Bombay High Court
Teltech Instrumentation Pvt. Ltd vs Bharat Petroleum Corporation Ltd on 1 March, 2012
Author: Anoop V. Mohta
Bench: Anoop V. Mohta
1 arbp962.10.sxw
ssm
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 962 OF 2010
Teltech Instrumentation Pvt. Ltd.,
A company duly registered under
the Companies Act, 1956 and having
its Registered office at 4th Floor,
Kamanwala Chambers,
Sir Phirosha Mehta Road,
Mumbai-400 001. ......Petitioners.
Vs.
Bharat Petroleum Corporation Ltd.
A Government of India undertaking
Inter-alia, having its offices at
Sewri Fort Road,
Sewri (East),
Mumbai-400 015. ......Respondents.
Mr. M.K. Mudnany for the Petitioners.
Mr. S.A. Bhalwal a/w Mr. Vijendra Mishra i/by M/s. Vyas & Bhalwal
for the Respondents.
CORAM :- ANOOP V. MOHTA, J.
JUDGMENT RESERVED ON :- 6 FEBRUARY 2012.
JUDGMENT PRONOUNCED ON :- 1 MARCH 2012.
JUDGMENT:-
The Petitioners have invoked Section 14 (2) of the Arbitration ::: Downloaded on - 09/06/2013 18:14:26 ::: 2 arbp962.10.sxw ssm and Conciliation Act, 1996 (for short, the Arbitration Act, 1996) as there exists arbitration clause in the agreement, and thereby seeking declaration that the mandate of Arbitrator nominated by the Director (Marketing) of the Respondents pursuance to the Arbitration clause contained in the tender inquiry stands terminated.
2 The Petitioners participated in a tender inquiry by the Respondents as tender documents were forwarded to the Petitioners along with other six. Various pre-bid meetings took place between 4 August 1999 to 17 October 2000. In the meantime, one France company appointed the Petitioners for casting and assembling of batch controllers for the entire world. There was no clause where the Petitioners were restricted to import or deal in or to supply (all that batch controllers) any other make. The Petitioners on 17 October 2000, as the Respondents inquiry was at negotiations stage, expressed inability to supply a flow meters and accordingly requested to modify the terms. The Respondents ultimately without accepting the Petitioners offer, placed order with other company and lodged a claim as compensation for damages, being the difference between the price at which the materials were offered by the subsequent tenderers and the price quoted by the Petitioners.
::: Downloaded on - 09/06/2013 18:14:26 :::3 arbp962.10.sxw ssm 3 A Letter of intent dated 22 August 2000 issued by the Respondents to the Petitioners with details of technical and commercial terms. By letter dated 12 July 2002, the Respondents invoked the Arbitration Clause.
4 On 18 October 2002, the Director of Respondents nominated three Arbitrators. The matter went on for seven years but for one reason or other, the Arbitrators abandoned or ceased to act as Arbitrators. Therefore, the Arbitration could not be completed within two years after entered into the reference on or within such time not exceeding further 12 months as provided in clause 21. The Arbitrator in fact, issued directions on but could not proceed with the Arbitration further.
5 The Respondents in spite of above mandate of time, by letter dated 28 April 2009 appointed the present Arbitrator. The Petitioners, therefore, objected by letter dated 6 August 2009 that as the mandate of Arbitrators stand terminated, therefore, there is no question of appointment of any Arbitrator. The learned Arbitrator, however, by order dated 8 March 2010 dismissed the Application of the Petitioners.
::: Downloaded on - 09/06/2013 18:14:26 :::4 arbp962.10.sxw ssm 6 The Petitioners, therefore, invoked Section 14, by reserving the rights under Section 34 of the Arbitration Act, 1996 and basically prayed as under:
"a) That this Hon'ble Court may be pleased to hold that the mandate of Shir J. Dinaker, or any other arbitrator as may be nominated by Director (Marketing) of the Respondents pursuant to the arbitration clause contained in Tender Enquiry No. M/M/WL/60T/1999/167-OR stands terminated."
