Montana Developers Pvt. Ltd vs Aditya Developers And 7 Others
2016 Latest Caselaw 3075 Bom

                                                            901-arbpl680-16

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               IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                   ORDINARY ORIGINAL CIVIL JURISDICTION




                                                        
             ARBITRATION PETITION (LODGING) NO.680 OF 2016


      Montana Developers Private Limited            )




                                                       
      A Company incorporated under the              )
      Companies Act, 1956, having its               )
      registered office at "A" Wing, 6th Floor,     )
      Universal Business, Chandivali Farm           )




                                                 
      Road, Off Sakivihar Road, Andheri             )
      (East), Mumbai - 400 072.                     )         ...Petitioner

                   ....Versus....
                                     
      1). Aditya Developers                         )
                                    
          A Partnership Firm registered under       )
          the Indian Partnership Act, 1932          )
          having its registered office at C-402,    )
          Gokul Divine, Irla, S.V. Road, Vile       )
             

          Parle (West), Mumbai - 400 056            )
          



      2)   Shri Binal S. Koradia                    )

      3)   Shri Binal S. Koradia HUF                )

      4)   Smt.Amisha Binal Koradia                 )





      5)   Shri Arvind Shamji Chedda                )

      6)   Shri Jayant Shamji Chedda                )





      7)   Shri Manish Mulchand Chedda              )

      8)   Ms.Heena Parag Chedda                    )

           All partners of Aditya Developers        )
           A Partnership Firm registered under      )
           the Indian Partnership Act, 1932         )
           having its registered office at C-402,   )

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                                                                      901-arbpl680-16

         Gokul Divine, Irla, S.V. Road, Vile             )
         Parle (West), Mumbai - 400 056                  )            ...Respondents




                                                                                        
    Mr.Virag Tulzapurkar, Senior Counsel with Mr.Farid Karachiwala and




                                                                
    Mr.Sahil Sayed i/b M/s.Wadia Ghandy & Co. for the Petitioner.

    Mr.Pradeep Sancheti, Senior Counsel with Dr.Birendra Saraf,
    Ms.Pooja Kshirsagar, Mr.Yogesh Adhia and Mr.Anand Chovatia i/b




                                                               
    Mr.Yogesh Adhia for the Respondents.

                                     CORAM : R.D. DHANUKA, J.

DATE : 22ND JUNE, 2016.

ORAL JUDGMENT :-

1.

By this petition filed under section 27 of the Arbitration &

Conciliation Act, 1996 (for short the "Arbitration Act") the petitioner

seeks an order and direction for issuance of witness summons

against various persons / entities with a direction to produce various

documents set out in prayer clauses (a) and (b) of the petition before

the learned arbitrator on 11th July, 2016 at 11:00 a.m. Some of the

relevant facts for the purpose of deciding this petition are as under :

2. The petitioner is the claimant in the arbitration

proceedings, whereas the respondents are the original respondents.

3. On 17th September, 2013 and 1st October, 2013, by

consent of parties, a former Chief Justice of India was appointed as a

sole arbitrator to adjudicate upon the disputes and differences

between the parties. The petitioner filed a statement of claim on 30 th

November, 2013. The statement of claim was resisted by the

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respondents by filing statement of defence. The parties led oral

evidence before the learned arbitrator. The evidence of the petitioner

was closed. The respondents have commenced the evidence of their

witnesses. During the pendency of the evidence of the respondents,

the petitioner applied for permission to examine more witnesses and

to produce various documents.

4. The said application filed by the petitioner was vehemently

opposed by the respondents before the learned arbitrator on various

grounds.

5. After hearing both the parties, the learned arbitrator

passed an order on 29th April, 2016, thereby granting approval to the

petitioner for filing an application before this Court for issuance of

witness summons to various witnesses described in the said

application before the learned arbitrator. Pursuant to the said

approval granted by the learned arbitrator in the order dated 29th

April, 2016, the petitioner has filed this application under section 27 of

the Arbitration Act for issuance of witness summons and for

production of documents by invoking section 27 of the Arbitration Act.

The application is vehemently opposed by the respondents. Since the

application is opposed by the respondents, I have heard the learned

senior counsel appearing for the respondents first.

