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Judgment
R. D. Dhanuka, J
By this Writ Petition filed under Articles 226 and 227 of the Constitution of India, the petitioner has impugned the order dated 19th January, 2021
passed by the learned Arbitrator dismissing the Application filed by the petitioner under Section 16 of the Arbitration and Conciliation Act, 1996 (for
short ‘the Arbitration Act’) and holding that the Arbitral Tribunal has jurisdiction to entertain claims laid down by the respondent.
Some of the relevant facts for the purpose of deciding this Writ Petition are as under :-
Mr. Sanjay Jain, learned counsel for the respondent at the threshold raised a preliminary objection that this writ petition filed under Articles 226 and
227 of the Constitution of India impugning the order passed by the Arbitral Tribunal rejecting the application filed by the respondent in such arbitral
proceedings raising a plea of jurisdiction raised by such respondent is not maintainable. The remedy, if any, of the petitioner (original respondent)
would be to challenge the said order passed by the Arbitral Tribunal along with final award, if the petitioner is aggrieved by the final order under
Section 34 of the Arbitration Act. Learned counsel invited our attention to various paragraphs of the judgment of the Hon’ble Supreme Court in
case of Deep Industries Limited v/s. Oil and Natural Gas Corporation and Limited and Anr., (2020) 15 SCC 706.
Dr. Veerendra Tulzapurkar, learned senior counsel for the petitioner, on the other hand, would contend that the writ petition filed by his client under
Articles 226 and 227 of the Constitution of India is maintainable in view of the principles of law laid down by the Hon’ble Supreme Court in case
of Deep Industries Limited (supra) and other subsequent judgments. In view of these rival submissions made by the learned counsel for the parties,
we shall decide the issue of maintainability of this writ petition impugning the order passed by the Arbitral Tribunal rejecting the application filed by the
petitioner under Section 16 of the Arbitration Act and holding that the Arbitral Tribunal has jurisdiction to adjudicate upon the claims made by the
respondent (original claimant).
It was the case of the petitioner society that the respondent had executed agreements for sale with the unit purchasers in the year 1995 and agreed
to form a society within the timeline prescribed under Rule 8 of the Maharashtra Ownership Flats (Regulations of the Promotion of Construction, Sale
Management and Transfer) Rules, 1964 (for short ‘MOFA Rules’). The respondent had also covenanted that it would execute a conveyance of
the property within four months of the registration of the society. It was the case of the petitioner that the respondent did not disclose any further
construction that was proposed to be carried out on the said property at the time of entering into the agreements for sale with various unit purchasers,
though, under Clause 6 of the agreement for sale, the respondent had expressly covenanted that the residential FSI from the property would be
available only to the society after its registration.
It was the case of the petitioner that since the respondent failed to execute a Deed of Conveyance in favour of the petitioner society inspite of
receiving full consideration from the flat purchasers even after expiry of eight years after execution of the Memorandum of Understanding (for short
‘MOU’), in the year 2016, the petitioner filed an application bearing no. 59 of 2016 before the Competent Authority under Section 11 of the
Maharashtra Ownership Flats Act, 1963 (for short ‘MOFA’) for a unilateral Deemed Conveyance. The said application was resisted by the
respondent. The said application was dismissed by the Competent Authority on 22nd February, 2017 on account of the fact that there was no
occupation certificate issued in respect of the building. Liberty was however granted to the petitioner to file another application.
On 3rd March, 2018, the petitioner filed an application bearing no. 33 of 2018 for a unilateral Deemed Conveyance against the respondent before
the Competent Authority under Section 11 of the MOFA. On 10th August, 2018, the Competent Authority passed an order allowing the said
application filed by the petitioner. In the said order, the Competent Authority held that the respondent builder had made a claim in respect of two
basements, open parking, unsold premises and balance FSI/TDR in the said building. However, as per various Courts citations, developer does not get
any rights besides on the unsold flats and balance FSI/TDR after prescribed period of four months after registration of society. Therefore, claim made
by the builder in respect of common spaces and TDR was false. The builder has rights in respect of unsold premises/shops only in the said building.
The objections raised by the builder in this regard are not legal. The Competent Authority directed the concerned Sub-Registrar or any other
appropriate Registration Officer under the Registration Act, 1908 to register ex-parte Deemed Conveyance Deed conveying right, title and interest of
the developer in property described in Deemed Conveyance Certificate in the name of the society, after adjudication by Collector of Stamp.
It was ordered by the Competent Authority that the said Deemed Conveyance application filed by the society in respect of Survey No. 41, CTS
No.308-309, S. V. Road, Santacruz (West), Mumbai-400 054 was allowed by granting ex-parte Deemed Conveyance. Pursuant to the said order
dated 10th August, 2018, the Competent Authority and Deputy District Registrar, Co-operative Society-III, Mumbai issued a certificate under Section
11(4) of the MOFA and certified that this case was proper for ex-parte execution of Conveyance Deed of the right, title and interest of the promoters
of the land of area 1718.2 sq. mtrs. of description TPS No. 4, Santacruz, CTS H/309, Division H Ward, City Survey Officer Bandra limit, Tal.
