Ashokbhai Raisingbhai Parmar vs The Abritrator, Kumari Neetaben V ...
2021 Latest Caselaw 4021 Guj

         C/SCA/13800/2020                                              ORDER




          IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

         R/SPECIAL CIVIL APPLICATION NO. 13800 of 2020
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               ASHOKBHAI RAISINGBHAI PARMAR
                            Versus
          THE ABRITRATOR, KUMARI NEETABEN V PATEL
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Appearance:
MS TEJAL A VASHI FOR MR VH DESAI(298) for the Petitioner(s) No. 1
MR MRUGEN K PUROHIT(1224) for the Respondent(s) No. 2
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 CORAM: HONOURABLE MR. JUSTICE VIPUL M. PANCHOLI
                    Date : 10/03/2021
                     ORAL ORDER

1. This petition is filed under Article 227 of the Constitution of India, in which, the petitioner has challenged the order dated 30.09.2020 passed below Exh.23 passed by respondent No.1 Arbitrator in Arbitration Case No.1 of 2020.

2. Heard learned advocate Ms.Tejal A. Vashi for learned advocate Mr. V.H. Desai for the petitioner and learned advocate Mr.Mrugen K. Purohit for respondent No.2.

3. Learned advocate for the petitioner submitted that respondent Nos.2 and 3 have formed a Partnership Firm on 01.08.2008 in the name and style of "Ronak Developers". The said partnership firm is registered on 01.08.2008. Partnership Deed was executed. It is submitted that the said Partnership Deed provides that in case of any dispute or difference of opinion, which may raise between the parties, the dispute is

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required to be referred to the Arbitrator. It is submitted that the dispute or difference of opinion arose between respondent Nos.2 and 3 and therefore, respondent No.2 has invoked the arbitration clause and matter was referred to the concerned Arbitrator i.e. respondent No.1.

3.1 It is submitted the respondent No.2 filed a Statement of Claim. Thereafter, respondent No.2 submitted an application on 01.08.2020 and requested respondent No.1 Arbitrator to join the present petitioner as opponent No.2 in the said Arbitration Case No.1 of 2020. Respondent No.1 issued the notice to the petitioner. On receipt of the notice, the petitioner appeared and raised an objection before respondent No.1 Arbitrator and contended that the petitioner cannot be joined as party opponent in the arbitration proceedings. However, without considering the objection raised by the petitioner, the impugned order has been passed by respondent No.1, by which, the petitioner is joined as party opponent in the said arbitration case. The petitioner has, therefore, filed the present petition.

4. Learned advocate Ms.Tejal A. Vashi appearing for the petitioner has assailed the impugned order mainly on the ground that respondent No.1 has no jurisdiction to entertain the application filed by respondent No.2 for joining the petitioner as party opponent in the arbitration proceedings. There is no agreement entered into between the petitioner and

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respondent Nos.2 and 3. Thus, as the petitioner is not a partner in the partnership firm, there was no reason for respondent No.1 Arbitrator to join the present petitioner as opponent in the proceedings. Learned advocate for the petitioner has referred the provisions contained in Sections 16, 34 and 37 and Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act" for short). After referring to the same, it is contended that the petitioner has no other alternative remedy but to challenge the impugned order before this Court and, therefore, the present petition is filed. It is also contended that from the relief prayed by respondent No.2 before respondent No.1 Arbitrator, it is clear that such type of reliefs can be considered by the competent Civil Court and not by the Arbitrator and, therefore, the impugned order be quashed and set aside.

4.1 Learned advocate Ms.Tejal A. Vashi has placed reliance upon the order dated 30.07.2020 passed by the Division Bench of this Court in the case of Narmada Clean­tech Versus Indian Council of Arbitration, passed in Letters Patent Appeal No.308 of 2020. After referring to the said decision, it is submitted that the present petition challenging the order of the learned Arbitrator is maintainable. It is, therefore, urged that this Court may entertain this petition and thereby quash and set aside the impugned order.

