Gujarat High Court
M/S Jitf Water Infrastructure ... vs M/S Aquafil Polymers Company ... on 12 March, 2021
Bench: Vipul M. Pancholi
C/SCA/1107/2021 CAVJUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 1107 of 2021
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE VIPUL M. PANCHOLI : Sd/
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1 Whether Reporters of Local Papers may be YES
allowed to see the judgment ?
2 To be referred to the Reporter or not ? YES
3 Whether their Lordships wish to see the
fair copy of the judgment ? NO
4 Whether this case involves a substantial
question of law as to the interpretation
of the Constitution of India or any NO
order made thereunder ?
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M/S JITF WATER INFRASTRUCTURE LIMITED
Versus
M/S AQUAFIL POLYMERS COMPANY PRIVATE LIMITED
=======================================================
Appearance:
MR RS SANJANWALA, Sr. Adv. with MR VIJAY SINH with MR
HEMANG H PARIKH(2628) for the Petitioner(s) No. 1
MR RASESH H PARIKH(3862) for the Petitioner(s) No. 1
MR MITUL SHELAT with MR RUTUL P DESAI(6498) for the
=======================================================
CORAM: HONOURABLE MR. JUSTICE VIPUL M. PANCHOLI
Date : 12/03/2021
CAV JUDGMENT
1. This petition, which is filed under Articles 226
and 227 of the Constitution of India, is directed
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against the order dated 29.11.2020 passed by the
learned Arbitrator in arbitration proceeding
between the petitioner and the respondent pending
before the Gujarat Chamber of Commerce Industries
(hereinafter referred to as "GCCI" for short)
bearing Reference No.GCCI/ADRC/A042.
2. The factual matrix of the present case is as
under,
2.1 It is the case of the petitioner that the
petitioner is a Company incorporated under
the provision of the Companies Act, 1956,
which entered into an agreement with M/s.
Aquafil - Wintech JV (hereinafter referred to
as "JV" for short), a joint venture of
Aquafil Polymers Co. Pvt. Ltd. It is stated
that the work order was executed on
08.08.2014 on turnkey basis. The said work
was related to procurement of Design, Supply,
Installation and Commissioning of Intake
Facilities, Transmission Mains, Water
Treatment Plant and Reservoir for North Zone
including 5 years of operation and
maintenance of JICA funded Guwahati Water
Supply Project. The said contract value was
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Rs.79.47 crores. It is alleged that because
of the lapse on the part of JV, entire work
was delayed and the petitioner communicated
to JV by sending various communications and
pointed out shortcomings in their service
being rendered for the project by JV.
2.2 It is stated that on 08.01.2018, the
petitioner sent notice through email and
thereby exercised its rights available under
the contract to terminate the contract as
envisaged under the contract vide Clause
No.19.2 and in pursuance to the termination,
the petitioner exercised its right as per
mandate of Clause No.19 in order to safeguard
its interest. Thereafter JV itself vide its
letter dated 08.02.2018 invoked Arbitration
Clause being Clause No.20.3 of the contract
and proposed the name of sole arbitrator to
adjudicate the dispute. The petitioner,
thereafter, sent communication on 14.02.2018
and refuted the contentions raised in the
letter of JV and pointed out that the
petitioner has the authority to appoint the
Arbitrator and not the JV. The petitioner,
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therefore, nominated another learned sole
Arbitrator to adjudicate the dispute. The
said learned Arbitrator vide notice dated
12.03.2018 entered into the reference and
directed the parties to appear before him on
30.03.2018 for preliminary hearing.
Thereafter on 24.03.2018, the JV informed the
petitioner that it would be approaching the
MSME Commissionerate with its claims as per
the mandate Micro, Small and Medium
Enterprises Development Act, 2006
(hereinafter referred to as "MSME Act"). The
petitioner, therefore, refuted the
contentions of JV on various grounds
including the ground that the JV is not
registered as Micro or Small or Medium
enterprise and, therefore, same cannot invoke
the provision of MSME Act.
2.3 It is stated that MSME Commissionerate issued
notice dated 10.04.2018 intimating to the
petitioner that the application from the
respondent has been filed against the
petitioner under Section 18(1) of the MSME
Act and thereby seeking recovery of delayed
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payment of Rs.12,34,11,703.68. The
petitioner, thereafter, filed reply on
23.04.2018 and contested the maintainability
of the said Reference under MSME Act. Inspite
of that, MSME Commissionerate vide its notice
dated 29.05.2018, intimated the petitioner to
attend the preliminary meeting, which was
scheduled on 31.05.2018 and in pursuance
thereto, the petitioner attended the said
meeting and requested for time to file reply
of the application and the documents were
provided to the petitioner. Thereafter, the
Council terminated conciliation proceeding
and passed an order dated 30.06.2018 and
referred the matter to GCCI for arbitration.
2.4 The petitioner, therefore, filed writ
petition being Special Civil Application
No.11169/2018 challenging the order dated
30.06.2018 before this Court. It is stated
that this Court vide order dated 09.09.2019
dismissed the said petition and, therefore,
the petitioner filed Letters Patent Appeal
No.1667/2019 before the Division Bench of
this Court. The said LPA has been dismissed
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on 24.07.2020. It is stated that during the
pendency of the said LPA, arbitration
proceeding commenced inspite of the fact that
GCCI, an institute facilitating arbitration,
was party to the said LPA.
2.5 It is the case of the petitioner that GCCI
vide order dated 14.09.2019 sought consent of
the learned Arbitrator to act as Arbitrator
in the disputes between the petitioner and
the respondent and in pursuance thereto, the
learned Arbitrator gave his consent on
19.09.2019 and same was informed to the
petitioner. The GCCI, vide communication
dated 30.09.2019, called upon the parties to
appear before the learned Arbitrator on
11.10.2019. It is further stated that first
meeting of arbitration proceeding was held on
11.10.2019, wherein the learned Arbitrator
directed the petitioner and the respondent to
complete pleadings within prescribed time
limit. The respondent/ claimant was asked to
file its statement of claim (SOC) on or
before 11.11.2019. The statement of defence
(SOD) and counter claim (CC), if any, shall
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be filed by the petitioner on or before
10.12.2019 and the reply to CC, if any, shall
be filed by the respondent/ claimant on or
before 24.12.2019 and the next date of
hearing of the arbitration proceeding was
scheduled on 22.01.2020.
2.6 It is stated that the respondent/ claimant
could not file SOC within prescribed date
and, therefore, an application was filed for
extension of time, which was allowed.
Thereafter, the respondent/ claimant filed
SOC. The petitioner was directed to file SOD
and CC within ten days' time and the said
order was passed on 22.01.2020.
2.7 It is further stated that on 20.02.2020, the
arbitration proceedings were conducted by the
learned Arbitrator, wherein the petitioner
filed an application seeking stay of
arbitration proceeding by stating that LPA
filed by the petitioner is pending before the
Division Bench of this Court. The learned
Arbitrator rejected the said application and
closed the right of the petitioner to file
its SOD. Thereafter, the matter was kept on
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24.03.2020 and, thereafter, the proceedings
were kept on 28.04.2020.
2.8 At this stage, it is stated that the Hon'ble
Supreme Court in exercise of jurisdiction
under Articles 141 and 142 of the
Constitution of India, vide its order dated
23.03.2020, passed in Suo Motu Writ Petition
(C) No.3/2020, whereby the Hon'ble Supreme
Court was pleased to extend the limitation
period under general law as well as specific
law whether condonable or not w.e.f.