7 This Court, by order dated 3 May 2010, not granted any ad-
interim relief. On 18 July 2011, while admitting the Petition, prima facie observed that the Petitioners never objected to the fourth Arbitrator on 27 April 2007 on the ground that the mandate was expired. Therefore, the period of two years would begin only after the present Arbitrator enters upon the reference. It is further observed that it is open for the Petitioners to extend the time as provided under clause 21(p). The learned counsel appearing for the Petitioners relied upon a Judgment of the Supreme Court in NBCC Ltd. Vs. J.G. Engineering Pvt. Ltd. 1. However, the learned Judge has observed that in that case mandate of the Arbitrator had expired and it is also 1 2010(3) Mh.L.J. 18 ::: Downloaded on - 09/06/2013 18:14:26 ::: 5 arbp962.10.sxw ssm observed in the order that the Petitioners are entitled to take the same contention in Section 34 Application.
8 Heard both the parties finally.
9 It is relevant to note Clause 21 (a) and (b) of the terms and conditions, which reads as under:-
"21(a) Any dispute or difference of any nature whatsoever any claim, cross-claim, counter-claim or set off of the Corporation against the Contractor or regarding any right, liability, act, omission or account of any of the parties hereto arising out of or in relation to this agreement shall be referred to the Sole Arbitration of the Director (Marketing) of the Corporation or of some officer of the Corporation who may be nominated by the director (Marketing) The Contractor will not be entitled to raise any objection to any such arbitrator on the ground that the Arbitrator is an Officer of the Corporation or that he has dealt with the matters to which the contract relates or that in the course of his duties as an Officer of the Corporation he had expressed views on all or any other matters in disputes or difference.
In the event of the arbitrator to whom the matter is originally referred being transferred or vacating his office he shall be entitled to continue the arbitration proceedings notwithstanding his transfer or vacating his office unless the Director (Marketing) at the time of such transfer, vacation of office or any time thereafter designates another person to act as arbitrator in his place in accordance with the terms of the agreement.::: Downloaded on - 09/06/2013 18:14:26 :::
6 arbp962.10.sxw ssm In the event of the arbitrator to whom the matter is originally referred, vacating his office or being unable or refusing to act for any reason the Director (Marketing) at the time of vacation of office or inability or refusal to act shall designate another person to act as an arbitrator in accordance with the terms of the said agreement.
The arbitrator newly appointed shall be entitled to proceed with the reference from the point at which it was left by his predecessor.
It is also a term of this contract that no person other than the Director (Marketing) or a person nominated by such Director (Marketing) of the Corporation as aforesaid shall act as arbitrator hereunder. The award of the arbitrator so appointed shall be final, conclusive and binding on all parties to the agreement subject to the provision of the Arbitrator Act, 1940 or any statutory modification or re- enactment thereof and the rules made thereunder for the time being in force shall apply to the arbitrator proceedings under this clause.
b) The award shall be made in writing and published by the arbitrator within two years after entering upon the reference or within such extended time not exceeding further twelve months as the Sole Arbitrator shall by a writing under his own hands appoint. The parties hereto shall be deemed to have irrevocably given their consent to the Arbitrator to make and publish the award within the period referred to herein above and shall not be entitled to raise any objection or protest thereto under any circumstances whatsoever."
10 The relevant Sections 14 and 15 of the Arbitration Act are reproduced as under:-
::: Downloaded on - 09/06/2013 18:14:26 :::7 arbp962.10.sxw ssm "14. Failure or impossibility to act.- (1) The mandate of an arbitrator shall terminate if-
(a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and
(b) he withdraws from his office or the parties agree to the termination of his mandate.
(2) If a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate.
(3) If, under this section or sub-section (3) of section 13, an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or sub-section (3) of section 12.
15. Termination of mandate and substitution of arbitrator.- (1) In addition to the circumstances referred to in section 13 or section 14, the mandate of an arbitrator shall terminate-
(a) where he withdraws from office for any
reason;or
(b) by or pursuant to agreement of the parties.
(2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.
