Anto Augustine & Josekutty Augustine v. Girish Koshy George, Thomas William Pangaraj, Maxim JayaraJ Serrao, Pushparaj Sunny Nadar & M/S Asian Mega Motors

## **(CR)** ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE ALEXANDER THOMAS** **&** **THE HONOURABLE MRS. JUSTICE SHOBA ANNAMMA EAPEN MONDAY, THE 6[TH] DAY OF JUNE 2022 / 16TH JYAISHTA, 1944** **ARB.A NO. 4 OF 2022** **ORDER IN OP(ARB) 160/2020 OF COMMERCIAL COURT (PRINCIPAL SUB** ## **COURT), ERNAKULAM** **APPELLANT/PETITIONER/2ND & 3RD RESPONDENTS IN ARBITRATION** ## **CASE:** 1 ANTO AUGUSTINE, AGED 50 YEARS S/O. AUGUSTINE, SAMUDHRANIDHI P.O PALLIKUNNU, KANNUR DISTRICT 670 002 (NOW RESIDING AT MOONGANANIYIL HOUSE, VAZHAVATTA P.O, KAKKAVAYAL VIA, VYTHIRI TALUK, MUTTIL SOUTH VILLAGE, WAYANAD) 2 JOSEKUTTY AUGUSTINE, S/O. AUGUSTINE, SAMUDHRANIDHI P.O PALLIKUNNU, KANNUR DISTRICT 670 002 (NOW RESIDING AT MOONGANANIYIL HOUSE, VAZHAVATTA P.O, KAKKAVAYAL VIA, VYTHIRI TALUK, MUTTIL SOUTH VILLAGE, WAYANAD) BY ADVS. C.S.BISSIMON DENNY VARGHESE ## **RESPONDENTS/RESPONDENTS/CLAIMANTS/1ST RESPONDENT IN THE** ## **ARBITRATION CASE:** 1 GIRISH KOSHY GEORGE S/O. LATE T.K GEORGE, VILLA NO. 93/A, KADAPATHALLA NAGAR, BEHIND GOLF LINKS, KAWDIAR, TRIVANDRUM 695 003 ARB.A NO. 4 OF 2022 ..2.. - 2 THOMAS WILLIAM PANGARAJ S/O. SELVARAJ, NO. 2, CROSS STREET, BALAJI NAGAR, SELAIYUR, TAMBARAM, CHENNAI 600 073 - 3 MAXIM JAYARAJ SERRAO S/O. LATE ROMAN SERRAO, SERRAO HOUSE, SANKAT KARIYA, MUNDKUR P.O, MULKI SOUTH KANARA, KARNATAKA 576 121 - 4 PUSHPARAJ SUNNY NADAR S/O. RAYAPPA LURDU SAMY, PLOT NO. 3/6, SECOND FLOOR, BUILDING NO. B, ANAND VIHAR CO-OPERATIVE SOCIETY LTD, DR. RAGUNATHAN ROAD, MUMBAI 400 050 - 5 M/S. ASIAN MEGA MOTORS CB 10 11, TRADE CENTRE BUILDING, OPP. SUB REGISTRAR OFFICE, CALTEX, KANNUR 670 002 BY ADVS. V.N.RAMESAN NAMBISAN P.CHANDRASEKHAR BENOY SASI THIS ARBITRATION APPEALS HAVING COME UP FOR ADMISSION ON 06.06.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **(CR)** ## **ALEXANDER THOMAS & SHOBA ANNAMMA EAPEN, JJ.** --------------------------------------------------------------------------- ## Arbitration Appeal No. 4 of 2022 [ _arising out of the impugned order dated 23.11.2021 in OP(Arb.) No.160/2020 of Principal Sub Court, Ernakulam_ ] ---------------------------------------------------------- Dated this the 6[th] day of June, 2022 ## **JUDGMENT** ## ALEXANDER THOMAS, J. The order rendered on 23.11.2021 in OP(Arb.) No.160/2020, rejecting the objections regarding the jurisdictional bar of the arbitral tribunal, is the subject matter of the instant arbitration appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996 (for short, “the Act”). 2. The appellants herein are the petitioners in the OP(Arbitration) and respondents 2 & 3 in the arbitration case before the arbitrator, whereas respondents 1 to 4 herein are respondents 1 t0 4 in the OP(Arb.) and the four claimants in the arbitration case before the arbitrator. The 5[th] respondent herein is the 5[th] respondent in the OP(Arb.) and the 1[st] respondent in the arbitration case before the ARB.A NO. 4 OF 2022 **==> picture [31 x 8] intentionally omitted <==** arbitrator. 3. Heard Sri.C.S.Bissimon Chempankulam, learned counsel appearing for the appellants herein; and Sri.P.Chandrasekharan, learned counsel appearing for respondents 1 to 4 herein. 4. There is no appearance for the 5[th] respondent (partnership firm). In the nature of the orders proposed to be passed in this arbitration appeal, notice to the 5[th] respondent will stand dispensed with. 5. Pursuant to the order passed by this Court in Arbitration Request No.42/2016, the disputes between the appellants and the respondents 1 to 4 herein have been referred to arbitral tribunal appointed by this Court in that proceedings. The arbitral tribunal has numbered the arbitration case as Arbitration Case No.2/2016. According to the case projected by the claimants, the matter essentially arises out of certain _inter-se_ disputes between the rival parties, who are partners in a partnership firm. According to the appellants, they have raised certain objections in the written statement filed by them, which, according to them, would affect the very jurisdiction of the arbitration tribunal. Later, ARB.A NO. 4 OF 2022 **==> picture [31 x 8] intentionally omitted <==** for the sake of formality, they have also separately preferred an application, stating their objections and