15.03.2020. Thus, it is the case of the
petitioner that because of the order passed
by the Hon'ble Supreme Court, limitation
stopped running from 15.03.2020. Thereafter
by another order dated 06.04.2020 passed in
SMP (C) No.5/2020, the Hon'ble Supreme Court
in exercise of jurisdiction under Article 142
of the Constitution of India was pleased to
observe that no evidence shall be recorded
through video conferencing without the
consent of both the parties. In the meantime,
the Government of India declared lockdown
w.e.f. 25.03.2020 and, therefore, GCCI
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adjourned the hearing of the arbitration
proceeding indefinitely.
2.9 The petitioner has further stated that on
27.05.2020, the advocate for the respondent/
claimant informed the petitioner that the
date of hearing before the learned Arbitrator
is scheduled on 30.05.2020 and the witness of
the respondent/ claimant would be examined on
that day. The petitioner, therefore, filed
civil application on 28.05.2020 in LPA, which
was kept for orders, for stay of the
arbitration proceedings. The petitioner also
received communication from GCCI that hearing
is scheduled on 30.05.2020 through video
conferencing and thus, two days' time was
given to the petitioner for crossexamination
of witness of the respondent/ claimant. The
said application filed by the petitioner
before the Division Bench of this Court could
not be listed for hearing, therefore, the
petitioner addressed a letter dated
29.05.2020 to GCCI and requested for
adjournment on the grounds/ reasons mentioned
in the said communication. It is stated that
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the petitioner received communication through
email on 01.06.2020, whereby the petitioner
came to know that learned Arbitrator has
framed the issue on 30.05.2020 and examined
the sole witness of the respondent/ claimant
and even discharged the said witness without
even affording an opportunity of cross
examination. The proceedings were adjourned
to 18.06.2020 for arguments.
2.10 It is stated that one of the JV Partner of
respondent viz., Wintech Engineering Pvt.
Ltd. (Wintech) filed an application dated
18.06.2020 before the learned Arbitrator
praying for impleadment in the proceeding as
necessary party and requested that the claim
of the claimant be dismissed. The respondent
filed affidavit in reply on 25.06.2020 to the
said application. The learned Arbitrator vide
order dated 14.07.2020 dismissed the said
application of Wintech as withdrawn. The
learned Arbitrator recorded the compromise
entered into between the said parties, which
was beyond the scope of reference in the
arbitration proceedings.
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2.11 In the meantime, the Hon'ble Supreme Court
passed further orders on 10.07.2020
clarifying the applicability of limitation in
respect of completion of pleading in
arbitration proceedings. It is stated that
the said order was in context of Section 29A
and 23(4) of the Arbitration & Conciliation
Act, 1996 (hereinafter referred to as
"Arbitration Act").
2.12 It is stated that as the Division Bench
dismissed LPA No.1667/2019 filed by the
petitioner vide order dated 24.07.2020, prior
to that on 21.07.2020, when the arbitration
proceedings were listed, the petitioner filed
an application for permitting to file SOD, CC
and also to crossexamine the witness of the
respondent. It is stated that the learned
Arbitrator vide impugned order dated
29.07.2020, after hearing the arguments of
the parties, directed the petitioner to file
additional affidavit. The same was filed on
04.08.2020. Thereafter, the learned
Arbitrator vide impugned order dated
29.11.2020, dismissed the application filed
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by the petitioner with exemplary cost. The
petitioner, therefore, filed the present
petition.
3. Heard learned Senior advocate, Mr. R.S. Sanjanwala
assisted by learned advocate, Mr. Vijay Sinh and
learned advocate, Mr. Hemang Parikh for the
petitioner and learned advocate, Mr. Mitul Shelat
assisted by learned advocate, Mr. Rutul Desai
appearing for the respondent.
4. SUBMISSIONS CANVASSED BY LEARNED SENIOR ADVOCATE,
MR. R.S. SANJANWALA APPEARING FOR THE PETITIONER.
4.1 At the outset, it is pointed out about
maintainability of the present petition as
the respondent has raised the issue with
regard to the maintainability of the present
petition under Articles 226 and 227 of the
Constitution of India. It is contended that
this petition is maintainable against the
impugned order in view of the law laid down
by the Hon'ble Supreme Court in case of
Bhaven Constructions Vs. Executive Engineer
Sardar Sarovar Narmada Nigam Ltd. & Anr.,
reported in 2021 SCC Online SC 8. It is
submitted that the Hon'ble Supreme Court,
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after considering the previous judgments,
held that the High Court can interfere in
case of exceptional circumstances or bad
faith in exercise of jurisdiction under
Articles 226 and 227 of the Constitution of
India and the jurisdiction of this Court is
broad and pervasive and, therefore, this
petition is maintainable.
4.2 After addressing on merits of the case, it is
contended that the learned Arbitrator while
passing impugned order, held that the
Arbitral Tribunal can exercise the power of
procedural review, if sufficient cause is
made out, but the application filed by the
petitioner was dismissed on the ground that
if the application filed by the petitioner is
allowed, the learned Tribunal will have to
permit the petitioner to file SOD and CC and,
thereafter, the respondent/ claimant would be
permitted to file reply to the CC and,
thereafter, the admission, denial would be
carried out, issues will be framed and
witnesses will have to be examined, which
would delay the proceedings. It is submitted
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that in fact, the petitioner has given
sufficient cause for not filing SOD before
the learned Arbitrator. It was pointed out
that the petitioner filed petition
challenging the order of GCCI to relegate the
petitioner through arbitration to be
conducted by GCCI. It is submitted that
thereafter, the petitioner immediately filed
LPA No.1667/2019, wherein the arguments were
concluded on 08.01.2020 and the Division
Bench of this Court kept the said matter for
orders and, thereafter, the judgment was
pronounced by the Division Bench on
24.07.2020. It is submitted that the
petitioner had never anticipated that the
pronouncement of the judgment will take such
considerable time. It is submitted that due
to exceptional circumstances and prevailing
COVID19 situation, it took time for passing
judgment in LPA, which was dismissed only on
24.07.2020. It is submitted that therefore
the petitioner was bonafidely pursuing the
remedy before this Court and when the
petitioner has challenged the jurisdiction of
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the learned Arbitrator by filing the
aforesaid petition, request was made to the
learned Arbitrator to adjourn the proceeding
and thus, sufficient cause was shown by the
petitioner before the learned Arbitrator.
4.3 It is further submitted that the time limit
for filing SOC and SOD under Section 23(4) of
the Arbitration Act has not expired till
date. It is submitted that the learned
Tribunal was constituted on 27.09.2019 and
thus, time period of six months under Section
23(4) of the Arbitration Act would have
expired on 27.03.2020, by which, the Hon'ble
Supreme Court suspended all the period of
limitation and the said order is also
applicable to the provision of Section 23(4)
of the Arbitration Act. It is, therefore,
submitted that because of the extra ordinary
situation, the period of six months has not
yet expired and thus, the learned Arbitrator
ought to have taken lenient view and ought to
have permitted the petitioner to file SOD and
CC and also permitted the petitioner to
crossexamine the witness of the respondent/
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claimant.
4.4 At this stage, it is further contended that
the right to defence is a basic right and,
therefore, the learned Arbitrator ought to
have taken liberal view and when the
petitioner has pointed out sufficient cause,
the application filed by the petitioner was
required to be allowed instead of dismissing
the same with exemplary cost.
4.5 It is further submitted that the learned
Arbitrator has recorded the evidence of the
witnesses of respondent/ claimant through
video conferencing though the Hon'ble Supreme
Court passed an order dated 06.04.2020,
wherein the Hon'ble Supreme Court directed
that in no case, evidence shall be recorded
without mutual consent of both the parties by
video conferencing and the said order was
modified on 26.10.2020. It is, therefore,
submitted that thus the learned Arbitrator
has committed an error while examining the
witness of the respondent/ claimant through
video conferencing without the consent of the
petitioner. It is further submitted that
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closing of right of the petitioner to file CC
has caused serious prejudice to the
petitioner and on the other hand, if the
petitioner is permitted to file CC and to
crossexamine the witness of the respondent/
claimant, no prejudice would be caused to the
respondent/ claimant and more particularly
when the period of limitation is extended by
the Hon'ble Supreme Court, therefore, the
time line provided under Section 23(4) of the
Arbitration Act will not be disturbed and the
respondent/ claimant can be easily
compensated. It is further submitted that
even this Court can fix the time limit for
filing SOD and CC by the petitioner and to
crossexamine the witness of the respondent/
claimant and the petitioner will adhere to
said time limit, therefore in the interest of
justice, same be permitted by quashing and
setting aside the impugned order.
