INDORE SAHKARI DUGDH SANGH vs ASHUTOSH SHARMA - DIRECTOR
- Court
- Gujarat High Court
C/FA/4935/2023 CAV JUDGMENT DATED: 02/07/2026
Reserved On : 07/05/2026
Pronounced On : 02/07/2026
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 4935 of 2023
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2023
In R/FIRST APPEAL NO. 4935 of 2023
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2024
In R/FIRST APPEAL NO. 4935 of 2023
FOR APPROVAL AND SIGNATURE:
HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA AGARWAL
and
HONOURABLE MR.JUSTICE D.N.RAY
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Approved for Reporting Yes No
==========================================================
INDORE SAHKARI DUGDH SANGH & ANR.
Versus
ASHUTOSH SHARMA - DIRECTOR & ANR.
==========================================================
Appearance:
R P PANSARI(7439) for the Appellant(s) No. 2
MR.DHAVAL C.DAVE, SR.ADVOCATE WITH MR. UDIT N VYAS,
ADVOCATE WITH MR. R.PANSARI, ADVOCATE (9255) for the Appellant(s)
No. 1
MR. R.S.SANJANWALA, SR.ADVOCATE WITH MR ANKIT SHAH(6371) for
the Defendant(s) No. 1
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CORAM: HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE
SUNITA AGARWAL
and
HONOURABLE MR.JUSTICE D.N.RAY
CAV JUDGMENT
(PER : HONOURABLE MR.JUSTICE D.N.RAY)
1. Heard Mr. Dhaval C. Dave, learned Senior Advocate with
Mr. Udit N. Vyas, learned Advocate and Mr. R. P. Pansari,
learned Advocate for the appellant and Mr. R. S. Sanjanwala,
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learned Senior Advocate with Mr. Ankit Shah, learned
Advocate for the respondent.
2. The present appeal arises out of proceedings initiated
under the provisions of the Arbitration and Conciliation Act,
1996 (hereinafter referred to as “ the Act, 1996 ”). The
appellant herein was the original applicant, whereas the
respondents were the original opponents in Commercial Civil
Miscellaneous Application No. 539 of 2021 instituted before
the Commercial Court at Ahmedabad.
3. The appellant had challenged an arbitral award dated
16.07.2021 passed by the learned Sole Arbitrator by filing an
application under Section 34 of the Act, 1996. The
Commercial Court, Ahmedabad, by judgment and order dated
02.03.2023, dismissed the said application. Aggrieved
thereby, the appellant has preferred the present appeal under
Section 37 of the Act, 1996.
4. Brief facts leading to this appeal are as under:-
4.1 The appellant issued a Notice Inviting Tender (NIT)
bearing No. ISDF/Engg/Civil/12-13 dated 29.09.2012 for
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execution of civil, structural, road and allied works, including
supply of labour, materials and ancillary services, in
connection with the construction and completion of a new
dairy plant for Indore Dugdh Sangh. Pursuant to the said
tender notice, several bids were received by the appellant.
According to the appellant, one Mr. S.K. Sodani was found to
be the highest responsive bidder; however, as he allegedly did
not evince interest in undertaking the work, the contract
came to be awarded to respondent No.1, who was stated to be
the second highest responsive bidder. A work order dated
23.02.2013 was thereafter issued in favour of respondent
No.1.
4.2 The work was required to be executed in accordance
with the terms and conditions contained in the tender
documents and the work order. Subsequently, an addendum
agreement dated 30.03.2013 was also executed between the
parties. It is not in dispute that respondent No.1 commenced
the work and, during the course of execution, raised running
account bills from time to time.
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4.3 It is the case of the appellant that, up to the fourth
running account bill, respondent No.1 had not raised any
claim towards reimbursement of service tax and such a claim
was first made in the fifth running account bill and the said
claim was not accepted in view of the terms governing the
contract. It is further the appellant’s case that, despite certain
delays attributable to respondent No.1, extensions and
relaxations were granted from time to time. The original
contractual period contemplated completion of the project on
or before 22.03.2014. However, the work ultimately came to
be completed on 30.11.2017.
4.4 It is the further case of the appellant that having regard
to the delay in completion of the project, liquidated
damages/penalty became recoverable from respondent No.1
under the terms of the contract. The amount of such penalty
was initially assessed at Rs.1,15,50,709/-. It is stated that
certain representations made on behalf of respondent No.1
regarding delay in release of payments were considered by
the appellant and, accordingly, the computation of penalty
was revised.
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4.5 Disputes subsequently arose between the parties in
relation to payment of running account bills, reimbursement
of service tax and other claims arising out of the execution of
the contract. Respondent No.1 invoked the arbitration clause
contained in Clause 68 of the tender conditions by
communication dated 31.08.2019. Thereafter, the disputes
were referred to arbitration and came to be adjudicated by a
learned Sole Arbitrator.
4.6 Upon conclusion of the arbitral proceedings, the learned
Sole Arbitrator passed an award dated 16.07.2021 whereby
various claims preferred by respondent No.1 were partly
allowed. Under the award, respondent No.1 was held entitled
to recover an aggregate amount of Rs.1,97,78,235/- under
different heads. The award also granted interest on certain
components of the claim at the rates specified therein,
together with costs.
