Hyndai Engineering And ... vs Pioneer Fabricators (P) Ltd. And ...
2005 Latest Caselaw 1125 Del

JUDGMENT

R.C. Jain, J.

1. Let the plaint be registered as suit.

2. Learned counsel for the plaintiff is called upon to satisfy the Court about the maintainability of civil suit for the reliefs claimed by him. Heard.

3. The above named plaintiff has filed the present suit for declaration and injunction with the averments that the plaintiff had entered into a contract dated 24.9.2003 with defendant No. 1 for the work of fabrication, supply and installation of galvanized metal railing and crash barrier at the Naini Bridge Works ( a project being executed by the plaintiff at Allahabad, Uttar Pradesh). It is alleged that the work performed by defendant No. 1 was of poor and sub-standard quality and was not within the stipulated time. The contract between the parties did not permit any escalation in contract price but still the plaintiff permitted an escalation in contract price as the execution of the project was getting delayed. The work was finally completed on 3.5.2004 and defendant No. 1 issued a (sic) no claims certificate (sic) in favor of the plaintiff dated 25.8.2004 However, defendant No. 1 vide letter dated 9.9.2004 raised a further claim of Rs. 14,88,487/- against the plaintiff which claim was refuted by the plaintiff. Vide its letter dated 8.11.2004, defendant No. 1 invoked the Arbitration Agreement contained in contract dated 24.9.2003 which was replied to by the plaintiff vide letter dated 3.12.2004 and the plaintiff did not consent to the appointment of the persons proposed by defendant No. 1 as arbitrators for adjudication of the alleged disputes between the parties. However, without approaching the Court under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of the Arbitrator, the defendant No. 1 unilaterally and of its own appointed defendant No. 2 as the Sole Arbitrator for adjudication of the alleged disputes between the parties vide a communication dated 11.2.2005. Defendant No. 2 has accepted the illegal appointment and issued purported order of the same day requiring the parties to attend the proceedings before him. The appointment of defendant No. 2 and the proceedings/order of defendant No. 2/Arbitrator are stated to be sham and void ab-initio illegal proceedings. The plaintiff has claimed the following reliefs in the present suit:

(i) Pass a decree declaring the purported arbitral tribunal consisting of Defendant No. 2 as illegal and in violation of the provisions of the Arbitration and Conciliation Act, 1996, and the contract between the parties dated 24.9.2003.

(ii) Pass a decree declaring the appointment of defendant No. 2 as sole arbitrator, dated 11.5.2005, as illegal and void ab-initio.

(iii) Pass a decree declaring defendant No. 2's acceptance of appointment as sole arbitrator, dated 14.5.2005, as illegal and void.

(iv) Pass a decree declaring orders/directions dated 14.5.2005, 25.5.2005 and 6.6.2005 passed by defendant No. 2 to be illegal and void ab-initio.

(v) Issue a decree of injunction prohibiting defendant No. 1 and defendant No. 2 from giving effect to any order/direction/award purportedly passed by defendant No. 2.

(v) Issue a decree of injunction prohibiting defendant No. 2 from acting as a sole arbitrator for adjudication of alleged disputes between the plaintiff and defendant No. 1.

(vi) Issue a decree of mandatory injunction directing defendant No. 1 to comply with the provisions of Section 11 of the Arbitration and Conciliation Act, 1996, in the event of its wanting to appoint an arbitrator for adjudication of disputes between it and the plaintiff.

4. The core question is whether the present suit for the above reliefs claimed by the plaintiff is maintainable under the Code of Civil Procedure or the remedy of the plaintiff lay through some other appropriate legal proceedings under the provisions of Arbitration and Conciliation Act, 1996 (hereinafter referred to be as the (sic). The 1996 Act has been enacted by the Parliament to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto. Some of the main objective of the Act are as under:

(i) to comprehensively cover international and commercial arbitration and conciliation as also domestic arbitration and conciliation;

(ii) to make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration.

(iii) to provide that the arbitral tribunal gives reasons for its arbitral award;

(iv) to ensure that the arbitral tribunal remains within the limits of its jurisdiction.

(v) to minimize the supervisory role of Courts in the arbitral process;

(vi) to permit an arbitral tribunal to use mediation, conciliation or other procedures during the arbitral proceedings to encourage settlement of disputes;

(vii) to provide that every final arbitral award is enforced in the same manner as if it were a decree of the Court;

(viii) to provide that a settlement agreement reached by the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal; and

(ix) to provide that, for purposes of enforcement of foreign awards, every arbitral award made in a country to which one of the two international Conventions relating to foreign arbitral awards to which India is a party, applies, will be treated as a for sign award.

5. Section 5 of the Act brings out clearly the object of new Act, namely, that of an encouraging resolution of disputes expeditiously and less expensively and when there is an Arbitration Agreement, the courts intervention should be minimal. This has been so held by the Supreme Court in the case of P. Anand Gajapathi Raju and Ors. v. P.V.G. Raju (Dead) and Ors., .

6. Therefore it is to be seen whether the plaintiff can file a civil suit and whether this Court can intervene in the above referred matter so as to grant relief of declaration and injunction as sought for by the plaintiff in the present suit. As noticed above, the plaintiff seeks to assail the action of defendant No. 1 in appointing defendant No. 2 as a Sole Arbitrator without invoking the provisions of Section 11 of the Act. Assuming for the sake of argument that the appointment of defendant No. 2 as Sole Arbitrator by defendant No. 1 is illegal or void, it would at best amount that the Arbitral Tribunal has not been constituted in accordance with law. Section 16 of the Act has brought a sea change in the jurisdiction and powers of the Arbitral Tribunal. This provision confers the power on the Arbitral Tribunal to rule on its own jurisdiction, including ruling on any objection with respect to the validity of the Arbitration Agreement. This in turn would show that a party which considers the appointment of the Arbitrator as illegal or void may raise an objection to the jurisdiction of the arbitral tribunal to entertain the claims and the arbitral tribunal is invested with the power and duty to answer the said objection. If the decision of the arbitral tribunal is that it has no jurisdiction to entertain the reference, an appeal is provided under Section 37 of the Act. Besides the validity and constitution of the arbitral tribunal is a ground for challenging the Award of the Arbitrator under Section 34 of the Act.

7. In the opinion of this Court, on the face of the provisions contained in Section 16(1) and 34(2) of the Act, the remedy of the plaintiff lay under the said provisions and not by way of a civil suit like the present one. Therefore, this Court has no hesitation in holding that the present suit as framed and filed is not maintainable. However, on the request of learned counsel for the plaintiff liberty is granted to the plaintiff to raise objection in regard to the jurisdiction of the arbitral tribunal to entertain and proceed with the reference.

8. The suit and all pending applications stand disposed of accordingly.