Gujarat High Court
Liquidator, The Karamsad Urban Co ... vs The Suprintendent Of Post Offices Anand on 29 October, 2020
Author: Biren Vaishnav
Bench: Biren Vaishnav
C/IAAP/30/2020 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/PETN. UNDER ARBITRATION ACT NO. 30 of 2020
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BIREN VAISHNAV
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1 Whether Reporters of Local Papers may be allowed to see the YES
judgment ?
2 To be referred to the Reporter or not ? YES
3 Whether their Lordships wish to see the fair copy of the NO
judgment ?
4 Whether this case involves a substantial question of law as to NO
the interpretation of the Constitution of India or any order made
thereunder ?
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LIQUIDATOR, THE KARAMSAD URBAN CO OPERATIVE BANK LTD.
Versus
THE SUPRINTENDENT OF POST OFFICES ANAND
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Appearance:
MR PREMAL S RACHH(3297) for the Petitioner(s) No. 1
MUKESHKUMAR B THAKKAR(8079) for the Petitioner(s) No. 1
KSHITIJ M AMIN(7572) for the Respondent(s) No. 1,2
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CORAM:HONOURABLE MR. JUSTICE BIREN VAISHNAV
Date : 29/10/2020
CAV JUDGMENT
1. In this petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, the Karamsad Urban Cooperative Bank Ltd. (in liquidation) has approached this Court with a prayer that an independent and impartial person be appointed as a sole arbitrator to decide the dispute between the parties.
Page 1 of 20 Downloaded on : Fri Oct 30 04:01:59 IST 2020 C/IAAP/30/2020 CAV JUDGMENT2. Facts in brief are that the petitioner bank owned certain buildings which they wanted to give on rent. The respondent no.2 - Post Master invited tenders on 25.04.1969 for requirement of accommodation at Karamsad Village for a post office including a residential house for the post master. The petitioner was one of the bidders. The bid of the petitioner was found acceptable and therefore, a lease agreement was entered into between the petitioner-bank and the Senior Superintendent of Post, Kheda Division, Nadiad, (now Anand). The lease agreement commenced from 01.07.1969 with a monthly rent of Rs.200/- for a period of five years expiring on 30.06.1974.
3. The case of the bank is that on 05.03.1974 before the expiry of lease, the petitioners demanded increase of rent of Rs.200/- to 300/- which was not paid but the respondents continued to occupy the premises. On 03.08.1979, the petitioner bank refused to accept the monthly rent and issued a notice on 21.07.1981 for the respondents to vacate the premises. Verbal communications were exchanged, according to the petitioner for increase of rent. On a joint meeting in February, 1992 between the petitioners and the respondents, it was agreed that the rent would be payable at the rate of Rs.3/- per square feet per month amounting to Rs.5544/- per month from 01.03.1992. According to the petitioners, the respondents continued to default and therefore a legal notice was sent on 23.09.1999. On 09.07.2019, the petitioner received a letter dated 02.07.2019 from the respondents to renew the lease. On 25.07.2019 the petitioners informed that since the bank has gone into liquidation, the respondents should vacate the premises, unless they would want to initiate arbitration in accordance with the Page 2 of 20 Downloaded on : Fri Oct 30 04:01:59 IST 2020 C/IAAP/30/2020 CAV JUDGMENT arbitration clause on the lease agreement. On 23.01.2020, the premises was handed over by the respondents to the petitioner bank, however, since there was a continued default of payment of outstanding dues of Rs.1,31,44,016/- of lease rent from 1979 to 1992, the respondents were served a legal notice from the petitioner on 06.02.2020, asking for arrears of rent and also inviting the respondents to appoint an independent arbitrator. Since no response was received from the respondents, the present Arbitration Petition under Section 11(6) of the Act has been filed.
4. An affidavit in reply has been filed by the respondents opposing the petition on the ground of delay. A rejoinder has been filed explaining the conduct of the respondents and disputing that the petition under Section 11(6) be dismissed on the ground of delay.
5. Mr.Premal Rachh learned counsel for the petitioner would submit as under:
A. Inviting the attention to the lease agreement of 1969, Mr.Rachh submitted that unequivocally and undisputedly, there was an arbitration clause in the lease agreement. Once there was an arbitration clause in the lease agreement, which is undisputed, the only consideration that should weigh with this Court is to appoint an arbitrator in accordance with the provisions of Section 11(6) of the Act without entering into the disputes with regard to the limitation that has been placed by the respondents.
