The Kottayam Municipality v. Ramky Energy and Environment Limited

``` OP(C) NO.81 OF 2023 ``` ``` 1 ``` # **`IN THE HIGH COURT OF KERALA AT ERNAKULAM`** # **`PRESENT`** ``` THE HONOURABLE MR.JUSTICE C.S.DIAS ``` ``` FRIDAY, THE 13[TH] DAY OF JANUARY 2023 / 23RD POUSHA, 1944 ``` ``` OP(C) NO. 81 OF 2023 ``` ## **`PETITIONER/S:`** ``` THE KOTTAYAM MUNICIPALITY KOTTAYAM 686001 REPRESENTED BY ITS SECRETARY ``` ``` BY ADV AJIT JOY ``` ## **`RESPONDENT/S:`** ``` M/S RAMKY ENERGY AND ENVIRONMENT LIMITED, REGISTERED OFFICE AT RAMKY GRANDIOSE, RAMKY TOWERS, GACHIBOWLI, HYDERABAD, TELENGANA, PIN - 500032 REPRESENTED BY THE MANAGING DIRECTOR ``` ``` THIS OP (CIVIL) HAVING COME UP FOR ADMISSION ON 13.01.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` ``` OP(C) NO.81 OF 2023 ``` ``` 2 ``` ## **JUDGMENT** The original petition is filed to set aside Exts.P9 and P11 orders passed by the Arbitral Tribunal in Arbitration Proceedings No.2/2017. 2. The thumbnail sketch of the facts leading to Exts.P9 and P11 are: 2.1. The petitioner municipality had entered into Ext.P1 concession agreement with the respondent company for the erection of a waste disposal project. 2.2. Disputes arose between the parties, and the respondent invoked the arbitration clause in Ext.P1 agreement. Ultimately, the Honourable Supreme Court appointed the Arbitral Tribunal by Ext.P2 order. 2.3. The petitioner has filed Ext.P3 preliminary objection, _inter alia_ , contending that the claim statement filed by the respondent is hopelessly barred by limitation. 2.4. The petitioner has also filed Ext.P4 application under Section 16(3) of the Arbitration and Conciliation ``` OP(C) NO.81 OF 2023 3 ``` Act, 1996 (in short, ‘Act’) to treat the preliminary objection as a challenge to the jurisdiction of the Arbitral Tribunal. The respondent filed Ext.P5 reply to Ext.P3 preliminary objection. - 2.5. The petitioner repeatedly requested before the - Arbitral Tribunal to hear the preliminary objection. 2.6. By Ext.P6 minutes dated 24.05.2022, the Arbitral Tribunal recorded that the preliminary objection would be heard on 28.06.2022. 2.7. The was heard on preliminary objection 06.08.2022, and the Arbitral Tribunal, by Ext.P7 minutes, held that an opportunity would be given to both sides to argue on the plea of limitation. However, by Ext.P9 minutes, the Arbitral Tribunal held that the plea of limitation would be heard as a preliminary issue at the time of final arguments. - 2.8. Ext.P9 is not in line with Exts.P6 and P7 - decisions. Hence, the petitioner filed Ext.P10 application ``` OP(C) NO.81 OF 2023 4 ``` requesting the Arbitral Tribunal to hear and decide the preliminary objection. 2.9. The Presiding Arbitrator, by Ext.P11 e-mail, has informed the petitioner that Ext.P9 order would stand and the present application could not be entertained. 2.10. The course adopted by the Arbitral Tribunal is against the scheme and provisions of the Act. Therefore, Exts.P9 and P11 may be set aside, and the Arbitral Tribunal may be directed to decide on Ext.P3 preliminary objection. Hence, the original petition. 3. Heard; Sri.Ajit Joy, the learned Counsel appearing for the petitioner on admission. 4. The petitioner’s contention in Exts.P3 and P4 objections is that the claim petition filed by the respondent is hopelessly barred in view of the provisions of the Limitation Act, 1963. Hence, the petitioner wants the said objection to be considered as a preliminary issue. 5. The Arbitral Tribunal, taking into account that the parties have no oral evidence, by Ext.P9 order, held that ``` OP(C) NO.81 OF 2023 5 ``` the issue of limitation can be considered as a preliminary issue at the time of final arguments. 6. Although the petitioner filed Ext.P10 application reiterating its request, the Principal Arbitrator rejected the request by Ext.P11 order. The net result of Exts.P9 and P11 is that the petitioner’s request to consider its preliminary objection has been deferred for consideration to the final hearing stage. 7. This Court has its reservations on whether a plea of limitation ― a mixed question of law and fact ― would fall within the fold of Section 16 of the Act. Nevertheless, as the Arbitral Tribunal is seisin of the matter, this Court refrains from delving further on the said question. 