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Failure to Request Hearing Date does not Automatically Terminate Arbitration Proceedings: Supreme Court

Case Name: Dani Wooltex Corporation & Ors v. Sheil Properties Pvt Ltd. & Anr 

Case No.: Civil Appeal No.6462 of 2024 

Dated: May 16, 2024 

Quorum: Justice Abhay S Oka and Justice Pankaj Mithal 

FACTS OF THE CASE: 

T The first appellant is a partnership company called Dani Wooltex Corporation, and it possessed some land in Mumbai. Sheil Properties, a private limited company, was the initial respondent and was involved in the development of real estate. Another limited corporation in the consumer goods industry is the second respondent, Marico Industries, or simply “Marico.”  

Under the terms of the Development Agreement, dated August 11, 1993 (referred to as “the Agreement”), Sheil was allowed to develop a portion of the first appellant’s property. The first appellant consented to sell Marico another piece of its property through the execution of a Memorandum of Understanding (MOU) between the two parties. Marico was granted a specific amount of FSI/TDR as per the terms of the MOU. 

Marico published a notice informing the public that objections were welcome. Sheil responded with one, stating that the Agreement would govern any business dealings between Marico and the first appellant.  

Due to the disagreement between Sheil and the first appellant, Sheil filed a lawsuit (Suit No. 2541 of 2006) demanding the particular performance of the MOU as amended by the purported consent provisions. In the aforementioned lawsuit, Marico and the first appellant were parties. Additionally, Sheil was named as a party defendant in a lawsuit that Marico filed (Suit No. 2116 of 2011) against the first appellant in this case.  

The learned Single Judge overturned the Arbitral Tribunal’s order to terminate the proceedings and instructed the arbitral tribunal to carry on with the proceedings by means of the contested judgement and order. It is noteworthy to mention that I.A. no. 180843 of 2023 indicates that on July 26, 2023, the experienced lone arbitrator notified the parties of his unwillingness to continue serving as the sole arbitrator. 

 LEGAL PROVISIONS:  

  • Section 32(2)(c) of the Arbitration Act- conferred a residual authority on the Arbitral Tribunal to end the proceedings in the event that it determines that their continuance is no longer necessary or feasible for any other reason. 

 CONTENTIONS OF THE APPELLANTS: 

The learned counsel for the appellants fiercely and strongly argued that In the case of Kothari Developers v. Madhukant S. Patel, the learned Single Judge of the High Court of Judicature at Bombay held that the Arbitral Tribunal was entitled to invoke its power under Section 32(2)(c) of the Arbitration Act if it is proven that the proceedings have become unnecessary due to the claimant’s inaction.  

This was brought up by the learned senior counsel appearing on behalf of the first appellant. He argued that the Arbitration Act’s Section 14 does not give the Court the authority to review the Arbitral Tribunal’s ruling, particularly when that ruling is supported by the evidence and a reasonable argument.  

The experienced senior attorney went on to say that the Arbitral Tribunal made an effort to guarantee Sheil’s attendance at Marico’s arbitration. Following the Marico case ruling, Sheil opted not to attend the Arbitral Tribunal sitting on March 11, 2020.  

It is argued that no information is in the record indicating that Sheil’s claim arbitration was scheduled to take place following Marico’s arbitration, nor is there any evidence supporting that allegation. In his submission, he stated that the Arbitral Tribunal’s factual findings on Sheil’s position could not be overturned by the Court. 

 CONTENTIONS OF THE RESPONDENTS: 

The arguments put forward by the learned counsel for the appellants were sharply and passionately rejected by the learned counsel for the respondents that the authority granted by Section 32(2)(c) of the Arbitration Act cannot be used unless a clear determination is made that it is either impractical or impossible to carry on with the procedures.  

The learned senior counsel argued that the Court must consider the legality of the Arbitral Tribunal’s termination of its mandate in order to exercise its authority under Section 14(2) of the Arbitration Act. The Court’s decision in the case of Lalitkumar V. Sanghavi & Anr. v. Dharamdas V. Sanghavi & Ors served as support for this claim. He argued that it is not possible to infer desertion.  

