Gujarat High Court

Shankar Shabanna Kurbur vs S. K. Corporation on 18 August, 2023

Bench: Biren Vaishnav

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     C/SCA/566/2022                              JUDGMENT DATED: 18/08/2023

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            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

               R/SPECIAL CIVIL APPLICATION NO. 566 of 2022


FOR APPROVAL AND SIGNATURE:


HONOURABLE MR. JUSTICE BIREN VAISHNAV

and
HONOURABLE MR. JUSTICE DEVAN M. DESAI


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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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                      SHANKAR SHABANNA KURBUR
                                 Versus
                          S. K. CORPORATION
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Appearance:
MR AB MUNSHI(1238) for the Petitioner(s) No. 1
MR NM KAPADIA(394) for the Respondent(s) No. 1,2,3,4,5,6,7,8,9
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    CORAM:HONOURABLE MR. JUSTICE BIREN VAISHNAV
          and
          HONOURABLE MR. JUSTICE DEVAN M. DESAI

                             Date : 18/08/2023

                            ORAL JUDGMENT

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(PER : HONOURABLE MR. JUSTICE BIREN VAISHNAV)

[1] Heard learned Senior Counsel Mr.Percy

Kavina appearing with Mr.A.B.Munshi, learned

advocate for the petitioner and learned advocate

Mr.N.M.Kapadia for the respondents.

[2] Rule returnable forthwith. Learned advocate

Mr.N.M.Kapadia waives service of notice of rule for

and on behalf of respondents. With consent of

learned advocates appearing for the respective parties,

the matter is taken up for final hearing.

[3] The petitioner, who was the original

claimant, has filed this petition for a direction to

quash and set aside the judgment and order dated th

Additional District Judge, District & Sessions Court,

Surat below Exhibit-16 in Commercial CMA No.1 of

2019.

[4] The facts in brief are as under:-

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4.1 It is the case of the petitioner that the

petitioner and the respondents are partners of a

partnership firm namely "S.K. Corporation". The firm

was mainly engaged in the development of land,

construction and development of societies and

apartments.

4.2 It appears that pursuant to an Arbitration

Clause in the partnership deed, as disputes arose

inter-se between the partners, an Arbitrator was

appointed pursuant to some proceedings under

Section 11 of the Arbitration and Conciliation Act, by

this Court. The petitioner-claimant filed a Statement

of Claim. The Aribtral Tribunal (Coram: Hon'ble

Mr.Justice Mr.A.L.Dave, Retired Judge of this High

Court) was appointed as an Arbitrator. An th application for interim relief was filed on 7 July,

2018. On that date, the Tribunal passed an order

directing the respondents to maintain status quo in

respect of the properties in question till further

orders.

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4.3 On 17.07.2018, the respondent Corporation

and its partners filed an application for

modification / vacation of interim relief. The Tribunal,

after hearing the parties, partly allowed the

application modifying the order to the extent that the

respondents would maintain status-quo in respect of

the title of 33 flats.

4.4 It appears that the petitioner-claimant also

filed an application for cancellation of Agreement to

Sale made in favour of third parties and for

amendment of Statement of Claim. That application,

by an order dated 11.03.2019, was ordered

accordingly as effected in the order so passed.

4.5 An application was filed for deleting a few

lines seeking amendment of para-10 of the

application for modification / vacation for interim th relief by the respondents. On that very date i.e. 11

March, 2019, Arbitral Tribunal rejected the

application seeking modification of the application.

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4.6 The respondents, aggrieved by the order th dated 11 March, 2019 passed by the learned

Arbitral Tribunal, challenged the same before the

Commercial Court. The Commercial Court, vide order

dated 01.10.2023, allowed the application and th quashed the order dated 11 March, 2019. Hence,

the present petition.

