Neeraj Kumarpal Shah vs Manbhupinder Singh Atwal

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

R/PETN. UNDER ARBITRATION ACT NO. 23 of 2023

With CIVIL APPLICATION (FOR STAY) NO. 1 of 2021 In R/PETN. UNDER ARBITRATION ACT NO. 23 of 2023 With R/PETN. UNDER ARBITRATION ACT NO. 24 of 2023 With CIVIL APPLICATION (FOR STAY) NO. 1 of 2021 In R/PETN. UNDER ARBITRATION ACT NO. 24 of 2023 With R/PETN. UNDER ARBITRATION ACT NO. 110 of 2022 With CIVIL APPLICATION (FOR DIRECTION) NO. 1 of 2022 In R/PETN. UNDER ARBITRATION ACT NO. 110 of 2022 With CIVIL APPLICATION (FOR DIRECTION) NO. 1 of 2023 In R/PETN. UNDER ARBITRATION ACT NO. 110 of 2022

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR. JUSTICE BHARGAV D. KARIA

================================================================

1 Whether Reporters of Local Papers may be allowed to see the judgment ?

2 To be referred to the Reporter or not ?

3 Whether their Lordships wish to see the fair copy of the judgment ?

4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ?

================================================================ NEERAJ KUMARPAL SHAH Versus MANBHUPINDER SINGH ATWAL ================================================================

Page 1 of 497

Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Appearance:

Arbitration Petition No.23 of 2023:

Learned Senior Advocate Mr. Saurabh N. Soparkar with learned advocate Mr. Bhadrish Raju with learned advocate Mr.Karan Shah with learned advocate Mr. Ajit Nair with learned advocate Mr. Himanshu C. Desai for the petitioners.

Arbitration Petition No.24 of 2023:

Learned advocate Mr. Masoom K. Shah with learned advocate Mr. Jay Shah with learned advocate Mr. Dhruvin Dossani with learned advocate Mr. Parth Thummar for the petitioners.

Arbitration Petition No.110 of 2022:

Learned Senior Advocate Mr. Kamal Trivedi with learned advocate Mr. Parth Contractor and learned Senior Advocate Mr. Shalin Mehta with with learned advocate Mr. Pranav Vyas with learned advocate Mr. Pranjal Buch with learned advocate Mr. Manhan Singh Saini for the respective parties. ================================================================

CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA

Date : 05/07/2024

ORAL JUDGMENT

Heard learned Senior Advocate Mr.

Saurabh N. Soparkar with learned advocate

Page 2 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Mr. Bhadrish Raju with learned advocate

Mr.Karan Shah with learned advocate Mr.

Ajit Nair with learned advocate Mr.

Himanshu C. Desai in Arbitration Petition

No.23 of 2023 and in the counter

petitions.

Heard learned advocate Mr. Masoom K.

Shah with learned advocate Mr. Jay Shah

with learned advocate Mr. Dhruvin Dossani

with learned advocate Mr. Parth Thummar

in Arbitration Petition No.24 of 2023 and

in counter petitions.

Heard learned Senior Advocate Mr.

Kamal Trivedi with learned advocate Mr.

Parth Contractor and learned Senior

Advocate Mr. Shalin Mehta with with

learned advocate Mr. Pranav Vyas with

learned advocate Mr. Pranjal Buch with

Page 3 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

learned advocate Mr. Manhan Singh Saini in

Arbitration Petition No.110 of 2022 and

in counter petitions.

INDEX Sr. PARTICULARS PARAGRAPH No. NOS. 1 Introduction 01 to 15 2 Chronology of Events 16 to 17 3 Arbitration proceedings 18 to 84 4 Points of determination/Issues 1.1 to 1.50

I - Jurisdiction of the Arbitration Tribunal

1) Whether the Tribunal could have continued the arbitration proceedings under section 29A of the Arbitration and Conciliation Act, 1996 or not?

2) Whether the Arbitration 2.1 to 2.37 Tribunal could have continued with the arbitration proceedings after the re-

determination of fees payable by the parties which is opposed by the respondent nos. 1 and 2 being in violation of principle of party autonomy?

3) Whether the Tribunal could 3.1 to 3.16 have denied the respondent no.1 and 2 to lead evidence and

Page 4 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

file counter claims in violation of principle of natural justice?

4) Whether the provisions of 4.1 to 4.18 sections 12 and 13 of the Arbitration and Conciliation Act, 1996 are violated in arbitration proceedings?

5) Whether the Arbitration 5.1 to 5.17 Tribunal would have assumed the jurisdiction to proceed with the arbitration involving allegation of fraud and forgery which are subject matter of criminal investigation?

II Merits

6(i) Whether the Tribunal 6.1 to 6.18 was right in holding that respondent no.1 made misrepresentation to the

claimant from December 2014 to February, 2016 and minutes of the meeting dated 18th July, 2015 was forged by respondent no.1?

6(ii) Whether the Tribunal was right in holding that respondent no.1 was guilty of misappropriation of sum of Rs. 22.19 Crore from bank account of respondent no.4-C2R LLP and liable to pay the same to respondent no.4-C2R LLP with

Page 5 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

interest at the rate of 12% p.a.?

7) Whether the Tribunal was 7.1 to 7.36 right in awarding amount of Rs. 84 Crore towards damages and loss of profit together with interest at the rate of 12% p.a.?

8) Whether the Tribunal was 8.1 to 8.18 right in awarding costs, fees and expenses as per Appendix-A to Appendix-G totalling to Rs.14,27,29,234.65 and SGD(Singapore Dollar) 984,454.87 payable to the claimant?

III Scope of Section 34 9.1 to 9.32

9) Whether any interference is called for in the impugned arbitration award under section 34 of the Arbitration and Conciliation Act, 1996?

5 Order 85 Introduction :

1. These petitions are originally filed

Page 6 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

as First Appeals under section 13(1) of

the Commercial Courts, Commercial Division

and Commercial Appellate Division of High

Courts Act, 2015 (For short "the

Commercial Courts Act") read with section

34 of the Arbitration and Conciliation

Act, 1996 (for short "the Act")

challenging the award dated 16.04.2021

passed by the Arbitral Tribunal (For short

"the Tribunal") comprising of Mr. Dato'

Anantham Kasinather, Presiding Arbitrator,

Mr. Andre Yeap and late Hon'ble Mr.

Justice G.T. Nanavati as members-

coarbitrators in arbitration proceedings

between the petitioners original

defendants - respondents and the

respondent- original claimant.

2. These petitions were listed by the

Registry before the Division Bench having

Page 7 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

the Roster of Commercial Division of the

High Court. While the matter was heard on

12.10.2022 by the Division Bench, one of

the members recused from the matter.

Thereafter the matter was placed before

another Division Bench and on 18.10.2022,

another member also recused from the

matter. Thereafter, the matter was placed

on 21.10.2022 before the another Division

Bench, where also one of the member

recused from the matter. When the matter

was placed in vacation before the

specially constituted Division Bench on

27.10.2022, learned advocate for the

petitioners were not present and time was

sought.

3. It is also pertinent to note that

Arbitration Petition No.110/2022 is filed

by the original claimant under section 36 Page 8 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

of the Act for execution of the arbitral

award dated 16.04.2021 in an international

commercial arbitration as the claimant was

a Non Resident Indian. Therefore, the

execution petition is filed before this

Court.

4. The chronology of events which have

taken place between the parties is

narrated in detail here in below, however,

the sequence of events of the present

proceedings is narrated in brief here in

below:

5. When the Arbitration Petition

No.110/2022 came up for hearing before the

learned Single Judge of this Court, it was

pointed out that the respondents in

Arbitration Petition No.110 of 2022 have

also preferred First Appeals challenging

Page 9 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

the arbitral award under section 34 of the

Act before this Court and the same were

listed before the Division Bench. This

Court therefore, on 7.11.2022 directed the

Registry to list the First Appeals along

with Arbitration Petition No. 110 of 2022.

Thereafter the matter was adjourned from

time to time at the request of learned

advocates for the respondents-defendants.

6. On 15.02.2023, the Registry was

directed to change the nomenclature of

First Appeal No.3240/2022 and First Appeal

No.3950/2022 to that of arbitration

petition as both the appeals were filed

under section 34 of the Act. Accordingly,

the nomenclature was changed and the

matters were placed along with Arbitration

Petition No.110 of 2022 renumbered as

Arbitration Petition No.23/2023 (Old

Page 10 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Number being First Appeal No.3240/2022)

and Arbitration Petition No.24 of 2023

(Old Number being First Appeal No.

3950/2022).

7. These petitions were specially

assigned to this court by the Hon'ble

Acting Chief Justice in March,2023 at the

request of the parties after hearing qua

preliminary issue was concluded by the

learned advocates for the parties on 23rd

February,2023. These matters were heard

from time to time till 1.05.2023 on

various dates and on 01.05.2023, the

matters were reserved for judgment by

passing the following order:

"Heard learned Senior Advocate Mr. Saurabh Soparkar with learned advocate Mr. Karan Shah for the petitioners in Arbitration Petition No.23/2023, learned advocate Mr.

Page 11 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Masoom Shah with learned advocate Mr. Parth Thammar for the petitioners in Arbitration Petition No.24/2023 and learned Senior Advocate Mr. Kamal Trivedi with learned Senior Advocate Mr. Shalin Mehta with learned advocate Mr. Parth Contractor with learned advocate Mr. Pranav Vyas with learned advocate Mr. Manhar Singh Saini with learned advocate Mr. Vinay Bairagra with learned advocate Mr. Pranjal Buch for the petitioner in Arbitration Petition No.110/2022 and for respondents in Arbitration Petition Nos.23/2023 and 24/2023.

Arguments are concluded. The parties are at liberty to file short notes, if they wish to do so. Reserved for judgment."

8. Thereafter due to paucity of time,

judgment could not be delivered for

reasonable time, and therefore, on

08.02.2024, the matters were released.

9. Thereafter the matters were listed

before another coordinate Bench where it

was ordered as not before the Bench.

Page 12 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Meanwhile it appears that the original

claimant approached the Hon'ble Supreme

Court by filing Special Leave

Petition(Civil) No.7669-7670 of 2024

challenging the order dated 08.02.2024.

The Hon'ble Supreme Court by order dated

08.04.2024 remanded the matter back to

this Court to decide the same.

10. Pursuant to the aforesaid order dated

08.04.2024, a note was filed before the

Registry on 24.04.2024 by learned advocate

Mr. Karan Shah to place the matter before

this Court.

11. On perusal of records, it appears that

before the above proceedings took place, a

note was also filed by learned advocate

Mr. Karan Shah on 12.02.2024 before the

Page 13 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Registry to place the matter before this

Court, however, that note was not

considered and filed by the Registry after

obtaining the orders from the Hon'ble the

Chief Justice. It is pertinent to note

that in the said note, it was stated by

learned advocate Mr. Karan Shah that when

Civil Application (For Direction) No. 1 of

2023 in Arbitration Petition No.110/2022

came to be listed on 09.02.2024 before

this Court wherein learned Counsel for the

respondent in Arbitration Petition

No.110/2022 and petitioners in Arbitration

Petition No.23/2022 had requested that the

matter was extensively heard by this Bench

and hence to reconsider the earlier order

of releasing the matters and keep the

order reserved for judgment. However, such

statement made in the note dated 12.2.2024

Page 14 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

is not true and correct as no such request

was made either by learned advocate Mr.

Karan Shah who has stated so in the said

note nor the advocate for the petitioner

in Arbitration Petition No.110 of 2022 had

made such request. Thus the advocates have

misrepresented in the note filed before

the Registry.

12. On 9.2.2024 when Civil Application

No.1 of 2023 was listed before this Court

only it was mentioned that as the main

matters are released, no order is required

to be passed in the civil application for

directions and accordingly the matter was

adjourned to be placed before the

appropriate Court.

13. Be that as it may, after the aforesaid

order passed by Hon'ble Supreme Court, the

Page 15 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Registry has listed the matter before this

Court on 03.05.2024 and following order

was passed in Civil Application NO. 1 of

2023 in Arbitration Petition NO. 110 of

2022 directing the respondents therein to

file an affidavit disclosing the list of

properties of movable or immovable

properties for satisfying the arbitration

award within a period of two weeks as

there was a direction by the Hon'ble

Supreme Court to pass appropriate order

under section 36 of the Act:

"1. Learned Senior Advocate Mr.S.N.Soparkar appearing for the respondent has tendered the preliminary affidavit-in-reply on behalf of the respondent in Civil Application No. 1 of 2023 in Civil Application No. 1 of 2022 in Arbitration Petition No. 110 of 2022. The same is ordered to be taken on record.

2. Referring to the orders passed by the authority under the Prevention of Money Laundering Act, 2002 and the order dated 20th

Page 16 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

October, 2023 passed by this Court in Special Civil Application No.18654 of 2023, learned Senior Advocate Mr. Soparkar has made statement at bar as under:-

"That by virtue of 3rd proviso below Sub section (1) of Section 5 of the Prevention of Money Laundering Act read with Order dated 20th October, 2023 passed by this Hon'ble Court, according to respondent- Shri Neeraj Kumarpal Shah, the attachement order passed by the Prevention of Money Laundering Act continues to be in force."

3. Learned Senior Advocate Mr. Kamal Trivedi appearing for the petitioner in Arbitration Petition No. 110 of 2022 has submitted that as one of the property of the another judgement debtor is situated at Mumbai, the petitioner has filed Interim Application No.1390 of 2022 in Commercial Execution Application No. 23308 of 2021 wherein, the Hon'ble Bombay High Court has directed the judgement debtor to file an affidavit on oath disclosing all his assets movable as well as immovable.

3.1 It was further submitted that as per provisions of Rule 41 read with Rule 11, 12A, 13 of Order 21 the Code of Civil Procedure, 1908

Page 17 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

[for short "the CPC"], this Court can direct the judgement debtor to disclose on oath, the movable and immovable properties so that it can be decided whether such property is required to be attached during the pendency of the execution petition or not.

Rule 41(1) of Order 21 of the Code reads as under :

"41. Examination of judgment- debtor as to his property. -- (1) Where a decree is for the payment of money the decree-holder may apply to the Court for an order that -- (a) the judgment-debtor, or

(b) any officer thereof, or (c) any other person. be orally examined as to whether any or what debts are owing to the judgment debtor and whether the judgment-

debtor has any and what other property or means of satisfying the decree; and the Court may make an order for the attendance and examination of such judgmentdebtor, or officer or other person and for the production of any books or documents."

4. On the other hand, Mr. S.N.Soparkar, learned Sr.Advocate for the respondent has submitted as under :-

"That there is no provision of law

Page 18 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

under which the judgement debtor can be called upon to make disclosure about his assets and that too without there being credible ground for the alleged fear of dissipation of the property, to make disclosure of his assets."

5. Considering the above submissions and looking to the manner in which, the matter has proceeded before this Court, the respondent is directed to file an affidavit disclosing the list of properties movable or immovable properties for satisfying the arbitration award which is decreed for which this petition is filed, within a period of two weeks from today.

6. Civil Applications along with Arbitration Petition No.110 of 2022 is kept for further orders on receipt of the aforesaid affidavit."

14. Arbitration Petition No.110 of 2022 is

therefore, kept pending subject to filing

of the affidavit by the original

respondents therein. The matters were

thereafter listed for dictation of

Page 19 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

judgment and order in Arbitration Petition

No. 23 and 24 of 2023.

15. For the sake of convenience, Neeraj

Kumarpal Shah, petitioner of Arbitration

Petition No. 23 of 2023 shall be referred

to as "the respondent no.1", Manbhupinder

Sing Atwal, respondent of Arbitration

Petition No.23 of 2023 shall be referred

to as "the claimant", Kamal Sevaram

Jadhvani, petitioner of Arbitration

Petition No.24 of 2023 and respondent no.2

in Arbitration Petition No.23 of 2023

shall be referred to as "the respondent

no.2", Dinesh Shivanna respondent no.3 in

Arbitration Petition Nos.23 and 24 of 2023

shall be referred to as "the respondent

no.3" and C2R Project LLP, respondent no.4

in Arbitration Petition Nos.23 and 24 of

2023 shall be referred to as "respondent

Page 20 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

no.4-C2R LLP" as described by the

Tribunal.

CHRONOLOGY OF EVENTS

16. The facts emerging from the record

giving rise to theses petitions under

sections 34 and 36 of the Act can be

summarised as under:

17. This section of the order is only

confined to the recording the time-line

of the events giving rise to the disputes

between the parties so as to adjudicate

upon the issues which are raised by

respondent nos.1 and 2 in the arbitration

petitions filed under section 34 of the

Act challenging the arbitral award dated

16.04.2021 passed by the Tribunal (for

short "the arbitral award") and to decide

the Arbitration Petition no. 110/2022 for

Page 21 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

execution of the same.

(i) The claimant is a Non-Resident

Indian based in Oman and a retired officer

of the Indian army.

(ii) In 2011, the claimant established

a Defense Advisory and Consultancy

company in the name of MSA Global LLC (MSA

Global) which is engaged in managing

security electronics on the Oman border,

Military Communications Systems and

Vehicle Based Weapon systems as stated in

paragraph no. 1.1 at page 7 of the

Statement of Claim (For short "SOC").

(iii) It is the case of the claimant

that when he visited Ahmedabad in December

2014, he was introduced to respondent

no.1. Pursuant to that meeting, it was

Page 22 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

decided to work together including

participating in Indian defense technology

company by the name of Kinetex Solutions

Private Limited (as stated in paragraph

no.39 of the SOC, Pargraph III, page-3).

(iv) According to the claimant,

respondent no.1 represented to the

claimant that he was running a successful

business empire worth Rs. 20,000 Crore

including LLP which was valued at Rs. 100

Crore. The business plan proposed by

respondent no.1 was the claimant's capital

contribution which would be used for

developing infrastructure on land which

land would be procured by and brought into

LLP by respondent no.1 and respondent

no.2. According to the claimant,

respondent no.1 represented that

respondent no.1 and respondent no.2 have

Page 23 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

already invested in Indian defense

technology company in the name of Kinetix

Solutions Pvt. Ltd.

(v) On 30th December, 2014, the

claimant sent email to respondent no.1 as

a fall out of the meeting along with the

details and profile of his company MSA

Global LLC.

(vi) In January, 2015, according to the

claimant, further discussions were held

with respondent no.1 as regards the

advancement of their common business

interests, leading to a further meeting on

9th February, 2015 wherein according to

the claimant, it was represented by

respondent no.1 that all regulatory

approvals with respect to the investments

being made by the claimant will be put in

Page 24 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

place by the respondents and respondent

no.1 would be offering 20% stake in his

Rs. 100 Crore company at par to the

claimant for about Rs.20-25 Crore.

(vii) It is also the case of the

claimant that respondent nos.1 to 3 were

informed by the claimants about the

upcoming defense exhibition in Abu Dhabi

being the International Defence Exhibition

("IDEX") which was to take place from 22nd

to 26th February, 2015 and the claimant

agreed to take respondent nos. 2 and 3 to

Abu Dhabhi for IDEX.

(viii) The claimant also sent an email on

09.02.2015 to respondent no.1 providing

his Director Identification Number (DIN)

followed by Whatsapp messages between 14th

to 16th February, 2015.

Page 25 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

(ix) On 10th February, 2015 a Limited

Liability Partnership (LLP) agreement was

executed forming respondent no.4-C2R LLP

providing for various clauses which will

be referred later on and relevant clauses

i.e clause 8 - capital contribution,

clause 19 - obligation of partner, clause

22 - change in partners relied upon by the

Tribunal shall be referred later on in the

order during the analysis and discussion

so that same may not be repeated time and

again.

(x) It appears that between 09.02.2015

and 28.02.2015, various e-mails were

exchanged between the parties with regard

to the residential status as NRI of the

claimant and to obtain DIN number of the

claimant which is required for the purpose

Page 26 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

of registration of LLP.

(xi) The claimant took respondent nos.2

and 3 to Abu Dabhi to attend the IDEX as

promised by him during the meeting held on

09.02.2015. Thereafter, the meeting was

held on 27.02.2015 between the claimant,

respondent nos.1 to 3 at Ahmedabad to

formally induct the claimant into

respondent no.4-C2R LLP. In the said

meeting, an addendum to the LLP Agreement

dated 10.02.2015 was executed where the

claimant agreed to acquire 20% stake in

respondent no.4-C2R LLP for a contribution

of Rs. 45 Crore. It is the case of the

claimant that respondent no.1 represented

that such increase in stake was necessary

since the respondent no.4-C2R LLP would be

undertaking capital intensive activities

for development of infrastructure.

Page 27 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

(xii) Accordingly, share of the claimant

in Profit and Loss Account of each partner

was determined as 20%, respondent no.1-

40%, respondent no.2 and 3 - 20% each. The

claimant according to the agreement

between the parties on 27.02.2015

transferred his shares of Rs.45 Crore to

respondent no.4-C2R LLP as under:

SR DATE AMOUNT RS. NO. (1) 8 March 2015 5,00,00,000/-

(2) 25 March 2015 5,00,00,000/-

(3) 6 April 2015 5,00,00,000/- (4) 6 April 2015 2,50,00,000/- (5) 13 April 2015 2,50,00,000/-

(6) 25 May 2015 5,00,00,000/- (7) 2 July 2015 2,50,00,000/- (8) 6 July 2015 2,50,00,000/- (9) 31 August 2015 2,50,00,000/- (10) 21 September 2015 5,00,00,000/- (11) 11 February 2016 7,50,00,000/-

(xiii) From March 2015 to February 2016,

Page 28 of 497

Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

during the period when the claimant

transferred the aforesaid amount in the

bank account of respondent no.4-C2R LLP,

the following events have taken place as

per the claim statement filed by the

claimant and recorded by the Tribunal:

"60. On 31 March 2015, a meeting of partners of C2R was held which was attended by the Claimant and Respondent Nos. 1 to 3. In the said meeting, Respondent No. 1 was authorised to "negotiate with landlord to purchase the land of 71 acre at Ambli Gam and at Bhangadh at Delhi Mumbai Industrial Corridor." The parties further approved the purchase of a brand called URASATTVA from a firm, Rising Tradelink Limited, which was owned by Respondent No.1. At the said time, Respondent No. 1 had indicated that the brand would be purchased at a token amount, and no quantum had been specified. [(Claimant's Documents, Volume C-1 Pages 463 to 464) (SOC, paragraph 3.8, page 24) (SOC, paragraph 3.39, page 62)]

61. On 1 May 2015, the second meeting of the partners of C2R took place where the Respondent

Page 29 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

No. 1 was authorised to finalise and expedite the process of taking over of 45% stake in Kinetix. Respondent No. 1 represented that this investment would be made from the capital contribution of the Claimant as a temporary arrangement, while Respondent No. 1 was in the process of procuring the land for the LLP. [(Claimant's Documents, Volume C-1 Pages 465 to

467) (SOC, paragraph 3.11, page

27)]

62. In May 2015, Respondent No. 1 took the Claimant to Dholera to show the tentative areas where land was proposed to be acquired for the LLP, but did not identify any specific land parcel, and did not show any document pertaining to the title of the said lands.

(SOC, paragraph 3.41(c), page 69)

63. On 11 June 2015, a discussion was held between the partners of C2R to designate the work to be done by each partner towards the business of C2R. In furtherance of the same, Col. Jugraj Goraya, who was the then General Manager of C2R, circulated an email to all the partners detailing the division of the work and the projects to be undertaken. [(Claimant's Documents, Volume C-2 Pages 884 to 895) (SOC, paragraph 3.30, page-45))

Page 30 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

64. Based on the prospective business of C2R, Col. Jugraj Goraya had further prepared a brochure of the business opportunities of C2R as well as a presentation to be circulated amongst prospective clients. (Claimant's Documents, Volume C-2 Pages 896 to 937). As per the brochure, C2R's projects were to focus on 5 sectors:

(1) Defense/Aerospace

(2) UAV Systems/Drones

(3) E-governance/software development

(4) Eco-friendly/ low income housing portable shelters

(5) Renewable energy

65. On 7 October 2015, the third meeting of the partners of C2R took place where it was decided that Respondent No. 1 was authorised to operate the bank account of C2R, as well as utilise the net-banking and mobile banking facilities in relation to the account. (Claimant's Documents, Volume C-1 Pages 467 to 469).

66. Around April 2016, Respondent No. 1 suggested that the

Page 31 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

shareholding pattern of C2R be amended so that the majority is held by Respondent No. 1 and the Claimant. (SOC, para 3.40(d), page

65)

67. Following the aforesaid suggestion, Respondent No. 1 informed the Claimant, by an email dated 26 April 2016, that the change in shareholding was being objected to by the ROC on the ground that it was not in terms of the capital contribution. (Claimant's Documents, Volume C-2 Page 702)

68. In the communications between the parties, the chartered accountant of Respondent No. 1, by an email dated 28 April 2016 (Claimant's Documents, Volume C-2 Page 713), suggested that the following response could be given to the ROC:

"LLP has already invested sizeable sum in one of company namely Kinetix Solutions Pvt. Ltd and which is an associate company of the said LLP by having 45% equity stake. Now, the said company is in need of Rs. 7.5 crare sum for a specific project which has very good ROI (Return on Investment) hence LLP is on verge to invest required funds.

Page 32 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

In this investment, Mr. Neeraj Shah (promoter) can only be able to invest Rs. 2.45 crore within 45 days and whereas Mr. Manbhupinder Singh Atwal (additional designated partner) will bring Rs. 5.35 crores as of now within 45 days, rest two partners unable to bring any funds. This will satisfy the current need. Therefore, LLP will offer only 32.5% hike of equity to Mr. N.K. Shah and major 85% hike of equity to Mr. M.S. Atwal from current/existing profit-sharing ratio and other two partners ratio will subsequently decrease. We certify and ensure your good office to align the sharing ratio in the following manner which shall resolve the query raised by your good office.

N.K. Shah: 53%

M.S. Atwal: 37%

Kamal Jadhwani: 3%

Dinesh Shivanna: 7%

69. The Claimant agreed to the said response. However, the Claimant by his email dated 28 April 2016 stated that he would not be able to contribute any such amount into C2R since he did not have any more funds to bring into

Page 33 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

the LLP. (Claimant's Documents, Volume Claimant-2 Pages 711)

70. In September 2016, the Claimant received positive enquiries from CBC, one of the entities he was negotiating with, who indicated that the Indian Government had introduced certain regulatory changes which had eased the process of importing and manufacturing arms and ammunition in India. (Affidavit Evidence of the Claimant, para 172)

71. In order to assess the situation regarding the land available, on 16 September 2016, the Claimant, along with his associate, Col. R.K. Singh, visited Gujarat in order to examine the exact status of the site in Dholera. During the visit Respondent No. 1 identified scattered parcels of land as the portion, which was being acquired for C2R, but did not produce any title documents for the same. When the Claimant enquired as to how a manufacturing industry could be set up in scattered parcels, Respondent No. 1 stated that a single piece of land would be allotted to C2R against such scattered parcels once the Final Plan of Dholera was approved by the appropriate authority. (SOC, para 3.41(h), page 71."

Page 34 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

(xiv) It appears that thereafter on

18.05.2016, second addendum to the LLP

Agreement between the parties was signed,

whereby the profit sharing ratio of the

LLP was revised whereby claimant was

having 37% share, respondent no.1 was

having 53% share, respondent no.2 was

having 3% share and respondent no.3 was

having 7% share.

(xv) It appears that the claimant for

the first time sought bank details of

respondent no.4-C2R LLP after May, 2016 on

6.10.2016 and on perusal of the bank

statement provided by respondent no.1

along with the copies of Memorandum of

Understanding executed by him for the

purchase of land for respondent no.4-C2R

LLP, the claimant sought further details

Page 35 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

from respondent no.1 on 18.10.2016 along

with the accounts. However, respondent

no.1 did not provide such statement till

23rd October, 2016 as stated by the

claimant who has relied upon the document

at page 482 to 523 of Volume C-2 filed by

the claimant before the Tribunal. Several

emails were exchanged between the parties

on 23rd and 24th October, 2016 wherein the

claimant raised query to respondent no.2

as to why his contribution in respondent

no.4-C2R LLP which he has represented to

be Rs. 60 Crore was non existent which was

replied by respondent no.1 stating that

his money has been contributed towards

land of which only Rs. 4 Crore had been

paid through bank entries while the rest

has been paid in cash after withdrawing

from his account(claimants documents

Page 36 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

volume C2 page 517).

(xvi) On revelation of the above facts,

the claimant called an urgent meeting on

25.10.2016 with respondent nos. 2 and 3

who are other partners in respondent no.4-

C2R LLP. It is the case of the claimant

that respondents nos. 2 and 3 denied

having any knowledge regarding the

operation of funds by respondent no.1 as

they had never any access to the operation

of bank accounts of the respondent no.4 -

C2R LLP.

(xvii) The claimant and respondent nos.2

and 3 therefore, considering the conduct

of respondent no.1 in managing the funds

provided by the claimant in respondent

no.4-C2R LLP unanimously decided to expel

respondent no.1 as partner from respondent

Page 37 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

no.4-C2R LLP due to breach of LLP

agreement and misappropriation of funds of

LLP and the following resolutions were

passed:

"1) Resolution to freeze and suspend the bank account of C2R at Kotak Mahindra Bank, Prahaladnagar Branch, Ahmedabad. (Page 451)

(2) Resolution appointing G.K. Choksi and Co. as auditors to conduct a detailed special audit Of the accounts of C2R. (Page 452)

(3) Resolution appointing Mr. Mihil Lakhia as the advocate of C2R to represent C2R in legal proceedings. (Page 453)

(4) Resolution inducting Mr. Ranjan Kumar Singh and Mr. Angad Atwal as designated Partners of C2R. (Page 455)

(5) Resolution for opening a current account with SBI, Ahmedabad in the name of C2R.

