Bombay High Court

Palmview Overseas Ltd vs Ravi Arya And Ors on 2 May, 2023

Author:
K.R.Shriram

Bench:
K.R. Shriram

2023:BHC-OS:3790-DB 1/38 COMAPL-36947-22.doc

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMMERCIAL APPEAL (L) NO.36947 OF 2022
IN
COMMERCIAL ARBITRATION PETITION (L) NO.25151 OF 2022
WITH
INTERIM APPLICATION (L) NO.38727 OF 2022
Palmview Investments Overseas Limited )
Portcullis Trustnet (BVI) Ltd. )
Portcullis Trustnet Chambers, P.O.Box 3444 )
Road Town, Tortola, British Virgin Islands ) ..Appellant
Vs.
1. Ravi Arya, Adult Indian Inhabitant )
Residing at 6, Satlej Terrace, 6 Walkeshwar )
Road, Mumbai 400 006 )

2. Nakul Arya, Adult Indian Inhabitant )
Residing at 6, Satlej Terrace, 6 Walkeshwar )
Road, Mumbai 400 006 )

3. Sushma Arya, Adult Indian Inhabitant)
Residing at 6, Satlej Terrace, 6 Walkeshwar )
Road, Mumbai 400 006 )

4. Varun Arya, Adult Indian Inhabitant )
Residing at 6, Satlej Terrace, 6 Walkeshwar )
Road, Mumbai 400 006 )

5. Ravi Arya, HUF )
6, Satlej Terrace, 6 Walkeshwar Road, )
Mumbai 400 006 )

6. Arya Iron & Steel Co. Pvt. Ltd. )
Having registered office at )
51-53A Mittal court "A" Wing )
Nariman Point, Mumbai 400 021 )

7. Pawan Arya, Adult Indian Inhabitant )
at 51-53A Mittal court "A" Wing )
Nariman Point, Mumbai 400 021 )

8. Puneet Arya, Adult Indian Inhabitant )
at 51-53A Mittal court "A" Wing )
Nariman Point, Mumbai 400 021 )
9. Poonam Arya, Adult Indian Inhabitant )
at 51-53A Mittal court "A" Wing )
Nariman Point, Mumbai 400 021 )

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10. Trupti Arya, Adult Indian Inhabitant )
at 51-53A Mittal court "A" Wing )
Nariman Point, Mumbai 400 021 )

11. Pawan Arya, HUF )
at 51-53A Mittal court "A" Wing )
Nariman Point, Mumbai 400 021 )

12. MP Recycling Pvt Ltd. )
having its registered office at )
43, Ramwadi, Kalbadevi Road, )
Mumbai 400 002 )

13. Arya Ship Breaking Co. Pvt Ltd. )
having its registered office at )
43, Ramwadi, Kalbadevi Road, )
Mumbai 400 002 ) ..Respondents
------
Mr. Kevic Setalvad, Senior Advocate a/w Mr.. Vijay K Singh, Mr. Vinay J
Bhanushali, Mr. Abhiraj Rao, Ms Shreya Arur, Mr. Sanmit Vaze and Mr. Jehan
Lalkaka for Appellant / Applicant.
Mr. Haresh Jagtiani, Senior Advocate a/w Mr. Suprabh Jain, Mr. Pushpvijay Kanoji
and Ms Jahnavi Vora i/b Mr. Mohd Shariq for Respondent Nos 1 and 2.
Mr. Sharan Jagtiani, Senior Advocate a/w Mr. Priyank Kapadia and Ms Apurva
Manwani i/b Mr. Yakshay Chheda for Respondent Nos 3 to 5.
Mr. Sameer Bindra i/b Khaitan & Co for Respondent No 6.
Ms Chandni Dewani i/b Vashi and Vashi for Respondent Nos 7 to 11.
----
WITH
COMMERCIAL APPEAL (L) NO.37275 OF 2022
IN
COMMERCIAL ARBITRATION PETITION (L) NO.25249 OF 2022
WITH
INTERIM APPLICATION (L) NO.38730 OF 2022

Mr Vijay K Singh a/w Mr Vinay J Bhanushali, Mr Abhiraj Rao,Ms Shreya Arur, Mr
SanmitVaze and Mr Jehan Lalkaka for Appellant /Applicant
Mr Sharan Jagtiani, Senior Advocate a/w Mr Priyank Kapadia and Ms Apurva
Manwani i/b Mr Yakshay Chheda for Respondent Nos 1 to 3
Mr Haresh Jagtiani, Senior Advocate a/w Mr Suprabh Jain, Mr Pushpvijay Kanoji
and Ms Jahnavi Vora i/b Mr Mohd Shariq for Respondent Nos 4 and 5
Ms Chandni Dewani i/b Vashi and Vashi for Respondent Nos 7 to 11

CORAM : K.R. SHRIRAM &
RAJESH S. PATIL JJ
RESERVED ON : 16th MARCH 2023
PRONOUNCED ON : 2nd MAY 2023

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JUDGMENT (PER K.R.SHRIRAM J.) :

1 This appeal has been filed under
Section 37
of the Arbitration and

Conciliation Act 1996 (the
Arbitration Act
), impugning an order dated

1st November 2022 passed by a Learned Single Judge of this court in an

arbitration petition filed under
Section 34
of the Arbitration Act. The

Learned Single Judge set aside the award dated 16 th June 2022 passed by

the Arbitral Tribunal in international commercial arbitration proceedings on

separate applications filed by respondent nos.1 and 2 and respondent nos.3

and 5 under
Section 31(6)
read with
Section 32
of the Arbitration Act that

the person who signed the notice invoking arbitration and signed the

statement of claim on behalf of Claimant, i.e., appellant herein had no valid

authority to do so, nevertheless granted liberty to cure the defect.

2 The facts in brief are as under:

Respondent no.6-Arya Iron & Steel Co. Pvt. Ltd., is a company

registered in Mumbai under the provisions of
Companies Act
1956.

Appellant and other respondents are shareholders of respondent no.6.

Respondent no.6 is, inter alia, engaged in the business of manufacturing and

selling of iron and steel products.

3 Appellant is a company incorporated under the relevant laws of

British Virgin Islands (BVI). Appellant is an investment company.

Respondent nos.1 to 5 (RA Group) and 7 to 11 (PA Group) together with

respondent nos.12 and 13 are promoters of respondent no.6. It is appellant's

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case that in view of a Shareholder's Agreement dated 25 th March 2009,

appellant holds 49% shares in respondent no.6 and the balance is held by

respondent nos.1 to 5 (RA Group) and 7 to 13 (PA Group). Respondent

nos.12 and 13 are closely owned and controlled by RA Group and PA

Group, i.e., respondent nos.1 to 5 and 7 to 11, respectively.

4 It is appellant's case that it was asked by other respondents to join as

shareholder and to infuse funds in respondent no.6. Appellant and

respondents entered into a Shareholder's Agreement as well as Share

Purchase and Share Subscription Agreement all dated 25 th March 2009.

Appellant invested about Rs.80 crores in respondent no.6. Appellant was

made 49% shareholder and the remaining 51% was with respondent nos.1

to 5 (PA Group) and 7 to 11 (RA Group). It is appellant's case that as per

the Shareholders' Agreement, it had nominated one Sunil Jain as nominee

director on the board of respondent no.6 and the said Sunil Jain had even

attended certain board meetings. Disputes arose between appellant and

respondents, i.e., between shareholders of respondent no.6. Consequently,

appellant invoked arbitration proceedings on 30 th April 2018 in terms of the

Shareholders' Agreement dated 25th March 2009. The Arbitral Tribunal

comprising of three members, namely, Hon'ble Mr. Justice C. K. Thakker

(Retd.) as Presiding Arbitrator, Hon'ble Mr. Justice Deepak Verma (Retd.)

and Hon'ble Mr. Justice Mohit Shah (Retd.)was constituted. Later on,

Hon'ble Mr. Justice C. K. Thakker (Retd.) resigned and he was substituted

by Hon'ble Mr. Justice A. K. Sikri (Retd.).

