S.14 of the Arbitration Act cannot be construed in a manner to give adjudicatory authority to inferior courts: Calcutta High Court

The present matter deals with an exparte ad interim order of injunction and its continuance till the disposal of the temporary injunction application was challenged in the instant appeal in Regent Hirise Pvt. Ltd. v Sanchita Chatterjee [F.M.A.T 77 OF 2016]. It was prayed before the quorum of Harish Tandon J. and Kausik Chanda J. that where the Civil Court in a suit seeking declaration that the nominated Arbitrator is ineligible under Section 12(5) of the Arbitration and Conciliation Act, 1996 is restricted from continuing with the arbitration proceedings by way of anti-Arbitration injunction.

The facts which emanate from the plaint evince that dispute relates to an agreement for procurement of the land by virtue of an agreement for sale. It was alleged that the 7th defendant representing himself to be an influential person having contacts with the officials of the different government departments assured to resolve all the pending litigations of the plaintiff so that the property can be sold unencumbered. In course of such transaction he received a sum aggregating to Rs. 22,50,000/-. The plaintiff could certainly come to know that the defendant no. 7 was shown to have been appointed as the sole Arbitrator under the aforesaid agreement. Not only the plea of fraud is also alleged in the plaint but the ineligibility of the 7th defendant to act as the sole Arbitrator is raised in the said suit. It appeared in course of a hearing that the plaintiffs appeared in the Arbitral proceedings and caused a letter raising the plea of ineligibility of the 7th defendant to act as an Arbitrator and to proceed with the Arbitral proceedings. Immediately, thereafter thepresent suit is filed and an order of injunction is passed to operate till the disposal of the application for temporary injunction.

It was submitted on behalf of the petitioners that the jurisdiction of the Civil Court has not been expressly taken away if the challenge was thrown on the ineligibility of the Arbitrator coming within the ambit of Section 12(5) of the said Act conjointly with the incidences incorported in the Seventh Schedule appended thereto.

The bench turned to judgment in HRD Corporation-VsGAIL (India) Limited reported in 2018(12) SCC 471 wherein it is held that by virtue of such amendment the dichotomy is manifested between a person who is ineligible to be appointed as Arbitrator and a person against whom there is a justifiable doubts on the existence of his impartiality and/or independence. It is held that ineligibility strikes at the root of the jurisdiction or in other words the appointment, such Arbitrator becomes de jure within the meaning of Section 14(1)(a) of the Act and , therefore, unable to perform his functions in such capacity.

The court on perusal of facts and relevant cases, rendered judgment that, “Even the provision of Section 14 providing the remedy to the Court cannot be stretched to an ordinary Civil Court inferior in grade to a Court of a District Judge in a district and as a logical collolary, the challenge on the ground of disqualification or ineligibility under Section 12(5) cannot be maintained in such Court. The remedy can only be resorted to a court defined under Section 2 (1)(e) of the Act even for such purposes.

In view of the above, it was also opined that the Court which passed the impugned order was not the “Court” within the meaning of the “Court” under Section 2 (1)(e) of the Act and, therefore, the order is per se illegal and cannot be sustained.

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