* IN THE HIGH COURT OF DELHI AT NEW DELHI
th
% Reserved on: 28 February, 2024
st
Pronounced on: 31 May, 2024
+ O.M.P. (COMM) 104/2024 & I.A. 4567-4568/2024
VIRTUAL WIRE TECHNOLOGIES PVT. LTD.
At B-1, New Adarsh Apartment,
Sector-10, Dwarka,
New Delhi-110075.
….Petitioner
Through: Mr. Rakesh Kumar Khanna, Sr.
Advocate with Ms. Abha R. Sharma,
Ms. Puja Anand, Dr. Vikas Pahal and
Mr. Raja Chatterjee, Advocates.
versus
COUNCIL OF SCIENTIFIC AND INDUSTRIAL RESEARCH
Anusandhan Bhawan
2 Rafi Marg,
New Delhi-110001.
..…Respondent
Through: Mr. Abhinav Hansaria, Advocate.
CORAM:
HON'BLE MS. JUSTICE NEENA BANSAL KRISHNA
J U D G M E N T
NEENA BANSAL KRISHNA, J.
1. The Petition under Section 34 of the Arbitration and Conciliation Act,
1996 , has been filed on behalf of the
(hereinafter referred to as „the Act‟)
petitioner, to challenge the Interim Award dated 25.01.2024 dismissing the
Application under Section 16 of the Act,1996.
Signature Not Verified
Digitally Signed O.M.P. (COMM) 104/2024 Page 1 of 15
By:VIKAS ARORA
Signing Date:11.06.2024
13:59:42
2. It is submitted that vide Impugned Interim Award dated 25.01.2024,
while rejecting the submissions raised by the petitioner, the learned
Arbitrator has decided to continue with the arbitral proceedings, which has
prejudiced the petitioner as his rights have been infringed; is violative,
perverse and is liable to be dismissed.
3. It is asserted that Section 21 of the Act, is water tight and its
compliance is mandatory to determine the date of commencement on which
the request was made for the dispute to be referred to Arbitration and when
such request was received by the other party. There was no valid Notice of
Invocation ever served upon the petitioner as is evident from the documents
filed in the main Petition, as well as from the affidavits of evidence which
have already been submitted by the Claimant/respondent. The learned
Arbitrator could not have continued with the proceedings by enlarging the
scope of Section 21 of the Act.
4. Further, Clause 8 and Clause 15 of the Agreement dated 07.03.2007
provided that a Monitoring Committee comprising of three eminent Experts
in the area, shall monitor the Project for achieving its objective. In case
during the tenure of the Project, it was found that it cannot be completed
successfully, the Monitoring Committee may decide to foreclose the Project
which shall be final and binding on all the parties. Clause 15 which provided
for Arbitration, specifically stated that the three members of Monitoring
Committee shall act as an Arbitral Tribunal and the decision of the majority
shall be final and binding on all the parties.
5. The Monitoring Committee of three Members, was constituted vide
Office Order dated 07.03.2007, to monitor the Project. However, just at the
last leg of the Project, there was an unexplained delay in payment of final
Signature Not Verified
Digitally Signed O.M.P. (COMM) 104/2024 Page 2 of 15
By:VIKAS ARORA
Signing Date:11.06.2024
13:59:42
instalment which was not released by the respondent, but arbitrarily,
abruptly, and unceremoniously the entire Project was shelved. The
respondent despite letters and reminders, failed to release the payment of the
amount.
6. The meeting of the Monitoring Committee was held on 24.04.2012, in
the office/premises of the respondent, pursuant to which it directed the
petitioner to comply with the directions and also for submission of
documents etc. by the petitioner. The decision of the Monitoring Committee
qua the categorical Waiver and Closure of the loan, was to be final and
binding as per Clause 8 of the Agreement.
7. The respondent sent a Legal Notice dated 20.12.2013 after almost one
and a half years of the signed and settled Minutes of the Meeting. The
respondent vide Letter dated 21.02.2014, referred the alleged disputes to
Arbitration under Clause 15 of the Agreement, by appointing the Monitoring
Committee as the Arbitral Panel.
