Once Arbitral proceedings are terminated, Jurisdiction of Arbitrator Ends

Madhya Pradesh High Court, Indore Judgments

MADHYA PRADESH HIGH COURT

DIVISION BENCH :-HON’BLE SHRI JUSTICE S.C. SHARMA

HON'BLE SHRI JUSTICE RAJEEV KUMAR DUBEY

WP No.5870/2016

Manish Kedia & Others
vs.
Shri S.L. Jain (Retired Justice) and another

Mr V.N. Dubey, learned counsel counsel for the petitioners.

Mr Raghvendra Singh Raghuvanshi, learned counsel for the respondents

J U D G M E N T

PER.. S.C. SHARMA, SHARMA, J

The petitioners before this court have filed this present writ  petition being aggrieved by the order dated 30-04-2016 passed by the sole Arbitrator (Respondent No.1).

02. The facts of the case reveal that the petitioners No.1 and 2 have started the partnership firm in the name and style of M/s Bhawani Packaging vide partnership deed dated 07-03-2009 and the respondent No.2 as stated in the writ petition retired from the partnership firm on 04-11-2011. The dispute took place between the parties and the parties as stated in the writ petition took recourse of arbitration
proceedings under the Arbitration and Conciliation Act, 1996 hereinafter referred as ('the Act of 1996'). The sole Arbitrator with the consent of the parties was appointed. While the matter was pending before the Arbitrator, both the parties to the arbitration proceedings preferred an application for compromise on 21-04-2015 stating categorically that all the disputes have been mutually settled between them. The application for compromise is on record dated 21-04-2015. In the application it has
also been stated that the parties will not file any case and will not take any recourse of other procedural law for ventilating their grievances. On the basis of the compromise application filed by the parties, the learned Arbitrator has passed the order on 21-04-2015 terminating the arbitration proceedings. Thereafter, the respondent No.2 has preferred some application before the learned Arbitrator and the learned
2 Arbitrator by the impugned order dated 30-04-2016 has recalled his earlier order dated 21-04-2015. Being aggrieved by the recalling of the earlier order dated 21-04-2015, the present writ petition has been filed.
03. Learned counsel for the petitioners has argued before this court that once the arbitration proceedings have came to an end, keeping in view Section 32 of the Arbitration and Conciliation Act, 1996, the question of recalling the order dated 21-04-2015 and reviving the arbitration proceedings in absence of any statutory provisions under the Act of 1996 does not arise. He has prayed for quashment of the aforesaid order.
04. On the other hand, learned counsel appearing for the respondent No.2 has argued before this court that the Arbitrator was jurisdictionally competent to pass the recalling order, regarding termination of
proceedings and the same issue has been dealt by this court in the case of State of M.P. and another Vs. M/s R.B. Krishnanai in Arbitration Revision No. 9/2016 dated 03-01-2017. He has also argued before this court that once the the proceedings are pending before the Arbitrator, this court is jurisdictionally incompetent to interfere with the proceedings pending before the Arbitrator in light of the judgment delivered by the Hon'ble apex court in the case of SBP & Co. Vs. Patel Engineering Ltd., and another reported in (2005) 8 SCC 618. Reliance has also been placed upon the judgment delivered in the case of Lalit Kumar V. Sanghavi (dead) through LRs and another Vs. Dharamdas Vs.
Sanghavi and others reported in (2014) 7 SCC 255 and his contention is  that writ petition under article 226 of the Constitution of India in respect of arbitration proceedings is not maintainable.
05. Heard learned counsel for the parties and perused the record. The  matter is being heard finally with the consent of both the parties.
06. In the present case the undisputed facts reveal that the respondent No.1 was appointed as Arbitrator in the matter. Both the parties i.e the petitioners No. 1 and 2 and the respondent No.3 have
participated in the arbitration proceedings. Joint application was preferred stating categorically that the parties have entered into a compromise and in light of the compromise entered between the parties, the arbitration proceedings be disposed of as compromised. The learned Arbitrator based upon the compromise application submitted by the parties has passed an order dated 21-04-2015. The order also states that parties have entered into compromise with free consent and, therefore, the claims of both the parties as well as the firm M/s Bhawani Packaging are disposed of as withdrawn. Meaning thereby, the arbitration proceedings came to an end. Section 32 of the Arbitration and Conciliation Act, 1996 reads as under :-

“32. Termination of proceedings —

(1) The arbitral proceedings shall be terminated by the final arbitral award

or by an order of the arbitral tribunal under sub-section .

