Madhya Pradesh High Court
M/S Shri Dev Enterprises vs Shri Rahul Shukla on 9 May, 2017
AC-73-2016
(M/S SHRI DEV ENTERPRISES Vs SHRI RAHUL SHUKLA)
09-05-2017
ORDER
(09.05.2017.) Per : Sujoy Paul J.
The applicants have invoked the jurisdiction of this Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for brevity, the Arbitration Act')' seeking a direction to appoint a former District/High Court Judge as an arbitrator for resolving the disputes between the parties.
2. Draped in brevity, the relevant facts are that the applicants and the respondents admittedly entered into a joint venture agreement on 10.5.2014. The agreement contains an arbitration clause. Contention of learned counsel for the applicants is that certain dispute emerged between the parties for which an arbitrator was required to be appointed in consonance with Clause 18 of the said agreement. The respondents without issuing any notice or without obtaining the consent of the applicants, appointed an arbitrator who is basically a Journalist although passed LL.B.
3. Learned counsel for the applicant submits that the appointment of arbitrator runs contrary to Clause 18 of the agreement and hence such appointment is in nullity in the eyes of law. Accordingly, under Section 11 of the Arbitration Act, appropriate orders may be issued for appointment of suitable arbitrator.
4. Per contra, Shri Pranay Verma, learned counsel for the respondent submits that the arbitrator was appointed on 27.3.2016. The arbitrator asked the parties to appear before him and file their claims. The applicants engaged a counsel and appeared before the arbitrator. The said counsel appeared on various proceedings. By taking this Court to the proceedings filed along with the reply by the respondent, it is urged that in none of the proceedings, the counsel for the applicant raised any objection regarding competency/jurisdiction of the learned arbitrator. They participated in the proceedings without any demur. Interestingly, they changed the counsel, who again filed Vakalatnama. Thus, they appeared before the arbitrator with open eyes and in absence of any objection being raised at any point of time, applicants cannot be permitted to turn around and say that the appointment of arbitrator is a nullity.
5. To bolster the aforesaid contention, the Verma relied on Section 4 of the Act and contends that in view of conduct of applicants which is arising out of their continuous participation in the proceedings before the arbitrator, they have waived their right to raise their eye-brows about the appointment of arbitrator or its continuance. He placed reliance on Section 13 of the said Act to submit that procedure to change the arbitrator is enumerated in the said section and the said section could have been invoked with quite promptitude.
6. In support of the aforesaid contention, he relied on the basic judgments of Supreme Court wherein general principle of Waiver is laid down way back in the year 1968. Reliance is placed on AIR 1968 SC 933, Associated Hotels of India Ltd. vs. S.B. Sardar Ranjit Singh. In support of contention regarding waiver on the part of the applicant, he also placed reliance on AIR 1988 SC 2045, Neelakantan & Bros. Constructions vs. S.E. National Highway; AIR 2002 Karnataka (NOC) 30 Rail India Technical & Economic Services Ltd. vs. Ravi Constructions, (2002) 3 SCC 175, Inder Sain Mittal vs. Housing Board, Haryana and (2009) 2 SCC 337, BSNL vs. Motorola India (P) Ltd.
7. In rejoinder submission, Shri Awasthy, submits that the proceedings of arbitrator makes it clear that appearance of the counsel for the applicant by no stretch of imagination can be treated to be a participation on the part of the applicants. The counsel merely prayed for time to file Vakalatnama or expressed the inability of applicants to participate in the proceedings because of aliment of father of applicant no.1.
8. No other point is pressed by counsel for the petitioner.
9. I have heard counsel for the parties at length and perused the record.
10. Before dealing with the rival contentions, it is apt to quote Clause 18 of the agreement, which reads as under:
â 18. In case of any dispute the matter shall decided by one of the arbitrator as appointed with the mutual consent of the both the directors of the company.â Sections 4 and 13 of the Arbitration Act reads as under:
â4. Waiver of right to object. A party who knows that-
a. any provision of this Part from which the parties may derogate. or b. any requirement under the arbitration agreement has not been-complied with and yet proceeds with the arbitration without stating his objection to such non- compliance without undue delay or, if a time limit is provided for slating that objection, within that period of time, shall be deemed to have waived his right to so object.
13. Challenge procedure.
1. Subject to sub-section (4), the parties are free to agree on a procedure for challenging an arbitrator.
2. Failing any agreement referred to in sub-section (1), a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in subsection (3) of section 12, send a written statement of the reasons for the challenge to the arbitral tribunal.
3. Unless the arbitrator challenged under sub-section (2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge.
4. If a challenge tinder any procedure agreed upon by the parties or tinder the procedure under sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award.
5. Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with section 34.
