High Court is not taken away and therefore, exercise of jurisdiction under Article 227 cannot be considered as lack of jurisdiction, but a propriety or a particular guideline with regard to the approach in such matters which are laid down by the Apex Court in case of SBP & Co. Vs. Patel Engineering Ltd. & Anr., reported in (2005) 8 SCC, 618.
10.5 He next relied upon judgment of the Kerala High Court in case of Union of India Vs. Advanced Polymer Technology & Ors. in OP (ICA) No.5 of 2018 dated 03.12.2019, to contend that in case of expiry of period, continuing sittings of arbitration cannot be granted validity as after expiry of period, Arbitrator becomes functus officio.
10.6 Reliance is also placed on the decision of this Court in case of Nilesh Ramanbhai Patel & Ors. Vs. Bhanubhai Ramanbhai Patel & Ors., reported in 2019 (2) GLR, 1537. It is submitted that any extension for the Page 19 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT mandate has to be by the Court and in the instant case, regarding international commercial arbitration, the Supreme Court is the only Court and therefore, extension of mandate under Section 29A ought to have been sought from the Apex Court. The Arbitrator on its own could not have granted such extension.
10.7 He next relied upon judgment of the Apex Court in case of Jayesh H.Pandya Vs. Subhtex India Ltd., reported in 2019 SCC Online, SC, 1101, contending that where time is fixed for the arbitration or schedule of time limit in such arbitration proceedings is the concept recognized by law and after expiry of such period, the Arbitrator becomes de jure and unable to perform functions and mandate to act as an Arbitrator. 10.8 Reliance is also placed on the judgment of this Court in case of Heirs and Legal Representatives of Sidhrajsinhji Pragrajsinhji & Ors. Vs. Bengal Cynosure Development Private Limited & Ors. reported in 2019(3) GLH 406, to contend that this Court in exercise of powers under Article 226 of the Constitution of India has exercised jurisdiction even in a matter of arbitration award despite there being alternative remedy.
11. As against this, learned Senior Advocate for the claimant submitted that the dispute pertains to an Page 20 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT LLP where opposite party is one of the partners and in fact, who has siphoned off money of the partnership in crores of rupees. It is submitted that the majority of investment in the LLP was by claimant No.1 and only small portion was invested by the opposite party and when it was found that the opposite party were acting against interest of LLP for their personal benefit, claimant lost his confidence in these partners and that is the basis of arbitration. The claimant is resident out of India and the subject matter of arbitration is international commercial arbitration. By taking this Court through the contents of the arbitration proceedings, it is strongly contended that the opposite party actually has participated in the arbitration proceedings and has also given tacit consent to the ongoing arbitration. Therefore, during arbitration, all that the opposite party has done is seeking adjournments, questioning the Arbitrator and by unbecoming the conduct kept of badggaring the Arbitrators.
11.1 At the outset, maintainablility of the writ petition is questioned by relying upon the declaration made by the Apex Court in the judgment in case of SBP & Co. (supra). It is contended that the question of Section 29A, if is required to be decided upon, only the Apex Court has jurisdiction to so decide. The Page 21 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT appointment of the Arbitrator was in exercise of powers of Section 11 of the Act and therefore, submission of the opposite party that the direction referring to Section 29A of the Act being under Article 142, cannot be accepted.
11.2 It is submitted that the mandate under Section 29A has not expired as provided under the order of the Apex Court itself upon appointment of new Presiding Arbitrator. In the instant case, even before the tribunal was reconstituted by appointment of new Arbitrator, the mandate had not expired. It is also submitted that the chronology of events suggests that the Presiding Arbitrator retired. The nominee of the retired Presiding Arbitrator also resigned. But, from the communications made by the nominee of the opposite party, it appears that the nominee of the opposite party continued and therefore, the arbitral tribunal cannot be said to have become defunct. He drew attention of this Court to the communication of Hon'ble Mr.Justice G.T.Nanavati (retired Supreme Court Judge) stating that there is no resignation on his part and the arbitral tribunal is not defunct and therefore, appointment of the nominee of the claimant be made and as there was an agreement between both the nominees, the Presiding Arbitrator was also appointed.
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C/SCA/3913/2020 JUDGMENT 11.3 It is submitted that after appointment of the
Presiding Arbitrator on 24.01.2019, the opposite party has participated in the arbitration proceedings. He took this Court through the e-mail communication on behalf of the opposite party and also the tribunal proceedings. It is submitted that from participation of the opposite party, there was nothing to indicate that except for the charges for arbitration, the opposite party has not raised any objection. It is submitted that in any case, the opposite party has not raised any objection with regard to mandate under Section 29A and it is only later on that such a contention is raised.
11.4 It is submitted that insofar as constitution of the new tribunal and continuing of mandate is concerned, it is the stand of the opposite party itself before this Court in the previous proceedings under Section 9 that the tribunal is constituted. It is submitted that the stand taken by the opposite party is on affidavit and the Court has relied upon such affidavit substantially to decide such application and therefore, now the opposite party cannot be permitted to take a stand contrary to his own stand on the issue of constitution of the tribunal. It is submitted that in that view of the matter, the tribunal was thus constituted even before statutory period under Section 29A expired. It is submitted that Page 23 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT in any case, after the amendment which came into effect on 30.08.2019, for the present arbitration being international commercial arbitration, prescription of period of 12 months would not apply and therefore, the arbitration proceedings are justified and the tribunal continued with the arbitration.
11.5 It is submitted that the opposite party is taking a contrary stand to his own affidavit before the High Court and therefore, has not come with clean hands and hence, not entitled to exercise of jurisdiction under Article 226 in his favour.