B. Even otherwise, Mr.Rachh would submit that it is evident from the communication dated 02.07.2019 (Annexure:I page, 36) of the petition itself that the post office i.e. the respondents themselves Page 3 of 20 Downloaded on : Fri Oct 30 04:01:59 IST 2020 C/IAAP/30/2020 CAV JUDGMENT intended to renew the lease agreement. A reference thereto has been made and therefore there was continued cause of action and there was no delay in raising the dispute and requesting for appointing of an arbitrator. Mr.Rachh would therefore submit that there is no delay. Mr. Rachh invited the attention of the Court to the list of dates and events at page 55 to the rejoinder and submit that right from the year 1969 onwards, till the year 2006, notices were issued and communications were exchanged by the parties in context of the leased premises and for depositing of the rent that was outstanding from the respondents. In fact, on 26.05.2014, page 88 of the rejoinder, the department of the Posts requested that the lease deed which has expired in the year 1974 may be renewed for a period upto 24.11.2018 for a further period of five years. This itself shows that the dispute was live. This was in addition to the communication dated 02.07.2019 referred to hereinabove.
6. Mr. Siddharth Dave, learned advocate appearing for Mr. Devang Vyas, learned Additional Solicitor General of India with Mr. Kshitij Amin would submit that from the affidavit filed it is clear that from 30.06.1979 the lease agreement was not renewed. Rent was paid regularly which the petitioner did not accept. Mr.Dave would therefore submit that the dispute cannot now be referred to arbitration once the lease has expired in June, 1979. There was a huge delay of around 40 years on the part of the petitioners and therefore, the dispute being stale cannot be referred for arbitration. He would submit that the petitioner bank has waived its rights under the agreement and therefore now recourse to arbitration by relying on such a clause is not acceptable. Mr.Dave would further submit that in fact a civil suit was filed in the Civil Court at Anand Page 4 of 20 Downloaded on : Fri Oct 30 04:01:59 IST 2020 C/IAAP/30/2020 CAV JUDGMENT and a notice was issued for vacating of the premises. In such circumstances, the Arbitration Petition is not maintainable.
7. Having considered the facts of the case on hand, it will be in the fitness of things to refer to the chronology of dates and events which have unfolded in the entire episode. They read as under:
Date Event Annexure
01.07.1969 The lease commenced on 01.07.1969 for Copy of
a monthly rental of Rs.200/- lease deed
as per
Annexure-
C with the
petition.
05.03.1974 The petitioner wrote a letter to the Attached
respondents informing the lease period is As
expiring on 30.06.1974 and the lesae rent Annexure-
to fix as Rs.300/- otherwise to vacate the D With
premises. The
Petition
09.03.1979 Respondent replied that the rent shall be Annexure
payable as per the agreement as Rs.200/- I-1 with
And continued enjoying the possession this
under the condition of lease to be deemed rejoinder
renewal on issuance of notice to renew. affidavit.
03.08.1979 Petitioner refused to accept the rent of Annexure-
Rs.200/- E in the
petition.
21.07.1981 Notice sent by Ad. C.G.Dave to the Annexure-
Respondent calling upon the Respondent F in the to either increase the rent or vacate the petition. premises.
Page 5 of 20 Downloaded on : Fri Oct 30 04:01:59 IST 2020 C/IAAP/30/2020 CAV JUDGMENT11.02.1992 A joint meeting was held on 11.02.1992 Annexure-
between the petitioner and respondents G in the (then Superintendent of post Mr.I.A. petition. Vohra and Sub Post Master Mr. I P Bhoi attended the meeting). It was decided between the parties to increase the rent of the leased premises from Rs.200/- to Rs.3/- per sq. Ft. i.e. Rs.5544/- per month. (However, this was not implemented by the Respondent) 23.09.1999 Further the notice given by the Advocate Annexure-
Arunbhai B Patel of the Petitioner to the H in the Respondents calling upon them to vacate petition. the leased premises.
15.10.1999 Advocate Mr. Paresh S Dhora of the Annexure-
Respondents replied the notice of the I-2 with Petitioner refusing to vacate possession this and saying that the Petitioner herein has rejoinder no power to terminate the contract of affidavit. lease.