6. Where an arbitral award is set aside on an application made under sub-section (5), the Court may decide as to whether the arbitrator who is challenged is untitled to any fees.â [Emphasis Supplied]
11. The Clause 18 of the agreement indisputably shows that Arbitrator was required to be appointed by mutual consent of both the Directors of the company. It is equally undisputed that the Arbitrator was appointed without following the procedure laid down in the said clause. The Arbitrator issued notices to both the parties. The order-sheets of arbitration proceedings dated 30.12.2015, shows that the present applicants were absent on the said date, and therefore, matter was fixed for 31.01.2016. The hearing was adjourned on the said date. It was also adjourned on 28.02.2017. On 27.03.2017, the Arbitrator issued notices to the non-applicants for their presence on 12.04.2016. On 12.04.2016, again notices were directed to the issued by the Arbitrator to the non-applicants by registered post. On the next date i.e., 30.04.2016, one Shri Naushad Khan, Advocate appeared on behalf of the non-applicants (present applicants) and preferred an application for providing documents. It is also prayed that Shri Ghanshyam Das Agrawal is suffering from cancer, and therefore, matter may be adjourned. The matter was accordingly adjourned for 07.05.2016, it was further directed that the applicant shall provide all the documents to the non-applicants therein. On the next date i.e., 04.05.2016, the documents were provided to Shri Naushad Khan, Advocate who appeared for non-applicants therein. He prayed for time to file vakalatnama for all the partners of the firm. He further prayed for time to file reply. On 20.05.2016, Shri Naushad Khan, Advocate filed his vakalatnama and an application for early hearing which was accepted by the Arbitrator. As per joint request of the parties, the matter was fixed for 09.07.2016. The order-sheets further show that Shir Naushad Khan, Advocate preferred an application on 16.07.2016 to provide original agreement before the arbitrator. On 13.08.2016, the parties prayed for adjournment on the ground of extreme rains at Bhopal which request was accepted. On next date i.e., 20.08.2016, the Arbitrator was out of town and the matter was fixed on 10.09.2016. On this date, one Shir Manish Viswakarma, Advocate appeared on behalf of the present applicants and filed his vakalatnama. He prayed for time to file reply which was granted.
12. A cumulative reading of order-sheets aforesaid leaves no room for any doubt that the present applicants appeared through their counsel in various dates of hearing before the Arbitrator. They filed certain applications for summoning the documents etc. The present applicants prayed for time to file reply. At no point of time, they raised any objection about the appointment of the Arbitrator.
13. The doctrine of waiver is statutorily recognized in Section 4 of the Arbitration Act.
14. It is manifest from a plain reading of section 4 of the Arbitration Act that the doctrine of âwaiverâ is reduced in writing in the shape of said provision. Putting it differently, I find force in the contention of Shri P.Verma that principle of âwaiverâ got a statutory sanction/ recognition in the Arbitration Act. As per the general principle, âwaiverâ is an intentional relinquishment of a known right. There can be no waiver unless the person against whom the waiver is claimed had full knowledge of his rights and of fact and enable him to take effective action for enforcement of such right. {See : Associated Hotels case (supra}. There is a presumption in law that present applicants were aware of section 4 of the Arbitration Act. Ignorance of law cannot be a ground or excuse to wriggle out of a statutory provision including a provision which is pregnant with doctrine of âwaiverâ.
15. The factual matrix of this case, as discussed above, shows that the applicants' participation in arbitration proceedings were with full knowledge about nature of proceedings. They appeared in several dates and in no such date raised any objection regarding appointment of Arbitrator. In the case Bharat Sanchar Nigam Ltd.& Anr vs Motorola India Pvt.Ltd -(2009)2 SCC 337, the Apex Court clearly held that if objections were to be made, they should have been made prior to first arbitration hearing. But the applicants had not raised any such objection. The applicants, therefore, had clearly failed to meet the stated requirement to approach the arbitration without delay. As such, their right to approach is deemed to be waived. Since principle of waiver which got statutory colour in the Arbitration Act is so clearly explained in this judgment, I am not inclined to deal with other judgments related to similar point cited by Shri P.Verma. In addition, it is seen that if a party is aggrieved by appointment of Arbitrator, he can challenge such appointment as per section 13 of the Arbitration Act. This is trite law that if an Act provides a thing to be done in the particular manner, it has to be done in the same manner and other methods are forbidden. {See : Baru Ram Vs Prasanni-AIR 1959 SC 93, Dhanajaya Reddy Vs. State of Karnataka-(2001) 4 SCC-9, CIT Vs. Anjum M.H.Ghaswala-(2002) 1 SCC 633 and judgment of this court in Satyanjay Tripathi Vs. Banarsi Devi-(2011) 2 MPLJ 690}. Hence, no such interference in appointment of Arbitrator can be made in the present proceedings based on application filed under section 11(6) of the Act.
16. As discussed above, the principle of âwaiverâ flowing from Section 4(b) of the Act is clearly attracted. The present applicants have failed to raise objections regarding appointment of Arbitrator promptly. In the present application, no direction can be issued for appointment of any Arbitrator. Consequently, this application fails and is hereby dismissed.
(SUJOY PAUL) JUDGE MKL