6. Mr.Sancheti, the learned senior counsel for the

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respondents submits that merely because the learned arbitrator was

of the opinion that certain witnesses were required to be examined

and various documents were required to be produced through the

said witnesses, this Court cannot pass an order mechanically under

section 27 of the Arbitration Act. He submits that the said order

cannot be implemented by this Court by exercising powers under

section 27 of the Arbitration Act in view of various objections which

were raised by the respondents before the learned arbitrator in a

detailed affidavit filed in the said proceedings. He submits that one of

the objection raised by the respondents before the learned arbitrator

was that the petitioner had already closed its evidence and the

respondents had already commenced the evidence. The cross-

examination of the witness examined by the respondent had already

commenced by the petitioner. He submits that there were several

other objections raised by the respondents before the learned

arbitrator for opposing the permission sought by the petitioner for

taking the assistance of this Court under section 27 of the Arbitration

Act.

7. It is submitted by the learned senior counsel that this Court

can go into the validity of the order passed by the learned arbitrator

thereby granting permission to the petitioner to examine further

witnesses after closing of evidence of the petitioner and for

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production of documents. My attention is invited to section 27 of the

Arbitration Act and it is submitted that under the said provision, the

learned arbitrator may apply to the Court for assistance in taking

evidence. Under section 27(3) of the Arbitration Act, it is at the

discretion of the Court to provide assistance and to order issuance of

witness summons or for production of documents.

8. It is submitted that merely because the learned arbitrator

was of the view that production of documents and issuance of

witness summons would be necessary, if after hearing the parties on

merits, this Court comes to the conclusion that production of such

witnesses or documents was not warranted, this Court can refuse to

grant such assistance to the petitioner under section 27 of the

Arbitration Act. He submits that in the facts of this case, the learned

arbitrator could not have taken a view that examination of additional

witness and production of documents was warranted. In support of

his submission, the learned senior counsel made an attempt to

distinguish the judgment dated 16th October, 2015 delivered by this

Court in case of National Insurance Company Limited vs. S.A.

Enterprises in Review Petition (Lodging) No.51 of 2015 in Arbitration

Petition No.1544 of 2015 on the ground that the facts considered by

this Court in the said judgment were different. My attention is also

invited to paragraph 36 of the said judgment and it is submitted that

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this Court in the said order took a view that once the Court comes to

a conclusion that documents were required for adjudication of the

issues in the peculiar facts and circumstances of the case, the Court

in that event could issue direction or pass appropriate order under

section 27 of the Arbitration Act. He submits that thus this Court will

have to independently decide whether the order passed by the

learned arbitrator for production of documents or for production of

witness was warranted in the facts and circumstances before the

learned arbitrator in each case.

9. My attention is also invited to the judgment of the Delhi

High Court in case of Reliance Polycrete Limited vs. National

Agricultural Co-operative Marketing Federation of India, (2008)

SCC OnLine Delhi 837. He submits that the Delhi High Court has

held that though the learned arbitrator had opined that production of

witnesses and documents was necessary, it is for the Court to decide

under section 27 as to whether production of documents or witness

was necessary or not. He also placed reliance on the judgment of the

Division Bench of the Delhi High Court in case of Bharat Heavy

Electricals Limited v. Silor Associates S.A, (2014) SCC OnLine

Delhi 4442 and in particular paragraphs 2, 16 and 19 in support of

the submission that the Court while hearing an application under

section 27 of the Arbitration Act is empowered to decide the

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relevancy of the documents and the effect of the order passed by the

learned arbitrator. Reliance is also placed on the judgment of the

Delhi High Court in case of Silor Associates SA vs. Bharat Heavy

Electrical Limited delivered on 1st July, 2014 in O.M.P. No.1037 of

2013 and more particularly paragraph 15.

10. Mr.Tulzapurkar, the learned senior counsel appearing for

the petitioner on the other hand placed reliance on the judgment of

this Court in case of National Insurance Company Limited (supra)

and more particularly paragraphs 30, 40 to 42 and would submit that

the learned arbitrator after hearing the parties has opined that

production of additional witnesses and documents was warranted in

the facts of this case. He submits that if a civil suit would have been

filed under the provisions of the Code of Civil Procedure, 1908 for

issuance of witness summons to a party or for production of

documents, the petitioner was not required to serve the respondent

and the respondent was not required to be heard. He submits that

merely because the parties in this case had agreed to refer the

disputes and differences to arbitration, parties cannot be put to dis-

advantage because the learned arbitrator is not empowered to issue

such witness summons to a witness or to produce a document. He

submits that to obviate this difficulty caused, a provision is made for

providing assistance by the Court for issuance of witness summons

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under section 27 of the Arbitration Act or for production of documents

to a party.