(Page 457)

(6) Resolution amending the profit-sharing ratio of C2R (Page

458) as under:

(a) Claimant: 85%

Page 38 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

(b) Respondent No. 2: 5%

(c) Respondent No. 3: 5%

(d) Ranjan Kumar Singh: 2.5%

(e) Angad Atwal: 2.5%

(7) Resolution for entering into a term sheet with Mr. Suresh Bhatia for the purpose of sale of stake in Kinetix. (Page 460)

(8) Resolution authorising Respondent No. 3 to sign the term sheet for proposed transfer of stake in Kinetix. (Page 461)

(9) Resolution authorising Respondent No. 2 to file Caveat in legal proceedings in Gujarat (Page

462)."

(xviii) On 26 October 2016, a new LLP

agreement was executed between the

Claimant, Respondent Nos. 2 and 3, and the

two new partners of C2R, Mr. Ranjan Kumar

Singh and Mr. Angad Atwal were admitted.

The profit-sharing ratio was in terms of

the resolution dated 25 October 2016.

Page 39 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

(xix) On 27 October 2016, Kotak

Mahindra Bank confirmed that the account

of C2R had been frozen.

(xx) On 5th November 2016, the

Claimant received a letter from Kotak

Mahindra Bank seeking clarification

regarding the allegations raised by

Respondent No. 1 in a letter dated 28

October 2016 addressed to the bank. In the

said letter, Respondent No. 1 claimed to

be the 'Managing Designated Partner and

the sole majority shareholder in C2R.

Respondent No. 1 threatened legal action

against Kotak Mahindra Bank in case the

accounts of respondent no.4-C2R LLP were

not re-opened.

(xxi) On 20 November, respondent no.4-

Page 40 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

C2R LLP, through its counsel, responded to

the letter sent by Kotak Mahindra Bank

stating that Respondent No. 1 had been

expelled from C2R due to his fraudulent

conduct, and further informed the bank

regarding the new shareholding of the

partnership.

(xxii) On 11th November 2016, C2R received

a letter from the ROC with respect to

certain complaints made by Respondent No.

1 against C2R. The said letter referred to

two letters dated 29 October 2016 and 11

November 2016 as per which Respondent No.

1 claimed to be a partner of C2R. He

further requested the ROC to not take on

record any filings from C2R.

(xxiii) On 20th November 2016, C2R,

through its counsel, responded to the

Page 41 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

ROC's letter dated 11 November 2016

negating the allegation of Respondent No.

1 and further stating that Respondent No.

1 had been expelled from C2R due to breach

of the LLP Agreement and fraud played by

him.

ARBITRATION PROCEEDINGS

18. On 8th November 2016, Respondent No. 1

filed a petition under Section 9 of the

Act before the City Civil Court of

Ahmedabad being CMA 111/2016 seeking an

injunction against C2R and its partners

from acting on the resolutions dated 26

October 2016.

19. After the Claimant filed his

objections to the Section 9 Petition,

Respondent No. 1, by way of his rejoinder,

Page 42 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

attempted to introduce a new document,

alleging it to be the minutes of a meeting

dated 18 July 2015 of the partners of C2R.

These minutes had not been filed by

Respondent No. 1 with his Section 9

Petition and found no mention in the

entire Section 9 Petition. The said

minutes of the meeting dated 18 July 2015

appeared to ratify every action of

Respondent No. 1, including the MOUs

entered into by him for the purchase of

the land.

20. On the filing of the purported minutes

of the meeting dated 18 July 2015,

Respondent No. 2 and 3 filed an Affidavit

dated 20 November 2016 denying the Minutes

of the meeting dated 18 July 2015 and

categorically alleging that it was a

forged and fabricated document.

Page 43 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

21. However, during the pendency of the

said Petition, the Respondent No. 2

attempted to resile from his earlier

affidavit and the stand taken by him.

Respondent No. 2 further attempted to

claim that he had signed all the

resolutions dated 25 October 2016, as well

as the letters sent through C2R thereafter

through a misconception.

22. On 29 December 2016, the Section 9 Petition filed by Respondent No. 1 (i.e.

the Respondent No. 1 was the Applicant in

CMA 111/2016) was dismissed.

23. Respondent No. 1 preferred an appeal

against the Judgment dated 29th December

2016, which was dismissed by this Court on

4th May 2017 affirming the findings of the

Page 44 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Learned District Judge.

24. Respondent No. 1 preferred a special

leave petition before the Hon'ble Supreme

Court against the aforesaid Judgement

which was also dismissed by Order dated 15

September 2017.

25. During the proceedings filed by

respondent no.1 under section 9 of the

Act, the claimant and respondent no.3

collectively invoked arbitration against

respondent no.1 on 10.11.2016 as per

arbitration clause no. 35 of LLP Agreement

and appointed Hon'ble Mr. Justice J.M.

Panchal(retired) as their arbitrator. In

response, respondent no.1 appointed

Hon'ble Mr. Justice Mohit Shah(retired) as

co-arbitrator on 5.12.2016.

Page 45 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

26. On or around 16.01.2017, Hon'ble Mr.

Justice Mohit Shah, nominee of respondent

no.1, recused himself from the Arbitral

Tribunal. The claimant therefore, on

17.01.2017 called upon respondent no.1 to

appoint another co-arbitrator on his

behalf. Respondent no.1 appointed late

Hon'ble Mr. Justice G.T. Nanavati

(retired) as co-arbitrator in place of

Hon'ble Mr. Justice Mohit Shah on

16.02.2017.

27. As Hon'ble Mr. Justice J.M. Panchal

and late Hon'ble Mr. Justice G.T. Nanavati

were unable to agree on the appointment of

a Presiding Arbitrator within the

stipulated time period of 30 days as

required as per clause 35 of the LLP

agreement, the claimant filed application

under section 11 of the Act before the

Page 46 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Hon'ble Supreme Court of India by an

international arbitration. The Hon'ble

Supreme Court of India passed the order

dated 24.07.2017 in Arbitration Petition

No. 14/2017 as under:

"1) Heard the learned Senior Counsel appearing for the parties.

2) This petition has been filed under Section 11(6) of the Arbitration and Conciliation Act, 1996. One of the points of controversy that has come up before us is whether the present matter is a case of an International Commercial Arbitration in view of the fact that the petitioner is stated to be habitually resident in Oman, and would therefore, fall within sub-clause (i) of Section 2(f) of the Act.

3) Shri Gopal Shankar Narain, learned counsel on behalf of Respondent No.3, has correctly brought to our notice a certificate issued by the Sultanate of Oman of 2017 stating that the petitioner has been a habitual resident of Oman at least since 2012. This being the case, the present matter is undoubtedly a case of an International

Page 47 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Commercial Arbitration.

4) Given the fact that the arbitration clause between the parties requires the appointment of three Arbitrators, and given the fact that Respondent No.1 has appointed Hon'ble Mr. Justice G.T. Nanavati to be their Arbitrator and Respondent Nos. 2 and 3 along with the petitioner have appointed Hon'ble Mr. Justice J.M. Panchal, we appoint Hon'ble Mr. Justice C.K. Thakker, former Judge of this Court, to be the Chairman of the three-Member panel to adjudicate all disputes between the parties.

5) The petition is disposed of in the aforesaid terms."

28. Accordingly, Hon'ble Mr. Justice C.K.

Thakker (retired) was appointed as the

Presiding Arbitrator and the Arbitral

Tribunal was constituted. The Hon'ble

Supreme Court has also held that the

proceedings between the parties to be an

international commercial arbitration for

appointment of the Presiding Officer by

the Hon'ble Supreme Court under section

Page 48 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

11(6) of the Act.

29. The Tribunal held its first meeting on

29.08.2017 and passed the order with

regard to time schedule for filing claim

statement, reply, counter claim, if any.

The Tribunal also decided about the fees

to be paid by the parties. Further

meetings of the Tribunal were held on 3rd

October,2017 15th October,2017 22nd

October,2017 and 25th October, 2017 and

arguments on the application filed by the

claimant under section 17 of the Act were

heard and the matter was reserved for

pronouncement of order in section 17

application.

30. The Presiding Arbitrator Hon'ble Mr.

Justice C.K. Thakker(retired) vide email

dated 11.11.2017 communicated to the co-

Page 49 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

arbitrator and counsels appearing for the

parties about his inability to continue in

the proceedings.

31. After the resignation of Hon'ble Mr.

Justice C.K. Thakker(retired), as co-

arbitrators were unable to agree upon the

new Presiding Arbitrator, claimant

approached again to the Hon'ble Supreme

Court of India. The Hon'ble Supreme Court

by order dated 04.12.2017 appointed

Hon'ble Mr. Justice M.B. Shah (retired

Supreme Court Judge) as a Presiding

Arbitrator.

32. Arbitral Tribunal therefore, comprised

of Hon'ble Mr. Justice M.B. Shah

(retired) as the Presiding Arbitrator

along with Hon'ble Mr. Justice G.T.

Nanavati (retired) and Hon'ble Mr. Justice

Page 50 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

J.M. Panchal (retired) with effect from

04.12.2017.

33. The claimant filed application

levelling allegations against the Tribunal

and therefore, Hon'ble Mr. Justice J.M.

Panchal (retired) and Hon'ble Mr. Justice

M.B. Shah (retired) resigned from the

Tribunal in November, 2018.

34. Therefore, practically there were no

members of the Tribunal with effect from

11.11.2017 onwards after resignation of

Hon'ble Mr. Justice C.K. Thakker(retired).

35. The claimant thereafter appointed Mr.

Andre Yeap, Senior Counsel from Singapore

as a member - co-arbitrator on November,

2018 and Mr. Andre Yeap and late

Hon'ble Mr. Justice G.T. Nanavati

Page 51 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

(retired) jointly appointed late Mr.

Vinayak Pradhan from Malaysia as Presiding

Arbitrator on 24.01.2019. Therefore, the

Arbitral Tribunal was having full coram

with effect from 24.01.2019 comprising of

late Mr. Vinayak Pradhan as the Presiding

Arbitrator along with Hon'ble Mr. Justice

G.T. Nanavati (retired) and Mr. Andre Yeap

Senior Counsel as members - co-

arbitrators.

36. Respondent no.2 also filed an

application declaring expiry of the

mandate of arbitration proceedings under

Section 29A of the Act.

37. Learned advocate Mr.Gursharan H. Virk

appearing on behalf of respondent no.1

sent email dated 05.03.2019 addressed to

all concern including the arbitrators

Page 52 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

under the instructions of respondent no.1

in reply to the email dated 05.03.2019

addressed by Shri Kirit Singh Nagra

dsklegal, advocate for the claimant

referring to the earlier trails of emails

of 01.02.2019 of respondent no.1, email

dated 24.01.2019 of Presiding Arbitrator

Mr. Pradhan, letter dated 26.12.2018 of

the claimant to respondent no.1, email

dated 31.12.2018 of respondent no.1 to

claimant, email dated 2.01.2019 of Hon'ble

Mr. Justice G.T. Nanavati to co-arbitrator

and parties in reply to the email dated

31.12.2018, email dated 09.01.2019 from

claimant to respondent no.1, email dated

9.1.2019 from respondent no.1 to claimant

and ultimately, learned advocate for

respondent no.1 requested the Tribunal to

convene a preliminary arbitral meeting at

Page 53 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

the earliest subject to convenience of the

arbitrators as respondent no.1 desired to

press for urgent hearing and disposal of

the application under section 17 of the

Act. Request made by learned advocate for

the respondent no.1 in email dated

05.03.2019 reads as under:

"Respectfully, therefore, the issue of arbitral fees stands settled in terms above. The Respondent no.1 must be permitted to agitate, to the fullest extent of the law, its counter claims against the claimant and the claimant may be directed, if deemed fit by the Hon'ble Tribunal to discharge the cost implication in relation thereto.

I am instructed by my client to pray that the Hon'ble Tribunal be pleased to convene a preliminary arbitral meeting at the earliest, subject to the convenience of the Hon'ble Arbitrators, since the Respondent no.1 desires to press for urgent hearing and disposal of its application under section 17 of the Arbitration and Conciliation Act, 1996."

Page 54 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

38. Thereafter on 08.05.2019, learned

advocate Mr. Virk for respondent no.1 sent

an email in reference to email dated

26.04.2019 received from Presiding

Arbitrator calling upon the respondents to

submit the counter claim, if any. Learned

advocate Mr. Virk raised objection with

regard to the fees determined by the

Tribunal which was ordered to be paid by

respondent no.1 and after referring to

above email, it was stated as under:

"Since day one, my client has made it abundantly clear that he is incapable of making payment of such exorbitant fees; and if the adjudication of my client's case is conditional upon payment of fees as above, then the cost of litigation is going to make it impossible for my client to defend his case. Never has my client shrugged from the payment of fees; and my client has always indicated his readiness to make payment of fees of Rs.50000 per-hearing, i.e. the fees which was being discharged to the Hon'ble Tribunal

Page 55 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

presided by Hon'ble Justice Shri C.K. Thakker and subsequently, the Hon'ble Tribunal presided by Hon'ble Justice Shri M.B. Shah, both, former Hon'ble Judges of the Hon'ble Supreme Court of India.

The background of the constitution of this new Tribunal, presided by Hon'ble Shri Pradhan is the disbanding of the earlier Hon'ble Tribunal on account of the conduct of the Claimant. This, therefore, cannot become the reason to burden my client with abnormal arbitral fees which are incapable of being discharged.

On behalf of the Respondent No. 1, therefore, it is urged that the Hon'ble Tribunal be pleased to reconsider the directives of the e-mail dated 26.04.2019 in light of the present e-mail, and further be pleased to permit the Respondent No. 1 to agitate and proceed with his counter claims (already filed), since, the issue of costs of arbitration can always be factored in the award, in terms of Section 31A of the Arbitration and Conciliation Act, 1996."

39. By email dated 23.05.2019, late Shri

Vinayak P. Pradhan, Presiding Arbitrator,

at the relevant time informed the parties

Page 56 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

that 24th January 2019 email had set out

the basis of charges considering ICC

Schedule as an upper limit and therefore,

it was communicated by the lawyer of the

claimant that average fees could not

exceed the ICC Schedule and only conflict

was in relation to the amount of the

deposit required. It was further informed

that by email dated 5th February, 2019, it

was merely stated that the Tribunal is

prepared to consider the application of

ICC's scale of fees and expenses and the

Tribunal has decided to stay with 24th

January 2019 scale of charges and

deposits. It was informed to the

respondents that if the respondents do not

meet their obligation of payment, they

would be prohibited from pursuing their

counterclaims unless they paid their share

Page 57 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

of the deposit.

40. Learned advocate Mr. Virk for the

respondent by email dated 06.06.2019

reiterated that respondent no.1 has

already expressed his readiness to pay the

arbitration fees decided by the Tribunal

consisting of Hon'ble Mr. Justice Shri

C.K. Thakker (retired), Hon'ble Mr.

Justice M.B. Shah (retired), Hon'ble Mr.

Justice J.M. Panchal (retired) and Hon'ble

Mr. Justice G.T. Nanavati. It was informed

that it would be highly unusual and unfair

to burden respondent no.1 with a massive

fee quantum and it would make it

impossible for respondent no.1 to

participate in the arbitration

proceedings.

Page 58 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

41. By email dated 15.08.2019 late Shri

Vinayak Pradhan informed the parties about

the directions and orders issued by the

Tribunal as under:

"The Tribunal issues the following directions and orders.

Fees.

1. The terms of each member of the Tribunal for agreeing to act as arbitrators are as follows:

The Parties are to pay each member of the Tribunal the sum of SGD 50,000 prior to the constitution of the Tribunal.

(ii) In addition, for work done the parties are to pay SGD 1,200 an hour.

(iii)For meetings and hearings which are fixed for the whole day the Parties are to pay each member of the Tribunal SGD 6,500 a day.

Travelling time will be charged at SGD 600 per hour.

(iv) For items (ii) and (iii) above, the Parties are to pay prior to the constitution of the Tribunal, to each member of the

Page 59 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Tribunal, a further sum of SGD 50,000 as a deposit to be drawn down against bills to be rendered from time to time. If the sum drawn down reduces the deposit remaining to SGD 18,000, the Parties will top up each deposit to SGD 50,000 within 10 days of being given notice to do so. This will continue until the arbitration award is delivered.

(v) Further, the Parties are to pay each member of the Tribunal's expenses to be calculated in accordance with the SIAC's practice at the time the expenses are incurred. A separate sum of SGD 10,000 is to be paid to each member of the Tribunal as an advance deposit for expenses. This may need to be topped up as the arbitration progresses with payment of the sum required to be made within 10 days of notice to do so.

(vi) The payments listed above are to be made by each set of Parties by the time stated. Once the time for payment is past, if one Party does not pay its share of the deposit, the other Party may do so, on terms that these become recoverable costs from the non- paying Party in any event. All Parties are notwithstanding these arrangements jointly and severally

Page 60 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

liable for the Tribunal's fees and expenses.

(vii) In the event that any payment is not made on time, the Tribunal may suspend the arbitration in whole or in part or terminate it.

(viii) In the event that any Party does not make its payment of its share of the deposit on time, the Tribunal will stay that Party's claim

(ix)Upon the payments stated in paras. 3(i), (iv) and (v) being made, the Tribunal shall be constituted and will enter into the reference to arbitration and commence work.

In this connection, please note that the Tribunal has not been properly constituted and entered into the reference as yet. This will happen when the deposits are paid or a Party has paid its share with the other Party's claim being suspended for non payment.

(xi) The payments are to reach the respective arbitrators' bank accounts by 6 September 2019.

Schedule. The Arbitration will proceed from where it left off

Page 61 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

with the completion of the cross- examination of Claimant's witness No. 5. The parties are to notify the Tribunal by 6 September2019 as to who the other witnesses will be.

There does not appear to be any need for any further preliminary meeting and the first tranche of the hearings will be held in Singapore from 16 to 18 October 2019, 28 and 29 October 2019 and 7 to 15 November 2019 with the exception of 13 November 2019. I will forward Mr.Yeap's and my banking details. The Parties already have Justice Nanavatis.

The Claimant is to arrange for the hearing facilities at Maxwell Chambers, Singapore with the initial costs to be borne equally by both parties. The hearing times will be 9.30 a.m. to 4.30 p.m.

Transcripts The transcripts are to be taken by livenote or other equivalent processes for immediate view and same day provision of transcripts. Again, the Claimant is to arrange for this on terms that the initially costs are shared by the Parties.

The Tribunal looks forward to the cooperation of the Parties to

Page 62 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

conclude this arbitration expeditiously and in a courteous and co-operative manner.

Best regards,

Vinayak Pradhan"

42. In response to the above directions

and orders issued by the Tribunal, learned

advocate Mr. Virk for the respondent by

email dated 15.08.2019 at 15:12 hours

again reiterated that the fees proposed to

be charged by the Tribunal is more than

15-20 times fees which was being charged

by the Tribunals presided by Former

Hon'ble Judges of the Hon'ble Supreme

Court of India. It was further stated as

under :

"1. The Respondent No.1 - Neeraj K. Shah does not agree with the exorbitant fees directed to be paid to the Hon'ble Tribunal and cannot afford said high fees.

2. For the first time, today - vide the trailing email of the

Page 63 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Hon'ble Presiding Arbitrator Shri Pradhan, it is conveyed that meetings of the matter would take place at Singapore on the dates mentioned in the said email. The Respondent No. 1 - Neeraj K. Shah strongly objects to the said unilateral change in venue of hearings of the matter, which, in terms of the Agreement between the parties is to take place at Ahmedabad, Gujarat, India.

On behalf of the Respondent No. 1 it is respectfully submitted that it is not known as to how, why and when the Hon'ble Tribunal suddenly chose to move the matter from Ahmedabad to Singapore without consulting the parties and it is further submitted that my client is not in a position to afford the exorbitant costs associated with conducting the arbitration in Singapore."

43. By email dated 19.08.2019 late Shri

Vinayak Pradhan informed the parties that

hearing will take place at Ahmedabad and

it was further stated as under :

"It parties are to be note that the Tribunal has not been

Page 64 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

constituted and will not be constituted until the deposits are paid. This does not appear to have been pointed out to the learned Judge."

44. Learned advocate for the claimant by

email dated 20.08.2019 raised objection to

the email dated 15.08.2019 of the

respondent and agreed to pay the amount of

fees as per the directions and order

communicated by the Tribunal by email

dated 15.08.2019 and also agreed to incur

the cost for hearing scheduled on 16-18

October, 2019, 28-29 October, 2019 and 14-

15 November, 2019 with a prayer to protect

the interest of the claimant qua the cost.

45. With regard to the email of the

respondent, the following objections were

raised:

4. The repetitive contentions in the emails of Sh. G.S. Virk

Page 65 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

clearly indicate the conduct of the Respondent in not allowing the present arbitration proceedings to move forward. It is pertinent to note that in the Section 9 proceedings, which were being pursued by the Claimant before the Hon'ble High Court of Gujarat at Ahmedabad, the Respondent No. 1 and 2 had repeatedly raised an objection as to the maintainability of the Claimant's petition inter alia on the ground that the Arbitral Tribunal has already been constituted, and in view of the same, the Section 9 petition is not maintainable.

While the Section 9 petition was disposed of on grounds maintainability, the and Claimant is taking necessary steps to assail the said Judgment dated 21st June, 2019, the Respondent is repeatedly attempting to derail the arbitral process on frivolous grounds, as is evident from its emails. Such conduct of the Respondents ought to be viewed with utmost circumspection.

5. The Respondent's constant reliance upon the Judgment dated 21 June, 2019, and in particular, qua the alleged conduct of the Claimant is completely misplaced. It is to be noted that the Claimant has acted bona fide at all times to seek expeditious

Page 66 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

disposal of its claims and reliefs before the Arbitration Tribunal. It is the Claimant's case that the Respondent No. 1 and 2 have constantly thwarted the Claimant's attempts to seek legal remedies, despite the Respondent Nos. 1 and 2 having only invested paltry sums of INR 225,000 and INR 125,000 respectively as against the Claimant's investment of INR 45 crores into the Respondent No. 4 LLP. Furthermore, having invested the only the aforesaid sums in the LLP, the Respondent Nos. 1 and 2 have raised frivolous counterclaims to the tune of about INR 80 crores and INR 46.2 crores respectively and are now stating their inability to pay the arbitral fee, and yet seek adjudication of such exaggerated and frivolous claims purportedly at the expense of the Claimant. The contents of the last paragraph of Sh. Virk's email, are therefore, nothing more than another attempt to mislead this Hon'ble Tribunal from the main issues for determination in the arbitration."

46. Thereafter there was exchange of email

between the learned advocate of the

Page 67 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

claimants and the respondents on

21.08.2019 and 30.08.2019.

47. By email dated 06.10.2019 late Shri

Vinayak Pradhan presiding arbitrator of

the Tribunal confirmed that all the

Tribunal members who received the payment

from the claimant has requested and since

the Tribunal has been constituted, the

matter to proceed as scheduled on 16 to 18

October, 2019.

48. Thereafter at the hearing of the

Tribunal held on 07.11.2019 Tribunal suo

motu raised issue of applicability of

section 29A of the Act and after hearing

the arguments of the parties on the said

issue for two days decided that it had the

mandate to continue with the arbitration

proceedings and adjourned the matter on

Page 68 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

19.11.2019 at the request of respondent

no.1 subject to payment of cost by

respondent no.1 approximately Rs. 1.9

Crore to have been incurred by the

claimant vide order dated 23.12.2019 and

next date was fixed by the Tribunal on

3.1.2020 as 13 to 18 February 2020.

49. It appears that before arbitration

proceedings were to start on 13.02.2020,

respondent no.1 approached this Court on

12.02.2020 by preferring Special Civil

Application No.3913/2020 under Article 226

of the Constitution of India seeking

relief inter-alia in the nature of

issuance of writ of quo warranto to quash

and terminate the mandate of the Tribunal

and obtain stay on the arbitral

proceedings.

Page 69 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

50. The order passed by this Court dated

12.02.2020 in Special Civil Application

No. 3913/2020 reads as under:

"1. Learned Senior Advocate Mr.Soparkar for the petitioner and learned Senior Advocate Mr.N.D.Nanavaty for respondent No.2, who is supporting the petitioner, jointly submitted that the Arbitral Tribunal has lost its mandate and therefore, cannot proceed further with the arbitration. He drew attention of this Court to the order of the Apex Court dated 04.12.2027 in MA No.1482 of 2017 in Arbitration Petition No.14 of 2017 and particularly referred to the directions of the Apex Court in connection with Section 29A of the Arbitration and Conciliation Act that the arbitral proceedings will commence on and from the date on which the first sitting takes place. According to the petitioner, first date of arbitration was 01.02.2018 and therefore, as provided under Section 29A of the Arbitration and Conciliation Act, the award is to be made within a period of 12 months and therefore, period of 12 months had expired on 31.01.2019.

Page 70 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

1.1 Learned Senior Advocate for the petitioner referred to Section 29A(3) of the Act which provides for extension of period by consent of the parties by further period of not exceeding six months. That period was also over by 31.07.2019. It is the case of the petitioner that till such date, the Arbitral Tribunal was not constituted. For this, learned Senior Advocate for the petitioner drew attention of this Court to communication dated 21.01.2019 with regard to terms of each member of Tribunal and categoric mention in such communication by the Principal Arbitrator that upon payment stipulated in the very communication, the Tribunal shall be constituted and will enter into the reference of arbitration and commence work. He referred to various communications on behalf of the petitioner to the Principal Arbitrator about inability of the petitioner to accept the fee structure of arbitration. It is submitted that an application under Section 9 was filed by the petitioner before this Court being MCA No.90 of 2019, which came to be disposed of on the basis that the Arbitral Tribunal is constituted. Despite this, it was consistent stand of the respondent, including respondent

Page 71 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

No.5 that the Arbitral Tribunal is not constituted. He drew attention of this Court to various such communications, where stand of the respondent, including that of respondent No.5 is that the Arbitral Tribunal is not constituted. It is submitted that it was only on 06.10.2019, a communication was issued by respondent No.5 that the Tribunal is constituted.

1.2 It is therefore submitted that the date on which the Arbitral Tribunal was constituted even as per respondent No.5, the Arbitral Tribunal had expired the mandate contemplated under Section 29A of the Act and therefore, the arbitration proceedings are without jurisdiction.

1.3 It is submitted that change of arbitration fees from Rs.50,000/- per arbitrator to exorbitant fees as described by the new Arbitration President and that too without consultation and consent of the petitioner is forcing the petitioner to participate in the arbitration proceedings where the Arbitrators have predecided to reject the counter claim of the petitioner. In communication dated 26.04.2019 has communicated that there will be no counter-claim and only defence can be raised by the

Page 72 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

respondent to claimant's claims and this stand is only because the petitioner is unable to pay to foot cost of newly constituted Arbitral Tribunal.

2. Learned Senior Advocate Mr.Shalin Mehta for respondent No.1 submitted that though caveat is filed, the same is not reflected. He therefore, prays to be heard on behalf of respondent No.1.

2.1 His submissions is on preliminary points, i.e. (a) the subject will lie before before the Commercial Division of this Court under Section 10 of the Commercial Courts and and (b) this writ is not maintainable in view of Section 16 read with Section 34 of the Arbitration and Conciliation Act.

2.2 It is submitted that the petition is ill-timed. Tomorrow, second tranche of arbitration sitting is to commence. All concerned have flew down to Ahmedabad, incurring very heavy expenditure and that too at the cost of respondent No.1 alone as the petitioner has not contributed a single farthing.

2.3 It is submitted that conduct and communications from the

Page 73 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

petitioner would indicate that he has really and in fact, participated in the arbitral proceedings, but probably fearing an outcome against him, has filed the petition. The Court was cursorily taken through compilation provided and attention was drawn to certain e-mail communications to substantiate participation of the petitioner in arbitral proceedings.

2.4 It is submitted that the petitioner has prayed for writ of quo warranto, which essentially would not lie against an Arbitral Tribunal as the same is not any public body.

3. For the purpose of understanding the controversy, it may be necessary to refer and reproduce relevant portion of pleadings and documents. Order dated 04.12.2017 passed by the Apex Court in MA No.1482 of 2017 reads as under:-

"By our Order dated 24.07.2017, we appointed Hon'ble Mr.Justice C.K.Thakker, former Judge of this Court, to be the presiding Arbitrator. Justice Thakker has since stated that it would not be possible for him to take up the assignment.

Page 74 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

In this view of the matter, we now appoint Hon'ble Mr.Justice M.B.Shah, former Judge of this Court to be the Chairman of the Arbitarl Tribunal.

Considering the fact that Justice Thakker was unable to accept the assignment, the period within which the award is to be delivered under Section 29A of the Arbitration and Conciliation Act will commence on and from the date on which the first sitting takes place."

4. In communication dated 28.11.2016 addressed on behalf of respondent No.1 to the then existing Arbitral Tribunal, it is stated as under:-

"31. In view of the above circumstances and since this Hon'ble Tribunal will not be in a position to complete the present arbitration proceedings within the specified period of twelve months under the Act, there exists no reason for the Claimant to give his consent for an extension of the time period for existing Tribunal. The Claimant therefore wishes to place on record that this Hon'ble Tribunal has failed to dispense justice in a fair and timely manner. Further, the Claimant does not give his consent

Page 75 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

for any extension of the time period for this Hon'ble Tribunal as contemplated under Section 29A(3) of the Act or otherwise.

