Dismissed

Crosslite Infra Private Limited v. Director of Industries and Commerce Haryana Cum Chairman Haryana Msemsc

Kerala HC6 Oct 2022WP(C)/15207/2022

Case brief

AI extract

What is this about?

In a writ petition challenging arbitration proceedings initiated under the MSME Act, the Kerala High Court dismissed the petition as an abuse of process for filing repeated applications to challenge jurisdiction without exhausting remedies under Section 34.

What did the court decide?

Writ petition dismissed without costs.

What the court decided

Crosslite Infra Private Limited Vs Director of Industries and… — Arbitration | Kerala HC (2022)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR.JUSTICE V.G.ARUN

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THURSDAY, THE 6^TH DAY OF OCTOBER 2022 / 14TH ASWINA, 1944

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WP(C) NO. 15207 OF 2022

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PETITIONER/S:

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CROSSLITE INFRA PRIVATE LIMITED 1/1029, THEKKEDATH, NANJAPPA NAGAR, OLAVAKKODE, PALAKKAD, KERALA- 678002 REPRESENTED BY ITS MANAGING DIRECTOR T.S. JAYAPRAKASH, AGED 55 YEARS, S/O T N SIVARAMAN, (RESIDING AT THEKKEDATHU HOUSE, OLAVAKKOD PO, PALAKKAD, PIN - 678002 BY ADVS. JOHNSON GOMEZ AJIT JOY S.BIJU (KIZHAKKANELA) SANJAY JOHNSON JOHN GOMEZ SANJITH JOHNSON MOHAMED SHEHARAN

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RESPONDENT/S:

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1 DIRECTOR OF INDUSTRIES AND COMMERCE HARYANA CUM CHAIRMAN HARYANA MSEMSC FIRST FLOOR 30 BAY BUILDING SECTOR 17 CHANDIGARH., PIN - 160017 2 DR. BHARATH BHUSHAN PARSOON FORMER JUDGE, PUNJAB & HARYANA HIGH COURT, CHANDIGARH, THE SOLE ARBITRATOR, AT 608, NEAR MAIN MARKET, SECTOR-31, GURGAON, PIN - 122001 3 M/S PRAVSHA PROJECTS PRIVATE LIMITED DLF-IV, GURUGRAM, HARYANA -122002 PIN-122002, REPRESENTED BY ITS MANAGING DIRECTOR & CEO, MR PRAVEEN KUMAR CHAND., PIN - 122002 4 MR. PRAVEEN KUMAR CHAND MANAGING DIRECTOR & CEO, M/S PRAVASHA PROJECTS PRIVATE LIMITED, 1208, DLF-IV, GURUGRAM, HARYANA, PIN - 122002 BY ADV MADHU RADHAKRISHNAN

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON

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16.6.2022, THE COURT ON 06.10.2022, DELIVERED THE FOLLOWING:

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W.P.(C) No.15207 of 2022

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JUDGMENT

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Dated this the 06^th day of October, 2022

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The petitioner is the sub-contractor of M/s.Corrtech International Private Limited, that had entered into an agreement with M/s.GAIL (India) Ltd for lying of RLNG Gas Pipeline. The petitioner had, in turn, entered into an agreement with the third respondent for supply of project management services. Disputes arose between the petitioner and the third respondent and the third respondent issued a notice claiming compensation of Rs.10 Crores to which the petitioner sent a reply disputing the liability, Thereupon, the petitioner filed AR.No.61 of 2021 before this Court, seeking appointment of an arbitrator. In the meanwhile, the third

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respondent filed two applications before the MSME Council, Haryana alleging that the petitioner had

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W.P.(C) No.15207 of 2022

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failed to honour the invoices raised for the services rendered by it. The MSME Council attempted to resolve the dispute through

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conciliation and having failed in the attempt, referred the dispute to the second

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respondent/sole arbitrator under Section 18(4) of the MSME Act. Aggrieved, the petitioner filed W.P.(C) No.24643 of 2021 contending that the MSME

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Council did not have the jurisdiction to entertain the applications filed by the third respondent and the reference order was issued without affording sufficient opportunity to the petitioner. It was also alleged that a copy of the order of reference was not furnished to the petitioner. W.P.(C) No.24643 of 2021 was disposed of by Ext.P10 judgment, with the following directions;

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“ 1. The 1^st respondent is directed to issue a copy of the order passed under Section 18(3) of the the Micro, Small and Medium Enterprises Development Act

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referring the issue for arbitration, to the petitioner, as expeditiously as possible, at any rate, within one week from the date of receipt of a copy of this judgment.