8. If at all the deferment of Exts.P3 and P4 objection to the final stage of the proceeding is to be treated as a rejection of the petitioner’s request, then the petitioner has no other option but to wait till the award is passed as stipulated under Section 16(6) of the Act. Furthermore, ``` OP(C) NO.81 OF 2023 6 ``` only an order accepting a plea under Sections 16(2) or (3) of the Act is appealable under Section 37(2) of the Act. 9. The above question is no longer _res integra_ in the light of the declaration of law in **Deep Industries Ltd. v. Oil and Natural Gas Corporation Ltd** _._ [(2020) 15 SCC 706], wherein the Honourable Supreme Court held as follows: “22. One other feature of this case is of some importance. As stated hereinabove, on 9-5-2018, a Section 16 application had been dismissed by the learned arbitrator in which substantially the same contention which found favour with the High Court was taken up. **The drill of Section 16 of the Act is that where a Section 16 application is dismissed, no appeal is provided and the challenge to the Section 16 application being dismissed must await the passing of a final award at which stage it may be raised under Section 34.** What the High Court has done in the present case is to invert this statutory scheme by going into exactly the same matter as was gone into by the arbitrator in the Section 16 application, and then decided that the two-year ban/blacklisting was no part of the notice for arbitration issued on 2-11-2017, a finding which is directly contrary to the finding of the learned arbitrator dismissing the Section 16 application. For this reason alone, the judgment under appeal needs to be set aside. Even otherwise, as has been correctly pointed out by Mr. Rohatgi, the judgment under appeal goes into the merits of the case and states that the action of putting the Contractor and his Directors “ _on holiday_ ” is not a consequence of the termination of the agreement. This is wholly incorrect as it is only because of the termination that the show-cause notice dated 18-10-2017 proposing to impose a two-year ban/blacklisting was sent. ``` OP(C) NO.81 OF 2023 ``` ``` 7 ``` Even otherwise, entering into the general thicket of disputes between the parties does not behove a court exercising jurisdiction under Article 227, where only jurisdictional errors can be corrected. Therefore to state that the ban order was passed under a General Contract Manual and not Clause 18 of the agreement, besides being incorrect, would also be incorrect for the reason that the General Contract Manual does not mean that such order was issued as an administrative order invoking the executive power, but was only as an order which emanated from the contract itself. Further to state that “serious disputes” as to jurisdiction seem to have cropped up is not the same thing as saying that the Arbitral Tribunal lacked inherent jurisdiction in going into and deciding the Section 17 application. In point of fact, the Arbitral Tribunal was well within its jurisdiction in referring to the contract and the ban order and then applying the law and finally issuing the stay order. Even if it be accepted that the principle laid down by Section 41( _e_ ) of the Specific Relief Act was infracted, in that damages could have been granted, as a result of which an injunction ought not to have been issued, is a mere error of law and not an error of jurisdiction, much less an error of inherent jurisdiction going to the root of the matter. Therefore, even otherwise, the High Court judgment cannot be sustained and is set aside. 