State Of U.P. And 2 Others vs M/S Chhatrashakti Construction ...
2021 Latest Caselaw 7176 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

Court No. - 34
 
Case :- WRIT - C No. - 56358 of 2016
 
Petitioner :- State Of U.P. And 2 Others
 
Respondent :- M/S Chhatrashakti Construction Company And Anr.
 
Counsel for Petitioner :- Nimai Dass
 
Counsel for Respondent :- Kartikeya Saran
 

 
Hon'ble Pankaj Bhatia,J.

Heard learned Standing Counsel for the State-petitioners and Sri Kartikeya Saran, learned counsel for the respondents.

The present writ petition has been filed alleging that by means of an order dated 19.1.2015 this Court had appointed an Arbitrator for adjudication in between the parties. Subsequently, during the pendency of the arbitration proceedings, the respondents filed an amendment application for their claim which was allowed after lapse of one and half years.

The contention, in sum and substance, is that after the appointment of the Arbitrator on 19.1.2015 more than 18 months have already passed, as such, the Arbitrator became functus officio and could not have allowed the amendment application. Challenging the said order passed by the Arbitrator the present petition has been filed. The reliefs claimed in this writ petition are as under:

"(i) Issue a writ, order or direction in the nature of certiorari quashing the effect and operation of the impugned order and order dated 02.09.2016 passed by the respondent no. 2, Arbitral Tribunal allowing the Amendment Application filed by the respondent no. 1 M/s Chhatrashakti Construction Company in claim petition filed by the claimant/respondent no. 1 (Annexure no. 6 to the writ petition)."

Sri Kartikeya Saran, counsel appearing on behalf of respondents, argues that all the remedies that are available to be taken by the parties are contained in the Arbitration and Conciliation Act which is a complete code. He also argues that even the Supreme Court has deprecated a challenge to the proceedings before the Arbitrator by means of petition under Article 227 of Constitution of India. He relies upon the judgement of this Court in Civil Appeal No. 14665 of 2015 (Bhaven Construction vs. Executive Engineer Sardar Sarovar Narmada Nigam) decided on 06.1.2021, the judgement of the Supreme Court in Civil Appeal Nos. 3802-03 of 2020 (M/S N.N. Global Mercantile Private limited vs. M/S Indo Unique Flame Ltd.) decided on 11.1.2021 as well as judgement of Supreme Court passed in Civil Appeal No. 9106 of 2019 (Deep Industries Limited vs. Oil and Natural Gas Corporation Limited & Another) decided on 28.11.2019.

The Supreme Court in the case of Deep Industries Limited (supra) considered the scope of Section 5 of the Arbitration and Conciliation Act which specifically prohibits the intervention of a judicial authority except as provided in the Act itself and recorded as under:

"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)

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 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."

The Supreme Court after discussing the judgement in the case of SBP & Co. vs. Patel Engineering Ltd. & Another, (2005) 8 SCC 618 recorded as under:

"While the learned Additional Solicitor General is correct in stating that this statement of the law does not directly apply on the facts of the present case, yet it is important to notice that the seven-Judge Bench has referred to the object of the Act being that of minimizing judicial intervention and that this important object should always be kept in the forefront when a 227 petition is being disposed of against proceedings that are decided under the Act.

It is true that in Punjab Agro Industries Corporation Limited (supra), this Court distinguished SBP & Co. (supra) stating that it will not apply to a case of a non-appointment of an Arbitrator. This Court held:

"9. We have already noticed that though the order under Section 11(4) is a judicial order, having regard to Section 11(7) relating to finality of such orders and the absence of any provision for appeal, the order of the Civil Judge was open to challenge in a writ petition under Article 227 of the Constitution. The decision in SBP & Co. does not bar such a writ petition. The observations of this Court in SBP & Co. that against an order under Section 11 of the Act, only an appeal under Article 136 of the Constitution would lie, is with reference to the orders made by the Chief Justice of a High Court or by the designate Judge of that High Court. The said observations do not apply to a subordinate court functioning as designate of the Chief Justice." What is important to note is that the observations of this Court in this judgment were for the reason that no provision for appeal had been given by statute against the orders passed under Section 11, which is why the High Court's supervisory jurisdiction should first be invoked before coming to this Court under Article 136. Given the facts of the present case, this case is equally distinguishable for the reason that in this case the 227 jurisdiction has been exercised by the High Court only after a first appeal was dismissed under Section 37 of the Act.

