Srei Infrastructure Finance Limited vs Tuff Drilling Private Limited

REPORTABLE IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 15036 OF 2017 (arising out of SLP(C)No.16636 of 2015)

SREI INFRASTRUCTURE FINANCE LIMITED APPELLANT(s)

VERSUS

TUFF DRILLING PRIVATE LIMITED RESPONDENT(s)

J U D G M E N T

ASHOK BHUSHAN, J.

Leave granted.

1. This appeal has been filed against the

judgment dated 13.02.2015 of the Calcutta High

Court by which the High Court in exercise of

jurisdiction under Article 227 of the

Constitution of India has set aside the Order

passed by the arbitral tribunal by which the

arbitral tribunal had refused to recall its

Order dated 12.12.2011 terminating the

Signature Not Verified arbitration proceedings on account of non filing Digitally signed by NIDHI AHUJA Date: 2018.05.05 11:57:55 IST Reason: of the claim by the claimant. 2

2. The undisputed facts of the case are: -

The respondent filed an application under

Section 11 of the Arbitration and Conciliation

Act, 1996 (hereinafter referred to as “the 1996

Act”) for referring the dispute to arbitrator on

the strength of contract entered with appellant.

During pendency of the application under Section

11 with consent of the parties, Sri Baskar Sen,

Senior Advocate, Bar-at-Law was appointed as

Arbitrator. The application under Section 11 of

the 1996 Act was thus dismissed as not pressed.

One-man arbitral tribunal entered into reference

and called for the first sitting of the arbitral

tribunal on 27.08.2011. Both the parties

appeared on 27.08.2011 on which date arbitral

tribunal had directed the respondent to file the

statement of claim.

3. Subsequently, 19th November was fixed on

which date the claimant was absent. The arbitral

tribunal directed for filing statement of claim

by 9th December. On 9th December, the claim could 3

not be filed by respondent and by order dated

12.12.2011, tribunal terminated the proceedings

under Section 25(a) by making the following

observations: -

“...It appears that the claimant is not interested to proceed with the reference. No cause has been shown as to why they have not filed their Statement of Claim in spite of repeated opportunities being given to them. In view of Section 25(a) of the Arbitration & Conciliation Act, 1996 the Arbitrator, therefore, has no alternative but to terminate the proceedings.

The arbitration proceedings in respect of the dispute in which Tuff Drilling Private Limited is the claimant which arose out of the agreement dated 21st January, 2008 pertaining to 1500 HP diesel electric rig is thus terminated...”

4. The Claimant filed an application dated

20.01.2012 praying for recall of the order dated

12.12.2011 with further prayer to condone the

delay in filing the statement of claim by

granting necessary extension of time. In the

application, reasons for non-filing of the 4

statement of the claim and for non-appearance of

the claimant on 19.11.2011 and 12.12.2011 were

stated in detail. The application filed by the

claimant was objected by the appellant. The

appellant questioned the maintainability of the

application dated 20.01.2012 on the ground that

arbitral tribunal has become functus officio in

view of termination of the proceedings under

Section 25(a), hence the arbitral tribunal

cannot recall its order terminating the

proceedings. The arbitral tribunal heard both

the parties and by an order dated 26.04.2012

accepted the preliminary objections of the

appellant holding that in view of order

terminating the proceedings, he cannot pass an

order recommencing the arbitration proceedings.

The application of the respondent claimant was

thus rejected. Aggrieved by the order of the

arbitral tribunal dated 26.04.2012, the claimant

approached the Calcutta High Court in its

revisionary jurisdiction by filing C.O.No.3190

of 2012. The appellant before the High Court 5

objected the maintainability of the application

under Article 227 of the Constitution. It was

further contended before the High Court that

after terminating the proceedings arbitral

tribunal had become functus officio and had no

power to recall the order dated 12.12.2011. The

High Court after considering the submissions of

parties came to the conclusion that arbitral

tribunal enjoys the power to recall its own

order relying on the Patna High Court judgment

reported in M/s Snebo Engineering Ltd. Vs. State

of Bihar and Ors., AIR 2004 Patna 33. The High

Court also overruled the objections of appellant

that application under Article 227 by the

claimant challenging the order dated 12.12.2011

was not maintainable. The High Court after

entertaining the application under Article 227

held that arbitral tribunal has power to recall

its own order. The High Court set aside the

order of the arbitral tribunal and remitted the

matter back to the arbitral tribunal to decide

the application dated 20.01.2012 filed by the 6

respondent on merits. The appellant aggrieved by

the judgment of Calcutta High Court has come up

in this appeal.