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2. The petitioner is free to raise the contention based on his application under Section 16 of the Arbitration and Conciliation Act before the 2^nd respondent and the 2^nd respondent will do the needful after hearing the parties, in accordance to law

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3. The petitioner is also free to raise the jurisdiction of the 1^st respondent to invoke the powers under Section 18 of the Micro, Small and Medium Enterprises Development Act and the 1^st respondent will consider the same, if it has jurisdiction to consider the same and will pass appropriate orders in accordance to law.”

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In compliance of the direction, copies of the reference orders dated 27.08.2021 (Exts.P11 and P12) were furnished to the petitioner. On receipt of Exts.P11 and P12, petitioner approached this Court again in W.P.(C) No.889 of 2022 seeking to quash the reference orders. That writ petition was dismissed as per Ext.P13 judgment, finding

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that, while disposing the earlier writ petition under Ext.P10, no liberty was granted to challenge Exts.P11 and P12 orders. Paragraph 12 of Ext.P13 Judgment being relevant, are extracted hereunder;

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“12. Therefore, the prayers in this writ petition need not be entertained in the light of Ext.P21 judgment. This Court allowed the petitioner to raise maintainability question before the 1st and 2nd respondent as evident by direction Nos. 2 and 3 in Ext.P21 judgment. As directed by this Court, the petitioner submitted Exts.P22 and P23 representations. Now, the petitioner prays for a direction to the 1st respondent to consider Exts.P22 and P23. Such a direction is not necessary in the light of Ext P21 judgment. Moreover, this Court was not inclined to entertain the challenge against the orders passed by the 1st respondent under Sec.18(3) of the MSME Act, when W.P.(C.) No. 24643/2021 came up for consideration. That is why this Court directed the petitioner to raise the question of maintainability before the 1st and 2nd respondents itself. In such circumstances, the petitioner cannot

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challenge Exts.P19 and P20 before this Court again by filing another writ petition. In the light of the above finding, this writ petition is not maintainable. The question of the territorial jurisdiction of this Court to consider the legality of Exts.P19 and P20 orders need not be considered in this case, in the light of Ext.P21 judgment, which admittedly became final. That question is left open.”

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Aggrieved by Ext.P13, the petitioner

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preferred Writ Appeal No.328 of 2022. After elaborate hearing, the writ appeal was dismissed by Ext.P14 judgment, affirming the findings of the learned Single Judge. The Division Bench also

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took note of the submission made by the respondents that the petitioner had already filed an application under Section 16 of the

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Arbitration and Conciliation Act, 1996. It was therefore observed that it was open for the petitioner to ventilate his grievance before the Arbitrator. The application filed before the

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Arbitrator under Section 16, calling upon the Arbitral Tribunal to rule on its own

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jurisdiction, was thereafter dismissed by Ext.R3(1) order dated 10.03.2022. An application for discovery and production of documents filed by the petitioner was also dismissed by the Arbitrator by imposing a cost of Rs.10,000/-, as per Ext.P2 order dated 16.04.2022. Undeterred, the petitioner filed three other applications, one under Section 16(4) of the Arbitration and Conciliation Act, 1996, another for keeping the proceedings in abeyance till a decision is taken on the application under Section 16(4) and the third, for conducting physical hearing. The three applications were dismissed by the Sole Arbitrator as per Ext.P5 common order dated 28.04.2022. The main reason for dismissing the applications was the petitioner's failure to file

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separate applications in the two pending references, viz; 2045 of 2020 and 2155 of 2020.

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Utilising that finding, the petitioner filed separate applications (Exts.P6 and P7) under Section 16(4) of the Arbitration and Conciliation Act. In the meanwhile, the petitioner also raised

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a counter claim. Later, in view of the contention regarding inherent lack of

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jurisdiction raised in Exts.P6 and P7, the petitioner filed Exts.P8 and P9 applications, seeking to withdraw the counter claim. Thereafter, the petitioner filed Exts.P15 and P16 applications for adjournment, stating that its Counsel’s son's marriage is scheduled to be held on 07.05.2022. Pending the applications, this writ petition is filed seeking the following reliefs;

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“a) Issue a writ of mandamus or any other writ order or direction compelling and commanding the Respondent No.2 to consider Exhibit P6 and Exhibit P7 application filed under Section 16 of the Arbitration and Conciliation Act of 1996 before further proceeding with arbitration

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in Case No.2045/2020 and Case No.2155/2020 and to pass orders thereon with an opportunity for physical hearing of the said applications before final hearing in Arbitration Case and passing of the final award.”

