Citation Codes

Equivalent Citations

citation codes

Case Number

CMPMO No. 393 of 2016

Disposition

dismissed

Attorney(S)

Mr. G.D Verma, Senior Advocate, with Ms. Soma Thakur & Mr. Jagmohan Chandel, Advocates.
Mr. J.S Bhogal, Senior Advocate, with Mr. Satish Sharma, Advocate.

Judges

Mansoor Ahmad Mir, C.J
Tarlok Singh Chauhan, J.

Acts

ARTICLE 227 CONSTITUTION OF INDIA
etc.:10.1. Section 11
10.3. Section 14
Arbitration and Conciliation H Act,1996 (for short "the Act")
Section 32 and Section 14,

See more information ...

Smart Summary

Case Summary: CMPMO No. 393 of 2016 — High Court of Himachal Pradesh

Reserved on: 27.12.2016 | Decided on: 10.01.2017

Petitioner: M/s CNG Trading Company Pvt. Ltd. | Respondent: H.P. State Electricity Board Ltd.

Bench: Hon'ble Mr. Justice Mansoor Ahmad Mir (Chief Justice) and Hon'ble Mr. Justice Tarlok Singh Chauhan.

Factual and Procedural Background

The petitioner, M/s CNG Trading Company Pvt. Ltd., invoked the jurisdiction of the High Court under Article 227 of the Constitution challenging an order dated 19 April 2016 made by the Arbitrator-cum-Chief Engineer (PCA), HPSEBL. That order dismissed the petitioner's application for impleadment of the Society for Promotion of Information Technology and E-governance ("SITEG") as a party-respondent in the arbitration.

The learned Single Judge of this Court, noting conflicting views in earlier single-judge decisions of this court on the question whether the High Court can exercise its power of superintendence under Article 227 over arbitral tribunals constituted under the Arbitration and Conciliation Act, 1996, referred the following question to a larger Bench:

Whether the High Court can exercise power of superintendence vested under Article 227 of the Constitution on Arbitral Tribunals constituted under the Arbitration and Conciliation Act, 1996?

After hearing learned counsel for the parties, the larger Bench answered the reference and disposed of the petition (see "Holding and Implications" below for the result).

Legal Issues Presented

Whether the High Court can exercise the power of superintendence under Article 227 of the Constitution of India over arbitral tribunals constituted under the Arbitration and Conciliation Act, 1996.

Arguments of the Parties

Petitioner's Arguments

The petitioner, through Senior Counsel Mr. G.D. Verma, relied upon a decision of a learned Single Judge of this Court in M/s M.L. Gupta & Associates v. H.P. Housing & Urban Development Authority & others (2014 (3) Shim. LC 1694) as foundation for its case.
The petitioner argued that if the High Court could not entertain the petition under Article 227, it would be left remediless (the argument of being left without an effective remedy was raised before the Court and noted in the opinion).

