Versov Industries Ltd (VIL) was awarded a contract for mobile air compressor for a period of five years in a tender floated by Dragon Drill Ltd (DDL). However, DDL shortly after entering into the contract, terminated the
CS Professional · Arbitration, Mediation and Conciliation · PYQS · June 2024
Versov Industries Ltd (VIL) was awarded a contract for mobile air compressor for a period of five years in a tender floated by Dragon Drill Ltd (DDL). However, DDL shortly after entering into the contract, terminated the same on the ground that some part of the equipment was not new and was defective. This position was disputed by the VIL and on the very next day, the vendor code of the VIL was blocked, thereby, disabling VIL to bid for any other further bids floated by DDL. A Show Cause Notice was issued by DDL to VIL asking why it should not be black listed for a period of two years. Since disputes had arisen between the parties, VIL invoked the arbitration clause contained in the contract. This notice was the subject-matter of dispute before the Arbitrator as well as before the Court. Pursuant to the notice, Srimaan (Retd. High Court Judge) was appointed as a Sole Arbitrator to decide the disputes between the parties. A claim petition was filed by VIL before the learned Arbitrator in which the termination of the contract/show cause notice was challenged and damages claimed. After this claim petition was filed, VIL was blacklisted by an order passed by the DDL for a period of two years. Meanwhile, a Section 17 application was also moved before the learned Arbitrator. Applications were then moved by VIL to amend both the petition as well as the Section 17 application to challenge this order, the amendements for which, were granted by the learned Arbitrator. Subsequently, an appeal against the Section 17 Order was filed and disposed of by the jurisdictional City Civil Court, by which the learned Arbitrator's order was upheld. Consequently, the first appeal filed under Section 37 was dismissed. At this stage, a Special Civil Application was filed under Article 227 of the Constitution of India before the State High Court in whcih the City Civil Court's order was challenged. The High Court referred to a preliminary contention that the petition filed under Article 227 should be dismissed at the threshold, as it did not raise any jurisdictional issue. It was also held on a reading of the notice for arbitration that the notice did not raise the issue of ban for two years and was confined only to illegal termination. The High Court finally held that no stay could possibly have been granted under Section 17 of the ban order as an injunction cannot be granted in cases where the party can be compensated later in damages. Meanwhile, one of the consultants of VIL, in a meeting with the management, indicated that instead of taking the legal route and complicating the matter, they could have opted for online dispute resolution (ODR), which would have saved time and cost involved. In the background of above facts, answer the following: (b) 'If petitions were to be filed under Article 226 of the Constitution against the orders passed in appeals under Section 37, the entire arbitration would be derailed'. Elucidate.
Answer & Explanation:
The facts of the given situation appears similar to the matter of Deep Industries Limited Vs. Oil & Natural Gas Corporation Limited and Ors. decided by Hon'ble Supreme Court of India. In this case, she Court inter alia decided that there is no doubt whatsoever that if petitions were to be filed under Articles 226/227 of the Constitution of India against orders passed in appeals under Section 37, the entire arbitral process would be derailed and would not come to fruition for many years. At the same time, Courts should not forget that Article 227 is a constitutional provision which remains untouched by the non-obstante clause of Section 5 of the Arbitration and Conciliation Act, 1996. In the given circumstances, what is important to note is that petitions can be filed under Article 227 against judgements allowing or dismissing first appeals under Section 37, yet the High Courts needs to be extremely circumspect in interfering.
Topics: Judicial Intervention
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