Bombay HC Imposes Rs 5 Lakh Cost On Adani Enterprises For Seeking Belated Review Of Order Appointing Arbitrator [Read Judgment]

Division bench of Chief Justice Pradeep Nandrajog and Justice Bharati Dangre set aside the single bench's order condoning delay of 7 years and observed-

"The torpedo fired by the respondent is declared to be a dud and it sinks without hitting its target."

Case Background

Antikeros and Adani entered into an agreement on February 28, 2008. Under the agreement, Adani was to supply bunker fuel to the appellants' vessel MT Antikeros at Mundra Port. On March 5, 2008, Adani supplied the fuel and twelve days later on March 17 a dispute arose between the parties regarding the quantity and quality of the fuel supplied.

On June 3, 2008 the appellant raised a demand towards damages in sum of $1,040,400.00. The respondent denied liability in a reply dated August 25, 2008 and raised a counterclaim in sum of $90,325.00 towards the adjusted cost of the fuel which was offloaded in United Arab Emirates where the vessel was diverted. The agreement dated February 28, 2008 envisaged resolution of the dispute at Mumbai as per the Arbitration and Conciliation Act, before a Tribunal comprising three Arbitrators. One each to be nominated by the contracting parties and the 3rd to be appointed by the said two Arbitrators.

However, Adani failed to nominate an Arbitrator despite the appellant company appointing one in 2009. On February 28, 2011 the appellant company filed an Arbitration Application under Section 11 of the Act before High Court praying that the Arbitrator on behalf of the respondent be appointed.

In spite of being served the respondent did not appear and thus on April 21, 2011 a Single Judge of the High Court disposed of the said application and appointed Ms. J.K.Bhatt as an Arbitrator, on behalf of Adani. Moreover, RS Cooper and JK Bhatt appointed TV Shanbhag, the Presiding Arbitrator. The Arbitral Tribunal came to be constituted.

In September 2013, the Arbitral Tribunal settled the issues which arose for determination. Parties proceeded to lead evidence, both oral and documentary. Recording of evidence concluded on April 26, 2018. Thereafter, on August 3, 2018 the respondent filed an application seeking recall of the order passed by the Tribunal on 3rd July 2013, as also the order dated 19th September 2013, by which order issues were settled. The Tribunal rejected the said application on and on August 21, 2018 Adani's counsel informed the Tribunal that the respondent intended to challenge the said order passed single judge appointing Ms. JK Bhatt as arbitrator.

On August 28, 2018 the Tribunal rejected Adani's application seeking recall. Two days later, the respondent filed a petition seeking review of the order dated April 21, 2011 passed by the High Court. It also sought a 7 years delay in filing the Review Application to be condoned. On March 22, 2018 the impugned order was passed condoning delay of 7 years in seeking review of the order dated 21st April 2011 and simultaneously recalling the said order appointing Ms.J.K. Bhatt as arbitrator on Adani's behalf.

Judgement

Senior Advocate Prashant Pratap appeared on behalf of the appellant company and Senior Advocate Vikram Nankani for Adani Enterprises.

At the outset, CJ Nandrajog observed-

"Torpedo shot by the respondent on 30th August 2018 hit its target. The Arbitral Tribunal came to be hit, in that, its constitution was blasted by the torpedo fired by the respondent."

Court noted that a 7 judge bench of the Supreme Court in the case of S.B.P. & Co. vs. Patel Engineering Ltd. & Anr., held that the power under Section 11 of the Act was a judicial power.

"Though a judicial power, the power under Section 11, prior to the Act being amended with effect from 1st January 2016 was not the power vested in the Court, but vested in the Chief Justice or his delegate. Power under Section 9 and Section 34 of the Act is in the Court, and the Court would be as defined under clause (e) of Sub-section 1 of Section 2 as it then exited in the Act.

Thus, the impugned decision in so far it uses the arrow in the quiver by relying upon decisions noting jurisdiction and power of Constitutional Courts, being Courts of record, has used an arrow which was not available to be used on the bow" Court said.

The bench held that the single judge who passed the impugned judgement had no jurisdiction to entertain the petition seeking review.

Moreover, Court highlighted how the single judge failed to substantiate the reason for allowing application for condonation of delay after 2680 days of the award.

"The learned Single Judge has held that by acquiescence and/or by consent jurisdiction cannot be conferred on a Court or an authority having no jurisdiction to take cognizance of a matter and because the learned Single Judge was exercising procedural review jurisdiction to correct a wrong by a Court of record, the issue of delay was irrelevant. Therefore, the learned Single Judge has not dealt with the sufficiency of the cause shown in the pleadings in the Notice of Motion.

For the reasons above, holding that it was not a case of procedural review and much less by a Court of record inasmuch as the order review whereof was prayed for was passed by the delegate of the Chief Justice of this Court, we hold that in formally condoning the delay on the reasoning given, the impugned order is vitiated when it proceeds to condone the delay by not considering whether sufficient cause was shown to condone the delay."

With regard to respondent Adani's conduct in the case, Court observed-

"It participated in the arbitration proceedings till when after evidence was led by both parties and counsel for the appellant concluded submissions and the counsel for the respondent opened arguments in reply and after seeking adjournments from the Tribunal filed the review petition on 30th August 2018.

It needs no rocket science for anyone to infer that probably the respondent got a premonition that it might lose. The members of the Arbitral Tribunal charged and were paid daily hearing fee. The counsel engaged by the appellant were also paid their fee. The respondent knew of the expenditure being incurred by the appellant. We therefore hold that the respondent failed to show sufficient cause entitling it to 2680 days delay in seeking review of the order dated 21st April 2011 to be condoned.

Both appeals are allowed. Impugned order dated 22nd March 2018 is set aside. The torpedo fired by the respondent is declared to be a dude and it sinks without hitting its target."

Finally, Court determined that the appellant would be entitled to costs incurred before the Single Judge as also in the instant appeals which was quantified at Rs.5 lakhs.

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