35. In view of the above said, the Claimant urges the Hon'ble Presiding Arbitrator to consider the aforesaid submissions on behalf of the Claimant and withdraw from the present arbitration proceedings as the Presiding Arbitrator."

4.1 The aforesaid is the categoric stand of respondent No.1 to an ongoing arbitration proceedings under the order of the Apex Court. 4.2 The relevant portion of the response by the Presiding Arbitrator Hon'ble Mr.Justice M.B.Shah, former Judge, Supreme Court of India dated 01.12.2018 reads as under:-

"2. It appears that it might be your habit to make such baseless statements and allegations to get the Order in your client's favour. Be sure that such baseless statements and allegations would not count much before the Tribunal consisting of three retired Judges of the Honourable Supreme Court. It is, therefore, quite possible that because of such behaviour, Ex. Presiding Arbitrator Mr.Justice C.K.Thakker (Former

Page 76 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Judge, Supreme Court of India) was required to withdraw his consent to continue as Presiding Arbitrator. This led the Honourable Supreme Court to appoint the undersigned to be the Presiding Arbitrator vide Order dated 04th December, 2017....

But before Order could be passed, on various grounds, the matter was adjourned and that is not required to be narrated here. However, that can be verified by referring to various minutes, orders and e- mails sent by this Tribunal. However, the oral evidence of the Claimant's four witnesses was recorded at length during the meetings held from 27th to 31st August, 2018; 05th, 29th & 30th October, 2018. Recording of the oral evidence of the Claimant's fifth witness was partly recorded on 30th October, 2019 which was to be continued on 16th December, 2018.

It is to be highlighted that the Order Prepared below the application filed by the Claimant under Section 17 of the Act is ready and is approved by the learned Co-Arbitrator, Justice Nanavati. Copy of the said Order was also delivered to Justice Panchal's residence on 29th November, 2018 at about 08:30 PM.

Page 77 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

However, on the same day, at 10:15 PM, Brother Justice Panchal arranged to e-mail resignation letter which was addressed to me with a copy to all and he withdrew from the Tribunal with immediate effect. Further, he has stated in the resignation letter that, "I have received and gone through the letter dated 28/11/2018 addressed by the Claimant's Counsel to the Arbitral Tribunal. IN paragraph 31 of the said letter, the Claimant has shown disinclination for an extension of time to make award. Allegations are against the whole Tribunal."

4.3 In the letter dated 29.11.2018 addressed by the Co-Arbitrator Hon'ble Mr.Justice J.M.Panchal, former Judge, Supreme Court of India to the Presiding Arbitrator Hon'ble Mr.Justice M.B.Shah, former Judge, Supreme Court of India, it is stated as under:-

"I have received and gone through the letter dated 28/11/2018 addressed by the Claimant's Counsel to the Arbitral Tribunal. In paragraph 31 of the said letter, the claimant has shown disinclination for an extension of time to make award. Allegations are against the whole Tribunal.

The record would demonstrate that

Page 78 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

respondent No.1 and respondent No.2 have delayed the matter at every juncture. Despite best efforts, the Tribunal has not been able to decide claimant's application filed u/s 17 of Act of 1996. There is no likelihood of main matter being disposed of within stipulated period. These proceedings are hotly contested and are only likely to get more intense and taxing in the days to come.

In view of the above, I hereby tender my resignation and withdraw from the Tribunal with immediate effect."

5. The issue of roster raised by learned Senior Advocate for the respondent pertains to Section 10(1) of the Commercial Courts Act, which provides that in an international commercial arbitration, all applications or appeals arising out of such arbitration under the provisions of the Arbitration and Conciliation Act, 1996 have to be filed in High Court and to be heard and disposed of by Commercial Division. Prima facie, when the contention before the Court to invoke Article 226 is on the basis of jurisdiction, to proceed with the Arbitral Tribunal after lapse of mandate, the

Page 79 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

contentions which are raised on basis of Section 29A of the Arbitration and Conciliation Act to invoke Article 226 cannot be said to be an application under Section 29A before the Arbitral Tribunal or petition before this Court to be an application arising out of the Arbitration and Conciliation Act.

6. To counter the submission of alternative remedy provided under the Arbitration and Conciliation Act in terms of Section 16 read with Section 34, reliance is placed by learned Senior Advocate for the petitioner to a judgment of this Court in case of HEIRS OF LEGAL OF SIDHRAJSINHJI PRAGRAJSINHJI & ORS. Vs. BENGAL CYNOSURE DEVELOPMENT PRIVATE LIMITED & ORS., reported in 2019(3) GLH, 406 wherein, it was held that in gross facts, the Court can exercise powers under Article 226.

7. Since the notice is being issued for the respondents to respond, the issue of writ of co warranto raised by respondent No.1 is kept open.

8. The issue that goes to the root of the matter is jurisdictional issue. The Arbitral Tribunal, whose mandate stands extinguished

Page 80 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

by operation of Section 29A whether can be permitted to arbitrate, especially in given facts and circumstances of the case. As observed in the presiding paragraphs, the Arbitral Tribunal constituted upon the orders of the Apex Court. Reference will have to be made to the terms and conditions which were stipulated by the new Presiding Arbitrator in his communication dated 24.01.2019, which are as under:-

"(i) The parties are to pay each member of the Tribunal sum of SGD (Singapore Dollars) 50,000 prior to the constitution of the Tribunal.

(ii) In addition, for work done the parties are to pay SGD 1,200 an hour.

(iii) For meetings and hearing which are fixed for the whole day the Parties are to pay each member of the Tribunal SGD 6,500 a day.

Travelling time will be charged at SDG 600 per hour.

(iv) Four items (ii) and (iii) above, the Parties are to pay prior to the constitution of the Tribunal, to each member of the Tribunal, a further sum of SGD 50,000 as a deposit to be drawn down against bills to be rendered

Page 81 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

from time to time. If the sum drawn down reduces the deposit remaining to SGD 18,000, the Parties will top up each deposit to SGD 50,000/- within 10 days of being given notice to do so. This will continue until the arbitration award is delivered.

(v) Further, the Parties are to pay each member of the Tribunal's expenses to be calculated in accordance with the SIAC's practice at the time the expenses are incurred. A separate sum of SGD 10,000 is to be paid to each member of the Tribunal as an advance deposit for expenses. This may need to be topped up as the arbitration progresses with payment of the sum required to be made within 10 days of notice to do so.

Upon the payments sated in paras. 3(i), (iv) and (v) being made, the Tribunal shall be constituted and will enter into the reference to arbitration and commence work."

8.1 These fees were objected by the petitioner another party to arbitration, especially with regard to exorbitant cost as against the cost stipulated by the previous Arbitral Tribunal. The new Presiding Arbitrator in communications dated 15.08.2019

Page 82 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

and 19.08.2019 has stated as under:-

Communication dated 15.08.2019

"(vii) In the event that any payment is not made on time, the Tribunal may suspend the arbitration in whole or in part or terminate it.

(viii) In the event that any Party does not make its payment of its share of the deposit on time, the Tribunal will stay that Party's claim.

(ix) Upon the payments sated in paras. 3(i), (iv) and (v) being made, the Tribunal shall be constituted and will enter into the reference to arbitration and commence work.

(x) In this connection, please note that the Tribunal has not been properly constituted and entered into the reference as yet.

This will happen when the deposits are paid or a Party has paid its share with the other Party's claim suspended for non payment.

(xi) The payments are to reach the respective arbitrators' bank accounts by 6 September 2016."

Communication dated 19.08.2019

Page 83 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

"The Tribunal has taken cognizance of Mr.Gursharan Virk's email and reconsidered its directions and directs as follows:

The Hearings will take place in Ahmedabad and not in Singapore. All other directions except for the references to Maxwell Chambers and Singapore stand.

It Parties are to be note that the Tribunal has not been constituted and will not be constituted until the deposits are paid. This does not appear to have been pointed out to the learned Judge."

9. It was for the first time by communication dated 06.10.2019 the Presiding Arbitrator of the newly constituted Arbitral Tribunal conveyed about constitution of the Tribunal. Considering the order of the Apex Court and mandate of Section 29A, prima facie period of one year had lapsed on 31.01.2019. Even if consent of the parties is to be presumed (which is not the fact in this case), the extended period of six months had also lapsed and there is no order of the Court which has extended the period of mandate. In that eventuality, prima facie, mandate of the Arbitral Tribunal stood terminated.

Page 84 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

10. In the facts of this case, as reproduced in the presiding paras, the stand of respondent No.1 was against extension of period for Arbitral Tribunal beyond period of one year and the and making 'U' turn in extending the mandate period on its own creating Arbitral Tribunal beyond period of mandate and then in hot haste to conduct arbitration proceedings, the reasons are not far to imagine.

11. A simple fact of ascertaining date on which the arbitration started, there is no clarity, prima facie leading this Court to believe the contention of the learned Senior Advocate for the petitioner that international arbitration is foisted upon the petitioner with a forgone conclusion of resisting the claim of the petitioner on his inability to pay the somewhat exorbitant arbitration costs, little remains to arbitrate. The manner in which arbitration is proceeding, the outcome is also not far to imagine. In background of the peculiar facts of the case, the Court finds that the petitioner has made a ground to interfere.

12. The shifting stand of the newly appointed Presiding

Page 85 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Arbitrator is evident even from the communication as late as of 15.01.2020, wherein the Presiding Arbitrator communicates that the issue relating to Section 29A will be dealt with by the Tribunal in its final award. At the same time, in communication dated 07.02.2020, the Presiding Arbitrator informs the parties that, "All the other matters raised by Mr.Sarkar have been dealt with by the Tribunal in its previous Order(s).

Notwithstanding this, the Tribunal reiterates that the Parties will be notified of the date the Tribunal entered into reference on 13 February 2020".

13. This, in the opinion of the Curt, creates doubt about the jurisdiction of the Tribunal to arbitrate beyond the period during which mandate is operational. Prima facie, no amount concession or participation of the petitioner in the arbitration proceedings can confer jurisdiction and similarly, no amount of expenditure incurred in the present arbitration proceedings can also confer jurisdiction.

14. NOTICE returnable on 26.02.2020. In the meantime, respondent No.5 shall not undertake proceedings further with the arbitral process /hearings, particularly scheduled from

Page 86 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

13.02.2020 onwards."

51. Against the above order dated

12.02.2020 claimant immediately filed

SLP(C) Diary No.5800/2020 before the Apex

Court. The Hon'ble Supreme Court passed

the following order on 14.02.2020 :

"UPON hearing the counsel the Court made the following

O R D E R

Issue notice.

Having heard learned senior counsel for both sides at great length, we pass the following order, which is not on the merits of the dispute:

1. The Arbitral Tribunal may continue with the hearing that is being fixed from 13th to 18th February, 2020. It may resume the hearing from tomorrow.

2. The Arbitral Tribunal will, for the time being, confine itself to taking evidence and hearing the parties.

3. The Gujarat High Court is requested to take up the matter on 26.02.2020. All parties assure us

Page 87 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

that they will not take any adjournment on that date. The High Court will endeavour to complete the hearing as soon as is practically possible and deliver judgment.

This order substitutes the order that has been passed on 12.02.2020.

To come up on 16.03.2020."

52. Pursuant to the above order dated

14.02.2020 passed by the Hon'ble Supreme

Court in the SLP preferred by the claimant

challenging the order dated 12.02.2020,

hearing before the Tribunal took place

from 15th February to 18th February, 2020

wherein cross examination of witnesses (1)

Col. R.K. Singh (retd.) (2) Mr. Ashok

Kashyap and (3) Mr. V.C. Misra was

conducted.

53. Presiding Arbitrator late Mr. Vinayak

Pradhan unfortunately expired on

Page 88 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

08.03.2020. Therefore, again coram of

Tribunal with effect from 08.03.2020 was

fractured.

54. This Court by order dated 11.03.2020

dismissed the Writ Petition No.3913/2020

along with another Special Civil

Application No.4441/2020 seeking identical

reliefs filed by the respondent no.2

holding that the petition cannot be

entertained under Article 226 of the

Constitution of India during the pendency

of the arbitral proceedings.

55. Thereafter on 09.09.2020 late Hon'ble

Mr. Justice G.T. Nanavati(retired) and Mr.

Andre Yeap jointly appointed Mr. K.

Anantham as the Presiding Arbitrator and

the arbitration proceedings were conducted

Page 89 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

by the reconstituted Tribunal.

56. The 4th Arbitral Tribunal conducted

the arbitration proceedings on 9th and 11th

2020 and December 10,11,17,18 and 19,

2020.

57. Respondent nos. 1 and 2 had preferred

SLP (C)Nos. 14869/2020 and 14900/2020

challenging the judgment dated 11th March,

2020 passed by this Court. The Hon'ble

Supreme Court by order dated 18.12.2020

disposed of the SLP by following

pronouncement:

"We find no ground to interfere with the impugned order(s) passed by the High Court. The Special Leave Petitions are, accordingly, dismissed. Pending interlocutory application(s), if any, is/are disposed of."

58. In paragraph no.44 of the Award, the

Page 90 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Tribunal has dealt with exclusion of

evidence of respondent nos. 1 and 2. The

decision was taken by the Tribunal to

exclude respondent nos.1 and 2 from filing

their evidence and those of their

witnesses after affording several

opportunities to file their evidence. The

Tribunal has set out in detail, as

outlined in the submission of the

claimant, that several opportunities were

afforded to the respondent nos. 1 and 2

and of their repeated failures to meet the

deadlines to file their evidence including

in some cases self-imposed deadlines.

Respondent no.1 filed written application

to tender evidence whereas respondent no.2

made oral application which was refused by

the Tribunal by a reasoned order dated

18.12.2020 in respect of respondent no.1

Page 91 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

and oral order in case of respondent no.2.

Order dated 18.12.2020 reads as under:

"1. We have heard the Advocates appearing on the application filed by Respondent 1, seeking leave of this Tribunal to lead evidence on behalf of Respondent 1 in these proceedings. The application is supported by the Affidavit of Respondent 1. The application was opposed by the Claimants, Respondent 3 and Respondent 4 but supported by Respondent 2.

2. In essence, the Affidavit purports to provide reasons as to why Respondent 1 has not been able to comply with the earlier directions ordered by this Tribunal for him to file his Affidavit evidence.

3. Respondent 1 advanced several reasons in seeking leave of this Tribunal, with the principal reasons being:-

i)the existence of parallel proceedings initiated by the parties at various stages of the adjudication process;

ii)an alleged contrary stance taken by the Tribunal in an

Page 92 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

exchange of four (4) communications with the parties between 15/7/2019 and 11/11/2019;

iii)the need for Respondent 1 to engage new Counsel and the ensuing delay arising in efforts to instruct new Counsel; and

iv)finally, the recent illness suffered by Respondent 1.

4 On the morning of 10/12/2020, this Tribunal received oral submissions in support and in opposition to this application. Mr. S Jayasimha, on behalf of Respondent 1, presented Item (i) of paragraph 3 above in this manner. Since the Supreme Court of India would be deliberating on whether the mandate of this Tribunal, which was then led by the late Mr. Vinayak Pradhan as Presiding Arbitrator, had expired at the material time, the Respondent's right to file an Affidavit containing his evidence ought to be preserved, if that right existed at that time, especially, if there is no further prejudice being caused to any party.

5. Counsel for the Claimant helpfully produced an Aide-Memoire

Page 93 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

on the commencement of oral arguments containing the history of the earlier proceedings in relation to the manner in which this Tribunal has dealt with earlier submissions by Respondent 1 for an extension for time to file his Affidavit. The history of the earlier proceedings relevant to Item (i) of paragraph 3 above is as follows:

a) The Tribunal in its directions to the parties dated 20 October 2019 had stated as follows: "The Tribunal notes that Respondent No.1 and Respondent No.2 have failed to file any affidavits of evidence in chief for themselves or any of their witnesses.

Accordingly, the Tribunal considers and takes it that: .... (2) Respondent No. 1 and Respondent No. 2 have elected not to give evidence themselves and have also elected not to call any witnesses to give evidence on their behalf. As such, unless otherwise directed by the Tribunal, the arbitration is to continue and to proceed on this basis.

b)The Tribunal further directed that if Respondent 1 and or Respondent 2 wished to change its position on the giving of

Page 94 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

evidence, it had to make its written application to the Tribunal on or before 25 November 2019 and on the basis of the conditions imposed therein. The reason for the written undertakings required by the Tribunal is as clearly stated in its email: namely that the late filing by the 13 and 2nd Respondents could potentially lead to a longer hearing with more evidence having to be considered by the Tribunal which in turn would impact on the time of delivery of the Award.

c)Mr. Virk, then Counsel for Respondent 1, in his email of 28 October 2019 responded to the Tribunal stating inter alia as follows: "I am instructed to state that the Respondent No. 1 will move appropriate application for extension of time to file affidavits of evidence of its witnesses on 07.11.2019." However, on 7 November 2019, Mr. Virk did not move such as application on behalf of his client.

d)Respondent 1 also did not submit any written application by the stipulated date of 25 November 2019 and to avail himself of the opportunity to file his evidence.

Page 95 of 497

Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

e) On 28 November 2019 the Tribunal again allowed an

extension of time to file the evidence of Respondent 1 and Respondent 2, attaching similar conditions as those previously attached. The date stipulated was 5 December 2019.

Respondent 1 and Respondent 2 yet again failed to submit a written application by the stipulated date of 5 December 2019 and to avail themselves of the opportunity to file their evidence.

(F) In its directions dated 15 January 2020, the previous Tribunal had concluded as follows:

A The Tribunal found that Respondent 1 and Respondent 2 have been afforded many extensions of time to file in their evidence without any conditions attached by the previous Tribunal. Despite this, they had not availed themselves of it.

B The Tribunal in its email of 20 October 2019 noted that Respondent 1 and Respondent 2 had failed to file any affidavits of evidence in chief for themselves or of any of their witnesses and accordingly the Tribunal considered and took it that they had elected not to give evidence themselves and had also elected not to call any witnesses to give evidence on their behalf.

Page 96 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

C The 2 further extensions granted by the Tribunal vide its directions dated 20 October 2019 and 28 November 2019 were subject to conditions which were fair and reasonable as the 1st and 2nd Respondents' had failed to file their evidence within the stipulated time frame specified by the earlier Tribunal and the numerous time extensions given to them, all of which had been unconditional.

D Taking into account these circumstances, the Tribunal found no merit in Mr Virk's contentions as regards the imposition by the Tribunal of conditions in granting the extensions) when the time for the filing of the evidence of Respondent 1 and Respondent 2 had already expired.

E The final date stipulated by the Tribunal ie, 5 December 2019, for filing any written application having passed, the Tribunal declared that Respondent 1 and Respondent 2 had waived their right to file any affidavit in lieu of their evidence in chief or that of its witnesses', along with copies of their supporting documents. Their right to file such evidence was declared closed and the arbitration shall proceed on this basis.

Page 97 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

g) There are 2 aspects which are particularly relevant to the outcome of this application. First, it was not all clear what and which "parallel proceedings"

Mr Jayasimha was referring to. At no point in time were "parallel proceedings "previously raised by Respondent 1 as a reason to seek an extension of time for the filing of his evidence. Indeed, Respondent 1's application to the Gujarat High Court for a stay of the arbitration proceedings was filed just prior to the arbitration hearing in Gujarat scheduled for 13 to 18 Feb 2020, which was well after Respondent 1 had failed to comply with its own offer to file its application by 7 November 2019, after the final stipulated date of 5 December 2020 for Respondent 1 to file its application in relation to the filing of his evidence and after the previous Tribunal's directions dated 15 January 2020 declaring Respondent 1's election to not give evidence and the closure of his right to give evidence in these proceedings.

h)Secondly, there been no change of circumstances to warrant the Tribunal departing from the previous directions dated 15 January 2020. Indeed, given that the status of the proceedings now is more advanced than it was in 15

Page 98 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

January 2020, compelling reasons reasons was required to be furnished by Respondent 1 as to why he had failed to file his affidavit of evidence in chief in accordance with the timelines previously directed, as well as why he failed to avail himself of the applications as allowed in the previous Tribunal's directions dated 20 October 2019 and 28 November 2019, and to also demonstrate why he should now be allowed to give evidence when he had previously elected by his conduct to not give evidence.

i) The Tribunal did not consider Items (ii) to (iv) of paragraph 3 as it did not consider the issues raised therein to be credible or based on adequate grounds to allow this application."

6 Accordingly, in the light of the long history of failures on the part of Respondent 1 to act on the many earlier opportunities to file his Affidavit evidence; his failure to file his application to introduce such evidence by 5 December 2019; this being the first time that Respondent 1 has raised "parallel proceedings" as having precluded him from filing his Affidavit earlier, which the Tribunal does not accept as a justifiable or adequate reason;

Page 99 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

the Tribunal's own interpretation of the Supreme Court Order, as regards its jurisdiction to continue with this Arbitration and which interpretation has already been made known to the parties, the Tribunal finds no merit in this application and consequently rejects Respondent 1's application for leave to introduce his affidavit evidence with costs to be paid by Respondent 1 to the Claimant in any event."

59. In the aforesaid order, Tribunal has

taken into consideration the time provided

to the respondent no.1 and 2 from October

2019 for adducing the evidence which was

the 5th opportunity. Prior thereto

respondent nos. 1 and 2 sought time to

lead evidence on 4 occasions. Firstly, on

02.02.2018 when Tribunal granted time as

under:

"14. If the parties want to lead evidence by way of evidence, the parties shall file Affidavit-in- lieu of Examination-in-chief of the witnesses along with copies of supporting documents on or before

Page 100 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

15th March 2018."

60. Thereafter, extension of time for four

weeks was sought on 07.04.2018 by

respondent no.1 for filing examination in

chief of respondent no.1 and his witness

which was allowed by the Tribunal as per

the following order:

"2. Application for extension of time for filing Examination-in- chief of the Respondent No.1 and his witnesses.

Notwithstanding objections from the Claimant, the Tribunal granted the extension with this justification.

However, in the interest of justice, the aforesaid application required to be allowed... Hence it is directed that the parties shall file Affidavit-in lieu of Examination-in-chief of the witnesses on or before 10th May, 2018 with copies of supporting documents....."

61. Thereafter second extension was sought

on 10.05.2018 for further 45 days by

Page 101 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

counsel for respondent no.1 for filing

affidavit in lieu of examination in chief

of respondent no.1.

62. It appears that the Tribunal

thereafter granted extension on 27.08.2018

and 31.08.2018 by recording consolidated

minutes that respondent nos. 1 and 2 have

still not filed required affidavit and

directed for the same to be filed on or

before 25.09.2018. Tribunal recorded

minutes as under:

"5... However, remaining Respondents have still not filed such Affidavit/s of their witnesses. Hence, it is directed that the parties who are yet to file such Affidavits of their witnesses shall file the same without any further delay, i.e. on or before 25th September 2018, failing which, it would be presumed that they have waived their right to file the same."

Page 102 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

63. During the aforesaid date, the

claimant was cross examined by the counsel

for respondent no.1 which lasted for five

days.

64. Thereafter the Tribunal granted 4th

extension on 2.11.2018 directing

respondent no.1 and 2 to file affidavit on

or before 20.12.2018 by observing as

under:

"6. Secondly, with regard to merits, it is directed that -

(ii) The Respondent No. 1 shall also file Affidavit/s in-lieu of Examination-in-chief of his witness/s on or before 20th December 2018. Copy thereof shall be provided to the Claimant and Respondent Nos. 2, 3 & 4 in advance."

65. By 2.11.2018, one expert witness led

by the claimant and two fact witnesses

were also cross examined by counsel for

Page 103 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

respondent no.1 on 5th October, 2018, 20th

October, 2018 and 30th October, 2018 and

another witness of the claimant Col R.K.

Singh (retd.) was also partly cross

examined on 30th October, 2018.

66. Thereafter, time was granted by the

Tribunal to respondent nos. 1 and 2 to

file their evidence by 25th October, 2019

by observing as under:

"The Tribunal notes that whilst Respondent No.3 has filed the Affidavit of Evidence-in Chief of Mr. Dinesh Shivanna, Respondent Nos. 1 and 2 have failed to file any Affidavits of Evidence-in-chief for themselves or any of their witnesses.

Accordingly, the Tribunal considers and takes it that:

1.Only Respondent No.3 is offering evidence, as stated in the Affidavit of Evidence-

in-chief of Mr. Dinesh Shivanna;

Page 104 of 497

Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

2.Respondent Nos. 1 and 2 have elected not to give evidence themselves and have also elected not to call any witnesses to give evidence on their behalf. As such, unless otherwise directed by the Tribunal, the Arbitration is to continue and to proceed on this basis;

3.The Tribunal also directs that in the event that Respondent Nos. 1 and 2 wish to change its position on the giving of evidence, it has to make its written application to the Tribunal on or before Friday, 25 November 2019 supported by way of Affidavit(s) setting out in detail the full reasons for its failure to comply with each of the previous directions for the filing of Affidavits of Evidence-in-

chief and also explaining fully why it should now be allowed to adduce any evidence by way of Affidavits of Evidence-in chief for itself and or its witnesses, with drafts of such Affidavits of Evidence-in-chief to be attached together with any such application. The Tribunal considers the aforesaid timeline to be more than fair and reasonable having regards

Page 105 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

to the conduct of the parties to the Arbitration thus far;

4.Given that the filing of any Affidavits of Evidence-in- chief by Respondent No.1 and or Respondent No.2 may potentially lead to a longer hearing with more evidence to be considered by the Tribunal which may in turn impact the timing of the delivery of the Award by the Tribunal, the Tribunal will only consider any aforesaid application by Respondent No.1 and or Respondent No. 2 for the filing of Affidavits of Evidence-in-chief, if such applications are accompanied by written undertakings from both Respondent No.1 and Respondent No.2 that they are agreeable to an extension of time for the delivery of the Award by the Tribunal of up to 9 months from the date of either the last oral hearing or submissions by the parties or their last written submissions, whichever is later,"

67. The Tribunal thereafter granted 6th

opportunity to respondent no.1 to file

Page 106 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

evidence on 7.11.2019 by preferring an

application for extension of time to file

affidavit of evidence of witnesses.

However, no such application was filed by

respondent no.1. Tribunal thereafter

granted seventh opportunity on 28.11.2019

to file evidence by 5th December, 2019 and

thereafter order dated 18.12.2020 was

passed. The Tribunal closed the right of

respondent nos. 1 and 2 to file evidence

formally on 15.01.2020 after recording all

the opportunities granted to respondent

nos. 1 and 2.

68. Respondent no.1 filed an application

on 10.12.2020 which was replied by the

claimant on 11.12.2020. The Tribunal

disposed of application by order dated

18.12.2020 as quoted here in above.

Respondent no.1 also filed application on

Page 107 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

10.12.2020 for recalling the claimants and

Col. Jugraj Goraya (Retd.) for further

cross examination and for summoning Mr.

Angad Atwal for cross examination. The

Tribunal dismissed all the applications by

a separate reasoned order each dated

08.12.2020 respectively.

69. Tribunal has decided the following

issues:

1) Whether the claimant was induced to

execute the Addendum dated 27th February,

2015 and invest Rs.45 Crore into C2R due

to the fraudulent misrepresentation of

respondent nos. 1 and 2?

70. To decide the above issue, Tribunal

has framed the following sub-issues:

Page 108 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

(a) Whether representations attributed to

Respondent nos. 1 and 2 were made in

period December 2014 to February 2015?

71. The Tribunal after considering the

submissions of claimant and the respondent

no.1 and 2 arrived at following conclusion

in para 103 of the arbitral award:

"103. Accordingly, in the face of the above reasoning, it is the conclusion of the Tribunal that the Claimant's version of the meetings held between December 2014 and February 2015, including the representations attributed to Respondent No.1 represents the true version of the background facts. In this respect, the Tribunal rejects the claim of Respondent No. 2 that there was very little interaction between them and the Claimant before 27/2/15 and the claim of Respondent No.1., that it was the Claimant who volunteered to join the LLP."

(b) Whether the representations made

by respondent nos 1 and 2 in the

Page 109 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

period from December 2014 to February

2015 were fraudulent?

72. After considering the law on

fraudulent misrepresentation and

submissions made on behalf of the claimant

together with oral evidence on record and

response of respondent nos. 1 and 2, the

Tribunal recorded the findings and arrived

at following conclusion in para no.136 of

the arbitral award:

"136. Conclusions on whether the representations were fradulent

(a) The Tribunal is satisfied on a balance of probabilities that the representations made by Respondent No.1 in the period December 2014 to February 2015, set out in paragraph 105 of this Award, are fraudulent based on the findings, set out above;

b) The Tribunal is satisfied that the Claimant was induced by these fraudulent misrepresentations to execute the Addendum of 27 February 2015 and thereby become a

Page 110 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

partner, based on the findings set out in paragraph 134 above;

(c) The Tribunal concludes that the exception in Section 19 of the Indian Contracts Act does not preclude the Claimant from succeeding in his claim for fraudulent misrepresentation against Respondent No.1, notwithstanding, his failure to conduct a due diligence of C2R, as Respondent No.1 is guilty of active misrepresentation. The Tribunal in coming to this conclusion is following the decision of the Supreme Court of India in the of decision Avitel Post Studioz Ltd's HSBC PI Holdings (Mauritius) Ltd, 2020 SCC On Line SC 656, and

(d) The Tribunal is not persuaded that Respondent No.2 is guilty of active fraudulent misrepresentation. In the Tribunal's view Respondent No.2 was not present in the meetings prior the meeting of 27 February 2015 and was probably silent, when Respondent No.1 actively made the fraudulent misrepresentations.

attributed to him at the meeting of 27 February 2015. Accordingly, the Tribunal concludes that Respondent No.2 is not guilty of fraudulent misrepresentation."

