TMI Blog2021 (3) TMI 1391X X X X Extracts X X X X X X X X Extracts X X X X ..... administered or refers to Judges who exercise judicial functions. Courts are established by the state for administration of justice that is for exercise of the judicial power of the state to maintain and uphold the rights, to punish wrongs and to adjudicate upon disputes. Tribunals on the other hand are special alternative institutional mechanisms, usually brought into existence by or under a statute to decide disputes arising with reference to that particular statute, or to determine controversies arising out of any administrative law. The following principles are well settled, in respect of the scope of interference under Article 226/227 in challenges to orders by an arbitral tribunal including orders passed under Section 16 of the Act:- (i) An arbitral tribunal is a tribunal against which a petition under Article 226/227 would be maintainable; (ii) The non-obstante clause in section 5 of the Act does not apply in respect of exercise of powers under Article 227 which is a Constitutional provision; (iii) For interference under Article 226/227, there have to be 'exceptional circumstances'; (iv) Though interference is permissible, unless and until the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal could consider framing a preliminary issue and deciding the same as soon as possible. iii. If the Tribunal is of the opinion that objections under Section 16 would require evidence to be led then the Tribunal could direct limited evidence to be led on the said issue and adjudicate the same. iv. If the Tribunal is of the opinion that detailed evidence needs to be led both written and oral, then after the evidence is concluded, the objections under Section 16 would have to be adjudicated first before proceeding to passing of the award. The manner in which the Arbitral Tribunal, considered the objections/application under Section 16 in the present case - HELD THAT:- The ld. Arbitrator has fully applied his mind and given reasons as to why the application of Petitioners (Respondent No. 5 to 10 in the arbitration) under Section 16 of the Act is not to be adjudicated at this stage. The ld. Arbitrator observes that the property in question which was purchased by the Petitioners was subject matter of the reference which was made by the ld. Single Judge of this Court on 9th January, 2018. Ld. Arbitrator, further observes that the Petitioners may be genuine purchasers of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent No. 7) and Sh. Anshul Bhalotia (Respondent No. 8). 3. CS (OS) 384/2017 titled Sh. Arun Kumar Bhalotia Anr. Vs. Sh. Gopal Kumar Bhalotia was filed before this Court, in which an application was moved by Respondent No. 5 (Sh. Gopal Kumar Bhalotia) under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter 'the Act'). 4. Vide order dated 9th January, 2018, the ld. Single Judge of this Court, referred the disputes to Arbitration by a sole Arbitrator. The relevant portion of the said order reads as under: 1. After hearing the counsels for the parties, this suit is disposed of by referring the disputes in the present suit as also disputes which may arise in any manner with respect to or connected with the family settlement/partition dated 15.7.2009, to the Arbitration of Shri B.B. Chaudhary, District Sessions Judge (Retired) Mobile No. 9910384611. 2. Counsels for the parties also agree that irrespective of the wording of the arbitration clause in the family settlement/partition dated. 15.7.2009, the Arbitrator hereby appointed to determine the disputes between the parties connected to or with respect to the family settlement/parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Submissions of the Petitioners 7. It is argued on behalf of the Petitioners that if the issue of jurisdiction is not decided at the initial stage, parties like the Petitioners would be saddled with arbitral proceedings for several years and incur huge costs and this is contrary to the spirit of section 16(5) of the Arbitration and Conciliation Act, 1996 itself. 8. The submission of Mr. Arjun Garg, ld. counsel for the Petitioners is that there has been a complete failure by the Arbitral Tribunal in exercising jurisdiction and deciding the application under Section 16. Insofar as the maintainability of the petition is concerned, it is urged by him that the provisions of the Act cannot oust the jurisdiction of the High Courts and under Article 227, the said power ought to be exercised sparingly, the jurisdiction of High Courts ought not to be ousted especially when there is a manifest error by the Arbitral Tribunal or abdication of duty, the High Courts ought to exercise jurisdiction under Article 227. He further argues that the objection under Section 16 has to be decided at the outset and cannot be simply postponed by the Arbitrator without any decision as the language in S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dre Estate Pvt. Ltd. v. Salochna Goyal and Ors. 2010(119) DRJ 457. (iii) Awasthi Construction Co. v. Government of NCT of Delhi LPA No. 701/2012 decided on 16th October, 2012 by Delhi High Court. (iv) United Spirits Ltd. v. M/s. Stitch Craft (India) W.P.(C) 4886/2013 decided on 8th November, 2013 by Delhi High Court. (v) ATV Projects India Ltd. v. Indian Oil Corporation Ltd. Anr. 2013 (136) DRJ 720 (DB). (vi) Lalitkumar v. Sanghavi (Dead) Through LRs Anr. v. Dharamdas V. Sanghavi Ors. (2014) 7 SCC 255. (vii) M/s. Evolve Marketing Services Pvt. Ltd. v. M/s. Aircel Ltd. Anr. bearing W.P. (C) 2839/2015, decided by Delhi High Court on 7th September, 2015. (viii) Rajeev Gupta v. DMRC bearing W.P.