Bombay High Court
M/S. Shinde And Sons, Through It S … vs Godawari Marathwada Irrigation … on 15 April, 2026
2026:BHC-AUG:15917-DB
Comm. Arb. Appeal 1 of 2019 ssc.odt
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
BENCH AT AURANGABAD
COMMERCIAL ARBITRATION APPEAL NO. 1 OF 2019
M/s. Shinde & Sons,
Through Its Partner
Mr. Satish S/o Budhajirao Shinde,
Age : 52 Years, Occu : Business,
R/o Opp. Bhairavnath Patsanstha,
Nagar-Pune Road, Kedgaon Devi,
Ahmednagar. ... APPELLANT
...VERSUS...
1. Godawari Marathwada
Irrigation Development
Corporation, Through Its
Executive Engineer,
Majalgaon Canal Division,
Gangakhed, Dist. Parbhani.
2. Mr. B. B. Jadhav,
Wanshri Elegance
Survey No. 80/2, Plot No. 14,
Baner Road, Aundh, Pune. ... RESPONDENTS
_______________________________________________________________
Mr. G. K. Naik Thigle, Advocate for the Petitioner
Mr. P. R. Katneshwarkar, Senior Advocate i/b. Mr. S. G. Bhalerao,
Advocate for Respondent No. 1
_______________________________________________________________
CORAM : ARUN R. PEDNEKER AND
VAISHALI PATIL-JADHAV, JJ.
RESERVED ON : 27.02.2026
PRONOUNCED ON : 15.04.2026
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J U D G M E N T [Per Vaishali Patil-Jadhav, J.] :
1. Rule. Rule made returnable forthwith and heard finally with the
consent of the learned counsel for the parties.
2. By the present Commercial Arbitration Appeal, filed under
Section 37 of the Arbitration and Conciliation Act, 1996, the appellant-
contractor has challenged the Judgment and Order dated 11.09.2018
passed by the learned District Judge-1, Beed, in Miscellaneous Civil
Application (ARB) No. 242 of 2015, whereby the application filed by
respondent no. 1 – GMIDC under Section 34 of the Arbitration and
Conciliation Act,1996 came to be allowed and the arbitral award dated
27.01.2015 passed by the sole arbitrator was set aside.
3. The facts of the appeal, in brief, are as follows:
Pursuant to tender notice No. JPC/LCB/53 of 1990-91, tenders
were invited by the Government of Maharashtra, Irrigation Department
for the work of construction of Earth Work, Structures, Lining and
Selective Lining of Kothala Branch Canal, KM No. 7 to 9, Distributory D-
12 and D-13 of Kothala Branch Canal on Majalgaon Right Bank Canal.
The estimated cost of the work was Rs. 1,15,98,000/-. The appellant,
being the successful tenderer, was allotted the work accordingly. An
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agreement came to be executed between the parties. As per the terms of
the contract, the stipulated period for completion of work was 30
Calendar months from the date of issuance of notice to proceed with the
work.
4. The work was required to be completed on or before 13.08.1993.
It is the case of the appellant that due to non-fulfilment of reciprocal
obligations by the respondent no. 1 and various extensions granted
from time to time, the scope of the work underwent a sea change both
in terms of quantity and financial implications. The work came to be
completed on 21.06.2006 and the final bill was drawn thereafter on
11.07.2006.
5. Being aggrieved by the imposition of penalty and termination of
contract, the appellant instituted RCS No. 258 of 1994 seeking an
injunction restraining the respondent no. 1 from assigning the
remaining work to a third agency. The respondent no. 1 also instituted
proceedings being RCS No. 221 of 1995 seeking a declaration that the
unilateral appointment of Sole Arbitrator by the appellant as illegal and
for an injunction restraining the arbitrator from acting as a Sole
Arbitrator. Both the suits were subsequently compromised. The
appellant waived the right regarding revision of rates and it was agreed
that the parties will not resort to arbitration. The termination order was
revoked and the contract was revived.
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6. The work was completed on 21.06.2006 and the final bill was
drawn/paid on 11.07.2006. It is the case of appellant that due to
abnormal increase in the quantity of work and various breaches of the
contract that occurred during execution of the work, the appellant had
raised various claims. As the claims raised were not settled and disputes
arose between the parties, notice under Clause 52 of the General
Conditions of Contract for settlement of disputes was issued, in the
meantime, by the appellant on 11.05.2006. On 29.07.2006, the
respondent no. 1 gave option for the appointment of an Arbitrator
which was exercised by the appellant on 05.08.2006.
7. Initially, one Mr. S.D.Chate was appointed as Sole Arbitrator on
14.08.2006, who later showed his inability to work as an arbitrator and
withdrew from the proceedings. Thereafter, Mr. E.B.Jogdand was
appointed as Sole Arbitrator, who also, showed his inability to work and
withdrew from the proceedings in 2012. Subsequently, by
communication dated 14.02.2014, the appellant requested the Chief
Engineer for appointment of an Arbitrator. The respondent no. 1, by
communication dated 13.03.2014, suggested a list of names of Mr.
A.R.Kamble, Mr. V.D.Nemade and Mr. B.B.Jadhav for appointment as
Arbitrator. Vide letter dated 15.03.2014, appellant selected the name of
Mr. B.B.Jadhav for appointment as a Sole Arbitrator. However, it is the
case of respondent that Mr. A.R. Kamble was appointed as the sole
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Arbitrator in exercise of powers conferred under clause 52 of the
contract by the Chief Engineer.
