CASE TITLE:
M/s. Zapdor-Ubc-Abnjv Delhi Vs Union Of India
DATE OF ORDER:
1 September 2022
JUDGE(S):
Hon’ble Mrs. Sangeeta Chandra
PARTIES:
Petitioner: M/S Zapdor-Ubc-Abnjv Delhi Respondent: U.O.I. Thru.General Manager Northern Railway New Delhi AndOrs
SUBJECT
According to the Allahabad High Court's decision, the parties are deemed to have established the said venue of the arbitral proceedings as well as the seat of arbitration by their conduct when they fail to specifically identify the seat of arbitration and participate in the arbitration at a location without objecting. As a result, the courts in that location would have sole authority to oversee the arbitral procedures.
IMPORTANT PROVISIONS
The Arbitration and Conciliation Act, 1996 (herein after ‘the Act’)
- Section 34 - Application for setting aside arbitral award. - Recourse to a Court against an arbitral award may be made only by an application for setting aside such award.
- Section 37 - Appealable orders. - Notwithstanding anything contained in any other law for the time being in force, an appeal shall lie to the Court authorised by law to hear appeals from original decrees of the Court passing the order.
- Section 43 - Limitations. - The Limitation Act, 1963 (36 of 1963), shall apply to arbitrations as it applies to proceedings in court.
The Constitution of India
- Article 227 - Power of superintendence over all courts by the High Court.
BRIEF FACTS
- “Design, Supply, Erection, Testing and Commissioning of 25 KV, 50 Hz Single Phase, Electrification Works incorporating OHE and TSS composite Electrical Works” was the title of the Tender Notice that the Respondents floated on October 30, 2015. (hereinafter referred to as the Tender Paper ELCORE)
- The Petitioner’s proposal was determined to be acceptable, and on April 19, 2016, the Chief Electrical Engineer/P&D Central Organization for Railway Electrification (CORE) in Allahabad issued a Letter of Acceptance awarding the contract for a total value of more than Rs. 30 crores 27 lakhs.
- A contract for the operation of the agreement for the composite electrification works in the Jafrabad - Akbar Pur - Tanda Section under the supervision and control of Divisional Headquarters at Lucknow was signed on 14.7.2016 between the Petitioner and the Chief Project Director Railway Electrification Lucknow.
- Because of the sluggish progress, only 8% of the work was finished in seven and a half months, as opposed to the 100% target for fifteen months - the Respondents terminated the contract.
- The Arbitration Tribunal was established when the Petitioner invoked the arbitration clause. The CORE office in New Delhi conducted the entire arbitration process. In favour of the Petitioner, the Arbitral Tribunal issued an Award totaling more than three crore rupees, which was signed and presented in New Delhi on March 6, 2019, along with interest compounded annually at a rate of 10%.
- The petitioner submitted a request for the return of the arbitration award as well as a request objecting to the section 34 application’s request for a delay condonation. The Commercial Court granted the Request for Condonation of Delay made by the Respondents by a composite order while rejecting the Petitioner's Application for Return of Arbitration Application.
ISSUES RAISED
- Whether this petition under Article 227 is maintainable?
- Whether Cause of Action or subject matter of the Suit would determine the Court which could exercise supervisory jurisdiction to decide the Section 34 petition?
- Whether it would be the ‘Venue’ or the ‘Seat’ of Arbitral proceedings which would determine the Court which can exercise supervisory jurisdiction over the Arbitral proceedings?
- Whether in the absence of a specific mention in the contract agreement regarding ‘Seat’ of Arbitration, the conduct of parties would determine the ‘Seat’ and therefore act as an exclusionary clause for Courts at all other places to exercise supervisory control over the Arbitral proceedings?
ARGUMENTS ADVANCED BY THE PETITIONER
- The learned counsel for the Petitioners argued that because the Arbitral Award was signed and delivered at New Delhi and the Arbitral Proceedings were conducted solely there, the Commercial Court in Lucknow lacked territorial jurisdiction to consider the Application under Section 34 of the Act of 1996.
- No part of the cause of action originated within the territorial jurisdiction of the Commercial Court in Lucknow, as far as Section 34 of the Act of 1996 is concerned. The Learned Commercial Court has cited the General Conditions of Contract.
- It is further submitted that that supervisory jurisdiction under Section 34 is not concurrent and must be restricted to Courts in the location selected by the parties as place of Arbitration exclusively, irrespective of where the cause of action arose.
- The Learned counsel for the Petitioner relied upon the judgements rendered by the Supreme Court in QUIPPO Construction Equipment Ltd v. Janardan Nirman Private Limited (2020) and Om Prakash and others v. Vijay Dwarka Dass Verma 2020.
- It has been argued by the Petitioner’s Counsel that the provisions of contract are determinative of the seat of Arbitration. The location of the Section 34 Application would need to be determined based only on the Arbitration's seat. He has further argued that the arbitration venue will be decided by the parties’ actions even in cases where the contract’s clauses leave it up to the parties to choose and the contract does not specify a location.
ARGUMENTS ADVANCED BY THE RESPONDENT
- The petition was submitted on behalf of a Joint Venture by the Director of just one of the firms that make up that Joint Venture, and the respondent has raised a preliminary objection as to its maintainability.
- It has been claimed that Mr. Amresh Anand, who serves as the Director of just one of the firms that make up the Joint Venture, is the Deponent of the affidavit submitted in support of the petition. He has not been given permission by other Joint Venture partners to file any petitions with the High Court. He might only be permitted to sign the application and negotiate the contract with the railways; he would not be permitted to file the petition on behalf of the joint venture's other two partners.
- According to the learned counsel for the Respondent, the learned Commercial Court issued an order in accordance with Section 34 of the Act of 1996, which is subject to appeal under Section 37 of the Act if the order of admission of Application under Section 34 of the Act is deemed to be of a nature to give finality to the rights of the parties under Article 227 of the Constitution. A petition under Article 227 of the Constitution cannot be filed in opposition to interlocutory orders since the Statute of 1996 is a unique act and a full code in and of itself.
JUDGEMENT ANALYSIS
- In light of the information provided above with regard to Sections 4 and 20 of the 1996 Act, this court has also taken into account the behaviour of the parties, which is extremely relevant for a decision to be made. The Tender Paper ELCORe, which governs the contract, left it up to the parties - and particularly the Railways - to specify the location of the arbitration by written agreement.
- The Court noted that the Railways consented to take part in the arbitration procedures in New Delhi without raising any objections, regardless of any formal agreement, conditions in the Contract, or even in the correspondence between the parties stating the seat of arbitration. Thus, it can be claimed that the Railways forfeited their right to protest and decided via their actions that the arbitration would take place in New Delhi, which would also serve as the location of the arbitration procedures.
- As a result, issues 2, 3 and 4 are also decided in favour of the petitioner, and it is decided that failure to specifically mention a Seat of Arbitration and the Railways’ participation in Arbitration proceedings at New Delhi without objecting shall be regarded as determination of the Venue of arbitration as well as the Seat, giving the Courts at New Delhi exclusive jurisdiction to oversee the Arbitral proceedings, including any challenge to the Award.
CONCLUSION
The 12.12.2019 order in question is deemed void and subject to reversal. The Section 34 Application was heard by the Commercial Court in Lucknow despite lack of jurisdiction. Because of this inherent lack of jurisdiction, the proceedings before it are liable to be set aside. This petition is stands allowed. The 12.12.2019 order in question is revoked.
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