Gujarat High Court
Padmrajsinh Ghanshyamsinh ... vs Hitesh M Bagdai on 22 October, 2021
Bench: Bhargav D. Karia
C/SCA/14555/2019 JUDGMENT DATED: 22/10/2021
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 14555 of 2019
With
R/SPECIAL CIVIL APPLICATION NO. 13244 of 2019
With
CIVIL APPLICATION (FOR VACATING INTERIM RELIEF) NO. 1 of 2020
In
R/SPECIAL CIVIL APPLICATION NO. 13244 of 2019
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy
of the judgment ?
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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PADMRAJSINH GHANSHYAMSINH JADEJA
Versus
HITESH M BAGDAI
==========================================================
Appearance:
MR DIPEN DESAI(2481) for the Petitioner(s) No. 1
NOTICE SERVED BY DS(5) for the Respondent(s) No.
1,10,11,12,13,2,3,4,5,6,7,8,9
==========================================================
CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 22/10/2021
ORAL JUDGMENT
1. Heard learned Senior Advocate Mr. Mihir
Thakore for learned advocate Mr. Dipen Desai
C/SCA/14555/2019 JUDGMENT DATED: 22/10/2021
for the petitioner of Special Civil
Application No. 14555 of 2019, learned Senior
Advocate Mr. Shalin Mehta for learned advocate
Mr. Bomi Shethna for the petitioner of Special
Civil Application No. 13244 of 2019 and
learned Senior Advocate Mr. Kamal Trivdei for
learned advocate Mr. Hriday Buch for
respondent No.1.
2. Both these matters are arising out of the
common issue and therefore, the same are heard
analogously and are disposed of by this common
order.
3. Special Civil Application No. 13244 of 2019
is filed with the following prayers:
"(A) This Hon'ble court be pleased to
admit this petition;
(B) This Hon'ble Court be pleased to
issue, appropriate writ, direction and/or
order in the nature of mandamus directing
the Respondent no.4-sole arbitrator Mr.
Hitesh Bagdai to delete the name of the
petitioners who are unnecessarily joined
as party to the arbitration proceedings
pending at Rajkot and further be pleased
to quash the entire arbitration
proceedings against the petitioners;
(C) This Hon'ble Court be pleased to
issue, appropriate writ, direction and/or
order in the nature of certiorari quashing
and setting aside the notice dated
3.6.2019 issued by the arbitrator to the
C/SCA/14555/2019 JUDGMENT DATED: 22/10/2021
petitioners and consequent proceedings;
(D) Pending admission and/or final
disposal of this petition this Hon'ble
Court be pleased to stay the notice dated
3.6.2019 issued by the sole Arbitrator-Mr.
Hitesh Bagdai qua the petitioners.
(E) Ad-interim and/or interim relief in
terms of para (D) herein above;
(F)Pass such other and further order as
thought fit in the interest of justice;"
4. Special Civil Application No. 14555 of 2019
is filed with the following prayers:
(A) The Hon'ble Court be pleased to issue a
writ of certiorari or writ in the nature of
certiorari or any other appropriate writ,
order or direction quashing and setting
aside the proceedings of arbitration
commenced by the respondent No.1-Sole
Arbitrator vide notice dated 05.11.2018 at
Annexure-J and for which impugned notice
dated 19.07.2019 is issued, annexed at
Annexure-M to the
petition.
(B) The Hon'ble Court be pleased to issue a
writ of prohibition or writ in the nature
of prohibition permanently
prohibiting/restraining the respondent no.l
from proceeding further with the
arbitration proceedings initiated by the
respondent No.2.
(C) Pending hearing and final disposal of
the petition, the Hon'ble Court may be
pleased to stay the further execution,
C/SCA/14555/2019 JUDGMENT DATED: 22/10/2021
operation and continuation of arbitral
proceedings which have been commenced by
the respondent No.2 before the respondent
No.l.
(D) The Hon'ble Court may be pleased to
grant such other and further relief/s as
deemed just and proper by this Hon'ble
Court in the interest of justice."
