Shree Renuka Sugars Limited vs Praj Industries Limited

K.L. Manjunath, J.—The legality and correctness of the order passed by the sole Arbitrator in Arbitration Case No. 1/2010 dated 2.12.2013 Annexure-K is called in question in these writ petitions. The petitioner is the respondent before the Arbitrator. The sole Arbitrator was appointed in CMP No. 270/2009. The claim was made by the respondent against the petitioner and counter claim is also made by the petitioner against the respondent.

Parties have led evidence. Arguments were also in progress. According to the Arbitrator, he has heard both the parties for more than half a dozen sittings. Thereafter, the petitioner filed two applications as I.A. 1 and I.A. 2. I.A. 1 is for reopening the matter and grant permission to lead additional evidence. I.A. 2 is filed for seeking permission to recall and re-examine RW-2 by way of further evidence. These applications were resisted by the respondent. The Arbitral Tribunal has rejected these two applications. Challenging the same, these petitions are filed.

At the outset, Sri. Udaya Holla, learned senior counsel for the respondent submits that the writ petitions filed by the petitioner before this Court is not maintainable in view of the law laid down by the Hon''ble Supreme Court in the case of S.B.P. and Co. Vs. Patel Engineering Ltd. and Another, . Relying upon the Constitution Bench of the Supreme Court, it is contended that even if the petitioner is considered as the aggrieved person, his remedy is only to raise his ground u/s 34 of Arbitration Act after award is passed and if the award goes against the petitioner. He further contends that against the order passed on an interlocutory application, the petitioner cannot be permitted before this Court for invoking the jurisdiction of this Court under Articles 226 and 227 of Constitution of India.

Per contra, Sri. Prabhuling K. Navadagi, learned counsel for petitioner submits that said judgment has no application to the facts of this case. While his Lordships considering the power of High Court in entertaining the writ petition in regard to the orders passed by the Hon''ble Chief Justice or his designate u/s 11(6) of the Arbitration Act for appointment of Arbitrator. Therefore, he request�s the Court to over rule the objections raised by Sri. Udaya Holla.

After hearing the learned counsel for the parties, the only point to be considered is:

Whether the petitioner can challenge the rejection of its application filed before the Arbitral Tribunal even without awaiting the final decision of the Arbitral Tribunal?

The admitted facts of this appeal are:

The sole Arbitrator was appointed by this Court in CMP No. 270/2009. The parties after filing the claim statement and counter claim have led in evidence. After completion of arguments when the arguments were heard at length for more than six hearing dates, two applications were filed which are rejected by the Tribunal on the ground that it is not possible for the Tribunal to allow the applications reopening the case and permit the petitioner to lead additional evidence and recall RW-2.

RW-2 is none other than the witness of the petitioner. The Hon''ble Apex Court in the aforesaid decision in paragraph 46 has summed up its conclusion which reads as follows:

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 u/s 11(6) of the Act is not an administrative power. It is a judicial power.

ii) The power u/s 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 that is exercised by the designated, judge would be that of the Chief Justice as conferred by the statute.

(iv) The Chief Justice or the designated judge will have the right to decide the preliminary aspects as indicated in the earlier part of this judgment. These will be, his own jurisdiction, to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators. The Chief Justice or the judge designated would be entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified in terms of Section 11(8) of the Act if the need arises but the order appointing the arbitrator could only be that of the Chief Justice or the judge designate.

(v) Designation of a district judge as the authority u/s 11(6) of the Act by the Chief Justice of the High Court is not warranted on the scheme of the Act.

(vi) Once the matter reaches the arbitral tribunal or the sole arbitrator, the High Court would not interfere with 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.

(vii) Since an order passed by the Chief Justice of the High Court or by the designated judge of that court is a judicial order, an appeal will lie against that order only under Article 136 of the Constitution of India to the Supreme Court.

(viii) There can be no appeal against an order of the Chief Justice of India or a judge of the Supreme Court designated by him while entertaining an application u/s 11(6) of the Act.

(ix) In a case where an arbitral tribunal has been constituted by the parties without having recourse to Section 11(6) of the Act, the arbitral tribunal will have the jurisdiction to decide all matters as contemplated by Section 16 of the Act.

(x) Since all were guided by the decision of this Court in M/s. Konkan Railway Corpn. Ltd. and Another Vs. M/s. Rani Construction Pvt. Ltd., and orders u/s 11(6) of the Act have been made based on the position adopted in that decision, we clarify that appointments of arbitrators or arbitral tribunals thus far made, are to be treated as valid, all objections being left to be decided u/s 16 of the Act. As and from this date, the position as adopted in this judgment will govern even pending applications u/s 11(6) of the Act.

(xi) Where District Judges had been designated by the Chief Justice of the High Court u/s 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 concerned High Court or a Judge of that court designated by the Chief Justice.

(xii) The decision in M/s. Konkan Railway Corpn. Ltd. and Another Vs. M/s. Rani Construction Pvt. Ltd., is over ruled.

The Hon''ble Apex Court while summing up the matter, sub paragraph (vi) of paragraph 46 has clearly ruled that the High Court cannot 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 34 or Section 37 of the Act. Therefore, it is clear that when the application of the petitioner has been rejected by the Tribunal the only remedy open to the petitioner is to approach the Court in terms of Section 34 or 37 of the Act in the event, petitioner suffers award. With the above observations, these petitions are dismissed.