At the outset it is necessary to bear in mind that by way of the proposed amendment the grounds which are now being sought to be inserted have absolutely no foundation in the petitioner’s application preferred under Section 34 of the Arbitration Act. As has been rightly noticed by the learned District Judge at no point of time any objection about neutrality of the Arbitrator was raised by resorting to Section 12, 13 or 15 of the Arbitration Act. This needs to be emphasized for the sole reason to ascertain as to if, the proposed amendment merely intends to add some facts to the pending challenge to the award or is it that it is intended to put forth absolutely new challenge. {Para 8}
9. In the matter of Hindustan Construction Ltd (supra) it has been
held that in an appropriate case amendment of an application under
Section 34 can be allowed even beyond the period provided that is three months under sub Section 3 of Section 34 and a further period of one month as provided under the proviso to that subsection. However, it has also been made clear that such amendment cannot be allowed if it constitutes a fresh challenge.
Understood in the light of the above observations it is abundantly clear that under the garb of amendment of the application preferred under Section 34, absolutely new grounds to challenge the award are being sought to be incorporated without there being any foundation, beyond the statutory period prescribed under Section 34(3) of the Arbitration Act. This certainly cannot be permitted to happen.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
BENCH AT AURANGABAD
WRIT PETITION NO. 6501 OF 2022
Friends & Friends Shipping Private Limited Vs Central Warehousing Corporation
CORAM : MANGESH S. PATIL, J.
PRONOUNCED ON :12.07.2022
Heard. Rule. The Rule is made returnable forthwith. With the
consent of both the sides, the matter is heard finally at the stage of
admission.
2. The petitioner which has suffered an arbitration award has
challenged it under Section 34 of the Arbitration and Conciliation Act,
1996 (hereinafter, ‘the Arbitration Act’) before the District Court. He is
aggrieved by the common order passed on his applications (Exhibits 14
and 15) whereby it had prayed for amendment of the application
preferred under Section 34 and also had prayed for stay to the execution
of the award.
3. Learned advocate Mr. Totala would submit that the award was
passed on 31.03.2018. It has been challenged by the petitioner under
Section 34 of the Arbitration Act. The respondent was prosecuting
execution of the award which it had filed during the Covid period. No
effective hearing in the execution was taking place. While preparing for
the submissions on the said application it was realized that some
important legal points to challenge the award were not taken and the
petitioner is seeking amendment of the application under Section 34.
Mr. Totala would submit that an additional ground raising objection
regarding neutrality of the arbitrator in the light of the provision of
Section 12(5) which was inserted by way of amendment in the year
2015 with effect from 23.10.2015, was sought to be raised. By referring
to the decision in the matter of Ellora Paper Mills Limited Vs. State of
Madhya Pradesh; (2022) 3 Supreme Court Cases 1, he would submit
that even in pending arbitration proceeding, the provision has been
applied and it is not merely a prospective one. He would further submit
that an additional ground to demonstrate fraud was also sought to be
inserted. Both these grounds go to the root of the legality of the award
and the District Court should have allowed such amendment to be
carried out.
4. Mr. Totala would refer to following decisions as well :
(i) PSA SICAL Terminals Pvt. Ltd. Vs. Board of
Trustees of V.O. Chidambranar Port Trust Tuticorin and
others; A.I.R. 2021 Supreme Court 4661.
(ii) Bharat Broadband Network Limited Vs. United
Telecoms Ltd.; (2019) 5 Supreme Court Cases 755.
(iii) Perkins Eastman Architects DPC and Another
Vs. HSCC (India) Ltd.; (2020) 20 SCC 760.
(iv) Bharat Heavy Electricals Ltd. Vs. Sudhir Cranes
Pvt. Ltd. in C.R.P.(PD) No. 3790 of 2019 decided on
04.01.2022 by the Madras High Court.
(v) TRF Limited Vs. Energo Engineering Projects
Limited; (2017) 8 Supreme Court Cases 377.
