Arbitral Tribunal Not Justified In Dismissing Claim Petition For Not Being Verified As Per CPC: Gujarat High Court

The bench of Chief Justice Aravind Kumar and Justice Ashutosh Shastri held that in view of the High Court’s power of superintendence under Article 227 of the Constitution of India, the Single Judge’s finding that the Arbitral Tribunal’s order was not amenable to writ jurisdiction on account of there being an alternative remedy available under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act), was not sustainable.

After certain disputes arose between the appellant, Pahal Engineers, and the respondent, Gujarat Water Supply and Sewerage Board (GWSSB), under a contract, the appellant invoked the arbitration clause and the dispute was referred to arbitration.

During the arbitral proceedings, the respondent, GWSSB, raised a preliminary objection before the Arbitral Tribunal, contending that the claim petition/ statement of claim submitted by the appellant/claimant was not maintainable since it was not verified as contemplated under Order VI Rule 15 of the CPC.

Upholding the preliminary objection, the Arbitrator dismissed the statement of claims and terminated the arbitration proceedings.

Against this, the appellant filed a writ petition under Article 226 of the Constitution of India before the Gujarat High Court. While noting that the statutory remedy under Section 34 of the A&C Act was available to the appellant to challenge the Arbitral Tribunal’s order, the Single Judge ruled that the Tribunal’s order was not amenable to writ jurisdiction. The Single Judge thus, upheld the order of the Arbitral Tribunal.

The appellant filed an intra-court appeal before the Division Bench of the High Court, challenging the order of the Single Judge.

The appellant, Pahal Engineers, submitted before the High Court that the Arbitral Tribunal had committed patent illegality and the Single Judge, who has the power of superintendence under Article 227 of the Constitution of India, failed to exercise its power. It added that there is no absolute bar against the High Court from exercising its power under Article 227, to correct the jurisdictional errors committed by the Arbitral Tribunal.

The respondent, GWSSB, averred that non-verification of pleadings by the appellant/claimant was fatal to the arbitral proceedings, which cannot be interfered with by the Single Judge since an alternative remedy under Section 34 of the A&C Act was available to it.

Noting that the claim petition was undisputedly filed without verification of pleadings, the Court reckoned that in view of Section 19 of the A&C Act, the Arbitral Tribunal is not bound by CPC or the Indian Evidence Act, 1872. Further, if the parties fail to reach an agreement on the procedure to be followed by the Arbitral Tribunal in conducting its proceedings, the Tribunal itself is empowered under Section 19(3) to regulate the proceedings in the manner it may consider appropriate.

The bench concluded that failure to abide by the procedural laws, would not be fatal to the arbitral proceedings.

“Thus, we are of the considered view that procedural law, if any, which undisputedly did not apply in the instant proceedings commenced under the Act 1996 would not be fatal and as such Arbitral Tribunal was not justified in dismissing the claim petition itself without going into the merits and as such the impugned order dated 24.04.2019 is not sustainable in law,” the Court said.

Referring to the decision of the Coordinate Bench of the Gujarat High Court in Narmada Clean-Tech & Anr. vs. Indian Council of Arbitration & Ors. (2020), the Court took note that the High Court, in exercise of its power of superintendence under Article 227, can interfere when there has been a patent perversity in the orders of the Tribunals and Courts subordinate to it or where there has been a gross and manifest failure of justice or the basic principles of natural justice have been flouted. Further, the High Court's power of superintendence under Article 227 cannot be curtailed by any statute, the Coordinate Bench in Narmada Clean-Tech had held.

Thus, the High Court ruled that the finding recorded by the Single Judge that the writ petition could not be entertained on the ground that an alternative remedy under Section 34 of the A&C Act was available to the writ applicant, was not sustainable.

The High Court thus set aside the order of the Single Judge and quashed the order of the Arbitral Tribunal.

Noting that the mandate of the Arbitral Tribunal had expired, the Court granted liberty to the parties to seek extension of mandate. “The Arbitral Tribunal on such mandate being extended shall proceed to adjudicate the claim on merits and in accordance with law by accepting the amended claim statement,” the Court directed.

Case Title: Pahal Engineers versus Gujarat Water Supply and Sewerage Board

Case Citation: 2023 Livelaw (Guj) 34

Counsel for the Appellant: Mr. Mihir Joshi, Senior Counsel with Mr Isa Hakim

Counsel for the Respondent: Mr. Keyur Gandhi, advocate for Gandhi Law Associates

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