(C) No. 8085/2015 decided by Delhi High Court on 15th September 2015. (ix) United Electrical Industries Ltd. v. Micro and Small Enterprises Ors (2017) 238 DLT 9 (DB). (x) Business India Exhibitions Pvt. Ltd. v. Arvind V. Savant(DB). (xi) Indore Municipal Corporation v. Simplex Infrastructure Ltd. bearing W.P.(C) No. 20485/2018, decided by Madhya Pradesh High Court on 04th October, 2018. (xii) Tangirala Srinivasa Ganga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (12/10/2020). 4. List this matter on 8th January 2021. Parties to make their submissions on the said date, on the basis of above three judgments. 12. Thus, further submissions were heard in view of the recent decisions of the Supreme Court and of this Court, post the present judgment being reserved on 19th December, 2019. Ld. Counsels made further submissions on 29th January, 2021. Submissions on recent decisions 13. Ld. counsel for the Petitioners - Mr. Garg referred to the judgment in Deep Industries Ltd. v. Oil and Natural Gas Corporation Ltd. Anr. and Bhaven Construction through Authorised Signatory Premjibhai K. Shah v. Executive Engineer Sardar Sarovar Narmada Nigam Ltd. Anr. Civil Appeal No. 14665 of 2015, decided on January 6, 2021. Relying upon the judgment in Deep Industries (supra) his submission was that in the said case, also, the Supreme Court categorically held that the jurisdiction of the writ court under Article 227 would not be barred. However, the High Court would be extremely circumspect in interfering. The jurisdiction would be exercised where the Arbitrator patently lacks inherent jurisdiction. In the said case, according to Mr. Garg, ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercises writ jurisdiction. Challenge to an order of an arbitral tribunal can be raised by way of a writ petition. In Union of India v. R. Gandhi, President Madras Bar Association (supra) the Supreme Court observed on the question as to what constitutes 'Courts' and 'Tribunals' as under: 38. The term 'Courts' refers to places where justice is administered or refers to Judges who exercise judicial functions. Courts are established by the state for administration of justice that is for exercise of the judicial power of the state to maintain and uphold the rights, to punish wrongs and to adjudicate upon disputes. Tribunals on the other hand are special alternative institutional mechanisms, usually brought into existence by or under a statute to decide disputes arising with reference to that particular statute, or to determine controversies arising out of any administrative law. Courts refer to Civil Courts, Criminal Courts and High Courts. Tribunals can be either private Tribunals (Arbitral Tribunals), or Tribunals constituted under the Constitution (Speaker or the Chairman acting under Para 6(1) of the Tenth Schedule) or Tribunals authorized by the Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unals unlike those tribunals set up under the statute or specialized tribunals under the Constitution of India. Thus, a Petition under Article 227 challenging orders of an Arbitral Tribunal would be maintainable. Scope and extent of interference 20. Coming now to the question as to what would be the scope of interference under Article 226/227 against orders passed by the Arbitral Tribunals, though, a number of judgments have been cited by both parties, recent decisions of the Supreme Court and of this Court have settled the issue. 21. While there is no doubt that the arbitral tribunal is a tribunal over which writ jurisdiction can be exercised, the said interference by a writ court is limited in nature. Recently, in Deep Industries (supra) decided on 28th November, 2019, the Supreme Court considered S.B.P. Company v. Patel Engineering Ltd. and Anr. (2005)8 SCC 618 and Fuerst Day Lawson Limited v. Jindal Exports Limited (2011) 8 SCC 333 and observed as under: 15. Given the aforesaid statutory provision and given the fact that the 1996 Act repealed three previous enactments in order that there be speedy disposal of all matters covered by it, it is clear that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tsoever-it must be the perversity of the order that must stare one in the face. Unfortunately, parties are using this expression which is in our judgment in Deep Industries Ltd., to go to the 227 Court in matters which do not suffer from a patent lack of inherent jurisdiction. This is one of them. Instead of dismissing the writ petition on the ground stated, the High Court would have done well to have referred to our judgment in Deep Industries Ltd. and dismiss the 227 petition on the ground that there is no such perversity in the order which leads to a patent lack of inherent jurisdiction. The High Court ought to have discouraged similar litigation by imposing heavy costs. The High Court did not choose to do either of these two things. In any case, now that Shri Vishwanathan has argued this matter and it is clear that this is not a case which falls under the extremely exceptional category, we dismiss this special leave petition with costs of Rs. 50,000/- to be paid to the Supreme Court Legal Services Committee within two weeks. 23. In Bhaven Constructions (supra), the Supreme Court was dealing with a similar situation where an order passed by the arbitrator under Section 16(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that stage. Respondent No. 1 then appeared before the sole arbitrator and challenged the jurisdiction of the sole arbitrator, in terms of Section 16(2) of the Arbitration Act. 16. Thereafter, Respondent No. 1 chose to impugn the order passed by the arbitrator under Section 16(2) of the Arbitration Act through a petition under Article 226/227 of the Indian Constitution. In the usual course, the Arbitration Act provides for a mechanism of challenge under Section 34. The opening phrase of Section 34 reads as '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)'. The use of term 'only' as occurring under the provision serves two purposes of making the enactment a complete code and lay down the procedure. 