M/S. Lifeshine Medical Services Pvt. ... vs Dr. Alety Jeevan Reddy And Another
2024 Latest Caselaw 670 Tel

Telangana High Court

M/S. Lifeshine Medical Services Pvt. ... vs Dr. Alety Jeevan Reddy And Another on 19 February, 2024

             THE HONOURABLE SMT JUSTICE K. SUJANA

              CIVIL REVISION PETITION No.576 OF 2023


ORDER:

The present revision petition is filed being aggrieved by the

order dated 24.12.2022 passed by the Arbitral Tribunal

comprising of the Sole Arbitrator, whereunder, the petitioner

herein who is the respondent in Arbitration Application

No.198 of 2021 filed a petition before the Arbitral Tribunal under

Section 19 of the Arbitration and Conciliation Act, 1996 (for short

'Act, 1996') praying to decide the arbitrability of the claims which

are based on insufficiently stamped document and an unregistered

lease agreement dated 01.05.2018 executed by respondent Nos.1

and 2 herein who are claimants in the said Arbitration

Application.

2. The brief facts of the case are that vide proceedings dated

19.11.2022 from the pre-trial enquiry for settlement of issues and

marking of documents and for taking further steps, the Arbitral

Tribunal, having heard both sides at length with reference to the

submissions on what documents to mark with consent or without

consent, framed six issues in total and decided to mark Exs.C1-

C22 and Exs.R1-R24, some of which were marked subject to SKS,J

objection. It is contended that Ex.C1 is a copy of the Hospital

Lease Agreement (Claim Statement enclosure page Nos.13-29)

dated 01.05.2018 which was marked subject to objection raised

with regard to stamp duty and registration of the same, for

otherwise, the contents admitted by respondent/petitioner herein.

3. Aggrieved thereby, this revision is preferred by respondent in

Arbitration Application No.198 of 2021 stating that the Arbitral

Tribunal ought to have framed and decided the issue of

arbitrability of claims as a preliminary issue so as to avoid the

unnecessary protraction of Arbitration proceedings since there

would remain no necessity of leading evidence and considering the

same, in case, the claims are held to be non-arbitrable. That apart,

the Arbitral Tribunal failed to consider that the claims made by

petitioner herein against the respondents herein with regard to the

inadmissibility of document as the same was based on

insufficiently stamped document and an unregistered lease

agreement based on oral understanding, alleged to have been

entered into between the parties, subsequent to the lease

agreement, thereby, making the claims ex facie not maintainable

for the reason that the written lease agreement dated 01.05.2018

is void and inadmissible in law. Further, the Arbitral Tribunal SKS,J

failed to appreciate the fact that Arbitration cannot be continued

until the lease agreement is properly stamped as per the

provisions of the Indian Stamp Act, 1872.

4. Heard Mr. Vadeendra Joshi, learned counsel for petitioner,

and Mr. Kishore Rai, learned senior counsel representing Ms.

Divya Rai Sohni, learned counsel for respondents.

5. Learned counsel for petitioner contended that the Arbitral

Tribunal has erroneously marked Ex.C1 without considering the

fact that the same is an unstamped document, as such, it cannot

be taken into consideration. In support of the said contention, he

has relied upon the judgment of the Constitutional Bench of the

Hon'ble Supreme Court in the Interplay between Arbitration

Agreements under the Arbitration and Conciliation Act, 1996,

and the Indian Stamp Act, 1899 Vs. Bangalore, Karnataka 1,

whereunder, in paragraph Nos.133 to 137 the relevant subject was

discussed at length and in connection thereof, learned counsel for

petitioner asserted that in paragraph No.234 - Conclusions, the

Hon'ble Supreme Court held that an objection raised with regard

to the stamping of document does not fall for determination under

(2023) SCC OnLine SC 1666 SKS,J

Sections 8 or 11 of the Act, 1996, and the concerned Court must

examine whether the arbitration agreement prima facie exists. In

other words, any objections raised in relation to the stamping of

the agreement falls within the ambit of the Arbitral Tribunal to

decide.

6. In view of the above, learned counsel for petitioner

contended that as Ex.C1 is an insufficiently stamped document,

the Tribunal ought not to have marked the same in spite of

objection being raised by the other side. Therefore, prayed this

Court to allow this revision petition, setting aside the order dated

24.12.2022 passed by the Arbitral Tribunal.