4.6 It is contended that even in case of normal
civil proceeding, where the right to file SOD
and CC is closed by the concerned civil
court, ordinarily this Court can exercise the
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powers under Article 227 of the Constitution
of India directing the concerned civil court
to reopen the said stage, however merely
because here the time limit is prescribed
under the Arbitration Act, this Court may not
refuse to exercise the power under Article
227 of the Constitution of India and more
particularly, when the petitioner was
legitimately and under bonafide impression
pursuing the remedy before this Court, there
was no intention on the part of the
petitioner to derail the arbitration
proceeding. It is, therefore, submitted that
the learned Arbitrator ought to have decided
the application filed by the petitioner
sympathetically and ought to have taken
liberal view. It is also contended that the
conduct of the petitioner is not such that
right to defend can be closed by the learned
Arbitrator.
4.7 Reliance has been placed upon various
provision of MSME Act as well as Arbitration
Act in support of the submissions made on
behalf of the petitioner.
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4.8 It is submitted that though the impugned
order passed by the learned Arbitrator can be
challenged after the award is passed under
Section 34 of the Arbitration Act, there is
provision of predeposit and, therefore, the
said remedy is onerous and, therefore, this
Court may interfere with the impugned order
at this stage.
4.9 Reliance has been placed upon the judgment of
the Hon'ble Supreme court in case of Kailash
Vs. Nankhu Co., reported in (2005) 4 SCC 480.
4.10 Lastly, it is submitted that reliance placed
by learned advocate for the respondent on the
decisions which are supplied by way of
separate compilation, are not applicable to
the facts of the present case.
5. SUBMISSIONS CANVASSED BY LEARNED COUNSEL, MR.
MITUL SHELAT APPEARING FOR THE RESPONDENT.
5.1 The petition has been opposed on the ground
that the same is not maintainable and this
Court may not exercise the jurisdiction under
Articles 226 and 227 of the Constitution of
India. It is submitted that subject reference
is under the provision of the MSME Act and
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under Section 19 of the MSME Act read with
Section 34 of the Arbitration Act, the
petitioner has statutory remedy of assailing
any order passed by the learned Arbitrator
while assailing the award. Reliance has been
placed upon the decision rendered in case of
Devi Enterprise Ltd. Vs. State Level Industry
Facilitation Council, Through Member & Ors.,
reported in AIR 2015 GUJ 114.
5.2 It is further submitted that the scheme of
the said Act has been considered by the
Division Bench of this Court in LPA
No.1667/2019 and merely because Appellate
Remedy requires predeposit, is no ground for
entertaining a challenge under Articles 226
and 227 of the Constitution of India. In
support of this submission, reliance has been
placed upon the judgments in case of Pam
Development (Pvt.) Ltd. Vs. State of West
Bengal, reported in (2019) 8 SCC 112, in case
of Snehadeep Structures Private Limited Vs.
Maharashtra Small Scale Industries
Development Corporation Limited, reported in
(2010) 3 SCC 34 and in case of In Modern
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Industries Vs. Steel Authority of India
Limited, reported in (2010) 5 SCC 44. At this
stage, it is also submitted that the
Arbitration Act is a selfcontained code,
which provides for remedies for various
issues which may arise during the course of
arbitral proceedings. Relying upon the
provision contained in Section 5 of the
Arbitration Act, it is contended that same
prohibits judicial intervention except as
provided by PartI of the Arbitration Act,
for which, PartI of the Arbitration Act has
been referred to. Thus it is contended that
the parties cannot seek any remedy outside
the provision of the Act including filing of
the petition before this Court.
5.3 On the aforesaid point, it is further
submitted that the intervention of the High
Court under Articles 226 and 227 of the
Constitution of India against the order
passed by the Arbitral Tribunal is not
permissible. It is submitted that the
Arbitral Tribunal is not adjudicating any lis
which is in the nature of public law remedy
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and the lis is in the nature of private
contractual dispute and remedy is regulated
under the Act itself. In support of the said
contention, reliance has been placed upon
following decisions,
(1) In case of M/s. S.B.P. & Co. Vs. M/s.
Patel Engineering Ltd. & Anr., reported
in 2006 (1) GLH 105;
(2) In case of Lalitkumar V. Sanghavi (dead)
Through Lrs. Neeta Lalit Kumar Sanghavi
& Anr. Vs. Dharamdas V. Sanghavi & Ors.,
reported in (2014) 7 SCC 255.
5.4 At this stage, reliance has been placed upon
the judgment in case of GTPL Hathway Ltd. Vs.
Strategic Marketing Pvt. Ltd., reported in
2020 (4) GLH 1 and after referring to the
said judgment, it is submitted that the issue
regarding the maintainability of a challenge
to the order passed during the course of
arbitral proceeding has been considered in
this judgment and this Court has held that
the order passed during the arbitration
proceeding by the Arbitral Tribunal cannot be
challenged under Articles 226 and 227 of the
Constitution of India.
5.5 At this stage, it is pointed out that even in
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case of Bhaven Constructions (supra), upon
which reliance has been placed by learned
advocate for the petitioner, the Hon'ble
Supreme Court has held that the petition
under Articles 226 and 227 of the
Constitution of India is not maintainable
challenging the orders passed by the Arbitral
Tribunal except under exceptional
circumstances inasmuch as the petitioner is
not left remediless under the statute nor is
there any bad faith by one of the parties.
5.6 Reliance has also been placed upon the
decision rendered by the Hon'ble Supreme
Court in case of Punjab State Power
Corporation Vs. Emta Coal Ltd. & Anr.,
delivered in Special Leave to Appeal (C)
No.8482/2020, wherein the decision rendered
in case of Deep Industries Ltd. Vs. Oil and
Natural Gas Corporation Ltd. & Anr., reported
in (2019) SCC Online SC 1602 has been
explained again. It is held that the power
under Article 227 of the Constitution of
India can be exercised only in respect of the
cases, which suffer from the patent lack of
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inherent jurisdiction, however in the facts
of the present case, the petitioner has not
demonstrated any ground suggesting any patent
lack of inherent jurisdiction of the Arbitral
Tribunal. It is also submitted that the
standard of review applicable to challenge
arising out of the exercise of powers under
the Arbitration Act is circumscribed. In the
proceeding under Article 226 of the
Constitution of India, the Court would
confine the review only to consider as to
whether the exercise of power is within the
jurisdiction of the Tribunal. It is not to
correct error, which is apparent on the face
of the record, much less an error of law and
the Court could not act as an Appellate Court
or Tribunal. The Court cannot review or
reweigh the evidence upon which the order has
been passed or correct errors of law in
decision. In support of this contention,
reliance has been placed upon the decision in
case of Sadhana Lodh Vs. National Insurance
Co. Ltd. & Anr., reported in (2003) 3 SCC
524.
