The general rule and principle, in view of the legislative mandate clear from Act 3 of 2016 and Act 33 of 2019, and theprinciple of severability and competencecompetence, is that the Arbitral Tribunal is the preferred first authority to determine and decide all questions of nonarbitrability. The court has been conferred power of “second look” on aspects of nonarbitrability post the award in terms of subclauses (i), (ii) or (iv) of Section 34(2)(a) or subclause (i) of Section 34(2)(b) of the Arbitration Act. -
A deed of retirement-cum-continuation of partitionship - The retirement deed recorded that the respondent no.1 retired from the respondent no.2 partnership firm on the terms and conditions mentioned therein and the business of partnership firm was continued by the appellant and the respondent nos.3 to 5-The respondent no.1 by his advocate’s notice dated 18th February 2019 invoked the arbitration clause (clause 19) in the retirement deed. - a petition under Section 11 of the Arbitration Act was filed by the respondent no.1 - the learned Single Judge of the Bombay High Court allowed the petition andappointed a member of the Bar as the sole Arbitrator. - The present appeals - Apex court held that The practice is that the advocates serve a notice of the proceedings filed in theCourt even before it comes up before the Court. The Court acts upon such service effected by the advocate on proof thereof being produced in the form of an affidavit of service.Therefore, there is nothing illegal about the High Court acting upon the advocate’s notice admittedly served to the appellant - Therefore, we reject the first submission made by the learned Senior Counsel appearing for the appellant regarding the failure to serve the notice of the petition under Section 11. - The minutes of preliminary meeting recorded by the learnedArbitrator do not record that the appellant appeared in themeeting without prejudice to his right of challenging the order appointing the Arbitrator. - As the objection was rejected by the learned Arbitrator, in view of subsection (6) of Section 16, on 21st December 2021, the appellant has filed a petition under Section 34 of the Arbitration Act, which is pending before theBombay High Court for challenging the said Order.- Thus, this Court held that while dealing with petition under Section 11, the Court by default would refer the matter when contentions relating to nonarbitrability are plainly arguable. In such case, the issue of nonarbitrability is left open to be decided by the Arbitral Tribunal. On perusal of the impugned order, we find that the issues of nonarbitrability and the claim being time barred have not been concluded by the learned Single Judge of the Bombay High Court. In fact, in clause (vii) of the operative part of theimpugned Order, the learned Single Judge has observed that the contentions of the parties have been kept open. The petitions filed by the appellant under Section 34 of the Arbitration Act, challenging the Order dated 25th May 2021 are pending before the High Court in which the appellant can raise all permissible contentions - Therefore, in our considered view, no case for interference is made out. We, therefore, dismiss the appeals, while leaving open the contentions raised by the appellant in pending petitions under Section 34 of the Arbitration Act before the High Court of Bombay.
1
NONREPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 874 OF 2022
(Arising out of SLP (Civil) No. 7635 of 2021)
MOHAMMED MASROOR SHAIKH … APPELLANT
v.
BHARAT BHUSHAN GUPTA & ORS. ... RESPONDENTS
WITH
CIVIL APPEAL NO. 875 OF 2022
(Arising out of SLP (Civil) No. 7655 of 2021)
AND
CIVIL APPEAL NO. 875 OF 2022
(Arising out of SLP (Civil) No. 7714 of 2021)
J U D G M E N T
ABHAY S. OKA, J.
Leave granted.
1. These three appeals take exception to the similar orders
passed by a learned Single Judge of the Bombay High Court
2
on 6th March 2020 on the petitions under Section 11 of the
Arbitration and Conciliation Act, 1996 (for short “the
Arbitration Act”). The appellant, the respondent no.1 and the
respondent nos.3 to 5 were the partners of three different
partnership firms in the name and style of M/s M.M.
