Bombay High Court
Central Depositories Services (India) ... vs Ketan Lalit Shah on 25 March, 2025
Author: Revati Mohite Dere
Bench: Revati Mohite Dere
2025:BHC-OS:5460-DB
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (L) NO.15131 OF 2024
Central Depositories Services (India) Limited,
A company incorporated under the
Companies Act, 1956 and having its
registered office at Marathon Futurex,
A-Wing, 25th Floor, NM Joshi Marg,
Lower Parel, Mumbai 400013. .....Petitioner
Vs.
Ketan Lalit Shah,
An adult, Indian Inhabitant having
his address at B2, Amalfi, 27B,
L.D. Ruparel Marg, Malabar Hill,
Mumbai-400006. .....Respondent
WITH
WRIT PETITION NO.3083 OF 2024
Central Depositories Services (India) Limited,
A company incorporated under the
Companies Act, 1956 and having its
registered office at Marathon Futurex,
A-Wing, 25th Floor, NM Joshi Marg,
Lower Parel, Mumbai 400013. .....Petitioner
Vs.
Ketan Lalit Shah,
(Legal heir of Lalit Popatlal Shah)
An adult, Indian Inhabitant having
his address at B2, Amalfi, 27B,
L.D. Ruparel Marg, Malabar Hill,
Mumbai-400006. .....Respondent
Shivgan 1/29
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WITH
WRIT PETITION NO.3077 OF 2024
Central Depositories Services (India) Limited,
A company incorporated under the
Companies Act, 1956 and having its
registered office at Marathon Futurex,
A-Wing, 25th Floor, NM Joshi Marg,
Lower Parel, Mumbai 400013. .....Petitioner
Vs.
Neeta Ketan Shah,
An adult, Indian Inhabitant having
her address at B2, Amalfi, 27B,
L.D. Ruparel Marg, Malabar Hill,
Mumbai-400006. .....Respondent
WITH
WRIT PETITION NO.3721 OF 2024
Central Depositories Services (India) Limited,
A company incorporated under the
Companies Act, 1956 and having its
registered office at Marathon Futurex,
A-Wing, 25th Floor, NM Joshi Marg,
Lower Parel, Mumbai 400013. .....Petitioner
Vs.
Lalit Popatlal Shah HUF,
An adult, Indian Inhabitant having
his address at B2, Amalfi, 27B,
L.D. Ruparel Marg, Malabar Hill,
Mumbai-400006. .....Respondent
WITH
WRIT PETITION (L) NO.16245 OF 2024
Shivgan 2/29
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Central Depositories Services (India) Limited,
A company incorporated under the
Companies Act, 1956 and having its
registered office at Marathon Futurex,
A-Wing, 25th Floor, NM Joshi Marg,
Lower Parel, Mumbai 400013. .....Petitioner
Vs.
Bipin Nemchand Shah,
An adult, Indian Inhabitant having
his address at 1801, Dev Darshan Building,
50, Ridge Road, Near Teen Batti,
Mumbai-400006. .....Respondent
WITH
WRIT PETITION (L) NO.16246 OF 2024
Central Depositories Services (India) Limited,
A company incorporated under the
Companies Act, 1956 and having its
registered office at Marathon Futurex,
A-Wing, 25th Floor, NM Joshi Marg,
Lower Parel, Mumbai 400013. .....Petitioner
Vs.
Prafulla Lalit Shah,
An adult, Indian Inhabitant having
his address at B2, Amalfi, 27B,
L.D. Ruparel Marg, Malabar Hill,
Mumbai-400006. .....Respondent
WITH
WRIT PETITION (L) NO.16251 OF 2024
Central Depositories Services (India) Limited,
A company incorporated under the
Companies Act, 1956 and having its
registered office at Marathon Futurex,
A-Wing, 25th Floor, NM Joshi Marg,
Lower Parel, Mumbai 400013. .....Petitioner
Shivgan 3/29
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Vs.
