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IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA
Mansoor Ahmad Mir, Sandeep Sharma, JJ.
M/s P.K. Construction Co and another - Petitioners
Versus
The Shimla Municipal Corporation and others - Respondents
CWP Nos. 2322 & 2371 of 2016
Decided On : 12-04-2017
ARBITRATION - Termination of Arbitrator's Mandate - Applicability of Sections 29A and 29B of the Arbitration and Conciliation (Amendment) Act, 2015 - Interpretation - Maintainability of Petitions under Articles 226 and 227 of the Constitution of India - Scope and Limitations - Availability of Alternative Remedies - Judicial Review of Arbitral Proceedings.
Fact of the Case:
The petitioners, who were awarded contracts for the construction of parking complexes in Shimla, filed petitions under Articles 226 and 227 of the Constitution of India, seeking to challenge the termination of the mandate of the sole arbitrator appointed to resolve disputes arising out of the concession agreements. The petitioners contended that the arbitrator failed to make the final award within the stipulated time frame prescribed under Section 29A of the Arbitration and Conciliation Act, 1996 (the Act), as amended in 2015, resulting in the automatic termination of his mandate. They argued that this Court should decide the dispute in light of Sections 28(3) and 29B(3) of the Act.
Finding of the Court:
The Court held that Sections 29A and 29B of the amending Act, 2015, were not applicable to the present arbitral proceedings since they had commenced before the promulgation of the amendment. The Court reasoned that Section 26 of the amending Act specifically provided that its provisions would not apply to arbitral proceedings commenced before the amendment came into force, unless otherwise agreed by the parties. In this case, there was no agreement between the parties to be governed by the provisions of the amending Act. The Court further held that even if Sections 29A and 29B were applicable, the petitioners had an alternative remedy under Section 15 of the Act to seek the appointment of a substitute arbitrator in the event of termination of the mandate of the original arbitrator. Therefore, the Court dismissed the petitions, holding that it had no jurisdiction to decide the dispute under Articles 226 and 227 of the Constitution of India.
Issues: 1. Applicability of Sections 29A and 29B of the Arbitration and Conciliation (Amendment) Act, 2015, to arbitral proceedings commenced before the amendment came into force. 2. Interpretation of Section 26 of the amending Act, 2015, regarding the applicability of its provisions to pending arbitral proceedings. 3. Maintainability of petitions under Articles 226 and 227 of the Constitution of India to challenge the termination of an arbitrator's mandate and seek a decision on the merits of the dispute. 4. Availability of alternative remedies under the Arbitration and Conciliation Act, 1996, for addressing the termination of an arbitrator's mandate and the appointment of a substitute arbitrator.
Ratio Decidendi: 1. Sections 29A and 29B of the Arbitration and Conciliation (Amendment) Act, 2015, are not applicable to arbitral proceedings commenced before the amendment came into force, unless otherwise agreed by the parties. 2. Section 26 of the amending Act, 2015, clearly provides that its provisions will not apply to arbitral proceedings commenced before the amendment came into force, unless otherwise agreed by the parties. 3. Petitions under Articles 226 and 227 of the Constitution of India are not maintainable to challenge the termination of an arbitrator's mandate and seek a decision on the merits of the dispute, where alternative remedies are available under the Arbitration and Conciliation Act, 1996. 4. The Arbitration and Conciliation Act, 1996, provides alternative remedies for addressing the termination of an arbitrator's mandate and the appointment of a substitute arbitrator, such as the provisions of Section 15.
Final Decision: The Court dismissed the petitions filed under Articles 226 and 227 of the Constitution of India, holding that it had no jurisdiction to decide the dispute and that the petitioners had an alternative remedy under the Arbitration and Conciliation Act, 1996.
Sandeep Sharma, J.
Since common questions of law and facts are involved, both the petitions were clubbed and are being disposed of by this common judgment.
2. The writ petitions, though, have been filed by different entities but arise out of same and similar dispute and same reliefs have been sought. The main reliefs, common in both the petitions, are reproduced below:
“1. Record may be called for from respondent No 3.
2. The petition be kindly heard finally & decided in the light of Section 28(3) read with S 29B(3) of the Arbitration & Conciliation Act, the Ground para & the statement of claim including subsequent MAs on record.
3. Exemplary/compensatory cost may be awarded to the petitioners qua respondent No.1.
4. Interest may be kindly allowed in terms of Section 31(7) of the Arbitration & Conciliation Act.”
3. Since dispute in both the petitions is same and similar, for the sake of brevity, facts of CWP No. 2322 of 2016 are being discussed.
4. Respondents, i.e. Department of Urban Development and H.P. Infrastructure Development Board (in short, ‘HPIDB’) invited Expression of Interest (in short, ‘EOI’) from interested national/international independent legal entities/joint ventures/consortia for construction, operation/maintenance and running of parking complexes in Shimla city under Public Private Partnership mode (in short, ‘PPP mode’) vide Annexure P-1. Procedure was also laid down for submission of EOI therein. Petitioners in CWP No. 2322 of 2016 and CWP No. 2371 of 2016 submitted EOI for construction of parking complexes at Chotta Shimla and near Lift, respectively, as is evident from Annexure P-2 (in both the petitions). The EOI was accepted in both the cases, vide Annexure P-2 itself. Petitioners were required to pay Annual Concession Fee and further were asked to pay Development Fee and Construction Performance Security. Petitioners have also annexed abstract copy of Request for Proposal (in short, ‘RFP’)/agreement. Art 4, ‘Conditions Precedent’, whereof provides that, “Subject to the express terms to the contrary, limited aspects of the Construction Period (when commenced) and any legitimate rights arising in law, the rights and obligations under this Concession Agreement shall take effect only upon fulfillment of all the Conditions Precedent set out in Articles 4.1 and 4.2 on or before the expiry of a period of 90 (ninety) days from the Proposal Acceptance Date. However, the Concessioning Authority may at any time at its discretion and in writing, waive fully or partially any of the Conditions Precedent of the Concessionaire.”
5. In case of dispute, Art 27.3 of RFP, provides for arbitration or adjudication, which reads as under:
“27.3 Arbitration or Adjudication
a. In the event that the parties are unable to resolve the Dispute through Direct Discussion under Article 27.2, the parties shall submit the Dispute for arbitration in accordance with the Arbitration & Conciliation Act, 1996. The arbitration proceedings shall be conducted by the “Secretary, Law, GoHP” as the Sole Arbitrator (the “Sole Arbitrator”).
b. The Sole Arbitrator shall make a reasoned award and any award made pursuant to this Article 27.3 shall be final and binding on the Parties as from the date on which it is made and the Concessionaire and the Concessioning Authority agree to undertake to carry out the award without delay.
d. The cost incurred on the process of Arbitration including inter alia the fees of the arbitral tribunal and the cost of the proceedings shall be borne by the Parties in equal proportions. Each Party shall bear its own legal fees incurred as a result of any Dispute under this Article 27.”
6. Sanction for the construction of parking complex was accorded by respondent No.1, vide Annexure P-4, dated 9.12.2011, on various conditions, one of which was that the petitioners shall dump the debris with the permission of respondent No.1. Respondent No.1 also issued compliance certificate indicating fulfillment of conditions by the Conces
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