Supreme Court - Daily Orders
Siel Ltd. vs Prime Industries Ltd. on 15 September, 2016
Bench: S.A. Bobde, Ashok Bhushan
1
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.380 OF 2016
SIEL LTD.& ANR. .....APPELLANTS
VERSUS
PRIME INDUSTRIES LTD. ....RESPONDENT
O R D E R
The appellants have preferred this appeal by special leave against the impugned judgment and order dated 21.5.2010, passed by the Division Bench of the High Court of Delhi in FAO No.480 of 2008. The Division Bench has set aside the judgment and order dated 23.10.2008 of a learned Single Judge of that Court. The learned Single Judge had held that the arbitration in question could have been entered upon and decided by a panel of three arbitrators as provided by the Rules of Indian Council of Arbitration (hereinafter referred to as the 'ICA Rules') and not by a sole arbitrator as has been done in this case.
On 10.6.1994, the appellants - M/s Siel Ltd. & Anr., entered into an agreement with the respondent - M/s Prime Signature Not Verified Industries Ltd. The said agreement contained an Digitally signed by SANJAY KUMAR Date: 2016.11.10 16:00:26 IST arbitration clause which reads as under : Reason: 2
“The Arbitration Clause
18. Arbitration – All disputes between the parties hereto arising out of this agreement shall be referred to an arbitrator appointed by Indian Council of Arbitration, New Delhi, and the provisions of the Indian Arbitration Act for the time being in force shall be applicable to such reference. Such reference will be decided as per the rules of Indian Council of Arbitration. The award/decision so given shall be final and binding upon the parties.” The respondent - M/s Prime Industries Ltd. made a claim on the appellants - M/s Siel Ltd. & Anr., in the sum of Rs.2,86,65,917/-, for loss and damages for breach of the agreement. The appellants having refuted the claim of the respondent, approached the High Court by filing a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for the sake of brevity, the '1996 Act'), for reference of the dispute to Indian Council of Arbitration in terms of clause 18 of the aforesaid agreement.
By order dated 2.7.1999, a learned Single Judge of the High Court referred the matter to the Indian Council of Arbitration for appointment of arbitrator as per the ICA Rules. Thereafter, on 4.11.1999, the respondent - M/s Prime Industries Ltd., wrote a letter to the Registrar of Indian Council of Arbitration making request for registering its claim by filing five sets of the statement of claim on its behalf along with supporting documents, as per the guidelines of Indian Council of Arbitration in 3 case of appointment of three arbitrators.
By a letter dated 6.1.2000, the Registrar of Indian Council of Arbitration conveyed to the claimant - M/s Prime Industries Ltd that since the amount involved in the dispute is Rs.6,81,12,565.00, as per the ICA Rules, the matter has to be heard and determined by an Arbitral Tribunal of three arbitrators, unless the parties to the dispute agree to refer the dispute to sole arbitrator. The Indian Council of Arbitration further called upon the parties to deposit a tentative amount of Rs.95,500.00 towards the cost and expenses of the said arbitration under Rule 27 of the ICA Rules, implying that the arbitration would be conducted before a panel of three arbitrators. However, by letter dated 18.1.2000, the claimants asserted that under the arbitration clause of the agreement, the parties had agreed to refer the dispute to “an arbitrator” and demanded that the claims be decided by a sole arbitrator, to be appointed by Indian Council of Arbitration. They further said that they would pay a sum of Rs.43,125.00 towards the administrative fees and the arbitrator fee under Rule 30(2) of the ICA Rules, instead of Rs.95,500.00.
By a letter dated 30.1.2000 addressed to the Claimants, the Registrar, Indian Council of Arbitration, directed the appellants to appoint a sole arbitrator with consent of the respondent – claimant and deposit a sum of Rs.4787500. The dispute was thereupon referred to the sole 4 arbitrator. The arbitrator rejected the respondent's objection that he alone would not be entitled to hear the reference in view of the arbitration clause of the agreement which contemplated a panel of three arbitrators. The main objection was heard on the ICA Rules which requires that where the claim exceeds Rs.50 lakhs, the dispute will be heard and determined by three arbitrators unless the parties agree to refer the dispute to a sole arbitrator.
The learned arbitrator agreed under section 13(2) of the General Clauses Act, 1857, the term “an arbitrator” could include “arbitrators”, but held that the said Act itself does not apply to private agreements. The learned Arbitrator observed that the parties agreed for a procedure for appointing the “sole arbitrator” though the term used was 'an arbitrator'. He also held that although the arbitration clause of the agreement requires reference to be decided according to the ICA Rules which required a decision by a panel of three arbitrators if the claim exceeded Rs.50 lakhs, that would not affect the agreement of the parties for appointment of the sole arbitrator.