5. This Court [Coram: Hon'ble Mr. Justice
A.Y.Kogje] passed the following order on
01.08.2019 in Special Civil Application No.
13244 of 2019:
"1. NOTICE returnable on 5 th SEPTEMBER,
2019.
2. Learned Senior Counsel for the
petitioners relying upon the judgment of
this Court in the case of Saurashtra
Chemicals ltd. and Others v. Hon'ble Mr.
Justice K. Ramamoorthy (Retd.) reported in
MANU/GJ/0329/2005 submits that the
Arbitration Petition is not maintainable.
It is further submitted that the
petitioners are not the party to the MOU
under which the Arbitration Clause is
provided, yet the petitioners are
impleaded as a party and that too, in the
Arbitration proceedings. Initially when
the notices were issued on two occasions
by the Arbitrator, the petitioners were
not the party and no Notice was issued.
3. It is submitted that in an application
under Section 9 before the Civil Court,
the petitioners had filed a separate
application on the ground that the
petitioners are not party to the MOU and
therefore, cannot be roped in the
C/SCA/14555/2019 JUDGMENT DATED: 22/10/2021
Arbitration proceedings. However, such an
application had remained undecided in view
of the fact that the Section 9 Application
itself was rejected. Learned Senior
Counsel relies upon the judgment of the
Apex Court in the case of Deutsche Post
Bank Home Finance Limited v. Taduri
Sridhar reported in 2011 (11) SCC 375 in
support his submissions.
4. In view of the aforesaid, by way of
interim relief the Arbitration proceedings
insofar as the petitioners are concerned
is stayed, till returnable date. Direct
Service is permitted."
6. Both the petitions are arising out of common
facts which are narrated here-in-below:
6.1 A Memorandum of Understanding ['MOU' for
short] was executed on 09.08.1999 between one
Padmarajsinh Jadeja, son of late Ganshyamsinh
Jadeja and Smt. Hansadevi wd/o Ghanshyamsinh
Jadeja on one hand and Shri Jawaharbhai
Pethalji Chavda on the other hand for issue
of allotment of land of late Gnashyamsinh
Jadeja who was erstwhile ruler of Princely
State of Khijadiya-Dhrol.
6.2 As per the terms of the MOU, it was
agreed between the parties that as and when
the land which was a subject-matter of the
MOU is allotted by the State, 66.66% of the
land shall be converted in favour of the
C/SCA/14555/2019 JUDGMENT DATED: 22/10/2021
Mr. Jawaharbhai Chavda and 33.33% shall be
retained by the legal heirs of late Shri
Ganshyamsinh Jadeja as Mr. Jawaharbhai Chavda
agreed to provide assistance to reclaim the
land and also paid Rs. 11.00 lakh.
6.3 The MOU also contained the clause with
regard to resolution of the dispute between
the parties by appointment of sole Arbitrator
agreed upon by the parties in Clause 13 of
the MOU which reads as under:
"13. Any dispute or difference which may
arise between the parties hereto with
regard to construction, meaning, effect
or carrying out this Deed, shall be
referred to Arbitration and decision of
Shri Hitesh Bagdai, resident of Rajkot,
who shall be the sole Arbitrator and the
award or decision of said Shri Hitesh
Bagdai shall be final and binding upon
both the parties."
6.4 It appears that after long drawn
litigation, the State allotted 51 Acres of
land at Village-Lothada, Taluka-Rajkot in
Survey No. 167 in the year 2017 out of which,
45 Acres of land was sold to the petitioner
of Special Civil Application No. 13244 of
2019 by Padmarajsinh Ghanshyamsinh Jadeja and
Jayshreeben Ghanshyamsinh Jadeja as legal
heirs of late Ganshyamsinh Jadeja.
C/SCA/14555/2019 JUDGMENT DATED: 22/10/2021
6.5 It appears that Mr. Jawaharbhai Chavda,
in whose favour the MOU was signed and
executed in the year 1999 so as to render
assistance to Mr. Padmarajsinh Jadeja to
re-claim the land from the State, invoked
Clause No. 13 of the MOU in the year 2018 by
issuance of a legal notice on 10.07.2018
after Mr. Padmarajshin Jadeja failed to give
response to the notice dated 13.06.2018 with
regard to implementation of the MOU.