11.6 It is submitted that the arbitral tribunal had made its stand very clear on 20.10.2019 and thereafter also, the opposite party had continued to participate in the arbitration proceedings. At that stage, contention of lack of jurisdiction on account of lapse of time period was not raised by the opposite party and even if such contention was to be raised by the opposite party, the same would have to be decided by the Court as contemplated under the provisions of the Act. It is submitted that the Court, as defined under the Act pertaining to international commercial arbitration, would be the Supreme Court as the Supreme Court, in exercise of powers under Section 11, has appointed the arbitral tribunal. It is also submitted that considering the Page 24 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT order passed by the Supreme Court in the arbitration petition of the claimant being international commercial arbitration, argument of the opposite party cannot be accepted that the direction qua Section 29A is to be read as if direction under Article 142. It is submitted that the issue of mandate was never raised by the opposite party. There is not a single application on record by the opposite party either for ascertaining date of arbitral tribunal to enter into arbitration or to object to the jurisdiction of the tribunal to arbitrate. The only option is provided under Section 16 of the Act. 11.7 It is lastly submitted that even if the entire argument of the opposite party is to be accepted being lack of jurisdiction, still, it is open for the claimant to fall back on the arbitration clause of the LLP agreement. Today, with consent of all the parties, relevant clause 35 of the LLP agreement is produced for perusal and it is submitted that in any case, as the LLP agreement was very much in existence, the parties in any case would constitute arbitral tribunal as provided under the arbitration clause. It is submitted that as provided, each party is to appoint one Arbitrator each and accordingly, each party has appointed its respective Arbitrator and two Arbitrators have appointed the Presiding Arbitrator. Therefore, constitution of the Page 25 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT arbitral tribunal is very much in conformity with the provisions of the Act and in consonance with the arbitration clause of the LLP agreement. 11.8 Learned Senior Advocate for the claimant has thereafter contested the amendment stating that the draft amendment cannot be permitted as the prayer made in the petition itself makes the petition not maintainable and when this defence was taken by the claimant at the time of argument for interim relief, question was left open and now by amendment, defence of the claimant is sought to be knocked off and that would be detrimental to the defence of the claimant and would also change complexion and hence, amendment may not be permitted. 11.9 Learned Senior Advocate for the claimant thereafter painstakingly taken this Court through the judgments cited by learned Senior Advocate for the opposite party and tried to submit as to each of the judgment is on the aspect which is either not relevant for the purpose of this case on facts or on law. It is therefore submitted that the judgments cited would not support the case of the opposite party.
12. Learned Advocate Mr.Kirit Nagra for the claimant submitted that the entire challenge before the Court is jurisdictional challenge. It is submitted that Page 26 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT the Act provides for the arbitration tribunal to rule on its own jurisdiction. It is submitted that Section 16 of the Act provides for competence of the arbitral tribunal to rule on its jurisdiction and sub-section (5) provides that the arbitral tribunal shall decide on a plea which are referred to in case of jurisdiction and after taking a decision, if the plea is rejected then the tribunal proceeding has to continue. Thereafter, option available to the party aggrieved is provided under sub-section (6) of Section 16 and therefore, when the Act itself provides for a remedy, the Court may not entertain the petition midway under Articles 226 and 227 of the Constitution of India.
12.1 It is submitted that the plea regarding objection to the arbitral tribunal by the petitioner was not with regard to lack of jurisdiction on account of expiry of mandate, but the objection had always been with regard to cost of arbitral tribunal. However, in exercise of powers under Section 16, the arbitral tribunal took upon itself to rule on its own jurisdiction (see page No.421) and after considering the directions of the Apex Court, has proceeded with the arbitration proceedings. In that manner, the arbitration is conducted as per the provisions of law and cannot be interfered with in-between.
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C/SCA/3913/2020 JUDGMENT 12.2 It is submitted that though the petitioner has filed writ petition, in essence, what the petitioner
wants to be decided under the writ jurisdiction, is in fact, exercise which has to be undertaken under the appellate jurisdiction as provided under the Act, more particularly Sections 16(6) and 34 and therefore, it is prayed that the petition may not be entertained.
13. On behalf of the claimant, reliance is placed on the judgment of the Apex Court in case of SBP & Co. (supra) to contend that the writ petition is not maintainable, more particularly when the objection is with regard to jurisdiction.
13.1 Reliance is also placed on the judgment of the Apex Court in case of Swiss Timing Limited Vs. Commonwealth Games 2010 Organising Committee, reported in (2014) 6 SCC, 677, to emphasis that policy of least interference in the arbitration proceedings is a recognized principle.
13.2 Learned Senior Advocate for the claimant also relied upon judgment of the Apex Court in case of Tamil Nadu Electricity Board Vs. Sumathi & Ors., reported in (2000) 4 SCC, 543, on the ground of manipulability of a writ petition is disputed questions of fact. Page 28 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020
C/SCA/3913/2020 JUDGMENT 13.4 Learned Senior Advocate for the claimant next relied upon judgment of the Apex Court in case of
Lalitkumar V.Sanghavi (dead) through LRs Neeta Lalitkumar Sanghavi & Anr. Vs. Dharamdas V.Sanghavi & Ors., reported in (2014) 7 SCC, 255, to contend that interference by the High Court under Article 226 in arbitration proceedings is not maintainable.
14. Heard rival submissions of the parties and perused documents on record. Elaborate arguments have been made and attention of the Court has been drawn to various e-mail communications as well as recorded proceedings of the arbitral tribunal. Allegations and counter allegations have been made regarding conduct of both the parties and observations made by Courts in various proceedings between the same parties to put the bonafides of rival parties to great doubt. However, considering the nature of issue that arises for considerations, arguments and counter arguments regarding allegations of conduct and misconduct should pail into insignificance.
15. The moot issues that the Court is called upon to decide are (i) whether mandate of the arbitral tribunal continues even after expiry of period of 12 months as prescribed under Section 29A of the Act and if so, (ii) can this Court in exercise of powers under Page 29 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT Article 226 /227 of the Constitution, issue a declaration of the mandate having been terminated. For the above purpose, the Court is also not inclined to examine the issue of draft amendment for amending the prayer seeking writ of quo warranto to amended prayer clause seeking writ of certiorari or any other appropriate writ as the ultimate prayer would be, in the opinion of the Court, declaration from the Court that the mandate of the tribunal has expired and that the tribunal has lost jurisdiction to arbitrate.
