Calcutta High Court
Sri Arun Kumar Bhunia vs Badal Midya on 30 October, 2019
Equivalent citations: AIR 2020 (NOC) 152 (CAL), AIRONLINE 2019 CAL 740 (2019) 4 CALLT 545, (2019) 4 CALLT 545
Author: Ashis Kumar Chakraborty
Bench: Ashis Kumar Chakraborty
A.P. No. 402 of 2018
IN THE HIGH COURT AT CALCUTTA
ORIGINAL JURISDICTION
ORIGINAL SIDE
SRI ARUN KUMAR BHUNIA
VS.
BADAL MIDYA
BEFORE:
The Hon'ble JUSTICE ASHIS KUMAR CHAKRABORTY
For the petitioners : Mr. Sukanta Chakraborty, Advocate,
Mr.Sakabda Roy, Advocate,
Mr. Arpan Guha, Advocate,
For the respondent : Mr. Supratic Roy, Advocate,
Judgement on: 30.10.2019
Ashis Kumar Chakraborty, J.
In this application under Section 11 (6) of the Arbitration and Conciliation Act, 1996, as amended by Act 3 of 2015 (hereinafter referred to as "the Act of 1996"), the petitioner has prayed for appointed of an Arbitrator to adjudicate the disputes between the parties relating to the partnership agreement dated May 06, 2013.
Shortly stated the facts leading up to the filing of this application are that on May 06, 2013 the petitioner and the respondent entered into a partnership deed (hereinafter referred to as "the partnership deed") for the purpose of carrying on the partnership business of real estate, under the name and style of "Saraswati Real Estate-II" (hereinafter referred to as the partnership firm). The terms and conditions under which the petitioner and 2 the respondent agreed to carry on the said partnership business are stipulated in the partnership deed. Clause 19 of the partnership deed contemplates that all disputes, differences and/or claims arising out of or touching upon any issue of any nature whatsoever between the partners whether, during the tenure of the partnership or thereafter shall be settled through arbitration by a sole arbitrator shall be referred to the to be unanimously nominated by the partners.
According to the petitioner, the partnership firm purchased the property being a plot of land situated in the District of Paschim Medinipur, being J.L. No. 187, Mouza: Polan Kamarara, R.S. Khatian No.31, L.R. Khatian No.152, R.S. Plot No.612 (Part) L.R. Plot No.1507, measuring 16.93 decimal of land together with four storied incomplete building (hereinafter referred to as the 'said building'). The petitioner has alleged that although he performed all his obligations under the partnership deed but by a letter dated December 19, 2017 addressed to a former Judge of this Court alleged that various disputes have arisen between the parties herein and appointed the said former Judge of this Court as the sole arbitrator to adjudicate the disputes between the parties to the partnership deed. A copy of the said letter was also forwarded to the petitioner. Thereafter, the said arbitrator entered upon the reference in the arbitration and the respondent herein, as the claimant filed his statement of claim before the arbitrator. The petitioner also filed his counter statement. Subsequently, the petitioner filed an application before the arbitrator alleging that the mode of conduct of the arbitral proceeding has given rise to an apprehension to his mind that he will not get fair justice from the arbitrator. On the basis of such allegations, the petitioner requested the arbitrator to stop the arbitral proceeding. The present respondent, as the claimant in the 3 arbitral proceeding contested in the said application. By an order dated February 17, 2018 the arbitrator rejected the said application filed by the present petitioner with costs assessed at Rs.8000/- to be paid to the claimant by the next date. Thereafter, on March 13, 2018 the petitioner issued a letter to the respondent alleging that the appointment of the said arbitrator was not as per the procedure laid down in Clause 19 of the partnership deed and as such the said arbitration proceeding initiated at the instance of the respondent is not valid. The petitioner asserted the said letter dated March 13, 2018 to be a notice under Section 11 of the Act of 1996 and called upon the respondent to agree to the appointment of the arbitrator named by him. Since the respondent did not reply to the said letter dated March 13, 2018, the petitioner has filed this application claiming the relief already as mentioned above.
