Full Judgment Text
$~32
* IN THE HIGH COURT OF DELHI AT NEW DELHI
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Date of Decision: 13 May, 2022
+ O.M.P. (T) (COMM.) 31/2021
PRIME INTERGLOBE PRIVATE LIMITED ..... Petitioner
Through: Mr. Gaurav Gupta, Mr. Nikhil Kohli,
Ms. Ritika Gambhir Kohli and Ms.
Aman Prasad, Advocates.
versus
SUPER MILK PRODUCTS PRIVATE LIMITED ..... Respondent
Through: Mr. Aseem Chaturvedi and Mr.
Shivank Diddi, Advocates.
CORAM:
HON'BLE MR. JUSTICE SANJEEV NARULA
J U D G M E N T
SANJEEV NARULA, J. ( Oral ):
I.A. No. 3810/2021 (seeking condonation of delay of 564 days in filing the
present accompanying petition)
1. In light of the relaxation of limitation granted through several orders of
the Supreme Court vide Suo Moto W.P. (C) 3/2020, Re: Cognizance for
extension of limitation, and also for the grounds and reasons stated in the
application, the delay of 564 days in filing the present petition, is condoned
and the application is allowed.
2. The application stands disposed of.
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3. The Petitioner/ counter-claimant could not file its counter-claims
within the prescribed time during the course of the arbitral proceedings before
the Sole Arbitrator – Hon’ble Ms. Justice Pratibha Rani (Retd.), former Judge
of this Court, who was unilaterally appointed by the Respondent. With the
Respondent deciding not to pursue its claims and inability of Petitioner to
raise any counter-claim(s), the Arbitrator terminated the proceedings. In this
in this background, Petitioner relying on the law as laid down in Perkins
1
Eastman Architects DPC and Anr. v. HSCC (India) Ltd. , has preferred the
present petition seeking appointment of an independent substitute Arbitrator,
for adjudication of its counter-claims.
- Statutory provisions invoked – Section 14 r/w Section 15 of the
Arbitration and Conciliation Act, 1996 [ hereinafter “ the Act ”].
nd
- Relevant Order of the Tribunal – Termination Order dated 22 August,
2019 passed by the Sole Arbitrator [ hereinafter “ Termination Order” ] .
B RIEF F ACTS
4. The facts necessary for deciding the present lis are set forth in seriatim
as under: -
4.1. Prime Interglobe Pvt. Ltd. [ hereinafter “ PIPL ”] entered into 12
Franchise Agreements [ hereinafter “ FAs ”] with Super Milk Products Pvt.
Ltd. [ hereinafter “ SMPPL ”]. In addition to FAs, parties also executed one
rd
‘Master Franchise Agreement’ dated 03 October, 2016 [ hereinafter
“ MFA ”].
1
2019 SCC OnLine SC 1517
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4.2. On 27 May, 2019, SMPPL terminated FAs which was objected to by
PIPL leading to disputes between the parties. SMPPL invoked arbitration vide
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letter dated 06 June, 2019 and unilaterally appointed the Arbitrator.
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4.3. In the first hearing before the Arbitrator on 12 June, 2019, SMPPL
filed an application under Section 17 and PIPL filed an application under
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Section 16 of the Act. During the course of second hearing on 14 June, 2019,
an offer was made by PIPL to comply with some of the prayers made in the
application under Section 17. The same were accepted by SMPPL and the
matter was listed for arguments on afore-noted applications. Vide
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communication dated 13 July, 2019 addressed to the Arbitrator, SMPPL
sought extension of time for filing Statement of Claim [ hereinafter “ SOC ”]
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which was allowed and the next date of hearing was fixed as 17 August,
2019.
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4.4. In the meantime, on 27 July, 2019, SMPPL wrote a letter to the
Arbitrator stating that it did not wish to file its SOC or pursue its monetary
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claim under the FAs and prayed that the Consent Order dated 14 June, 2019
passed in the application under Section 17 of the Act, be passed as a final
award in favour of the Claimant. Relevant portion of the said correspondence
reads as under: -
“ Against this background, we state, that the Claimant does not wish to further
pursue its monetary claims under the 12 Franchise Agreements forming
subject matter of the present arbitral proceedings and prays that the Consent
Order dated 14 June 2019 be passed as a final award in favour of the
Claimant in the Application under Section 17 of the Act.