Andheri, Mumbai Suburban District in the name of the petitioner society. The respondent did not challenge the said order passed by the Competent
Authority dated 10th August, 2018 or the said Deemed Conveyance Certificate issued under Section 11(4) of the MOFA.
The dispute arose between the parties which was referred to Arbitration under the Arbitration clause forming part of the Agreement entered into
between the parties. On 21st August, 2020, the petitioner filed a statement of claim before the Arbitral Tribunal against the petitioner inter-alia praying
for various reliefs. The petitioner filed an application in the month of September 2020 in the said Statement of Claim before the Arbitral Tribunal under
Section 16 of the Arbitration Act inter-alia praying for dismissal of the said claim for want of jurisdiction. The said application under Section 16 was
opposed by the respondent. The Arbitral Tribunal passed the impugned order dated 19th January, 2021 rejecting the said application filed by the
petitioner and holding that the Arbitral Tribunal has jurisdiction to entertain and adjudicate upon the claims made by the respondent.
Dr. Tulzapurkar, learned Senior Counsel for the petitioner invited out attention to various provisions of the Agreement entered into between the
parties, the correspondence exchanged between the parties, averments made in the statement of claim and in the pleadings filed by the parties in the
application filed by his client under Section 16 of the Arbitration Act before the Arbitral Tribunal. It is submitted by the learned senior counsel that the
petitioner had filed an application under Section 11 of the MOFA before the Competent Authority seeking an order for Deemed Conveyance in view
of the respondent having failed to comply with its duties and obligations to execute a Deed of Conveyance in favour of the petitioner society within the
time prescribed. The Competent Authority has already passed a quasi-judicial order granting Deemed Conveyance in favour of the petitioner. The
Competent Authority has also issued a Deemed Conveyance Certificate in favour of the petitioner society. The said order passed by the Competent
Authority under Section 11 was a quasi-judicial order which has attained finality. The respondent could not have claimed in the arbitral proceedings
effectively seeking a reversal of the said quasi-judicial order granting Deemed Conveyance by reserving the FSI/TDR in respect of the plot which
was subject matter of the said order of Deemed Conveyance in favour of the petitioner.
It is submitted that the Arbitral Tribunal can never examine the validity or nullity of a quasi-judicial order passed under a statute. Such claim for
specific performance, if any, can only be maintained before the Courts and not before the Arbitral Forum. The Competent Authority has already
decided the title in respect of the said property in favour of the petitioner. The said order passed by the said quasi-judicial authority would operate in
rem and thus no such arbitral proceedings as filed by the respondent in respect of such title certificate which operated in rem were at all maintainable
before the Arbitral Tribunal. The Arbitral Tribunal has assumed jurisdiction on a perverse finding that the MOFA does not confer any adjudicatory
function of the Competent Authority. Since, the Arbitral Tribunal has committed a fundamental and patent error in the impugned order, this writ
petition filed by the petitioner under Article 226 read with Article 227 of the Constitution of India is thus maintainable. It is submitted that it was a case
of lack of inherent jurisdiction of the Arbitral Tribunal in deciding a right in rem. This Court has thus ample power in such case to exercise powers
under Article 226 or 227 of the Constitution of India.
It is submitted that the Arbitral Tribunal itself had no jurisdiction to entertain any such claim which would nullify the effect of the said quasi-judicial
order which has already attained finality. Learned senior counsel placed reliance on the judgment of Supreme Court in case of Booz Allen and
Hamilton Inc. v/s. SBI Home Finance Limited and Ors., (2011) 5 SCC 532 in support of this submission. He invited our attention to paragraphs 15 to
24 of the judgment of the Hon’ble Supreme Court in case of Deep Industries Limited (supra) and would submit that since it was clear case of
inherent lack of jurisdiction of the Arbitral Tribunal to entertain the claims made by the respondent which if awarded would nullify the effect of an
order of Deemed Conveyance of the property passed in favour of the petitioner, this petition filed under Articles 226 and 227 of the Constitution of
India is maintainable.
It is submitted by the learned senior counsel that the Hon’ble Supreme Court in the said judgment in case of Deep Industries Limited (supra)
has distinguished its earlier judgment in case of SBP and Company v/s. Patel Engineering Ltd. and Anr., (2005) 8 SCC 618. He submits that the
judgment of Hon’ble Supreme Court in case of Deep Industries Limited (supra) thus would apply to the facts of this case. Learned senior counsel
also relied upon the judgment of Hon’ble Supreme Court in case of Vidya Drolia and Ors. v/s. Durga Trading Corporation, (2021) 2 SCC 1 in
support of the aforesaid submission.