Developers, Nisarga, M/s M.M. Developers, Shanti Nagar and
M/s M.M. Developers, Shramjivi. The facts of these three
cases are identical and therefore, for convenience, we are
referring the facts of the case in Civil Appeal arising out of
Special Leave Petition (Civil) No. 7635 of 2021. A deed of
retirementcumcontinuation dated 12th September 2014 (for
short “the retirement deed”) in respect of the firm M/s M.M.
Developers, Nisarga (the respondent no.2) was executed by
and between the appellant, the respondent no.1 and the
respondent nos.3 to 5. The retirement deed recorded that the
respondent no.1 retired from the respondent no.2
partnership firm on the terms and conditions mentioned
therein and the business of partnership firm was continued by
the appellant and the respondent nos.3 to 5.
3
2. The respondent no.1 by his advocate’s notice dated 18th
February 2019 invoked the arbitration clause (clause 19) in
the retirement deed. According to the case of the respondent
no.1, the appellant and the respondent nos.3 to 5 did not
respond to the said notice. Therefore, a petition under Section
11 of the Arbitration Act was filed by the respondent no.1. By
the impugned Order dated 6th March 2020, the learned Single
Judge of the Bombay High Court allowed the petition and
appointed a member of the Bar as the sole Arbitrator. Similar
orders were passed in relation to the two other firms. The
present appeals have been filed on 9th June 2021.
3. A counter affidavit has been filed by the respondent no.1
contending that though the appellant was served with the
advocate’s notice of the petition under Section 11 of the
Arbitration Act, he did not appear in the petition. In the
counter affidavit, it is pointed out that on 8th May 2021 in the
preliminary meeting held by the learned Arbitrator, the
appellant was represented by an advocate. It is pointed out
that the respondent no.1 filed an application under Section 17
4
of the Arbitration Act before the learned Arbitrator claiming
certain interim directions. The respondent no.3 filed an
application under Section 16 of the Arbitration Act contending
that there was no arbitration agreement in existence and that
the claim made by the respondent no.1 before the Arbitrator
was barred by limitation. By the order dated 25th May 2021,
the learned Arbitrator rejected the objection raised under
Section 16. The respondent no.1 has pointed out in the
counter affidavit that before the learned Arbitrator, the
appellant, the respondent no.2 and respondent nos.4 and 5
were represented by a common advocate who specifically
supported the submissions of the learned counsel appearing
for the respondent no.3 in support of the application under
Section 16. It is also pointed out that the aforesaid material
facts have been suppressed in the present appeals filed on 9th
June 2021. It is also pointed out that by the order dated 24th
June 2021, the learned Arbitrator allowed the application
under Section 17 filed by the respondent no.1. By filing
additional documents, the respondent no.1 has brought on
5
record a copy of an appeal filed by the appellant and the
respondent no.2 for challenging the Order dated 24th June
2021 before the Bombay High Court.
4. During the course of submissions, Mr. Manish Vashisht,
the learned Senior Counsel appearing for the appellant
accepted that the appellant has filed a petition under Section
34 of the Arbitration Act for challenging the order dated 25th
May 2021 passed by the learned Arbitrator overruling the
objections raised by the respondent no.3.
5. The learned Senior Counsel appearing for the appellant
in support of the appeals firstly urged that the High Court did
not issue and serve a notice of the petition filed under Section
11 of the Arbitration Act. His submission is that the appellant
was admitted in intensive care unit of a hospital on 3rd May
2021 and was discharged on 3rd June 2021. He relied upon
the documents placed on record to that effect in the rejoinder.
He submitted that clause 19 of the retirement deed does not
provide for referring a dispute between the respondent no.1,
who was the retiring partner and the continuing partners to
6
arbitration. He submitted that this crucial fact has been
ignored by the learned Single Judge of the Bombay High
Court. Moreover, even the facts pleaded in the petition under
Section 11 of the Arbitration Act show that the claim of the
respondent no.1 was barred by limitation. He relied upon a
decision of this Court in the case of State of Orissa and
another v. Damodar Das1
. He submitted that as the appellant
was not given a notice of the date fixed in the petition under
Section 11, he could not urge before the learned Single Judge
that the claim of the respondent no.1 was barred by limitation
and that there was no arbitration clause. He submitted that
the appellant caused appearance before the learned Arbitrator
without prejudice to his rights and contentions. The learned
counsel relied upon another decision of this Court in the case
of Vidya Drolia & Others v. Durga Trading Corporation2 and
in particular what is held in paragraphs 95 and 98 thereof.