Samir Shah,
An adult, Indian Inhabitant having
his address at 3B, Suvas Apartment, 68/F,
Rungta Lane, Off Nepeansea Road,
Malabar Hill, Mumbai-400006. .....Respondent
Mr. Janak Dwarkadas, Senior Advocate with Mr. Kunal Dwarkadas,
Mr. Rahul Dwarkadas, Ms. Sanaya Contractor, Mr. Rahil Shah & Mr.
Rahul Deshpande, i/b. Veritas Legal, Advocate for the Petitioner in all
Writ Petitions.
Mr. Karl Tamboly with Mr. Ravichandra Hegde, Ms. Parinaz
Bharucha, Mr. Ashok Panday & Mr. Kandarp Trivedi, i/b. RHP
Partners, Advocate for Respondents in all Writ Petitions.
CORAM : REVATI MOHITE DERE &
DR. NEELA GOKHALE, JJ.
RESERVED ON : 28th FEBRUARY 2025.
PRONOUNCED ON : 25th MARCH 2025
JUDGMENT :
- (Per Dr. Neela Gokhale, J.)
1) Rule. Rule made returnable forthwith and with consent of
the parties, the Petitions are taken up for final hearing forthwith.
2) The Petitioner assails order dated 18 th April 2024 passed
by the Arbitral Tribunal in Arbitration Case Nos.3 to 9 of 2023,
wherein claims filed by individual Respondents in all the Petitions
herein, against the present Petitioner were ' dismissed as withdrawn,
with liberty to file afresh'. The issue in all the Writ Petitions is
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identical and hence, all the Petitions are being disposed off with this
common judgment and order with Writ Petition (L) No.15131 of
2024 being taken as the lead Petition.
3) The Petitioner and the Respondents were parties in their
respective disputes referred to arbitration. The following questions
arise for determination:
(a) Whether the impugned order warrants
interference by this Court, in the exercise of its jurisdiction
under Article 226 of the Constitution of India?
(b) If yes, whether the Arbitral Tribunal, in exercise
of its powers under Section 19(3) of the Arbitration &
Conciliation Act, 1996 ('the Act') can permit withdrawal of a
claim with liberty to file a fresh claim?
4) The brief facts leading to the present Petitions are as
follows. The Petitioner is a company registered under the Companies
Act, 1956 and is a Depository, an organisation that facilitates the
holding of securities in an electronic form and also records the
transfer of ownership of securities through beneficial owner accounts
held with its depository participants, being entities registered with
Depositories. The Respondent/s-Claimant/s are individuals that claim
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to be beneficial owners of securities and holders of dematerialized
accounts registered with the Petitioner.
5) The individual Respondents were all claimants before the
Arbitral Tribunal against the Petitioner herein. An agreement was
executed between the Petitioner, in the lead Petition i.e. Ketan Shah
and Anugrah Stock & Broking Private Limited ('Anugrah') as a
Depository Participant under the bye laws of the Petitioner. The bye
laws of Petitioner/CDSL provides for reference to arbitration. In
September 2009, Ketan Shah opened a trading and demat account
with Anugrah (Stock Broker). Funds and securities were transferred to
the broker from time to time towards margin obligations and for
trades in the future options and segments. Disputes arose between the
parties leading to Ketan Shah addressing a notice dated 15 th September
2023 calling upon the Petitioner to indemnify him towards loss caused
to him due to negligence of the Petitioner and Anugrah along with
interest thereon and other expenses incurred by Ketan Shah. By this
notice, Ketan Shah invoked arbitral proceedings in terms of the
arbitration clause in the agreement to be conducted under the bye laws
of the Petitioner ('CDSL Bye-laws'). Thus, the arbitration proceedings
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commenced from 15th September 2023.