11.12.2006 The Reserve Bank of India decided to Annexure-
cancel the licence of the Karamsad Urban I-3 with
Cooperative Bank Ltd. Karamsad, this
Gujarat i.e. Petitioner herein, as a final rejoinder
step after examining all the options for affidavit.
revival of the bank and in order to protect the interest of the depositors.
14.10.2011 Liquidator of the Petitioner Bank served Annexure-
notice through the Advocate R.R.Parikh I-4 with to the Respondents to vacate the leased this premises as the Petitioner bank has to pay rejoinder off a huge amount to its depositor by affidavit. selling the leased premises.
24.08.2012 Then liquidator Shri G.R.Rathod Annexure instituted a suit in the Principal Senior I-5 with this Page 6 of 20 Downloaded on : Fri Oct 30 04:01:59 IST 2020 C/IAAP/30/2020 CAV JUDGMENT Civil Judge Court vide suit No.380/2012. rejoinder affidavit.
26.05.2014 Request for renewal of lease vide letter Annexure- (28.05.2014) no.D/Karamsad/2014 I-6 with this rejoinder affidavit.
11.11.2016 In the aforesaid matter, the Principal Annexure-
Senior Civil Judge has held that the said I-7 with
Court does not have power and this this
matter could be adjudicated by the rejoinder
Arbitrator in terms of the lease deed. affidavit.
02.07.2019 A letter from the Respondent was Annexure-I
received by the Petitioner informing the with the
later that the lease deed is over and the petition. same should be extended for a further period of 5 years. (refer para-9 hereinafter) 25.07.2019 Petitioner herein, replied the above letter Annexure-J of 02.07.2019 through its Advocate in the R.R.Parikh that the Petitioner Bank is petition. under liquidation and the liquidator is in the process to get the Arbitrator appointed. Hence, the Petitioner is not intending to renew the lease deed.
31.12.2019 The letter dated 31-12-2019 of the Annexure- actually Respondent Post Master Grade-1 of I-8 with received on Karamsad mentioning about the delivery this 23.01.2020 of possession and keys as of 31.12.2019 rejoinder while actually delivering the letter and affidavit. possession on 23.01.2020 wherein the Manager of the petitioner bank has stated that the possession is taken reversing their rights to recover the disputed rents and its increase under dispute.
Page 7 of 20 Downloaded on : Fri Oct 30 04:01:59 IST 2020 C/IAAP/30/2020 CAV JUDGMENT8. From the aforesaid chronology of events, what is evident is that two dates stand out which indicate that the dispute with regard to the lease agreement stand still and the issue can be considered as "live". In the year 2014 i.e. on 28.05.2014 the respondents themselves requested that the lease be renewed. That the lease agreement subsisted was also clear from their letter dated 02.07.2019. What is also evident from reading of the notice issued by the petitioners on 06.02.2020, by their advocate Shri Mukesh Thakkar is that by the notice of 06.02.2020, though it was clear that the premises had been handed over by the respondent on 23.01.2020, the dispute did exist as to payment of outstanding rent as computed in the notice dated 06.02.2020. It was in the context of this dispute that the petitioner had invoked the arbitration clause in the lease deed agreement. The arbitration clause in the lease deed reads as under:
"PROVIDED ALWAYS and it is hereby expressly agreed that if at any time there shall arise any dispute, doubt, difference or question with regard to the interpretation or meaning or any of the terms and conditions of this demise or in respect of the right, duties and liabilities of the parties hereto or in any way touching or arising out of these presents or otherwise in relation to the premises then every such dispute, difference doubt or question (except the decision whereof is herein expressly provided for) shall be referred to the sole arbitration of the Director General, Post and Telegraphs or Page 8 of 20 Downloaded on : Fri Oct 30 04:01:59 IST 2020 C/IAAP/30/2020 CAV JUDGMENT in case his designation is changed or his office is abolished the officer who for the time being is entrusted whether or not in addition other functions with the functions of the Director General of Post and Telegraphs, by whatsoever designation such official may be called or if he be unable or unwilling to act, then of an officer appointed by him in this behalf. It will be no objection to any such appointment that the person appointed is a Government Servant, that he had to deal with the matters to which the indenture of lease relates and that in the course of his duties as such Government servant has expressed views on all or any of the matters in dispute or difference. The decision of the arbitration shall be final and binding on the parties to this deal. The provisions of the Indian Arbitration Act, 1940, or any statutory modifications or respondent-enactments thereof and the rules made thereunder for the time being in force shall apply to such arbitration and this deed shall be deemed to be a submission to arbitration within the meaning of the said Act."
9. Let us consider the authorities cited at the bar by Mr.Premal Rachh. In the case of State of Orissa and Ors. v. Gokulnanda Jana reported in (2003) 6 SCC 465, the Supreme Court while considering the maintainability of a petition under Article 226 of Page 9 of 20 Downloaded on : Fri Oct 30 04:01:59 IST 2020 C/IAAP/30/2020 CAV JUDGMENT the Constitution of India against an administrative order passed under Section 11(6) of the Arbitration Act held as under:
"10. The challenge of the appellant in the writ petition against the order of the Designated Judge is based on the following facts :
(i) The contract between the parties was executed before the Act came into force, hence, the act does not apply;
(ii) Dispute is a stale one having arisen nearly 20 years ago.;
(iii) Clause 23 of the agreement contemplates the adjudication of a dispute by a company arbitrator.
(iv) No person other than an arbitrator nominated in Clause 23 of the argument has any jurisdiction to entertain the disputes."
10. In the case of Uttarakhand Purv Sainik Kalyan Nigam Limited. Versus Northern Coal Field Limited [2020 (2) SCC 455], considering Section 11(6) and the amendment of the Act post 2015, wherein, sub-section (6A), was added after Section 11 of the Act, the Supreme Court held that after the insertion of the amendment the legal position that is now existing is that the appointee of the Chief Justice or the nominee of the Chief Justice who is nominated to appoint arbitrator under Section 11(6) of the Act has to confine his examination to the existence of an arbitration agreement. The question whether the issue is barred by limitation etc. has to be decided by the arbitrator in accordance with the provisions of Section 16 of the Act. The relevant paragraphs of the judgment read as under:
Page 10 of 20 Downloaded on : Fri Oct 30 04:01:59 IST 2020 C/IAAP/30/2020 CAV JUDGMENT"7.5 Further, the Chief Justice was required to decide all threshold issues with respect to jurisdiction, the existence of the agreement, whether the claim was a dead one; or a time-barred claim sought to be resurrected; or whether the parties had concluded the transaction by recording satisfaction of their mutual rights and obligations, and received the final payment without objection, under Section 11, at the preference stage. The decision in Patel Engineering (supra) was followed by this Court in Boghara Polyfab, National Insurance Co. v. Boghara Polyfab (P) Ltd. (2009) 1 SCC 267. Master Construction, Union of India & Ors. v. Master Construction Co., (2011) 12 SCC 349 and other decisions.
7.6 The Law Commission in the 246th Report recommended that:
"33. ... the Commission has recommended amendments to sections 8 and 11 of the Arbitration and Conciliation Act, 1996. The scope of the judicial intervention is only restricted to situations where the Court/Judicial Authority finds that the arbitration agreement does not exist or is null and void. In so far as the nature of intervention is concerned, it is recommended that in the event the Court/Judicial Authority is prima facie satisfied against the argument challenging the arbitration agreement, it shall appoint the arbitrator and/or refer the parties to arbitration, as the case may be. The amendment envisages that the judicial authority shall not refer the parties to arbitration only if it finds that there does not exist an arbitration agreement or that it is null and void. If the judicial authority is of the opinion that prima facie the arbitration agreement exists, then it shall refer the dispute to arbitration, and leave the existence of the arbitration agreement to be finally determined by the arbitral tribunal. (emphasis supplied) Page 11 of 20 Downloaded on : Fri Oct 30 04:01:59 IST 2020 C/IAAP/30/2020 CAV JUDGMENT 7.7. Based on the recommendations of the Law Commission, Section 11 was substantially amended by the 2015 Amendment Act, to overcome the effect of all previous judgments rendered on the scope of power by a non obstante clause, and to reinforce the kompetenzkompetenz principle enshrined in Section 16 of the 1996 Act. The 2015 Amendment Act inserted sub-section (6A) to Section 11 which provides that :
"(6-A)The Supreme Court or, as the case may be, the High Court, while considering any application under subsection (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement."
(emphasis supplied) 7.8 By virtue of the non obstante clause incorporated in Section 11(6A), previous judgments rendered in Patel Engineering (supra) and Boghara Polyfab (supra), were legislatively over-ruled. The scope of examination is now confined only to the existence of the arbitration agreement at the Section 11 stage, and nothing more.
