1999 Supreme(Bom) 64

IN THE HIGH COURT OF BOMBAY
(O.O.C.J.)
F.I. Rebello, J.
M/s. Anuptech Equipments Private Ltd...... Petitioners.
Versus
M/s. Ganpati Co-op. Housing Society Ltd. others ..... Respondents.
Arbitration Petition No. 229 of 1998, decided on 30-1-1999.
Advocates appeared :
N.G. Thakkar, S.A. i/b V.L. Punjwani, for petitioner.
R.D. Dhanuka, i/b. Mrs. A.R. Dhanuka, for respondents.
D.Y. Chandrachud, A.S.G., for Union of India on notice.

Headnote:Section 151-See Arbitration and Conciliation Act, 1996, Section 5.

       Article 226-See Arbitration and Conciliation Act, 1996.

       Arbitration and Conciliation Act, 1996

       -Section 1-Territorial jurisdiction of High Court-Agreement refers to a place within jurisdiction of High Court-Thus, High Court has jurisdiction objection insofar as the jurisdiction of this Court to decide the petition on the ground of territorial jurisdiction. It was sought to be contended that the dispute arises from a claim falling outside the territorial jurisdiction of this Court. Court referred to various correspondence exchange. In the agreement itself the reference was made to a place within the jurisdiction of this Court. The place for the purpose of service of notice of the Arbitration proceedings was within the jurisdiction of this Court. The correspondence exchanged between the parties and which is on record shows that it was addressed to 108, Standard House, Maharshi Karve Road, Bombay. In the light of that it is not possible to accept the plea of the respondents that this Court would have ordinary jurisdiction. Even otherwise having held that it is only the extraordinary jurisdiction of the Court under Section 226 which is available, this Court would have jurisdiction in the matter and consequently that contention has also to be rejected.

       Sections 2(c), 25(a) and 32(2)(c)-Arbitral award under Section 2(c) of Act-An interim award included in it-Expression "order and award" being distinct and different one is termination of proceedings without deciding merits of matter and other is termination on merits-Thus, termination of proceedings under Section 25(a) would be also termination of proceedings by an order.- The expression "order" and "award" are distinct and different. One is termination of proceedings without deciding the merits of the matter, the other is termination on merits. Therefore, it is clear that looking at the Act itself there is no provision to challenge certain orders or decisions.