::: Downloaded on - 09/06/2013 18:14:26 :::8 arbp962.10.sxw ssm (3) Unless otherwise agreed by the parties, where an arbitrator is replaced under sub-section (2), any hearings previously held may be repeated at the discretion of the arbitral tribunal.
(4) Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator under this section shall not be invalid solely because there has been a change in the composition of the arbitral tribunal."
11 The learned counsel appearing for the Respondents has strongly relied on the Judgment of this Court Jayesh H. Pandya & Anr. Vs. Subhtex India Limited & Ors. 2 whereby referring to Sections 4,11,14 and 16 it is observed as under:-
"Parties to an arbitration agreement are entitled to stipulate the time within which an arbitral award is to be rendered. In the present case, the time which was prescribed was four months. In such a case, however, where a party intends to assert a rigid adherence to the time prescribed by the arbitration agreement, it must at the earliest opportunity make its intention known to ensure compliance with a rigid standard as to time."
"The petitioners stood by and allowed the Arbitrator to fix a time schedule for the filing of pleadings. If they had a serious intent of not allowing the proceedings to continue beyond the period of four months, it was the duty of the petitioners to inform the Arbitrator at the earliest when the time schedule was fixed by the Arbitral Tribunal. Counsel appearing on behalf of the petitioners, in fact, fairly stated before the Learned Arbitrator on 27th August, 2007 that the contention which was sought to be taken up ought to 2 2009(Supp.) Bom.C.R. 225 ::: Downloaded on - 09/06/2013 18:14:26 ::: 9 arbp962.10.sxw ssm have been urged on 4th May, 2007, but at that stage he had not read his papers. The petitioners' Advocate unfortunately sought to controvert the correctness of what was recorded by the Learned Arbitrator in his order dated 27th August, 2007. The Arbitrator, as the record would show, was constrained to set the record straight by a communication dated 27th September, 2007. The Learned Arbitrator is justified in coming to the conclusion that the petitioners have by their conduct waived their objection to enforce a punctilious observance of the time schedule of four months. To adopt any other construction would frustrate the object and purpose of arbitral proceedings and bring the whole machinery provided by the Act to facilitate an efficacious recourse to arbitration into grave peril.
Speaking for myself, I would decline to accept a construction which would lead to that result. The Court is duty bound to effectuate the object and intent of Parliament in enacting the law and the view which I have taken is one which will protect the object which Parliament had in view.
12 The Respondents' counsel, thereby contended that in the present fact also, the Petitioners have waived the rights and never objected to continue with the Arbitration Proceedings. The learned counsel appearing for the Petitioners, however, apart from raising objection, pointed out the recent Supreme Court Judgment in NBCC Ltd.
(Supra) whereby while dealing with the provisions of Sections 14, 15, 21, 32 of the Arbitration Act, 1996, declared the law in the following terms by referring, relying and distinguishing various other Supreme Court Judgments, which were not referred and/or relied in the above judgment of this Court. The Apex Court has observed as under:-
::: Downloaded on - 09/06/2013 18:14:26 :::10 arbp962.10.sxw ssm "5. A perusal of the arbitration agreement quite clearly reveals that the arbitrator has the power to enlarge the time to make and publish the award by mutual consent of the parties. Therefore, it is obvious that the arbitrator has no power to further extend the time beyond that which is fixed without the consent of both the parties to the dispute. It is an admitted position that the respondent did not give any consent for extension of time of the arbitrator. Thus given the situation, the arbitrator had no power to further enlarge the time to make and publish the award and therefore his mandate had automatically terminated after the expiry of the time fixed by the parties to conclude the proceedings."
"Arbitration is an efficacious and alternative way of dispute resolution between the parties. There is no denying the fact that the method of arbitration has evolved over the period of time to help the parties to speedily resolve their disputes through this process and in fact the Act recognizes this aspect and has elaborate provisions to cater to the needs of speedy disposal of disputes. The present case illustrates that inspite of adopting this efficacious way of resolving the disputes between the parties through the arbitration process, there was no outcome and the arbitration process had lingered on for a considerable length of time which defeats the notion of the whole process of resolving the disputes through arbitration."
