Chattisgarh High Court

South Eastern Coal Fields Ltd vs M/S Chhayaash Multipurpose ... on 10 February, 2023

                                    1

                                                                   NAFR
           HIGH COURT OF CHHATTISGARH, BILASPUR
                      Order reserved on :20/01/2023

                      Order delivered on : 10/02/2023

                        WP (227) No. 783 of 2022
   1. South Eastern Coal Fields Ltd., Through The Chief Of Security At
      Seepat Road, Bilaspur, Police Station Bilaspur, District : Bilaspur,
      Chhattisgarh
   2. The General Manager, South Eastern Coalfields Limited At G. M.
      Office, Johila Area, Post Office- SECL, Johila, District - Shahdol,
      Madhya Pradesh
                                                          ---- Petitioner s
                                     Versus
    M/s Chhayaash Multipurpose Agency Through Proprietor, Capt.
     Shyam Pratap Singh Shekhawat (Retd.) Registered Office H-20,
     Fortune Estate, Damkhera, Kolar Road, Bhopal, District : Bhopal,
     Madhya Pradesh
                                                          ---- Respondent

And WP (227) No. 786 of 2022

2. South Eastern Coal Fields Ltd., Through The Chief Of Security At Seepat Road, Bilaspur, Police Station Bilaspur, District : Bilaspur, Chhattisgarh

3. The General Manager, South Eastern Coalfields Limited At G. M. Office, Johila Area, Post Office- SECL, Johila, District - Shahdol, Madhya Pradesh

---- Petitioner s Versus  M/s Vazra Securities and Detectives Through Proprietor, Lt. Cdr. SS Chauha (Retd.), Registered Office H-20, Fortune Estate, Damkhera, Kolar Road, Bhopal, Madhya Pradesh, India - PIN Code.

---- Respondent

For Petitioners. : Mr.Vishal Bhatnagar, Mr. Pankaj Agrawal, Ms. Lata Walia & Mr. Ram Kumar, Advocates.

For Respondent : Mr. Siddharth Shukla, Advocate.

Hon'ble Smt. Justice Rajani Dubey (CAV Order)

1. Since the aforesaid writ petitions arise out of the same order dated

31.10.2022 (Annexure P-1) passed in the matter of M/s Chhayaash

Multipurpose Agency Vs. SECL and another by the sole Arbitrator,

they are being disposed of by this common order.

2. The petitioner - SECL filed these two petitions under Article 227 of the

Constitution of India against order dated 31.10.2022 passed by the

sole Arbitrator, whereby the preliminary objection filed by the petitioner

under Section 16 of the Arbitration and Conciliation Act, 1996 (for

short 'the Act of 1996') has been rejected by the Arbitrator.

3. Case of the petitioner, in brief, is that the petitioners granted work

order for providing security services for the

office/premises/works/installations and other premises of petitioner

company - S.E.C.L, a Mini Ratna Company, which is Government of

India undertaking under the administrative control of Ministry of Coal,

to the respondents for a period of two years i.e. 2011-2013 as per the

terms and conditions of the agreement (Annexure P/2). During the

subsistence of agreement (Annexure P/2), since the respondents

failed to comply with the terms and condition of agreement and the

DGR guidelines, a vigilance enquiry was conducted, wherein it was

found by the petitioners that the respondents-security agency was

indulged in impersonation, cheating and fraudulent activities and thus

received excess amount of Rs.29.37 lakh. The respondents herein

sought the return of the security deposit money from the

petitioners. Thereafter, a complaint bearing

No.RX0092016A0003 was registered by the C.B.I./ACB,

Jabalpur, against the respondents and consequently, the original

documents qua the agreement and other official files/record

were seized by the CBI and are currently under their possession.

Vide letter dated 10.01.2019, the respondents herein sent a

notice (Annexure P/4) invoking the arbitration clause i.e. Clause

No.17 of the agreement to the petitioners and filed an Arbitration

Petition bearing ARBP No. 17/2019 & 18/2019 (Annexure P/5)

before this Court under Section 11(6) of the Arbitration and

Conciliation Act, 1996, seeking appointment of an arbitrator.

4. The petitioners filed reply (Annexure P/6) to the Arbitration

Petitions and this Court vide order dated 07.01.2022 (Annexure

P/7), allowed the arbitration petitions and pleased to appoint

Arbitrator. Thereafter, challenging the order dated 07.01.2022,

the petitioner filed SLP(C) bearing No. 14107/2022 before the

Hon'ble Apex Court, wherein vide order dated 12.08.2022

(Annexure P/8), the Hon'ble Apex Court was pleased to dispose

of the petition stating that :-

"In our considered view the pleas sought to be raised on behalf of the petitioner, namely

(a) that the claim of the Respondent is time barred,

(b) that the dispute is not arbitrable; or

(c) that the petitioner has a counter claim against the Respondent contractor etc., can be effectively raised and gone into by the learned arbitrator."