Respondent's Arguments

The respondent, through Senior Counsel Mr. J.S. Bhogal, relied upon this Court's earlier decision in H.P.S.E.B. v. M/s Ansal Properties & Anr., reported in 2005 (1) Current Law Journal (HP) 593, to contend that the High Court cannot exercise power of superintendence under Article 227 over arbitral tribunals constituted under the Arbitration and Conciliation Act, 1996, and therefore the petition is not maintainable.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
M/s M.L. Gupta & Associates v. H.P. Housing & Urban Development Authority & others, 2014 (3) Shim. LC 1694	Relied upon by the petitioner as supporting intervention by the High Court in the context of arbitral proceedings.	The larger Bench found this decision to be in conflict with binding Apex Court decisions and expressly overruled it.
H.P.S.E.B. v. M/s Ansal Properties & Anr., 2005 (1) Current Law Journal (HP) 593	Earlier decision of this Court holding that the High Court cannot exercise power of superintendence under Article 227 over arbitral tribunals under the Act.	The Bench held that the Ansal Properties decision is in tune with Apex Court judgments and upheld its reasoning.
Lalitkumar v. Sanghavi (through LRs) & Another v. Dharamdas V. Sanghavi & Others, (2014) 7 SCC 255	Determined the issue, relying on the law in S.B.P. & Co. v. Patel Engineering Ltd.; held that High Court intervention under Articles 226/227 in respect of orders of arbitral tribunals is not permissible.	The Bench relied on this decision as determinative of the reference and reproduced relevant paras to support the conclusion that High Court intervention is not permissible.
S.B.P. & Company v. Patel Engineering Ltd. and another, (2005) 8 SCC 618	Established that orders passed by an arbitral tribunal during arbitration are not to be corrected by High Courts under Articles 226/227; Section 34/37 provide statutory routes.	The Bench relied on the principles in this decision (as cited in Lalitkumar) to conclude that Article 227 jurisdiction cannot be used to intervene in arbitral tribunal orders.
Union of India v. M/s Ambica Construction, AIR 2016 Supreme Court 1441	Explained that an arbitrator is not a court but an outcome of an agreement; discussed definitions of "Court" under the Act and Section 41 powers.	The Bench cited this decision to support the proposition that arbitrators are not courts and to underline that statutory remedies under the Act govern recourse against arbitral decisions.

Court's Reasoning and Analysis

The larger Bench considered the referral question in the context of Apex Court authority and the scheme of the Arbitration and Conciliation Act, 1996. The Court's analysis proceeded in the following steps (as recorded in the opinion):

Identified the direct question referred by the learned Single Judge — whether the High Court can exercise powers of superintendence under Article 227 over arbitral tribunals constituted under the Act.
Noted conflicting single-judge decisions of this Court (notably M/s M.L. Gupta's decision and the decision in H.P.S.E.B. v. M/s Ansal Properties) which necessitated a reference.
Examined binding Supreme Court decisions, principally Lalitkumar v. Sanghavi (which itself relied on S.B.P. & Co. v. Patel Engineering Ltd.), holding that intervention by High Courts under Articles 226 or 227 against orders of arbitral tribunals is not permissible. The Bench reproduced and relied on relevant paragraphs from those decisions to explain the settled principle.
Analysed provisions of the Act that delineate remedies and the role of courts: Sections 11, 12, 14, 32 and the definition of "court" (Section 2(1)(e)) and Section 41 were discussed to show that the Act provides specific routes and that arbitral tribunals are creatures of agreement and not courts in the ordinary sense.
Considered the argument that parties might be left remediless if Article 227 intervention were denied, and noted that the issue of lack of remedy had been addressed in the Apex Court authorities (as reproduced and explained in the opinion), which indicated statutory remedies under the Act are adequate and intended by the legislature.
Concluded that the approach in S.B.P. & Co. (and Lalitkumar interpreting it) excludes High Court corrective intervention under Articles 226/227 in relation to orders of arbitral tribunals, and that the earlier single-judge decision in M.L. Gupta was in conflict with these Apex Court authorities.
Accordingly, the Bench overruled the M.L. Gupta decision to the extent it conflicted with the binding Supreme Court jurisprudence and held that the petition before the High Court under Article 227 was not maintainable.

Holding and Implications

Core Ruling: The reference was answered in favor of the view that the High Court cannot exercise powers of superintendence under Article 227 of the Constitution over arbitral tribunals constituted under the Arbitration and Conciliation Act, 1996. The petition was dismissed as not maintainable.

Consequences and Implications (as stated in the opinion):

The petition filed under Article 227 by the petitioner is dismissed and all pending applications are also dismissed.
The petitioner is at liberty to pursue whatever remedy(ies) are available under the statutory mandate of the Arbitration and Conciliation Act, 1996.
The Bench held that the decision in H.P.S.E.B. v. M/s Ansal Properties is in consonance with Apex Court law and thereby upheld its approach; the decision in M/s M.L. Gupta & Associates (2014 (3) Shim. LC 1694) was found to be in conflict with the Supreme Court jurisprudence and was overruled to that extent.

No further broad propositions were laid down beyond applying the binding Supreme Court precedent; the direct effect is the dismissal of the Article 227 petition and the instruction that statutory remedies under the Act are the appropriate recourse.