23. We reiterate that the policy of the Act is speedy disposal of arbitration cases. The Arbitration Act is a special Act and a selfcontained code dealing with arbitration. This Court in _Fuerst Day Lawson Ltd. [Fuerst Day Lawson Ltd._ v. _Jindal Exports Ltd._ , (2011) 8 SCC 333 : (2011) 4 SCC (Civ) 178], has specifically held as follows : (SCC p. 371, para 89) “ _89._ It is, thus, to be seen that Arbitration Act, 1940, from its inception and right through to 2004 (in _P.S. Sathappan [P.S. Sathappan_ v. _Andhra Bank Ltd._ , (2004) 11 SCC 672]) was held to be a self-contained code. Now, if the Arbitration Act, 1940 was held to be a self-contained code, on matters pertaining to arbitration, the Arbitration and Conciliation Act, 1996, which consolidates, amends and designs the law relating to arbitration to bring it, as much as possible, in harmony with the UNCITRAL Model must be held only to be more so. Once it is held that the Arbitration Act is a ``` OP(C) NO.81 OF 2023 ``` ``` 8 ``` self-contained code and exhaustive, then it must also be held, using the lucid expression [ _S.N. Srikantia & Co._ v. _Union of India_ , 1965 SCC OnLine Bom 133 : AIR 1967 Bom 347] of Tulzapurkar, J., that it carries with it ‘ _19_ . … a negative import that only such acts as are mentioned in the Act are permissible to be done and acts or things not mentioned therein are not permissible to be done. …’ ( _S.N. Srikantia & Co. case [S.N. Srikantia & Co._ v. _Union of India_ , 1965 SCC OnLine Bom 133 : AIR 1967 Bom 347], SCC OnLine Bom para 19) In other words, a letters patent appeal would be excluded by the application of one of the general principles that where the special Act sets out a self-contained code the applicability of the general law procedure would be impliedly excluded.” What becomes clear is that had the High Court itself disposed of the first appeal in the present case, no Article 227 petition could possibly lie — all that could perhaps have been done was to file an LPA before a Division Bench of the same High Court. This, as we have seen, has specifically been interdicted by _Fuerst Day Lawson Ltd. [Fuerst Day Lawson Ltd._ v. _Jindal Exports Ltd._ , (2011) 8 SCC 333 : (2011) 4 SCC (Civ) 178] Merely because, on the facts of this case, the first appeal was disposed of by a court subordinate to the High Court, an Article 227 petition ought not to have been entertained. 10. The question as to whether this Court can interfere with an order passed by an Arbitrator under Sections 16(2) or (3) of the Act, under Article 227 of the Constitution of India, is also answered in paragraphs 16 and 17 in _Deep Industries Ltd._ , which reads as follows: ``` OP(C) NO.81 OF 2023 ``` ``` 9 ``` “16. Most significant of all is the non obstante clause contained in Section 5 which states that notwithstanding anything contained in any other law, in matters that arise under Part I of the Arbitration Act, no judicial authority shall intervene except where so provided in this Part. Section 37 grants a constricted right of first appeal against certain judgments and orders and no others. Further, the statutory mandate also provides for one bite at the cherry, and interdicts a second appeal being filed [ _see_ Section 37(2) of the Act]. 17. This being the case, there is no doubt whatsoever that if petitions were to be filed under Articles 226/227 of the Constitution 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, we cannot forget that Article 227 is a constitutional provision which remains untouched by the non obstante clause of Section 5 of the Act. **In these circumstances, what is important to note is that though petitions can be filed under Article 227 against judgments allowing or dismissing first appeals under Section 37 of the Act, yet the High Court would be extremely circumspect in interfering with the same, taking into account the statutory policy as adumbrated by us hereinabove so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction”.** ## 11. Recently, in **Bhavan Construction v. Executive** **Engineer, Sardar Sarovar Narmada Nigam Ltd.** [(2022) 1 SCC 75], the Hon'ble Supreme Court has held as follows: “18. In any case, the hierarchy in our legal framework, mandates that a legislative enactment cannot curtail a constitutional right. In _Nivedita Sharma_ v. _COAI [Nivedita Sharma_ v. _COAI_ , (2011) 14 SCC ``` OP(C) NO.81 OF 2023 ``` ``` 10 ``` 337 : (2012) 4 SCC (Civ) 947], this Court referred to several judgments and held : (SCC p. 343, para 11) “ _11_ . We have considered the respective arguments/submissions. There cannot be any dispute that the power of the High Courts to issue directions, orders or writs including writs in the nature of habeas corpus, certiorari, mandamus, quo warranto and prohibition under Article 226 of the Constitution is a basic feature of the