6) Ketan Shah filed his Statement of Claim ('SOC') bearing
Arbitration Case No. 3 of 2023. Claims were also filed on behalf of
the other individual Respondents. The Petitioner filed its Statement of
Defence ('SOD') in response to the SOC on 27 th October 2023 and a
rejoinder, sur rejoinder and sur sur rejoinder were also filed by the
respective parties. According to the Petitioner, oral arguments
concluded in the arbitration proceedings on 12 th February 2024. Vide
an e-mail dated 28th February 2024, Post Hearing Clarifications
('PHC') were submitted to the Arbitral Tribunal. According to the
Petitioner, for the first time in the said PHC, Ketan Shah stated that he
had engaged a chartered accountant to analyze shares in his demat
account resulting in possible material alterations in his claim. He
sought a week's time to place on record his CA's certificate. The
Petitioner opposed the introduction of new documents. On 20 th
March 2024, during the hearing of the PHC, claimant/s sought an
amendment to the prayers in the SOC to include an altered claim. The
application for amendment was opposed by the Petitioner.
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7) It is the Petitioner's further case that the Arbitral Tribunal
being of the view that since the time for passing of the award had
expired in May 2024, an amendment was not possible and hence,
offered two options to the claimant - to either withdraw the
arbitration cases and file a fresh application if they so desire, or, to
continue with the present claim. Ketan Shah through his counsel
informed the Tribunal that he would like to withdraw his claim. The
Arbitral Tribunal recorded as follows:
"....on receipt of Letters for Withdrawal from Claimant in
Arbitration Case Nos. 3 - 9 of 2023, the Hon'ble Tribunal
will pass necessary Orders/Award. Meanwhile, the
hearings in the Arbitration Case Nos.3 - 9 of 2023 stands
concluded."
8) Ketan Shah by a letter dated 21st March 2024 addressed to
the Arbitral Tribunal withdrew his claim and sought liberty to file a
fresh claim. The relevant paragraph reads as under:
"2. As submitted during the hearing on March 20,
2024, in the matter, given that I intend to place on
record additional documents to substantiate my Claim, I
withdraw the captioned arbitration proceedings, seeking
liberty from the Hon'ble Arbitral Tribunal to file a fresh
Claim. It would be difficult for me to deal with the
Statement of Defence filed by the Respondent where
there is a bare denial of my Claim for shares/securities.
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Further, given the fact that the Respondent has not
provided complete statement and documents which
were requested for, I would be doing an audit of my
entire shareholding and re-filing my Statement of
Claim.
3. I humbly pray that appropriate Orders may be passed
in this regard by the Hon'ble Arbitral Tribunal and
liberty may be granted to file a fresh Claim. I am deeply
grateful to the Hon'ble Arbitral Tribunal for granting me
a patient hearing in the matter."
9) On 29th March 2024, CDSL addressed a letter recording
its detailed objections to the liberty sought by Ketan Shah to file a
fresh claim. CDSL inter alia raised the following objections:
"(a) The Tribunal does not possess the power
to grant liberty to a party;
(b) Ketan Shah has not made out any
grounds for grant of liberty to file fresh proceedings
upon withdrawal;
(c) CDSL would be severely prejudiced in
the event Ketan Shah is granted liberty to file fresh
proceedings."
10) Pursuant to arguments advanced by the respective parties,
supported by citations, the Arbitral Tribunal by its order dated 18 th
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April 2024 dismissed the Arbitration Proceedings as withdrawn while
granting Respondent/s-Claimant/s liberty to file fresh claim, if and
when the Claimant so decides. The Claimant/s were also directed to
give a fresh Notice of invocation of arbitration. The Petitioner herein
was given liberty to re-agitate its contentions pertaining to limitation,
jurisdiction, res judicata, etc. It is this order which is impugned by the
Petitioner in the present proceedings.
11) Mr. Janak Dwarkadas, learned Senior Counsel represented
the Petitioner and Mr. Karl Tamboly, learned Counsel represented the
Respondent/s in all Petitions.
12) Mr. Dwarkadas, learned Senior Counsel for the Petitioner
submitted as under:
i. Since Arbitral proceedings were terminated, no remedy
was available to the Petitioner under the provisions of
the Act and hence, the Petition is maintainable under
Article 226 of the Constitution of India.
ii. Tribunals cannot be equated with Courts of law and
they do not have plenary powers. Procedural
provisions cannot trump substantive law. An Arbitral
Tribunal not being a Court of law does not have
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general jurisdiction and does exist in perpetuity.
