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Ellora Paper Mills Ltd. v. State Of M.P. And Others
Factual and Procedural Background
The petitioner filed a petition under Article 226/227 of the Constitution seeking several reliefs, primarily to quash an order dated 2-2-2001 by the Arbitral Tribunal rejecting the petitioner’s objection under section 13 of the Arbitration and Conciliation Act, 1996. The petitioner challenged the authority and impartiality of certain arbitrators, contending bias due to their prior involvement as defendants in an earlier civil suit. The petitioner also argued that specific clauses in the contract rendered the dispute non-arbitrable. The petitioner sought either quashing of the impugned order or appointment of an independent arbitrator. The petition arose after an earlier civil suit and revision proceedings, including an order from this Court and subsequent Supreme Court liberty to raise objections in arbitration proceedings. The respondent supported the impugned order, contending the writ petition was not maintainable at this interlocutory stage.
Legal Issues Presented
- Whether the writ petition under Article 226/227 challenging an interlocutory order of the Arbitral Tribunal rejecting an objection under section 13 of the Arbitration and Conciliation Act is maintainable.
- Whether the Arbitral Tribunal had jurisdiction to decide on its own competence and the arbitrability of the dispute.
- Whether the petitioner’s objections regarding bias and impartiality of arbitrators and procedural fairness can be entertained at this stage.
Arguments of the Parties
Petitioner’s Arguments
- Some members of the Arbitral Tribunal were defendants in an earlier civil suit, rendering them biased and incapable of impartial adjudication.
- Contractual clauses (Clauses 23, 25, 7, and 4(d)) indicate that the Purchase Committee’s decision is final and binding, and the dispute is non-arbitrable.
- The principle that no one can be a judge in their own cause was emphasized.
- The petitioner relied on prior civil proceedings, including rejection of an application under section 34 of the Act and subsequent orders by this Court and the Supreme Court granting liberty to raise objections in arbitration.
- Section 16 of the Act empowers the Arbitral Tribunal to decide its own jurisdiction, and the petitioner contended that the Tribunal erred in rejecting objections related to jurisdiction and arbitrability.
- The petitioner argued that the writ petition is maintainable, relying on an interim order dated 4-5-2001 and contending that after about 16 years it would be improper to relegate the petitioner to other remedies.
Respondent’s Arguments
- The writ petition is not maintainable at this interlocutory stage as the Arbitral Tribunal’s interlocutory orders cannot be challenged by writ petitions.
- The petitioner did not raise the “exception clause” or similar jurisdictional objections in the original objection before the Tribunal, so the Tribunal had no occasion to decide on these aspects.
- There is no procedural infirmity or illegality in the impugned order dated 2-2-2001.
- The petition should be dismissed.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| SBP and Co. v. Patel Engineering Ltd., (2005) 8 SCC 618 | Judicial intervention under Articles 226/227 against interlocutory orders of Arbitral Tribunal is not permissible; parties must wait until award unless appeal under section 37 is available. | The Court relied on this Supreme Court Seven Judge Bench ruling to hold the writ petition challenging an interlocutory order is not maintainable and to emphasize minimal judicial interference during arbitration. |
| Tata Industries Ltd. v. Grasim Industries Ltd., (2010) SCC Online (Bombay) 1740 | Under section 16 of the Act, the Arbitral Tribunal decides its own jurisdiction; judicial interference is not warranted at the stage of pending arbitral proceedings. | The Court applied this principle to hold that the Tribunal’s decision on jurisdiction cannot be questioned at this interlocutory stage and objections must be raised after the award. |
Court's Reasoning and Analysis
The Court first addressed the maintainability of the writ petition under Articles 226/227 against an interlocutory order of the Arbitral Tribunal rejecting the petitioner’s objection under section 13 of the Arbitration and Conciliation Act. It noted that the petitioner’s reliance on judgments related to section 11(6) of the Act was misplaced since the present petition was under Articles 226/227 challenging an order by the Tribunal under section 13.
The Court referred extensively to the authoritative Supreme Court ruling in SBP and Co. v. Patel Engineering Ltd., which held that High Courts cannot entertain writ petitions against interlocutory orders of Arbitral Tribunals during arbitration proceedings. The scheme of the Arbitration Act requires parties to wait until the arbitral award is rendered, except where a statutory right of appeal under section 37 exists.