"7. It is true that apparently there is no provision under the Act for the Court to fix a time limit for the conclusion of an arbitration proceeding, but the Court can opt to do so in the exercise of its inherent power on the application of either party. Where however the Arbitration agreement itself provides the procedure for enlargement of time and the parties have taken recourse to it, and consented to the enlargement of time by the arbitrator, the Court cannot exercise its inherent power in extending the time fixed by the parties in the absence of the consent of either of them."::: Downloaded on - 09/06/2013 18:14:26 :::
11 arbp962.10.sxw ssm "11. The mandate of the arbitrator was terminated only because of the fact that the arbitrator having failed to conclude his proceedings within time did not warrant to be continued as an arbitrator in the absence of the consent of both the parties. It is clear from a bare reading of Sub-section 1(a) of Section 14 of the Act, the mandate of an arbitrator shall terminate if he fails to act without undue delay. In the present case, it is clear that the arbitrator had extended the time provided to it without any concrete reasons whatsoever and thus his mandate was liable to be terminated."
"Thus it can be construed that the parties had not agreed to the extension of the mandate of the arbitrator failing which, the mandate was automatically terminated."
"12. Further, Sub-section (2) of Section 14 of the Act stipulates that if a controversy remains concerning any of the grounds referred to under Clause (a) of Sub-section 1, a party may, unless otherwise agreed to by the parties, apply to the Court to decide on the termination of the mandate. Thus the respondent rightly applied to the Court for the termination of the mandate of the arbitrator pursuant to the provisions of this section, and the Court was within its jurisdiction to decide accordingly."
"13. However, the contention of the Appellant that the High Court had erred in not allowing the appellant to decide upon the appointment of an arbitrator pursuant to Sub- section (2) of Section 15 of the Act must be accepted. Section 15(2) of the Act provides that where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator replaced."
13 The learned counsel appearing for the Respondents has relied on the Supreme Court Judgment, based upon the Arbitration Act ::: Downloaded on - 09/06/2013 18:14:26 ::: 12 arbp962.10.sxw ssm Bhupinder Singh Bindra Vs. Union of India 3 , that the Petitioners having consented for extension directly and indirectly and also for adjournments from time to time and dragged on the case for considerable time, cannot raise such objection of latches or delay on the part of the Arbitrator. The Apex Court, on facts directed the Arbitrator to adjudicate upon the dispute within 6 months from the date of receipt of the order. Thereby also contended in view of the terms of the contract continuation of the Arbitration Proceedings cannot be stated to be bad in law, merely because time schedule was not adhered.
14 Before adverting to the legal issue, it is necessary to consider the Arbitration terms and conditions between the parties. As recorded, apart from peremptory condition to complete the Arbitration proceedings within two years and/or within extension period of 12 months which in the present case admittedly would expire by efflux of time and in view of clause itself. It is relevant to note that the parties have agreed specifically that in case the Arbitrator appointed by the Director (Marketing) and/or Respondents, if transferred or vacated its office unless such other Officer/Arbitrator is appointed, he shall 3 1995 DGLS soft 721= 1995 5 SCC 329 ::: Downloaded on - 09/06/2013 18:14:26 ::: 13 arbp962.10.sxw ssm continue the Arbitration proceedings notwithstanding his transfer. It is also specifically agreed that if such officer is unable and/or refused to act and vacate the office and/or expressed inability and/or refused to act, the Respondents shall designate another person to act as an Arbitrator in accordance with the terms of the said agreement. It is relevant to note that they have specifically agreed that the Arbitrator newly appointed, shall be entitled to proceed with the reference from the point at which it was left by his predecessor. If this is so, it is very clear that once the Arbitrator is appointed and a reference is commenced and in this case admittedly first time in the year 1982, the subsequent Arbitrators if appointed and/or not appointed, needs to complete the Arbitration proceedings within the mandate period of 2 years plus one year. The clause nowhere provides that if new Arbitrator and/or Officer is appointed as an Arbitrator, the Arbitration proceedings will re-commenced from that date. On the contrary, the clauses so referred above provides that the new Arbitrator shall continue with the reference from the point at which it was left by his predecessor. This means, the parties have admittedly agreed that the time period so prescribed is final and binding. It means the Arbitration Proceedings should commence and end within the prescribed period, if not, in my view and basically in the present facts ::: Downloaded on - 09/06/2013 18:14:26 ::: 14 arbp962.10.sxw ssm and circumstances, there is no question of continuation of Arbitration proceedings once the period of three years lapsed.