(2) The arbitral tribunal shall issue an order for the termination of the

arbitral proceedings where—

(a) the claimant withdraws his claim, unless the respondent objects to the

order and the arbitral tribunal recognises a legitimate interest on his part in

obtaining a final settlement of the dispute,

(b) the parties agree on the termination of the proceedings, or

(c) the arbitral tribunal finds that the continuation of the proceedings has

for any other reason become unnecessary or impossible.

(3) Subject to section 33 and sub-section (4) of section 34, the mandate of

the arbitral tribunal shall terminate with the termination of the arbitral

proceedings.”

07. The aforesaid statutory provisions of law provides for termination of proceedings in case parties agree for the same as per section 32 (2) (b) of the Act of 1996. In the present case by virtue of section 32 in light of the compromise between the parties, the termination of arbitral proceedings, has taken place.
08. Learned counsel for the respondent has drawn the attention of this court towards the judgment delivered in the case of State of M.P. and others Vs. M/s R.B. Krishnanai (supra) and his contention is that in the aforesaid case also the compromise took place between the parties and the Madhya Pradesh Arbitration Tribunal has dismissed the reference as not pressed on 19-03-2013 and thereafter an MJC was preferred for recall of the order dated 19-03-2013 and the Tribunal has recalled the
order dated 19-03-2013 and the order passed by the Tribunal recalling the order of termination was subjected to judicial scrutiny and the Division Bench of this court has held that such a recall is permissible under the law.
09. This court has carefully gone through the aforesaid order passed in Arbitration Revision No. 9/2016 dated 03-01-2017. In the aforesaid case proceedings were under the Madhyastham Adhikaran Adhiniyam, 1983 and the order passed by this court reads as under :-