Section 19 of the Act does not confer jurisdiction on
the Arbitral Tribunal to override the provisions of
Section 32(2)(a) read with Section 32(3) of the Act
which are substantive in nature.
iii. The operative part of the impugned order results in
termination of mandate of the Arbitral Tribunal and
would therefore, override the liberty purported to have
been reserved in the impugned order.
iv. An Arbitral Tribunal assumes jurisdiction as per the
provisions of the Act and terminates either with passing
of the final award under Section 32(1) of the Act or by
an order of the Arbitral Tribunal under Section 32(2) of
the Act. Thus, the jurisdiction of the Tribunal is co-
terminus with the life of the arbitral proceedings.
v. The Arbitral Tribunal could have only passed an order
permitting withdrawal of the claim and thereafter, the
Arbitrator is rendered functus officio, thus, has no
jurisdiction to grant liberty to file fresh proceedings.
vi. Even assuming while denying that principles underlying
Order 23 of the Civil Procedure Code, 1908 ('CPC')
could be invoked, the Civil Court would not have
jurisdiction to grant liberty to institute a fresh suit on
the grounds mentioned in the impugned order.
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vii. The impugned order to the extent that it grants liberty
to file fresh arbitral proceedings causes irreparable
injury and prejudice to the Petitioner. The Petitioner
has a legitimate interest in obtaining a final settlement
of the dispute.
13) Mr. Dwarkadas relied upon the following citations in
support of his arguments:
a) Anuptech Equipments Private Ltd. v. Ganpati Co-
operative Housing Society Limited & Ors.1
b) Ganpati Co-operative Housing Society Limited v.
Anuptech Equipments Private Ltd. & Ors.2
c) Vimal Madhukar Wasnik (Dr.), Nagpur v. Sole
Arbitrator3
d) Dowell Leasing & Finance Ltd. v. Radheshyam B.
Khandelwal & Ors.4
e) S.K. and Associates and Anr. v. Indian Farmer and
Fertilizers Co-operative Ltd., Allahabad & Anr.5
f) Union of India v. Indian Agro Marketing Co-operative
1 1999 SCC OnLine Bom 54
3 2005 SCC OnLine Bom 741
4 2007 SCC OnLine Bom 655
5 2010 SCC OnLine All 1884
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Ltd.6
g) Harinarayan G. Bajaj v. Sharedeal Financial Consultants
Pvt. Ltd. & Anr.7
h) MS Vag Educational Services v. Aakash Educational
Services Limited8
i) Hyderabad Metropolitan Development Authority, Rep.
By its Metropolitan Commissioner and Anr. v. Ramky
Elsamex Hyderabad ring Road Limited, rep. By its
Authorized Representative9
j) Maharashtra State Electricity Board v. Datar Switchgear
Ltd.10
k) K.S.Bhoopathy & Ors. v. Kokila & Ors.11
l) V. Rajendran & Anr. v. Annasamy Pandian (Dead) Thr.