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5.7 It is further submitted that the scheme of
Arbitration Act mitigates against the
judicial intervention. The intention is to
ensure certainty and expediency in conduct of
arbitration proceeding. Thus, the petition
under Articles 226 and 227 of the
Constitution of India is not maintainable in
law. Reliance has been placed upon the
judgment in case of Uttarakhand Purv Sainik
Kalyan Nigam Ltd. Vs. Northern Coal Field
Ltd., reported in (2020) 2 SCC 455, in case
of Bhaven Construction Vs. Executive Engineer
Sardar Sarovar Narmada Nigam Ltd. & Anr.,
reported in 2021 SCC Online SC 8 and in case
of Sterling Industries Vs. Jayprakash
Associates Ltd. & Ors., reported in 2019 SCC
Online SC 1154.
5.8 It is also submitted that the petitioner is
not pursuing the proceeding bonafidely as the
joint venture is not impleaded in the memo of
petition and the writ proceeding does not
continue the cause title as is before the
Arbitral Tribunal. It is also contended that
the petitioner has suppressed material facts.
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It is pointed out that the petitioner has
filed substantive application before the
Arbitral Tribunal; one application is filed
seeking waiver of order of costs imposed vide
impugned order dated 29.11.2020, thereafter,
another application is filed for stay of the
proceeding. The petitioner has also
challenged the mandate of the Arbitral
Tribunal and prayed that the Arbitral
Tribunal should not proceed further with the
Reference. Thus on this ground also, this
petition may not be entertained.
5.9 It is thereafter submitted that the
petitioner has mislead this Court by
asserting that the petitioner is willing to
proceed with the arbitral proceeding before
the Arbitral Tribunal in whatever time
scheduled prescribed by the Court. In fact,
the petitioner has challenged the mandate of
the Arbitral Tribunal and prayed that the
Arbitral Tribunal must not proceed with the
Reference. Thus looking to the conduct of the
petitioner also, this Court may not consider
the case of the petitioner.
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5.10 It is also pointed out from the record that
the hearing of LPA was concluded on
08.01.2020 and at no point of time during
hearing or thereafter, this Court has stayed
the arbitral proceeding. Stage for filing
written statement was closed vide order dated
20.02.2020 and at the said point of time,
there was no pandemic nor there was any cause
available with the petitioner not to file
written statement. In fact, SOC was received
by the petitioner on 20.11.2019 and SOD was
not filed till 20.02.2020. The petitioner has
even not made request for seeking extension
of time. The only reason sought was pendency
of the proceeding before this Court but there
was no stay granted by this Court, therefore,
the petitioner ought to have participated in
the arbitral proceeding. It is further
submitted that the lockdown was imposed by
the Government on 23.03.2020 and, therefore,
the same has no bearing on the validity of
the order dated 20.02.2020. It is further
submitted that the intention of the
petitioner is to adopt dilatory tactics by
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initiating the proceeding by one after
another. The proceeding before this Court was
filed on the premise of jurisdiction, however
thereafter, the said issue was expressly
given up by the petitioner before the
Arbitral Tribunal. Thus looking to the
conduct of the petitioner, this Court may not
entertain the present petition.
5.11 After referring to Section 23(4) of the
Arbitration Act, it is submitted that the
said provision does not confer any right upon
the parties. In fact, it is a mandate upon
the Arbitral Tribunal to ensure that the
pleadings are completed within a period of
six months. It circumscribes the jurisdiction
of the Tribunal. It is further submitted that
the order under Section 19 of the Arbitration
Act would bind the parties and in the present
case, such type of order passed by the
Arbitral Tribunal fixing the time limit for
filing pleadings is not challenged by the
petitioner. Thus, it is not correct on the
part of the petitioner to contend that
Section 23(4) of the Arbitration Act confer
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right upon the petitioner to submit his
defence within a period of six months. It is
further submitted that the decision rendered
in case of Kailash Vs. Nanhku (supra) upon
which reliance has been placed by the
petitioner would not render any assistance to
the petitioner in the facts of the present
case.
5.12 It is also contended that the petitioner has
failed to point out sufficient cause before
the learned Arbitrator for not filing SOD and
CC within stipulated time. Merely LPA was
pending before the Division Bench of this
Court, which was kept for orders without any
stay granted by this Court, cannot be treated
as sufficient cause and does not operate as
stay of the impugned order passed by the
learned Single Judge assailed in the Appeal.
At his stage, reliance has been placed upon
following decisions,
(1) In case of State of Uttar Pradesh & Ors.
Vs. Combined Chemicals Company Pvt.
Ltd., reported in (2011) 2 SCC 151;
(2) In case of Atma Ram Properties (P) Ltd.
Vs. Federal Motos (P) Ltd., reported in
C/SCA/1107/2021 CAVJUDGMENT
(2005) 1 SCC 705;
(3) In case of Bharti Airtel Ltd. & Ors. Vs.
Union of India, reported in 2016 SCC
Online Delhi 2872;
(4) In case of Collector of Customs, Bombay
Vs. M/s. Krishna Sales (P) Ltd.,
reported in AIR 1994 SC 1239 = 1994
Suppl. (3) SCC 73.
5.13 At this stage, it is also pointed out that
additional affidavit dated 04.08.2020 filed
by the petitioner before the Arbitral
Tribunal also does not state any cause much
less any sufficient cause. Same refers to
"discussion with inhouse counsel". It is
submitted that the affidavit does not state
the name of inhouse counsel nor placed on
record any opinion given by the counsel.
Assertion that though it is on account of the
advice of lawyer, cannot be accepted. Even
otherwise, advice of the lawyer is not
sufficient cause. In support of the said
contention, reliance has been placed upon the
decision of Delhi High Court as well as
Calcutta High Court and, thereafter,
submitted that defiance and noncompliance of
procedural orders cannot be a cause, much
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less any sufficient cause. In fact, each of
the cause set out by the petitioner is a
consequence of conscious decision made by the
petitioner contrary to express order passed
by the Arbitral Tribunal.
5.14 It is further submitted that the petitioner
has made reference to the order dated
06.04.2020 passed by the Hon'ble Supreme
Court in Suo Motu Writ (C) No.5/2020 in
support of its case, however, the said order
was never relied upon during the course of
hearing before the learned Arbitrator. Even
otherwise, the Hon'ble Supreme Court has
subsequently passed an order on 26.10.2020.
Upon combine reading of the said orders, it
is contended that same has no application to
arbitral procedural per se. The discretion
was vested with the concerned Court to
proceed with the crossexam1994ination even
without consent. At this stage, it is pointed
out that the order dated 30.05.2020 passed by
the Arbitral Tribunal closing the right of
the petitioner to crossexamine the witness
of the respondent/ claimant is also not under
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challenge.
5.15 After referring to the reasoning recorded by
the learned Arbitrator while passing impugned
order, it is contended that no error is
committed by the learned Arbitrator while
rejecting the application filed by the
petitioner and, therefore, this Court may not
interfere with the said order. It is,
therefore, urged that this petition be
dismissed.
DISCUSSION AND FINDINGS:
6. Having heard learned advocates appearing for the
parties and having gone through the material
placed on record, first of all, the issue with
regard to maintainability of the present petition
is required to be decided as learned advocate
appearing for the respondent has raised
preliminary issue with regard to maintainability
of the present petition and placed reliance upon
various decisions rendered by this Court as well
as the Hon'ble Supreme Court.
7. In case of M/s. S.B.P. & Co. Vs. M/s. Patel
Engineering Ltd. & Ors. (supra), the Hon'ble
Supreme Court has observed in Para Nos.44 and 45
C/SCA/1107/2021 CAVJUDGMENT
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
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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
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."
8. In case of Lalitkumar V. Sanghavi (supra), the
Hon'ble Supreme Court has once again referred to
and relied upon the decision rendered in case of
M/s. S.B.P. & Co. Vs. M/s. Patel Engineering Ltd.
& Ors. (supra), more particularly, the
observations made in Para No.45 of the said
decision.