5. The petitioners subsequently filed an application (Annexure P/9)

under Section 16 of the Act, 1996, before the learned Sole

Arbitrator, wherein the petitioners sought to challenge the

jurisdiction of the learned Arbitrator in the arbitration matter. The

learned Arbitrator, vide impugned order dated 31.10.2022,

passed the order dismissing the application filed by the

petitioners under Section 16 of the Act, 1996. Hence, these

petitions.

6. Learned counsel for the petitioners submits that there is serious

question of jurisdiction and wants to establish why this present

petition is time barred and non arbitrable. The learned Arbitrator

has not drawn his attention towards the order dated 12.08.2022

of Hon'ble Apex Court, wherein the first question laid out was

that the matter is time barred and, therefore, beyond limitation.

At first, the issue ought to have been adjudicated by the learned

Arbitrator, however, the learned Arbitrator has not even delved

into the question of limitation in the impugned order dated

31.10.2022, let alone give any reasoning for carrying out the

present arbitration proceedings. He further submits that the

learned Arbitrator ought to have dealt with the contention that the

present arbitration case is entirely out of jurisdiction of the

Arbitration Tribunal as the same is time barred, which it has

failed to do so. According to the agreement, the cause of action

for invocation of the arbitration clause at best arose till 2016, as

the respondent sough the claim from the petitioners lastly in the

year 2013 in the month of October, therefore, the limitation

period for the invocation of the arbitration clause and for the

claim was arisen from October, 2013 to October, 2016. However,

the notice for invocation of the arbitration clause and seeking

appointment of arbitrator was served upon by the respondents to

the petitioners on 10.01.2019. The notice invoking arbitration

clause and the claim sought had become legally stale, non-

arbitrable & unenforceable, and therefore, hopelessly time

barred.

7. Further submission of learned counsel for the petitioners is that it

is well established fundamental principle that any order/award or

any decree passed by the Court or the Council without

jurisdiction is a nullity and its invalidity could be set up whenever

and wherever it is sought to be enforced or relied upon. This

Court has already held that because the limitation is a mixed

question of fact and law & is ordinarily and generally to be

decided by the arbitration tribunal, but in cases, where the notice

of invocation of arbitration clause under the arbitration

agreement is ex-facie time barred, the Courts must reject the

appointment of an arbitrator, which the learned Arbitrator has

failed to consider. In the present case, the cause of action for

invocation of the arbitration clause at best arose till 2016, as the

respondent sought the claim form the petitioner lastly in the year

2013 in the month of October, therefore, the limitation period for

the invocation of the arbitration clause and of course for the

claim be arisen from October, 2013 to October, 2016. It has

been also argued that the present case is out of the jurisdiction

of the Arbitration Tribunal itself for the sole reason that the

subject matter of present case involves serious CBI investigation

of corruption due to which the whole dispute has arisen in the

first place. Until and unless the CBI concludes the matter, the

final award in the present arbitration, even if passed, cannot be

given effect to. Further, in absence of original record

pertaining to the present case, which the CBI seized, hold

utmost relevance for adjudication of arbitration proceeding,

which the learned Arbitrator also failed to deal with and held in

para 21 of the impugned order that "..... onus of proving its case

lies with the Respondent and the seized document can be

produced by resorting to appropriate provisions available under

the law and the same cannot be canvassed as a ground to hold

the dispute is non-arbitrable.", which has no logic at all for the

reason that as to how the original documents currently in

possession of the CBI Court would be obtained for carrying out

the present arbitration. While making the current observation,

the learned Arbitration failed to apply it judicial mind that the

case is of corruption and the investigating body is CBI, as such,

the learned Arbitrator made the petitioners crippled by making

such observation as there is no remedy left to the petition to

acquire the said documents. The learned Arbitrator has also

stated no provision from the Act, 1996, which possibly states that

just in case the original documents could not be acquired the

proceedings still could be carried out or even that the Section

21-24 of the Act, 1996 can be waived of in the adjudication of the

present arbitration proceedings. Learned counsel also submits

that the arbitration is a process employed for settlement of

disputes and in the present case, the dispute is not amenable for

settlement through arbitration due to its non-arbitrability as the

same relates to rights and liabilities which arise out of serious

criminal offence. Further submission is that the learned

Arbitrator paid no heed to the substantial question of law

involved in the present case and did not even mention the

contention of limitation in the impugned order let alone give

reasoning for the same. The learned Arbitrator before getting into

the aspects of arbitrability should have give reasoning as to how

the present arbitration is itself maintainable being time barred

and outside the limitation. The impugned order dated

31.10.2022 stays silent regarding the same. The learned

Arbitrator has also failed to consider catena of judgments

passed by Hon'ble Supreme Court effectively concluded that in

case where the cause of action and subject matter of the dispute

have erga omnes effect, requires centralized adjudication, and

mutual adjudication would not have appropriate and enforceable,

such disputes even in the presence of arbitration agreement

would not be arbitrable. To buttress his submission, he placed

reliance on the decisions of Hon'ble Apex Court rendered in the

matter of Srei Infrastructure Finance Limited Vs. Tuff Drilling

Private Limited reported in (2018) 11 SCC 471, Deep

Industries Limited Vs. Oil and Natural Gas Corporation

Limited and Another reported in (2020) 15 SCC 706.

