Punjab-Haryana High Court
Omml Spml Jv Through Deepak Kumar Jain vs National Hydroelectr Power ... on 23 January, 2024
Author: G.S.Sandhawalia
Bench: G.S.Sandhawalia
FAO-CARB-5-2024 (O&M) 2024:PHHC:009551-DB
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
FAO-CARB-5-2024 (O&M)
Date of decision: 23.01.2024.
OMML-SPML (JV) through Sh. Deepak Kumar Jain
...Appellant
Vs.
NHPC Limited
...Respondent
CORAM: HON'BLE MR. JUSTICE G.S.SANDHAWALIA
HON'BLE MS. JUSTICE LAPITA BANERJI
Present:- Mr. Ashok Gupta and
Mr. Eklavya Gupta, Advocates,
for the appellant(s).
****
LAPITA BANERJI, J.
1. In the present appeal, the appellant has prayed for setting aside
of the impugned order dated December 16, 2023 passed by the learned
Additional District Judge, Faridabad in CIS No. ARB-63-2020. The learned
Additional District Judge relied on the decision reported in 2009 (5) SCC
142 Kwality Mfg. Corpn. Vs. Central Warehousing Corpn. to come to the
finding that the Arbitral Tribunal dated 29.02.2020 by way of majority
award took a plausible view which did not merit any interference. The
majority award being neither against the public policy of India nor being
vitiated by patent illegality or error appearing on the face of the award, on
the ground of erroneous application of law and re-appreciation of the
evidence, whether oral or documentary, was the reason the award was not
interfered with. The relevant portion relied on by the learned Additional
FAO-CARB-5-2024 (O&M) 2024:PHHC:009551-DB
District Judge in Central Warehousing Corpn. (supra) is reproduced herein
below:-
"The Court while considering challenge to arbitral
award does not sit in appeal over the findings and decision of
the arbitrator, which is what the High Court has practically
done in this matter. The umpire is legitimately entitled to take
the view which he holds to be the correct one after considering
the material before him and after interpreting the provisions of
the agreement. If he does so, the decision of the umpire has to
be accepted as final and binding."
2. The learned Additional District Judge also relied on the case of
Associate Builders Vs. Delhi Development Authority reported in (2015) 3
SCC 49 and Saanggyong Engineering and Construction Company
Limited Vs. National Highways Authority of India reported in 2019 (15)
SCC 131 to come to the finding that neither any public policy of India has
been violated nor has any patent illegality been caused by the Arbitral
Tribunal in terms of the Section 34 of the Arbitration and Conciliation Act,
1996. Relevant portion of Associate Builders (supra) relied upon by him is
reproduced herein below:-
"41. In case 'Associate builders Vs. Delhi Development
Authority' Civil appeal no.10531 of 2014 decided on
25.11.2014, it has been held by Hon'ble Supreme Court of
India that an arbitrator is the sole judge of quantity and quality
of evidence when he awarded the award. Thus, the award
cannot be held invalid unless the court comes to the conclusion
that the arbitrator acted arbitrary, capricious or perverse. The
Court can interfere, if court comes to the conclusion that the
award is against the public policy particularly when it shocked
conscious of the court. In case, the Court found that the
Arbitrator approach is neither arbitrary nor capricious, then
no interference is called for on facts. Further, the Court is
permitted to interfere only when arbitrator construes the
contract in such a way that no fair minded or reasonable
person can do. Further, the Court is not permitted to interfere
on the ground that another view is possible, but certainly it can
interfere if there is a patent illegality or perversity appear on
the face of it."