8. Appellant, by letter dated 15.07.2014 requested the Arbitrator
Mr. B.B. Jadhav to commence the arbitration proceedings. The learned
Arbitrator accordingly, communicated the parties about the preliminary
meeting scheduled on 03.08.2014. However, in the meantime,
respondent no. 1, vide letter dated 01.08.2014, informed Mr.
B.B.Jadhav that in view of their objection regarding the appointment of
Mr. B.B.Jadhav as sole arbitrator, and in view of the order dated
14.07.2014 passed by the Assistant Chief Administrator, GMIDC,
Mr.A.R.Kamble is appointed as a sole arbitrator for settlement of
disputes and claims regarding the work and as such, it is not advisable
for him to attend the meeting scheduled on 03.08.2014. The respondent
no. 1 also had approached this Court by way of Arbitration Application
No. 12 of 2014 seeking cancellation of appointment of Mr.B.B.Jadhav as
a Sole Arbitrator on the ground that he is not eligible for being
appointed as he was a retired officer and was not holding charge of the
post of Superintending Engineer and by relying on Clause 53 of the
General Conditions of Contract, it is submitted that Mr. B.B. Jadhav was
incompetent to act as an arbitrator. The said application came to be
dismissed by this Court by order dated 18.11.2014, with liberty to raise
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objections before the arbitrator in accordance with law within a period
of 45 days.
9. Thereafter, against the judgment and order dated 18.11.2014 of
this Court, the respondent no. 1 approached the Hon’ble Supreme Court
by filing SLP No. 5274 of 2015.
10. During the pendency of the proceedings filed before this Court
and the Hon’ble Supreme Court, the learned Arbitrator proceeded with
the matter. In all, seven meetings were conducted from 03.08.2014 to
30.11.2014 including a site inspection on 29.11.2014. However, the
respondent no. 1 never caused appearance before the learned
Arbitrator. Ex-parte award was passed by the learned Arbitrator on
27.01.2015, directing payment of an amount of Rs. 1,02,45,34,130/-
with interest at the rate of 18% per annum.
11. Thereafter, the SLP No. 5274/2015 was disposed of by the
Hon’ble Supreme Court by order dated 09.03.2015, granting liberty to
the respondent no. 1 to put forth its challenges as permissible in law,
while assailing the validity of the award.
12. The respondent no. 1 challenged the said award dated
27.01.2025 by filing an application under Section 34 of the Arbitration
and Conciliation Act, 1966. The learned District Court allowed the
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application and set aside the arbitral award dated 27.01.2025. Hence,
the present appeal is filed under Section 37 of the Arbitration and
Conciliation Act, 1996.
13. The learned counsel Mr. Girish Thigle for the appellant would
submit that the impugned judgment and order passed by the learned
District Judge suffers from jurisdictional error. He would submit that the
well-reasoned arbitral award is set aside mainly on the ground that it is
an ex-parte award, without referring to or considering any of the
clauses under Section 34 of the Arbitration & Conciliation Act, 1996.
14. Mr. Thigle would further submit that the learned District Judge
has, in paragraph 26 of the impugned order, considered the issue
regarding the appointment and qualification of the learned Arbitrator,
though no such objection was raised before the arbitral tribunal as
required under Section 13 of the Arbitration and Conciliation Act, 1996.
It is contended that, in the absence of any such challenge at the
appropriate stage, the said objection could not have been entertained
while exercising jurisdiction under Section 34 of the Act.
15. He would further submit that the impugned judgment and order
is passed without jurisdiction. He placed reliance on the decision of the
Hon’ble Supreme Court in Indus Mobile Development Pvt. Ltd. Vs.
Datawind Innovations Pvt. Ltd. reported in (2017) 7 SCC 618 to
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contend the same. He would submit that application under Section 34
could only have been filed in a Court where the arbitral proceedings
were held. It was submitted that the learned arbitrator conducted the
proceedings/sittings at Pune and Aurangabad and no sittings were
conducted at Beed. Therefore, the Commercial Court at Beed had no
territorial jurisdiction to entertain the application.
16. By placing reliance on the decision of the Hon’ble Supreme Court
in Gayatri Balasamy vs. Novosoft, the learned counsel would submit
that, setting aside an award has serious consequences and every
attempt should be made to save an award. He would also submit that
the award could not be set aside unless it was contrary to the
substantive provision of law, any provision of the Arbitration and
Conciliation Act, 1996, or the terms of the agreement.
It was lastly submitted that the impugned order is unsustainable
and liable to be set aside, and the arbitral award dated 27.01.2015
deserves to be restored.
In support of his submissions, learned counsel for the appellant
relied on Quippo Construction Equipment Limited Vs. Janardan
Nirman Private Limited; [(2020) 18 Supreme Court Cases 277], Gayatri
Balasamy Vs. ISG Novasoft Technologies Limited; [(2025) 7 SCC 1],
UHL Power Company Limited Vs. State of Himachal Pradesh; [(2022) 4
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Comm. Arb. Appeal 1 of 2019 ssc.odt
SCC 116], Eminent Colonizers Private Limited Vs. Rajasthan Housing
Board and Others; [2026 SCC OnLine SC 148], Jan De Nul Dredging
India Pvt. Ltd. Vs. Tuticorn Port Trust; [2026 SCC OnLine SC 33], Indus
Mobile Distribution Private Limited Vs. Datawind Innovations Private
Limited and Others; [(2017) 7 SCC 678], BBR (India) Private Limited
Vs. S.P.Singla Constructions Private Limited; [(2023) 1 SCC 693], Atul
R. Shah Vs. M/S V. Vrijlal Lalloobhai and Co. and another; [1999 (1)
Mh.L.J. 629], and Reliance Infrastructure Limited Vs. State of Goa;
[(2024) 1 SCC 479].