8. On the other hand, learned counsel for respondents submits that

the petitioners are adopting dilatory tactic. Arbitration

proceedings and criminal proceeding based on similar facts can

be simultaneously continued and challenge to the demand

notices is amenable to arbitration proceedings. The petitioners

issued demand notices to the respondents on 16/17 th November,

2020, which shows that they are in possession of the documents

and non-availability of original documents is no impediment for

conducting arbitration proceedings. He further submits that

Clause 17 of the agreement provides for arbitration, the Clause

5.11 of the agreement and Clause 49 of the DGR Policy of 2006,

a general provision of arbitration, will not be applicable. Hon'ble

Apex Court in SLP (C) No.8482/2020 (arising out of impugned

final judgment and order dated 10.12.2019 in CWP No.

12700/2019 passed by the High Court of Punjab & Haryana at

Chandigarh) held that :

"Unfortunately, parties are using this expression which is in our judgment in Deep Industries Ltd., to go to the 227 Court in matters which do not suffer from a patent lack of inherent jurisdiction. This is one of them. Instead of dismissing the writ petition on the ground stated, the High Court would have done well to have referred to our judgment in Deep Industries Ltd. and dismiss the 227 petition on the ground that there is no such perversity in the order which lead to a patent lack of inherent jurisdiction." Thus, in view of aforesaid, the instant petitions are also liable to be dismissed.

9. Heard learned counsel for the parties and perused the material

available on record.

10. In the instant case, by virtue of this Court's order dated

07.01.2022 passed in ARBR Nos. 17/2019 and 18/2019, while

allowing the respondents' application filed under Section 11 (6)

of the Act, 1996, appointed the sole Arbitrator for settlement of

the dispute. Against the said order dated 07.01.2022, the

petitioners preferred SLP (C) No. 12253/2022 before Hon'ble

Supreme Court, wherein vide order dated 12.08.2022 it was held

as under :-

" In our considered view the pleas sought to be raised on behalf of the petitioner, namely,

(a) that the claim of the respondent is time barred;

            (b)     that the dispute is not arbitrable; or
            (c)     that the petitioner has a counter a claim against

the respondent contractor et., can be effectively raised and gone into by the learned arbitrator.

11. The petitioners have filed an application before the learned

Arbitrator under Section 16 of the Act, 1996, which was

dismissed by the learned Arbitrator by the impugned order.

12. A Constitution Bench of the Supreme Court in the matter of SBP

& Co. Vs. Patel Engineering Ltd reported in 2005 (8) SCC 618

while considering the issue as to whether the powers of the

Chief Justice or his Nominee under Section 11(6) of the Act,

1996 are administrative or judicial, scanned all relevant

provisions of the Act, 196 including the scope of interference by

the High Court under Articles 226/227 of the Constitution of India

against the overruling of objections filed by a party before the

Arbitral Tribunal under Section 16 and went on to hold in paras

45, 46 and 47, which are 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, 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, 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 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.

(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 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.

13. The objections so raised by the petitioners under Section 16 of

the Act, 1996, by way of petition before the learned Arbitrator not

only came to be dismissed by giving reasonable finding therein

but also the SLP preferred against this High Court order dated

07.01.2022 passed in ARBP No.17/2019 dismissed observing

that the pleas sought to be raised on behalf of the petitioners

can effectively be raised and gone into by the learned Arbitrator.

14. The petitioners can approach the writ Court in cases where

application under Section 16 is dismissed by the Arbitrator and

such dismissal is so perverse that the only possible conclusion is

that there is a patent lack in the inherent jurisdiction. A patent

lack of inherent jurisdiction requires no argument whatsoever - it

must be the perversity of the order that must stare one in the

face. The Hon'ble Supreme Court has made observation with

regard to patent lack of inherent jurisdiction in SLP (C)

No.8482/2020 (supra), which reads thus :-

"Unfortunately, parties are using this expression which is in our judgment in Deep Industries Ltd., to go to the 227 Court in matters which do not suffer from a patent lack of inherent jurisdiction. This is one of them. Instead of dismissing the writ petition on the ground stated, the High Court would have done well to have referred to our judgment in Deep Industries Ltd. and dismiss the 227 petition on the ground that there is no such perversity in the order which lead to a patent lack of inherent jurisdiction." Thus, in view of aforesaid, the instant petitions are also liable to be dismissed."

15. Keeping in view the dictum of Hon'ble Apex Court in the matter

of S.B.P.'s (supra), as also keeping in mind the legislative intent

expressed by the legislature through Section 5, 16(5) and 16(6)

with regard to the minimal judicial interference for quick disposal

of arbitral proceedings, no interference is warranted by this

Court in the present petitions.

16. The dispute of the petitioners, according to the Clause 17 of

agreement, was first referred to the sole Arbitrator by virtue of

order dated 07.01.2022 passed in ARBR No.17/2019, and the

said order attained finality by virtue of dated 12.08.2022 in

SLP(C) No.12253/2022, whereby it was observed by Hon'ble

Supreme Court that the pleas raised by the petitioners can