Abhibus Services India Pvt. Limited, Hyderabad vs Pallavan Transport Consultancies Services Ltd. , Represented by its Managing Director, Chennai

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2022 Supreme(Mad) 245

IN THE HIGH COURT OF JUDICATURE AT MADRAS
V. Parthiban, J.
M/s. Abhibus Services India Pvt. Limited, Hyderabad & Another – Appellants
Versus
Pallavan Transport Consultancies Services Ltd., Represented by its Managing Director, Chennai & Others – Respondents
C.M.A. Nos. 408, 701, 702, 858, 859, 861, 862, 890 & 892 of 2021 & C.M.P. Nos. 2640, 4224, 4231, 4946, 4948, 4973, 4983, 5115, 5117 of 2021
Decided On : 04-02-2022

Advocate Appeared:
For the Appellants:Srinath Sridevan, Advocate.
For the Respondents:R. Shanmuga Sundaram, Advocate General Assisted by K. Moorthy, R. Shanmuga Sundaram, Advocate General assisted by D. Raghu, S.B. Kiran Kumar, Advocates.

Headnote:
Constitution of India,1950 - Articles 136 ,1(3),4, 226 and 227 - Code of Civil Procedure,1908 - Order 1, Rule 10 - Arbitration and Conciliation Act,1996. – Section 8, 9,7 ,11,,6 2(1)(h) ,17 44,45,21 and 46 - Amendment Act, 2016 - Section 24 of the 1940 Act, under the 1996 Act - Limitation Act - Section 34(3) - Indian Evidence Act, 1872 - Arbitration & Conciliation (Amendment) Act, 2015 - Appellants herein being non-signatory to Arbitration agreement cannot be made parties in arbitral proceedings initiated at instance of claimant 2nd respondent herein as against State Undertakings - In course of arbitral proceedings on behalf of State Transport Corporation Interlocutory Application was filed making a counter claim against claimant/appellants herein for first time - When objections were raised against maintainability of such Application by appellants herein lea - Whether proposed respondents are necessary parties to arbitral Proceedings? - Whether arbitral Tribunal has jurisdiction to implead proposed respondents as necessary parties – Held, Court is constrained to hold that arbitral Tribunal’s decision though well founded on facts and materials, cannot be countenanced in law - C.M.As. are allowed and impleadment orders in all I.As are hereby set aside - Court ought not to lose sight of fact that State Corporations are stated to be reeling under grave financial strain and are unable to withstand any protracted litigations in respect of claim made against them in pending arbitral proceedings. In - Before parting with these appeals, after amendment to section 8(1) and universal acceptance of “Group of Companies” doctrine an express provision could be inserted in existing A & C Act, 1996 conferring power on arbitral Tribunal to implead non-signatory/third party to arbitral proceedings in a given circumstance - In any event as it stands today any order of Tribunal passed - By bringing an express provision in Act could be in tune with evolving liberal legal standards adopted by Courts in the realm of arbitration - legal uncertainty on cardinal issue has been hanging fire for some time giving rise to divergent views - A suitable amendment will set at rest conflict of legal opinions on vital issue - Miscellaneous Petitions closed.

JUDGMENT :

(Prayer: Civil Miscellaneous Appeals filed against the order of the Sole Arbitrator comprising of Justice R.Banumathi (Retd.) dated 05.01.2021 made in I.A.No.2 of 2020 in all batch matters Arb.TN-STU/MTC/2 of 2020, Arb.No.TN-STU/Tirunelveli/6 of 2020, Arb.TN-STU/SETC/7 of 2020, Arb.TN-STU/Coimbatore/9 of 2020, Arb.TN-STU/Kumbakonam 8/2020, Arb.TN-STU/Madurai/3 of 2020, Arb.TN-STU/Salem 4 of 2020 and Arb.TN-STU/Villupuram 5 of 2020 respectively.

Civil Miscellaneous Appeal filed against the order of the Sole Arbitrator comprising of Justice R.Banumathi (Retd.) dated 05.01.2021 made in I.A.No.2 of 2020 in all batch matters Arb.TN-STU/MTC/2 of 2020.)

1. The appellants herein were the proposed respondents in the above arbitration proceedings.

2. The present appeals are against the order of the learned Arbitrator allowing application (I.A.No.2 of 2020) filed by the respondents/State Undertakings herein seeking to implead them in their counter claims in the arbitral proceedings. According to the appellants herein, they were not signatories to the arbitration agreement and hence cannot be impleaded in the first place. More so, the arbitral Tribunal has no power to implead them as parties in terms of the scheme of the Arbitration and Conciliation Act, 1996.

3. The appellants herein being non-signatory to the Arbitration agreement cannot be made parties, in the arbitral proceedings initiated at the instance of the claimant, the 2nd respondent herein as against the State Undertakings. In the course of the arbitral proceedings, on behalf of the State Transport Corporation, Interlocutory Application No.2 of 2020 was filed making a counter claim against the claimant/appellants herein for the first time. When objections were raised against the maintainability of such Application by the appellants herein, the learned arbitral Tribunal framed questions for consideration as under.

i) Whether the proposed respondents are necessary parties to the arbitral Proceedings?

ii) Whether the arbitral Tribunal has jurisdiction to implead the proposed respondents as necessary parties?

4. Before dealing with final decision of the arbitral Tribunal in the I.A., it is essential to delineate the relevant facts that gave rise to the reference to the arbitration proceedings between the 2nd respondent herein being the claimant and the State Transport Corporations, the original parties. For the sake of clarity, the original parties to the Arbitration are described as claimant (the 2nd/3rd respondent herein) and the State Corporation (1st respondent herein).

i) The State Corporation has floated a tender for implementation of a project called Electronic Ticket Machine (hereinafter referred to as ‘ETM’) in all State Transport Undertakings (hereinafter referred to as ‘STUs’). The claimant before the Tribunal, viz. M/s. Ingenerie Technologies Solutions Pvt. Ltd., the 2nd or the 3rd respondent as the case may be in these appeals in response to the call for bids, applied for consideration as consortium along with two other companies on board namely, the appellants herein. After consideration of all the bids, finally, the claimant was selected to execute the project, declaring the claimant as the lead partner of the consortium, comprising both the appellants herein.

ii) Prior to the actual award of the contract on 03.04.2013, several requirements and legal formalities needed to be complied with as per the pre-contract stage called as Request For Proposal (RFP) dated 13.09.2012. During that RFP stage, several criteria had been laid down for consideration of the potential bidders for the project. Ultimately, the consortium comprising the appellants herein with M/s.Ingenerie Technologies Solutions Pvt. Ltd., as lead partner was selected for execution of the project.

iii) In the course of the execution of the project a dispute arose between the parties which led to the fi

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2022 Supreme(Mad) 245

Cases Referred (33)