8. It is submitted that the respondent failed to file the Statement of Claim
till 2018, though as per its own submissions, it had invoked the Arbitration
in the year 2014. The Arbitral Panel remained non-committal from 2014 till
2018. The respondent thus, filed the Petition under Section 14(1)(a) and 15
(2) of the Act, praying for substitution of the Arbitral Tribunal by
appointment of a Sole Arbitrator. The said Application was hopelessly
barred by time and was not maintainable under the said Sections. However,
this Court allowed the Petition and appointed of the Sole Arbitrator.
9. The petitioner preferred a Special Leave Petition against that Order
which was dismissed with a finding that all such issues can be adjudicated
by the Arbitral Tribunal.
Signature Not Verified
Digitally Signed O.M.P. (COMM) 104/2024 Page 3 of 15
By:VIKAS ARORA
Signing Date:11.06.2024
13:59:42
10. It is submitted that the impugned Order dismissing the Application
under Section 16 of the Act, is an Interim Award against which the Petition
under Section 34 of the Act is maintainable. It is further submitted that the
Order of the learned Arbitrator is without consideration of vital evidence and
is patently illegal, perverse and irrational. It is, therefore, in violation of the
principles of natural justice. The Tribunal was biased, which is obvious and
apparent from the fact that even though the statement of Claim was filed
after taking time on two occasions, beyond the period of limitation, the
learned Arbitrator had covered the objection of the petitioner by imposing
petty costs as an eye wash. It is submitted that the impugned Interim Award
is therefore, liable to be set-aside.
11. Learned counsel for the petitioner, in support of its assertions, has
placed reliance on Indian Farmers Fertilizer Cooperative Limited vs.
Bhadra Products, (2018) 2 SCC 534; B and T AG vs. Ministry of Defence,
MANU/SC/0601/2023 and Shriram Transport Finance Co. Ltd. vs. Shri
Narender Singh in FAO(COMM) 179/2021 and CM APPL. 39706/2021.
12. Learned counsel on behalf of the respondent, has not filed any
formal Reply but has taken a preliminary objection that the impugned Order
is not an Interim Award. It is a simplicitor dismissal of the Application
under Section 16 of the Act against which the Petition under Section 34 of
the Act, is not maintainable for which reliance has been placed on Deep
Industries Limited vs. Oil and Natural Gas Corporation Limited And
Another, (2020) 15 SCC 706.
Signature Not Verified
Digitally Signed O.M.P. (COMM) 104/2024 Page 4 of 15
By:VIKAS ARORA
Signing Date:11.06.2024
13:59:42
13. Submissions heard.
14. A preliminary objection has been taken in regard to the
maintainability of the Petition under Section 34 of the Act against an Order
dismissing the Application under Section 16 of the Act.
15. In the case of IFFCO Ltd. (supra), the Apex Court explained that
Section 16 of the Act lays down the principle of Kompetenz- Kompetenz i.e.
the Arbitral Tribunal may rule on its own jurisdiction. While adjudicating on
the jurisdiction under Section 16 of the Act, it refers to three things: (1) as to
whether there is an existence of a valid Arbitration Agreement; (2) whether
the Arbitral Tribunal is properly constituted; and (3) matters submitted to
the Arbitration, should be, in accordance with the Arbitration Agreement.
The jurisdiction is a coat of many colours and that the word displays a
certain colour depending upon the context in which it is mentioned.
Jurisdiction may be defined as the power of the Court to hear and determine
a cause, to adjudicate and exercise any judicial power in relation to it; in
other words, by jurisdiction, it is meant the authority by which a Court has
to decide matters that are litigated before it or to take cognizance of the
matters presented in a formal way for its decision.
16. Section 16 of the Act deals with the competence of the Arbitral
Tribunal to rule on its jurisdiction. It reads as under:
16. Competence of arbitral tribunal to rule on its
“
jurisdiction.