that, according to them, it affects the very jurisdiction of the arbitral tribunal and that the arbitrator may hold that it does not have jurisdiction to entertain the arbitration claim. The plea was resisted by respondents 1 to 4 herein/claimants. The arbitrator, after hearing both sides, has passed order dated 08.09.2018, rejecting the pleas of jurisdictional bar raised by the appellants herein. Aggrieved thereby, the appellants herein had preferred an application under Section 34 of the Act to set aside the above said order dated 08.09.2018 rendered by the arbitral tribunal in Arbitration Case No.2/2016, whereby the objections regarding the jurisdictional bar have been rejected as above. The Principal Sub Court has numbered the said Section 34 petition as OP(Arb.) No.160/2020. After hearing both sides, the court below has rendered the impugned order dated 23.11.2021, dismissing OP(Arb.) No.160/2020, stating that the above said objections have been rightly rejected by the arbitral tribunal and that no interference is called for in the Section 34 petition. Being aggrieved by the said impugned order dated 23.11.2021 rendered by the court below, dismissing OP(Arb.) ARB.A NO. 4 OF 2022 **==> picture [31 x 8] intentionally omitted <==** No.160/2020, the appellants have preferred the instant arbitration appeal by invoking the provisions contained in Section 37(1)(b) of the Act. 6. Some of the main objections raised by the appellants regarding the jurisdictional bar of the arbitral tribunal are as follows; firstly, that there is no valid agreement between the parties; secondly, that even going by the version of the claimants, the place of arbitration is shown as Chennai in the agreement claimed by them, which is in the State of Tamil Nadu. Further, one of the main pleas in the arbitration claim is that the claimants are entitled for a declaration that the respondent partnership firm stands dissolved with effect from 21.02.2015 and that the claimants shall have no liability, whatsoever, relating to the transactions done by the respondents therein. In that regard, the appellants would point out that the Apex Court has held in various decisions as in _**Booz Allen & Hamilton Inc.** v._ _**SBI Home Finance Ltd. & Ors** [2011 (5) SCC 532]_ that certain disputes between the parties are not arbitrable by the very nature of the disputes and that one such dispute would be insolvency and winding up matters. That, the learned Single Judge of this Court ARB.A NO. 4 OF 2022 **==> picture [31 x 8] intentionally omitted <==** has held in the case in _**Kadeeja** v._ _**Manjusha** [2018 (2) KLT 145]_ that a prayer for dissolution of partnership firm is not arbitrable in terms of the arbitration clauses conceived under the Act and that the mandatory procedure under Section 44 of the Partnership Act will have to be resorted to as third party rights are involved. 7. Yet another objection raised by the appellants is that the claimants have raised allegations of serious fraud and that by the very nature of the arbitration process, it would not be amenable for resolving such disputes, especially, in the matters of allegations of serious fraud. These objections have been rejected by both the arbitral tribunal as per the order dated 08.09.2018 rendered by the arbitral tribunal in Arbitration Case No.2/2016, which, in turn, has been confirmed as per the impugned order dated 23.11.2021 rendered by the court below in OP(Arb.) No.160/2020 filed at the instance of the appellants herein. 8. After hearing both sides _in extenso_ , we are of the firm view that once jurisdictional bar issues, as per Section 16(2) of the Act, are rejected by the arbitral tribunal, as envisaged in Section 16(5) of the Act, then, the arbitral tribunal is obliged to carry on ARB.A NO. 4 OF 2022 **==> picture [31 x 8] intentionally omitted <==** with the arbitration process and conclude the proceedings in the manner known to law, as conceived in Chapter VI of the Act and then, render the award in the dispute. At the stage of rejection of jurisdictional bar issues, the Act does not permit the aggrieved party to challenge the same by filing Section 34 petition before the court below concerned and the arbitrator will have to proceed and conclude the arbitration process; and after the rendering of the award, the party aggrieved can then challenge the same by filing an application under Section 34 of the Act; and in that process, the aggrieved party can raise all issues, including jurisdictional bar issues as well as the other aspects of the case; and it is for the Section 34 petition court to decide on those issues only after the rendering of the award. Hence, we are of the firm view that the court below did not have jurisdiction to entertain the Section 34 petition, filed on behalf of the appellants, to challenge the above said order dated 08.09.2018 rendered by the arbitral tribunal, rejecting the jurisdictional bar issues. 