Dismissed

Sri a Tangaraj v. Sri Gopal

Karnataka HC17 Nov 2022WP/16626/2022

Case brief

AI extract

What is this about?

This petition challenged a sole arbitrator's interlocutory order appointing an auditor. The single judge held that under the larger bench decision in Patel Engineering Ltd., the High Court cannot interfere with interlocutory orders under Articles 226/227 unless the matter remains solely at the appointment stage. The petition was dismissed.

What did the court decide?

Petition disposed of; no interference with the arbitrator's interlocutory order allowed.

Sri a Tangaraj Vs Sri Gopal — Arbitration | Karnataka HC (2022)

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WP No. 16626 of 2022

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 17^TH DAY OF NOVEMBER, 2022

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BEFORE

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THE HON'BLE MR JUSTICE M.NAGAPRASANNA WRIT PETITION NO. 16626 OF 2022 (GM-RES)

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BETWEEN:

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SRI. A TANGARAJ, S/O M.K.ADIMOOLAM, AGED ABOUT 47 YEARS, No.SB-52/1, 4^TH CROSS, PEENYA INDUSTRIAL AREA, BENGALURU – 560 058.

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…PETITIONER

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(BY SRI. SWAMY SHIVA PRAKASH H, ADVOCATE)

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AND:

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Digitally signed by PADMAVATHI B K Location: HIGH COURT OF KARNATAKA

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SRI. GOPAL, S/O SRI. B.SHIVANNA, AGED ABOUT 46 YEARS, NO.2199, ROOPIKA NILAYA, OPP. RR BUILDING, LAGGERE ROAD, 2^ND BLOCK, PEENYA, BENGALURU – 560 058. RETIRED PARTNER OF M/S TDJG ELECTRICALS INDUSTRIES.

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M/S. TDJA ELECTRICALS INDUSTRIES, REGISTERED UNDER PARTNERSHIP ACT, (DEEMED TO BE DISSOLVED), No.SB-52/1, 4^TH CROSS, PEENYA INDUSTRIAL AREA,

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WP No. 16626 of 2022

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BENGALURU – 560 058. REPRESENTED BY ITS PARTNER.

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…RESPONDENTS

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(BY SRI. BAPAT SAMPATH VINAYAKA RAO, ADVOCATE FOR R1;

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R2 IS DELETED VIDE ORDER DATED 01.09.2022)

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THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED ORDER PASSED BY THE LEARNED HON'BLE ARBITRAL TRIBUNAL OF SHRI PRAKASH KUMAR, SOLE ARBITRATOR, ARBITRATION AND CONCILIATION CENTERBENGALURU (DOMESTIC AND INTERNATIONAL), BENGALURU, IN THE MATTER OF A.C.No.184/2021 DATED 08.08.2022 AS PER ANNEXURE – N AND ETC.,

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THIS PETITION, COMING ON FOR PRELIMINARY HEARING IN 'B' GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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The petitioner is before this Court seeking the following

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prayer;

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a) "Quash the impugned order passed by the learned Hon'ble Arbitral Tribunal of Shri Prakash Kumar, Sole Arbitrator, Arbitration and Conciliation Center- Bengaluru (Domestic & international), Bengaluru, in the matter of

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WP No. 16626 of 2022

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A.C.No.184/2021 dated 8.08.2022 as per

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Annexure-N.

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b) Allow writ petition by issuing such other writ, order or direction as this Hon'ble Court deems fit under the circumstances of the case in the interest of justice."

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What drives the petitioner before this Court is an order passed by the sole arbitrator in A.C.No.184/2021 dated 08.08.2022 by allowing an application filed by the respondents herein seeking appointment of an auditor. Notwithstanding the objection filed by the petitioner, the sole arbitrator has allowed the said application. It is this interlocutory order that drives the petitioner to this Court in the subject petition.

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The petition whether would be maintainable or not against an interlocutory order is no longer res-judicata as the Division Bench of this Court in W.P.No.19822/2018, disposed on 27.08.2018 while answering the very issue has held as follows;

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"11. The argument of the learned counsel for the petitioner, that the said dictum of the Supreme Court cannot be interpreted as robbing this Court of its writ jurisdiction which is constitutionally vested in it,

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WP No. 16626 of 2022

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touches only the existence of power of judicial review. However, what the Supreme Court has laid down in the case of Patel Engineering Ltd. (supra), defines the confines and contours of the exercise of power of judicial review in relation to the interlocutory orders passed in the course of arbitration proceedings.

