Bombay High Court stays order passed by arbitrator 9 years after final award

The Bombay High Court recently stayed an order passed by an arbitrator nine years after the final award on the ground that the award was passed against parties who had never been party to the arbitration proceedings [Raigad Co-operative Housing Soc. Ltd. v. Truly Creative Developers Pvt. Ltd. & Ors.]. .The factual matrix in the case was that the respondent, Truly Creative Developers, was appointed as redeveloper of the petitioner society, Raigad Co-operative Housing Society which also included another society, Samta Nagar. The developer appointed a sub-contractor, Labh Shub Properties.The only arbitration agreement that existed was between the developer and the sub-contractor.Due to differences between the parties, the sub-contractor approached the Court in a proceeding under Section 9 of the Arbitration Act. The High Court appointed a sole arbitrator with the consent of both parties to adjudicate the disputes.Eventually the entire arbitration proceeding was necessarily between the sub-contractor and the developer which culminated in an award on December 2010. None of the societies were parties to the proceedings.There was also an execution proceeding filed in 2013 to bring into effect the arbitration award, but those proceedings also lapsed for non-removal of office objections and were never restored..While the arbitration was ongoing, Samta Nagar removed the respondent developer and brought in a new developer in 2007 for the redevelopment project. The project was substantially been completed with only Occupation Certificate to be received from Maharashtra Housing and Area Development Authority (MHADA).At this point, the sub-contractor filed a Section 17 application in the disposed arbitral proceedings seeking a restraining order against the societies and MHADA, who were respondents there, from assigning the development work to any third party and for appointment of a Court Receiver.The sole arbitrator allowed the application because there seemed to be no opposition from the respondents. The order formed the subject matter of the present plea..Counsel for the societies submitted that the arbitrator had acted in patent lack of jurisdiction having become functus officio and had no jurisdiction under Section 17 of the Act to pass such an order post the award .Further, they pointed out that only the Court had powers to appoint a receiver and not the arbitrator.Agreeing with the contentions of the counsel, Justice GS Kulkarni held that the order in the application under Section 17 of the Arbitration Act was outside the ambit of arbitration..Justice Kulkarni expressed his shock at the manner in which the tribunal went beyond its jurisdiction which had already lapsed.“A reading of the findings and conclusion, in my opinion, does not lead to any logic or any understandable reading of the impugned order...it is beyond comprehension as to how the learned arbitrator could exercise jurisdiction and more particularly on the ground that there was no opposition to pass such a draconian order. Certainly the exercise of such jurisdiction not only lacks rationale but also a legal propriety,” the High Court said. .The Court held that the arbitrator completely overlooked his jurisdiction to entertain such an application having become functus officio (mandate of officer expired) on 27 December, 2010 and published the award.“What is peculiar is that the arbitrator has gone beyond the award in appointing the Court Receiver and directing him to take possession of the buildings, but also passing an order that the MHADA and Samta Nagar are restrained from assigning the development work to any third party” the order stated..Justice Kulkarni said that even assuming that the award in question was in the process of being enforced, Samta Nagar which was impleaded as party to the Section 17 application was required to give consent without which the tribunal’s jurisdiction could not have been invoked.“Admittedly, there is no such agreement and hence per-se the arbitral tribunal had no jurisdiction to entertain Section 17 application,” the Court said..Having made his stand clear, Justice Kulkarni proceeded to stay the order passed by the arbitrator in the Section 17 application..Senior Advocate Dr Birendra Saraf with Advocates Aditya Shiralkar, Suraj Juneja, Aryan Srivastava briefed by Wadia Ghandy & Co. appeared for Samta Nagar.Senior Advocate Sharan Jagtiani with Advocates Chirag Kamdar and Vishal Shriyan appeared for Raigad CHS.[Read Order]