LR Karthyayani Natchiar12
m) HPCL Bio-Fuels Ltd. v. Shahaji Bhanudas Bhad 13
n) Taj Ahmad v. State of U.P. Thru Secy & Ors.14
6 2022 SCC OnLine Del 1291
7 2003 (2) Mh.L.J. 598
8 2022 SCC OnLine Del 3401
9 2023 SCC OnLine TS 4416
10 2002 SCC OnLine Bom 983
11 (2000) 5 Supreme Court Cases 458
12 (2017) 5 Supreme Court Cases 63
13 2024 SCC OnLine SC 3190
14 2013 SCC OnLine All 1408
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o) Awaneesh Chandra Jha v. Anil Prasad Nanda 15
p) Paira Ram & Anr. v. Ganesh Dass & Ors.16
q) R.S. Jiwani (M/S.), Mumbai v. Ircon International Ltd.,
Mumbai17
r) Sewpujanrai Indrasanrai Ltd. v. Collector of Customs
and Ors.18
s) R. Jeevaratnam v. State of Madras19
t) Gajendra Prasad Saxena v. State of U.P. & Ors. 20
u) Kamal K. Singh v. Union of India, Through the
Ministry of Corporate Affairs & Ors.21
v) Roger Shashoua & Ors. v. Mukesh Sharma & Ors.22
w) Union Bank of India v. Rajat Infrastructure Private
Limited & Ors. And Sunview Assets Private Limited 23
14) Mr. Tamboly, learned counsel for the Respondent/s-
Claimant/s submitted as under:
15 2022 SCC OnLine Del 1866
16 1965 SCC OnLine Punj 450
17 2010 (1) Mh.L.J.547
18 1958 SCC OnLine SC 56
19 1965 SCC OnLine SC 54
20 2015 SCC OnLine ALL 8706
21 2019 SCC OnLine Bom 5609
22 (2017) 14 SCC 722
23 (2023) 10 SCC 232
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I. The Petitions are not maintainable. Interference of
the High Court under Article 226/227 of the
Constitution of India is permissible only in
exceptionally rare cases.
II. The order terminating arbitral proceedings under
Section 32 of the Act can be challenged before a Court
of competent jurisdiction under Section 14 of the Act.
III.The Indian Evidence Act, 1872 and the Code of Civil
Procedure, 1908 are applicable to arbitral proceedings. In
any case, under Section 19 of the Act, the Arbitral Tribunal
can lay down its own procedure.
15) He placed reliance on the following judgments:
a) Bhaven Construction through Authorised Signatory
Premjibhai K. Shah v. Executive Engineer, Sardar
Sarovar Narmada Nigam Limited and Anr.24
b) IDFC First Bank Limited v. Hitachi MGRM Net
Limited 25
24 (2022) 1 Supreme Court Cases 75
25 2023 SCC OnLine Del 4052
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c) Akash Automobiles v. Mahindra & Mahindra Ltd. 26
d) Deep Industries Limited v. Oil and Natural Gas
Corporation Limited & Anr.27
e) Hindustan Petroleum Corporation Limited, Through its
Authorized Representative Gangandeep Singh Sodhi v.
Om Construction, Through its Sole Proprietor Satya
Pal Yadav & Ors.28
f) SBP & Co. v. Patel Engineering Ltd. & Anr.29
g) Tagus Engineering Private Limited & Ors. v. Reserve
Bank of India & Ors.30
h) Lalitkumar V. Sanghavi (Dead) Through Lrs Neeta Lalit
Kumar Sanghavi & Anr. v. Dharamdas V. Sanghavi &
Ors.31
i) Prime Interglobe Private Limited v. Super Milk
Products Private Limited32
j) Rashmi Housing Private Limited v. Pan India
Infraprojects Private Limited33
26 2022 SCC OnLine Bom 8437
27 (2020) 15 SCC 706
28 2023 SCC OnLine Bom 2219
29 (2005) 8 Supreme Court Cases 618
30 (2022) 1 HCC (Bom) 115
31 (2014) 7 SCC 255
32 2022 SCC OnLine Del 1599
33 2014 SCC OnLine Bom 1874
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k) HPCL Bio-Fuels Ltd. (Supra)
l) Serosoft Solutions Pvt. Ltd. v. Dexter Capital Advisors
Pvt. Ltd.34
m) Chandrakant Pandurang Shingade & Anr. v. Walchand
Gulabchand Bora & Anr.35
n) Mario Shaw v. Martin Fernandez & Anr.36
o) M. S. Sanjay v. Indian Bank & Ors.37
p) Revajeetu Builders and Developers v. Narayanaswamy
& Sons and Ors.38
q) Heeralal v. Kalyan & Ors.39
r) State of Goa v. Praveen Enterprises40
16) At this stage, the Petitioner brought to our notice that
there was a prayer for amending the Petition in terms of the 'Draft
Amendment' placed on record by the Petitioner, but the same has not
been considered till date. By way of the 'Draft Amendment', the
Petitioner essentially sought to amend original prayer (a) in the
34 2025 SCC OnLine SC 22
35 2019 SCC OnLine Bom 1669
36 1996(1) Mh.L.J.564
37 Civil Appeal No. 1188/2025 decided on 29.1.2025
38 (2009) 10 SCC 84
39 (1998) 1 SCC 278
40 (2012) 12 SCC 581
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Petition to add the words 'to the extent that it grants liberty to the
Respondents to invoke fresh arbitration proceedings.' Similarly, the
Petitioner sought to delete prayer (b). The Petitioner thus, sought to
amend pleadings corresponding to the prayers to the proposed
amendment to the prayers. The original prayer was a challenge to the
impugned order in its entirety and also seeking alternate relief in terms
of directing the Arbitral Tribunal to hear and decide the arbitral
proceedings on the basis of existing pleadings and the records as it
stands on date. Mr. Tamboly objected to the amendments being
allowed.
