The Single Bench of the Delhi High Court in the case of Union of India vs Delhi State Consumer Co Operative Federation Ltd. consisting of Justice Prateek Jalan observed that if claimant shows a sufficient cause, the Arbitral Tribunal can accept the statement of claim even after expiry of the time as envisaged under Section 23(1) of the Arbitration and Conciliation Act, 1996 (“the Act”).
Facts
The 24 arbitral proceedings arise in substantially similar circumstances. In response to four different tender enquiries floated by the Union, the respondent (DSCCFL) offered to supply various qualities of pulses (dal) for the use of defence personnel. As per the Union, DSCCFL failed to furnish the requisite security deposit, because of which each of the contracts were cancelled at the risk and cost of the respondent. The Union sought to claim consequential damages.
Procedural History
The Union received legal notices from DSCCFL for reference of the matters to arbitration. The Arbitrator issued his first order by which, both parties were directed to file their Statement of Claims and counter Statement of Claims. But neither party had filed the same. The Arbitrator was informed by the Union’s representative that they had sent a letter to the Law Ministry for appointment of a government counsel and would file the Statement of Claims when the Govt. Counsel is appointed. The Arbitrator gave further time for filing. The hearings were adjourned to a later date; however, the Arbitrator issued an order preponing the hearing. The Department of Legal Affairs issued an office order by which the proceedings in question were to be heard by Ms. Renu Pandey, Assistant Legal Adviser. Ms. Pandey was, however, appointed as an Arbitrator by a separate communication issued eight months. She directed the Union to file the Statement of Claims “on the next date of hearing”. It was not filed, and a further order came to be passed again directing the Union to do the same. The Union once again submitted that they have written a letter for appointment of government counsel and that reply was still awaited. The Union was directed to pursue the matter with the Law Ministry for early appointment of counsel and to file the Statement of Claims on the next date of hearing. The Union appointed a counsel in these proceedings. Before any further progress could be made in the matter, the Arbitrator terminated the proceedings by the impugned order. Upon receipt of these orders, the Union applied to the Arbitrator for recall thereof and the applications were taken up for hearing. However, the Union claims that the learned Arbitrator returned the applications without passing any orders.
Contentions Made
Petitioner: The Arbitrator has, in declining to consider the applications made by the Union for recall of the impugned orders, failed to exercise jurisdiction vested in her. The termination of the proceedings has a harsh consequence upon the Union. It cannot be presumed that the Union would not have been able to submit its Statement of Claims on the next date fixed for the purpose.
Respondent: They objected at the outset as to the maintainability of these petitions under Article 227 of the Constitution in respect of the impugned orders passed by the learned Arbitrator under the Act. They urged the Court not to permit the Union to take advantage of its own gross delays in the facts and circumstances of these cases.
In rejoinder, it was submitted on behalf of the petitioner that the supervisory jurisdiction of this Court is available even in respect of certain arbitral proceedings. The Arbitrator having failed to exercise a power vested in her, these cases fall within the scope of Article 227.
Observations of the Court
The Bench, dealing with the issues raised, made separate observations. Relying on Srei Infrastructure case, it noted that after termination of proceedings, if the sufficient cause is shown, there is no impediment in the power of the to accept the show cause and permit the claimant to file the claim. He held these petitions not liable to be rejected on approval of maintainability as these cases presented an “exceptional circumstance” where exercise of jurisdiction would not constitute an interference with the arbitral process, but a step-in aid thereof. In the facts of the present cases, the Arbitrator has failed to exercise the jurisdiction vested in her, since she has passed no order on the applications filed by the Union for recall of the orders. The factual position pleaded in these petitions, to the effect that the applications were taken up for hearing before the Arbitrator and returned without any order been passed thereupon, has not been refuted by the respondent. The abrupt issuance of the impugned orders without holding any hearing and without issuing show cause notice to the Union, as required by Srei Infrastructure, was deemed unsustainable.
Judgment
A reading of Srei Infrastructure leads to an inescapable conclusion that an order terminating proceedings u/s 25(a) of the Act can be recalled by the Arbitral Tribunal on the application of the claimant, and that the interference of the writ court is justified where the Tribunal has failed to interfere. The Bench therefore noted that the judgment in Awasthi Construction, which was relied upon by the respondent, must be read in this context. The Arbitrator was directed to consider the applications presented by the Union for recall of the orders terminating the arbitral proceedings u/s 25(a) of the Act. As the proceedings have been unduly prolonged, the Arbitrator was directed to dispose of the applications after hearing the parties.
Case: Union of India vs Delhi State Consumer Co Operative Federation Ltd.
Citation: CM(M)-IPD-12/2022
Bench: Justice Prateek Jalan
Decided on: 9th May 2022
Read Judgment @Latestlaws.com
Picture Source :
