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2013 DIGILAW 85 (ORI)

Sasmita Pradhan v. Citicorp Finance (India) Ltd.

2013-04-02

S.K.MISHRA

body2013
ORDER 1. Heard learned counsel for the petitioners and the learned counsel appearing for the opposite party. 2. The facts of the case leading to filing of this writ petition can be summarized as follows: – The petitioner No.1 approached the opposite party for sanction of a loan for purchasing a PC 200 HRDR EXC, hereinafter referred as the vehicle, for brevity. The opposite party agreed to finance her to the tune of Rs. 39,22,000/- for purchase of said vehicle. Petitioner No.2 stood as a guarantor to the loan facility. After purchase of the vehicle, petitioner No.1 paid some installments. Thereafter, because of recession and decrease in construction work, she sustained huge financial loss and could not deposit some of the installments in time. 3. One Ram Pravesh Singh intimated the petitioners that the opposite party has requested him to act as an Arbitrator to adjudicate the dispute between the parties. The apposite party was directed to file its claim statements. On receipt of the claim statements, the petitioners raised an objection before the said arbitrator on 16.12.2010 regarding the initiation of the arbitration proceeding at Kolkata. It was submitted by the learned counsel for the petitioner that the entire cause of action out of which the arbitration proceeding has been initiated took place in the state of Odisha. It was further submitted that the agreement was signed in the State of Odisha and moreover the place where arbitration proceedings will be conducted was kept blank at the time of signing the agreement and later on "Kolkata" has been inserted. As per order dated 20.12.2012, the Arbitrator held that the arbitration proceeding has been rightly initiated. It is submitted that such an order passed by the Arbitrator is not supported by any cogent reason. It is further submitted that since cause of action arose within the jurisdiction of the Court, at Bhubaneswar in particular, the arbitral proceeding at Kolkata is not maintainable. 4. In course of hearing, the learned counsel for the petitioner submits that as per Section 20 of the Code of Civil Procedure, 1908, hereinafter referred as the Code for brevity, the arbitral proceeding should have been initiated at Bhubaneswar. Secondly, it is contended that the agreement restricting the jurisdiction of the Court is against public policy and the same should be struck down and initiation of arbitration proceeding at Kolkata should also be quashed. 5. Secondly, it is contended that the agreement restricting the jurisdiction of the Court is against public policy and the same should be struck down and initiation of arbitration proceeding at Kolkata should also be quashed. 5. Learned counsel for the opposite party, on the other hand, submitted that in the agreement it was specifically mentioned that the Courts at Kolkata will have the jurisdiction over the matter and the arbitral proceeding should be initiated at Kolkata. Thus, it is stated that the contention raised by the learned Counsel for the petitioner is not tenable. Secondly, it is contended that the petitioners instead of filing an appeal before the District Judge under Section 37 of the Arbitration and Conciliation Act, 1996, hereinafter referred as the Act for brevity, has filed this writ petition under Articles 226 and 227 of the Constitution of India. Therefore, the writ application is not maintainable. 6. As far as the first contention is concerned, as reference to the arbitration agreement reveals that the parties have agreed that all the disputes, differences or claims arising out of these presents or as to the construction meaning or affect thereof or as to the rights and liabilities of the parties thereunder shall be settled by arbitration to be held in Kolkata in accordance with the Act or any statutory amendments thereof or any statute enacted for replacement thereof and shall be referred to the sole arbitration of a person to be nominated/appointed by CFIL. Section 19 of the Act provides that the arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872. The parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings. Furthermore, it is seen that Section 20 of the Act provides that the parties are free to agree on the place of arbitration. Sub-section (2) of Section 20 provides that failing any agreement referred to in Sub-section (1), the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties. Thus, it is clear that the provisions of the Code is not applicable to an arbitration proceeding. Sub-section (2) of Section 20 provides that failing any agreement referred to in Sub-section (1), the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties. Thus, it is clear that the provisions of the Code is not applicable to an arbitration proceeding. By virtue of Section 20 of the Act, the parties are free to agree on the place of arbitration and therefore, this Court comes to the conclusion that the reference of the arbitral proceeding at Kolkata in accordance with the arbitral agreement is not illegal. 7. Coming to the second question, it is seen that the petitioners have questioned the jurisdiction of the arbitral tribunal and has filed an application under Section 16 of the Act. They have prayed the Arbitral Tribunal to rule on its jurisdiction. The Arbitral Tribunal has decided the matter in favour of the opposite party and held that it has jurisdiction over the matter. Instead of filing an appeal against the said order before the competent Court, the petitioners have prayed this Court to invoke the jurisdiction under Articles 226 and 227 of the Constitution of India. In this regard, it is profitable to take note of the Constitution Bench judgment of the Supreme Court in S.B.P. Co. vs. Patel Engineering Ltd. and another, (2005) 8 SCC 618 . At paragraph 44, the Supreme Court has held 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 of India. The Supreme Court has further held that there is 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 his 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 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 Supreme Court further held that the arbitral tribunal is after all, the creature of 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. The Supreme Court, therefore, disapproved 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 Articles 226 or 227 of the Constitution of India. 8. Of course, in this case, the petitioner has drafted the writ petition with a prayer to quash initiation of the arbitral proceeding. Though, specifically they have not prayed to set aside the order passed by the arbitral tribunal under Section 16 of the Act, in essence, this Court feels that the petitioners are aggrieved by the order passed by the arbitral tribunal and therefore, they should have preferred an appeal and a petition under Articles 226 and 227 of the Constitution of India is not maintainable. On the basis of the aforesaid reasoning, this Court is of the opinion that the writ petition is devoid of merit and is dismissed. Petition dismissed.