All rights and contentions of the Claimant/our Client under the MFA
including claims and dues are expressly reserved and nothing stated
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hereinabove shall be deemed to be an admission or waiver of claims on part
of the Claimant for its claims under the MFA. The Claimant further expressly
reserves its rights to pursue its claims under the MFA before the appropriate
forum.
In this light, the Claimant does not wish to file a Statement of Claim, and
humbly prays that the Hon'ble Tribunal, appropriate orders on the next date
of hearing.
The Claimant reserves its right to claim costs of the arbitral proceedings and
the computation of the same shall be shared at the stage of passing of the final
award. ”
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4.5. On 16 August, 2019, PIPL addressed a letter to the Arbitrator stating
that the arbitral proceedings are rendered infructuous in absence of any claim
and the Tribunal is functus officio . Relevant part of the said letter reads as
under: -
“ We state that the present proceedings have been rendered infructuous as the
Claimant has refused to make a Claim before the Hon’ble Tribunal. We
further state that this Hon’ble Tribunal has not adjudicated any matter
arising out of or in connection with the disputes among the parties. It is
further stated that the Claimant’s application under Section 17, Arbitration
& Conciliation Act, 1996 has already been rendered infructuous in view of
the consent terms agreed between the Parties and recorded in the order dated
14.06.2019.
In view of the above, we state that the present proceedings stand terminated
and consequently this Hon’ble Tribunal is functus officio on account of the
refusal of the Claimant to pursue its claims.
It is clarified that there has been no adjudication or determination of any of
the claims and/or defences in the present proceedings. The Respondent is
therefore entitled to, and expressly reserves the right to agitate its rights and
contentions including any claims, counter-claims and/or defences in
accordance with law under the said Agreements before the appropriate forum
of competent jurisdiction. ”
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4.6. On 17 August, 2018, during the third hearing, the Arbitrator gave
PIPL an opportunity to file its claims and during the course of hearing, PIPL
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submitted that it was examining the matter.
4.7 On the same date, PIPL addressed a communication to the Arbitrator
stating that since there is no claim on behalf of SMPPL, the arbitral
proceedings are liable to be terminated under Section 25( a ) of the Act, and
there has been no adjudication of the rights or disputes in the present
proceedings with respect to the 12 FAs. PIPL also reiterated that it had not
given up any rights under the FAs, including right to raise claims/ counter-
claims and relied upon the judgment of this Court in Union of India v. Arun
2
Kumar Gupta . Relevant portion of the afore-said communication is
reproduced below: -
“ 1. The Respondent categorically states that it has not waived or given up any
rights available to it under the said 12 Franchise Agreements with respect to
raising any claims/counter claim against the Claimant;
2. The termination of the present proceedings under Section 25(a) of the
Arbitration and Conciliation Act, 1996, on account of the refusal of the
Claimant to file a statement of claim or pursue its Claims under the 12
Franchise Agreements, cannot in any manner whatsoever, amount to
foreclosure of the rights of the Respondent to raise claims under the said
Agreements in future as there has been no adjudication of any rights of the
parties or the disputes thereto, in the present Arbitral proceedings.
3. The Respondent categorically reserves its rights to raise any claims against
the Claimant herein, under the said Agreements in future, as also stated in
the email dated 16.08.2019;
xx … xx … xx
5. In light of the above, it is humbly submitted that as there is no claim before
the Arbitral Tribunal on behalf of the Claimant, the proceedings are to be
terminated under Section 25(a) of the Arbitration and Conciliation Act, 1996,
and there has been no adjudication of the rights or disputes in the present
2
2018 SCC OnLine Del 8285
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proceedings with respect to the 12 Franchise Agreements, and the
Respondent has the right to pursue its claims under the said agreements, in
accordance with law at the appropriate stage. ”
Impugned Termination Order
4.8. The Arbitrator considered the e-mail communications extracted
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hereinabove and passed the impugned Termination Order on 22 August,
2019 holding that in absence of SOC under the FAs, the mandate of the
Arbitral Tribunal stands terminated under Section 25( a ) of the Act. The
operative portion of the Order, reads as follows: -
“ The Claimant has not filed any Statement of Claim under the 12 Franchise
Agreements (referred to above) and no dispute for adjudication is pending
before the Tribunal. Therefore, this Tribunal need not delve upon the
contentions raised on behalf of the Respondent. The contents of the emails
sent by the parties have been extracted hereto above only to straighten the
record. In the given circumstances as there is no Statement of Claim before
this Tribunal under the 12 Franchise Agreements, the proceedings are
terminated under Section 25(a) of the Arbitration and Conciliation Act, 1996.