The Court further relied on the opinion of Justice Dr. D.Y. Chandrachud in Tata Industries Ltd. v. Grasim Industries Ltd., which emphasized that the arbitral tribunal has exclusive jurisdiction to rule on its competence under section 16, and judicial interference at the interlocutory stage is not warranted.
In light of these precedents, the Court concluded that the writ petition challenging the interlocutory order was not maintainable. Consequently, the petitioner’s other objections related to bias, fairness, jurisdiction, and procedural impropriety were rendered irrelevant at this stage. The petitioner was advised to raise these objections before the appropriate forum at the proper stage of the arbitration process.
Holding and Implications
The writ petition is dismissed as not maintainable.
The Court’s decision directly affects the parties by rejecting the petitioner’s attempt to challenge an interlocutory order of the Arbitral Tribunal through a writ petition under Articles 226/227. The petitioner retains the right to raise objections concerning jurisdiction, bias, and procedural fairness before the appropriate forum at the suitable stage in the arbitration process, typically after the arbitral award. No new precedent was set beyond reaffirming established principles limiting judicial intervention during arbitration proceedings.
In this petition filed under Article 226/227 of the Constitution, the petitioner has prayed for following reliefs:—
(i) The Hon'ble High Court may be pleased to issue a writ of certiorari or any other appropriate writ, order or direction quashing the impugned order dated 2-2-2001 (Annexure P-14) as illegal and void.
(ii) The Hon'ble High Court may be pleased to declare that the respondent No. 2 to respondent No. 7 have no authority or jurisdiction to act as arbitrators, by issuance of an appropriate writ, order or direction.
(iii) Without prejudice to the aforesaid reliefs, alternatively it is humbly submitted that this Hon'ble Court may kindly be pleased to appoint an independent and impartial or a body to act as arbitrator to adjudicate, in the interest of justice.
(iv) Any other writ, order or direction as this Hon'ble Court deems just and proper may also kindly be issued in favour of the petitioner.
2. Basically, the petitioner is aggrieved by order dated 2-2-2001 (Annexure P/14) whereby his objection filed under section 13 of the Arbitration and Conciliation Act, 1996 (hereinafter called as the ‘Act’) is rejected by the Arbitral Tribunal.
3. During the course of arguments, Shri Pancholi, learned counsel for the petitioner raised various points. It is submitted that some members of Arbitral Tribunal were defendants in the earlier civil suit. Hence, they cannot impartially decide the instant dispute. He submits that such biased members cannot form part of the Tribunal. In addition, it is submitted that as per terms of tender (Clause 23 and 25) (Annexure R/1), it is clear that the decision taken by Purchase Committee shall be final and binding. In addition, if Clause 7 of the Agreement is read with Clause 4(d), it will be clear like noonday that the matter is not arbitrable by the committee. By Annexure P/2 dated 15-11-1993 and Annexure P/7, the lot of papers supplied by the petitioner were rejected by the respondents. This decision, as per Clause 4(d) is conclusive and binding on the Contractor. Hence, as per Clause 7, the matter is not arbitrable. He further submits that no one can be a judge in his own cause. In support of aforesaid contentions, synopsis and additional synopsis are filed by the petitioner. In the synopsis, it is urged that a civil suit was filed by the petitioner against the respondents. In the said civil suit, an application under section 34 of the Act was filed by the respondents for sending the matter for resolution of dispute by the Arbitrator. The said application was rejected by the Civil Court. Aggrieved, Civil Revision No. 1117/99 was filed by the respondents, which was decided on 3-5-2000 (Annexure P/9). This Court considered the arbitration clause and opined that there exists a dispute and hence Arbitrator needs to be appointed. The said order was challenged by petitioner before the Supreme Court. The SLP was withdrawn but the Apex Court by order dated 28-9-2000 (Annexure P/10) granted liberty to the petitioner to raise objection in the arbitration proceedings. The order of this Court passed in Civil Revision No. 1117/99 got merged in the order of Supreme Court. Shri Pancholi has taken pains to submit that the Arbitral Tribunal as per section 16 of the Act may decide about its own jurisdiction. He placed reliance on various judgments to submit that the aspect of “exception clause” in the agreement should be left open to be decided by Arbitrator and cannot be decided while referring the dispute for arbitration. In nutshell, Shri Pancholi contended that while deciding the Civil Revision No. 1117/99, this Court had no occasion to decide the aspect of “exception clause” or jurisdiction of Arbitral Tribunal. In view of the liberty given by Supreme Court, objections were raised which were erroneously decided by the Arbitral Tribunal. Hence, this petition is maintainable. Heavy reliance is placed on the interim order dated 4-5-2001 passed in this petition. It is urged that in view of this interim order, this petition can be entertained. It is further argued that it will not be proper to relegate the petitioner to avail any other remedy after about 16 years. The petitioner relied on various judgments in support of various points raised by him.