(vi) State of Maharashtra Vs. Hindustan
Construction Company Limited; (2010) 4 Supreme
Court Cases, 518.
(vii) State of Chattisgarh & Anr. Vs. M/s. Sal Udyog
Private Limited; (2022) 2 SCC 275.
5. Learned advocate Mr. Totala also submitted that since admittedly
there was a proceeding challenging the award under Section 34 which
was pending before the District Court, even the District Court ought to
have allowed the application for stay which was preferred under Section
36 (2) and (3) of the Arbitration Act.
6. Mr. Uttarwar learned advocate for the respondent would support
the order of the District Judge. He would submit that absolutely new
grounds to challenge the award in a pending proceeding under Section
34 of the Arbitration Act were being sought to be inserted by way of the
proposed amendment. He would submit that it is during execution, even
according to the petitioner, that it realized absence of such grounds
which clearly demonstrates that under the garb of the proposed
amendment absolutely new grounds having no foundation in the
application under Section 34 are now being sought to be inserted. This
cannot be permitted to happen. He would submit that the decisions
cited on behalf of the petitioner are not applicable to the fact situation of
the matter in hand. There is no illegality in the order and the petition be
dismissed.
7. I have carefully considered the rival submissions and perused the
decisions cited at the bar and the papers.
8. At the outset it is necessary to bear in mind that by way of the
proposed amendment the grounds which are now being sought to be
inserted have absolutely no foundation in the petitioner’s application
preferred under Section 34 of the Arbitration Act. As has been rightly
noticed by the learned District Judge at no point of time any objection
about neutrality of the Arbitrator was raised by resorting to Section 12,
13 or 15 of the Arbitration Act. This needs to be emphasized for the sole
reason to ascertain as to if, the proposed amendment merely intends to
add some facts to the pending challenge to the award or is it that it is
intended to put forth absolutely new challenge.
9. In the matter of Hindustan Construction Ltd (supra) it has been
held that in an appropriate case amendment of an application under
Section 34 can be allowed even beyond the period provided that is three
months under sub Section 3 of Section 34 and a further period of one
month as provided under the proviso to that subsection. However, it has
also been made clear that such amendment cannot be allowed if it
constitutes a fresh challenge. While interpreting the ratio in the matter
of Hindustan Construction Ltd (supra) it has been observed in the matter
of M/s. Sal Udyog Private Limited (supra) as under :
“24. Reliance placed by learned counsel for the respondent-
Company on the ruling in the case of Hindustan Construction
Company Limited (Supra) is found to be misplaced. In the
aforesaid case, the Court was required to examine whether in
an appeal preferred under Section 37 of the 1996 Act against
an order refusing to set aside an Award, permission could be
granted to amend the Memo of Appeal to raise
additional/new grounds. Answering the said question, it was
held that though an application for setting aside the Arbitral
Award under Section 34 of the 1996 Act had to be moved
within the time prescribed in the Statute, it cannot be held
that incorporation of additional grounds by way of
amendment in the Section 34 petition would amount to filing
a fresh application in all situations and circumstances, thereby
barring any amendment, however material or relevant it may
be for the consideration of a Court, after expiry of the
prescribed period of limitation. In fact, laying emphasis on the
very expression “the Courts find that” applied in Section
34(2)(b) of the 1996 Act, it has been held that the said
provision empowers the Court to grant leave to amend the
Section 34 application if the circumstances of the case so
warrant and it is required in the interest of justice. This is
what has been observed in the preceding paragraph with
reference to Section 34 (2A) of the 1996 Act.