6.6 After invocation of the arbitration
clause, the Sole Arbitrator Mr. Hitesh Bagdai
issued notice to commence arbitral
proceedings to convene a primary meeting on
05.11.2018. However, the same was refused by
Mr. Jadeja. In the meanwhile, proceedings
under section 9 of the Arbitration and
Conciliation Act, 1996 ['the Arbitration Act'
for short] were also initiated by Mr. Chavda
by filing Civil Misc. Application No. 170 of
2018 before the District Court at Rajkot. The
purchaser of the land preferred Special Civil
Application No. 13244 of 2019 challenging the
notice issued by the sole Arbitrator on the
ground that they were not signatory to the
MOU under which the arbitration clause is
provided and therefore, they could not have
been impleaded as party in the arbitration
proceedings.
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6.7 Mr. Jadeja preferred Special Civil
Application No. 14555 of 2019 challenging
invocation of arbitration clause and
appointment of Mr. Bagdai as sole Arbitrator
on the ground that he is not qualified as an
Arbitrator under section 12(5) of the
Arbitration Act. The challenge was also
appears to have been made on the ground of
maintainability of the arbitration
proceedings on the basis of the MOU executed
in the year 1999.
6.8 The District Court, Rajkot, dismissed
the Civil Misc. Application No. 170 of 2018
filed under section 9 vide order dated
29.06.2019 with liberty to avail efficacious
remedy under section 17 of the Arbitration
Act.
6.9 A statement of claim was filed on
04.05.2019 and an application under section
17 of the Arbitration Act was filed on
16.07.2019 by claimant Mr. Chavda. However,
further proceedings of the arbitration was
stayed as stated here-in-above by this Court
vide order dated 01.08.2019.
6.10 Civil Application No. 1 of 2020 is filed
for vacating the interim relief granted by
this Court.
C/SCA/14555/2019 JUDGMENT DATED: 22/10/2021
7. Learned Senior Advocate Mr. Mihir Thakore
assisted by learned advocate Mr. Dipen Desai
for the petitioner-Mr. Padmarajsinh Jadeja in
Special Civil Application No. 14555 of 2019
submitted that Clause 13 of the MOU could not
have been invoked after more than twelve years
as the MOU was executed in the year 1999
whereas, notice invoking the arbitration
clause was issued in the year 2018 by
appointing the sole Arbitrator.
7.1 It was submitted that the MOU which was
executed between Mr. Jadeja and Mr. Chavda
pertains to rendering of help to re-claim the
land from the State Government and therefore,
such MOU is not valid as per the provisions
of the Indian Contract Act,1872 as there is
no consideration referred in such MOU and on
that ground itself, the arbitration
proceeding is not maintainable.
7.2 It was submitted that after execution of
the MOU, the same is never implemented and as
such arbitration proceedings are initiated
only with a view to extract money from
Mr. Jadeja.
7.3 Learned Senior Advocate Mr. Thakore
further submitted that Mr. Bagadai, who is
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appointed as sole Arbitrator as per the terms
of the MOU, is also disqualified in view of
the provisions of sub-section (5) of section
12 of the Arbitration Act which provides that
if the relationship of any person either with
the party or the counsel for the subject-
matter of the dispute falls under any of the
categories specified in the Seventh Schedule,
such person would be ineligible to be
appointed as an Arbitrator. It was submitted
that Mr. Bagadai is a close family friend of
Mr. Chavda and therefore, he is ineligible to
be appointed as an Arbitrator as per the
section 12(5) of the Arbitration Act.