16. The Court would now deal with the judgments cited by learned Senior Advocate for the opposite party in support of his contentions. Learned Senior Advocate for the opposite party relied upon decision of the Apex Court in case of M/s.Deep Industries Limited (supra) to contend that interference by the Court under Articles 226 and 227 of the Constitution can be made in case of patently lack in inherent jurisdiction. In para-7 of the judgment, it is recorded that an appeal was filed against Section 17 order which was disposed of by the City Civil Court, against which petition was filed under Article 227 of the Constitution of India before the High Court. A preliminary contention was raised that the petition filed should be dismissed at the threshold as it did not raise any jurisdictional issue. The dispute therein was with Page 30 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT regard to whether arbitration notice was confined only to termination of the agreement and that the issue of blacklisting would decide the scope of arbitration. It is in this set of facts that the Apex Court has held in paras-12 and 13 as under:-
"12) Most significant of all is the non-
obstante clause contained in Section 5 which states that notwithstanding anything contained in any other law, in matters that arise under Part I of the Arbitration Act, no judicial authority shall intervene except where so provided in this Part. Section 37 grants a constricted right of first appeal against certain judgments and orders and no others. Further, the statutory mandate also provides for one bite at the cherry, and interdicts a second appeal being filed (See Section 37(2) of the Act)
13) This being the case, there is no doubt whatsoever that if petitions were to be filed under Articles 226/227 of the Constitution against orders passed in appeals under Section 37, the entire arbitral process would be derailed and would not come to fruition for many years. At the same time, we cannot forget that Article 227 is a constitutional provision which remains untouched by the non-obstante clause of Section 5 of the Act. In these circumstances, what is important to note is that though petitions can be filed under Article 227 against judgments allowing or dismissing first appeals under Section 37 of Page 31 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT the Act, yet the High Court would be extremely circumspect in interfering with the same, taking into account the statutory policy as adumbrated by us herein above so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction." (emphasis supplied) 16.1 In the aforesaid judgment, para-13 clearly lays down that the High Court would be extremely circumspect in interfering. This judgment, therefore, limits exercise of discretion under Article 227. 16.2 The judgment of the Apex Court in case of U.P.State Cooperative Land Development Bank Ltd. (supra) was relied upon to contend that Article 226 does not make divide between a public law and private law and when the arbitral tribunal, though deciding private dispute is discharging its function under the statute, there will be element of public function on the part of the tribunal making it amenable to writ jurisdiction of the High Court. For this reason, the learned Senior Advocate for the opposite party relied upon para-27. It is found that in the facts of the case, the Supreme Court was considering the case wherein the dispute was whether to hold Cooperative Land Development Bank Limited as instrumentality of the State and amenable to writ jurisdiction. However, considering further observations Page 32 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT in the very same para, wherein the Apex Court has settled the guidelines and self-imposed limitations have to be exercised by the High Court under this jurisdiction so as to prevent exercise of jurisdiction which could be termed as "bull in China shop".
16.3 The judgment in case of Harbanslal Sahnia & Anr. (supra) will not help the case of the opposite party inasmuch as, in that case the Supreme Court has ruled on maintainability of a writ petition in the face of alternative remedy. The Supreme Court held that rule of exclusion of writ jurisdiction against available alternative remedy is of discretion and not of compulsion. The Supreme Court has mentioned the contingencies in which writ jurisdiction could be exercised. In this case, the fact was with regard to cancellation of a dealership by Oil Company on the ground of the failed sample test and a contention was raised that such tests were being carried out in violation of the instructions of the Government orders. In the instant case, when the issue is with regard to lack of jurisdiction and in view of lack of jurisdiction, remedy is prescribed, therefore, cannot be equated with remedy alternative to writ jurisdiction.
16.4 The judgment in case of Binny Ltd. & Anr.
(supra) was relied upon for the contention that the Page 33 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT tribunal constituted under the provisions of the Act,
though may be arising out of contract, but still, be considered to be discharging public function and therefore, amenable to judicial review. For this reliance is placed on para-11 of the judgment, more particularly, quote from the book on Judicial Review of Administrative Action by de Smith, Woolf & Jowell to explain public function when they intervene or participate in social or economic affairs in public interest. The Court finds that in the facts of this case, there does not appear to be any public interest involved nor any public duty cast upon the tribunal so as to attract ratio of this judgment to substantiate maintainability of writ under Article 226. In fact, ratio of the judgment is in para-29, which reads as under:-
"29. Thus, it can be seen that a writ of mandamus or the remedy under Article 226 is pre-eminently a public law remedy and is not generally available as a remedy against private wrongs. It is used for enforcement of various rights of the public or to compel the public/statutory authorities to discharge their duties and to act within their bounds. It may be used to do justice when there is wrongful exercise of power or a refusal to perform duties. This writ is admirably equipped to serve as a judicial control over administrative Page 34 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT actions. This writ could also be issued against any private body or person, specially in view of the words used in Article 226 of the Constitution. However, the scope of mandamus is limited to enforcement of public duty. The scope of mandamus is determined by the nature of the duty to be enforced, rather than the identity of the authority against whom it is sought. If the private body is discharging a public function and the denial of any right is in connection with the public duty imposed on such body, the public law remedy can be enforced. The duty cast on the public body may be either statutory or otherwise and the source of such power is immaterial, but, nevertheless, there must be the public law element in such action. Sometimes, it is difficult to distinguish between public law and private law remedies. According to Halsbury's Laws of England 3rd ed. Vol. 30, page-682, "1317a public authority is a body not necessarily a county council, municipal corporation or other local authority which has public statutory duties to perform and which perform the duties and carries out its transactions for the benefit of the public and not for private profit."