Delivered by: Mansoor Ahmad Mir, Chief Justice; concurred by: Tarlok Singh Chauhan, Judge. Date of judgment: 10 January 2017.

Show full summary ...

M/S. Cng Trading Company Pvt. Ltd. Petitioner v. H.P State Electricity Board Ltd.

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA

CMPMO No. 393 of 2016

Reserved on: 27.12.2016 Decided on: 10.01.2017P

M/s CNG Trading Company Pvt. Ltd.

f … Petitioner. Versus

H.P. State Electricity Board Ltd r .

t …Respondent. Coram

The Hon'ble Mr. Jus o tice Muansoor Ahmad Mir, Chief Justice.The Hon'ble M C r. Justice Tarlok Singh Chauhan, Judge.Whether appr oved for reporting? Yes. For the h petitioner: Mr. G.D. Verma, Senior Advocate, g

with Ms. Soma Thakur & Mr. i

Jagmohan Chandel, Advocates. H

For the respondent: Mr. J.S. Bhogal, Senior Advocate, with Mr. Satish Sharma, Advocate. Mansoor Ahmad Mir, Chief Justice.

The learned Single Judge, vide order, dated 27^th October, 2016, while recording the reasons as to why reference

was required, has referred the following question for adjudication by the larger Bench:

"Whether the High Court can exercise power of superintendence

vested under Article 227 of H theConstitution on Arbitral Tribunals constituted under th o e pro f vision ofArbitration and C onciliation Act,1996?"

3. Before we deal withr the question (supra), it is apt to give a brief history o of theu case herein.4. The C petitioner invoked jurisdiction of this Court bythe medium of petition under Article 227 of the Constitution of India p h raying therein that the order, dated 19^thApril, 2016,

i^mg ade by the Arbitrator-cum-Chief Engineer (PCA), HPSEBL, H

whereby the application filed by the petitioner for impleadment of Society for Promotion of InformationTechnology and E-governance (for short "SITEG") (DIT) as party-respondent was dismissed, be set aside.

5. Mr. G.D. Verma, learned Senior Counsel appearing on behalf of the petitioner, made the foundation of

his arguments on the basis of the judgment rendered by a learned Single Judge of this Court in the case titled as M/s.

M.L. Gupta And Associates versus H.P. Housing an P d Urban Development Authority and others, reporte.d in

2014 (3) Shim. LC 1694.

6. Per contra, Mr. J.S. B ho o gal,

flearned Senior Counsel appearing on behalf of the t respondent, while relying upon the judgment rendered by r this Court in the case titled as

H.P.S.E.B. versus M o /s. A u nsal Properties & Anr., reportedin 2005 (1) Cu C rrent Law Journal (HP) 593, argued that theHigh Court c annot exercise power of superintendence in terms of Artic h le 227 of the Constitution of India over the Arbitral

i^Trg ibunals constituted under the Arbitration and Conciliation H ^Act,1996 (for short "the Act") and thus, the petition is^not maintainable. 7. The learned Single Judge, after noticing the conflicting views taken by the learned Single Judges of this

Court in the judgments (supra), made a reference.

8. We have heard learned counsel for the parties.

9. The Apex Court in the case titled as Lalitkumar

V. Sanghavi (dead) through LRs Neeta Lalit Kumar

Sanghavi and another versus Dharamdas V. Sang . ha P viand others, reported in (2014) 7 Supreme Co H urt Cases255, has determined the issue and while placin g reliance on the law declared by the Apex Court in th o e cas

fe titled as SBP & Company versus Patel Eng r ine t ering Ltd. and another,reported in (2005) 8 Supreme Court Cases 618, held that the intervention by th o e Hig u h Courts, in the proceedings underArticles 226 o C r 227 of the Constitution of India, with theorders made by the Arbitral Tribunals is not permissible. It is apt to r h eproduce paras 8 to 14 of the judgment herein:

"8. Within a couple of weeks thereafter,the original applicant died on 7.10.2012. H