[5] Learned Senior Counsel Mr.Percy Kavina

appearing for the petitioner would make the following

submissions:-

5.1 Mr.Kavina, learned Senior Counsel, would th invite the Court's attention to the Minutes of 10

Arbitral Sitting held on 25.02.2019. Taking us to the

Minutes of the Meetings of the Sitting, Mr.Kavina,

learned Senior Counsel, would submit that, on that

date, the parties were heard on the question of

modification / vacation of interim relief and also were

heard on the application tendered by the petitioner

for amendment. The matter was finally concluded

and kept for orders.

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5.2 Mr.Kavina, learned Senior Counsel, would

further submit that as soon as the Arbitral Tribunal th pronounced an order on 11 March, 2019, after

conducting hearing which was concluded on

25.02.2019, and on the Minutes being drawn on

13.03.2019, the respondents moved an application on

15.03.2019. Inviting the attention of the Court to the th order below the application dated 15 March, 2019,

Mr.Kavina, learned Senior Counsel, would submit

that what is evident from reading the contents of the

order is that the Sole Arbitrator in accordance with

Section 29(A) of the Arbitration Act, received notice th on 20 February, 2018 and issued notice to the th concerned parties on 26 February, 2018 fixing th preliminary meeting on 12 March, 2018. The

Tribunal, noting the relevant dates and pained by

the conduct of the respondents, passed an order that

the Sole Arbitraor is not willing and not available to

continue as arbitrator in the matter.

5.3 Mr. Kavina, learned Senior Counsel,

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therefore, inviting the Court's attention to the

relevant dates would indicate that even taking

26.02.2018 being the date on which the Arbitrator

entered upon the reference would be the date on

which the Arbitrator's mandate would cease prior

thereto. On 25.02.2019, the matter was heard and

reserved for orders. The mandate of the Arbitrator on

that date had not ceased. Passing of an order on th 11 March, 2019, therefore, could not have been

taken as a ground for setting aside the order as an

order passed without jurisdiction as it is held by the

Commercial Court in its impugned order.

5.4 Mr.Kavina, learned Senior Counsel, would

invite the Court's attention to the relevant dates th again in the order below the application of 15

March, 2019, which indicates that on every occasion,

the respondents, who participated before the Sole

Arbitrator, sought for time by filing adjournment th pursis, had participated in the hearing on 25 th February, 2019 and tendered an application on 15

of March, at 1.45 p.m. indicating that they do not

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agree to the arbitration proceedings being continued

as the mandate of the Arbitrator had expired.

According to Mr.Kavina, learned Senior Counsel, the

conduct of the parties, especially the respondents

would indicate that having so participated in the

proceedings, an implied consent needs to be taken

note of and the Commercial Court, therefore, could

not have set aside the order observing that such an

order could not have been passed as the mandate of

the Arbitrabtor had expired.

5.5 Mr.Kavina, learned Senior Counsel, would

further submit that on that very date, an application

for amendment of Statement of Claim was considered

by the Tribunal, in which, the Tribunal partly

allowed the application for amending para-10 at the

hands of the very respondents, while the prayers for

modification of the interim order was rejected by the

Tribunal, which order, the respondents did not

challenge. He would, therefore, submit that if the

order of the Tribunal is allowed to stand, the effect

thereof, would be that even the earlier orders of

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rejecting the application for modification of para-10 in

the application of the respondents would stand

concluded without it being challenged.

[6] Learned counsel Mr.N.M.Kapadia for the

respondents would make the following submissions:-

6.1 Drawing the Court's attention to the

relevant part of the order impugned in this petition,

Mr.Kapadia, learned counsel, would submit that it is

apparent on reading the order that the order was

passed on consensus. Mr.Kapadia, learned counsel,

would submit that specific attention of the Court was

drawn to para-6 of the order, wherein, the Court

recorded the consensus of the learned advocate for

the petitioner herein that he had fairly conceded to

the fact that the order under challenge was without

jurisdiction. He would, therefore, submit that once

consensus has been recorded, it is not open for the

petitioner to challenge the order.