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5 Right from the beginning, there were objections raised by RA Group,

i.e, respondent nos.1 to 5 on the constitution of the Arbitral Tribunal or on

the impartiality of the Arbitral Tribunal, etc. All these objections were

rejected. In fact on the constitution of the Arbitral Tribunal, the Tribunal's

order was challenged in the Bombay High Court before a Single Judge, who

dismissed the same. The intra court appeal was also dismissed by the

Division Bench and the SLP filed also came to be dismissed.

6 Thereafter, pleadings were filed by the parties and the matter

proceeded to recording of evidence. Before the evidence was recorded,

points of dispute was also framed. Evidence of appellant was being recorded

and appellant filed witness affidavit of two persons. Sunil Jain, who was the

nominee Director of appellant in respondent no.6, appeared as CW-1 and

was cross-examined by all respondents. His testimony was completed and

he had been discharged from the proceedings as witness. Second witness

was one Gagan Preet Singh as CW-2, whose cross-examination is yet to be

concluded. CW-1 had appeared as a fact witness and CW-2, a Chartered

Accountant, is produced as an expert witness. After completion of cross-

examination of CW-1 and before the cross-examination of CW-2 could

commence, an application under
Section 31(6)
read with
Section 32
of the

Arbitration Act was filed by respondent nos.1 and 2 on 20 th December 2021

(the said application). Reply was filed by appellant. A similar application

was filed by respondent no.3 and respondent no.5. It was the case of

applicant in the said applications that CW-1 - Sunil Jain, who signed and

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verified the statement of claim did not have a valid / requisite authority to

invoke arbitration and/or institute the present claim on behalf of appellant

and/or to sign and verify the pleadings and to depose on behalf of appellant

as the said authority does not emanate from the resolution dated 16 th July

2018 on which, Sunil Jain relied upon. The said resolution was not a valid

document in the eyes of law. According to applicant of the said application,

authorization by the invalid document, namely the resolution in favour of

Sunil Jain, goes to the root of the matter. Whether the resolution is a proper

and valid resolution under the laws of BVI is a matter of Foreign Law and

such aspect in Foreign Law is required to be proved as a question of fact that

too by an expert in Foreign Law, as required under
Section 45
of the Indian

Evidence Act. Appellant having failed to prove that the resolution was a

valid resolution under the laws of BVI, the Arbitral Tribunal was asked to

pass award / interim award and declare that the claim was presented

without authority; that the notice invoking arbitration dated 30th April 2018

was without authority and hence the Arbitral Tribunal should dismiss the

claim with cost. Naturally appellant opposed the application and submitted

that even if it is found that the authorization of Sunil Jain was not a valid

authorization, appellant was ready and willing to rectify the defect. Of

course, this was also opposed by respondent nos.1 and 2, and 3 and 5, (the

RA Group), in as much as according to these respondents there is no

averment at all in the statement of claim that the resolution was validly

passed under BVI laws and the resolution produced was impermissible and

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cannot be read in evidence as it did not meet with the requirements of

Section 44
of the Indian Evidence Act. In order to say that the resolution is

valid as per BVI laws, appellant will have to produce an expert, which

opportunity appellant has already lost. Moreover, it would be on the

assumption that the resolution is valid under BVI laws, which presumption

would be improper as there are no pleadings that the resolution is valid

under the BVI laws. Therefore, granting such opportunity to appellant

would mean showing indulgence to a disentitled party.

7 The Arbitral Tribunal by its award dated 16 th June 2022, allowed the

application of RA Group by holding that there were no averments that the

resolution authorising Sunil Jain was passed as per BVI laws and as no

evidence was led to prove that the said resolution was in accordance with

the BVI laws, the resolution was invalid. The Tribunal also held that even

under the provisions of the
Companies Act, 2013
, the resolution could not

be accepted and, therefore, the resolution was invalid. While holding so,

the Arbitral Tribunal observed that even though appellant has not proved

the resolution dated 16th July 2018 on the strength of which Sunil Jain had

signed and verified the statement of claim is a valid document under law, a

further question is required to be decided, i.e., whether non production of

valid authorization as irregular and is curable. The Arbitral Tribunal went

ahead and decided the question and held that after considering the various

submissions made including the judgments cited, the claim should not be

dismissed for technical reasons as, whether the claim was signed and

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verified by a competent person does not go to the root of the matter. In

other words, the Arbitral Tribunal held that the defect was curable.

Paragraphs 77 and 78 of the Arbitral Tribunal's order dated 16 th June 2016

read as under:

"77. The dicta of the aforesaid pronouncements is that such a
defect is curable. That apart, as noticed above in the present
case, there was no specific denial about the passing of the
Resolution by these Applicants / Respondents in their respective
defence statements and no specific question was raised by the
respondents that the resolution was not valid under the BVI
Laws or Indian Laws. Because of this reason, no specific Issue
was framed either. Therefore, there was no occasion for the
Claimant to lead any evidence on this aspect. This is yet another
reason that the Claimant should be given a chance to show that
Mr. Sunil Jain is vested with necessary authority to institute the
present Arbitration proceedings and has also been authorised to
sign and verify the statement of claim and to depose in the
matter. Non granting of such an opportunity would cause
prejudice to the Claimant and would amount to miscarriage of
justice to the Claimant.

78. The claimant can do so either by proving that the Resolution
dated 16.07.2018 placed on record is a valid Resolution under
BVI laws or by filing fresh Resolution, as this irregularity is
ratifiable as well. The Tribunal grants two weeks' time to the
Claimant to respond as to which option the Claimant would like
to exercise so that further directions are issued by the Tribunal in
this behalf."

8 Aggrieved by this liberty granted by the Arbitral Tribunal to rectify the

defect, two separate petitions under
Section 34
of the Arbitration Act were

filed by respondent nos.1, 2, 3 and 5. Both the petitions were heard

together and by a common order and judgment pronounced on

1st November 2022, Learned Single Judge of this court held that the

impugned orders / interim award would be in contravention of the public

policy of India and fundamental Policy of Indian Law. According to the

Learned Single Judge, it was impossible for the Arbitral Tribunal to permit

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ratification of the resolution /rectifying the defect. It is that order, i.e.,

impugned in this appeal.

Appellant did not challenge the findings of the Arbitral Tribunal,

since, as submitted by Mr. Setalvad, appellant was anyways given a chance

to rectify the defect.

Other than Mr. Setalvad, Mr. Sharan Jagtiani and Mr. Haresh Jagtiani,

none of the other counsel made any submissions.

9 Mr. Setalvad submitted as under:

(a) The defect in the board resolution is a procedural defect and is

curable.

(b) The Arbitral Tribunal has held that there was defect in the board

resolution but has also held that such a defect was curable and accordingly

gave appellant the opportunity to prove that the board resolution was valid

under BVI laws or file a fresh resolution. These directions were passed by

considering and keeping with the settled position in law as laid down by the

Apex Court and various High Courts including this court.

(c) The suit filed by a company with defective board resolution or even

without any board resolution at all is not fatal. It is procedural in nature

and is curable defect. A substantive right should not be allowed to be

defeated on account of a procedural irregularity which can be cured at any

time, as held in
United Bank of India Vs. Naresh Kumar
1, Sheth builders
Vs.

