| CITATION | 2023 BHC 3790 |
| DATE OF JUDGMENT | 2 May, 2023 |
| COURT | High Court of Judicature at Bombay |
| APPELLANT | Ravi Arya and others |
| RESPONDENT | Palmview Investments Overseas Limited |
| BENCH | HON’BLE SHRI JUSTICE K.R. SHRIRAM HON’BLE SHRI JUSTICE RAJESH S. PATIL |
INTRODUCTION
The case revolves around the validity of a resolution under Section 34 of the Arbitration and Conciliation Act, 1996. The petitioners argue that the resolution is not valid under either Indian or BVI laws, and that the proceedings were not instituted by a ‘party’ to the Arbitration Agreement. The Tribunal, however, has given the claimant the opportunity to either produce a fresh resolution or establish the validity of the existing one. The appeal was filed under the Section 37 of the Arbitration and Conciliation Act 1996. The said appeal is filed by the Appellants Ravi Arya & ors. under Section 37 of the Arbitration Act, arguing that an order dated 1st November 2022 set aside an arbitration petition filed under Section 34 of the Arbitration Act.
FACTS OF THE CASE
- The case involves two petitions challenging an order under Section 34 of the Arbitration and Conciliation Act, 1996, passed by the Arbitral Tribunal in a dispute involving Palmview Overseas Ltd.
- This appeal has been filed under Section 37 of the Arbitration and Conciliation Act 1996 (the Arbitration Act), impugning an order dated 1st November 2022 passed by a Learned Single Judge of this court in an arbitration petition filed under Section 34 of the Arbitration Act.
- The Learned Single Judge set aside the award dated 16th June 2022 passed by the Arbitral Tribunal in international commercial arbitration proceedings on separate applications filed by respondent nos.1 and 2 and respondent nos.3 and 5 under Section 31(6) read with Section 32 of the Arbitration Act that the person who signed the notice invoking arbitration and signed the statement of claim on behalf of Claimant, i.e., appellant herein, never had any valid authority to do so.
- Failure to provide such an opportunity would be prejudicial to the Claimant and constitute a miscarriage of justice for them. Yet the court held that such a defect is merely a procedural irregularity which can be cured. There is a presumption of proper verification and execution of statement of claim. Then the onus would be on respondents to lead evidence to prove the Foreign Law. On the contrary, the order of the Arbitral Tribunal is in keeping with the fundamental policy of Indian Law.
- The Arbitral Tribunal’s order is not an interim award and not amenable to challenge under Section 34 of the Arbitration Act because the order is not a judicial determination of any of the issues framed by the Arbitral Tribunal. The question of illegality and/or validity of the board resolution was not even an issue since there was no denial in the statement of defense.
- The Learned Single Judge’s finding that the Arbitral Tribunal has exercised jurisdiction in equity by permitting appellant to rectify the board resolution under Section 28(2) of the Arbitration Act, is incorrect.
- The order passed by the Arbitral Tribunal had no connection with the substance of the dispute. The Arbitral Tribunal has not acted contrary to the law nor has disregarded the law.
- The Arbitral Tribunal has not exercised any equitable jurisdiction. The Apex Court in IFFCO (supra) has held that language of Section 31(6) of the Arbitration Act is advisedly wide in nature; that an interim award may be made on “any matter” with respect to which Arbitral Tribunal makes a final award. To the extent, the Arbitral Award permits appellant to cure the invalidity of the board resolution, is in conflict with the public policy of India and is liable to be set aside.
ISSUES
1. Whether the order of the Learned Single Judge to set aside the award was correct?
2. Whether the Arbitral Tribunal had the jurisdiction to permit appellant to cure the defect in the board resolution?
3. Whether the order of the Arbitral Tribunal is in conflict with the public policy of India?
4. Whether the lack of specific denial of the board resolution in respondents’ statement of defense amounts to admission of its validity?
CONTENTIONS OF APPELLANT
The appellants contend that:
1. Mr. Sunil Jain had no authority to affirm/present the Statement of Claim and/or to depose on behalf of the claimant.
2. There was no valid authority to invoke the arbitration.
3. The claim is presented without authority, that the notice invoking arbitration is without authority and for dismissal of the claim.
4. They also challenge the Tribunal’s decision to treat the invalid resolution as a curable defect/irregularity. They argue that having come to the conclusion that the resolution was invalid under the Indian law, the Tribunal could not have held the illegality as curable and rectifiable as held in United Bank of India Vs. Naresh Kumar, (Kirpal) and Sheth builders Vs. Michael Gabriel2 (“Sheth Builders Pvt. Ltd vs Michael Gabriel on 4 January, 2024”)
4. The Tribunal, although held that the Resolution was invalid under the Indian law, has not held that Mr. Sunil Jain, had no authority to initiate the proceedings or to sign the Statement of Claim or to depose on behalf of the Claimant-PVIL.
