Archana Bhagwan Jaswani v. Empire Silk Weaving Industries

1. This is a Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) seeking to impugn an Award dated October 15, 2016 (“Impugned Award”) passed by the Learned Arbitral Tribunal, awarding a total sum of ~Rs.27.60 Lakhs said to be payable by the Petitioner, Archana Bhagwan Jaswani (“Archana”) to the Respondent, Empire Silk Weaving Industries (“Empire”).

2. The Impugned Award has been passed by a Learned Arbitral Tribunal constituted under the bye-laws of Bharat Merchants’ Chamber (“Chamber”). The arbitration commenced in terms of an arbitration clause contained in invoices raised by Empire on Archana, in relation to goods supplied to Archana.

3. It is Archana’s case that the orders were initially placed on a sister concern of Empire and eventually, the supplies were made by, and payments were made to Empire. The arbitration clause being contained primarily in the invoices raised by Empire, the Arbitral Tribunal is supposedly without jurisdiction in the matter.

4. That apart, Archana would submit that with the intervention of an intermediary who was acquainted with both sides, an amount of Rs.35 Lakhs had been paid in full and final settlement of the disputes and differences between the parties and the residual sum of Rs.16.06 Lakhs claimed by Empire was not payable at all. On the contrary, Empire would acknowledge receipt of Rs.35 Lakhs, but would strongly contest that such receipt was in full and final settlement of the amounts owed.

5. One round of arbitration has already transpired between the parties, which led to an award dated August 20, 2014 which, under Section 34 of the Act, came to be set aside by consent of the parties on April 27, 2015. The Learned Single Judge recording the consent of the parties to have the arbitral award set aside, also recorded that the issue of jurisdiction would be kept open and Archana would be entitled to raise the same in the arbitral proceedings to be conducted afresh.

6. In this round of proceedings, two primary grounds of attack are the lack of jurisdiction and denial of legal representation by an advocate in the course of the arbitration proceedings. It is seen from the record that the statement of claim was filed on October 28, 2015, which was dealt with by a detailed written statement dated December 5, 2015 filed by Archana. She refused to select an arbitrator on the premise that this would undermine the challenge on the ground of jurisdiction. Consequently, the Chamber selected a nominee arbitrator on Archana’s behalf and the two arbitrators selected the presiding arbitrator.

7. The matter has had a checkered course before the Chamber’s Tribunal with about half a dozen opportunities being given to Archana to participate in the arbitration proceedings, which she would insist would need to be handled by an advocate while representation by an advocate was denied by the Arbitral Tribunal. In fact, a criminal complaint is also said to have been filed on the premise that the arbitration proceedings constitutes a fraud on account of the counterparties being members of the Chamber and therefore, the two primary grounds for consideration in this Petition are whether the Learned Arbitral Tribunal lacked jurisdiction and whether the denial of legal representation would vitiate the Impugned Award as being contrary to the fundamental policy of India. It is noteworthy that both parties have sought representation by lawyers and both parties were denied legal representation by the Learned Arbitral Tribunal.

8. I have heard Learned Counsel for the parties at some length and examined the written submissions filed by them and the record, with the assistance of their submissions, both verbal as well as written.

9. It is seen from the record that in the earlier round of arbitration, quite apart from the arbitration clause contained in the invoices, the parties had executed a specific arbitration agreement dated January 15, 2014 which recorded their agreement to participate in the arbitration proceedings in accordance with the bye-laws of the Chamber. The grouse that the arbitration clause in invoices does not constitute an unequivocal agreement to arbitrate stands overtaken by the fact that the parties actually executed an arbitration agreement in the last round. Indeed, the Learned Single Judge on the last occasion in order dated April 27, 2015, kept the issue of jurisdiction open, but that does not constitute a ruling on the jurisdiction. It only meant that the element of jurisdiction could be agitated and that would be gone into despite the earlier award being set aside by consent.

10. The record indeed contains an explicit arbitration agreement. It is apparent that this ground is an afterthought that has been taken out in this round of proceedings on the premise that there is no commitment of the parties to arbitrate. The arbitration agreement signed by the parties on January 15, 2014, in my opinion, is a clear pointer that the jurisdictional objection was already pre-empted by the prior confirmation of the commitment to arbitrate by the parties, and therefore, I do not think this ground of attack to the Impugned Award warrants further consideration.

11. As regards legal representation, it is seen from the bye-laws of the Chamber that Bye-law 33 is explicit in its terms inasmuch as it prohibits any party from bringing any advocate or solicitor to the proceedings. This can be a controversial requirement, but once parties have committed to arbitrate in terms of the bye-laws, it would follow that the parties have agreed to the condition that they would arbitrate and resolve their dispute as men of commerce, without the aid of legal representation. Case Law Cited:

12. On the facet of arbitration clauses in invoices, Learned Counsel for Archana has sought to rely on the judgment in M/s Divya Shivlaks Impex[1] to indicate that legal representation is a fundamental facet of dispute resolution and denial of the same would vitiate the arbitration proceedings entirely. However, on a close reading of the said judgment, it is seen that the judgment explicitly indicates that there was no other material indicating that the parties had irrevocably agreed to arbitrate. On the other hand, in the facts of this case, there is other explicit material available, namely, the agreement dated January 15, 1 M/s Divya Shivlaks Impex Vs. Shantilal Jamnadas Textiles – 1999 II Mh.L.J. 223 2014 over and above the invoices based on which the goods has been provided.

13. Learned Counsel on behalf of Archana also seeks to rely on Faze to contend that the right of legal representation by an advocate is a positive right available in the law and denial of the same would vitiate the arbitration proceedings as being contrary to Indian law. However, from a close reading of this judgment, it is apparent that the Court had indeed referred to the possibility of the right of being represented by an advocate potentially being excluded by statute, in which case the legal representation would not be available. It is not as if the right to be represented by an advocate can be insisted upon regardless of the terms on which the parties agreed to arbitrate.

14. In the facts of this case, once the parties had agreed to arbitration in terms of the bye-laws of the Chamber, Bye-law 33 which partakes the character of such explicit exclusion of representation by an advocate, applied to the arbitration between the parties. The exclusion in Bye-law 33, of legal representation would rather fit better with the case law in Skanska[3], from which, Paragraph 16 would bear reproduction:- “16. The next contention was that the petitioner has sought services of an Advocate. That was rejected. The Tribunal has dealt with the said application and considering the Rules and the

2 Face Three Exports Ltd. Vs. Pankaj Trading Co. & Ors – 2004 II Mh.L.J. 196