4.7 Being dissatisfied with the arbitral award, the appellant
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instituted Commercial Civil Miscellaneous Application No.539
of 2021 before the Commercial Court, Ahmedabad, under
Section 34 of the Act, 1996, seeking to set aside the award. By
judgment and order dated 02.03.2023, the Commercial Court
dismissed the said application and upheld the award.
4.8 It is averred by the appellant that, respondent No.1,
through its advocate, issued a notice dated 31.08.2019
seeking appointment of an arbitrator under Clause 68 of the
tender conditions and subsequently proposed the name of the
Sole Arbitrator by notice dated 05.11.2019. In response, the
appellant addressed a communication dated 14.11.2019,
asserting, inter alia , that under its bye-laws the Divisional
Commissioner, Indore Division, functioned as the ex-officio
Chairman of the organisation and was the authority
competent to act as arbitrator in disputes arising from
contractual transactions. The appellant therefore questioned
the validity of the appointment of the learned Sole Arbitrator
and raised objections regarding his jurisdiction. An
application to that effect was filed before the learned
Arbitrator on 02.02.2020. The said objection came to be
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rejected by the learned Arbitrator by order dated 01.03.2020.
4.9 It is further the appellant’s case that, during the arbitral
proceedings, the learned Arbitrator observed that although
the agreement conferred jurisdiction upon the courts at
Ahmedabad and stipulated Ahmedabad as the seat of
arbitration, it was agreed that the arbitral sittings would be
conducted at Indore for reasons of convenience, while
jurisdiction of the courts at Ahmedabad would remain
unaffected. The appellant has raised a grievance with regard
to certain procedural aspects of the arbitral proceedings.
Thereafter, the matter was taken up before the sole Arbitrator
on 30.04.2021 and witnesses of claimant were examined, and
thereafter, the matter was directed to be listed on 29.06.2021.
It is stated that after examination of the claimant’s witnesses,
the matter was listed for further proceedings, and affidavits of
Mr. Rajendra Singh and Mr. Shivaji Rao Jadhav were tendered
on behalf of the appellant on the said date i.e. 29.06.2021.
4.10 The learned Sole Arbitrator observed that the affidavits
filed under Order XVIII Rule 4 of the Code of Civil Procedure
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(CPC) were not duly attested and, therefore, could not be
treated as evidence and the right of respondent to lead
evidence was closed on 30.06.2021. The learned Sole
Arbitrator rendered the said award dated 16.07.2021. The
appellant thereafter challenged the award under Section 34 of
the Act, 1996.
5. Upon dismissal of the said challenge by the Commercial
Court vide judgment and order dated 02.03.2023, the
appellant has preferred the present appeal under Section 37
of the Act, 1996, with the following prayers:-
(a) Your Lordships may be pleased to allow the Appeal of the
Appellant;
(b) Your Lordships may be pleased to quash and set aside the
impugned judgment dated 02.03.2023 in Comm. C.M.A
No.539/2021 passed by the Ld. Judge. Commercial Court,
City Civil Court, Ahmedabad and further be pleased to
declare/hold that the impugned judgment dated 02.03.2023
in Comm. C.M.A No.539/2021 passed by the Ld. Judge,
Commercial Court, City Civil Court, Ahmedabad was without
jurisdiction;
(c) Your Lordships may be pleased to call for the records and
proceedings of Comm. C.M.A No.539/2021 from the file of the
Ld. Judge, Commercial Court, City Civil Court, Ahmedabad;
(d) Your Lordships may be pleased to pass any further relief
or reliefs as deem fit and necessary in facts of the present
case in the interest of justice;
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6. Mr. Dhaval C. Dave, learned Senior advocate appearing
on behalf of the appellants, at the threshold, raised a
preliminary objection going to the root of the matter,
contending that the learned Sole Arbitrator manifestly lacked
the requisite jurisdiction to adjudicate upon the arbitration
proceedings, and consequently, the award directing
reimbursement of service tax as well as the grant of interest
in favour of the respondent No.1 is legally unsustainable, non-
est in law, and liable to be set aside.
6.1 Mr. Dave, learned Senior advocate, further urged that
the learned Sole Arbitrator grossly erred in failing to
appreciate the material and undisputed fact that there was an
inordinate and unjustified delay on the part of the respondent
in completion of the project within the stipulated timeline as
prescribed under the Work Order. Mr. Dave further submitted
that in terms of the express provisions of the tender
document, a penalty of Rs. 1,15,50,709/- was duly proposed to
be imposed upon the respondent on account of such delay;
however, in view of the respondent's counter-claim pertaining
to delay occasioned by the appellant in making timely
payments, the said penalty was, in the interest of equity,
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reduced to a nominal sum of Rs. 11,76,000/-, equivalent to one
week's levy.