Page 111 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

73. Tribunal thereafter framed the

following issue:

Whether there was misappropriation of

funds by respondent nos. 1 and 2?

74. The Tribunal after considering the

submissions made on behalf of the

claimants for misappropriation of funds by

respondent no.1 and restitution and damage

for the same to prove that the respondent

no.1 has siphoned off the funds of

respondent no.4-C2R LLP and that money

transferred by respondent no.1 was not

used for purchase of land and that minutes

of meeting dated 18.07.2015 is forged on

the basis of oral and documentary evidence

as well as response of respondent no.1 and

2 for the claim of misappropriation

Page 112 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Tribunal recorded the findings and arrived

at following conclusion in para 191 of the

arbitral award:

"Conclusion:

191. On the issue of misappropriation of the sum of Rs.22.19 crores by Respondent Nos. 1 and 2, the Tribunal's conclusions are as follows:

1.Respondent No.1 is guilty of misappropriating the sum of Rs. 22.19 crores from the accounts of C2R;

2.The withdrawal and utilization of the sum of Rs.22.19 crores by Respondent No.1 from the account of C2R was without the knowledge and approval of the remaining partners and in breach of the LLP Agreement;

3.That Respondent No.1 make restitution of the sum of Rs.22.19 crores

4.misappropriated by him from the account of CR, (Respondent No.4), by repaying the aforesaid sum to Respondent No.4.

Page 113 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

5.Respondent No.2 is not guilty of misappropriating the funds of C2R;

6.Respondent Nos. 1 and 2 did not contribute any monies towards the capital of C2R nor did he purchase the land for CR as required of him by the resolution of 31 March 2015.

7.The resolution of 18 July 2015 is a forgery."

75. Tribunal after arriving at conclusion

regarding the aforesaid issues on merits

has dealt with the following

jurisdictional objections raised by

respondent nos.1 and 2 as follows in para

192 of the arbitral award:

"Before the Tribunal proceeds to deal with the Reliefs sought by the claimant, the Tribunal proposes to deal with the several jurisdictional objections raised by respondent nos. 1 and 2. The objections are as follows:

Page 114 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

(1) The proceedings have continued beyond the mandate of the tribunal permitted under section 29A of the Arbitration Act;

(2)The allegedly exorbitant expenses imposed by this Hon'ble Tribunal are not based on the consent of both parties;

(3) The unreasonable conditions imposed on Respondent Nos. 1 and 2 for the filing of their evidence, and the rejection of their respective counter claims on account of delay, breaches the principles of natural justice and is against the due process of law and

(4) The allegations which have been made in the Statement of Claim involve aspects of fraud, including forgery, which are subject to criminal investigation by law enforcement authorities. As such, the present disputes are not amenable to arbitration proceedings, as per the settled position of law in India. (Booz Allen & Hamilton v SBI Home Finance Ltd (2011) 5 SC 532)"

76. Tribunal arrived at following findings

on above objections raised by respondent

no. 1 and 2 :

Page 115 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

"Findings of Tribunal on the duration of the mandate of the Tribunal

196. The Tribunal is satisfied that it has the mandate to complete this arbitration notwithstanding the lapse of 12 months since the commencement of this Arbitration. The Tribunal is satisfied that the reasons provided in its order of 18/12/20 upholding its mandate to complete this Arbitration is the correct order since it is consistent with the decision of the Delhi High Court in the case ONGC Petro Additions Limited v. Fernas Construction Co. Inc The Tribunal finds nothing in the Judgment of the Court to justify limiting its applicability to the peculiar facts of the case, as submitted by Counsel for Respondent No.1. The authority of M/S Suryadev Alloys and Powers Pvt Ltd v. M/s. Shri Govindaraja Textiles Pvt Ltd cited by Counsel for Respondent No.1 is not relevant as the case did not involve an international arbitration."

xxx "Finding of Tribunal on issue of Exorbitant fees of the Tribunal

199. The Tribunal is satisfied that Respondent Nos.1 and 2 have not been denied due process due to their alleged inability to pay

Page 116 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

fees. The fact of the matter is that Respondent Nos.1 and 2 were both given ample opportunities to file their witness statements, were represented by counsel, allowed to cross-examine all witnesses and granted postponement of the November hearing dates to suit their convenience and that of their Counsel at various stages of this arbitration. Respondent Nos.1 and 2 enjoyed all of these rights, notwithstanding, failing to bear any part of the expenses of the Tribunal since the appointment of the late Mr. Pradhan and in the case of Respondent No.1 not paying the costs ordered against him for the adjournment of the hearing dates, The Tribunal also notes that the similar objection raised by Respondent Nos. 1 and 2 before the Hon'ble Supreme Court at the hearing held on 18/12/20 did not find any favour with the court.

Accordingly, the Tribunal dismisses the second

jurisdictional objection." xxx "Findings of the TRibunal

204. It is the finding of the Tribunal that the case of Booz Allen is clearly not applicable to the facts of this Arbitration. As regards Ayyasamy's case, the pronouncements of the Hon'ble Supreme Court in the case of

Page 117 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Avitel Post Studio cited above are relevant and worth quoting:

"4. The principles of law laid down in this appeal make a distinction between serious allegations of forgery/fabrication in support of the plea of fraud as opposed to "simple allegations".

Two working tests laid down in para 25 are:

(1) does this plea permeate the entire contract and above all, the agreement of arbitration, rendering it void, or (2) whether the allegations of fraud touch upon the internal affairs of the parties inter se having no implication in the public domain."

"After these judgments, it is clear that "serious allegations of fraud" arises only if either of the two tests laid down are satisfied, and not otherwise. The first test is satisfied only when it can be said that the arbitration clause or agreement itself cannot be said to exist in a clear case in which the court finds that the party against whom breach is alleged cannot be said to have entered into the agreement relating to arbitration at all. The second test can be said to have been met in cases in which allegations are made against the

Page 118 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

State or its instrumentalities of arbitrary, fraudulent, or mala fide conduct, thus necessitating the hearing of the case by a writ court in which questions are raised which are not predominantly questions arising from the contract itself or breach thereof, but questions arising in the public law domain." (see paragraph 14 of.the Judgment of the Court in the case of Avitel Post Studioz Limited and Others Versus HSBC, Pi Holdings Limited [2020] 6 ML 544.)

205. The Tribunal's finding is that the Claimant's claim in this arbitration does not include "serious allegations of fraud" of the nature described by the Hon'ble Supreme Court in the above passage so as to bar the Claimant from pursuing its claim in this Arbitration. Accordingly, since this arbitration involves a civil dispute, the objection that the Claimant's claim is not arbitrable is rejected."

77. Thereafter Tribunal recorded the

disagreement between the members of the

Tribunal with regard to clause 34(A) and

34(B) of the LLP agreement dated

Page 119 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

10.02.2015 as under:

"INTERPRETATION OF CLAUSES 34(A) AND 34(B)

206. A point of disagreement (not raised by Respondent No.1 in his pleadings or through the Submission of his Counsel) between the Members of this Arbitral Tribunal relates to the interpretation of Clause 34(A) and Clause 34(B) of the LLP Agreement of 10th February, 2015. These Clauses read as follows:

"34. LIMITATION OF LIABILITY/INDEMNIFICATION: (A) LIMITED LIABILITY :

Except as expressly provided herein, neither partner will be liable to the other partner or the LLP with respect to any subject matter of this agreement under any contract, negligence, strict liability or other legal or equitable theory for (i) any special, indirect, incidental, consequential or punitive damages or lost profits or (ii) cost of procurement of substitute goods or services.

(B) INDEMNIFICATION BETWEEN THE PARTNERS:

Neither partner shall indemnify the other partner or LLP or its respective officers, directors,

Page 120 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

employees and its respective successors, heirs and assigns ("indemnities") for any loss, claim, damage, liability or action except to the extent resulting from its respective gross negligence or willful wrongdoing. This paragraph does not limit either partner's other remedies available to its under the laws."

207. The view of Justice Nanavati is that Clause 34(A) of the LLP Agreement of 10 February 2015 provides a complete defence to Respondent Nos.1 and 2 against any claim for damages for loss of profits and consequential losses, generally. In Justice Nanavati's view the exemption against liability contained therein, avails Respondent Nos.1 and 2 and constitutes a total defence against all the claims of the Claimant, save the claim of Respondent No.4, for the return of its misappropriated funds. The majority view is that the Claimant is entitled to damages suffered by him arising from the fraudulent representations made by Respondent No.1 which had the effect of inducing him to execute the Addendum and by extension, become a party to the LLP Agreement of 10 February 2015. The majority view

Page 121 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

is premised on the reasoning that Clause 34A does not operate to limit or exempt partners liability inter-se, where the partner/s against whom the claim is made are guilty of willful wrongdoing, as is the case with Respondent No. 1.

This reasoning is based on the literal interpretation of the words "willful wrong-doing" in Clause 34(B).

208. Accordingly, the majority view is that Clause 34(4) does not operate to exempt Respondent Nos.1 and 2 from liability against claims by the Claimant since to cheat your partner of his investment by fraudulent misrepresentation is more grave than gross-negligence and is the worst and most deplorable form of willful wrongdoing. On a proper holistic reading, Clause 34(A) and Clause 34(B) were never intended to exclude liability for gross negligence or willful wrongdoing. To suggest that the parties had intended to exclude liability for gross negligence and willful wrongdoing, which includes fraud and fraudulent misrepresentation, would be tantamount to giving an unconditional license for any investor to be completely victimized with civil impunity, which no reasonable businessman would have done."

Page 122 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

78. Tribunal has thereafter framed the

following issues with regard to claim of

the claimants:

i) Return of 22.19 Crore to respondent

no.4-C2R LLP.

79. With regard to above issue, the

Tribunal arrived at following conclusion

in para 219 of the award:

"CONCLUSION

219. That Respondent No. 1 is liable to pay the sum of Rs 22.19 crores to the LLP, i.e., Respondent No.4, together with interest of 12% p.a. from 11/2/16 till the date of payment. The Tribunal considers 11/2/16 to be the appropriate date since this was the date when the last tranche of the Claimant's investment was credited into the account of Respondent No.4. The Tribunal is of the view that the award of interest should 12% p.a.

Page 123 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

ii) claim for loss of return on

investment and loss of profits.

80. With regard to above issue, the

Tribunal arrived at the following

conclusion:

"CONCLUSION

231. The Tribunal is not persuaded that the Claimant is entitled to both heads of damages, i.e., damages for loss of investment and damages for consequential losses for loss of opportunity. In the view of the Tribunal, the damages for loss of opportunity are based on the premise that but for the breach of contract on the part of Respondent No.1, the Claimant's contribution towards the capital of C2R together with the promised capital contributions of Respondent Nos. 1 and 2 would have resulted in C2R making the quantum of profits projected by the Claimant's expert witness. Since the Claimant's investment can only be "parked" in one entity, at any one time, the Tribunal is of the view that it cannot award damages for loss of return on investment, since the damages assessed by the expert is on the assumption that

Page 124 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Claimant's investment is available to C2R in the period 27 February 2015 to 31 March 2015 (see paragraph 12.77 of the expert's report at page 113.)"

iii) Whether the claimant is entitled to

damages of Rs.84 Crore for loss of

profits?

81. With regard to the above issue,

conclusion by the majority of the members

of the Tribunal is as under:

"CONCLUSION

259 The Tribunal accepts the methodology and the application of the methodology to the facts of this case adopted by the Claimant's expert witness Mr. Ellis and concludes that the Claimant is entitled to be awarded the sum of Rs.84 Crores as damages for loss of profits and loss of opportunity.

260. The Tribunal rejects the Claimant's claim of Rs.12 crores for loss of return on investment as in the Tribunal's view, this claim can only be relevant in the

Page 125 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

alternative scenario as outlined by the expert in paragraph 13.15 of his affidavit report."

iv) Return of all documents in possession

of respondent no.1.

82. With regard to above issue, findings

of the Tribunal are as under:

"Findings of Tribunal

265. It is the Tribunal's finding that following his expulsion from C2R, Respondent No. 1 is obliged in law to return all the documents of Respondent No. 4 currently in his possession to Respondent No.

4. Accordingly, since by his own admission, the documents of Respondent No. 4 are still in his possession, then, in the absence of any interim order restraining this Tribunal from making any order for the return of the documents, the Tribunal's view is that it has the jurisdiction to require Respondent No. 1 to return all the documents back to Respondent No. 4 pursuant to Prayer D of paragraph 26 of the Statement of Defence of Respondent No.4."

Page 126 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

83. Tribunal thereafter dealt with the

issue of awarding costs. Tribunal after

considering the various heads of costs

passed the formal final award by majority

and awarded the following to the

claimant :

"AWARDS

A. AWARDS to the Claimant and Respondent No.4 and Orders Respondent No.1 to pay to C2R, the Respondent No.4, the sum of INR 22.19 crores together with interest at 12% per annum from 12 March to the date of payment, forthwith.

B. AWARDS to the Claimant and Orders Respondent No.1 to pay damages in the amount of INR 84 crores to the Claimant, forthwith.

C. AWARDS to the Claimant and Orders Respondent No.1 to pay interest at 12% per annum on the sum of INR 84 crores from 25th September, 2017 till the date of payment, forthwith.

Page 127 of 497

Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

D. AWARDS costs on a full

indemnity basis in favour of the Claimant, Respondent No.3 and Respondent No.4, to be paid by Respondent No.1 and Respondent No.2 jointly and severally forthwith;

E. In relation to the aforesaid costs at Paragraph Dabove, Awards to the Claimant and Orders Respondent No.1 and Respondent No.2 to jointly and severally pay forthwith to the Claimant, the following amounts:

(1) the full legal cost and expenses incurred by the Claimant in relation to the Arbitration and related court proceedings, including the legal costs and expenses of the legal teams of the Claimant, Respondent No.3 and Respondent No.4, the fees and expenses of the Tribunal, the fees incurred by EPQ Global, all of which have been borne by the Claimant, amounting to a) INR 14,27,33,429.65 and b) SGD 984,454.87, as set out in Appendix A of the Written Submissions on behalf of the Claimant dated 7 January 2021 (and as revised by the Tribunal) and a copy of which is attached hereto marked as "Appendix A" for easy reference, and which includes:

Page 128 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

i) the sum of INR 1,12,79,291.25 and SGD 229,683 ordered to be paid pursuant to the Order dated 23 December 2019;

ii) the fees and expenses of the Tribunal already paid by the Claimant as of the date of this Award;

iii) the costs and expenses incurred by Respondent No.3 and Respondent No.4 as of 7 January 2021 which have been borne by the Claimant."

84. Late Hon'ble Mr. Justice G.T. Nanavati

(retired) has passed the dissenting final

award with regard to cost of Rs. 84 Crore

as damages for loss of opportunity,

however agreed with the conclusion arrived

at by the majority of the members of the

Tribunal that respondent no.1 is guilty of

misappropriation of Rs. 22.19 Crore from

the account of respondent no.4-C2R LLP and

also agreed with conclusion reached by the

Page 129 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

majority that claimant is not entitled for

damages and/or loss of investment and also

with rejection of claim of Rs. 12 Crore on

return of investment.

Points for determination/Issues:

Considering the above findings of the

Tribunal, the following points for

determination arises from the arbitral

award:

I - Jurisdiction of the Arbitration

Tribunal

1) Whether the Tribunal could have

continued the arbitration proceedings

under section 29A of the Arbitration and

Conciliation Act, 1996 or not?

Submissions made by learned Senior Advocate Mr. S.N. Soparkar for petitioner-

Page 130 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

respondent no.1:

1.1) Learned Senior Advocate Mr. S.N.

Soparkar for the respondent no. 1

submitted that the provisions of section

29A of the Act is mandatory and therefore,

the Arbitration Tribunal has become

functuos officio with effect from

01.02.2018 and therefore, it cannot be

said to be pending arbitration in the eyes

of law because 12 months as per the order

of Hon'ble Supreme Court got over on

31.01.2019. Reliance was placed on order

dated 4.12.2017 in MA No. 1482 of 2017 in

Arbitration Petition No.14 of 2017 where

Hon'ble Mr. Justice M.B. Shah (retired)was

appointed as Chairman of the Arbitral

Tribunal as Hon'ble Mr. Justice C.K.

Thakker (retired)had resigned and it was

further held that the period within which

Page 131 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

the award is to be delivered under section

29A of the Arbitration and Conciliation

Act will commence on and from the date on

which the first sitting takes place and

therefore, first meeting took place on

01.02.2018.

1.2) It was further submitted that

Hon'ble Mr. Justice J.M. Panchal (retired)

resigned on 29.11.2018 and Hon'ble Mr.

Justice M.B.Shah (retired) resigned on

01.12.2018 and late Mr. Vinayak Pradhan

gave consent to be the Presiding

Arbitrator on 24.01.2019. It was also

pointed out in email dated 24.01.2019 that

the Tribunal shall be constituted and will

enter into a reference through Arbitration

and commence work only upon payment of

fees as stated in mail. It was therefore,

submitted that it cannot be said that

Page 132 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

arbitration was pending under section 29A

of the Act after 1.02.2019.

1.3) It was submitted that the

provisions of section 29A of the Act is

mandatory and its effect is automatic by

operation of law and the amendment of

section 29A of the Act only applies to

pending arbitration as held by the Hon'ble

Supreme Court in case of Tata Sons(P) Ltd.

(Formerly Tata sons Ltd.) v. Siva

Industries and Holdings Ltd. and others

reported in 2023 SCC OnLine SC 23 reported

in 2023 SCC OnLine SC 23, wherein it is

held as under:

"23 The first respondent has not entered appearance in these proceedings. The second respondent, who is contesting the proceedings as a guarantor, has urged that the amendment of Section 29A by Act 33 of 2019 would not lead to the conclusion

Page 133 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

that an international commercial arbitration lies outside the purview of the provision. The second respondent has submitted that reading the provisions of Section 29A in the manner in which the applicant seeks to read them would result in a situation where there would be no timeline under the statute for an international commercial arbitration. Where an international commercial arbitration is governed by the Rules of an arbitral institution, such rules would structure the conduct of the arbitration. The second respondent has submitted that it was not the intention of the legislature that in a case which is not governed by an arbitral institution, the court would have no control over the time taken in the course of the arbitral proceedings leaving the matter entirely within the discretion of the arbitral forum in a situation such as the present, where the arbitral proceeding is governed by Indian Law and has a seat within the country.

xxx

34 The 2019 Amendment Act does not contain any provision equivalent to Section 26 of Act 3 of 2016 evincing a legislative intent

Page 134 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

making the application of the amended provision prospective. The amended provisions of Section 29A, in terms of which the arbitral tribunal has to endeavour to dispose of the proceedings in an international commercial arbitration as expeditiously as possible within a period of twelve months from the completion of the pleadings are remedial in nature. The amended provision has excepted international commercial arbitrations from the mandate of the twelve- month timeline which governs domestic arbitrations. The amendment is intended to meet the criticism over the timeline in its application to international commercial arbitrations. The amendment is remedial in that it carves out international commercial arbitrations from the rigour of the timeline of six months. This lies within the domain of the arbitrator and is outside the purview of judicial intervention. The removal of the mandatory time limit for making an arbitral award in the case of an international commercial arbitration does not confer any rights or liabilities on any party. Since Thirumalai Chemicals Ltd v. Union of India (2011) 6 SCC 739 Jose Da Costa and Anr. v. Bascora Sadasiva Sinai Narcornim, (1976) 2 SCC 917; Gurbachan Singh

Page 135 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

v. Satpal Singh (1990) 1 SCC 445;

Rajendra Kumar v. Kalyan (D) by Lrs, (2000) 8 SCC 99 Hitendra Vishnu Thakur v. State of Maharashtra, (1994) 4 SCC 602 Section 29A(1), as amended, is remedial in nature, it should be applicable to all pending arbitral proceedings as on the effective date i.e., 30 August 2019."

1.4) Learned Senior Advocate Mr.

Soparkar submitted that reference to ONGC

Petro Additions reported in 2020 SCC

OnLine Del 2582 of the Delhi High Court by

the Tribunal is not correct. It was

submitted that in paragraph 196 of the

impugned award the Tribunal has

erroneously considered the reasons

provided in order dated 18.12.2020

upholding its mandate to complete the

arbitration. Learned Senior Advocate Mr.

Soparkar submitted that there is no order

passed by the Tribunal on 18.12.2020 as

referred by the Tribunal in paragraph 196

Page 136 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

of the impugned award.

1.5) He thereafter referred to the

transcript of hearing of 8.11.2019 wherein

after considering the arguments between

the parties on applicability of section

29A of the Act for termination of the

mandate of the Tribunal on completion of

12 months on 1.2.2019, the Tribunal

declared as under:

"(2:43 pm) CHAIRMAN:

Gentlemen, thank you for your submissions, you have done that before and we must say we are very impressed by your diligence, your, as I said, your erudition and the manner in which you have presented your submissions.

14:44 It has not been an easy decision for us to take, but we have, in a sense, struggled our way around it and have come to the conclusion that we will proceed with the evidence."

1.6) Referring to the above transcript

Page 137 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

of the meeting it was submitted that there

is no order passed by the Tribunal for

recording satisfaction and the reasons for

upholding its mandate to complete the

arbitration.

1.7) It was submitted that reference

was placed by the Tribunal on the decision

in case of ONGC Petro Additions (supra) to

hold that order passed by the Tribunal

which is not in existence is in

consistence with the decision of Delhi

High Court. It was further submitted that

reliance placed on the decision in case of

Tata Sons(P) Ltd. (supra) is also not

correct as fallacy is that in the said

case it is recorded in paragraph no.13

that moratorium began on 05.07.2019 which

applied to the arbitration and it got over

on 03.06.2022 and therefore, arbitration

Page 138 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

was considered as pending when the

amendment was brought in the statute on

August 2019.

1.8) Reliance was placed on the

following decisions to submit that section

29A of the Act is mandatory and therefore,

Arbitral Tribunal has become functus

officio on 1.2.2019:

a) State of Bihar and others v. Bihar

Rajya Bhumi Vikas Bank Samiti reported in

(2018) 9 SCC 472, wherein it is held as

under:

"[22] However, according to Shri Tripathi, an application filed under Section 34 is a condition precedent, and if no prior notice is issued to the other party, without being accompanied by an affidavit by the applicant endorsing compliance with the said requirement, such application, being a non-starter, would have to be dismissed at the end of the 120

Page 139 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

days' period mentioned in Section 34(3). Apart from what has been stated by us hereinabove, even otherwise, on a plain reading of Section 34, this does not follow. Section 34(1) reads as under: "34. Application for setting aside arbitral award.-(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3)."

What is conspicuous by its absence is any reference to sub-section (5). The only requirement in Section 34(1) is that an application for setting aside an award be in accordance with sub- sections (2) and (3). This, again, is an important pointer to the fact that even legislatively, subsection (5) is not a condition precedent, but a procedural provision which seeks to reduce the delay in deciding applications under Section 34. One other interesting thing needs to the noted - the same Amendment Act brought in a new Section 29A. This provision states as follows:

"29A. Time limit for arbitral award.- (1) The award shall be made within a period of twelve months from the date the arbitral

Page 140 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

tribunal enters upon the reference.

Explanation.- For the purpose of this sub-section, an arbitral tribunal shall be deemed to have entered upon the reference on the date on which the arbitrator or all the arbitrators, as the case may be, have received notice, in writing, of their appointment.

(2) If the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree.

(3) The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months.

(4) If the award is not made within the period specified in sub-section (1) or the extended period specified under sub-section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period:

Page 141 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Provided that while extending the period under this subsection, if the court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five per cent for each month of such delay."

[23] It will be seen from this provision that, unlike Section 34(5) and (6), if an Award is made beyond the stipulated or extended period contained in the Section, the consequence of the mandate of the Arbitrator being terminated is expressly provided. This provision is in stark contrast to Section 34(5) and (6) where, as has been stated hereinabove, if the period for deciding the application under Section 34 has elapsed, no consequence is provided. This is one more indicator that the same Amendment Act, when it provided time periods in different situations, did so intending different consequences."

b) Roop Singh Bhatty v. M/s. Shriram City

Union Finance Limited of Telangana High

Court (judgment dated 08.04.2022 in C.R.P.

Page 142 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

No. 1354 of 2021 and allied matters),

wherein it is held as under:

"14. The provision as it stood was in mandatory terms and leaves no scope to infer otherwise. The intention of the Parliament is made abundantly clear from the reading of Sub-sections (3) and (4). Subsection (3) enables parties by consent to extend the time by further period of six months. But it also makes it clear that it should not be extended beyond six months. According to sub-section (4), after the initial period of one year and extended period of six months, if extended by consent, the mandate of the arbitrator terminates. Thus, he becomes functus-officio after that period and, therefore, seizes to be an arbitrator. An arbitrator is a creature of the statute and has to work within the four corners of the Act.

17. The disputes raised in these two revisions were covered by unamended Section 29-A. From the dates and events of these two cases, it is apparent that the concerned arbitrators passed awards after one year of entering appearance. They became functus officio one year after entering appearance and were wholly incompetent to deal with the

Page 143 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

disputes and pass awards. Thus, awards passed by the arbitrators are nullity and void ab initio. In law there do not exist awards and therefore question of enforcement of the awards do not arise. The execution Court grossly erred in not appreciating this aspect."

c) Union of India v. Advanced Polymer

Technology and ors. (judgment dated

3.12.2018 passed in O.P.(ICA) No. 5 of

2018) of Kerala High Court, wherein it is

held as under:

"17. However, in this case it is seen that the Arbitrator continued his sittings even after the expiry of the period on 08.08.2018 and passed interim orders. In the absence of any order granting enlargement of time, the Arbitrator did not have any authority to hold sittings or pass orders. Therefore, when he became functus officio on expiry of the extended period, sittings held after 08.08.2018 till enlargement of time is granted cannot have any validity."

1.9) It was submitted that the amended

Page 144 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

provision providing a longer period of

time cannot revive a dead remedy inasmuch

as a vested right accrued under original

section cannot be taken away by amendment

retrospectively. In support of his

submission reliance was made on the

following decisions:

a) In case of T. Kaliamurthi and another

v. Five Gori Thaikkal Wakf and others

reported in (2008) 9 SCC 306, the Hon'ble

Supreme Court held as under:

"40. In this background, let us now see whether this section has any retrospective effect. It is well settled that no statute shall be construed to have a retrospective operation until its language is such that would require such conclusion. The exception to this rule is enactments dealing with procedure. This would mean that the law of limitation, being a procedural law, is retrospective in operation in the sense that it will also apply to proceedings pending at

Page 145 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

the time of the enactment as also to proceedings commenced thereafter, notwithstanding that the cause of action may have arisen before the new provisions came into force. However, it must be noted that there is an important exception to this rule also. Where the right of suit is barred under the law of limitation in force before the new provision came into operation and a vested right has accrued to another, the new provision cannot revive the barred right or take away the accrued vested right."

b) New India Assurance Co. Ltd. v. Smt.

Shanti Misra, Adult reported in (1975) 2

SCC 840, wherein Hon'ble Supreme Court has

held as under:

"[7] In our opinion taking recourse to the proviso appended to sub-section (3) of Section l10A for excusing the delay made in the filing of the application between the date of the accident and the date of the constitution of the Tribunal is not correct. Section 5 of the Limitation Act, 1963 or the proviso to sub-section (3) of Section l10A of the Act are meant to condone the default of the party on the ground of sufficient

Page 146 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

cause, But if a party is not able to file an application for no fault of his but because the Tribunal was not in existence, it will not be a case where it can be said that the "applicant was prevented by sufficient cause from making the application in time"

within the meaning of the proviso. The time taken between the date of the accident and the constitution of the Tribunal cannot be condoned under the proviso. Then, will the application be barred under sub- section (3) of Section l10A? Our answer is in the negative and for two reasons:

(1) Time for the purpose of filing the application under Section 110A did not start running before the constitution of the Tribunal. Time had started running for the filing of the suit but before it had expired the forum was changed. And for the purpose of the changed forum, time could not be deemed to have started running before a remedy of going to the new forum is made available.

(2) Even though by and large the law of limitation has been held to be a procedural law, there are exceptions to this principle.

Generally the law of limitation which is in vogue on the date of the commencement of the action governs it. But there are certain exceptions to this principle. The

Page 147 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

new law of limitation providing a longer period cannot revive a dead remedy. Nor can it suddenly extinguish vested right of action by providing for a shorter period of limitation."

c) Tata Teleservices v. Union of India

reported in 2016 SCC OnLine Guj 3889,

wherein this Court held as under:

"13.00. In the backdrop of the above facts, few decisions of the Hon'ble Supreme Court on the point and more particularly, with respect to retrospective applicability of the provisions of the Act are required to be referred to and considered.

