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RESERVED JUDGMENT IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Appeal From Order No.70 of 2019 Namrata Sen
…..Appellant
Versus
Captain Saurabh Chauhan
….Respondent
Mr. B.C. Pande, Senior Advocate assisted by Mr. B.D. Pande, Advocate for the appellant Mr. T.A. Khan, Senior Advocate assisted by Mr. Vinay Bhatt, Advocate for the respondent
JUDGMENT
Hon’ble Lok Pal Singh, J.
This appeal, under Section 37 of the Arbitration and Conciliation Act, 1996, has been preferred against the order dated 20.01.2019 passed by Arbitral Tribunal (sole Arbitrator) in Arbitration Reference No.47 of 2015 Mrs. Namrata Sen vs. Captain Saurabh Chauhan (Retd.).
Factual matrix of the case is that the appellant filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, (for short, the Act) being Arbitration Application No.47 of 2015 stating that a registered partnership deed dated 18.12.2006 was executed between the maternal grandmother of the appellant, namely, Smt. Reva Rautela and her brother i.e. the respondent Captain Saurabh Chauhan. The partnership was for running a hotel in the name and style “Rewa Retreat” at Bhowali, District Nainital. Thereafter, on 06.06.2008, by way of a supplementary partnership deed, the appellant herein Mrs. Namrata Sen was inducted as a partner in
2 the firm. Since then the appellant claimed herself to be a partner of the firm. Maternal grandmother of the appellant, Smt. Reva Rautela passed away on 16.4.2014. Thereafter, certain dispute arose between the appellant and the respondent. The appellant moved an application before the respondent for appointment of an Arbitrator. As no heed was paid towards the request made by the appellant, appellant filed Arbitration Application numbered as No.47 of 2015 under Section 11(6) of the Act before this Court. Notices were issued to the respondent on the arbitration application. The respondent filed his reply denying the execution of supplementary partnership deed dated 06.06.2008 and contended that the appellant is not a partner in the firm. He further contended that the supplementary partnership deed is a forged and fabricated document. Having considered the rival submissions of learned counsel for the parties, as also in view of the fact that the respondent had admitted the applicant to be a partner of the firm in the assessment year 2010-11, 2011-12 and 2012-13 before the Income Tax Authorities, learned designated Judge, vide judgment dated 11.06.2018, allowed the arbitration application moved u/s 11 of the Act and appointed the sole Arbitrator Mr. Justice Irshad Hussain, Former Judge of this High Court, to adjudicate upon disputes arisen between the parties. Relevant paragraph of the judgment dated 11.06.2018 is extracted hereunder:- “4. The principal contention of the counsel for the respondent Sri Naresh Pant is that the applicant is not a partner. In fact respondent denies the supplementary partnership deed and claims it to be a
3 forged and fabricated document. Therefore the clear stand of the respondent is that since the applicant is not a partner of the firm, and the supplementary partnership deed on which she has placed reliance is a forged and fabricated, there is no question of appointment of arbitrator. 5. The fact of the matter is that though the supplementary partnership deed is not registered, the respondent had admitted the applicant to be a partner of the firm in the year 2010-11, 2011-12 and 2012-13 before the Income Tax authorities, a fact to which the respondent admits. 6. Be that as it may, the veracity and the bona fide of the claim of the applicant of a partner is that the respondent had admitted that applicant was one of the partners of the firm, and he now cannot retract. 21. Therefore, in view of the above, this Court is convinced that since there is a dispute and since there is an arbitration clause in the deed, the arbitrator must be appointed. This Court appoints Justice Irshad Hussain, former Judge of this High Court, as the sole arbitrator who shall constitute the arbitral tribunal. This shall, however, be subject the learned Arbitrator’s disclosure under Section 11(8) read with Section 12 of the Arbitration and conciliation Act.”
Feeling aggrieved, the respondent preferred Special Leave to Petition (C) No.25315/2018 before the Hon’ble Apex Court, which was dismissed by the Hon’ble Apex Court, vide judgment and order dated 28.09.2018.