25. To sum up, existence of Clause 6(b) in the Agreement
governing the parties, has not been disputed, nor has the
application of Circular dated 27th July, 1987 issued by the
Government of Madhya Pradesh regarding imposition of 10%
supervision charges and adding the same to cost of the Sal
seeds, after deducting the actual expenditure been questioned
by the respondent-Company. We are, therefore, of the view
that failure on the part of the learned Sole Arbitrator to
decide in accordance with the terms of the contract governing
the parties, would certainly attract the “patent illegality
ground”, as the said oversight amounts to gross contravention
of Section 28(3) of the 1996 Act, that enjoins the Arbitral
Tribunal to take into account the terms of the contract while
making an Award. The said ‘patent illegality’ is not only
apparent on the face of the Award, it goes to the very root of
the matter and deserves interference. Accordingly, the present
appeal is partly allowed and the impugned Award, insofar as
it has permitted deduction of ‘supervision charges’ recovered
from the respondent-Company by the appellant-State as a
part of the expenditure incurred by it while calculating the
price of the Sal seeds, is quashed and set aside, being in direct
conflict with the terms of the contract governing the parties
and the relevant Circular. The impugned judgment dated 21st
October, 2009 is modified to the aforesaid extent.”
Understood in the light of the above observations it is abundantly clear
that under the garb of amendment of the application preferred under
Section 34, absolutely new grounds to challenge the award are being
sought to be incorporated without there being any foundation, beyond
the statutory period prescribed under Section 34(3) of the Arbitration
Act. This certainly cannot be permitted to happen.
10. True it is that in the matter of Ellora Paper Mills Limited (supra),
the Section 12(5) which is inserted in the year 2015 has been held to
govern a pending arbitration proceeding. However, it is to be borne in
mind that it was a proceeding which was initiated under Sections 11, 14
and 15 and although the Arbitral Tribunal was constituted many years
ago it had never commenced its proceeding. This is not the fact situation
in the matter in hand. In this matter, without raising any objection at
any earlier point of time on account of neutrality of the arbitrator by
resorting to Sections 12, 13 and 14, an award has been passed and even
it has been put to execution. Therefore, the petitioner is not entitled to
derive any benefit from the decision in the matter of Ellora Paper Mills
Limited (supra) as well.
11. Same is the case with another clause sought to be inserted by the
proposed amendment to make out an additional ground of fraud. Again,
even the fact sought to be inserted do not have any foundation and was
never raised till the award was passed. Even this ground has been
sought to be added beyond the period of limitation prescribed by Section
34(3).
12. The observations and the conclusions of the learned District Judge
in the impugned order refusing the proposed amendment are clearly
unassailable. The award in the matter was passed way back on
31.03.2018. Though the proceeding to challenge it was initiated on
26.06.2018, simultaneously, the execution was filed. At no point of time
an attempt was made to raise the additional grounds immediately after
the application under Section 34 was filed. The application seeking
amendment was filed in November 2021, after a lapse of two and half
years of preferring a proceeding under Section 34 and when the
petitioner was served with a notice in the execution. I find no illegality
in the order passed by the learned District Judge.
13. However, the learned District Judge has refused to decide the
application (Exh. 15) preferred under Section 36(2) and (3) under an
erroneous belief that by way of such application the interim relief/stay
has been sought only till the decision on the application (Exhibit 14)
whereby the petitioner had prayed for amendment of the application,
when the prayer in the application (Exh. 15) clearly shows that the
petitioner was seeking stay to the execution of the award till decision of
the arbitration application. Therefore, the learned District Judge has
clearly erred in refusing to decide the application for stay (Exhibit 15) on
its own merits. It would, therefore, be appropriate that the District Judge
is now directed to decide the application (Exhibit 15) on its own merits
by hearing the parties.
14. The Writ Petition is partly allowed.
15. The Writ Petition to the extent of putting up a challenge to the
order rejecting application (Exh. 14) is dismissed.
16. The order passed by the District Judge to the extent of rejection of
application for stay (Exh. 15) is quashed and set aside, to that extent the
matter is remitted back to the District Judge who shall now decide the
application for stay (Exh. 15) on its own merits after hearing the parties
as early as possible.
17. The Rule is made absolute in above terms.
(MANGESH S. PATIL, J.)
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