5. This court on 07.07.2015 issued notice and

in the meantime stayed the operation of the

order passed by the Calcutta High Court.

Although, the respondent was served but none

appeared on behalf of the respondent. While

hearing the matter on 29.08.2017, this court

noticed that question of law raised in this case

is important one and since no one has appeared

on behalf of respondent, this court requested

Shri Rakesh Dwivedi, Senior Advocate, to assist

the court in deciding the issue.

6. We have heard Shri Jayant Bhushan, learned

senior counsel, assisted by Shri Santanu Ghosh,

learned counsel for the appellant. Shri Rakesh

Dwivedi, learned senior counsel assisted by Ms.

Sansriti Pathak, learned counsel, has been heard

as amicus curiae.

7

7. Learned Counsel for the appellant submits

that the arbitral tribunal had terminated the

proceedings on 12.12.2011 due to non-filing of

claim by the claimant in spite of opportunities

having been granted to it. The arbitral tribunal

had become functus officio and had no

jurisdiction to recall the order dated

12.12.2011 on the application filed by the

respondent claimant to recall the said order. It

is further contended that against the order

dated 12.12.2011 terminating the proceeding

application under Article 227 of the

Constitution of India was not maintainable.

Learned counsel for the appellant has relied on

judgment of this Court reported in Lalit Kumar

V. Sanghavi Vs. Dharamdas V. Sanghavi & Ors.,

2014(7) SCC 255 in support of the submissions

that Writ Petition was not maintainable against

the order of arbitral tribunal. It is further

submitted by the appellant that remedy if any

available to claimant was to file an application 8

under Section 34 of 1996 Act for setting aside

the order dated 12.12.2011.

8. Shri Rakesh Dwivedi, learned amicus curiae,

submits that the termination of proceedings

under Section 25(a) and termination of

proceedings under Section 32(2) are two

different eventualities. When the proceedings

are terminated under Section 32(2), the mandate

of the arbitral tribunal also terminates whereas

no such consequence can be read in termination

of proceedings under section 25(a). Under

section 25(a), proceedings are terminated on

default of the claimant to file the statement of

claim. Section 32(3) would not apply to case

falling under section 25(a) of the 1996 Act. The

Arbitration Act, 1996 does not provide for

remedy against the order under section 25(a). He

contends the remedy under Section 34 is not

available against such an order unless the order

under Section 25(a) is also treated as an award.

Learned amicus curiae submits that there seems 9

to be legislative gap with respect to 25(a) and

32(2)(c). He submits that it is more appropriate

that Order under Section 25(a) be treated as an

award so as to make it amenable under Section

34. On the submissions that whether arbitral

tribunal can exercise the power akin to

principle underlying under Order IX Rule 13

C.P.C. Learned amicus curiae submits that

arbitral tribunal can recall an order passed

under Section 25(a) on the principles underlying

Order IX Rule 13 C.P.C. Learned amicus curiae in

support of above submissions has also referred

to judgments of Patna High Court, Delhi High

Court, Madras High Court & Bombay High Court

which shall be referred to while considering the

submissions in detail.

9. Referring to this court’s judgment in SPP

Vs. Patel Engineering, it is submitted that the

said case has no applicability when Section 34

and 37 of the 1996 Act are not applicable. It

was pointed out by learned amicus curiae that 10

Lalit Kumar was a case where proceedings were

terminated under Section 32(2)(c). Learned

amicus curiae has lastly submitted that

legislative gap as is apparent in context of

provisions of Section 25(a), 32 and 34 need to

be stitched up in light of the object of the

legislation.

