B. S. N. Joshi & Sons Limited v. Rashtriya Ispat Nigam Limited
2019-03-12
C.PRAVEEN KUMAR, M.SATYANARAYANA MURTHY
body2019
DigiLaw.ai
JUDGMENT : M. Satyanarayana Murthy, J. 1. M/s. B.S.N. Joshi and Sons Limited represented by its Director Mr. Arvind Joshi filed the writ petition under Article 226 of Constitution of India seeking a writ of Mandamus declaring the action of the respondent No.1 in appointing the arbitrator respondent No.2 vide proceedings Arb/non-ICA/4.66P.A. Boiler/102 dated 30.03.2018 in spite of there being a bar under VII schedule as illegal and barred by the principles of law and forbear the respondent No.2 as arbitrator under the Arbitration and Conciliation Act (for short “the Act”). 2. The petitioner is a company engaged by the respondent No.1 to provide certain services relating to the loading, transportation and conveying the coal from the coal mines to the prescribed location of the respondent company. As a part of its business, invited tenders from various agencies for appointment of an agent for transportation of coal from M/s. Mahanadi Coalfields Limited to Visakhaptnam Steel Plant of the respondent vide reference No. Pur.2.66.PABOILERCOAL/0141, dated 26.10.2012. 3. The respondents issued another open tender notice for appointing an agent for participation in joint sampling analysis and loading supervision job of medium cooking coal supplies from M/s. Central Coalfields Ltd. to Visakhaptnam Steel Plant Ltd. of the respondent” vide reference No. Pui.2.66.PAMCC/0142, dated 26.10.2012. 4. The petitioner company participated in the tender process in respect of these two jobs and became successful bidder for both the tenders. In pursuance of the same, the petitioner issued the letter of acceptance detailing the terms and conditions of the contract relating to boiler coal and medium cooking coal supply from the two coalfields. The tenure for both the contract is two years. They entered into the contract and the scope of work was elaborately described in the contract. As per the contract in case of any dispute, etc. the same shall be resolved by both the parties through arbitration in accordance with the provisions of the Arbitration and Conciliation Act. 1996 and, the same was accepted by letter of acceptance, dated 24.08.2013 vide reference No.2.66.PABOILERCOAL/0061 and reference No. 2.66.PMCC/0063. 5. In terms of the contract, the petitioner performed his part of contract strictly in terms and conditions. The petitioner was not granted time for mobilization etc.
1996 and, the same was accepted by letter of acceptance, dated 24.08.2013 vide reference No.2.66.PABOILERCOAL/0061 and reference No. 2.66.PMCC/0063. 5. In terms of the contract, the petitioner performed his part of contract strictly in terms and conditions. The petitioner was not granted time for mobilization etc. During the pendency of the contract, the respondent issued a notice dated 09.11.2013 vide reference No. BSN/DC/MCC/1432, whereby the respondent pointed out certain failures on part of the petitioner, more particularly, failure to discharge the number of obligations envisaged under the contract. Without affording an opportunity to the petitioner, the respondent sent communication dated 07.02.2014 terminating the contract of the petitioner and reply was issued by the petitioner for the alleged communication terminating the contract. As the termination was illegal, the petitioner invoked arbitration clause as per the terms and conditions of the contract and Justice Vaman Rao was appointed as sole arbitrator to decide all the disputes between the parties vide Communication reference No.RINL/PA/BSN/BC/MCC/151 dated 07.02.2014. 6. The sole arbitrator Justice Vaman Rao directed both parties to pursue with their claim in accordance with law established under the Arbitration and Conciliation Act, 1996. The petitioner filed a claim statement for termination of contract and claimed a sum of Rs.1,33,92,000/- along with interest @ 24% p.a., a further sum of Rs.63,000/- was also claimed towards costs and expenses. The respondent No. 1 filed their reply/counter denying the averments in the statement of claim. The respondent company by way of communication to the Arbitrator filed memo reporting no counter-claim. Accordingly, arbitral Tribunal framed issues and decided disputed in the arbitration proceedings and passed an award on 19.04.2016 in A.C.No.03 of 2014. 7. During the pendency of the Arbitration proceedings, the respondent issued a letter dated 06.01.20 IS bearing reference No. PUR.4.66.PA MCC/06. The respondent referred to clause S.03 of the contract and requested the petitioner to remit an amount of Rs.7,67,34,980.028 & 6,81,444.824 byway of demand draft on account of penalties/counter claim, etc. copies of the award vide reference No. 4.66. PAM CC/06 and reference No.4.66.BOILERCOAL/05 respectively. 8. Reply was sent on 20.01.20 is denying the contents and informed the respondents to follow the procedure of arbitration which was already under process before the learned Sole Arbitrator vide reference No. BSNJ/VSKP/2014-15/63 dated 20.01.2015. 9. On receipt of reply, the respondent No.1 sent a mail dated 09.02.2015 to the Arbitrator thereby stating that.