The parties are left to bear their own cost. ”
4.9. Aggrieved by the aforesaid Order, PIPL has approached this Court
seeking appointment of an independent substitute Arbitrator for adjudication
of its counter-claims against SMPPL under the FAs.
C ONTENTIONS OF THE P ARTIES
On behalf of PIPL:
5. Mr. Gaurav Gupta, counsel for Petitioner/ PIPL makes the following
submissions: -
5.1. By way of the Termination Order, the Arbitrator terminated the
proceedings under Section 25( a ) of the Act qua the rights of SMPPL and not
that of PIPL under Section 25( b ). If the arbitral proceedings have been
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terminated due to non-prosecution or non-filing of SOC under Section 23 of
the Act, it does not ipso facto bar the filing of counter-claims or adjudication
thereupon by the Tribunal, in accordance with law. A counter-claim is, by its
very nature, an independent claim
5.2. Although, the Arbitrator relies on Section 25( a ) of the Act, for
termination of the proceedings, however, given the facts of the present case,
Section 32(2)( a ) of the Act is applicable. Section 25( a ) applies in case of
‘ default ’ on part of the Claimant (SMPPL herein) to communicate its SOC,
whereas, Section 32(2)( a ) of the Act is applicable when the Claimant
‘ withdraws his claim ’ and as such, the facts of the present case attract Section
32(2)( a ).
5.3. It is well-settled that an order terminating the arbitral proceedings under
3
Section 32 of the Act, can be challenged before the Court under Section 14.
In the alternative, even if the Termination Order is considered as termination
of proceedings under Section 25( a ) of the Act, then also, PIPL can invoke
4
Section 14 of the Act.
5.4. The Sole Arbitrator was unilaterally appointed by SMPPL. The Apex
Court, in a catena of cases, has held that unilateral appointment of an Arbitral
3
Lalit Kumar v. Dharmadas , (2014) 7 SCC 255. (pp.4-6 paras 10-15) and PCL Suncon v. NHAI , 2021
SCC OnLine Del 313 (pp. 10-11 paras 42-43).
4
Gangotri Enterprises Limited v. NTPC Tamil Nadu Energy Company Limited , MANU/DE/0115/2017
(pp. 5-7 paras 25 to 27); Bridge and Roof v. Guru Gobind Singh Indraprasth University ,
MANU/DE/4107/2017 (pp. 2-3 paras 9 – 12); M.L. Lakhanpal v. Darshan Lal , MANU/DE/0366/2018 (pp.
6-10 paras 35 to 42); and Sharda Engineering v. South East Central Railway , 2017 SCC OnLine Chh 516
(pp. 3 para 4).
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Tribunal is impermissible in law and Court has the power to appoint an
5
independent Arbitrator under Section 14 r/w Section 15 of the Act. In that
light, this Court has the power to appoint an independent substitute Arbitrator
to adjudicate the counter-claims of PIPL.
On behalf of SMPPL
6. Per contra , Mr. Aseem Chaturvedi, counsel present today as well as
Mr. Darpan Wadhwa, Senior Counsel who had made submissions on behalf
of Respondent/ SMPPL on previous occasions, argued as follows: -
6.1. The Arbitral Tribunal stands terminated by the erstwhile Arbitrator and,
as on date, no Tribunal exists, as such, there can be no substitution, as prayed
for. The same can also be inferred from a bare perusal of the prayer sought
for by PIPL, wherein it has preferred not to challenge the legality of the
Termination Order passed by the Tribunal but has merely prayed for
appointment of a substitute Arbitrator. In the present case, upon the passing
of the Termination Order, the erstwhile Arbitrator became functus officio .