Learned designate of the Chief Justice, hearing the arbitration application u/s 11(6) of the Act,
4 recorded findings that although the supplementary partnership deed is not registered but the fact of the matter is that the appellant is a partner in the firm “Reva Retreat” in view of the admission of the respondent to the effect that he submitted income tax returns showing the name of the appellant as a partner. Findings recorded in regard to the supplementary partnership deed and appointment of the Arbitral Tribunal by judgment dated 11.06.2018 has attained finality, whereafter the learned Arbitral Tribunal issued notice to the parties. The appellant submitted her claim before the Arbitral Tribunal. The respondent filed its reply to the claim raised by the appellant. During the pendency of arbitral proceedings, the respondent moved an application before the learned Arbitrator stating that the supplementary partnership deed dated 06.06.2008 is a forged and fabricated document and it does not even bear the signature of the respondent and prayed that the appellant be directed to produce the alleged supplementary partnership deed dated 06.006.2008 in original so that its genuineness may be verified by the handwriting expert of Forensic Laboratory. Appellant filed objections to the application moved by the respondent and stated that this Court has dealt with the aspect regarding genuineness of the partnership deed in its judgment dated 11.06.2018, which has been affirmed by the Hon’ble Apex Court in SLP No.25315 of 2018 filed by the respondent. Thus the plea that the deed dated 06.06.2008 is a forged deed is not tenable as the same has attained finality. It was also contended that the same issue cannot be re- agitated by the respondent by filing such an
5 application. After hearing the parties, learned Arbitral Tribunal vide its order dated 20.01.2019 allowed the application. While doing so, the Arbitral tribunal recorded finding that when the dispute has been referred to arbitration all issues arising to decide the dispute between the parties need to be legally and factually decided to provide finality to the dispute and therefore, the important issue regarding the validity or otherwise of the supplementary partnership deed dated 06.06.2008 required to be judicially adjudicated by the Arbitral Tribunal. Feeling aggrieved by the order of Arbitral Tribunal dated 20.01.2019, appellant Mrs. Namrata Sen has preferred the present appeal.
On the very onset, Mr. T.A. Khan, learned Senior Counsel appearing for the respondent would raise a preliminary objection regarding maintainability of the appeal under Section 37 of the Act against the order impugned.
Having heard learned counsel for the parties, it is important to first set out the relevant provisions contained in the Act. Section 37 defines “Appealable orders”, which is as follows:- “37. Appealable orders.-(1) An appeal shall lie from the following orders (and from no others) to the court authorized by law to hear appeals from original decree of the Court passing the order, namely.- [(a) refusing to refer the parties to arbitration under Section 8;
(b) granting or refusing to grant any measure under Section 9;
6 (c) setting aside or refusing to set aside an arbitral award under Section 34.] (2) An appeal shall also lie to a court from an order of the arbitral award- (a) accepting the plea referred to in sub-section (2) or sub-section (3) of Section 16; or (b) granting or refusing to grant an interim measure under Section 17. (3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.”
Furthermore, the application was moved by the respondent before the Arbitral Tribunal under Section 26 of the Act, which is extracted hereunder:- 26. Expert appointed by arbitral tribunal.- (1) Unless otherwise agreed by the parties, the arbitral tribunal may-
(a) appoint one or more experts to report to it on specific issues to be determined by the arbitral tribunal; and
(b) require a party to give the expert any relevant information or to produce, or to provide access to, any relevant documents, goods or other property for his inspection.
(2) Unless otherwise agreed by the parties, if a party so requests or if the arbitral tribunal considers it necessary, the expert shall, after delivery of his written or oral report, participate in an oral hearing where the parties have the opportunity to put questions to him and to present expert witnesses in order to testify on the points at issue.
(3) Unless otherwise agreed by the parties, the expert shall, on the request of a party, make available to that
7 party for examination all documents, goods or other property in the possession”
Section 11(6-A) is important for decision in this case, which is extracted hereunder:- “[(6-A) The Supreme Court or, as the case may, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub- section (6), shall notwithstanding any judgment, decree or order of any court, confine to the examination of the existence of an arbitration agreement.”
By way of Amendment Act, 2015 (Act No. 3 of 2016), Section 6-A has been inserted in the Act w.e.f. 23.10.2015, which contemplates that the Supreme Court or, as the case may, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall notwithstanding any judgment, decree or order of any court, confine to the examination of the existence of an arbitration agreement, which means that before the Court appoints an Arbitrator, a duty casts upon the Chief Justice or his designate to examine the existence of any arbitration agreement. Prior to the Amendment Act, 2015 (Act no.3 of 2016), the powers of the Chief Justice or his designate were administrative in nature whereas after insertion of Section 6-A, the Chief Justice or his designate has been conferred with judicial power.
Hon’ble Apex Court in Rameshwar Das Agarwal v. Kiran Agrawal (2008) 2 SCC 155, has held
8 that the power being exercised by the Chief Justice or the designated Judge under Section 11 is not an administrative power but it is a judicial power.
11.