17) Heard the parties and perused the record with their
assistance.
18) In so far as question (a) raised in paragraph number 3
herein is concerned, the law is well settled. In IDFC First Bank
Limited (Supra), the Delhi High Court has enumerated certain
circumstances wherein such type of petitions can be entertained. The
relevant portion of the judgment reads as thus;
"24. While there is no doubt that a remedy under Articles
226 and 227 are available against the orders passed by the
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Arbitral Tribunal, such challenges are not to be entertained
in each and every case and the court has to be "extremely
circumspect".
25. Recently, in Surender Kumar Singhal v. Arun Kumar
Bhalotia, this Court, after considering all the decisions, of
the Supreme Court has laid down circumstances in which
such petitions ought to be entertained. The relevant portion
of the said judgment reads as under:
"24. A perusal of the above-mentioned decisions, shows
that the following principles are well settled, in respect of
the scope of interference under Articles 226/227 in
challenges to orders by an Arbitral Tribunal including
orders passed under Section 16 of the Act:
(i) An Arbitral Tribunal is a tribunal against which a
petition under Articles 226/227 would be maintainable.
(ii) The non obstante clause in Section 5 of the Act does
not apply in respect of exercise of powers under Article
227 which is a constitutional provision.
(iii) For interference under Articles 226/227, there have to
be 'exceptional circumstances'.
(iv) Though interference is permissible, unless and until
the order is so perverse that it is patently lacking in
inherent jurisdiction, the writ court would not interfere.
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(v) Interference is permissible only if the order is
completely perverse i.e. that the perversity must stare in
the face.
(vi) High Courts ought to discourage litigation which
necessarily interfere with the arbitral process.
(vii) Excessive judicial interference in the arbitral process
is not encouraged.
(viii) It is prudent not to exercise jurisdiction under Articles
226/227.
(ix) The power should be exercised in 'exceptional rarity'
or if there is 'bad faith' which is shown.
(x) Efficiency of the arbitral process ought not to be
allowed to diminish and hence interdicting the arbitral
process should be completely avoided."
19) A perusal of the above would show that it is only under
exceptional circumstances or when there is bad faith or perversity that
writ petitions ought to be entertained.
20) In Bhaven Construction (Supra), the Supreme Court held
that the Arbitration Act is a code in itself and the phrase is not merely
perfunctory, but has definite legal consequences. Section 5 of the Act is
one such consequence, which limits the extent of judicial intervention
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in matters governed by Part I of the Act. The framework of the Act
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 solution. The use of term
"only" as occurring under the provision serves two purposes of making
the enactment a complete code and lay down the procedure. Further,
paragraph 18 of the decision reads as thus;
"18. In any case, the hierarchy in our legal framework,
mandates that a legislative enactment cannot curtail a
constitutional right. In Nivedita Sharma v. COAP, 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. 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
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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."