8. Reply was sent on 20.01.20 is denying the contents and informed the respondents to follow the procedure of arbitration which was already under process before the learned Sole Arbitrator vide reference No. BSNJ/VSKP/2014-15/63 dated 20.01.2015. 9. On receipt of reply, the respondent No.1 sent a mail dated 09.02.2015 to the Arbitrator thereby stating that. “we the respondent i.e., M/s. Rashtriya Ispat Nigam Ltd., Visakhapatnarn Steel Plant do not intent filing counter claim in the above subject matter. This is for your kind information.” 10. The award passed by the sole arbitrator attained finality since no application was filed under Section 34 of the Arbitration and Conciliation Act, 1996 for setting aside of the Award. 11. While the matter stood thus, the respondent No.1 sent a letter dated 06.02.2018 vide reference No. PUR2.66. PABOILERCOAL and Pur.2.66/PAMCC/21 stating that due to unsatisfactory performance of the petitioner, respondent No.1 sustained loss and the same needs to be recovered from the petitioner and quantified the penalty at Rs.7,74,16,424.85 called upon the petitioner to pay the same with a threatened action to treat the letter for invocation of the arbitration clause. The petitioner by letter dated 15.02.2018 and 21.02.2018 informed that already the Arbitration proceedings were terminated and after four years, giving up of the counter claim, the counter-claim of the respondent cannot be entertained vide reference dated 15.02.2018 NO.BSNJ/VSKP/2017-18/334 and reference dated 21.02.2018 No. BSNJ/VSKP/2017-18/347. 12. Later, the respondent No.1 sent a letter dated 3-0.03.2018 informing that Mr. David Macwan, Technical Consultant is appointed as Sole Arbitrator for deciding the disputes as regards the counter claim of the respondent. Immediately, the petitioner sent a communication dated 04.04.2018 reference No.BSNJ/VSKP/2018-19/001 that the appointment of Mr. David Macwan is not binding on it. However, the arbitrator called for a meeting on 28.04.2018 at Visakhapatnam. The petitioner informed the concerned Arbitrator that the petitioner does not accept his appointment and Arbitral Tribunal is seized of the powers. Similarly, the Arbitral Tribunal cannot be constituted since the Arbitration proceedings have already terminated. The petitioner also filed an application for termination of arbitration proceedings along with objections under Schedule- V and contended that once the arbitration proceedings are held, no further proceedings can be held and that the arbitral tribunal is seized of the powers to proceed in the matter.
