M/S. Crescent Real Estates And ... vs M/S. Subha Gruha Projects India ...
2021 Latest Caselaw 1876 Tel

     HONOURABLE SRI JUSTICE M.S.RAMACHANDRA RAO
                                   AND
        HONOURABLE SRI JUSTICE T.VINOD KUMAR

             CIVIL REVISION PETITION No.360 of 2021

ORDER: (Per Hon'ble Sri Justice M.S. Ramachandra Rao)


       This Civil Revision Petition is filed under Article 227 of the

Constitution of India challenging a procedural order dt.Nil of the

Arbitral Tribunal at Hyderabad (learned arbitrator herein) ( hereafter

referred to as "learned arbitrator") received through e.mail by the

petitioner on 20-01-2001.


2.     The dispute between the petitioner and the 1st respondent arose

in relation to an agreement for sale of an immoveable property

dt.24-08-2018 entered into by petitioner with the 1st respondent.

3. The 1st respondent had filed a claim petition before the

learned arbitrator for registration of an extent of 31,332 sq. yds out of

47,450 sq. yds in Sy.Nos.377 and 377 part of Lemoor Village,

Kandukur Mandal, Ranga Reddy District.

The application u/s 16 of the Arbitration and Conciliation Act, 1996 filed by petitioner

4. After that, petitioner filed an Interlocutory Application under

Section 16 of the Arbitration and Conciliation Act, 1996 (for short

'the Act'), contending that the agreement of sale dt.24-08-2018

entered into by the petitioner with the 1st respondent is an unregistered

one, that the said agreement of sale is a compulsorily registerable ::2::

document, that it is not also properly stamped and so it cannot be

looked into for any purpose.

5. It is the plea of the petitioner in the said application that the

Arbitral Tribunal, having been constituted on the basis an arbitration

clause in an unregistered agreement of sale, which is not legally

enforceable, learned arbitrator may not assume jurisdiction and go

into the issues of arbitrability of the claims made by 1st respondent

before him.

6. The petitioner also contended that since it is questioning the

very existence and invocability of the arbitration clause in the said

unregistered agreement of sale, and since under Section 16 of the Act,

the Arbitral Tribunal is competent to rule on its own jurisdiction

including ruling on any objections with respect to the existence or

validity of the arbitration agreement, and since the objection raised by

the petitioner goes to the root of the matter, the learned arbitrator

should decide the said application first. The petitioner also reserved

its right to file a statement of defence after the application under

Section 16 of the Act is decided.

The stand of the 1st respondent in the said application

7. Counter-affidavit was filed to this application by the 1st

respondent/claimant opposing this application.

8. It is the contention of the 1st respondent in the counter-affidavit

filed by it that Clause-13 of the unregistered agreement of sale ::3::

contains arbitration providing reference of dispute between the parties

to an Arbitrator and invoking the same, it had filed a claim petition

before the learned arbitrator. It is also contended that an arbitration

agreement does not require registration under the Registration Act,

1908 since it is an independent agreement, independent of the main

contract.

9. The respondent refuted the contentions of the petitioner that the

document is not properly stamped and ought to be compulsorily

registered. He alleged that the agreement of sale was duly stamped

and the contention of petitioner in that regard cannot be accepted.

10. Alternatively it is contended that, assuming for the sake of

argument that the instrument is not duly stamped, opportunity should

be given for impounding the same, because insufficiency of stamp

was a curable defect.

The impugned order passed by the learned arbitrator communicated on 20-1-2021

11. The learned arbitrator recorded the contentions of the parties

and the decisions cited by them, and observed in para-9 of his order as

under:

"6. In the light of the above and in the interest of justice, this Tribunal shall address the issue of jurisdiction in consideration of the insufficiently stamped agreement of sale as raised by the respondent in its application, along with the main Arbitration Application. Therefore, both the parties are directed to complete their respective pleadings before this Tribunal".