13.01. In the case of S.S. Gadgil (supra), the Hon'ble Supreme Court has observed and held that in absence of an express provision or clear implication, legislature does not intend to attribute to the amending provision a greater retrospectivity than is expressly mentioned, nor to authorize the Income Tax Officer to commence proceedings which before the new Act came into force had upon the expiry of the period provided, become barred. In the aforesaid

Page 148 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

decision, the Hon'ble Supreme Court had an occasion to consider the question, as to, whether in case where the right to assess or reassess has lapsed on account of expiry of the period of limitation prescribed under the earlier statute, the Income Tax Officer can exercise his powers to assess or reassess under the amending statute which gives an expressly period of limitation and to that, the Hon'ble Supreme Court has noted decision of the Calcutta High Court in the case of Calcutta Discount HC-NIC Page 38 of 64 Created On Tue Mar 22 01:53:00 IST 2016 38 of 64 Company Ltd.

reported in 1953 (23) ITR 471 (AIR 1953 Calcutta 721) and consequently has held the notice issued relying on amended section invalid by further observing that section as amended not to be given greater retrospectivity than is expressly mentioned. In the aforesaid decision in the case of S.S. Gadgil (supra) in para 12 and 13, the Hon'ble Supreme Court has observed and held as under :

"12. In considering whether the amended statute applies, the question is one of interpretation i.e. to ascertain whether it was the intention of the Legislature to deprive a tax payer of the plea that action for assessment or re-

Page 149 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

assessment could not be commenced, on the ground that before the amending Act became effective, it was barred. Therefore the view that even when the right to assess or reassess has lapsed on account of the expiry of the period of limitation prescribed under the earlier statute, the Income-tax Officer can exercise his powers to assess or re-assess under the amending statute which gives an extended period of limitation was not accepted in Calcutta Discount Company's case, 1953-23 ITR 471 :

(AIR 1953 Cal 721).

13. As we have already pointed out the right to commence a proceeding for assessment against the assessee as an agent of a non-

resident party under the Income- tax Act before it was amended, ended on March 31, 1956. It is true that under the amending Act by S.18 of the Finance Act, 1956, authority was conferred upon the Income-tax Officer to assess a person as an agent of a foreign party under S. 43 within two years from the end of the year of assessment. But authority of the Income-tax Officer under the Act before it was amended by the Finance Act of 1956 having already come to an end, the amending provision will not assist him to commence a proceeding even though at the date when he issued the

Page 150 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

notice it is within the period provided by that amending Act. This will be so, notwithstanding the fact that there has been no determinable point of time between the expiry of the time provided under the old Act and the commencement of the amending Act. The legislature has given to S. 18 of the Finance Act 1956, only a limited retrospective operation i.e. up to April 1,1956, only. That provision must be read subject to the rule that in the absence of an express provision or clear implication, the Legislature does not intend to attribute to the amending provision a greater retrospectivity than is expressly mentioned, nor to authorize the Income-tax Officer to commence proceedings which before the new Act came into force had by the expiry of the period provided become barred."

13.02. A similar view has been taken by the Hon'ble Supreme Court in the case of J. P. Jani, Income Tax Officer, Circle IV, Ward-G, Ahmedabad and another, versus Induprasad Deveshanker Bhatt, reported in AIR 1969 S.C. 778 and while interpreting section 297(2)

(d)(ii) of the Income Tax Act, after considering the earlier decision of the Hon'ble Supreme Court in the case of S. S. Gadgil

Page 151 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

versus Lal and Co., [1964-53 ITR 231 = AIR 1965 SC 171], the Hon'ble Supreme Court in para 5 and 6 has observed and held as under :-

"5. On behalf of the appellants Mr. Narasaraju stressed the argument that the High Court was in error in holding that the provisions of the new Act of 1961 were not applicable in cases where the time limit fixed in the old Act had expired before the coming into force of the new Act. It was contended that Section 297 (2) (d)

(ii) of the new Act was wide in its sweep and it took in all assessment years after the year ending on 31st March, 1940 irrespective of the question whether the right to reopen the assessment in respect of any such assessment years was barred or not under the old Act at the date when the new Act came into force.

According to Mr. Narasaraju the legislative intention was that once the new Act came into force, the question whether the assessment in respect of any assessment year after the year ending on 31st March, 1940 was liable to be reopened or not should be decided with reference to the provisions of the new Act. It was argued that the new Act authorized such assessment to be

Page 152 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

reopened whatever might be the position in regard to the right to re-open such assessment under the old Act. In our opinion, the argument put forward by Mr. Narasaraju is not warranted. It is admitted in this case that the right of the Income Tax Officer to re-open the assessment for the year 1947-48 was barred under the old Act before the new Act came into force. In our opinion it is not permissible to construe Section 297 (2) (d) (ii) of the Act as reviving the right of the Income Tax Officer to re- open the assessment which was already barred under the old Act. The reason is that such a construction of Section 297 (2) (d) (ii) would be tantamount to giving of retrospective operation to that Section which is not warranted either by the express language of the Section or by necessary implication. The principle is based on the well-known rule of interpretation that unless the terms of the statute expressly so provide or unless there is a necessary implication, retrospective operation should not be given to the statute so as to affect, alter or destroy any right already acquired or to revive any remedy already lost by efflux of time. On behalf of the appellants reference was made to the opening

Page 153 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

phrase "Where in respect of any assessment year after the year ending on the 31st day of March, 1940" occurring in S. 297 (2) (d)

(ii) of the new Act, but these general words cannot take in their sweep all assessment years subsequent to the year ending on 31st March, 1940 without regard to the question whether the right to re-open the assessment in respect of any assessment year was or was not barred under the repealed Act. We consider that the language of the new Section must be read as applicable only to those cases where the right of the Income Tax Officer to reopen the assessment was not barred under the repealed Section. In our view the new statute does not disclose in express terms or by necessary implication that there was a revival of the right of the Income Tax Officer to re-open an assessment which was already barred under the old Act. This view is borne out by the decision of this court in S. S. Gadgil v. Lal and Co., 1964-53 ITR 231= (AIR 1965 SC 171). In that case, a notice was issued against the assessee as an agent of a non- resident on 27th March, 1957 and that notice related to the assessment year 1954-55. Under clause

Page 154 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

(iii) of the proviso to Section 34 (1) as it stood prior to its amendment by the Finance Act, 1956, a notice of assessment or reassessment could not be issued against a person deemed to be an agent of a non- resident after the expiry of one year from the end of the year of assessment. The right to commence a proceeding for assessment against the assessee as agent of a non-resident for the assessment year 1954- 55 therefore ended on 31st March, 1956 under the new Act before its amendment in 1956. This provision was, however, amended by the Finance Act, 1956 and under the amended provision the period of limitation was extended to two years from the end of the assessment year. The amendment was made on 8th September, 1958 but was given effect from 1st April, 1956. Since the time within which notice could be issued against a person deemed to be an agent of a non-resident was extended to two years from the end of the assessment year, it was contended on behalf of the Income Tax Officer that the notice issued by him was within the terms of the amended provision and was, therefore, a valid notice. Now the notice issued on 27th March, 1957 was clearly within a period of two years from the end of the assessment year 1954-55 and if the

Page 155 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

amended provision applied, the notice would be a valid notice. It was, however, held by this Court that notice was not a valid notice inasmuch as the right of the Income Tax Officer to re-open the assessment of the assessee under the unamended provision became barred on 31st March 1956 and the amended provision did not operate against him so as to authorize the Income Tax Officer to commence proceedings for re-opening the assessment of the assessee in a case where before the amended provision came into force, the proceedings had become barred under the unamended provision. At page 240 of the Report (ITR) = (at p. 177 of AIR), Shah, J. speaking or the Court observed as follows:-

"As we have already pointed out, the right to commence a proceeding for assessment against the assessee as an agent of a non- resident party under the Income Tax Act before it was amended, ended on March 31, 1956. It is true that under the amending Act by Section 18 of the Finance Act, 1956, authority was conferred upon the Income Tax Officer to assess a person as an agent of a foreign party under Section 43 within two years from the end of the year of assessment. But authority of the Income Tax Officer under the Act

Page 156 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

before it was amended by the Finance Act of 1956, having already come to an end the amending provision will not assist him to commence a proceeding even though at the date when he issued the notice it is within the period provided by that amending Act. This will be so, notwithstanding the fact that there has been no determinable point of time between the expiry of the time provided under the old Act and the commencement of the amending Act. The legislature has given to Section 18 of the Finance Act 1956, only a limited retrospective operation, i. e. up to April 1, 1956 only. That provision must be read subject to the rule that in the absence of an express provision or clear implication, the legislature does not intend to attribute to the amending provision a greater retrospectivity than is expressly mentioned, nor to authorize the Income Tax Officer to commence proceedings which before the new Act came into force had by the expiry of the period provided become barred".

6. In our opinion, the principle of this decision applies in the present case and it must be held that on a proper construction of Section 297 (2) (d) (ii) of the new Act, the Income Tax Officer

Page 157 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

cannot issue a notice under Section 148 in order to re-open the assessment of an assessee in a case where the right to re-open the assessment was barred under the old Act at the date when the new Act came into force. It follows therefore that the notices dated 13-11-1963 and 9-1-1964 issued by the Income Tax Officer, Ahmedabad were illegal and ultra vires and were rightly quashed by the Gujarat High Court by the grant of a writ."

13.03. In the case of New India Insurance Comnpany Ltd. versus Smt. Shanti Misra, Adult reported in (1975) 2 SCC 840, in para 7 the Hon'ble Supreme Court has observed and held as under :

"7. In our opinion taking recourse to the proviso appended to sub- section (3) of Section 110A for excusing the delay made in the filing of the application between the date of the accident and the date of the constitution of the Tribunal is not correct. Section 5 of the Limitation Act, 1963 or the proviso to sub-section (3) of Section l10A of the Act are meant to condone the default of the party on the ground of sufficient cause, But if a party is not able to file an application for no

Page 158 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

fault of his but because the Tribunal was not in existence, it will not be a case where it can be said that the "applicant was prevented by sufficient cause from making the application in time"

within the meaning of the proviso. The time taken between the date of the accident and the constitution of the Tribunal cannot be condoned under the proviso. Then, will the application be barred under sub- section (3) of Section 110A? Our answer is in the negative and for two reasons:

(1) Time for the purpose of filing the application under Section 110A did not start running before the constitution of the Tribunal. Time had started running for the filing of the suit but before it had expired the forum was changed. And for the purpose of the changed forum, time could not be deemed to have started running before a remedy of going to the new forum is made available.

(2) Even though by and large the law of limitation has been held to be a procedural law, there are exceptions to this principle.

Generally the law of limitation which is in vogue on the date of the commencement of the action governs it. But there are certain exceptions to this principle. The new law of limitation providing a longer period cannot revive a dead

Page 159 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

remedy. Nor can it suddenly extinguish vested right of action by providing for a shorter period of limitation."

13.04. In the case of Thirumalai Chemicals Limited versus Union of India and Others reported in (2011) 6 SCC 739, while discussing the law of limitation, the Hon'ble Supreme Court in paragraph Nos.29 to 33 has observed and held as under :

"Law of Limitation

29. Law of limitation is generally regarded as procedural and its object is not to create any right but to prescribe periods within which legal proceedings be instituted for enforcement of rights which exist under substantive law. On expiry of the period of limitation, the right to sue comes to an end and if a particular right of action had become time barred under the earlier statute of limitation the right is not revived by the provision of the latest statute. Statutes of limitation are thus retrospective insofar as they apply to all legal proceedings brought after their operation for enforcing cause of action accrued earlier, but they are prospective in the sense that neither have the

Page 160 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

effect of reviving the right of action which is already barred on the date of their coming into operation, nor do they have effect of extinguishing a right of action subsisting on that date. Bennion on Statutory Interpretation 5th Edn.(2008) Page 321 while dealing with retrospective operation of procedural provisions has stated that provisions laying down limitation periods fall into a special category and opined that although prima facie procedural, they are capable of effectively depriving persons of accrued rights and therefore they need be approached with caution.

30.Learned author in order to establish the above proposition referred to the decision of the Court of Appeal in The Ydun case [THE YDUN (1899) Probate Division at page 236 (The Court of Appeal) where the Court held that the amending legislation dealt with procedure only and therefore applied to all actions whether commenced before or after the passing of the Act and even in respect of previously accrued rights. The principle laid down in "The Ydun" was applied in The King v. Chandra Dharma (1905) 2 KB 335 and it was held that if a statute shortening the time within which proceedings can be taken is retrospective then it is

Page 161 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

impossible to give good reason, why a statute extending the time within which proceedings be taken, should not be held to be retrospective.

31.The Judicial Committee of Privy Council in Yew Bon Tew v.

Kenderaan Bas Mara (1982) 3 All E.R. 833, opined that whether statute has retrospective effect, cannot in all cases safely be applied by classifying statute as procedural or substantive and pointed out in certain situation the Court would rule against a retrospective operation.

32.Limitation provisions therefore can be procedural in the context of one set of facts but substantive in the context of different set of facts because rights can accrue to both the parties. In such a situation, test is to see whether the statute, if applied retrospectively to a particular type of case, would impair existing rights and obligations. An accrued right to plead a time bar, which is acquired after the lapse of the statutory period, is nevertheless a right, even though it arises under an Act which is procedural and a right which is not to be taken away pleading retrospective operation unless a contrary intention is discernible from the statute. Therefore, unless the

Page 162 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

language clearly manifests in express terms or by necessary implication, a contrary intention a statute divesting vested rights is to be construed as prospective.

33.A statute, merely procedural is to be construed as retrospective and a statute while procedural in nature affects vested rights adversely is to be construed as prospective. The manner of filing an appeal, under sub- section (2) of Section 19 of FEMA and the time within which such an appeal has to be preferred and the power conferred on the Tribunal to condone delay under the proviso to sub-section (2) of Section 19 are matters of procedure and act retrospectively, so as to cover causes of action which arose under FERA. "

13.05. At this stage, decision of the Judicial Committee of the Privy Council in the case of Yew Bon Tew also known as Yong Boon Tiew Versus Kenderran Bas Mara, reported in 1983 (1) A.C. 553 is required to be referred to and considered. In the aforesaid decision, Privy Council has observed and held as under :

"A statute of limitations may be described either as procedural or as substantive. For example, in English law, at the expiration of

Page 163 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

the period prescribed for any person to bring an action to recover land, the title of that person to the land is extinguished. Such a limitation therefore goes to the cause of action itself. In most cases however the English Limitation Act only takes away the remedies by action or by set-off; it goes only to the conduct of the suit; it leaves the claimant's right otherwise untouched in theory so that, in the case of a debt, if the statute-barred creditor has any means of enforcing his claim other than by action or set-off, the Act does not prevent his recovering by those means. In this sense, the 1948 Ordinance and the 1974 Act are procedural. Cf. Harris Vs. Quine (1869) L.R. 4 Q.B. 653 and Rodriguez Vs. Parker [1967] 1 Q.B. 116.

Apart from the provisions of the Interpretation Statutes, there is at common law a prima facie. Rule of construction that a statute should not be interpreted retrospectively so as to impair an existing right or obligation unless that result is unavoidable on the language used. A statute is retrospective if it takes away or impairs a vested right acquired under existing laws, or creates a new obligation, or imposes a new duty, or attaches a new

Page 164 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

disability, in regard to events already past. There is however said to be an exception in the case of a statute which is purely procedural, because no person has a vested right in any particular course of procedure, but only a right to prosecute or defend a suit according to the rules for the conduct of an action for the time being prescribed.

But these expressions "retrospective" and "procedural"', though useful in a particular context, are equivocal and therefore can be misleading. A statute which is retrospective in relation to one aspect of a case (e.g. because it applies to a pre- statute cause of action) may at the same time be prospective in relation to another aspect of the same case (e.g. because it applies only to the post-statute commencement of proceedings to enforce that cause of action); and an Act which is procedural in one sense may in particular circumstances do far more than regulate the course of proceedings, because it may, on one interpretation revive or destroy the cause of action itself.

Whether a statute is to be

Page 165 of 497

Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

construed in a retrospective sense, and if so to what extent, depends, on the intention of the legislature as expressed in the wording of the statute, having regard to the normal canons of construction and to the relevant provisions of any interpretation statute.

From authorities cited, it is my considered judgment that whether the prospective or retrospective Rule of construction should apply depends on the nature of the new statute or amending statute. If it is purely a procedural statute and does not deal with substantive rights then the retrospective Rule of construction should apply. But where the statute deals with substantive rights, or deals with both procedural and substantive rights, then the prospective Rule of construction is applicable... From the authority laid down in 'The Ydun' I am of the View that the amending Act deals only in procedure. In the absence of any express provision to the contrary, the amending Act should, therefore, apply retrospectively.

The learned judge added that, if the Plaintiffs had begun their action before the 1974 Act came into force, the Defendants would

Page 166 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

have escaped liability, thus taking the view that the Act, though retrospective in relation to a cause of action, was prospective in relation to an action to enforce that cause of action. Their Lordships mention the learned judge's comment only to illustrate the different senses in which a statute can be said to be retrospective or prospective.

The Defendants appealed. The Federal Court adopted a more flexible approach to the "procedural" test: -

"The pertinent question for

determination is the nature of [the 1974 Act] - does it affect rights or procedure? An Act which makes alteration in procedure only is retrospective : see "The Ydun".

In our view there are no cases upon which differences of opinion may more readily be entertained, or which are more embarrassing to dispose of, than the cases where the court has to decide whether or not an amending statute affects procedure and consequently will operate retrospectively or affects substantive rights and therefore in the absence of a clear contrary intention, should not be read as acting retrospectively. The distinction between procedural

Page 167 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

matters and substantive rights must often be of great fineness. Each case therefore must be looked at subjectively; there will inevitably be some matters that are classified as being concerned with substantive rights which at first sight must be considered procedural and vice versa."

The Federal Court developed this line of reasoning by referring to part of the judgment of Williams J. in Maxwell Vs. Murphy. The passage in the judgment of Williams J. (at page 277) which the Federal Court found of great assistance, as also have their Lordships, reads as follows : -

"Statutes of limitation are often classed as procedural statutes.

But it would be unwise to attribute a prima facie retrospective effect to all statutes of limitation. Two

classes of case can be considered. existing statute of limitation may be altered by enlarging or abridging the time within which proceedings may be instituted. If the time is enlarged whilst a person is still within time under the existing law to institute a cause of action the statute might well be classed as procedural. Similarly if the time is abridged

Page 168 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

whilst such person is still left with time within which to institute a cause of action, the abridgment might again be classed as procedural. But if the time is enlarged when a person is out of time to institute a cause of action so as to enable the action to be brought within the new time or is abridged so as to deprive him of time within which to institute it whilst he still has time to so, very different considerations could arise.

A cause of action which can be enforced is a very different thing to a cause of action the remedy for which is barred by lapse of time. Statutes which enable a person to enforce a cause of action which was then barred or provide a bar to an existing cause of action by abridging the time for its institution could hardly be described as merely procedural. They would affect substantive rights".

Whether a statute has a retrospective effect cannot in all cases safely be decided by classifying the statute as procedural or substantive. For example, in "The Ydun"

case the barque might have

Page 169 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

grounded on 13 May instead of 13 September 1893 and the Act might have come into force on 5 December 1893 when it received the Royal Assent, instead of 27 days later. Had those been the facts the Act would, if its procedural character were the true criterion of its effect, have deprived the owners of their ability to pursue their cause of action on the day the Act reached the Statute Book. A Limitation Act which had such a decisive effect on an existing cause of action would not be "merely procedural" in any ordinary sense of that expression. Their Lordships assume (without expressing an opinion) that "The Ydun" case was, on its facts, correctly decided.

Their Lordships consider that the proper approach to the construction of the 1974 Act is not to decide what label to apply to it, procedural or otherwise but to see whether the statute, if applied retrospectively to a particular type of case, would impair existing rights and obligations. The Appellants assert that a Limitation Act does not impair existing rights because the cause of action remains, on the basis that all that is affected is the remedy. There is logic in the distinction on the particular facts of "The Ydun" case, because

Page 170 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

the right to sue remained, for a while, totally unimpaired. But in most cases the loss, as distinct from curtailment, of the right to sue is equivalent to the loss of the cause of action. The Public Authorities Protection Act can be regarded as procedural on the facts of "The Ydun" case, but a slight alteration to those facts would have made it substantive. A limitation act may therefore be procedural in the context of one set of facts, but substantive in the context of a different set of facts."

In the aforesaid decision, ultimately it is ruled that an accrued right to plead a time barred which is acquired after the lapse of the statutory period is in every sense a right even though it arises under an Act which is procedural. It is further observed and ruled that it is right which is not to be taken away by conferring on the statute a retrospective operation unless such a construction is unavoidable.

13.06. In the case of K.M. Sharma versus Income Tax Officer, Ward 13(7), New Delhi reported in 2002 (4) SCC 339, the Hon'ble Supreme Court in paragraph Nos.14 and 21 Page 171 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

has observed and held as under :

"14. Fiscal statute more particularly on a provision such as the present one regulating period of limitation must receive strict construction. Law of limitation is intended to give certainty and finality to legal proceedings and to avoid exposure to risk of litigation to litigant for indefinite period on future unforeseen events. Proceedings, which have attained finality under existing law due to bar of limitation cannot be held to be open for revival unless the amended provision is clearly given retrospective operation so as to allow upsetting of proceedings, which had already been concluded and attained finality. The amendment to sub-section (1) of Section 150 is not expressed to be retrospective and, therefore, has to be held as only prospective. The amendment made to sub- section (1) of Section 150 which intends to lift embargo of period of limitation under Section 149 to enable Authorities to reopen assessments not only on the basis of Orders passed in proceedings under the IT Act but also on Order of a Court in any proceedings under any law has to be applied prospectively on or after 1-4- 1989 when the said amendment was

Page 172 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

introduced to sub- section (1). The provision in sub-section (1) therefore can have only prospective operation to assessments, which have not become final due to expiry of period of limitation prescribed for assessment under Section 149 of the Act.

21. On a proper construction of the provisions of Section 150(1) and the effect of its operation from 1- 4-1989, we are clearly of the opinion that the provisions cannot be given retrospective effect prior to 1-4-1989 for assessments which have already become final due to bar of limitation prior to 1-4-1989. Taxing provision imposing a liability is governed by normal presumption that it is not retrospective and settled principle of law is that the law to be applied is that which is in force in the assessment year unless otherwise provided expressly or by necessary implication. Even a procedural provision cannot in the absence of clear contrary intendment expressed therein be given greater retrospectivity than is expressly mentioned so as to enable the Authorities to affect finality of tax assessments or to open up liabilities, which have become

Page 173 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

barred by lapse of time. Our conclusion, therefore, is that sub-section (1) of Section 150, as amended with effect from 1-4-1989, does not enable the Authorities to reopen assessments, which have become final due to bar of limitation prior to 1-4-1989 and this position is applicable equally to reassessments proposed on the basis of Orders passed under the Act or under any other law."

13.07. In the case of Manan Corporation Vs. Assistant commissioner of Income-tax, reported in 356 ITR 44, the Division Bench of this court in para 28 and 30 has observed and held as under :-

"28. ... In the case of Commissioner of Income-Tax vs. Gold Coin Health Food P. Ltd. reported in 304 ITR 308, the Hon'ble Supreme Court of India has held as under :

In Zile Singh v. State of Haryana [2004] 8 SCC 1, it was observed as follows :

"13. It is a cardinal principle of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have a retrospective operation. But the

Page 174 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

rule in general is applicable where the object of the statute is to affect vested rights or to impose new burdens or to impair existing obligations. Unless there are words in the statute sufficient to show the intention of the Legislature to affect existing rights, it is deemed to be prospective only - 'nova constitutio futuris forman imponere debet non praeteritis' -

a new law ought to regulate what is to follow, not the past. (See Principles of Statutory Interpretation by Justice G. P. Singh, 9th Edn., 2004 at page

438.) It is not necessary that an express provision be made to make a statute retrospective and the presumption against a case where the new law is made to cure an acknowledged evil for the benefit of the community as a whole. (ibid., page 440).

14. The presumption against retrospective operation is not applicable to declaratory statutes... In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is 'to explain' an earlier Act, it would be without object unless construed retrospectively. An explanatory Act is generally passed to supply an obvious omission or to clear up

Page 175 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

doubts as to the meaning of the previous Act. It is well-settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended... An amending Act may be purely declaratory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect (ibid., pages 468-69).

15. Though retrospectivity is not to be presumed and rather there is presumption against retrospectivity, according to Craies (Statute Law, 7th Edn.), it is open for the Legislature to enact laws having retrospective operation. This can be achieved by express enactment or by necessary implication from the language employed. If it is a necessary implication from the language employed that the Legislature intended a particular section to have a retrospective operation, the courts will give it such an operation. In the absence of a retrospective operation having been expressly given, the courts may be called upon to construe the provisions and answer the question whether the Legislature had sufficiently expressed that intention giving the statute

Page 176 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

retrospectively. Four factors are suggested as relevant : (i) general scope and purview of the statute; (ii) the remedy sought to be applied; (iii) the former state of the law; and

(iv) what it was the Legislature contemplated (page 388). The rule against retrospectivity does not extend to protect from the effect of a repeal, a privilege which did not amount to accrued right (page

392)."

"30. In the case of National Agricultural Co-operative Marketing Federation of India Ltd. and another, vs. Union of India and others reported in AIR 2003 SC 1329, the Hon'ble Supreme Court has held in paragraphs 15, 16 and 17 as under:

"15. The legislative power either to introduce enactments for the first time or to amend the enacted law with retrospective effect, is not only subject to the question of competence but is also subject to the question of competence but is also subject to several judicially recognized limitations with some of which we are at present concerned. The first is the requirement that the words used must expressly provide or clearly imply retrospective

Page 177 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

operation. The second is that the retrospectivity must be reasonable and not excessive or harsh, otherwise it runs the risk of being struck down as unconstitutional. The third is apposite where the legislation is introduced to overcome a judicial decision. Here the power cannot be used to subvert the decision without removing the statutory basis of the decision."

16. There is no fixed formula for the expression of legislative intent to give retrospectivity to an enactment."Sometimes this is done by providing for jurisdiction where jurisdiction had not been properly invested before.

Sometimes this is done by reenacting retrospectively a valid and legal taxing provision and then by fiction making the tax already collected to stand under the reenacted law. Sometimes the Legislature gives its own meaning and interpretation of the law under which tax was collected and by legislative fiat makes the new meaning binding upon Courts. The Legislature may follow anyone method or all of them.

17. A validating clause coupled with a substantive statutory change is therefore only one of

Page 178 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

the methods to leave actions unsustainable under the unamended statute, undisturbed.

Consequently, the absence of a validating clause would not by itself affect the retrospective operation of the statutory provision, if such retrospectivity is otherwise apparent."

Identical question came to be considered by the Hon'ble Supreme Court in the case of K.M. Sharma (supra) and while considering the question whether the provisions of section 150(1) as amended from 1/4/1989 can be given retrospective effect prior to 1/4/1989 for assessments which have already become final due to bar of limitation prior to 1/4/1989, while holding that the said provision cannot be given retrospective effect prior to 1/4/1989 for assessments which have already become final due to bar of limitation prior to 1/4/1989, in paragraph Nos.14 and 21 the Hon'ble Supreme Court has observed and held as under :-

"14. Fiscal statute more particularly on a provision such as the present one regulating period of limitation must receive strict construction. Law of limitation is intended to give

Page 179 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

certainty and finality to legal proceedings and to avoid exposure to risk of litigation to litigant for indefinite period on future unforeseen events. Proceedings, which have attained finality under existing law due to bar of limitation cannot be held to be open for revival unless the amended provision is clearly given retrospective operation so as to allow upsetting of proceedings, which had already been concluded and attained finality. The amendment to sub-section (1) of Section 150 is not expressed to be retrospective and, therefore, has to be held as only prospective. The amendment made to sub- section (1) of Section 150 which intends to lift embargo of period of limitation under Section 149 to enable Authorities to reopen assessments not only on the basis of Orders passed in proceedings under the IT Act but also on Order of a Court in any proceedings under any law has to be applied prospectively on or after 1-4-

1989 when the said amendment was introduced to sub- section (1). The provision in sub-section (1) therefore can have only prospective operation to assessments, which have not become final due to expiry of period of limitation prescribed for assessment under Section 149 of

Page 180 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

the Act.

21. On a proper construction of the provisions of Section 150(1) and the effect of its operation from 1- 4-1989, we are clearly of the opinion that the provisions cannot be given retrospective effect prior to 1-4-1989 for assessments which have already become final due to bar of limitation prior to 1-4-1989. Taxing provision imposing a liability is governed by normal presumption that it is not retrospective and settled principle of law is that the law to be applied is that which is in force in the assessment year unless otherwise provided expressly or by necessary implication. Even a procedural provision cannot in the absence of clear contrary intendment expressed therein be given greater retrospectivity than is expressly mentioned so as to enable the Authorities to affect finality of tax assessments or to open up liabilities, which have become barred by lapse of time. Our conclusion, therefore, is that sub-section (1) of Section 150, as amended with effect from 1-4-1989, does not enable the Authorities to reopen assessments, which have become final due to bar of limitation prior to 1-4-1989 and

Page 181 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

this position is applicable equally to reassessments proposed on the basis of Orders passed under the Act or under any other law."

14.00. Now, so far as reliance placed upon the decisions of the Hon'ble Supreme Court in the case of Ahmedabad Manufacturing & Calico Printing Co. Ltd. (supra) as well as another decision of the Hon'ble Supreme Court in the case of Jyoti Traders (supra), by the learned counsel appearing on behalf of the revenue is concerned, on facts and considering the provisions which came to be considered by the Hon'ble Supreme Court in the aforesaid decisions, none of the aforesaid decisions shall be applicable to the facts of the case on hand.

In the case of Jyoti Traders (supra), the Hon'ble Supreme Court was considering the proviso to section 21 which specifically provided that assessment and reassessment may be made after expiration of the period aforesaid but not after the expiration of 8 years and from the end of such year. In the aforesaid proviso it expressly enabled assessment where period expires and it operates

Page 182 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

upon expiry of limitation period. Therefore, the said decision shall not be applicable considering the wordings used in section 201 as amended by Finance Act, 2014, more particularly when it has been expressly provided and/or made prospective w.e.f. 1/4/2010.