7. Per contra, learned senior counsel appearing for

respondents contended that in view of the judgment rendered by

the Hon'ble Supreme Court in SBP & Co., Vs. Patel Engineering

Limited and Another 2 this revision petition itself is not

maintainable as the same is filed challenging the order dated

24.12.2022 passed by the Arbitral Tribunal when the matter is at

an interlocutory stage. In other words, an appeal lies before this

(2005) 8 SCC 618 SKS,J

Court and not a revision. The relevant paragraph Nos.45 and 46 of

the said judgment read as under:

"45. It is seen that some High Courts have proceeded

on the basis that any order passed by an Arbitral

Tribunal during arbitration, would be capable of being

challenged under Article 226 or 227 of the

Constitution. We see no warrant for such an

approach. Section 37 makes certain orders of the

Arbitral Tribunal appealable. Under Section 34, the

aggrieved party has an avenue for ventilating its

grievances against the award including any in-between

orders that might have been passed by the Arbitral

Tribunal acting under Section 16 of the Act. The party

aggrieved by any order of the Arbitral Tribunal, unless

has a right of appeal under Section 37 of the Act, has

to wait until the award is passed by the Tribunal. This

appears to be the scheme of the Act. The Arbitral

Tribunal is, after all, a creature of a contract between

the parties, the arbitration agreement, even though, if

the occasion arises, the Chief Justice may constitute it

based on the contract between the parties. But that

would not alter the status of the Arbitral Tribunal. It

will still be a forum chosen by the parties by

agreement. We, therefore, disapprove of the stand

adopted by some of the High Courts that any order

passed by the Arbitral Tribunal is capable of being SKS,J

corrected by the High Court under Article 226 or 227

of the Constitution. Such an intervention by the High

Courts is not permissible.

46. The object of minimising judicial intervention

while the matter is in the process of being arbitrated

upon, will certainly be defeated if the High Court could

be approached under Article 227 or under Article 226

of the Constitution against every order made by the

Arbitral Tribunal. Therefore, it is necessary to indicate

that once the arbitration has commenced in the

Arbitral Tribunal, parties have to wait until the award

is pronounced unless, of course, a right of appeal is

available to them under Section 37 of the Act even at

an earlier stage."

8. Learned senior counsel appearing for respondents,

submitted that the revision petitioners challenged an order of the

Arbitral Tribunal when the matter was at an interlocutory stage,

as such, the same is not maintainable. Therefore, prayed this

Court to dismiss the revision petition as the same is not

maintainable on the ground that an appeal lies in such case.

9. At this stage, learned counsel for the petitioner confuted the

contention made by learned senior counsel appearing for SKS,J

respondents, with regard to the applicability of the judgment

rendered by the Hon'ble Supreme Court in SBP & Co., (supra)

stating that the said judgment has been legislatively overruled by

the amendment made in the year 2015 and submitted that the

same is also held by the Hon'ble Supreme Court in the following

cases:

I. Bharat Sanchar Nigam Limited and Another Vs. Nortel

Networks India Private Limited 3. The paragraph Nos.45

and 45.1, as relied upon, reads as under:

"45. In a recent judgment delivered by a three-Judge Bench in Vidya Drolia

v. Durga Trading Corpn. [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC

1 : (2021) 1 SCC (Civ) 549] , on the scope of power under Sections 8 and 11,

it has been held that the Court must undertake a primary first review to

weed out "manifestly ex facie non-existent and invalid arbitration

agreements, or non-arbitrable disputes". The prima facie review at the

reference stage is to cut the deadwood, where dismissal is barefaced and

pellucid, and when on the facts and law, the litigation must stop at the first

stage. Only when the Court is certain that no valid arbitration agreement

exists, or that the subject-matter is not arbitrable, that reference may be

refused.

45.1. In para 144, the Court observed that the judgment in Mayavati Trading

[Mayavati Trading (P) Ltd. v. Pradyuat Deb Burman, (2019) 8 SCC 714 : (2019)

4 SCC (Civ) 441] had rightly held that the judgment in Patel Engg. [SBP & Co.

v. Patel Engg. Ltd., (2005) 8 SCC 618] had been legislatively overruled. Para

(2021) 5 SCC 738 SKS,J

144 reads as : (Vidya Drolia case [Vidya Drolia v. Durga Trading Corpn.,

(2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] , SCC pp. 114-15)