Thereafter, the learned arbitrator upheld the claim of the respondent-claimant and passed an award dated 30.7.2005 in the sum of Rs.1,13,68,273.00 plus Rs.39,03,107.00 as interest amount (in total Rs.1,52,71,380.00 along with future interest at the rate of 6% per annum from the date of the said award till the 5 date of payment.
The appellants - M/s Siel Ltd. & Anr., the Award Debtors, challenged the aforesaid award of the learned Arbitral Tribunal under Section 34 of the 1996 Act, before the High Court of Delhi.
The learned Single Judge upheld the contention of the appellants that the dispute could not have been referred to a sole arbitrator. According to the learned Single Judge, since the parties had agreed to refer the disputes before 'an arbitrator' to be appointed by Indian Council of Arbitration and had also agreed that the reference be decided in accordance with the ICA Rules. The ICA Rules require that where the claim exceeds Rs.50 lakhs, the disputes will be heard and determined by a panel of three arbitrators. Therefore, the matter could not have been decided by a sole arbitrator. Accordingly, by order dated 23.10.2008, learned Single Judge set aside the award of the sole Arbitrator. Being aggrieved by the same, the respondent - M/s Prime Industries Ltd., preferred an appeal under Section 37 of the 1996 Act, before a Division Bench of the High Court of Delhi.
The Division Bench of the High Court vide order dated 21.5.2010, decided the matter in favour of the respondent
- M/s Prime Industries Ltd., holding that the term “an arbitrator” in clause 18 of the agreement was used with the intention to make a reference only to “sole arbitrator” and that was also the intention in the order 6 on a petition filed under section 11 (6) of the 1996 Act, for appointment of the arbitrator. By that judgment and order dated 21.5.2010, the Division Bench set aside the order of learned Single Judge and remanded the matter back to the learned Single Judge to decide the objections of the appellants and the respondent on the merits of the award in accordance with law. Against the impugned judgment and order of the High Court, the appellants have been granted leave to appeal.
The main contention of Mr. S. Ganesh, learned Senior Counsel appearing for the appellants, is that the arbitration clause clearly contains an agreement between the parties to refer their dispute to 'an arbitrator' to be appointed by the ICA and further that such reference will be decided as per the ICA Rules. Read with the Rule 21(b) of the ICA Rules, the parties, in fact, agreed to the dispute being decided by a panel of three arbitrators where the claim exceeds Rs.50 lakhs. In any event, according to Mr. Ganesh, the term “an arbitrator” must be read to include within its scope the plural i.e. “arbitrators”, depending upon the amount of the claim.
Per contra, Dr. Manish Singhvi, learned counsel appearing for the respondent, submits that by arbitration clause, the parties unequivocally agreed for a reference to a sole arbitrator by using the term “an arbitrator” to 7 be appointed by Indian Council of Arbitration. The parties did not leave any chance with the Indian Council of Arbitration but to appoint a sole arbitrator that is an arbitrator. After the appointment of the arbitrator, the said clause further contemplates that the reference would be decided as per the ICA Rules. It was, thus, contended that arbitration clause in the agreement entered into between the parties, contains two separate actions to be done by the Indian Council of Arbitration – firstly, the appointment of an arbitrator, to which the ICA Rules do not apply, and secondly, a decision of the reference, as per the ICA Rules. It is necessary to set out the arbitration clause (supra) in juxtaposition to ascertain the true intention of the parties.
Rule 21 (a) and (b) of the ICA Rules read as follows :
“Rule 21 : The number of arbitrators to hear a dispute shall be determined as under :
(a) Where the claim does not exceed Rs.50 lakhs and where the arbitration agreement does not specify three or more arbitrators, the reference shall be deemed to be to a sole arbitrator, unless the parties to the dispute agree to refer the dispute to three arbitrators within thirty days from the date of notification of request for arbitration.