6.2 It was further strenuously argued by Mr. Dave that the
learned Sole Arbitrator, in violation of the principles of
natural justice and the audi alteram partem rule, denied the
appellant the fundamental right to be heard by refusing to
permit any authorized legal representative of the appellant to
remain present during the course of the arbitration
proceedings, thereby occasioning prejudice and effectively
depriving the appellant of the opportunity to adduce and lead
evidence in support of its case. It was further vehemently
contended that the affidavits duly filed in evidence under
Order XVIII, Rule 4 of the Code of Civil Procedure, 1908
(CPC), were altogether accorded no consideration whatsoever
by the learned Sole Arbitrator, rendering the award perverse
and contrary to the settled principles of evidence.
6.3 Mr. Dave, learned Senior Advocate, further argued that
the claimant-respondent raised the claim for reimbursement
of service tax only commencing from the 5th Running Account
Bill (RA Bill), which in fact, is a clear and unequivocal
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admission by conduct on the part of the claimant-respondent,
demonstrating that no such entitlement to reimbursement of
service tax or interest accruing thereupon existed in its
favour.
6.4 Mr. Dave, learned Senior advocate, thereafter,
submitted that there was a failure to correctly construe the
definition of "Court" as enumerated under Section 2(e) of the
Act, 1996, which expressly defines "Court" to mean the
Principal Civil Court of original jurisdiction in a district,
having the competence and jurisdiction to decide the
questions constituting the subject matter of the arbitration.
6.5 Lastly, it was submitted that, in the facts and
circumstances of the present case, since the arbitral award
was passed at Indore, it is the Principal Civil Court of original
jurisdiction at Indore that is exclusively vested with
jurisdiction under Section 34 of the Act, 1996, to entertain
and decide challenges to the said award.
7. Mr. R. S. Sanjanwala, learned Senior advocate appearing
on behalf of the respondent, submitted that a plain reading of
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Clause 6E of the Agreement unequivocally obligated appellant
No. 1 to reimburse the Service Tax amount upon production
of the requisite receipt or challan deposited by the
respondent-Contractor in accordance with the applicable
rules. Mr. Sanjanwala further contended that Clause 6E also
mandated appellant No. 1 to disburse 75% of the value of
each bill raised by the respondent within 5 working days of its
submission, and the remaining 25% within 20 days thereafter,
subject to verification by the appointed Consultant or
Competent Authority, being M/s. Perfect Solutions,
Engineering Consultant.
7.1 Mr. Sanjanwala further submitted that notwithstanding
the persistent delay and default on the part of the appellants,
the respondent continued to discharge its contractual
obligations. Mr. Sanjanwala detailed the defaults attributable
to the appellants, including non-supply of drawings and
designs within stipulated timelines, slow bill verification by
the Consultant, delayed payments under the running bills in
breach of Clause 6C, failure to procure the requisite Pollution
Certificate from the Pollution Control Board resulting in
suspension of construction work for over 5 to 6 months, and
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waterlogging rendering the site unworkable. Despite repeated
written communications and legal notices dispatched by the
respondent bringing these defaults to the appellants'
attention, the same were left wholly unaddressed and
unanswered.
7.2 Mr. Sanjanwala further averred that the cumulative
effect of the appellants' aforementioned defaults occasioned
severe financial stringency upon the respondent, as payments
due under the running bills were not released within the
contractually stipulated timelines, certain amounts were
unlawfully withheld without any authority, and Service Tax
reimbursements mandated under Clause 6E were altogether
denied. Mr. Sanjanwala, thereafter contended that the
respondent is, therefore, legally entitled to reimbursement of
the Service Tax paid, together with interest thereupon, as well
as interest on the delayed payment of running bills and refund
of the withheld amounts.
7.3 In respect of the quantum of the claim, Mr. Sanjanwala
submitted that Clause 2 of the Agreement establishes a clear
hierarchy of precedence among the constituent documents,
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with the Agreement form taking primacy over all other
documents. On the basis of the said contractual framework,
he asserted that the respondent is entitled to a sum of Rs.
1,82,88,627/- towards reimbursement of Service Tax along
with interest at 24% per annum, Rs. 64,78,952.60/- on
account of delayed payment of running bills with interest, and
Rs. 1,43,11,209/- in respect of amounts unlawfully withheld by
the appellants along with interest thereupon, aggregating to a
total claim of Rs. 3,90,78,788.60/-.
ANALYSIS AND FINDINGS :-
8. The contours of a “second look” at an award under
Section 34 of the Act, 1996 are provided in the amended
provisions as under :-
“34. Application for setting aside arbitral award.
(1) Recourse to a Court against an arbitral award may be made only by an
application for setting aside such award in accordance with sub-section (2)
and sub-section (3).
(2) An arbitral award may be set aside by the Court only if—
(a) the party making the application [establishes on the basis of the
record of the arbitral tribunal that] -
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to
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which the parties have subjected it or, failing any indication
thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper
notice of the appointment of an arbitrator or of the arbitral
proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated
by or not falling within the terms of the submission to
arbitration, or it contains decisions on matters beyond the
scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to
arbitration can be separated from those not so submitted,
only that part of the arbitral award which contains decisions
on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral
procedure was not in accordance with the agreement of the
parties, unless such agreement was in conflict with a
provision of this Part from which the parties cannot derogate,
or, failing such agreement, was not in accordance with this
Part; or
(b) the Court finds that -
(i) the subject-matter of the dispute is not capable of
settlement by arbitration under the law for the time being in
force, or
(ii) the arbitral award is in conflict with the public policy of
India.