7.4 In support of his submissions learned
Senior Advocate Mr. Thakore relied upon the
following decisions:
1. Narmada Clean-tech vs. Indian Council of
Arbitration reported in 2021 (1) GLR 821;
2. Bhaven Construction through Authorised
Signatory Premjibhai K.Shah vs. Executive
Engineer Sardar Sarovar Narmada Nigam Ltd and
anr reported in 2021(O) AIJEL-SC 66915;
3. N.G.Projects Limited vs. Backbone
Projects Limited reported in 2016 (4) GLR
3181;
4. Vinod Jayrambhai Patel vs. Gujarat
Industrial Coop. Bank Ltd. reported in 2019
(2) GLR 1383;
C/SCA/14555/2019 JUDGMENT DATED: 22/10/2021
5. Haryana Space Application Centre
(HARSAC) and anr vs. Pan India Consultants
Private Limited reported in (2021) 3 SCC 103;
6. Bharat Broadband Network Limited vs.
United Telecoms Limited reported in (2019) 5
SCC 755;
7. Voestalpine Schienen GMBH vs. Delhi
Metro Rail Corporation Limited reported in
(2017) 4 SCC 665.
8. Learned Senior Advocate Mr. Shalin Mehta
assisted by learned advocate Mr. Bomi Shethna
for the petitioners of Special Civil
Application No. 13244 of 2019, who are
purchasers of the land in question from
Mr. Jadeja submitted that the petitioners-
purchasers of the land could not have been
impleaded as party in the arbitration
proceedings by the sole Arbitrator as they are
neither the signatories to the MOU nor they
are concerned in any manner whatsoever with
the terms of the MOU or transaction which is a
subject-matter of the arbitration proceedings.
8.1 Learned Senior Advocate Mr. Mehta also
adopted the contentions raised by learned
Senior Advocate Mr. Thakore that sole
Arbitrator is ineligible as per section 12(5)
of the Arbitration Act.
C/SCA/14555/2019 JUDGMENT DATED: 22/10/2021
8.2 It was submitted by learned Senior
Advocate Mr. Mehta that as per the settled
legal position, persons who are not
signatories to the arbitration agreement
cannot be joined or impleaded as party in the
arbitration proceedings. He relied upon the
provisions of section 2(h) of the Arbitration
Act, which defines "party" means a party to
an arbitration agreement. Reference was also
made to section 8 of the Arbitration Act to
contend that as per the decisions of the
Supreme Court, the person, who is not
signatory to the arbitration agreement,
cannot be impleaded in the arbitration
proceedings. Reliance was placed on the
following decisions in support of his
submissions:
1. Sukanya Holdings Pvt. Ltd vs. Jayesh H.
Pandya reported in 2003 (5) SCC 531;
2. Saurashtra Chemicals Ltd vs. Hon'ble
Justice K.Ramamoorthy reported in 2005 (4)
GLR 2810;
3. Deutsche Post Bank Home Finance Limited
vs. Taduri Sridhar reported in 2011 (11) SCC
375;
4. Shantilal Shivabhai Jadav vs.
Kaushikbhai Hiralal Siddhiwala reported in
2018 (3) GLH 1;
5. Reckitt Benkeiser (India) Private
Limited vs. Reynderd label Printi India Pvt.
C/SCA/14555/2019 JUDGMENT DATED: 22/10/2021
Ltd. reported in 2019 (7) SCC 62;
6. Vidya Drolia and ors vs. Durga Trading
Corporation reported in 2020 (14) Scale 55."
8.3 Relying upon the aforesaid case laws, it
was submitted that as held by the Supreme
Court in case of Deutsche Post Bank Home
Finance Limited (supra), the purchasers could
not have been joined as party in the
arbitration proceedings as the Supreme Court,
while referring to sections 7 and 8 of the
Arbitration Act, relied upon the decision in
case of S.N.Prasad vs. Monnet Finance Ltd
reported in 2011 (1) SCC 320 wherein it is
held as under:
"12. ... ... ... ... There can be reference to
arbitration only if there is an
arbitration agreement between the
parties. If there is a dispute between
a party to an arbitration agreement,
with other parties to the arbitration
agreement as also non-parties to the
arbitration agreement, reference to
arbitration or appointment of
arbitration can be only with respect to
the parties to the arbitration
agreement and not the non-
parties........As there was no
arbitration agreement between the
parties, the impleading of the
appellant as a respondent in the
proceedings and the award against the
appellant in such arbitration cannot be
sustained."