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Learned Counsel for the petitioner contended that the third respondent was not registered as an MSME on 09.11.2017 and 25.03.2018, the dates on which the agreements were executed between petitioner and the third respondent with respect to the subject work. It is contended that the reference under Section 18(4) of the MSME Act was made without jurisdiction and consequently, the second respondent to whom the disputes are referred, lacks jurisdiction. In such circumstances, continuation of the arbitration proceedings before the second respondent amounts to a patent illegality.

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Learned Counsel for the third respondent

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W.P.(C) No.15207 of 2022

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contended that the instance writ petition is a classic example of abuse of process and is hence liable to be dismissed with exemplary cost. Attention is drawn to Ext.P13 judgment, where this Court has specifically held that no liberty was granted to the petitioner to challenge Exts.P11 and P12 reference orders. The said finding was affirmed by the Division Bench. On being informed that the application under Section 16(4) of the Arbitration and Conciliation Act, filed by the petitioner, was pending

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consideration, the Division Bench left it for the Arbitrator to decide those applications. The applications under Section 16(4) was dismissed by Ext.R3(1) order dated 10.03.2022. Without challenging that order, the petitioner preferred yet another application under Section 16(4) which was also got dismissed by Ext.P5 order. Taking cue from the observation in Ext.P5 that separate applications ought to have been filed in both

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references, the petitioner filed two separate applications, Exts.P6 and P7, again under Section 16(4). The manner in which the Sole Arbitrator is being bombarded with repeated applications under Section 16(4) followed with writ petitions before this Court, leave no room for doubt that the attempt is to stall the arbitration proceedings. As contended by the Counsel for the respondent, even if the application under Section 16(4) is dismissed, the remedy of the aggrieved person is to challenge the legality of that order, while challenging the award of the Arbitrator under Section 34 of the Arbitration and Conciliation Act, as held by the Apex Court in Deep Industries

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Ltd v ONGC [(2020) 15 SCC 706] and Bhaven Construction v. Executive Engineer, Sardar Sarovar Narmada Nigam Ltd and others [(2022) 1 SCC 75 ] . Further, Section 5 of the Arbitration and Conciliation Act limits the scope of

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interference in arbitration proceedings. On

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merits, it is to be noted that in Ext.P13 judgment, this Court had made it abundantly clear that, no liberty was granted to the petitioner to challenge Exts.P11 and P12 reference orders. It was also observed that the petitioner was allowed to raise its contentions before the Arbitrator and Director of Industries and Commerce, Haryanacum-Chairman, MSME Council. This Court also refused to issue a direction to the second respondent to consider the pending arbitration. The findings of the learned Single Judge were affirmed by the Division Bench. The submission of the Counsel for the respondent that the petitioner had already filed an application under Section 16(4) of the Arbitration and Conciliation Act and the proceedings of the Arbitrator dated 05.03.2022, were taken note of and the petitioner permitted to ventilate his grievance. The Division Bench judgment was rendered on

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09.03.2022. The petitioner’s application under

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Section 16(4) was dismissed by the Arbitrator the next day (10.03.2022). The petitioner did not challenge that order and instead filed yet another application under Section 16(4). On that application being dismissed as per Ext.P5 order dated 28.04.2022, another set of applications, Exts.P6 and P7, were filed. As rightly contended by the learned Counsel for the respondent, even if Exts.P6 and P7 applications are dismissed, those orders cannot be challenged in a writ petition. In this regard, it is essential to have look at Section 16 extracted hereunder;

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“16. Competence of arbitral tribunal

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to rule on its jurisdiction.—

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(1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,— (a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the

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contract; and (b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.

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(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator.

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(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.

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(4) The arbitral tribunal may, in either of the cases referred to in subsection (2) or sub-section (3), admit a later plea if it considers the delay justified.

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(5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral

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award.

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(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34.”

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Section 16(6) specifically stipulates that, a

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party aggrieved by an arbitral award passed, after rejecting the challenge against

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jurisdiction, has to make an application for setting aside the award in accordance with Section 34. application filed for setting aside

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the arbitral award. This position is no longer

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res integra in view of the decision in Deep

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Industries Ltd (supra) , paragraph 22 reads as

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under.