Mr. Sanjay Jain, learned counsel for the respondent, on the other hand, invited our attention to various provisions of the MOU entered into
between the petitioner and the respondent and various averments made in the statement of claim filed by his client before the Arbitral Tribunal. It is
submitted by the learned counsel that the respondent has not challenged the impugned order passed by the Competent Authority under Section 11 of
the MOFA before the Arbitral Tribunal. The respondent has prayed for declaration that the agreement dated 6th June, 2008 entered into between the
parties is valid, subsisting and binding on the petitioner herein and has prayed for a specific performance of the said agreement. He invited out
attention to the prayer clauses in the said statement of claim and would submit that his client has also prayed for a monetary reliefs in the sum of
Rs.75,00,000/- in prayer clause (d), in the sum of Rs.529,99,25,925/- in prayer clause (e) which was in alternate and without prejudice to prayer
clauses (b) to (d) and also has claimed an amount of Rs.584,36,19,879/- in prayer clause (f) which is in the alternate and without prejudice to the
prayer clauses (b) to (d).
Learned counsel for the respondent also invited our attention to the statements made by the respondent herein before the Arbitral Tribunal and
recorded in paragraphs 10.3 and 10.4 of the impugned order. The respondent had made it clear before the Arbitral Tribunal that the prayers sought by
the respondent herein was an action in personam and not in action in rem. The respondent has sought several obligations under the said MOU and the
claim was adjudicable before the Arbitral Forum. The respondent had made it clear that the respondent was not in any manner seeking any relief to
set aside or nullify the certificate issued under Section 11 of the MOFA, however it was open to the respondent to seek adjudication in respect of
subordinate rights under the MOU which were denied by the petitioner. No prayers or reliefs sought by the respondent would in any manner affect
the vesting of title in the petitioner. However, in view of the recognition of the rights and acceptance of the obligation and promises and counter
promises incorporated in the MOU, respondent was entitled to have the same adjudicated before the Arbitral Tribunal.
The respondent had also prayed for damages in addition to or in alternate to the reliefs of specific performance. The Arbitral Tribunal has
jurisdiction to entertain the claim and adjudicate in accordance with law.
Learned counsel for the respondent submits that the order passed by the Competent Authority under Section 11 of the MOFA does not adjudicate
upon the title in respect of any property but such order is subject to the final adjudication of title by a Civil Court. He submits that all the proceedings
which can be decided by a Civil Court can be also decided by the Arbitral Forum unless specifically barred for want of jurisdiction. Reliefs sought by
the respondent in the statement of claim are not barred from adjudication by the Arbitral Tribunal. Though the order in respect of the title of a party in
a property operates in rem, the other arrangements which are in the nature of subsidiary rights can still be adjudicated upon by the Arbitral Forum.
Learned counsel invited our attention to various prima-facie findings rendered by the Arbitral Tribunal on the issue whether the order passed by
the Competent Authority under Section 11 of the MOFA decides the title in respect of any property in favour of the society or not and is final in all
respect or not. He relied upon the judgments referred before the Arbitral Tribunal in paragraphs 15 to 23 of the said order passed by the Arbitral
Tribunal. He submits that the respondent has not challenged the order of Deemed Conveyance passed by the Competent Authority in the statement of
claim. He relied upon various paragraphs of the judgment of Supreme Court in case of Booz Allen and Hamilton Inc. (supra) in support of argument
that the Arbitral Tribunal has power to decide the subsidiary rights of a party.
Learned counsel for the respondent invited our attention to paragraphs 4, 5, 16 to 22, 45 and 46 of the judgment of the Hon’ble Supreme Court
in case of Deep Industries Limited (supra) and would submit that the Hon’ble Supreme Court has not considered in the said judgment that a writ
petition was maintainable under Articles 226 and 227 of the Constitution of India against an order passed by the Arbitral Tribunal rejecting an
application under Section 16 of the Arbitration Act. He submits that in the said judgment the Hon’ble Supreme Court has considered the facts
where application under Section 16 filed by the respondent in the arbitral proceedings was dismissed by the Arbitral Tribunal. The claimant had also
filed an application under Section 17 of the Arbitration Act before the learned Arbitrator. The learned Arbitrator had stayed the operation of the order
passed under Section 17 of the Arbitration Act.
The claimant had also applied for amendment to the statement of claim as well as the said application under Section 17 to challenge the order
dated 15th February, 2018. The learned Arbitrator had allowed the said application for amendment by order dated 10th March, 2018. The said order
dated 9th May, 2018 disposing of the application filed by the claimant under Section 17 was disposed of by the learned Arbitrator in which he had
granted stay of the operation of the order dated 15th February, 2018 on the condition that two years ban/black listing would only operate, if the
claimant ultimately losses any final arbitration proceedings was impugned before the City Civil Court, Ahmedabad. The City Civil Court disposed of
the said appeal against the order passed by the learned Arbitrator under Section 17 of the Arbitration Act, upholding the order passed by the learned
Arbitrator and dismissed the said appeal.
That order passed by the City Civil Court, Ahmedabad in the appeal under Section 37 was challenged before the Gujarat High Court by invoking
Article 227 of the Constitution of India. The Gujarat High Court without deciding the jurisdictional issue allowed the said writ petition and set aside the
order passed by the City Civil Court, Ahmedabad.