[Explanation 1.—For the avoidance of any doubt, it is clarified that
an award is in conflict with the public policy of India, only if, -
(i) the making of the award was induced or affected by fraud
or corruption or was in violation of section 75 or section 81;
or
(ii) it is in contravention with the fundamental policy of
Indian law; or
(iii) it is in conflict with the most basic notions of morality or
justice.
Explanation 2. - For the avoidance of doubt, the test as to whether
there is a contravention with the fundamental policy of Indian law
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shall not entail a review on the merits of the dispute.]
[(2A) An arbitral award arising out of arbitrations other than international
commercial arbitrations, may also be set aside by the Court, if the Court
finds that the award is vitiated by patent illegality appearing on the face of
the award:
Provided that an award shall not be set aside merely on the ground of an
erroneous application of the law or by reappreciation of evidence.]
(3) An application for setting aside may not be made after three months
have elapsed from the date on which the party making that application had
received the arbitral award or, if a request had been made under section 33,
from the date on which that request had been disposed of by the arbitral
tribunal:
Provided that if the Court is satisfied that the applicant was prevented by
sufficient cause from making the application within the said period of three
months it may entertain the application within a further period of thirty
days, but not thereafter.
(4) On receipt of an application under sub-section (1), the Court may, where
it is appropriate and it is so requested by a party, adjourn the proceedings
for a period of time determined by it in order to give the arbitral tribunal an
opportunity to resume the arbitral proceedings or to take such other action
as in the opinion of arbitral tribunal will eliminate the grounds for setting
aside the arbitral award.
[(5) An application under this section shall be filed by a party only after
issuing a prior notice to the other party and such application shall be
accompanied by an affidavit by the applicant endorsing compliance with
the said requirement.
(6) An application under this section shall be disposed of
expeditiously, and in any event, within a period of one year from the
date on which the notice referred to in sub-section (5) is served upon
the other party.]”
9. In this regard, it is apposite to refer to the landmark
decision of the Hon'ble Apex Court in Vidya Drolia and
Others v. Durga Trading Corporation , reported in (2021)
2 SCC 1 , wherein the Hon'ble Apex Court has observed and
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held as under:
“71. Complexity is not sufficient to ward off arbitration. In
terms of the mandate of Section 89 of the Civil Procedure
Code and the object and purpose behind the Arbitration Act
and the mandatory language of Sections 8 and 11, the
mutually agreed arbitration clauses must be enforced. The
language of Sections 8 and 11 of the Arbitration Act are
peremptory in nature. Arbitration Act has been enacted to
promote arbitration as a transparent, fair, and just
alternative to court adjudication. Public policy is to
encourage and strengthen arbitration to resolve and settle
economic, commercial and civil disputes. Amendments from
time to time have addressed the issues and corrected the
inadequacies and flaws in the arbitration procedure. It is for
the stakeholders, including the arbitrators, to assure that the
arbitration is as impartial, just, and fair as court adjudication.
It is also the duty of the courts at the post-award stage to
selectively yet effectively exercise the limited jurisdiction,
within the four corners of Section 34(2)(b)(ii) read with
Explanation 1 and 2 and check any conflict with the
fundamental policy of the applicable law. We would
subsequently refer to the ‘second look’ 39 principle which is
applicable in three specific situations dealing with
arbitrability as per the mandate of Section 34 of the
Arbitration Act.
… … … …
85. The Arbitration Act based upon the UNCITRAL Model
Law introduced an entirely new regimen with the objective to
promote arbitration in commercial and economic matters as
an alternative dispute resolution mechanism that is fair,
responsive and efficient to contemporary requirements. One
of the primary objectives of the Arbitration Act is to reduce
and minimize the supervisory role of courts. Accordingly, the
statutory powers of the arbitral tribunal to deal with and
decide jurisdictional issues of non-arbitrability were amplified
and the principles of separation and competence- competence
were incorporated, while the courts retained some power to
have a ‘second look’ in the post-award challenge
proceeding. On the jurisdiction of the court at the referral
stage, views of this Court have differed and there have been
statutory amendments to modify and obliterate the legal
effect of the court decisions.
… … … …
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102. B.N. Srikrishna, J. in Shin-Etsu Chemical Co. Ltd. v.
Aksh Optifibre Ltd. and Another,49 a case relating to
transnational arbitration under the New York Convention,
had invoked the principle of ex visceribus actus for
interpretation of the Arbitration Act. Sub-section (3) of
Section 8 of the Arbitration Act envisages that even in a
situation where an application to the court has been made in
a pending proceeding, arbitration proceedings may
commence and continue and even an award can be made.
