2026:HHC:30098 IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA CARBA No. 9 of 2026 Decided on July 16, 2026 ------------------------------------------------------------------------------------------------ M/s Sharma & Co. ...Appellant Versus The Executive Engineer, Electrical Division No. 1 …Respondent ------------------------------------------------------------------------------------------------ Coram: The Hon’ble Mr. Justice Sandeep Sharma, Judge. Whether approved for reporting?1 ------------------------------------------------------------------------------------------------ For the appellant Ms. Suman Thakur, Advocate. For the respondents Mr. Sanjay Dutt Vasudeva, Deputy Advocate General. ------------------------------------------------------------------------------------------------ Sandeep Sharma, J. (Oral) By way of present appeal filed under S.37(C) of the Arbitration and Conciliation Act, 1996, challenge has been made to order dated 22.9.2025 passed by learned District Judge, Shimla in Arb. Case No. 3- S/2 of 2018, whereby objections under S.34(2) of the Act ibid, against award dated 27.1.2018 passed by Arbitrator-cum-Superintending Engineer, HPPWD Solan, have been dismissed. The appeal was initially registered as Arbitration Appeal No. 8 of 2026, but, vide order dated 1.7.2026, same was ordered to be converted to Commercial Arbitration Appeal and registered as CARBA No. 9 of 2026. 2. Facts of the case, briefly noted and germane for the limited controversy, are that the respondents floated tender in 2010-11 for replacement of damaged cables in Sub Station and providing special repair to panels (SDBs) in various floors of Himachal Bhawan at new 1 Whether reporters of the local papers may be allowed to see the judgment? 2026:HHC:30098 2 Delhi and appellant, which is a civil and electrical engineering firm, was declared successful bidder. Negotiations were held between parties and appellant agreed to give 18% rebate on items quoted by it and it was agreed to charge extra for accessories mentioned at Sr. No.1 of the DNIT. Respondents on 26.7.2010 accepted the tender amount of Rs.7,68,783/- and agreement No. 75 of 2010-2011 was executed between the parties. On 20.9.2010, respondents intimated Resident Commissioner, Himachal Bhawan that work was awarded to the appellant. As per appellant, it completed the work but department retained huge amount of appellant and failed to pay for extra work and amount as mentioned in Annexure C-2 which is stated to be Rs.21,02,331/-. Appellant made requests to Executive Engineer and other official to release balance amount. Similar request was made by appellant to Engineer-in-Chief, on 25.3.2015, who in turn vide letter dated 23.4.2015, directed Superintending Engineer, Electrical Cicle, HPPWD Shimla to enquire into the matter and send detailed report. 3. Thereafter, when issue was not resolved, appellant issued legal notice dated 1.5.2015 as per clause 25 of agreement, requesting Engineer-in-Chief to appoint arbitrator for adjudication of dispute between the parties. Vide letter dated 25.6.2015, Engineer-in-Chief, appointed Superintending Engineer, Arbitration Circle, HPPWD, Solan, as an Arbitrator. Arbitration proceedings commenced before Arbitrator. Appellant staked following claim before the Arbitrator: “Claim No.1 Amount work done against agreement No.75: Rs.17,86,000 2026:HHC:30098 3 Claim No.2 Analysis for extra work/ substituted items not provided in the agreement and their bills but got executed: Rs.1,94,052/- Claim No. 3 Analysis of rats item i.e. serial No.1 of agreement No. 75 for which it was specifically mentioned in the negotiation letter that claimant will charge extra for accessories: Rs.1,21,719/- Claim No.4 Interest on delayed payment Rs.5,97,221/- Claim No.5 Arbitration Cost Rs.90,000/-” 4. Learned Arbitrator, vide award dated 27.1.2018, allowed the claim qua claim No. 4 only and dismissed the claim qua other claims, in the following manner: Sr. No. Description of claim Amount claimed Amount awarded 1. Claim No.1 Amount work done against agreement No.75: Rs.17,86,000 Nil 2. Claim No.2 Analysis for extra work/ substituted items not provided in the agreement and their bills but got executed: Rs.1,94,052/- Nil 3. Claim No. 3 Analysis of rats item i.e. serial No.1 of agreement No. 75 for which it was specifically mentioned in the negotiation letter that claimant will charge extra for accessories: Rs.1,21,719/- Nil 4. Claim No.4 Interest on delayed payment 18% Simple interest @ 8% on balance payment of Rs.2,35,199/- from 16-8-12 to 22-9-16. 5. Claim No.5 Arbitration Rs.90,000/- Nil 2026:HHC:30098 4 Cost 5. Feeling aggrieved, the appellant preferred Objections under S.34(2)of the Act ibid in the court of learned District Judge, Shimla which came to be registered as Arbitration Case No. 3-S/2 of 2018. The objections were instituted on 22.5.2018. While contesting objections, respondents stated that work in question was awarded to appellant for Rs.7,68,783, agreement No.75 was executed and work was to be completed by appellant by 3.9.2010 but same was completed on 6.6.2013; payment of Rs.8,01,596/- was made to the appellant and balance gross amount of Rs.1,47,744/- was pending for approval of deviation. 