The Madras High Court admitted a Writ Petition challenging the Madras High Court Arbitration Rules, 2020 as being ultra vires of the Arbitration and Conciliation Act, 1996 and the Commercial Courts Act, 2015.
The Petitioner argued that:
“Madras High Court (Arbitration) Rule 2020 as framed in exercise of Section 82 of the Arbitration and Conciliation Act 1996 and published in Official Gazette of State of Tamil Nadu on 17.03.2021 is ultra vires of plenary statue of Arbitration and Conciliation Act 1996 and Commercial Courts Act 2015 as amended upto date and void ab initio."
There are many grounds on which the petitioner filed the petition. Some of them are as follows:
"(a) Respondent no 1 is not competent to draw rules namely Madras High Court Arbitration Rules in repugnant with Commercial courts Act 2015 and Civil Procedure Code 1908 as applicable to Commercial Courts.
(b) Even Respondent No.1 is to rely on Section 122 of Civil Procedure Code on a presumption delegation rule-making powers under Section 122 of Civil Procedure Code is intact for the commercial Court's Act and could be invoked to sustain the subordinate legislative authority. Necessary approval under Section 126 is not obtained from Respondent No. 2 nor from Respondent No. 1 as for Union Territory of Pondicherry is concerned.
(c) The impugned Rules though provide for the cost being awarded in a proceeding under section 34 of the Arbitration and Conciliation Act. The arbitrator having become Functus Officio, no executable award or an order executable under Section 36 of Civil Procedure Code is provided. Thus proceedings under Section 34 or 37 of Arbitration and Conciliation Act 1996 or even in proceedings under Article 136 of Constitution of India before the Supreme court can be dragged vexatious thus ultimately depriving the value of the award as being done Arb OP no 49 of 2020 on the file Principal District Judge Karur. Ultimately this absence procedure for collection of cost undermines Rule of law under Article 14 of the Constitution of India.
(d) It is humbly submitted there are execution petitions Under Order 21 Rule 1, filed by the borrowers/ award-debtors as the claimant-finance company refuses to receive the award money and keep the high interest-bearing loan alive. The CRP(MD)598 of 2021 is one such petition, yet those interests of the borrowers as secured under Order 21 are not considered in drafting the Rules.
(e) The Rule 6 of Order XI Commercial Courts Act relating to electronic records of arbitral proceedings are concerned, they owe their existence to the provisions of the Information Technology Act 2000. Hence The Respondent No1 can not tweak those rules by the way of subordinate legislative authority under Section 82 of the Arbitration and Conciliation Act 1996. There is no parliamentary approval for impugned Rules.
(f) In the case of the state of Tamil Nadu vs Krishna Murthy reported in 2006 (4)SCC 517 it was held subordinate legislative Rules can be challenged if they are inconsistent with any enactment. In this case, the impugned Arbitration Rules is inconsistent with the Commercial Courts Act 2015.
(g) It is humbly submitted that Rule 12((IV) of said Rules is not consistent with section 2(e) Arbitration and conciliation Act 1996 as the same contemplates for the transfer of arbitral proceedings to an additional district judge who is not a principal court of original jurisdiction as per definition of a district judge as occurring in section 3(17) General clause Act or where the commercial Courts have been constituted, the commercial disputes related Arbitration proceedings can only be transferred to the notified commercial Courts under the Commercial Courts Act.
(h) The Arbitration and Conciliation Act 1996- Section 43k and 43L provides for depository of the award and other records but the newly impugned Rules 8(IV) and (V) provides for the summoning of evidence from the Arbitral Tribunal. This kind of Rule provides for the procedures leading to entropy in commercial disputes.
(i) It is humbly submitted that Section 21 of the Commercial Courts Act provides for the obstinate powers to the provisions of the Act, Hence no subordinate Rules can be framed inconsistent with the said Commercial Courts Act.
(j) It is humbly submitted that in Alka Chandevar Vs. Shamsul Israr Khan reported in 2017 (16) SCC119 the apex court held that section 29(5) of the Arbitration and Conciliation Act can be invoked by the Arbitration to secure the obedience of order of the Tribunal, by the way of contempt of Tribunal under the contempt of Courts Act as in the case of proceedings before the court. However, the impugned Rules does not contain any procedure to be followed in such cases."
At last, it was prayed that the Court issue a writ of declaration to the effect that:
“Madras High Court (Arbitration) Rule 2020 as framed in exercise of Section 82 of the Arbitration and Conciliation Act and published in Official Gazette of State of Tamil Nadu on 17.03.2021 a is ultra vires of plenary statue of Arbitration and Conciliation Act 1996 and Commercial Courts Act 2015 as amended upto date and void ab initio and to grant such other reliefs as this Honourable court may think fit and proper in the facts and circumstance of the case and thus render Justice."
The Division Bench comprising of Chief Justice Sanjib Banerjee and Justice Senthilkumar Ramamoorthy fixed the matter for hearing on July 2, 2021.
Case Details
Name: Sivesh varshan @ Sivakumar v. The High Court of Judicature At Madras represented by its Registrar General Chennai-600104
Bench: Chief Justice Sanjib Banerjee and Justice Senthilkumar
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