Michael Gabriel2, Pragya Electronics Pvt Ltd. Vs. Cosmo Ferrites Ltd.
3,

1. 1996 (6 )SCC 660

2. 2020 SCC Online Bom 9042

3. 2021 SCC Online Del 3428

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Western India Theaters Ltd. Vs. Ishwarbhai Somabhai Patel4
,
Sangat Printers

Pvt Ltd. Vs. Wimpy International Ltd.5
,
Alcon Electronics Pvt Ltd. Vs. Celem

S. A.6
,
National Ability SA Vs. Tinna Oil & Chemicals Ltd.
7 and
Welding Rods

Pvt Ltd. Vs. Indo Borax and Chemicals Ltd.8

(d) In Sheth Builders (Supra) and
Alcon Electronics
(Supra), there was no

board resolution at all when suits were instituted. Yet the court held that

such a defect is merely a procedural irregularity which can be cured.

Appellant could not be worse-off than in cases where there was no board

resolution at all.

(e) In
United Bank of India
(supra) the court has held that in addition to

and dehors
Order 29 Rule 1 of the Code of Civil Procedure
Code (
CPC
), a

company can authorise any person to sign the plaint on its behalf and that

would be considered sufficient compliance with
Order 6 Rule 14 of the CPC
.

Further, in
United Bank of India
(Supra) and
Pragya Electronics

(Supra) nowhere it is mentioned that the signatories were persons falling

under
Order 29 Rule 1 of the CPC
.

(f) The Learned Single Judge by distinguishing the judgments relied

upon by appellant on the grounds that none of them involved arbitration

proceedings is patently wrong.
In
Pragya Electronics
(supra) where
United

Bank of India
(supra) and
Sangat Printers
(supra) was followed, was a case

invoking arbitration proceedings.

4. AIR 1959 Bom 386 (DB)

5. 2012 SCC Online Del 299

6. 2015 (1) MhLJ 852

7. 2008 (105) DRJ 446

8. 2001 SCC Online Guj 269 (DB)

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(g) It is totally irrelevant that the other matters did not involve arbitration

proceedings. This is because the law
laid down in
the judgments cited above

is that the defect is procedural in nature and is curable and it would apply

equally to arbitration proceedings.

(h) The signing and verification of the statement of claim was a matter of

procedure. The same was governed by Indian Law. Matter of procedure

should always be governed by law of the country, where the court / tribunal

is situated. It is not in the realm of substantive law. This has been the

consistent position of Indian Law as held in
All India Reporter Vs.

Ramchandra Dhondo Datar9
,
Cement Co. Ltd. Vs. Abdul Hessein Essaji10
,

Ganpati Nana Powar Vs. Jivanabai Kom Subanna11
, Netram Dadaram

Palliwal Vs. Bhagwan Wallaji Kunbi12 , and
Vatech Global Co. Vs. Unicorn

Denmart Ltd.13

(i) It is settled position in law that all matters of procedure such as

signing and verification are governed by the domestic law of the country,

where the court is situated - Lex Fori (Dicey, Morris and Collins on the

Conflict of Law14). There is a presumption of proper verification and

execution of statement of claim.

(j) As per Section 85 read with
Section 57(6)
of the Indian Evidence Act,

signing and verification of plaint / statement of claim does not require

evidence to prove the same as courts will take judicial notice of such

9. 1959 SCC Online Bom 152

10. ILR 1937 Bom 85

11. ILR (1923) 47 Bom 227

12. 1940 SCC Online MP 49

13. 2022 SCC Online DEL 2349

14. 16th Ed., Chapter 4, Pages 121, 131-32

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signature / verification as was held in Joyce Cecilia Romalia De Souza Vs

Carl J M De Souza15, Zhejiang Medicines & Health Products Import and

Export Co. Vs. Devashi Impex16, National and Grindlays Bank Vs M/s World

Science News17 and Jugraj Singh Vs Jaswant Singh18.

(k) Even if signing / verification of the statement of claim was not

procedural law but of substantive law and, therefore, BVI Law's were

applicable, then the onus would be on respondents to lead evidence to

prove the Foreign Law. The onus of proving Foreign Law as a fact always

lies upon the party relying upon it. Absent the Foreign Law being

impleaded by the person objecting, the court will apply Indian Law as held

in
Malaysian International Trading Corporation Vs Mega Safe Deposit

Vaults19
,
Rhodia Limited Vs. Neon Laboratories
20 and Dicey, Morris and

Collins on The Conflict of Laws21

(l) The impugned award is not in contravention of public policy of India

and fundamental policy of Indian Law.

(m) The Arbitral Tribunal has rightly followed the binding judgments. The

order of the Arbitral Tribunal is clearly not contrary to the most basic

notions of justice such as would shock the conscience of the court. Notably,

the ground of patent illegality is not available in the present case, as

appellant is a foreign entity, as per the provisions of
Section 34
(2-A read

with
Section 2(1)(f)(ii)
of the Arbitration Act and Vijay Karia Vs. Prysmian

15. 2022 SCC Online Bom 421

16. 2016 SCC Online Bom 10041

17. ILR (1976) DEL 559

18. 1970 2 SCC 386 (3J)

19. 2006 SCC Online Bom 92

20. 2004 SCC Online Bom 1125

21. 16th Ed. Chapter 3, Page 103

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Cavi E Sistemi SRL22 and Ssangyong Engineering and Construction Co. Ltd.

Vs. NHAI23

(n) Providing an opportunity to appellant to rectify its board resolution,

can hardly be said to be against public policy. On the contrary, the order of

Arbitral Tribunal is in keeping with the fundamental policy of Indian Law. If

the Arbitral Tribunal had not permitted, then it would have been contrary to

public law.

(o) The Arbitral Tribunal's order is not an interim award and not

amenable to challenge under
Section 34
of the Arbitration Act because the

order is not a judicial determination of any of the issues framed by the

Arbitral Tribunal. It does not decide any legal rights or liabilities of the

parties under the shareholders agreement dated 25th March 2009.

(p) The question of illegality and/or validity of the board resolution was

not even an issue since there was no denial in the statement of defence.

The order was merely a procedural order passed under
Section 19
of the

Arbitration Act pursuant to an application under
Section 31
read with

Section 32
of the Arbitration Act.

(q) As there was no denial qua the passing of the resolution in the

respective statements of defence, no specific issue was framed on this aspect

and hence there was no occasion for appellant to lead evidence on the point

of the validity of the resolution. It is in this background the Arbitral

Tribunal provided that appellant should be given an opportunity to show

22. (2020) 11 SCC 1

23. (2019) 15 scc 131

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that Sunil Jain possessed the necessary authority to sign the pleadings and

depose as witness.

(r) As held in
Sanshin Chemicals Industry Vs. Oriental Carbons &

Chemicals Ltd.24
, Harinarayan G Bajaj Vs. sharedeal Financial Consultants

Pvt Ltd.25, Deepak Mitra Vs. District Judge,
Allahabad26, Punj Lloyd Ltd Vs

Oil
and Natural Gas Corporation Ltd.27 and Ranjiv Kumar Vs. Sanjiv Kumar 28

an Interim award is in the nature of preliminary decree. For an order to be

an interim award, it must have finally decided a claim, part of a claim and/

or counter claim which forms subject matter of the arbitral proceedings.

The rights and/or liabilities under the contract must have been judicially

determined. As that has not been done in this case, an order of this nature

passed by the Arbitral Tribunal can hardly be said to be an interim award.

The Delhi High Court in
Future Coupons Pvt. Ltd. Vs. Amazon.com NV

Investment Holdings LLC29
held that interlocutory orders passed in arbitral

proceedings are immune from challenge and party must wait till the final

award and only then can he vent his grievances, both against the

interlocutory order as well as the final award.

(s) The judgment of the Apex Court in
Indian Farmers Cooperative Ltd.