9. We would now proceed to give our reasonings for arriving at the above said conclusion. Section 16 of the Act provides as follows; ARB.A NO. 4 OF 2022 ..9.. _“Section 16. Competence of arbitral tribunal to rule on its jurisdiction.—_ _(1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,-_ _(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and_ _(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause._ _(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator._ _(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings._ _(4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified._ _(5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award._ _(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34.”_ 10. Since Section 34 is a very lengthy provision, there is no necessity to quote the same for the present purposes. However, ARB.A NO. 4 OF 2022 ..10.. Section 37 may have some relevance and we would make reference to that provision. Section 37 reads as follows; _“Section 37. Appealable orders.—_ _(1) An appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely:—_ _(a) granting or refusing to grant any measure under section 9;_ _(b) setting aside or refusing to set aside an arbitral award under section 34._ _(2) An appeal shall also lie to a Court from an order granting of the arbitral tribunal.—_ _(a) accepting the plea referred in sub-section (2) or subsection (3) of section 16; or_ _(b) granting or refusing to grant an interim measure under section 17._ _(3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.”_ 11. The Apex Court, in the decision in _**Babar Ali**_ v. _**Union of India & Others** [(2000) 2 SCC 178]_ , while dealing with the constitutionality of the Act, has categorically stated that only because the question of jurisdiction of the arbitrator is required to be considered after the award is passed and not at any penultimate stage by the appropriate court, it cannot be a ground for submitting that such an order is not subject to any judicial ARB.A NO. 4 OF 2022 **==> picture [37 x 8] intentionally omitted <==** scrutiny. The Apex Court has categorically held therein that the time and manner of judicial scrutiny can legitimately be laid down by the enactment passed by Parliament. 12. In _**M.S.Commercial & Others**_ v. _**Calicut Engineering Works Ltd.** [(2004) 10 SCC 656]_ , the Apex Court has clearly held in para 5 thereof that once the arbitrator had taken a decision that there was an arbitration agreement, then, by virtue of sub-section (5) of Section 16 of the Act, the arbitrator was bound to continue with the arbitration proceedings and make an arbitral award and that, the only right that the petitioners therein then had was to challenge the award by resorting to Section 34 petition before the court below concerned at that stage. It is clearly held therein that where such a plea of the party is rejected by the arbitral court, then, the same would not even be a ground of challenge under Section 34 of the above Act. At the same time, the Apex Court has clearly clarified therein that the above would not mean that while challenging the arbitral award, if so challenged, the petitioners therein cannot challenge the order rejecting their earlier application, if, in law, they are entitled to do so. 13. _**SBP & Co.**_ v. _**Patel Engineering Ltd. & Another**_ ARB.A NO. 4 OF 2022 **==> picture [37 x 8] intentionally omitted <==** _[(2005) 8 SCC 618 = AIR 2006 SC 450]_ is a decision rendered by a Seven Judges Bench of the Apex Court, whereby the earlier dictum laid down by the Apex Court in _**Konkan Railway Corporation Ltd.**_ v. _**Rani Construction (P) Ltd.