10. We have considered the submissions of

learned counsel for the appellant and learned

amicus curiae and have perused the record. From

the submissions, following issues arise for

consideration in this Civil Appeal:-

1)Whether arbitral tribunal which has

terminated the proceeding under Section

25(a) due to non filing of claim by claimant

has jurisdiction to consider the application

for recall of the order terminating the

proceedings on sufficient cause being shown

by the claimant?

2)Whether the order passed by the arbitral

tribunal under Section 25(a) terminating the 11

proceeding is amenable to jurisdiction of

High Court under Article 227 of the

Constitution of India?

3)Whether the Order passed under Section 25(a)

terminating the proceeding is an award under

the 1996 Act so as to amenable to the remedy

under Section 34 of the Act?

11. The law of Arbitration was earlier governed

by the Arbitration Act, 1940. The Law Commission

of India and several other organisations

expressed opinion that the 1940 Act needs

extensive amendments to make it more responsive

to contemporary requirements. In the wake of

rise in commercial litigation both at domestic

and international level, a need was felt for a

comprehensive law to deal the subject. The

United Nations Organisation on International

Trade Law (UNCILTRAL) adopted a Model Law on

International Commercial Arbitration in the year

1985. Taking into consideration domestic

arbitration as well as international commercial 12

arbitration, Parliament enacted the Arbitration

and Conciliation Act, 1996. Main objective for

introducing the legislation was to make

provision for an arbitral procedure which is

fair, efficient and capable of meeting the needs

of the specific arbitration. In Section 2 of the

Act, arbitral tribunal has been defined to mean

a sole arbitrator or a panel of arbitrators. The

arbitral tribunal was entrusted with various

statutory functions, obligations by the

enactment.

12. The arbitration is a quasi judicial

proceeding, equitable in nature or character

which differs from a litigation in a Court. The

power and functions of arbitral tribunal are

statutorily regulated. The tribunals are special

arbitration with institutional mechanism brought

into existence by or under statute to decide

dispute arising with reference to that

particular statute or to determine controversy

referred to it. The tribunal may be a statutory 13

tribunal or tribunal constituted under the

provisions of the Constitution of India. Section

9 of the Civil Procedure Code vests into the

Civil Court jurisdiction to entertain and

determine any civil dispute. The constitution of

tribunals has been with intent and purpose to

take out different categories of litigation into

the special tribunal for speedy and effective

determination of disputes in the interest of the

society. Whenever, by a legislative enactment

jurisdiction exercised by ordinary civil court

is transferred or entrusted to tribunals such

tribunals are entrusted with statutory power.

The arbitral tribunals in the statute of 1996

are no different, they decide the lis between

the parties, follows Rules and procedure

conforming to the principle of natural justice,

the adjudication has finality subject to remedy

provided under the 1996 Act. Section 8 of the

1996 Act obliges a judicial authority in a

matter which is a subject of an agreement to

refer the parties to arbitration. The reference 14

to arbitral tribunal thus can be made by

judicial authority or an arbitrator can be

appointed in accordance with the arbitration

agreement under Section 11 of the 1996 Act.

13. After noticing the objective of the

enactment, we now revert to issues which have

arisen in these appeals.

Issue No.I

14. Chapter V of the Act deals with the conduct

of arbitral proceedings. Section 18 provides

“the parties shall be treated with equality and

each party shall be given a full opportunity to

present his case. Section 18 contains the

principle of natural justice to give full

opportunity to parties to present their case.

15. Section 19 of the Act provides for

determination of rules of procedure. Sub-clause

(1) of Section 19 provides that the arbitral

tribunal shall not be bound by the Code of Civil

Procedure, 1908 or the Indian Evidence Act,

1872. The words “arbitral tribunal shall not be 15

bound” are the words of amplitude and not of a

restriction. These words do not prohibit the

arbitral tribunal from drawing sustenance from

the fundamental principles underling the Civil

Procedure Code or Indian Evidence Act but the

tribunal is not bound to observe the provisions

of Code with all of its rigour. As per sub-

clause (2) of Section 19 the parties are free to

agree on the procedure to be followed by the

arbitral tribunal in conducting its proceedings.

16. Section 23 deals with claim and defence.

Section 24 deals with hearing and written

proceedings.

