POORAM FINSERV PRIVATE LIMITED (NBFC) v. SANTHOSH KUMAR ROBINSON K. S. S/O ROBINSON
2024-09-06
A.K.JAYASANKARAN NAMBIAR, SYAM KUMAR V.M.
body2024
DigiLaw.ai
JUDGMENT : 1. This appeal is filed challenging the Order dated 05.07.2024 of the Additional District Court, Thrissur in Arb. O.P. No. 792 of 2017. Appellant herein was the respondent in the said Arb. O.P. The Arb. O.P. had been filed before the District Court by the respondent herein invoking Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act of 1996') seeking to set aside an arbitration award. 2. Arbitration proceedings had been initiated by the appellant seeking to recover amounts due from the respondent under a loan agreement. Though notice issued by the arbitrator had been received by the respondent, he did not choose to participate in the arbitration proceedings. An award for an amount of Rs.37,60,547/-with interest and cost was rendered against the respondent by the arbitrator on 20.08.2017. The said award was challenged by the respondent before the District Court by filing the above Arb. O.P. The learned Judge, after hearing both sides, concluded that the arbitration had been conducted violating the mandates of Sections 11 and 12 of the Act of 1996. The District Court relied on the dictum laid down by this Court in M/s. Hedge Finance Private Limited v. Bijish Joseph, ILR 2022 (3) Ker. 947, wherein it was held that “post-2015 amendment era, there are only two modes of appointment of a sole Arbitrator (i) by express agreement in writing between the parties, post the dispute, agreeing to waive the applicability of Section 12 of the Act or (ii) by order of appointment by the High Court under Section 11 of the Act. If the appointment of a sole arbitrator is made other than by the above two methods, the appointment is ex facie bad and is in contravention of the provisions of the Act, which goes to the roots of the matter, and the Arbitrator becomes de jure ineligible to act as an arbitrator by the operation of law”. Thus following the proposition laid down by this Court that there should be neutrality not only for the arbitrator, but also in the arbitrator selection process as well, the learned District Judge set aside the award and allowed the Arb. O.P. filed by the respondent. The said Order of the District Court is challenged in this Arb. Appeal. 3 We heard Sri.P.B.Krishnan, Senior Advocate instructed by Sri.Sabu George learned counsel for the appellant. 4.
O.P. filed by the respondent. The said Order of the District Court is challenged in this Arb. Appeal. 3 We heard Sri.P.B.Krishnan, Senior Advocate instructed by Sri.Sabu George learned counsel for the appellant. 4. The principal contention put forth by the learned Senior Counsel is that on the date of issuance of the impugned Order, the District Court had no jurisdiction to entertain a petition filed under Section 34 of the Act of 1996 since by that time, an amendment had been effected to Section 15(2) of the Commercial Courts Act, 2015 transferring the jurisdiction to entertain a Section 34 application falling within relevant pecuniary limit from the District Court to the Commercial Court. Thus at the time of consideration of the above Arb. O.P., the District Judge had no jurisdiction to entertain the same and ought to have transferred it to the Commercial Court. Thus terming the impugned Order as one rendered without jurisdiction, the learned Senior Counsel seeks it to be set aside. 5. On the face of it, the contention raised by the learned Senior Counsel based on lack of jurisdiction raised against the impugned Order is appealing. However, it assumes relevance to also take note of the findings on merit rendered by the District Court in the impugned Order. After a discussion on merits, it has been unequivocally found by the learned Judge that the arbitrator had been appointed in stark violation of Sections 11 and 12 of the Act of 1996 and hence the award passed by him was unsustainable in law. The said part of the impugned Order rendered on merits remains uncontroverted and valid. We cannot lose sight of the same while proceeding to consider the prayer of the appellant to set aside the impugned Order. 6. Indeed at the time of rendering the Order impugned, the District Court had no jurisdiction to entertain the Arb. O.P. which had been filed by the respondent invoking Section 34 of the Act of 1994. The amendment to Section 15(2) of the Commercial Courts Act, 2015 had by then already transferred the said jurisdiction from the District Court to the Commercial Court. The impugned Order does not however reveal that the factum of absence of jurisdiction was brought to the notice of the District Court or that it had engaged the court's attention.