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8.4 It was therefore, submitted by learned
Senior Advocate Mr. Mehta that as observed by
the Apex Court, if 'X' enters into two
contracts with one 'M' and another with 'D'
each containing an arbitration clause
providing for settlement for disputes arising
under the respective contract, in a claim for
arbitration by 'X' against 'M' in regard to
the contract with 'M', 'X' cannot implead 'D'
as party on the ground that there is an
arbitration clause in agreement between 'X'
and 'D'.
8.5 Learned Senior Advocate Mr. Mehta
thereafter relied upon the decision in case
of Reckitt Benkeiser (India) Private Limited
(supra), wherein the Supreme Court reiterated
the decision in case of Chloro Controls India
Private Limited vs. Severn Water Purification
Inc. and ors reported in 2013 (1) SCC 641.
The Apex Court in the said decision,
explaining the doctrine of a "group of
companies" held that ordinarily, the
arbitration takes place between the persons
who have been parties to both the arbitration
agreement as well as the substantive contract
underlying it. However, an arbitration
agreement entered into by a company being one
C/SCA/14555/2019 JUDGMENT DATED: 22/10/2021
within a group of corporate entities can, in
certain circumstances, bind its non-signatory
affiliates. The Supreme Court applied this
principal in case of Cheran Properties
Limited vs. Kasturi and Sons Limited and ors
reported in 2018 (16) SCC 413 after analyzing
the earlier decision and including the
doctrine expounded in Chloro Controls India
Private Limited (Supra) as under:
"1. ... ... ... ... ...
"23. As the law has evolved, it has
recognised that modern business
transactions are often effectuated through
multiple layers and agreements. There may
be transactions within a group of
companies. The circumstances in which they
have entered into them may reflect an
intention to bind both signatory and non-
signatory entities within the same group.
In holding a nonsignatory bound by an
arbitration agreement, the court
approaches the matter by attributing to
the transactions a meaning consistent with
the business sense which was intended to
be ascribed to them. Therefore, factors
such as the relationship of a nonsignatory
to a party which is a signatory to the
agreement, the commonality of subject-
matter and the composite nature of the
transaction weigh in the balance. The
group of companies doctrine is essentially
intended to facilitate the fulfilment of a
mutually held intent between the parties,
where the circumstances indicate that the
intent was to bind both signatories and
nonsignatories. The effort is to find the
true essence of the business arrangement
and to unravel from a layered structure of
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commercial arrangements, an intent to bind
someone who is not formally a signatory
but has assumed the obligation to be bound
by the actions of a signatory."
8.6 It was therefore, submitted that the
purchasers and petitioners of Special Civil
Application No. 13244 of 2019 could not have
been impleaded as a party in the arbitration
proceedings.
8.7 Learned Senior Advocate Mr. Mehta also
relied upon the decision of Division Bench in
case of Narmada Clean-tech (supra) to submit
that High Court can exercise its writ
jurisdiction under Article 226 or power of
superintendence vested in it under Article
227 over the Arbitral Tribunals constituted
under the provisions of the Arbitration Act.
The power of the High Court to issue
prerogative writ is wide and no limitation is
placed by Constitution on such power when the
authority has acted without jurisdiction. It
was submitted that in view of the decision of
the Division Bench, this Court is required to
exercise powers under Articles 226 or 227
more particularly, when arbitral Tribunal has
no jurisdiction as the purchasers and
petitioners of Special Civil Application
No.13244 of 2019 could not have been
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impleaded as party in the arbitration
proceedings as they are not signatories to
the MOU under which the arbitration
proceedings are initiated.
9. On the other hand, learned Senior Advocate
Mr. Kamal Trivedi assisted by learned advocate
Mr. Hriday Buch for Mr. Jawaharbhai Chavda-
respondent No.2 in Special Civil Application
No. 14555 of 2019 and respondent No.1 in
Special Civil Application No. 13244 of 2019
submitted that as held by this Court as well
as the Apex Court, no challenge can be made
for the proceedings initiated under the
Arbitration Act under Article 227 of the
Constitution of India.