17. Section 25 deals with default of a party

which provision is up for interpretation in this

case and is as follows:

“25. Default of a party.—Unless otherwise agreed by the parties, where, without showing sufficient cause,—

(a) the claimant fails to communicate his statement of claim in accordance with sub-section (1) of section 23, the arbitral 16

tribunal shall terminate the proceedings;

(b) the respondent fails to communicate his statement of

defence in accordance with sub-

section (1) of section 23, the arbitral tribunal shall continue the proceedings without treating that failure in itself as an admission of the allegations by the claimant and shall have the discretion to treat the right of the respondent to file such statement of defence as having been forefeited;

(c) a party fails to appear at an oral hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings and make the arbitral award on the evidence before it.”

18. Chapter VI deals with Making of Arbitral

Award and Termination of Proceedings. Section

32 deals with Termination of Proceedings which

is quoted as below:-

17

“32. Termination of proceedings.—

(1) The arbitral proceedings shall

be terminated by the final arbitral

award or by an order of the

arbitral tribunal under sub-

section (2).

(2) The arbitral tribunal shall

issue an order for the termination

of the arbitral proceedings where—

(a) the claimant withdraws his

claim, unless the respondent

objects to the order and the

arbitral tribunal recognises a

legitimate interest on his part

in obtaining a final settlement

of the dispute,

(b) the parties agree on the

termination of the proceedings,

or

(c) the arbitral tribunal finds

that the continuation of the

proceedings has for any other 18

reason become unnecessary or

impossible.

(3) Subject to section 33 and sub-

section (4) of section 34, the

mandate of the arbitral tribunal

shall terminate with the

termination of the arbitral

proceedings.”

19. In the present case, proceedings were

terminated vide Order dated 12.12.2011 under

Section 25(a). After termination of proceedings,

application to recall the said order was filed

by claimant on 20.01.2012, which was rejected by

arbitral tribunal on the ground that it has no

jurisdiction to re-commence the arbitration

proceedings. Section 25 contemplates a situation

when the claimant fails to communicate his

statement of claim within the time as envisaged

by Section 23, the arbitral tribunal has to

terminate the proceedings. This section thus 19

contemplates a situation where arbitration

proceeding has not been started. The most

important words contained in Section 25 are

“where without showing sufficient cause – the

claimant fails to communicate his statement of

claim”. Under Section 23(1), the claimant is to

state the facts supporting his claim within the

period of time agreed upon by the parties or

determined by the arbitral tribunal. The

question of termination of proceedings thus

arises only after the time agreed upon between

the parties or determined by the arbitral

tribunal comes to an end. When the time as

contemplated under Section 23(1) expires and no

sufficient cause is shown by the claimant the

arbitral tribunal shall terminate the

proceedings. The question of showing sufficient

cause will arise only when the claimant is asked

to show cause as to why he failed to submit his

claim within the time as envisaged under Section

23(1) or the claimant, on his own, before the

order is passed under Section 25(a) to terminate 20

the proceedings comes before the arbitral

tribunal showing sufficient cause for not being

able to submit his claim within the time. In

both the circumstances, i.e. when a show-cause

notice is issued to the claimant as observed

above or claimant of his own shows cause for

non-filing the claim within the time the

arbitral tribunal shall take a call on

terminating the proceedings. It is easy to

comprehend that in the event, the claimant shows

a sufficient cause, the arbitral tribunal can

accept the statement of claim even after expiry

of the time as envisaged under Section 23(1) or

grant further time to the claimant to file a

claim. Thus, on sufficient cause being shown by

a claimant even though time has expired under

Section 23(1), it is not obligatory for the

arbitral tribunal to terminate the proceedings.

The conjunction of the wording “where without

showing sufficient cause” and “the claimant

fails to communicate his statement of claim”

would indicate that it is a duty of the arbitral 21

tribunal to inform the claimant that he has

failed to communicate his claim on the date

fixed for that and requires him to show-cause

why the arbitral proceedings should not be

terminated? Opportunity to show sufficient

cause for his failure to communicate his claim

statement can only be given after he has

actually failed to do so. Whether in a case

where claimant failed to file a statement of

claim and has failed also to show-cause before

an order of termination of proceedings is

passed, claimant is entitled to show-cause

subsequent to the termination is the question

which has fallen for consideration.