9. In case of Deep Industries Ltd. (supra), the
Hon'ble Supreme Court has observed in Para Nos.2
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and 16 as under,
"2) The present appeal raises important
questions relating to the High Court's
exercise of jurisdiction under Article 227
of the Constitution of India when it comes
to matters that are decided under the
Arbitration and Conciliation Act, 1996
("the Act" for short).
16) 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 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."
10. Recently, the Hon'ble Supreme Court in case of
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Punjab State Power Corporation (supra) once again
referred to and relied upon the decision rendered
in case of Deep Industries Ltd. (supra) and made
following observations,
"We are of the view that a foray to the
writ Court from a section 16 application
being dismissed by the Arbitrator SLP (C)
No. 8482/2020 can only be if the order
passed is so perverse that the only
possible conclusion is that there is a
patent lack in 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.
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 leads to a patent lack of inherent
jurisdiction. The High Court ought to have
discouraged similar litigation by imposing
heavy costs. The High Court did not choose
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to do either of these two things. In any
case, now that Shri Vishwanathan has argued
this matter and it is clear that this is
not a case which falls under the extremely
exceptional category, we dismiss this
special leave petition with costs of
Rs.50,000/ to be paid to the Supreme Court
Legal Services Committee within two weeks."
11. In case of Sterling Industries (supra), the
Hon'ble Supreme Court has once again referred to
and relied upon Para No.45 of the decision
rendered in case of M/s. S.B.P. & Co. Vs. M/s.
Patel Engineering Ltd. & Ors. (supra).
12. In case of Bhaven Construction (Supra), the
Hon'ble Supreme Court has observed in Para Nos.10
to 12 and 18 to 22 as under,
"10. Having heard both parties and perusing the
material available on record, the question
which needs to be answered is whether the
arbitral process could be interfered under
Article 226/227 of the Constitution, and
under what circumstance?
11. We need to note that the Arbitration Act is
a code in itself. This phrase is not merely
perfunctory, but has definite legal
consequences. One such consequence is
spelled out under Section 5 of the
Arbitration Act, which reads as under
"Notwithstanding anything contained in any
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other law for the time being in force, in
matters governed by this Part, no judicial
authority shall intervene except where so
provided in this Part." The nonobstante
clause is provided to uphold the intention
of the legislature as provided in the
Preamble to adopt UNCITRAL Model Law and
Rules, to reduce excessive judicial
interference which is not contemplated
under the Arbitration Act.
12. The Arbitration Act itself gives various
procedures and forums to challenge the
appointment of an arbitrator. The framework
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 solutions.
18. 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.
19. In this context we may observe M/s. Deep
Industries Limited v. Oil and Natural Gas
Corporation Limited, (2019) SCC Online SC
C/SCA/1107/2021 CAVJUDGMENT
1602, wherein interplay of Section 5 of the
Arbitration Act and Article 227 of the
Constitution was analyzed as under:
"15. Most significant of all is the
non obstante 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)
16. 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 non
obstante clause of Section 5 of the
Act. In these circumstances, what is
important to note is that though
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petitions can be filed under Article
227 against 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."
20. In the instant case, Respondent No. 1 has
not been able to show exceptional
circumstance or 'bad faith' on the part of
the Appellant, to invoke the remedy under
Article 227 of the Constitution. No doubt
the ambit of Article 227 is broad and
pervasive, however, the High Court should
not have used its inherent power to
interject the arbitral process at this
stage. It is brought to our notice that
subsequent to the impugned order of the
sole arbitrator, a final award was rendered
by him on merits, which is challenged by
the Respondent No. 1 in a separate Section
34 application, which is pending.
21. Viewed from a different perspective, the
arbitral process is strictly conditioned
upon time limitation and modeled on the
'principle of unbreakability'. This Court
in P. Radha Bai v. P. Ashok Kumar, (2019)
13 SCC 445, observed:
C/SCA/1107/2021 CAVJUDGMENT
36.3. Third, Section 34(3) reflects
the principle of unbreakability. Dr
Peter Binder in International
Commercial Arbitration and
Conciliation in UNCITRAL Model Law
Jurisdictions, 2nd Edn., observed:
"An application for setting aside
an award can only be made during the
three months following the date on
which the party making the application
has received the award. Only if a
party has made a request for
correction or interpretation of the
award under Article 33 does the time
limit of three months begin after the
tribunal has disposed of the request.
This exception from the threemonth
timelimit was subject to criticism in
the working group due to fears that it
could be used as a delaying tactics.
However, although "an unbreakable
timelimit for applications for
setting aside" was sought as being
desirable for the sake of "certainty
and expediency" the prevailing view
was that the words ought to be
retained "since they presented the
reasonable consequence of Article 33".
According to this "unbreakability" of time
limit and true to the "certainty and
expediency" of the arbitral awards, any
grounds for setting aside the award that
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emerge after the threemonth timelimit has
expired cannot be raised.
37. Extending Section 17 of the Limitation
Act would go contrary to the principle
of "unbreakability" enshrined under
Section 34(3) of the Arbitration Act.
(emphasis supplied)
22. If the Courts are allowed to interfere with
the arbitral process beyond the ambit of
the enactment, then the efficiency of the
process will be diminished.
13. In case of GTPL Hathway Ltd. (supra), this Court
has observed in Para Nos.3 and 14 as under,
"3. Short question which arises for
consideration of this Court is whether the
any order passed during pendency of
arbitration proceedings under the Act1996
can be challenged by certiorari under
Articles 226 and 227 of the Constitution of
India or not.
14. In view of aforesaid conspectus of law, and
considering the provisions of the Act,
1996, the order passed by the Arbitration
Tribunal during the course of Arbitration
cannot be challenged by the petitioner
under Articles 226 and/or 227 of the
Constitution of India when the constitution
bench of the Apex Court in case of M/s.
S.B.P. And Co. v. M/s. Patel Engineering
Ltd. And Anr.(supra) has disapproved the
stand that any order passed by the Arbitral
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Tribunal is capable of being corrected by
the High Court under Articles 226 and 227
of the Constitution of India and has
categorically held that such intervention
by the High Court is not permissible. The
Apex Court in case of M/s. Deep Industries
Limited v. Oil and Natural Gas Corporation
(supra) has held that it is also important
to notice that the seven Judge Bench has
referred to the object of the Act being
that of minimizing judicial intervention
and that this important object should
always be kept in the forefront when a 227
petition is being disposed of against
proceedings that are decided under the
Act,1996 and that the policy of the Act is
speedy disposal of arbitration cases as the
Act,1996 is 'selfcontained' Code and deals
with all the cases."
14. Thus from the aforesaid decisions rendered by the
Hon'ble Supreme Court as well as this Court, it
can be said that the petition under Articles 226
and 227 of the Constitution of India is though
maintainable, the scope of interference is very
limited and the powers can be exercised when the
orders passed by the Arbitral Tribunal are
patently lacking inherent jurisdiction. The
Arbitration Act is a code in itself and it gives
very procedures and forums to challenge the
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appointment of the Arbitrator. The ambit of
Article 227 of the Constitution of India is broad
and pervasive and the High Court should not use
its inherent power to interject the arbitral
process at the interim stage. If the High Court is
allowed to interfere with the arbitral process
beyond the ambit of the enactment, then the
efficiency of the process will be diminished.
