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IN THE HIGH COURT OF DELHI AT NEW DELHI
Prateek Jalan, J.
Union Of India - Appellant
Versus
Delhi State Consumer Co Operative Federation Ltd. - Respondent
Civil Miscellaneous (Main) No. 425, 430, 431, 432, 433, 438, 442, 443, 444, 449, 450, 453, 456, 457, 458, 459, 460, 461, 462, 463, 464, 465, 466, 467 of 2021, Civil Miscellaneous Application Nos. 20315-20317, 20601-20603, 20606-20608, 20614-20616, 20619-20621, 20776-20778, 20876-20878, 20881-20883, 20886-20888, 21150-21152, 21185-21187, 21370-21372, 21497-21499, 21502-21504, 21507-21509, 21515-21517, 21523-21525, 21533-21535, 21538-21540, 21548-21550, 21553-21555, 21560-21562, 21568-21570, 21575-21577 of 2021
Decided On : 09-05-2022
arbitration - termination of proceedings - Section 25(a) of the arbitration and Conciliation act, 1996 - Summary of Acts and Sections: The court discussed the termination of arbitral proceedings under Section 25(a) of the act and the jurisdiction of the arbitrator to consider the application for recall of the termination order. The court also highlighted the legal principles established in the judgment of Srei Infrastructure Finance Limited vs. Tuff Drilling Private Limited (2018) 11 SCC 470, emphasizing the arbitrator's duty to inform the claimant of their failure to communicate their claim and to provide an opportunity to show sufficient cause. The court also discussed the maintainability of petitions under article 227 of the Constitution in respect of arbitral orders, citing the judgments in Deep Industries Limited vs. Oil and Natural Gas Corporation Limited and another (2020) 15 SCC 706 and Surender Kumar Singhal & Ors. vs. arun Kumar Bhalotia & Ors. Decision dated 25.03.2021. The court concluded that the petitions were not liable to be rejected on grounds of maintainability.
Fact of the Case:
The Union of India filed 24 petitions under article 227 of the Constitution in respect of identical orders dated 19.02.2021 passed by a sole arbitrator in 24 different arbitration proceedings against the respondent-Delhi State Consumers Co-operative Federation Limited. The arbitrator terminated the proceedings under Section 25(a) of the arbitration and Conciliation act, 1996. The Union sought a direction upon the arbitrator to consider the applications filed by it for recall of the impugned orders. The 24 arbitral proceedings arose from the Union's cancellation of contracts with DSCCFL for failure to furnish the requisite security deposit, leading to claims for consequential damages.
Finding of the Court:
The court found that the arbitrator failed to exercise jurisdiction vested in her by declining to consider the applications made by the Union for recall of the impugned orders. The court held that the petitions under article 227 were not liable to be rejected on grounds of maintainability and directed the arbitrator to consider the applications for recall of the termination orders. The court also emphasized the duty of the arbitrator to inform the claimant of their failure to communicate their claim and to provide an opportunity to show sufficient cause.
Issues: The issues included the arbitrator's jurisdiction to consider the application for recall of the termination order, the maintainability of petitions under article 227 of the Constitution in respect of arbitral orders, and the duty of the arbitrator to inform the claimant of their failure to communicate their claim and to provide an opportunity to show sufficient cause.
Ratio Decidendi: The court established that the arbitrator has a duty to inform the claimant of their failure to communicate their claim and to provide an opportunity to show sufficient cause, and that the petitions under article 227 were not liable to be rejected on grounds of maintainability. The court also emphasized that the arbitrator's failure to exercise jurisdiction vested in her justified the exercise of article 227 jurisdiction by the High Court.
Final Decision: The court partly allowed the writ petitions and directed the arbitrator to consider the applications presented by the Union for recall of the orders terminating the arbitral proceedings under Section 25(a) of the act. The arbitrator was directed to dispose of the applications after hearing the parties within three months from the date of the judgment.