9.1 It was submitted that the petitioners of
both the petitions can take all the
contentions which are raised before this
Court in these petitions before the
Arbitrator under section 16 of the
Arbitration Act so far as the jurisdiction as
well as the challenge to the validity of the
arbitration agreement is concerned. In
support of his submissions, learned Senior
Advocate Mr. Trivedi relied upon the
following decisions:
1. GTPL Hathway Ltd vs. Strategic Marketing
Pvt. Ltd reported in MANU/GJ/1363/2020;
C/SCA/14555/2019 JUDGMENT DATED: 22/10/2021
2. CDC Financial Services (Mauritius) Ltd
vs. BPL Communications Ltd reported in (2003)
12 SCC 140;
3. SBP & Co. vs. Patel Engineering Ltd
reported in (2005) 5 SCC 618;
4. Bhaven Construction vs. Sardar Sarovar
Narmada Nigam Ltd reported in 2021 SCC Online
SC 8;
5. IMC Ltd vs. Board of Trustees of
Deendayal Port Trust reported in
MANU/GJ/1010/2018;
6. IMC Ltd vs. Board of Trustees of
Deendayal Port Trust reported in order dated
21.01.2019 passed in SLP ©
7. Mahanagar Telephone Nigam Ltd vs. Canara
Bank Ltd reported in (2020) 12 SCC 767.
9.2 In addition to above, reliance was also
placed on the decision of this Court in case
of Mohammadali Mohammadhusain Gandhi vs. M/s.
Universal Icon Builders and ors rendered on
31.01.2020 in Special Civil Application
No. 16123 of 2017 with regard to the
contentions raised by learned Senior Advocate
Mr. Shanlin Mehta that the purchasers who are
not signatories the MOU cannot be impleaded
as party in the arbitration proceedings.
9.3 It was submitted that even if this Court
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entertains the petition under Article 227 of
the Constitution of India in view of the
aforesaid decisions, it cannot be said that
the purchasers of the land by registered sale
deed executed by Mr. Jadeja are not necessary
or proper party as they would be directly
affected by the decision which may be taken
in the arbitration proceedings. Because as
per the terms of the MOU, Mr. Chavda is
entitled to 66.66% of the land to be allotted
to Mr. Jadeja by the State
Government.
9.4 It was further submitted that so far as
the contention with regard to ineligibility
of the sole Arbitrator who is named in Clause
13 of the MOU is concerned, provision of
section 12(5) of the Arbitration Act would
not be applicable as Mr. Bagdai is neither
having any close relationship with Mr. Jadeja
nor is a close family member of Mr. Chavda.
Reference was made to Clause (9) to the
Seventh Schedule which defines relationship
of the Arbitrator with the parties or counsel
to contend that Mr. Bagdai has no close
family relationship with any one of the
parties. It was submitted that in fact, Mr.
Bagdai is close friend of both Mr. Jadeja and
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Mr. Chavda at the relevant point of time when
the MOU was executed in the year 1999 and
that is the only reason that he is named in
Clause (13) of MOU as sole Arbitrator as
agreed upon by Mr. Jadeja at the relevant
point of time.
9.5 It was also submitted by learned Senior
Advocate Mr. Kamal Trivedi that further
affidavit filed on behalf of Mr. Jadeja
showing the photographs of Mr. Bagdai with
the family of Mr. Chavda is of no consequence
as such photographs cannot be considered at
this stage to come to the conclusion that
Mr. Bagdai has close family relationship with
Mr. Chavda as per Clause 9 of the Seventh
Schedule so as to make him ineligible under
section 12(5) of the Arbitration Act.
9.6 It was also submitted that assuming for
a while if the provision of section 12(5) of
the Arbitration Act is to be invoked then in
such case, the appropriate remedy for the
petitioners would be to take recourse under
sub-section (2) of section 14 of the
Arbitration Act.
9.7 It was therefore, submitted that both
the writ petitions are required to be
dismissed as the same are not liable to be
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entertained either under Article 226 or 227
of the Constitution of India.
10. Having heard learned advocates for the
respective parties and having gone through the
material on record, it appears that the
arbitration proceedings are initiated by
issuance of notice by the sole Arbitrator in
the year 2018 as per Clause 13 of the MOU
executed in the year 1999.