Section 16, it was held, incorporates the principles of
separation and competence-competence thereby clearly
indicating that the 49 (2005) 7 SCC 234 arbitrator can
decide his or her own jurisdiction even when the validity of
the main contract or the arbitration agreement is challenged.
Section 34 states that the Court can go into three different
aspects of arbitrability at the post-award stage. Therefore,
the Arbitration Act itself envisages that the arbitral tribunal
should rule on the questions of non-arbitrability subject to the
second look of the court post the award. This helps in
expeditious and quick disposal of matters before the court at
the first stage while reserving the court’s power to examine
the three facets of arbitrability at the third stage. This also
prevents the possibility of a multiplicity of trials, an aspect
highlighted in Sukanya Holdings (P) Ltd.
… … … …
131. Section 34 of the Act is applicable at the third stage
post the award when an application is filed for setting aside
the award. Under Section 34, an award can be set aside – (i)
if the arbitration agreement is not valid as per law to which
the party is subject; (ii) if the award deals with the disputes
not contemplated by or not falling within the submission to
arbitration, or contains a decision on the matter beyond the
scope of submission to arbitration; and (iii) when the subject
matter of the dispute is not capable of settlement by
arbitration under the law for the time being in force. Thus,
the competence - competence principle, in its negative effect,
leaves the door open for the parties to challenge the findings
of the arbitral tribunal on the three issues. The negative
effect does not provide absolute authority, but only a priority
to the arbitral tribunal to rule the jurisdiction on the three
issues. The courts have a ‘second look’ on the three aspects
under Section 34 of the Arbitration Act.
… … … …
154. Discussion under the heading ‘Who decides
Arbitrability?’ can be crystallized as under:
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154.1Ratio of the decision in Patel Engineering Ltd. on the
scope of judicial review by the court while deciding an
application under Sections 8 or 11 of the Arbitration Act, post
the amendments by Act 3 of 2016 (with retrospective effect
from 23.10.2015) and even post the amendments vide Act 33
of 2019 (with effect from 09.08.2019), is no longer applicable.
154.2Scope of judicial review and jurisdiction of the court
under Section 8 and 11 of the Arbitration Act is identical but
extremely limited and restricted.
154.3The general rule and principle, in view of the legislative
mandate clear from Act 3 of 2016 and Act 33 of 2019, and the
principle of severability and competence-competence, is that
the arbitral tribunal is the preferred first authority to
determine and decide all questions of non-arbitrability. The
court has been conferred power of “second look” on aspects
of non- arbitrability post the award in terms of sub-clauses (i),
(ii) or (iv) of Section 34(2)(a) or sub-clause (i) of Section 34(2)
(b) of the Arbitration Act.
154.4Rarely as a demurrer the court may interfere at the
Section 8 or 11 stage when it is manifestly and ex facie
certain that the arbitration agreement is non- existent, invalid
or the disputes are non-arbitrable, though the nature and
facet of non-arbitrability would, to some extent, determine
the level and nature of judicial scrutiny. The restricted and
limited review is to check and protect parties from being
forced to arbitrate when the matter is demonstrably ‘non-
arbitrable’ and to cut off the deadwood. The court by default
would refer the matter when contentions relating to non-
arbitrability are plainly arguable; when consideration in
summary proceedings would be insufficient and inconclusive;
when facts are contested; when the party opposing
arbitration adopts delaying tactics or impairs conduct of
arbitration proceedings. This is not the stage for the court to
enter into a mini trial or elaborate review so as to usurp the
jurisdiction of the arbitral tribunal but to affirm and uphold
integrity and efficacy of arbitration as an alternative dispute
resolution mechanism.”
(Emphasis Supplied)
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10. In the recent report of the High-Level Expert
Committee on Arbitration Law Reforms , constituted under
the Chairmanship of Dr. T. K. Vishwanathan, former
Secretary, Ministry of Law and Justice, Government of India
(Chairman), to examine the working of the Arbitration and
Conciliation Act, 1996, and recommend legislative reforms
thereto, submitted on 07.02.2024, the Committee, inter alia,
made the following recommendations pertaining to “second
look” by courts at the post-award stage, which reads as under:
“1.2.6 Recommend statutory means to minimise
recourse to judicial authorities/Courts in arbitration
centric dispute resolution mechanisms:
(i) While oversight by a court is essential to the
legitimacy and integrity of the arbitral process, its role
must be limited to overall supervision, and a second-
look at the post-award stage. A second-look by courts
must also be within the parameters provided in Section
34 of the Act;
(ii) There is an urgent need to institutionalize the
process of appointment of arbitrators, and minimize
court intervention at the very first stage;
(iii) In any event, the Supreme Court and the High
Courts must endeavour to dispose of applications for
appointment of arbitrators expeditiously, and without
any delay.”
11. Thus, the second look contemplated under Section 34 of
the Act, 1996 is not a review on the merits of the award.
Therefore, before taking a second look on the parameters
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provided in Section 34, we feel it necessary to examine the
specific contention of Mr. Dave that the award is vitiated due
to violation of audi alteram partem. To us, if we have
eventually hold that the procedural safeguard by the Tribunal
we need not enter into further examination of the other
contentions raised by Mr. Dave.
