HONOURABLE SRI JUSTICE M.S.RAMACHANDRA RAO
AND
HONOURABLE SRI JUSTICE T.VINOD KUMAR
CIVIL REVISION PETITION No.360 of 2021
ORDER: (Per Hon'ble Sri Justice M.S. Ramachandra Rao)
This Civil Revision Petition is filed under Article 227 of the
Constitution of India challenging a procedural order dt.Nil of the
Arbitral Tribunal at Hyderabad (learned arbitrator herein) ( hereafter
referred to as "learned arbitrator") received through e.mail by the
petitioner on 20-01-2001.
2. The dispute between the petitioner and the 1st respondent arose
in relation to an agreement for sale of an immoveable property dt.24-08-2018 entered into by petitioner with the 1st respondent.
3. The 1st respondent had filed a claim petition before the learned arbitrator for registration of an extent of 31,332 sq. yds out of 47,450 sq. yds in Sy.Nos.377 and 377 part of Lemoor Village, Kandukur Mandal, Ranga Reddy District.
The application u/s 16 of the Arbitration and Conciliation Act, 1996 filed by petitioner
4. After that, petitioner filed an Interlocutory Application under Section 16 of the Arbitration and Conciliation Act, 1996 (for short 'the Act'), contending that the agreement of sale dt.24-08-2018 entered into by the petitioner with the 1st respondent is an unregistered one, that the said agreement of sale is a compulsorily registerable ::2::
document, that it is not also properly stamped and so it cannot be looked into for any purpose.
5. It is the plea of the petitioner in the said application that the Arbitral Tribunal, having been constituted on the basis an arbitration clause in an unregistered agreement of sale, which is not legally enforceable, learned arbitrator may not assume jurisdiction and go into the issues of arbitrability of the claims made by 1st respondent before him.
6. The petitioner also contended that since it is questioning the very existence and invocability of the arbitration clause in the said unregistered agreement of sale, and since under Section 16 of the Act, the Arbitral Tribunal is competent to rule on its own jurisdiction including ruling on any objections with respect to the existence or validity of the arbitration agreement, and since the objection raised by the petitioner goes to the root of the matter, the learned arbitrator should decide the said application first. The petitioner also reserved its right to file a statement of defence after the application under Section 16 of the Act is decided.
The stand of the 1st respondent in the said application
7. Counter-affidavit was filed to this application by the 1st respondent/claimant opposing this application.
8. It is the contention of the 1st respondent in the counter-affidavit filed by it that Clause-13 of the unregistered agreement of sale ::3::
contains arbitration providing reference of dispute between the parties to an Arbitrator and invoking the same, it had filed a claim petition before the learned arbitrator. It is also contended that an arbitration agreement does not require registration under the Registration Act, 1908 since it is an independent agreement, independent of the main contract.
9. The respondent refuted the contentions of the petitioner that the document is not properly stamped and ought to be compulsorily registered. He alleged that the agreement of sale was duly stamped and the contention of petitioner in that regard cannot be accepted.
10. Alternatively it is contended that, assuming for the sake of argument that the instrument is not duly stamped, opportunity should be given for impounding the same, because insufficiency of stamp was a curable defect.
The impugned order passed by the learned arbitrator communicated on 20-1-2021
11. The learned arbitrator recorded the contentions of the parties and the decisions cited by them, and observed in para-9 of his order as under:
"6. In the light of the above and in the interest of justice, this Tribunal shall address the issue of jurisdiction in consideration of the insufficiently stamped agreement of sale as raised by the respondent in its application, along with the main Arbitration Application. Therefore, both the parties are directed to complete their respective pleadings before this Tribunal".
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12. Thus, the Arbitral Tribunal indicated in the order passed by it that it would address the issue of jurisdiction in relation to the plea of the agreement of sale being unregistered and insufficiently stamped, raised by the petitioner, in its application filed under Section 16 of the Act, along with the main application. It directed both parties to complete their respective pleadings and fixed a new schedule for various filings to be made by the parties by altering the schedule fixed earlier to some extent.
The present Revision
13. Challenging the same, this Revision is filed. Contention of counsel for petitioner
14. It is contention of the learned counsel for petitioner that the Arbitrator had committed an illegality and acted arbitrarily and contrary to the settled principles of law while passing the impugned order; that learned arbitrator heard arguments on the application filed u/Section 16 of the Act filed by petitioner on 21-12-2020 and adjourned the same directing the counsel for the parties to submit latest case law and also to give written arguments informing that a date would be given, but without intimating further date, the impugned order was passed.
15. It is contended that if an opportunity of hearing had been given, the judgments cited by the petitioner would have been properly ::5::
explained and the learned arbitrator would not have passed the impugned order.
16. It is also contended that the Arbitral Tribunal did not take into account the provisions of Section 35 of the Indian Stamp Act, 1899 which made inadmissible in evidence insufficiently stamped documents such as the agreement of sale between the parties; and learned arbitrator's view that he would address the issue of jurisdiction with the main Arbitration Application has caused grave prejudice and injustice to the petitioner.
