Rajasthan High Court - Jodhpur
Doshion Private Ltd vs Hindustan Zinc Limited & Anr on 4 January, 2018
Equivalent citations: AIR 2018 RAJASTHAN 33, (2018) 3 WLC (RAJ) 510, (2019) 2 ARBILR 137, 2018 (192) AIC (SOC) 19 (RAJ)
Author: Arun Bhansali
Bench: Arun Bhansali
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
S.B. Arbitration Application No. 18 / 2017
Doshion Private Limited, Registered Office At Plot No. 24, Phase II,
GIDC Vatva, Ahmedabad-382445
----Petitioner
Versus
1. Hindustan Zinc Lilmited, Registered Office At Yashad Bhawan,
Swaroop Sagar, Udaipur.
2. Honble Justice (RETD.) Narayan Prasad Gupta, R/o 59, High
Court Judges Colony, Sector-105, Noida (UP)
----Respondents
_____________________________________________________
For Petitioner(s) : Mr. Prakul Khurana
Mr. Ankit Sareen
For Respondent(s) : Dr. Sachin Acharya
Mr. Shridhar Mehta
_____________________________________________________
HON'BLE MR. JUSTICE ARUN BHANSALI
REPORTABLE Order
04/01/2018
This arbitration application under Section 14 read with Section 11 of the Arbitration and Conciliation Act, 1996 ('the Act') has been filed by the applicant seeking termination of the mandate/removal of sole arbitrator and for appointment of fresh/new arbitrator.
The application has been filed with the following prayers:
"In view of the aforesaid, the applicant humbly prays before this Hon'ble Court that this Hon'ble Court may be pleased to:
a. Terminate/Revoke the mandate of the Hon'ble Arbitrator Justice (Retd.) Narayan Prasad Gupta to act as the sole Arbitrator in the impugned Arbitration proceedings.
b. Appoint a fresh/new arbitrator to act as the Sole Arbitrator with the mandate to complete the arbitral proceedings by taking over the proceedings from its current stage.
(2 of 16) [ARBAP-18/2017] c. Pass appropriate order determining the fee payable to the new Arbitrator.
d. Pass any other order which this Hon'ble Court deems just and proper in favour of the Applicant."
The application with prayers as quoted above has been filed with the contentions that by order dated 27/9/2016 passed in Arbitration Application No. 6/2016 sole arbitrator was appointed to adjudicate upon the contractual dispute between the parties in terms of arbitration agreement and as per the Manual of Procedure for Alternative Dispute Resolution, 2009 ('the Manual of Procedure'); the arbitral proceedings commenced at Udaipur and parties filed their respective claim and counter claim. The respondent/claimant filed a claim of Rs. 99 crore (approx.) to which the applicant/respondent filed counter claim to the tune of Rs. 111 crore (approx.) for the alleged loss suffered respectively by the parties to the contract; the arbitrator fixed the fees payable by the parties for the resolution of dispute as per IV Schedule of the Act on 10/5/2016 calculating the same separately for the claim and counter claim as per the rates prescribed in the Schedule.
It appears that the fees fixed by the arbitrator were sought to be discussed by the applicant herein and submissions were made including based on Notification No.01/SRO/2017 dated 23/3/2017 issued by the Rajasthan High Court amending the Manual of Procedure and providing for calculation of arbitrator's fees on the aggregate of claim and counter claim and same was made applicable w.e.f. 23/10/2015.
(3 of 16) [ARBAP-18/2017] However, request made by the applicant for scaling down the fee was declined by the arbitrator on 26/5/2017 (Annex.13). Submissions have been made in the application that on account of conflict like situation between the applicant and the arbitrator on the issue of fee, particularly when the applicant only has raised the objection of scaling down of fee, the applicant has lost faith that the sole arbitrator would be able to adjudicate upon the matter in dispute with utmost impartiality, several other submissions have also been made in the application.