It is submitted by the learned counsel for the respondent that a seven Judge bench of the Hon’ble Supreme Court in case of SBP and
Company (supra) has held that a party aggrieved by an order of Arbitral Tribunal under Section 16 of the Arbitration Act, unless has a right of appeal
under Section 37 of the Act has to wait until the award is passed by the Arbitral Tribunal. The object of minimizing judicial intervention while the
matter is arbitrated upon, will be defeated if the High Court could be approached under Article 227 or under Article 226 of the Constitution of India
against every order made by the Arbitral Tribunal. It is submitted that the facts before the Hon’ble Supreme Court in the said judgment in case of
Deep Industries Limited (supra) were totally different and are clearly distinguishable.
Learned counsel for the respondent invited our attention to paragraph 228 of the judgment of Hon’ble Supreme Court in case of Vidya Drolia
and Ors. (supra) and would submit that the Hon’ble Supreme Court in the said latest judgment has already held that the Arbitral Tribunal has been
given jurisdiction to decide on the subject matter of arbitrability. They are required to identify specific public policy in order to determine the subject
matter arbitrability. Merely, because a matter verges on a prohibited territory, should not by in itself stop the Arbitrator from deciding the matter. He
should be careful in considering the question of non-arbitrability.
It is submitted that it was not the case of the petitioner that the prayer for specific performance in the statement of claim filed by the respondent
cannot be granted by the Arbitral Tribunal. The Arbitral Tribunal has recorded finding that the reliefs claimed by the respondent are an action in
personam and not right in rem. The reliefs seeking specific performance of the provisions of MOU are arbitrable. Such findings rendered by the
Arbitral Tribunal being not perverse cannot be interfered by this Court. The petitioner has remedy available under Section 34 of the Arbitration Act by
impugning the impugned order passed by the Arbitral Tribunal under Section 16 of the Arbitration Act along with final award, if the petitioner is
aggrieved by such final award by filing a petition under Section 34 of the Arbitration Act.
The petitioner has been delaying the arbitral proceedings filed by the respondent on one or the other ground. The petitioner has now filed a
statement of defence and has also filed a counter claim before the Arbitral Tribunal for damages under the said MOU without prejudice to the
contentions raised in the application filed under Section 16 of the Arbitration Act. The pleadings are now already completed in the arbitral proceedings
before the Arbitral Tribunal. The Trial is likely to start any moment.
Dr. Tulzapurkar, learned senior counsel for the petitioner in his rejoinder argument clarified that it was not the case of the petitioner that all the
cases of specific performance are actions in rem. Since, the Competent Authority has already declared the petitioner as the owner and a title is
conferred upon the petitioner by the said order passed under Section 11 of the MOFA, the proceedings filed by the respondent before the Arbitral
Tribunal are an action in rem and thus issue of jurisdiction raised by the petitioner was rightly raised and ought to have been decided in favour of the
petitioner. The respondent has challenged the said order of Deemed Conveyance directly or indirectly in the statement of claim.
Mr. Sanjay Jain, learned counsel for the respondent placed reliance on the order passed by the Supreme Court on 5th March, 2021 in Civil Appeal
No. 1098-1099 of 2021 in Case of Navayuga Engineering Company v/s. Bangalore Metro Rail Corporation Limited and the order dated 18th
September, 2020 in Special Leave to Appeal (C) No. 8482 of 2020 in case of Punjab State Power Corporation Limited v/s. Emta Coal Limited and
Anr. and would submit that the case of the petitioner would not fall under the patent lack of inherent jurisdiction of the Arbitral Tribunal. He submits
that the Hon’ble Supreme Court in the said two orders have clearly held that the Court under Article 227 of the Constitution of India in a writ
petition arising out an order passed by the Arbitral Tribunal can exercise powers only if the order passed is so perverse that the only possible
conclusion is that there is a patent lack in inherent jurisdiction which requires no argument whatsoever. Perversity in the order must be such that must
stare one in the face. The writ jurisdiction can be exercised only in case of exceptional rarity or cases which are stated to be patently lacking in
inherent jurisdiction and not otherwise.
It is submitted that the petitioner has not made out any such case within such exception made by the Hon’ble Supreme Court even in case of
Deep Industries Limited (supra), in case of Navayuga Engineering Company (supra) and in case of Punjab State Power Corporation Limited (supra).
REASONS AND CONCLUSION :-
It is not in dispute that the respondent had not executed the Deed of Conveyance in favour of the petitioner society under the provisions of
MOFA. The petitioner society had filed an application under Section 11 of the MOFA before the Competent Authority. The Competent Authority has
allowed the said application filed by the petitioner and directed that execution of Deed of Conveyance of the right, title and interest of promoters in the
land in building under the name of the society through the Sub-Registrar or any other appropriate Registration Officer be executed ex-parte. It is held
by the Competent Authority that agreement had been executed between the members of the petitioner society and the respondent in respect of the
sale of premises and building constructed as per building plan on land of area 1718.2 sq. mtrs. as described in the said agreement. The said Competent
Authority has already issued a certificate of Deemed Conveyance in favour of the petitioner.