6. Nonetheless, learned District Judge, vide judgment dated 22.9.2025, dismissed the objections and upheld the award passed by Arbitrator. Feeling aggrieved, the appellant has approached this Court, in the instant proceedings, laying challenge to the judgment passed by learned District Judge, on various grounds as mentioned in the appeal. 7. However, before going into the claim and counter-claim of the parties, it would be relevant to note that the dispute in question is a commercial dispute, as per Commercial Courts Act, 2015, wherein ‘commercial dispute’ has been defined as under: “(c) “commercial dispute” means a dispute arising out of–– (i) ordinary transactions of merchants, bankers, financiers and traders such as those relating to mercantile documents, including enforcement and interpretation of such documents; (ii) export or import of merchandise or services; 2026:HHC:30098 5 (iii) issues relating to admiralty and maritime law; (iv) transactions relating to aircraft, aircraft engines, aircraft equipment and helicopters, including sales, leasing and financing of the same; (v) carriage of goods; (vi) construction and infrastructure contracts, including tenders; (vii) agreements relating to immovable property used exclusively in trade or commerce; (viii) franchising agreements; (ix) distribution and licensing agreements; (x) management and consultancy agreements; (xi) joint venture agreements; (xii) shareholders agreements; (xiii) subscription and investment agreements pertaining to the services industry including outsourcing services and financial services; (xiv) mercantile agency and mercantile usage; (xv) partnership agreements; (xvi) technology development agreements; (xvii) intellectual property rights relating to registered and unregistered trademarks, copyright, patent, design, domain names, geographical indications and semiconductor integrated circuits; (xviii) agreements for sale of goods or provision of services; (xix) exploitation of oil and gas reserves or other natural resources including electromagnetic spectrum; (xx) insurance and re-insurance; (xxi) contracts of agency relating to any of the above; and (xxii) such other commercial disputes as may be notified by the Central Government. Explanation.––A commercial dispute shall not cease to be a commercial dispute merely because— 2026:HHC:30098 6 (a) it also involves action for recovery of immovable property or for realisation of monies out of immovable property given as security or involves any other relief pertaining to immovable property; (b) one of the contracting parties is the State or any of its agencies or instrumentalities, or a private body carrying out public functions;” 8. The Commercial Courts Act, 2015, was notified vide Act No.4 of 2016 and as per S.1(3), (3) it shall be deemed to have come into force on the 23rd day of October, 2015. S.3 of aforesaid Act, provides that the State Government, may after consultation with the concerned High Court, by notification, constitute such number of Commercial Courts at District level, as it may deem necessary for the purpose of exercising the jurisdiction and powers conferred on those Courts under this Act, however, fact of the matter is that commercial courts at District level were notified vide Notification dated 13.5.2026 by the Home Department, Government of Himachal Pradesh, whereby Civil Judge can decide commercial disputes of Rs.3.00 Lakh to Rs.30.00 Lakh, Senior Civil Judge, Rs.30.00 Lakh to Rs.60.00 Lakh and District Judge/Additional District Judge from Rs.60.00 Lakh to Rs.1.00 Crore. 9. Coming to facts of present case, when objections were presented by appellant to learned District Judge on 22.5.2018, said court was not designated as ‘commercial court’ in terms of S.3 of 2015 Act and as such, it had no jurisdiction to entertain the dispute, same being a ‘commercial dispute’. 2026:HHC:30098 7 10. Aforesaid position has been clarified by co-ordinate Benches of this Court in Nitin Sonkhia v. Executive Engineer HPPWD Mandi Division No.II, Distt. Mandi, H.P. CARBA No. 07 of 2025, decided on 19.3.2026, wherein, it has been held as under: “5. Having heard the learned Counsel for the parties and having perused the statutory provisions of the Commercial Courts Act and taking into consideration the fact that the dispute in hand relates to a commercial dispute, this petition is allowed by holding that the judgment passed by the learned District Judge in the objections filed by the present petitioner under Section 34 of the Arbitration and Conciliation Act against the arbitral award, details whereof are given herein above, is nonest and without jurisdiction. 6. 