17. Learned counsel for petitioner cited judgments of the Supreme Court in Bhaven Construction Vs. Executive Engineer Sardar Sarovar Narmada Nigam Limited and others1, Srei Infrastructure Finance Limited Vs. Tuff Drilling Private Limited2, judgment of the Bombay High Court in M/s.Sanwal Coal Industries Vs. Western Coal Fields Ltd and others3 and judgment in Raj International Vs. Tripura Jute Mills Ltd4. Contention of counsel for 1st respondent
18. Sri K.V.Bhanu Prasad, learned counsel appearing for 1st respondent refuted the said contentions, and pointed out that the learned Arbitrator had merely postponed its decision in the Application field under Section 16 of the Act by the petitioner; and has not held that the agreement of sale can be looked into by rejecting 1 Order dt.06-01-2021 in Civil Appeal No.14665 of 2015 = MANU/SC/0008/2021 2 Order dt.20-09-2017 in Civil Appeal No.015036 of 2017 3 Order dt.26-08-2010 in W.P.No.2888 of 2010 4 (2008) 5 Gauhati Law Reports 347 (Agartala Bench) ::6::
the pleas of the petitioner; and in view of Section 5 of the Act, the said order of the learned arbitrator could not be challenged before this Court under Article 227 of the Constitution of India. Consideration by this court
19. We have noted the submissions of both sides.
20. Section 5 of the Act states:
"5. Extent of judicial intervention.- Notwithstanding anything contained in any other law for the time being in force, in matters governed by the by this Part, no judicial authority shall intervene except where so provided in this Part". (emphasis supplied)
21. Section 34 of the Act provides for application for setting arbitral award. Sub section (1) of section 34 states:
"Section 34:
(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-Section and sub-section (3). ..."(emphasis supplied)
22. Section 37 of the Act deals with what orders are appealable, and sub-Section (2) Section 37 states:
"(1) .. ..
(2) An appeal shall lie to a Court from an order of the arbitral tribunal -
(a) accepting the plea referred in sub-section (2) of or sub-section (3) of Section 16; or
(b) granting or refusing to grant an interim measure under Section 17. ..."(emphasis supplied) ::7::
23. Thus clause (a) of sub-Section (2) of Section 37 of the Act declares that an appeal would lie to a Court from an order of the Tribunal only if Arbitral Tribunal were to accept a plea referred in sub-Section (2) or sub-Section (3) of Section 16 of the Act.
24. In the instant case, though the application filed by the petitioner is under sub-Section (2) of Section 16 of the Act, the impugned order passed by the learned arbitrator does not indicate that the learned arbitrator had accepted the plea raised by the petitioner or rejected it. He has merely deferred it for consideration at a later stage.
25. That apart, when sub-Section (1) of Section 34 of the Act provides that recourse to a Court against an arbitral award can be made 'only' by an application for setting aside such award in accordance with sub-section (2) and sub-section (3) of the Act, there cannot be normally any interference with the orders passed by an arbitrator under Art.227 of the Constitution of India.
26. As held by the Supreme Court in Bhaven Constructions (1 supra), the term 'only' as occurring under the provision serves two purposes of (i) making the enactment a complete code and (ii) lay down the procedure; and though an enactment cannot curtail the Constitutional right under Article 226 or 227, it would be prudent for a Judge to not exercise jurisdiction to allow judicial interference beyond the procedure established under the enactment, and that the said power under Article 226/227 of the Constitution needs to be ::8::
exercised in exceptional rarity, wherein one party is left remediless under the statute or a clear 'bad faith' is shown by one of the parties.
27. In Deep Industries Limited Vs. Oil and Natural Gas Commission Limited and others5, adverting to the same issue, the Supreme Court held that if petitions were to be filed under Article 226/227 of the Constitution against orders passed in appeals under Section 37 of the Act, the entire arbitral process would be derailed and would not come to fruition for many years; and though the non- obstante clause of Section 5 of the Act does not touch Article 227 of the Constitution of India, yet the High Court has to be circumspect in interfering with the judgments allowing or dismissing the appeals under Section 37 of the Act taking into account the statutory policy, so that the interference is restricted to orders which are passed patently lacking in inherent jurisdiction.
28. Though learned counsel for parties sought to draw our attention to several judgments cited before the learned Arbitrator relating to enforceability of an arbitration agreement in unstamped or unregistered contracts / agreements, we are not inclined to consider the same because as of now the arbitrator has not taken any decision on the aspect by specifically stating that this objection would be gone into while deciding the main Arbitration Application.
29. In our opinion, in the absence of any view taken by the learned Arbitrator in that regard in the impugned order either accepting the 5 (2020) 15 SCC 706 ::9::
contention of the petitioner or rejecting the said objection, the instant case does not fall within the limited category of cases where interference under Article 227 of the Constitution is permitted i.e., that the impugned order cannot be said to be one which is patently lacking any inherent jurisdiction or which leaves the petitioner remediless under the statute or there is existence of clear 'bad faith'.
30. It is not, in our opinion, proper to make any assumption that learned arbitrator would not deal with the objection raised by the petitioner in the Application filed under Section 16 of the Act when he decides the main Arbitration Application, and we cannot assume that he will not decide it or would decide it erroneously. If such a thing happens, the aggrieved party can always avail the remedy under Section 34 of the Act.
31. Taking a different view, in our opinion, would derail the arbitral process, which according to the Act, is to be made a quicker process than an ordinary civil suit.
32. We express no opinion either way on the contentions raised by the parties either on the aspects of the agreement of sale in question
(a) requiring registration or not, (b) that it is properly stamped or not, and we leave it to the learned Arbitrator to consider these issues after hearing both sides.
33. As regards the plea raised by the petitioner that no hearing was given by the Arbitrator before passing the impugned order, this fact is ::10::
disputed by the learned counsel for 1st respondent. Since in any event, the issue has now been left open both by the learned Arbitrator and also by us, we say no more on the aspect.
34. We are of the opinion that this is not a fit case for interference by this Court with the impugned order of the learned arbitrator in exercise of the power conferred on us under Article 227 of the Constitution of India.
35. Accordingly, the Civil Revision Petition is dismissed. No costs.
36. Consequently, miscellaneous petitions, pending if any, shall stand closed.
______________________________ M.S. RAMACHANDRA RAO, J ___________________ T.VINOD KUMAR, J Date: 30-06-2021 Vsv