Hon’ble Apex Court in the case of Cheran Properties Limited vs. Kasturi & Sons Limited & Ors. 2018 (16) SCC 413, while referring to a previous judgment of Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc. (2013) 1 SCC 641 has held that an arbitration agreement which is entered into by a company within a group of companies may bind non-signatory affiliates, if the circumstances are such as to demonstrate the mutual intention of the parties to bind both signatories and non-signatories. In applying the doctrine, the law seeks to enforce the common intention of the parties, where circumstances indicate that both signatories and non-signatories were intended to be bound.
12.
In view of the above dictum of Hon’ble Apex Court, an arbitration agreement would also bind the third party who is not the signatory of the arbitration agreement, meaning thereby, that the respondent who himself has admitted the appellant as a partner and submitted income tax returns of three years in the life time of Smt. Reva Rautela, has after her death denied that the appellant is not a partner. Any findings recorded by the learned Judge under Section 11(6) of the Act, and in view of the provisions contained by Amendment Act No.3 of 2015 by insertion of Section (6-A), are judicial in nature and has been affirmed by the Hon’ble Apex Court, and are thus binding upon the parties. The respondent has admitted
9 the appellant to be a partner of the firm in the assessment year 2010-11, 2011-12 and 2012-13 before the Income Tax Authorities, to which the respondent now cannot deny. Otherwise also, the judicial pronouncement u/s 11(6) of the Act would apply as res judicata in the case, inasmuch as, the application u/s 11(6) of the Act has been decided by a Judge of this Court, which is a competent court to decide the application u/s 11(6) of the Act. A judgment or order, on an issue between the parties decided by a competent court of jurisdiction, has an affect of res judicata. The findings recorded by this Court in arbitration application and affirmed by the Hon’ble Apex Court that supplementary partnership deed does exist between the parties, has attained finality.
Hon’ble Apex Court in the case of Duro FelGuera S.S. vs. Gangavaram Port Limited, (2017) 9 SCC 729, has held as under:- “16. However, in the year 2005, a Constitution Bench of seven Judges in SBP and Co. v. Patel Engg. Ltd. made a departure from the previous judgments and held that the order passed by the Chief Justice is not administrative but judicial in nature and hence the same is subject to appeal under Article 136 of the Constitution of India. The Court further held that in deciding the appointment of an arbitrator, the Chief Justice could first by way of a preliminary decision decide the court’s own jurisdiction of that matter to entertain the arbitration petition, the existence of a valid arbitration agreement, the subsistence of a
10 “live claim i.e. the claim that is not barred by limitation. 17. The judgment in SBP and Co.3 was further clarified in National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., wherein this Court held that while appointing an arbitrator, the following could be considered: “22. Where the intervention of the court is sought for appointment of an Arbitral Tribunal under Section 11, the duty of the Chief Justice or his designate is defined in SBP & Co. This Court identified and segregated the preliminary issues that may arise for consideration in an application under Section 11 of the Act into three categories, that is, (i) issues which the Chief Justice or his designate is bound to decide; (ii) issues which he can also decide, this is, issues which he may choose to decide; and (iii) issues which should be left to the Arbitral Tribunal to decide.”
In view of dictum of Hon’ble Apex Court, in nutshell, while deciding the application u/s 11 of the Act, there are three contingencies, first the issue which the Chief Justice or his designate is bound to decide, second issue which he can also decide or he may choose to decide and third issues which should be left to the Arbitral Tribunal to decide. Before deciding the application u/s 11(6) of the Act, the Chief Justice or his designate has to record findings as to whether there exist any arbitral agreement between the parties. Being the judicial proceedings u/s 11 of the Act, any findings
11 recorded by the Chief Justice or his designate in this regard are judicial pronouncement which has the binding effect on the parties as the same is appealable before the Apex Court in view of Section (6-A) and (6-B) of the Act. The same issue as decided by the Chief Justice or his designate is not open to be adjudicated by the Arbitral Tribunal.
15.
Another question which can be considered by the Chief Justice or his designate is as to whether the claim is well within time or barred by limitation. The issue of existence of supplementary partnership deed dated 06.06.2008 has already been decided by the designate of the Chief Justice by its judgment, and which got affirmed by the Supreme Court, which has attained finality. The same issue cannot be re-agitated by the parties and cannot be decided by the Arbitral Tribunal.