“02- The facts of the case reveal that the respondent had filed a  reference under the provisions of Madhyastham Adhikaran Adhiniyam, 1983 against the State of Madhya Pradesh claiming a sum of Rs.3,99,30,145/- and the same was registered as Reference Case No.40/2006. The work in question was completed as revealed in the completion certificate dated 27/04/2007 and the respondent – Contractor before this Court has submitted quantified claim on 18/11/2005, which was not decided and therefore, a reference case was filed.
3- The facts of the case further reveal that on 19/03/2013 an application was filed stating that parties have entered into a compromise and the reference to be treated as withdrawn. The Tribunal has dismissed the reference as not pressed on 19/03/2013.
04- Thereafter, on 29/04/2014 an MJC was preferred for recalling of order dated 19/03/2013 and the Tribunal by an order dated 02/02/2016 has recalled the order. The present revision has been filed against order dated 02/02/2016.
05- Learned counsel for the applicant State of Madhya Prades has vehemently argued before this Court that the order passed by the Tribunal dated 19/03/2013 amounts to an award and therefore,
in light of Section 17-A, the Tribunal was not having jurisdiction to recall the award.
06- This Court has carefully gone through the order passed by the Tribunal. Paragraphs No.10 to 17 of the order passed by the Tribunal reads as under:-
“10. Contention of the applicant is that a fraud was played by the non-applicants whereby the applicant was persuaded to withdraw the ref. Case 40/06 on the ground that his 50%security deposit and performance guarantee would be refunded by 31.3.2013. This is so revealed in Annexure A-4 dated 13.3.2013. Additionally, the employer was to make arrangement for providing thrust blocks also. According to the applicant, the non-applicants failed to fulfill the promises; whereas the applicant under financial pressure agreed to withdraw the ref. Case. The non-applicants, having not fulfilled their commitment as per Annexure A-4 and A-5, have played a fraud with the applicant, in as much as, the applicant withdraw the ref. Case as not pressed on acting upon the promises of the non-applicants, which were never fulfilled.
11. By virtue of I.A.No.1 of the applicant has prayed for production of the documents relating to the meeting and Annexure A-4. Since the factum of meeting has not been refuted and Annexure A-4 and
A-5 have also not been refuted, we do not feel it proper to issue any direction to the respondents, as prayed for in I.A.No.1, which accordingly stands disposed of.
12. As regards objection in the light of Sec.17-A of the Act of 1983, it may be seen that it prohibits the Tribunal from reviewing the award including the interim award. Dismissal of ref. case No.40/06 on 19.3.2013 is not pressed do not amount to an award and the MJC is, thus, quite maintainable.
13. The work 'fraud' has been defined under Sec.17 of the Contract Act, 1872, as under:-
“Fraud” means and includes any of the following acts committed
by a party to a contract, or with his connivance, or by his agent, with intent o deceive another party thereto or his agent, or to induce him to enter into the contract:—
(1) The suggestion, as a fact, of that which is not true, by one who does not believe it to be true;
(2) The active concealment of a fact by one having knowledge or belief of the fact;
(3) A promise made without any intention of performing it;
(4) Any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.”
 The term 'fraud' has been explained by the Hon'ble Supreme Court of India in the case of Ramesh Kumar v. Furu Ram, (2011) 8 SCC 613, as under:-
“16. The manner in which the agreements dated 12.3.1992 were entered, the awards dated 13.3.1992 were made and the said awards  were made rule of the court, clearly disclose a case of fraud. Fraud an be of different forms and different hues. It is difficult to define it with precision,  as the shape of each fraud depends upon the fertile imagination and cleverness who conceives of and perpetrates the fraud. Its ingredients are an intention to deceive, use of unfair means, deliberate concealment of material facts, or abuse of position of confidence. `Fraud' is `knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his detriment'. `Fraud' is also defined as a concealment or false representation through a statement or conduct that injures another who relies on it in acting (vide The Black's Law Dictionary). Any conduct involving deceit resulting in injury, loss or damage to some one is fraud.”
14. Exercise of power of recall may be made when a party is likely to suffer not on account of his own but on account of action of another party, which may be termerd as fraudulent action. In the case in hand, we find that the completion certificate was issued long back on 27.4.2007, as revealed in Annexure A-1, it was certified that the work was satisfactory and the balance work was nil as on March, 07. Thereafter, on 13.3.2013 the Member (Engineering), N.V.D.A., Bhopal, asked the C.E. To
ensure the refund of 50% of the security deposit and performance guarantee, if so provided in the contract agreement and has no adverse impact on the work. The consent letter was also executed between the contractor and the Executive Engineer in this regard on 12.3.2013. This was all agreed, if the applicant withdraws the ref. Case No.40/06.
15. Relying upon the aforesaid, the petitioner/applicant chose not to press the reference petition and got it dismissed. It is not the stand of the non-applicants that they have fulfilled the promises mentioned in Annexure A-4 and A-5. Thus, it is revealed that the applicant was fraudulently persuaded to withdraw the ref. case.
16. The non-applicants have opposed the MJC on the ground that the ref. Case was not withdraw with liberty to file afresh, and therefore, the same cannot be restored.
17. We may derive stength from the decision of the Hon'ble Supreme Court of India in the case of Jey Ply Wood Pvt. Ltd. V. Madhukar Nowlakha, AIR 2006 SC 1260. In this case, the suit was withdrawn without liberty to file a fresh suit on the same cause of action. We may profitably quote the following paragraphs from the judgment:- “23. As indicated hereinbefore, the only point which falls for our
consideration in these appeals is whether the Trial Court was entitled in law to recall the order by which it had allowed the plaintiff to withdraw his suit.24. From the order of the Learned Civil Judge (Senior Division) 9th Court at Alipore, it is clear that he had no intention of granting any leave