20. When the arbitral tribunal without

sufficient cause being shown by the claimant to

file the claim statement can terminate the

proceedings, subsequent to termination of

proceedings, if the sufficient cause is shown,

we see no impediment in the power of the

arbitral tribunal to accept the show-cause and 22

permit the claimant to file the claim. The

Scheme of Section 25 of the Act clearly

indicates that on sufficient cause being shown,

the statement of claim can be permitted to be

filed even after the time as fixed by Section

23(1) has expired. Thus, even after passing the

order of terminating the proceedings, if

sufficient cause is shown, the claims of

statement can be accepted by the arbitral

tribunal by accepting the show-cause and there

is no lack of the jurisdiction in the arbitral

tribunal to recall the earlier order on

sufficient cause being shown.

21. Section 32 contains a heading “Termination

of Proceedings”. Sub-section (1) provides that

the arbitral proceedings shall be terminated by

the final arbitral award or by an order of the

arbitral tribunal under sub-section(2). Sub-

section(2) enumerates the circumstances when the

arbitral tribunal shall issue an order for the

termination of the arbitral proceedings. The 23

situation as contemplated under Section 32(2)(a)

and 32(2)(b) are not attracted in the facts of

this case. Whether termination of proceedings

in the present case can be treated to be covered

by Section 32(2)(c) is the question to be

considered. Sub-clause(c) contemplates two

grounds for termination, i.e.; (i) the arbitral

tribunal finds that the continuation of the

proceedings has for any other reason become

unnecessary or (ii) impossible. The eventuality

as contemplated under Section 32 shall arise

only when the claim is not terminated under

Section 25(a) and proceeds further. The word

‘unnecessary’ or ‘impossible’ as used in clause

(c) of Section 32(2) cannot be said to be

covering a situation where proceedings are

terminated in default of the claimant. The word

unnecessary or impossible has been used in

different contexts than to one of default as

contemplated under Section 25(a). Sub-section

(3) of Section 32 further provides that the

mandate of the arbitral tribunal shall terminate 24

with the termination of the arbitral proceedings

subject to Section 33 and sub-section (4) of

Section 34. Section 33 is the power of the

arbitral tribunal to correct any computation

errors, any clerical or typographical errors or

any other errors of a similar nature or to give

an interpretation of a specific point or part of

the award. Section 34(4) reserves the power of

the Court to adjourn the proceedings in order to

give the arbitral tribunal an opportunity to

resume the arbitral proceedings or to take such

other action as in the opinion of arbitral

tribunal will eliminate the grounds for setting

aside the arbitral award. On the termination of

proceedings under Sections 32(2) and 33(1),

Section 33(3) further contemplates termination

of the mandate of the arbitral tribunal, whereas

the aforesaid words are missing in Section 25.

When the legislature has used the phrase “the

mandate of the arbitral tribunal shall

terminate” in Section 32(3), non-use of such

phrase in Section 25(a) has to be treated with a 25

purpose and object. The purpose and object can

only be that if the claimant shows sufficient

cause, the proceedings can be re-commenced.

22. Learned amicus curiae has referred to

judgment of this Court in Grindlays Bank Ltd.

Vs. Central Government Industrial Tribunal &

Ors., 1980 (Supp) SCC 420. In that case this

Court was considering the power of industrial

tribunal to set aside its ex-parte award on

being satisfied that there was sufficient cause.

The Court also noticed that there was no

specific express provision in the Act or the

Rules giving the tribunal jurisdiction to do so.

In Para 6, following was held:-

“6. We are of the opinion that the Tribunal had the power to pass the impugned order if it thought fit in the interest of justice. It is true that there is no express provision in the Act or the rules framed thereunder giving the Tribunal jurisdiction to do so. But it is a well known rule of statutory construction that a Tribunal or body should be considered to be endowed with such ancillary or incidental powers as are necessary 26

to discharge its functions effectively for the purpose of doing justice between the parties. In a case of this nature, we are of the view that the Tribunal should be considered as invested with such incidental or ancillary powers unless there is any indication in the statute to the contrary. We do not find any such statutory prohibition. On the other hand, there are indications to the contrary.”