** [(2002) 2 SCC 388]_ was overruled. In _**SBP'**_ s case _[(2005) 8 SCC 618 = AIR 2006 SC 450]_ ( _supra_ ), the larger Bench has categorically held in para 45 thereof that it is seen that some High Courts have proceeded on the basis that any order passed by an arbitral tribunal during arbitration, would be capable of being challenged under Articles 226 or 227 of the Constitution of India. Their Lordships of Apex Court have clearly held therein that there is no warrant for such an approach. Further that, Section 37 of the Act makes certain orders of the arbitral tribunal appealable and that, the party aggrieved by any order of the arbitral tribunal, unless has a right of appeal under Section 37 of the Act, has to wait until the award is passed by the arbitral tribunal, and that, this appears to be a scheme of the Act. The arbitral tribunal has been held to be a creature of a contract between the parties and that even if the arbitral tribunal is constituted by the orders of the High Court under Section 11 of the Act, that by itself will not alter the status of the arbitral tribunal ARB.A NO. 4 OF 2022 **==> picture [37 x 8] intentionally omitted <==** and it will still be a forum chosen by the parties in the agreement. 14. The impact and applicability of the dictum laid down by the Apex Court in _**SBP'**_ s case _[(2005) 8 SCC 618 = AIR 2006 SC 450]_ ( _supra_ ) has been considered by the Apex Court in a case in _**National Thermal Power Corporation Ltd. (NTPC)**_ v. _**Seimens Atkeingesellschaft** [(2007) 4 SCC 451]._ In para 18 thereof in _**NTPC**_ 's case _[(2007) 4 SCC 451] (supra)_ , the Apex Court has opined that Section 16 of the Act is a provision, which deals with the competence of the arbitral tribunal to rule on its own jurisdiction. _**SBP'**_ s case _[(2005) 8 SCC 618 = AIR 2006 SC 450]_ ( _supra_ ) confined the operation of Section 16 of the Act to cases, where the arbitral tribunal was constituted at the instance of the parties to the contract without reference to the Chief Justice under Section 11(6) of the Act and that, in a case where the parties had thus constituted the arbitral tribunal without recourse to Section 11(6) of the Act, they still have the right to question the jurisdiction of the arbitral tribual including the right to invite a ruling on any objection with respect to the existence or validity of the arbitration agreement and that, it could, therefore, rule that there existed no arbitration agreement or that it was not valid. Further, it is held ARB.A NO. 4 OF 2022 **==> picture [37 x 8] intentionally omitted <==** therein that under Section 16(5) of the Act, the arbitral tribunal has the obligation to decide the plea referred to in Section 16(2) or (3) and where it rejects the plea, it could continue with the arbitral proceedings and make the award. Under Section 16(6) of the Act, a party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with Section 34. In other words, in the challenge to the award, the party aggrieved could raise the contention that the tribunal had no jurisdiction to pass it or that it had exceeded its authority in passing it and that this happens when the tribunal proceeds to pass an award. In clear and categorical terms, the Apex Court has held in para 18 of the decision in _**NTPC**_ 's case _[(2007) 4 SCC 451] (supra)_ that in a case where the arbitral tribunal proceeds to pass an award after overruling the objection relating to jurisdiction, it is clear from Section 16(6) of the Act that the parties have to resort to Section 34 of the Act to get rid of that award, if possible. But, if the tribunal declines jurisdiction or declines to pass an award and dismisses the arbitral proceedings, the party aggrieved is not without a remedy and then Section 37(2) of the Act deals with such a situation. Where the plea of absence of jurisdiction or a claim ARB.A NO. 4 OF 2022 **==> picture [37 x 8] intentionally omitted <==** being in excess of jurisdiction is accepted by the arbitral tribunal and it refuses to go into the merits of the claim by declining jurisdiction, a direct appeal is provided under Section 37(2)(a) of the Act and that what is made directly appealable in terms of Section 37(2)(a) of the Act is only an acceptance of a plea of absence of jurisdiction or of excessive exercise of jurisdiction and the consequential refusal to proceed further either wholly or partly. It will be pertinent to refer to paras 18 and 19 of the decision of the Apex Court in _**NTPC**_ 's case _[(2007) 4 SCC 451] (supra),_ which read as follows; _“18. The expression "jurisdiction" is a