14.01. Now, so far as the reliance placed upon the decision of the Hon'ble Supreme Court in the case of Biswanath Jhujhunwala & Anr. (supra) by the learned counsel appearing on behalf of the revenue is concerned, considering the language used in the notification which felt for consideration by the Hon'ble Supreme Court and observations made by the Hon'ble Supreme Court in para 12 and 13 and considering the provisions of section 201 as amended by Finance Act, 2014 and the Statement and Object while amending section 201, as referred to hereinabove, the said decision shall not be applicable to the facts of the case on hand.

15.00. Considering the law laid down by the Hon'ble Supreme Court in the aforesaid decisions, to the facts of the case on hand and more particularly considering the fact that while amending section 201 by Finance Act, 2014, it has been

Page 183 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

specifically mentioned that the same shall be applicable w.e.f. 1/10/2014 and even considering the fact that proceedings for F.Y. 2007-08 and 2008-09 had become time barred and/or for the aforesaid financial years, limitation under section 201(3)(i) of the Act had already expired on 31/3/2011 and 31/3/2012, respectively, much prior to the amendment in section 201 as amended by Finance Act, 2014 and therefore, as such a right has been accrued in favour of the assessee and considering the fact that wherever legislature wanted to give retrospective effect so specifically provided while amending section 201(3)

(ii) of the Act as was amended by Finance Act, 2012 with retrospective effect from 1/4/2010, it is to be held that section 201(3), as amended by Finance Act No.2 of 2014 shall not be applicable retrospectively and therefore, no order under section 201(i) of the Act can be passed for which limitation had already expired prior to amended section 201(3) as amended by Finance Act No.2 of 2014. Under the circumstances, the impugned notices / summonses cannot be sustained and the same deserve to be quashed and set aside and writ

Page 184 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

of prohibition, as prayed for, deserves to be granted."

1.10) It was further submitted that the

contention of the claimant that new

Tribunal is established on 24.01.2019 is

also not correct in view of clarification

of late Hon'ble Mr. Justice G.T. Nanavati

(retired) on 4.12.2018 that the Arbitral

Tribunal is not defunct and he continued

to be part of the Arbitral Tribunal.

1.11) It was also submitted that

claimant itself has stated on 28.11.2018

that it will not give extension of time to

the Arbitrtal Tribunal.

1.12) Learned Senior Advocate Mr.

Soparkar submitted that once the mandate

is over as per section 29A of the Act, as

it existed on 1.02.2019, the only remedy

Page 185 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

available to the parties is to approach

the Court for extension of time and it is

not in dispute that none of the parties

have gone to the Court for extension of

time and as such, the mandate of the

Tribunal cannot be extended.

1.13) It was further submitted that the

contention raised on behalf of the

claimant that whenever there is a new

appointment of arbitrator there is a

fresh Arbitral Tribunal and for the said

fresh Arbitral Tribunal another 12 months'

time is available is also contrary to the

provisions of section 29A of the Act. It

was pointed out that the Arbitral Tribunal

has considered the evidence which was

taken by the members of the Tribunal

constituted earlier as if no new Tribunal

has come into effect otherwise entire

Page 186 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

evidence ought to have been taken afresh

de novo.

1.14) It was submitted that the fact

that 9 months' extension was sought by the

Arbitral Tribunal clearly shows that all

the reconstituted Tribunal are one

original Tribunal and substitution of

members of the Tribunal is provided under

section 15 of the Act and therefore, the

provisions of section 29A would be

applicable to the Tribunal which has come

into effect as per order passed by Hon'ble

Supreme Court on 9.12.2017.

1.15) Learned Senior Advocate Mr.

Soparkar in the alternative submitted that

new Tribunal has come into existence on

appointment of arbitrator then, fresh

notice of invocation of arbitration has to

Page 187 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

be given as per section 21 of the Act and

the respondent ought to have been given

right to appoint his nominee member under

section 11(2) of the Act and both the

nominee arbitrators have the power to

appoint the Presiding Arbitrator as per

section 11(4) of the Act. However, in

facts of the case, none of the procedure

is followed on appointment of arbitrator

and therefore, it cannot be said that on

appointment of arbitrator it becomes a new

Arbitral Tribunal.

1.16) Learned Senior Advocate Mr.

Soparkar submitted that reliance placed by

the claimant on the order dated 04.12.2020

passed by the Supreme Court dismissing SLP

against final order of the High Court

refusing to entertain the writ petition

and the order passed in IA no.11012/2021

Page 188 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

filed by the claimant seeking modification

permitting the Arbitral Tribunal to pass

award cannot be treated as acceptance of

existence of the Tribunal by the Hon'ble

Supreme Court. It was submitted that

interim order was passed by the High Court

in SCA No.3913 of 2020 preferred by the

respondent nos. 1 and 2 on 12.02.2020 and

the Hon'ble Supreme Court substituted the

order on 14.02.2020 and permitted the

Tribunal to go ahead with the hearing and

evidence but not to pass award and

thereafter when High Court rejected the

writ petition which was upheld by Hon'ble

Supreme Court by order dated 18.12.2020

then the interim order passed by the

Hon'ble Supreme Court on 14.02.2020 by

prohibiting the Arbitral Tribunal to pass

award would have become infructuous.

Page 189 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

However, the claimant without disclosing

that SLP (C) Diary No.5800 of 2020 has

become infructuous filed IA No.11012 of

2021 seeking modification of order dated

14.02.2020 permitting the Arbitral

Tribunal to pass award. Therefore, order

dated 22.02.2021 passed in IA

No.11012/2021 passed by the Hon'ble

Supreme Court directing the Arbitral

Tribunal to pass award cannot be relied

upon so as to contend that the provisions

of section 29A as it existed would not

apply to the facts of the case. It was

therefore, submitted that order dated

22.02.2021 passed in IA preferred by the

claimant to seek modification of the order

dated 14.02.2020 consequently seeking

publication of award, cannot extend the

mandate of the Tribunal which has come to

Page 190 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

an end.

1.17) It was submitted that the Hon'ble

Supreme Court has not passed the order in

IA no.11012/2021 under Article 142 of the

Constitution of India but it was an order

in continuation of the order dated

14.02.2020 passed in SLP(C) Diary No.

5800/2020. It was further submitted that

the contention of the claimant that until

the award is delivered, the arbitration

is to be treated as pending is also not

correct because as per the provisions of

section 29A(4), passing of an award within

12 months is mandatory and if the award is

not passed declaring the arbitration is

pending, then provisions of section 29A(4)

would become redundant. It was therefore,

submitted that entire arbitration

proceedings are required to be quashed and

Page 191 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

set aside only on the ground that the

Arbitral Tribunal did not have any mandate

to proceed with the arbitration

proceedings.

1.18) Learned Senior Advocate Mr.

Soparkar submitted that the Tribunal has

committed an error in computation and

imposition of the cost on the respondent

nos.1 and 2, that there is difference

between computation in subparagraph no.(P)

to (U) of para no.272 and the final award

made by the Tribunal. It was submitted

that the Tribunal has also committed an

error in awarding fees of the lawyers who

did not appear before the Tribunal but

appeared for claimant in other proceedings

which could not have been considered by

the Tribunal as per the provisions of

section 31A of the Act. It was submitted

Page 192 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

that the Tribunal has also committed an

error in relying upon the minority opinion

in Afcon's case and such reliance is

contrary to decision of Supreme Court in

case of Common Cause case reported in

(2004) 5 SCC 222.

Submissions of learned advocate Mr. Masoom Shah for the petitioner-respondent no.2:

1.19) Learned advocate Mr. Masoom Shah

adopted the submissions of learned Senior

Advocate Mr. S.N. Sopakar and submitted

that Arbitral Tribunal believed that it's

mandate was over and further the finding

of the Tribunal that the affidavit of

evidence was not filed and delayed is

incorrect, because Tribunal asked for

consent of 9 months for extension and

therefore, the affidavit of evidence was

not filed because of arbitrary and

Page 193 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

unreasonable demands of the Arbitral

Tribunal which violates the principles of

natural justice and is in violation of

section 29A of the Act.

Submissions of claimant :

1.20) With regard to applicability of

Section 29A of the Act, learned advocate

for the claimant pointed out that an

Arbitral Tribunal can be constituted in

three ways under the Act i.e. (i) by

parties mutually agreeing as provided

under Section 11(2) and (3) of the Act or

(ii) by an order of the Court under

Section 11(6) of the Act, or (iii) by an

order of the Court under Section 29A(6) of

the Act.

1.21) It was submitted that in first two

eventualities, the mandate of such a

Page 194 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Tribunal will be of 12 months from the

date on which the arbitrators enter upon

the Reference i.e. date of their

appointment [prior to the amendment in

Section 29A(1) w.e.f. 30.08.2019] or from

the date of completion of pleadings [after

30.08.2019). It was submitted that under

the aforesaid circumstances, in the event

of the constitution of a fresh Arbitral

Tribunal, a fresh mandate of 12 months

would start.

1.22) It was further submitted that in

3rd eventuality, the said Tribunal would

be deemed to be in continuation of the

previously appointed Arbitral Tribunal as

has been categorically provided by the

legislature under sub-Section (7) of

Section 29A of the Act. In the aforesaid

eventuality, a fresh mandate of 12 months

Page 195 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

would not start since it is deemed to be

in continuation of earlier Tribunal.

1.23) Learned advocate for the claimant

thereafter referring to the constitution

of four Arbitral Tribunals under section

11 of the Act either by Court or mutual

agreement between the parties submitted

that none of the constitutions were made

under Section 29A(6) of the Act, and

therefore, the deeming provision,

specifically provided under Section 29A(7)

of the Act applicable to constitutions

being made under that section only, cannot

be made applicable to the constitutions of

the Tribunal made under Section 11 of the

Act. It was submitted that in view of the

aforesaid four constitutions being under

Section 11 of the Act, fresh mandate of 12

months would start upon each constitution.

Page 196 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

1.24) It was further submitted that

even the learned Single Judge of this

Court (Hon'ble Mr. Justice N.V. Anjaria)

in a CAV Judgment dated 21.06.2019

rendered in MCA No.90 of 2019, as well as,

the petitioners herein have considered the

Arbitral Tribunal constituted on

24.01.2019, as a new Arbitral Tribunal

and in fact, even the petitioners

themselves have considered the Arbitral

Tribunal having been newly constituted on

different occasions and at no point of

time, did they treat the same as being in

continuation of a previous Arbitral

Tribunal as is evident from email dated

28.10.2019 annexed with convenience

compilation 2, page 76.

1.25) Learned advocate for the original

Page 197 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

claimant submitted that sub-section (1)

of Section 29A came to be amended from

30.08.2019, which clarifies that period of

12 months would not be mandatory for

International Commercial Arbitration and

therefore, post-amendment, the time limit

of 12 months as prescribed in Section 29A

of the Act is applicable only to domestic

arbitration. Further, since Section

29A(1), as amended, is remedial in nature,

it applies to all pending arbitral

proceedings as on the effective date ie.,

30.08.2019.

1.26) It was submitted that in the

present case, the arbitral proceedings

before the Arbitral Tribunal constituted

under Section 11(3) of the Act on

24.01.2019 with a fresh mandate and

consisted of late Mr. Vinayak Pradhan,

Page 198 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Hon'ble Mr. Justice G.T. Nanavati

(retired) and Mr. Andre Yeap, were

pending as on 30.08.2019, which were

thereafter also pending before a new

Arbitral Tribunal constituted on

09.09.2020, consisting of Hon'ble Mr.

Justice Anantham Kasinather(retired),

Hon'ble Mr. Justice G.T. Nanavati

(retired) and Mr. Andre Yeap. Therefore,

the mandate of the Arbitral Tribunal had

not stood terminated and hence, the

arbitral award passed is legal and valid.

1.27) It was submitted even while

assuming without admitting that there was

only one Arbitral Tribunal continuing all

through out, whose mandate got over on

31.01.2019 (ie. 12 months from

01.02.2018), then in that case also, the

arbitration proceedings would be treated

Page 199 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

as 'pending' as on 30.08.2019 i.e. the

date on which amendment in Section 29A(1)

was made effective, since the said

amendment is retrospective in nature, as

held by the Hon'ble Supreme Court in the

judgment in case of 'Tata Sons Pvt. Ltd.

vs. Siva Industries & Holdings Ltd,

reported in 2023 SCC OnLine SC 23. It was

submitted tht in the said judgment, the

mandate of the Tribunal got over on

14.08.2019, being prior to the effective

date, and despite that fact, it was held

that in view of amended Section 29A(1) of

the Act, the Arbitral Tribunal would be

acting within his domain to continue the

arbitration proceedings for its

expeditious conclusion. It was submitted

that in the present case the petitioners'

object to the said interpretation on the

Page 200 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

ground that it was owing to Section 14 of

the Insolvency and Bankruptcy Code, 2016,

that suspends the arbitration proceedings

from 05.07.2019. However, the implication

of the moratorium is provided under

Section 60(6) of the IBC and hence, the

said moratorium period had nothing to do

with the pendency of the said proceedings

in the said case, since all that has been

provided by Section 60(6) of IBC is to

exclude the period of moratorium for

counting the limitation period for

instituting any suit or application by or

against the corporate debtor.

1.28) Thereafter, learned advocate for

the claimant referred to the following

observations of the Hon'ble Delhi High

Court in case of ONGC Petro Additions

reported in 2020 SCC OnLine Del 2582, as

Page 201 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

approved by the Hon'ble Supreme Court as

under:

"12. It is submitted by Mr. Dewan that the changes brought about in Section 29A will have retrospective effect from October 23, 2015, i.e., the date from which Section 29A was introduced into the Act, vide Amendment Act of 2015."

"26. In view of my above discussion, it must be held that the provisions of Section 29A(1) shall be applicable to all pending arbitrations seated in India as on August 30, 2019, and commenced after October 23, 2015.

1.29) Referring to above observations it

was submitted that even if the aforesaid

Arbitral Tribunal constituted on

24.01.2019 is not considered to be a new

tribunal with a fresh mandate, then in

that case also, the same having been

constituted after 20.10.2015, would be

covered by the amended Section 29A(1) of

the Act.

Page 202 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

1.30) Learned advocate for the claimant

referring to the last order dated

22.02.2021 of the Hon'ble Supreme Court

wherein it is observed that "... we clarify

that these proceedings before us have now

come to an end, as a result of which, the

Arbitral Tribunal is free to go ahead with

the final award" submitted that it is not

legally permissible for anyone to overlook

the last order dated 22.02.2021 of the

Hon'ble Supreme Court.

1.31) It was therefore, submitted that

the Award dated 16.04.2021, impugned in

the present proceedings, cannot be said to

be illegal, null and void on the ground

that the Arbitral Tribunal had no mandate

and jurisdiction to render the same and

even otherwise, as per the provisions of

Page 203 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Section 14 read with Section 29A of the

Act, petitioners ought to have challenged

the same before the 'Court', at the

relevant point of time as specifically

observed by this Court in its order dated

11.03.2020 passed in SCA No.3913 of 2020

which came to be upheld by the Hon'ble

Supreme Court vide its order dated

18.12.2020 in SLP (C) No. 14900 of 2020.

1.32) It was submitted that despite the

aforesaid observations, the petitioners

did not avail of the said remedy provided

under the Act and had continued to

participate in the arbitration proceedings

without any protest in that regard.

Therefore, at this stage, after rendition

of the award, the Petitioners are estopped

from raising the said ground in the

present proceedings.

Page 204 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

1.33) It was submitted that the alleged

ground of the petitioners to the effect

that the Arbitral Tribunal in the present

case had no jurisdiction to render the

Award in view of the expiry of the time

limit as provided under Section 29A of the

Act, and hence the same should be set

aside, is not available in view of the

fact that, Section 34 of the Act provides

for setting aside awards on very limited

grounds as contained in sub-sections (2)

and (3) of Section 34, wherein the

aforesaid ground is not provided.

1.34) It was submitted that the judgment

relied upon by the petitioner in case of

Jayesh H Pandya vs. Subhtex India Ltd.

reported in (2020) 17 SCC 383, would not

be applicable to the facts of the present

Page 205 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

case, because of multiple reasons namely

(i) In the said case, in para 8 of the

judgment, it has been recorded that at the

appropriate time, the Petitioner therein

had filed Section 14 application seeking

termination of mandate, which has not been

made by the Petitioners herein; (ii) the

judgment was not rendered within the

limited scope of Section 34 of the Act and

(iii) that too, it was domestic

arbitration.

Reasons and Findings:

1.35) Sub-section(1) of section 29A of

the Act was substituted by Act 33 of 2019

with effect from 30.08.2019. Prior to

amendment section 29A(1) of the Act reads

as under:

"29A. Time limit for arbitral award-(1) The award shall be made within a period of twelve months

Page 206 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

from the date the arbitral tribunal enters upon the reference.

Explanation. For the purpose of this sub-section, an arbitral tribunal shall be deemed to have entered upon the reference on the date on which the arbitrator or all the arbitrators, as the case may be, have received notice, in writing, of their appointment."

1.36) After amendment with effect from

30.08.2019, section 29A(1) reads as under:

"29A. Time limit for arbitral award-(1) The award in matters other than international commercial arbitration shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings under sub-section(4) of section 23.

Provided that the award in the matter of international commercial arbitration may be made as expeditiously as possible and endeavour may be made to dispose off the matter within a period of twelve months from the date of completion of pleadings under sub- section (4) of section 23."

Page 207 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

1.37) The Hon'ble Apex Court has

examined pre and post 2019 amendment in

section 29A in case of Tata Sons Pvt.

Ltd.v. Siva Industries & Holdings Ltd.,

reported in 2023 SCC OnLine Sc 23 as

under:

"20 The provisions of Section 29A were introduced into the Arbitration Act with effect from 23 October 2015 by Act 3 of 2016

8. Section 29A was substituted by Act 33 of 20199 with effect from 30 August 2019. The provisions of Section 29A as originally inserted and as they stand after the amendment of 2019 are tabulated below:

SECTION 29-A PRE AND POST 2019 AMENDMENT

POST 2015 AMENDMENT W.E.F POST 2019 AMENDMENT W.E.F 23.10.2015 30.08.2019 29A. (1) The award shall be made 29A. (1) The award in matters other within a period of twelve months from than international commercial the date the arbitral tribunal enters upon arbitration shall be made by the arbitral the reference. Explanation. -For the tribunal within a period of twelve months purpose of this sub-section, an arbitral from the date of completion of tribunal shall be deemed to have pleadings under sub-section (4) of entered upon the reference on the date section 23: Provided that the award in on which the arbitrator or all the the matter of international commercial arbitrators, as the case may be, have arbitration may be made as received notice, in writing, of their expeditiously as possible and appointment. endeavor may be made to dispose of

Page 208 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

(2) If the award is made within a period the matter within a period of twelve of six months from the date the arbitral months from the date of completion of tribunal enters upon the reference, the pleadings under sub-section (4) of arbitral tribunal shall be entitled to section 23.

receive such amount of additional fees (2) If the award is made within a period as the parties may agree. of six months from the date the arbitral (3) The parties may, by consent, extend tribunal enters upon the reference, the the period specified in subsection (1) for arbitral tribunal shall be entitled to making award for further period not receive such amount of additional fees exceeding six months. as the parties may agree. (4) If the award is not made within the (3) The parties may, by consent, extend period specified in sub-section (1) or the the period specified in sub-section (1) for extended period specified under sub- making award for further period not section (3), the mandate of the exceeding six months. arbitrator(s) shall terminate unless the (4) If the award is not made within the Court has, either prior to or after the period specified in sub-section (1) or the expiry of the period so specified, extended period specified under sub- extended the period. Provided that while section (3), the mandate of the extending the period under this sub- arbitrator(s) shall terminate unless the section, if the Court finds that the Court has, either prior to or after the proceedings have been delayed for the expiry of the period so specified, reasons attributable to the arbitral extended the period. Provided that while tribunal, then, it may order reduction of extending the period under this sub- fees of arbitrator(s) by not exceeding section, if the Court finds that the five per cent for each month of such proceedings have been delayed for the delay. reasons attributable to the arbitral (5) The extension of period referred to tribunal, then, it may order reduction of in sub-section (4) may be on the fees of arbitrator(s) by not exceeding five application of any of the parties and per cent for each month of such delay. may be granted only for sufficient cause Provided further that where an and on such terms and conditions as application under sub-section (5) is may be imposed by the Court. pending, the mandate of the arbitrator (6) While extending the period referred shall continue till the disposal of the said to in sub-section (4), it shall be open to application: Provided also that the the Court to substitute one or all of the arbitrator shall be given an opportunity of arbitrators and if one or all of the being heard before the fees is reduced. arbitrators are substituted, the arbitral (5) The extension of period referred to in proceedings shall continue from the subsection (4) may be on the application stage already reached and on the basis of any of the parties and may be granted of the evidence and material already on only for sufficient cause and on such record, and the arbitrator(s) appointed terms and conditions as may be imposed under this section shall be deemed to by the Court. have received the said evidence and (6) While extending the period referred to material. in sub-section (4), it shall be open to the (7) In the event of arbitrator(s) being Court to substitute one or all of the appointed under this section, the arbitral arbitrators and if one or all of the tribunal thus reconstituted shall be arbitrators are substituted, the arbitral

Page 209 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

deemed to be in continuation of the proceedings shall continue from the previously appointed arbitral tribunal. stage already reached and on the basis (8) It shall be open to the Court to of the evidence and material already on impose actual or exemplary costs upon record, and the arbitrator(s) appointed any of the parties under this section. under this section shall be deemed to (9) An application filed under subsection have received the said evidence and (5) shall be disposed of by the Court as material. expeditiously as possible and (7) In the event of arbitrator(s) being endeavour shall be made to dispose of appointed under this section, the arbitral the matter within a period of sixty days tribunal thus reconstituted shall be from the date of service of notice on the deemed to be in continuation of the opposite party previously appointed arbitral tribunal.

(8) It shall be open to the Court to (emphasis supplied) impose actual or exemplary costs upon any of the parties under this section. (9) An application filed under sub-section (5) shall be disposed of by the Court as expeditiously as possible and endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party"

(emphasis supplied)

1.38) Hon'ble Apex Court thereafter has

analysed section 29A(1) prescribing time

limit for arbitral award as under:

"24 The provisions of Section 29A, as originally introduced into the statute, 24 The provisions of Section 29A, as originally introduced into the statute, mandated that all awards shall be made within a period of twelve months from the date on which the arbitral tribunal enters upon the reference. The explanation

Page 210 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

clarified when the arbitral tribunal would be deemed to have entered upon the reference, namely, the date on which the arbitrator has received written notice of the appointment. The mandatory nature of the provisions of Section 29A(1) and their application to all arbitrations conducted under the Act, domestic or international commercial, was evident from the use of the word "shall". In terms of Section 29A(4), in case the arbitral award was not rendered within the twelve or eighteen month period as the case may be, the mandate of the arbitrator(s) would stand terminated, unless on an application made by any of the parties, the court extended time on sufficient cause being shown.

25 After the amendment, Section 29A(1) stipulates that the award "in matters other than international commercial arbitration" shall be made by the arbitral tribunal within a period of twelve months from the date of the completion of the pleadings under Section 23(4). The expression "in matters other than an international commercial arbitration" makes it abundantly clear that the timeline of twelve months which is stipulated in the substantive part of Section

Page 211 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

29A(1), as amended, does not apply to international commercial arbitrations. This is further reaffirmed in the proviso to Section 29A(1) which stipulates that the award in the matter of an international commercial arbitration "may be made as expeditiously as possible" and that an "endeavour may be made to dispose of the matter within a period of 12 months" from the date of the completion of pleadings. The expression "as expeditiously as possible" coupled with the expression "endeavour Section 23(4) of the Arbitration Act, as inserted by Act 33 of 2019, provides that "The statement of claim and defence under this section shall be completed within a period of six months from the date the arbitrator or all the arbitrators, as the case may be, received notice, in writing of their appointment." may be made"

demonstrate that the intent of Parliament is that the period of twelve months for making the award is not mandatory in the case of an international commercial arbitration. In an international commercial arbitration, the arbitral tribunal is required to endeavour, that is, make an effort to render the arbitral award within a period of twelve months or in a timely manner. In a

Page 212 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

domestic arbitration, Section 29A(1) stipulates a mandatory period of twelve months for the arbitrator to render the arbitral award. In contrast, the substantive part of Section 29A(1) clarifies that the period of twelve months would not be mandatory for an international commercial arbitration. Hence, post amendment, the time limit of twelve months as prescribed in Section 29A is applicable to only domestic arbitrations and the twelve-month period is only directory in nature for an international commercial arbitration.

26 Sub-section (3) of Section 29A empowers parties, by consent, to extend the period specified in sub-section (1) for making the award by a further period not exceeding six months. Thereafter, if the award is not made within the period which is specified in sub-section (1) or the extended period specified in sub-section (3), the mandate of the arbitrator shall terminate unless the court has extended the period either prior to or after the expiry of the period so specified. In other words, the timeline of twelve months for making the award (in matters other than international commercial arbitration), is

Page 213 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

qualified by the consensual entrustment to the parties under sub-section (3) to extend the period by six months after which the court is empowered in terms of sub-section (4) to extend the period for making the award. The submission of the second respondent is that the provisions of sub-section (3) and sub-section (4) must also apply to an international commercial arbitration. This would merit close scrutiny. The legislature has not expressly excluded the applicability of sub-sections (3) and (4) of Section 29A to an international commercial arbitration. But, at the same time, it must be noticed that the rationale underlying sub-section (3) is to ensure that despite the stipulation of twelve months for the making of an arbitral award in the domestic context, parties may by consent agree to an extension of time by a further period of six months. Such an extension of six months is envisaged in the case of a domestic arbitration since there is a mandate that the award shall be made within a period of twelve months. A further extension has, however, been entrusted to the court in terms of sub-section (4) of Section 29A. However, insofar as an international commercial arbitration is concerned, the

Page 214 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

statutory regime is clear by the substantive part of sub-section 1 of Section 29A in terms of which the timeline of twelve months for making an arbitral award is not applicable to it. In an international commercial arbitration, the legislature has only indicated that the award should be made as expeditiously as possible and that an endeavour may be made to dispose of the matter within a period of twelve months from the completion of pleadings.

27 The introduction of amended Section 29A finds its genesis in the report dated 30 July 2017 of the Committee chaired by Justice B N Srikrishna. The 'High Level Committee', as it is described, was set up to review the "institutionalization of (the) arbitration mechanism" in India. The report specifically elaborates upon the reason for the exclusion of international commercial arbitrations from the ambit of the mandatory timeline of twelve months stipulated in the context of a domestic arbitration. The report of the Committee records:

"In fact, one of the provisions of the ACA -- section 29A -- which was inserted by the 2015 Amendment Act, is perceived to have made

Page 215 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

arbitral institutions wary of arbitrations in India. Section 29A provides for strict timelines for completion of arbitration proceedings. This has been criticised as unduly restrictive of the conduct of arbitrations by arbitral institutions which provide for timelines for different stages of the arbitration proceedings."

"The Committee notes that international arbitral institutions have strongly criticised the setting of timelines for conducting international commercial arbitrations. These institutions are of the view that monitoring the conduct of the arbitral proceedings is best left to the arbitral institutions.

Institutions have their own machinery for case management and do not require monitoring by the court. With respect to domestic arbitrations, the general opinion of arbitrators is that the timelines fixed for conducting domestic arbitrations under section 29A should take effect post completion of pleadings."

28 The recommendations of the Committee are extracted below:

Page 216 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

"1. A new sub-section may be inserted in section 29A limiting the applicability of the section to domestic arbitrations only.

International commercial arbitrations may be left outside the purview of the timelines provided in Section 29A.

2. Section 29A(1) may be amended such that the time in section 29A(1) starts to run post completion of pleadings.

Further, a time period of 6 months may be provided for submission of pleadings.

3. Section 29A(4) may be amended to provide that if an application under Section 29A(5) is filed before a court, the mandate of the arbitral tribunal continues till the application is disposed.

4. Section 29A(9) may be amended to add if the application is not disposed of within the period mentioned therein, it is deemed to be granted.

5. A new sub-section should be inserted in Section 29A providing that where the court seeks to reduce the fees of the

Page 217 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

arbitrator(s), sufficient opportunity should be given to such arbitrator(s) to be heard." (emphasis supplied)

29 The Committee indicated that international arbitration institutions had been critical of the setting up of timelines for conducting international arbitrations. International arbitral institutions with their own machinery for case management were of the view that they did not require the monitoring of timelines by the intervention of the court. The Committee also noted that in other jurisdictions, timelines for arbitral proceedings are usually agreed by the parties themselves in accordance with the nature and complexity of the dispute. The intervention of the court in the extension of timelines was criticized by arbitral institutions and eventually led to the formulation of the amended provisions of Section 29A which have expressly kept international commercial arbitrations outside the purview of the mandatory timelines provided in Section 29A. Hence, in terms of the amended provisions of Section 29A, arbitral tribunals in international commercial arbitrations are only expected to make an endeavor to complete the

Page 218 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

proceedings within twelve months from the date of competition of pleadings and are not bound to abide by the time limit prescribed for domestic arbitrations.

30 Having clarified that the 2019 Amendment Act has excluded international commercial arbitrations from the statutorily prescribed mandatory time limits, the question arises whether the amended Section 29A would apply prospectively or retrospectively.