7.9. Reliance is placed on the judgment in Duro Felguera S.A. v. Gangavaram Port Limited, (2017) 9 SCC 729. wherein this Court held that :
"48. ...From a reading of Section 11(6A), the intention of the legislature is crystal clear i.e. the Court should and need only look into one aspect-the existence of an arbitration agreement. What are the factors for deciding as to whether there is an arbitration agreement is the next question. The resolution to that is simple - it needs to be seen if the agreement contains a Clause which provides for arbitration pertaining to the disputes which Page 12 of 20 Downloaded on : Fri Oct 30 04:01:59 IST 2020 C/IAAP/30/2020 CAV JUDGMENT have arisen between the parties to the agreement."
(emphasis supplied) 7.10. In view of the legislative mandate contained in Section 11(6A), the Court is now required only to examine the existence of the arbitration agreement. All other preliminary or threshold issues are left to be decided by the arbitrator under Section 16, which enshrines the Kompetenz-Kompetenz principle.
7.11. The doctrine of Kompetenz-Kompetenz , also referred to as Compétence-Compétence , or Compétence de la recognized , implies that the arbitral tribunal is empowered and has the competence to rule on its own jurisdiction, including determining all jurisdictional issues, and the existence or validity of the arbitration agreement. This doctrine is intended to minimize judicial intervention, so that the arbitral process is not thwarted at the threshold, when a preliminary objection is raised by one of the parties. The doctrine of kompetenz-kompetenz is, however, subject to the exception i.e. when the arbitration agreement itself is impeached as being procured by fraud or deception. This exception would also apply to cases where the parties in the process of negotiation, may have entered into a draft agreement as an antecedent step prior to executing the final contract. The draft agreement would be a mere proposal to arbitrate, and not an unequivocal acceptance of the terms of the agreement. Section 7 of the Contract Act, 1872 requires the acceptance of a contract to be absolute and unqualified. [Dresser Rand SA v. Bindal Agro-Chem Ltd. (2006) 1 SCC 751. See also BSNL v. Telephone Cables Ltd. (2010) 5 SCC
213. Refer to PSA Mumbai Investments PTE Ltd. v. Board of Trustees of the Jawaharlal Nehru Port Trust & Anr. (2018) 10 SCC 525.] If an arbitration agreement is not valid or non-existent, the arbitral tribunal cannot assume jurisdiction to adjudicate upon the disputes. Appointment of an arbitrator may Page 13 of 20 Downloaded on : Fri Oct 30 04:01:59 IST 2020 C/IAAP/30/2020 CAV JUDGMENT be refused if the arbitration agreement is not in writing, or the disputes are beyond the scope of the arbitration agreement. Article V(1)(a) of the New York Convention states that recognition and enforcement of an award may be refused if the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made .
7.12. The legislative intent underlying the 1996 Act is party autonomy and minimal judicial intervention in the arbitral process. Under this regime, once the arbitrator is appointed, or the tribunal is constituted, all issues and objections are to be decided by the arbitral tribunal.
7.13. In view of the provisions of Section 16, and the legislative policy to restrict judicial intervention at the pre-reference stage, the issue of limitation would require to be decided by the arbitrator. Subsection (1) of Section 16 provides that the arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. Section 16 is as an inclusive provision, which would comprehend all preliminary issues touching upon the jurisdiction of the arbitral tribunal. The issue of limitation is a jurisdictional issue, which would be required to be decided by the arbitrator under Section 16, and not the High Court at the pre-reference stage under Section 11 of the Act. Once the existence of the arbitration agreement is not disputed, all issues, including jurisdictional objections are to be decided by the arbitrator.