Thus, the present petition filed under Section 14 r/w Section 15 is not
maintainable.
6.2. The Termination Order was passed under Section 25( a ) of the Act that
results in termination of arbitral proceedings, and not merely the mandate of
the Arbitrator. In terms of Section 15 of the Act, power of a Court to appoint
5
TRF Limited v. Energo Engineering Projects Limited , (2017) 8 SCC 377; Bharat Broadband Network
Limited v. United Telecoms Limited , (2019) 5 SCC 755; Perkins Eastman Architects DPC and another v.
HSCC (India) Ltd. , 2019 SCC OnLine SCC 1517.
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a substitute Arbitrator is only in a case where “ the mandate of the arbitrator
terminates ”, and the said provision does not vest a generic power for
appointment of a substitute Arbitrator in any/ all cases, and certainly not in
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case where the proceedings themselves have been terminated.
6.3. PIPL has proceeded on an incorrect understanding of the law by
contending that owing to the non-obstante clause contained in Section 25( a ),
a termination thereunder is of the mandate of the Arbitrator and not of the
arbitral proceedings. This interpretation is incorrect and contrary to the bare
legislative text. The termination under Section 25( a ) of the Act is akin to a
termination under Section 32. Further, the liberty granted under Section 25(a)
extends only to the Claimant (SMPPL) and not the Respondent (PIPL). Thus,
PIPL cannot avail itself of the exception contained in Section 25( a ) of the Act.
6.4 Even assuming that PIPL, for the purposes of its counter-claim(s), was
to plead that it qualified as a ‘claimant’ and is entitled to benefit thereon, it
ought to have made an application before the Arbitrator, and not before this
Court. Admittedly, PIPL has not approached the Arbitrator with any such
application.
6.5. PIPL chose not to prefer a counter-claim before the Arbitrator and the
same can be inferred from the fact that PIPL neither contested nor raised any
counter-claim(s) before the Tribunal, despite being given an opportunity by
6
PCL Suncon ( supra )
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the Arbitrator. PIPL, in fact, explicitly stated (as is evident from the records)
that it would raise a counter-claim, if any, at an appropriate stage in future.
6.6. Further, the conduct of PIPL disentitles it to seek any indulgence from
this Court. In an on-going arbitral proceeding, between the same parties,
before another Tribunal appointed by this Court, the arbitral fee is unpaid by
PIPL owing to liquidity concerns, leaving SMPPL to bear the entire cost of
the arbitral proceedings.
6.7. Reliance placed on the judgment of the Supreme Court in Perkins
Eastman ( supra ) is misplaced since the judgment was passed in November
2019, while the appointment of the Arbitrator took place in June 2019 and
arbitral proceedings stood terminated vide Termination Order, at which time,
the law permitted unilateral appointments.
A NALYSIS
7. The questions that arise for determination are: (a) whether PIPL has
rightly invoked the remedy under Section 14/ 15 of the Act, particularly when
the Termination Order is ostensibly passed under Section 25( a ) of the Act; (b)
whether PIPL should be directed to approach the erstwhile Arbitrator, who
passed the Termination Order, and whether such an Arbitrator would have the
power to recall the said order?
8. In order to adjudicate upon the above-stated questions, that centre
around the interpretation of Sections 25( a ) and 32 of the Act, it is essential to
first analyse the above-said two provisions.
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Contours of Section 25(a) of the Act
9. Section 25( a ) of the Act, primarily deals with termination of
proceedings upon default of a party, and reads as under: -
“ 25. Default of a party. — Unless otherwise agreed by the parties,
where, without showing sufficient cause,—
(a) the claimant fails to communicate his statement of claim in
accordance with sub-section (1) of section 23, the arbitral tribunal shall
terminate the proceedings ”
10. On a bare reading of the above provision, it emanates that Section 25( a )
is applicable in case of ‘ default of a party ’. The said provision contemplates
that where the claimant, without showing sufficient cause, fails to
communicate his statement of claim, within the time as stipulated under
Section 23, the Tribunal shall be empowered to terminate the proceedings.
