2022 (2) TMI 134 - SC - Indian Laws

Court interprets arbitration clause in retirement deed, emphasizes notice, advocate's role, and limited judicial review.

MOHAMMED MASROOR SHAIKH Versus BHARAT BHUSHAN GUPTA & ORS.

The Court upheld the interpretation of the arbitration clause in a retirement deed, rejecting the appellant's challenge and emphasizing the importance of ... Invocation of arbitration clause (clause 19) in the retirement deed - failure to serve the notice of the petition under Section 11 - time limitation - HELD THAT:- It is not in dispute that along with advocate’s notice dated 8th November 2019, the appellant and the respondent nos.2 to 5 were served a copy of the petition filed under Section 11 of the Arbitration Act by the respondent no.1. In the impugned Order, the learned Single Judge of the Bombay High Court has referred to the affidavit of service of notice filed on behalf of the respondent no.1. A judicial notice will have to be taken of a long standing and consistent practice followed on the Original Side of the Bombay High Court. The practice is that the advocates serve a notice of the proceedings filed in the Court even before it comes up before the Court - the appellant could have always made arrangements to contest the said petition. Therefore, we reject the first submission made by the learned Senior Counsel appearing for the appellant regarding the failure to serve the notice of the petition under Section 11. This Court held that while dealing with petition under Section 11, the Court by default would refer the matter when contentions relating to non-arbitrability are plainly arguable. In such case, the issue of non-arbitrability is left open to be decided by the Arbitral Tribunal. On perusal of the impugned order, we find that the issues of non-arbitrability and the claim being time barred have not been concluded by the learned Single Judge of the Bombay High Court. In fact, in clause (vii) of the operative part of the impugned Order, the learned Single Judge has observed that the contentions of the parties have been kept open. The petitions filed by the appellant under Section 34 of the Arbitration Act, challenging the Order dated 25th May 2021 are pending before the High Court in which the appellant can raise all permissible contentions. The appeal is dismissed, while leaving open the contentions raised by the appellant in pending petitions under Section 34 of the Arbitration Act before the High Court of Bombay. Issues:- Interpretation of arbitration clause in a retirement deed- Failure to serve notice of petition under Section 11 of the Arbitration Act- Allegations of suppression of material facts- Jurisdiction of the Court under Sections 8 and 11 of the Arbitration Act- Role of the Arbitral Tribunal in determining non-arbitrability issuesInterpretation of arbitration clause in a retirement deed:The case involved appeals against orders passed by a Single Judge of the Bombay High Court in petitions under Section 11 of the Arbitration Act. The appeals pertained to similar orders concerning three partnership firms. The retirement deed recorded the retirement of a partner and continuation of the business by the remaining partners. The respondent invoked the arbitration clause in the deed, leading to the appointment of an arbitrator. The appellant challenged this, arguing that the clause did not cover disputes between the retiring and continuing partners. The Court noted the importance of the arbitration clause's interpretation and rejected the appellant's contention, emphasizing the need for proper arrangements to contest the petition despite hospitalization.Failure to serve notice of petition under Section 11:The appellant claimed that the High Court failed to serve a notice of the petition under Section 11, citing hospitalization as a reason for non-appearance. However, the Court found that the appellant had been served notice in November 2019, well before the hospitalization, and could have made arrangements to contest the petition. The Court dismissed this argument, highlighting the consistent practice of advocates serving notices on behalf of clients.Allegations of suppression of material facts:The respondent alleged suppression of material facts by the appellant in the appeals filed in June 2021. It was revealed that the appellant's advocate had appeared before the Arbitrator and supported objections raised by another respondent. The Court noted the advocate's subsequent request to withdraw appearance and the pending petition under Section 34 challenging the Arbitrator's order. The Court emphasized the need for full disclosure and transparency in legal proceedings.Jurisdiction of the Court under Sections 8 and 11 of the Arbitration Act:The Court discussed the limited scope of judicial review under Sections 8 and 11 of the Arbitration Act, emphasizing the competence of the Arbitral Tribunal in determining non-arbitrability issues. Referring to a previous decision, the Court highlighted that issues of non-arbitrability should be left open for the Arbitral Tribunal to decide. The Court observed that the High Court had kept contentions open in the impugned Order, allowing the appellant to raise permissible arguments in pending petitions under Section 34.Role of the Arbitral Tribunal in determining non-arbitrability issues:The Court reiterated the principle that the Arbitral Tribunal is the preferred authority to decide questions of non-arbitrability. It emphasized that the Court's role is limited to a second look post-award and interference at the Section 8 or 11 stage is rare. The Court found that the issues of non-arbitrability and time-barring had not been concluded by the High Court, leaving them open for determination by the Arbitral Tribunal. Consequently, the Court dismissed the appeals, allowing the appellant to raise contentions in the pending petitions under Section 34 before the High Court of Bombay.