for filing of a fresh suit on the same cause of action while allowing the plaintiff to withdraw his suit. That does not, however, mean that by passing such an order the learned court divested itself of its inherent power to recall its said order, which fact is also evident from the order itself which indicates that the Court did not find any scope to exercise its inherent powers under Section 151 of the Code of Civil Procedure for recalling the order passed by it earlier. In the circumstances set out in the order of 24th September, 2004, the learned trial court felt that no case had been made out to recall the order which had been made at the instance of the plaintiff himself. It was, therefore, not a question of lack of jurisdiction but the conscious decision of the Court not to exercise such jurisdiction in favour
of the plaintiff.25. The aforesaid position was reiterated by the learned Single Judge of the High Court in his order dated 4th February, 2005, though the language used by him is not entirely convincing. However, the position was clarified by the learned Judge in his subsequent order dated 14th March, 2005, in which reference has been made to a bench decision of the Calcutta High Court in the case of Rameswar Sarkar (supra) which, in our view, correctly explains the law with regard to the inherent powers of the Court to do justice between the parties. There is no doubt in our minds that in the absence of a specific provision in the Code of Civil Procedure providing for the filing of an application for recalling of an order permitting withdrawal of a suit, the provisions of Section 151 of the Civil Procedure Code can be resorted to in the interest of justice. The principle is well stablished that when the Code of Civil Procedure is silent regarding a procedural aspect, the inherent power of the court can come to its aid to act ex debito justitiae for doing real and substantial justice between the
parties. This Court had occasion to observe in the case of Manohar Lal Chopra vs. Rai Bahadur Rao Raja Seth Hiralal, AIR 1962 SC 527, as follows:
“It is well settled that the provisions of the Code are not exhaustive, for the simple reason that the Legislature is incapable of contemplating all the possible circumstances which may arise in future litigation and consequently for providing the procedure for them.” In view of the aforesaid discussion, the MJC is hereby allowed. The  order dated 19.3.2013 passed by this Tribunal in Ref. Case No.40/2006 is hereby recalled and the reference case No.40/2006 is restored to its original file for being adjudicated in accordance with law. No order as to costs.”
07- The Tribunal has arrived at a conclusion that the order passed by the Tribunal earlier in respect of withdrawal of the reference does not amount to an award and therefore, the Tribunal has the power to recall its order in light of Section 17-A of the Act of 1983.
08- Section 16, 17, 17-A of the Madhyastham Adhikaran Adhiniyam, 1983 reads as under:-
16. Award.-(1) The Tribunal shall after recording evidence, if necessary and after perusing the material on record and on affording opportunity to parties to submit their arguments, make an award:
Provided that the Tribunal may make an 'interim' award: [Provided further that the Tribunal shall give reasons in brief for an award including an interim award.] (2) The Tribunal shall, as far as possible, make its award within four months from the date of service notice of reference on Opposite Party.
3) The Tribunal may award cots and interest at such rate as may appear reasonable to it.
[(4) The award shall be as per opinion of the majority of the members. If the Members of Bench differ in opinion on any point, the points shall be decided according to the opinion of majority if there is a majority, but if the members are equally divided, the point or points on which they differ shall be stated for reference of the case for hearing on such point or points by one or more of the other Members of the Tribunal, or by the Chairman himself, as the case may be, and then such point or points shall be decided according to the opinion of the majority of the Tribunal, who have heard the case including those who had first heard it.] (5) The award shall spell out clearly the relief granted, the Party in whose favour and against whom relief has been granted and by whom and in whose favour costs and interest, if any, are payable. (6) Copies of the award, certified under hand and seal of an officer of the Tribunal authorised in that behalf by the Chairman, shall be supplied to all the parties.
17. Finality of award.- Notwithstanding anything to the contrary contained in any law relating to arbitration but subject to section 19, an award including an 'interim' award, made by the Tribunal under this Act, shall be final and binding on the parties thereto. 17-A. Inherent powers.- Nothing in this Act shall be deemed to limit or otherwise affect the inherent powers of the Tribunal to make such
order as may be necessary for the ends of justice or to prevent abuse of the process of the Tribunal:
Provided that no interim order by way of injunction, stay or attachment before award shall be granted:
Provided further that the Tribunal shall have no power to review the award including the interim award.”
9- This Court has carefully gone through the definition of the award and Section 16 of the Act of 1983. The order passed by the Tribunal in respect of withdrawal of the reference is certainly not an
award and as allegation of fraud was made, the Tribunal in exercise of power conferred under Section 17-A of the Act of 1983 has rightly passed the impugned order. 10- In case, the arguments canvased by the learned counsel for the State of Madhya Pradesh are accepted, the respondent –
Contractor will not be having any remedy of getting his dispute  adjudicated by Madhyastham Adhikaran on merits. The respondent – Contractor was able to make out a case before the Tribunal for
restoration of his reference case and in the considered opinion of this Court, the Tribunal in exercise of power conferred under Section 17-A of the Act of 1983 has rightly restored the Reference Case
No.40/2006 to its original number for being adjudicated in accordance with law.
11- Section 19 of the Madhyastham Adhikaran Adhiniyam, 1983 reads as under:-