The respondent appeared on caveat and has filed reply to the application making allegations that the intention and conduct of the applicant has always been to delay the arbitral proceedings initiated by the respondent against the applicant to recover its loss on account of breach of contract. The averments made in the application questioning the action/determination of the arbitrator and the implication/inference sought to be drawn by the applicant have been denied.
Further submissions have been made that apparently no objection was raised at the time when the fees were fixed. It is also submitted that the application made is frivolous and has been made on vague grounds and, therefore, the same deserves to be dismissed.
A rejoinder has been filed by the applicant along with certain emails exchanged between the arbitrator and the parties.
During the course of submissions being made by parties on the application, an issue arose as to the maintainability of the (4 of 16) [ARBAP-18/2017] present application under Section 14 of the Act before this Court. The parties were granted opportunity to address on the said aspect and they have been heard on the issue.
Learned counsel for the respondent submitted that in view of the provisions of Section 14(2) read with Section 2(1)(e) of the Act, which defines 'Court', the application as filed by the applicant can only be maintained before the Principal Civil Court of original jurisdiction, which in the present case is District Court at Udaipur and, therefore, the application filed by the applicant before this is not maintainable.
Reliance was placed on Nimet Resources Inc. & Anr. Vs. Essar Steels Ltd. : (2009) 17 SCC 313.
Learned counsel for the applicant vehemently opposed the submissions and submitted that the application is maintainable before this Court only. It was submitted that the provisions of Section 14 after the amendment to the Act, which came into effect w.e.f. 23/10/2015, provides that the mandate of the arbitrator shall terminate and he shall be substituted by another arbitrator on two contingencies, (a) & (b), as enumerated therein and it is only if a controversy remains concerning any of the grounds referred to in clause (a), a party may apply to the court to decide on the termination of mandate. It was submitted that looking to the nature of controversy which has arisen in the present case, it is apparent that no controversy remains and once there is no controversy, it is this Court alone which needs to pass order (5 of 16) [ARBAP-18/2017] regarding termination of the mandate and appointment of a new/fresh arbitrator.
Further submission was made that the jurisdiction of this Court is not ousted to entertain an application for declaring that arbitral tribunal has failed or neglected to perform its duty and for appointment of a substitute arbitrator.
Further submissions were made that the word 'controversy' appearing in sub-section (2) of Section 14 only denotes requirement to establish any of the grounds indicated in sub- section (1) of Section 14 and the same does not require inter party debate on the issue as essential precondition for approaching the court to decide on the termination of mandate. Reference was also made to the provisions of Section 11(6) and Section 12 of the Act for emphasizing that in view of the present circumstance, it is only this Court which needs to exercise its jurisdiction for terminating the mandate of the arbitrator and for appointing a fresh arbitrator.
Reliance was placed on Aargee Engineers & Co. & Ors.vs. Era Infra Engineering Ltd. & Ors. : 2017 (5) Arb.L.R 370 (All.), M/s. Manibhai & Brothers vs. General Manager : Petition under Arbitration Act No.11/2016 decided on 29/4/2016 by Gujarat High Court, State of Arunachal Pradesh vs. Subhash Projects and Marketing Ltd. : Manu/GH/0170/2006 decided by Gauhati High Court on 19/7/2006 and M/s. Ganesh Containers Movers Syndicate vs. Rajasthan Small Industries Corporation Ltd. :
(6 of 16) [ARBAP-18/2017] S.B.Civil Misc. Application (Arbitration) No.31/15 decided on 22/4/2016 by Rajasthan High Court at Jaipur Bench.
I have considered the submissions made by learned counsel for the parties and have perused the material available on record.
It would be relevant to notice the provisions of Sections 2(1)
(e), 14 & 15 of the Act, which read as under:
"2.Definitions.- (1) In this Part unless the context otherwise requires-
(a)............
(b)...........
(c)............
(d)............