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“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

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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. What the High Court has done in the present case is to invert this statutory scheme by going into exactly the same matter as was gone into by the arbitrator in the Section 16 application, and then decided that the two-year ban/blacklisting was no part of the notice for arbitration issued on 2-112017, a finding which is directly contrary to the finding of the learned arbitrator dismissing the Section 16 application. For this reason alone, the judgment under appeal needs to be set aside. Even otherwise, as has been correctly pointed out by Mr Rohatgi, the judgment under appeal goes into the merits of the case and states that the action of putting the Contractor and his Directors “on holiday” is not a consequence of the termination of the agreement. This is wholly incorrect as it is only because of the termination that the show-cause notice dated 18-10-2017 proposing to impose a two-year ban/blacklisting was sent. Even otherwise, entering into the general thicket of

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disputes between the parties does not behove a court exercising jurisdiction under Article 227, where only jurisdictional errors can be corrected. Therefore to state that the ban order was passed under a General Contract Manual and not Clause 18 of the agreement, besides being incorrect, would also be incorrect for the reason that the General Contract Manual does not mean that such order was issued as an administrative order invoking the executive power, but was only as an order which emanated from the contract itself. Further to state that “serious disputes” as to jurisdiction seem to have cropped up is not the same thing as saying that the Arbitral Tribunal lacked inherent jurisdiction in going into and deciding the Section 17 application. In point of fact, the Arbitral Tribunal was well within its jurisdiction in referring to the contract and the ban order and then applying the law and finally issuing the stay order. Even if it be accepted that the principle laid down by Section 41(e) of the Specific Relief Act was infracted, in that damages could have been granted, as a result of which an injunction ought not to have been issued, is a mere error of law and not an error of

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jurisdiction, much less an error of inherent jurisdiction going to the root of the matter. Therefore, even otherwise, the High Court judgment cannot be sustained and is set aside.”

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The legal position has been reiterated by the

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Apex Court in Bhaven Construction (supra) . This Court is also conscious of the limited scope for interference with arbitral proceedings, in view of Section 5 of the Act.

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Although various other contentions are raised, including the contention as to the seat of arbitration, I am not inclined to delve into those contentions in the light of the earlier concluded judgments of this Court. Although I find the writ petition to be an abuse of process of court, I refrain from imposing cost taking into account the submission of the Counsel for the petitioner that the writ petition was moved at a time when the request for adjournment of the arbitral proceedings was declined, in spite of

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the Sole Arbitrator being informed about the impending marriage of the Counsel’s son and an emergent eye surgery, which the Counsel was advised to undergo.

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For the aforementioned reasons, the writ

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petition is dismissed without cost.

Sd/-

V.G.ARUN JUDGE

Scl/

W.P.(C) No.15207 of 2022

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APPENDIX OF WP(C) 15207/2022

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PETITIONER EXH Exhibit1	IBITS A TRUE COPY OF THE ORDER DATED 10/03/2022 PASSED BY RESPONDENT NO. 2
Exhibit2	A TRUE COPY OF THE ORDER DATED 16/04/2022 PASSED BY THE RESPONDENT NO 2
Exhibit2a	A TRUE COPY OF THE SECTION 16 APPLICATION DATED 21/04/2022 FILED BY THE PETITIONER IN CASE NO. 2045 AND 2155 OF 2020 BEFORE THE RESPONDENT NO. 2
Exhibit3	A TRUE COPY OF THE APPLICATION FOR PHYSICAL HEARING DATED 25/04/2022 FILED BY THE PETITIONER IN CASE NO. 2045 AND 2155 OF 2020 BEFORE THE RESPONDENT NO. 2
Exhibit4	A TRUE COPY OF THE APPLICATION DATED 22/04/2022 FOR KEEP IN ABEYANCE ALL FURTHER PROCEEDINGS CASE NO. 2045 AND 2155 OF 2020 FILED BY THE PETITIONER
Exhibit5	A TRUE COPY OF THE ORDER DATED 28/04/2022 PASSED BY THE RESPONDENT NO 2 IN CASE REF. NO. 2045 OF 2020
Exhibit6	A TRUE COPY OF THE SECTION 16 APPLICATION DATED 30/04/2022 FILED BY THE PETITIONER BEFORE RESPONDENT NO 2 IN CASE NO 2045 OF 2020
Exhibit7	A TRUE COPY OF THE SECTION 16 APPLICATION DATED 30/04/2022 FILED BY THE PETITIONER BEFORE RESPONDENT NO 2 IN CASE NO 2155 OF 2020
Exhibit8	A TRUE COPY OF THE APPLICATION DATED 01.05.2022 TO WITHDRAW THE COUNTERCLAIM IS CASE NO 2045 OF 2020 FILED BY THE PETITIONER BEFORE THE RESPONDENT NO 2
Exhibit9	A TRUE COPY OF THE APPLICATION DATED 01.05.2022 TO WITHDRAW THE COUNTERCLAIM IS CASE NO 2155 OF 2020 FILED BY THE PETITIONER BEFORE THE