Having considered the provisions contained in Section 37 of the Act, it emerges out that the order impugned does not fall in any of the provisions contained in sub-section (1)(a)(b)(c) and sub-section (2)(a)(b) of Section 37. To my mind, appeal from order u/s 37 of the Act does not lie against the impugned order. But having considered the fact, as discussed above, that the issue of genuineness of supplementary partnership deed dated 06.06.2008 which has been decided by the designate/Judge of this Court in favour of the appellant observing that the appellant is a partner in the firm “Reva Retreat” in its judgment dated 11.06.2019, has attained finality upto the level of Hon’ble Apex Court, the same cannot be re-agitated
12 and re-considered by the Arbitral Tribunal in arbitral proceedings. Thus, this Court is convinced that the appeal is not maintainable u/s 37 of the Act against the impugned order, but having considered the fact that the learned Arbitral Tribunal has exceeded in its jurisdiction by re-opening the issue which has already been decided by this Court and affirmed by the Hon’ble Apex Court is binding on the parties, thus the order dated 20.01.2019 passed by Arbitral Tribunal, allowing the application, is without jurisdiction and any order passed by the Arbitral Tribunal cannot be challenged at this stage before any forum, but relying upon the principles that no one should be left remediless, this Court has to see whether an Appeal from Order when found not maintainable can be permitted to be converted into a writ petition under Article 227 of the Constitution of India.
Hon’ble Apex Court in Nawab Shaqafath Ali Khan and others v. Nawab Imdad Jah Bahadur and others, (2009) 5 SCC 162 has held as under:- “48. If the High Court had the jurisdiction to entertain either an appeal or a revision application or a writ petition under Articles 226 and 227 of the Constitution of India, in a given case it, subject to fulfillment of other conditions, could even convert a revision application or a writ petition into an appeal or vice versa in exercise of its inherent power. Indisputably, however, for the said purpose, an appropriate case for exercise of such jurisdiction must be made out.”
13 18. Hon’ble Apex Court in Col. Anil Kak (Retd.) v. Municipal Corporation Indore & Ors., (2005) 12 SCC 734 has held as under:- “2. All that the High Court has done is to treat the petition filed before it under Section 115 of the Code as a proceeding initiated under Article 227 of the Constitution. The respondents had filed the revision originally and during the pendency of that revision the High Court appears to have taken a view that an order in an appeal arising from a proceeding under Order 39 Rules 1 and 2 of the Code, could not be challenged under Section 115 of the Code since the order was in the nature of an interlocutory order. In such a situation, in our view, the High Court rightly decided to permit the revision petitioners before it, to convert the same as a proceeding under Article 227 of the Constitution. After all, the court could have done it on its own, even without a motion in that behalf by the petitioner. We see absolutely no ground to interfere with the said order on the grounds raised in this special leave SLP (C)No.11940 of 2003.”
In view of the above, as this Court, being the court of record and findings, has jurisdiction to hear the petition u/s 227 of the Constitution of India, present appeal from order is converted into writ petition to avoid miscarriage of justice with the appellant.
20.
Power under Article 227 of The Constitution of India can be exercised by the High Court on an application or by suo moto over all Courts or Tribunal throughout the territories in relation to which it exercises jurisdiction. This Court has been
14 apprised by filing the present petition that the learned Arbitral Tribunal has passed the impugned order permitting the respondent to take steps for getting the questionable signatures on the supplementary partnership deed dated 06.06.2008 to be examined by hand writing expert of central government lab. Since the validity of supplementary partnership deed dated 06.06.2008 has been held by the designate of Chief Justice in the proceedings under Section 11(6) of the Act and has been affirmed by the Hon’ble Apex Court, the findings, so recorded, being the judicial pronouncement, are binding on the parties. Learned Arbitral Tribunal is merely a Tribunal to adjudicate the lis referred to it on the issues which have not been decided by the Chief Justice or his designate in proceedings u/s 11(6) of the Act. As the issue of validity of supplementary partnership deed dated 06.06.2008 has already been decided by the designate of Chief Justice and affirmed by the Hon’ble Apex Court, neither the said issue can be re-agitated by the parties before the Arbitral Tribunal nor the Arbitral Tribunal had got jurisdiction to decide the same controversy, being barred by the provisions contained in Section 11(6-A) of the Act.
21.
Power under Article 227 of the Constitution of India is superintendent in nature and can be exercised by the court to keep the subordinate courts and Tribunals in its meets and bounds to stop the foul play and to avoid miscarriage of justice. A perusal of the impugned order would reveal that the learned Tribunal has exceeded in its jurisdiction by directing to examine the signatures through the handwriting
15 expert. Impugned order has caused miscarriage of justice with the appellant and the same is liable to be set aside.
Accordingly, the writ petition is allowed. Impugned order dated 20.01.2019 passed by Arbitral Tribunal is hereby set aide. Arbitral Tribunal shall proceed to decide the lis in accordance with law.
23.
No order as to costs.
(Lok Pal Singh, J.)
05.09.2019 Rajni