There cannot be any general definition of public authority or public action. The facts of each case decide the point.
From the aforementioned para, it is categorically held that the scope of mandamus is limited Page 35 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT to enforcement of public duty. The scope of mandamus is determined by the nature of the duty to be enforced, rather than the identity of the authority against whom it is sought. Considering the lis here, where the dispute is between the partners of an LLP, the Court is of the view that the judgment does not help case of the opposite party.
16.5 In case, N.G.Projects Limited (supra), reliance is placed on paras, 12, 23 and 24 by learned Senior Advocate for the petitioner to contend that the judgments in cases of SBP & Co. (supra) and L.Chandra Kumar (supra) do not take away jurisdiction of the High Court under Article 227 and it is not lack of jurisdiction nut propriety or particular guideline with regard to approach in such matters where the Apex Court has laid down for exercising discretion under Article 227 suggesting self-restraint. Para-2 of the judgment referred to the facts of the case and para 20 is discussion with regard to principle that when the parties have themselves agreed and accepted forum of redressal, they would be estopped from wriggling out of provisions of the Arbitration Act. In the facts of that case, however, the Court has chosen to exercise self-restraint and not to exercise discretion under Article 227, thereby dismissing the petition.
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C/SCA/3913/2020 JUDGMENT 16.6 The judgment in case of Advanced Polymer Technology & Ors. (supra) was relied upon for the contention that continuing of sitting after expiry of
period permitted for arbitration is without authority and in fact, after expiry of period, Arbitrator becomes functus officio. It is a case where the arbitration was to be completed within a period of 12 months and with consent of the parties, period for passing the arbitral award was extended by 6 months. However, before expiry, the Arbitrator passed an order directing either parties to apply and obtain extension of further period. It is in these facts that the petition came to be filed. Examining cause for delay and the procedure adopted by the Arbitrator and considering objections raised by the respondent against continuation of the Arbitrator at the fag end on the ground that a retired High Court Judge has to be appointed as Arbitrator and therefore, objecting to continuation till the end, such respondent had participated in the arbitration. Thereafter, the Court has proceeded to extend the period by four months for passing the award. The observations made by the Kerala High Court in para-17 are passing reference in the facts of the case and may not be termed to be the ratio. 16.7 The judgment in case of Nilesh Ramanlal Patel & Ors. (supra) is on the issue of extension of mandate of Page 37 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT Arbitrator. Reliance is placed on para-15 to contend that the power to extend the period of mandate of an Arbitrator beyond period of 12 months would rest when the Court and that neither parties nor Arbitrator, even by joint consent can extend such period. The judgment cited for the aforesaid contention, however, would not support the contention itself considering what has been held by the Court in later part of para-15 itself. The Court was considering the facts where arbitral proceedings could not be completed within 12 months from the date of constitution of the arbitral tribunal, which was extended by period of 6 months. Later on it was objected by daughters of the deceased opponent on the ground that such extension was without their consent and therefore, not valid and that it must be held that the mandate of the arbitrator has come to an end. Accordingly, the Arbitrator passed an order holding that his mandate has come to an end. The Court examined the provisions of the Act, more particularly definition clause of phrase "Court" and sub-sections (4), (5) and (6), which pertain to appointment of Arbitrator by the High Court or the Supreme Court considering the nature of arbitration and Section 29. The Court concluded that in case of international commercial arbitration, appointments made would be by the Supreme Court. The Court finds that the facts to that extent are identical to the present case Page 38 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT and as in exercise of powers under Section 11, the arbitral tribunal was appointed by the Supreme Court, therefore, as is held in para-15 of this judgment, the Court to decide on the mandate under Section 29A will be the "Court" which had exercised powers under Section 11. Therefore, what is held in this judgment, runs contrary to the contentions of learned Senior Advocate for the petitioner. In later part of para-15, the Court has held as under:-
"15. ...... The powers under sub-section (6) of Section 29A are of considerable significance. The powers for extending the mandate of an arbitrator are coupled with the power to substitute an arbitrator. These powers of substitution of an arbitrator are thus concomitant to the principal powers for granting an extension. If for valid reasons the Court finds that it is a fit case for extending the mandate of the arbitrator but that by itself may not be sufficient to bring about an early end to the arbitral proceedings, the Court may also consider substituting the existing arbitrator. It would be wholly incumbent to hold that under subsection (6) of Section 29A the legislature has vested powers in the Civil Court to make appointment of arbitrators by substituting an arbitrator or the whole panel of arbitrators appointed by the High Court under Section 11 of the Act. If we therefore accept this contention of Shri Mehta, it would lead to irreconcilable conflict Page 39 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT between the power of the superior Courts to appoint arbitrators under section 11 of the Act and those of the Civil Court to substitute such arbitrators under Section 29A(6). This conflict can be avoided only by understanding the term "court" for the purpose of Section 29A as the Court which appointed the arbitrator in case of Court constituted arbitral Tribunal."
(emphasis supplied) Therefore, in the facts of this case, on the issue with regard to extension, remedy for the petitioner would therefore lie with the Court appointing Arbitrator for any declaration on the mandate of the Arbitrator appointed.