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	RESPONDENT NO 2
Exhibit10	A TRUE COPY OF THE JUDGEMENT DATED 23/12/2021 IN WP(C) NO. 24643 OF 2021
Exhibit11	A TRUE COPY OF THE ORDER DATED 27/08/2021 PASSED BY RESPONDENT NO 1 IN CASE NO 2045 OF 2020
Exhibit12	A TRUE COPY OF THE ORDER DATED 27/08/2021 PASSED BY RESPONDENT NO 1 IN CASE NO. 2155 OF 2020
Exhibit13	A TRUE COPY OF THE JUDGMENT DATED 02/03/2022 IN WP(C) NO. 889/2022
Exhibit14	A TRUE COPY OF THE JUDGEMENT DATED 09/03/2022 IN WA NO.328/2022
Exhibit15	A TRUE COPY OF THE APPLICATION DATED 02/05/2022 FOR ADJOURNMENT OF THE ARBITRATION PROCEEDINGS FILED BEFORE RESPONDENT NO. 2 IN CASE NO 2045 /2020
Exhibit16	A TRUE COPY OF THE APPLICATION DATED 02/05/2022 FOR ADJOURNMENT OF THE ARBITRATION PROCEEDINGS FILED BEFORE RESPONDENT NO. 2 IN CASE NO 2155 /2020
RESPONDENT EXHI	BITS
Exhibit R3(1)	TRUE COPY OF THE ORDER DATED 10/03/2022 PASSED BY THE RESPONDENT NO. 2/ARBITRATION TRIBUNAL ON THE WRIT PETITIONER'S FIRST SET OF APPLICATION FILED U/S 16 OF THE ARBITRATION AND CONCILIATION ACT, 1996
Exhibit R3(2)	TRUE COPY OF THE MSME REGISTRATION CERTIFICATE OF THE RESPONDENT NO.3
Exhibit R3(3)	TRUE COPY OF THE ORDER DATED 16/04/2022 PASSED BY THE RESPONDENT NO.2/ARBITRATION TRIBUNAL ON THE WRIT PETITION'S APPLICATION FOR DISCOVERY AND PRODUCTION OF THE DOCUMENTS
Exhibit R3(4)	TRUE COPY OF THE RESPONSE FILED BY THE RESPONDENT NO.3 BEFORE THE ARBITRATION TRIBUNAL/RESPONDENT NO.2 AGAINST THE WRIT PETITIONER'S SECOND SET OF APPLICATION (CONSOLIDATED) FILED UNDER SECTION 16 OF THE ARBITRATION AND RECONCILIATION ACT, 1996

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Exhibit R3(5)	TRUE COPY OF THE APPLICATION FILED BY RESPONDENT NO. 3 BEFORE THE ARBITRATION TRIBUNAL/RESPONDENT NO.2 FOR CONSOLIDATION OF THE CLAIM CASES 2045/2020 AND 2145/2020
Exhibit R3(6)	TRUE COPY OF THE RESPONSE FILED BY RESPONDENT NO.3 BEFORE THE ARBITRATION TRIBUNAL/RESPONDENT NO.2 AGAINST THE WRIT PETITIONER'S SECOND SET OF APPLICATION (SEPARATE FOR 2045/2020 AND 2155/2020) FILED UNDER SECTION 16 OF THE ARBITRATION AND CONCILIATION ACT, 1996
Exhibit R3(7)	TRUE COPY OF THE ORDER DATED 07/07/2022 PASSED BY RESPONDENT NO.2/ARBITRATION TRIBUNAL REGARDING NEXT DATE OF HEARING AS 23/05/2022
PETITIONER EXHIB	ITS
Exhibit P17	A true copy of the memorandum of claim statement produced jointly in Case Ref No.'s 2045/2020 and 2155/2020 filed by the Respondent No.3 without Annexures

Crosslite Infra Private Limited v. Director of Industries and Commerce Haryana Cum Chairman Haryana Msemsc

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What did the court decide?

What the court decided

Crosslite Infra Private Limited v. Director of Industries and Commerce Haryana Cum Chairman Haryana Msemsc

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