In a judgment of Gujarat HC passed recently , whether any order passed during pendency of arbitration proceedings under the Act of 1996 can be challenged by certiorari under Articles 226 and 227 of the Constitution of India or not.
The Court emphaszied,
“Considering the policy, objects and the provisions of the Arbitration Act of 1996, an order passed during arbitration proceedings by the Arbitral Tribunal cannot be challenged under Articles 226 and 227 as the 1996 Act is a special act and a self-contained code dealing with arbitration”.
The Court relied on the 2005 Supreme Court decision in SBP & Co. v. Patel Engineering where the 7-judge bench has disapproved the stand that any order passed by the Arbitral Tribunal is capable of being corrected by the High Court and has categorically held that such intervention is impermissible. Reference was also made to the 2019 verdict in Deep Industries v. ONGC where the Apex Court iterated that the object of the Act is minimising judicial intervention, and that this important objective should be kept on the forefront when disposing off a 227 petition against proceedings that are deciced under 1996 Act and that policy of the Act is speedy disposal of arbitration cases and the Act is a self-contained code dealing with all cases.
Facts of the Case
A contract was executed on 5th December, 2014 between the petitioner and the respondent for the period between 15th January, 2015 to 31st March, 2017 for establishing a Customer Care Center and accordingly, the petitioner had outsourced customer call services to the respondent.
During the inspection checking on 29th September, 2016 carried out by the petitioner in the office of respondent, it was found that the respondent had manipulated its software program namely, “CZentrix” to show an exaggerated number of persons logged in at the same time than actually appointed to address calls of the customers and by such manipulation in computer program, the respondent used to claim and raise false and inflated invoices based on exaggerated number of persons employed by the respondent for the petitioner’s service call centre. The petitioner on further inquiry came to know that two employees of the petitioner had in connivance with the respondent committed a fraud on the petitioner. A criminal complaint came to be filed against the respondent on 31st March, 2017 for offences punishable under sections 408, 409, 120B, 34 of the Indian Penal Code and sections 65 and 66(D) of the Information and Technology Act, 2008.
It is the case of the petitioner that they had already cleared the invoices till the scam came to light and thereafter, the petitioner stopped making monthly payment since they had paid much more than actually due to the respondent. It is the case of the petitioner that the petitioner continued to avail the services of customer care centre for approximately six weeks from the date of inspection i.e. up to 24th November, 2016. From 24th November, 2016, the petitioner started its own customer care centre.
Pursuant to criminal complaint, chargesheet came to be filed on 7th September, 2018 before the Court of Ahmedabad Metropolitan Magistrate. It is the case of the petitioner that with a view to elude the criminal charges, the respondent issued notice on 30th May, 2017 for invoking arbitration clause that too after filing the quashing petition before the High Court. The petitioner gave reply to such notice on 25th July, 2017.
Thereafter, respondent filed petition under section 11 of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator. The High Court vide order dated 9th February, 2018 appointed retired Judge of this Court, Justice D.A. Mehta to resolve the disputes between the parties keeping all the contentions open to be considered by the learned arbitrator. Since the arbitrator resigned, this Court appointed Justice J.M. Panchal, former Judge of Supreme Court of India, as the sole arbitrator.
The respondent thereafter filed his statement of claim and the petitioner filed his counter claim against the same. The petitioner also made an application seeking certain documents from the respondent which is still pending for consideration by the learned arbitrator. The Arbitral Tribunal vide order dated 19th December, 2018 directed to take on record the preliminary statement of defense and counter claim and observed that it would be open for the petitioner to amend the same in accordance with law. After hearing the parties, the Arbitral Tribunal vide order dated 14th February, 2019, dismissed the preliminary objection application filed by the petitioner. Being aggrieved by the said order rejecting the application filed by the petitioner raising preliminary objection, the petitioner has preferred the present petition.
The bench observed
The Gujarat High Court took stock of the provisions of the Arbitration Act including, inter alia, Section 16 on the Competence of an arbitral tribunal to rule on its jurisdiction, Section 34 dealing with the Application for setting aside an arbitral award, and Section 37 regarding “Appealable order”. “The above provisions of the Act, 1996 provides for complete procedure as an alternative to normal procedure for adjudication of disputes before the Civil Court under the provisions of the Code of Civil procedure,1908”.
“It would be open for both the sides to raise their contention on merit before the appropriate forum at the appropriate time in accordance with the law”, the Court ruled.
The petition was thus dismissed.
Read the Judgment here: