MAHARASHTRA STATE ELECTRICITY BOARD Vs. DATAR SWITCHGEAR LIMITED

JUDGEMENT

(1.) ADMIT. Respondents waive service. By consent taken up for hearing and final disposal.

(2.) THE question which this Court is called upon to decide in these proceedings is whether an Arbitral Tribunal constituted under the Arbitration and Conciliation Act, 1996 is empowered by the provisions of the Act to suspend the hearing of the arbitral proceedings and, in the alternate, whether the Court exercising jurisdiction under section 9 can issue a direction to that effect. Shorn at this stage of all the details to which it would nevertheless become necessary to advert during the course of the judgment, the Arbitral Tribunal by an interim direction, directed the petitioner ("mseb") to deposit certain amounts which were permitted to be withdrawn by the respondent ("dsl") against Bank Guarantees. The Bank which had issued the Bank Guarantees extended the guarantees from time to time but then declined to renew them any further. The Guarantees were not invoked by the MSEB before expiry, as a result of a clause in the guarantees which made invocation conditional upon permission being granted by the Arbitral Tribunal to MSEB. DSL has, in the meantime, been declared a sick industrial undertaking under the Sick Industrial Companies (Special Provisions) Act, 1985 and pleads that it is unable financially to secure any alternative Bank Guarantee at this stage. On an application moved by MSEB, the Arbitral Tribunal has ordered DSL to bring back the moneys which were withdrawn and to this order, DSL has submitted itself. The Arbitral Tribunal has declined to accede to the prayer of MSEB that the arbitral proceedings be suspended in their entirety (including the hearing of the counter claim of MSEB) until the moneys are brought back. That decision is challenged by MSEB. Of the three arbitrators constituting the Arbitral Tribunal, Mr. Justice V. D. Tulzapurkar has expressed the view that he was doubtful as to whether the Tribunal had the power to suspend the proceedings, but, that in any case, no case for suspension has been made out since the conduct of DSL was neither deliberate, nor contumacious. The second learned arbitrator Mr. Justice M. L. Pendse has held that there was no power in the Arbitral Tribunal to suspend its proceedings and to grant a stay as prayed but, that in any event, in view of the fact that the arbitral proceedings have proceeded to a considerable extent and evidence has been substantially recorded, it would not be appropriate for the Tribunal to accede to the prayer. A dissenting view has, however, been expressed by Mr. Justice S. C. Pratap, who has held that there is a power in the Arbitral Tribunal to grant a stay of proceedings and a sufficient ground has been made out before the Tribunal to do so in the facts of the present case, since the conduct of DSL is contumacious. The dissenting member of the Tribunal has, however, directed that the hearing of the counter claim preferred by MSEB must proceed though, as already noted earlier, the prayer of MSEB was that the entire proceedings including hearing of the counter claim ought to be stayed. The Arbitral Tribunal has thus by a majority declined to stay the proceedings before it.

(3.) IN these proceedings, MSEB has moved the Court both in the exercise of its appellate jurisdiction under section 37 of the Act, treating the order passed by the Arbitral Tribunal as one under section 17 declining to grant an interim measure of protection and in the alternative under section 9, contending that even if the appeal is held not to be maintainable, this Court has the power and jurisdiction to suspend the arbitral proceedings as prayed. The issues which, therefore, arise before the Court, relate to (i) whether the Arbitral Tribunal has the power to stay or suspend its proceedings under the Act; (ii) whether the Court has the power to do so in a proceeding under section 9; and (iii) whether a case for the exercise of power in the present case has been made out. HE FACTS :