17. Per contra, learned senior counsel Mr. P.R. Katneshwarkar i/b
Mr.S.G. Bhalerao for respondent no. 1, supported the impugned
judgment and order and would submit that the same is passed after due
consideration of the material on record and does not warrant any
interference in the present appeal. He would submit that, at the outset,
the very foundation of the appellant’s case is misconceived and contrary
to the terms of the contract. The appellant had accepted the tender with
specific terms and conditions in which, time was the essence of the
contract. However, he failed to complete the work within the stipulated
period i.e., on or before 13.08.1993, despite repeated extensions
granted by the respondent no. 1. The delay being solely attributable to
the appellant, penalty under the relevant clauses of the agreement was
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rightly imposed and the contract was terminated in accordance with
law.
18. It is the case of the respondent no. 1 that as the work was not
completed within the stipulated period, the appellant committed a
breach of the contract and therefore, a penalty of Rs. 5,800/- per day
was imposed by the Executive Engineer, by communication dated
21.12.1993. Thereafter, an order of termination of contract was issued
on 31.01.1994.
19. The learned senior counsel would submit that the appellant had
committed various breaches of the terms and conditions of the contract.
The civil proceedings between the parties were admittedly
compromised. The appellant had given specific undertaking including
waiver of claims relating to revision of rates, and agreed not to pursue
disputes further. In view of such binding undertakings, no subsisting
dispute survived between the parties and the invocation of arbitration is
untenable. It is further submitted that the arbitration proceedings
themselves were not maintainable as there was no “live claim” in
existence.
20. He would submit that despite specific objections raised by the
respondent to the appointment of the arbitrator, the same were not
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taken into consideration and the arbitrator proceeded with undue haste.
The respondent had, in fact, appointed a competent arbitrator in terms
of the contract, namely Shri A. R. Kamble; however, the appellant
deliberately proceeded with an ineligible arbitrator Mr. B.B. Jadhav and
conducted proceedings unilaterally.
21. The learned senior counsel would further submit that the ex-parte
award is passed in violation of principles of natural justice. The
arbitrator proceeded with the matter despite being aware of the
pending challenge to his appointment before the Hon’ble High Court
and thereafter before the Hon’ble Supreme Court. The undue haste in
proceeding with the matter and passing an ex-parte award
demonstrates bias and procedural impropriety.
22. It is submitted that the award is perverse and contrary to public
policy. The claims allowed by the arbitrator are not supported by any
cogent evidence and are based on assumptions, conjectures and
surmises. The amounts awarded are excessive, fictitious and beyond the
scope of the contract, thereby rendering the award liable to be set aside.
23. Learned senior counsel would submit that the learned District
Judge has rightly exercised jurisdiction under Section 34 of the Act. The
findings recorded are within the permissible scope of interference,
particularly in view of the illegality in the constitution of the arbitral
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tribunal, absence of a live claim, bar of limitation and violation of
principles of natural justice.
It is lastly submitted that the learned District Judge has rightly set
aside the arbitral award. The present appeal, being devoid of merits,
deserves to be dismissed with costs.
In support of his submissions, learned counsel for the respondent
relied on Kotak Mahindra Bank Ltd. Vs. Narendra Kumar Prajapat;
[2023 SCC OnLine Del 3148], Bharat Broadband Network Limited Vs.
United Telecoms Limited; [(2019) 5 SCC 755], S.P. Singla Constructions
Private Limited Vs. State of Himachal Pradesh and Another; [(2019) 2
SCC 488], Kinnari Mullick and Another Vs. Ghanshyam Das Damani;
[(2018) 11 SCC 328], Atul R. Shah Vs. M/s. V. Vrijlal Lalloobhai and
Co. and another; [AIR 1999 Bombay 67] and The Godavari
Marathwada Irrigation Development Corporation, Aurangabad Vs. M/s.
R.B. Kurhade and Company and other; [Arbitration Appeal No.
20/2018 with connected matter].
24. Heard Mr. Girish K. Naik-Thigale, learned counsel for the
Appellants and Mr. P. R. Katneshwarkar, learned senior counsel for
Respondent No.1. Perused the impugned judgment and order and
relevant documents.
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25. The facts which are not in dispute, as emerging from the
record are that, pursuant to Tender Notice, the work of construction of
earthwork, structures, lining and selective lining of Kothala Branch
Canal, having an estimated cost of Rs. 1,15,98,000/-, came to be
allotted to the appellant, and an agreement was accordingly executed
between the parties. The stipulated period for completion of the said
work was 30 calendar months, i.e., on or before 13.08.1993; however,
the work ultimately came to be completed on 21.06.2006, after grant of
extensions from time to time. In the interregnum, disputes arose
between the parties, leading to institution of civil suits, being RCS No.
258 of 1994 and RCS No. 221 of 1995, which were subsequently
compromised, resulting in revival of the contract. Thereafter, upon
completion of the work, the final bill came to be drawn on 11.07.2006.
As, disputes with regard to claims persisted, the arbitration clause was
invoked, followed by further correspondence resulting in initiation of
arbitral proceedings. Initially, Mr. S.D. Chate was appointed as the Sole
Arbitrator on 14.08.2006, who withdrew, followed by appointment of
Mr. E.B. Jogdand, who also withdrew, and subsequently, Mr. B.B. Jadhav
came to be appointed as the Sole Arbitrator pursuant to communication
dated 15.03.2014. The arbitral proceedings were thereafter conducted,
and an ex parte arbitral award of Rs. 1,02,45,34,130/- with interest was
passed on 27.01.2015.
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26. From the submissions and the facts noted above, following
questions arise for our consideration.