word of many hues. Its colour is to be discerned from the setting in which it is used. When we took at Section 16 of the Act, we find that the said provision is one, which deals with the competence of the Arbitral Tribunal to rule on its own jurisdiction. SBP & Co. v. Patel Engg. Ltd. in a sense confined the operation of Section 16 to cases where the Arbitral Tribunal was constituted at the instance of the parties to the contract without reference to the Chief Justice under Section 11(6) of the Act. In a case where the parties had thus constituted the Arbitral Tribunal without recourse to Section 11(6) of the Act, they still have the right to question the jurisdiction of the Arbitral Tribunal including the right to invite a ruling on any objection with respect to the existence or validity of the arbitration agreement. It could therefore rule that there existed no arbitration agreement, that the arbitration agreement was not valid, or that the arbitration agreement did not confer jurisdiction on the Tribunal to adjudicate upon the particular claim that is put forward before it. Under sub-section (5), it has the obligation to decide the plea and where it rejects the plea, it could continue with the arbitral proceedings and make the award. Under sub-section (6), a party aggrieved by such an arbitral award may make an application for setting aside such_ ARB.A NO. 4 OF 2022 ..16.. _arbitral award in accordance with Section 34. In other words, in the challenge to the award, the party aggrieved could raise the contention that the Tribunal had no jurisdiction to pass it or that it had exceeded its authority, in passing it. This happens when the Tribunal proceeds to to pass an award. It is in the context of the various sub-sections of Section 16 that one has to understand the content of the expression "jurisdiction" and the scope of the appeal provision. In a case where the Arbitral Tribunal proceeds to pass an award after overruling the objection relating to to jurisdiction, it is clear from subsection (6) of Section 16 that the parties have to resort to Section 34 of the Act to get rid of that award, if possible. But, if the Tribunal declines jurisdiction or declines to pass an award and dismisses the arbitral proceedings, the party aggrieved is not without a remedy. Section 37(2) deals with such a situation. Where the plea of absence of jurisdiction or a claim being in excess of jurisdiction is accepted by the Arbitral Tribunal and it refuses to go into the merits of the claim by declining jurisdiction, a direct appeal is provided. In the context of Section 16 and the specific wording of Section 37(2a) of the Act, it would be appropriate to hold that what is made directly appealable by Section 37(2)(a) of the Act is only an acceptance of a plea of absence of jurisdiction, or of excessive exercise of jurisdiction and the refusal to proceed further either wholly or partly._ _19. In a case where a counterclaim is referred to and dealt with and a plea that the counterclaim does not survive in view of the settlement of disputes between the parties earlier arrived at is accepted, it could not be held to be a case of refusal to exercise jurisdiction by the Arbitral Tribunal. Same is the position when an Arbitral Tribunal finds that a claim was dead and was not available to be made at the relevant time or that the claim was not maintainable for other valid reasons or that the claim was barred by limitation. They are all adjudications by the Tribunal on the merits of the claim and in such a case the aggrieved party can have recourse only to Section 34 of the Act and will have to succeed on establishing any of the grounds available under that provision. It would not be open to that party to take up the position that by refusing to go into the merits of his claim, the Arbitral Tribunal had upheld a plea that it does not have jurisdiction to entertain the claim and hence the award or order made by it, comes within the purview of Section 16(2) of the Act and consequently is appealable under Section 37(2)(a) of the Act.”_ ARB.A NO. 4 OF 2022 ..17.. 15. The Division Bench of the Bombay High Court has also considered the above said issue in the case in _**BASF Styrenics Pvt. Ltd.