Mr. Sukanta Chakraborty, learned advocate appearing in support of the application submitted that from a reading of the arbitration agreement contained in Clause 19 of the partnership deed it is evident that none of the parties cannot unilaterally appoint an arbitrator and refer the disputes relating to the said partnership business to arbitration. According to the petitioner, since by the said letter dated December 19, 2017 the respondent unilaterally appointed the said arbitrator the arbitration proceeding conducted by the said arbitrator is not a valid proceeding and any decision of the said arbitrator is liable to be set aside in an application under Section 34 of the Act of 1996. It was pointed out that Section 21 of the Act of 1996 provides unless otherwise agreed by the parties, the arbitral proceeding in respect of a particular dispute commences on the date on which a request of one of the parties to refer the disputes to arbitration is received by the other party. Therefore, according to the petitioner, in the present case when the respondent did not make any 4 request to the petitioner for referring to the alleged disputes to arbitration and the respondent unilaterally appointed the said arbitrator there is no valid reference of the disputes to arbitration. In support of such contention, learned counsel appearing for the petitioner placed reliance on the decisions of the Supreme Court in the cases of Milk Food Ltd. -vs- GMC Ice Cream (P) Ltd. reported in (2004) 7 SCC 288. The petitioner also cited the decision of a learned Single Judge of Delhi High Court in the case of Alupro Building Systems Pvt. Ltd. -vs- Ozone Overseas Pvt. Ltd. reported in 2017 SCC Online Del 7228. Learned counsel appearing for the petitioner further contended that in the present case, when the reference of the disputes by the respondent to the said Arbitrator is invalid, the petitioner in compliance with the arbitration agreement between the parties issued the said notice dated March 13, 2018. It was further contended that since the respondent has not replied to the said notice dated March 13, 2018 within 30 days from the receipt above, the petitioner was entitled to and filed this application under Section 11 (6) of the Act of 1996 for appointment of the sole arbitrator by this Court to adjudicate the disputes between the parties relating to the said partnership business. In this regard, learned counsel appearing for the petitioner relied on the decision of the Supreme Court in the case of Punj Lloyd Ltd. -vs- Petronet MHB Ltd. reported in (2006) 2 SCC 638.
Urging the above grounds learned counsel for the petitioner prayed for an appointment of an arbitrator by this Court to adjudicate the disputes which have arisen between the parties relating to the said partnership deed.
On the other hand, Mr. Supratik Roy, learned counsel appearing for the respondent raised strong objection to the maintainability of the present application by the petitioner. It is submitted that the present petitioner has 5 already filed his counter statement in the arbitration proceeding before the said arbitrator and he has not filed any application under Section 16 of the Act of 1996 to challenge the reference made to the said arbitrator. According to the respondent, the said letter dated December 19, 2017 was forwarded to the petitioner and he had also received the same. Even after receiving of the said letter dated December 19, 2017 the petitioner did not raise any objection to the reference of the disputes between the parties to the said arbitrator. According to the learned Counsel appearing for the respondent, even if it is accepted for the set of arguments that in the instant case by his conduct, the petitioner waived his right to challenge the arbitration proceeding being conducted by the said arbitrator. In support of such contention, reliance was placed by the petitioner on the decision of the Supreme Court in the case of Narayan Prasad Lohia -vs- Nikunj Kumar Lohia & Ors. reported in (2002) 3 SCC 572. Citing the decision of the Supreme Court in the Case of Antrix Corporation Ltd. -vs- Devas Multimedia Pvt. Ltd. reported in (2014) 11 SCC 560 it was further argued for the respondent that once the arbitration proceeding has already commenced before the said arbitrator and the petitioner be unsuccessful in his application under Section 12 of the Act of 1996 the present application under Section 11(6) of the 1996 is not maintainable.
