Calcutta High Court
Ava Merchandising Solutions Pvt. Ltd vs Torero Corporation Pvt. Ltd on 1 July, 2019
Author: Arindam Sinha
Bench: Arindam Sinha
Judgment
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
AP NO.136 OF 2019
AP NO.59 OF 2019
GA NO.339 OF 2019
AVA MERCHANDISING SOLUTIONS PVT. LTD.
Versus
TORERO CORPORATION PVT. LTD.
BEFORE:
The Hon'ble JUSTICE ARINDAM SINHA
For Petitioner : MR. JISHNU CHOWDHURY, ADV.
MR. RATUL DAS, ADV.
MR. A.AGARWALLA, ADV.
MR. B.SHARMA, ADV.
For Respondent : MR. JOYJIT GANGULY, ADV.
MR. P.SANCHETI, ADV.
MR. S.CHATTERJEE, ADV.
MR. A.GHOSH, ADV.
Heard on : Several dates.
Judgment on : 1st July, 2019.
Arindam Sinha, J. : Mr.Chowdhury, learned advocate appears on
behalf of petitioner and submits, as on 20th August, 2018, the Arbitrator had
become de jure unable to perform his functions and as such there should be
an order declaring termination of mandate. He submits, the Arbitrator
thereafter went on to purportedly make and publish award dated 4th October,
2018. He demonstrates from the award, case was received by the Council
under Micro, Small and Medium Enterprises Development Act, 2006 on 9th
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November, 2016. Failure of conciliation was informed by letter dated 21st
August, 2017. This letter not only reported that but was also the letter, by
which there was initiation of arbitration process as per the Act of 2006 and, his
client was asked to submit statement of facts. Thus this letter dated 21st
August, 2017 is the letter for commencement of arbitration under section 21,
in Arbitration and Conciliation Act, 1996, as well as for the Tribunal being
informed of its appointment and it entering upon the reference. A year from
then expired on 20th August, 2018, within which time the Tribunal did not
conclude the proceedings by publishing award. There was no extension of time
for the Tribunal to conclude the reference. These facts are undisputed.
He relies on judgment of Supreme Court in NBCC Ltd. V.
J.G.Engineering Private Limited reported in (2010) 2 SCC 385, to
paragraphs 10, 27 and 28. He submits, where parties had not mutually
extended time in the reference and a party had thereafter approached for
termination on expiry of last extended time, Supreme Court declared that it
can be construed, parties had not agreed to extension of the mandate and as
such it was automatically terminated.
Next he relies on a Division Bench judgment of Delhi High Court in
Surinder Pal Singh Vs. HPCL reported in 2006 (92) DRJ 537, paragraph 16
to submit, view expressed was, where in an arbitration a party intends to have
issue regarding termination of mandate resolved, he has to apply to competent
Court under sub-sections (1) and (2) in section 14 of the 1996 Act. Similar view
was expressed by a Division Bench of Gauhati High Court in State of
Arunachal Pradesh Vs. Subhash Projects and Marketing Ltd. reported in
(2006) 3 Gauhati Law Reports 939.
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Lastly, he relies on judgment of a learned single Judge of Bombay
High Court in Neeta Lalitkumar Sanghavi Vs. Bakulaben Dharmadas
Sanghavi available at 2019 SCC Online Bom 250. He places paragraph 21 in
the judgment, which is reproduced below:-
"21. Looking at the opening words "the mandate of an arbitrator
shall terminate" appearing in Section 32(3) and the use of the exact
words in the opening part of Section 14(1) would also indicate that
in a situation where such as the one contemplated under Section
32(2) (c) would be covered by Section 14(1) and therefore an
application under Section 14(2) would be maintainable. I find
considerable force in the argument canvassed on behalf of the
petitioners that an order which is not an award, but at the same
time puts and end to the mandate of the Tribunal as well as
termination of the arbitral proceedings, would fall within Section
32(2) and would have to be considered under Section 14(2)."
He submits, facts were that an order was passed by the Tribunal, which order
was asserted as one party to be an award and, therefore, recourse to a Court
against it could only be under section 34. The other party contended it was an
order passed under section 32. According to him the learned Judge went on to
deal with the question applying provisions in section 14.
Mr. Ganguli, learned advocate appearing on behalf of respondent
submits, interference of Court in matters arbitration stand limited to extent per
section 5. Where there has been an award made, recourse against it to Court is
only possible under section 34. Section 5 would not admit of his learned friend's
contention. Further, section 14 contemplates of situation where the proceedings
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are continuing or can be continued upon appointment of substitute arbitrator.
This is not possible in the case since award was passed. In any event, the
reference was compelled under the 2006 Act, in which section 24 provides for
overriding effect of provisions in sections 15 to 23 therein, notwithstanding
anything inconsistent contained in any other law for the time being in force.
Drawing attention to sub-section (5) of section 18 in the 2006 Act, he submits,
provisions therein are for every reference made under the section to be decided
within period of 90 days from making of it. The provision is directory and has
overriding effect over provisions in section 29A of the 1996 Act.