(IFFCO) Vs. Bhadra Products30
has been wrongly relied upon by the Learned

Single Judge because
the said judgment
was totally inapplicable for the

facts and circumstances of the case at hand.

24. 2001(3) SCC 341

25. 2003 Mh LJ 598

26. AIR 2000 All 609

27. 2016 SCC Online Bom 3749

28. AIR 2018 Cal 130 (DB)

29. 2022/DHC/005024

30. 2018 (2) SCC 534

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(t) Reliance of respondents on
Maharashtra State Electricity Distribution

Company Ltd. (MSEDCL) Vs. Godrej and Boyce Manufacturing Co. Ltd
.31 is

completely misplaced. That was a case where one party to a joint venture

invoked arbitration without any authority from the other party to the joint

venture.

(u) The Learned Single Judge's finding that the Arbitral Tribunal has

exercised jurisdiction in equity by permitting appellant to rectify the board

resolution under
Section 28(2)
of the Arbitration Act, is incorrect. Apart

from making a bald statement, the Learned Single Judge has not given any

reason or explanation as to how the Arbitral Tribunal has exercised

equitable jurisdiction.

(v)
Section 28
of the Arbitration Act is not applicable since it provides

Rules applicable to substance of dispute. The order passed by the Arbitral

Tribunal had no connection with the substance of the dispute. It was merely

a procedural order. It gave appellant an opportunity to rectify the defect as

was mandated by law. Permitting a party to cure a procedural defect as held

in various judgments is the norm. The Arbitral Tribunal has not acted

contrary to the law nor had disregarded the law. It has in fact applied the

correct principles.

(w) The Arbitral Tribunal has not exercised any equitable jurisdiction.

The Arbitral Tribunal has only applied the law when a document is filed by

a company without the board resolution or a defective board resolution, it is

31. 2019 SCC Online Bom 3920

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a procedural defect which is not fatal and must be permitted to be cured.

10 Mr. Sharan Jagtiani submitted as under:

(a) On maintainability of petition under
Section 34
of the Arbitration Act,

as held by the Apex Court in
IFFCO
(Supra), a final decision on "any matter"

or issue which arises between the parties to arbitration is an interim award,

which can be independently and separately challenged under
Section 34
of

the Arbitration Act. The Apex Court in
IFFCO
(supra) has held that language

of
Section 31(6)
of the Arbitration Act is advisedly wide in nature; that an

interim award may be made on "any matter" with respect to which Arbitral

Tribunal makes a final award. The expression "matter" is wide in nature

and subsumes issues at which the parties are in dispute.

(b) The facts and issues that arise in
MSEDCL
(supra) are almost identical

to that of the present matter.

Reliance by appellant on Harinarayan G. Bajaj

(Supra),
Sanshin Chemical Industry
(Supra),
Punj Lloyd Ltd.
(Supra),

Deepak Mitra (Supra), Ranjiv Kumar & Anr. (Supra), advocating a narrower

construction of what constitutes an interim award is misplaced. The nature

of orders passed in these judgments cited by appellant are entirely distinct

from the impugned order.

Similarly appellant's reliance on
Future Coupons

Pvt Ltd.
(Supra), is also misconceived because in
Future Coupons
(Supra)

the application before the Arbitral Tribunal was only under
Section 33(2)(c)

of the Arbitration Act and not for an interim award under
Section 31(6)

read with
Section 2(c)
of the Arbitration Act.

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(c) The Arbitral Tribunal's findings are in favour of respondents on

matters of pleading, matters of evidence and position of Indian Law under

the
Indian Companies Act, 2013
. The Arbitral Tribunal having categorically

found in favour of respondents that appellant has not proved the board

resolution dated 16th July 2018 on the strength of which, Sunil Jain had

signed and verified the statement of claim as a valid document under law,

nevertheless, wrongfully allowed appellant to cure the invalidity. The

Arbitral Tribunal's reasoning was since the defect is curable and since there

was no specific denial of the passing of the board resolution in the

respondents' statement of defence and no specific question was raised on

this aspect - no issue was framed or in the absence of issue being framed,

there was no occasion for appellant to lead evidence in this aspect. For those

reasons, appellant should be given an opportunity to show that Sunil Jain is

authorized to sign and verify the statement of claim and depose on behalf of

appellant, was flawed.

(d) To the extent, the Arbitral Award permits appellant to cure the

invalidity of the board resolution, is in conflict with the public policy of

India and is liable to be set aside. This is because it negates and reverses the

finality of findings in favour of respondents confirming subject matter of the

interim award thus giving appellant a clean slate to re-agitate disputed

matters of substance arising in the arbitration.

(e) Once it has been held on appreciation of pleadings and evidence led

in this regard that Sunil Jain lacks the requisite authority to sign and verify

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the statement of claim, the issue stood determined. The Arbitral Tribunal's

jurisdiction to consider this issue ends on such determination. The Arbitral

Tribunal cannot extend its jurisdiction by permitting appellant to cure the

invalidity of Sunil Jain's authority and thereby retain the jurisdiction to once

again determine his authority to sign and verify the statement of claim.

(f) If the party is allowed to lead evidence once it has chosen not to do

so, no litigation will ever end. Such course of action would also militate

against the fundamental policy of Indian Law which tries to attain finality to

arbitral awards.

(g) If authority to a person to institute legal proceedings was given at a

board meeting held on a particular date and it is established after trial, that

the meeting was held, in a manner unknown to law, or that in fact no such

meeting was held on the date stated by plaintiff, the court would not allow

plaintiff to undo the effect of that finding by once again holding a meeting

to issue such authority. Such opportunities erodes the binding finality of

awards. There is fundamental and inherent contradiction in the interim

award in as much as, on the one hand the Arbitral Tribunal holds that

pleadings regarding the validity of the board resolution are required to be

made by appellant in the statement of claim itself since appellant would not

know what position respondents may take in the statement of claim in this

regard. Such pleadings are entirely absent. The Arbitral Tribunal rejects

appellant's submission that the lack of specific denial of the board resolution

in respondents' statement of defence amounts to admission of its validity.

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The Arbitral Tribunal noticed that PA group in the reference has denied the

existence and validity of the board resolution and, therefore, appellant was

put to notice of its burden to prove the same.

In a departure from this reasoning, however, an opportunity is given

by the Arbitral Tribunal to appellant to cure the invalidity of the board

resolution is premised on the reasoning that there is no specific denial of the

validity of the board resolution by respondents in their statements of

defence due to which no specific issue was framed and as such no evidence

was led by appellant in this regard. Therefore, by giving an opportunity to

cure the defect, the Arbitral Tribunal has given not one but two options,

when no such opportunity was sought by appellant.

(h) Appellant never even made an application to the Arbitral Tribunal to

allow it to cure the validity for Sunil Jain's authorization to sign and verify

the statement of claim. Still an opportunity was given.

(i) The Arbitral Tribunal has exercised jurisdiction in equity ( Ex Aequo

Etbono/ Amiable Compositeur) which is not permitted under
Section 28
of

the Arbitration Act. This was not a case where the Arbitral Tribunal

exercised power in law available to it on a matter of mere procedure. It was

entirely a matter of substance decided in accordance with substantive law.

The opportunity to cure the defect in the board resolution by the options in

paragraph 77 of the award are demonstrably an exercise of power in equity.

The Arbitral Tribunal holds that if it does not grant appellant an opportunity

to cure the invalidity of Sunil Jain's authority, it would cause prejudice to

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appellant and that would amount to miscarriage of justice to appellant.

This is a clear exercise of equitable jurisdiction under
Section 28(2)
of the

Arbitration Act, where it was not available to the Arbitral Tribunal. The

observations in Interocean Shipping India Pvt Ltd. Vs. ONGC32 are apposite

even to the present case. None of the judgments relied upon by appellant

even remotely apply.

