Friday, 1 March 2019

Whether writ petition is maintainable against interlocutory order passed by arbitrator during course of proceeding?

 Keeping the object of the Act in view, the Supreme Court has stated the law in the case of Patel Engineering Ltd. (supra) in no uncertain terms that once the matter reaches the Arbitrator, the interlocutory orders made by him cannot be the subject matter of challenge in the writ proceedings. The following observations and dictum in Patel Engineering put it beyond the pale of doubt that the interlocutory orders passed during the course of arbitration proceedings are not to be interfered with under Articles 226 or 227 of the Constitution of India:-

 For what has been discussed hereinabove, we are clearly of the view that this Court in the writ jurisdiction will not interfere in an interlocutory order passed by the Arbitrator in the pending arbitral proceeding; and that the party aggrieved may reserve its right to lay a challenge to such an interlocutory order, if and when it suffers an adverse award.

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

Writ Petition Nos. 19822/2018 and 19834/2018 (GM-RES)

Decided On: 27.08.2018

Radiant Infosystems Limited Vs. The Karnataka State Road Transport Corporation Limited

Hon'ble Judges/Coram:
Dinesh Maheshwari, C.J. and Dixit Krishna Shripad, J.

Citation: AIR 2019 Karnat 6


1. In these Writ Petitions, the petitioner-company seeks to question the orders dated 21.02.2018 and 26.04.2018 made by the Sole Arbitrator in the matter of A.C. No. 128/2017, whereby, respectively, the Arbitrator notified the parties that no further documents shall be received in the matter; and rejected the petitioner's application seeking permission to produce additional documents.

2. The brief facts and relevant background aspects of the matter are as under:

(a) Pursuant to the order of this Court in C.M.P. No. 236/2016, the dispute between the parties as regards termination of contract came to be referred to the Sole Arbitrator Sri Justice Mohammed Anwar for holding the arbitration proceedings under the aegis of the Arbitration and Conciliation Center, Bengaluru. Both the sides have filed their pleadings and the documents in support of their respective stand.

(b) The Sole Arbitrator in the first sitting on 31.01.2018, fixed a Time Table for the conduct and conclusion of the proceedings. The documents produced by the parties were marked too. On the next date of hearing, which was held on 21.02.2018, the Arbitrator put the parties to the notice that they would not be permitted to produce any further document. The relevant part of the order sheet as drawn by the Sole Arbitrator on 21.02.2018 reads as under:

"9. Both parties have concluded their marking and exhibiting of their respective documents. The proceeding for this purpose was commenced on 14.02.2018 and concluded today. It is noticed from these proceedings that on every day of marking of these documents both sides had been producing fresh lot of documents on record of this proceeding piling up the heap of documents running into several hundreds of pages. Both parties are made known that whatever documents that were in their custody and were not produced till today, their production will not be permitted to further pile up the lot of documents except of course reserving liberty to the parties to confront the either party in cross examination with any material document."

(c) The issues were framed on 05.03.2018 and the matter was set down for recording the evidence of claimant by way of affidavit, on 14.03.2018.

(d) On 15.03.2018, the petitioner filed an application under Section 24(3) of the Arbitration and Conciliation Act, 1996 ('the Act') for production of 16 documents while stating, inter alia, that the said documents are relevant for answering the issues as framed, inasmuch as the documents earlier produced before the framing of issues would not suffice to prove the stand taken by the petitioner/claimant. The application so moved was opposed by the respondent herein.

(e) The Sole Arbitrator, after hearing the parties, has dismissed the said application of the petitioner with a cost of Rs. 25,000/- by the impugned order dated 26.04.2018.

3. Learned counsel for the petitioner, Sri Arun Kumar has vehemently argued that although most of the documents were produced before framing of the issues, the necessity to seek permission to produce some more documents arose after examining the issues; that a party to the litigation would be able to decide as to whether the evidence should be led or not, and as to what kind/nature of evidence should be led, only after examining the issues; and that the right to lead the evidence cannot be defeated on the ground that the parties have already produced some evidence along with the pleadings before framing of the issues.

4. Per contra, learned counsel for the respondent Sri P.D. Surana has contended that whatever be the procedure prescribed by the Code of Civil Procedure, 1908, it is always open to the Arbitral Tribunal to prescribe its own procedure, the provisions of CPC being inapplicable; the Arbitrator by the order dated 21.02.2018 had specifically made it clear to both the parties that the documents already produced by the parties would be taken in evidence and no more documents would be permitted to be produced except for confronting the other party in cross-examination; and both the parties having acquiesced in the same, it is not open for one of the parties to contend to the contrary at the later stage.

5. Learned counsel for the respondent has also contended that, ordinarily, writ Courts do not interfere with the interlocutory orders passed in the arbitral proceedings since the party, if and when suffers an adverse award, could always challenge an interlocutory order in appropriate proceedings by making out a case that such an order ought not to have been made by the Arbitrator. Learned counsel has relied upon the decision of Apex Court in the case of SBP and Co. v. Patel Engineering Ltd.: MANU/SC/1787/2005 : (2005) 8 SCC 618 in support of his contention.