23. It is true that power of review has to be

expressly conferred by a Statute. This Court in

Paragraph 13 has also stated that the word

review is used in two distinct senses. This

Court further held that when a review is sought

due to a procedural defect, such power inheres

in every tribunal. In Paragraph 13, following

was observed:-

13. .... The expression “review” is used in the two distinct senses, namely (1) a procedural review which is either inherent or implied in a court or Tribunal to set aside a palpably erroneous order passed under a misapprehension by it, and (2) a review on merits when the error sought to be corrected is one of law and is apparent on the face of the record. It is in the latter 27

sense that the court in Patel Narshi Thakershi case held that no review lies on merits unless a statute specifically provides for it. Obviously when a review is sought due to a procedural defect, the inadvertent error committed by the Tribunal must be corrected ex debito justitiae to prevent the abuse of its process, and such power inheres in every court or Tribunal.”

24. In Kapra Mazdoor Ekta Union Vs. Birla Cotton

Spinning and Weaving Mills Ltd. & Anr., (2005)

13 SCC 777, this Court again held that a quasi-

judicial authority is vested with the power to

invoke procedural review. In Paragraph 19 of

the judgment, following was laid down:-

“19. Applying these principles it is apparent that where a court or quasi-judicial authority having jurisdiction to adjudicate on merit proceeds to do so, its judgment or order can be reviewed on merit only if the court or the quasi-judicial authority is vested with power of review by express provision or by necessary implication. The procedural review belongs to a different category. In such a review, the court or quasi-judicial authority having jurisdiction to adjudicate proceeds to do so, but in doing so commits (sic ascertains whether it has committed) a procedural illegality which goes to 28

the root of the matter and invalidates the proceeding itself, and consequently the order passed therein. Cases where a decision is rendered by the court or quasi- judicial authority without notice to the opposite party or under a mistaken impression that the notice had been served upon the opposite party, or where a matter is taken up for hearing and decision on a date other than the date fixed for its hearing, are some illustrative cases in which the power of procedural review may be invoked. In such a case the party seeking review or recall of the order does not have to substantiate the ground that the order passed suffers from an error apparent on the face of the record or any other ground which may justify a review. He has to establish that the procedure followed by the court or the quasi- judicial authority suffered from such illegality that it vitiated the proceeding and invalidated the order made therein, inasmuch as the opposite party concerned was not heard for no fault of his, or that the matter was heard and decided on a date other than the one fixed for hearing of the matter which he could not attend for no fault of his. In such cases, therefore, the matter has to be reheard in accordance with law without going into the merit of the order passed. The order passed is liable to be recalled and reviewed not because it is found to be erroneous, but because it was passed in a proceeding which was itself 29

vitiated by an error of procedure or mistake which went to the root of the matter and invalidated the entire proceeding. In Grindlays Bank Ltd. v. Central Govt.

Industrial Tribunal5 it was held that once it is established that the respondents were prevented from appearing at the hearing due to sufficient cause, it followed that the matter must be reheard and decided again.”

25. There cannot be a dispute that the power

exercised by the arbitral tribunal is a quasi-

judicial. In view of the provisions of the 1996

Act, which confers various statutory powers and

obligations on the arbitral tribunal, we do not

find any such distinction between the statutory

tribunal constituted under the statutory

provisions or Constitution in so far as the

power of procedural review is concerned. We have

already noticed that Section 19 provides that

arbitral tribunal shall not be bound by the

rules of procedure as contained in Civil

Procedure Code. Section 19 cannot be read to

mean that arbitral tribunal is incapacitated in

drawing sustenance from any provisions of Code 30

of Civil Procedure. This was clearly laid down

in Nahar Industrial Enterprises Limited Vs. Hong

Kong and Shanghai Banking Corporation, (2009) 8

SCC 646. In Paragraph 98(n), following was

stated:-

“(n) It is not bound by the procedure laid down under the Code. It may however be noticed in this regard that just because the Tribunal is not bound by the Code, it does not mean that it would not have jurisdiction to exercise powers of a court as contained in the Code. “Rather, the Tribunal can travel beyond the Code of Civil Procedure and the only fetter that is put on its powers is to observe the principles of natural justice.” (See Industrial Credit and Investment Corpn. of India Ltd. v. Grapco Industries Ltd.)”