(j) In the circumstances, the appeal has to be dismissed.

11 Mr. Haresh Jagtiani, in addition to adopting the submissions of Mr.

Sharan Jagtiani, submitted as under:

(a) The Arbitral Tribunal having held that the resolution based on which

Sunil Jain signed the pleadings was illegal on the basis of the substantive

law applicable in India, which is the applicable law governing the

arbitration, could not have given the liberty to cure the defect.

(b) Sunil Jain was the only fact witness deposing on behalf of appellant

and the resolution relied upon by him having been held as not proved, the

resolution becomes inadmissible in evidence and no part of the award can

be based upon an inadmissible document under the
Indian Evidence Act

1872. The issue is purely one of substance and not procedure which is

incapable of being cured in the manner in which it is sought to be by the

Arbitral Tribunal.

(c) The resolution has been passed by appellant which is a BVI registered

company whose sole director is Execorp, a corporate entity whose place of

32. 2022 SCC Online Bom 1699

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registration is unknown. Applying the test of Indian Law, such a company

like appellant will not be recognized as a legal entity given that
Section 149

of the Companies Act 2013 only permits a natural person to be a director

and not another artificial entity. This also has been held by the Arbitral

Tribunal against appellant and by this yardstick as well the resolution has

been declared to be invalid. It is on a pure question of substance that this

finding has been arrived at.

(d) Paragraphs 77 and 78 of the award are at odds with the rest of the

findings in the award. The liberty given in paragraph 78 to file a fresh

resolution can only be explained or justified on principles of equity and

good conscience.
Section 28 (2)
of the Arbitration Act does not permit this

unless parties have agreed under the contract that the Arbitral Tribunal can

fall back on equity.

(e) The Arbitral Tribunal is a creature of contract between two parties

intending to resolve their dispute by arbitrators of their choice and
Section

28(2)
of the Arbitration Act proscribes the Arbitral Tribunal from exercising

equitable jurisdiction except, if expressly agreed by contract of parties

referring the resolution of their dispute to arbitration.

(f) Since the parties had not agreed to the Arbitral Tribunal applying

principles of equity, the Arbitral Tribunal could not have given the

opportunity to appellant to cure the defect.

12 Though elaborate submissions were made, the issues at hand are :-

(a) Whether petition filed by respondent nos.1 to 4 under
Section 34
of

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the Arbitration Act was maintainable ?

(b) Whether, (i) Arbitral Tribunal having found in favour of respondents

in holding that Sunil Jain was neither a Secretary nor a Director nor other

principal officer of appellant and the board resolution dated 16 th July 2018,

on the strength of which Sunil Jain has signed and verified the statement of

claim, is not a valid document under law, could the Arbitral Tribunal say

that the defect was curable or ratifiable? and (ii) for the reasons mentioned

in paragraph 77 of the award, appellant should be given a chance to show

that Sunil Jain is vested with necessary authority to institute the present

arbitration proceedings and also has been authorised to sign and verify the

statement of claim and to depose in the matter or in the alternative file a

fresh resolution ?

(c) Whether Section 28 of the Arbitration Act would be applicable in as

much as, granting an opportunity to rectify the defect is an exercise of

powers under Section 28(2) of the Arbitration Act which parties have not

expressly authorised the Arbitral Tribunal to do so.

Our answers are as under:

Issue (a):-

13 On the issue of the maintainability of petition under
Section 34
of the

Arbitration Act, we would hold that the petition was maintainable. The

Apex Court in
IFFCO
(supra) has held that the words "any matter" used in

Section 31(6)
of the Arbitration Act is very wide in nature and that an

interim award may be made on "any matter" with respect to which the

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Arbitral Tribunal may make a final Arbitral Award. The expression "matter"

is wide in nature and subsumes issues at which the parties herein are in

dispute. Paragraph 8 of IFFCO reads as under:

"8. The language of
Section 31(6)
is advisedly wide in nature. A
reading of the said sub-section makes it clear that the jurisdiction to
make an interim arbitral award is left to the good sense of the arbitral
tribunal, and that it extends to "any matter" with respect to which it
may make a final arbitral award. The expression "matter" is wide in
nature, and subsumes issues at which the parties are in dispute. It is
clear, therefore, that any point of dispute between the parties which
has to be answered by the arbitral tribunal can be the subject matter of
an interim arbitral award. However, it is important to add a note of
caution. In an appropriate case, the issue of more than one award may
be necessitated on the facts of that case. However, by dealing with the
matter in a piecemeal fashion, what must be borne in mind is that the
resolution of the dispute as a whole will be delayed and parties will be
put to additional expense. The arbitral tribunal should, therefore,
consider whether there is any real advantage in delivering interim
awards or in proceeding with the matter as a whole and delivering one
final award, bearing in mind the avoidance of delay and additional
expense. Ultimately, a fair means for resolution of all disputes should
be uppermost in the mind of the arbitral tribunal."

The Supreme Court was considering whether a decision on limitation

is an interim award which can be independently and separately challenged

under
Section 34
of the Arbitration Act.
Paragraph 30 of IFFCO
(supra)

reads as under:

"30. In our view, therefore, it is clear that the award dated 23 rd July,
2015 is an interim award, which being an arbitral award, can be
challenged separately and independently under
Section 34
of the
Arbitration Act. We are of the view that such an award, which does
not relate to the arbitral tribunal's own jurisdiction under
Section 16
,
does not have to follow the drill of
Section 16(5)
and (6) of the Act.
Having said this, we are of the view that Parliament may consider
amending
Section 34
of the Act so as to consolidate all interim
awards together with the final arbitral award, so that one challenge
under
Section 34
can be made after delivery of the final arbitral
award. Piecemeal challenges like piecemeal awards lead to
unnecessary delay and additional expense."

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14 The facts and issues which arose in
MSEDCL
(Supra) are almost

similar to that of the present matter.

In
MSEDCL
(supra), the respondent in

the arbitration challenged the claimant's authority to file a claim on behalf a

joint venture. The respondent filed a formal application for issuance of an

interim award under
Section 31(6)
of the Arbitration Act dismissing the

claim. The tribunal rejected this application. The Learned Single Judge of

this court allowed the petition filed by MSEDCL under
Section 34
of the

Arbitration Act and dismissed the claim. The Court held that the claimant's

JV partner- Electropath had not authorized the filing of the claim. The

Learned Single Judge found that Electropath did not give any express

authority in favour of the claimant to refer the dispute to arbitration arising

out of the business relating to the joint venture, and the claimant could not

legally represent Electropath as lead member of the said joint venture in

absence of any express authority on behalf of the Electropath.

Significantly, the court held that the arbitrator ought to have held that the

statement of claim filed by the claimant in its individual capacity was not

maintainable and ought to have allowed the said application filed by the

Respondents under
section 31(6)
of the Arbitration Act and ought to have

dismissed the claims made by the claimant. Consequently, this Court

allowed the petition under
Section 34
of the Arbitration Act and allowed the

application filed by MSEDCL under
Section 31(6)
of the Arbitration Act and

ordered dismissal of the claim.

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15 Both these judgments, i.e.
IFFCO
(supra) and
MSEDCL
(supra) relied

on by Respondents is subsequent in time vis-à-vis the judgments cited by

appellant.

16 Advocating a narrower construction of what constitutes an interim

award appellant relied on various judgments, i.e., Harinarayan G. Bajaj

(supra),
Sanshin Chemical Industry
(supra),
Punj Llyod Ltd.
(supra)

Deepak Mitra (supra), Ranjiv Kumar (supra), to submit that an 'interim

award' is limited to orders which finally decide any part of the claim or

counterclaim between the parties or an order which results in dismissal of

the reference. The nature of orders passed in the judgments cited by

appellant are entirely distinct from the Order dated 16th June 2022.