**_ v. _**Offshore Industrial Construction Pvt. Ltd. & Another**_ [ _2002 SCC Online Bom 174 = AIR 2002 Bom 289 = (2002) 2 Mah LJ 873_ ] and has placed reliance on the aforesaid decision in _**Babar Ali**_ 's case _[(2000) 2 SCC 178] (supra)_ , and held in para 11 thereof that judicial scrutiny is only available for challenging the award in accordance with the procedure laid down in the Act, and that merely because the question of jurisdiction of the arbitrator is required to be considered after the award is passed and not at any penultimate stage before an appropriate court, the same would not be a ground for urging that such an order is not subject to any judicial scrutiny. In that case, the Bombay High Court was dealing with a case, where the plea of no jurisdiction was repelled by the arbitrator and the court held that the challenge made against the same was premature. The Division Bench of the Bombay High Court held that, by dismissing the Arbitration Petition, it cannot be held that the court has committed any error of law and/or jurisdiction. The Division ARB.A NO. 4 OF 2022 ..18.. Bench thus dismissed the Arbitration Appeal. Paras 10 & 13 of the _**BASF**_ 's case [ _2002 SCC Online Bom 174 = AIR 2002 Bom 289 =_ ## _(2002) 2 Mah LJ 873_ ] ( _supra_ ) read as follows; _“_ _**10.** In our considered opinion, therefore, the scheme of the Act is clear, and it is that if the arbitral Tribunal holds that it has jurisdiction, such an order cannot be said to be illegal or without jurisdiction at that stage, inasmuch as the competent Legislature has conferred the power on arbitral Tribunal "to rule on its own jurisdiction". Hence, such an order can be challenged only in the manner laid down in sub-sections (5) and (6) of Section 16, viz., after the arbitration proceedings are over and the award is made. If, on the other hand, it holds that it has no jurisdiction, an order can be challenged under Subsection (2) of Section 37 of the Act._ ## _xxxxx xxxxx xxxx_ _**13.** In our opinion , however, looking to the scheme of the Act, as also the ratio in Babar Ali, it cannot be said that by dismissing the Arbitration Petition, the learned Single Judge has committed any error of law and/or of jurisdiction. The contention, therefore, does not detain us, and deserves to be rejected.”_ 16. The learned Single Judge of the Delhi High Court in a case in _**Union of India & Another**_ v. _**M/s East Coast Boat Builders and Engineers Ltd.** [AIR 1999 Delhi 44],_ has held in para 19 thereof that, from the scheme of the Act, it is apparent that the legislature has not provided an appeal against an order under Section 16(5), where the arbitral tribunal takes a decision rejecting the plea that the arbitral tribunal has no jurisdiction and that, the ARB.A NO. 4 OF 2022 **==> picture [37 x 8] intentionally omitted <==** intention appears to be that, in such a case, the arbitral tribunal shall continue with the arbitral proceedings and make an award without delay and without being interfered with in the arbitral process, at any stage, by any court in their supervisory role. Therein, the learned Single Judge of the Delhi High Court was dealing with the case where the plea of “lack of jurisdiction” was rejected by the arbitral tribunal, wherein it was ruled that the disputes raised in the arbitration claim petition are arbitrable. The party, being aggrieved by the same, filed an application under Section 34 of the Act to set aside the award, on the premise that the said decision of the arbitral tribunal, rejecting the plea of “lack of jurisdiction” should be taken as an interim award. The learned Single judge held in para 17 of the decision in _**East Coast Boat Builders and Engineers Ltd.**_ 's case _[AIR 1999 Delhi 44] (supra)_ that the impugned order cannot be seen as an interim award and that, for arriving at that conclusion, the reasonings given by the learned Single Judge of the Delhi High Court, as contained in para 18 thereof, are that if an order on the point of jurisdiction of the arbitral tribunal was to be an interim award under the Act, Section 37 of the Act would not have provided for ARB.A NO. 4 OF 2022 **==> picture [37 x 8] intentionally omitted <==** appeal against an order whereby the arbitral tribunal holds that it has no jurisdiction and that, while enacting Section 16 of the Act, the legislature was conscious that the arbitral tribunal could hold in its favour or against itself on the point of jurisdiction and that if the legislature had to treat an order, under Section 16 of the Act, to be an interim