FAO-CARB-5-2024 (O&M) 2024:PHHC:009551-DB
3. The relevant extract from Saanggyong Engineering and
Construction Company Limited (supra) is reproduced herein below:-
"42. Similarly, in case of Saanggyong Engineering and
Construction Company Limited Vs. National Highways
Authority of India, 2019 (15) SCC 131, it has been held by the
Hon'ble Supreme Court of India, which was held after the
amendment of the Act was carried out and an additional
ground of 'patent illegality' was incorporated in sub-section
2A of Section 34 of the Act. In that case, the observation of
Hon'ble Supreme Court of India is reproduced as under:-
"36. Thus, it is clear that public policy of India is
now constricted to mean firstly, that a domestic award is
contrary to the fundamental policy of Indian law, as
understood in paras 18 and 27 of Associate Builders, or
secondly, that such award is against basic notions of
justice or morality as understood in paras 36 to 39 of
Associate Builders. Explanation 2 to Section 34(2) (b)
(ii) and Explanation 2 to Section 48 (2) (b) (ii) was
added by the Amendment act only so that Western Geco,
as understood in Associate Builders, and paras 28 and
29 in particular, is now done away with.
37. Insofar as domestic award made in India are
concerned, an additional ground is now available under
sub- section (2-A), added by the Amendment Act, 2015,
το Section 34. Here, there must be patent illegality
appearing on the face of the award, which refers to such
illegality as goes to the root of the matter but which does
not amount to mere erroneous application of the law. In
short, what is not subsumed within "the fundamental
policy of Indian law", namely, the contravention of a
statute not linked to public policy or public interest,
cannot be brought in by the back door when it comes to
setting aside an award on the ground of patent illegality.
38. Secondly, it is also made clear that re-
appreciation of evidence, which is what an appellate
court is permitted to do, cannot be permitted under the
ground of patent illegality appearing on the face of the
award."
4. Four issues that were agitated before the learned Additional
District Judge in an application under Section 34 of the 1996 Act were as
follows:-
FAO-CARB-5-2024 (O&M) 2024:PHHC:009551-DB
i) The ground of illegal composition of arbitral.
ii) The presiding arbitrator Shri Anil Razdan did not
disclose his relationship with the respondent.
iii) The application filed under Section 12 (5) read with
Section 14 of the Act was not properly entertained by the
AT.
iv) The findings given on all the issues are not decided
strictly in accordance with the construction of the
contract and the interpretation thereof is totally biased
and beyond the pleadings and evidence of parties,
therefore, the majority award may be set aside.
5. Before this Court in appeal, issue No.1 before the Arbitral
Tribunal which related to the statement of claim not being verified or not
being signed by the authorized representatives of the claimant was
primarily agitated. It was also contended that out of 31 issues only 7 issues
were considered to be preliminary issues and considered by the Arbitral
Tribunal and the award was passed by the majority of two arbitrators on
February 29, 2020.
6. The seven preliminary issues framed by the learned Arbitral
Tribunal were as follows:-
I) Whether the present Statement of Claim (SOC) has
been properly signed and filed by the duly
authorized person on behalf of the claimant?
II) Whether the claimant is entitled for such claims
mentioned in SOC which have been made without
following the due procedure as stipulated in terms
of the contract? (OPR)
III) Whether the claimant is entitled for such claims
mentioned in SOC, which were never raised either
before the Respondent and /or before the
Adjudicating Authority in terms of the contract?
(OPR)
IV) Whether the claims of the claimant are barred by
law of limitation? (OPR)
FAO-CARB-5-2024 (O&M) 2024:PHHC:009551-DB
V) Whether the claimant is stopped from claiming any
amount prior to 04.10.2010 in view of the
execution of the Compression Agreement dated
24.01.2011? (OPR)
VI) Whether the present statement of claim instituted
by M/s. Om Metals-SPML (JV) being an
unregistered partnership firm with Om Metals as a
lead partner is barred by the provision of Section
69(2) & (3) of the Partnership Act, 1932 from
instituting any proceedings to enforce a right
arising from a contract against any third party?
(OPR)
VII) Whether the claimant delayed the work not only on
account of hindrances encountered but due to its
own fault on several accounts like lack of
resources, expertise/efficiency etc.? (OPR)
7. The brief facts of the case relate to the agreement entered into
between the claimant and the respondent for supply of various equipments
and materials for hydro mechanical works of a Hydro Electric Project at
Himachal Pradesh and also for performance of a Compression Agreement
by the claimant. For performance of the said contracts, various bank
guarantees/performance guarantees were given by the claimant from time to
time. It was the claimant's case that due to no fault of their own because of
various hindrances including 'force majeure' the schedule of the civil
works could not be adhered to by the claimant.