The petitioner also filed an application for termination of arbitration proceedings along with objections under Schedule- V and contended that once the arbitration proceedings are held, no further proceedings can be held and that the arbitral tribunal is seized of the powers to proceed in the matter. The respondent No.1 filed reply to the same and accordingly the issue was supposed to be adjudicated by the learned Arbitrator. The learned Arbitrator obtained legal opinion of one Advocate Sri V.K.R.Rao and based on that opinion held that in spite of the fact that arbitration proceedings have taken place earlier, the Tribunal has power to go ahead with the process of arbitration. This procedure adopted by the respondent No.2 is vitiated as the learned Arbitrator (now appointed and so referred for brevity and is not to be construed as accepted) could not have obtained an opinion on his jurisdictional powers. Such an action is patently opposed to the scheme and spirit of the Arbitration and Conciliation Act. 13. It is specifically contended that once the arbitration proceedings have already been initiated in which the respondent filed memo stating that it does not want to prefer any counter claim and came to be recorded by the earlier Arbitrator, appointment of second arbitrator after the amendment in the year 20 IS to the Arbitration and Conciliation Act, 1996 is without jurisdiction. It is in violation of the provisions of Arbitration and Conciliation Act, 1996. Similarly, it is a gross illegality being committed by a State agency as enshrined under Article 12 of the Constitution of India. The Chairman of the respondent No.1 has no authority to appoint any person as Arbitrator as it is illegal and not in accordance with law and contrary to law. 14. It is further contended that the respondent No.2 is trying to proceed with the arbitral proceedings and such attempt to proceed is not only illegal but without jurisdiction and contrary to the principles of law and prayed for relief as state above. 15.
14. It is further contended that the respondent No.2 is trying to proceed with the arbitral proceedings and such attempt to proceed is not only illegal but without jurisdiction and contrary to the principles of law and prayed for relief as state above. 15. The petitioner further stated in the affidavit that Arbitrator who has been now appointed by the respondent No.1 a is a consultant and is associated to the respondent No. 1 and as such cannot be appointed as Arbitrator as per Section 12 (5) and the Seventh schedule of the Arbitration and Conciliation Act, 1996 as amendment Act 2015 (3 of 2016), which clearly prohibits any person being appointed as Arbitrator having any kind of relationship with the parties. 16. The petitioner earlier filed Writ Petition No. 36081 of 2018, which was withdrawn with liberty to avail other remedies available under the Arbitration and Conciliation Act. 1996. Therefore, approached this Court having no other alternative remedy under Article 226 of Constitution of India and prayed for the relief stated supra. 17. At the stage of admission heard both counsel Sri Aadesh Varma, learned counsel for the petitioner and Sri K. Sarva Bhouma Rao, learned counsel for the respondent at length. 18. Sri Aadesh Varma, learned counsel for the petitioner contended that making reference claiming an amount of Rs.7,74,16,424.85 ps., appointing second arbitrator is an abuse of process of the Court. The respondent No. 1 herein already filed a memo before the Arbitral Tribunal earlier waiving its right to file counter-claim and when the respondent No. 1 filed such memo waiving its right to file counter-claim, they cannot now claim such relief again by appointing another arbitrator. It is further contended that, in case the petitioner has to wait till passing of the award to challenge the award in view the amended provisions of the Arbitration and Conciliation Act, 1996 by amendment Act 2015 (3 of 2016), the petitioner has to pay 50% of the amount and it would cause serious loss to the petitioner and to avoid such contingency, this Court can interfere with such proceedings pending before the Arbitrator, the respondent No.2 herein. 19.
19. Sri K.Sarva Bhouma Rao, learned counsel for the respondents contended that the petitioner earlier filed W.P.No.36081 of 2018 before this Court, which was withdrawn giving liberty to the petitioner to redress his grievance under the provisions of Arbitration and Conciliation Act, thereby the petitioner is disentitled to claim relief in this petition and that judicial interference in arbitration proceedings is minimized except as permitted by the Act in view of Section 5 of the Act. When judicial interference is not permitted against the order passed under Section 13 of the Act, this Court cannot exercise power under Article 226 of Constitution of India and requested to dismiss the petition. 20. Considering rival contentions, perusing the material available on record, the point that arises for consideration is: “Whether this Court can exercise extraordinary jurisdiction under Article 226 of Constitution of India against the order passed under Section 13 of Arbitration and Conciliation Act and quash the proceedings pending before the Arbitrator?” In Re POINT: 21. The object behind enacting the Arbitration and Conciliation Act, is to minimize the litigation and settle the disputes between the parties at low cost and in minimum time. Legislature adopted a new Act in 1996 only to make it more convenient to resort, to settlement before the arbitral Tribunal and to avoid judicial intervention at every stage, Section 89 of C.P.C. suggested mode of settlement, conciliation and reference to Legal services authority to settle the pending disputes by alternative disputes resolution system, instead of making the parties to wait years together due to procedural fetters in the C.P.C. before the Civil Court. 22. The Arbitration and Conciliation Act, 1986 is a complete code, the Act itself providing remedies to the aggrieved parties at different stages either after or during pendency of the proceedings before the Arbitral tribunal minimizing the judicial intervention. Limited jurisdiction calling for judicial interference is circumscribed by Section 5 of the Act, which reads thus: “Section 5 -Extent of Judicial intervention:- Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this part, (Part, I)” 23. Part I deals with appointment of Arbitrator, powers of the arbitrator and role of the arbitrator and passing of award etc. 24.