The amendment to Section 15(2) of the Commercial Courts Act, 2015 had by then already transferred the said jurisdiction from the District Court to the Commercial Court. The impugned Order does not however reveal that the factum of absence of jurisdiction was brought to the notice of the District Court or that it had engaged the court's attention. Be that as it may, findings entered on the merits of the matter by the District Court reveal that the award is not in any terms sustainable in law. If it has been found so on merits by the District Judge albeit, without jurisdiction, the same result would befall the award had it been scrutinized by a Commercial Court. Hence interfering with the Order of the District Court on the technical ground of lack of jurisdiction and leaving it open to be considered by a Commercial Court will not serve any worthy purpose. It would be a mere exercise in futility. Moreover, the plenary powers vested in this Court mandate that we should also take note of the equity involved. Equity demands that an illegally rendered award, like the one in the case at hand, ought not to be pursued beyond this Court once we are convinced that the same is legally unsustainable. The power/duty vested in this Court in the said respect flows from Article 215 of the Constitution of India which declares the High Courts to be Courts of record and is set out below: “215. High Courts to be courts of record - Every High Court shall be a court of record and shall have all the powers of such a court including the power to punish for contempt of itself.” Supreme Court in Life Insurance Corporation of India v. D.J. Bahadur and others, (1981) 1 SCC 315 , Naresh Shridhar Mirajkar and others v. State of Maharashtra and another, AIR 1967 SC 1 and M.V. Elisabeth and others v. Harwan Investment & Trading (P) Ltd. AIR 1993 SC 1014 have held that the High Courts in India are superior courts of records and have inherent plenary powers. In M.M. Thomas v. State of Kerala and another, (2000) 1 SCC 666 , the Supreme Court explained the nature of the plenary power by affirmatively quoting from the Halsbury’s Laws of England (4th Edn. Vol.
In M.M. Thomas v. State of Kerala and another, (2000) 1 SCC 666 , the Supreme Court explained the nature of the plenary power by affirmatively quoting from the Halsbury’s Laws of England (4th Edn. Vol. 10, Para 713) which had stated as follows: “Prima facie, no matter is deemed to be beyond the jurisdiction of a superior court unless it is expressly shown to be so, while nothing is within the jurisdiction of an inferior court unless it is expressly shown on the face of the proceedings that the particular matter is within the cognizance of the particular court. An objection to the jurisdiction of one of the superior courts of general jurisdiction must show what other court has jurisdiction, so as to make it clear that the exercise by the superior court of its general jurisdiction is unnecessary. The High Court, for example, is a court of universal jurisdiction and superintendency in certain classes of actions, and can not be deprived of its ascendancy by showing that some other court could have entertained the particular action.” Again in Municipal Corporation of Greater Mumbai and another v. Pratibha Industries Limited and others, (2019) 3 SCC 203 , the Supreme Court relied on M.M. Thomas's case and on Shivdev Singh and others v. State of Punjab and others, AIR 1963 SC 1909 while considering the issue of recalling an Order passed under Section 9 of the Act of 1996, termed it a proper exercise based on the plenary powers of the High Courts. 7. In view of the above, this Court has the power, nay duty, to ensure that an inequity that could result from setting aside the impugned Order of the District Court, albeit rendered without jurisdiction, is not further perpetuated by relegating the illegal award to be subjected to scrutiny before a court of competent jurisdiction. The improperly pursued arbitration proceeding as well as the resultant illegal arbitral award, ought to be set at naught, here and now. Accordingly, while we concur that the District Court erred in entertaining the Arb. O.P. and in rendering the impugned Order as it had no jurisdiction during the relevant time, we dismiss the above Arb. Appeal as it is equitable and in the interests of justice to do so. 8. The Arb. Appeal thus stands dismissed.
Accordingly, while we concur that the District Court erred in entertaining the Arb. O.P. and in rendering the impugned Order as it had no jurisdiction during the relevant time, we dismiss the above Arb. Appeal as it is equitable and in the interests of justice to do so. 8. The Arb. Appeal thus stands dismissed. However, this will not preclude the appellant from pursuing further remedies, if any, available to him under the relevant arbitration agreement. 9. All pending interlocutory applications stand dismissed.