He argued that because the lawsuits Marico and Sheil brought were distinct from one another, the arbitral processes were also distinct. Sheil and Marico have not filed a claim for relief from one another. 

But because the two referrals had similar questions about whether the agreement requirements could be enforced, the parties decided to move forward with Sheil’s reference after Marico’s reference was resolved. The sole arbitrator in the Sheil reference did not offer any more instructions following the preliminary directives that were given on November 8, 2011, concerning the submission of pleadings, he further submitted. 

 COURT’S ANALYSIS AND JUDGMENT: 

The court said that the Arbitration Act’s chapter V covers provisions pertaining to the conduct of arbitral procedures, as noted by the court. Under subsection (1) of Section 23, the Arbitral Tribunal has the authority to set the deadlines for filing pleadings in the event that the parties cannot agree on the dates for filing statements of claim and defence.  

It was further observed that Section 23, subsection (4), which became effective on October 23, 2015, stipulates that the filing of pleadings, or statements of claim and defence, must be finished within six months of the date on which the learned arbitrator—or all of the learned arbitrators, as the case may be—receive written notice of their appointment. 

The authority granted by clause (c) of subsection (2) of Section 32 of the Arbitration Act may only be used in the event that it is no longer necessary or feasible to continue the proceedings for whatever reason.  

The authority granted by clause (c) of subsection (2) of Section 32 cannot be used unless the Arbitral Tribunal certifies, on the basis of the evidence on file, that the proceedings are no longer required or feasible. The fundamental purpose of passing the Arbitration Act will be defeated if the aforementioned power is used carelessly. 

The court has also examined that even if the parties to the proceedings do not desire a hearing, it is the Arbitral Tribunal’s responsibility to schedule one. The Arbitral Tribunal’s responsibility is to make a decision regarding the dispute that has been referred to it. In the event that parties fail to show up for a scheduled conference or hearing without a valid reason, the Arbitral Tribunal retains the right to invoke pertinent provisions of the Arbitration Act, including Section 25.  

It is difficult to deduce the abandonment. When stated or proven facts are so clear-cut that the only conclusion that can be made is that there has been an abandonment, there is an implied abandonment. An inference of abandonment can only be made if a claimant’s documented behaviour is such that it points exclusively to the conclusion that the claimant has given up on the matter. Even in cases where it is to be inferred, there must be solid facts on file that support the conclusion that the person was abandoned.  

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Judgment reviewed by Riddhi S Bhora. 

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The Delhi High Court ruled that a Retired Public Officer cannot occupy the position of Inquiry Officer under the Export Inspection Agency Employees Rules, 1978

Case title: Parveen Kumar Vs Export Inspection Council & Ors.

Case no.: W.P. (C) 3940/2017 & CM APPL.14022/2021

Decision on: March 6th, 2024

Quoram: Justice Tushar Rao Gedela

Facts of the case

The Petitioner, Parveen Kumar was working as a Technical Officer in Export Inspection Agency under the respondent office. The Petitioner, in the course of his employment exposed a recruitment scam in his department in which sixteen Assistant Director was recruited fraudulently. In 2013, the Petitioner was directed to proceed to sub-office (SO), Kanpur to hold charge but he requested to not depute him on tour to SO Kanpur. The same was rejected by the respondents and the Petitioner stood relieved from EIA Delhi Head Office. Further, he filed the tour programme which was approved by the respondent.

In 2014, the Respondent again directed the Petitioner to be deputed on tour to SO, Kanpur till further orders. He immediately filed a tour programme but the same was rejected for not having a termination date of tour. The respondents repeatedly intimated the petitioner to rectify the improper tour programme but the petitioner was unable to do it and requested the respondents to co-operate and help him in the same.  However, the respondents issued a charge memorandum against the Petitioner alleging disobedience of the order.