Section 25 of the Act is triggered in case of failure on part of a party to show
sufficient cause. It results in either termination of proceedings under sub-
clause (a) or, continuation of arbitration proceedings, notwithstanding the
default under sub-clauses (b) and (c) of Section 25 of the Act.
11. The ambit of Section 25( a ) of the Act and remedy available with a party
against such order has been discussed in the decision of the Supreme Court in
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SREI Infrastructure Finance Ltd. v. Tuff Drilling P. Ltd. . In the said case,
at first sitting, when both the parties appeared, the Arbitral Tribunal directed
the Respondent therein to file its SOC. However, subsequently, owing to
default on part of the Respondent, Arbitrator terminated its right to file SOC
under Section 25( a ) of the Act. The Respondent then filed an application
seeking recall of the termination order and condonation of delay in filing
7
(2018) 11 SCC 470.
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SOC. The Appellant challenged the maintainability of the application on the
ground that by virtue of the termination order, the Tribunal had become
functus officio and hence, it could not recall its own termination order. The
Tribunal rejected the application of the Respondent and held that it cannot
recommence the arbitral proceedings. The High Court set-aside the
termination order passed by the Arbitrator and remitted the matter back to it
to decide the application afresh. The Supreme Court dismissed the appeal and
held that the Tribunal had committed an error in holding that it had no
jurisdiction to recall its termination order passed under Section 25( a ). On
‘ sufficient cause ’ being shown, the Tribunal can recall the order and
recommence the arbitration proceedings.
Contours of Section 32(2) of the Act
12. Section 32(1) of the Act elucidates the situations when arbitral
proceedings shall be terminated viz. by way of a final arbitral award or by an
order of the Tribunal under sub-section (2) of Section 32. The three situations
where the Tribunal can terminate the arbitration proceedings envisaged under
the Section 32 are as follows: -
(i) when the Claimant “ withdraws his claims ”,
(ii) when the parties “ agree on termination of the proceedings ”, or
(iii) when the Tribunal finds that the “ continuation of the proceedings has
for any other reason become unnecessary or impossible ”.
Whether PIPL could have invoked Sections 14/ 15 of the Act?
13. Now the question arises regarding the provision that is applicable to the
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impugned Termination Order and whether PIPL can seek appointment of a
8
substitute Arbitrator. In Lalit Kumar v. Dharmadas , the Arbitrator
terminated the proceedings on account of lack of interest being shown by the
Claimant to pursue arbitration. The original Applicant wrote to the Arbitrator
seeking revocation/ modification of termination order issued by him and also
filed a petition seeking appointment of an Arbitrator under Section 11 of the
Act. The said petition was dismissed. The Supreme Court held that the
termination order issued by the Arbitrator, fell within the scope of Section
32(2)( c ) of the Act i.e., the continuation of the arbitration had become
‘impossible’ and 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) ”.
9
14. In M.L. Lakhanpal v. Darshan Lal , a coordinate bench of this Court
dealt with challenge to rejection of applications for filing and extension of
time to file SOC. In arbitration proceedings, several opportunities were
granted to the Petitioner to file its SOC, however, when the Petitioner failed
to appear and file the claim, the Tribunal closed right the right to file its SOC.
Applications seeking recall of the said order moved by the Petitioner were
also rejected. In challenge to the said order, this Court relied upon Lalit
Kumar ( supra ) and held that the order passed by the Arbitrator closing the
right of the Petitioner to file its SOC can be challenged either under Section
34 or Section 14(2) of the Act. Relevant portion of the said decision is as
follows: -
8
(2014) 7 SCC 255.