21) The Delhi High Court has followed the same principles of
law expounded in IDFC First Bank Limited (Supra) in Kelvin Air
Conditioning & Ventilation System Private Limited v. Triumph Reality
Private Limited.41 In its recent decision, in the matter of Serosoft
Solutions Pvt. Ltd. (Supra), the Supreme Court has also considered the
issue regarding the circumstances in which the High Court can
correctly exercise its supervisory jurisdiction under Article 227 of the
41 2024 SCC Online Del 7137
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Constitution of India. The Supreme Court while not finding any
justification for interference by the High Court in the order passed by
the Arbitral Tribunal in that case, reiterated the conditions for
exercising jurisdiction under Articles 226/227 of the Constitution of
India. The Supreme Court has in fact stressed on Conditions 5 and 6
of the decision in Kelvin Air Conditioning (Supra), which reads as
thus:
"(v) Interference is permissible only if the order is completely
perverse i.e. that the perversity must stare in the face.
(vi) High Courts ought to discourage litigation which
necessarily interfere with the arbitral process.
(vii) Excessive judicial interference in the arbitral process is
not encouraged.
(viii) It is prudent not to exercise jurisdiction under Articles
226/227.
(ix) The power should be exercised in 'exceptional rarity' or
if there is 'bad faith' which is shown.
(x) Efficiency of the arbitral process ought not to be allowed
to diminish and hence interdicting the arbitral process should
be completely avoided."
Thus, the Supreme Court has reaffirmed the law that
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interference under Articles 226/227 is 'permissible only if the
order is completely perverse i.e. the perversity must stare in the
face'. Conditions (vi) to (x) underscore the reason why the High
Courts ought not to interfere with orders passed by the Arbitral
Tribunal for more than one reason.
22) We looked into the impugned order to see if in fact there
is any perversity in the decision of the Tribunal and hence, raised
question (a) herein above. The claim/s were that of the Respondents
herein. Pursuant to a view taken by the Arbitral Tribunal to disallow
an amendment to the claim/s on the ground that the time for passing
of the award was ending in May 2024, the Arbitral Tribunal offered
two options to the claimant/s therein. The same is reflected in
paragraph number 4 of the order dated 20 th March 2024 passed by the
Arbitral Tribunal. The Respondent/s-Claimant/s chose the option to
withdraw the present claim and file a fresh claim instead of continuing
with the existing claim. Obviously, the Respondent/s-Claimant/s would
not have sought withdrawal simplicitor and it was only on the option
offered by the Arbitral Tribunal that the Respondent/s-Claimant/s
sought withdrawal of its claim with liberty to file afresh.
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23) Per contra, the Petitioner has harped upon Section 32(2)(a)
of the Act to say that the Arbitral proceedings shall be terminated
where the claimant withdraws his claim, unless the Respondent to the
proceeding objects the order of withdrawal and the Arbitral Tribunal
recognizes the legitimate interest on its part on obtaining a final
settlement of the dispute. A plain reading of the impugned order itself
does not indicate any such recognition of a 'legitimate interest' of the
Petitioner herein, sufficient to reject the request of the Respondent/s-
Claimant/s to withdraw the claim. Section 32 of the Act declaring the
termination of mandate of an Arbitral Tribunal is a consequence of
withdrawal of a claim and is not a ground on which an objection to
withdraw a claim can be sustained. In fact, paragraph A of the
Speaking Order impugned herein, itself reveals clearly that the Arbitral
Tribunal was alive to its mandate being terminated on withdrawal of
the claim as the Tribunal notes that the Respondent/s-Claimant/s shall
have to give a fresh notice of invocation of arbitration. In fact, we are
informed that pursuant to the said order, Ketan Shah has already
addressed a letter to the Arbitral Secretary and CDSL seeking to file
fresh arbitration proceedings in terms of the liberty granted by the
impugned order. Thus, the Respondent/s-Claimant/s have already
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invoked the arbitration clause as contemplated under Section 21 of the
Act. In response, the CDSL has conveyed to Ketan Shah that since the
present petition was sub judice appointing Arbitral Tribunal afresh
would render the present Petitions infructuous and hence has not
acted any further on the invocation.