(1) The arbitral tribunal may rule on its own jurisdiction,
including ruling on any objections with respect to the
existence or validity of the arbitration agreement, and for
that purpose,
—
Signature Not Verified
Digitally Signed O.M.P. (COMM) 104/2024 Page 5 of 15
By:VIKAS ARORA
Signing Date:11.06.2024
13:59:42
(a) an arbitration clause which forms part of a
contract shall be treated as an agreement independent
of the other terms of the contract; and
(b) a decision by the arbitral tribunal that the contract
is null and void shall not entail ipso jure the invalidity
of the arbitration clause.
(2) A plea that the arbitral tribunal does not have
jurisdiction shall be raised not later than the submission
of the statement of defence; however, a party shall not be
precluded from raising such a plea merely because that
he has appointed, or participated in the appointment of,
an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope
of its authority shall be raised as soon as the matter
alleged to be beyond the scope of its authority is raised
during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases
referred to in sub-section (2) or sub-section (3), admit a
later plea if it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea referred
to in sub-section (2) or sub-section (3) and, where the
arbitral tribunal takes a decision rejecting the plea,
continue with the arbitral proceedings and make an
arbitral award.
(6) A party aggrieved by such an arbitral award may
make an application for setting aside such an arbitral
award in accordance with section 34.
”
17. Clause 2 of Section 16 provides that the objection in regard to the lack
of jurisdiction of the Arbitral Tribunal shall not be raised later than the
submission of the Statement of Defence. Either party i.e. even a party who
Signature Not Verified
Digitally Signed O.M.P. (COMM) 104/2024 Page 6 of 15
By:VIKAS ARORA
Signing Date:11.06.2024
13:59:42
has appointed the Arbitrator is not precluded from challenging the
jurisdiction of the Arbitrator. While Clause 2 provides the time frame for
challenging the jurisdiction, Clause 3 further provides that where a plea is
taken that the Tribunal is exceeding the scope of its authority, it shall be
raised as soon as the matter alleged to be beyond the scope of its authority is
raised during the arbitral pleadings. Clause 4 given the discretion to the
Arbitral Tribunal to admit the plea later if it considers the delay to be
justified.
18. Sub Section (ii) 5 further provides that in case the Arbitral Tribunal
rules in favour of its jurisdiction by dismissal of the application under
Clause 2 or Clause 3, it may proceed further with the arbitral proceedings
and make the arbitral award. Such award when adjudicated by the Arbitral
Tribunal, becomes challengeable under Section 34, as is stated in Clause 6.
19. From Section 16 it is evident that on dismissal of the application
challenging the jurisdiction of the Arbitral Tribunal, it is mandated that the
Arbitral Tribunal shall proceed further with the trial on merits. The ultimate
culmination of the adjudicatory process in an Award, which is subject to
challenge under Section 34 of the Act.
20. The question which arises is what is the remedy available to a party in
case of dismissal of the application under sub-Clause (2) and (3) of Section
16 of the Act.
21. Section 37 of the Act provides for appealable orders. Sub-Section (2)
of Section 37 reads as under:
(2) An appeal shall also lie to a Court from an order of
“
the arbitral tribunal
(a) accepting the plea referred to in sub-section
(2) or sub-section (3) of section 16; or
Signature Not Verified
Digitally Signed O.M.P. (COMM) 104/2024 Page 7 of 15
By:VIKAS ARORA
Signing Date:11.06.2024
13:59:42
(b)granting or refusing to grant an interim measure
under section 17
.”
22. It specifically provides that the Appeal under Section 37 would be
maintainable only if the application under Section 16(ii) and (iii) is allowed.
This explicitly ousts the remedy of Appeal under Section 37 of the Act
against the Order dismissing the Application under Section 16(ii) and (iii).
23. In the case of NTPC Ltd. vs. Siemens Atkeingesellschaft, (2007) 4
SCC 451, the Apex Court while setting out Section 16 and 37, observed that
an Appeal under Sub-Section 2 of Section 37 lies only if there is an Order
allowing the application under Section 16(2) and (3) of the Act.
