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2009 Supreme(Del) 1187

IN THE HIGH COURT OF DELHI AT NEW DELHI
HONBLE MR. JUSTICE VIKRAMAJIT SEN HONBLE MR. JUSTICE V.K. JAIN, JJ
OVAL INVESTMENT P. LTD. & ORS. - Appellant
Versus
INDIABULLS FINANCIAL SERVICES LTD. & ORS. - Respondent
RFA(OS) No.68/2009 & CM No.11652/2009
Decided on : November 03, 2009

Advocates appeared:
Through : Mr. C.A. Sundaram, Sr. Adv., Mr. Arun Bhardwaj, Sr. Adv. with Mr. Manish Sharma, Ms. Rohini Musa, Mr. Vishal Malhotra, Mr. Rohan Sharma, Advs.
Through : Mr. A.S. Chandhiok, Sr. Adv., Dr. A.M. Singhvi, Sr. Adv., Mr. B.B. Sawhney, Sr. Adv. with Ms.Sweta Kakkad, Mr.Varun Pathak & Ms. Dimple Murria, Advs.

Headnote:Arbitration & Conciliation Act, 1996 Section 21 - Specific Relief Act, 1963 - Section 34 - Civil Procedure Code, 1908 - Section 16 - Order VII Rule l1(d) Arbitral Tribunal-- Power to rule on its own jurisdiction - Whether the notice was a notice under Section 21 and whether the giving of notice under Section 21 is to be construed as a precondition to the exercise of jurisdiction by the Arbitral are questions which the Tribunal will have to decide - Learned Single Judge has rightly concluded that the suit is barred under Section 34 of the Act of 1963 - Appeal dismissed.

       

JUDGMENT

VIKRAMAJIT SEN, J.

1. This Appeal is directed against the Judgment of the learned Single Judge passed on 18.8.2009, whereby the Plaint of the Appellant was rejected in terms of Order VII Rule 11(d) of the Code of Civil Procedure, 1908 („CPC? for short). The Plaintiff had filed a suit for declaration and permanent injunction.

2. The Prayers read as follows:-

(a) pass a decree of declaration in favour of the plaintiff companies and against the defendant No.1 company that the invocation of arbitration/reference to arbitration in terms of letter dated 17.07.2009 of the defendant No.1 company is vitiated and liable to be struck down on account of it being improper and based on fraud, forgery and illegality.

(b) pass a decree of perpetual injunction restraining the defendant No.1 from invoking the arbitration clause qua the plaintiff companies without following the due process mentioned in the said clause and as per law.

(c) pass a decree of perpetual injunction restraining the defendant No.1 from selling, transferring, alienating or in any manner creating a third party interest in relation to shares of M/s GHCL and GTL as mentioned in para No.27 of the suit and further in relation to property No.F7/1 to F7/4 and F7/8 to F7/11, F Block, Connaught Place, New Delhi and Khasra No.352/2, 563 (0-9) min and 564 (0-11) min Village Bijwasan Tehsil Mehrauli, New Delhi.

(d) pass such order(s) as this Hon?ble Court may deem fit and appropriate in the facts and circumstances of the case.

3. The crux of the controversy is the alleged non-service of a Notice dated 17.7.2009, whereby the Respondent/Defendant had made an invocation of arbitration clause. This Notice was stated to have been dispatched by the Defendant to the Appellant under Certificate of Posting (UPC), Registered Post Acknowledgement Due, and thirdly by Courier. The contention of the Appellant is that non-service of the said Notice would have the consequence of rendering arbitral proceedings void ab initio on a plain reading of Section 21of the Arbitration and Conciliation Act, 1996 („A&C Act? for short).

4. Before the learned Single Judge the submission of the Respondent was that the existence of an arbitration clause was not in doubt; that if the Plaintiff had no objection as to the legal propriety of the arbitral proceedings, these objections should have been ventilated before the Arbitral Tribunal itself, on a conjoint reading of Section 16 and Section 5 of the A&C Act. According to the Respondent, the only exception to the general rule that Civil Courts possessed no jurisdiction over arbitral proceedings was the power conferred by the statute under Section 9 of the A&C Act to pass interim measures. Therefore, the suit was not maintainable.

5. Reliance was placed on Secur Industries Ltd. –vs- Godrej & Boyce Mfg. Co. Ltd., (2004) 3 SCC 447, Milkfood Ltd. –vs- GMC Ice Cream (P) Ltd., (2004) 7 SCC 288, Singhal & Brothers –vs- Mahanagar Telephone Nigam Ltd., 2005 (5) Bom CR 261 and SBP & Co. –vs- Patel Engineering Ltd., (2005) 8 SCC 618.

6. The learned Single Judge has very concisely traversed the relevant provisions of the A&C Act. In particular, it has been noted that under Section 37(2) of the A&C Act an appeal can be filed against orders passed by the arbitrators on the question of jurisdiction, as well as by a challenge to any interim orders/measures passed by the Arbitral Tribunal under Section 17 of the A&C Act. Furthermore, a note has been taken of the wording of Section 16(1) which confers on the Arbitral Tribunal the power to rule on its own jurisdiction. The Plaintiff/Appellant?s contention before the learned Single Judge, as well as before us, is that in the event Section 21 of the A&C Act is breached, the Arbitral Tribunal is not competent to assume the power of ruling on its jurisdiction. For doing so, the essential prerequisite would be that the Arbitral Tribunal should be properly and legally constituted.

7. The following paragraphs from Secur Industries Ltd











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