A disciplinary enquiry was initiated against the Petitioner in which he made a representation against the illegal appointment of an ineligible person, being a retired public servant, as Inquiry Officer in contravention of Rule 11 of the EIA Rules. But, the representation was rejected by the Respondent. The Disciplinary Authority passed an order of penalty of reduction in rank from Technical Officer to Lower Post of Junior Scientific Assistant against the petitioner. Consequently, the Petitioner preferred a statutory appeal which was dismissed by the Appellate Authority. Aggrieved by the same, the Petitioner filed the present Writ Petition, challenging the impugned orders of the Disciplinary Authority and the Appellate Authority.

Contentions of the Petitioner

Praveen Kumar appearing in person challenged the Disciplinary Authority (DA) primarily on two grounds which violated the Principles of Natural Justice and Rules and Regulations of the Export Inspection Agency (EIA). He submitted that the appointment of the Inquiry Officer was invalid as it violated Rule 11 (2) of the respondent (EIA Rules). Rule 11(2) prescribes the Inquiry Officer to be a “Public Servant” but submitted that the Inquiry Officer in the present case was a retired employee and was not in active duty. As such, retired employees cannot be called a Public Servant. Further, the petitioner contended that he was not granted any opportunity of hearing by the Disciplinary Authority before passing the impugned order, because according to Rule 11 (4) of the EIA Rules, after the written Statement of Defence is submitted, if the Charged Officer seeks hearing, the Disciplinary Authority must grant such hearing before passing the final order. However, he was not granted any Personal Hearing in spite of his requisition, which according to the petitioner not only violated the statutory rules but also the well settled Principles of Natural Justice.

Contentions of the Respondents

The Counsel, on the contrary submitted that even the retired officer can be construed as a public servant and as such, the Inquiry Officer was appointed is in accordance with the EIA Rules. The Inquiry Officer was paid remuneration for the purposes of conducting inquiry against the Petitioner who is a public servant and the disciplinary proceedings itself would fall within the public duty of the Respondent. Further, with respect to the violation of Rule 11(4) the Counsel submitted that there was no defence raised by the Petitioner in the defence statement except making allegations except against the officers and authorities. He opined that if personal hearing was granted, the Petitioner would have simply continued the tirade of baseless allegations and thus, the denial of the same cannot be termed as a violation of the said rule.

Court’s Analysis and Judgement

The Court considering the arguments of the parties notes that the issue in present petition revolves around the interpretation of the provisions of Rule 11(2) and Rule 11 (4) of the EIA Rules, 1978.

The Bench, on perusal of Rule 11(2) of the EIA Rules, asserted two key aspects. According to the rule, firstly, the Disciplinary Authority may itself inquire into the truth of any imputation of misconduct against agency employee; and secondly, that it may appoint under that sub rule ‘a public servant’ to inquire into such truth thereof. The court adopting a plain and simple reading of the provision emphasized that the term such person / Inquiry Officer must be a servant of the public and not a person who ‘was’ a servant of the public and thereby rejected the argument of the respondent. The Inquiry Officer, who was a retired officer of the respondent, did not fulfil the criteria of a ‘public servant’ and held such appointment to be violative of Rule 11 (2) of the EIA Rules. Thus, it ruled that a public servant occupying the position of Inquiry Officer cannot be a retired person.

The Court further adjudicated on the issue of violation of the Rule 11(4) of the EIA Rules wherein the Charged Officer was permitted to seek personal hearing before the DA. The said Rule prescribed the e procedure as to how the DA would proceed after the conclusion of the Inquiry Officer’s report. The Court referring to the rule asserted that the DA was mandated to afford the Charged Officer (CO) an opportunity to tender a written Statement of Defence against the Articles of Charge and the proposed penalty. Moreover, even in accordance with the principles of natural justice the DA ought to afford an opportunity of personal hearing to the CO, if he desires. It highlighted that the opportunity of personal hearing is not a mere formality. It is intrinsic and intertwined not only with the disciplinary proceedings but also with the principles of natural justice. But however, in the instant case it was observed that even on the receipt of requisition no such an opportunity was afforded to the petitioner by the respondent, thus violating Rule 11 (4) of the EIA Rules, 1978.

The Delhi High Court in view of the above violations remitted the matter back to the Disciplinary Authority for adjudication.

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Judgement Reviewed by – Keerthi K

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