26. We thus are of the view that principles

underlying Order 9 Rule 13 can very well be

invoked by the arbitrator. There is nothing on

record to indicate that parties have agreed to

the contrary. The issue, which has arisen for

consideration has engaged attention of different

High Courts from time to time. Patna High Court

in M/s. Senbo Engineering Ltd. Vs. State of 31

Bihar & Ors., AIR 2004 Patna 33, had occasion to

consider the order terminating the proceedings

under Section 25(a). Patna High Court after

considering the provision has held that arbitral

tribunal has power to review on sufficient cause

being shown. In paragraph 32, following has

been laid down:-

“32. I find the submissions of Mr. Chatterjee well founded. Mr. Chatterjee has relied upon the provisions of the Act itself (that is to say, the internal aids to interpretation) in support of the point that on sufficient cause being shown, the arbitral tribunal has full authority and power to recall an order under Section 25(a) of the Act. I think that one would arrive at the same conclusion on the basis of some external aids to interpretation.”

27. Referring to judgment of this Court in

Grindlays Bank Ltd. (supra) and Anil Sood Vs.

Presiding Officer, Labour Court II, (2001) 10

SCC 534, Patna High Court further laid down in

Paragraph 39 as given below:-

32 “39. The two Supreme Court decisions under the Industrial

Disputes Act are also a pointer in the direction that the arbitral tribunal must be held to have the power of procedural review and the authority to recall, on sufficient cause being shown, an order terminating the proceeding under Section 25(a) of the Act. The second question too is, thus, answered in the affirmative and in favour of the petitioner.”

28. Delhi High Court in Awasthi Construction Co.

Vs. Govt. Of NCT of Delhi & Anr., 2013 (1) Arb.

LR 70 (Delhi)(DB) has elaborately considered

this issue. In Paragraph 17 and 18, following

has been held:-

“17. We may in this regard also notice that the legislature, in Section 25, has not provided for termination of proceedings automatically on default by a party but has vested the discretion in the arbitral tribunal to, on sufficient cause being shown condone such default. We are of the view that no distinction ought to be drawn between showing such sufficient cause before the proceedings are terminated and after the proceedings are terminated. If the arbitral tribunal is empowered to condone 33

default on sufficient cause being shown, it matters not when the same is shown. It may well nigh be possible that the sufficient cause itself is such which prevented the party concerned from showing it before the proceedings terminated. It would be a pedantic reading of the provision to hold that the arbitral tribunal in such cases also stands denuded. Once the legislature has vested the arbitral tribunal with such power, an order of termination cannot be allowed to come in the way of exercise thereof.

18. There is another reason for us to hold so. The emphasis of the Arbitration Act is to provide an alternative dispute resolution mechanism. The provisions of the Act ought to be interpreted in a manner that would make such adjudication effective and not in a manner that would make arbitration proceedings cumbersome. A view that the arbitral tribunal is precluded, even where sufficient cause exists, from reviving the arbitral proceedings and the only remedy available to a party is a writ petition and which remedy is available only in the High Court often situated at a distance from the place where the parties are located, would be a deterrent to arbitration. It is also worth mentioning that Section 19(2) of the Act permits the parties to agree on the procedure to be followed by the arbitral tribunal.

The parties may, while so laying 34

down the procedure, provide for the remedy of review/revival of arbitral proceedings and which agreement would be binding on the arbitral tribunal. If the arbitral tribunal in such a situation would be empowered to, on sufficient cause being shown, revive the arbitral proceedings, we see no reason to, in the absence of such an agreement hold the arbitral tribunal to be not empowered to do so. If it were to be held that such power of review/recall is not available to an arbitral tribunal, the arbitral tribunal would not be competent to set aside an order under Section 25(b) also, compelling the respondent against whom proceedings have been continued, to file a writ petition, making the continuation of proceedings before the arbitral tribunal a useless exercise.”