5. On the other hand, learned advocate Mr.Mrugen

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Purohit for respondent No.2 has opposed this petition and mainly contended that though this petition is maintainable as per the various decisions rendered by the Honourable Supreme Court, the scope of interference is very limited. It is submitted that ordinarily, High Court should not interfere with the order passed by the Arbitral Tribunal except where there are patent jurisdictional error. In the present case, the petitioner has failed to point out any patent jurisdictional error committed by respondent No.1 Arbitrator while passing the impugned order and, therefore, this petition may not be entertained.

5.2 Learned advocate for respondent No.2 has placed reliance upon the following decisions:

(1) SBP & Co. Vs. Patel Engineering Ltd. And Anr. reported in (2005) 8 SCC 618

(2) M/s. Deep Industries Ltd. Vs. ONGC and anr.

rendered vide judgment dated 28.11.2019 in Civil Appeal No.9106 of 2019

(3) Punjab State Power Corporation Ltd. Vs. EMTA Coal Ltd. And anr. rendered vide order dated 18.09.2020 passed in Special Leave to Appeal (C) No.8482 of 2020

5.3 Learned advocate Mr.Purohit thereafter has referred the provisions contained in Sections 5, 8,

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16, 17, 29A, 34 and 37 of the Act. It is thereafter submitted that even a non­signatory of the Agreement can be impleaded as party in the arbitration proceedings. Learned advocate has referred the Deed of Partnership and, thereafter, referred the claim statement filed by the petitioner. After referring to the averments made in the said claim petition/ application for injunction, it is submitted that the dispute is with regard to land bearing Survey No.2216 admeasuring 1­28­67 Hectare­Are­Sq. Mtrs., paiki Acre 1.27 Are, which is of the ownership of the partnership firm. It is submitted that looking to the said averment, in the facts of the present case, the presence of the petitioner is required in the arbitration proceedings. Respondent No.1 Arbitrator also considered the objections raised by the petitioner and allowed the application by specifically observing that during the course of arbitration proceedings, the present petitioner has specifically admitted that the said land in question is purchased by way of Agreement to Sell by the petitioner and for deciding the issue involved in the matter, presence of the petitioner is required. Thus, no error is committed by respondent No.1 while impleading the petitioner as party in the arbitration proceedings.

5.4 At this stage, learned advocate for respondent No.2 has placed reliance upon the following decisions:

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(1) Chloro Controls India Pvt. Ltd Vs. Severn Trent Water Purification INC and ors reported in (2013) 1 SCC 641

(2) Cheran Properties ltd. Vs. Kasturi and sons Ltd and Ors reported in (2018) 16 SCC 413

(3) JIFT Water Infrastructure Ltd. Vs. MSME Commissionerate rendered vide order dated 24.07.2020 passed in LPA No.1667 of 2019

(4) M/s. ONGC Ptero Additions Ltd. Vs. State of Gujarat rendered vide order dated 01.09.2020 passed in Special Civil Application No.7858 of

5.5 Learned advocate Mr.Purohit thereafter submitted that the petitioner is having alternative remedy and petitioner can challenge the impugned order under Section 34 of the Act at the time of challenging final award passed by the Arbitrator. It is, therefore, urged that this Court may not interfere with the impugned order. Learned advocate has placed reliance upon the decision rendered by the Division Bench of this Court in the case of Imc Limited Vs. Board of Trusteed of Deendayal Port Trust reported in 2019 (3) GLR 1798.

6. Having heard learned advocates appearing for the parties and having gone through the material placed on record, it is emerged that the Partnership Deed is

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executed between respondent Nos.2 and 3 and as per Clause No.13 of the said Partnership Deed, the dispute between respondent Nos.2 and 3 has been referred to respondent No.1 Arbitrator. From the material placed on record, it appears that in the application filed by respondent No.2 before respondent No.1 Arbitrator, there are specific averments made with regard to land bearing Survey No.2216 admeasuring 1­28­67 Hectare­Are­Sq. Mtrs. Paiki Acre 1.27 Are. The said land was purchased from the amount of the partnership firm. Agreement to Sell was executed on 08.09.2012 in the name of the present petitioner, who is the father of respondent No.3. It is specifically stated that respondent No.2 has paid Rs.56,00,000/­ for purchase of the land in question. It is also revealed that during the course of arbitration proceedings, the present petitioner has admitted certain aspects before respondent No.1 Arbitrator and, therefore, the application was filed by respondent No.2 for impleadment of the present petitioner and respondent No.1 Arbitrator has allowed the said application.

