Author: Mahima, 5th Year student at School of Law, UPES, Dehradun.
Citation: MP No. 2586/2020
Date of Judgment: April 7, 2021
Bench: Prakash Shrivastava, Virender Singh
Original Copy: View
Issues in Question:
- Whether the High Court can terminate the mandate of an Arbitrator under Section 14 of the Arbitration and Conciliation Act, 1996 while exercising limited supervisory jurisdiction under Article 227 of the Constitution of India?
Background of the Case:
- The petitioner and the respondent entered into a contract for Composite Electrical Work for Single Phase Electrification Works of Jabalpur Division of West Central Railway. Owing to a major setback in 2015, the respondent issued a termination notice dated 12.02.2019 and steps under Section 9 of the Arbitration and Conciliation Act, 1996 were initiated for invoking bank guarantee.
- The petitioner sent a legal notice dated 06.08.2019 invoking the arbitration clause and either appointed Mr. Justice (Retd.) D.M. Dharmadhikari, Former Judge, Supreme Court of India as sole Arbitrator or Justice (Retd.) Usha Mehra, Former Judge, Delhi High Court.
- The Chief Project Director intimated the counsel for petitioner that the notice was addressed to the wrong officer via an email dated 23.08.2019. Following the intimation, the petitioner addressed the notice to General Manager, CORE, Allahabad on 26.08.2019.
- The respondent, on 16.09.2019 wrote to the petitioner seeking consent to waive off applicability of Section 12(5) of the Act and later on, via a letter dated 25.09.2019 asked the petitioner to appoint any two of the four names as petitioner’s arbitrators. The petitioner filed a petition on 05.10.2019 under Section 11(4) of the Act of 1996 as respondents failed to appoint the Arbitrator even after petitioner’s notice.
- The General Manager of the Central Organisation for Railway Electrification appointed an Arbitral Tribunal on 19.11.2019 which in its order dated 28.11.2019 directed the parties to submit their pleadings.
- The petitioner raised objection to the constitution of the Arbitral Tribunal and moved the Trial Court with an application dated 22.07.2020 under Section 14 of the Act seeking termination of Arbitrator’s mandate.
- The counsel for petitioner submitted that the mandate of two of the arbitrators should be terminated as two retired railway employees were appointed as Arbitrators but are de jure ineligible to conduct the arbitration under Section 12(5) read with Section 14 of the Act of 1996.
- The counsel for respondent submitted that appointment of retired employees as Arbitrators was permissible under the arbitration clause.
- The Trial Court refused to adjudicate upon termination of mandate of the Arbitrator animadverting the pendency of Section 11 application in the High Court.
Judgment:
- The High Court observed that the petitioner had already filed an application dated 05.10.2019 under Section 11 after the respondents failed to appoint an arbitrator as per the notice issued by the petitioner dated 06.08.2019 when it went further and moved the Trial Court with an application dated 22.07.2020 under Section 14.
- The Court also observed that the prayer under both the petitions is for appointment of an independent Arbitrator and therefore, the Court invalidated parallel proceedings filed by the petitioner.
- The High Court cited the Supreme Court judgment of Jai Singh and Ors v Municipal Corporation of Delhi and Another for elucidating upon the scope of limited supervisory jurisdiction under Article 227 where it was held that jurisdiction granted under Article 227 cannot be exercised for rectifying the errors in the judgment of a court or the arbitral award by a Tribunal exercising its jurisdiction appropriately.
- The Jabalpur Seat of Madhya Pradesh High Court dismissed the appeal while emphasising upon the fact that adjudicating this issue was not under its jurisdiction as it was exercising limited supervisory jurisdiction. Further, the Court observed that the issue can be indubitably adjudicated in the pending application under Section 11 (AC No. 96/2019).
Analysis:
- The judgment of the High Court was smooth and clear where it refused to interfere from adjudicating upon such an issue which can ultimately be resolved under the pending application AC No. 96/2019.
- The High Court laid insistence on the precedent set by the Supreme Court where it was held that correctional jurisdiction can be exercised only when the impugned orders were passed under consequential relinquishment of duty or in egregious desecration of fundamental principles of laws.