High Court (India)

February 20, 2020

Bombay HC penalizes Adanis Rs. 5 lakhs for delay of 7 years in challenging appointment of Arbitrator

[ by Kavita Krishnan ]


The Bombay High Court ruled that a party cannot sleep over its rights and participate in further proceedings and one fine day approach the Court or the authority to rectify the error.

The appellants (Antikeros Shipping Corporation – based out of Liberia) and the respondents (Adani Enterprises Limited – Indian company) entered into an agreement in February 2008 by which the respondent was to supply bunker fuel to the appellants’ vessel. The agreement dated also envisaged resolution of disputes between the parties at Mumbai as per the Arbitration and Conciliation Act, 1996 (“Act”) before a Tribunal comprising three Arbitrators. As per the agreement, both the parties were to nominate an Arbitrator and the 3rd was to be appointed by the said two Arbitrators.

A dispute arose between the parties in March 2008. The appellant raised a demand towards damages in sum of $1,040,400.00. The respondent denied liability and raised a Counter-Claim in sum of $90,325.00 towards the adjusted cost of the fuel which was off-loaded in United Arab Emirates where the vessel was diverted.

In March 2009, the appellant invoked the Arbitration clause and proposed a sole Arbitrator. However there was no response from the respondent.

In February 2011, the appellant filed an application under Section 11 of the Act in the Bombay High Court seeking the appointment of an Arbitrator on behalf of the respondent. In spite of being served the respondent did not appear and thus on 21st April 2011 a learned Single Judge of the Bombay High Court appointed Ms. J.K. Bhatt as an Arbitrator for the Respondents.

In February 2013 the Adanis filed an application before the Arbitral Tribunal challenging the tribunal’s jurisdiction on the plea that the appellant being a company incorporated outside India the High Court had no jurisdiction under Section 11 of the Act to appoint an Arbitrator because it was a case of an international commercial arbitration.

In August 2018 the respondent filed a petition seeking review of the order dated 21st April 2011 passed by the High Court. It also sought 7 years delay in filing the Review Application to be condoned. In March 2018 the impugned order was passed condoning delay of 7 years in seeking review of the order dated 21st April 2011 and simultaneously recalling the said order appointing Ms. J.K. Bhatt an Arbitrator on behalf of the respondent.

The Bombay High Court held that “the torpedo fired by the respondent is declared to be a dude and it sinks without hitting its target.”

Chief Justice Pradeep Nandrajog and Justice Bharati Dangre presided over the case. The Court observed that the Single Judge has recognized the fact that under the Act no power of review is vested. Though not specifically recognized, implicit in the impugned order is the recognition of the fact by the learned Single Judge that unlike the Supreme Court which is vested with a power of review under Article 137 of the Constitution of India, High Courts are not vested with any power of review under the Constitution.

The Court further observed that the Single Judge failed to substantiate the reason for allowing application for condonation of delay after 2680 days of the Award. The Court held, “The respondent knew about the order dated 21st April 2011 when the Arbitral Tribunal gave notice to it and the appellant filed its Statement of Claim on 5th July 2012. On 1st February 2013 the respondent challenged the jurisdiction of the Tribunal on the plea that the appellant being a company incorporated outside India the order under Section 11 of the Act was a nullity because it was a case of an International Commercial Arbitration. On 3rd July 2013 the Arbitral Tribunal rejected the challenge to its jurisdiction and the respondent kept quiet. It participated in the arbitration proceedings until after evidence was led by both parties and counsel for the appellant concluded submissions and the counsel for the respondent opened arguments in reply and after seeking adjournments from the Tribunal filed the review petition on 30th August 2018. It needs no rocket science for anyone to infer that probably the respondent got a premonition that it might lose. We therefore hold that the respondent failed to show sufficient cause entitling it to 2680 days delay in seeking review of the order dated 21st April 2011 to be condoned.”

The Court directed that the Adanis (Respondents) were entitled to costs quantified at Rs. 5 lakhs.

View Full Judgement

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