7. In the case of Imc Limited Vs. Board of Trusteed of Deendayal Port Trust (supra), the Division Bench of this Court has held in Paragraphs­39 and 41 as under:

"39. Further, it is also required to be noted that the scope of interference with the interim orders passed by the Arbitral Tribunal is considered by the Hon'ble Supreme Court in a judgment in the case of M/s.SBP and Co. v.

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M/s.Patel Engineering Ltd. And Anr. reported in 2006(1) GLH 105. In the aforesaid judgment, by a majority view, the Hon'ble Supreme Court has disapproved 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. Paragraphs 44 and 45, of the aforesaid judgment, which are relevant for the purpose, read as under:

"44. 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 in­between 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.

     45.       The   object      of    minimizing        judicial






       C/SCA/13800/2020                          ORDER

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."

xxx xxx xxx

41. In light of the view expressed by the Hon'ble Supreme Court in the judgments referred to above and considering that the learned Arbitral Tribunal itself has observed that only by considering the prima­facie case, such impleadment of the appellant is ordered, keeping open the contentions which are to be raised by the appellant and further, in view of the reasons recorded by us, as referred above, in our opinion, the learned Single Judge has not committed any error in dismissing the petition filed by the appellant herein."

8. In the case of M/s. Deep Industries Ltd. Vs. ONGC and anr. (supra), the Honourable Supreme Court has observed in Paragraph­10 to 13 as under:

"10. Having heard learned counsel for both parties, it is first necessary to set out certain provisions of the Arbitration & Conciliation Act, 1996. Section 5 states:­

5. Extent of judicial intervention.­ Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so

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provided in this Part.

Section 37 which is also material states as follows:­

37. Appealable orders.­ (1) An appeal shall lie from the following orders (and from no others) to the Court authorized by law to hear appeals from original decrees of the Court passing the order, namely:­

(a) refusing to refer the parties to arbitration under section 8;

(b) granting or refusing to grant any measure under section 9;

(c) setting aside or refusing to set aside an arbitral award under section 34. (2) An appeal shall also lie to a Court from an order granting of the arbitral tribunal.­

(a) accepting the plea referred in sub­ section (2) or sub­section (3) of section 16; or

(b) granting or refusing to grant an interim measure under section 17. (3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.

What is also important to note is that under Section 29A of the Act which was inserted by the Amendment Act, 2016 a time limit was made within which arbitral awards must be made, namely, 12 months from the date the arbitral tribunal enters upon the reference. Also, it is important to note that even so far as Section 34 applications are concerned, Section 34(6) added by the same amendment states that these applications are to be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub­section (5) is served upon

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the other parties.

11. Given the aforesaid statutory provision and given the fact that the 1996 Act repealed three previous enactments in order that there be speedy disposal of all matters covered by it, it is clear that the statutory policy of the Act is that not only are time limits set down for disposal of the arbitral proceedings themselves but time limits have also been set down for Section 34 references to be decided. Equally, in Union of India vs. M/s Varindera Const. Ltd., dated 17.09.2018, disposing of SLP (C) No. 23155/2013, this Court has imposed the self­same limitation on first appeals under Section 37 so that there be a timely resolution of all matters which are covered by arbitration awards.

