Jharkhand HC Dismisses JUVNL’s Appeal Challenging Order Of Writ Court Appointing Arbitrator; Rejects "Opening Of Floodgates" Argument

The Court observed that it is the duty of the High Court to reject a petition or the defence that is based on a purely technical stand to gain an unfair advantage over the other parties.

The Division Bench of Acting Chief Justice Shree Chandrashekhar and Justice Navneet Kumar observed, “…except for a broad proposition that the High Court should not exercise its powers in teeth of the provisions under the AC Act, we are not shown any decision that in a situation like the present one no order for referring the parties to arbitration could have been made by the writ Court. The submission that the exercise of power under Article 226 of the Constitution to accept the proposal of an aggrieved party for arbitration notwithstanding refusal by the other party shall open floodgates cannot be countenance in law. In “Butu Prasad Kumbhar v. Steel Authority of India Ltd.” 1995 Supp (2) SCC 225 the Hon’ble Supreme Court refused to accept “opening of the floodgates” argument that similar writ petitions shall start pouring. The cases of the present nature are relatively few and arise only when the other party takes an unfair stand. To conclude, this is the duty of the High Court to reject a petition or the defence that is based on a purely technical stand to gain unfair advantage over the other parties.”

AG Rajiv Ranjan and Sr. SC Sachin Kumar appeared for the Appellant whereas Sr. SC Vandana Singh and Advocate Vikas Pandey appeared for the Respondents.

The JUVNL issued a letter of intent to the M/s Rites for the electrification of 4923 villages but unilaterally reduced the number of villages to 1848. Later, with the consent of JSEB, the works under contract were assigned to M/s Ramjee Power Construction Limited (in short, RPCL) which directly received payments from the JSEB. There were allegations and counter-allegations by the parties which led to the invocation of the arbitration clause.

The Sole Arbitrator passed an award for Rs. 89,20,07,989/- with interest and later when the award was challenged, the appellate authority partly allowed the objection of M/s Rites and published the award with an enhanced value of Rs. 327,76,03,759/- with interest of Rs. 416,96,11,748/-.

Aggrieved by the awards, the JUVNL challenged under Section 34 of the Arbitration & Conciliation Act, 1996, (‘A&C Act’) which was dismissed holding that the award made by the Permanent Machinery of Arbitration cannot be challenged in a proceeding under Section 34 of the A&C Act.

In the writ petition filed by M/s Rites, the Court referred to the arbitration clause incorporated under Article 9 in the contract agreement and decision in the “Northern Coalfield Limited v. Heavy Engineering Corporation Limited and another” (2016 SC) and decided that the disputes between the parties should be referred to sole Arbitrator for adjudication.

The Court held, “It was at the insistence of the Rites that a provision for arbitration was incorporated under Article 9 in the contract agreement… There is no dispute that Article 9 contains an arbitration agreement but the difficulty has arisen in the present case because the arbitration between the parties was conducted through the Permanent Machinery of Arbitration which specifically excluded the application of the Arbitration Act, 1940 (now, the Arbitration and Conciliation Act, 1996). This is too well settled that this is the substance and not merely the form in the pleadings or any provision of law or any condition or stipulation in a contract that has to be looked at for inferring the true intention of the parties.”

JUVNL contended that the jurisdiction under Article 226 of the Constitution of India cannot be exercised in teeth of the statutory provisions under the AC Act.

The Court further said, “The power under Article 226 of the Constitution is exercised in furtherance of justice, equity and good conscience. In matters that pertain to the larger public interest the power under Article 226 of the Constitution is not fettered by any limitation. By raising technical objections, a party to litigation cannot be permitted to frustrate the basic object and purpose behind the writs… Before the sole Arbitrator, no objection was taken by the JUVNL that the claims raised by the Rites cannot be decided through arbitration. Now taking refuge in a situation where the awards made by the Permanent Machinery of Arbitration are not enforceable, the JUVNL has raised a host of technical objections. There may be a substance in the proposal that the Rites may approach the civil Court, but then, why the Rites? The JUVNL which approached the Commercial Court to challenge the awards dated 19th January 2011 and 19th September 2011 would have instead gone to the civil Court.”

Accordingly, the Court dismissed the appeal.

Cause Title: Jharkhand Urja Vikas Nigam Limited v. M/s Rites Ltd. and Ors.

Appearances:

Appellant: AG Rajiv Ranjan, Sr. SC Sachin Kumar, Advocate Karamdeo.

Respondents: Sr. SC Vandana Singh, AC Apoorva Singh, Advocates Vikas Pandey, Sanjay Kumar Prasad, Piyush Poddar, Manav Poddar and Deepak Kumar Sinha.

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