Constitution and cannot be curtailed by parliamentary legislation — _L. Chandra Kumar_ v. _Union of India [L. Chandra Kumar_ v. _Union of India_ , (1997) 3 SCC 261 : 1997 SCC (L&S) 577]. _However, it is one thing to say that in exercise of the power vested in it under Article 226 of the Constitution, the High Court can entertain a writ petition against any order passed by or action taken by the State and/or its agency/instrumentality or any public authority or order passed by a quasi-judicial body/authority, and it is an altogether different thing to say that each and every petition filed under Article 226 of the Constitution must be entertained by the High Court as a matter of course ignoring the fact that the aggrieved person has an effective alternative remedy._ Rather, it is settled law that when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation.” (emphasis supplied) **It is therefore, prudent for a Judge to not exercise discretion to allow judicial interference beyond the procedure established under the enactment. This power needs to be exercised in exceptional rarity, wherein one party is left remediless under the statute or a clear “bad faith” shown by one of the parties. This high standard set by this Court is in terms of the legislative intention to make the arbitration fair and efficient”.** xxx xxx xxx xxx **26. It must be noted that Section 16 of the Arbitration Act, necessarily mandates that the issue of jurisdiction must be dealt first by the tribunal, before the court examines the same** ``` OP(C) NO.81 OF 2023 ``` ``` 11 ``` **under Section 34. Respondent 1 is therefore not left remediless, and has statutorily been provided a chance of appeal** ”. 12. On an overall appreciation of the provisions and scheme of the Act, especially Section 5, and the law laid down in the afore-cited decisions, I am of the definite view that it is not for this Court to interfere in a case of the present nature. I do not find any ground or circumstance of exceptional rarity to exercise the powers of superintendence of this Court under Article 227 of the Constitution of India. Resultantly, without prejudice to the right of the petitioner to work out its remedies in accordance with law, the original petition is dismissed. The Registry is directed to forthwith forward a certified copy of this judgment to the Arbitral Tribunal. Sd/- ## **C.S.DIAS, JUDGE** okb/13.1.2023 //True copy// P.S. to Judge ``` OP(C) NO.81 OF 2023 12 ``` ## **`APPENDIX OF OP(C) 81/2023`** ``` PETITIONER EXHIBITS ``` - `Exhibit P1 A TRUE COPY OF THE CONCESSION AGREEMENT ENTERED INTO BETWEEN THE PETITIONER MUNICIPALITY AND THE RESPONDENT COMPANY ON 17.06.2005,` - `Exhibit P2 . A TRUE COPY OF THE ORDER DATED 22.04.2022 OF THE HON'BLE SUPREME COURT IN M.A. 677 OF 2022 IN SLP (CIVIL) NO. 921 OF 2019` - `Exhibit P3 . A TRUE COPY OF THE PRELIMINARY OBJECTION DATED 10.05.2018 SUBMITTED BY THE PETITIONER IN A.R. NO. 2 OF 2017` - `Exhibit P4 A TRUE COPY OF THE APPLICATION DATED 30.06.2018 FILED BY THE PETITIONER BEFORE THE ARBITRAL TRIBUNAL IN A.R. NO. 2 OF 2017 TO TREAT THE PRELIMINARY OBJECTION AS AN APPLICATION UNDER SECTION 16 (3) OF THE ARBITRATION AND CONCILIATION ACT 1996` - `Exhibit5 A TRUE COPY OF THE REPLY DATED 21.06.2018 FILED BY THE RESPONDENT IN A.R. NO. 2 OF 2017 TO THE PRELIMINARY OBJECTION FILED BY THE PETITIONER` - `Exhibit P6 A TRUE COPY OF THE MINUTES OF THE MEETING OF THE ARBITRAL TRIBUNAL HELD ON 24.05.2022` - `Exhibit P7 . A TRUE COPY OF THE MINUTES OF THE MEETING OF THE ARBITRAL TRIBUNAL HELD ON 06.08.2022` - `Exhibit P8 A TRUE COPY OF THE EMAIL COMMUNICATION DATED 13.09.2022 SENT BY THE COUNSEL FOR THE PETITIONER TO THE ARBITRATORS` ``` Exhibit P9A TRUE COPY OF THE MINUTES OF THE MEETING OF THE ARBITRAL TRIBUNAL HELD ON 17.11.2022 Exhibit P10. A TRUE COPY OF THE APPLICATION DATED17.11.2022 SUBMITTED BY THE PETITIONER BEFORE THE ARBITRAL TRIBUNAL IN A.R. NO. 2 OF 2017 ``` ``` OP(C) NO.81 OF 2023 13 ``` ``` Exhibit P11A TRUE COPY OF THE EMAIL DATED 08.12.2022 SENT BY THE PRESIDING ARBITRATOR HON'BLE JUSTICE MR. K.S.P. RADHAKRISHNAN (RETD) INTIMATING HIS DECISION IN EXHIBIT P10 Exhibit P12A TRUE COPY OF THE JUDGMENT DATED 18.01.2022 IN O.P. (C) NO. 101 OF 2022 OF THIS HON'BLE COURT ```