award, it would not have provided for an appeal under Section 37 of the Act, where the arbitral tribunal allows the plea that the arbitral tribunal does not have jurisdiction and the legislature would have left a challenge to such order as well under Section 34 of the Act. Hence, it was observed that it cannot be accepted that the order under Section 16 of the Act would change its nature upon two different contingencies, that is to say, where the order rejects the plea of no jurisdiction, it becomes an interim award and where the arbitral tribunal allows the plea of no jurisdiction, it is not an interim award amenable to challenge under Section 34 of the Act before the court below and only appealable in terms of Section 37(2)(a) of the Act. Hence, it was reasoned therein that it can be easily interpreted that in either case, it is not an interim award. The contingency, where the arbitral tribunal allows the plea of “lack of jurisdiction” or excess ARB.A NO. 4 OF 2022 **==> picture [37 x 8] intentionally omitted <==** of jurisdiction, as conceived in Section 37(2)(a) of the Act, does not arise in the facts of the case. However, the conclusion laid down by the Delhi High Court in _**East Coast Boat Builders and Engineers Ltd.**_ 's case _[AIR 1999 Delhi 44] (supra)_ is that where the plea of “lack of jurisdiction” or excess of jurisdiction is disallowed by the arbitral tribunal, there is no question of challenging the same under Section 34 of the Act and the arbitral tribunal is obliged to continue further and then, pass the award and the party aggrieved, when getting an opportunity, to challenge the same by filing Section 34 petition. The decision in _**Rajnigandha Cooperative Group Housing Society Ltd.**_ v. _**Chand Construction Co. & Another** [2001 (60) DRJ 293]_ is another Single Bench decision of the Delhi High Court, which is on the same line as in _**East Coast Boat Builders and Engineers Ltd.**_ 's case _[AIR 1999 Delhi 44] (supra)_ . It is pertinent to refer to paras 8 to 10 of the decision in _**Rajnigandha Cooperative Group Housing Society Ltd.**_ 's case _[2001 (60) DRJ 293] (supra)_ , which read as follows; _“8. The question whether Section 16 of the Act places an embargo upon the petitioner to challenge the interim award under the provisions of Section 34 of the Act came up for consideration before this court in Union of India and Another_ ARB.A NO. 4 OF 2022 ..22.. _Vs. M/s. East Coast Boat Builders & Engineers Ltd. AIR 1999 Delhi 44 : 1998 (47) DRJ 333._ _9. The court went into various relevant provisions in this regard and dealt with the proposition in very lucid and elaborate manner and came to the conclusion that the decision by an arbitral tribunal under Section 16(5) holding that it has jurisdiction to entertain the claim petition is not an interim award. The court in categorical terms held that where the arbitral tribunal decides the question of jurisdiction under Section 16(5) of the Act and rules that the disputes raised in the claim petition are arbitrable, the petition under Section 34 of the Act is not maintainable as no appeal is provided under the Act against such order and since the order is not an interim award it is not challengeable under Section 34 of the Act._ _10. It was further observed that from the scheme of the Act, it is apparent that the legislature did not provide appeal against the order under Section 16(5) whereby the arbitral tribunal takes a decision rejecting the plea that the arbitral tribunal has no jurisdiction. The intention appears to be that in such case the arbitral tribunal shall continue with the arbitral proceedings and make an award without delay and without being interfered in the arbitral process at that stage by any Court in their supervisory role.”_ 17. The Division Bench of the Gujarat High Court has also considered same issues in the cases in _**Nirma Ltd.