15 As recorded above, the Hon'ble Supreme Court in NBCC (supra) recently after considering the provisions of Section 14 and 15 reiterated that where the parties had not agreed the extension of the mandate of the Arbitrator, the mandate automatically gets terminated.
In the present case, in view of the agreed clauses as referred above, there is no question of extension of time even by consent of the parties as the parties themselves agreed the time schedule, so fixed. The Court, even otherwise, in such situation cannot direct and/or compel any one of the parties to continue with the Arbitration and when the clauses are so clear. There is no reason to accept the submission made by the learned counsel appearing for the Respondents that from time to time the parties appeared before the other Arbitrators and sought time on many occasions. The concept of "Waiver" so defined under the Arbitration Act, is applicable in a situation where there is any vagueness in the contract between the parties. The conduct may be relevant, but in view of the clauses specified time, apart from the law now declared by the Supreme Court recently, I am not accepting the submission that the appearance of the Petitioners before the ::: Downloaded on - 09/06/2013 18:14:26 ::: 15 arbp962.10.sxw ssm subsequent Arbitrators, even in the year 2007, 2008 and 2009 that itself is nothing but the acquiescence or waiver of the basic clause. A time, if extended by consent of the parties, if provided, is one thing but if the Agreement clauses itself mandated that Arbitration proceedings should be concluded within two plus one year, and further provide that even subsequent Arbitrator should continue from the point at which his/her predecessor left the Arbitration, itself means the intension was that it should be finished within three years from the date of commencement. In the present case, it was in the year 2002. Therefore, further proceedings, in my view, after 2005 even if any, is unsustainable.
16 There is no provision under the Arbitration Act to condone the delay when agreement between the parties binds them to see that the Arbitration proceedings should be finished within time prescribed.
This time restriction is well within the scope and purpose of Arbitration Act, at national and international arbitrations.
17 I would have, in a given case, refer the matter to the Larger Bench in view of the judgment of this Court Jayesh H. Pandya (Supra) cited by the Respondents, but considering the peculiar clauses ::: Downloaded on - 09/06/2013 18:14:26 ::: 16 arbp962.10.sxw ssm of the agreement between the parties and in view of the fact that the Supreme Court recently in NBCC (Supra) considering the provisions of the Arbitration Act, reiterated the position by referring and distinguishing even earlier Judgments of the Hon'ble Supreme Court and reiterated that there is no question of unilateral extension of mandate of the arbitration, the mandate automatically gets terminated. Such mandate cannot be extended specifically at the instance of only one party. In view of this, I am not inclined to refer the matter to the Larger Bench, as it is not necessary in view of distinguishing facts and circumstances and the clauses so referred in both these judgments.
18 The Arbitration Act, 1996 has an international foundation for all the purposes. The time fixed for the Arbitration and/or schedule of time limit in such Arbitration proceedings, as it is recognized, there is no reason to not accept the same, basically in the present facts and circumstances where the parties themselves agreed to bind themselves by the time limit. Section 14 read with Section 15 of the Arbitration Act, also recognize this mechanism.
19 Resultantly, the Petition is allowed in terms of prayer clause (a).
::: Downloaded on - 09/06/2013 18:14:26 :::17 arbp962.10.sxw ssm The mandate of Mr. J. Dinaker, or any other new Arbitrator nominated by the Respondents, pursuant to the Arbitration Clause contained in Tender Enquiry No.M/M/WL/60T/1999/167-OR shall stand terminated. Rule discharged. There shall be no order as to costs.
(ANOOP V. MOHTA, J.) ::: Downloaded on - 09/06/2013 18:14:26 :::