       Let us consider a case where proceedings are terminated on account of the failure to file claims statement as in the present case. Under Section 25(a) of the Act of 1996, the Arbitral Tribunal could terminate the proceedings if the petitioners herein had been unable to show sufficient cause. In the event, the petitioner seeks to challenge the order on the ground that the material on record shows sufficient cause what is the remedy available to a party. Will such a decision tantamount to an award under Section 34 and consequently, is the remedy under Section 34(2) of the Act of 1996 available. Let us, therefore, proceed to examine whether in the Act itself the decision under Section 25(a) itself provides for any relief against the decision by the Arbitral Tribunal. In terms of Section 37 such a decision is also not appealable as what is appealable, is only accepting the plea referred to in sub-section (2) or (3) of Section 16 or an order granting or refusing an interim relief in terms of Section 17. Under Section 16(6) also no remedy is available as the issue as to whether the Tribunal has jurisdiction or that the Tribunal was exceeding the scope of its authority and in the event the plea had to be rejected could only be taken up in the event an award was passed. Can, therefore, it be said that the decision under Section 25(a) constitute an award. Ordinarily, as suggested by the learned Additional Solicitor General it would be prudent to look into the provisions of the Act itself to find out the remedy. Therefore, it perhaps could have been held if possible that closing of proceedings under Section 25(a) should be termed as an award as the definition of an arbitral award under Section 2(c) merely states that it includes an interim award. However, Section 31 of the Act of 1996 speaks about the forms and contents of Arbitral Award. Sub-section (3) of Section 31 requires that the Award must state the reasons. Sub-section (6) of Section 31 provides that the Arbitral Tribunal can also make an interim award on any matter with respect to which it could have made a final arbitral award. This interpretation, however, stands excluded in view of the express language contained in Section 32 of the Act of 1996. Section 32 provides that the Arbitral Proceedings shall be terminated by the final Arbitral Award or by an order of the Arbitral Tribunal under sub-section (2). In other words, it is clear that the Act itself recognizes two methods by which the arbitral proceedings could be terminated one by passing of the final arbitral award and the other in terms of sub-section (2) of Section 32 of the Act of 1996. Sub-section (2) of Section 32 provides in what other cases other than the final arbitral award the proceedings can be terminated. In the instant case, we are not concerned with sub-section (2)(a) but under sub-section (2)(c) where the Arbitral Tribunal finds that the continuation of the proceedings has for any other reason become unnecessary or impossible. To Courts mind this would include proceedings under Section 25(a) as Section 25(a) contemplates termination of arbitration proceedings if the Tribunal comes to the conclusion that there is no sufficient cause. A harmonious construction of Sections 25(a) and 32(2)(c) would indicate that the termination of proceedings in Section 25(a) can also be read with Section 32(2)(c). Therefore, termination of proceedings under Section 25(a) would be also termination of proceedings by an order. Even if, it be not so what is the remedy available to a party in respect of an order passed under Section 25(a) or Section 32(2). Section 34 provides a remedy insofar as an award is concerned only. There is no remedy insofar as an order is concerned. Here also once again on~ must consider the issue pertaining to Section 32(2), what would be the effect under Section 32(2)(a) where the respondent objects to the order and the Arbitral Tribunal does not recognize a legitimate interest on his part in obtaining a final settlement of the dispute. Will such a decision be final? Similarly, under Section 32(2)(c) when the Tribunal gives a finding that the continuation of the proceedings is necessary, will the one become final and incapable of challenge? What will be the effect of such an order? Considering Section 5 which contemplates that in matters governed by Part I, no judicial authority shall intervene except where so provided.

       As pointed out earlier, once it is held that an award is distinct from an order and that the order would not constitute an award in terms of Section 31, the award cannot be challenged under Section 34. Even if, a wider interpretation is given to Section 33 to include orders passed under Section 32(2), the jurisdiction is limited to correction of errors in terms of sub-section (1)(a) or to give an interpretation of a specific point or part of the award. This could only be in the event there was some ambiguity in the award. Under sub-section (4), if there was a requirement to decide a claim then also the Arbitral Tribunal has jurisdiction. This could be only where the0 award passed had omitted a decision on a claim. Therefore, it is clear that the expressions "order" and "award" are distinct and different and that the decision given under Section 25(1)(a) is an order terminating the proceedings.

       -Section 5-Civil Procedure Code, 1908, Section 151-Exercise of suo motu powers by Court-When Act expressly excludes judicial interference, it will be impossible to exercise power under Section 151, CPC.-on behalf of the petitioners, it was contended that this Court can Suo motu exercise jurisdiction. Such Suo motu exercise of jurisdiction can only be under Section 151 of Civil Procedure Code to exercise its inherent jurisdiction. In so far as Sluo motu exercise of power is concerned, the learned counsel placed reliance on the judgment of the Division Bench of this Court in the case of Union of India v. M/s. Ajit Mehta and Associates, Pune and others, AIR 1990 Bom 45 and more specifically from paragraphs 29 onwards. In that case, the provisions of the Act of 1940 was under consideration. The issue was whether the Court on an application under Section 17, even though the award had not been challenged or if challenged where no grounds of challenge had been taken could set aside an award if the party had not raised it as an objection in the petition. A Division Bench of this Court after considering the case law in the matter held, that the exercise of suo motu power in such cases is not disapproved by the Apex Court and the said view can be said to have been modifIed only to this extent that when the grounds for setting aside the award fell within Section 30 of the Act, the Court has no power to act suo motu. Thereafter, proceeding further and considering certain observations of the Apex Court in paragraph 32, this Court observed that considering the judgment of the Apex Court in Madan Lal v. Sunder Lal, AIR 1967 SC 1233 and Union of India v. Om Prakash, AIR 1976 SC 1745, the suo motu powers of the Court are saved, but the suo motu powers can be exercised for setting aside awards which are otherwise patently illegal or void and that such grounds can be outside the purview of Section 30(c) of the Act of 1940.