11. Learned senior counsel also invited my attention to a

judgment of this Court in case of United Spirits Limited,Bangalore

vs. Delta Distilleries Limited, Mumbai & Anr., 2012 (6) Mh.L.J.

522 and in particular paragraphs 11 and 15, in an unreported

judgment of this Court delivered on 2nd April, 2007 in case of

M/s.Rasiklal Ratilal vs. Fancy Corporation Limited & Anr. in

Arbitration Petition No.64 of 2007 and in particular paragraphs 9 and

10. Reliance is also placed on the judgment of the Delhi High Court

delivered on 28th March, 2016 in case of Thiess Iviinecs India vs.

NTPC Limited & Anr., O.M.P. (E) (COMM.) 12/2016 and in particular

paragraphs 25 to 28. He submits that the Delhi High Court has

followed the judgment of this Court in case of National Insurance

Company Limited (supra) and also interpreted the judgment of the

Delhi High Court in case of Bharat Heavy Electricals Limited

(supra) relied upon by the learned senior counsel for the

respondents.

12. It is submitted by the learned senior counsel that the

powers of the Court under section 27 of the Arbitration Act is not

adjudicatory power but the said section provides machinery for

issuance of witness summons to the parties and for production of

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documents which power did not vest in the arbitral tribunal. He

submits that various tribunals and quasi judicial authorities are

granted various powers under the provisions of the Code of Civil

Procedure for issuance of witness summons and for production of

documents similar to the powers vests in Courts under Code of Civil

Procedure. However, there are no such powers prescribed under the

Arbitration Act empowering the learned arbitrator to issue witness

summons and for production of documents.

13.

It is submitted that the learned arbitrator once having taken

a view that production of such documents or witness was warranted

in the facts of this case, the Court cannot go into the validity of such

order passed by the learned arbitrator at the stage of hearing the

application under section 27 of the Arbitration Act filed by such a

party. He submits that if the learned arbitrator ultimately decides the

matter by rendering an award, the party aggrieved by the said award

made by the learned arbitrator can challenge the said award under

section 34 of the Arbitration Act along with the order passed by the

learned arbitrator under section 27 of the Arbitration Act.

14. It is submitted that in view of section 5 of the Arbitration

Act, if the respondents could not have challenged the order passed

by the learned arbitrator by filing any proceedings in this Court at this

stage, the respondents cannot be allowed to challenge the validity of

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the said order passed by the learned arbitrator at this stage by

opposing the present application under section 27 of the Arbitration

Act on the ground that the learned arbitrator could not have passed

such order granting permission to the petitioner to take the assistance

of this Court to examine any witness or to produce documents.

15. This Court in case of National Insurance Company

Limited (supra) after adverting the judgment of this Court in case of

M/s. Rasiklal Ratilal (supra) and in case of United Spirits Limited,

Bangalore (supra) has held that it is not possible for the Court to

interfere with the proceedings which are pending before the learned

arbitrator while hearing an application under section 27 of the

Arbitration Act. Paragraphs 36, 40 to 42 of the said judgment read

thus :-

"36. This Court has also held that considering the scheme of the Arbitration Act, it is not possible for the Court to interfere with the proceedings which are pending before the arbitral tribunal. The Arbitrator is a

master of his own proceeding. The Court normally should not direct or re-schedule the proceeding of the learned arbitrator. It is also held that considering the scheme of Section 27 of the Arbitration Act, there is no procedure available whereby the Court should give hearing to the witness or a party against whom the

Court wants to issue directions to produce record or to issue summons for witness. Such hearing is not at all contemplated under this provision and/or even in any other provision of Code of Civil Procedure, 1908. Once the Court comes to a conclusion that these documents are required for adjudication of the issues in the peculiar facts and circumstances of the case, it can issue direction or pass such an order to produce

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the original documents before the learned arbitrator directly. It is held that the Court's assistance in taking

evidence as contemplated is restricted only to this extent of giving direction to the parties to produce the documents or issue summons to witnesses. In the

said judgment, however, this Court directed the bank for production and deposit of the original documents with the learned arbitrator.