(e) "Court" means -
(i) in the case of an arbitration other than international commercial arbitration, the principal civil court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of a suit, but does not include any civil court of a grade inferior to such principal civil court, or any Court of Small Causes;
14. Failure or impossibility to act.- (1) The mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator, 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 (7 of 16) [ARBAP-18/2017] 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 1 Subs. by Act 3 of 2016, sec. 9 (w.e.f. 23.10.2015) 14 arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.
(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."
As already noticed hereinbefore, the applicant has filed the application under Section 14 read with Section 11 of the Act with prayers for termination/revocation of mandate of the arbitrator and for appointment of a fresh arbitrator.
The provisions of Section 14 deal with the termination of mandate of an arbitrator essentially on four conditions (i) he becomes de jure or de facto unable to perform his functions, (ii) for other reasons fails to act without undue delay, (iii) he withdraws from his office and (iv) the parties agree to the termination of his mandate. Sub-section (2) of Section 14 provides that if a controversy remains concerning any of the grounds referred to in clause (a) i.e. where the arbitrator has become de jure or de facto unable to perform his function or (ii) for other reasons fail to act without undue delay, a party may apply to the 'Court' to decide on the termination of mandate. Other two conditions, i.e. withdrawal from the office or parties agree to termination of the mandate have been dealt with in sub-
(8 of 16) [ARBAP-18/2017] section (3) of Section 14 indicating that in such a situation the same shall not imply acceptance of validity of any ground referred to in the Section.
Section 15 of the Act deals with appointment of substitute arbitrator according to the rules that are applicable to the appointment of arbitrator being replaced.
The provisions of sub-section (2) of Section 14 as noticed hereinbefore, specifically provides an application to the court to decide on the termination of the mandate of the arbitrator, if a controversy remains. The term 'Court' already stands defined under Section 2(1)(e) of the Act, which in the case of an arbitration other than international commercial arbitration means the principal civil court of original jurisdiction in a District, which in the present case is the courts at Udaipur.
The principal submission made by counsel for the applicant is that in the present circumstances, as no controversy remains concerning the grounds referred to in clause (a) of sub-section (1) of Section 14 i.e. whether the arbitrator has become de jure or de facto unable to perform his function on account of the fact that fee being charged is contrary to the provisions of Manual of Procedure as amended, the application can be maintained before this Court.
The said aspect about maintainability of the application under Section 14(2) of the Act was decided by Hon'ble Supreme Court in the case of Nimet Resources (supra), wherein, the Hon'ble Judge, while deciding the arbitration petition of similar nature, wherein, the petition was filed for terminating the (9 of 16) [ARBAP-18/2017] mandate of the sole arbitrator and for appointment of substitute arbitrator on the allegations that the arbitrator was unnecessarily delaying the arbitral proceedings, laid down as under:
"6. The question, however, which falls for consideration is as to whether this petition is maintainable before this Court. An application under sub- section (5) and sub- section (6) of Section 11 of the 1996 Act was maintainable before the Chief Justice of this Court. The learned Judge, as a designate of the Chief Justice of India, passed the Order dated 29.9.2000 appointing the learned Arbitrator. It was a judicial order.
7. Sub-section (2) of Section 14 of the 1996 Act reads as under:- "Section 14(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.
(emphasis supplied)
8. Application in terms of sub-Section (2) of Section 14, thus, lies before a 'Court' within the meaning of the 1996 Act.
9. It is only thus the 'Court', within the meaning of the provisions of the said Act which can entertain such an application raised by the parties herein and determine the dispute therein on merit.
10. Unlike the 1940 Act, "Court" has been defined in Section 2(1)(e) to mean;
"2(1)(e) Court means the Principal Civil Court of Original Jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject- matter of the arbitration if the same had been the subject- matter of a suit, but does not include any civil court of a grade inferior to such Principal Civil Court, or any Court of Small Causes"
11. As a "Court" has been defined in 1996 Act itself, an application under Section 14(2) would be maintainable only before the Principal Civil Court which may include a High Court having jurisdiction but not this Court.