24) Order 23 of the CPC provides for withdrawal and
adjustment of suits and under Sub-rule (3) the Court has discretion to
permit the plaintiff to withdraw a suit or part of a plaint in the suit
with liberty to institute a fresh suit in respect of the subject matter of
such suits or part of the claim. Similarly, section 19 of the Act provides
for determination of rules of procedure. The Arbitral Tribunal
undoubtedly is not bound by the CPC or the Indian Evidence Act,
however, failing any agreement on the procedure to be followed in
conduct of the proceeding, the Arbitral Tribunal has the power to
determine conduct of the proceeding in the manner it considers
appropriate. The Tribunal has observed in paragraph 7 of the
impugned order that in view of the massive fraud committed by
Anugrah and to ascertain the exact amount of securities lost by the
Respondent/s-Claimant/s it would be fair to allow them to withdraw
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the existing arbitration applications with a liberty to file fresh
proceedings. Furthermore, the Respondents' (Petitioner herein)
contentions to raise objections regarding limitation, res judicata, etc.
are left open to be agitated in case such fresh arbitral proceedings are
invoked. In these circumstances, there is no glaring perversity, least of
all of a kind which 'stares in the face' in the order impugned herein, to
justify any interference in the impugned order. In any case, there is no
counter claim of the Petitioner herein in the arbitral proceedings and
the Petitioner has no legitimate interest to claim a final award. As
such, the impugned order does not cause any prejudice or irreparable
damage to the Petitioner.
25) We have also gone through the decisions cited on behalf of
the Petitioner. We agree with the ratios laid down in those decisions.
There can be no dispute that the powers of the High Court to issue
Writs under Articles 226/227 of the Constitution of India is a basic
feature of the Constitution and it cannot be curtailed by parliamentary
legislation, in this case, Section 5 of the Act, however, this power is to
be exercised in exceptional rarity where one party is left remedy less
or clear bad faith is shown by one of the parties. We are satisfied that
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the facts in the present case do not comprise such 'exceptional rarity'
to justify any interference. There is also no doubt that once the
proceedings are terminated, the Arbitral Tribunal is rendered functus
officio and has no jurisdiction to continue with the proceedings. We
have perused the decisions relied upon by the Petitioner on this point
also. In this regard, we note that the Arbitral Tribunal itself has
declared that the Respondent/s-Claimant/s shall have to give a fresh
notice of invocation of arbitration if the claimant decides to initiate
fresh proceedings after withdrawal. Thus, the Arbitral Tribunal is
under no misconception of enjoying a continued mandate and to
remain seized of the arbitral proceedings even after withdrawal of the
claim. Section 32 of the Act as canvassed by the Petitioner, is a
consequence of termination of mandate and not a restriction on the
power of the Arbitrator to permit withdrawal of claim. In this view of
the matter, the decisions cited by the Petitioner do not carry the case
of the Petitioner any forward.
26) In view of the foregoing discussion, question (a) is
answered accordingly. We do not find any perversity in the impugned
order to warrant interference in the same, in exercise of our
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jurisdiction Articles 226/227 of the Constitution of India. The order
does not depict any bad faith and no case of extreme rarity seems to
exist either. In this view of the matter, the need to determine question
(b) does not arise.
27) Therefore, we do not find any reason to interfere with the
impugned order. The Petitions are dismissed.
28) Rule is accordingly discharged. In view of the same, the
draft amendment is rendered infructuous and accordingly disposed.
29) All parties to act on an authenticated copy of this
Judgment.
(DR. NEELA GOKHALE, J.) (REVATI MOHITE DERE, J.)
1) At this stage, after the Judgment is pronounced, Mr.
Dwarkadas, learned Senior Counsel for the Petitioner, seeks stay of
this Judgment.
2) For the reasons that we have recorded, the request is
rejected.
(DR. NEELA GOKHALE, J.) (REVATI MOHITE DERE, J.)
Digitally
signed by
SHAMBHAVI
SHAMBHAVI NILESH
NILESH SHIVGAN
SHIVGAN Date:
2025.03.25
19:42:53
+0530