40. In my view, the arbitral tribunal cannot issue a witness summons itself or cannot enforce its own order of producing certain documents or cannot force a party or a third party to lead evidence or to produce documents. The arbitral tribunal or a party to

the proceedings with the approval of the arbitral tribunal may apply to the Court for assistance in taking

evidence. In my view, at this stage, this Court cannot go into the validity and correctness of the order passed by the learned arbitrator granting permission

to the respondent herein for seeking assistance of this Court in taking evidence under Section 27 of the Arbitration Act. It is for the arbitrator to decide as to whether particular documents or presence of a particular witness would be necessary for the proper

adjudication of the dispute between the parties or not, if any such application is made by the parties to the

arbitral proceedings. In these proceedings under Section 27 of the Arbitration Act, this Court cannot decide whether production of such documents or presence of such witness was warranted or not.

41. The purpose of Section 27 of the Arbitration Act, in my view, is to provide assistance to the arbitral tribunal or to a party in taking evidence with a view to expedite the arbitral proceedings. Merely because the

arbitral tribunal has no power to issue a witness summons or to compel the attendance of the witnesses, the parties should not suffer. The legislature has inserted the Section 27 of the Arbitration Act to avoid this inconvenience to the parties to the arbitral proceedings and has thus empowered the arbitral tribunal as well as the parties to take assistance of the Court. The Court is

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empowered to issue direction to a party or even third party to produce documents or witnesses by

summoning the party or even third party if the arbitral tribunal has granted permission and is of the opinion that production of such documents or evidence of

such party including third party would be necessary for proper and effective adjudication of the dispute before it.

42. In so far as the illustration given by the learned counsel for the review petitioner that even if the learned arbitrator would have granted permission to the respondent herein to examine the President of

India, whether this Court could have directed the office to issue witness summons upon the President of India

is concerned, in my view, that is not the situation in this case. The illustration given by the learned counsel for the review petitioner, in my view, is totally irrelevant for the purpose of deciding this review petition. A

perusal of the order passed by the arbitral tribunal indicates that the learned arbitrator has directed the review petitioner to produce certain documents and has permitted the respondent herein for issuance of

the witness summons upon two of the Surveyors and the Branch, which according to the learned arbitrator,

would be relevant for the purpose of adjudication of the dispute between the parties."

16. I am thus inclined to accept the submission of

Mr.Tulzapurkar, the learned senior counsel for the petitioner that the

powers under section 27 of the Arbitration Act are not adjudicatory

powers. In my view, the said provision provides a procedure for

providing assistance to a party in whose favour the learned arbitrator

has opined that the production of documents or witness was

warranted in the facts of his case. Under section 19 of the Arbitration

Act, it is clearly provided that the learned arbitrator shall not be bound

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by the Code of Civil Procedure, 1908 or Evidence Act, 1872. In my

view, the arbitral tribunal is thus not empowered to issue any witness

summons itself or to compel a party to produce any documents under

the provisions of the Arbitration Act. If the learned arbitrator is

satisfied on the application made by any of the party that production

of witness or documents which is not being produced inspite of the

attempts made by a party, the arbitral tribunal can grant permission to

such a party to take the assistance of this Court under section 27 of

the Arbitration Act. In my view, merely because a party has filed the

arbitration proceedings in view of the agreement between the parties,

he cannot be put to dis-advantage in view of the powers of

summoning a witness not having been provided to the arbitrator

under the provisions of the Arbitration Act.

17. If the petitioner before this Court was required to file a suit

and if he was required to examine any witness or to produce a

document, which was not produced by such a party or such witness

or a party would have refused to give evidence, the petitioner in that

event could have applied for issuance of witness summons or for

production of document under the provisions of the Code of Civil

Procedure, 1908. At that stage, the respondent was not required to

be heard by this Court. In my view, once the arbitral tribunal was of

the opinion that production of such document or witness was

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warranted in the facts and circumstances of the case, at this stage,

the respondent could not have raised any objection on merits of the

order passed by the learned arbitrator. If the learned arbitrator

decides on merits against the respondents herein, the respondents

would be entitled to challenge the said award along with the order

passed by the learned arbitrator granting such permission to the

petitioner to apply to this Court for the assistance under section 27 of

the Arbitration Act.

18.