12. A perusal of the award shows that the learned Arbitrator
was fully cognizant of the implications of the order dated
08.03.2021 passed by the Hon’ble Apex Court in Suo Motu
Writ Petition (Civil) No. 3 of 2020 regarding the extension of
limitation on account of the COVID-19 pandemic. However,
despite noting and recording the said order, the right of the
respondents to lead evidence was closed. For the aforesaid
purpose, the observations contained in paragraph Nos. 21 to
25 of the award are reproduced hereinbelow:
“21) The matter was directed to be taken on 27.3.2021 but
with the consent of the parties it was taken on 3.4.2021. Shri
Ayush Sharma was cross-examined and after cross-
examination he was discharged on 3.4.2021. One Mr. Rajiv
Moure was cross-examined on his affidavit on 6.4.2021, by
mistake on top of the cross-examination the date was shown
as 20.3.2021.On 6.4.2021 the Claimant closed his evidence,
Mr. Ashutosh Neemgaonkar submitted that he would file
affidavit of Respondents' witnesses within two weeks. The
matter was directed to be taken up on 22.4.2021.
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22) The parties appeared before me on 29.6.2021, affidavits
of Mr. Rajendra Singh S/o Devi Singh Nayak and Shivaji Rao
S/o Govind Rao Jadhav were filed. The said affidavits were
unattested affidavits. Neither those were attested by Notary
Public or the Oath Commissioner or any Competent
Authority. After going through the provisions of Law,
specially Order 18 Rule 4 CPC, I observed that unattested
affidavits cannot be considered as evidence. As counsel for
the Respondents was not present and there was no legal
evidence from the side of the Respondents, I closed the right
of the Respondents to lead evidence and closed the case for
arguments on 30.6.2021. On 30.6.2021 Mr. Ashutosh
Neemgaonkar on behalf of the Respondents filed an
application for taking notarized affidavits on record and
permit cross-examination. The only reason given in the
application for not filing the notarized affidavits was that
because of the lock-down Notaries or Oath Commissioners
were not available and, therefore, unattested affidavits were
filed. I observed that right of the parties to submit affidavit
and lead evidence was closed then that was end of the
matter. The application filed along with affidavits of Rajendra
Singh and Shivaji Rao was rejected. Parties were heard and
the matter was closed for Award.
23) Section 29A (1) of the Arbitration & Conciliation Act
provides that the Award shall be made within a period of 12
months from the date the Arbitral Tribunal enters upon the
reference. If the Award is not made within the period of one
year, the parties may by consent extend the period of one
year for making Award for a further period not exceeding 6
months. In the present matter the parties were directed to
appear before the Arbitrator on 3.1.2020; however, the
matter could not be completed because of imposition of lock-
down due to Corona and again imposition of lock-down
because of second wave of Corona in 2021, the parties agreed
that the period may be extended for further 6 months.
However, in the matter of suo moto Writ Petition (Civil) No.3
of 2020 in re-cognizance for extension of limitation the
Supreme Court in its order dated 8th March, 2021 observed
as under:-
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"Due to onset of COVID-19 pandemic, this Court took suo
moto cognizance of the situation arising from difficulties
that might be faced by the litigants across the country in
filing petitions/applications/suits/appeals all other
proceedings within the period of limitation prescribed
under the general law of limitation or under any special
laws (Both Central or State), by order dated 23.03.2020
this Court extended the period of limitation prescribed
under the general law or special laws whether
compoundable or not with effect from 15.03.2020 till
further orders. The order dated 23.03.2020 was extended
from time to time. Though, we have not seen the end of
the pandemic, there is considerable improvement. The
lockdown has been lifted and the country is running to
normalcy. Almost all the courts and tribunals are
functioning either physically or by virtual mode. We are
of the opinion that the order dated 23.03.2020 has served
its purpose and in view of the changing scenario relating
to the pandemic, the extension of limitation should come
to an end.
We have considered the future course of action.
We deem it appropriate to issue the following directions:
(1) In computing the period of limitation for any
suit, appeal, application or proceeding, the period
from 15.03.2020 till 14.03.2021 shall stand
excluded. Consequently, the balance period, if
any, shall become available with effect from
15.03.2021.
(2) In case where limitation would have expired
during the period between 15.03.2020 till
14.03.2021, notwithstanding the actual balance
period of limitation remaining, all persons shall
have a limitation period of 90 days from
15.03.2021. In the event the actual balance period
of limitation remaining with effect from
15.03.2021, is greater than 90 days, that longer
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period shall apply.
(3) The period from 15.03.2020 till 14.03.2021
shall also stand excluded in the computing the
periods prescribed under Section 23(4) and 29A
of the Arbitration & Conciliation Act, 1996,
Section 12A of the Commercial Court Act, 2015
and provisions (b) and (c) of Section 13B of the
Negotiable Instruments Act, 1881 and any other
laws which prescribe period(s) of limitation for
instituting proceedings, other limits (within which
the court or tribunal can condone delay) and
termination of proceedings.