       This argument, to Court, is of no consequence as in those cases the Court was seized of the matter pursuant to an application under Section 17 of the Act of 1940. The award had to culminate into a decree. That could be done only on application under Section 17 or in the event of a challenge to the Award under the Rules framed for passing a decree. In the present case as pointed out earlier Section 5 of the Act of 1996 makes it clear, that no judicial authority which would include Courts can intervene except where so provided in this part. Therefore, unless there is a remedy provided under the Act, it would be impossible to accept the plea that this Court can exercise its suo motu powers which in the present case would mean its inherent powers. Once the Act expressly excludes judicial interference it will be impossible to exercise the powers under Section 151 of the Code of Civil Procedure.

       Section 12(3)(b)-Arbitral Tribunal-Constituted contrary to provisions of agreement or Act-Illegal and its decision null and void. The Arbitral Tribunal as constituted was not in terms of the agreement between the parties. Under Section 12(3) appointment of Arbitrator could have been challenged if he did not possess the qualification agreed to between the parties at the earliest available opportunity. There has been no waiver by the petitioners of their right to challenge the appointment of respondent No.3. A Tribunal constituted contrary to the provisions of the agreement or Act will be illegal and consequently its decisions will be null and void.

       Sections 25(a), 32(2) and 5 and Constitution of India, Article 226Arbitration proceedings-One of the arbitrators appointed by the other party was not qualified to be appointed as arbitrator in terms of the arbitration Agreement-However, Arbitral Tribunal terminated the proceedings on ground of failure of claimants to file statement of claim even though they had been constantly reminding the other party to appoint a duly qualified person and had also requested for time to file their claim statement-Composition of Tribunal being ex-facie, illegal and without jurisdiction, its decision will be null and void-Such Tribunal of which one of the arbitrators was disqualified would be tribunal without jurisdiction amenable to the writ jurisdiction of the High Court.-Where one of the Arbitrators was disqualified not having been holding the required qualification as provided in the arbitration agreement the composition of the tribunal was, ex-facie, illegal, null and void. The joint Arbitrator appointed by such arbitrator along with other arbitrator will also not be qualified in the circumstances to be a joint arbitrator. The tribunal constituted contrary to the provisions of the agreement or Act will be illegal and consequently its decisions will be null and void. Even if, it be held that the tribunal was not a tribunal within the meaning of Article 226 of the Constitution, it would nevertheless be a person to whom a writ could go under Article 226 of the Constitution. Where a remedy is not available to an aggrieved person and considering Section 5 of the Arbitration Act of 1996, High Court can exercise its extraordinary jurisdiction under Article 226 of the Constitution. Proceedings in arbitration involve the civil rights of the parties. It is a cardinal principle of our jurisprudence that no man should be left without a remedy. Judicial review cannot be made dependent on men, who pass order.

       Hierarchy of Courts is an answer to that. The Arbitral Tribunal had to consist of arbitrators duly qualified. Admittedly, one of the arbitrators could not have sat on the tribunal as he did not have the qualification for being appointed. Therefore, the tribunal wherein said arbitrator was party would be a tribunal without jurisdiction. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree, and such a defect cannot be cured even by consent of parties. The composition of the tribunal being contrary to law was without culminating into the decision was liable to be quashed and set aside on that count. In the agreement itself the reference having been made to a place within the jurisdiction of the High Court and the place for the purpose of service of notice of the Arbitration proceedings was within the jurisdiction of the Bombay High Court. It was not possible to accept the plea of the High Court not having jurisdiction. Even otherwise having held that it is only the extraordinary jurisdiction of the Court under Article 226 which is available, this Court would have jurisdiction in the matter. 1998 (5) LLJ 613, AIR 1963 SC 274, AIR 1990 Bom 45, AIR 1963 SC 874, AIR 1976 SC 425, AIR 1990 SC 1426, 1980 (4) SCC 556, AIR 1954 SC 340. Rel.