7.14. In the present case, the issue of limitation was raised by the Respondent Company to oppose the appointment of the arbitrator under Section 11 before the High Court. Limitation is a mixed question of fact and law. In ITW Signode India Ltd. v. Collector of Central Excise, (2004) 3 SCC 48. a three judge bench of this Court held that the question of limitation Page 14 of 20 Downloaded on : Fri Oct 30 04:01:59 IST 2020 C/IAAP/30/2020 CAV JUDGMENT involves a question of jurisdiction. The findings on the issue of limitation would be a jurisdictional issue. Such a jurisdictional issue is to be determined having regard to the facts and the law. Reliance is also placed on the judgment of this Court in NTPC v. Siemens Atkein Gesell Schaft, (2007) 4 SCC 451. wherein it was held that the arbitral tribunal would deal with limitation under Section 16 of the 1996 Act. If the tribunal finds that the claim is a dead one, or that the claim was barred by limitation, the adjudication of these issues would be on the merits of the claim. Under sub-section (5) of Section 16, the tribunal has the obligation to decide the plea; and if it rejects the plea, the arbitral proceedings would continue, and the tribunal would make the award. Under sub-section (6) a party aggrieved by such an arbitral award may challenge the award under Section 34. In M/s. Indian Farmers Fertilizers Cooperative Ltd. v. Bhadra Products, (2018) 2 SCC
534. this Court held that the issue of limitation being a jurisdictional issue, the same has to be decided by the tribunal under Section 16, which is based on Article 16 of the UNCITRAL Model Law which enshrines the Kompetenze principle."
11. When the issue came up as to the appointment of an arbitrator and the Court was inclined to ask for a suggested name, Mr.Siddharth Dave learned counsel appearing for Mr.Devang Vyas would draw the attention of the Court to the lease agreement and submit that even otherwise the arbitrator was named in the lease agreement inasmuch as it was the Director General of Post or Telegraph or in case of his designation or office, being abolished, any person who is designated with such directions can be appointed as an arbitrator. In this context, Mr.Rachh invited the attention of this Court to a judgment of the Supreme Court in the case of TRF Limited v. Energo Engineering Pvt Ltd. [2017 8 SCC 377].
Page 15 of 20 Downloaded on : Fri Oct 30 04:01:59 IST 2020 C/IAAP/30/2020 CAV JUDGMENT12. Considering Section 11(6) and Section 12(5) of the Act, once the Supreme Court found that the procedure of appointment has been infracted by the respondents, it is within the jurisdiction of the Court to step in and to appoint an independent arbitrator notwithstanding the designated arbitrator named in the arbitration clause. Considering the several decisions preceding the judgments, the Supreme Court held as under:
"50. First, we shall deal with Clause (d). There is no quarrel that by virtue of Section 12(5) of the Act, if any person who falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as the arbitrator. There is no doubt and cannot be, for the language employed in the Seventh Schedule, the Managing Director of the Corporation has become ineligible by operation of law. It is the stand of the learned senior counsel for the appellant that once the Managing Director becomes ineligible, he also becomes ineligible to nominate. Refuting the said stand, it is canvassed by the learned senior counsel for the respondent that the ineligibility cannot extend to a nominee if he is not from the Corporation and more so when there is apposite and requisite disclosure. We think it appropriate to make it clear that in the case at hand we are neither concerned with the disclosure nor objectivity nor impartiality nor any such other circumstance. We are singularly concerned with the issue, whether the Managing Director, after becoming ineligible by operation of law, is he still eligible to nominate an arbitrator. At the cost of repetition, we may state that when there are two parties, one may nominate an arbitrator and the other may appoint another. That is altogether a different situation. If there is a clause requiring the parties to nominate their respective arbitrator, their authority to nominate cannot be questioned. What really in that circumstance can be called in question is the procedural compliance and the eligibility of their arbitrator depending upon the norms provided under the Act and the Schedules appended thereto. But, here Page 16 of 20 Downloaded on : Fri Oct 30 04:01:59 IST 2020 C/IAAP/30/2020 CAV JUDGMENT is a case where the Managing Director is the named sole arbitrator and he has also been conferred with the power to nominate one who can be the arbitrator in his place. Thus, there is subtle distinction. In this regard, our attention has been drawn to a two-Judge Bench decision in State of Orissa and others v. Commissioner of Land Records & Settlement, Cuttack and others20. In the said case, the question arose can the Board of Revenue revise the order passed by its delegate. Dwelling upon the said proposition, the Court held:
"25. We have to note that the Commissioner when he exercises power of the Board delegated to him under Section 33 of the Settlement Act, 1958, the order passed by him is to be treated as an order of the Board of Revenue and not as that of the Commissioner in his capacity as Commissioner. This position is clear from two rulings of this Court to which we shall presently refer. The first of the said rulings is the one decided by the Constitution Bench of this Court in Roop Chand v. State of Punjab. In that case, it was held by the majority that where the State Government had, under Section 41(1) of the East Punjab Holdings (Consolidation and Prevention of Fragmentation) Act, 1948, delegated its appellate powers vested in it under Section 21(4) to an officer, an order passed by such an officer was an order passed by the State Government itself 20 (1998) 7 SCC 162 and not an order passed by any officer under this Act within Section 42 and was not revisable by the State Government. It was pointed out that for the purpose of exercise of powers of revision by the State under Section 42 of that Act, the order sought to be revised must be an order passed by an officer in his own right and not as a delegate of the State. The State Government was, therefore, not entitled under Section 42 to call for the records of the case which was disposed of by an officer acting as its delegate."Page 17 of 20 Downloaded on : Fri Oct 30 04:01:59 IST 2020 C/IAAP/30/2020 CAV JUDGMENT
51. Be it noted in the said case, reference was made to Behari Kunj Sahkari Awas Samiti v. State of U.P. 21, which followed the decision in Roop Chand v. State of Punjab22. It is seemly to note here that said principle has been followed in Chairman, Indore Vikas Pradhikaran (supra).