29. The Delhi High Court again reiterated the

same principle in ATV Projects India Ltd. Vs.

Indian Oil Corporation Ltd. & Anr., 200(2013)

Delhi Law Times 553 (DB).

30. The Madras High Court in Bharat Heavy

Electricals Limited Vs. Jyothi Turbopower

Services Private Limited & Ors., 2017(1) Arb. LR

289 (Madras) again took the view that after 35

terminating the proceedings under Section 25(a),

the arbitral tribunal can recall the said order

on sufficient cause being shown and the arbitral

tribunal does not become functus officio after

passing an order under Section 25(a). The

Madras High Court has agreed with the view

expressed by the Division Bench of the Delhi

High Court as noticed above.

31. A contrary view has also been expressed by

certain High Courts. The Kerala High Court in

PMA Shukkur Vs. Muthoot Vehicle, (2010) Arb. LR

121 (Kerala), held that the power to set aside

an ex-parte award vests in the Court, and the

arbitrator does not have any concurrent power to

set aside an ex-parte award.

32. We endorse the views of Patna High Court,

Delhi High Court and Madras High Court as noted

above, in so far as they have held that the

arbitral tribunal after termination of

proceedings under Section 25(a) on sufficient 36

cause being shown can recall the order and re-

commence the proceedings.

33. In the present case, the arbitral tribunal

has rejected the application of the claimant by

order dated 26.04.2012 taking the view that

after an order is passed by him terminating the

proceedings, he cannot pass the order

recommencing the arbitration proceedings. In

view of the above discussions, we are of the

view that the arbitral tribunal committed an

error in holding that it has no jurisdiction to

recall an order terminating the proceedings

under Section 25(a). The arbitral tribunal

having not considered the cause shown by the

claimant in its application, it is in the ends

of justice that the arbitral tribunal be asked

to consider the application filed by the

claimant dated 20.01.2012 praying for recall of

the order dated 12.12.2011 and to grant

extension for filing the statement of claim. 37

34.Coming to Issue No. 2 and 3, in view of what

we have said regarding Issue No. 1 that arbitral

tribunal has jurisdiction to consider an

application for recall of order terminating the

proceedings under Section 25(a), it is not

necessary for us to enter into Issue No. 2 and 3

for purposes of this case. For deciding the

present Civil Appeal, our answer to Issue No.1

is sufficient to dispose of the matter.

35. In result, the appeal is dismissed. The

interim order dated 07.07.2015, granting stay on

the operation of order dated 13.02.2015 passed

by the High Court stands discharged and the

arbitral tribunal shall now proceed to decide

the application of claimant-respondent dated

20.01.2012 expeditiously. The parties shall bear

their own costs.

36. We place on record our appreciations for the

valuable assistance rendered by Mr. Rakesh

Dwivedi, Sr. Advocate appearing as amicus. 38

………………………………………J. ( A.K. Sikri )

………………………………………J. ( Ashok Bhushan )

NEW DELHI;

SEPTEMBER 20, 2017 39

ITEM NO.1502 COURT NO.6 SECTION XVI

S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS

Civil Appeal No. 15036/2017

(Arising out of SLP (C)No. 16636/2015)

SREI INFRASTRUCTURE FINANCE LIMITED Appellant(s)

VERSUS

TUFF DRILLING PRIVATE LIMITED Respondent(s)

Date : 20-09-2017 This matter was called on for pronouncement of judgment today.

For Appellant(s) Mr. Santanu Ghosh, Adv.

Mr. Kaushik Dey, Adv.

Ms. Manpreet, Adv.

Mr. S. K. Verma, AOR

For Respondent(s) Ms. Sansriti Pathak, AOR

Hon'ble Mr. Justice Ashok Bhushan pronounced the judgment of the Bench comprising Hon'ble Mr. Justice A. K. Sikri and His Lordship.

Leave granted.

The appeal is dismissed in terms of the signed reportable judgment.

(NIDHI AHUJA) (MALA KUMARI SHARMA) COURT MASTER COURT MASTER

[Signed reportable judgment is placed on the file.]