6. Sub-section (1) of Section 3 of the Commercial Courts Act inter alia provides that the State Government may, after consultation with the concerned High Court, by notification, constitute such number of Commercial Courts at District level, as it may deem necessary for the purpose of exercising the jurisdiction and powers conferred on those Courts under the said Act. 7. Sub-section (2) of Section 3 of the Act further provides that State Government shall, after consultation with the concerned High Court, by notification specify, the local limits of the area to which the jurisdiction of a Commercial Court shall extend and may, from time to time, increase, reduce or alter such limits. 8. Similarly, Sub Section (3) thereof provides that State Government may, with the concurrence of the Chief Justice of the High Court, appoint one or more persons having experience in dealing with commercial disputes to be the Judge or Judges, of a Commercial Court either at the level of District Judge or a Court below the level of a District Judge. 9. Therefore, in order for a Court to excise the power of Commercial Court, the procedure prescribed under Section 3 of 2026:HHC:30098 8 the Commercial Act, should have been complied with. As admittedly in the present case, neither at the time of filing of the objections or at the time of adjudication thereof, the Court in issue stood constituted as a Commercial Court, nor the provisions of Sub Sections (2) and (3) of Section 3 of Commercial Courts Act were complied with, the judgment under challenge passed by learned District Judge is per se without jurisdiction.” 11. Aforesaid position was reiterated by same Co-ordinate Bench of this Court in State of Himachal Pradesh and another v. Dina Nath, CARBA No. 1 of 2026, decided on 9.7.2026, 12. Learned counsel for appellant, while inviting attention of this Court to judgment passed by Hon'ble Supreme Court of India in Perkins Eastman Architects DPC v. HSCC (India) Limited, Arbitration Application No. 32 of 2019, decided on 26.11.2019, reported in AIR 2020 SC 59, argued that a person, having relationship with the parties, is not eligible to be appointed as arbitrator in terms of S.12(5) of Arbitration and Conciliation Act, as amended vide Act No. 3 of 2016, as such, arbitrator i.e. Superintending Engineer, Arbitration Circle, HPPWD, Solan, was not eligible to adjudicate the dispute, having relationship with the respondent Department. To enure her argument, learned counsel for the appellant referred to a judgment passed by a co-ordinate Bench of this Court in Hem Raj, LSM v. The Divisional Manager, Forest Working Division, Shimla, Arbitration Appeal No. 28 of 2023, decided on 2.1.2024, wherein, it was held as under: “12. In this case, the arbitrator happened to be an employee of the claimant itself and thus was ineligible to be appointed as an 2026:HHC:30098 9 arbitrator in light of the amendment carried out in Section 12 of the Arbitration and Conciliation Act, 1996, in the year 2015. Therefore, as the award in issue has been passed by a person, who was ineligible to be appointed as an arbitrator, the award in issue is void ab initio. As this Court has held the award in issue to be void ab initio, therefore, but natural, the judgment passed by learned District Judge under Section 34 of the Arbitration and Conciliation Act, 1996, in terms whereof the award was upheld, becomes otiose. This appeal therefore succeeds and the award dated 17.01.2020, passed by the Arbitrator-cum-Executive Director H.P. State Forest Development Corporation Limited, Shimla, is set aside being void ab initio, having been passed by a person who was not eligible to be appointed as an arbitrator, so is the fate of the judgment passed by learned District Judge. However, setting aside of the award shall not come in the way of the claimant in having an arbitrator appointed for the adjudication of the issue, in accordance with law.” 13. However, since the very institution of objections, which involve a ‘commercial dispute’ arising out of tender, is defective, this court would refrain from going into merits and demerits of the arguments advanced by respective parties, who were unable to dispute that learned District Judge, Shimla, having not been notified as ‘commercial division’ under Commercial Courts Act, as late as 2026, had no jurisdiction to try the dispute, present petition is disposed of; judgment dated 22.9.2025 passed by learned District Judge, Shimla in Arbitration Case No. 3-S/2 of 2018 is set aside and learned District Judge, Shimla is directed to return the objections filed by appellant, to it for presenting the same before appropriate forum, in accordance with law, especially, S.3 of 2026:HHC:30098 10 Commercial Courts Act. However, it is ordered that the period from the date of institution of present appeal till supply of a certified copy of this order to appellant, shall be excluded while calculating limitation. 14. The appeal is accordingly disposed of, alongwith all pending applications. (Sandeep Sharma) Judge July 16, 2026 (vikrant)