Allowed

Union of India v. Sri. P. N. Shiva Prasad

Karnataka HC12 Jul 2024COMAP/153/2024

Case brief

AI extract

What is this about?

This commercial appeal challenges a Commercial Court order confirming an arbitral award. The appellant, a government entity, alleged COVID-19 lockdowns prevented adequate participation. The High Court held that pandemic restrictions prohibited effective participation and allowed the appeal, setting aside the award to commence fresh proceedings.

What did the court decide?

The order confirming the award is set aside and the award itself is set aside; arbitration proceedings to commence afresh.

Union of India Vs Sri. P. N. Shiva Prasad — Arbitration | Karnataka HC (2024)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12^TH DAY OF JULY, 2024

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PRESENT

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THE HON'BLE MRS JUSTICE ANU SIVARAMAN

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AND

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THE HON'BLE MR JUSTICE ANANT RAMANATH HEGDE COMMERCIAL APPEAL NO. 153 OF 2024

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BETWEEN:

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UNION OF INDIA, REPRESENTED BY P.D. (P&A), ATVP, MINISTRY OF DEFENCE, "AKANKSHA", DEVELOPMENT ENCLAVE, RAO TULA RAM MARG, NEW DELHI - 110 010.

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…APPELLANT

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(BY SRI K. ARAVIND KAMATH, ASG A/W SRI. CHANDRA CHUD A., CGSC.)

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AND:

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SRI. P.N.SHIVA PRASAD, S/O LATE P.S. NANJAPPA, AGED ABOUT 72 YEARS, CMD OF M/S SHAKTHI RUBBER PRODUCTS PVT. LTD., SHIVBAGH, KADAKOLA P.O., MYSURU - 571311.

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ARBITRAL TRIBUNAL, COMPRISING OF SOLE ARBITRATOR, SMT. H.S.KAMALA, RETD., DISTRICT JUDGE, ARBITRATION & CONCILIATION CENTRE, NO.49, EAST WING, 3^RD FLOOR, KHANIJA BHAVAN, RACE COURSE ROAD, BENGALURU - 560 001.

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…RESPONDENTS

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(BY SRI. S.RUPESH KUMAR, ADV. FOR C/R-1, V/O DATED 01.07.2024 NOTICE TO R2 IS DISPENSED WITH.)

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THIS COMMERCIAL APPEAL IS FILED UNDER SECTION 13(1A) OF COMMERCIAL COURTS ACT 2015 R/W SECTION 37(1)(c) OF THE ARBITRATION AND CONCILIATION ACT, 1996, PRAYING TO ALLOW THE APPEAL AND SET ASIDE THE ORDER DATED 21.02.2024 IN COM A.P.NO.36/2023 PASSED BY THE HON'BLE LXXXIX ADDITIONAL CITY CIVIL AND SESSIONS JUDGE AT BENGALURU (CCH 90) COMMERCIAL COURT CONFIRMING THE AWARD PASSED BY THE LEARNED ARBITRAL TRIBUNAL DATED 17/11/2020 IN A.C.NO.58/2020 ETC.

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THIS APPEAL BEING HEARD AND RESERVED ON 10^TH JULY, 2024 AND COMING ON FOR PRONOUNCEMENT OF JUDGMENT THIS DAY, THE COURT PROUNCED THE FOLLOWING:

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CAV JUDGMENT

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(PER: HON'BLE MR JUSTICE ANANT RAMANATH HEGDE)

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This appeal is under Section 37 of the Arbitration and Conciliation Act, 1996 (Hereinafter referred to as the 'Act of 1996' for short).

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The existence of the arbitration agreement is not in dispute. The appellant was the respondent before the arbitrator. Respondent No.1 made a claim before the Arbitral Tribunal for recovery of certain amount under different heads. The Arbitral Tribunal has allowed the claim

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in part and held that the claimant is entitled to Rs.1,81,98,786/- along with interest @ 6% p.a. from the

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date of the petition till payment. Claim under certain heads are rejected.

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The claimant has accepted the award and has not questioned the same. The respondent before the arbitrator has questioned the award by filing Section 34 application. Said application is rejected.

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The appellant before this Court has also filed an application under Order XLI Rule 27 of the Code of Civil Procedure seeking leave of the Court to produce additional documents. The respondents have orally objected to the said application.

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The appeal is primarily on the premise that fair opportunity of hearing was denied to the appellant. It is further urged that on account of Covid-19 pandemic related restrictions, the appellant could not participate in the proceeding before the Tribunal and decision rendered by the arbitrator without giving sufficient opportunity to the appellant which comes within the mischief of Section 34(2)(a)(iii) of the Act of 1996. It is also the case of the

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appellant that the appellant intended to produce

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documentary evidence in support of the defence however, same could not be done on account of Covid-19 pandemic related restrictions and the appellant is seeking the leave of the Court to produce certain documents.