JUDGMENT
Prateek Jalan, J. - These 24 petitions under article 227 of the Constitution of India have been filed by the Union of India [hereinafter, 'the Union'] in respect of identical orders dated 19.02.2021 passed by a sole arbitrator in 24 different arbitration proceedings. The Union has, in the alternative, sought a direction upon the arbitrator to consider the applications filed by it for recall of the impugned orders.
2. all the proceedings were filed by the Union against the respondent-Delhi State Consumers Co-operative Federation Limited [hereinafter, 'DSCCFL']. By the impugned orders, the arbitrator has terminated the proceedings under Section 25(a) of the arbitration and Conciliation act, 1996 [hereinafter, 'the act'].
a. Facts
3. The 24 arbitral proceedings arise in substantially similar circumstances. In response to four different tender enquiries floated by the Union, DSCCFL offered to supply various qualities of pulses [dal] for the use of defence personnel. according to the Union, DSCCFL failed to furnish the requisite security deposit, as a result of which each of the contracts were cancelled at the risk and cost of the respondent. The Union sought to claim consequential damages. a chart showing the details of each contract and the damages claimed by the Union has been placed on record, but it is not necessary to reproduce the same here, as the facts relating to the underlying dispute between the parties are not relevant to the adjudication of the issue raised in these petitions.
4. What is relevant for the present purposes is that each of the contracts contains an identical arbitration clause, which is in the following terms:-
'15 I. aRBITRaTION CLaUSE:
(a) In the event of any question, dispute or difference arising under or out of or in connection with the conditions mentioned in this schedule or in annexure thereto or in General Conditions of contract governing contracts placed by the Central Purchase Organisation of the Government of India. (Now under Department. Of Supply.) Form No. DGS&D-68 (Revised) or touching or concerning the construction, meaning or operation or effect thereof/or of any matter contained therein or as to the rights, duties or liabilities of the parties in connection with this contract (Except as to any matters the decision of which is specially provided for in the conditions mentioned in the schedule or in annexure thereto or in General Conditions of Contract as aforesaid), the same shall be referred the Sole arbitration of any person appointed by the additional Secretary to Government of India, Ministry or Department of Government of India administratively dealing with the contact at the time of such appointment, or if there is no additional Secretary or he is one leave or is absent from duty or is not available for any reason whatsoever the Joint Secretary dealing with the contract of such Ministry or Department at the time of such appointment. It will be no objection to any such appointment that the person appointed is a Government Servant.
(b) In the event of the arbitrator dying, neglecting or refusing to act or resigning or being unable to act for any reasons or his award being set aside by the court for any reason, it shall be lawful for the said additional Secretary or the Joint Secretary, as the case may be, to appoint an arbitrator in the place of the outgoing arbitrator in the manner aforesaid and the person so appointed will proceed with the references from the stage at which it was left by his predecessor. It is also a term of this contract that no person, other than a person appointed by the additional Secretary or the Joint Secretary of the Ministry or Department as aforesaid shall act as arbitrator and if for any reason that is not possible the matter shall not be referred to arbitration at all.
(c) Subject as aforesaid the arbitration and conciliation act, 1996 and the Rules thereunder and any statutory modification thereof for the time being in force shall apply to the arb
The main legal point established in the judgment is the arbitrator's duty to inform the claimant of their failure to communicate their claim and to provide an opportunity to show sufficient cause, an....
High Court’s exercise of jurisdiction under Article 227 of the Constitution, and setting aside of the order of the Tribunal.
Once 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 ....
Failure to file a statement of defense within the statutory period under the Arbitration Act results in forfeiture of that right, emphasizing the necessity for timely compliance in arbitral proceedin....
Arbitrators must consider recall applications under Section 25(a) of the Arbitration Act when sufficient cause is shown, especially in the absence of alternate remedies for appeal.
The main legal point established is that under Section 25(a) of the Arbitration and Conciliation Act, 1996, the arbitral tribunal cannot terminate proceedings if the claimant shows sufficient cause f....
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