52. Mr. Sundaram, has strongly relied on Firm of Pratapchand Nopaji (supra). In the said case, the three-Judge Bench applied the maxim Qui facit per alium facit per se. We may profitably reproduce the passage:
"9. The principle which would apply, if the objects are struck by Section 23 of the Contract Act, is embodied in the maxim: Qui facit per alium facit per se (What one does through another is done by 21 (1997) 7 SCC 37 22 AIR 1963 SC 1503 oneself). To put it in another form, that which cannot be done directly may not be done indirectly by engaging another outside the prohibited area to do the illegal act within the prohibited area. It is immaterial whether, for the doing of such an illegal act, the agent employed is given the wider powers or authority of the pucca adatia, or, as the High Court had held, he is clothed with the powers of an ordinary commission agent only.
53. The aforesaid authorities have been commended to us to establish the proposition that if the nomination of an arbitrator by an ineligible arbitrator is allowed, it would tantamount to carrying on the proceeding of arbitration by himself. According to learned counsel for the appellant, ineligibility strikes at the root of his power to arbitrate or get it arbitrated upon by a nominee.
Page 18 of 20 Downloaded on : Fri Oct 30 04:01:59 IST 2020 C/IAAP/30/2020 CAV JUDGMENT54. In such a context, the fulcrum of the controversy would be, can an ineligible arbitrator, like the Managing Director, nominate an arbitrator, who may be otherwise eligible and a respectable person. As stated earlier, we are neither concerned with the objectivity nor the individual respectability. We are only concerned with the authority or the power of the Managing Director. By our analysis, we are obligated to arrive at the conclusion that once the arbitrator has become ineligible by operation of law, he cannot nominate another as an arbitrator. The arbitrator becomes ineligible as per prescription contained in Section 12(5) of the Act. It is inconceivable in law that person who is statutorily ineligible can nominate a person. Needless to say, once the infrastructure collapses, the superstructure is bound to collapse. One cannot have a building without the plinth. Or to put it differently, once the identity of the Managing Director as the sole arbitrator is lost, the power to nominate someone else as an arbitrator is obliterated. Therefore, the view expressed by the High Court is not sustainable and we say so.
55. Another facet needs to be addressed. The Designated Judge in a cryptic manner has ruled after noting that the petitioner therein had no reservation for nomination of the nominated arbitrator and further taking note of the fact that there has been a disclosure, that he has exercised the power under Section 11(6) of the Act. We are impelled to think that that is not the right procedure to be adopted and, therefore, we are unable to agree with the High Court on that score also and, accordingly, we set aside the order appointing the arbitrator. However, as Clause
(c) is independent of Clause (d), the arbitration clause survives and hence, the Court can appoint an arbitrator taking into consideration all the aspects. Therefore, we remand the matter to the High Court for fresh consideration of the prayer relating to appointment of an arbitrator."
Page 19 of 20 Downloaded on : Fri Oct 30 04:01:59 IST 2020 C/IAAP/30/2020 CAV JUDGMENT13. Accordingly, the Arbitration petition is allowed. Mr. J.C. Upadhyay, Former Judge, High Court of Gujarat is appointed as an arbitrator for resolving the dispute arising out of the contract in question. The application is allowed. A declaration to that effect obtained from Mr. J.C. Upadhyay, Former Judge, High Court of Gujarat seeking his consent has been placed on the record of the case.
(BIREN VAISHNAV, J) ANKIT SHAH Page 20 of 20 Downloaded on : Fri Oct 30 04:01:59 IST 2020