(1) Whether the arbitrator Mr. B.B. Jadhav is
appointed in terms of clause 52 and 53 of the agreement
between the parties ?
(2) Whether the application under section 34 of the
Arbitration and Conciliation Act is filed before the
appropriate court having jurisdiction to entertain the
same ?
(3) Whether the award by the arbitrator is patently
illegal and is amenable for interference under section 34
of the Arbitration and Conciliation Act.
CONSIDERATION
27. As regards the issue, whether the arbitrator is appointed in terms
of clause 52 and 53 of the agreement is concerned, The relevant clauses
52 and 53 of the agreement, which govern the arbitration mechanism
between the parties read as under :
“52. SETTLEMENT OF DISPUTES:
If the contractor considers any work demanded of him to
be outside the requirements of the contract, or considers any
drawings record of ruling of the Engineer-in-charge on any
matter in connection with or arising out of the contract or the
carrying out of work to be unacceptable, he shall promptly ask
the Engineer-in-charge in writing for written instructions orksk/ 14/36
Comm. Arb. Appeal 1 of 2019 ssc.odtdecision. Thereupon the Engineer-in-charge shall give his written
instructions or decision within a period of twenty days of such
request.
Upon receipt of the written instructions or decision the
contractor shall promptly proceed without delay to comply with
such instructions or decision.
If the Engineer-in-charge fails to give his instructions or
decision in writing within a period of twenty days after being
requested, or if the contractor is dissatisfied with the instructions
or decision of the Engineer-in-charge, the contractor may within
twenty days after receiving the instructions or decision appeal to
be Superintending Engineer, who shall afford an opportunity to
the contractor to be heard and to offer evidence in support of his
appeal, to the requirement of department. The Superintending
Engineer shall give a decision within a period of twenty days
after the contractor has given the said evidence in support of his
appeal.
If the contractor is dissatisfied with the decision of the
Superintending Engineer the contractor may within twenty days
after receiving the decision, appeal to the Chief Engineer, who
shall afford an opportunity to the contractor to be heard and to
offer evidence in support of his appeal. The Chief Engineer shall
give decision within a period of twenty days after the contractor
has given evidence in support of his appeal.
If the contractor is dissatisfied with this decision, the
contractor within a period of twenty days from receipt of decision
shall indicate his intention to refer the dispute to Arbitration,
failing which the said decision shall be final and conclusive.
53. ARBITRATION :
All dispute of differences in respect of which the decision is
not final and conclusive, shall be referred for arbitration to a sole
arbitrator appointed as follows.
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Within thirty days of receipt of notice from the contractor
of his intention to refer the dispute to arbitration the Chief
Engineer shall send to the contractor a list three offers of the rank
of Superintending Engineer or higher, who have not been
connected with the work under this contract. The contractor shall
within fifteen days of receipt of this list selected and
communicate to the Chief Engineer the name of one officer from
the list who shall then be appointed as the Sole arbitrator. If
contractor fails to communicate his selection of name, within the
stipulated period, the Chief Engineer shall without delay select
one officer from the list and appoint him as the sole arbitrator. If
the Chief Engineer fails to send such a list within thirty days as
stipulated the contractor shall send a similar list to the Chief
Engineer within fifteen days; the Chief Engineer shall then select
one officer from the lit of appoint him as a sole arbitrator within
fifteen days. If the Chief Engineer fails to do so the contractor
shall communicate to the Chief Engineer the name of one officer
from the list, who shall then be the sole arbitrator.
The arbitrator shall be conducted in accordance within the
provisions of the Indian Arbitration Act, 1940, or any statutory
modification thereof. The decision of the sole arbitrator shall not
final and binding on the parties thereto. The arbitrator shall
determine the amount of costs of arbitration to be awarded to
either parties.
Performance under the contract shall continue during the
arbitration proceedings and payment due to the contractor by the
Department shall not be withheld, unless they are the subject
matter of the arbitration proceedings.
All awards shall be in writing and in case of awards amounting to
Rs. 1.00 lakhs & above, such awards shall state reasons for the
amounts awarded.
Neither party is entitled to bring claim to arbitration if the
Arbitrator has not been appointed before the expiration of thirty
days after defect liability period.
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28. Clause 53 of the contract provides that within thirty days of
receipt of notice from the contractor, of his intention to refer the
dispute to arbitration the Chief Engineer shall send to the contractor a
list of three officers of the rank of Superintending Engineer or higher
who have not been connected with the work under this contract. The
contractor shall within fifteen days of receipt of this list select and
communicate to the Chief Engineer the name of one officer from the
list, who shall then be appointed as the sole arbitrator, within stipulated
time then the Chief Engineer shall select, the officer from the list and
appoint him as sole arbitrator.
29. In the instant case, on receipt of notice from the contractor to
refer the dispute to the arbitrator, three names were suggested by the
Chief Engineer from which one person was selected by the appellant.
Accordingly, in terms of clause 53 of the agreement, the arbitrator was
appointed. The appointment of arbitrator is in terms of clause 53 of the
contract. The District Court while deciding the application under section
34 has rightly observed that the arbitrator was correctly appointed and
the objection raised that only a serving officer has to be appointed, has
been rejected. No error can be found with the impugned order of the
District Court on the issue of appointment of arbitrator is concerned.
