MOHAMMED MASROOR SHAIKH vs BHARAT BHUSHAN GUPTA

MOHAMMED MASROOR SHAIKH vs BHARAT BHUSHAN GUPTA - Supreme Court Case 2022

NON­REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  874 OF 2022

(Arising out of SLP (Civil) No. 7635 of 2021)

MOHAMMED MASROOR SHAIKH     …    APPELLANT

v.

BHARAT BHUSHAN GUPTA & ORS.      ...  RESPONDENTS

WITH

CIVIL APPEAL NO. 875 OF 2022

(Arising out of SLP (Civil) No. 7655 of 2021)

AND

CIVIL APPEAL NO. 875 OF 2022

(Arising out of SLP (Civil) No. 7714 of 2021)

J  U  D  G  M  E  N  T

ABHAY S. OKA, J.

Leave granted.

1. These three appeals take exception to the similar orders

passed by a learned Single Judge of the Bombay High Court

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on 6th  March 2020 on the petitions under Section 11 of the

Arbitration   and   Conciliation   Act,   1996   (for   short   “the

Arbitration Act”). The appellant, the respondent no.1 and the

respondent nos.3 to 5 were the partners of three different

partnership   firms   in   the   name   and   style   of   M/s   M.M.

Developers, Nisarga, M/s M.M. Developers, Shanti Nagar and

M/s M.M. Developers, Shramjivi.   The facts of these three

cases   are   identical   and   therefore,   for   convenience,   we   are

referring the facts of the case in Civil Appeal arising out of

Special  Leave  Petition  (Civil)  No.  7635 of   2021.  A  deed  of

retirement­cum­continuation dated 12th  September 2014 (for

short “the retirement deed”) in respect of the firm M/s M.M.

Developers, Nisarga (the respondent no.2) was executed by

and   between   the   appellant,   the   respondent   no.1   and   the

respondent nos.3 to 5.  The retirement deed recorded that the

respondent   no.1   retired   from   the   respondent   no.2   ­

partnership   firm   on   the   terms   and   conditions   mentioned

therein and the business of partnership firm was continued by

the appellant and the respondent nos.3 to 5.

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2. The respondent no.1 by his advocate’s notice dated 18th

February 2019 invoked the arbitration clause (clause 19) in

the retirement deed.  According to the case of the respondent

no.1, the appellant and the respondent nos.3 to 5 did not

respond to the said notice. Therefore, a petition under Section

11 of the Arbitration Act was filed by the respondent no.1. By

the impugned Order dated 6th March 2020, the learned Single

Judge of the Bombay High Court allowed the petition and

appointed a member of the Bar as the sole Arbitrator.  Similar

orders were passed in relation to the two other firms. The

present appeals have been filed on 9th June 2021. 

3. A counter affidavit has been filed by the respondent no.1

contending that though the appellant was served with the

advocate’s   notice   of   the   petition   under   Section   11   of   the

Arbitration Act, he did not appear in the petition.   In the

counter affidavit, it is pointed out that on 8th May 2021 in the

preliminary   meeting   held   by   the   learned   Arbitrator,   the

appellant was represented by an advocate.  It is pointed out

that the respondent no.1 filed an application under Section 17

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of the Arbitration Act before the learned Arbitrator claiming

certain   interim   directions.   The   respondent   no.3   filed   an

application under Section 16 of the Arbitration Act contending

that there was no arbitration agreement in existence and that

the claim made by the respondent no.1 before the Arbitrator

was barred by limitation.  By the order dated 25th May 2021,

the   learned   Arbitrator   rejected   the   objection   raised   under

Section   16.     The   respondent   no.1   has   pointed   out   in   the

counter   affidavit   that   before   the   learned   Arbitrator,   the

appellant, the respondent no.2 and respondent nos.4 and 5

were   represented   by   a   common   advocate   who   specifically

supported the submissions of the learned counsel appearing

for the respondent no.3 in support of the application under

Section 16.  It is also pointed out that the aforesaid material

facts have been suppressed in the present appeals filed on 9th

June 2021.  It is also pointed out that by the order dated 24th

June   2021,   the   learned   Arbitrator   allowed   the   application

under   Section   17   filed   by   the   respondent   no.1.   By   filing

additional documents, the respondent no.1 has brought on

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record a copy of an appeal filed by the appellant and the

respondent no.2 for challenging the Order dated 24th  June

2021 before the Bombay High Court.

4. During the course of submissions, Mr. Manish Vashisht,

the   learned   Senior   Counsel   appearing   for   the   appellant

accepted that the appellant has filed a petition under Section

34 of the Arbitration Act for challenging the order dated 25th

May  2021  passed   by  the   learned  Arbitrator  overruling  the

objections raised by the respondent no.3.  