6. However, learned counsel for the petitioner would submit that the ratio in the said decision in Patel Engineering Ltd. was laid down in the peculiar facts and circumstances of that case and that the same has been considered by Hon'ble Gauhati High Court in the case of Raj International v. Tripura Jute Mills Ltd.: MANU/GH/0287/2008 : 2008 (3) GLT 695 holding that the indulgence of the writ Court may be warranted where the case involves extraordinary situation. While relying upon the decision in the case of L. Chandra Kumar v. Union of India: MANU/SC/0261/1997 : (1997) 3 SCC 261, learned counsel has also contended that the writ jurisdiction having been constitutionally vested in this Court, there could be no fetter on its exercise where the exigency of a case warrants. Learned counsel has also attempted to rely upon other decisions, including that of the Apex Court in the case of SREI Infrastructure Finance Ltd. v. Tough Drilling Pvt. Ltd.: MANU/SC/1272/2017 : (2018) 11 SCC 470 to contend that a writ petition is maintainable against the orders passed by the Arbitral Tribunal.

7. Having heard learned counsel for the parties and having perused the material placed on record with reference to the law applicable, we are not inclined to interfere in this matter.

8. The submission of the learned counsel for the petitioner that a right accrues to the party to the arbitral proceedings to lead the evidence only after the issues are framed and that this right is not lost merely because some documents were already produced at the earlier stage does not merit consideration in these petitions since the arbitral proceedings are still pending and that it is open to the petitioner to invoke the remedy under Section 34 of the Act, if and when it suffers an adverse award. It is more so because, admittedly the parties have already produced voluminous evidence, looking to which, the Arbitrator in his order dated 21.02.2018 specifically stated that the parties had, on day-to-day basis, produced the documents running into several hundreds of pages and they shall not be permitted to produce further documents.

9. It is also not correct to suggest that the parties would invariably be not knowing before the framing of the issues, as to what evidence is to be produced to prove their respective cases. This apart, framing or non-framing of issues pales into insignificance, if parties have gone to the trial after otherwise knowing each other's case. The Arbitrator by his aforesaid observation only meant that despite having the custody of the documents, if the parties had not produced the same, their production would not be allowed, except for confronting the witness in the cross-examination. It is not the case of the petitioner that these documents were not in its custody and they are produced, only after procuring the same later. However, we do not wish to express final opinion on this aspect, lest there be any prejudice to the case of any of the parties, if the challenge is laid to the award, when made adverse to its interest.

10. We are not expressing final opinion on the merits of challenge to the orders impugned essentially for the reason that in view of the dictum in Patel Engineering Ltd. (supra), the petitioner is not entitled to maintain these writ petitions in this Court against such interlocutory orders passed by the Arbitrator in the course of arbitration proceedings.

11. The argument of the learned counsel for the petitioner, that the said dictum of the Supreme Court cannot be interpreted as robbing this Court of its writ jurisdiction which is constitutionally vested in it, touches only the existence of power of judicial review. However, what the Supreme Court has laid down in the case of Patel Engineering Ltd. (supra), defines the confines and contours of the exercise of power of judicial review in relation to the interlocutory orders passed in the course of arbitration proceedings.

12. Keeping the object of the Act in view, the Supreme Court has stated the law in the case of Patel Engineering Ltd. (supra) in no uncertain terms that once the matter reaches the Arbitrator, the interlocutory orders made by him cannot be the subject matter of challenge in the writ proceedings. The following observations and dictum in Patel Engineering put it beyond the pale of doubt that the interlocutory orders passed during the course of arbitration proceedings are not to be interfered with under Articles 226 or 227 of the Constitution of India:-

"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 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."

(underlining supplied for emphasis)

13. Of course, various issues as regards the nature of the power exercised by the Chief Justice of High Court or the Chief Justice of India under Section 11(6) of the Act and the co-related aspects were also the subject matter of decision before the larger Bench in the case of Patel Engineering Ltd. (supra) and hence, having expounded on the principles in relation to all the questions involved, the Supreme Court summarized its point-wise conclusions in paragraph 47 of the decision aforesaid. The relevant part of such summation, applicable directly to the present case, as occurring in clause (vi) of paragraph 47 reads as under:

"Once the matter reaches the Arbitral Tribunal or the Sole Arbitrator, the High Court would not interfere with the orders passed by the Arbitrator or the Arbitral Tribunal during the course of the arbitration proceedings and the parties could approach the court only in terms of Section 37 of the Act or in terms of Section 34 of the Act."

(underlining supplied for emphasis)

14. In the case of Raj International (supra), the decision relied upon by the learned counsel for the petitioner, the learned Single Judge of Gauhati High Court has observed as under:

"34. In the present case in hand, the order in question is not relating to appointment of Arbitrator and the fact of the case is different than the case of Patel Engineering Limited (supra). Reliance is to be placed on a decision only if factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of courts are neither to be read as Euclid's theorems nor as provisions of statute as said by the Apex Court in the case of Union of India v. Major Bahadur Singh, reported in AIR 2005 AIR SCW 6113. An earlier case can be treated as precedent only if the facts and circumstances in such earlier cited case is in pari materia in all respects with facts and circumstances of the case in hand as stated by the Apex Court in the case of Ramesh Singh Photti v. State of A.R., reported in 2004 AIR SCW 3682.