16.8 In case of Jayesh H.Pandya (supra), reliance is placed on paras-4 and 7 to point out the facts of the case and the question before the Apex Court. Reliance is also placed on para-23, wherein the Apex Court has held in the facts of the case that the Arbitrator had became de jure unable to perform his functions and the mandate to act as an Arbitrator in the arbitral proceedings between the parties as prayed for stood terminated. In the facts of this case, it is found that in terms of arbitration agreement, it was a clause that the Arbitrator will make his award within a period of 4 months from the date of service of agreement and that the Arbitrator shall have power to extend period for Page 40 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT publishing the award from time to time with consent of the parties. With this clause, the issue before the Supreme Court was the final judgment of the High Court of Judicature at Bombay, whereby the High Court, while dismissing the arbitration petition, held that the appellants waived their right to extension of time for completion of arbitration proceedings beyond stipulated period of 4 months. Para-14 of the judgment indicates that on account of inability of the Arbitrator to conclude the arbitral proceedings within 4 months, objection was recorded to extend the time before the Arbitrator. By order, the Arbitrator had rejected the application, which came to be challenged by the appellants invoking Section 14 of the Act by filing arbitration petition for declaration that the Arbitrator had become de jure and unable to perform his act. It was this petition which came to be dismissed by the High Court and was examined by the Supreme Court. Considering the object and purpose of expeditious resolution of the Act, the Court had allowed the appeal and the judgment of the High Court was set aside. However, it is pertinent to point out that the entire exercise was under the provisions of the Act itself and there was no invocation of provisions of Article 226 and 227 of the Constitution.
16.9 Reliance was placed on the decision of this Page 41 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT Court in case of Heirs and Legal Representatives of
Sidhrajsinhji Pragrajsinhji & Ors (supra) to contend that the Court is competent to invoke Article 226 of the Constitution. In the facts of the case, the Court was dealing with the final award which was an ex parte award and having found gross facts and biased attitude of the Arbitrator, had interfered under Article 226 despite alternative remedy under Section 34 of the Act. The Court is informed that the said judgment is the subject matter of challenge before LPA Bench. Hence, the Court refrains from commenting on this judgment at this stage.
17. The foundation of the arbitration proceedings is arbitration clause of LLP agreement where the petitioners-opposite parties of both these petitions are partners on one side the the respondent-claimant is partner on the other side. The basic dispute is loss of confidence of the claimant as he suspected siphoning of money he invested in LLP by other partners and for the purpose of settlement, arbitration clause came to be invoked, which reads as under:-
"35. ARBITRATION:
All disputes and difference whatsoever which shall arise between the partners and the personal representatives of the deceased partner relating to any matter or between partner and LLP whatsoever touching the affairs Page 42 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT of the LLP or the interpretation of this agreement shall be referred to a single arbitrator, if the parties agree upon one, otherwise to three arbitrators one to be appointed by each party to the difference in accordance with and subject to the provisions of the arbitration and conciliation act, 1996 or any statutory modification or re-enactment thereof for the time being in force.
The partners agree that the decision shall be the sole, exclusive and binding remedy between them regarding any and all disputes, controversies, claims and counter-claims presented to the arbitrators. If a decision is not complied with by the partner, then any award or decision may be entered in a court of a competent jurisdiction for a judicial recognition of the decision and an order of enforcement.
The jurisdiction for all the above purposes will be Ahmedabad, Gujarat only."
18. Being an international arbitration, application came to be filed before the Supreme Court and in Arbitration Petition No.14 of 2017 filed under Section 11(6) of the Act, arbitral tribunal came to be appointed under order dated 24.07.2017. In-between, inability was expressed by the Presiding Arbitrator to take up assignment and hence, another order came to be passed on 04.12.2017 in MA No.1482 of 2017, whereby in place of Hon'ble Mr.Justice C.K.Thakker (retired Supreme Court Page 43 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT Judge), Hon'ble Mr.Justice M.B.Shah (retired Supreme Court Judge) came to be appointed as Presiding Arbitrator. In the said order, it was specified that as Hon'ble Mr.Justice C.K.Thakker was unable to accept assignment, the period within which the award is to be delivered under Section 29A of the Act was to commence on and from the date on which the first sitting takes place. The first sitting of the arbitral tribunal under the Chairmanship of Hon'ble Mr.Justice M.B.Shah took place on 01.02.2018. It appears that the proceedings continued over the period and evidences of witnesses also came to be recorded. At that stage, an application under Section 17 was moved by the claimant. However, before the Order on Section 17 application could be pronounced, a letter was addressed to the arbitral tribunal stating that the tribunal may not be able to conclude the proceedings within a period of 12 months and that the claimant is not consenting to any extension beyond the period of 12 months.
19. From the record, it appears that language used by the claimant in addressing to the Hon'ble retired Judges of the Supreme Court was found offending, as a result of which the Presiding Arbitrator resigned from the arbitral tribunal and the nominee of the claimant Hon'ble Mr.Justice J.M.Panchal (retired Supreme Court Page 44 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT Judge) also followed the suit by addressing a letter categorically stating that the allegations are made against entire tribunal. On 26.12.2018, the claimant nominated one Mr.Andre Yeap of Singapore as his nominee. However, the nominee of the opposite side Hon'ble Mr.Justice G.T.Nanavati continued as the nominee on the tribunal categorically communicating that there is no resignation on his part. From the communication, it appears that there was opposition to appointing foreign national as an Arbitrator. However, ultimately, Mr.Andre Yeap continued as nominee. On 24.01.2019, communication is made by nominee of claimant on behalf of both the Arbitrators appointing one Mr.Vinayak Pradhan as Presiding Arbitrator. On 24.01.2019 itself, new Presiding Arbitrator prescribed his schedule of fees and specified that the arbitral tribunal shall be constituted and will enter into reference upon payment being made as per the schedule of payment mentioned in his communication. In the meantime, on 25.01.2019, an application under Section 9 came to be filed before this Court, which ultimately came to be disposed of by CAV judgment dated 21.06.2019. The mainstay of the decision in the CAV judgment was not to exercise powers under Section 9 in view of the stand taken by the claimant that upon appointment of Mr.Vinayak Pradhan as Presiding Arbitrator on 24.01.2019, the tribunal is constituted. Page 45 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020
C/SCA/3913/2020 JUDGMENT With regard to unhappy situation that arose between the members of the arbitral tribunal and claimant in particular, observations are made by this Court in the CAV judgment. As the same would not be directly affecting the issue before this Court, the same are not referred to.