5. The learned Senior Counsel appearing for the appellant

in support of the appeals firstly urged that the High Court did

not issue and serve a notice of the petition filed under Section

11 of the Arbitration Act.  His submission is that the appellant

was admitted in intensive care unit of a hospital on 3rd May

2021 and was discharged on 3rd  June 2021. He relied upon

the documents placed on record to that effect in the rejoinder.

He submitted that clause 19 of the retirement deed does not

provide for referring a dispute between the respondent no.1,

who was the retiring partner and the continuing partners to

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arbitration.   He   submitted   that   this   crucial   fact   has   been

ignored   by   the   learned   Single   Judge   of   the   Bombay   High

Court.  Moreover, even the facts pleaded in the petition under

Section 11 of the Arbitration Act show that the claim of the

respondent no.1 was barred by limitation.  He relied upon a

decision of this Court in the case of  State   of   Orissa   and

another v. Damodar Das1

. He submitted that as the appellant

was not given a notice of the date fixed in the petition under

Section 11, he could not urge before the learned Single Judge

that the claim of the respondent no.1 was barred by limitation

and that there was no arbitration clause. He submitted that

the appellant caused appearance before the learned Arbitrator

without prejudice to his rights and contentions.  The learned

counsel relied upon another decision of this Court in the case

of Vidya Drolia & Others v. Durga Trading Corporation2 and

in particular what is held in paragraphs 95 and 98 thereof.

He submitted that the issues which are concluded by the

impugned order cannot be reopened by the learned Arbitrator.

1 (1996) 2 SCC 216

2 (2021) 2 SCC 1

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6. The learned counsel appearing for the respondent no.1

submitted   that   a   notice   of   arbitration   petition   filed   under

Section 11 was served upon the appellant.  He submitted that

the appellant was represented before the Arbitral Tribunal by

his   advocate,   Mr.   Shreyans   Baid,   who   supported   the

objections raised by the respondent no.3 under Section 16 of

the   Arbitration   Act   regarding   the   absence   of   arbitration

agreement as well as the time barred claim.   He submitted

that the said objection was overruled by the learned Arbitrator

by his order dated 25th  May 2021. He pointed out that this

material fact has been suppressed by the appellant while filing

these appeals.   He pointed out that the appellant has filed

petitions under Section 34 of the Arbitration Act before the

Bombay High Court on 2nd December 2021 for challenging the

order dated 25th  May 2021. He submitted that the appellant

can always agitate the issues raised by him in these appeals

in the arbitration petition under Section 34. He submitted that

documents have been placed on record which show that Mr.

Baid, the learned advocate was appearing on behalf of the

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appellant   before   the   learned   Arbitrator   and   that   the   said

advocate represented the appellant before the Arbitrator from

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th  May   2021.     The   learned   counsel   appearing   for   the

respondent no.1 submitted that what is held in paragraph 154

of the decision of this Court in the case of  Vidya  (supra)

completely supports the case of the respondent no.1.  

7. The learned Senior Counsel appearing for the appellant

clarified that though the advocate’s notice of filing the petition

under Section 11 was served upon the appellant, the date

fixed in the arbitration petition was not communicated to the

appellant.  Moreover, the Court did not issue any notice on the

petition filed under Section 11.

8. We have given careful consideration to the submissions.

It is not in dispute that along with advocate’s notice dated 8th

November 2019, the appellant and the respondent nos.2 to 5

were served a copy of the petition filed under Section 11 of the

Arbitration  Act by the respondent no.1.   In the impugned

Order, the learned Single Judge of the Bombay High Court has

referred to the affidavit of service of notice filed on behalf of

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the respondent no.1.  A judicial notice will have to be taken of

a   long   standing   and   consistent   practice   followed   on   the

Original Side of the Bombay High Court. The practice is that

the advocates serve a notice of the proceedings filed in the

Court even before it comes up before the Court.   The Court

acts   upon   such   service   effected   by   the   advocate   on   proof

thereof being produced in the form of an affidavit of service.

Therefore, there is nothing illegal about the High Court acting

upon the advocate’s notice admittedly served to the appellant.

According to the case of the appellant, he was admitted to a

hospital on 3rd May 2021.  However, the advocate’s notice of

the petition under Section 11 was served upon the appellant

in   November   2019.     Therefore,   the   appellant   could   have

always   made   arrangements   to   contest   the   said   petition.

Therefore, we reject the first submission made by the learned

Senior   Counsel   appearing   for   the   appellant   regarding   the

failure to serve the notice of the petition under Section 11. 

9. While filing the present appeals on 9th  June 2021, the

appellant ought to have disclosed that on 8th  May 2021, his

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advocate had appeared before the learned Arbitrator in the

first preliminary meeting convened by the learned Arbitrator.

