Jalandhar Improvement Trust vs Shourya Towers Private Limited

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2025 Supreme(Online)(P&H) 19952

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
Jasgurpreet Singh Puri, J
Jalandhar Improvement Trust – Appellant
Versus
Shourya Towers Private Limited – Respondent
CR-6014-2025 (O&M)

Important Points

High Courts should exercise supervisory jurisdiction under Article 227 of the Constitution over ongoing arbitral proceedings only in exceptional rarity, such as patent jurisdictional error or bad faith. Interference with procedural interlocutory orders is impermissible when the party has alternative recourse post-award under the statutory regime.

Subject

Arbitration Law - Procedural Arbitration

Act Referred

Constitution of India: Art.227, Art.226
Arbitration and Conciliation Act, 1996: S.25(b), S.11(6), S.12, S.16, S.23, S.34, S.37, S.5, S.29(A), S.18, S.33, S.17
Code of Civil Procedure: S.115
Stamp Act, 1899: S.33, S.35

Headnote

(A) Arbitration and Conciliation Act, 1996 - Sections 5, 23(4) and 25(b) - Article 227 of the Constitution of India - Arbitration - Forfeiture of right to file statement of defence - Delay in proceedings - Respondent failed to file statement of defence within six months despite multiple opportunities - Arbitral tribunal forfeited right to file defence under Section 25(b) - High Court's supervisory jurisdiction under Article 227 should be exercised in exceptional rarity - Legislative policy aims to minimize judicial intervention - No patent lack of inherent jurisdiction or bad faith demonstrated - Revision petition held maintainable but not entertainable due to failure to establish exceptional circumstances to justify interference in ongoing arbitral process. (Paras 31, 32, 33, 44, 46, 48)

(B) Arbitration - Judicial intervention - Scope of - High Court ought to avoid interference with orders passed by arbitral tribunal during ongoing proceedings - Parties must wait until final award is pronounced unless right of appeal is specifically provided under Section 37 - Legislative intent to ensure speedy and effective resolution is paramount. (Paras 34, 35, 45)

Facts of the case:
A dispute arose between the parties regarding a construction agreement. An arbitrator was appointed, and proceedings commenced. Despite being granted multiple opportunities over a period exceeding six months, the respondent failed to file its statement of defence. The arbitrator subsequently passed an order forfeiting the respondent's right to file a statement of defence and counter-claim under Section 25(b) of the Act. An application to recall this order was dismissed by the arbitrator. The aggrieved party filed a revision petition under Article 227 of the Constitution.

Findings of Court:
The court held that the time limit prescribed under Section 23(4) is mandatory and for a period of six months. Since the petitioner exceeded this timeline and failed to show 'sufficient cause,' the tribunal rightfully exercised its discretion to forfeit the right to file the defence. The court found no patent lack of jurisdiction or bad faith.

Issues: Whether the High Court should exercise its supervisory jurisdiction under Article 227 to set aside an interlocutory order passed by an arbitral tribunal forfeiting the right to file a statement of defence.

Ratio Decidendi: Judicial interference in arbitral proceedings must be minimized to support the statutory framework of the Act. Article 227 jurisdiction is not a substitute for appeal and is reserved for cases of patent jurisdictional error or extreme injustice. As the tribunal acted within its competence and the petitioner failed to prove exceptional circumstances, the court declined to interfere.

Result: Revision petition dismissed.

Advocates:
For the Appellants/Petitioners: Anmol Rattan Sidhu, Mandeep Kaur, Sandhya Gaur, Raghav Gulati, Kamal Gupta
For the Respondents: Chetan Mittal, Himanshu Gupta, Sehej Sandhawalia, Avichal Sharma

Table of Content
1. summary of arbitral procedural history regarding default and forfeiture of defence. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12)
2. petitioner asserts lack of intent and procedural failure as legal grounds for relief. (Para 13 , 14 , 15 , 16 , 17 , 18 , 19)
3. respondent argues against entertainability based on the arbitration act's mandatory timelines and self-contained nature. (Para 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29)
4. high court exercises restraint confirming that section 23(4) and 25(b) preclude interference in the absence of manifest jurisdictional error. (Para 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48)

JASGURPREET SINGH PURI, J. (ORAL)

1. The present is a Civil Revision Petition filed under Article 227 of the Constitution of India seeking quashing of the order dated 09.04.2025 (Annexure P-11) passed by learned Sole Arbitrator whereby the right to file the statement of defence as well as the counter claim of the petitioner has been struck off by invoking the provisions of Section 25(b) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Arbitration Act’). Further prayer has been made for setting aside of the impugned order dated 12.08.2025 (Annexure P-18) passed by learned Sole Arbitrator whereby the application filed by the petitioner for recalling of the aforesaid order dated 09.04.2025 has been rejected.

2. Brief facts of the present case are that there was an Agreement between petitioner No.1 i.e. Jalandhar Improvement Trust and the respondent-Contractor pertaining to construction of towers and thereafter, a dispute arose between the parties. Since there was a valid arbitration clause in the aforesaid Agreement and the mechanism for appointment of an Arbitrator had failed, the respondent-Contractor filed an application before this Court for appointment of an Arbitrator under the provisions of Section 11(6) of the Arbitration Act which was allowed by a Co-ordinate Bench of this Court vide order dated 30.08.2024 (Annexure P-3) and a former Judge of this Court was appointed as a Sole Arbitrator by way of the aforesaid order.

3. Learned Sole Arbitrator initiated the proceedings vide Annexure P-4 on 27.09.2024 and on that date, it was directed that the Power of Attorneys on behalf of the parties be filed by the next date of hearing and the counsel for the claimant (who is the respondent in the present petition) appeared and one Inderpal Singh, Trust Engineer along with Mandeep, Assistant, Trust Engineer also appeared and stated before the learned Arbitrator that Executive Officer of Trust will represent all the respondents in the matter. In the aforesaid first sitting of the learned Arbitrator, the procedure to be followed during the course of arbitration proceedings was also recorded in consultation with both the parties and in this way, a procedure was formulated which is also attached vide Annexure-I of Annexure P-4 in the present petition. The aforesaid order (Annexure P-4) is reproduced as under:-

“Annexure P-4

BEFORE THE ARBITRAL TRIBUNAL COMPRISING OF SOLE ARBITRATOR MR. JUSTICE RAJIV SHARMA (RETD.)

Arbitration Case No. 269 of 2020

In the matter of Arbitration:

BETWEEN

Shourya Towers Pvt. Ltd. Registered Office at B-111. Sector 5, Noida, UP through its authorized representative Sh. Mohit Garg.

....Claimant

AND

1. Jalandhar Improvement Trust, Jalandhar.

2. Chairman, Jalandhar Improvement Trust.

3. Punjab Local Body Government, Government of Punjab,Plot No.3, Dakshin Marg, Sector 35-A, Chandigarh

4. Director, Punjab Local Body Government, Government of Punjab, Plot No.3, Dakshin Marg, Sector 35-A, Chandigarh