I have carefully considered the materials on record and the arguments advanced by the learned counsel appearing for the respective parties. There is no dispute with regard to the existence of the arbitration agreement between the parties contained in Clause 19 of the partnership deed. From a reading of the said letter dated December 29, 2017 issued by the respondent it is evident that the present respondent unilaterally appointed the arbitrator by invoking the arbitration agreement contained in Clause 19 of the partnership deed. The 6 letter dated December 19, 2017 by which the respondent referred the disputes alleged to have arisen relating to the partnership deed was forwarded to and received by the petitioner. The petitioner has also filed his counter statement to the statement of the claim filed by the claimant, the respondent herein. From the records, it further appears that the present respondent has also filed his affidavit of evidence in Examination-in-Chief to prove his claim in the arbitration. At this stage, the petitioner filed the application before the arbitrator alleging that the mode of conduct of the arbitral proceeding has given rise to an apprehension in his mind that he will get fair justice from the arbitrator. The said application is based on the grounds mentioned in Section 12 (3) of the Act of 1996. However, as held by the Supreme Court in the case of Antrix Corporation Ltd. (supra) when the respondent already invoked the arbitration agreement contained in Clause 19 of the partnership deed and the petitioner filed his counter statement before the arbitrator the petitioner cannot invoke the same arbitration agreement for the second time. In the present case, the petitioner had a right to move an application before the arbitrator under Section 13 of the Act of 1996 which has been rejected by the arbitrator. As held by the Supreme Court in the case of Antrix Corporation Ltd. (supra) if the petitioner is required to challenge the award of the arbitrator under Section 34 of the Act of 1996 the petitioner would also be entitled to challenge the decision of the arbitration rejecting the petitioner's application under Section 13 of the Act of 1996. In the facts of the present case as discussed above, the decision of the Supreme Court in the case of Punj Lloyd Ltd. (supra) is of no assistance to the petitioner.
In order to appreciate the merit of the contention raised by the petitioner with regard to the invalidity of the unilateral reference of disputes by the 7 respondents to the said petitioner, it is expedient to consider the provisions contained in Section 21 as well as Section 11 (6) (a) of the Act of 1996. A bare reading of Section 21 of the Act of 1996 indicates that except where the parties have agreed to the contrary, the date of commencement of an arbitral proceeding would be the date on which the notice issued by one party for referring the disputes to arbitration is received by the other. Further, Section 11 (6) (a) of the Act of 1996 stipulates that when the procedure for appointment of the arbitrator has been agreed upon by the parties the Chief Justice of the High Court or his designate can appoint an arbitrator only when one of the parties fails to act as required under the agreed procedure. From a conjoint reading of Sections 21 and 11 (6) (a) of the Act of 1996 it is evident that unless there is a valid notice under Section 21 of the Act of 1996 issued by one of the parties calling upon the other party for appointment of the arbitrator as per the procedure agreed in the arbitration agreement and the latter refuses to agree to the arbitrator appointed by the former or refuses to nominate his arbitrator, as the case may be the Chief Justice of the High Court or his designate cannot entertain any application for appointment of any arbitrator by the Court. Therefore, there cannot be any doubt that issuance a valid notice under Section 21 of the Act of 1996 for referring the disputes between the parties to the arbitration is a condition precedent for commencement of a valid arbitral proceeding. The mandatory requirement of a notice under Section 21 of the Act of 1996 is further evidenced by the provisions in Section 43 (2) of the same Act providing that for the purpose of Limitation Act, 1963 an arbitration shall be deemed to have commenced on the date referred in Section 21. In this regard, I am in respectful agreement with the decision of a learned single Judge of the Delhi High Court in the case of Alupro Building System Pvt. Ltd. (supra). 8 For all these reasons, by the said letter dated December 19, 2017 when the respondent unilaterally appointed the arbitrator de hors Clause 19 of the partnership deed I find the petitioner is justified in contending that the arbitration proceeding initiated by the said arbitrator is invalid.
In the instant case, when the petitioner has already raised objection to the appointment of the arbitrator for not being unanimously appointed by the parties as agreed under Clause 19 of the partnership deed it cannot be held that the conduct of the petitioner amounts to a 'waiver' under section 4 of the act of 1996. Therefore, the decision of the Supreme Court in the case of Narayan Prasad Lohia (supra) cited by the respondent has no application in this case.
If the petitioner is aggrieved with the award made by the arbitrator appointed by the said letter dated December 19, 2017 he shall also be entitled to challenge such award on the ground that the unilateral appointment of the arbitrator by the claimant, the respondent herein was not as per the agreed procedure laid down in Clause 19 of the partnership deed.
With the above findings, the application A. P. no.402 of 2018 is rejected. There shall, however, be no order as to costs.
(ASHIS KUMAR CHAKRABORTY, J.)