TaxTMI 
TaxTMI 
2023 (10) TMI 1570
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....der :- "a) To issue an appropriate writ, order or direction in the nature of Certiorari setting aside the Impugned Order dated 16th September 2023, passed by the Sole Arbitrator; b) To issue an appropriate writ, order or direction in the nature of Certiorari setting aside the Appointment Order dated 12th December 2022, passed by this Hon'ble Court;" 2. In the Petition, the case of the Petitioner is as under :- A. Respondent No. 2 was incorporated on 27th April 2004. By an Order dated 12th February 2021, the National Company Law Tribunal ("NCLT") admitted Respondent No. 2 into the Corporate Insolvency Resolution Process ("CIRP") under Section 9 (5) of the Insolvency and Bankruptcy Code, 2016, ("IBC") and declared Moratorium under Section 14 of the IBC. This was prior to the Tender floated by the Petitioner. The Certificate dated 16th February 2021 given by Rajesh K. Jetley and Company, Chartered Accountants, for the purpose of tendering, did not mention the fact that Respondent No.2 had been admitted into CIRP under Section 9(5) of the IBC. B. By an Order dated 24th February 2021, the NCLT appointed one Anil Tayal as the Interim Resolution Professional....
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....Respondent No.2's NOC which purportedly permitted Respondent No.1 to be the Sole Claimant in the Arbitration and represent Respondent No.2 in the Arbitration. L. From 11th January 2023 till August 2023, the Petitioner participated in the Arbitration Proceedings before the Arbitrator. M. In August 2023, the Petitioner discovered that Respondent No.2 was undergoing CIRP under IBC prior to the publication of the Tender by the Petitioner and hence discovered the fraud and misrepresentation of the said Joint Venture. N. The Petitioner, by an e-mail dated 1st September 2023 addressed to the Arbitrator, pointed out the said fraud played by the said Joint Venture and submitted that, in view of the same, the Purchase Order awarded to the said Joint Venture was void as it has been obtained fraudulently and, therefore, the arbitration agreement contained therein was void. The Petitioner further submitted that the Arbitration Proceedings before the Arbitrator could not proceed further. The Petitioner submitted that it was in the process of initiating appropriate legal proceedings against all parties who had committed the said fraud, and, in view of the foregoing, requested the Arb....
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....e requisite jurisdiction to entertain any challenge to the said Order dated 12th December 2022. This Court cannot and ought not to set aside the appointment of the Arbitrator under its writ jurisdiction. Mr. Bhole submitted that the said Application under Section 11 of the Arbitration Act was filed only by Respondent No.1, and, in paragraph 31 of the said Application, it was disclosed that Respondent No.2 was not empowered to represent in any legal affairs and that presently it was under CIRP. Therefore, before the passing of the said Order dated 12th December 2022 in the said Section 11 Application, the Petitioner was aware that Respondent No.2 was under CIRP and that only Respondent No.1 would be participating in the arbitration proceedings. Despite the same, the Petitioner did not oppose the appointment of an Arbitrator by the said Order dated 12th December 2022. Thus, the Arbitral Tribunal was constituted with the Petitioner having knowledge of the fact that Respondent No.2 was under CIRP and only Respondent No.1 would take part in the Arbitration Proceedings. The only dispute between the parties was restricted to nomination/appointment of an Arbitrator, which this Court res....
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....ot be said that the Arbitrator lacked jurisdiction. He further submitted that the remedy against the said Order dated 12th December 2022, passed under Section 11 of the Arbitration Act, was the filing of an SLP before the Hon'ble Supreme Court and the remedy against the said Order dated 16th September 2023 passed by the Arbitrator, under Section 16 of the Arbitration Act, was to challenge the same whilst challenging the award under Section 34 of the Arbitration Act. Therefore, this was not a case where the Petitioner was left without a remedy. He further submitted that, in the light of what had been submitted by him, there was no "bad faith" shown by Respondent No.1. 9. Mr. Behramkamdin, the learned Senior Advocate appearing on behalf of the Petitioner, vehemently submitted that, in the facts and circumstances of the present case, the present Writ Petition is maintainable. In addition to the judgements in Deep Industries (supra) and Bhaven Construction (supra) referred to by Mr. Bhole, Mr. Behramkamdin also referred to a Judgement of the Delhi High Court in IDFC First Bank Limited Vs. Hitachi MGRM Net Limited. [2023 SCC Online Del 4052] and submitted that a Writ Court could ....