17. In any case, the hierarchy in our legal framework, mandates that a legislative enactment cannot curtail a Constitutional right. In Nivedita Sharma v. Cellular Operators Association of India, (2011) 14 SCC 337, this Court referred to several judgments and held: 11. We have considered the respective arguments/submissions. There can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 16. This being the case, there is no doubt whatsoever that if petitions were to be filed under Articles 226/227 of the Constitution against orders passed in appeals under Section 37, the entire arbitral process would be derailed and would not come to fruition for many years. At the same time, we cannot forget that Article 227 is a constitutional provision which remains untouched by the non-obstante clause of Section 5 of the Act. In these circumstances, what is important to note is that though petitions can be filed under Article 227 against judgments allowing or dismissing first appeals under Section 37 of the Act, yet the High Court would be extremely circumspect in interfering with the same, taking into account the statutory policy as adumbrated by us herein above so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction. 19. In the instant case, Respondent No. 1 has not been able to show exceptional circumstance or 'bad faith' on the part of the Appellant, to invoke the remedy under Article 227 of the Constitution. No doubt the ambit of Article 227 is broad and pervasive, however, the High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess. However, a plain reading of the arbitration agreement points to the fact that the Appellant herein had actually acted in accordance with the procedure laid down without any mala fides. 22. Respondent No. 1 did not take legal recourse against the appointment of the sole arbitrator, and rather submitted themselves before the tribunal to adjudicate on the jurisdiction issue as well as on the merits. In this situation, the Respondent No. 1 has to endure the natural consequences of submitting themselves to the jurisdiction of the sole arbitrator, which can be challenged, through an application under Section 34. It may be noted that in the present case, the award has already been passed during the pendency of this appeal, and the Respondent No. 1 has already preferred a challenge under Section 34 to the same. Respondent No. 1 has not been able to show any exceptional circumstance, which mandates the exercise of jurisdiction under Articles 226 and 227 of the Constitution. 23. The Division Bench further opined that the contract between the parties was in the nature of a works contract as it held that the manufacturing of bricks, as required under the contract, was only a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 16 application being dismissed must await the passing of a final award at which stage it may be raised under Section 34. (emphasis supplied) 26. In view of the above reasoning, we are of the considered opinion that the High Court erred in utilizing its discretionary power available under Articles 226 and 227 of the Constitution herein. Thus, the appeal is allowed and the impugned Order of the High Court is set aside. There shall be no order as to costs. Before we part, we make it clear that Respondent No. 1 herein is at liberty to raise any legally permissible objections regarding the jurisdictional question in the pending Section 34 proceedings. 24. A perusal of the above-mentioned decisions, shows that the following principles are well settled, in respect of the scope of interference under Article 226/227 in challenges to orders by an arbitral tribunal including orders passed under Section 16 of the Act. (i) An arbitral tribunal is a tribunal against which a petition under Article 226/227 would be maintainable; (ii) The non-obstante clause in section 5 of the Act does not apply in respect of exercise of powers under Article 227 which is a C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause that he has appointed, or participated in the appointment of, an arbitrator. (3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. (4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified. (5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award. (6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34. 26. Can the arbitral tribunal, in the light of Section 16(5) postpone the decision in the plea is the question. In McDermott International Inc. (supra), the Supreme Court held as under: 51. After the 1996 Act came into force, under Section 16 of the Act the party questioning the jurisdiction of the arbitrator has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch question of jurisdiction. In the instant case, there is no dispute that the petitioner raised a preliminary objection as to the jurisdiction of the arbitrator to try the dispute referred to him by the appointing authority. 19. For better appreciation, section 16(2), (3) and (5) of the Arbitration and Conciliation Act, 1996 is quoted hereunder: 16. Competence of arbitral tribunal to rule on its jurisdiction. -- (2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator. (3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. (6) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral in proceedings and make an arbitral award ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o others) to the court authorized by law to hear appeals from original decrees of the court passing the order, namely:-- (a) granting of refusing to grant any measure under section 9; (b) setting aside or refusing to set aside an arbitral award under section 34. 