He submitted that the issues which are concluded by the
impugned order cannot be reopened by the learned Arbitrator.
1 (1996) 2 SCC 216
2 (2021) 2 SCC 1
7
6. The learned counsel appearing for the respondent no.1
submitted that a notice of arbitration petition filed under
Section 11 was served upon the appellant. He submitted that
the appellant was represented before the Arbitral Tribunal by
his advocate, Mr. Shreyans Baid, who supported the
objections raised by the respondent no.3 under Section 16 of
the Arbitration Act regarding the absence of arbitration
agreement as well as the time barred claim. He submitted
that the said objection was overruled by the learned Arbitrator
by his order dated 25th May 2021. He pointed out that this
material fact has been suppressed by the appellant while filing
these appeals. He pointed out that the appellant has filed
petitions under Section 34 of the Arbitration Act before the
Bombay High Court on 2nd December 2021 for challenging the
order dated 25th May 2021. He submitted that the appellant
can always agitate the issues raised by him in these appeals
in the arbitration petition under Section 34. He submitted that
documents have been placed on record which show that Mr.
Baid, the learned advocate was appearing on behalf of the
8
appellant before the learned Arbitrator and that the said
advocate represented the appellant before the Arbitrator from
8
th May 2021. The learned counsel appearing for the
respondent no.1 submitted that what is held in paragraph 154
of the decision of this Court in the case of Vidya (supra)
completely supports the case of the respondent no.1.
7. The learned Senior Counsel appearing for the appellant
clarified that though the advocate’s notice of filing the petition
under Section 11 was served upon the appellant, the date
fixed in the arbitration petition was not communicated to the
appellant. Moreover, the Court did not issue any notice on the
petition filed under Section 11.
8. We have given careful consideration to the submissions.
It is not in dispute that along with advocate’s notice dated 8th
November 2019, the appellant and the respondent nos.2 to 5
were served a copy of the petition filed under Section 11 of the
Arbitration Act by the respondent no.1. In the impugned
Order, the learned Single Judge of the Bombay High Court has
referred to the affidavit of service of notice filed on behalf of
9
the respondent no.1. A judicial notice will have to be taken of
a long standing and consistent practice followed on the
Original Side of the Bombay High Court. The practice is that
the advocates serve a notice of the proceedings filed in the
Court even before it comes up before the Court. The Court
acts upon such service effected by the advocate on proof
thereof being produced in the form of an affidavit of service.
Therefore, there is nothing illegal about the High Court acting
upon the advocate’s notice admittedly served to the appellant.
According to the case of the appellant, he was admitted to a
hospital on 3rd May 2021. However, the advocate’s notice of
the petition under Section 11 was served upon the appellant
in November 2019. Therefore, the appellant could have
always made arrangements to contest the said petition.
Therefore, we reject the first submission made by the learned
Senior Counsel appearing for the appellant regarding the
failure to serve the notice of the petition under Section 11.
9. While filing the present appeals on 9th June 2021, the
appellant ought to have disclosed that on 8th May 2021, his
10
advocate had appeared before the learned Arbitrator in the
first preliminary meeting convened by the learned Arbitrator.
The minutes of preliminary meeting recorded by the learned
Arbitrator do not record that the appellant appeared in the
meeting without prejudice to his right of challenging the order
appointing the Arbitrator. In fact, Mr. Baid, the learned
counsel who appeared for the appellant before the learned
Arbitrator, by email dated 29th May 2021 addressed to the
learned Arbitrator, sought his permission to withdraw his
appearance. In the said email, the advocate stated that he
was appointed on the instructions of the present appellant.