9
2018 SCC OnLine Del 6833.
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“ 41. Therefore, the order passed by the Sole Arbitrator closing the right
of the petitioner to file the Statement of Claim and rejecting his
application seeking recall of the said order could either be challenged
under Section 34 of the Act or under Section 14(2) of the Act…. ”
15. In Gangotri Enterprises Ltd. v. NTPC Tamil Nadu Energy Company
10
Ltd. , the Petitioner sought time to file its SOC on five occasions but failed
to do so. Consequently, the Tribunal closed its right under Section 23 r/w
Section 25 of the Act. A petition under Section 14(1) of the Act was filed
seeking appointment of a substitute Arbitrator. This Court, placing reliance
on Lalit Kumar ( supra ) held that the appropriate recourse/ remedy for the
Petitioner to challenge the order closing its right to file its claims was
amenable to challenge under Section 14 of the Act. Relevant portion of the
said decision reads as follows: -
“ 26. The decision in the case of Lalit Kumar V. Sanghavi (supra) also
turned on the principle that the petitioner could not be rendered remediless
on account of the arbitrator terminating the proceedings. In that case no
recourse would be available to the petitioner under Section 34 of the Act
and thus the question would have to be considered within the scope of
Section 14 of the Act. Thus, this decision applies only in cases where the
arbitral proceedings are terminated by the arbitrator other than by making
an award, that is, under Section 32(2) of the Act; it is clearly not applicable
where the arbitral proceedings are terminated by virtue of Section 32(1) of
the Act, that is, by making of an award.
27. Thus, the second question, whether the order dated 28.04.2016 closing
the right of GEL to file its statement of claims and thereby terminating the
proceedings qua such claims, is amenable to challenge under Section 14 of
the Act, is answered in the affirmative. In cases where the arbitrator's
mandate is terminated, a re-course to Section 14(2) of the Act would be
available provided a specific remedy is not provided under the Act. In the
present case, the arbitrator's mandate to adjudicate any claims of GEL
under the Agreement, stands terminated. Concededly, the order dated
28.04.2016 as also the final award that may be passed, in as much as it
would not include GEL's claim, would not be amenable to challenge under
Section 34 of the Act. ”
10
2017 SCC OnLine Del 6560.
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16. It has been argued that, as on the date of the Termination Order, there
was no SOC filed by the SMPPL and therefore, the appropriate provision
applicable is Section 25( a ). In the opinion of the Court, this is not the correct
interpretation. Section 25( a ) is attracted under a different factual situation. As
discussed above, the primary distinction between Section 25( a ) and Section
32(2)( a ) of the Act is that the former is triggered when the claimant fails to
communicate his SOC as per the prescribed timelines under Section 23 i.e.,
there is a default on part of the claimant, and the latter kicks in when the
Tribunal finds that the continuation of the proceedings has, for any other
reason, become “unnecessary or impossible” . The present case is not one
wherein SMPPL’s claim(s) were terminated and/ or struck off on account of
failure to file SOC despite opportunities. Rather, SMPPL/ Claimant has
consciously chosen to withdraw/ give up its claim thereof. Hence the
termination could not have been under Section 25( a ), as mentioned by the
Arbitrator vide its Termination Order, rather under Section 32(2)( a ) of the
Act, notwithstanding the fact that Arbitrator has relied upon Section 25( a ) of
the Act. It is a well-settled position in law that non-mentioning or wrong
mentioning of a provision of law is inconsequential. Moreover, the
circumstances leading to passing of the Termination Order makes the nature
of the said Order absolutely evident. SMPPL had consciously decided not to
pursue its claims and made a request to the Arbitrator for disposal in terms of
the interim directions.
17. In the instant case, there may not have been a SOC before the Arbitrator
as on the date of termination yet, the claims have been withdrawn. SMPPL
expressly prayed that their financial claims should not be adjudicated, thereby
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indicating to the Tribunal that they are giving up their claims. The withdrawal
thus, clearly falls within the ambit of Section 32(2)( a ) of the Act. Once
SMPPL/ Claimant withdrew its claims and there was no counter-claim set up
by PIPL on that date, continuation of proceedings became “ unnecessary or
impossible” and were terminated under Section 32(2) of the Act. Once the
arbitration proceedings were terminated, the mandate of the Arbitral Tribunal
stood terminated. In that light, the question whether the proceedings stood
validly terminated is for this Court to determine in the instant petition under
Section 14 of the Act.