24. In SBP & Co. vs. Patel Engg. Ltd., (2005) 8 SCC 618, Apex court
observed that the Tribunal under Sub-Section (5) has the obligation to
decide the plea and where it rejects the plea, it would continue with the
arbitration proceedings and finally passed the Award on the merits. Sub-
Section (6) of S.16 further provides that party aggrieved by such an Arbitral
Award, may make an application for setting-aside such an Arbitral Award,
in accordance with Section 34 of the Act. While challenging such Award, a
party may also raise the contention that the Tribunal had no jurisdiction to
pass it or that it had exceeded its authority in passing it. This happens only
when the Tribunal passes an Award. However, in a case where the Tribunal
overrules the objection relating to jurisdiction and dismisses the Application
under Section 16 of the Act, no Appeal is provided and the party must await
the passing of final Award at which stage it may be raised in the Petition
under Section 34 of the Act. However, where the Application under Section
16 of the Act is allowed and the Tribunal dismisses the arbitral proceedings
Signature Not Verified
Digitally Signed O.M.P. (COMM) 104/2024 Page 8 of 15
By:VIKAS ARORA
Signing Date:11.06.2024
13:59:42
in such a case, the aggrieved party may directly file an Appeal under Section
37 (2).
25. Similar observations were made by the Apex Court in the case of
Deep Industries Limited vs. Oil and Natural Gas Corporation Limited And
Another (supra), that no Appeal or Petition under Section 34 of the Act, lies
against an Order dismissing the Application under Section 16 of the Act.
26. The impugned Order has dismissed the Application under S.16 of the
Act and has proceeded to adjudicate the Claim on merits. Such dismissal
order is beyond the challenge under S.34 of the Act as has been held in the
case of Patel Engg. Ltd.,(supra).
27. The logic for deferring a challenge to the Order dismissing the
Application under Section 16 till passing of Award is self-evident; the
intention of Arbitration Act was to minimize judicial intervention at every
stage, in order to facilitate expeditious adjudication of disputes through
arbitration. If every Order was made appealable, it would be destructive of
the object of Arbitration Act itself as it would become akin to litigation and
thus, dilatory. Experience has shown that tendency to rush to the court
against every Order, has contributed to inordinate delays in disposal of cases
through Arbitration. It is in this spirit that the Act envisages that such Orders
as one dismissing the Application under S.16 of the Act, which are
essentially interlocutory, may be challenged along with the Award in the
petition under S. 34 of the Act. Therefore, the present petition under S.34 of
the Act, is barred under the law; such order can be challenged when it
culminates into the Interim/Final Award.
28. Significantly, the petitioner has sought to justify the present petition
on the ground that dismissal of such Application tantamount to Interim
Signature Not Verified
Digitally Signed O.M.P. (COMM) 104/2024 Page 9 of 15
By:VIKAS ARORA
Signing Date:11.06.2024
13:59:42
Award. In the case of IFFCO Ltd. (supra) distinction of Interim and Final
Award has been explained.
29. It was observed that a preliminary Issue affecting the whole claim
would expressly be the subject matter of an interim award. In Exmar BV vs.
National Iranian Tanker Co.
(1992) 1 Lloyd’s Rep 169, it was explained
that the Award which finally decides a particular issue to finally determine
the rights of the parties constitutes an Interim Award.
30. In Satwant Singh Sodhi vs. State of Punjab (1999) 3 SCC 487 it was
explained by the Apex Court that if the Interim Award is intended to have
effect only so long as the final Award is not delivered, it will have the force
of the interim Award and would cease to have effect after the final Award is
made. If on the other hand, the interim Award is intended to finally
determine the rights of the parties, it will have the force of a complete
Award.
31. In McDermott Internation Inc. vs. Burn Standard Co. Ltd. (2006) 11
validity of partial A the Apex Court held
SCC 181 under the heading “ ward”
that an Award is defined under Section 2(c) to include an interim Award.