26. The other provisions of appeal are sections 50 and 59 of the Act which are relating to foreign awards and Geneva Convention awards. Therefore, it can be safely said that the impugned order is not appealable order and there is no other option before the petitioner except to approach this court. 27. In paragraph 46 of the Patel Engineering Ltd. (supra), the Apex Court held that the object of the minimizing 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. The Apex Court also indicated 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 Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urisdiction either at the preliminary stage or at the time it rendered a final award in the matter.... 65.....The crucial aspect is that the issue of jurisdiction or bar to the suit created by law should be one that can be disposed of as an issue of law only. In other words if it is a mixed question issues at the final stage of the matter.... 30. In the opinion of this Court, the scheme of Section 16 of the Act envisages that issues of jurisdiction ought to be raised before the Arbitral Tribunal at the earliest, before the submission of the statement of defence. Under Section 16(5), the Tribunal is mandated to decide the said issue. The question that arises is at what stage is the objection to be decided. As per McDermott International Inc. (supra), the jurisdictional question is to be decided as a preliminary ground. This obviously means that the objection has to be decided at the earliest. However, there cannot be a hard and fast rule. Depending on the facts and circumstances of each case, the Tribunal ought to decide the objection under Section 16 of the Act as soon as possible, as a preliminary ground. The following factors can be borne in mind when objections are ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1 to 4. Vide order dated 11.04.2019, it has been observed that the objections can be decided along with the other issues. The application cannot be separately decided. On similar grounds, the present application is not decided on merit at this stage. The Respondent No. 5 to 10 may take all these objections in their reply to the claim and the counter claim, if any. The objection taken in the application will be taken care of while passing the award in the case. Counsel for the Respondent No. 5 to 10 seeks adjournment to file the reply to the claim/counter claim. The reply may be filed on or before 07.08.2019. The parties are to bear the out of pocket expenses of the Arbitrator. So far 10 hearings including today's hearing have taken place in the campus of the high court or at the present venue. The expenses of Rs. 1500/- per hearing shall be borne by Claimant and the Respondent No. 1 to 4 in equal proportion. Come up for reply to be filed by Respondent No. 5 to 10 at 07.08.2019 at 2 PM at the above-mentioned venue. In case the counsel for the Respondent No. 5 to 10 files the reply well before 07.08.2019 and supply the copies to the claimant a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect to the property, which the respondents purchased from the respondent No. 2, subsequent to the date of the settlement/partition deed 15.7.2009. The respondents No. 5 to 10 may be genuine purchaser of the property. However, that property is also the subject matter of the disputes, referred for arbitration. Therefore, the request of the claimants was allowed to send notice of the arbitration proceedings to the respondents No. 5 to 10 so that their rights might not be dealt with in their absence. They have been called so that they may file their response to the claims and the counter claims in respect to the property purchased by them from counter claimants. In the order dated 11.04.2019 of the arbitral tribunal, it has been held that the objections of the respondents No. 1 to 4 against the request to issue notice to the respondents No. 5 to 10 and also any objection which the respondents No. 5 to 10 may raise, will be taken care of at an appropriate stage. The Ld. Counsel for the respondents No. 5 to 10 has argued that since the respondents have put appearance and have filed an application u/s. 16 of the Arbitration and Conciliation Act, therefore, their request ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also be taken up on that date. The claimants shall also comply with the order dated 11.04.2019 in respect with the directions in reference to the documents of the Plot no. 10, Sector 12B, Dwarka, New Delhi. 34. A perusal of the above orders shows that the ld. Arbitrator has fully applied his mind and given reasons as to why the application of Petitioners (Respondent No. 5 to 10 in the arbitration) under Section 16 of the Act is not to be adjudicated at this stage. The ld. Arbitrator observes that the property in question which was purchased by the Petitioners was subject matter of the reference which was made by the ld. Single Judge of this Court on 9th January, 2018. Ld. Arbitrator, further observes that the Petitioners may be genuine purchasers of the property, however, the sale consideration qua the said property was to be decided between the parties. Thus, notice was issued to the Petitioners so that their rights are not jeopardized in any manner. An application to recall notice of arbitration under Section 16 cannot, therefore, in the opinion of the ld. Arbitrator, be decided at this stage and would rightly have to await completion of pleadings and admission and denial. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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