Delhi High Court
Pyramid Finmart Pvt. Ltd vs Rk Sinha And Associates And Ors on 20 February, 2025
$~59
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 20th February 2025
+ CM(M) 252/2025 & CM APPL. 7571/2025 STAY
PYRAMID FINMART PVT. LTD .....Petitioner
Through: Mr. Ravi Kapoor and Mr.
Sameer Dawar, Advocates
versus
RK SINHA AND ASSOCIATES AND ORS
.....Respondents
Through: Mr. Sunil Kumar, Sr. Adv. with
Mr. Saurabh S. Sinha, Mr.
Mrigank Prabhakar and Mr
Siddharth Sahu, Advocates.
CORAM:
HON'BLE MR. JUSTICE RAVINDER DUDEJA
J U D G M E N T ( ORAL)
RAVINDER DUDEJA, J.
1. This is a petition under Article 227 of the Constitution of India,
challenging the order dated 29.01.2025, passed by the Sole Arbitrator
in arbitration proceedings titled "M/s. R.K. Sinha & Associates & Anr.
Vs. M/s. Pyramid Finmart Pvt. Ltd. & Anr."
2. The brief factual background of the matter is that petitioner
company being engaged in the business of land sale, purchase and
construction was approached by the respondents to purchase the land
situated at Yamuna Express Highway. Petitioner No. 1and respondent
No. 1 entered into an agreement to sell dated 20.11.2018.
3. During the performance of the contract, certain disputes arose
between the parties. Petitioner filed petition under Section 11 (6) of
the Arbitration & Conciliation Act for appointment of an Arbitrator
before the High Court.
4. Vide order dated 20.01.2022, Sole Arbitrator was appointed to
adjudicate the disputes between the parties.
5. Complainant's evidence was closed. Petitioner filed two
affidavits as evidence - RW-1 by affidavit dated 14.12.2024 and RW-
2 by affidavit dated 12.01.2025. RW-1 is the Senior Manager of
petitioner while RW-2 is the Director of the petitioner.
6. Learned counsel for the claimant submitted before the
Arbitrator that examination and cross examination of RW-2 be
conducted as the first witness.
7. Vide order dated 29.01.2025, the learned Arbitrator was of the
view that RW-2 is the main witness in the matter, and therefore, he be
examined and cross examined as a first witness. Learned Arbitrator
observed that RW-1 was not involved in the transaction. However,
direction was issued that both the witnesses shall remain present on
the dates fixed for evidence.
8. Learned counsel for the petitioner has argued that it is the sole
prerogative of the party to determine the sequence by which it wishes
to lead its evidence. It is further submitted that only the petitioner
company is the signatory to the contract and that respondent No. 3
was neither a party to the contract nor has entered into any arbitration
agreement with respondents No. 1 & 2. He merely signed
the agreement as the Director of the petitioner company and not in his
personal capacity.
9. It is further submitted that there was no occasion for piercing
the corporate veil of the petitioner company as the company is a
separate and distinct entity. It is also argued that RW-1 Anand Kumar
Tiwari had signed the pleadings on behalf of the petitioner company.
RW-1 is the authorized signatory of the petitioner company, and
therefore, in accordance with provisions of Rule 3-A of Order 18
CPC, it was RW-1 which ought to be examined first and not
respondent No. 3.
10. In support of his submissions, learned counsel for the petitioner
has placed strong reliance on the following judgments:-
i) In Re: Agya Boortmalt Ltd 2012 SCC OnLine CLB 39;
ii) Swardharma Swarajya Sangha v. Indian Commerce &
Industries Company, 1997 SCC OnLine Mad 766;
iii) BOC India v. Zinc Products, 1996 SCC OnLine Pat 563;
iv) M/s Nimbro v. National Insurance Co., 1990 SCC OnLine Del
65;
v) United Bank of India v. Naresh Kumar, (1996) 6 SCC 660;
vi) State Bank of Travancore v. Kingston Computers India (2011)
11 SCC 524;
vii) Devarapalli Pattabhi Ramaiah v. D. Lakshmi Prasanna, 1997
SCC OnLine AP 616;
viii) Shaik Rafath Begum v. T. V. R. Anjaneyulu, 2006 SCC OnLine
AP 691;
ix) Saidai Sa. Duraisamy v. Stalin M. K., 2016 SCC OnLine Mad
23267;
x) Sarabjit Singh v. Gurinder Singh Sandhu, 2010 SCC OnLine
Del 3881
xi) Kumudini Damodar Magar & Ors vs Bhushan Damodar Magar
& Ors., [2004 (3) Mh. LJ]
11. At the very outset, the learned counsel for respondents No. 1&
2 has taken strong objection to the maintainability of the petition filed
under Article 227 of the Constitution. While referring to Section 5
and Section 19 of the Arbitration & Conciliation Act, it is submitted
that the remedy under Article 227 of the Constitution is not available
to the petitioner against the order passed by the Arbitral Tribunal. In
support of his submissions, the learned counsel placed reliance on the
following judgments:-
i) Sanj Dainik Lokopchar & Ors v. Gokulchand Govindlal
Sananda 2019 (3) Mh.L.J.
ii) Punjab State Power Corpn. Ltd v Emta Coal Ltd & Anr (2020)
17 SCC 93.
iii) SBP & CO v. Patel Engineering Ltd & Anr (2005) 8 SCC 618
iv) Surender Kumar Singhal & Ors. Vs. Arun Kumar Bhalotia &
Ors., MANU/DE/0561/2021
12. On the merits of the petition, it is submitted that RW-2 is the
main witness, inasmuch as, it is he who had invoked the arbitration
proceedings by filing an application under Section 11 of the
Arbitration & Conciliation Act and is also the beneficiary of receipt of
money. It is further submitted that the provision of Order 3-A of Order
18 CPC is not mandatory, but directory and the said provision confers
discretion to the court to permit for reasons to be recorded, the party to
appear as his own witness at a later stage.