5. The order of the Tribunal partakes of the nature of an interim award which is amenable to a challenge in a petition under section 34 of the Act.
6. The continuation of the proceedings has become unnecessary or impossible based on the evidence of Mr. Sunil Jain who has been examined by the claimant-PVIL in support of its claim.
CONTENTIONS OF RESPONDENT
The respondent contend that:
1. The decision by the Arbitral Tribunal is in line with the fundamental policy of Indian Law and does not conflict with basic notions of justice.(“Prysmian Cavi E Sistemi S.R.L vs Vijay Karia”)
2. The Tribunal had the authority to pass an order as an amiable compositeur.
3. The resolution dated 16.7.2018, even though accepted as invalid by the Tribunal, was justifiably treated as a curable defect/irregularity with an opportunity granted to rectify the same.
4. In their separate defense statements, the Petitioners made no express rejection of the Resolution’s passage, and the Respondents made no specific claim that the resolution was invalid under BVI or Indian law. As a result, there was no occasion for the Claimant to provide any evidence on this point.
5. The Claimant should be given a chance to show that Mr.Sunil Jain is vested with necessary authority to institute the present Arbitration proceedings and has also been authorized to sign and verify the Statement of Claim and to depose in the matter.
6. Non-granting of such an opportunity would cause prejudice to the Claimant and would amount to mis-carriage of justice.
JUDGEMENT
The Learned Single Judge’s decision to interfere with the award under Section 34 of the Arbitration Act was deemed incorrect. The Arbitral Tribunal’s award was restored, and the appeal was allowed. The costs of the arbitration proceedings will be borne by the appellant. The Arbitral Tribunal will try to schedule the proceedings at its earliest convenience. This decision applies to the Commercial Appeal (L) No.37275 of 2022, which also filed the same order and judgment. Mr. Sharan Jagtiani’s request for a stay of the judgment was refused.
ANALYSIS
The appeals under Section 37 of the Arbitration Act were allowed, observing that an impugned order is an interim award under Section 31 (6) of the Arbitration Act. This applies to petitions maintainable under Section 34 of the Arbitration Act, as the Impugned Order is an interim award. The substantive rights of parties should not be defeated due to procedural irregularities, as a company may ratify such authorization either expressly or implicitly. The Arbitral Tribunal has not acted contrary to the law, but has applied the principles of natural justice and the requirements for signing and verification of pleadings as specified under Order 29 Rule 1 (suits by corporations) in conjunction with Order 6 Rule 14 (pleading verification) of the CPC. By allowing a party to cure a procedural defect, the Arbitral Tribunal has acted according to law and applied the principles of natural justice. Section 28 of the Arbitration Act applies only to the substance of the dispute and not procedural issues.
CONCLUSION
The petition under Section 34 of the Arbitration Act was maintainable, as the appellant argued that Sunil Jain’s lack of authority was a procedural defect and curable. The Arbitral Tribunal exercised its powers on a matter of mere procedure, not a matter of substance decided in accordance with substantive law. The court held that the Arbitral Tribunal, as established in Nahar Industrial Enterprises Ltd Vs. Hongkong and Shanghai Banking Corporation, can travel beyond the CPC and its powers are limited to observing natural justice principles.
REFERENCES
- Kirpal, BN. “United Bank Of India vs Sh. Naresh Kumar And Ors on 18 September, 1996.” Indian Kanoon, https://indiankanoon.org/doc/1555740/. Accessed 7 February 2024.
- “Nahar Industrial Enterprises Ltd vs Hongkong & Shanghai Banking Corp on 29 July, 2009.” Indian Kanoon, 29 July 2009, https://indiankanoon.org/doc/1155272/. Accessed 7 February 2024.
- “Prysmian Cavi E Sistemi S.R.L vs Vijay Karia And 76 Ors on 7 January, 2019.” Indian Kanoon, https://indiankanoon.org/doc/55011063/. Accessed 7 February 2024.
- “Sheth Builders Pvt. Ltd vs Michael Gabriel on 4 January, 2024.” Indian Kanoon, 4 January 2024, https://indiankanoon.org/doc/138541902/. Accessed 7 February 2024.
- Sushma-arya-and-ors-versus-palmview-overseas-ltd-and-ors-1-442578.pdf
This Article is written by Humerah Farooqui student of National Academy of Legal Studies and Research, Hyderabad; Intern at Legal Vidhiya.
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