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12. Keeping the object of the Act in view, the Supreme Court has stated the law in the case of Patel Engineering Ltd. (supra) in no uncertain terms that once the matter reaches the Arbitrator, the interlocutory orders made by him cannot be the subject matter of challenge in the writ W.P.Nos.19822/2018 & 19834/2018 proceedings. The following observations and dictum in Patel Engineering put it beyond the pale of doubt that the interlocutory orders passed during the course of arbitration proceedings are not to be interfered with under Articles 226 or 227 of the Constitution of India:-

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"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 challenged under Article 226 or 227 of the Constitution. We see no warrant for such an approach. Section 37 makes certain orders of the Arbitral Tribunal appealable. Under Section 34, the aggrieved party has an avenue for ventilating its grievances against the award including any inbetween orders that might have been passed by the Arbitral Tribunal acting under Section 16 of the Act. The party aggrieved by any order of the Arbitral Tribunal, unless has a right of appeal under Section 37 of the Act, has to wait until the award is passed by the Tribunal. This appears to be the scheme of the Act. The Arbitral Tribunal is, after all, a creature of a

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WP No. 16626 of 2022

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contract between the parties, the arbitration agreement, even though, if the occasion arises, the Chief Justice may constitute it based on the contract between the parties. But that would not alter the status of the Arbitral Tribunal. It will still be a forum chosen by the parties by agreement. We, therefore, disapprove of the stand adopted by some of the High Courts that any order passed by the Arbitral Tribunal is capable of being corrected by the High Court under Article 226 or 227 of the Constitution. Such an intervention by the High Courts is not permissible.

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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." (underlining supplied for emphasis)

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13. Of course, various issues as regards the nature of the power exercised by the Chief Justice of High Court or the Chief Justice of India under Section 11(6) of the Act and the co-related aspects were also the subject matter of decision before the larger Bench in the case of Patel Engineering Ltd.

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(supra) and hence, having expounded on the principles in relation to all the questions involved, the Supreme Court summarized its point-wise conclusions in paragraph 47 of the decision

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aforesaid. The relevant part of such summation, applicable directly to the present case, as occurring in clause (vi) of paragraph 47 reads as under:

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"Once the matter reaches the Arbitral Tribunal or the Sole Arbitrator, the High Court would not interfere with the orders passed by the Arbitrator or the Arbitral Tribunal during the course of the arbitration proceedings and the parties could approach the court only in terms of Section 37 of the Act or in terms of Section 34 of the Act." (underlining supplied for emphasis)

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14. In the case of Raj International (supra), the decision relied upon by the learned counsel for the petitioner, the learned Single Judge of Gauhati High Court has observed as under:

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"34. In the present case in hand, the order in question is not relating to appointment of Arbitrator and the fact of the case is different than the case of Patel Engineering Limited (supra). Reliance is to be placed on a decision only if factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of courts are neither to be read as Euclid's theorems nor as provisions of statute as said by the Apex Court in the case of Union of India v. Major Bahadur Singh,reported in AIR 2005 AIR SCW 6113. An earlier case can be treated as precedent only if the facts and circumstances in such earlier cited case is in pari materia in all respects with facts and circumstances of the case in hand as stated by the Apex Court in the case of Ramesh Singh Photti v. State of A.R, reported in 2004 AIR SCW 3682.

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35. After going through the decision of the Patel Engineering (supra) this Court is of the considered opinion that the factual situation of that case does not fit in with the factual situation of the case in

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hand and one additional and different fact may make a world of difference between two cases. Even if this Court considered the case of Patel Engineering (supra) as relied upon by the learned Counsel of the respondents, then also it can be easily said that their lordship in paragraph 46 held that each and every order made by the Tribunal should not be allowed to challenge under Article 227 or 226 of the Constitution for defeating the purpose of arbitration proceeding meaning thereby that in an extra ordinary situation, the Court can exercise the power under Articles 227 and 226 of the Constitution against the order made by the Arbitral Tribunal or Arbitrator, particularly when there is no provision either for revision or for any appeal and it would not be proper for a Court to force the party in an arbitral proceeding like the present petitioner to appear before the arbitral tribunal/arbitrator, till the completion of whole proceeding and passing of award though prima facie it appears that the arbitrator did not act in accordance with the mandate of the provisions of the Act and acted as a purported agent of the appointing authority, herein the Commissioner, (I&C), Government of Tripura while respondent is a Government undertaking. In view of the aforesaid observation and discussion, this Court has no hesitation to hold that this is a fit case where the Court should exercise its power under Article 227 of the Constitution and accordingly, the impugned order is set aside and the matter is remitted back to the Arbitrator to decide the plea of jurisdiction raised before him by the petitioner and then proceed with the matter of arbitration in accordance with law. No order as to costs."