6.2 Mr.Kapadia, learned counsel, would further

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submit that the order really does not help the

petitioner herein inasmuch as, the Commercial Court,

by the order under challenge has left it open for the

new Arbitrator to decide the application which the

parties may file afresh. Mr.Kapadia, learned advocate

would further submit that the order under challenge

is of October, 2021 and the petition is filed in

January, 2022, that too after filing of a reply to

fresh application made by the petitioner, which

response has already been filed by the petitioner.

The challenge to this order is, therefore an after

thought.

6.3 Mr.Kapadia, learned counsel, also would

invite the Court's attention to the application filed

under Section 16 of the Arbitration Act by the

petitioner, wherein, in paras 11 & 12, it is expressly

conceded by the petitioner that the original claimant

has accepted the order passed by the Commercial

Court.

6.4 Inviting the Court's attention to the

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Affidavit-in-reply filed to the petition, Mr.Kapadia,

learned advocate, would submit that apart from there

being unreasonable delay in filing the petition, the

jurisdiction of this Court in exercise of powers under

Article 227 of the Constitution of India, is limited

especially when it is the case of challenge to an

order passed under the proceedings arising out of an

Arbitration and Conciliation Act. This Court, in the

case of Deep Industries Limited vs. Oil and Natural

Gas Corporation Limited and Another reported in (2020) 15 SCC 706 has held that the Court should be circumspect in interfering with such orders.

Mr.Kapadia, learned advocate, would invite the

Court's attention to paras 11 and 15 to 18 of the

judgment indicating that the judicial intervention in

such matters is extremely restricted.

6.5 Mr.Kapadia, learned advocate, would further

submit that now, the process of appointing new

Arbitrator is in place, and once a new Arbitrator

takes over, the proceedings be carried forward and

the application filed for modification in the reply of

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the petitioner can be considered by the authorities.

Mr.Kapadia, learned advocate, would submit that the

conduct of the parties is not relevant, in light of the

Mandate under Section 29A of the Arbitration Act.

Admittedly, when the Mandate of the Arbitrator had

expired, mere participation in such proceeding would

not obliviate the natural consequences of law.

[7] Having considered the submissions made by

the learned advocates for the respective parties,

certain dates have to be kept in mind so as to test

the arguments made by the learned counsels for the

respective parties.

[8] What is evident on reading the order dated th 19 March, 2019, by which unfortunately, the sole

Arbitrator had to recuse from the arbitral proceedings

on an application filed by the respondents speaks

volumes of the conduct of the respondents. What is

evident is that the High Court vide its order dated th 9 of February, 2018 had requested the Arbitrator

(Coram: Hon'ble Mr. Justice A.L.Dave, Retired Judge

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of this Court) to act as a Sole Arbitrator to resolve

the disputes between the present parties. On a

consent given by the Arbitrator, an order was passed th by this Court on 16 February, 2018 appointing

Hon'ble Mr. Justice A.L.Dave as a Sole Arbitrator.

th He was so informed vide notice dated 20 of

February, 2018. The Tribunal issued notice to the th concerned parties on 26 February, 2018 fixing th preliminary / first meeting on 12 March, 2018.

[9] At this point, it will be relevant to

reproduce the provisions of Section 29A of the

Arbitration and Conciliation Act:-

29A. Time limit for arbitral award.- (1) The award in matters other than international commercial arbitration shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23.

Explanation.- For the purpose of this sub-

section, an arbitral tribunal shall be deemed to have entered upon the reference on the date on which the arbitrator or all the arbitrators, as

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the case may be, have received notice, in writing, of their appointment." [Provided that the award in the matter of international commercial arbitration may be made as expeditiously as possible and endeavor may be made to dispose of the matter within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23.] (2) If the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree.

(3) The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months.

(4) If the award is not made within the period specified in sub-section (1) or the extended period specified under sub-section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period:

Provided that while extending the period under this sub-section, if the Court finds that the proceedings have been delayed for the reasons

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attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five per cent. for each month of such delay.