17 Appellant's reliance on the judgment of
Free Coupons Pvt Ltd.
(supra)

on this aspect is not correct. In that case the order of the Arbitral Tribunal

was challenged, and the Hon'ble Delhi High Court did not entertain the

challenge under
Section 34
of the Arbitration Act.

The main distinction that appellant misses is that in
Future Coupons

Pvt Ltd.
(supra) the application before the Arbitral Tribunal was only under

Section 32(2)(c)
of the Arbitration Act and not for an Interim Award under

Section 31(6)
read with
Section 2(c)
of the Arbitration Act. In that case, the

question was whether order of Competition Commission of India dated 17 th

December 2022 and order of the National Company Law Tribunal admitting

an application against Future FRL would prevent the arbitration from

proceeding. It was on the basis of these two other orders in two completely

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different proceedings and their alleged effect on the arbitration that the

petitioner filed its application under
Section 32(2)(c)
of the Arbitration Act

seeking a determination that the continuation of the arbitration proceedings

has become unnecessary or impossible. It is in this context that the findings

of the Delhi High Court came to be rendered by holding that had the

application been allowed and the arbitration reference terminated, perhaps

a remedy would have been available under
Article 227
of the Constitution of

India but that since the application was dismissed by the Arbitral Tribunal,

no remedy would lie against the interlocutory order of the Tribunal under

Section 34
of the Arbitration Act.
Section 31(6)
of the Arbitration Act and

the very concept of an Interim Award being under challenge did not arise
in

that case
.

18 In our view,
IFFCO
(supra) and
MSEDCL
(supra) are authorities for

the proposition that an order or decision is an interim award if it finally

decides an issue or 'matter' between the parties on which the tribunal can

make a final award, including an order determining whether the claimant is

authorised to file the claim. As such, the Impugned Order dated 16 June

2022 is an Interim Award within the meaning of
Section 2(1)(c)
read with

Section 31(6)
of the Arbitration Act.

Issue (b) and Issue (c)

19 The issue as to whether the Arbitral Tribunal could have given an

opportunity to cure the irregularity or whether there was a bar under

Section 28(2)
of the Arbitration Act have to be considered together and can

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be answered thus:

It is appellant's case that the lack of authority or defective authority of

Sunil Jain is a procedural defect and is curable; it was a case, where the

Arbitral Tribunal exercised powers in law available to it on a matter of mere

procedure; it was not a matter of substance decided in accordance with

substantive law. In our view, the Arbitral Tribunal did not decide any matter

of substance in accordance with substantive law. Having said that, the

Arbitral Tribunal, as
laid down in

Nahar Industrial Enterprises Ltd Vs.

Hongkong and Shanghai Banking Corporation33
by the Apex Court, can

travel beyond
the CPC
and the only fetter that is put on its powers is to

observe the principles of natural justice.

Paragraph 98(n) of
Nahar

Industrial Enterprises Ltd.
(Supra) reads as under:

"98(n) It is not bound by the procedure laid down under the Code. It
may however be noticed in this regard that just because the Tribunal is
not bound by the Code, it does not mean that it would not have
jurisdiction to exercise beyond
the Code of Civil Procedure
. Rather, the
Tribunal can travel beyond
the Code of Civil Procedure
and the only
fetter that is put on its powers is to observe the principles of natural
justice."

(emphasis supplied)

20 As held by the Apex Court in Srei Infrastructure Finance Ltd. Vs. Tuff

Drilling (P) Ltd.34
Section 19
cannot be read to mean that the arbitral

tribunal is incapacitated in drawing sustenance from any provisions laid

down under
the CPC
. Just because the Arbitral Tribunal is not bound by
the

CPC
, it does not mean that it would not have jurisdiction to exercise powers

of a court as contained in
the CPC
.

33. (2009) 8 SCC 646

34. (2018) 11 SCC 470

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Section 19
of the Arbitration Act, for ease of reference, reads as

under:

"Determination of rules of procedure.--

(1) The arbitral tribunal shall not be bound by
the Code of Civil
Procedure
, 1908 (5 of 1908) or the
Indian Evidence Act, 1872
(1 of
1872).

(2) Subject to this Part, the parties are free to agree on the procedure
to be followed by the arbitral tribunal in conducting its proceedings.

(3) Failing any agreement referred to in sub-section (2), the arbitral
tribunal may, subject to this Part, conduct the proceedings in the
manner it considers appropriate. The power of the arbitral tribunal
under sub-section (3) includes the power to determine the
admissibility, relevance, materiality and weight of any evidence."

Paragraph 26 of Srei Infrastructure Finance Ltd.
(supra) reads:

26. There cannot be a dispute that the power exercised by the arbitral
tribunal is a quasi-judicial. In view of the provisions of the 1996 Act,
which confers various statutory powers and obligations on the arbitral
tribunal, we do not find any such distinction between the statutory
tribunal constituted under the statutory provisions or Constitution in
so far as the power of procedural review is concerned. We have
already noticed that
Section 19
provides that arbitral tribunal shall
not be bound by the rules of procedure as contained in Civil
Procedure Code.
Section 19
cannot be read to mean that arbitral
tribunal is incapacitated in drawing sustenance from any provisions
of
Code of Civil Procedure
. This was clearly
laid down in

Nahar
Industrial Enterprises Limited Vs. Hong Kong and Shanghai Banking
Corporation
, (2009) 8 SCC 646. In Paragraph 98(n), following was
stated:-

"(n) It is not bound by the procedure laid down under the Code. It
may however be noticed in this regard that just because the Tribunal
is not bound by the Code, it does not mean that it would not have
jurisdiction to exercise powers of a court as contained in the Code.

"Rather, the Tribunal can travel beyond
the Code of Civil Procedure

and the only fetter that is put on its powers is to observe the
principles of natural justice."

(emphasis supplied)

21 In Oil & Natural Gas Corporation Ltd. Vs. Interocean Shipping (India)

Pvt Ltd.35 learned single Judge of this court held that though the Arbitral

Tribunal is not bound by the Evidence Act and Civil Procedure Code, the

35. 2017 Scc Online Bom 1032

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principles thereof will still apply. Paragraph 48 of Oil Natural Gas

Corporation Ltd. (Supra) reads as under:

"48. This Court has already held in catena of the decisions that though
under
Section 19
of the Arbitration and Conciliation Act, 1996, the
arbitral tribunal was not bound by
the Code of Civil Procedure
, 1908,

Indian Evidence Act, 1872
, the arbitral tribunal is still bound by the
principles of
Indian Evidence Act
,
Code of Civil Procedure
, 1908 and
also the principles of natural justice. In my view, the impugned award
on this issue shows clear perversity and patent illegality."

22 In
United Bank of India
(supra) the Apex Court has held that letter of

authority of an individual, who had signed the pleadings on behalf of the

company can be cured by the company subsequently. The court held that

where suits are instituted or defended on behalf of a public corporation,

public interest should not be permitted to be defeated on a mere

technicality. Though appellant is not a public corporation, a litigant's

interest should not be permitted to be defeated on a mere technicality.

Procedural defects which do not go to the root of the matter should not be

permitted to defeat a just cause. There is sufficient power in the Courts,

under
the Code of Civil Procedure
, to ensure that injustice is not done to any

party who has a just case. As far as possible a substantive right should not

be allowed to be defeated on account of a procedural irregularity which is

curable. The court also held that in the absence of a person expressly

authorised to sign the pleadings on behalf of the company, for example by

the Board of Directors passing a resolution to that effect or by a power of

attorney being executed in favour of any individual, the company can ratify

the said action of it's officer in signing the pleadings. Such ratification can

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be express or implied.