For interpretation of statutes, Mr.Ganguly relies on judgment of
Supreme Court in Godawat Pan Masala Products I.P.Ltd. Vs. Union of India
reported in (2004) 7 SCC 68, paragraph 29 from which, inter alia, following is
reproduced below:-
"29. It is an accepted canon of construction of statutes that a
statute must be read as a whole and one provision of the Act
should be construed with reference to other provisions of the same
Act so as to make a consistent, harmonious enactment of the whole
statute. The Court must ascertain the intention of the legislature by
directing its attention not merely to the clauses to be construed, but
to the scheme of the entire statute. The attempt must be to
eliminate conflict and to harmonise the different parts of the
statute for it cannot be assumed that Parliament had given by one
hand what it took away by the other."
He submits, recourse provided by section 34 cannot be seen to have been
usurped by section 14 (1996 Act). He then relies on an earlier judgment of
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Supreme Court in M/s.Rubber House Vs. E N Industries Pvt. Ltd. reported in
AIR 1989 Supreme Court 1160. Supreme Court said if the statute is
mandatory, things done not in the manner or form prescribed have no effect or
validity, but if it is directory, the non-compliance may not lead to any serious and
adverse consequence. Lastly, he relies on judgment of a learned single Judge of
this Court in WP 14810 (W) 2016 ( Asian Freight Vs. Principal Commissioner
of Customs) available at 2016 SCC OnLine Cal 4500, paragraph 41. The
learned Judge, relying on several authorities said, inter alia, as follows:-
"41. It is settled by a catena of decisions rendered by the Supreme
Court, while considering varying statutes, that when a public
functionary is required by a statute to do or perform a certain thing
or activity within a specified time, the same is ordinarily directory;
however, if the consequence for inaction on the part of the statutory
authority within such specified time is expressly provided in the
statute, it must be held to be imperative."
It appears there is controversy between parties regarding mandate of
arbitrator, whether terminated at a particular point in time. The point in time
asserted by petitioner is expiry of one year from commencement of the reference,
without there being mutual extension of time or extension by Court, of time for
the Tribunal to make and publish award. For this submission petitioner relied on
NBCC Limited (supra) where Supreme Court said, in the facts there, it can be
construed that the parties had not agreed to the extension of mandate of the
arbitrator, failing which the mandate was automatically terminated.
Contention of respondent regarding overriding effect of the 2006 Act
and provision in sub-section (5) of section 18 therein being directory, non-
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compliance of which will not visit the reference or parties with adverse
consequences, cannot be accepted. Section 18 deals with references to Micro and
Small Enterprises Facilitation Council. Sub-section (1) provides for making of
reference. Sub-section(2) provides for what would happen on receipt of a
reference. Sub-section (3) provides for consequent contingency of conciliation
being unsuccessful, for reference to arbitration as alternative dispute resolution,
making provisions in the 1996 Act apply to the dispute. The provisions by this
section do not override provisions made in the 1996 Act as contended. Provision
in sub-section (5) of section 18 in the 2006 Act provider for time limit of 90 days,
for the Council to deal with the reference made under section 18. Whether or not
on expiry of 90 days the reference stands terminated is not a question that needs
be answered for adjudication of the controversy at hand.
In Neeta Lalitkumar Sanghavi (supra) there was a Tribunal
appointed, which twice over passed order under section 32 of the 1996 Act. Then
there was appointment of substitute sole arbitrator, who dealt with a delayed
application of legal representatives of one of the parties, who had since died.
Learned single Judge discussed facts and law in a situation where the arbitrator,
though had dismissed the application for substitution, as delayed, but thereupon
allowed it. On dismissal of the application for substitution there could be
termination of mandate since the reference was left with one party, or it could
proceed ex parte. The learned Judge went on to deal with the application in the
manner as in paragraph 33 of the judgment, extracted below.
"33. For all the aforesaid reasons and in view of the discussion
above, the impugned order dated 20th July, 2017 passed by the
sole Arbitrator in so far as he rejects the application of the
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petitioners for bringing themselves on record is set aside and the
sole Arbitrator is directed to substitute the petitioners as the
claimants in place of the original claimant Shri Lalitkumar
Vanmalidas Sanghavi and thereafter proceed with the arbitration
and pass a final award as expeditiously as possible."
The judgment is of no help to petitioner.
Termination of mandate of arbitral proceeding is provided for in section
14. A further situation has been interpreted by Supreme Court, to automatically
terminate the mandate, as on expiry of the period prescribed in section 29A.
Facts in this case regarding application of time period provided under section
29A are undisputed. The award, relied upon as such by respondent, was passed after prescribed time had expired. On making of award petitioner has come forward seeking a declaration that the mandate stood terminated before its publication. The petition is maintainable under sub-section(2) of section 14 since respondent has raised a controversy by contending that award has been made and there can be recourse to Court only under section 34.
What is clear distinction on facts in this case, from facts in any other case cited is that in this case there was no order made by the Tribunal under section 31 or 32 of the 1996 Act, within time prescribed. There thus is no difficulty in finding that on the expiry of prescribed time, mandate of the Tribunal had terminated. What the arbitrator went on to do after termination of mandate is of no consequence, if he did not have it.
For reasons aforesaid AP 136 of 2019 succeeds. Consequently AP 59 of 2019, being challenge to award passed after termination of mandate, is 7 8 dismissed as misconceived. No separate order need be made on the general application. It is disposed of accordingly.
(ARINDAM SINHA, J.) sb.
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