Part I deals with appointment of Arbitrator, powers of the arbitrator and role of the arbitrator and passing of award etc. 24. In view of the limited jurisdiction to interfere with the proceedings under the Act, the question before us is “Whether the order passed by the Arbitrator under Section 13 of the Act is subject to judicial review under Article 226 of the Constitution of India by this Court?” 25. In the statement of objects and reasons of the Arbitration and Conciliation Bill, 1995 presented to Parliament one of the main objectives was proclaimed to be “to minimize the supervisory role of courts in the arbitral, process”. This was an euphemism. What is prohibited is ‘intervention’ in arbitration proceedings. Assistance of Courts may be sought under Sections 8, 9 and 27 equivalent to Old Sections 31, 32 and 33 which permitted interventions have been omitted. 26. In BHEL v. C.N Garg (2001) 57 DRJ 154 (Del DB) Division Bench of Delhi High Court observed that Section 5 was inserted to discourage “judicial intervention’ and repelled the argument that a party having grievance against an arbitrator on account of ‘bias’ or ‘prejudice’ is without remedy by stating he has to wait for action under Section 34 of the Act. 27. Thus, in view of the object of the Act and observations made by Division Bench of Delhi High Court, though not binding precedent, the scope of judicial intervention is limited. 28. There are two different views. One view permits judicial intervention since Section 5 of the Act did not take away the jurisdiction of the High Court or any other Constitutional Court to interfere with the arbitral proceedings since the power under Article 226 of Constitution of India is extraordinary and such power can be exercised to prevent abuse of process of the Court or do complete justice to the parties. 29. The power of judicial review vested in the superior Courts undoubtedly has wide amplitude but the same should not be exercised when there exists an arbitration clause. But the Court should not use discretion where it is pure disputed question of fact. The Court can exercise such power under Sections 8, 9, 11 and 34 of the Act since these provisions permit judicial intervention at different stages. 30.
But the Court should not use discretion where it is pure disputed question of fact. The Court can exercise such power under Sections 8, 9, 11 and 34 of the Act since these provisions permit judicial intervention at different stages. 30. In “Sanjana M. Wig v. Hindustan Petroleum Corporation (2005) 8 SCC 242 ” the Apex Court while answering the principal question which arises for consideration is as to whether discretionary jurisdiction would be refused to be exercised solely on the ground of existence of an alternative remedy which is more efficacious. Ordinarily, when a dispute between the parties requires adjudication of disputed question of facts wherefore the parties are required to lead evidence both oral and documentary which can be determined by a domestic forum chosen by the parties, the Court may not entertain a writ application. 31. Relying on some of the earlier decisions, the Apex Court, in the said case, further held as follows: “It may be true that in a given case when an action of the patty is de hors the terms and conditions contained in an agreement as also beyond the scope and ambit of domestic forum created therefore the writ petition may be held to be maintainable; but indisputably therefore such a case has to be made out. It may also be true, as has been held by this Court in Indian Oil Corporation Ltd. v. Amritsar Gas Service (1991)1 SCC 533 ) and E. Venkatakrishna v. Indian Oil Corporation (2000)7 SCC 764 ) that the arbitrator may not have the requisite jurisdiction to direct restoration of distributorship having regard to the provisions contained in Section 14 of the Specific Relief Act. 1963; but while entertaining a writ petition even in such a case, the court may not loose sight of the fact that if a serious disputed question of fact is involved arising out of a contract qua contract, ordinarily a writ petition would not be entertained. A writ petition, however, will be entertained when it involves a public law character or involves a question arising out of public law functions on the part of the respondent.” 32. In “Empire Jute Co.