31 The provisions of Section 29A, as introduced by Act 3 of 2016, were prospective in nature by virtue of Section 26 of the 2015 Amendment Act. In terms of Section 26, Section 29A was introduced with effect from 23 October 2015 and applied to all arbitration proceedings that commenced on or after 23 October 2015. Section 26 of the 2015 Amendment Act read as follows:

"26. Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of Section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in

Page 219 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

relation to arbitral proceedings commenced on or after the date of commencement of this Act."

32 In Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd,11 a two Judge Bench of this Court while dealing with the construction and applicability of Section 26 of the 2015 Amendment Act in relation to arbitration proceedings and / or legal proceedings in connection with such arbitration proceedings, inter alia, observed in a footnote that Section 29A was procedural in nature. However, this Court stated that Section 29A created new obligations in respect of a proceeding which had already commenced since it laid down a strict timeline for rendering an arbitral award for the first time in the framework of the Arbitration Act (emphasis supplied). This Court clarified:

"Section 29A of the Amendment Act provides for time limits within which an arbitral award is to be made. In Hitendra Vishnu Thakur v. State of Maharashtra (1994) 4 SCC 602 at 633, this Court stated:

"(iii) Every litigant has a vested right in substantive law but no such right exists in procedural law.

Page 220 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

(iv) A procedural statute should not generally speaking be applied retrospectively where the result would be to create new disabilities or obligations or to impose new duties in respect of transactions already accomplished.

(v) A statute which not only changes the procedure but also creates new rights and liabilities shall be construed to be prospective in operation, unless otherwise provided, either expressly or by necessary implication."

It is, inter alia, because timelines for the making of an arbitral award have been laid down for the first time in Section 29A of the (2018) 6 SCC 287 Amendment Act that parties were given the option to adopt such timelines which, though procedural in nature, create new obligations in respect of a proceeding already begun under the unamended Act. This is, of course, only one example of why parties may otherwise agree and apply the new procedure laid down by the Amendment Act to arbitral proceedings that have commenced before it came into force."

Page 221 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

33 Procedural law establishes a mechanism for determining rights and liabilities of a party and a machinery for enforcing them. 12 Generally, procedural laws are presumed to be retrospective, unless there is a clear indication that such was not the intention of the legislature,13 or the procedural law imposes new obligations qua transactions already concluded or creates new rights or liabilities.

34 The 2019 Amendment Act does not contain any provision equivalent to Section 26 of Act 3 of 2016 evincing a legislative intent making the application of the amended provision prospective. The amended provisions of Section 29A, in terms of which the arbitral tribunal has to endeavour to dispose of the proceedings in an international commercial arbitration as expeditiously as possible within a period of twelve months from the completion of the pleadings are remedial in nature. The amended provision has excepted international commercial arbitrations from the mandate of the twelve- month timeline which governs domestic arbitrations. The amendment is intended to meet the criticism over the timeline in its

Page 222 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

application to international commercial arbitrations. The amendment is remedial in that it carves out international commercial arbitrations from the rigour of the timeline of six months. This lies within the domain of the arbitrator and is outside the purview of judicial intervention. The removal of the mandatory time limit for making an arbitral award in the case of an international commercial arbitration does not confer any rights or liabilities on any party. Since Section 29A(1), as amended, is remedial in nature, it should be applicable to all pending arbitral proceedings as on the effective date i.e., 30 August 2019.

35 We may notice certain judgments of the High Courts on the provisions of Section 29A which have been adverted to during the course of oral submissions. Those decisions are:

i. A decision of a Single Judge of the High Court of Delhi dated 23 January 2020 in Shapoorji Pallonji & Co. Pvt. Ltd. Vs Jindal India Thermal Power Ltd.;

ii. A decision of a Single Judge of the Delhi High Court dated 21 July 2020 in ONGC Petro Additions

Page 223 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Ltd. vs Ferns Construction Co. Inc.; and

iii. The decision of the Chief Justice of the High Court of Judicature for Orissa at Cuttack dated 11 December 2020 in M/s SARA International Pvt. Ltd. Vs Southern Eastern Railways & Anr.

36 In Shapoorji Pallonji, the Delhi High Court had held that amended Section 29A(1) of the Arbitration and Conciliation Act, being procedural law, would apply to the pending arbitrations as on the date of the amendment.

However, a coordinate bench in MBL Infrastructures Ltd v. Rites Ltd.18 held that the amended Section 29A would be prospective in nature, without referring to the earlier order in Shapoorji Pallonji. Finally, the Delhi High Court in ONGC Petro Additions settled the controversy and reiterated the position of law as laid down in Shapoorji Pallonji. The Court, inter alia, stated that Section 29A(1) shall be applicable to all pending arbitrations seated in India as on August 30, 2019 and commenced after October 23, 2015, and there is no strict time line prescribed to the proceedings which are in nature of international commercial arbitration as defined under the

Page 224 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Act, seated in India."

1.39) The Apex Court after analysing

section 29A(1) post amendment has held

that the amended section of the Act being

procedural law as held by Delhi High Court

in case of ONGC Petro Additions Ltd. v.

Ferns Construction Co. Inc (supra) shall

be applicable to all the pending

arbitration seated in India as on 30th

August, 2019 and commenced after 23rd

October, 2015 and there is no strict time

line prescribed to the proceedings which

are in the nature of international

commercial arbitration as described under

the Act seated in India.

1.40) Therefore, it is necessary to

ascertain as to whether the arbitration

proceedings between the parties can be

Page 225 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

said to be pending as on 30th August, 2019

so as to apply the amended provisions of

section 29A(1) of the Act.

1.41) The chronology of the events

enumerated here in above demonstrates that

the arbitration proceedings initiated by

the claimant under section 11 of the Act

pursuant to the order passed by the

Hon'ble Supreme Court dated 24.07.2017

under section 11(6) of the Act has

continued thereafter with change of

arbitrators from time to time.

1.42) On 4.12.2017 Hon'ble Mr. Justice

C.K. Thakker (retired) withdrew from the

arbitration and Hon'ble Mr. Justice M.B.

Shah (retired) was appointed as Presiding

Arbitrator. On 29.11.2018, Hon'ble Mr.

Justice J.M. Panchal (retired) Hon'ble

Page 226 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Mr. Justice M.B. Shah (retired) withdrew

from arbitration and thereafter, Mr. Andre

Yeap, late Hon'ble Mr. Justice G.T.

Nanavati (retired) appointed late Mr.

Vinayak Pradhan as Presiding Arbitrator on

24.01.2019.

1.43) Thereafter, the arbitration

proceedings were continued by both the

parties as none of the parties has made

any attempt to terminate the arbitration

proceedings on completion of 12 months on

31.01.2019. Merely because members of the

Arbitral Tribunal has changed from time to

time, Arbitral Tribunal does not cease to

exist. Even after 24.01.2019, when late

Mr. Vinayak Pradhan was appointed as

Presiding Officer, respondent nos. 1 and 2

through their advocate sent email dated

05.03.2019 to convene the preliminary

Page 227 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

meeting for urgent hearing and disposal of

the application under section 17 of the

Act, thereafter on 08.05.2019, another

email was sent by learned advocate for

respondent no.1 raising objections with

regard to the fees determined by the

Tribunal which was ordered to be paid by

respondent no.1.

1.44) By email dated 23.05.2019, late

Mr. Vinayak Pradhan informed the parties

that the fees have been determined

considering the ICC Schedule as an upper

limit.

1.45) Thereafter, learned advocate Mr.

Gursharan H. Virk for respondent by email

dated 06.06.2019 reiterated that

respondent no.1 has expressed his

Page 228 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

readiness to pay the arbitral fees

determined by the Tribunal consisting of

Hon'ble Mr. Justice C.K. Thakker(retired),

Hon'ble Mr. Justice M.B. Shah (retired),

Hon'ble Mr. Justice J.M. Panchal

(retired)and late Hon'ble Mr. Justice G.T.

Nanavati (retired) and has also expressed

inability of respondent no.1 to

participate in arbitration proceedings in

view of the exorbitant fees determined by

the Tribunal.

1.46) By email dated 15.08.2019, late

Mr. Vinayak Pradhan informed the parties

about directions and orders issued by the

Tribunal and the same was replied by email

dated 15.08.2019 by advocate of respondent

no.1 expressing inability to pay the fees.

By email dated 19.08.2019, late Mr.

Vinayak Pradhan informed the parties that

Page 229 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

hearing will take place at Ahmedabad.

1.47) By email dated 20.08.2019,

advocate for the claimant raised

objections to the email dated 15.08.2019

and also agreed to incur cost for hearing

scheduled for dates 16-18 October, 2019,

28-29 October, 2019 and 14-15 November,

2019.

1.48) From the above facts which are

emerging from the record as the parties

were continuing with arbitration

proceedings till 30.08.2019, it cannot be

said that arbitration proceedings were not

pending when the amendment in section

29A(1) of the Act came into effect.

1.49) In view of above facts, decision

Page 230 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

in case of Tata Sons Pvt. Ltd.(supra)

relied upon by both the sides and

objections raised by respondent nos. 1 and

2, it is held that Tribunal has rightly

continued the proceedings as per the

provisions of section 29A of the Act as

amended with effect from 30.08.2019 as the

time limit of 12 months would not apply to

the international commercial arbitration

after amendment of 2019 and consistent

with amended provision of section 29A,

Tribunal has rightly acted within its

domain and jurisdiction to decide to

continue the arbitration proceeding beyond

what is originally stipulated as per

unamended provision prior to 30.08.2019

and the contention raised on behalf of

respondent nos. 1 and 2 (petitioner) that

the Tribunal has lost mandate on

Page 231 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

completion of 12 months on 1.2.2019 is

without any basis.

1.50) In view of the foregoing reasons,

reliance placed by both the sides on

various judgments are not discussed, as on

facts, it emerges that the arbitration

proceedings were pending as on 30.08.2019

and therefore, the limitation of 12 months

would not apply to the pending arbitration

proceedings.

2) Whether the Arbitration Tribunal could

have continued with the arbitration

proceedings after the re-determination of

fees payable by the parties which is

opposed by the respondent nos. 1 and 2

being in violation of principle of party

autonomy?

Page 232 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Submissions made by learned Senior Advocate Mr. S.N. Soparkar for petitioner- respondent no.1:

2.1) Learned Senior Advocate Mr.

Soparkar raised second issue with regard

to jurisdiction of the Tribunal to fix the

fees without the consent of both the

parties. It was submitted that findings of

the Tribunal on the issue of exorbitant

fees is incorrect because respondent nos.1

and 2 has never denied to pay the fees

fixed by the Tribunal headed by Hon'ble

Mr. Justice M.B. Shah (retired) which was

later on enhanced by the Presiding

Arbitrator late Mr. Vinayak Pradhan and

the agreement of the claimant to pay the

fees on condition that counter claim filed

by the respondent nos. 1 and 2 would not

be decided and accordingly, the

conditional payment of fees of the

Page 233 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

claimant unilaterally, the Tribunal could

not have proceeded further with the

proceedings. It was submitted that in

paragraph no.199 of the impugned award,

the Tribunal has recorded that due process

of conducting the proceedings has not been

under challenge is not correct. It was

further pointed out that the Tribunal did

not permit the respondent nos. 1 and 2 to

file the counter claim and only permitted

to proceed with the filing of witness

statement and allowed to cross examine all

the witnesses, also permitted postponement

of hearing in November 2020 to suit the

convenience of the counsel etc., cannot be

said to be mandating any jurisdiction to

the Tribunal to proceed with the arbitral

proceedings in absence of the consent of

fixing of enhanced fees of the Tribunal.

Page 234 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

It was submitted that the respondent nos.

1 and 2 have raised the objection for

fixing of the fees by filing various

applications and reference was made to

various emails and correspondence between

the advocate of the petitioners and the

Tribunal to submit that Tribunal has never

considered the objections raised by the

respondent nos. 1 and 2 and only on the

basis of unilateral consent given by the

claimant to pay the fees including that of

the respondent, the Tribunal proceeded

with the hearing which is contrary to the

principle of party autonomy.

2.2) Learned Senior Advocate Mr. S.N.

Soparkar also referred to the observations

of the Tribunal in paragraph no.199 of the

Award as Supreme Court at the hearing held

on 18.12.2020 did not find any favour with

Page 235 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

the Court, is also misplaced because the

Supreme Court has only affirmed the order

of the High Court of not to entertain the

writ petition and has not decided any

other issue in order dated 18.12.2020.

2.3) It was submitted that Presiding

Arbitrator late Mr. Vinayak Pradan and

thereafter Mr. Anantham, Arbitral Tribunal

had no power to modify the fees fixed by

Hon'ble Mr. Justice M.B. Shah (retired),

the then presiding arbitrator of the

Tribunal. It was pointed out that on

3.10.2017, fees of Rs. 3 lakhs to each

arbitrator as reading fees and Rs. 2 lakhs

to each arbitrator as hearing fees per day

were decided and fees of Rs.50,000/- for

drafting etc. were decided for each

arbitrator. Accordingly, respondent no.1

Neeraj and respondent no.2 Kamal were

Page 236 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

required to be given Rs. 50,000/-

respectively for hearing. It was further

pointed out that on 1.02.2018 also when

the first hearing took place as per the

order of Hon'ble Supreme Court on

appointment of Hon'ble Mr. Justice M.B.

Shah (retired) as Presiding Arbitrator,

Tribunal continued fees of Rs. 2 lakhs per

hearing payable to each arbitrator and

accordingly, the respondent nos. 1 and 2

were required to be given Rs.50,000/- only

to each of the arbitrator respectively.

2.4) It was submitted that late Mr.

Vinayak Pradhan was appointed as Presiding

Arbitrator by the remaining two

arbitrators namely Hon'ble Mr. Justice

G.T. Nanvaty (retired)and Andrea Yeap, he

accepted the arbitration subject to

payment of fees which was unilaterally

Page 237 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

enhanced exorbitantly which was not

affordable to the respondent nos. 1 and 2

and accordingly, the respondent nos. 1 and

2 objected such unilateral enhancement of

the exorbitant fees vide emails dated

1.2.2019, 4.2.2019 and 8.2.2019.

2.5) Learned Senior Advocate Mr.

Soparkar referred to the Convenience

Compilation no.2 filed by the respondent

nos. 1 and 2 in relation to exorbitant

fees fixed by the Tribunal to point out

that the respondent nos. 1 and 2 never

agreed for such unilateral enhancement of

the fees as compared to the fees fixed

earlier for which the petitioners were

always ready and willing to pay such fees.

It was therefore, submitted that such

action of the Tribunal to unilaterally fix

exorbitant fees of the Tribunal violates

Page 238 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

the basic feature of the Act which is

party autonomy as if the party does not

agree to the exorbitant fees by the

Tribunal then arbitration cannot proceed

with arbitral proceedings.

2.6) It was pointed out that as per

email of late Mr. Vinayak Pradhan dated

23.05.2019, the arbitrators have decided

to proceed with the reference only when

the issue of fee was agreed to be paid by

the claimant. However, the fact remains

that the respondent nos. 1 and 2 never

agreed for fees and in absence of any

agreement between the parties, the

proceedings could not have been continued,

as the proceedings can go on only on the

basis of party autonomy. It was therefore,

submitted that entire arbitration

proceedings are wholly invalid and without

Page 239 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

jurisdiction and in conflict with public

policy as Arbitral Tribunal has acted with

bias and prejudice. Reliance was placed on

the decision of Hon'ble Supreme Court in

case of Afcons Gunanusa JV reported in

2022 SCC Online SC 1122.

2.7) It was further submitted that even

the fees fixed by the Tribunal consisting

of late Mr. Vinayak Pradan and Mr.

Anantham as Presiding Arbitrator are

contrary to section 15(4) of the Act which

provides that all orders made prior to the

replacement of the arbitrators are binding

to the reconstituted Tribunal.

2.8) Learned Senior Advocate Mr.

Soparkar pointed out that there was a

waiver only for four months and High Court

rejected the plea of the claimant on

Page 240 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

principle of waiver for extension of time

for completion of arbitral proceedings. It

was submitted that in aforesaid decision

Supreme Court held that coerced act of

participation in arbitration cannot be

termed as waiver. Therefore, the

contention of the claimant that there is

waiver on part of the respondent nos. 1

and 2 when respondent nos. 1 and 2

participated in the arbitral proceedings

with regard to extension of limitation is

misplaced inasmuch as it is apparent from

the documents placed on record that

participation of the respondent nos. 1 and

2 was under protest and objections were

also filed by the respondent nos. 1 and 2

invoking principle of party autonomy as

the respondent nos. 1 and 2 were not ready

to pay exorbitant fees determined after

Page 241 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

the reconstitution of the Tribunal when

late Mr. Vinayak Pradhan was appointed as

Presiding Arbitrator.

Submissions of learned advocate Mr. Masoom Shah for the petitioner-respondent no.2:

2.9) Learned advocate Mr. Masoom Shah

adopted the submissions of learned Senior

Advocate Mr. S.N. Soparkar and further

submitted that counter claims were not

permitted due to non payment of fees and

thereafter inspite of taking of fees from

the claimant, the counter claim are not

decided. It was further submitted that

there was no claim against respondent

no.4-C2R LLP for non payment of fees yet

it's counter claim was not decided.

2.10) It was submitted that Arbitral

Tribunal relies on order dated 14.02.2020

Page 242 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

passed by the Supreme Court but the

Hon'ble Supreme Court itself has

restrained the Tribunal from delivering

the award and only permitted the Arbitral

Tribunal to record evidence.

2.11) It was submitted that apart from

what is stated above, there is improper

conduct and selfish conduct for fixing the

unilateral fixation of exorbitant fees for

their own private determination, which is

then taken from one party inspite of

objection of the other party who didn't

have capacity to pay exorbitant fees.

There is misuse of position of Statutory

Tribunal.

2.12) It was further submitted that

there was no case that respondent no.4-C2R

LLP had not paid the arbitral fees and

Page 243 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

C2R LLP through appellant Kamal Jadhwani

filed its counter claim on 24.01.2018 and

on 01.02.2018 though the Tribunal decided

to deal with the counter claim,

subsequently it appears that counterclaim

of C2R LLP was not decided.

2.13) It was therefore, submitted that

appropriate remedy against unilateral

fixation or enhancement of fee by the

Arbitral Tribunal is by way of application

to the 'Court' either under Section 14 of

the Act, seeking termination of mandate,

as was done in case of ONGC Ltd. vs.

Afcons reported in 2022 SCC OnLine SC 1222

or by way of an application under Section

39(3) of the Act before the 'Court',

seeking fixation of reasonable fees.

Page 244 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Submissions of claimants:

2.14) It was further submitted that the

the petitioners' contention that Arbitral

Tribunal inherently lacked jurisdiction

since the very appointment of arbitrators

was a violation of party autonomy is

entirely misplaced inasmuch as the

Arbitral Tribunal was constituted

initially and on three subsequent

occasions in terms of the arbitration

agreement read with section 11(6) and

11(2) of the Act and the constitution of

each of the four Arbitral Tribunals is

elaborated in para nos. 26 to 38 of the

Award and there is no error in the

constitution of the Arbitral Tribunal such

that it could be assailed in petition

filed under section 34 of the Act.

Page 245 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

2.15) It was submitted that the

petitioners did not file any application

under Section 10 of the Act before the

Arbitral Tribunal to state that the

Tribunal does not have jurisdiction, and

in the absence of any express application,

are now precluded from raising any grounds

that the Arbitral Tribunal did not have

jurisdiction to adjudicate the disputes.

It was submitted that the attempt on part

of the petitioners to contend that it

raised a plea within the meaning of

Section 16 does not meet the requisite

standards set out under Section 16 and

therefore does not merit consideration

2.16) It was submitted that the

allegation that party autonomy was

violated because the Arbitral Tribunal

unilaterally fixed exorbitant fees is

Page 246 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

misplaced as the petitioners have

attempted to canvas that party autonomy is

an unlimited right which is incorrect and

party autonomy cannot be raised as a

pretext for preventing the Arbitral

Tribunal from adjudicating disputes which

are espoused by one party against another.

2.17) Learned advocate for the claimant

thereafter while dealing with party

autonomy with respect to fixation or

revision of Arbitrator's fees, without the

consent of the parties submitted that in

all there are 4 different Arbitral

Tribunals, and therefore, the fees fixed

by the first Arbitral Tribunal cannot be

foisted upon the newly constituted

Arbitral Tribunal and hence, different

fees decided by third and fourth Arbitral

Tribunal cannot be said to be the revised

Page 247 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

fees in place of the earlier one and in

fact, the very allegation of 'exorbitant

fees' were in fact raised before this

Court as well as Hon'ble Supreme Court,

which were eventually rejected. Thus, the

challenge raised by the petitioners as

regards 'exorbitant fees of the Arbitral

Tribunal, stood finally concluded between

the parties, leaving no scope for further

decision on the said issue.

2.18) Referring to separate charts on

arbitrator's fees and costs at Annexure I

to the petition, it was submitted that the

Respondent-Claimant has already

demonstrated before this Court that the

Arbitrator's fees were not exorbitant and

in fact was lower that the international

standards in the case of International

Commercial Arbitration.

Page 248 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

2.19) With regard to the aspect of plea

being taken by the petitioners by way of

emails before the Arbitral Tribunal, it is

submitted that the same is also totally

misconceived inasmuch as, the same cannot

be considered to be the plea being raised

under Section 16 of the Act, in the

absence of any formal application

specifically filed before the Arbitral

Tribunal and even otherwise, the grounds

which are sought to be raised by the

petitioners under Section 16 of the Act is

as such not available and that, the same

ought to have been made under Section 14

of the Act, which has also not been filed

by the petitioners.

Reasons and Findings:

2.20) With regard to issue of exorbitant

Page 249 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

fees raised by respondent nos. 1 and 2

before the Tribunal, Tribunal has dealt

with the said issue in para no. 199 of the

Award as under:

"199. The Tribunal is satisfied that Respondent Nos. 1 and 2 have not been denied due process due to their alleged inability to pay fees. The fact of the matter is that Respondent Nos. 1 and 2 were both given ample opportunities to file their witness statements, were represented by counsel, allowed to cross-examine all witnesses and granted postponement of the November hearing dates to suit their convenience and that of their Counsel at various stages of this arbitration. Respondent Nos.1 and 2 enjoyed all of these rights, notwithstanding, failing to bear any part of the expenses of the Tribunal since the appointment of the late Mr. Pradhan and in the case of Respondent No.1 not paying the costs ordered against him for the adjournment of the hearing dates. The Tribunal also notes that the similar objection raised by Respondent Nos. 1 and 2 before the Hon'ble Supreme Court at the hearing held on 18/12/20 did not find any favour with the court.

Accordingly, the Tribunal

Page 250 of 497

Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

dismisses the second

jurisdictional objection."

2.21) Respondent nos. 1 and 2 has raised

the issue of exorbitant fees determined by

the Tribunal comprising of late Mr.

Vinayak Pradhan Presiding Officer, Mr.

Andre Yeap and late Hon'ble Mr. Justice

G.T. Nanavati(retired) members of the

Tribunal who have occupied the office with

effect from 24.01.2019, by showing

inability to pay the fees determined by

the Tribunal.

2.22) It is also not in dispute that the

Tribunal consisting of Hon'ble Mr. Justice

C.K. Thakker (retired), Hon'ble Mr.

Justice M.B. Shah(retired), late Hon'ble

Mr. Justice G.T. Nanavati(retired) and

Hon'ble Mr. Justice J.M. Panchal (retired)

had determined the fees much lesser than

Page 251 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

what is determined by the Tribunal members

who are part of the Tribunal from

24.01.2019 because other members except

late Hon'ble Mr. Justice G.T.

Nanavati(retired) who have recused

themselves from the arbitration

proceedings.

2.23) Relevant dates on the decision of

issue of exorbitant fees alleged to have

been taken by the Tribunal unilaterally as

provided by the parties is as under:

Sr. Date Particulars No. 1. 03.10.17 Order of the Arbitral Tribunal

presided by Justice C.K. Thakker stating the fees of the arbitral proceedings. (See Table) 2 01.02.18 Order of the Arbitral Tribunal presided by Justice M.B. Shah stating the fees of the arbitral proceedings. (See Table) 3 24.01.19 Vinayak Pradhan's Email:

20:26 a.Mr. Vinayak Pradhan gives consent to be Presiding Arbitrator.

b. A Schedule of fees to be paid by parties is also given. (Refer to Table) (Fees are 10 times more than previous fees charged by the

Page 252 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Tribunal of CK Thakker J and MB Shah J. )

c.If the Payment is not done by one party, then other parties will make payment on behalf of a non-paying party.

d.If the payment is not made on time, Tribunal will suspend/terminate Tribunal.

4 01.02.19 Neerajbhai's Email:

а. I am not in a position to pay more than 50,000 per day. (as paid to earlier Tribunal of CK Thakker J and MB Shah J.)

b. Not in a position to bear logistic and transportation expenses.

c. Request made to not accept the assignment.

d. No consent was given.

e. Preference for presiding arbitrator to be appointed by the SC.

Note: Thus the entire fee issue is created because Mr. Atwal (Claimant) forced MB Shah J. to resign by making uncharitable accusations regarding his health, memory etc.

5 04.02.19 Atwal (Nagra's) Email:

16:04 a.Claims that the Party can't agree or disagree to the appointment of the presiding arbitrator when the appointment is done by a co- arbitrator nominated by Neerajbhai.

(Note: objection was due to the charging of 10 times the fees)

b. No justification for the lack of financial position.

Page 253 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

c. Doubts the inability to pay fees.

d. Trust of the claimant eroded from MB Shah J.

e. The claimant seeks clarification on how much and when to pay the fees.

f. Evidence recorded earlier is part of the record and the newly constituted Tribunal will have the benefit of it.

6 04.02.19 Kamal Jadhwani's Email:

16:10 a.No consent

b. Not in a position to afford excessive fees of the Tribunal. Old fees yet to be paid.

c. Mr. Atwal making baseless allegations against Tribunal (retired SC judges) just because the order is not in their favour.

d. Preference for presiding arbitrator to be appointed by the SC.

Note: Thus the entire fee issue is created because Mr. Atwal (Claimant) forced MB Shah J. to resign by making uncharitable accusations regarding his health, memory etc.

7 08.02.19 Gursharan Virk's (Nirajbhai) Email:

a.Two former arbitrators have resigned due to the conduct of the claimant. (This fact is never denied by the claimant)

The resignation letter of MB Shah J. must be placed before SC.

8 25.02.19 Vinayak Pradhan's Email:

a. On the objection of fees, suggestions were made to apply the standards of ICC.

b. To the claimant's query, the

Page 254 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

reference for parties to deposit should read, claimant forming one party and Mr. Neeraj and Mr. Kamal forming another party. The claimant's obligation will be 50%.

c. Arbitration continues from where it was let off.

9 05.03.19 Atwal (Nagra's) Email:

14.44 a. Claimant is willing to pay entire arbitral fees for his claims.

b. Claimant is not willing qua respondents claim and counterclaim and if respondents fail to pay, their counterclaim cannot be permitted to be adjudicated.

c. Claimant undertakes to pay a 50% deposit as per the schedule.

d. Claimant thanks the arbitral Tribunal for continuing the arbitration from where it was last dropped off.

10 05.03.19 Gursharan Virk's (Nirajbhai) Email:

15:46 a. Repeats the capacity to pay only Rs. 50,000 per day (email dated 01.02.19)

b. The suggestion of the claimant to pay Neerajbhai's fees because he is not capable to pay should be rejected.

c. The suggestion is rejected and de hores the arbitration law.

d. Reference was made to the 31.12.18 email where Neerajbhai has requested that the presiding arbitrator be an Indian national, considering the vernacular nature of documents and heavy cost implications.

e. Justice GT Nanavati's email dated 02.01.19 which stated heavy cost

Page 255 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

implications of non-indian arbitrator requires consideration.

f. Discharge of cost requested and prayed for urgent hearing of S. 17 Application.

11 26.03.19 Atwal (Nagra's) Email:

12:49 a. Allegations were made against GT Nanavati J. as he supported the draft S. 17 order prepared by MB Shah J.

b. Please issue instructions regarding the payment of arbitral fees.

12 26.04.19 Vinayak Pradhan's Email:

18.23 a. As the respondents don't intend to make payment of fees, the claimant is directed to make the payment of the full amount. (Para 1)

b. Counter-claim of Neerajbhai not permitted due to non-payment of fees. (Para 2 & 3).

c. Previously notified fees are finalized. (Para 5) 13 04.05.19 Atwal (Nagra's) Email:

a. Claimant will be paying arbitral fees as per ICC Schedule and in tranches

14 08.05.19 Gursharan Virk's (Nirajbhai) Email:

a. Repeated that Nirajbhai can only pay Rs. 50,000.

b. The affront payment claimed is Rs. 2557000 per arbitrator.

c. Since day one it is informed - no capacity to pay exorbitant fees but ready to make Rs. 50,000 per hearing.

d. Permission was sought to proceed with the counterclaim since the cost

Page 256 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

can always be decided under S. 31A at the end.

15 23.05.19 Vinayak Pradhan's Email:

a. In the 05.02.19 email, Tribunal merely stated to consider the ICC scale of fees.

b. Tribunal decided to continue with the fees stated in the 24.01.19 email.

c. Respondents are prohibited from pursuing counterclaims unless they make a deposit.

16 06.06.19 Gursharan Virk's (Nirajbhai) Email:

a. Contents of 05.03.19 email repeated.

b. Originally Vinayak Pradhan Tribunal had proposed if one party fails to make payment, the other party will be called upon to make payment (subject to award).

c. Repeated that Nirajbhai can only pay Rs. 50,000.

d. Unfair to burden Nirajbhai with exorbitant fees and request to reconsider the decision.

