Order Passed U/S 11 Cannot Be Recalled If Valid Arbitration Agreement Exists To Justify Reference Of Parties To Arbitration: Calcutta HC

Brief Facts

The present application has been filed seeking recall of an order dated August 30, 2024 passed under section 11 of the Arbitration Act. The order is sought to be recalled on primarily three grounds: the arbitration agreement lacked a valid arbitration clause, material facts were suppressed pertaining to giving a reply to a notice under section 21 and the petitioner was not present when the order was passed.

It is the case of the petitioner that there should be a clear intention emanating from the arbitration clause that the matter would be referred to the arbitration by the parties which was not the case in the present case. Reliance was placed on the Calcutta High Court judgment in Blue Star Limited vs. Rahul Saraf, 2023.

In response, the respondent submitted that the present petitioner might have filed a review application which having not been done, the present application is not maintainable in law. it also argued that insofar as the allegation that a reply was given to the Section 21 notice, no proof of service has been annexed to the recall application, thus belying the allegation that any such reply was given and suppressed. It is reiterated that no such reply was received by the applicant in the Section 11 application at any point of time.

It is also submitted that even if it is assumed without admitting that there was such a reply, the reply annexed to the recall application does not indicate any denial to the existence of the arbitration clause but merely contains denials on the merits of the allegations.

It relied on the Supreme Court judgment in Budhia Swain and Others vs. Gopinath Deb and Others reported at (1999) wherein it was held that courts have inherent power to recall and set aside an order obtained by fraud practised upon the court, when the court is misled by a party or when the court itself commits a mistake which prejudices a party. A judgment rendered in ignorance of the fact that a necessary party had not been served at all and was shown as served or in ignorance of the fact that a necessary party had died and the estate was not represented would also be a sufficient ground for recall.

Observations:

The court at the outset observed that the first of such grounds as discussed by the Supreme Court in Budhia Swain (supra) for recalling an order is that the court was misled by a party and the second that hearing was not given to one of the parties. Hence, although the present application is not couched as such as a review application, the court decided to consider it a review application and proceeded to analyse the arguments of the petitioner on merits.

The court while going through the annexures to the recall application observed that the purported reply which was given by the present petitioner to the Section 21 notice did not dispute the very existence of the arbitration agreement.

The court observed that even if the reply of the petitioner to section 21 notice was received by the applicant under section 11 application in which the reference to arbitration was denied, such denial constitutes a refusal to appoint an arbitrator rendering the petition under section 11 seeking appointment of the arbitrator maintainable.

It further noted that in Blue Start Limited (supra), this court has observed that a valid arbitration agreement must demonstrate a clear and unambiguous intention of the parties to refer disputes to arbitration and a mere possibility to refer disputes to arbitration after the dispute having arisen does not satisfy the requirements of a binding arbitration agreement.

The context of the present case, however, is different. Here it is not a case of distinction between a clause which keeps open an option to the parties to refer the disputes to arbitration as opposed to a mandatory clause to refer such disputes to arbitration, the court noted.

“Clause 21 envisages in clear terms “Dispute Resolution and Arbitration”, thereby indicating the intention of the parties, at least prima facie, to choose arbitration as the chosen mode of dispute resolution in respect of the agreement “ the court observed.

A careful perusal of the relevant clauses in the present agreement shows that Clause 21 clearly stipulates that the same pertains to Dispute Resolution 10 and Arbitration. The use of the expression 'arbitration' clearly indicates that the parties intended to refer the disputes to arbitration as the chosen alternative dispute resolution mode.

“Clause 21 amply caters to the “prima facie satisfaction” element which is the root of the jurisdiction of the Section 11 Court. Hence, on a bare perusal of Clause 21 and Clause 22 (which is the jurisdiction clause confining the jurisdiction exclusively to courts at Kolkata), it cannot be said that the prima facie satisfaction arrived at by the Section 11 Court was patently bad in law or an error apparent on the face of the record” the judge said.

It also noted that regarding the absence of the present petitioner, which was the respondent in the Section 11 application, on the relevant date when the order under recall was passed, the same cannot be a good ground for recall of the order, since it is evident from the record that notice of the pendency of the application was given to the present petitioner. In fact, in the recall application, it is admitted that the present petitioner did have notice of the pendency of the Section 11 application.

Finally, the court observed that as to the alleged suppression of the reply given to the Section 21 notice, even if it is assumed that the said reply was received by the applicant in the Section 11 application, the same, even if disclose at the relevant juncture, would not change the outcome of the Section 11 application. As such, the said non-disclosure, even if any, cannot be termed as a “suppression” sufficient to be elevated to the level of a fraud practised on the Court.

Accordingly, the present recall application was dismissed.

Case Title: BANKAT GARODIA VS ADITYO PODDAR

Case Number: IA NO.GA-COM/2/2024 In AP-COM/17/2023

Judgment Date: 6/12/2024

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