30. Coming to the next question, whether the application under
section 34 of the Arbitration and Conciliation Act is filed before the
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appropriate court having jurisdiction to entertain the same, we need to
see section 34 of the Arbitration and Conciliation Act, which is as
under :-
“34. Application for setting aside arbitral award.–(1)
Recourse to a Court against an arbitral award may be
made only by an application for setting aside such award
in accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court
only if–
(a) the party making the application 1 establishes on
the basis of the record of the arbitral tribunal that —
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the
law to which the parties have subjected it or, failing any
indication thereon, under the law for the time being in
force; or
(iii) the party making the application was not given
proper notice of the appointment of an arbitrator or of
the arbitral proceedings or was otherwise unable to
present his case; or
(iv) the arbitral award deals with a dispute not
contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on
matters beyond the scope of the submission to
arbitration:
Provided that, if the decisions on matters
submitted to arbitration can be separated from those not
so submitted, only that part of the arbitral award which
contains decisions on matters not submitted to
arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the
arbitral procedure was not in accordance with theksk/ 18/36
Comm. Arb. Appeal 1 of 2019 ssc.odtagreement of the parties, unless such agreement was in
conflict with a provision of this Part from which the
parties cannot derogate, or, failing such agreement, was
not in accordance with this Part; or
(b) the Court finds that–
(i) the subject-matter of the dispute is not capable of
settlement by arbitration under the law for the time
being in force, or
(ii) the arbitral award is in conflict with the public
policy of India.
Explanation 1.–For the avoidance of any doubt, it
is clarified that an award is in conflict with the public
policy of India, only if,–
(i) the making of the award was induced or affected
by fraud or corruption or was in violation of section 75
or section 81; or
(ii) it is in contravention with the fundamental policy
of Indian law; or
(iii) it is in conflict with the most basic notions of
morality or justice.
Explanation 2.–For the avoidance of doubt, the test as
to whether there is a contravention with the
fundamental policy of Indian law shall not entail a
review on the merits of the dispute.
(2A) An arbitral award arising out of arbitrations other
than international commercial arbitrations, may also be
set aside by the Court, if the Court finds that the award
is vitiated by patent illegality
appearing on the face of the award:
Provided that an award shall not be set aside
merely on the ground of an erroneous application of the
law or by reappreciation of evidence.
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(3) An application for setting aside may not be made
after three months have elapsed from the date on which
the party making that application had received the
arbitral award or, if a request had been made under
section 33, from the date on which that request had been
disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the
applicant was prevented by sufficient cause from making
the application within the said period of three months it
may entertain the application within a further period of
thirty days, but not thereafter.
(4) On receipt of an application under sub-section (1),
the Court may, where it is appropriate and it is so
requested by a party, adjourn the proceedings for a
period of time determined by it in order to give the
arbitral tribunal an opportunity to resume the arbitral
proceedings or to take such other action as in the
opinion of arbitral tribunal will eliminate the grounds for
setting aside the arbitral award.
(5) An application under this section shall be filed by a
party only after issuing a prior notice to the other party
and such application shall be accompanied by an
affidavit by the applicant endorsing compliance with the
said requirement.
(6) An application under this section shall be disposed
of expeditiously, and in any event, within a period of one
year from the date on which the notice referred to in
sub-section (5) is served upon the other party.”
31. Section 34 uses the words that recourse to a court against an
arbitral award may be made only by an application for setting aside
such award in accordance with sub-section (2) and sub-section (3).
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The word ‘Court’ has been defined under section 2(e), as under :-
“(e) “Court” means–
(i) in the case of an arbitration other than
international commercial arbitration, the
principal
Civil Court of original jurisdiction in a district,
and includes the High Court in exercise of its
ordinary original civil jurisdiction, having
jurisdiction to decide the questions forming the
subject-matter of the arbitration if the same
had been the subject-matter of a suit, but does
not include any Civil Court of a grade inferior
to such principal Civil Court, or any Court of
Small Causes;
(ii) in the case of international commercial
arbitration, the High Court in exercise of its
ordinary original civil jurisdiction, having
jurisdiction to decide the questions forming the
subject-matter of the arbitration if the same
had been the subject-matter of a suit, and in
other cases, a High Court having jurisdiction to
hear appeals from decrees of courts
subordinate to that High Court;”
32. Section 20 of the Arbitration and Conciliation Act is relevant and
provides for place of arbitration, which is reproduced below :-
“20. Place of arbitration.–(1) The parties are free to
agree on the place of arbitration.
(2) Failing any agreement referred to in sub-section
(1), the place of arbitration shall be determined by the
arbitral tribunal having regard to the circumstances of
the case, including the convenience of the parties.
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(3) Notwithstanding sub-section (1) or sub-section (2),
the arbitral tribunal may, unless otherwise agreed by the
parties, meet at anyplace it considers appropriate for
consultation among its members, for hearing witnesses,
experts or the parties, or for inspection of documents,
goods or other property.”
33. The Supreme Court in the case of BGS SGS Soma JV Vs. NHPC
Limited, reported in (2020) 4 SCC 234 has held that where it is found
on the facts of a particular case that either no ‘seat’ is designated by
agreement, or has not been so determined by the arbitral tribunal, or
the so-called ‘seat’ is only a convenient ‘venue’ then there may be
several courts where a part of the cause of action arises, that may have
jurisdiction over the arbitration. The relevant portion is as under :-
“46. This Court in Indus Mobile Distribution Private Limited
(supra), after referring to Sections 2(1)(e) and 20 of the
Arbitration Act, 1996, and various judgments distinguishing
between the “seat” of an arbitral proceeding and “venue” of
such proceeding, referred to the Law Commission Report,
2014 and the recommendations made therein as follows:
“17. In amendments to be made to the Act, the Law
Commission recommended the following:
‘Amendment of Section 20‘
12. In Section 20, delete the word “Place” and add the
words “Seat and Venue” before the words “of arbitration”.
(i) In Sub-section (1), after the words “agree on the”
deletethe word “place” and add words “seat and venue”.