[Provided further that where an application under sub-section (5) is pending, the mandate of the arbitrator shall continue till the disposal of the said application:

Provided also that the arbitrator shall be given an opportunity of being heard before the fees is reduced.]

(5) The extension of period referred to in sub-section (4) may be on the application of any of the parties and may be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court.

(6) While extending the period referred to in sub-section (4), it shall be open to the Court to substitute one or all of the arbitrators and if one or all of the arbitrators are substituted, the arbitral proceedings shall continue from the stage already reached and on the basis of the evidence and material already on record, and the arbitrator(s) appointed under this section shall be deemed to have received the said evidence and material.

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(7) In the event of arbitrator(s) being appointed under this section, the arbitral tribunal thus reconstituted shall be deemed to be in continuation of the previously appointed arbitral tribunal.

(8) It shall be open to the Court to impose actual or exemplary costs upon any of the parties under this section.

(9) An application filed under sub-section (5) shall be disposed of by the Court as expeditiously as possible and endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.

[10] Reading the provisions of Section 29A in light of the explanation, it is evident that an

Arbitral Tribunal shall be deemed to have entered

upon the reference on the date on which the

Arbitrator has received notice. Taking the date of th 26 February, 2018, even as per the case of the

respondents, the mandate of the Tribunal would th expire on 26 February, 2019.

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[11] However, certain facts noticed by perusal of th the order dated 19 March, 2019, Minutes of the th Arbitral Sitting of 25 February, 2019 notified on th 30 March, 2019 and reading the three orders of th even date i.e. 11 March, 2019, one is modifying

interim relief, which is the subject matter in this

petition, an order on application for amendment of

the Statement of Claim and the application of the

respondents for modifying paragraph-10 of the

application for modification / vacation of interim

relief, it is apparent that the respondents in the

entire process of the arbitral proceedings consciously

and responsibly participated.




[12]              In the first instance, perusal of the Minutes
          th                                                      th
of 10            Arbitral Sitting held on 25                           February, 2019

would            indicate      that           as     a         precursor            to       this
                               th
application, on 12                  March, 2018, an application for

adjournment was made by the respondents and the th matter was posted for hearing on 26 March, 2018.

th On 26 March, 2018, the parties remained present,

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preliminary meeting was held and it was decided th that the next sitting would be held on 7 July, 2018.

th On an application filed for interim relief on 7 July

2018, as is evident from the Minutes of the Meeting th of 25 February, 2019, "parties have been heard on

the question of modification/vacation of interim relief

including amendment in para-3 of the application

seeking amendment of the application for vacating

interim relief. Parties have also been heard on the

application tendered by the claimant permitting

amendment of the claim petition, hearing on the

above aspects is finally concluded and the matter is

kept for orders." Obviously therefore, as is recorded th in the Minutes that on 13 March, 2019, the hearing

on these applications were concluded on 25.02.2019.

The orders were pronounced on 11.03.2019, i.e. one

application for modification which is the subject

matter of challenge in this petition, and on an

application for amendment of Statement of Claim and

on an application by the respondents praying for

modifying para-10 of the application for

modification/vacation of interim relief, where the

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Court passed certain remarks against the respondents

observing the conduct of the respondents.

th [13] In the order below application dated 17

July, 2018 and thereafter seeking amendment of the

application, whereby the respondents wanted to delete th para-10, the Tribunal on 11 March, 2019 observed

that there were on record two applications seeking th the same reliefs on and after 14 February, 2019.

th The respondents gave purshis dated 25 February,

2019, stating that they would not press the earlier

application seeking amendment in respect of paras 5,

9 and 10 of the application. However, they would

press the second application seeking amendment of

para-10. The Tribunal, reading the applications found

that, the para pressing the amendment indicated that

what was pleaded as a mistake would change the

whole meaning of the sentence and it is difficult to

be accepted as a mistake. It changes the entire

stand of the parties. Accordingly, the application for

modifying the relief in the application for vacating

stay was rejected.