"144. As observed earlier, Patel Engg. Ltd. [SBP & Co. v. Patel Engg. Ltd.,

(2005) 8 SCC 618] explains and holds that Sections 8 and 11 are

complementary in nature as both relate to reference to arbitration. Section 8

applies when judicial proceeding is pending and an application is filed for

stay of judicial proceeding and for reference to arbitration. Amendments to

Section 8 vide Act 3 of 2016 have not been omitted. Section 11 covers the

situation where the parties approach a court for appointment of an

arbitrator. Mayavati Trading (P) Ltd. [Mayavati Trading (P) Ltd. v. Pradyuat

Deb Burman, (2019) 8 SCC 714 : (2019) 4 SCC (Civ) 441] , in our humble

opinion, rightly holds thatPatel Engg. Ltd. [SBP & Co. v. Patel Engg. Ltd.,

(2005) 8 SCC 618] has been legislatively overruled and hence would not apply

even post omission of sub-section (6-A) to Section 11 of the Arbitration

Act.Mayavati Trading (P) Ltd. [Mayavati Trading (P) Ltd. v. Pradyuat Deb

Burman, (2019) 8 SCC 714 : (2019) 4 SCC (Civ) 441] has elaborated upon the

object and purposes and history of the amendment to Section 11, with

reference to sub-section (6-A) to elucidate that the section, as originally

enacted, was facsimile with Article 11 of the UNCITRAL Model of law of

arbitration on which the Arbitration Act was drafted and enacted."

While exercising jurisdiction under Section 11 as the judicial forum, the

court may exercise the prima facie test to screen and knockdown ex facie

meritless, frivolous, and dishonest litigation. Limited jurisdiction of the

courts would ensure expeditious and efficient disposal at the referral stage.

At the referral stage, the Court can interfere "only" when it is "manifest" that

the claims are ex facie time-barred and dead, or there is no subsisting

dispute. Para 148 of the judgment reads as follows : (Vidya Drolia case [Vidya

Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] ,

SCC p. 119)

"148. Section 43(1) of the Arbitration Act states that the Limitation Act, 1963

shall apply to arbitrations as it applies to court proceedings. Sub-section (2) SKS,J

states that for the purposes of the Arbitration Act and the Limitation Act,

arbitration shall be deemed to have commenced on the date referred to in

Section 21. Limitation law is procedural and normally disputes, being

factual, would be for the arbitrator to decide guided by the facts found and

the law applicable. The court at the referral stage can interfere only when it is

manifest that the claims are ex facie time-barred and dead, or there is no

subsisting dispute. All other cases should be referred to the Arbitral Tribunal

for decision on merits. Similar would be the position in case of disputed "no-

claim certificate" or defence on the plea of novation and "accord and

satisfaction". As observed in Premium Nafta Products Ltd. [Fili Shipping Co.

Ltd. v. Premium Nafta Products Ltd., 2007 UKHL 40 : 2007 Bus LR 1719 (HL)]

, it is not to be expected that commercial men while entering transactions

inter se would knowingly create a system which would require that the court

should first decide whether the contract should be rectified or avoided or

rescinded, as the case may be, and then if the contract is held to be valid, it

would require the arbitrator to resolve the issues that have arisen."

(emphasis supplied)

II. Uttarakhand Purv Sainik Kalyan Nigam Limited Vs.

Northern Coal Field Limited 4. The paragraph No.7.8, as

relied upon, reads as under:

"7.8. By virtue of the non obstante clause incorporated in Section 11(6-A),

previous judgments rendered in Patel Engg. [SBP & Co. v. Patel Engg. Ltd.,

(2005) 8 SCC 618] and Boghara Polyfab [National Insurance Co. Ltd. v.

Boghara Polyfab (P) Ltd., (2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117] , were

legislatively overruled. The scope of examination is now confined only to the

existence of the arbitration agreement at the Section 11 stage, and nothing

more."

(2020) 2 SCC 455 SKS,J

III. Vidya Drolia Vs. Durga Trading Corporation 5. The

paragraph No.144, as relied upon, reads as under:

"144. As observed earlier, Patel Engg. Ltd. [SBP & Co. v. Patel Engg. Ltd.,

(2005) 8 SCC 618] explains and holds that Sections 8 and 11 are

complementary in nature as both relate to reference to arbitration. Section 8

applies when judicial proceeding is pending and an application is filed for

stay of judicial proceeding and for reference to arbitration. Amendments to

Section 8 vide Act 3 of 2016 have not been omitted. Section 11 covers the

situation where the parties approach a court for appointment of an

arbitrator. Mayavati Trading (P) Ltd. [Mayavati Trading (P) Ltd. v. Pradyuat

Deb Burman, (2019) 8 SCC 714 : (2019) 4 SCC (Civ) 441] , in our humble

opinion, rightly holds that Patel Engg. Ltd. [SBP & Co. v. Patel Engg. Ltd.,

(2005) 8 SCC 618] has been legislatively overruled and hence would not

apply even post omission of sub-section (6-A) to Section 11 of the Arbitration

Act. Mayavati Trading (P) Ltd. [Mayavati Trading (P) Ltd. v. Pradyuat Deb

Burman, (2019) 8 SCC 714 : (2019) 4 SCC (Civ) 441] has elaborated upon the

object and purposes and history of the amendment to Section 11, with

reference to sub-section (6-A) to elucidate that the section, as originally

enacted, was facsimile with Article 11 of the UNCITRAL Model of law of

arbitration on which the Arbitration Act was drafted and enacted. Referring

to the legislative scheme of Section 11, different interpretations, and the Law

Commission's Reports, it has been held that the omitted sub-section (6-A) of

Section 11 of the Arbitration Act would continue to apply and guide the

courts on its scope of jurisdiction at stage one, that is, the pre-arbitration

stage."

10. Learned counsel for petitioner, elaborately submitted that it

is for the Arbitral Tribunal to decide the issue of deficient

stamping before proceeding with the matter on merits.

(2021) 2 SCC 1 SKS,J

11. Having regard to the rival submissions made and on going

through the material placed on record, it is noted that on the one

hand, the revision petitioner contends that the Arbitral Tribunal

ought not to have marked Ex.C1 as the same is an unstamped

document, whereas, on the other hand, the stand of respondents

is that as per Section 37 of the Act, 1996, the revision itself is not

maintainable.

12. At this stage, it is pertinent to note that an Order or Award

passed in the Arbitral proceedings can either be challenged under

Section 37(2) or under Section 34(1) of the Act, 1996.

13. Section 34(1) of the Act, 1996 reads as under:

"(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3)."

14. Section 37 of the Act, 1996, reads as under:

"Appealable orders.--(1) An appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely:--

SKS,J

a) refusing to refer the parties to arbitration under section 8;

b) granting or refusing to grant any measure under section 9;

c) setting aside or refusing to set aside an arbitral award under section 34.

(2) Appeal shall also lie to a court from an order of the arbitral tribunal --

a) accepting the plea referred to in sub-section (2) or sub-

section (3) of section 16; or

b) granting or refusing to grant an interim measure under section 17.

(3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court."

15. In view of the above extracted portion, it is clear that against

the orders passed by the Arbitral Tribunal in an interlocutory

stage of the Arbitral proceedings, an Appeal lies before the Court

either when the plea referred to in Sub-Sections (2) or (3) of Section

16 of the Act, 1996, is allowed, or when the prayer for grant of

interim measure under Section 17 (1) of the Act, 1996 is allowed or

rejected. In other words, in the first case, an Appeal would lie

under Section 37(2) (a) of the Act, 1996, whereas, in the second

case, the appeal would lie under Section 37(2) (b) of the Act, 1996.

SKS,J

16. With regard to the contention of learned senior counsel

appearing for respondents that as per the judgment of the Hon'ble

Supreme Court in SBP & Co., (supra) that once the arbitration

has commenced in the Arbitral Tribunal, parties have to wait until

the Award is pronounced, it is noted that an interlocutory order

passed by an Arbitral Tribunal would also be susceptible to

challenge as per Section 2 (c) of the Act, 1996, which reads

"arbitral award" includes an "interim award". However, the same

does not define the factors of an interim award.

17. In the case on hand, the order under challenge is an

interlocutory order passed by the Arbitral Tribunal and the same

does not come within the sphere of Article 227 of the Constitution

of India. Therefore, it can be concluded that this revision petition

is not maintainable and the same is liable to be dismissed.

18. Accordingly, without going into the merits of the case, the

Civil Revision Petition is dismissed. However, the revision

petitioner is at liberty to avail the appropriate remedy before the

appropriate forum, as available in law. In view of the time limit

prescribed in Section 29 of the Act, 1996, for concluding the

Arbitration proceedings, having regard to the fact that this revision SKS,J

petition was filed on 16.02.2023 and is pending consideration by

this Court till date, the period spent before this Court till date

stands excluded from computation of period of limitation. There

shall be no order as to costs.

As a sequel, miscellaneous petitions pending, if any, shall

stand closed.

_______________ K. SUJANA, J

Date: 19.02.2024 PT