8. Civil disputes arose between the parties as the construction
contract could not be completed within the stipulated time and with regard
to extension of time for such performance. Under Clause 6 of the general
conditions of contract, the disputes were referred to the adjudicator.
Adjudicator decided that the delay in completion of the works was not
attributable to the claimant and directed the release of bank guarantees
worth Rs.3 crores in favour of the claimant which were furnished in favour
FAO-CARB-5-2024 (O&M) 2024:PHHC:009551-DB
of the respondent along with payment of amount raised under the final bill
by the claimant.
9. The respondent neither paid dues under the final bill nor
released the bank guarantees. Thereafter, the claimant/appellant invoked the
arbitration proceedings.
10. Primarily, it was argued on behalf of the appellant that issue
No.1 was wrongly determined by the Arbitral Tribunal and the same was
perverse and contrary to Public Policy of India. It has been held by the
majority of the Arbitral Tribunal that even though non-signing of the
pleadings was a curable defect, the question that was required to be
examined was whether the claimant was unaware of the "curable defect" or
did not have sufficient time to "rectify the defect". The Arbitral Tribunal
found from records that the claimant was fully aware from the beginning
that the Statement of Claim (SOC) was not properly signed. The claimant
was given numerous opportunities to rectify the "curable defect". SOC was
filed on July 16, 2018 whereas Statement of Defence was filed on August
30, 2018 and issue with regard to non-maintainability of the SOC was taken
therein. Despite the matter being brought to the notice of the claimant, it
was argued that the SOC was not required to be signed in the rejoinder filed
on September 15, 2018. It was argued that the provisions of Code of Civil
Procedure was not required to be complied with in arbitration proceedings.
11. The majority of the Arbitral Tribunal was of the opinion from
August 2018 till February 2022 despite claimant being fully aware of the
SOC not being signed and the authority of one Mr. Kothari to represent the
claimant had been questioned and him being made aware on eight distinct
occasions about the shortcomings in the SOC, the claimant did not take any
FAO-CARB-5-2024 (O&M) 2024:PHHC:009551-DB
steps for amendment of SOC. Consequently, the "curable defects" remained
uncured till the very end.
12. Relying on the Apex Court's judgment in SREI
Infrastructure Finance Ltd. Vs. Tuff Drilling, reported in (2018) 11 SCC
470 the learned Arbitral Tribunal came to the finding that the "curable
defect" could be rectified with due permission till such time the judgment
was not pronounced.
13. The Arbitral Tribunal also relied on judgment of Apex Court in
Uday Shankar Triyar Vs. Ram Kalewar Singh and others reported in 2006
(1) SCC 75 to come to the finding that the general principle of "curable
defects" and irregularities not being allowed to defeat substantive rights or
cause injustice to the parties was subject to the exception where the
procedural defect was not rectified even after it was pointed out and due
opportunity was granted. The claimant instead of moving an application to
amend his SOC, contradicted himself in his stand regarding procedural
orders of the Tribunal and adopted a pick and choose approach regarding
applicability of different legislations to arbitral proceedings. Therefore, the
SOC remained unsigned till the date of the judgment/award. Since the SOC
was not maintainable in its entirety therefore, the Tribunal came to the
conclusion that numerous reliefs sought by the claimant could not be taken
up for consideration.
14. This Court finds upon perusal of the documents that the
petitioner/claimant has described itself as a joint venture between Om
Metals Infra Projects Ltd., a company incorporated in India and Subhash
Projects & Marketing Ltd., another company incorporated in India.
FAO-CARB-5-2024 (O&M) 2024:PHHC:009551-DB
15. Neither the constituent companies were before the Tribunal nor
did they authorize any representative by way of Board resolution before the
Arbitral Tribunal. Also, a valid authorization to said Mr. Kothari was not
given by both the constituents.