The question is whether the High Court is right in dismissing the application as not maintainable. By the judgment under appeal, the Bombay High Courtopined that the remedy of the appellantlies 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 suc h anapproach. Section 37 makes certaHinorders of the arbitral tribunal appealable. Under Sectionf 34, the

aggrieved party has an avenue for

ventilating his grievoances against

the award in r clu t din g any in-betweenorders that might have been passedby th u e arbitral tribunal actingunder Section 16 of the Act. Thep o arty aggrieved by any order of thearbitral tribunal, unless has a right C of appeal under Section 37 of the Act, has to wait until the award ispassed by the Tribunal. This h

appears to be the scheme of the Act.The arbitral tribunal is after all, g

the creature of a contract between i

the parties, the arbitrationagreement, even though if theoccasion arises, the Chief Justice H

may constitute it based on the contract between the parties. But that would not alter the status of the arbitral tribunal. It will still bea forum chosen by the parties byagreement. 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.

9. The learned Senior Counsel forH the appellants, Shri Shyam Divan, submitted that if ap o plicati

fon under Section 11 is also held not maintainable, the appellants would be left remediless while their gr r ieva t nce subsists. On theother hand, learned senior counsel forthe res u pondents Shri C.U. Singhsubmitted that the appellant's onlyremedy is to approach the arbitral trib o unal seeking a recall of its decision C to terminate the arbitration proceedings. 10. Chapter III of the Act deals with the h

appointment, challenge to theappointment and termination of the g

mandate and substitution of the i

arbitrator etc.:10.1. Section 11 provides for the various H

modes of appointment of an arbitrator for the adjudication of the disputes which the parties agree to have resolved by arbitration. Broadly speaking,arbitrators could be appointed either bythe agreement between the parties or by making an application to the Chief

Justice of the High Court or the Chief

Justice of India, as the case may be, as

specified under Section 11 of the Act.

10.2. Section 12(3) provides for a challenge to the appointment of an arbitrator on two grounds. They are -

(a) "that circumstances exist" which

"give rise to justifiable doubts as to"

the "independence or impartiality"

of the arbitrator;

(b) that the arbitrator d f oes nHot"possess the qualification agreed toby the parties".

10.3. Section 14 t d ecloares that "themandate of r an arbitrator shallterminate" in the circumstancesspecified therein. They are-

" o 14. F u ailure or impossibility toact. - (1) The mandate of an C arbitrator shall terminate if - (a) he becomes de jure or de facto h

unable to perform his functions orfor other reasons fails to act without g

undue delay; and i

(b) he withdraws from his office orthe parties agree to the termination H

of the mandate." (2) If a controversy remainsconcerning any of the groundsreferred to in clause (a) of sub-section (1), a party may, unless otherwise agreed by the parties,

apply to the Court to decide on the

termination of the mandate."

Section 14(2) provides that if there is

any controversy regarding the

termination of the mandate of the arbitrator on any of the grounds referred to in the clause (a) then an application may be made to the Court "to decide on

the termination of the mandate".

11. Section 32 of the Act on the other

hand deals with the termination of arbitral proceedings. From the lang H uageof Section 32, it can be seen that arbitral proceedings get terminated ei f ther in themaking of the final arbitral award or by an order of the arbitral tribunal under

sub-Section 2. Su t b-s ectoion (2) providesthat the arbitr r al tribunal shall issue anorder for the termination of the arbitralproceedin u gs in the three contingenciesmentioned in sub-clauses (a) to (c)thereof.

C^12.o On the facts of the present case, the applicability of sub-clauses (a) and (b) ofSection 32(2) is clearly ruled out and we h

are of the opinion that the order dated29.10.2007 by which the Tribunal g

terminated the arbitral proceedings i

could only fall within the scope ofSection 32, sub-Section (2), sub-clause(c) i.e. the continuation of the H

proceedings has become impossible. By virtue of Section 32(3), on the termination of the arbitral proceedings, the mandate of the arbitral tribunal alsocomes to an end. Having regard to thescheme of the Act and more particularly on a cumulative reading of Section 32

and Section 14, the question whether the

mandate of the arbitrator stood legally

terminated or not can be examined by

the court "as provided under Section

14(2)".