**_ v. _**Lurgi Energie Und Entsorgung GMBH, Germany & Others** [AIR 2003 GUJARAT 145]_ and _**Executive Engineer, Sardar Sarovar Narmada Nigam** v._ _**Bhaven Construction, Vadodara & Another** [AIR 2006 GUJARAT 74]._ In the latter case, the Gujarat High Court has referred to the judgment of the Apex Court in _**SBP'**_ s case _[(2005) 8 SCC 618 = AIR 2006 SC 450]_ ( _supra_ ). Therein, the arbitrator had rejected the application filed ARB.A NO. 4 OF 2022 **==> picture [37 x 8] intentionally omitted <==** by the petitioner therein under Section 16(6) of the Act by holding that he has jurisdiction to resolve the disputes and the challenge thereto was considered in _**Sardar Sarovar Narmada Nigam** 's case [AIR 2006 GUJARAT 74] (supra)_ . It was held therein that going by the scheme of the Act, the challenge would fail and the petitioner therein will have to wait till the award is passed by the arbitrator and the challenge is thereafter made under Section 34 of the Act. However, the question with regard to the jurisdiction and the appointment of the arbitrator and whether the Act is applicable or not and also to consider the nature of the contract between the parties etc., were all directed to be kept open to be raised by the petitioner therein at the appropriate stage. The learned Single Judge of this Court, in a case in _**Hrishikesan Namboothiripad**_ v. _**PNY Sabha Finance Ltd.** [2019 (3) KLT 38],_ has held that, in view of the provisions contained in Section 16(5) & (6) of the Act, it is clear that when the arbitrator passes any order during the pendency of the arbitration in respect of the maintainability of the arbitration proceedings, the remedy available is to challenge the order along with the challenge to the award under Section 34 of the Act. Therein, the party had chosen to file a writ petition to ARB.A NO. 4 OF 2022 **==> picture [37 x 8] intentionally omitted <==** challenge the decision of the arbitral tribunal and it was held by the learned Single judge of this Court, that the writ petition is not maintainable. 18. The facts of the instant case fall on a very simple matrix. The plea of “lack of jurisdiction” was raised by the respondents in the arbitration case before the arbitral tribunal. The said plea of “lack of jurisdiction” was rejected by the arbitrator. The arbitral tribunal has, thereafter, proceeded with the arbitration proceedings. We are told that now the matter is at the stage of adducing evidence. We are appraised that the sole witness of the claimants has been examined and the stage is now set for recording evidence of the respondents in the claim petition, viz., the appellants herein. Therefore, in view of the above said conclusive legal position flowing from the simple and clear mandate of Section 16(5) & (6), where the jurisdictional bar of “lack of jurisdiction” is rejected by the arbitral tribunal, then, the arbitrator is obliged to continue with the arbitration proceedings and then proceed further with the matter and then conclude the said arbitration proceedings in the manner known to law in terms of Chapter V of the Act and render the award and then, if the appellants have any grievance in the ARB.A NO. 4 OF 2022 **==> picture [37 x 8] intentionally omitted <==** matter, they will be at liberty to challenge the said award, so passed by the arbitral tribunal, in terms of Section 34 of the Act. Then only, the law provides an opportunity to the aggrieved party to challenge the award in terms of the provisions contained in Section 34 of the Act and at that stage, both the jurisdictional bar issues and other aspects of the matter could be raised in any manner known to law. In the facts of this case, the issue as to the allowing of jurisdictional bar objection and availability of an appellate remedy, in terms of Section 37(2)(a) of the Act, does not arise. In other words, the court below did not have jurisdiction to entertain the Section 34 petition filed by the appellants herein. In that view of the matter, it is ordered that the impugned order dated 23.11.2021, rendered by the Principal Sub Court, Ernakulam in OP(Arb.) No. 160/2020, filed by the appellants herein, will stand set aside solely on the ground that the said court does not have jurisdiction to entertain such a Section 34 petition at that stage. Consequently, it is also ordered that OP(Arb.) No.160/2020, which is a Section 34 petition filed by the appellants herein, will also stand dismissed as not maintainable. The Registry will forward a copy of this judgment to the ARB.A NO. 4 OF 2022 **==> picture [37 x 8] intentionally omitted <==** Arbitrator, who has rendered the order dated 08.09.2018 in Arbitration Case No.2/2016, for necessary information. With these observations and directions, the above Arbitration Appeal will stand finally disposed of. **Sd/-** ## **ALEXANDER THOMAS** ## **JUDGE** **Sd/-** **SHOBA ANNAMMA EAPEN JUDGE** bka/-