16. A beneficial reference on the issue of "joint ventures" may be
made to the decision in New Horizons Limited and another Vs Union Of
India and others reported in (1995) 1 SCC 478.
17. The expression 'joint venture' has been succinctly described in
respect of companies which are incorporated for carrying out such joint
ventures in New Horizons Limited (supra). Relevant extract is as follows :
"24. The expression "joint venture" is more frequently
used in the United States. It connotes a legal entity in the
nature of a partnership engaged in the joint undertaking of a
particular transaction for mutual profit or an association of
persons or companies jointly undertaking some commercial
enterprise wherein all contribute assets and share risks. It
requires a community of interest in the performance of the
subject-matter, a right to direct and govern the policy in
connection therewith, and duty, which may be altered by
agreement, to share both in profit and losses.
XXX XXX XXX
25. As noticed earlier, in its tender NHL had stated
that it is a joint venture company established by TPI, LMI and
WML and IIPL wherein TPI, LMI and WML and other
companies in the same group as well as Mr Aroon Purie own
60% shares and IIPL owns 40% shares. It was also stated that
the joint venture has received approval of the Government of
India and is currently in operation and that the promoter will
increase their capital/contribution to commensurate with the
project need and that the company has been established as an
information and database management company with expertise
in database processing, publishing, sales/marketing and the
dissemination of related information. In the tender it is also
stated that as a joint venture in the true sense of the phrase, the
company will have access to expertise in database
management, sales and publishing of its parent group
companies. It would thus appear that the Indian group of
companies (TPI, LMI and WML) and the Singapore-based
company (IIPL) have pooled together their resources in the
FAO-CARB-5-2024 (O&M) 2024:PHHC:009551-DB
sense that TPI, LMI and WML have made available their
equipment and Organisation at various places in the country
while IIPL has made available its wide experience in the field
as well as the expertise of its managerial staff. All the
constituents of NHL have thus contributed to the resources of
the Company (NHL). This shows that NHL is an association of
companies jointly undertaking a commercial enterprise
wherein they will all contribute assets and will share risks and
have a community of interest. We are, therefore, of the view
that NHL has been constituted as a joint venture by the group
of Indian companies and IIPL, the Singapore-based company
and it would not be correct to say that IIPL which has a
substantial stake in the success of the venture, having 40% of
shareholding, is a mere shareholder in NHL.
XXX XXX XXX
27. The conclusion would not be different even if the
matter is approached purely from the legal standpoint. It
cannot be disputed that, in law, a company is a legal entity
distinct from its members."
18. Such discussions were made in New Horizons Limited (supra)
while consideration of the issue of lifting of corporate veil. Consequently, it
becomes clear that either a corporate entity being separate legal entity has
to file the proceedings or all the individual members/participants in a joint
venture will have to initiate and carry the proceedings. An unregistered
association of the individuals, firms and/or companies is not a legal person
or juridical entity, in the eyes of law.
19. Section 69 of the Indian Partnership Act, 1932 may be referred
to in this context. The same is reproduced herein below:-
"69. Effect of non-registration.--
(1)No suit to enforce a right arising from a contract or conferred
by this Act shall be instituted in any court by or on behalf of any
person suing as a partner in a firm against the firm or any person
alleged to be or to have been a partner in the firm unless the firm
is registered and the person suing is or has been shown in the
Register of Firms as a partner in the firm.
(2)No suit to enforce a right arising from a contract shall be
instituted in any Court by or on behalf of a firm against any third
FAO-CARB-5-2024 (O&M) 2024:PHHC:009551-DB
party unless the firm is registered and the persons suing are or
have been shown in the Register of Firms as partners in the firm.