The respondent has not impugned the said order of Deemed Conveyance in favour of the petitioner passed by the Competent Authority. The
respondent filed statement of claim inter-alia praying for specific performance of the MOU dated 6th June, 2008 entered into between the parties and
for various monetary claims. The respondent had made it clear before the Arbitral Tribunal that the claim made by the respondent was entirely based
on the said MOU dated 6th June, 2008, which was a contract between the petitioner and the respondent. The said MOU provided for certain
promises, reciprocal premises, obligations and counter obligations relating to the immovable property for which the certificate under Section 11 of the
MOFA was issued. The respondent did not dispute that the petitioner was neither entitled to the Conveyance of the land described in the agreement
entered into under Section 4 of the MOFA with the members of the petitioner nor that the Competent Authority under Section 11 had jurisdiction to
issue the certificate for grant of Deemed Conveyance under Section 11 of the MOFA.
It was the case of the respondent that the said agreement further recommenced and admits the rights of the respondent herein to further develop
the property and confers additional rights. Those Acts in the MOU are to be verified only after completion of the development of the building of the
petitioner. It was the case of the respondent that under the said MOU, further rights were conferred upon the respondent herein independent of the
agreement under Section 4 of the MOFA entered into by the respondent with the flat purchasers. The Arbitral Tribunal also recorded the statement
made by the respondent that the respondent was not in any manner seeking any relief to set aside or to nullify the certificate issued under Section 11.
In our view, in view of such statement made in the statement of claim and in view of the statements made by the respondent clarifying the reliefs
sought by the respondent before the Arbitral Tribunal that the respondent was not seeking any reliefs which would nullify the order of Deemed
Conveyance granted in favour of the petitioner society passed by the Competent Authority, the Arbitral Tribunal was right in rejecting the said
application filed by the petitioner under Section 16 of the Arbitration Act. The apprehension of the petitioner that respondent had filed arbitration
proceedings to nullify the order passed by the Competent Authority is baseless and imaginary.
Dr. Tulzapurkar, learned senior counsel for the petitioner fairly admitted that it was not the case of the petitioner society that such order of
Deemed Conveyance passed by the Competent Authority under Section 11 of the MOFA could not be adjudicated upon by a Civil Court. He however
urged before this Court vehemently that the Arbitral Tribunal cannot go into the validity of such order of Deemed Conveyance under Section 11 in
respect of the title of the property in favour of the petitioner.
In our view, the Arbitral Tribunal has jurisdiction to decide all the claims which can be decided by a Civil Court unless the same is specifically
barred either expressly or by necessary implication. The Hon’ble Supreme Court in case of Booz Allen and Hamilton Inc. (supra) has held that
the Arbitral Tribunals are private forum chosen voluntarily to adjudicate their dispute in place of Courts and Tribunals which are public fora constituted
under the Laws of the Country. However, Civil or Commercial dispute whether contractual or non-contractual which can be decided by a Court, are
in principle capable of being adjudicated and resolved by Arbitral Tribunal unless the jurisdiction of the Arbitral Tribunals is excluded either expressly
or by necessary implication. Adjudication of certain categories of proceedings are reserved by the legislature exclusively for public forum as a matter
of public policy. Certain other categories of cases, either not expressly reserved for adjudication by public forum (Courts and Tribunals), may by
necessary implication have been executed from the purview of private forum.
The Hon’ble Supreme Court in the said judgment also held that a right in rem is a right exercisable against the world at large, as contrasted
from a right in personam which is an interest protected solely against specific individuals. Action in personam referred to actions determining the rights
and interest of the parties themselves in the subject matter of the case, whereas actions in rem referred to actions determining the title to property and
the rights of the parties, not merely among themselves but also against persons of any time claiming an interest in that property. In paragraph 38 of the
said judgment, the Hon’ble Supreme Court clarified that disputes relating to subordinate rights in personam arising from rights in rem always have
been considered to be arbitrable.
In the MOU entered into between the parties, the respondent claims various rights of development on the said property after completion of the
construction of the building for the petitioner. All these rights claimed by the respondent in the statement of claim are subordinate rights in personam
arising from rights claimed by the petitioner in the said property. These principles laid down in the judgment of the Hon’ble Supreme Court in case
of Booz Allen and Hamilton Inc. (supra) squarely apply to the facts of this case. The claims made by the respondent in the statement of claim are
relating to subordinate rights in personam under the said MOU and thus are arbitrable. No case is made out by the petitioner in this case to show that
the reliefs sought by the respondent in the statement of claim could be exclusively tried only by a Civil Court and not by the Arbitral Tribunal and are
barred from being tried by the Arbitral Tribunal by any express or necessary implication.