35. After going through the decision of the Patel Engineering (supra) this Court is of the considered opinion that the factual situation of that case does not fit in with the factual situation of the case in hand and one additional and different fact may make a world of difference between two cases. Even if this Court considered the case of Patel Engineering (supra) as relied upon by the learned Counsel of the respondents, then also it can be easily said that their lordship in paragraph 46 held that each and every order made by the Tribunal should not be allowed to challenge under Article 227 or 226 of the Constitution for defeating the purpose of arbitration proceeding meaning thereby that in an extra ordinary situation, the Court can exercise the power under Articles 227 and 226 of the Constitution against the order made by the Arbitral Tribunal or Arbitrator, particularly when there is no provision either for revision or for any appeal and it would not be proper for a Court to force the party in an arbitral proceeding like the present petitioner to appear before the arbitral tribunal/arbitrator, till the completion of whole proceeding and passing of award though prima facie it appears that the arbitrator did not act in accordance with the mandate of the provisions of the Act and acted as a purported agent of the appointing authority, herein the Commissioner, (I&C), Government of Tripura while respondent is a Government undertaking.

In view of the aforesaid observation and discussion, this Court has no hesitation to hold that this is a fit case where the Court should exercise its power under Article 227 of the Constitution and accordingly, the impugned order is set aside and the matter is remitted back to the Arbitrator to decide the plea of jurisdiction raised before him by the petitioner and then proceed with the matter of arbitration in accordance with law. No order as to costs."

15. If the learned Judge in the aforesaid case of Raj International, has interpreted the ratio in Patel Engineering Ltd. to mean that the rule of non-interference of the writ Court at the interlocutory stages of arbitral proceedings is confined only to matters relating to the appointment of the arbitrators, and interference is permissible in all other cases involving different fact situation, we could only state respectful disagreement with that view. The core of the decision of the Apex Court in Patel Engineering Ltd. appears to be covering ordinarily all the cases wherein, writ jurisdiction is invoked for challenging an interlocutory order of the Arbitrator.

16. The said decision in the case of Patel Engineering rendered by a larger Bench of the Hon'ble Supreme Court on various aspects governing the proceedings of arbitration, cannot be read as being confined only to the facts involved therein. The law declared by the Supreme Court therein, as noticed hereinabove, remains binding; and in this view of the matter, with respect, we are unable to endorse the views of the learned Single Judge of Gauhati High Court in the case of Raj International (supra).

17. Though learned counsel for the petitioner has also attempted to rely upon the decision in the case of SREI Infrastructure Finance Ltd. (supra) to contend that a writ petition is maintainable against the orders passed by the Arbitral Tribunal, but we are afraid, no such ratio is discernible from the said decision. Therein, the Arbitral Tribunal had terminated the proceedings under Section 25(a) of the Act due to non-filing of claim by the claimant, but the question was as to whether the Tribunal had jurisdiction to consider an application for recalling of the order terminating the proceedings. On the said question, the Supreme Court endorsed the views of Patna, Delhi and Madras High Courts that the Arbitral Tribunal, even after termination of proceedings under Section 25 of the Act, on sufficient cause being shown, could recall the order and recommence the proceedings; and held that in the given case, the Arbitral Tribunal committed an error in holding that it had no jurisdiction to recall the order terminating the proceedings. In the said case, a question was also raised as to whether the order passed by the Tribunal under Section 25 terminating the proceedings was amenable to the jurisdiction of the High Court under Article 227 of the Constitution of India (vide paragraph 12.2 of the report). However, the Hon'ble Supreme Court did not enter into the said question, in view of its decision on the principal issue involved in the matter. In this regard, the Supreme Court observed as under:

"35. Coming to Issues (ii) and (iii), in view of what we have said regarding Issue (i) that the Arbitral Tribunal has jurisdiction to consider an application for recall of order terminating the proceedings under Section 25(a), it is not necessary for us to enter into Issues (ii) and (iii) for purposes of this case. For deciding the present civil appeal, our answer to Issue (i) is sufficient to dispose of the matter."

18. The said decision in the case of SREI Infrastructure does not advance the cause of the petitioner. Similarly, the other decisions sought to be relied upon by learned counsel for the petitioner do not appear requiring dilation particularly, in view of the law laid down in no uncertain terms in the Larger Bench decision in Patel Engineering Ltd. (supra).

19. For what has been discussed hereinabove, we are clearly of the view that this Court in the writ jurisdiction will not interfere in an interlocutory order passed by the Arbitrator in the pending arbitral proceeding; and that the party aggrieved may reserve its right to lay a challenge to such an interlocutory order, if and when it suffers an adverse award.

20. In view of the above, exercise of writ jurisdiction in this matter is required to be, and is, declined.

21. Accordingly, these writ petitions stand dismissed. However, in relation to the order impugned, we leave it open for the petitioner to take recourse to appropriate remedy at the appropriate stage and in the appropriate forum; of course, in accordance with law.

No costs.



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