Paragraphs 8, 9, 10, 11 and 13 of United Bank of

India
(supra) read as under:

8. In this appeal, therefore, the only question which arises for
consideration is whether the plaint was duly signed and verified by a
competent person.

9. In cases like the present where suits are instituted or defended on
behalf of a public corporation, public interest should not be permitted
to be defeated on a mere technicality. Procedural defects which do not
go to the root of the matter should not be permitted to defeat a just
cause. There is sufficient power in the Courts, under
the Code of Civil
Procedure
, to ensure that injustice is not done to any party who has a
just case. As far as possible a substantive right should not be allowed
to be defeated on account of a procedural irregularity which is
curable.

10. It cannot be disputed that a company like the appellant can sue
and be sued in its own name. Under
Order 6 Rule 14 of the Code of
Civil Procedure
a pleading is required to be signed by the party and its
pleader, if any. As a company is a juristic entity it is obvious that some
person has to sign the pleadings on behalf of the company.
Order 29
Rule 1 of the Code of Civil Procedure
, therefore, provides that in a
suit by against a corporation the Secretary or any Director or other
Principal officer of the corporation who is able to depose to the facts
of the case might sign and verify on behalf of the company. Reading
Order 6 Rule 14 together with
Order 29 Rule 1 of the Code of Civil
Procedure
it would appear that even in the absence of any formal
letter of authority or power of attorney having been executed a
person referred to in Rule 1 of Order 29 can, by virtue of the office
which he holds, sign and verify the pleadings on behalf of the
corporation. In addition thereto and de hors
Order 29 Rule 1 of the
Code of Civil Procedure
, as a company is a juristic entity, it can duly
authorise any person to sign the plaint or the written statement on its
behalf and this would be regarded as sufficient compliance with the
provisions of
Order 6 Rule 14 of the Code of Civil Procedure
. A person
may be expressly authorised to sign the pleadings on behalf of the
company, for example by the Board of Directors passing a resolution
to that effect or by a power of attorney being executed in favour of
any individual. In absence thereof and in cases where pleadings have
been signed by one of it's officers a Corporation can ratify the said
action of it's officer in signing the pleadings. Such ratification can be
express or implied. The Court can, on the basis of the evidence on
record, and after taking all the circumstances of the case, specially
with regard to the conduct of the trial, come to the conclusion that
the corporation had ratified the act of signing of the pleading by it's
officer.

11. The courts below could have held that Sh. L.K. Rohatgi must have
been empowered to sign the plaint on behalf of the appellant. In the
alternative it would have been legitimate to hold that the manner in
which the suit was conducted showed that the appellant bank must
have ratified the action of Sh. L.K. Rohatgi in signing the plaint. If, for
any reason whatsoever, the courts below were still unable to come to

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this conclusion, then either of the appellate courts ought to have
exercised their jurisdiction under Order 41 Rule 27 (1) (b)
of the
Code of Civil Procedure
and should have directed a proper power of
attorney to be produced or they could have ordered Sh. L.K. Rohatgi
or any other competent person to be examined as a witness in order
to prove ratification or the authority of Sh. L.K. Rohatgi to sign the
plaint. Such a power should be exercised by a court in order to ensure
that injustice is not done by rejection of a genuine claim.

12. ********************

13. The court had to be satisfied that Sh. L.K. Rohatgi could sign the
plaint on behalf of the appellant. The suit had been filed in the name
of the appellant company; full amount of court fee had been paid by
the appellant bank; documentary as well as oral evidence had been
led on behalf of the appellant and the trial of the suit before the Sub
Judge, Ambala, had continued for about two years. It is difficult, in
these circumstances, even to presume that the suit had been filed and
tried without the appellant having authorised the institution of the
same. The only reasonable conclusion which we can come to is that
Sh. L.K. Rohatgi must have been authorised to sign the plaint and, in
any case, it must be held that the appellant had ratified the action of
Sh. L.K. Rohatgi in signing the plaint and thereafter it continued with
the suit.

23 In the impugned order, the Learned Single Judge has accepted that

this is the position in law but states that none of the cases relied upon by

appellant apply to the arbitral proceedings. According to the Learned Single

Judge, the cases relied upon by appellant either arose out of the order

passed by the Civil Court, which unlike an Arbitral Tribunal is a Court of

plenary jurisdiction or in respect of filing of winding up petition. According

to the Learned Single Judge, the Arbitral Tribunal unlike a Court of plenary

jurisdiction is a creature of contract governed by the agreement between the

parties and cannot act in equity, in the absence of an express authorisation

by the parties. As we will observe later
Section 28
of the Arbitration Act is

not applicable.

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In fact, as noted earlier, the Apex Court in
Srei Infrastructure Finance

Ltd.
(supra) relying on
Nahar Industrial Enterprises
(supra) has held that

Section 19
cannot be read to mean that the arbitral tribunal is incapacitated

in drawing sustenance from any provisions laid down under
the CPC
. Just

because the Arbitral Tribunal is not bound by the code, it does not mean

that it would not have jurisdiction to exercise powers of a court as contained

in
the CPC
. Rather, the Arbitral Tribunal can travel beyond
CPC
and the

only fetter that is put on its powers is to observe the principles of natural

justice.
The Apex Court in Jugraj Singh (supra) has held that once it is

ratified, the ratification is thrown back to the date of the act done and the

agent is put in the same position as if he had authority to do the act at the

time the act was done by him. Therefore, in our view, the decision of the

Arbitral Tribunal to permit appellant to cure the defect is perfectly justified.
Section 28
of the Arbitration Act deals with the question, which law

or rules the Arbitral Tribunal shall apply to the substance of the dispute. The

expression "substance of the dispute" could have reference only to the

merits of the case. We draw support for this view from Justice R.S.

Bachawat's Law of Arbitration and Conciliation36 (Bachawat), where it reads

as under:

"UNCITRAL Report on Adoption of Model Law

Paragraph (1) [Corresponding to Ss. 19(1) and (2)]

Two suggestions of divergent significance were made with respect to
paragraph (1). One suggestion was to make clear in the Model Law that
the freedom of the parties to agree on the procedure should be a

36. Sixth Edition Volume-I (Sections 1-34) - Pg. 1407/1506

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continuing one throughout the arbitral proceedings. The other suggestion
was to permit the parties to determine rules of procedure after the
arbitrators had accepted their duties to the extent the arbitrators agreed
(Para 171].

Neither suggestion was adopted. Although the provision as it now stood
implied that the parties had a continuing right to change the procedure,
the arbitrators could not in fact be forced to accept changes in the
procedure because they could resign if they did not wish to carry out new
procedures agreed to by the parties. It was noted that the time-frame
allowed for changing the procedures to be followed could be settled
between the parties and the arbitrators [Para 172]
Paragraph (2) [Corresponding to Ss. 19(3) and (4)]

An observation was made that, since in some legal systems a question of
admissibility, relevance, materiality and weight of evidence would be
considered to be a matter of substantive law, the question arose as to the
relationship between the second sentence of paragraph (2) and
Art. 28.

[Para 173].

It was understood that the objective of paragraph (2) was to recognize a
discretion of the arbitral tribunal which would not be affected by the
choice of law applicable to the substance of the dispute (Para 174).

The Commission adopted paragraph (2) [Para 175]

UNCITRAL Model Law

Section 28
(except clause (a) of sub-
section 1
) corresponds to
Article 28
of
the UNCITRAL Model Law.