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[14] All these factors would go to show that

uptil and until the Minutes of the Meeting passed on th 13 March, 2019, it did not occur to the respondents

to press the mandate of Section 29A. But as soon

as, it was found that the order modifying the relief th was unpalatable, as observed in the order dated 19

March, 2019, the respondents had made an th application on 15 March, 2019 before the Arbitral

Tribunal seeking that the mandate of Tribunal has

expired, and therefore, the clients i.e. the respondents

are not agreeable to hearing which was scheduled on th 16 March, 2019.

th [15] Para-1 of the order dated 19 March, 2019

when read would indicate and for the benefit of this

order, it is quoted as under:-

"1. This application is tendered on 15.03.2019 in this matter by Dr.B.D.Jain, learned advocate for the respondents; stating that since one year has passed from the date of Arbitral Tribunal holding its first meeting on 26.02.2018 and

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since his clients are not agreeable for further extension of time, hearing of 16.03.2019 may kindly be cancelled."

[16] Reading para 1 of the order dated

19.03.2019 thereof indicates that the application was th tendered on 15 March, 2019 stating that since one

year has passed from the date of the Arbitral

Tribunal holding its first meeting on 26.02.2018 and

since the respondents are not agreeable for further th extension of time, hearing on 16 March, 2019 be

cancelled. Apparently, the respondents had played

smart with the Arbitral Tribunal by making an

application to see that the Arbitral Tribunal does not

proceed further on the purported ground of the

mandate having expired. The Tribunal had in great

pain recorded the order observing the conduct of the

respondents and showed its unwillingness to continue.

The relevant portion of the order reads as under:-

"4. If the overall journey of this proceedings is seen, even the preliminary sitting was held after one adjournment sought on behalf of the respondents. Out of the sittings held, the

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respondents have sought time on seven occasions. On one occasion, both the sides sought time and on one occasion sitting was adjourned before it could be held by the Tribunal on its motion due to ailment. Thus, major cause for delay is attributable to respondents.

5. However, the fact remains that one year has lapsed and, therefore, the mandate of the Arbitrator gets terminated unless the parties agree to extend the time as contemplated in Section 29-A(4) of the Arbitration and Conciliation Act, 1996. Here, the respondents are not agreeable to extension of time and, therefore, mandate of the Arbitrator having terminated, the proceedings before this Tribunal get terminated. It is up to the parties to pursue their cause as may be available under law.

6. The parties are hereby informed that the Arbitrator is not willing and not available to continue as Arbitrator in this matter in the backdrop of above factual developments."

[17] The question is whether is it open for the

respondents now or the learned Commercial Court in

the impugned order to negate an order passed by the

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th Tribunal on 11 March, 2019 pursuant to hearing th held on 25 February, 2019, even otherwise a date

prior to the Mandate having expired in the

perception of the respondents.

[18] The conduct of the respondents is eloquent

enough to indicate that they had implied consented

to the Tribunal hearing the proceedings, and

therefore, their conduct to set aside the order would

be contrary to the provisions of Section 29A when

read in context of Sub-section-3. Conscious of the fact

that there has to be a consent of the parties for

further extension of six months, the conduct of the

respondents indicate an implied consent.

[19] The Hon'ble Supreme Court in the case of Inder Sain Mittal Vs. Housing Board, Haryana and

others reported in AIR (2002) SC 1157, in para-13

observed as under:-

"13. In the case on hand, it cannot be said that continuance of the proceedings and rendering of awards therein by the arbitrator

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after his transfer was in disregard of any provision of law much-less mandatory one but, at the highest, in breach of agreement. Therefore, by their conduct by participating in the arbitration proceedings without any protest the parties would be deemed to have waived their right to challenge validity of the proceedings and the awards, consequently, the objections taken to this effect did not merit any consideration and the High Court was not justified in allowing the same and setting aside the award.

