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
2
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.
3
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
4
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
5
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
6
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
7
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
8
appellant   before   the   learned   Arbitrator   and   that   the   said
advocate represented the appellant before the Arbitrator from
8
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
9
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
10
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
11
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.
12
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
13
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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