*************************************

Analytical Commentary on UNCITRAL Draft Model Law

Article 28.
Rules applicable to substance of dispute

(1) The arbitral tribunal shall decide the dispute in accordance with such
rules of law as are chosen by the parties as applicable to the substance of
the dispute. Any designation of the law or legal system of a given State
shall be construed, unless otherwise expressed, as directly referring to the
substantive law of that State and not to its conflict of laws rules.

(2) Failing any designation by the parties, the arbitral tribunal shall apply
the law determined by the conflict of laws rules which it considers
applicable.

(3) The arbitral tribunal shall decide ex aequo et bono or as amiable
compositeur only if the parties have expressly authorized it to do so.

(4) In all cases, the arbitral tribunal shall decide in accordance with the
terms of the contract and shall take into account the usages of the trade
applicable to the transaction.

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Commentary

1.
Article 28
deals with the question which law or rules the arbitral
tribunal shall apply to the substance of the dispute. This question, which
should be distinguished from the issue of the law applicable to the arbitral
procedure or the arbitration agreement is often dealt with in conventions
and national laws devoted to private international law or conflict of laws.
However, it is sometimes covered by national laws on arbitration and often
by arbitration conventions and arbitration rules."

(emphasis supplied)

During the hearing we had suggested to the counsel to also consider

the UNCITRAL reports.

25 The issue at hand was not substance of the dispute. The substance of

the dispute is the dispute and differences between the parties on account of

shareholding in respondent no.6, which according to appellant was misused

by PA group that gave them future dominance over respondent no.6. Even

if, for a moment we stretch to hold that the Arbitral Tribunal has exercised

jurisdiction in equity by allowing appellant to cure the irregularity, still it

will not be hit by the provisions of
Section 28(2)
of the Arbitration Act

because
Section 28
of the Arbitration Act deals with the question which law

or rules the Arbitral Tribunal shall apply to the substance of the dispute,

would mean the merits of the case. The object of
Sections 19(3)
and
19(4)

of the Arbitration Act is to recognize the discretion of the Arbitral Tribunal

on matters that do not relate to the substance of the dispute, whereas,

Section 28
of the Arbitration Act deals with substance of the dispute in

contradistinction to the law applicable to the procedure.

Pages 1570/1571 in Bachawat says:

According to
Article 28(3)
, the parties may authorize the arbitral
tribunal to decide the dispute ex aequo et bono or as amiables
compositeurs. This type of arbitration is currently not known or used in

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all legal systems and there exists no uniform understanding as regards
the precise scope of the power of the arbitral tribunal. When parties
anticipate an uncertainty in this respect, they may wish to provide a
clarification in the arbitration agreement by a more specific
authorization to the arbitral tribunal. Paragraph (4) makes clear that in
all cases, i.e., including an arbitration ex aequo et bono, the arbitral
tribunal must decide in accordance with the terms of the contract and
shall take into account the usages of trade applicable to the transaction
[Para 36]

This also indicates that
Section 28
applies only to the substance of the

dispute, that is, the transaction that is under dispute and not procedural

issues as in the case at hand.

Section 28(2)
provides the arbitral tribunal shall decide ex aequo et

bono or as amiable compositeur only if the parties have expressly

authorised it to do so. If the arbitrators are appointed as amiable

compositerus, they are exempt from the obligations of hearing the parties

and their respective proofs, or establish default against them and decide

according to the rule of law. These are clauses used in transactions where

the parties are contracting for a long relationship, in which the maintenance

of commercial trust between the parties is reasonably assured. These are

clauses where the arbitrator is freed from any duty to respect the rule of

law when deciding upon the merits of the dispute. The Arbitrator can

ignore technicalities and strict constructions and need not conform in the

ordinary legal procedures when conducting the reference.

In the case at hand the arbitral tribunal has not ignored the technical

objections raised by RA Group. It has infact conformed to the law laid down

by the Apex Court and various High Courts and has respected the rule of

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law while deciding the objection raised by the RA Group.

Therefore, to say the Arbitral Tribunal by holding that appellant

should be able to correct on irregularity, cannot be stated to have acted as

"amiable compositeurs" or "ex aequo et bono". The Arbitral Tribunal has

acted according to law and applied principles of natural justice.

26 The Arbitral Tribunal in our view, had not acted contrary to the law or

disregarded the law but has applied the correct position in law. The Arbitral

Tribunal has applied the principles of Order 29 Rule 4 read with
Order 6

Rule 14 of the CPC
and as noted earlier, there was no fetter in the Arbitral

Tribunal in doing so. The Arbitral Tribunal has acted in accordance with the

fundamental policy and Indian Law and granted appellant its right to cure

the defect. At the cost of repetition, the Arbitral Tribunal, as held in catena

of judgments, has held that when a proceeding is filed by company with

defective board resolution or even without any board resolution at all, is not

fatal and must be permitted to be cured. Procedural defect which do not go

to the root of the matter should not be permitted to defeat a just cause.

There is sufficient power in the Arbitral Tribunal to ensure that injustice is

not done to any party who has a just case. As far as possible a substantive

right should not be allowed to be defeated on account of a procedural

irregularity which is curable. If we take away that power then no arbitrator

will have power to ensure injustice is not done. This is the law and it is this

law which had been applied by the Arbitral Tribunal.

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The Claim has been filed by a company incorporated in BVI, which

holds 49% shares in Respondent No. 6 together with RA Group and PA

Group. Appellant has participated in the arbitral proceedings since 2018.

The relationship between the parties goes as far back as 25 th March 2009

when the share purchase agreement was entered into. It is in these

circumstances, it is difficult even to presume that the claim has been filed

and arbitral proceedings pursued without appellant having authorised the

institution of the same. The only reasonable conclusion which we can come

to is Sunil Jain must have been authorised to institute arbitration and sign

the Claim Statement, etc. but did not have a valid document to prove that.

We cannot say Sunil Jain was an impostor, as alleged by Mr. Haresh Jagtiani

repeatedly during his submissions. In his cross examination by Counsel for

Respondent No. 6, Sunil Jain has deposed that he has attended many

meetings of Respondent No. 6 after his appointment as Director of

Respondent No. 6 in January 2010. The substance of the dispute is for the

control of Respondent No. 6 between Appellant and the RA Group / PA

Group. Despite that RA Group has raised such objections.

Infact Mr. Haresh Jagtiani himself has admitted while cross examining

Sunil Jain that Sunil Jain was the nominee Director of Appellant in

Respondent No. 6. Question no. 113 and Question no. 114 and answers

thereto read as under:

"Q.113. Please confirm that you were present at most of the board
meetings of respondent no.1 company and have participated in the
deliberations in your capacity as a nominee director of the claimant.
Ans. I have attended many Board Meetings of Respondent No.1

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company.

Q.114. In your capacity as a Nominee Director by the Claimant, you
must have been given instructions as to the interest of the Claimant
that you were expected to protect an further. Is that correct ?
Ans. As per SHA, that is correct."

27 In the circumstances, the Learned Single Judge was not correct in

interfering with the award under
Section 34
of the Arbitration Act.

We set aside the impugned order and judgment of the Learned Single

Judge and restore the award of the Arbitral Tribunal.

28 The appeal is allowed on the above terms and costs to be cost in the

arbitral proceedings. Consequently, interim application (l) no.38727 of 2022

also stands disposed.

29 The Arbitral Tribunal shall endeavour to fix the date for proceeding

with the arbitral proceedings at its earliest convenience.

30 Our findings above will squarely apply to Commercial Appeal (L)

No.37275 of 2022, which was also filed impugning the same order and

judgment dated 1st November 2022. Consequently, Commercial Appeal (L)

No.37275 of 2022 and interim application (l) No.38730 of 2022 also stand

disposed.

31 Mr. Sharan Jagtiani prays for stay of the judgment. Stay refused.

(RAJESH S PATIL, J.) (K.R. SHRIRAM, J.)

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