18. Mr. Chaturvedi has also laid emphasis on the words “ unless the
Respondent objects to the order ” appearing in the provision to argue that
Section 32(2)( a ) is not applicable. This submission is devoid of merit as, at
the time of withdrawal of the claims, PIPL did not raise any objection.
19. At this juncture, it must also be noted that SMPPL had argued that in
light of the judgment of the Supreme Court in SREI Infrastructure ( supra ),
the remedy, if any, is only to seek review/ recall of the Termination Order.
This is not the correct reading of the judgment. In the said judgment, the
Supreme Court held that an application seeking recall of termination under
Section 25( a ) of the Act is maintainable, however, that cannot be interpreted
to mean that the proceedings under Section 14 of the Act cannot lie. The Court
finds no ground to relegate PIPL to the Arbitral Tribunal to seek recall of the
Termination Order. In any event, as already discussed above, the order passed
by the Tribunal, terminating the proceedings is not under Section 25( a ) of the
Act and therefore, the objection of SMPPL regarding maintainability of this
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petition, by placing reliance upon the decision in SREI Infrastructure ( supra )
is misconceived. On the contrary, even if the Termination Order is construed
to be passed under Section 25( a ), yet the instant petition, under Section 14 of
the Act is maintainable.
Whether PIPL should be redirected to the erstwhile Arbitrator and whether
the Arbitrator has the power to recall the Termination Order?
20. Next, question arises as to whether the same Arbitral Tribunal can be
requested to adjudicate the counter-claims which the PIPL intends to file. The
Court finds merit in the contention of PIPL that all throughout the
proceedings, PIPL had reserved its right to file counter-claim and did not give
th
up this right. This is apparent from the communication dated 17 August,
2019 wherein PIPL categorically reserved its right to raise counter-claims
against the SMPPL. In the said communication, PIPL was not absolutely clear
as to whether it intended to file its claim before the Arbitrator, as it only stated
that “ Respondent has the right to pursue its claims under the said
communication, in accordance with law, at the appropriate stage”. In any
event, before terminating the proceedings qua counter-claims of PIPL, the
Tribunal ought to have put PIPL to show cause. Now, with that termination,
the entire proceedings altogether have been closed and the entire record of the
arbitral proceedings have been returned to SMPPL. In view of the judgment
of the Supreme Court in Perkins Eastman ( supra ), the erstwhile Arbitrator is
de jure ineligible to resume her office as her appointment was made
unilaterally by SMPPL, in violation of Section 12(5) of the Act. Therefore,
the Court is now empowered to appoint a substitute Arbitrator.
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:23.05.2022
20:43:56
O.M.P. (T) (COMM.) 31/2021 Page 17 of 19
Conclusion
21. PIPL has unadjudicated counter-claims which the erstwhile Arbitral
Tribunal cannot decide having being appointed unilaterally, in view of the
legal position established by the Supreme Court in Perkins Eastman ( supra ).
The remedy of arbitration available to PIPL cannot be rendered inviable and
PIPL cannot be left remediless. The prayer sought in the present petition must
be granted and accordingly, an independent substitute Arbitrator should be
appointed to adjudicate the disputes between the parties.
22. In view of the foregoing, the present petition is allowed and Hon’ble
Mr. Justice D.K Jain (Retd.), former Judge of the Supreme Court [Contact
No.: +91 9999922288] is appointed as the common Sole Arbitrator for
adjudication of counter-claims of PIPL arising from and under the FAs
referred above.
23. The parties are directed to appear before the Sole Arbitrator as and
when notified. This is subject to the Arbitrator making necessary disclosure(s)
under Section 12(1) of the Act and not being ineligible under Section 12(5)
of the Act.
24. The Arbitrator will be entitled to charge their fee in terms of the
provisions of the Fourth Schedule appended to the Act.
25. All rights and contentions on merits, are left open.
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:23.05.2022
20:43:56
O.M.P. (T) (COMM.) 31/2021 Page 18 of 19
26. The present petition is allowed in the afore-said terms.
SANJEEV NARULA, J
MAY 13, 2022
as
rd
(Corrected and released on: 23 May, 2022)
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:23.05.2022
20:43:56
O.M.P. (T) (COMM.) 31/2021 Page 19 of 19