::4::

12. Thus, the Arbitral Tribunal indicated in the order passed by it

that it would address the issue of jurisdiction in relation to the plea of

the agreement of sale being unregistered and insufficiently stamped,

raised by the petitioner, in its application filed under Section 16 of the

Act, along with the main application. It directed both parties to

complete their respective pleadings and fixed a new schedule for

various filings to be made by the parties by altering the schedule fixed

earlier to some extent.

The present Revision

13. Challenging the same, this Revision is filed.

Contention of counsel for petitioner

14. It is contention of the learned counsel for petitioner that the

Arbitrator had committed an illegality and acted arbitrarily and

contrary to the settled principles of law while passing the impugned

order; that learned arbitrator heard arguments on the application filed

u/Section 16 of the Act filed by petitioner on 21-12-2020 and

adjourned the same directing the counsel for the parties to submit

latest case law and also to give written arguments informing that a

date would be given, but without intimating further date, the

impugned order was passed.

15. It is contended that if an opportunity of hearing had been given,

the judgments cited by the petitioner would have been properly ::5::

explained and the learned arbitrator would not have passed the

impugned order.

16. It is also contended that the Arbitral Tribunal did not take into

account the provisions of Section 35 of the Indian Stamp Act, 1899

which made inadmissible in evidence insufficiently stamped

documents such as the agreement of sale between the parties; and

learned arbitrator's view that he would address the issue of

jurisdiction with the main Arbitration Application has caused grave

prejudice and injustice to the petitioner.

17. Learned counsel for petitioner cited judgments of the Supreme

Court in Bhaven Construction Vs. Executive Engineer Sardar

Sarovar Narmada Nigam Limited and others1, Srei

Infrastructure Finance Limited Vs. Tuff Drilling Private

Limited2, judgment of the Bombay High Court in M/s.Sanwal Coal

Industries Vs. Western Coal Fields Ltd and others3 and judgment

in Raj International Vs. Tripura Jute Mills Ltd4.

Contention of counsel for 1st respondent

18. Sri K.V.Bhanu Prasad, learned counsel appearing for

1st respondent refuted the said contentions, and pointed out that the

learned Arbitrator had merely postponed its decision in the

Application field under Section 16 of the Act by the petitioner; and

has not held that the agreement of sale can be looked into by rejecting

Order dt.06-01-2021 in Civil Appeal No.14665 of 2015 = MANU/SC/0008/2021

Order dt.20-09-2017 in Civil Appeal No.015036 of 2017

Order dt.26-08-2010 in W.P.No.2888 of 2010

(2008) 5 Gauhati Law Reports 347 (Agartala Bench) ::6::

the pleas of the petitioner; and in view of Section 5 of the Act, the said

order of the learned arbitrator could not be challenged before this

Court under Article 227 of the Constitution of India.

Consideration by this court

19. We have noted the submissions of both sides.

20. Section 5 of the Act states:

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

21. Section 34 of the Act provides for application for setting

arbitral award. Sub section (1) of section 34 states:

"Section 34:

(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 and sub-section (3). ..."(emphasis supplied)

22. Section 37 of the Act deals with what orders are appealable, and

sub-Section (2) Section 37 states:

"(1) .. ..

(2) An appeal shall lie to a Court from an order of the arbitral tribunal -

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

(b) granting or refusing to grant an interim measure under Section 17. ..."(emphasis supplied) ::7::

23. Thus clause (a) of sub-Section (2) of Section 37 of the Act

declares that an appeal would lie to a Court from an order of the

Tribunal only if Arbitral Tribunal were to accept a plea referred in

sub-Section (2) or sub-Section (3) of Section 16 of the Act.

24. In the instant case, though the application filed by the petitioner

is under sub-Section (2) of Section 16 of the Act, the impugned order

passed by the learned arbitrator does not indicate that the learned

arbitrator had accepted the plea raised by the petitioner or rejected it.