12. Most significant of all is the non­obstante clause contained in Section 5 which states that notwithstanding anything contained in any other law, in matters that arise under Part I of the Arbitration Act, no judicial authority shall intervene except where so provided in this Part. Section 37 grants a constricted right of first appeal against certain judgments and orders and no others. Further, the statutory mandate also provides for one bite at the cherry, and interdicts a second appeal being filed (See Section 37(2) of the Act)

13. This being the case, there is no doubt whatsoever that if petitions were to be filed under Articles 226/227 of the Constitution against orders passed in appeals under Section 37, the entire arbitral process would be derailed and would not come to fruition for many years. At the same time, we cannot forget that Article 227 is a constitutional provision which remains untouched by the non­obstante clause of Section 5 of the Act. In these circumstances, what is important to note is that though petitions can be filed under Article 227 against

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judgments allowing or dismissing first appeals under Section 37 of the Act, yet the High Court would be extremely circumspect in interfering with the same, taking into account the statutory policy as adumbrated by us herein above so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction."

9. In the case of Punjab State Power Corporation Ltd. Vs. EMTA Coal Ltd. And anr.(supra), the Honourable Supreme Court once again held that powers under Article 227 of the Constitution of India can be exercised if there is a patent lack of inherent jurisdiction of the arbitrary Tribunal.

10. From the aforesaid decisions rendered by this Court and the Honourable Supreme Court, it can be said that the petition under Article 227 of the Constitution of India against the interim order passed by the Arbitral Tribunal is though maintainable, scope of interference of very limited.

11. From the discussion made hereinabove, it is clear that the petitioner has failed to point out any patent jurisdictional error committed by respondent No.1 while passing the impugned order.

12. Now, with regard to the aspect of impleadment of non­signatory party in the arbitration proceedings, the Division Bench of this Court in the case of Imc Limited Vs. Board of Trusteed of Deendayal Port Trust (supra), has observed in Paragraphs­33 and 34

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as under:

"33. Further, in the case of IVRCL Limited. v. Gujarat State Petroleum Corporation Limited And Anr. ­ First Appeal No.1714 of 2015 and other allied appeals, decided on 08­13/10/2015, a Division Bench of this Court held that it is no longer res­integra that in a given set of circumstances, even a non­signatory to an arbitral agreement can be subjected to arbitration proceedings. It is further observed that instances have been recognized by Courts where on the ground of piercing corporate veil, as one entity being found to be an alter ego of the other or on similar grounds, even a non­ signatory entity to an arbitration agreement is allowed to be joined in the arbitration proceedings. The Division Bench has disapproved the argument that, in no case, a non­signatory to the arbitration agreement can be compelled to submit to the jurisdiction of the Arbitral Tribunal validly constituted.

34. In view of the aforesaid judgments of the Hon'ble Supreme Court and Division Bench of this Court, we are not in agreement with the submission made by Shri S.N.Soparkar, learned Senior Counsel for the appellant, that the learned Arbitral Tribunal has no jurisdiction to examine the issue by lifting the corporate veil and further, on facts, no case is also made out to examine the claim of alter ego by lifting the corporate veil. Whether a case is made out for impleading a third party by applying the doctrine of lifting of corporate veil, is a matter which is to be examined having regard to facts of each case and keeping in mind the concept of group Companies. In the case on hand, it is not in dispute that initially, response to the RFQ is made by the appellant Company, RFP is issued to the appellant­Company, bid documents are submitted by the appellant­Company and only thereafter, pursuant to the terms in the RFP, 2nd respondent ­ SPV is registered by the appellant so as to execute the project. We have

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already held above that various clauses in the Concession Agreement also create rights and obligations not only against parties to the agreement but also against the appellant­ Company, which is a holding Company of the 2nd respondent ­ SPV. Even on facts, it cannot be said that the appellant­Company is a third party, has nothing to do with the disputes which have arisen between the 1st and 2nd respondents and has no obligations to the contract. In any event, the learned Arbitral Tribunal itself has opined that the findings recorded are prima­ facie and it is always open to contest the proceedings by participating before it. Even after impleadment, if the appellant disputes jurisdiction of the learned Arbitral Tribunal, all its objections are left open to be raised and considered at the appropriate stage."

13. In the case of Chloro Controls India Pvt. Ltd Vs. Severn Trent Water Purification INC and ors (supra), the Honourable Supreme Court has also observed in Paragraphs­72 to 76 as under:

"72. This evolves the principle that a non­ signatory party could be subjected to arbitration provided these transactions were with group of companies and there was a clear intention of the parties to bind both, the signatory as well as the non­signatory parties. In other words, 'intention of the parties' is a very significant feature which must be established before the scope of arbitration can be said to include the signatory as well as the non­signatory parties.