13. The law with regard to the scope of power of the High Court
under Article 227 against the orders passed by the Arbitral Tribunal is
well settled. It is a well settled law that the High Court can exercise
power under Article 227 against the orders passed by the Arbitral
Tribunal, but it is equally well settled that judicial interference in such
cases has to be mere minimal and recourse to Article 227 has to be
only under exceptional circumstances when it is shown that such an
order is absolutely perverse.
14. In the case of IDFC First Bank Limited Vs. Hitachi MGRM
Net Limited, MANU/DE/4418/2023, the Coordinate Bench of this
Court has enumerated the circumstances wherein a petition under
Article 227 can be entertained. The relevant para of the aforesaid
judgment reads as under:-
"24. While there is no doubt that a remedy under Articles 226 and
227 are available against the orders passed by the Arbitral Tribunal,
such challenges are not to be entertained in each and every case and
the court has to be "extremely circumspect."
15. Similarly, in the case of Surender Kumar Singhal Vs. Arun
Kumar Bhalotia, MANU/DE/0561/2021, after considering the
various decisions, this Court laid down certain principles explaining
the scope of power of the High Court under Article 227 of the
Constitution of India. The relevant para of the judgment reads as
under:-
"24. A perusal of the abovementioned 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.
(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."
16. The Special Leave to Appeal (numbered as 6171/2021)
challenging the order passed in Surender Kumar Singhal (supra), has
been dismissed by the Hon'ble Supreme Court vide order dated
27.04.2021.
17. The learned Single Judge of this Court in Kelvin Air
Conditioning & Ventilation System Private Limited CM (M)
3592/2024, 2024 DHC 4914 held as under:-
"11. This Court is very much conscious of the fact that the present
petition has been filed under Article 227 of the Constitution of
India whereby the Court is required to exercise its supervisory
powers. The duty of the supervisory Court is to interdict if it finds
that the findings are perverse i.e. (i) Erroneous on account of non-
consideration of material evidence, or (ii) Being conclusions which
are contrary to the evidence, or (iii) Based on inferences that are
impermissible in law. Reference be made to Puri Investments v.
Young Friends and Co., 2022 SCC OnLine SC 283.
12. This Court in order dated 03.10.2024 passed in CM(M)
3265/2024 titled as Agarwal Associates (Promoters) Limited v.
Sharda Developers has also observed that the remedy available under
Article 227 of the Constitution of India does not stand knocked off
by the non-obstante clause of Section 5 of Arbitration & Conciliation
Act, 1996 which provides that no judicial authority shall intervene
except where so provided and, therefore, though the petition would
be maintainable but fact remains that the scope of interference is
extremely squeezed."
18. Similarly, the Hon'ble Supreme Court in the case of SBP & CO
v. Patel Engineering Ltd & Anr (2005) 8 SCC 618, made following
pertinent observations in Para No. 45 & 56, which are reproduced
thus:-
"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."
19. It is not a disputed fact that RW-2 is the one who had invoked
Section 11 of the Arbitration & Conciliation Act for the purpose of
appointment of the Arbitrator. It has not been disputed during the
course of arguments that RW-2 had received the money. The learned
Arbitrator vide impugned order has been of the view that RW-2 is the
main witness in the matter. Even though, he directed RW-2 to be
examined and cross examined as a first witness, he has not discarded
the affidavit of RW-1 and in fact directed both the witnesses to remain
present on the date fixed for their evidence.
20. The provision contained in Order 18 Rule 3-A of the Code of
Civil Procedure, 1908 are directory and not mandatory and
exceptions can be made for valid reasons. What those valid reasons
are depends upon the facts and circumstances of each case.
21. A perusal of the impugned order clearly reveals that the same
does not suffer from any perversity, and therefore, this Court does not
find any reason to interfere with the impugned order.
22. In M/s. Garment Craft Vs. Prakash Chand Goel, Civil
Appeal arising out of SLP (C) No. 13941/2021, the Supreme Court
while explaining the scope of Article 227 of the Constitution of India,
observed that supervisory jurisdiction is not to correct every error of
fact or even a legal flaw when the final finding is justified or can be
supported. The High Court is not to substitute its own decision on
facts and conclusion, for that of the inferior court or tribunal. The
power under Article 227 is exercised sparingly only in appropriate
cases.
23. Since in exercise of power under Article 227, this Court does
not sit in appeal over the orders of the Arbitral Tribunal, even if the
Court was to take a contrary view, impugned order cannot be set aside
while exercising supervisory power under Article 227 of the
Constitution, and in particular, in the context of arbitral proceedings
where the interference has to be bare minimal.
24. In my view, it is not a fit case for the exercise of judicial
intervention in the order passed by the learned Arbitral Tribunal.
25. Hence, Court finds no merit in the present petition. The same is
accordingly dismissed.
RAVINDER DUDEJA, J.
February 20, 2025
RM