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(ii) In Sub-section (3), after the words “meet at any”
delete the word “place” and add word “venue”. [NOTE:
The departure from the existing phrase “place” of
arbitration is proposed to make the wording of the Act
consistent with the international usage of the concept of
a “seat” of arbitration, to denote the legal home of the
arbitration. The amendment further legislatively
distinguishes between the “[legal] seat” from a “[mere]
venue” of arbitration.]Amendment of Section 31
17. In Section 31
(i) In Sub-section (4), after the words “its date and
the” delete the word “place” and add the word “seat”.
18. The amended Act, does not, however, contain the
aforesaid amendments, presumably because the BALCO
judgment in no uncertain terms has referred to “place” as
“juridical seat” for the purpose of Section 2(2) of the Act.
It further made it clear that Section 20(1) and 20(2)
where the word “place” is used, refers to “juridical seat”,
whereas in Section 20(3), the word “place” is equivalent
to “venue”. This being the settled law, it was found
unnecessary to expressly incorporate what the
Constitution Bench of the Supreme Court has already
done by way of construction of the Act.
19. A conspectus of all the aforesaid provisions shows
that the moment the seat is designated, it is akin to an
exclusive jurisdiction clause. On the facts of the present
case, it is clear that the seat of arbitration is Mumbai and
Clause 19 further makes it clear that jurisdiction
exclusively vests in the Mumbai courts. Under the Law of
Arbitration, unlike the Code of Civil Procedure which
applies to suits filed in courts, a reference to “seat” is a
concept by which a neutral venue can be chosen by the
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parties to an arbitration clause. The neutral venue may
not in the classical sense have jurisdiction-that is, no part
of the cause of action may have arisen at the neutral
venue and neither would any of the provisions of Section
16 to 21 of the Code of Civil Procedure be attracted. In
arbitration law however, as has been held above, the
moment “seat” is determined, the fact that the seat is at
Mumbai would vest Mumbai courts with exclusive
jurisdiction for purposes of regulating arbitral
proceedings arising out of the agreement between the
parties.
20. It is well settled that where more than one court
has jurisdiction, it is open for parties to exclude all other
courts. For an exhaustive analysis of the case law, see
Swastik Gases Private Limited v. Indian Oil Corporation
Limited This was followed in a recent judgment in B.E.
Simoese Von Staraburg Niedenthal and Anr. v.
Chhattisgarh Investment Limited.”
34. In the present case, neither seat nor venue is mentioned in
agreement (GCC) between the parties and the arbitrator has chosen
venue at Pune and Aurangabad at his own convenience. The venue
chosen is not the exclusive seat of arbitration. Thus, in the present case,
the part of the cause of action arise within the jurisdiction of District
Court of Beed, which is the principal civil court of original jurisdiction
to deal with the application under section 34. Considering the law laid
down in the case of BGS SGS Soma JV Vs. NHPC Limited, cited supra,
and considering the provisions of the Arbitration Act, the District Court,
where the part of cause of action arises and where the subject suit could
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have been filed, has jurisdiction to entertain the application under
35. Considering the law laid down as above and having considered
the agreement between the parties and since there is no exclusive seat
or venue as mentioned in the agreement, the principal civil court of
original jurisdiction at Beed i.e. the District Court has jurisdiction in the
matter as part of the cause of action has arisen within the jurisdiction of
Beed. Interestingly this objection was not taken before the District
Court.
36. The next question that arises for our consideration is whether the
impugned award passed by the arbitrator is patently illegal and is
amenable for interference under section 34 of the Arbitration and
Conciliation Act. It is required to be noted that scope of interference in
the arbitral award is extremely limited.
37. The power of the ‘Court’ to interfere with arbitral award under
Section 34 and of this Court under Section 37 of the Arbitration Act
needs to be noted before considering the above submissions on merits
of arbitral award. The Supreme Court in the case of PSA Sical Terminals
Private Limited Vs. Board of Trustees of V.O. Chidambaranar Port Trust
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Tuticorn and Anr. reported in (2023) 15 SCC 781 has observed that it is
a settled legal position, that in an application under Section 34, the
court is not expected to act as an appellate court and reappreciate the
evidence. The scope of interference would be limited to grounds
provided under Section 34 of the Arbitration Act. The interference
would be so warranted when the award is in violation of “public policy
of India”, which has been held to mean “the fundamental policy of
Indian law”. A judicial intervention on account of interfering on the
merits of the award would not be permissible. However, the principles
of natural justice as contained in Section 18 and 34(2)(a)(iii) of the
Arbitration Act would continue to be the grounds of challenge of an
award. The ground for interference on the basis that the award is in
conflict with justice or morality is now to be understood as a conflict
with the “most basic notions of morality or justice”. It is only such
arbitral awards that shock the conscience of the court, that can be set
aside on the said ground. An award would be set aside on the ground of
patent illegality appearing on the face of the award and as such, which
goes to the roots of the matter. However, an illegality with regard to a
mere erroneous application of law would not be a ground for
interference. Equally, re-appreciation of evidence would not be
permissible on the ground of patent illegality appearing on the face of
the award.
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38. The Hon’ble Supreme Court in PSA Sical Terminals Private
Limited (supra) has further observed that a decision which is perverse,
though would not be a ground for challenge under “public policy of
India”, would certainly amount to a patent illegality appearing on the
face of the award. However, a finding based on no evidence at all or an
award which ignores vital evidence in arriving at its decision would be
perverse and liable to be set aside on the ground of patent illegality.