One other feature of this case is of some importance. As stated herein above, on 09.05.2018, a Section 16 application had been dismissed by the learned Arbitrator in which substantially the same contention which found favour with the High Court was taken up. The drill of Section 16 of the Act is that where a Section 16 application is dismissed, no appeal is provided and the challenge to the Section 16 application being dismissed must await the passing of a final award at which stage it may be raised under Section 34 What the High Court has done in the present case is to invert this statutory scheme by going into exactly the same matter as was gone into by the arbitrator in the Section 16 application, and then decided that the two year ban was no part of the notice for arbitration issued on 02.11.2017, a finding which is directly contrary to the finding of the learned Arbitrator dismissing the Section 16 application. For this reason alone, the judgment under appeal needs to be set aside. Even otherwise, as has been correctly pointed out by Mr. Rohatgi, the judgment under appeal goes into the merits of the case and states that the action of putting the Contractor and his Directors "on holiday" is not a consequence of the termination of the agreement. This is wholly incorrect as it is only because of the termination that the show cause notice dated 18.10.2017 proposing to impose a two year ban was sent. Even otherwise, entering into the general thicket of disputes between the parties does not behove a court exercising jurisdiction under Article 227, where only jurisdictional errors can be corrected. Therefore to state that the ban order was passed under a General Contract Manual and not Clause 18 of the Agreement, besides being incorrect, would also be incorrect for the reason that the General Contract Manual does not mean that such order was issued as an administrative order invoking the executive power, but was only as an order which emanated from the contract itself. Further to state that "serious disputes" as to jurisdiction seem to have cropped up is not the same thing as saying that the Arbitral Tribunal lacked inherent jurisdiction in going into and deciding the Section 17 application. In point of fact, the Arbitral Tribunal was well within its jurisdiction in referring to the contract and the ban order and then applying the law and finally issuing the stay order. Even if it be accepted that the principle laid down by Section 41(e) of the Specific Relief Act was infracted, in that damages could have been granted, as a result of which an injunction ought not to have been issued, is a mere error of law and not an error of jurisdiction, much less an error of inherent jurisdiction going to the root of the matter. Therefore, even otherwise, the High Court judgment cannot be sustained and is set aside."

The Supreme Court in the case of Bhaven Construction (supra) is held as under:

"Having heard both parties and perusing the material available on record, the question which needs to be answered is whether the arbitral process could be interfered under Article 226/227 of the Constitution, and under what circumstance?

We need to note that the Arbitration Act is a code in itself. This phrase is not merely perfunctory, but has definite legal consequences. One such consequence is spelled out under Section 5 of the Arbitration Act, which reads as under "Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part." The non-obstante clause is provided to uphold the intention of the legislature as provided in the Preamble to adopt UNCITRAL Model Law and Rules, to reduce excessive judicial interference which is not contemplated under the Arbitration Act.

The Arbitration Act itself gives various procedures and forums to challenge the appointment of an arbitrator. The framework clearly portrays an intention to address most of the issues within the ambit of the Act itself, without there being scope for any extra statutory mechanism to provide just and fair solutions."

The Supreme Court further discussed the earlier judgement of the Supreme Court in the case of Nivedita Sharma vs. Cellular Operators Association of India, 2011 14 SCC 337 recorded as under:

"In any case, the hierarchy in our legal framework, mandates that a legislative enactment cannot curtail a Constitutional right. In Nivedita Sharma v. Cellular Operators Association of India, (2011) 14 SCC 337, this Court referred to several judgments and held:

"11. We have considered the respective arguments/submissions. There cannot be any dispute that the power of the High Courts to issue directions, orders or writs including writs in the nature of habeas corpus, certiorari, mandamus, quo warranto and prohibition under Article 226 of the Constitution is a basic feature of the Constitution and cannot be curtailed by parliamentary legislation - L. Chandra Kumar v. Union of India, (1997) 3 SCC 261. However, it is one thing to say that in exercise of the power vested in it under Article 226 of the Constitution, the High Court can entertain a writ petition against any order passed by or action taken by the State and/or its agency/ instrumentality or any public authority or order passed by a quasi-judicial body/authority, and it is an altogether different thing to say that each and every petition filed under Article 226 of the Constitution must be entertained by the High Court as a matter of course ignoring the fact that the aggrieved person has an effective alternative remedy. Rather, it is settled law that when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation." (emphasis supplied)

It is therefore, prudent for a Judge to not exercise discretion to allow judicial interference beyond the procedure established under the enactment. This power needs to be exercised in exceptional rarity, wherein one party is left remediless under the statute or a clear ''bad faith' shown by one of the parties. This high standard set by this Court is in terms of the legislative intention to make the arbitration fair and efficient."

On the basis of law as laid down by the Supreme Court and discussed above, it is clear that scope of interference arising out of arbitration proceedings is extremely limited more so when the remedy under Arbitration Act is available to the parties.

The present petition, in fact, challenges the order whereby the amendment has been allowed mainly on the ground that after the lapse of time the Arbitrator has become functus officio. I am afraid that in view of the well settled law recourse to a writ remedy is not available as such the present writ petition itself is not maintainable.

Accordingly, the writ petition is dismissed.

The interim order granted by this Court on 29.11.2016 is vacated.

Copy of the order downloaded from the website of Allahabad High Court shall be accepted/treated as certified copy of the order.

Order Date :- 7.7.2021

Puspendra