11. It is not in dispute that at the relevant
point of time, the sole Arbitrator Mr. Bagdai
was friend of both Mr. Jadeja and Mr. Chavda.
12. Learned Senior Advocate Mr. Mihir Thakore has
raised serious grievance against the
appointment of Mr. Bagdai as Sole Arbitrator
on the ground that he has a close relation
with Mr. Chavda. In support thereof he has
filed an affidavit of Mr. Jadeja.
13. Taking into consideration the peculiar facts
of this case as it is not disputed by learned
Senior Advocate Mr. Trivedi that Mr. Bagdai
was friend of both Mr.Jadeja and Mr. Chavda
and he continues to be friend of Mr. Chavda as
on today, I am of the opinion that in the
interest of justice this is a fit case to
appoint a neutral person to conduct the
C/SCA/14555/2019 JUDGMENT DATED: 22/10/2021
arbitration proceedings in place of sole
Arbitrator Mr. Bagdai who is named in clause
13 of the MOU at the relevant point of time.
Accordingly, name of Hon'ble Mr. Justice
C.K.Thakkar, Former Judge of the Supreme Court
of India was suggested by this Court to act as
an Arbitrator between the parties as per the
provisions of the Arbitration Act. In view of
the suggestion, formal oral consent of
Hon'ble Mr. Justice C.K.Thakkar was sought to
act as an arbitrator by both the parties and
he has kindly conveyed the consent for the
same orally.
14. Both the parties are therefore, directed to
approach Hon'ble Mr. Justice C.K.Thakker,
Former Judge of the Supreme Court of India
whose name and address are known to both the
parties within a period of four weeks from
today so as to carry on the arbitration
proceedings at the stage at which it has been
stayed by this Court vide order dated
01.08.2019.
15. With regard to the contentions raised by
learned Senior Advocate Mr. Mehta on behalf of
the purchasers that they cannot be impleaded
as party respondent in the arbitration
proceedings on the ground that they are not
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signatories to the MOU executed between the
Mr. Jadeja and Mr. Chavda, when Former Supreme
Court Judge is appointed as Arbitrator, the
purchasers of the land in question i.e. the
petitioners of Special Civil Application
No. 13244 of 2019 can raise such dispute with
regard to jurisdiction or with regard to
impleading them as party respondents under
section 16 of the Arbitration Act before the
Arbitrator.
16. It would be open for the petitioners of both
the petitions to raise all the contentions
which are raised before this Court before the
Arbitrator and hence the same are not examined
or adjudicated in these proceedings in view of
the decisions of the Supreme Court in case of
Bhaven Construction [supra] wherein the Apex
Court has held 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
other law for the time being in force, in
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matters governed by this Part, no judicial
authority shall intervene except where so
provided in this Part." The non-obstante
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.
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.
23 . The High Court did not appreciate the
limitations under Articles 226 and 227 of
the Constitution and reasoned that the
Appellant had undertaken to appoint an
arbitrator unilaterally, thereby rendering
the Respondent No. 1 remediless. However, a
plain reading of the arbitration agreement
points to the fact that the Appellant
herein had actually acted in accordance
with the procedure laid down without any
mala fides.
27. It must be noted that Section 16 of the
Arbitration Act, necessarily mandates that
the issue of jurisdiction must be dealt
first by the tribunal, before the Court
examines the same under Section 34.
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Respondent No. 1 is therefore not left
remediless, and has statutorily been
provided a chance of appeal. In Deep
Industries case (supra), this Court
observed as follows:
"22. One other feature of this case is
of some importance. As stated herein
above, on 09.05.2018, a Section
16 application had been dismissed by
the learned Arbitrator in which
substantially the same contention
which found favour with the High Court
was taken up. The drill of Section
16 of the Act is that where a Section
16 application is dismissed, no appeal
is provided and the challenge to
the Section 16 application being
dismissed must await the passing of a
final award at which stage it may be
raised under Section 34."