(3)The provisions of sub-sections (1) and (2) shall apply also to a
claim of set-off or other proceeding to enforce a right arising
from a contract, but shall not affect,--
(a)the enforcement of any right to sue for the dissolution of a firm
or for accounts of a dissolved firm, or any right or power to
realise the property of a dissolved firm, or
(b)the powers of an official assignee, receiver or Court under the
Presidency-towns Insolvency Act, 1909 (3 of 1909) or the
Provincial Insolvency Act, 1920 (5 of 1920) to realise the
property of an insolvent partner.
(4)This section shall not apply,--
(a)to firms or to partners in firms which have no place of
business in the territories to which this Act extends, or whose
places of business in the said territories, are situated in areas to
which, by notification under section 56, this Chapter does not
apply, or
(b)to any suit or claim of set-off not exceeding one hundred
rupees in value which, in the Presidency-towns, is not of a kind
specified in section 19 of the Presidency Small Cause Courts Act,
1882 (5 of 1882), or, outside the Presidency-towns, is not of a
kind specified in the Second Schedule to the Provincial Small
Cause Courts Act, 1887 (9 of 1887), or to any proceeding in
execution or other proceeding incidental to or arising from any
such suit or claim."
20. There is no averment in the present appeal that the said 'joint
venture' was a registered association of firms. The petitioner was neither an
individual nor a company incorporated under the Companies Act nor a
registered partnership firm under the Indian Partnership Act nor the sole
proprietor of a Proprietorship Concern.
21. Even assuming that the appellant was a juridical entity for the
sake of arguments, still from the dissenting award passed by one of the
learned Arbitrators, it becomes clear that the said Bharat Kothari claiming
to be an authorized signatory of the claimant was not authorized by a Board
Resolution of both the companies which purportedly entered into a joint
FAO-CARB-5-2024 (O&M) 2024:PHHC:009551-DB
venture. The learned dissenting Arbitrator held that authorization through
Board resolution or otherwise by the claimants were matters of indoor
management and in the absence of a legal requirement or direction by the
Tribunal, there was no requirement to present such authorization as a part of
SOC, with which neither the Additional District Judge agreed nor this Court
respectfully agrees.
22. Therefore, it becomes abundantly clear that till the end there
was no authorization by either of the companies by way of Board
resolution, authorizing the said Bharat Kothari to be their representative.
Furthermore, this Court finds that present appeal has been filed by OMML-
SPML (JV) through one Deepak Kumar Jain, authorized representative of
OMML-SPML (JV) at NBCC Plaza, Tower III, 4th Floor, Sector-5 Pushp
Vihar, Saket New Delhi 1110017. The appellant in the present appeal being
FAO-CARB-5 is a different entity from the appellant/claimant before the
learned Additional District Judge. From perusal of the documents, it
appears that one Sunil Kothari reportedly authorized OMML-SPML (JV)
through one Deepak Kumar Jain to continue with the legal proceedings.
The said purported authorized signatory (Sunil Kothari) has not stated how
and when and by which resolution, he was authorized to nominate or
authorize Sh. Deepak Kumar Jain to conduct the present appeal nor any
document has been produced to that effect.
23. From the said purported authorization, the names of the
authorized representatives of the constituent companies do not come to the
fore as none of the names of the Directors of the constituents and partners
of the JV, apart from Sunil Kothari appear on the said document.
Accordingly, we are of the view that the appellant has no authority as such
FAO-CARB-5-2024 (O&M) 2024:PHHC:009551-DB
to file the present appeal. The learned Arbitral Tribunal correctly came to
the conclusion that the entire SOC was not maintainable as the "curable
defect" was not cured till the end. The learned Additional District Judge
also did not commit any error by refusing to interfere with the Award
passed by the arbitral Tribunal. It cannot be said that the Award is against
the public policy of India as the appellant sought to argue since the laws
which are in force have been taken into due consideration before passing of
the Award.
24. Accordingly, the present appeal being FAO-CARB-5 of 2024
along with connected applications, if any, are dismissed.
(G.S. SANDHAWALIA)
JUDGE
(LAPITA BANERJI)
JUDGE
January 23, 2024
vandana
Whether speaking/reasoned: Yes
Whether reportable: Yes