Moreover, the order dated 25th May 2021 passed by the
learned Arbitrator by which objections under Section 16 were
overruled shows that the same advocate appeared for the
appellant and supported the objections raised by the
respondent no.3. As the objection was rejected by the learned
Arbitrator, in view of subsection (6) of Section 16, on 21st
December 2021, the appellant has filed a petition under
11
Section 34 of the Arbitration Act, which is pending before the
Bombay High Court for challenging the said Order.
10. The learned counsel appearing for the respondent no.1
has relied upon what has been held in paragraphs 95 and 98
of the decision of this Court in the case of Vidya (supra). The
conclusions of this Court have been summarised in paragraph
154 of the said decision, which reads thus:
“154. Discussion under the heading
“Who Decides arbitrability?” can be
crystallised as under:
154.1. Ratio of the decision in Patel Engg.
Ltd. [SBP & Co. v. Patel Engg. Ltd., (2005) 8
SCC 618] on the scope of judicial review by
the court while deciding an application
under Sections 8 or 11 of the Arbitration
Act, post the amendments by Act 3 of 2016
(with retrospective effect from 23102015)
and even post the amendments vide Act 33
of 2019 (with effect from 982019), is no
longer applicable.
154.2. Scope of judicial review and
jurisdiction of the court under Sections 8
and 11 of the Arbitration Act is identical
but extremely limited and restricted.
12
154.3. The general rule and principle, in
view of the legislative mandate clear from
Act 3 of 2016 and Act 33 of 2019, and the
principle of severability and competencecompetence, is that the Arbitral Tribunal is
the preferred first authority to determine
and decide all questions of nonarbitrability. The court has been conferred
power of “second look” on aspects of nonarbitrability post the award in terms of
subclauses (i), (ii) or (iv) of Section 34(2)(a)
or subclause (i) of Section 34(2)(b) of the
Arbitration Act.
154.4. Rarely as a demurrer the court may
interfere at Section 8 or 11 stage when it is
manifestly and ex facie certain that the
arbitration agreement is nonexistent,
invalid or the disputes are nonarbitrable,
though the nature and facet of nonarbitrability would, to some extent,
determine the level and nature of judicial
scrutiny. The restricted and limited review
is to check and protect parties from being
forced to arbitrate when the matter is
demonstrably “nonarbitrable” and to cut
off the deadwood. The court by default
would refer the matter when contentions
relating to nonarbitrability are plainly
arguable; when consideration in summary
proceedings would be insufficient and
inconclusive; when facts are contested;
when the party opposing arbitration adopts
delaying tactics or impairs conduct of
arbitration proceedings. This is not the
stage for the court to enter into a mini trial
13
or elaborate review so as to usurp the
jurisdiction of the Arbitral Tribunal but to
affirm and uphold integrity and efficacy of
arbitration as an alternative dispute
resolution mechanism.”
(underlines supplied)
11. Thus, this Court held that while dealing with petition
under Section 11, the Court by default would refer the matter
when contentions relating to nonarbitrability are plainly
arguable. In such case, the issue of nonarbitrability is left
open to be decided by the Arbitral Tribunal. On perusal of
the impugned order, we find that the issues of nonarbitrability and the claim being time barred have not been
concluded by the learned Single Judge of the Bombay High
Court. In fact, in clause (vii) of the operative part of the
impugned Order, the learned Single Judge has observed that
the contentions of the parties have been kept open. The
petitions filed by the appellant under Section 34 of the
Arbitration Act, challenging the Order dated 25th May 2021 are
pending before the High Court in which the appellant can
raise all permissible contentions.
14
12. Therefore, in our considered view, no case for
interference is made out. We, therefore, dismiss the appeals,
while leaving open the contentions raised by the appellant in
pending petitions under Section 34 of the Arbitration Act
before the High Court of Bombay.
13. There will be no order as to costs. Pending applications,
if any, shall stand disposed of.
…………..…………………J
(INDIRA BANERJEE)
…………..…………………J
(ABHAY S. OKA)
New Delhi;
February 02, 2022.