20. Upon appointment of Mr.Vinayak Pradhan as the Presiding Arbitrator, schedule of fees, which was found by the opposite party rather exorbitant, was immediately, objected to. Communications after communications were addressed with regard to high fees of the arbitration proceedings. The parties brought to the notice of this Court even the issue of flipflop by the Presiding Arbitrator regarding date of commencement of arbitration proceedings. From the record of the proceedings, the Court finds that on behalf of the opposite party, efforts were made to ascertain the date from the tribunal itself as to the date on which the tribunal under the Chairmanship of Mr.Vinayak Pradhan would be said to have commenced. Probably, such efforts to get the specific date, obviously appear to be to ascertain whether such date is falling within the period of expiry of the mandate of one year during which the mandate is said to be operative or thereafter. As such date was never given with certainty by the arbitral tribunal, and in fact, in Page 46 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT the last of the proceedings, it has been recorded that parties will be notified the date the tribunal entered into reference on 13.02.2020. It is on account of this uncertainty and variance in stand of the Presiding Arbitrator that the petitioners have filed these petitions contending that the arbitral tribunal under the Chairmanship of Hon'ble Mr.M.B.Shah had commenced arbitral proceedings on 01.02.2018 and that the period of one year for completing arbitral proceedings by the conduct, as per the provisions of Section 29A (unamended), would expire on 31.01.2019 and when stand is taken by the Presiding Arbitrator himself in various communications dated 24.01.2019, 26.04.2019, 15.08.2019 that the arbitral tribunal has not been constituted and only in e-mail communication dated 06.10.2019 by the Presiding Officer stating that having received fees from the claimant by all the members of the tribunal, the tribunal is constituted, therefore, considering the date 06.10.2019 to be the date of constitution of the tribunal, which is after 31.01.2019 and even period of 6 months by consent as prescribed under Section 29A(3) had also expired and that there was no order from the Court for any extension, the mandate to continue with the arbitral proceedings stood terminated and therefore, constitution of the arbitral tribunal under the Chairmanship of Mr.Vinayak Pradhan was a non-starter. Page 47 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020
C/SCA/3913/2020 JUDGMENT From the facts on record, the Court finds that even after appointment of Mr.Vinayak Pradhan as Presiding Arbitrator and his communication with regard to exorbitant fees, till his communication dated 06.10.2019, only objection that was raised was with regard to exorbitant fees, a non-Indian to be an Arbitrator and the proceedings to be held at Singapore. The Court finds nowhere any objection on behalf of the opposite party with regard to loosing of mandate under Section 29A. From rather elaborate proceedings, which are recorded in writing, the Court has not found any objection with regard to mandate of the tribunal to continue and at all instances, efforts were made on the part of the opposite party only to the extent of ascertainment of the date which the aribitral tribunal deems to consider as date of commencement of arbitration under the Chairmanship of Mr.Vinayak Pradhan. In the record of the arbitral tribunal, in the proceedings recorded on 17.11.2019, reference to the mandate can be found that too at the hands of the Chairman, which reads as under:-
"CHAIRMAN:As I said, although we were hoping to come and get on with the evidence--you know, this is a bit exasperating that nothing is moving. We want to get on with the evidence.
However, there is one fundamental question
which we think is better addressed now than
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C/SCA/3913/2020 JUDGMENT
later and this is the question of section 29A.
You have had some argument about this before, including the Supreme Court's decision which is slightly dichotomous, because it says 29A is mandatory and, at the same time, it gives the tribunal time to carry on with the proceedings.
One view - I am not saying which is the correct view - one of the views taken is it can be one of the other. If you say it is mandatory proceedings, that is the end of it, there is no question of trying to give more time to a party to present its case.
The issue then is what is the mandatory effect of section 29 in the context of this case - not any other case, but of this case.
I understand from the papers, the claimant has taken the view that there should be no extension of section 29.
MR VIRK: Yes.
MR NAGRA: Yes.
CHAIRMAN: This is for you to submit on. What
we would lime to see is submissions focused on the question of 29. It is mandatory; it is not mandatory.
MR NAGRA: With due respect, sirs -
CHAIRMAN: I don't except you to answer now, unless yo want to place your fate in our hands. You will be given time to answer the question, Page 49 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT produce your authorities, and to devote full argument.
MR NAGRA: We are happy to do that at the relevant time as directed by the tribunal.
CHAIRMAN: There is a view that we want to do that now. We don't want to wait until the evidence is taken or anything else, because it is fundamental. If the tribunal decides that there are mandatory proceedings, things are at an end, then, so be it. If it says, "No, they can continue", then the evidence goes on."
21. With the aforesaid issue, hearing took place on the very issue by both sides and ultimately, on 08.11.2019, the Chairman recorded as under:-
"CHAIRMAN:Gentlemen, thank you for your submissions, you have done that before and we must say we are very impressed by your diligence, your, as I said, your erudition and the manner in which you have presented your submissions.
It has not been an easy decision for us to take, but we have, in a sense, struggled our way around it and have come to the conclusion that we will proceed with the evidence."
22. At this stage, it would be appropriate to refer to Section 16 of the Act which provides for competence of the arbitral tribunal to rule on its jurisdiction. The arbitral tribunal to rule on its own jurisdiction, Page 50 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT including ruling on any objections with respect to existence or validity of the arbitration agreement. The plea that the arbitral tribunal does not have jurisdiction and when the arbitral tribunal decided on plea referred to under sub-section (2) as in the present case, the arbitral tribunal is to continue with the arbitral proceedings to make an award. Sub-section (6) of Section 16 provides for the remedy available to party aggrieved to challenge such decision only after the stage of tribunal award. Whether arbitral tribunal has jurisdiction to arbitrate can also be a question that arbtiral tribunal itself can decided under Section 16. Here, the arbitral tribunal has answered and proceeded to record evidence. Thereafter, whether the issue of lack of jurisdiction will have to be challenged as provided in the Act itself, the decision of lack of jurisdiction under Section 29A will have to be a decision by the Court under the Act itself and by the 'Court' as defined in the Act.