13. The expression "court" is a defined expression under Section 2(1)(e) which reads as follows:-

"2(1)(e) 'Court' means the principal

Civil Court of original jurisdiction

in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, haviHng jurisdiction to decide the ques tions forming the subject- o mattefr of thearbitration if the same had been thesubject- matter of a suit, but does not- include an t y civil court of agrade inferior to such principal

Civil C u ourt, r or any Court of SmallCauses;"

14. o Therefore, we are of the opinion, the C apprehension of the appellant that they would be left remediless is without basisin law." h

(Emphasis added) 10 g . In the case titled as Union of India versus M/s. i Ambica Construction, reported in AIR 2016 Supreme

Court 1441, the Apex Court, while discussing Sections 2(c) and 41 of the Act, has held that the Arbitrator is not a Court,but outcome of an agreement. It is profitable to reproduce para 6 of the judgment herein:

"6. "Court" has been defined in section 2(c) of the Act to mean a civil court having jurisdiction to decide the questions

forming the subject- matter of the reference. Section 41 of the Act is extracted hereunder:

"41. Procedure and powers of Court. Subject to the provisions of this Act and of rules made thereunder :

(a) The provisions of the Code of Civil Procedure, 1908 (5 of 190 f 8), sh H allapply to all proceedings befor e theCourt, and to all appe o als, under thisAct, and

(b) The Court sha ll have, for the purpose of, a t nd in relation toarbitration proceedings, the same power u of marking orders in respect ofany of the matters set out in theS o econd Schedule as it has for thepurpose of, and in relation to any C proceedings before the Court: Provided that nothing in CI. (b) shall h

be taken to prejudice any powerwhich may be vested in an Arbitratoror umpire for making orders with

respect to any of such matters."The court can exercise the power specified H

in Second Schedule of the Act. However, Arbitrator is not a court. Arbitrator is the outcome of agreement. He decides the disputes as per the agreement entered intobetween the parties. Arbitration is analternative forum for resolution of disputes but an Arbitrator ipso facto does not enjoy

or possess all the powers conferred on the

courts of law."

(Emphasis added)

11. It is worthwhile to record herein that in para 18 of the judgment in M/s. M.L. Gupta's case (supra), the learned

Single Judge has discussed the judgment rendered by t P he Apex Court in SBP & Company's case (supra), H but de.spitethat has fallen in an error.

12. Mr. G.D. Verma, learne o d Sfenior Counselappearing on behalf of the pet t itio ner, argued that thepetitioner will be left remediless r .

13. This question u was also raised before the Apex Court in Lalitkuma o r V. Sanghavi's case (supra) and was replied in pa ra C 14 of the judgment, reproduced hereinabove.14.

h Having said so, it is held that the judgment made

i^byg the learned Single Judge in M/s. Ansal Properties' case(supra) is in tune with the judgments rendered by the Apex

Court, reproduced hereinabove and the judgment in M/s. M.L. Gupta's case (supra) is in conflict with the said Apex Court judgments, is, accordingly, overruled.

15. The reference is answered accordingly.

16. In view of the discussions made hereinabove, the petition merits to be dismissed being not maintainable.

17. The petitioner is at liberty to work out t P he remedy(ies) in terms of the mandate of the Act. .

18. The petition is dismissed accordingly al H ongwith all pending applications.

t^(M ^ano f

soor Ahmad Mir) r

Chief Justice

u (Tarlok Singh Chauhan) Judge January 10, 2017

( rajni )

Co gh i

M/S. Cng Trading Company Pvt. Ltd. Petitioner v. H.P State Electricity Board Ltd.

Case Summary: CMPMO No. 393 of 2016 — High Court of Himachal Pradesh

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioner's Arguments

Respondent's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

M/S. Cng Trading Company Pvt. Ltd. Petitioner v. H.P State Electricity Board Ltd.

Comments