A writ petition, however, will be entertained when it involves a public law character or involves a question arising out of public law functions on the part of the respondent.” 32. In “Empire Jute Co. Ltd. v. Jute Corporation of India 2008 (2) ALT 34 (SC) : AIR 2007 SCW 6930 ” the Apex Court had an occasion to deal with similar question and held as follows: “As the disputed facts and also the law are required to be determined by the Arbitrator, we are of the opinion that all disputes between the parties should be directed to be resolved upon raking recourse to the arbitration agreement contained in clause 9.0 of the Sale Order.” 33. Thus, Section 5 of the Act created letter on the judicial interference/intervention in the Arbitration proceedings except as provided in part-1 of the Act. 34. The main endeavour of the learned counsel for the petitioner is that respondent No.2 herein is incompetent to act as Arbitrator as he is consultant of the respondent No.1 and it is hit by Section 12 of the Act. According to sub-section (3) (a) and (b) of Section 12, an Arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or he does not possess the qualifications agreed to by the parties. 35. Sub-section (4) further permits any party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made. 36. Further sub-section (1) permits to challenge the Arbitrator when the Arbitrator failed disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. As such the petitioner expressed justifiable doubt as to the independence or impartiality of the Arbitrator on the ground that the respondent No.2 is the consultant, of respondent No.1. 37.
Further sub-section (1) permits to challenge the Arbitrator when the Arbitrator failed disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. As such the petitioner expressed justifiable doubt as to the independence or impartiality of the Arbitrator on the ground that the respondent No.2 is the consultant, of respondent No.1. 37. Admittedly, the petitioner filed writ petition No.36081 of 2018 claiming following relief: “to issue a Writ, Order or direction more particularly in the form of Writ of Prohibition or any other appropriate Writ thereby declaring that the action of the respondent No.1 “to appoint the arbitrator Respondent No 2 vide proceedings Arb/non-ICA/4.06 P.A. Boiler/102 dated 30.03.2018 is an illegal act and is barred by the principles of law and is contrary to the established provisions of the Arbitration and Conciliation Act, 1996 and forbear the Respondents from proceeding as Arbitrator under the Arbitration and Conciliation Act. This Hon’ble Court may if necessary further declare that once the arbitration proceedings have been held and in pursuance of the same an award has been passed and thereafter the arbitration proceedings have been terminated, fresh arbitration proceedings cannot be invoked at the whims and mercy of the Respondent and the same be termed as illegal and arbitrary and this Hon’ble Court, may pass any other order deemed to be fit and necessary in the facts and circumstances of the case.” 38. The said writ petition was dismissed as withdrawn granting liberty to avail appropriate legal remedies under the provisions of the Arbitration and Conciliation Act. 39. Thereafter, the petitioner filed objections before the arbitrator dated 30.03.2018 and the same was received by the Arbitrator on 04.04.2018, wherein it is contended in paragraph No.3 as follows: “M/s BSN Joshi has invoked arbitration against RINL challenging the termination of the two contracts and submitted a claim for Rs.1,96,92,000/-, CMD, RINL appointed Justice Vaman Rao (Retd), Former Justice A.P. High Court, as sole Arbitrator and RINL defended the said claims. In the A ward dated 19.04.2016 passed by the Ld. Arbitrator, the Claims of BSN Joshi were rejected. Consequently, RINLs termination was upheld. Thereby the action of RINL against BSN Joshi for non performance and damages arising out of risk and cost action were also upheld.