[20] In the case of Balak Ram and others (supra),

the Himachal Pradesh High Court was considering

somewhat similar facts in context of conduct of the

parties in participating in the proceedings despite the

mandate having expired. Para-4.ii of the judgment of

the Himachal Pradesh High Court, wherein Section 29A

is reproduced, reads as under:-

"4(ii) I have heard learned counsel on both sides on the above issue. My observations are as under :-

4(ii) (a) Section 29A of the A&C Act as it existed in the year 2016 (brought into force with effect

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from 23.10.2015 . By Act 3 of 2016-2015 Amending Act reads as under :-

"29A. Time limit for arbitral award.--

(1) The award shall be made within a period of twelve months from the date the arbitral tribunal enters upon the reference. Explanation.- For the purpose of this sub-section, an arbitral tribunal shall be deemed to have entered upon the reference on the date on which the arbitrator or all the arbitrators, as the case may be, have received notice, in writing, of their appointment. (2) If the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree.

(3) The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months.

(4) If the award is not made within the period specified in sub- section (1) or the extended period specified under sub-section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period:

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Provided that while extending the period under this sub-section, if the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five per cent. for each month of such delay.

(5) The extension of period referred to in sub- section (4) may be on the application of any of the parties and may be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court.

(6) While extending the period referred to in sub- section (4), it shall be open to the Court to substitute one or all of the arbitrators and if one or all of the arbitrators are substituted, the arbitral proceedings shall continue from the stage already reached and on the basis of the evidence and material already on record, and the arbitrator(s)appointed under this section shall be deemed to have received the said evidence and material.

(7) In the event of arbitrator(s) being appointed under this section, the arbitral tribunal thus reconstituted shall be deemed to be in continuation of the previously appointed arbitral tribunal. (8) It shall be open to the Court to impose actual or exemplary costs upon any of the parties under

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this section. An application filed under sub-section (5) shall be disposed of by the Court as expeditiously as possible and endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party."

As per Section 29A(1) of the Arbitration and Conciliation Act, the award has to be made within a period of 12 months from the date the Arbitral Tribunal enters upon the reference. Section 29A(3) provides for extension of the period specified in sub section (1) for a further period not exceeding six months by the consent of the parties.

An arbitral award, therefore, can be made within a period of 12 months from the date the Arbitrator enters upon the reference. The parties can extend this period by consent for a further period not exceeding six months. An award made beyond 12 months under Section 29A(1) or 18 months under Section 29A(3) shall not be valid.

4(iv) In view of above discussion on facts & law, it has to be held that consent of the parties envisaged under Section 29A(3) of the 2015 Arbitration & Conciliation Act for extending the arbitral period need not necessarily be either express or in writing. There can be a deemed consent, an implied consent of the parties, which

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can be gathered from their acts and conduct. Their acquiescence in proceeding with the arbitration case beyond twelve months without raising any objection to the continuation of proceeding does amount to consent. On the basis of such consent, the arbitral award if passed within a further period of six months would be a valid award. In the given facts, consent of the parties to continue the arbitral proceedings beyond the period of one year (12 months) from the date the Arbitrator entered upon the reference, is writ large. The award was passed by the Arbitrator within further period of two months. The award was thus saved by Section 29A(3) of the Act as it was passed within the period permitted under Section 29A (3) of the Act. The conclusion drawn by learned District Judge about the award being illegal having been passed beyond the mandated period, therefore, being illegal, cannot be justified.

Under Section 29A(3) of the Arbitration and Conciliation Act, there is no requirement that consent of the parties has to be expressed and that too, in writing.

[21] The Court in the facts of the case found

that the National Highway Authority of India had

never objected to the arbitration proceedings being

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continued beyond the date when according to them

the mandate had expired and the Court, therefore,

on the conduct of the parties held it to be a tacit

consent on their part for extending the period of

arbitration. Reliance was placed on the decision of

the Orissa High Court in the case of M/s. Sara International Pvt. Ltd. Vs. South Eastern Railways &