15. At this stage, the conduct of the petitioner is
also required to be considered by this Court while
considering the case of the petitioner. From the
facts of the present case, it is revealed that the
arguments of LPA were over on 08.01.2020 and the
Division Bench kept the matters for orders and,
hence in absence of any stay in favour of the
petitioner, the petitioner ought to have
cooperated with the arbitration proceeding. It is
required to be noted that as stated above, the
hearing of LPA was concluded on 08.01.2020 and at
no point of time during hearing or thereafter,
this Court has stayed the arbitral proceeding. As
can be seen from the record, the stage for filing
written statement was closed vide order dated
20.02.2020 and at the relevant point of time,
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there was no pandemic nor there was any cause
available with the petitioner not to file written
statement. As per the direction issued by the
learned Arbitrator, the respondent/ claimant filed
SOC, which was received by the petitioner on
20.11.2019, however till 20.02.2020, SOD was not
filed by the petitioner nor even the petitioner
has made any request for seeking extension of
time. The only reason sought was pendency of the
proceeding i.e. LPA filed by the petitioner before
this Court but admittedly there was no stay
granted by this Court, therefore, the petitioner
ought to have participated in the arbitral
proceeding. It is further submitted that the
lockdown was imposed by the Government on
23.03.2020 and, therefore, the same has no bearing
on the validity of the order dated 20.02.2020.
Thus from the conduct of the petitioner, it is
revealed that the petitioner has tried to adopt
dilatory tactics by initiating the proceeding one
after another. The proceeding before this Court
was filed on the premise of jurisdiction, however
thereafter, the said issue was expressly given up
by the petitioner before the Arbitral Tribunal.
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16. The contention of learned advocate appearing for
the respondent with regard to suppression of
material facts by the petitioner is also required
to be considered. From the facts of the case and
material produced on record, it is revealed that
while pursuing proceeding by the petitioner, the
joint venture is not impleaded in the memo of
petition and the writ proceeding does not continue
the cause title as is before the Arbitral
Tribunal. It is also revealed that the petitioner
has filed substantive application before the
Arbitral Tribunal; one application is filed
seeking waiver of order of costs imposed vide
impugned order dated 29.11.2020, thereafter,
another application is filed for stay of the
proceeding. Even by filing appropriate
application, the petitioner has challenged the
mandate of the Arbitral Tribunal and prayed that
the Arbitral Tribunal should not proceed further
with the Reference. Thus, the petitioner has
mislead this Court by asserting that the
petitioner is willing to proceed with the arbitral
proceeding before the Arbitral Tribunal in
whatever time scheduled prescribed by the Court.
C/SCA/1107/2021 CAVJUDGMENT
17. In view of the above, this court is of the view
that learned counsel for the respondent is correct
that the petitioner has not disclosed the relevant
facts of filing of application before the Arbitral
Tribunal in the present case, therefore, this
conduct of the petitioner, is also required to be
kept in view while entertaining the present
petition.
18. At this stage, another contention raised by
learned advocate appearing for the parties is also
required to be decided by this Court. Learned
advocate appearing for the respondent has
contended that subject reference is under the
provision of the MSME Act and under Section 19 of
the MSME Act read with Section 34 of the
Arbitration Act, the petitioner has statutory
remedy of assailing any order passed by the
learned Arbitrator at the time of assailing the
award. On the other hand, learned advocate for the
petitioner has contended that though the impugned
order can be challenged at the time of assailing
the award under Section 34 of the Arbitration Act,
the condition to predeposit as per Section 19 of
MSME Act is onerous and, therefore, the said
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remedy cannot be considered as efficacious remedy.
19. To consider the aforesaid submission canvassed by
learned advocates for the parties, the decision
rendered by this Court in case of Devi Enterprise
Ltd. (supra), is required to be referred to. In
the said case, the Division Bench has observed in
Para Nos.7, 8 and 9 as under,
"7. Having gone through the provision of the
law, we are of the opinion that the
condition of predeposit of 75% introduced
by Section 19 of the Act is valid and does
not suffer from the vice of
unconstitutionality. The reasonable
restrictions can always be imposed by the
legislation by putting conditions. While
enhancing condition of predeposit with
the main section, the object sought to be
achieved was that there shall be no
dilatory tactics. Such an object of the
legislature cannot be said to be
arbitrary, unconstitutional or ultra
vires. Therefore, we are of the considered
opinion that the provisions of Section 19
of the Act are not ultra vires to any
constitutional provision either Article 14
or Article 19(1)(g) of the Constitution of
India.
8. Mr.Saurabh G.Amin, learned advocate for
respondent No.3Union of India has placed
reliance on the decision of the Karnataka
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High Court in the case of Karnataka Power
Transmission Corporation Limited and
another Vs. Union of India and others,
reported in (2013)1 Karnataka LJ 497 =
(2012)0 Supreme (Karnataka) 500 [Writ
Petition Nos. 22370371/2010, C/W. 22374
375/2010, 22377378/2010, 40138, 40140 &
40141/2011 (GMRes), decided on 13 th
September, 2012] and he has also submitted
that paragraphs 24 to 27 be treated as a
part of his argument. Paragraphs 24 to 27
of the said decision of the Karnataka High
Court is reproduced below:
"24. This takes us to the vires of Section
19 of the Act. Mr.Naganand, learned
Senior counsel appearing for the
respondent submits that having regard
to the decision rendered by the Apex
Court in Mardia Chemical's case, the
appeal or the remedy should not be
illusory. He submitted that the
condition imposed under Section 19 of
the Micro Act is onerous.
25. Indeed provisions of the
Securitization Act fell for
consideration before the Apex Court in
the case of Mardia Chemicals Ltd.,
etc. etc. V/s Union of India and other
etc. reported in AIR 2004 SC 2371. The
condition of predeposit under the Act
was held to be illusory on the grounds
that :
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(i) It is imposed while approaching
the adjudicating authority for
the first instance, not in
appeal;
(ii) There is no determination of the
amount due as yet;
(iii) The secured assets or its
management with transferable
interest is already taken over
and under control of the secured
creditor;
(iv) no special reason for double
security in respect of an amount
yet to be determined and settled.
(v) 75% of the amount claimed by no
means would be a meagre amount;
(vi) it will leave the borrower in a
position where it would not be
possible for him to raise any
funds to make deposit of 75% of
the undetermined demand.
9. The Apex Court has further observed that
such conditions are not only onerous and
oppressive but also unreasonable and
arbitrary. Therefore, subsection (2) of
Section 17 of the Securitization Act was
found to be unreasonable, arbitrary and
violative of Article 14 of the
Constitution.
26. The observations made by the Apex
Court in Mardia Chemical's case are
with reference to a situation, where
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there is no adjudication of the amount
payable and that the secured assets or
its management with transferred
interest are already taken over under
the control of the secured creditor.
The Apex Court has observed that there
is no determination of the amount due
as yet. In those circumstances, the
Apex Court was of the view that said
condition regarding predeposit of 75%
without any prior determination by
competent authority is unreasonable,
arbitrary and violative of Article 14
of the Constitution.
27. In the case on hand, it is not so.
There is already adjudication of the
quantum by the Competent Authority,
which is designated under the Act,
which is the Facilitation Council. The
Facilitation Council had issued notice
to the respondents and an enquiry was
conducted and an award is passed. The
provisions of Arbitration Act so far
as it relates to holding of an enquiry
have been followed. Thus, there is an
adjudication of quantum. Thus, it is
not a case where without an
adjudication, the amount is
determined. In fact it is a
fullfledged trial and on an enquiry
the amount is determined. Thus, I am
of the view that the provisions
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relating to deposit of 75% of the
amount cannot be said to be
unreasonable, arbitrary and violative
of Article 14 of the Constitution. It
is not a case where the property or
the asset of respondent No.2 is taken
over without adjudication which would
make it difficult or impossible for
them to comply with the provisions of
Section 19 of the Act."
20. At this stage, this Court would like to refer to
the provisions contained in Sections 5, 16 and 34
of the Arbitration Act, which read as under,
"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
provided in this Part."
"16. Competence of arbitral Tribunal to rule on
its jurisdiction :
(1) The arbitral Tribunal may rule on its own
jurisdiction, including ruling on any
objections with respect to the existence or
validity of the arbitration agreement, and
for that purpose,
(a) an arbitration clause which forms part
of a contract shall be treated as an
agreement independent of the other
terms of the contract; and
(b) a decision by the arbitral Tribunal
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that the contract is null and void
shall not entail ipso jure the
invalidity of the arbitration clause.
