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2024 Supreme(Online)(GUJ) 4271

HIGH COURT OF GUJARAT
BHARGAV D. KARIA, J
NEERAJ KUMARPAL SHAH – Appellant
Versus
MANBHUPINDER SINGH ATWAL – Respondent
R/PETN. UNDER ARBITRATION ACT NO. 23 of 2023

Petitioner Advocates:MR AJIT S NAIR(10802) ,Respondent Advocate: MR.PARTH CONTRACTOR(7150)

The arbitral tribunal's unilateral fee determination violated party autonomy, a cardinal principle of arbitration, and its denial of respondents' rights to present evidence and counterclaims violated natural justice, rendering the award invalid under Section 34.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 11, 12, 13, 14, 16, 29A, 31A, 34, 36, 39(3) - Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 - Section 13(1) - International Commercial Arbitration - Arbitral Award - Setting aside of award - Jurisdiction of Arbitral Tribunal - Party autonomy - Principles of natural justice - Exorbitant fees - Fraud and forgery - Misrepresentation - Misappropriation - Damages - Costs.

(B) Party autonomy is a cardinal principle of arbitration; arbitral tribunals lack unilateral power to determine their fees; unilateral fee determination violates party autonomy. (Paras 2.26, 2.27, 2.28, 2.29)

(C) In international commercial arbitrations, the 12-month time limit under Section 29A is not mandatory post-2019 amendment; the amended Section 29A applies retrospectively to pending arbitrations. (Paras 1.37, 1.38, 1.39)

(D) Serious allegations of fraud, rendering a dispute non-arbitrable, require either the arbitration agreement's non-existence or allegations against the state involving public law. (Paras 5.3, 5.4, 5.5) (E) Claims and counterclaims are independent proceedings; dismissal of a claim doesn't affect a counterclaim. (Para 3.7)

Facts of the case:
The claimant, a non-resident Indian, invested in a Limited Liability Partnership (LLP) after alleged misrepresentations by respondent no. 1. Respondent no. 1 was later expelled from the LLP for alleged misappropriation of funds. The claimant initiated arbitration proceedings against respondent no. 1 and respondent no. 2.

Findings of Court:
The court found that the arbitral tribunal lacked jurisdiction due to violations of party autonomy regarding fees and principles of natural justice in denying respondent no. 1 and no. 2 the opportunity to present evidence and counterclaims. The arbitral award was quashed and set aside.

Issues: The main issues were the arbitral tribunal's jurisdiction to continue proceedings after the fees dispute, its denial of respondent no. 1 and no. 2's right to present evidence and counterclaims, and the arbitral award's validity under Section 34 of the Arbitration and Conciliation Act, 1996.

Ratio Decidendi: The court held that the arbitral tribunal's unilateral determination of exorbitant fees violated party autonomy, and its denial of respondent no. 1 and no. 2's right to present evidence and counterclaims violated natural justice. These jurisdictional errors rendered the award invalid under Section 34.

Result: Appeals allowed. Arbitral award quashed and set aside.

ORAL JUDGMENT

Heard learned Senior Advocate Mr.

Saurabh N. Soparkar with learned advocate Mr. Bhadrish Raju with learned advocate Mr.Karan Shah with learned advocate Mr. Ajit Nair with learned advocate Mr. Himanshu C. Desai in Arbitration Petition No.23 of 2023 and in the counter petitions.

Heard learned advocate Mr. Masoom K.

Shah with learned advocate Mr. Jay Shah with learned advocate Mr. Dhruvin Dossani with learned advocate Mr. Parth Thummar in Arbitration Petition No.24 of 2023 and in counter petitions.

Heard learned Senior Advocate Mr.

Kamal Trivedi with learned advocate Mr. Parth Contractor and learned Senior Advocate Mr. Shalin Mehta with with learned advocate Mr. Pranav Vyas with learned advocate Mr. Pranjal Buch with learned advocate Mr. Manhan Singh Saini in Arbitration Petition No.110 of 2022 and in counter petitions.