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....itation for Bid, Clause 26.8 of the Instruction to Bidders and Clauses 2.1, 2.6, 14.1 and 14.2 of the General Conditions of Contract. Mr. Behramkamdin submitted that, from the terms of the Tender, it was very clear that the party, which was under CIRP, could not have bid for the Tender, and, since, Respondent No. 2, which was one of the parties to the Joint Venture, was under CIRP, the Joint Venture could not have bid for the Tender. Mr. Behramkamdin submitted that these terms of the Tender also show that Respondent Nos.1 and 2 had induced the Petitioner to enter into an agreement with them by playing fraud upon the Petitioner. 13. Mr. Behramkamdin submitted that, in these circumstances, and for all the aforesaid reasons, the Arbitrator ought to have held that he has no jurisdiction to continue with the Arbitration Proceedings. 14. Finally, Mr. Behramkamdin referred to the said Order dated 16th September 2023 passed by the Arbitrator and, in particular, to the following paragraphs thereof :- "3. The aforesaid applications filed by the Respondent are not accepted for following reasons : 3.1 The bidder in the present contract, i.e. joint venture (JV) namely &#....
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....-31 of his Sec 11 petition before Hon'ble BHC mentioned the fact that his JV associate is under CIRP, the Respondent cannot be allowed to claim ignorance at this stage of arguments. 3.9 The present arbitration proceedings is initiated consequent to Hon'ble Bombay High Court order. There is no 'Stay' order from any competent court. 3.10 It is well settled law by Hon'ble Supreme Court that in terminated contracts, arbitration clause survives and disputes are arbitrable. In view of the above, both the applications of respondent are sans merit and are dismissed . The arbitration proceedings therefore shall continue." 15. Mr. Behramkamdin submitted that the findings of the Arbitrator in the said paragraphs are clearly perverse, meriting interference under Articles 226 and 227 of the Constitution of India Mr. Behramkamdin submitted that, therefore, the present Writ Petition is clearly maintainable. 16. Before we deal with the rival contentions of the parties on the maintainability of the present Petition, it would be appropriate to set out the relevant parts the judgements on this point cited by the parties. 17. Paragraphs ....
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....tion by the High Courts is not permissible. 46. The object of minimising judicial intervention while the matter is in the process of being arbitrated upon, will certainly be defeated if the High Court could be approached under Article 227 or under Article 226 of the Constitution against every order made by the Arbitral Tribunal. Therefore, it is necessary to indicate that once the arbitration has commenced in the Arbitral Tribunal, parties have to wait until the award is pronounced unless, of course, a right of appeal is available to them under Section 37 of the Act even at an earlier stage. 47. We, therefore, sum up our conclusions as follows: i) The power exercised by the Chief Justice of the High Court or the Chief Justice of India under Section 11(6) of the Act is not an administrative power. It is a judicial power. ii) The power under Section 11(6) of the Act, in its entirety, could be delegated, by the Chief Justice of the High Court only to another Judge of that Court and by the Chief Justice of India to another Judge of the Supreme Court. (iii) In case of designation of a Judge of the High Court or of the Supreme Court, the power....
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.... treated as valid, all objections being left to be decided under Section 16 of the Act. As and from this date, the position as adopted in this judgment will govern even pending applications under Section 11(6) of the Act. (xi) Where District Judges had been designated by the Chief Justice of the High Court under Section 11(6) of the Act, the appointment orders thus far made by them will be treated as valid; but applications if any pending before them as on this date will stand transferred, to be dealt with by the Chief Justice of the High Court concerned or a Judge of that Court designated by the Chief Justice. (xii) The decision in Konkan Rly Corpn. Ltd v. Rani Constructions (P) Ltd. is overruled." 18. Paragraphs 7 to 9 of the Judgement of this Court in Suchitra Chavan (Supra) are relevant and read as under :- "7.It will be relevant to refer to paragraphs 45 and 46 of the Hon'ble Apex Court judgment in SBP & Co. (supra) :- "45. It is seen that some High Courts have proceeded on the basis that any order passed an Arbitral Tribunal during arbitration, would be capable of being challenged under Article 226 or 227 of the Constitution. We see ....