Supreme Court in case of Vidya Drolia and Ors. (supra) has held that as per the mandate of sub-Section 5 of Section 16 of the Arbitration Act
when objection to the jurisdiction under sub-Sections 2 and 3 are rejected, the Arbitral Tribunal can continue with the proceedings and make the
arbitration award. A party aggrieved is at liberty to file application for setting aside such arbitral award under Section 34 of the Arbitration Act after
completion of proceedings. It is held that the Arbitration and Conciliation Act, 1996 does not in specific terms, exclude any category of dispute â€
Civil or Commercial â€" from Arbitrability.
It is held that under Section 16 of the Arbitration Act, the Arbitral Tribunal is empowered to rule on its own jurisdiction, including ruling on any
objections with respect to the existing or validity of the Arbitration Agreement. It is held that the arbitrators, like Courts, are legally bound to resolve
the disputes in accordance with public policy of the law.
Hon’ble Supreme Court in case of Deep Industries Limited (supra) has dealt with an appeal arising out of the order passed by the High Court
in a Writ Petition under Article 227 of the Constitution of India. The appellant before the Hon’ble Supreme Court had filed a claim petition before
the learned Arbitrator challenging the termination of the contract/show-cause notice and also claiming damages. During the pendency of the said
arbitral proceedings, the appellant was blacklisted by the ONGC for a period of two years. The appellant had filed an application under Section 17
before the learned Arbitrator. The appellant had also filed an application to amend the arbitration claim. The said application for amendment was
allowed by the learned Arbitrator.
The respondent in the meanwhile filed an application under Section 16 before the learned Arbitrator on the ground that the arbitration notice was
confined only to termination of the agreement and blacklisting outside the arbitrator’s ken. The said application under Section 16 was dismissed by
the learned Arbitrator holding that the notice was not merely confined to termination of contract but was also in respect of two years ban/blacklisting
that was sought to be imposed at that time. The learned Arbitrator by a separate order disposed of the application filed by the appellant under Section
17 thereby staying the operation of the order dated 15th February, 2018 thereby black listing the appellant by the ONGC. An appeal was filed before
the City Civil Court, Ahmedabad under Section 37 of the Arbitration Act. The City Civil Court passed an order in the said appeal under Section 37 in
the Arbitration Act dismissing the said appeal.
The aggrieved party filed an application under Article 227 of the Constitution of India before the High Court of Gujarat impugning the order passed
by the City Civil Court, Ahmedabad. The High Court of Gujarat referred to the two preliminary contentions raised on behalf of the petitioner that the
petition under Article 227 of the Constitution of India should be dismissed at a threshold as it did not raise any jurisdictional issue. The High Court
however without answering the said question then went on to state that the ban order had in fact been passed under a General Contract Manual
mainly and not under the provisions of the agreement and as a result of which serious disputes arose as to the jurisdiction of the arbitrator to deal with
the same.
The Gujarat High Court also held that on reading of a notice for arbitration that the notice did not raise the issue of the ban for two years and was
confined only to illegal termination. The Gujarat High Court held that no stay could be possibly granted under Section 17 of the ban order as an
injunction cannot be granted in the cases where the party can be compensated later in damages. The Gujarat High Court accordingly allowed the said
writ petition and was pleased to set aside the order passed by the City Civil Court, Ahmedabad.
The said order passed by the Gujarat High Court was challenged before the Hon’ble Supreme Court in the said judgment in case of Deep
Industries Limited (supra). In paragraph 17 of the said judgment, the Hon’ble Supreme Court held that there is no doubt whatsoever that if
petitions were to be filed under Articles 226 and 227 of the Constitution of India against the 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, the Court cannot forget that Article 227 is a
constitutional provision which remains untouched by the non-obstante clause of Section 5 of the Arbitration Act. In these circumstances, what is
important to note is that the petitions can be filed under Article 227 against the judgment allowing or dismissing the first appeals under Section 37 of
the Arbitration Act, yet the High Court would be extremely circumspect in interfering with the same, taking into account, the statutory policy as
adumbrated by the Hon’ble Supreme Court in the said judgment so that interference is restricted to orders that are passed which are patently
lacking in inherent jurisdiction.
In paragraph 19 of the said judgment, the Hon’ble Supreme Court referred to the judgment of the Constitutional Bench in case of SBP and
Company (supra) holding that under Section 34, the aggrieved party has an avenue for ventilating its grievances against the award including any in
between 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 Arbitral Tribunal. This appears
to be scheme of the Act. The Hon’ble Supreme Court in the said judgment in case of SBP and Company (supra) also held that the object of
minimising judicial intervention while the matter is in 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 of India 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, ofcourse, a right
of appeal is available to them under Section 37 of the Act even at a particular stage.
In paragraph 20 of the said judgment, the Hon’ble Supreme Court however held that the statement of law in the said judgment in case of SBP
and Company (supra) does not directly apply on the facts of the case in hand before the Hon’ble Supreme Court in the said judgment. The
Hon’ble Supreme Court also distinguished the judgment of Punjab Agro Industries Corporation Limited v/s. Kewal Singh Dhillon, (2008) 10 SCC
128 on the ground that in the case in hand in case of Deep Industries Limited (supra), the jurisdiction had been exercised by the High Court only after
the first appeal provided under Section 37 of the Arbitration Act was dismissed.