(2) A plea that the arbitral Tribunal does not
have jurisdiction shall be raised not later
than the submission of the statement of
defence; however, a party shall not be
precluded from raising such a plea merely
because that he has appointed, or
participated in the appointment of, an
arbitrator.
(3) A plea that the arbitral Tribunal is
exceeding the scope of its authority shall
be raised as soon as the matter alleged to
be beyond the scope of its authority is
raised during the arbitral proceedings.
(4) The arbitral Tribunal may, in either of the
cases referred to in subsection (2) or
subsection (3), admit a later plea if it
considers the delay justified.
(5) The arbitral Tribunal shall decide on a
plea referred to in subsection (2) or sub
section (3) and, where the arbitral
Tribunal takes a decision rejecting the
plea, continue with the arbitral
proceedings and make an arbitral award.
(6) A party aggrieved by such an arbitral award
may make an application for setting aside
such an arbitral award in accordance with
section 34."
34. Application for setting aside arbitral
award.
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(1) Recourse to a Court against an arbitral
award may be made only by an
application for setting aside such
award in accordance with sub section
(2) and subsection (3).
(2) An arbitral award may be set aside by
the Court only if
(a) the party making the application
furnishes proof that
(i) a party was under some incapacity; or
(ii) the arbitration agreement is not valid
under the law to which the parties
have subjected it or, failing any
indication thereon, under the law for
the time being in force; or
(iii) the party making the application was
not given proper notice of the
appointment of an arbitrator or of the
arbitral proceedings or was otherwise
unable to present his case; or
(iv) the arbitral award deals with a
dispute not contemplated by or not
falling within the terms of the
submission to arbitration, or it
contains decisions on matters beyond
the scope of the submission to
arbitration:
Provided that, if the decisions on
matters submitted to arbitration can
be separated from those not so
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submitted, only that part of the
arbitral award which contains
decisions on matters not submitted to
arbitration may be set aside; or
(v) the composition of the arbitral
Tribunal or the arbitral procedure was
not in accordance with the agreement
of the parties, unless such agreement
was in conflict with a provision of
this Part from which the parties
cannot derogate, or, failing such
agreement, was not in accordance with
this Part; or
(b) the Court finds that
(i) the subjectmatter of the dispute is
not capable of settlement by
arbitration under the law for the time
being in force, or
(ii) the arbitral award is in conflict with
the public policy of India.
"Explanation 1. For the avoidance of any
doubt, it is clarified that an award
is in conflict with the public policy
of India, only if,
(i) the making of the award was induced or
affected by fraud or corruption or was
in violation of Section 75 or Section
81; or
(ii) it is in contravention with the
fundamental policy of Indian law; or
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(iii) it is in conflict with the most
basic notions of morality or justice.
Explanation 2. For the avoidance of
doubt, the test as to whether there is
a contravention with the fundamental
policy of Indian law shall not entail
a review on the merits of the
dispute.";
(2A) An arbitral award arising out of
arbitrations other than international
commercial arbitrations, may also be
set aside by the Court, if the Court
finds that the award is vitiated by
patent illegality appearing on the
face of the award:
Provided that an award shall not be
set aside merely on the ground of an
erroneous application of the law or by
reappreciation of evidence.";
(3) An application for setting aside may
not be made after three months have
elapsed from the date on which the
party making that application had
received the arbitral award or, if a
request had been made under section 33
, from the date on which that request
had been disposed of by the arbitral
Tribunal:
Provided that if the Court is
satisfied that the applicant was
prevented by sufficient cause from
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making the application within the said
period of three months it may
entertain the application within a
further period of thirty days, but not
thereafter.
(4) On receipt of an application under
subsection (1), the Court may, where
it is appropriate and it is so
requested by a party, adjourn the
proceedings for a period of time
determined by it in order to give the
arbitral Tribunal an opportunity to
resume the arbitral proceedings or to
take such other action as in the
opinion of arbitral Tribunal will
eliminate the grounds for setting
aside the arbitral award.
(5) An application under this section
shall be filed by a party only after
issuing a prior notice to the other
party and such application shall be
accompanied by an affidavit by the
applicant endorsing compliance with
the said requirement.
(6) An application under this section
shall 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 the other party."
21. This Court would also like to refer to the
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provision contained in Section 19 of the MSME Act,
which reads as under,
"19. Application for setting aside decree, award
or order :
No application for setting aside any decree,
award or other order made either by the
Council itself or by any institution or
centre providing alternate dispute resolution
services to which a reference is made by the
Council, shall be entertained by any court
unless the appellant (not being a supplier)
has deposited with it seventyfive per cent
of the amount in terms of the decree, award
or, as the case may be, the other order in
the manner directed by such court:
Provided that pending disposal of the
application to set aside the decree, award or
order, the court shall order that such
percentage of the amount deposited shall be
paid to the supplier, as it considers
reasonable under the circumstances of the
case, subject to such conditions as it deems
necessary to impose."
22. Thus from the aforesaid provision of law, it can
be said that the petitioner can challenge the
impugned order at the time of challenging the
order under Section 34 of the Arbitration Act.
Further, the condition of predeposit cannot be
said to be onerous as contended by learned
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advocate for the petitioner. In case of Devi
Enterprise Ltd. (supra), the Division Bench of
this Court has considered the said provision
contained in Section 19 of the MSME Act, wherein
the Division Bench has upheld the constitutional
validity and the aforesaid provision and observed
that the provisions contained in Section 19 of the
MSME Act are not ultra vires to any constitutional
provision either under Article 14 or under Article
19(1)(g) of the Constitution of India. In view of
the above facts, the petitioner has remedy to
challenge the order passed by the Arbitral
Tribunal under Section 34 of the Arbitration Act
at the time of challenging the award.
23. In the aforesaid legal position, if the facts of
the present case, are carefully examined, it would
emerge that when the Reference was made under
Section 18 of the MSME Act to the Arbitral
Tribunal, the petitioner challenged the same by
filing writ petition being Special Civil
Application No.11169/2018 before this Court and
this Court, vide order dated 09.09.2018, dismissed
the said petition. Against the dismissal of said
writ petition, the petitioner filed Letters Patent
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Appeal No.1667/2019 before the Division Bench of
this Court. The Division Bench of this Court heard
the matter and kept the same for orders on
08.01.2020. In the meantime, as there was no stay
granted by this Court, GCCI vide communication
dated 30.09.2019, called upon the parties before
the learned Arbitrator on 11.10.2019 and first
meeting was held on 11.10.2019, wherein the
learned Arbitrator directed the parties to
complete the pleadings within prescribed time
limit. The respondent/ claimant was asked to file
its SOC on or before 11.11.2019 and the SOD and
CC, if any, were required to be filed by the
petitioner on or before 10.12.2019 and the next
date of hearing of arbitration proceeding was
scheduled on 22.01.2020. The respondent/ claimant
filed SOC during the extended time granted by the
learned Arbitrator and the petitioner was directed
to file SOD and CC within a period of 10 days. The
said order was passed on 22.01.2020, thereafter,
the matter was kept on 20.02.2020. The petitioner
submitted an application for stay of the
arbitration proceeding by stating that LPA filed
by the petitioner is pending before the Division
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Bench, however, the said application was rejected
and the right of the petitioner to file SOD was
closed and, thereafter, the matter was kept on
24.03.2020.
24. In the aforesaid facts, the case of the petitioner
is that after the matter was kept on 24.03.2020,
same was adjourned on 28.04.2020 and in the
meantime, because of the lockdown imposed by the
Central Government and because of COVID19, the
Hon'ble Supreme Court has extended the limitation
period under general law as well as special law
whether condonable or not w.e.f. 15.03.2020 and,
therefore, time prescribed for filing SOD by the
petitioner was automatically extended. Learned
advocate has also placed reliance upon the
provision contained in Section 23(4) of the
Arbitration Act and contended that the petitioner
can file SOD within a period of six months.