The minutes of preliminary meeting recorded by the learned

Arbitrator do not record that the appellant appeared in the

meeting without prejudice to his right of challenging the order

appointing   the   Arbitrator.     In   fact,   Mr.   Baid,   the   learned

counsel who appeared for the appellant before the learned

Arbitrator, by e­mail dated 29th  May 2021 addressed to the

learned   Arbitrator,   sought   his   permission   to   withdraw   his

appearance.   In the said e­mail, the advocate stated that he

was appointed on the instructions of the present appellant.

Moreover,   the   order   dated   25th  May   2021   passed   by   the

learned Arbitrator by which objections under Section 16 were

overruled   shows   that   the   same   advocate   appeared   for   the

appellant   and   supported   the   objections   raised   by   the

respondent no.3.  As the objection was rejected by the learned

Arbitrator, in view of sub­section (6) of Section 16, on 21st

December   2021,   the   appellant   has   filed   a   petition   under

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Section 34 of the Arbitration Act, which is pending before the

Bombay High Court for challenging the said Order.

10. The learned counsel appearing for the respondent no.1

has relied upon what has been held in paragraphs 95 and 98

of the decision of this Court in the case of Vidya (supra). The

conclusions of this Court have been summarised in paragraph

154 of the said decision, which reads thus: 

“154. Discussion   under   the   heading

“Who     Decides     arbitrability?” can   be

crystallised as under:

154.1. Ratio of the decision in Patel Engg.

Ltd. [SBP & Co. v. Patel Engg. Ltd., (2005) 8

SCC 618] on the scope of judicial review by

the   court   while   deciding   an   application

under Sections 8 or 11 of the Arbitration

Act, post the amendments by Act 3 of 2016

(with retrospective effect from 23­10­2015)

and even post the amendments vide Act 33

of 2019 (with effect from 9­8­2019), is no

longer applicable.

154.2. Scope   of   judicial   review   and

jurisdiction of the court under Sections 8

and 11 of the Arbitration Act is identical

but extremely limited and restricted.

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154.3. The general rule and principle, in

view of the legislative mandate clear from

Act 3 of 2016 and Act 33 of 2019, and the

principle of severability and competencecompetence, is that the Arbitral Tribunal is

the preferred first authority to determine

and   decide   all   questions   of   nonarbitrability. The court has been conferred

power of “second look” on aspects of nonarbitrability   post   the   award   in   terms   of

sub­clauses (i), (ii) or (iv) of Section 34(2)(a)

or sub­clause (i) of Section 34(2)(b) of the

Arbitration Act.

154.4. Rarely as a demurrer the court may

interfere at Section 8 or 11 stage when it is

manifestly   and   ex   facie   certain   that   the

arbitration   agreement   is   non­existent,

invalid or the disputes are non­arbitrable,

though   the   nature   and   facet   of   nonarbitrability   would,   to   some   extent,

determine the level and nature of judicial

scrutiny. The restricted and limited review

is to check and protect parties from being

forced   to   arbitrate   when   the   matter   is

demonstrably “non­arbitrable” and to cut

off   the   deadwood.  The   court   by   default

would refer the matter when contentions

relating   to   non­arbitrability   are   plainly

arguable; when consideration in summary

proceedings   would   be   insufficient   and

inconclusive;   when   facts   are   contested;

when the party opposing arbitration adopts

delaying   tactics   or   impairs   conduct   of

arbitration   proceedings.   This   is   not   the

stage for the court to enter into a mini trial

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or   elaborate   review   so   as   to   usurp   the

jurisdiction of the Arbitral Tribunal but to

affirm and uphold integrity and efficacy of

arbitration   as   an   alternative   dispute

resolution mechanism.”

(underlines supplied)

11. Thus, this Court held that while dealing with petition

under Section 11, the Court by default would refer the matter

when   contentions   relating   to   non­arbitrability   are   plainly

arguable.   In such case, the issue of non­arbitrability is left

open to be decided by the Arbitral Tribunal.   On perusal of

the   impugned   order,   we   find   that   the   issues   of   nonarbitrability and the claim being time barred have not been

concluded by the learned Single Judge of the Bombay High

Court.   In fact, in clause (vii) of the operative part of the

impugned Order, the learned Single Judge has observed that

the   contentions   of   the   parties   have   been   kept   open.   The

petitions   filed   by   the   appellant   under   Section   34   of   the

Arbitration Act, challenging the Order dated 25th May 2021 are

pending before the High Court in which the appellant can

raise all permissible contentions. 

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12. Therefore,   in   our   considered   view,   no   case   for

interference is made out.  We, therefore, dismiss the appeals,

while leaving open the contentions raised by the appellant in

pending   petitions   under   Section   34   of   the   Arbitration   Act

before the High Court of Bombay. 

13. There will be no order as to costs.  Pending applications,

if any, shall stand disposed of.

…………..…………………J

 (INDIRA BANERJEE)

…………..…………………J

     (ABHAY S. OKA)

New Delhi;

February 02, 2022.

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