“19. High Court's power of revision.- (1) The High Court may suo motu at any time or on an application for revision made to it within three months of the award by an aggrieved party, call for the record of any case in which an award has been made under this Act by issuing a requisition to the Tribunal and upon receipt of such requisition the Tribunal shall send or cause to be sent to that Court the concerned award and record thereof: Provided that any application for revision may be admitted after the prescribed period of three months, if the applicant satisfies the High Court that he had sufficient cause for not preferring the revision within such period.
Explanation.- The fact that the applicant was misled by any order, practice or judgment of the High Court in ascertaining or computing the prescribed period may be sufficient cause within the meaning of this sub-section.]
(2) If it appears to the High Court that the Tribunal–
(a) has exercised a jurisdiction not vested in it by law; or
(b) has failed to exercise a jurisdiction so vested; or
(c) has acted in exercise of its jurisdiction illegally, or with material irregularity; or
(d) has misconducted itself or the proceedings; or
(e) has made an award which is invalid or has been improperly procured by any party to the proceedings. the High Court may make such order in the case as it thinks fit.
(3) The High Court shall in deciding any revision under this section exercise the same powers and follow the same procedure as far as may be, as it does in deciding a revision under section 115 of the Code of Civil Procedure, 1908 (No.5 of 1908).
(4) The High Court shall cause a copy of its order in revision to be certified to the Tribunal.
Explanation.- For the purposes of this section, an award shall include an 'interim' award.”
12- In the present case, the impugned order is certainly not an award and Section 19 provides for a revision against an award. The jurisdiction of High Court under Section 19 of the Act of 1983 is quite limited. The High Court cannot exercise the powers of appellate Court as held by this Court in the case of Mahavir Construction Co. Vs. State of M. P. reported in 1998(1) MPLJ 69.
13- In light of the aforesaid, this Court is of the considered opinion that the present revision deserves to be dismissed and is accordingly dismissed. Certified Copy as per rules. “ 10. In the aforesaid case, the said Act includes a statutory provision which is a Section 17-A relating to Inherent powers and the Madhya Pradesh Arbitration Tribunal has exercised the inherent powers u/s 17-A of the Act of 1983. There is no such statutory provisions as contained under the Act of 1996 and, therefore, this court fails to understand that under which statutory provision of law the learned Arbitrator has exercised the powers by passing the impugned order dated 30-04-2016 and, therefore, the judgment relied upon by the learned counsel is distinguishable on facts.
11. Learned counsel has placed reliance upon a judgment passed by the apex court in SBP & Co. (supra). Undisputedly, during pendency ofarbitration proceedings this court does not have the power to stay or to interfere in the matter of arbitration as held by the Hon'ble apex court. However, in the present case, the order passed by the learned Arbitrator is nonest in law as the learned Arbitrator was jurisdictionally incompetent to pass the impugned order after the termination of arbitral proceedings and, therefore, the proceedings which are now pending before him can never be said to be a proceedings under the provisions of the the Arbitration and Conciliation Act, 1996. Infact, the impugned order and all further proceedings are null and void and therefore, the judgment relied upon is not applicable in the present case.
12. In the case of Lalit Kumar Vs. Sanghavi (supra), the apex court in paragraph-8 held as under :-
“8. Within a couple of weeks thereafter, the original applicant died on 7.10.2012. The question is whether the High Court is right in dismissing the application as not maintainable. By the judgment under appeal, the BombayHigh Court opined that the remedy of the appellant lies in invoking the jurisdiction of the High Court under Article 226 of the Constitution. In our view, such a view is not in accordance with the law declared by this Court in S.B.P. & Co. v. Patel Engineering Ltd., (2005) 8 SCC 618. The relevant portion of the judgment reads as under:
“45. It is seen that some High Courts have proceeded on the basis that any order passed by an arbitral tribunal during arbitration, would be capable of being challenged under Article 226 or 227 of the Constitution of India. We see no warrant for such an approach. Section 37 makes certain orders of the arbitral tribunal appealable. Under Section 34, the aggrieved party has an avenue for ventilating his 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 Tribunal. This appears to be the scheme of the Act. The arbitral tribunal is after all, the creature of a contract between the parties, the arbitration agreement, even though if the occasion arises, the Chief Justice may constitute it based on the contract between theparties. But that would not alter the status of the arbitral tribunal. It will stillbe a forum chosen by the parties by agreement. We, therefore, disapprove of the stand adopted by some of the High Courts that any order passed by the arbitral tribunal is capable of being corrected by the High Court under Article 226 or 227 of the Constitution of India. Such an intervention by the High Courts is not permissible.” That need not, however, necessarily mean that the application such as the one on hand is maintainable under Section 11 of the Act.”
13. This court has carefully gone through the aforesaid judgment. The Hon'ble Supreme Court has taken into account the judgment delivered in the case of SBP & Co. Vs. Patel Engineering (supra) and once again held that interference by High Court under article 226 of the Constitution of India in respect of arbitration proceedings is not maintainable.
14. In the considered opinion of this court once the arbitral proceedings have come to an end by virtue of Section 32 of the Act of 1996, the learned Arbitrator has become functus officio and could not have passed any further orders and, therefore, the writ petition under article 226 of the Constitution of India is certainly maintainable in the peculiar facts and circumstances of the case.
15. Resultantly, the writ petition stands allowed. The impugned order dated 30-04-2016 is hereby quashed. [right-post]
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