23. The Act does not prescribe for any intermediary stage for intervention by the Court. Section 5 is relevant at this stage, which starts with non-obstante clause and provides that no judicial authority shall intervene except provided in this part.
24. On the principle of least interference, the Page 51 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT Court would rely upon decision of the Apex Court in case of Swiss Timing Limited (supra), wherein the Court has held as under:-
"25. As noticed above, the concept of
separability of the arbitration
clause/agreement from the underlying contract
has been statutorily recognised by this country under Section 16 of the Arbitration Act, 1996. Having provided for resolution of disputes through arbitration, parties can not be permitted to avoid arbitration, without satisfying the Court that it will be just and in the interest of all the parties not to proceed with the arbitration. Section 5 of the Arbitration Act provides that the Court shall not intervene in the arbitration process except in accordance with the provisions contained in Part I of the Arbitration Act. This policy of least interference in arbitration proceedings recognises the general principle that the function of Courts in matters relating to arbitration is to support arbitration process. A conjoint reading of Section 5 and Section 16 would make it clear that all matters including the issue as to whether the main contract was void/voidable can be referred to arbitration. Otherwise, it would be a handy tool available to the unscrupulous parties to avoid arbitration, by raising the bogey of the underlying contract being void.
27. However, it would not be possible to shut out arbitration even in cases where the defence Page 52 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT taken is that the contract is voidable. These would be cases which are covered under the circumstances narrated in Section 12- unsoundness of mind; Section 14-absence of free consent, i.e. where the consent is said to be vitiated as it was obtained by Coercion (Section 15), Undue Influence (Section 16), Fraud (Section 17) or Misrepresentation (Section 18). Such a contract will only become void when the party claiming lack of free consent is able to prove the same and thus rendering contract void. This indeed is the provision contained in Section 2(j) of the Indian Contract Act. In exercising powers under Section 11(6) of the Arbitration Act, the Court has to keep in view the provisions contained in Section 8 of the Arbitration Act, which provides that a reference to arbitration shall be made if a party applies not later than when submitting his first statement on the substance of the dispute. In contrast, Section 45 of the aforesaid Act permits the Court to decline reference to arbitration in case the Court finds that the agreement is null and void, inoperative or incapable of being performed. 28 To shut out arbitration at the initial stage would destroy the very purpose for which the parties had entered into arbitration. Furthermore, there is no inherent risk of prejudice to any of the parties in permitting arbitration to proceed simultaneously to the criminal proceedings. In an eventuality where ultimately an award is rendered by arbitral tribunal, and the criminal proceedings result Page 53 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT in conviction rendering the underlying contract void, necessary plea can be taken on the basis of the conviction to resist the execution/enforcement of the award. Conversely, if the matter is not referred to arbitration and the criminal proceedings result in an acquittal and thus leaving little or no ground for claiming that the underlying contract is void or voidable, it would have the wholly undesirable result of delaying the arbitration. Therefore, I am of the opinion that the Court ought to act with caution and circumspection whilst examining the plea that the main contract is void or voidable. The Court ought to decline reference to arbitration only where the Court can reach the conclusion that the contract is void on a meaningful reading of the contract document itself without the requirement of any further proof.
30. I must also notice here that the defence of the contract being void is now-a-days taken routinely along with the other usual grounds, to avoid/delay reference to arbitration. In my opinion, such ground needs to be summarily rejected unless there is clear indication that the defence has a reasonable chance of success. In the present case, the plea was never taken till the present petition was filed in this Court. Earlier, the respondents were only impressing upon the petitioners to supply certain information. Therefore, it would be appropriate, let the Arbitral Tribunal examine whether there is any substance in the plea of fraud now sought to be raised by the Page 54 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT respondents."
25. At this stage, it is relevant to mention the amendment in Section 29A which is given effect from 30.08.2019 by which applicability of prescribed period of 12 months in the matter of international commercial arbitration was removed.
26. The issue of the date on which arbitration commenced is a disputed question of fact and as discussed earlier, would be for the arbitral tribunal to pronounce as it relates to issue of jurisdiction of the arbitral tribunal. As is held by this Court in case of Nilesh Ramanlal Patel & Ors. (supra) in para-15, any dispute as is raised in the present petition, if is required to be resolved then such dispute will have to be resolved by the Court which has exercised power under Section 11(6).
27. In the facts of the case, it is found that the chronology of events indicates several opportunities available to the opposite party to raise issue of extinguishing of the mandate and loss of jurisdiction of the tribunal before the Supreme Court. However, the opposite party continued to participate in the arbitral proceedings and entire first set of proceedings before the arbitral tribunal concluded and thereafter, on the eve of commencing of the next round of tribunal Page 55 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT proceedings that the petitions are brought before this Court under Article 226. This Court has passed order on 12.02.2020, which was carried before the Supreme Court by filing SLP (Civil) No.5800 of 2020, wherein the Supreme Court has passed order on 14.02.2020, which is referred to in the preceding para.
28. With regard to contention of maintainability, the Court would rely upon decision of the Apex Court in case of SBP & Co. (supra), wherein the Apex Court in paras-45, 46, and 47 has held as under:-
"45. It is seen that some High Courts have proceeded on the basis that any order passed by an arbitral tribunal during arbitration, would be capable of being challenged under Article 226 or 227 of the Constitution of India. We see no warrant for such an approach. Section 37 makes certain orders of the arbitral tribunal appealable. Under Section 34, the aggrieved party has an avenue for ventilating his grievances against the award including any in- between orders that might have been passed by the arbitral tribunal acting under Section 16 of the Act. The party aggrieved by any order of the arbitral tribunal, unless has a right of appeal under Section 37 of the Act, has to wait until the award is passed by the Tribunal. This appears to be the scheme of the Act. The arbitral tribunal is after all, the creature of a contract between the parties, the arbitration agreement, even though if the occasion arises, Page 56 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT the Chief Justice may constitute it based on the contract between the parties. But that would not alter the status of the arbitral tribunal. It will still be a forum chosen by the parties by agreement. We, therefore, disapprove of the stand adopted by some of the High Courts that any order passed by the arbitral tribunal is capable of being corrected by the High Court under Article 226 or 227 of the Constitution of India. Such an intervention by the High Courts is not permissible.