12. This Court in passing its Order dated 27.9.2000, as noticed hereinbefore, did not and could not retain any jurisdiction in itself as could be done in suitable cases under the 1940 Act. It even did not determine the validity or otherwise of the Arbitration Agreement. It allowed the parties to take recourse to their remedies before the learned Arbitrator. When the said Order was passed, this (10 of 16) [ARBAP-18/2017] Court was considered to have only an administrative power, but the same has since been held to be a judicial power in SBP & Co. v Patel Engg. Ltd. The said jurisdiction, however, does not extend to Section 14 of the Act.
13. The definition of 'court' indisputably would be subject to the context in which it is used. It may also include the appellate courts. Once the legislature has defined a term in the interpretation clause, it is not necessary for it to use the same expression in other provisions of the Act. It is well- settled that meaning assigned to a term as defined in the interpretation clause unless the context otherwise requires should be given the same meaning.
14. It is also well-settled that in the absence of any context indicating a contrary intention, the same meaning would be attached to the word used in the later as is given to them in the earlier statute. It is trite that the words or expression used in a statute before and after amendment should be given the same meaning. It is a settled law that when the legislature uses the same words in a similar connection, it is to be presumed that in the absence of any context indicating a contrary intention, the same meaning should attach to the words. [See Lenhon v. Gobson & Howes Ltd., AC at p.711, Craies on Statute Law, 7th Edn., p.141 and G.P. Singh's Principles of Statutory Interpretation, 10th Edn., p. 278]"
Hon'ble Supreme Court in State of West Bengal vs. Associated Contractors : (2015) 1 SCC 32 on a reference made to it on the question as to which Court shall have the jurisdiction to entertain and decide the application under Section 34 of the Act, laid down as under:
"25. Our conclusions therefore on Section 2(1)(e) and Section 42 of the Arbitration Act, 1996 are as follows:
(a) Section 2(1)(e) contains an exhaustive definition marking out only the Principal Civil Court of Original Jurisdiction in a district or a High Court having original civil jurisdiction in the State, and no other court as "court" for the purpose of Part-I of the Arbitration Act, 1996.
(b) The expression "with respect to an arbitration agreement" makes it clear that Section 42 will apply to all applications made whether before or during arbitral proceedings or after an Award is pronounced under Part-I of the 1996 Act.
(c) However, Section 42 only applies to applications made under Part-I if they are made to a court as defined. Since applications made under Section 8 are made to judicial authorities and since applications under Section 11 are (11 of 16) [ARBAP-18/2017] made to the Chief Justice or his designate, the judicial authority and the Chief Justice or his designate not being court as defined, such applications would be outside Section 42.
(d) Section 9 applications being applications made to a court and Section 34 applications to set aside arbitral awards are applications which are within Section 42.
(e) In no circumstances can the Supreme Court be "court"
for the purposes of Section 2(1)(e), and whether the Supreme Court does or does not retain seisin after appointing an Arbitrator, applications will follow the first application made before either a High Court having original jurisdiction in the State or a Principal Civil court having original jurisdiction in the district as the case may be.
(f) Section 42 will apply to applications made after the arbitral proceedings have come to an end provided they are made under Part-I.
(g) If a first application is made to a court which is neither a Principal Court of Original Jurisdiction in a district or a High Court exercising original jurisdiction in a State, such application not being to a court as defined would be outside Section 42. Also, an application made to a court without subject matter jurisdiction would be outside Section 42. The reference is answered accordingly."