39. To appreciate the test of perversity, the Hon’ble Supreme Court in
PSA Sical Terminals Private Limited (supra) in para 42 has further held
as under :-
“42. To understand the test of perversity, it will also be
appropriate to refer to paragraph 31 and 32 from the judgment
of this Court in Associate Builders (supra), which read thus:
31. The third juristic principle is that a decision which is
perverse or so irrational that no reasonable person would have
arrived at the same is important and requires some degree of
explanation. It is settled law that where:
(i) a finding is based on no evidence, or
(ii) an Arbitral Tribunal takes into account something
irrelevant to the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision,
such decision would necessarily be perverse.
32. A good working test of perversity is contained in two
judgments. In Excise and Taxation Officer-cum-Assessing
Authority v. Gopi Nath & Sons [1992 Supp (2) SCC 312], it was
held:
“7. … It is, no doubt, true that if a finding of fact is arrived
at by ignoring or excluding relevant material or by taking
into consideration irrelevant material or if the finding so
outrageously defies logic as to suffer from the vice of
irrationality incurring the blame of being perverse, then,
the finding is rendered infirm in law.”
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In Kuldeep Singh v. Commr. of Police (1999) 2 SCC 10, it was
held:
“10. A broad distinction has, therefore, to be maintained
between the decisions which are perverse and those which
are not. If a decision is arrived at on no evidence or
evidence which is thoroughly unreliable and no reasonable
person would act upon it, the order would be perverse. But
if there is some evidence on record which is acceptable and
which could be relied upon, howsoever compendious it
may be, the conclusions would not be treated as perverse
and the findings would not be interfered with.”
40. Now, adverting to the facts of the present appeal, letter dated
21.7.2014 was issued to the parties by the sole arbitrator, Mr. B. B.
Jadhav, wherein it is stated that he is appointed as a sole arbitrator for
settlement of claims arising out of the execution of the work by the
appellant, and he has decided to convene the first preliminary meeting
in the matter on 03.08.2014 at 11:00 a.m. at Hotel Kohinoor, Pune. It is
further noted in the letter that the said meeting is scheduled for
submission of written pleadings such as statement of claims, written
statement, rejoinder and other documents of both the parties. The said
letter was addressed to the Executive Engineer and to the appellant
herein.
41. On 01.08.2014, a letter was returned by the Executive Engineer
to Mr. B. B. Jadhav, informing him that Mr. A. R. Kamble,
Superintending Engineer, Irrigation Circle, Aurangabad, is appointed as
the sole arbitrator for settlement of disputes and claims relating to the
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work of the claimants, and therefore, it is not advisable to attend the
meeting scheduled on 03.08.2014. The arbitrator was thus put to notice
that the respondent-Executive Engineer had appointed Mr. A. R. Kamble
as the sole arbitrator in terms of the contract.
42. Thereafter, on 01.09.2014, the Executive Engineer issued another
letter to the appellant, intimating him to remain present in the chamber
of the Executive Engineer on 09.09.2014 for a meeting organized in
respect of the subject matter of the arbitration. In the minutes of the
meeting held by Mr. A. R. Kamble on 09.09.2014 at Aurangabad it can
be seen that the Executive Engineer, Deputy Engineer, Junior Engineer
and Section Engineer were present. The arbitrator waited for half an
hour and thereafter proceeded with the meeting and directed the
respondent to submit certain documents. On 01.10.2014, the
documents were filed before the arbitrator. The Executive Engineer filed
pleadings before Mr. A. R. Kamble as regards the maintainability of the
arbitral dispute, raising certain objections. The claimant did not
participate before the said arbitrator.
43. It is pertinent to note that, in parallel proceedings, the arbitrator,
Mr. B. B. Jadhav, on 24.07.2014, issued a letter to the earlier arbitrator,
Mr. E. B. Jogdand, for handing over the record of the arbitral
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proceedings along with documents submitted before him by both the
parties.
44. First Meeting :- On 03.08.2014, the first meeting of the arbitrator,
Mr. B. B. Jadhav, was held at Hotel Kohinoor, Pune wherein it is
recorded that the claimants were present, whereas, no representative of
the GMIDC, Aurangabad, was present. The arbitrator waited for one
and half hours and thereafter commenced the meeting. Thereafter, on
11.08.2014, the proceedings before the arbitrator Mr. B. B. Jadhav were
held and the parties were intimated about the next meeting scheduled
on 24.08.2014.
45. Second Meeting :- The second meeting before the arbitrator, Mr.
B. B. Jadhav, was held on 24.08.2014, wherein it is noted that none
appeared on behalf of the respondent, while the claimants were
present. The arbitrator fixed costs, meeting charges and other charges
and observed that in terms of Section 38(1) and (2) the fees shall be
payable in equal shares by the parties. The third meeting was scheduled
on 05.10.2014 at Hotel Kohinoor, Gymkhana, Pune. It is recorded that
the copies of the proceedings were submitted to both the parties.
46. Third Meeting :- The third meeting was held on 05.10.2014 by
Mr. B. B. Jadhav, wherein it was noted that none appeared on behalf of
either the appellant or the respondent. The sole arbitrator decided to
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hold the next meeting on 19.10.2014 and called upon the parties to
make payment of fees. The record indicates that the copies of order
were posted to all the parties.
47. Fourth Meeting :- The fourth meeting was conducted on 19.10.
2014 by Mr. B. B. Jadhav. The claimants were present, whereas the
respondents were not present. It was noted by the arbitrator that
despite specific notice on 03.08.2014, 24.08.2014, 05.10.2014, the
respondents had not caused their appearance. The arbitrator, therefore,
proceeded under Section 25 of the Arbitration and Conciliation Act,
1996. It is further recorded that the counsel for the claimants invited
attention to various claims and that the claimant had briefly introduced
the claim statement.