46. The object of minimizing judicial intervention while the matter is in the process of being arbitrated upon, will certainly be defeated if the High Court could be approached under Article 227 of the Constitution of India or under Article 226 of the Constitution of India against every order made by the arbitral tribunal. Therefore, it is necessary to indicate that once the arbitration has commenced in the arbitral tribunal, parties have to wait until the award is pronounced unless, of course, a right of appeal is available to them under Section 37 of the Act even at an earlier stage.
47. We, therefore, sum up our conclusions as follows:
i) The power exercised by the Chief Justice of the High Court or the Chief Justice of India under Section 11(6) of the Act is not an administrative power. It is a judicial power.
ii) The power under Section 11(6) of the Act, Page 57 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT in its entirety, could be delegated, by the Chief Justice of the High Court only to another judge of that court and by the Chief Justice of India to another judge of the Supreme Court.
(iii) In case of designation of a judge of the High Court or of the Supreme Court, the power that is exercised by the designated, judge would be that of the Chief Justice as conferred by the statute.
(iv) The Chief Justice or the designated judge will have the right to decide the preliminary aspects as indicated in the earlier part of this judgment. These will be, his own jurisdiction, to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators. The Chief Justice or the judge designated would be entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified in terms of Section 11(8) of the Act if the need arises but the order appointing the arbitrator could only be that of the Chief Justice or the judge designate.
(v) Designation of a district judge as the authority under Section 11(6) of the Act by the Chief Justice of the High Court is not warranted on the scheme of the Act.
(vi) Once the matter reaches the arbitral tribunal or the sole arbitrator, the High Court Page 58 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT would not interfere with orders passed by the arbitrator or the arbitral tribunal during the course of the arbitration proceedings and the parties could approach the court only in terms of Section 37 of the Act or in terms of Section 34 of the Act. (emphasis supplied)
(vii) Since an order passed by the Chief Justice of the High Court or by the designated judge of that court is a judicial order, an appeal will lie against that order only under Article 136 of the Constitution of India to the Supreme Court.
(viii) There can be no appeal against an order of the Chief Justice of India or a judge of the Supreme Court designated by him while entertaining an application under Section 11(6) of the Act.
(ix) In a case where an arbitral tribunal has been constituted by the parties without having recourse to Section 11(6) of the Act, the arbitral tribunal will have the jurisdiction to decide all matters as contemplated by Section 16 of the Act.
(x) Since all were guided by the decision of this Court in Konkan Railway Corporation Ltd. and Anr. v. Rani Construction Pvt. Ltd. and orders under Section 11(6) of the Act have been made based on the position adopted in that decision, we clarify that appointments of arbitrators or arbitral tribunals thus far made, are to be treated as valid, all Page 59 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT objections being left to be decided under Section 16 of the Act. As and from this date, the position as adopted in this judgment will govern even pending applications under Section 11(6) of the Act.
(xi) Where District Judges had been designated by the Chief Justice of the High Court under Section 11(6) of the Act, the appointment orders thus far made by them will be treated as valid; but applications if any pending Page 1824 before them as on this date will stand transferred, to be dealt with by the Chief Justice of the concerned High Court or a Judge of that court designated by the Chief Justice.
(xii) The decision in Konkan Railway Corporation Ltd. and Anr. v. Rani Construction Pvt. Ltd. is overruled. In view of the aforesaid guiding principles of the Hon'ble Supreme Court this court finds that the facts of the case do not warrant any interference of this court under art. 226/227 of the Constitution of India.
29. The argument of the claimant can also not be disregarded to the extent that LLP agreement is still in existence and so is clause-35 of the agreement, which pertains to arbitration. Therefore, alternatively claimant can fall back on the clause to constitute an arbitral tribunal on their own when there does not appear to be dispute between the tao nominees of both sides to appoint Presiding Arbitrator.
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C/SCA/3913/2020 JUDGMENT
30. During the course of arguments, the Court has taken on record copy of the draft amendment seeking to amend the prayer clause. However, there is no draft amendment application in original which is found on record of the Court.
31. On the issue of termination of mandate of arbitral tribunal, reliance is placed on the judgment of the Apex Court in case of Lalitkumar V.Sanghavi (dead) through LRs Neeta Lalitkumar Sanghavi & Anr. (supra), where in the facts, the arbitral tribunal terminated the proceedings on the ground that the claimant was not interested in the arbitral proceedings and therefore, an application came to be filed invoking Section 11 of the Act. The High Court dismissed such petition opining that the remedy lies in filing writ petition and not application under Section 11. The Apex Court, considering the provisions of the Act, more particularly Sections 14 and 32 of the Act, dismissed the appeal with a liberty to the appellant to determine legality of termination. However, it was held that intervention by the High Court under Article 226 of the Constitution of India in arbitration proceedings is not maintainable.
Therefore, in the facts of this case also, for the declaration of termination of arbitral tribunal, even under Section 29A needs to approach the 'Court' as Page 61 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020 C/SCA/3913/2020 JUDGMENT defined under the Act. The remedy therefore, lies within
the Act itself and therefore, not justifying interference under Articles 226 and 227 of the Constitution of India in the facts of this case.
32. In view of the aforesaid, the Court finds no case for interference, more particularly considering the relief which will have effect of declaration that the arbitral tribunal has lost its jurisdiction to arbitrate. Both these petitions therefore deserve to be and are hereby dismissed. Rule is discharged. No order as to costs.
Sd/-
(A.Y. KOGJE, J) SHITOLE Page 62 of 62 Downloaded on : Mon Jun 15 06:41:19 IST 2020