Madras High Court Arbitration Rules, 2020 Validity Challenged

Key takeaways

● A writ petition challenging the Madras High Court Arbitration Rules, 2020 as ultra vires the Arbitration and Conciliation Act, 1996 and the Commercial Courts Act, 2015 was accepted by the Madras High Court on May 2, 2021.

● The matter has been set for hearing on July 2, 2021, by a Division Bench consisting of Chief Justice Sanjib Banerjee and Justice Senthilkumar Ramamoorthy.

● Sivesh Varshan is the person who has filed the petition.

Introduction

A prayer was made before the Madras High Court to issue a writ declaring that the "Madras High Court (Arbitration) Rule 2020," framed in the exercise of Section 82 of the Arbitration and Conciliation Act 1996 and published in the Official Gazette of the State of Tamil Nadu on 17.03.2021, is ultra vires of the plenary statutes of the Arbitration and Conciliation Act 1996 and Commercial Courts Act 2015 as amended up to date and void ab initio, and to grant relief as the Court thinks fit.

Despite the fact that the procedure contemplated by the Madras High Court Arbitration Rules 2020 in a proceeding under Section 34 is designated as a summary, it does not confer any right on the effective party to request termination of the proceedings under Order XIIIA of the Civil Procedure Code.

As a result, a writ petition has been filed in the Honourable Court, invoking the Court's extraordinary jurisdiction under Article 226 of the Indian Constitution.

Clauses in the Petition

All of the Arbitration and Conciliation Acts of 1996, as well as the Information Technology Act of 2000, were passed in the exercise of legislative power under Entry 13 of the Union list in the VII Schedule of our Constitution, in response to a United Nations Assembly Resolution.

The High Court can make rules consistent with the Act as to the proceedings before the courts under the Act, according to Section 82 of the arbitration and conciliation act.

The Union of India is designated as the appropriate government for making appropriate rules for the purposes of Section 2 (e) of the Information Technology Act 2000. Under the said Act, no further delegation to powers of any responsible government is possible. As a result, the only competent authority to prescribe the procedure for the purposes of Section 6 of the said Act is the Union of India.

The parliament also passed the Commercial Courts Act 2015, which went into effect on October 23, 2015. It is respectfully submitted that Section 10 of the Commercial Court Act expresses parliament's intent to establish the commercial court as the sole forum for commercial arbitration.

Section 15 also provides for the transfer of all litigation relating to the Arbitration and Conciliation Act to the aforementioned courts, and it expressly states that all pending disputes will be resolved in accordance with the procedures outlined in the Commercial Courts Act. All of Tamil Nadu's main district courts have been classified as commercial courts. However, they handle the petition filed under the Arbitration and Conciliation Act like every other petition.

Details of the petition

Commercial Courts Act 2015 and Civil Procedure Code 1908 as they apply to commercial courts are incompatible with Madras High Court Arbitration Rules.

Respondent No. 1 would depend on Section 122 of the Civil Procedure Code on the basis that the delegation rule-making powers under Section 122 of the Civil Procedure Code are intact for the Commercial Courts Act and may be used to uphold the subordinate legislative authority. In the case of the union territory of Pondicherry, neither Respondent No. 2 nor Respondent No. 1 has given the required approval under Section 126.

The impugned Rules, on the other hand, allow for the award of costs in an arbitration or conciliation proceeding under Section 34 of the Arbitration and Conciliation Act. There is no executable award or order under Section 36 of the Civil Procedure Code since the arbitrator has become functus Officio.

Thus, proceedings under Section 34 or 37 of the Arbitration and Conciliation Act 1996, or even proceedings before the Supreme Court under Article 136 of the Constitution of India, can be dragged on indefinitely, reducing the value of the award, as was done in Arb OP no 49 of 2020 on the file of Principal District Judge Karur. Finally, the lack of a cost-collection system jeopardizes Article 14's rule of law under the Indian Constitution.

It is humbly submitted that borrowers/award-debtors have filed execution petitions under Order 21 Rule 1 because the claimant-finance firm refuses to accept the award money and keeps the high-interest-bearing loan alive.

The provisions of the Information Technology Act 2000 are responsible for Rule 6 of Order XI Commercial Courts Act, which deals with electronic records of arbitral proceedings. As a result, under Section 82 of the Arbitration and Conciliation Act 1996, Respondent No1 cannot change certain rules by subordinate legislative authority. The contested Rules have not received parliamentary approval.

Subordinate legislative Rules can be questioned if they are inconsistent with any enactment, according to the case of the state of Tamil Nadu vs Krishna Murthy, recorded in 2006 (4)SCC 517. The contested Arbitration Rules are in conflict with the Commercial Courts Act of 2015.

It is respectfully submitted that Rule 12 (IV) of the said Rules is incompatible with Section 2(e) of the Arbitration and Conciliation Act 1996, which provides for the transfer of arbitral proceedings to an additional district judge who is not a principal court of original jurisdiction as specified in Section 3(17) of the General Clause Act or where the Commercial Courts have been cowed.

It was submitted that the Supreme Court of India in Alka Chandevar Vs. Shamsul Israr Khan stated in 2017 (16)SCC119, held that Section 29(5) of the Arbitration and Conciliation Act can be invoked by the Arbitration to ensure adherence to the Tribunal's order by way of contempt of Tribunal under the Contempt of Courts Act, as in the case of proceedings before the court.
However, the contested Rules do not specify a protocol to be followed under such circumstances.

It is respectfully submitted that because Section 21 of the Commercial Courts Act grants obstinate powers to the Act's laws, no subordinate Rules can be enacted that are in conflict with the said Commercial Courts Act.

History

Sivesh is the sole appellant in a lawsuit brought by the legal heirs of Mr Pandian, a deceased borrower, arising from ad-hoc arbitration proceedings. The petitioners did not follow the rules of the Civil Procedure Code relating to pleadings as amended by the schedule to the Commercial Courts Act 2015.

In that case, however, the petitioners accepted the factum of payment and signature in the arbitration agreement, but rejected the arbitration agreement's contents, citing the antedate on the arbitration agreement stamp document. Despite the fact that the deceased creditor had settled his claim sum by check and was facing criminal prosecution for its dishonour, there was no fuss.

Since the learned district judge in Karur failed to carry out the interim order issued under Section 17 of the Arbitration and Conciliation Act on June 17, 2020, CRP(MD)547/2020 was filed. The borrowers have already alienated the land, which is still pending.

The petitioner does not want the relief of the arbitration cases. The writ petition does not request any remedy that is specifically at issue in any of the above Arbitration cases, and none of the issues that will be resolved in this case is relevant to the arbitration case. As a result, no remedy in the above arbitration case is sought here.

Conclusion

As a result, it was prayed before the Honourable Court to issue a writ of declaration that the "Madras High Court (Arbitration) Rule 2020," framed in exercise of Section 82 of the Arbitration and Conciliation Act and published in the Official Gazette of the State of Tamil Nadu on 17.03.2021, is ultra vires of the plenary statutes of the Arbitration and Conciliation Act 1996 and Commercial Courts Act 2015.