(4) The Government of India shall amend the
guidelines for containment zones, to state
'Regulate movement will be allowed for medical
emergencies, provision of essential goods and
services, and other necessary functions, such as,
time bound applications, including for legal
purposes, and educational and job related
requirements.
The suo moto writ petition is disposed of accordingly."
24) On 23.3.2020 the Supreme Court extended the period
of limitation prescribed under general law or special laws
whether compoundable or not with effect from 15.3.2020
till further orders, the order dated 23.3.2020 was
extended from time to time observing that the Court had
not seen end of the pandemic, the lock-down has been
lifted in the country returning to normalcy. The Supreme
Court opined that the order dated 23.3.2020 has served
its purpose and in view of the changing scenario relating
to the pandemic the extension of limitation should come
to an end. The Court observed that in computing the
period of limitation for any suit, appeal, application or
proceedings the period from 15.03.20 till 14.03.21 shall
stand excluded. Consequently, the balance period of
limitation remaining as on 15.03.21, if any, shall become
available with effect from 15.03.21.
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25) In the present matter, I directed the parties to appear
before me on 3.1.2020, one-year limitation was to expire
on 2.1.2021 and extended period of 6 months was also to
expire on 2.7.2021; however, the period between
15.3.2020 to 14.3.2021 i.e., one year is deducted from
the period of limitation the Award can be made within a
period of at least 9 months from today. Under the
circumstances the Award as made is within limitation.
13. Thus, it would be seen that the learned Arbitrator has
recorded a clear finding that “the award can be made within a
period of at least 9 months from today...”.
14. What is not palatable to us is that, despite noting the
fact that ample time was available for the award to be made
and that the respondents had notarized affidavits which they
were seeking to place on record in the proceedings, which
were being conducted right in the midst of the second wave of
the COVID-19 pandemic, the learned Arbitrator closed the
right of the respondents and proceeded to deliver the award.
15. Mr. Sanjanwala, learned Senior Advocate, has handed
over copies of the proceedings before the learned Arbitrator.
The proceedings dated 06.04.2021 are reproduced hereunder:
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“Parties as before.
Shri Rajiv Moure appeared as witness. He was enquired that
whether in addition to the statement made in the affidavit he
wanted to state something further, he stated that he was not
required to state anything. He was put under oath and was
cross-examined by Shri Ashutosh Neemgaonkar. After cross-
examination he was discharged.
The Claimant submits that he has no further witness for
cross-examination.
Shri Ashutosh Neemgaonkar submits that he would file
affidavits of Respondents' witnesses within two weeks from
today and shall also supply advance copies of the same to the
Claimant or his counsel. The date for further examination and
cross-examination shall be fixed after affidavits are received
by the Tribunal.
Let affidavits be filed on 22.04.2021”
16. On a pointed query as to why no proceedings dated
22.04.2021 could be found on record, Mr. Sanjanwala, learned
Senior advocate, submitted that no proceedings were held on
22.04.2021 and, in fact, the next proceedings were held only
on 29.06.2021 on account of the ongoing severe second wave
of the COVID-19 pandemic. The proceedings dated 29.06.2021
are reproduced hereunder:
“29.06.2021
Claimant Ashutosh Sharma with his counsel Shri Ajay
Assudani.
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Shri Shri Shivaji Rao S/o Govind Rao Jadhav is present in
person and represents the Respondent.
The matter was last taken on 06.04.2021 and was directed to
be taken up on 22.04.2021 for filing of the affidavits on behalf
of the witnesses of the Respondent. Mr. Rajendra Singh S/o
Devisingh Nayak has filed his affidavit in evidence. The
affidavit is neither singed by Mr. Rajendra Singh nor has
been attested by any competent person. Such an affidavit is
not an affidavit in the eyes of law and it cannot be taken to be
evidence under Order 18 Rule 4 CPC.
Shri Shivaji Rao S/o Govind Rao Jadhav has also filed his
affidavit. Though the affidavit has been signed by the
deponent but the same has not been attested either by the
Notary Public or any Oath Commissioner or competent
authority. Such an affidavit which is unattested cannot be
considered in the evidence under Provisions of Order 18 Rule
4 CPC. It was made clear on the last date that if the affidavits
are not filed or the witness is not brought or the witnesses
are not kept in attendance for their examination and cross
examination the Arbitrator may proceed to close the right of
the Respondent to lead evidence.
The matter was not taken on 22.4.2021 but after sometime
the affidavits were filed. Though the said affidavits are
absolutely incomplete the matter was directed to be taken up
on 26.6.2021 but at the request of Shri Ashutosh
Neemgaonkar it is taken today. The time was fixed for 2 PM,
it is already 2.30. As the counsel for the Respondent does not
appear and as there is no legal evidence on the record, left
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with no choice I close the right of the Respondent to lead
evidence and close the case for arguments.
Put up on 30.06.2021 at 2.30 PM.”
17. Thus, after closing the right of the respondents to lead
evidence and closing the matter for arguments, the matter
was posted on 30.06.2021 at 02:30 p.m. The order sheet dated
30.06.2021 records the following:
“30.06.2021
Claimant Ashutosh Sharma with his counsel Shri Ajay
Assudani.