In the A ward dated 19.04.2016 passed by the Ld. Arbitrator, the Claims of BSN Joshi were rejected. Consequently, RINLs termination was upheld. Thereby the action of RINL against BSN Joshi for non performance and damages arising out of risk and cost action were also upheld. Hence the losses incurred by RINL due to the said breach of contract and risk and cost operation through alternate agency are being claimed in this arbitration.” 40. But the same was rejected by the respondent No.2 by letter dated 01.09.2018. Therefore, the petitioner invoked Section 13 before Arbitrator, which conferred power on the arbitrator - respondent No.2 to decide such challenge. However, when the petitioner is unsuccessful in challenge under Section 13 (2) of the Act, the remedy open to him is under sub-section (4) of Section 13 of the Act. Which says that if a challenge under any procedure agreed upon by the parties or under the procedure under sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award. 41. Sub-section (5) of Section 13 of the Act made it clear that when an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with Section 34 of the Act. Thus, it is clear from sub-section (5) of Section 13, when a challenge was made under sub-section (2) of Section 13, the remedy open to him is to file an application under Section 34 but not otherwise. Thus, the efficacious remedy under the Act is available to the petitioner, who is unsuccessful in the challenge to Arbitrator under Section 13 (2) of the Act and such order is not amenable to the extraordinary jurisdiction under Article 226 of Constitution of India in view of catena of judgments of Apex Court and other Courts, few such judgments are noted below. 42. The Apex Court in “S.B.P. and Co. v. Patel Engineering Ltd. AIR 2006 SC 450 : 2005 (6) ALT 37 .1 (DN SC)” held that the object of 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 of the Constitution of India or under Article 226 of the Constitution of India 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. 43. It is important to note that the 1996 Act was enacted to replace the 1940 Arbitration Act in order to provide for an arbitral procedure which is fair, efficient and capable of meeting the needs of arbitration; also to provide that the tribunal gives reasons for an arbitral award: to ensure that the tribunal remains within the limits of its jurisdiction; and to minimise the supervisory roles of courts in the arbitral process (Vide: “Associate Builders v. Delhi Development Authority (2015) 3 SCC 49 : 2015 (2) ALT 3.1 (DN SC)”) 44. Similar view as above is further taken by the Apex Court in “M/s. Voestalpine Schienen GMBH v. Delhi Metro Rail Corporation Ltd. 2017 SCC OnLine SC 172” relying on the earlier judgment in “Deptt. of Economic, Policy and Development of the City of Moscow v. Bankers Trust Co. [2005 QB 207] and held as follows: “31 ..... Parliament has set out, in the Arbitration Act. 1996, to encourage and facilitate a reformed and more independent, as well as private and confidential, system of consensual dispute resolution, with only limited possibilities of court involvement where necessary in the interest of the public and of basic fairness.” 45. In “Cadre Estate Pvt. Ltd. v. Salochna Goyal and others 2010 (119) DRJ 457” High Court of Delhi while following the judgment in “S.B.P. and Co. v. Patel Engineering Ltd. “(referred supra) held that the Arbitration Act restricts the scope of interference by judicial authorities with arbitral proceedings and discussed about the extent of judicial interference in such arbitral proceedings with reference to Section 5 and concluded that under Part I of the Act, interference by the Court is only to the extent permissible thereunder. Section 8 enables the Court before which an action is brought to refer parties to arbitration. A court can pass orders of an interim nature even before the commencement of arbitral proceedings. This is envisaged in the circumstances outlined in Section 9 of the Act.