17 15.08.19 Vinayak Pradhan's Email:

9:30 a. Fees schedule decided.

b. If the Payment is not done by one party, then other parties will make payment on behalf of the non-paying party.

c. In the event payment is not made on time, Tribunal will suspend or terminate the arbitration.

d. If any party does not make its payment of its share, the Tribunal will stay that party's claim.

Page 257 of 497

Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

e. The Tribunal is not yet constituted.

f. Hearing to be done in Singapore

18 15.08.19 Gursharan Virk's (Nirajbhai) Email:

15:12 a. Exorbitant fees 15 to 20 times.

b. Do not agree and cannot afford the exorbitant fees

c. Objection to the change of venue from Ahmedabad to Singapore

d. Repeated that Nirajbhai can only pay Rs. 50,000.

19 19.08.19 Vinayak Pradhan's Email:

a. Hearing at Ahmedabad

b. Tribunal is not yet constituted and will be constituted upon deposit.

20 20.08.19 Atwal (Nagra's) Email :

a. The claimant will prove at the time of hearing that Neerajbhai has the capacity to make the payments.

21 21.08.19 Gursharan Virk's (Niraibhai) Email:

a. Repeated that Nirajbhai can only pay Rs. 50,000.

22 30.08.19 Atwal (Nagra's) Email :

a. Claimant has made payment of 1st tranches.

b. A request for a change of dates in light of Diwali

23 19.09.19 Vinayak Pradhan's Email:

a. Hearing at Ahmedabad

b. Tribunal is not yet constituted and will be constituted upon deposit.

24 06.10.19 Vinayak Pradhan's Email:

Page 258 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

a. Payment received b. Tribunal is constituted

25 23.10.19 Gursharan Virk's (Nirajbhai) Email:

1. Respondent No. I participate in the Arbitration proceedings without prejudice to seek recourse in accordance with the law as regards the prohibition of the counterclaim as he cannot afford the fees

b. Exorbitant Fees point repeated

Repeated that Nirajbhai can only pay Rs. 50,000.

26 28.10.2019 Gursharan Virk's (Nirajbhai) Email:

a. Extension of time for filing Affidavit b. On 7.11.19 request is made to hear the issues of counterclaim, Arbitral fees payment etc. c. Respondent No. 1 participate in the Arbitration proceedings without prejudice to seek recourse in accordance with the law as regards the prohibition of the counterclaim as he cannot afford the fees

27 3.11.2019 Gursharan Virk's (Niraibhai) Email:

a. Reference made to an e-mail dated 24.1.19 (Vinayak Pradhans E-mail) laying down exorbitant fees & other conditions

b. repeated that Nirajbhai can only pay Rs. 50,000.

c. The claimant is happy to pay exorbitant fees into crores to frustrate Neeraj and Kamalbhai with legal cost.

d. Request for an adjournment for hearings beyond the first session of 08.11.19

28 22.11.2019 Application for cost by Atwal.

Page 259 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

29 29.11.2019 Reply by Nirajbhai to Application of

Atwal.

30 05.12.2019 Gursharan Virk's (Nirajbhai) Email:

a. Neerajbhai refuses to give consent for an extension of time and to submit evidence as he does not have money to afford it.

31 23.12.2019 Order of Costs on Nirajbhai by Arbitral Tribunal.

32 15.01.2020 Vinayak Pradhan's Email:

08:14 a.Refers to the application dated PM 07.11.19, 22.11.19 by Nirajbhai.

b. Refers to application 22.11.19 by Kamal Jadhwani.

c. Order of the Tribunal I. The fees of the Tribunal are in line with SIAC or ICC rule, hence not herculean or exorbitant. II The date of the constitution of the Tribunal is something that the parties should ask their counsel and not the Tribunal.

III The issue relating to S. 29A will be answered in the final award.

33 20.01.20 Gursharan Virk's (Nirajbhai) Email:

a. Exorbitant cost point reiterated. b. Without prejudice to his objections, ready to provide a venue and stenographer.

c. By not delivering reasoned order on the point of S. 29A, Tribunal has frustrated Appellant-Neeraj.

34 19.10.20 Atwal (Pranav Vyas) Email :

Neeraj and Kamal have not paid past arbitral fees.

35 23.10.20 Anantham's Email:

a. Niraj is directed to comply with

Page 260 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

an order of cost dated 23.12.19. b. If one party doesn't pay his share then the other party will pay subject to recovery from the non- paying party.

2.24) From the above facts, it is

apparent that respondent nos. 1 and 2 have

never agreed for payment of fees

determined by the Tribunal consisting of

presiding Officer and members with effect

from 24.01.2019 by charging fees which was

more than 10 times than the fees fixed

previously by the Tribunal.

2.25) Therefore, there being no

agreement between the parties, the

arbitration proceedings which can go only

on basis of "party autonomy" would be

invalid and without jurisdiction and in

conflict with the public policy as the

arbitrators could not have unilaterally

Page 261 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

revised their fees and such a decision

would not bind respondent no.1 and 2.

2.26) In case of Oil and Natural Gas

Corporation v. Afcons Cunanusa JV reported

in 2022 SCC Online SC 1122, the Hon'ble

Supreme Court by majority decision on the

issue of fees payable to arbitrator has

held as under:

"(viii) Summary

68 Although there are jurisdictional differences, the following broad principles emerge from our discussion above:

(i) Typically, the fees payable to arbitrator(s) are determined through an agreement between the parties (of which the arbitrator(s) become aware of when they take up the assignment) or a separate agreement of the parties with the arbitrator(s). The arbitrator(s) then become bound by such contractually agreed fees;

and

(ii) Certain arbitration legislations give the

Page 262 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

arbitrator(s) effective power to determine their own fees, typically when there is an absence of agreement between the parties on the subject. However, such determination of fees is subject to review by the courts who can reduce the fees if they are not reasonable.

69. Thus, arbitrator(s) do not possess an absolute or unilateral power to determine their own fees.

Parties are involved in determining the fees of the arbitrator(s) in some form. It could be by: (i) determining the fees at the threshold in the arbitration agreement; or (ii) negotiating with the arbitrators when the dispute arises regarding the fees that are payable; or

(iii) by challenging the fees determined by the tribunal before a court.

C.2 Statutory scheme on payment of fees to arbitrators in India

C.2.1 Party autonomy

70 Party autonomy is a cardinal principle of arbitration. The arbitration agreement constitutes the foundation of the arbitral process. The arbitral tribunal is required to conduct the arbitration according to the procedure agreed by the parties.

Page 263 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

The procedure may stipulate adherence to institutional rules or ad hoc rules or a combination of both. Redfern and Hunter on International Commercial Arbitration (supra) compares arbitration to a ship, highlighting the extent of control parties exercise over arbitral proceedings: ―

In some respects, an international arbitration is like a ship. An arbitration may be said to be owned by the parties, just as a ship is owned by shipowners. But the ship is under the day-to-day command of the captain, to whom the owners hand control. The owners may dismiss the captain if they wish and hire a replacement, but there will always be someone on board who is in command (5) -- and, behind the captain, there will always be someone with ultimate control.

71. The leading treatise on international commercial arbitration further notes that the principle of party autonomy is entrenched in the international and national regimes on arbitration: ―

Party autonomy is the guiding principle in determining the procedure to be followed in an international arbitration. It is a

Page 264 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

principle that is endorsed not only in national laws, but also by international arbitral institutions worldwide, as well as by international instruments such as the New York Convention and the Model Law. The legislative history of the Model Law shows that the principle was adopted without opposition, (7) and Article 19(1) of the Model Law itself provides that: 'Subject to the provisions of this Law, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings.' This principle follows Article 2 of the 1923 Geneva Protocol, which provides that [t]he arbitral procedure, including the constitution of the arbitral tribunal, shall be governed by the will of the parties ...', and Article V(1)(d) of the New York Convention, under which recognition and enforcement of a foreign arbitral award may be refused if the arbitral procedure was not in accordance with the agreement of the parties'.

72 The Arbitration Act recognises the principle of party autonomy in various provisions. It allows the parties to derogate from the provisions of the Act on certain matters. Several provisions of the Arbitration Act explicitly embody the principle of party autonomy.

Page 265 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Section 2(6)107 of the Arbitration Act provides that parties have the freedom to authorise any person, including an arbitral institution, to determine the issue between them. Section 19(2)108 provides that the parties are free to choose the procedure to be followed for the conduct of arbitral proceedings. Section 11(2)109 provides that parties are free to decide on the procedure for the appointment of arbitrators. In Bharat Aluminium Co. v. Kaiser Aluminium Technical Services, this Court observed that party autonomy is the ―brooding and guiding spirit of arbitration. In Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd111, this Court referred to party autonomy as the backbone of arbitration.

73 Having spelt out party autonomy as the cardinal principle of arbitration in India, in the sections which follow we analyse how provisions relating to the payment of fees to arbitrators have to be interpreted in light of this principle."

2.27 Hon'ble Apex Court thereafter,

analysing Fourth Schedule and regulation

of arbitrator's fees summarised as under:

Page 266 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

"86. Based on the above discussion, we summarise the position as follows:

(i) In terms of the decision of this Court in Gayatri Jhansi Roadways Ltd (supra) and the cardinal principle of party autonomy, the Fourth Schedule is not mandatory and it is open to parties by their agreement to specify the fees payable to the arbitrator(s) or the modalities for determination of arbitrators' fees; and

(ii) Since most High Courts have not framed rules for determining arbitrators' fees, taking into consideration Fourth Schedule of the Arbitration Act, the Fourth Schedule is by itself not mandatory on court-appointed arbitrators in the absence of rules framed by the concerned High Court. Moreover, the Fourth Schedule is not applicable to international commercial arbitrations and arbitrations where the parties have agreed that the fees are to be determined in accordance with rules of arbitral institutions. The failure of many High Courts to notify the rules has led to a situation where the purpose of introducing the Fourth Schedule and sub-Section (14) to Section 11 has been rendered

Page 267 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

nugatory, and the court-appointed arbitrator(s) are continuing to impose unilateral and arbitrary fees on parties. As we have discussed in Section C.2.1, such a unilateral fixation of fees goes against the principle of party autonomy which is central to the resolution of disputes through arbitration. Further, there is no enabling provision under the Arbitration Act empowering the arbitrator(s) to unilaterally issue a binding or enforceable order regarding their fees. This is discussed in Section C.2.3 of this judgement. Hence, this Court would be issuing certain directives for fixing of fees in ad hoc arbitrations where arbitrators are appointed by courts in Section C.2.4 of this judgement."

2.28) After analysing the provisions of

section 31, 38 and 39 of the Act, the Apex

Court held as under:

"124 We believe that the directives proposed by the amicus curiae, with suitable modifications, would be useful in structuring how these preliminary hearings are to be conducted. Exercising our powers conferred under Article 142 of the

Page 268 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Constitution, we direct the adoption of the following guidelines for the conduct of ad hoc arbitrations in India: ―

1. Upon the constitution of the arbitral tribunal, the parties and the arbitral tribunal shall hold preliminary hearings with a maximum cap of four hearings amongst themselves to finalise the terms of reference (the ―Terms of Reference) of the arbitral tribunal. The arbitral tribunal must set out the components of its fee in the Terms of Reference which would serve as a tripartite agreement between the parties and the arbitral tribunal.

2. In cases where the arbitrator(s) are appointed by parties in the manner set out in the arbitration agreement, the fees payable to the arbitrators would be in accordance with the arbitration agreement. However, if the arbitral tribunal considers that the fee stipulated in the arbitration agreement is unacceptable, the fee proposed by the arbitral tribunal must be indicated with clarity in the course of the preliminary hearings in accordance with these directives. In the preliminary hearings, if all the parties and the arbitral tribunal agree to a

Page 269 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

revised fee, then that fee would be payable to the arbitrator(s). However, if any of the parties raises an objection to the fee proposed by the arbitrator(s) and no consensus can be arrived at between such a party and the tribunal or a member of the tribunal, then the tribunal or the member of the tribunal should decline the assignment.

3. Once the Terms of Reference have been finalised and issued, it would not be open for the arbitral tribunal to vary either the fee fixed or the heads under which the fee may be charged.

4. The parties and the arbitral tribunal may make a carve out in the Terms of Reference during the preliminary hearings that the fee fixed therein may be revised upon completion of a specific number of sittings. The quantum of revision and the stage at which such revision would take place must be clearly specified. The parties and the arbitral tribunal may hold another meeting at the stage specified for revision to ascertain the additional number of sittings that may be required for the final adjudication of the dispute which number may then be incorporated in the Terms of Reference as an additional term.

Page 270 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

5. In cases where the arbitrator(s) are appointed by the Court, the order of the Court should expressly stipulate the fee that arbitral tribunal would be entitled to charge. However, where the Court leaves this determination to the arbitral tribunal in its appointment order, the arbitral tribunal and the parties should agree upon the Terms of Reference as specified in the manner set out in draft practice direction (1) above.

6. There can be no unilateral deviation from the Terms of Reference. The Terms of Reference being a tripartite agreement between the parties and the arbitral tribunal, any amendments, revisions, additions or modifications may only be made to them with the consent of the parties.

7. All High Courts shall frame the rules governing arbitrators' fees for the purposes of Section 11(14) of the Arbitration and Conciliation Act, 1996.

8. The Fourth Schedule was lastly revised in the year 2016. The fee structure contained in the Fourth Schedule cannot be static and deserves to be revised

Page 271 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

periodically. We, therefore, direct the Union of India to suitably modify the fee structure contained in the Fourth Schedule and continue to do so at least once in a period of three years."

2.29) From the above dictum of law,

following conclusions and findings were

recorded by the Apex Court :

"G Conclusion

G.1 Findings

200 We answer the issues raised in this batch of cases in the following terms:

(i) Arbitrators do not have the power to unilaterally issue binding and enforceable orders determining their own fees. A unilateral determination of fees violates the principles of party autonomy and the doctrine of the prohibition of in rem suam decisions, i.e., the arbitrators cannot be a judge of their own private claim against the parties regarding their remuneration.

However, the arbitral tribunal has the discretion to apportion the costs (including arbitrators' fee and expenses) between the parties

Page 272 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

in terms of Section 31(8) and Section 31A of the Arbitration Act and also demand a deposit (advance on costs) in accordance with Section 38 of the Arbitration Act. If while fixing costs or deposits, the arbitral tribunal makes any finding relating to arbitrators' fees (in the absence of an agreement between the parties and arbitrators), it cannot be enforced in favour of the arbitrators. The arbitral tribunal can only exercise a lien over the delivery of arbitral award if the payment to it remains outstanding under Section 39(1). The party can approach the court to review the fees demanded by the arbitrators if it believes the fees are unreasonable under Section 39(2);

(ii) Since this judgment holds that the fees of the arbitrators must be fixed at the inception to avoid unnecessary litigation and conflicts between the parties and the arbitrators at a later stage, this Court has issued certain directives to govern proceedings in ad hoc arbitrations in Section C.2.4;

(iii)The term ―sum in dispute in the Fourth Schedule of the Arbitration Act refers to the sum in dispute in a claim and counter- claim separately, and not

Page 273 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

cumulatively. Consequently, arbitrators shall be entitled to charge a separate fee for the claim and the counter-claim in an ad hoc arbitration proceeding, and the fee ceiling contained in the Fourth Schedule will separately apply to both, when the fee structure of the Fourth schedule has been made applicable to the ad hoc arbitration;

(iv)The ceiling of Rs 30,00,000 in the entry at Serial No 6 of the Fourth Schedule is applicable to the sum of the base amount (of Rs 19,87,500) and the variable amount over and above it. Consequently, the highest fee payable shall be Rs 30,00,000; and

(v) This ceiling is applicable to each individual arbitrator, and not the arbitral tribunal as a whole, where it consists of three or more arbitrators. Of course, a sole arbitrator shall be paid 25 per cent over and above this amount in accordance with the Note to the Fourth Schedule.

G.2 Directions

201 We issue the following directions in each of the cases before this Court:

(i) In respect of Arbitration

Page 274 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Petition (Civil) No 5 of 2022, a fee schedule for the arbitrators was already prescribed in the LSTK contract. However, during the preliminary meeting on 25 November 2015, the arbitral tribunal observed that the fee schedule in the LSTK contract was unrealistic.

While Afcons agreed to revise the fees, ONGC expressed its disagreement. The tribunal directed ONGC to consider revising the fees. On 16 April 2016, the arbitral tribunal informed ONGC that it would no longer bargain on the amount of fees if ONGC was agreeable to the fee provided in the Fourth Schedule to the Arbitration Act, along with a reading fee of Rs 6 lakhs for each arbitrator. By its letter dated 22 April 2016, ONGC indicated that it was agreeable to revising the fees in terms of the Fourth Schedule. It only objected to the reading fee. Subsequently, the arbitral tribunal passed a procedural order dated 4 August 2016 directing the parties to deposit 25 per cent of the arbitrators' fee, which was recorded as Rs 30 lakhs. It seems a ceiling of Rs 30 lakhs was determined following the Fourth Schedule to the Arbitration Act. However, the arbitral tribunal then unilaterally decided to revise the fees and passed a procedural order fixing a fee of

Page 275 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Rs 1.5 lakhs for each arbitrator for every sitting of a three-hour duration. The tribunal also indicated it may also charge a reading or conference fee, which would be decided at a later stage. By an order dated 25 July 2019, the arbitral tribunal adjusted its fees to Rs 1 lakh per sitting. Around 54 sittings have been held in terms of the arbitral tribunal's order dated 25 July 2019. In this background, it is evident that there was no consensus between the parties and the arbitrators regarding the fee that is to be paid to the members of the arbitral tribunal. Allowing the continuance of the arbitral tribunal would mean foisting a fee upon the parties and the arbitral tribunal to which they are not agreeable. In view of our directives in Section C.2.4 and the facts noted earlier, we exercise our powers under Article 142 of the Constitution of India and direct the constitution of a new arbitral tribunal in accordance with the arbitration agreement. For this purpose, Arbitration Petition (C) No. 5 of 2022 would be listed for directions before this Court on 21 September 2022. The above directions should not be construed as a finding on the conduct of the arbitration proceedings. These

Page 276 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

directions are an attempt to ensure that the arbitral proceedings are conducted without rancour which may derail the proceedings. In consonance with our findings, the fee payable to the earlier arbitral tribunal would be the fee payable in terms of the Fourth Schedule of the Arbitration Act. Though the Fourth Schedule is per se not applicable to an international commercial arbitration, since ONGC had indicated (following the suggestion of the arbitral tribunal) that it would be agreeable to pay the fee payable in terms of Schedule, it cannot now take recourse to the arbitration agreement between the parties to pay a lesser fee. We further clarify that if the fee in excess of the amount payable under the Fourth Schedule has been paid to the members of the arbitral tribunal, such amount will not be recovered from them;

(ii) The civil appeal arising out of Special Leave Petition (Civil) No 13426 of 2021 is dismissed and the judgment of the Single Judge of the Delhi High Court dated 6 August 2021 is upheld;

(iii)The civil appeal arising out of Special Leave Petition (Civil) No 10358 of 2020 is allowed and

Page 277 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

the judgment of the Single Judge of the Delhi High Court dated 10 July 2020 is set aside; and

(iv) Miscellaneous Application Nos 1990-1991 of 2019 are dismissed."

2.30) Thus, in view of above decision of

Hon'ble Apex Court on the principle of

"party autonomy", Arbitral Tribunal in

facts of the case could not have insisted

upon respondent no.1 and 2 to pay the fees

fixed by it apparently more than 10 times

than what was fixed by the Arbitral

Tribunal at the inception of the arbitral

proceedings. Merely because members of the

Tribunal have been replaced by the parties

and two members are situated out of India,

Tribunal could not have unilaterally

increased the fees with the consent of the

claimant only ignoring the repeated

objections of respondent nos. 1 and 2.

Page 278 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

2.31) On perusal of the findings given

by the Tribunal on the issue of exorbitant

fees, it is clear that Tribunal has not

addressed any of the issues raised by

respondent nos. 1 and 2 and summarily

findings are given by referring to order

dated 18.12.2020 which is reproduced here

in above. On perusal of the order dated

18.12.2020, it nowhere addresses the issue

of exorbitant fees raised by the

respondent no.1 and 2.

2.32) Therefore, as held by the Apex

Court in case of Oil and Natural Gas

Corporation v. Afcons Cunanusa JV(supra),

Tribunal ought not to have proceeded with

the arbitral proceedings only on consent

of claimant to pay the fees by justifying

the fees as per ICC standards which was

Page 279 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

not acceptable to respondent nos.1 and 2.

Tribunal therefore, ought to have accorded

greater deference to "party autonomy" when

respondent no.1 and 2 have denied and

refused to pay the fees as determined,

then the Tribunal could not have recovered

the fees from the claimant as it would

amount to unilateral fixation of fees

which goes against the principle of "party

autonomy" which is central to the

resolution of the dispute through

arbitration, more particularly, when there

is no enabling provision under the Act

empowering the arbitrator to unilaterally

issue a binding or enforceable order

regarding their fees. Therefore, the order

passed by the Tribunal compelling

respondent nos. 1 and 2 to pay the fees

determined by it is contrary to the

Page 280 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

principle of "party autonomy".

2.33) The Hon'ble Supreme Court in case

of Bharat Aluminium Co. v. Kaiser

Aluminium Technical Services reported in

(2016) 4 SCC 126 wherein it is stipulated

that "party autonomy is the brooding and

guiding spirit of arbitration" where as in

case of Centrotrade Minerals & Metal Inc.

v. Hindustan Copper Ltd. reported in

(2017) 2 SCC 228, the Apex Court referred

to "party autonomy" as backbone of

arbitration.

2.34) In view of above settled legal

position and considering the facts of the

case, Tribunal would not have assumed

jurisdiction to continue the arbitration

proceedings.

Page 281 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

2.35) It is therefore, concluded that

the Tribunal had no jurisdiction to

continue the proceedings after the

reconstituted Tribunal determined the

charges of fees which is exorbitant and

opposed by respondent nos. 1 and 2 being

violative of principle of "party

autonomy". Tribunal has therefore, lost

the mandate to adjudicate the claim of the

claimant. Tribunal could not have

compelled respondent nos. 1 and 2 to

continue with the arbitration proceedings

by not deciding the application dated

20.2.2020 filed by respondent no.2 under

sections 12 and 13 of the Act and by not

permitting respondent nos.1 and 2 to lead

evidence and file counter claim. Tribunal

has also failed to adjudicate the counter

claim filed by respondent nos.1 and 2

Page 282 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

inspite of receiving entire fees from

claimant.

2.36) Thus it is apparent that the

arbitrators have acted with bias and

prejudice by unilaterally fixing the fees

to which the claimant readily agreed but

respondent nos. 1 and 2 objected the same

which is obvious from the events which

have taken place during the arbitration

proceedings.

2.37) This issue is therefore, answered

in favour of respondent no.1 and 2.

3) Whether the Tribunal could have denied

the respondent no.1 and 2 to lead evidence

and file counter claims in violation of

principle of natural justice?

Page 283 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Submissions made by learned Senior Advocate Mr. S.N. Soparkar for petitioner- respondent no.1:

3.1) Learned Senior Advocate Mr.

Soparkar submitted that because of the

following reasons, respondent no.2 Neeraj

was unable to present his case properly

resulting into violation of principles of

natural justice:

"10.1.1 Email dated 08.11.2020 flagging health issue of R-1 (Heath related document see CC- 4@312) for hearing of the 4th Tribunal commencing from 09.11.2020. (Award-Para 43).

10.1.2 On 09.11.2020 Ms. Miraaj Shah (Daughter of R-1) appeared in arbitration on the ground of ill health of R-1 in Arbitration proceedings.

10.1.3 Pandemic was going on & the Supreme Court had stopped the period of limitation & the courts across the country were working in virtual mode for urgent matters. In spite of this, Arbitration was proceeded with haste & hurry & cross-examination was made to be

Page 284 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

done in virtual mode & award came to be passed.

10.1.4 On 10.12.2020 Shreyas Jaysimha appeared as new advocate for R-1 in less than one month's time for cross examination and final hearing of bulkey records of 26K pages."

3.2) It was therefore, submitted that

entire award in view of facts emerging

from record is without jurisdiction as

there is inherent lack of jurisdiction as

the very appointment of arbitrator is in

violation of "party autonomy" which goes

to the root of the matter and the entire

award is therefore, nullity. It was

further submitted that in view of multiple

applications, petitions, emails, oral and

written submissions for defects of

jurisdiction of the Tribunal under section

29A, unilateral decision of charging

Page 285 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

exorbitant fees were placed before the

Tribunal. The Tribunal therefore, in such

applications of unilateral exorbitant fees

in the issue of jurisdiction under section

29A of the Act can be considered under

section 13 (leading to bias) or section 16

(inherent lack of jurisdiction for

violation of party autonomy) and in

either cases, the petitioner was required

to challenge the said decision under

section 34 of the Act only. Reliance was

placed on the decision of Hon'ble Supreme

Court in case of Waverly Jute Mills

reported in (1963) 3 SCR 209.

3.3) Learned Senior Advocate Mr.

Sopakar submitted that following clauses

of section 34 of the Act would be

attracted for setting aside the award :

"11.2.1 S. 34(2)(a)(iii) -

Page 286 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

Violation of natural justice for following reasons:

a. as consent of 9 months was sought for taking evidence on record.

b. Counter claim were not decided. Additionally, as claimant said so.

c. Dates were conveniently changed for Claimant but not for Petitioner-Neeraj.

d. Taking up the assignment by quoting exorbitant unilateral fees without consent of Petitioner- Neeraj & Petitioner Kamal.

e. That this Court called for the seal cover record, but only electronic drive submitted by the Ld. Arbitrators. Therein also entire record of s. 17 and other documents were missing.

11.2.2 S. 34(2)(b)(i) - Serious Fraud is outside the purview of arbitration.

11.2.3 S. 34(2)(b)(ii)- Public Policy of Indian Law:

a. Fundamental Policy of Indian Law

i. violation of mandatory provisions including 29A

Page 287 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

ii. violation of party autonomy for unilateral exorbitant fees

b. Justice(Shocks the conscious of the Court)

i. The individual violation as set out above as well as all the violations in sum of all of them together shocks the conscious of a reasonable man."

3.4) It was therefore, submitted that

the decisions relied upon by the

respondent would not be applicable as the

case of the petitioner is argued within

scope and ambit of section 34 of the Act.

3.5) Learned Senior Advocate Mr.

Soparkar submitted that the Tribunal has

also committed an error by continuing the

proceedings after having received full

fees from the claimant without

adjudicating the counter claim filed by

the respondent nos. 1 and 2 only because

Page 288 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

the said respondents did not pay the fees.

It was submitted that the fees fixed by

the Tribunal was per hearing per day and

not per claim. It was therefore, submitted

that the Tribunal was bound to decide the

counter claim filed by the respondent

nos.1 and 2.

Submissions of claimant:

3.6) It was submitted that the

objection raised by the petitioner that

principles of natural justice were

violated since consent was sought by the

Arbitral Tribunal from the Petitioners to

a nine-month extension for issuing the

Award as a precondition for taking their

evidence on record is also factually

misleading and the Arbitral Award

categorically records in paragraphs 44 to

Page 289 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

47, the entire factual matrix which led to

closure of the petitioners' right to lead

evidence in the arbitration. It was

therefore, submitted that petition

deserves to be dismissed in limine.

3.7) With regard to non-consideration

of the Counter-Claims, it was submitted by

learned advocate for the claimant that the

Act considers claims and counter-claims to

be independent proceedings, since the

latter is not contingent upon the former.

Reliance in this regard is placed on the

observations made in para 168 by the

Hon'ble Supreme Court in the aforesaid

ONGC Judgment which reads as under:

"168 On our analysis of the statutory framework of the Arbitration Act and the CPC, related academic discourse and judicial pronouncements, the

Page 290 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

following conclusions emerge:

(i) Claims and counter-claims are independent and distinct proceedings;

(ii) A counter-claim is not a defence to a claim and its outcome is not contingent on the outcome of the claim;

(iii)Counter-claims are independent claims which could have been raised in separate proceedings but are permitted to be raised in the same proceeding as a claim to avoid a multiplicity of proceedings; and

(iv)The dismissal of proceedings in relation to the original claim does not affect the proceedings in relation to the counter-claim."

3.8) It was submitted that in the

present case, vide the arbitral award, the

Arbitral Tribunal has adjudicated only the

claims submitted by the respondent -

Claimant, and for doing so, enough

opportunities were granted to the

petitioners for countering the same, as

well as their defence has also been taken

Page 291 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

into consideration and merely because the

Respondent Claimant deposited full fees,

including the share of the petitioners in

respect of their claim, the Arbitral

Tribunal is not bound in law to adjudicate

upon the Petitioners' Counter-Claim.

3.9) It was further submitted that in

the present case, the fees of the Arbitral

Tribunal was fixed on per hearing and per

hour basis, and hence, as the Counter

Claim filed by the petitioners were not

adjudicated, neither any hearing fees or

reading fees is being charged nor has been

paid by any party and therefore, in

absence of there being any payment for the

adjudication of the Counter-Claim, there

arises no question of considering the

same.

Page 292 of 497 Downloaded on : Wed Jul 10 20:46:41 IST 2024 NEUTRAL CITATION

C/ARBI.P/23/2023 JUDGMENT DATED: 05/07/2024

undefined

3.10) It was further submitted that it