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IN THE HIGH COURT OF DELHI AT NEW DELHI
Chandra Dhari Singh, J.
Jayanta Kumar Ghosh Outdoor Catering Pvt. Ltd. – Appellant
Versus
State of Maharashtra and Others – Respondents
ARB. A. (COMM.) 13/2023
Decided On : 24-04-2023
ARBITRATION - SECTION 37 - APPEAL AGAINST INTERIM ORDER - SCOPE OF INTERFERENCE - TERMINATION OF CONTRACT - CRIMINAL CONVICTION OF DIRECTOR - DISCLOSURE - PRINCIPLE OF LIS PENDENS - APPLICABILITY.
Fact of the Case:
Appellant, a company, was awarded a contract by the respondent to run a canteen at Maharashtra Sadan. The contract was terminated by the respondent on the ground that one of the directors of the appellant company was convicted in a criminal case, which fact, according to the respondent, was not disclosed by the appellant at the time of the declaration. The appellant approached the learned Arbitrator by way of filing an application under Section 17 of the Arbitration Act seeking setting aside of the Termination Order and, in the interregnum, a stay on operation of the said Order dated 4th October 2022. The application came to be dismissed vide the impugned Order dated 17th April 2023 and thereafter, the respondent acted upon the Termination Order and even awarded the contract to a third party.
Finding of the Court:
1. The scope of interference in an appeal under Section 37 of the Arbitration Act is narrow. The Courts shall neither enter into the merits of the facts and case of the parties nor enter into the merits of the findings made by the arbitrator. 2. The appellant failed to show that the findings of the learned Arbitrator were patently illegal, erroneous based on no evidence or reached any conclusion which a rational person could not arrive at. 3. The appellant further failed to show any illegality on the face of record so as to shock the conscience of the Court. 4. The limited and narrow scope of Section 37 of the Arbitration Act does attract any interference in the facts and circumstances of the instant case. 5. The learned Arbitrator considered all relevant material before her and only subsequent to consideration and appreciation of the same passed the impugned Order.
Issues: 1. Whether the Court can interfere in the findings of the learned Arbitrator under Section 37 of the Arbitration Act? 2. Whether the appellant disclosed the criminal conviction of its director at the time of the declaration? 3. Whether the principle of lis pendens is applicable in the instant case?
Ratio Decidendi: 1. The scope of interference in an appeal under Section 37 of the Arbitration Act is narrow. The Courts shall neither enter into the merits of the facts and case of the parties nor enter into the merits of the findings made by the arbitrator. 2. The appellant failed to show that the findings of the learned Arbitrator were patently illegal, erroneous based on no evidence or reached any conclusion which a rational person could not arrive at. 3. The appellant further failed to show any illegality on the face of record so as to shock the conscience of the Court. 4. The limited and narrow scope of Section 37 of the Arbitration Act does attract any interference in the facts and circumstances of the instant case. 5. The learned Arbitrator considered all relevant material before her and only subsequent to consideration and appreciation of the same passed the impugned Order.
Final Decision: The instant petition stands dismissed.
JUDGMENT :
CHANDRA DHARI SINGH, J
I.A. 7318/2023 & I.A. 7595/2023 (Exemptions)
1. Exemptions allowed subject to just exceptions.
2. The applications stand disposed of.
ARB. A. (COMM.) 13/2023, I.A. 7317/2023 (Stay) & I.A. 7594/2023 (Stay)
3. The instant appeal under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996 (hereinafter “Arbitration Act”) has been filed on behalf of appellant seeking the following reliefs:—
“(a) Pass an order or direction quashing and setting aside the impugned order dated 17.4.2023 passed by the Ld. Arbitrator; and
(b) Continue the interim order dated 6.10.2022 passed by this Hon'ble Court in OMP (I)(Comm) No. 285/2022 till disposal of the Arbitration Claim petition before the Ld. Arbitrator.
(c) Stay the operation and implementation of notice/order dated 04.10.2022 issued by the Resident Commissioner, Maharashtra Sadan, New Delhi;
(d) Restrain the respondent Nos 1 to 4 from causing any disturbance or hindrance in peaceful running of the Maharashtra Sadan Canteen (Old and New) by the appellant during the pendency of the present petition;
(e) Ad-interim orders in terms of prayer (b) and (c)
(f) Cost of the petition;
(g) Pass such further order or orders as this Hon'ble Court deem fit and proper in the facts and circumstances of the case.”
4. Mr. Sandeep Sethi, the learned senior counsel for the appellant submitted that the appellant is involved in catering business. One Jayanta Kumar Ghosh started running a proprietorship firm in the year 1989. Thereafter, the appellant company was incorporated by the name of M/s Jayant Kumar Ghosh Outdoor Catering Pvt. Ltd. on 19th November 2014 and since then it has been running successfully as an independent legal entity. The appellant company had taken over the business of the proprietorship firm on 20th April 2017 by a deed of Agreement and has been running independently as a separate distinct legal entity.
5. The respondent issued an e-tender notice bearing tender no. RC/MMS/Canteen/2020 dated 3rd December 2020 and in pursuance thereof had awarded the Contract dated 14th September 2021 in favour of the appellant to run Maharashtra Sadan Canteen vide communication dated 27th August 2021.
6. It is submitted that at the time of the tender, Jayanta Kumar Ghosh was only an executive director in the appellant company and did not have any role in the conducting the affairs of the appellant. The majority of the shareholding of the appellant company is held by Amar Thakkar and Preeti Thakkar in the ratio of 51% and 23.75%. Remaining 25.79% is with Beauty Ghosh.
7. It is submitted that vide communication/order dated 4th October 2022 the respondent illegally, arbitrarily, and unjustly terminated the Contract awarded to the appellant, without furnishing any prior Notice, on a representation of one M/s Cuisine Caterers & Hospitality Services (hereinafter “M/s Cuisine Caterers”). Apprehending an action on behalf of the respondent, the appellant moved an application under Section 9 of the Arbitration Act before this Court in OMP (I) COMM 285/2022, whereby, a Coordinate Bench of this Court granted interim restraint order vide order dated 6th October 2022 against the respondent seeking implementation of the Termination Order dated 4th October 2022.
8. Learned senior counsel stated that the arbitration clause was invoked, by way of a Notice dated 13th December 2022 and thereafter, by way of a petition under Section 11 of the Arbitration Act, and ultimately the learned Arbitrator concerned was appointed to adjudge the legality of the Termination Order assailed by the appellant herein.
9. During the course of the arbitration proceedings, the appellant moved an application under Section 17 of the Arbitration Act for an interim measure, which came to be dismissed on 17th April 2023, which has been impugned by the appellant in the instant appeal. Vide the Order dated 17th April 2023, the
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