Section 31 (6) also contemplates an interim Award. According to this
provision, an interim Award is not one in respect of which final Award can
be made, but it may be a final Award on the matter covered thereby, but at
an interim stage. It was further observed that when the Arbitrator chooses to
treat certain disputes at first instance and it gives a finding in respect of
those Claims with a finality attached to it, it would be deemed to be a final
Award under Section 2(c) of the Act for intent and persons.
32. The aforesaid judgments therefore, make it clear that on the matters
covered in an interim Award, is a final Award in respect of the issues when
Signature Not Verified
Digitally Signed O.M.P. (COMM) 104/2024 Page 10 of 15
By:VIKAS ARORA
Signing Date:11.06.2024
13:59:42
adjudicated finally therein, though made at an intermediate stage of the
arbitral proceedings.
33. In Iffco Farmers Fertilizer Cooperative Limited (supra) applying the
aforesaid Test as defined in the judgments discussed above, ___Court held
that an issue of Limitation when decided has a finality to it, is an Interim
Award against which challenge under Section 34 of the Act is maintainable.
34. In a separate concurring judgment P.K. Balasubramanium, J. in the
case of NTPC (supra) (in reference to Code of Civil procedure) observed
that in the larger sense any refusal to go into the merits of the claim may be
within the realm of jurisdiction. Even the dismissal of a claim as barred by
Limitation, touches on the jurisdiction of the Court. When a Claim is
dismissed on the ground of being barred by limitation, it will be in a sense a
case which the Tribunal refuses to exercise its jurisdiction on the merits of
the case. A finding on the plea of limitation in favour of party would oust
the jurisdiction of the Court and so an erroneous decision can be said to be
concerned with the question of jurisdiction which would fall within purview
of Section 115 of CPC.
35. Therefore, simplicitor dismissal of Application under Section 16 of
the Act, deciding the jurisdiction of the Arbitrator to continue with the
adjudication, cannot be termed as an interim Award and therefore, the
present petition under S.34 of the Act is clearly not maintainable. The
Petitioner would have to wait for the final Award to challenge this Order as
well, if the need be.
36. It may be pertinent to refer to the decision in the case
of Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1 where the
Apex court held that at the stage of considering the application under
Signature Not Verified
Digitally Signed O.M.P. (COMM) 104/2024 Page 11 of 15
By:VIKAS ARORA
Signing Date:11.06.2024
13:59:42
Section 11(6) the two facts essentially which are required to be considered
are : whether there is an arbitration clause and the disputes are arbitrable.
The issue of limitation should be left for the learned Arbitrator except where
the claims are blatantly on the face, barred by limitation.
37. The only relevant factor thus, significant for the purpose of the
Section 16 of the Act, is whether the Arbitral Tribunal got constituted in
accordance with the Agreement between the parties and whether such
constitution of Tribunal was within limitation.
38. The main ground of challenge raised by the Petitioner to dismissal of
Application under Section 16 of the Act, was that there was no proper
invocation of Arbitration as no service of Notice of Invocation under Section
21 of the Act, was effected and therefore, initiation of the arbitral
proceedings was bad in law.
39. The learned Tribunal has given a reasoned Order stating that the
service of Notice under Section 21 though disputed, has been admitted at the
time of admission/denial of the documents wherein the signatures were
admitted but the contents of the Notice were denied. The learned Tribunal,
therefore, has justifiably concluded that the service of Notice prior to
initiation of the arbitral proceedings, has been duly accepted. It has also
been observed that the said Notice dated 20.12.2013, is in accordance with
the Section 21 as it quoted not only the Arbitration Clause but also stated the
amount of Claim being raised by the respondent. It cannot be said that there
was any finding given about the Claims being barred by limitation. The
observations are essentially in the context of the invocation of arbitration
and consequent constitution/appointment of the Arbitrator being in
accordance with law.
Signature Not Verified
Digitally Signed O.M.P. (COMM) 104/2024 Page 12 of 15
By:VIKAS ARORA
Signing Date:11.06.2024
13:59:42
40. Once the Tribunal is constituted, then any challenge to the Claim
being filed belatedly or being beyond the limitation are the subject matter of
trial and adjudication and are neither relevant for the purpose of S.16 of the
Act nor any finding has been given about the Claims being within limitation.