4. Shri Pushpendra Yadav, learned Government Advocate supported the impugned order dated 2-2-2001 (Annexure P/14) and contended that this petition is not maintainable at this stage. If Arbitral Tribunal has taken a decision at interlocutory stage, it cannot be assailed by filing writ petition. He submits that the aspect of “exception clause” etc. were not raised by the petitioner in his objection (Annexure P/13). Thus, there was no occasion for the Tribunal to examine the said aspect. He submits that there is no procedural infirmity or illegality in the impugned order. Hence, this petition may be dismissed.
5. No other point is pressed by the parties.
6. I have heard the parties at length and perused the record.
7. As noticed, the petitioner has raised many grounds on the question of constitution of Arbitral Tribunal, on the aspect of bias and fairness etc. The petitioner has also raised the point that while appointing the Arbitrator, this Court was not obliged to decide the arbitrability of the dispute. I am only inclined to observe that the judgments cited in this regard by Shri Pancholi are related with exercise of powers under section 11(6) of the Act. This petition is filed under Article 226/227 of the Constitution against an order by which objection of the petitioner under section 13 of the Act is rejected by the Tribunal.
8. I deem it proper to first deal with the objection of the maintainability of this petition, which goes to the root of the matter. In other words, the question of deciding the aspect of procedural impropriety/fairness and competence of Arbitral Tribunal etc. would raise only if the present petition is maintainable. No doubt, by ex parte interim order dated 4-5-2001 passed in this case, the petition was entertained. However, curtains on this aspect are finally drawn by a Seven Judge Bench of Supreme Court in SBP and Co. v. Patel Engineering Ltd., (2005) 8 SCC 618. It is apposite to refer the relevant paragraphs which read 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. 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 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 Tribunal. This appears to be the scheme of the Act. The Arbitral Tribunal is, after all, a 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 the parties. But that would not alter the status of the Arbitral Tribunal. It will still be 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.
46. The object of minimizing judicial intervention while the matter is in the process of being arbitrated upon, will certainly be defeated if the High Court could be approached under Article 227 of the Constitution of India 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, of course, a right of appeal is available to them under section 37 of the Act even at an earlier stage.”
(Emphasis supplied)
9. Justice Dr. D.Y Chandrachud (as His Lordship then was) in Tata Industries Ltd. v. Grasim Industries Ltd., (2010) SCC Online (Bombay) 1740 opined as under:—
“Under section 16 of the Arbitration and Conciliation Act the arbitral tribunal is entitled to rule on its jurisdiction including a ruling on any objections relating to the existence or validity of an arbitration agreement. Under sub-section (5) of section 16 where the arbitral tribunal takes a decision rejecting the plea that it has no jurisdiction, it must continue with the arbitral proceedinss and make an arbitral award. Thereupon under sub-section (6) a party aggrieved by the arbitral award may take an application for setting aside an arbitral award in accordance with section 34. The Act clearly does not contemplate judicial interference at the stage when arbitral proceedings are pending upon a determination made by the Tribunal that it does not lack jurisdiction. The Court is bound to implement the policy and the provision of the law. Hence having regard to the discipline legislated upon by the provisions of section 16 of the Act. the procedural order of the Tribunal holding in essence that it had jurisdiction to entertain the counter-claim of the respondent cannot be questioned at this stage. Consistent with the provisions of sub-section (5) of section 16, the Tribunal would have to continue with the arbitral proceedings and make an arbitral award and the party aggrieved by the arbitral award would be entitled to move an application for setting aside the award under section 34. At this stage, the interference of the Court is no warranted.”
(Emphasis supplied)
10. In view of the judgment of Patel Engineering (supra) and Tata Industries (supra), I am unable to hold that present petition is maintainable. Resultantly, other objections relating to fairness of proceeding, jurisdiction of Arbitral Tribunal, procedural impropriety etc. pales into insignificance. The petitioner can raise said objection before appropriate forum at appropriate stage.
11. As analyzed above, this petition is not maintainable. Liberty is reserved to the petitioner to raise the relevant objections before the appropriate forum at appropriate stage.
12. The petition is dismissed with aforesaid observations. No cost.
Petition dismissed.
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