48. Fifth Meeting :- The fifth meeting was held by Mr. B. B. Jadhav on
26.10.2014, at Pune, wherein documents were produced by the
claimants and submissions were advanced. The matter was thereafter
posted for further consideration on 04.11.2014.
49. Sixth Meeting :- The sixth meeting was held by Mr. B. B. Jadhav
on 23.11.2014, wherein only the claimants were present and the
respondents were not present. The counsel for the claimants advanced
submissions claim-wise, which were taken on record.
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50. Seventh Meeting :- The seventh meeting was held on 29.11.2014.
The claimants were present, whereas the respondents were absent. The
arbitrator instructed the claimants, and the claimants continued with
their submissions. Thereafter, the matter was reserved for passing of the
final award.
51. On 27.01.2015 at 12:30 PM, Mr. B. B. Jadhav declared the final
award. It is noted that though the parties were directed to deposit the
costs of arbitral proceedings and the same was not deposited by the
respondents, a copy of the award was not supplied to the parties. The
parties were informed that they would be entitled to a copy of the
award upon payment of costs by the respondent.
52. The above procedure followed by the arbitrator reveals two
fundamental issues. Firstly, there existed a dispute regarding the
appointment of Mr. B. B. Jadhav. The respondents had filed an
application under Section 11 before the High Court for appointment of
an arbitrator. When the matter was taken up for consideration by this
Court, this Court by order dated 18.11.2024 granted liberty to the
respondents to raise within 45 days all grievances before the arbitrator
under Section 13(2) of the Arbitration Act. The respondents thereafter
challenged the order of the High Court dated 18.11.2014 before the
Hon’ble Supreme Court. Despite the arbitrator and the parties having
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knowledge that the respondent had applied before the High Court
under Section 11 for appointment of arbitrator, the arbitrator Mr. B. B.
Jadhav proceeded with the arbitration ex-parte and in hasty manner.
When the matter came up before Supreme Court, it was noted by the
respondent that the arbitrator, Mr. B. B. Jadhav, had already passed an
ex-parte award. In the absence of the respondent, the arbitrator had
proceeded hurriedly with the matter.
53. Unlike civil suits where the claim can be deemed to be admitted
in absence of written statement, in arbitration proceedings, the
arbitrator is expected to decide the claim on merits even though it is an
ex-parte proceeding. Section 25 particularly deals with this aspect,
which is noted below :-
25. DEFAULT OF A PARTY :
Unless otherwise agreed by the parties, where, without
showing sufficient cause,–
(a) the claimant fails to communicate his statement of claim in
accordance with sub-section (1) of section 23, the arbitral
tribunal shall terminate the proceedings;
(b) the respondent fails to communicate his statement of defence
in accordance with sub-section (1) of section 23, the arbitral
tribunal shall continue the proceedings without treating that
failure in itself as an admission of the allegations by the claimant
3[and shall have the discretion to treat the right of the
respondent to file such statement of defence as having been
forfeited].
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(c) a party fails to appear at an oral hearing or to produce
documentary evidence, the arbitral tribunal may continue the
proceedings and make the arbitral award on the evidence before
it.”
54. It was necessary for the arbitrator to follow the procedure under
Section 25 of the Arbitration Act. Although reference is made to Section
25 of the Act in the award, the evidence in support of the claims
appears to be lacking and the claims cannot be said to be established. A
perusal of the proceedings before the arbitrator indicates that the
submission of the claimants are made on two dates and the same is
accepted by the tribunal. No evidence is laid as regards the expansion of
work and performance of additional work. It is not known how the R.A.
bills were submitted to the respondents and for what claims and the
same were rejected by the respondents on which grounds. No affidavit
in evidence of technical person is before the tribunal. Work shown to
the arbitrator at alleged site visit is not known whether the said work
was executed by the appellant. Lengthy award is passed citing long list
of case laws, but is completely bereft of evidence and the conduct of the
arbitrator also appears to be biased. The process, to say the least,
appears to be biased and against the respondents. The arbitrator’s
award is thus patently illegal and also shocks the conscience of the
court and the award is in conflict with basic notions of justice.
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55. The procedure as contemplated under Section 25 of the
Arbitration Act does not appear to have been properly followed. There
are various issues those arise for consideration before the arbitrator Mr.
B. B. Jadhav. Independently, an application under Section 11 was filed.
In such circumstances, the arbitrator, Mr. B. B. Jadhav ought to have
waited for some time. However, in absence of the respondent, Mr. B. B.
Jadhav felt it appropriate to proceed with the matter in a hurried
manner.
56. The arbitrator ought to have examined the impact of the decree
of the Civil Court which has a prima facie bearing on the arbitration
proceedings, at least to the extent of the compromise recorded before
the Civil Court. Also, the delay in execution of the work also prima facie
rested on the claimant, for which suit and arbitral proceedings were
filed and later compromised. The arbitrator appears to have willingly
brushed aside the orders of civil court and without considering the
impact of the decree on the arbitration proceedings.
57. Thus, the District Court, while exercising jurisdiction under
Section 34 of the Arbitration and Conciliation Act, 1996, has set aside
the award passed by the arbitrator. We are in agreement with the order
passed under Section 34 and find no reason to interfere with the same.
However, it is clarified that the parties are at liberty to agree upon an
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arbitrator for adjudication of the dispute, failing which the applicant is
at liberty to approach this court for appointment of arbitrator. If such an
application is filed all contentions are kept open.
58. Accordingly, the Commercial Arbitration Appeal stands dismissed.
[VAISHALI PATIL-JADHAV, J.] [ARUN R. PEDNEKER, J.]
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