73. A non­signatory or third party could be subjected to arbitration without their prior consent, but this would only be in exceptional cases. The Court will examine these exceptions from the touchstone of direct relationship to the party signatory to the arbitration agreement, direct commonality of the subject

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matter and the agreement between the parties being a composite transaction. The transaction should be of a composite nature where performance of mother agreement may not be feasible without aid, execution and performance of the supplementary or ancillary agreements, for achieving the common object and collectively having bearing on the dispute. Besides all this, the Court would have to examine whether a composite reference of such parties would serve the ends of justice. Once this exercise is completed and the Court answers the same in the affirmative, the reference of even non­signatory parties would fall within the exception afore­ discussed.

74. In a case like the present one, where origin and end of all is with the Mother or the Principal Agreement, the fact that a party was nonsignatory to one or other agreement may not be of much significance. The performance of any one of such agreements may be quite irrelevant without the performance and fulfillment of the Principal or the Mother Agreement. Besides designing the corporate management to successfully complete the joint ventures, where the parties execute different agreements but all with one primary object in mind, the Court would normally hold the parties to the bargain of arbitration and not encourage its avoidance. In cases involving execution of such multiple agreements, two essential features exist; firstly, all ancillary agreements are relatable to the mother agreement and secondly, performance of one is so intrinsically inter­ linked with the other agreements that they are incapable of being beneficially performed without performance of the others or severed from the rest. The intention of the parties to refer all the disputes between all the parties to the arbitral tribunal is one of the determinative factor.

75. We may notice that this doctrine does not

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have universal acceptance. Some jurisdictions, for example, Switzerland, have refused to recognize the doctrine, while others have been equivocal. The doctrine has found favourable consideration in the United States and French jurisdictions. The US Supreme Court in Ruhrgos AG v Marathon Oil Co. [526 US 574 (1999)] discussed this doctrine at some length and relied on more traditional principles, such as, the non­ signatory being an alter ego, estoppel, agency and third party beneficiaries to find jurisdiction over the nonsignatories.

76. The Court will have to examine such pleas with greater caution and by definite reference to the language of the contract and intention of the parties. In the case of composite transactions and multiple agreements, it may again be possible to invoke such principle in accepting the pleas of nonsignatory parties for reference to arbitration. Where the agreements are consequential and in the nature of a follow­ up to the principal or mother agreement, the latter containing the arbitration agreement and such agreements being so intrinsically intermingled or inter­dependent that it is their composite performance which shall discharge the parties of their respective mutual obligations and performances, this would be a sufficient indicator of intent of the parties to refer signatory as well as non­signatory parties to arbitration. The principle of 'composite performance' would have to be gathered from the conjoint reading of the principal and supplementary agreements on the one hand and the explicit intention of the parties and the attendant circumstances on the other." (emphasis supplied)"

14. From the aforesaid decisions rendered by this Court and the Honourable Supreme Court, it is clear that a non­signatory or third party can be subjected to arbitration without their prior consent in

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exceptional cases. From the order passed by respondent No.1, it is clear that presence of the petitioner is required to decide the dispute between respondent Nos.2 and 3 and, therefore, the petitioner is impleaded as party respondent in arbitration proceedings.

15. Looking to the facts of the present case, this Court is of the view that no error is committed by respondent No.1 while passing the impugned order and, therefore, this Court is not inclined to exercise powers under Article 227 of the Constitution of India. Even otherwise, the petitioner is having alternative remedy of challenging the impugned order at the time of challenging the final award under Section 34 of the Act.

16. The petition is accordingly dismissed. However, it is to be observed that the observations made and findings recorded in this order are only for the purpose of deciding the issue prima­facie and all contentions of the parties are kept open for consideration before the Arbitral Tribunal or before any other forum.

(VIPUL M. PANCHOLI, J) piyush