Section 8 enables the Court before which an action is brought to refer parties to arbitration. A court can pass orders of an interim nature even before the commencement of arbitral proceedings. This is envisaged in the circumstances outlined in Section 9 of the Act. The power of the Chief Justice to appoint an arbitrator where any of the parties fails to appoint one despite an arbitration agreement is contained in Section 11. The grounds for challenging the appointment of an Arbitrator are set out in Section 12 and the challenge procedure is in Section 13 of the Act. However, Section 13(4) makes ii clear that if a challenge procedure is not, successful, the Arbitral Tribunal shall continue the arbitral proceedings and make an arbitral award, it is further held as follows: “It may be observed that as regards the Petitioner’s challenge to the jurisdiction of the learned Arbitrator it is not as if it has no remedy. If its application under Section 16 of the AC Act is allowed by the learned Arbitrator it will have no grievance left. If not, the Petitioner has to abide by the legislative scheme outlined in Section 16(5) read with Section 16(6) AC Act and await the passing of the Award. If the A ward goes against the Petitioner, it can challenge the Award on the grounds available to it under Section 34 of the AC Act. The mere fact that this may cause it the inconvenience of having to await the conclusion of the arbitral proceedings is no ground to entertain a writ petition at an intermediate stage in a manner contrary to the legislative scheme under Section 16 AC Act. The AC Act being a complete code in itself and with Section 5 of the AC Act limiting interference by judicial authorities, any attempt to expand the scope for interference by the High Court in exercise of its powers under Article 226 of the Constitution would defeat the object and purposes of the AC Act.” 46. In the case of “Commercial and others v. Calicut Engineering Works Limited (2004) 10 SCC 656 ”, the petitioner, i.e. Commercial filed an application dated 2.7.2003 to the Arbitrator for setting aside the report of hand writing expert in respect of the question as to whether the petitioner has signed the document which purportedly contained arbitration clause and another hand writing expert be appointed.
The said application was rejected by the Arbitrator. The Apex Court in Commercial and others v. Calicut’ Engineering Works Limited” (referred supra) held that the said rejection by the Arbitrator would be a ground of challenge under Section 34 of the Act. In “Rajinder Krishna Khanna and others v. Union of India and others AIR 1999 SC 463 ” a copy of inspection report basing on which the impugned arbitration award was made, was not available to the second respondent, as such, the second respondent had been unable to present its case thereon and principles of natural justice had been violated. The Apex Court in Rajinder Krishna Khanna (supra) held that denial of opportunity to present its case in the arbitration proceedings, would be one of the ground mentioned in Section 34(2)(iii) of the Act for setting aside the award made by the Arbitral Tribunal in such proceedings. In “Punj Sons Pvt. Ltd. v. National Aluminium Co. Ltd. and another AIR 1999 SC 1547 ”, the arbitrator had denied to consider the counter claim which was filed before him on the ground that the party should secure a fresh reference, regarding the dispute, which are the subject matter of the counter claim and both’ the original reference and second reference could be consolidated and decided together, and as the counter claim was not included in the reference, it cannot be adjudicated upon. The Apex Court in para-3 of AIR in Punj Sons Pvt. Ltd. (supra) held as under: “We have heard learned Counsel for the parties. It appears to us that the learned Arbitrator had, in the facts and circumstances of this case, rightly opined that whereas respondent No. 1 was not justified to raise a “counter claim” in the manner in which it was raised, but it could seek adjudication of the disputes involved in the “counter claim” by asking for a second reference and that as and when the second reference is made, both the references could be heard together. Respondent No. 1 could have sought a reference thereafter in respect of the disputes which were covered by the “counter claim” but he choose not to do so and in the bargain, almost ten years have gone by. According to Mr. Nariman, the view of the arbitrator was correct because the “counterclaim” was outside the scope of the reference made on 10.12.1986.” 47.