While considering the aspect pertaining to definition of 'Court', it was observed in para 20 of the above judgment, which is relevant for the present context, as under:
"20. As noted above, the definition of "court" in Section 2(1)(e) is materially different from its predecessor contained in Section 2(c) of the 1940 Act. There are a variety of reasons as to why the Supreme Court cannot possibly be considered to be "court" within the meaning of Section 2(1)(e) even if it retains seisin over the arbitral proceedings. Firstly, as noted above, the definition is exhaustive and recognizes only one of two possible courts that could be "court" for the purpose of Section 2(1)(e). Secondly, under the 1940 Act, the expression "civil court"
has been held to be wide enough to include an appellate court and, therefore would include the Supreme Court as was held in the two judgments aforementioned under the 1940 Act. Even though this proposition itself is open to doubt, as the Supreme Court exercising jurisdiction under Article 136 is not an ordinary Appellate Court, suffice it to say that even this reason does not obtain under the present definition, which speaks of either the Principal Civil Court or the High Court exercising original jurisdiction. Thirdly, if an application would have to be preferred to the Supreme Court directly, the appeal that is available so far as applications under Sections 9 and 34 are concerned, provided for under Section 37 of the Act, would not be (12 of 16) [ARBAP-18/2017] available. Any further appeal to the Supreme Court under Article 136 would also not be available. The only other argument that could possibly be made is that all definition sections are subject to context to the contrary. The context of Section 42 does not in any manner lead to a conclusion that the word "court" in Section 42 should be construed otherwise than as defined. The context of Section 42 is merely to see that one court alone shall have jurisdiction over all applications with respect to arbitration agreements which context does not in any manner enable the Supreme Court to become a "court" within the meaning of Section
42. It has aptly been stated that the rule of forum conveniens is expressly excluded by section 42. See: JSW Steel Ltd. vs. Jindal Praxair Oxygen Co.Ltd., p.542 para 59. Section 42 is also markedly different from Section 31(4) of the 1940 Act in that the expression "has been made in a court competent to entertain it" does not find place in Section 42. This is for the reason that, under Section 2(1)
(e), the competent Court is fixed as the Principal Civil Court exercising original jurisdiction or a High Court exercising original civil jurisdiction, and no other court. For all these reasons, we hold that the decisions under the 1940 Act would not obtain under the 1996 Act, and the Supreme Court cannot be "court" for the purposes of Section 42." Recently, a 5 Judges bench of Hon'ble Supreme Court in State of Jharkhand & Ors. Vs. Hindustan Construction Co. Ltd. :
Civil Appeal No.1093/2006 decided on 14/12/2017, on account of conflicting judgments answered the question as to whether the Supreme Court can entertain the application for making the award a Rule of the Court, even if it retains seisin over arbitral proceedings under Section 20 of the Arbitration Act, 1940 and inter alia laid down as under:
"58........The jurisdiction of a Court conferred under a statute cannot be allowed to shift or become flexible because of a superior court's interference in the matter in a different manner.
59. Thus analysed, we arrive at the irresistible conclusion that the decisions rendered in Saith and Skelton (supra) and Guru Nanak Foundation (supra) do not lay the correct position of law and, accordingly, they are overruled.
Any other judgment that states the law on the basis of the said judgments also stands overruled."
It was laid down that the jurisdiction of the Court conferred under a statute cannot be allowed to shift or become flexible (13 of 16) [ARBAP-18/2017] because of a superior court's interference in the matter in a different manner and the judgment in the case of State of Madhya Pradesh vs Saith and Skelton (P) Ltd. : 1972 (1) SCC 702 and Guru Nanak Foundation vs. Rattan Singh & Sons : 1981 (4) SCC 634 were overruled.