In paragraph 22 of the said judgment, the Hon’ble Supreme Court held that the drill of Section 16 of the Arbitration Act is that where a
Section 16 application is dismissed, no appeal is provided and the challenge under Section 16 application being dismissed must await the passing of a
final award at which stage it may be raised under Section 34. It is held that for that reason alone, the judgment of the Gujarat High Court under appeal
needs to be set aside. It is held that even otherwise, entering into the general thicket of the disputes between the parties does not behove a Court
exercising jurisdiction under Article 227, where only jurisdictional errors can be corrected. It is held that the Arbitral Tribunal was well within its
jurisdiction in referring to the contract and the ban order and than applying the law and finally issuing the stay order. The High Court judgment thus
could not be sustained and came to be set aside.
In paragraph 23 of the said judgment, the Hon’ble Supreme Court held that what becomes clear is that had the High Court itself disposed of
the first appeal in that case, no petition under Article 227 could possibly lie and all that could perhaps have been done was to file an LPA before a
Division Bench of the same High Court. The Hon’ble Supreme Court allowed the said Civil Appeal by setting aside the order passed by the High
Court exercising writ jurisdiction under Article 227 of the Constitution of India. In our view, the said judgment of the Hon’ble Supreme Court is
clearly distinguishable in the facts of this case. In this case petitioner has challenged the order passed by the Arbitral Tribunal rejecting an application
under Section 16 of the Act.
Be that as it may, in paragraph 22 of the said judgment, the Hon’ble Supreme Court has held that 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 the final award at which stage it may be raised under Section 34. In our view, the said judgment of the Hon’ble Supreme Court holding
that the party whose application under Section 16 of the Arbitration Act is rejected must await the passing of a final award at which stage it may be
raised under Section 34 would assist the case of the respondent and not the petitioner.
The Hon’ble Supreme Court in the order dated 5th March, 2021 in case of Navayuga Engineering Company (supra) had considered the facts
where arbitral award was already made in favour of the appellant allowing some of the claims. The Arbitration petitions filed under Section 34 of the
opponent was pending before the City Civil and Session’s Judge, Bengaluru. The execution of the said award was stayed on certain conditions.
Both the parties filed writ petition against the said order staying execution of award on certain conditions. The writ petition filed by the appellant was
dismissed whereas the writ petition filed by the respondent was allowed in which the deposit of 50% of the amount was ordered. The said order was
impugned before the Hon’ble Supreme Court in that matter.
The Hon’ble Supreme Court in paragraph 4 of the said order observed that despite the Supreme Court repeatedly referring to Section 5 of the
Arbitration Act in particular and the Arbitration Act in general and despite the Supreme Court having laid down in case of Deep Industries Limited
(supra) that the High Court under Articles 226 and 227 should be extremely circumspect in interference with orders passed under Arbitration Act,
such interfering being only in cases of exceptional, rarity or cases which are stated to be patently lacking in inherent jurisdiction, the Supreme Court
found that High Courts are interfering with deposit orders that have been made. That was not a case of exceptional rarity or any patent lack in
inherent jurisdiction. The Hon’ble Supreme Court accordingly set aside the order passed by the High Court exercising writ jurisdiction in such a
situation.
The Hon’ble Supreme Court in an order dated 18th September, 2020, in case of Punjab State Power Corporation Limited (supra) considered a
situation where the order passed by the Arbitral Tribunal was challenged only after 2½ years by filing writ petition after the arguments had
concluded before the Arbitral Tribunal. The writ petition filed under Article 227 was dismissed by the High Court directly against a Section 16
application. After adverting to the judgment in case of Deep Industries Limited (supra), the Hon’ble Supreme Court held that a foray to the Writ
Court from a Section 16 application being dismissed by the arbitrator can only be if the order passed was so perverse that the only possible conclusion
is that there is a patent lack of inherent jurisdiction requires no arguments whatsoever it must be the perversity of the order that must stare one in the
face. The Hon’ble Supreme Court observed that unfortunately parties are using this expression in the judgment in case of Deep Industries Limited
(supra), to go to the Writ Court under Article 227 in matter which did not suffer from a patent lack of inherent jurisdiction. This is one of them.
It is held by the Hon’ble Supreme Court that instead of dismissing the writ petition on the ground stated, the High Court could have done well
to have referred to the judgment in case of Deep Industries Limited (supra) and to dismiss the petition under Article 227 on the ground that there was
no such perversity in the order which need to be a patent lack of inherent jurisdiction. High Court ought to have discouraged similar litigation by
imposing heavy cost. The High Court did not choose to do either of these two things. The Hon’ble Supreme Court dismissed the said Spl. Leave
Petition with costs of Rs.50,000/-to be paid to the Supreme Court Legal Service Committee.