According to Mr. Nariman, the view of the arbitrator was correct because the “counterclaim” was outside the scope of the reference made on 10.12.1986.” 47. In “HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Limited (Formerly Gas Authority of India Ltd.) 2017 (10) SCAE 371 the Apex Court while discussing with the amended provisions of the Act observed as follows: “After the 2016 Amendment Act, a dichotomy is made by the Act between persons who become “ineligible” to be appointed as arbitrators, and persons about whom justifiable doubts exist as to their independence or impartiality. Since ineligibility goes to the rout of the appointment, Section 12(5) read with the Seventh Schedule makes it clear that if the arbitrator falls in anyone of the categories specified, in the Seventh Schedule, he becomes “ineligible” to act as arbitrator. Once he becomes ineligible, it is clear that, Under Section 14(1) (a), he then becomes de jure unable to perform his functions inasmuch as, in law, he is regarded as “ineligible”. In order to determine whether an arbitrator is de jure unable to perform his functions, it is not necessary to go to the Arbitral Tribunal Under Section 13. Since such a person would lack inherent jurisdiction to proceed any further, an application may be filed Under Section 14(2) to the Court to decide on the termination of his/her mandate on this ground. As opposed to this, in a challenge where grounds stated in the Fifth Schedule are disclosed, which give rise to justifiable doubts as to the arbitrator’s independence or impartiality, such doubts as to independence or impartiality have to be determined as a matter of fact in the facts of the particular challenge by the Arbitral Tribunal Under Section 13. If a challenge is not successful, and the Arbitral Tribunal decides that there are no justifiable doubts as to the independence or impartiality of the arbitrator/arbitrators, the Tribunal must then continue the arbitral proceedings Under Section 13(4) and make an award. It is only after such award is made, that the party challenging the arbitrator’s appointment on grounds contained in the Fifth Schedule may make an application for setting aside the arbitral award in accordance with Section)4 on the aforesaid grounds.
It is only after such award is made, that the party challenging the arbitrator’s appointment on grounds contained in the Fifth Schedule may make an application for setting aside the arbitral award in accordance with Section)4 on the aforesaid grounds. It is clear, therefore, that any challenge contained in the Fifth Schedule against the appointment of Justice Doabia and Justice Lahoti cannot be gone into at this stage, but will be gone into only after the Arbitral Tribunal has given am award. Therefore, we express no opinion on items contained in the Fifth Schedule under which the Appellant may challenge the appointment of either arbitrator. They will be free to do so only after an award is rendered by the Tribunal.” 48. As per the law declared in long line of perspective pronouncements, the jurisdiction of this Court under Article 226 of Constitution of India, after commencement of arbitration proceedings, is limited and more particularly against an order passed under Section 13 (2) of the Act, as such the Court cannot exercise power under Article 226 of Constitution of India to issue any order in this writ petition. 49. Learned counsel for the petitioner mainly contended that in case the Court did not exercise its extraordinary jurisdiction under Article 226 of Constitution of India, it will cause serious prejudice to the petitioner, as he will be forced to face the Arbitration proceedings, has to wait till passing of award to challenge the same under Section 34 of the Act, he has to comply with the amended provisions by depositing the amount prescribed therein, which would cause serious inconvenience to the petitioner personally and also to face some financial troubles. To obviate such difficulties, the Court can exercise such power under Article 226 of Constitution of India to nip the proceedings at the stage of bud. But this view merits no consideration, as the judicial intervention is limited to certain cases in view of Section 5 of the Act. Unless the provisions of the Act permits such judicial intervention or interference in the arbitration” proceedings, the Court cannot exercise such power irrespective of prejudice or inconvenience being caused to the parties and if such power is exercised, it amounts to illegal exercise of jurisdiction and contrary to the very intention of legislature in enacting Arbitration and Conciliation Act.
Unless the provisions of the Act permits such judicial intervention or interference in the arbitration” proceedings, the Court cannot exercise such power irrespective of prejudice or inconvenience being caused to the parties and if such power is exercised, it amounts to illegal exercise of jurisdiction and contrary to the very intention of legislature in enacting Arbitration and Conciliation Act. Therefore, this Court cannot exercise power under Article 226 of Constitution of India in arbitration proceedings unless such interference is permitted by any of the provisions of the Act. On this aspect, the law laid down by the Apex Court is consistent more particularly the recent judgment of the Apex Court rendered in HRD Corporation (Marcus Oil and Chemical Division) v. GAIL, (India) Limited (Formerly Gas Authority of India Ltd.) (referred supra). Therefore, this Court cannot interfere with the arbitral proceedings pending before the sole arbitrator in view of the specific bar contained in the Act referred above. Consequently, the petition is liable to be dismissed at the stage of admission. 50. In the result, the writ petition is dismissed. No costs. 51. Consequently, miscellaneous application pending if any, shall also stand closed.