INDEX

Sr. No.	PARTICULARS	PARAGRAPH NOS.
1	Introduction	01 to 15
2	Chronology of Events	16 to 17
3	Arbitration proceedings	18 to 84
4	Points of determination/Issues I – Jurisdiction of the Arbitration Tribunal 1) Whether the Tribunal could have continued the arbitration proceedings under section 29A of the Arbitration and Conciliation Act, 1996 or not?	1.1 to 1.50
	2) Whether the Arbitration Tribunal could have continued with the arbitration proceedings after the re- determination of fees payable by the parties which is opposed by the respondent nos. 1 and 2 being in violation of principle of party autonomy?	2.1 to 2.37
	3) Whether the Tribunal could have denied the respondent no.1 and 2 to lead evidence and	3.1 to 3.16

	file counter claims in violation of principle of natural justice?
	4) Whether the provisions of sections 12 and 13 of the Arbitration and Conciliation Act, 1996 are violated in arbitration proceedings?	4.1 to 4.18
	5) Whether the Arbitration Tribunal would have assumed the jurisdiction to proceed with the arbitration involving allegation of fraud and forgery which are subject matter of criminal investigation?	5.1 to 5.17
	6 II Merits 6(i) Whether the Tribunal was right in holding that respondent no.1 made misrepresentation to the claimant from December 2014 to February, 2016 and minutes of the meeting dated 18th July, 2015 was forged by respondent no.1? (ii) Whether the Tribunal was right in holding that respondent no.1 was guilty of misappropriation of sum of Rs. 22.19 Crore from bank account of respondent no.4-C2R LLP and liable to pay the same to respondent no.4-C2R LLP with	6.1 to 6.18

	interest at the rate of 12% p.a.?
	7) Whether the Tribunal was right in awarding amount of Rs. 84 Crore towards damages and loss of profit together with interest at the rate of 12% p.a.?	7.1 to 7.36
	8) Whether the Tribunal was right in awarding costs, fees and expenses as per Appendix-A to Appendix-G totalling to Rs.14,27,29,234.65 and SGD(Singapore Dollar) 984,454.87 payable to the claimant?	8.1 to 8.18
	III Scope of Section 34 9) Whether any interference is called for in the impugned arbitration award under section 34 of the Arbitration and Conciliation Act, 1996?	9.1 to 9.32
5	Order	85

Introduction :

1. These petitions are originally filed as First Appeals under section 13(1) of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (For short “the Commercial Courts Act”) read with section 34 of the Arbitration and Conciliation Act, 1996 (for short “the Act”) challenging the award dated 16.04.2021 passed by the Arbitral Tribunal (For short “the Tribunal”) comprising of Mr. Dato’ Anantham Kasinather, Presiding Arbitrator, Mr. Andre Yeap and late Hon’ble Mr. Justice G.T. Nanavati as members- coarbitrators in arbitration proceedings between the petitioners original defendants – respondents and the respondent- original claimant.

2. These petitions were listed by the Registry before the Division Bench having the Roster of Commercial Division of the High Court. While the matter was heard on 12.10.2022 by the Division Bench, one of the members recused from the matter. Thereafter the matter was placed before

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2024 Supreme(Online)(GUJ) 4271

HIGH COURT OF GUJARATBHARGAV D. KARIA, JNEERAJ KUMARPAL SHAH – AppellantVersusMANBHUPINDER SINGH ATWAL – RespondentR/PETN. UNDER ARBITRATION ACT NO. 23 of 2023

The arbitral tribunal's unilateral fee determination violated party autonomy, a cardinal principle of arbitration, and its denial of respondents' rights to present evidence and counterclaims violated natural justice, rendering the award invalid under Section 34.

Cases Referred (31)

HIGH COURT OF GUJARAT
BHARGAV D. KARIA, J
NEERAJ KUMARPAL SHAH – Appellant
Versus
MANBHUPINDER SINGH ATWAL – Respondent
R/PETN. UNDER ARBITRATION ACT NO. 23 of 2023