In this back drop, we shall decide whether the petitioner has made out a case of patent lack of inherent jurisdiction which requires no arguments
whatsoever and demonstrates the perversity in the order which stare on in the face and whether this case would fall in cases of exceptional rarity or
not. The Arbitral Tribunal in this case has recorded a finding that the dispute between the parties arising out of MOU dated 6th June, 2008 is an action
in personam alone and not an action in rem. The Arbitral Tribunal has also considered large number of judgments of this Court in paragraph 15 of the
impugned order holding that mere issuance of certificate does not bar the aggrieved party to adopt such legal appropriate proceedings to establish its
claim under the contract.
This Court in case of Zainul Abedin Yusufali Massawala and Ors. v/s. Competent Authority and in case of Shree Chitanmani Builders v/s. State
of Maharashtra, in case of Tushar Jivram Chauhan v/s. State of Maharashtra, (2015) 4 Mh.L.J. and in case of Mazda Construction Company v/s.
Sultanabad Darshan CHS Ltd., 2012 SCC OnLine Bom 1266 has held that jurisdiction of the Civil Court is not barred, despite a document of Deemed
Conveyance is placed on record and relied upon before the Civil Court dealing with the right, title and interest of the petitioner in the larger property by
independently applying its mind and on a total appraisal of the oral and documentary evidence before it.
In our view, the Arbitral Tribunal has rightly held that parties are neither stopped nor there is bar under the provisions of law to establish its right,
title or interest, independent of such Deemed Conveyance Certificate. Such certificate will have no bar in the matter where the right, title and interest
of any party is adjudicated before a forum which is conferred with such jurisdiction to adjudicate and deal with after perusing the oral and
documentary evidence and decide the dispute between the parties. Such adjudication is clearly independent of the Act performed under Section 11 of
the MOFA. The aforesaid judgments relied upon by the Arbitral Tribunal on this issue applies to the facts of this case.
In our view, the proceedings under Section 11 of the MOFA are filed in view of the default committed by the promoter to execute a Deed of
Conveyance in favour of the society by complying with its application under the provisions of the MOFA by executing a Deed of Conveyance. The
Competent Authority is thus empowered to pass an order of Deemed Conveyance ex-parte. Such order passed by the Competent Authority does not
create title in respect of such property conclusively in favour of the society. Such an order of Deemed Conveyance is subject to the final adjudication
of title in the appropriate Civil proceedings either before the Civil Court or by Arbitral Tribunal in case of their being an Arbitration Agreement
between the parties. There is no such provision under MOFA that the order passed by the Competent Authority under Section 11 of the MOFA is
final in all respect including on the issue of title in the property and bars the Civil Court or the Arbitral Tribunal from deciding the issue of title
independently.
In our view, there was thus no question of any inherent lack of jurisdiction of the Arbitral Tribunal in considering a claim for specific performance
of the MOU and various monetary claims including claim for damages which was for enforcement of subordinate rights in the nature of an action in
personam. The Arbitral Tribunal has jurisdiction thus to entertain, try and adjudicate upon such claims arising out of not in action in rem. In our view,
such claims as made by the respondent could be adjudicated upon only by the Arbitral Tribunal in view of there being an Arbitration Agreement and
not barred expressly or by necessary implication. There was thus no question of inherent lack of jurisdiction in the Arbitral Tribunal to decide those
claims.
The petitioner has also not made out a case under an exception carved out by the Hon’ble Supreme Court in case of Navayuga Engineering
Company (supra) for interfering with the orders passed under the Arbitration Act by a Writ Court under Articles 226 and 227 i.e. interference being
only in cases of exceptional rarity. In our view, this was a clear case of exclusive jurisdiction of the Arbitral Tribunal to decide such claims as made by
the respondent and thus the impugned order passed by the Arbitral Tribunal cannot be impugned in a writ petition under Articles 226 and 227 of the
Constitution of India.
The Hon’ble Supreme Court in the said order in case of Punjab State Power Corporation Limited (supra) has noticed the misuse of the said
expression ‘patent lack of inherent jurisdiction’ expressed by the Hon’ble Supreme Court in case of Deep Industries Limited (supra) by the
parties invoking writ jurisdiction under Article 227 in the matters where there is no lack of inherent jurisdiction and has strongly observed that though
there was no patent lack of inherent jurisdiction, the High Court who ought to have dismissed the writ petition on such ground, the High Court
dismissed the writ petition directly against order under Section 16 without following the drill of Section 16 of the Arbitration Act. The Hon’ble
Supreme Court has set aside the judgment of the Punjab and Harayana High Court with cost quantified at Rs.50,000/-. In our view, the writ petition
filed by the petitioner under Articles 226 and 227 of the Constitution of India in the facts of this case is a gross abuse of process of law and has been
filed with a view to delay the outcome of the arbitral proceedings which have to be disposed of expeditiously. The writ petition thus deserves to be
dismissed with exemplary cost.
We accordingly pass the following order :-
(a) Writ Petition is dismissed with cost quantified at Rs.50,000/-, which shall be paid by the petitioner to Maharashtra Legal Service Authority within
two weeks from today without fail and shall produce an original receipt for perusal of Associate of this Court within one week from the date of such
payment.