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15. If the learned Judge in the aforesaid case of Raj International, has interpreted the ratio in Patel Engineering Ltd. to mean that the rule of noninterference of the writ Court at the interlocutory stages of arbitral proceedings is confined only to

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matters relating to the appointment of the arbitrators, and interference is permissible in all other cases involving different fact situation, we could only state respectful disagreement with that view. The core of the decision of the Apex Court in Patel Engineering Ltd. appears to be covering ordinarily all the cases wherein, writ jurisdiction is invoked for challenging an interlocutory order of the Arbitrator.

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16. The said decision in the case of Patel Engineering rendered by a larger Bench of the Hon'ble Supreme Court on various aspects governing the proceedings of arbitration, cannot be read as being confined only to the facts involved therein. The law declared by the Supreme Court therein, as noticed hereinabove, remains binding; and in this view of the matter, with respect, we are unable to endorse the views of the learned Single Judge of Gauhati High Court in the case of Raj International (supra).

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17. Though learned counsel for the petitioner has also attempted to rely upon the decision in the case of SREI Infrastructure Finance Ltd. (supra) to contend that a writ petition is maintainable against the orders passed by the Arbitral Tribunal, but we are afraid, no such ratio is discernible from the said decision. Therein, the Arbitral Tribunal had terminated the proceedings under Section 25(a) of the Act due to non-filing of claim by the claimant, but the question was as to whether the Tribunal had jurisdiction to consider an application for recalling of the order terminating the proceedings. On the said question, the Supreme Court endorsed the views of Patna, Delhi and Madras High Courts that the Arbitral Tribunal, even after termination of proceedings under Section 25(a) of the Act, on sufficient cause being shown, could recall the order and recommence the proceedings; and held that in the given case, the Arbitral Tribunal committed an error in holding that it

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WP No. 16626 of 2022

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had no jurisdiction to recall the order terminating the proceedings. In the said case, a question was also raised as to whether the order passed by the Tribunal under Section 25(a) terminating the proceedings was amenable to the jurisdiction of the High Court under Article 227 of the Constitution of India (vide paragraph 12.2 of the report). However, the Hon'ble Supreme Court did not enter into the said question, in view of its decision on the principal issue involved in the matter. In this regard, the Supreme Court observed as under:

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"35. Coming to Issues (ii) and (iii), in view of what we have said regarding Issue (i) that the Arbitral Tribunal has jurisdiction to consider an application for recall of order terminating the proceedings under Section 25(a), it is not necessary for us to enter into Issues (ii) and (iii) for purposes of this case. For deciding the present civil appeal, our answer to Issue (i) is sufficient to dispose of the matter."

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18. The said decision in the case of SREI Infrastructure does not advance the cause of the petitioner. Similarly, the other decisions sought to be relied upon by learned counsel for the petitioner do not appear requiring dilation particularly, in view of the law laid down in no uncertain terms in the Larger Bench decision in Patel Engineering Ltd. (supra).

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19. For what has been discussed hereinabove, we are clearly of the view that this Court in the writ jurisdiction will not interfere in an interlocutory order passed by the Arbitrator in the pending arbitral proceeding; and that the party aggrieved may reserve its right to lay a challenge to such an interlocutory order, if and when it suffers an adverse award."

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10 -

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In the light of the issue being covered on all its

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fours with the reasons so rendered by the Division Bench of this Court in the aforesaid judgment, further delving into matter is unnecessary.

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For the aforesaid reasons, petition stands disposed.

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Sd/JUDGE

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PN List No.: 1 Sl No.: 7

Sri a Tangaraj v. Sri Gopal

Case brief

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Sri a Tangaraj v. Sri Gopal

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