Shri Ashutosh Neemgaonkar counsel for the Respondent.
Yesterday taking an exception to the unattested affidavits of
Rajendra Singh and Shivaji Rao I have held that these
affidavits are no evidence under the provisions of Order 18
Rule 4 CPC and cannot be taken as evidence. Nobody was
appearing in the witness box on behalf of the Respondent and
as it was already 2.30 PM I closed the right of the
Respondent to lead evidence and closed the case for
arguments.
Today Mr. Ashutosh Neemgaonkar on behalf of the
Respondent has filed an application for taking notarized
affidavits on record and permit cross examination. The only
reason given in the application for not filing the notarized
affidavits is that because of the lock down Notaries or Oath
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Commissioners were not available and, therefore, unattested
affidavits were filed.
This could have been said yesterday but unfortunately nobody
submitted so. Once the right of a party to submit affidavits
and lead evidence is closed then that was end of the matter.
The application filed along with the affidavits of Rajendra
Singh and Shivaji Rao is rejected.
Parties are heard. The matter is closed for Award.”
18. Thus, from the concluding portion of the order dated
30.06.2021, we can discern a tone of irritability, if not anger,
merely because something which could have been submitted
on 29.06.2021 came to be submitted on 30.06.2021.
19. In our view, the eventual decision to close the right of
the respondents, despite the affidavit being ready and
available for submission before the Tribunal, keeping in mind
that the proceedings were being conducted during the midst
of a severe COVID-19 period, coupled with the fact that the
Tribunal had ample time to pass the award, cannot be
sustained. We hold that the treatment meted out to the
respondents was such as to vitiate the proceedings on account
of the volatility and lack of even temperament demonstrated
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by the learned Arbitrator.
20. In Narinder Singh and Sons v. Union of India
through Divisional Superintendent Engineer-II,
Northern Railway, Ferozepur Division, Ferozepur ,
reported in (2022) 18 SCC 690 , it has been held as under:
“8. Section 19 of the Act states that while the Arbitral
Tribunal is not bound by the Code of Civil Procedure, 1908 or
the Evidence Act, 1872, in the absence of any agreement
between the parties as to the procedure to be followed, the
Arbitral Tribunal may conduct the proceedings in the manner
it considers appropriate.
9. Section 18 mandates that both parties shall be treated
with equality, and each party shall be given a full opportunity
to present his case. Reference can also be made to Sections
24 and 25 and newly enacted Section 29-A of the Act, which
though not applicable to this case, emphasize on quick and
prompt adjudications. Idioms carping “delay” and “hurry” in
adjudication highlight the importance of both speedy disposal
and reasonable opportunity, as both are essential for an even-
handed and correct decision. Neither should be sacrificed nor
inflated, as to prolong or trample a just and fair adjudication.
A pragmatic and common-sense approach would invariably
check any discord between the desire for expeditious disposal
and adequacy of opportunity to establish one’s case.
10. In the context of the present case, we agree with the
High Court that there was unnecessary haste and hurry by
the arbitrator, especially when the respondent had filed the
affidavit by way of evidence on 21-10-2010. Earlier, the
respondent had filed written statement shortly after the
appellant had filed the claim statement. The respondent was
also deprived of reasonable and fair opportunity to cross-
examine Paramdeep Singh (PW-1). The respondent had also
moved an application for waiver of costs, which was rejected
on 21-10-2010, albeit the arbitrator decided to continue the
arbitration to proceed ex parte and adjourned the matter to
9-11-2010 for final arguments. As the evidence of the
respondent by the way of affidavit was not taken on record,
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their contentions and evidence were not considered and thus
debilitated the respondent from stating their case. Given the
aforesaid factual position, there was violation of principles of
natural justice and lack of full opportunity as envisaged by
Section 18 of the Act, thereby, impeding a fair and just
decision. Consequently, the award suffers and is liable to be
set aside in terms of clause (iii) to Section 34(2)(a) as well as
clause (ii) to Section 34(2)(b) of the Act.”
21. Following the aforesaid decision of the Hon’ble Apex
Court, we are of the firm opinion that the award deserves to
be set aside on account of the violation of Section 18 of the
Act, 1996, inasmuch as the respondents were not treated
fairly and equally in the facts and circumstances noted
hereinabove. The present appeal is hereby allowed.
Accordingly, the award dated 16.07.2021 and order dated
02.03.2023 passed in Commercial Civil Misc. Application No.
539 of 2021 are hereby quashed and set aside. No order as to
costs.
22. We hereby issue the following consequential directions:
The parties are free to initiate fresh arbitration or Court
proceedings, if so advised. If the same is initiated
within a period of four (4) weeks from the date of
uploading of a copy of this judgment, then the period
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between the commencement of the previous round of
arbitration and this judgment shall be excluded for the
purposes of calculating the period of limitation under the
Limitation Act, 1963.
(SUNITA AGARWAL, CJ )
(D.N.RAY,J)
BINA SHAH
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