He has merely deferred it for consideration at a later stage.

25. That apart, when sub-Section (1) of Section 34 of the Act

provides that recourse to a Court against an arbitral award can be

made 'only' by an application for setting aside such award in

accordance with sub-section (2) and sub-section (3) of the Act, there

cannot be normally any interference with the orders passed by an

arbitrator under Art.227 of the Constitution of India.

26. As held by the Supreme Court in Bhaven Constructions

(1 supra), the term 'only' as occurring under the provision serves two

purposes of (i) making the enactment a complete code and (ii) lay

down the procedure; and though an enactment cannot curtail the

Constitutional right under Article 226 or 227, it would be prudent for

a Judge to not exercise jurisdiction to allow judicial interference

beyond the procedure established under the enactment, and that the

said power under Article 226/227 of the Constitution needs to be ::8::

exercised in exceptional rarity, wherein one party is left remediless

under the statute or a clear 'bad faith' is shown by one of the parties.

27. In Deep Industries Limited Vs. Oil and Natural Gas

Commission Limited and others5, adverting to the same issue, the

Supreme Court held that if petitions were to be filed under Article

226/227 of the Constitution against orders passed in appeals under

Section 37 of the Act, the entire arbitral process would be derailed and

would not come to fruition for many years; and though the non-

obstante clause of Section 5 of the Act does not touch Article 227 of

the Constitution of India, yet the High Court has to be circumspect in

interfering with the judgments allowing or dismissing the appeals

under Section 37 of the Act taking into account the statutory policy,

so that the interference is restricted to orders which are passed

patently lacking in inherent jurisdiction.

28. Though learned counsel for parties sought to draw our attention

to several judgments cited before the learned Arbitrator relating to

enforceability of an arbitration agreement in unstamped or

unregistered contracts / agreements, we are not inclined to consider

the same because as of now the arbitrator has not taken any decision

on the aspect by specifically stating that this objection would be gone

into while deciding the main Arbitration Application.

29. In our opinion, in the absence of any view taken by the learned

Arbitrator in that regard in the impugned order either accepting the

(2020) 15 SCC 706 ::9::

contention of the petitioner or rejecting the said objection, the instant

case does not fall within the limited category of cases where

interference under Article 227 of the Constitution is permitted i.e.,

that the impugned order cannot be said to be one which is patently

lacking any inherent jurisdiction or which leaves the petitioner

remediless under the statute or there is existence of clear 'bad faith'.

30. It is not, in our opinion, proper to make any assumption that

learned arbitrator would not deal with the objection raised by the

petitioner in the Application filed under Section 16 of the Act when he

decides the main Arbitration Application, and we cannot assume that

he will not decide it or would decide it erroneously. If such a thing

happens, the aggrieved party can always avail the remedy under

Section 34 of the Act.

31. Taking a different view, in our opinion, would derail the

arbitral process, which according to the Act, is to be made a quicker

process than an ordinary civil suit.

32. We express no opinion either way on the contentions raised by

the parties either on the aspects of the agreement of sale in question

(a) requiring registration or not, (b) that it is properly stamped or not,

and we leave it to the learned Arbitrator to consider these issues after

hearing both sides.

33. As regards the plea raised by the petitioner that no hearing was

given by the Arbitrator before passing the impugned order, this fact is ::10::

disputed by the learned counsel for 1st respondent. Since in any event,

the issue has now been left open both by the learned Arbitrator and

also by us, we say no more on the aspect.

34. We are of the opinion that this is not a fit case for interference

by this Court with the impugned order of the learned arbitrator in

exercise of the power conferred on us under Article 227 of the

Constitution of India.

35. Accordingly, the Civil Revision Petition is dismissed. No

costs.

36. Consequently, miscellaneous petitions, pending if any, shall

stand closed.

______________________________ M.S. RAMACHANDRA RAO, J

___________________ T.VINOD KUMAR, J Date: 30-06-2021 Vsv