In view of section 5 of the Arbitration Act, since the

respondents could not have challenged the order passed by the

learned arbitrator granting such permission to the petitioner to apply

to this Court for the assistance or the order of the learned arbitrator

holding that examination of additional witnesses or production of

documents was warranted, the respondents cannot be indirectly

allowed to challenge the validity of that order while opposing this

application under section 27 of the Arbitration Act. In my view, what

cannot be done directly, cannot be allowed to be done indirectly.

Under section 5 of the Arbitration Act, there is a clear bar for a Court

to intervene in any proceedings except the proceedings specifically

provided under the provisions of the Arbitration Act. There is no

proceeding provided under the Arbitration Act for challenging an

order passed by the arbitral tribunal granting permission to a party to

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seek assistance of a Court under section 27 of the Arbitration Act

during the pendency of the arbitral proceedings.

19. I am not inclined to accept the submission of Mr.Sancheti,

the learned senior counsel for the respondents that in the

proceedings under section 27 of the Arbitration Act, the Court can

decide the merits of the order passed by the learned arbitrator. In my

view, Mr.Tulzapurkar, the learned senior counsel for the petitioner is

right that under section 27 of the Arbitration Act, a procedure is

prescribed for taking assistance of this Court for issuance of witness

summons in terms of the order passed by the learned arbitrator and

the proceedings are not adjudicatory proceedings.

20. Though the learned senior counsel for the respondents

wanted to address this Court on merits of the order passed by the

learned arbitrator as to why production of additional witnesses or

production of documents was not at all warranted in the facts and

circumstances of this case, since the respondents cannot challenge

the order passed by the learned arbitrator granting permission to the

petitioner for taking assistance of this Court at this stage, this Court

cannot hear the respondents on the merits of the order passed by the

learned arbitrator at this stage.

21. Insofar as judgment of Delhi High Court in case of

Reliance Polycrete Limited (supra), Bharat Heavy Electricals

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Limited (supra) and Silor Associates SA (supra) relied upon by

Mr.Sancheti, learned senior counsel for the respondents are

concerned, a perusal of these judgments clearly indicates that effect

of section 5 of the Arbitration Act was not considered in those

judgments. Delhi High Court in its later judgment delivered on 28 th

March, 2016 in case of Thiess Iviinecs India (supra) after adverting

to the aforesaid judgments of Delhi High Court and the judgment of

this Court in case of National Insurance Company Limited (supra)

and after considering the bar under section 5 of the Arbitration Act

has taken a similar view that was taken by this Court in case of

National Insurance Company Limited (supra). In my view

judgment of this Court in case of National Insurance Company

Limited (supra) applies to the facts of this case. I am in agreement

with the views expressed by the Delhi High Court in its later judgment

in case of Thiess Iviinecs India (supra).

22. It is made clear that this Court has not expressed any

views on the merits as to whether the learned arbitrator was justified

in holding that production of additional witnesses or documents was

warranted in the facts and circumstances of this case or not and the

same is kept open.

23. I therefore, pass the following order :-

a). Arbitration Petition (Lodging) No.680 of 2016 is made

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absolute in terms of prayer clause (a). No order as to costs.

b). At this stage, the learned senior counsel for the petitioner

invited my attention to the directions issued by the learned arbitrator

in paragraph 17(a) of the order and would submit that the

respondents be directed to disclose mobile numbers of Mr.Jignesh

Hirani and Mr.Ashokbhai which they were using at the time of the

meeting alleged to have been held on 2nd October, 2012 at MCA

Club, Bandra Kurla Complex, Mumbai. Mr.Sancheti, learned senior

counsel on instructions states that without prejudice to the rights and

contentions of the respondents, the respondents would furnish the

mobile numbers of those two persons which are to their knowledge

as on today. The statement is accepted. The said mobile numbers

shall be provided to the petitioner within one week from today.

c). Learned senior counsel for the respondents seeks stay of

this order for a period of six weeks from today, which is vehemently

opposed by the learned senior counsel for the petitioner.

d). Since the learned arbitrator has already fixed the tentative

date as 11th July, 2016, I am not inclined to grant stay of this order or

of the order of the learned arbitrator. It is for the parties to apply for

adjournment before the learned arbitrator. If any such application is

made by the parties for adjournment, the learned arbitrator may

decide the said application on its own merits. The parties are directed

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to disclose the date of the next meeting and also the venue of

evidence to the office of the Prothonotary & Senior Master at the

earliest to enable the office to issue witness summons in compliance

with this order passed by this Court.

(R.D. DHANUKA, J.)