Factual Background 

In the case of Jayant Kumar Ghosh Outdoor Catering (P) Ltd v. State of Maharashtra the state of Maharashtra awarded the appellant company, Ghosh Catering, a contract after it met the conditions of the tender that was requested. However, on the representation of a third party, the state terminated the contract on the grounds that one of Ghosh Catering’s directors had been found guilty in a criminal case, which the state claims was not disclosed at the time of the declaration. Finally, the state’s use of the Ghosh catering approach was not made known at the time of the declaration. Eventually, Ghosh Catering requested the setting aside of the termination order by filing an application with the arbitrator under Section 17 of the Act. The application was ultimately rejected, and the state acted on the termination order by doing everything from awarding the contract to acting on it. Under the terms of Section 37 of the Arbitration Act, Ghosh Catering filed an appeal.

Issue 

Whether a court exercising its jurisdiction under Section 37 of the Arbitration and conciliation act 1996 in the service contract 

Argument Advanced 

The appellant argued that Section 52 of the Transfer of Property Act, 1882 would be applicable, which prohibits the passing of a conclusive and definitive ruling on the matter while the lis is being considered. It was strongly opposed that the state could not have given a contract to a third party before the lawsuit’s final resolution. Further, they contended that the state issued an interim order that had to be carried out within 24 hours. As a result, the order was erroneous, ambiguous, and arbitrarily placed, claims Ghosh Catering. Furthermore, the appellant argued that because its name was free of any prior criminal activity, the appellant had made the right declaration. It was argued that as the appellant was a sole proprietor, he was not a stakeholder in Ghosh Catering and had no influence over its operations. 

The defendant argued that the appellant submitted a false declaration and that the respondent had the right to cancel the contract in accordance with clauses 9 of the special conditions of the contract and 13 of the general conditions of the contract.

Analysis of court decision 

Justice Chandra Dhari Singh of the Delhi High Court’s single-judge bench noted that the arbitrator had taken into account relevant submissions as well as the record while coming to a decision on the appellant’s conviction because he had a direct and significant impact on the company’s eligibility. The arbitrator’s consideration of the material feature of the severability and separability of the director and appellant company, according to the court, cannot be disputed. Furthermore, it was stated that the parties’ agreement was determinable and could, therefore, be terminated in accordance with its terms.

CASE – Jayant Kumar Ghosh Outdoor Catering (P) Ltd v. State of Maharashtra ARB. A. (COMM.) 13/2023