25. With a view to consider the said submission, this
Court would like to refer to the provision
contained in Section 23 of the Arbitration Act,
which reads as under,
"23. Statements of claim and defence :
(1) Within the period of time agreed upon by
the parties or determined by the arbitral
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Tribunal, the claimant shall state the
facts supporting his claim, the points at
issue and the relief or remedy sought, and
the respondent shall state his defence in
respect of these particulars, unless the
parties have otherwise agreed as to the
required elements of those statements.
(2) The parties may submit with their
statements all documents they consider to
be relevant or may add a reference to the
documents or other evidence they will
submit.
"(2A) The respondent, in support of his
case, may also submit a counter claim
or plead a setoff, which shall be
adjudicated upon by the arbitral
tribunal, if such counterclaim or
setoff falls within the scope of the
arbitration agreement.".
(3) Unless otherwise agreed by the parties,
either party may amend or supplement his
claim or defence during the course of the
arbitral proceedings, unless the arbitral
Tribunal considers it inappropriate to
allow the amendment or supplement having
regard to the delay in making it.
(4) The statement of claim and defence under
this section shall be completed within a
period of six months from the date the
arbitrator or all the arbitrators, as the
case may be, received notice, in writing,
of their appointment."
C/SCA/1107/2021 CAVJUDGMENT
26. At this stage, the provision contained in Section
19 of the Arbitration Act is also required to be
referred to,
"19. Determination of rules of procedure
(1) The arbitral Tribunal shall not be bound by
the Code of Civil Procedure, 1908 (5 of
1908) or the Indian Evidence Act, 1872 (1
of 1872).
(2) Subject to this Part, the parties are free
to agree on the procedure to be followed by
the arbitral Tribunal in conducting its
proceedings.
(3) Failing any agreement referred to in sub
section (2), the arbitral Tribunal may,
subject to this Part, conduct the
proceedings in the manner it considers
appropriate.
(4) The power of the arbitral Tribunal under
subsection (3) includes the power to
determine the admissibility, relevance,
materiality and weight of any evidence."
27. From the aforesaid provision, it is clear that the
Arbitral Tribunal is not bound by the provision of
the Code of Civil Procedure, 1908 and the parties
are free to agree on the procedure to be followed
by the Arbitral Tribunal in conducting its
proceeding failing in agreement between the
parties. The Arbitral Tribunal conduct the
proceeding in the manner it consider appropriate.
C/SCA/1107/2021 CAVJUDGMENT
It is pertinent to note at this stage that in the
proceeding dated 11.10.2019, the learned
Arbitrator directed the parties to complete the
pleadings within prescribed time limit as observed
hereinabove and the said order is not challenged
by the petitioner and the petitioner has also not
requested for extension of time for filing SOD or
CC before the learned Arbitrator. It is further
required to be noted that the petitioner was
required to file SOD within a period of 10 days
from 22.01.2020 and the matter was kept on
20.02.2020. Thus in the facts of the present case,
the learned Arbitrator has prescribed the time
limit for filing all the pleadings and the said
order was not challenged, therefore, this Court is
of the view that the petitioner was required to
file SOD and CC within that time limit. The order
of the Hon'ble Supreme Court, upon which reliance
is placed by the petitioner for extension of
limitation period, would not be helpful to the
petitioner in the facts of the present case.
28. Learned advocate for the petitioner also contended
that the petitioner was not given reasonable
opportunity to examine the witness of the
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respondent/ claimant. It was pointed out that on
27.05.2020, the advocate for the respondent/
claimant informed the petitioner about the date of
hearing before the learned Arbitrator, which was
scheduled on 30.05.2020 and it was also stated
that the witness of the respondent/ claimant would
be examined on that day. The petitioner also
received communication from the GCCI that hearing
is scheduled on 30.05.2020 through video
conferencing and, therefore, 2 days' time was
given to the petitioner for crossexamination of
the witnesses of the respondent/ claimant. It is
stated that the learned Arbitrator has recorded
the evidence of the witness of the respondent/
claimant through video conferencing though the
order dated 06.04.2020 was passed by the Hon'ble
Supreme Court directing that in no case, evidence
can be recorded by video conferencing, however,
the said order is modified on 26.10.2020.
29. With regard to said contention, it is required to
be noted that the petitioner has not challenged
the aforesaid order passed by learned Arbitrator,
whereby the evidence of the respondent/ claimant
has been RECORDED through video conferencing nor
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the order dated 06.04.2020 was pointed out to
learned Arbitrator during the course of arguments.
Even otherwise, as per the subsequent order dated
26.10.2020 passed by the Hon'ble Supreme Court in
SMC (C) No.5/2020, this Court is of the view that
the said order would not be applicable to the
arbitral procedure per se. The discretion was
vested with the concerned Court to proceed with
the crossexamination even without consent. Thus,
when the order dated 30.05.2020 passed by the
learned Arbitrator closing the right of the
petitioner to crossexamine the witness is not
challenged, on this ground also, this Court is not
inclined to interfere with the impugned order.
30. Learned advocate for the petitioner has tried to
point out that there was sufficient cause for the
petitioner for not filing SOC and CC within
prescribed time limit as they were under the
bonafide impression that the Division Bench will
decide in their favour as LPA was pending and,
therefore, because of "discussion with inhouse
counsel", the petitioner did not file SOD and CC
within time limit. Further, now when the Division
Bench has passed an order against the petitioner
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on 24.07.2020, the petitioner has filed an
application for reopening stage of filing SOD and
CC and also requested that the petitioner be
permitted to crossexamine the witness of the
respondent/ claimant.
31. It is also pertinent to note that in the
additional affidavit filed by the petitioner on
04.08.2020 before the Arbitral Tribunal and even
in the application filed before the Arbitral
Tribunal, the petitioner has failed to point out
sufficient cause. In the additional affidavit,
there is reference with regard to "discussion with
inhouse counsel", however, the said affidavit
does not state the name of "inhouse counsel" nor
placed on record opinion given by any "inhouse
counsel" though it is asserted that it is on
account of the advice of the lawyer but details
are not given in the said affidavit. Even
otherwise, the advice of the lawyer is not
sufficient cause for considering the case of the
petitioner in the facts of the present case. From
the facts of the present case, this Court is of
the view that each of the cause set out by the
petitioner is a consequence of conscious decision
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taken by the petitioner, which is contrary to the
express order passed by the Arbitral Tribunal. At
this stage, it is required to be noted that in the
impugned order, the learned Arbitrator has
discussed in detail on this aspect.
CONCLUSION :
32. This Court has also considered the reasoning
recorded by learned Arbitrator while passing
impugned order and this Court is of the view that
no error is committed by the learned Arbitrator
while rejecting the application filed by the
petitioner, which requires any interference while
exercising power under Article 227 of the
Constitution of India. Even, the petitioner has
failed to point out any patent lack of
jurisdiction on the part of the learned Arbitrator
while passing impugned order, which requires any
interference under Article 227 of the Constitution
of India.
33. Thus in view of the above discussions, the
petitioner is not entitled for any relief as
prayed for in the present petition. Hence, the
present petition deserves to be dismissed and
accordingly stands dismissed.
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34. However, the observations made and the findings
recorded by this Court in the present order are
only for the purpose of deciding the issue prima
facie. Therefore, as and when the petitioner files
appropriate application before the appropriate
Forum, the said application and/or issue shall be
decided in accordance with law without being
influenced by the observations made in the present
order.
Sd/
(VIPUL M. PANCHOLI, J.)
Gautam