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Learned counsel appearing for the 1^st respondent would contend that the appellant, despite sufficient opportunity being granted did not appear before the Tribunal to contest the matter. Though there were few restrictions relating to Covid 19 pandemic, the appellant could have certainly appeared before the Tribunal either through video conference or physically to defend the case which the appellant failed to do. It is also submitted that the documents now sought to be produced were not produced in Section 34 proceeding and in an appeal under Section 37, the appellant cannot be permitted to contest the matter on the basis of additional documents.

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This Court has considered the contentions raised at the bar.

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It is not in dispute that the arbitrator was

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appointed on 18.06.2019. On 12.03.2020, the Arbitral Tribunal issued notice on the claim petition to the respondent. Admittedly, from 23.03.2020, lockdown was imposed throughout India on account of Covid-19 pandemic.

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It is claimed that the appellant from its head

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quarters in New Delhi had sent fax messages to the Arbitration Centre seeking extension of time on account of unprecedented Covid-19 situation. It is further stated that though the matter was adjourned on few occasions, later despite Covid-19 pandemic situation, the arbitrator proceeded to hear the matter on merits. It is further stated that on 29.09.2020, the appellant appeared through online and submitted that the appellant has already filed statement of objections and sought time to deposit the appellant's share of arbitration fees. On 05.10.2020, the arbitrator has discarded the defence filed by the appellant on the premise that the arbitration fees were not deposited within the time stipulated. On

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08.10.2020, the claimant has led evidence and 15 documents were marked. On 16.10.2020, the arbitrator has proceeded to record that the evidence of the appellant is closed and the matter is reserved for passing award. The award came to be passed on 17.11.2020.

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The aforementioned facts are not in dispute. It is to be noticed that except the date on which the arbitrator issued notice (12.3.2020), the rest of the proceedings before the Arbitral Tribunal were conducted when Covid-19 pandemic was prevailing across the country. It is also relevant to note that there were severe restrictions on the movement of the public and admittedly,

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the appellant is having headquarters at New Delhi and the seat of the Arbitral Tribunal was at Bengaluru.

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At this juncture, it is relevant to refer to Section

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34(2)(a)(iii) of the Act of 1996 which reads as under:

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"34(2) An arbitral award may be set aside by the Court only if -----

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(a)the party making the application establishes on the basis of the record of the arbitral tribunal that -

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(i) …. (ii)…. (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or"

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On a reading of the aforementioned provision, it is evident that if the party to the arbitration proceeding was not otherwise able to present his case, then, the said cause can be a valid cause to set-aside the arbitral award. Though the arbitrator has issued notice to the respondent relating to the constitution of the Tribunal and the claim made by the claimant, what cannot be ignored is the fact that restrictions on account of Covid-19 pandemic were in place starting from 23.03.2020 till the conclusion of the proceeding before the Arbitral Tribunal. In the first month starting from 23.03.2020, the lockdown was complete and gradually the restrictions were relaxed taking into account the situation prevailing in a given place/area.

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This Court can certainly take congnizance of the fact that different kinds of restrictions were in place in

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different places and restrictions were not uniform. Restrictions imposed were dependent on the gravity of the situation prevailing in any given area on account of Covid19 pandemic. It is also relevant to note that a Government machinery was primarily involved in combating the unprecedented Covid-19 pandemic. Admittedly, the appellant is a wing of the Union Government.

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By taking into consideration, the aforementioned

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factors, this Court is of the view that the appellant was otherwise prevented from participating in the proceeding before the Arbitral Tribunal. Though the appellant on few occasions had appeared through video conference and had submitted the statement of defence, and sought adjournment, what can be certainly noticed is that the appellant could not appear before the Tribunal either to conduct the cross examination or to lead evidence in support of the defence. This being the position, this Court is of the view that a case is made out under Section 34(2)(a)(iii) of the Act of 1996 to set-aside the arbitral award.

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Though learned counsel for the respondent had urged before the Court that the appellant has not made an attempt to produce additional documents before Section 34 Court, this Court is of the view that even in the absence of an application for production of additional document, the appellant has made out a case that he could not effectively participate in the arbitral proceeding either by cross examining the claimant or by leading evidence in support of the defence for the reasons beyond the control of the appellant. Thus, non-filing of the application before Section 34 Court seeking production of additional document cannot be a ground to dismiss the present appeal.

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Hence, the following:

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ORDER

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(i) Appeal is allowed.

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(ii) The order dated 21.02.2024 passed in COM.A.P.

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No.36/2023 by LXXXIX Additional City Civil Judge, Bengaluru is set-aside.

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- 10

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(iii) The award dated 17.11.2020 in AC No.58/2020

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before the Arbitrator is set-aside.

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(iv) The Arbitration proceedings shall commence afresh in accordance with law, within two weeks.

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(v) It is made clear that this Court has not

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expressed any opinion on the merits of the claim of either of the parties. All contentions are left open.

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(vi) No order as to cost.

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Sd/(ANU SIVARAMAN) JUDGE

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Sd/(ANANT RAMANATH HEGDE) JUDGE

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BRN

Union of India v. Sri. P. N. Shiva Prasad

Case brief

What is this about?

What did the court decide?

Union of India v. Sri. P. N. Shiva Prasad

Case brief

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What did the court decide?

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