28. In view of the above reasoning, we are
of the considered opinion that the High
Court erred in utilizing its discretionary
power available under Articles 226 and 227
of the Constitution herein. Thus, the
appeal is allowed and the impugned Order of
the High Court is set aside. There shall be
no order as to costs. Before we part, we
make it clear that Respondent No. 1 herein
is at liberty to raise any legally
permissible objections regarding the
jurisdictional question in the
pending Section 34 proceedings."
17. This Court in case of GTPL Hathway Ltd
[supra] reported in 2020 (4) GLH 1 has held as
under:
"14. In view of aforesaid conspectus of
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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 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 sevenJudge 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.
15.In view of aforesaid settled legal
proposition, considering the policy,
object and the provisions of the Act,1996,
an order passed during arbitration
proceedings by the Arbitration
Tribunal cannot be challenged under
Articles 226 and 227 of the Constitution
of India as the Act,1996 is a special
act and a selfcontained code
dealing with arbitration. Therefore,
the impugned order of the
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Arbitration Tribunal deciding the
preliminary objection raised by the
petitioner cannot be challenged under
Article 226 or 227 of the Constitution of
India.
16.In view of foregoing reasons,
the petition fails and is
accordingly dismissed. It is, however,
made clear that the petition is dismissed
without entering into merits of the
matter, only on the ground that the order
passed during course of arbitration cannot
be challenged under Articles 226 and/or
227 of the constitution of India and it
would be open for both the sides to raise
all the contentions on merits before
the appropriate forum in
appropriate proceeding at appropriate
time in accordance with law.
Interim relief, if any stands vacated.
Rule is discharged with no order as to
costs."
18. In case of Narmada Clean-tech (supra), the
Division Bench while considering the judgement
of GTPL Hathway Ltd. has held as under:
"29. The supervisory jurisdiction
under Article 227 is exercised for keeping
the subordinate Courts and Tribunals
within the bounds of their jurisdiction.
When a subordinate Court or Tribunal
assumes jurisdiction which it does not
have or fails to exercise jurisdiction
which it does have or the jurisdiction
though available is being exercised by the
Court in a manner not permitted by law and
leads to failure of justice, or grave
injustice has occasioned thereby, then the
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High Court must step into exercise its
supervisory jurisdiction. The High Court
cannot convert itself into a Court of
appeal and start reappreciating the
evidence but can only interfere when there
is an error of jurisdiction. The powers
under Article 227 are very wide and can be
used to secure the ends of justice and to
ensure that people have faith in the
judicial system. However, this power must
be exercised sparingly to keep the
subordinate Courts and Tribunals within
the bounds of their authority and not to
correct mere errors committed by them.
With regard to the inferior tribunals, it
has been held in a number of cases that
the High Court can quash or set-aside the
decision of an inferior tribunal in case
the order has been passed without
jurisdiction or is against the principles
of natural justice or the Tribunal fails
to exercise jurisdiction vested in it by
law. Though every error is not to be
corrected but if there is dereliction of
duty or flagrant violation of law then the
High Court must exercise its jurisdiction.
Therefore, when a Tribunal does not
exercise jurisdiction or acts in a manner
which will sully the image of the judicial
process or gives findings which are
perverse then the High Court can and must
exercise its powers of superintendence."
19. However, subsequently, it appears that the
Supreme Court in case of Bhaven Construction
[supra] has clarified the position by giving
elaborate reasons by rendering a considered
opinion that if the courts are allowed to
interfere with the arbitral proceedings beyond
the ambit of the enactment then the efficiency
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of the process will be diminished.
20. In view of the above, instead of entertaining
the petitions at this stage, the petitioners
of both the petitions are relegated to raise
all the contentions before the learned
Arbitrator, Hon'ble Mr. Justice C.K.Thakkar,
Former Judge of the Supreme Court of India.
Both the petitions are accordingly disposed
of. Notice is discharged.
21. At this juncture, learned advocate Mr. Bomi
Shethna prays that this order may be stayed
for a period of four weeks.
22. As the time is granted to the petitioners to
approach the Arbitrator for further
proceedings within a period of four weeks,
this order is not required to be stayed and
accordingly the request is rejected.
(BHARGAV D. KARIA, J)
JYOTI V. JANI