So far as the judgment of Allahabad High Court in Aargee Engineers (supra) relied on by counsel for the applicant is concerned, the learned Judge in the said case inter alia laid down as under:-
"34. It is true that if a controversy remains concerning any of the grounds referred to in Clause (a) of sub-section 1 of Section 14, unless otherwise agreed by the parties, it is the 'court' defined under Section 2(1)(e) of the Act, which would have jurisdiction to decide on termination of mandate of arbitrator. Use of expression 'controversy' in Section 14(1) of the Act has an object to serve. A substantial disagreement on facts requiring adjudication has to be decided by the 'court' defined under Section 2(1)
(e). This is so as such court can entertain evidence etc. in that regard. However, in cases where it is apparent on record that the arbitrator has failed to perform his functions, or for other reasons fails to act without undue delay, or where there is no substantial disagreement on termination of mandate of arbitrator, an arbitrator can be appointed exercising jurisdiction under Section 11 read with Section 15 of the Act. Such interpretation would clearly advance the cause of an early resolution of dispute by appointing an impartial arbitrator. Any different interpretation, as suggested by Sri Bhanot, would unnecessarily result in multiplicity of litigation at different forums, causing substantial delay, and would not sub-serve the object of Act."
The above principle laid down by the Allahabad High Court makes the jurisdiction as conferred in Section 14(2) of the Act flexible, wherein, if the termination of mandate is sought based on a substantial disagreement on facts requiring adjudication, the matter has to be decided by a court defined under Section 2(1)(e) of the Act, otherwise the High Court can exercise jurisdiction under Section 11 read with Section 15 of the Act.
(14 of 16) [ARBAP-18/2017] The above determination, only discusses about the appointment and does not deal with termination of mandate inasmuch as the termination cannot be assumed and the same in a case falling under Section 14(1)(a) needs to take place before the appointment can be made under Section 11 or Section 15(2) of the Act.
Besides the above, as the flexibility of jurisdiction based on facts as laid down in the above judgment is contrary to the principle laid down by 5 Judge Bench of Hon'ble Supreme Court in the case of Hindustan Construction Co. (supra), the said judgment cannot be relied on in support of the principle sought to be canvassed by learned counsel for the applicant.
A bare look at the judgment in the case of Subhash Projects & Marketing Ltd.(supra), delivered by Gauhati High Court, would reveal that in the said case, the applications for removal were filed before the principal civil court of original jurisdiction of the District i.e. the Deputy Commissioner, Papumpare and the Division Bench therein set aside the judgment of learned Single Judge of the High Court and remanded the proceedings to the principal civil court and as such the said judgment cited by learned counsel for the applicant does not support the contention sought to be raised in the present proceedings.
So far as the judgment of this Court in the case of Ganesh Containers Movers Syndicate (supra) is concerned, in the said judgment, as the issue of jurisdiction was not raised and decided, (15 of 16) [ARBAP-18/2017] the said judgment also does not advance the cause of the applicant.
The judgment in the case of M/s Manibhai (supra) also does not deal with the aspect of jurisdiction of the Court under Section 14(2) of the Act and as such the same has no application to the facts of the present case.
The submission made by learned counsel for the applicant based on the amendment in opening part of Section 14 providing for termination and substitution of arbitrator is also not of much significance inasmuch as the provisions of Section 15(2) of the Act provides for appointment of a substitute arbitrator in case where the mandate of the arbitrator terminates. It is only once the finding regarding the termination of mandate of arbitrator is recorded by the jurisdictional court that proceedings for substitution of the arbitrator can be initiated and not prior to that and a combined application in this regard based on the opening words of Section 14 cannot be maintained.
The very fact that the applicant is required to approach the court seeking termination of the mandate necessarily means that a controversy does remain concerning such termination.
In view of the above, it is apparent that the jurisdiction under Section 14(2) of the Act where the controversy remains concerning any of the grounds referred to in clause (a) of sub- section (1) of Section 14 and the mandate of an arbitrator is sought to be terminated by approaching the 'Court' the party has to apply to the court and the court would be as defined under (16 of 16) [ARBAP-18/2017] Section 2(1)(e) of the Act, which in the present case is the principal civil court of the District and the petition filed before this Court is apparently not maintainable.
In view of the above discussion, the application filed by the applicant under Section 14 of the Act is not maintainable, the same, is therefore dismissed with liberty to the applicant to approach the jurisdictional court, if so advised.
No order as to costs.
(ARUN BHANSALI)J. Baweja/-