Orissa High Court Allows Writ Petition Against Arbitrator’s Order Directing Evaluation Of Assets, Being Expansion Of Scope Of Reference

The Orissa High Court has set aside the order passed by the Arbitral Tribunal under Section 26 of the Arbitration and Conciliation Act, 1996 (A&C Act), where the Tribunal had directed the appointment of an expert evaluator for evaluating the assets of the counter-claimant in the arbitral proceedings involving money claims. While noting that the claims and counter claims raised by the parties were simply money claims, the bench of Justice Arindam Sinha held that expanding the scope of the arbitral reference by including evaluation of assets, would expose the petitioner to the risk of an award being passed beyond the four corners of the reference. The court said that in the event there is an expansion of the scope of reference by the Arbitral Tribunal, there is no provision in Section 26 of the A&C Act to add the same as a ground of challenge under Section 34; thus, rendering the party remediless. The bench further held that a disputed expansion of the scope of reference at the instance of an Arbitral Tribunal, may not be an expansion covered under Section 34 (2) (a) (iv) of the A&C Act. Thus, the bench allowed the writ petition and set aside the order of the Tribunal, holding that the case qualified as a ‘rarest of the rare’. Section 26 of the A&C Act provides that unless otherwise agreed by the parties, the arbitral tribunal may appoint one or more experts to report to it on specific issues to be determined by the arbitral tribunal. The petitioner, Santosh Kumr Acharya, who is the counter-claimant before the Arbitral Tribunal, filed a writ petition before the Orissa High Court, challenging the order passed by the Arbitral Tribunal where it had directed the appointment of an expert evaluator for evaluating the assets of the petitioner, on the instance of the opposite party/ claimant, Ratinakar Swain. The petitioner claimed that the claims and counter claims raised by the parties before the Arbitral Tribunal were simply money claims. It contended that an un-obtrusive expansion of the scope of arbitral reference, by including evaluation of assets, would operate to his prejudice. Thus, a case for intervention of the High Court in exercise of its power under Article 227 of the Constitution of India, was made. The court accepted the contention of the petitioner that where claims and counter claims are simply money claims, expanding the scope of arbitral reference by including evaluation of assets, would expose the petitioner to the risk of an award being made beyond the four corners of the reference. The bench further observed, “Section 26 does not provide for remedy, for challenge against an order made, by way of a ground to be taken, under section 34.” While considering the issue as to whether there was an expansion of the money claim by the Arbitral Tribunal’s direction to evaluate the assets of the petitioner, the court remarked that a simple money claim needs to be established by an award or a decree, before the claimant/plaintiff can even claim to restrain the other party. “To obtain an order of attachment before judgment, there has to be a finding, at least on affidavits, that the party seeking the relief, prima facie, appears to be entitled to a fixed sum of money and the potential judgment debtor is in the process of liquidating his assets to avoid execution of a decree that may be passed,” the court said. Perusing the order, the court concluded that the Tribunal had failed to frame issues on which the Tribunal needed an expert opinion. Further, it had not arrived at a finding that there was a real danger apprehended by the claimant that the petitioner/ counter-claimant, Acharya, was dealing or likely to deal with his assets for the purpose of avoiding execution of the arbitral award that was likely to be passed in the claimant’s favour. The bench further observed that in the event there is an expansion of the scope of reference by the Arbitral Tribunal, there is no provision in Section 26 to add the same as a ground of challenge under Section 34. Thus, the party may not find a remedy under Section 34, to challenge the award which is yet to be passed. The court reckoned that as per Section 34 (2) (a) (iv) of the A&C Act, an arbitral award may be set aside by the court if the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration. However, the court said, “A disputed expansion of the scope, particularly at the instance of a Tribunal, on working of the provisions for adjudication on reference may not be an expansion covered under sub-clause (iv) in clause (a), sub- section (2) of section 34,” said the court. The bench thus concluded, “In the circumstances, and accepting submissions made by Amicus Curiae, petitioner appears to have the grounds of ...

Orissa High Court Allows Writ Petition Against Arbitrator’s Order Directing Evaluation Of Assets, Being Expansion Of Scope Of Reference

Parina Katyal

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