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....ore rejected in the view of law laid down by the Hon'ble Apex Court in the case of SBP & Co. (supra)." 19. Paragraphs 4 to 7 of the Judgement of this Court in Tagus Engineering Private Limited (Supra) are relevant and read as under :- "4. We believe it is wholly impermissible for this Court to exercise its jurisdiction under Article 226 of the Constitution of India even on questions of jurisdictional competence except perhaps where the arbitral tribunal is itself a statutory tribunal i.e. one created by a statute. The decision of the Supreme Court in Deep Industries Ltd v Oil And Natural Gas Corporation Ltd & Another is unambiguous. In paragraph 19, the Supreme Court referred to SBP & Co v Patel Engineering Ltd and reaffirmed paragraph 14 of that decision. Paragraph 19 of Deep Industries reads thus: "19. In SBP & Co., this Court while considering interference with an order passed by an Arbitral Tribunal under Articles 226/227 of the Constitution laid down as follows: (SCC p.663, paras 45-46) 45. It is seen that some High courts have proceeded on the basis that any order passed by an Arbitral Tribunal during arbitration, would be capable of being ch....
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....3, para 11) "11. We have considered the respective arguments/submissions. There cannot be any dispute that the power of the High Courts to issue directions, orders or writs including writs in the nature of habeas corpus, certiorari, mandamus, quo warranto and prohibition under Article 226 of the Constitution is a basic feature of the Constitution and cannot be curtailed by parliamentary legislation - L. Chandra Kumar v. Union of India [(1997) 3 SCC 261 : 1997 SCC (L&S) 577]. However, it is one thing to say that in exercise of the power vested in it under Article 226 of the Constitution, the High Court can entertain a writ petition against any order passed by or action taken by the State and/or its agency/instrumentality or any public authority or order passed by a quasi-judicial body/authority, and it is an altogether different thing to say that each and every petition filed under Article 226 of the Constitution must be entertained by the High Court as a matter of course ignoring the fact that the aggrieved person has an effective alternative remedy. Rather, it is settled law that when a statutory forum is created by law for redressal of grievances, a writ petition should ....
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....dy under Article 227 of the Constitution. No doubt the ambit of Article 227 is broad and pervasive, however, the High Court should not have used its inherent power to interject the arbitral process at this stage. It is brought to our notice that subsequent to the impugned order of the sole arbitrator, a final award was rendered by him on merits, which is challenged by Respondent 1 in a separate Section 34 application, which is pending. 21. Viewed from a different perspective, the arbitral process is strictly conditioned upon time limitation and modelled on the "principle of unbreakability". This Court in P Radha Bai v P Ashok Kumar, (2019) 13 SCC 445 : (2018) 5 SCC (Civ) 773], observed: "36.3. Third, Section 34(3) reflects the principle of unbreakability. Dr Peter Binder in International Commercial Arbitration and Conciliation in UNCITRAL Model Law Jurisdictions, 2nd Edn., observed: "An application for setting aside an award can only be made during the three months following the date on which the party making the application has received the award. Only if a party has made a request for correction or interpretation of the award under Article 33 does the t....
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....y mandates that the issue of jurisdiction must be dealt first by the tribunal, before the court examines the same under Section 34. Respondent 1 is therefore not left remediless, and has statutorily been provided a chance of appeal. In Deep Industries case [Deep Industries Ltd. v. ONGC, (2020) 15 SCC 706], this Court observed as follows : (SCC p. 718, para 22) "22. One other feature of this case is of some importance. As stated hereinabove, on 9-5-2018, a Section 16 application had been dismissed by the learned arbitrator in which substantially the same contention which found favour with the High Court was taken up. The drill of Section 16 of the Act is that where a Section 16 application is dismissed, no appeal is provided and the challenge to the Section 16 application being dismissed must await the passing of a final award at which stage it may be raised under Section 34." (emphasis supplied) 27. In view of the above reasoning, we are of the considered opinion that the High Court erred in utilizing its discretionary power available under Article 226 and 227 of the Constitution herein. Thus, the appeal is allowed and the impugned Order of the High Court is se....