The stage of determination of the Claims being barred by limitation, is yet to
come and no finding on merits has been given in the impugned Order, which
was limited to adjudication on the jurisdiction of the Ld. Arbitrator to
commence the arbitration proceedings.
41. Once the Tribunal has been duly constituted, there is no time limit for
filing the application under S. 14&15 of the Act. The learned Tribunal has
thus, rightly rejected the contention of the petitioner that the filing of the
Application after five years, under Section 14 & 15 for substitution of the
Arbitrator by the respondent, was barred by limitation.
42. The second contention of the petitioner that the ld. Arbitrator was
biased since she permitted the filing the Statement of Claim after almost
nine years of initiation of arbitral proceedings by learned Arbitral Tribunal.
This plea was rejected as the arbitral proceedings got initiated in the year
2014 and the limitation for filing of the Claim has to be calculated from the
date of invocation of Notice i.e. 20.12.2013.
43. It is also pertinent to note that the delay in submission of the Claim,
was also essentially because though the Tribunal was constituted in 2014, it
did not function and eventually vide Notice dated 29.05.2018 a member of
the Arbitral Tribunal had expressed his difficulty to hold the meetings at
New Delhi, thereby necessitating the Application under Section 14 and 15 of
the Act for the change of the Arbitral Tribunal. The present Ld. Arbitrator
was appointed on 17.01.2023 and has commenced the proceedings
Signature Not Verified
Digitally Signed O.M.P. (COMM) 104/2024 Page 13 of 15
By:VIKAS ARORA
Signing Date:11.06.2024
13:59:42
immediately thereafter. The respondent had filed the Claim on 04.04.2023
and even the admission/ denial of the documents has also been done and the
matter is pending at the stage of evidence; neither any inordinate delay can
be imputed to the Ld. Arbitrator..
44. It may also be observed that the Section 29-A of the unamended
Arbitration Act provided that the arbitration proceedings may be concluded
within eighteen months and the amended Section 29-A (as amended on
23.10.2015) gives six month for completion of pleadings but the time frames
are not mandatory; rather they are directory leaving it to the discretion of
the Ld. Arbitrator as this section itself provides for grant of extension of
mandate of the Arbitral Tribunal to complete the adjudication and does not
prescribe any time lines for grant of extension or for completion of the
arbitral proceedings and pronounce the Award.
45. Once the Tribunal has assumed the jurisdiction in terms of the Act,
then the Tribunal is well within its jurisdiction to grant extension of time for
completion of pleadings; it cannot be said that the ld. Arbitrator was biased
merely because two adjournments were granted to the Petitioner and that
too, subject to cost. The Claim had been filed within 90 days of
Appointment of the substitute Arbitrator.
46. The impugned Order is neither perverse nor patently illegal and also
does not suffer from any fundamental policy of Indian law. The petitioner
in its grounds to challenge the Order, has merely used these words without
explaining how the Order is perverse. It has been categorically held that the
Notice of Invocation was duly served and was well within the limitation
period. There is no patent illegality or perversity in the impugned Order,
which only pertains to the Application under Section 16 of the Act vide
Signature Not Verified
Digitally Signed O.M.P. (COMM) 104/2024 Page 14 of 15
By:VIKAS ARORA
Signing Date:11.06.2024
13:59:42
which the challenge to the jurisdiction of the learned Arbitrator, has been
rejected. Further, such dismissal of Application under Section 16, does not
amount to an interim Award or an Arbitral Award and no Petition under
Section 34 of the Act, is maintainable.
47. The Petition is hereby dismissed. The pending applications also stand
disposed of.
(NEENA BANSAL KRISHNA)
JUDGE
RS
MAY 31, 2024/
Signature Not Verified
Digitally Signed O.M.P. (COMM) 104/2024 Page 15 of 15
By:VIKAS ARORA
Signing Date:11.06.2024
13:59:42