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.... others. Further, the statutory mandate also provides for one bite at the cherry, and interdicts a second appeal being filed [See Section 37(2) of the Act]. 17. This being the case, there is no doubt whatsoever that if petitions were to be filed under Articles 226/227 of the Constitution against orders passed in appeals under Section 37, the entire arbitral process would be derailed and would not come to fruition for many years. At the same time, we cannot forget that Article 227 is a constitutional provision which remains untouched by the non-obstante clause of Section 5 of the Act. In these circumstances, what is important to note is that though petitions can be filed under Article 227 against judgments allowing or dismissing first appeals under Section 37 of the Act, yet the High Court would be extremely circumspect in interfering with the same, taking into account the statutory policy as adumbrated by us herein above so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction." 21. Paragraph 18 of the Judgement of the Hon'ble Supreme Court in Bhaven Construction (Supra) is relevant and reads as under :- " ....
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....fter considering all the decisions, of the Supreme Court1 has laid down circumstances in which such petitions ought to be entertained. The relevant portion of the said judgment reads as under: "24. A perusal of the above-mentioned decisions, shows that the following principles are well settled, in respect of the scope of interference under Article 226/227 in challenges to orders by an arbitral tribunal including orders passed under Section 16 of the Act. (i) An arbitral tribunal is a tribunal against which a petition under Article 226/227 would be maintainable; (ii) The non-obstante clause in section 5 of the Act does not apply in respect of exercise of powers under Article 227 which is a Constitutional provision; (iii) For interference under Article 226/227, there have to be 'exceptional circumstances'; (iv) Though interference is permissible, unless and until the order is so perverse that it is patently lacking in inherent jurisdiction, the writ court would not interfere; (v) Interference is permissible only if the order is completely perverse i.e., that the perversity must stare in the face; (vi) High Courts ....
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....ourt should not exercise that discretion as a remedy is available to the Petitioner to challenge the said Order dated 12th December 2022 by filing an SLP before the Hon'ble Supreme Court. It is the case of the Petitioner that it has subsequently discovered that the Respondents obtained the said Order fraudulently. Even if that case of the Petitioner is true, it is open to the Petitioner to file an SLP challenging the said Order dated 12th December 2022. The Petitioner is not left without a remedy. For this reason, we are of the view that we should not exercise our writ jurisdiction under Articles 226 and 227 of the Constitution of India in respect of the challenge to the said Order dated 12th December 2022. 27. We are further of the view that, even otherwise, if this Court exercises its jurisdiction under Articles 226 and 227 of the Constitution of India, and starts entertaining Writ Petitions against Orders passed under Section 11 of the Arbitration Act, it will lead to opening the floodgates for such kind of litigation, which definitely needs to be avoided. Further, considering the nature of the case of the Petitioner, there may also be disputed questions of fact which cannot ....
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....ion of law set out by us hereinabove, a Writ Court, exercising its jurisdiction under Articles 226 and 227 of the Constitution of India, can entertain a Petition challenging an Order passed by an Arbitrator, under Section 16 of the Arbitration Act, rejecting the contention that he has no jurisdiction, only in exceptionally rare cases and for the few exceptions as mentioned above. We will therefore have to consider whether the case in the present Writ Petition is such an exceptional case which falls within one of the said exceptions. 31. As far as the exception of lack of inherent jurisdiction is concerned, it cannot be said that the Arbitrator did not have jurisdiction to pass the said Order dated 16th September 2023. As stated hereinabove, the Arbitrator was appointed by an Hon'ble Judge of this Court, under the provisions of Section 11 of the Arbitration Act, by the said Order dated 12th December 2022. Having been so appointed, the Arbitrator definitely had jurisdiction to decide an Application under Section 16 of the Arbitration Act. In fact, the said Order dated 12th December 2022 appointing the Arbitrator also mentions that the Respondent would be at liberty to raise al....