(b) Where the claim exceeds Rs.50 lakhs the dispute will be heard and determined by three arbitrators, unless the parties to the dispute agree to refer the dispute to a sole arbitrator within thirty days from the date of the notification of the request for arbitration.” 8 Having given our anxious consideration to the arbitration clause, we find that though the term used in the arbitration clause contemplates a reference to “an arbitration” appointed by the ICA, the context requires the term to be understood as capable of including the plural as the case may be. It must be remembered that at the time when the arbitration agreement was entered into, it was not possible to predict whether the disputes that would arise between the parties would be of value less than Rs.50 lakhs or more than that amount. Disputes of either description were contemplated. Thus, even though the words used are “to an arbitrator”, it appears that the term is clearly intended to embrace the plural depending upon the value of the claim. This must necessarily be so since the parties were conscious of the ICA Rules which stipulated, vide Rule 21, that if the claim does not exceed Rs.50 lakhs, the reference shall be deemed to be a sole arbitrator and if the claim exceeds Rs.50 lakhs, the reference shall be heard and determined by three arbitrators.
At this juncture, Mr. Ganesh, learned Senior Counsel for the appellants, invited our attention to section 13(2) of the General Clauses Act, 1897, which reads as follows :
“13(2) - Words in the singular shall include the plural, and vice versa.” 9 This provision clearly contemplates that subject to the context, the words “in the singular” shall include the plural, and vice versa.
It was however, submitted by Dr. Singhvi, learned counsel for the respondent, that the General Clauses Act, 1897, has no application to the construction of an agreement between the parties since section 131 in terms refers to the words occurring in all Central Acts and Regulations.
We are of the view that though section 13 of the General Clause Act, 1897, is made expressly applicable to Central Acts and Regulations, it cannot be said that words in an agreement cannot be construed in accordance with the Rules enunciated in that Act. After all, the entire Act is intended to provide guidance for interpretation of all Statutes including Statutes which govern agreements and contracts. The General Clause Act, 1897 is in that sense an Act common to all legislation and can be read along with a particular legislation to understand the meaning of words occurring in agreement and contracts. We see no reason why a mode of interpretation or a definition contained in the General Clauses Act cannot be applied to a word to resolve an ambiguity in an agreement or a 1 “13. Gender and number. - In all (Central Acts) and Regulations, unless there is anything repugnant in the subject or context, -
(1) words importing the masculine gender shall be taken to include females; and (2) words in the singular shall include the plural, and vice versa.” 10 contract, particularly, if the same words occur in it.
Undoubtedly, this should not be done where the words in the agreement are intended to express an intention to the contrary. We find that in fact, the General Clause Act, 1897, has been applied by the Bombay High Court in the case of Abbashbhai K. Golwala vs. R. G. Shah & Ors. - AIR 1988 Bombay 187, whereby the question as to whether the phrase “remaining partners” include “a remaining partner” arise. It was held that the principle underlying under section 13 of the General Clauses Act, 1897, would apply in interpreting the terms of the Partnership Deed and the Court observed as follows:
“Under section 13 of the General Clauses Act, 1897 in interpreting any Act or Regulation the words in the singular shall include the plural and vice versa. The same principle applies in interpreting the terms of the partnership deed. The phrase “remaining partners” includes 'a remaining partner' also, especially in the context of this clause where he is entitled to carry on business in partnership with any other person or persons. Under clause 2, therefore, on retirement of some of the partners, the partnership does not stand dissolved because the remaining partner or partners have a right to continue the said business in partnership either among themselves or with any other person or persons.” We may also note that the Rule 21 (a) and (b) of the ICA Rules also apply the same principle to section 13 of the General Clause Act, 1897.
PROCEDURE UPON REFERENCE UNDER THE ICA RULES The arbitration clause which provides for reference 11 of disputes to “an arbitrator” makes a clear reference to (1) an arbitrator to be appointed by the Indian Council of Arbitration and (2) that the reference shall be decided in accordance with the ICA Rules. This clearly contemplates that a reference to arbitration must be made to the Indian Council of Arbitration. Upon such reference being made, the ICA would be obliged to (a) appoint an arbitrator and
(b) conduct the arbitration. This is not a case where the parties have agreed that they would nominate an arbitrator or arbitrators and then a reference would be made to Indian Council of Arbitration. When such a reference is made, there is no doubt that the Indian Council of Arbitration would be bound to act with its Rules and first make the appointment of an arbitrator in accordance with Rule 22 of the ICA Rules.
Rule 42 of the ICA Rules provides that any dispute arising between two or more parties who have agreed for arbitration by Indian Council of Arbitration, shall be determined and settled in accordance with the Rules. 2 Rule 4. - (a) Any dispute relating to any commercial matter including shipping, sale, purchase, banking, insurance, building construction, engineering , technical assistance, know-how, patents, trade marks, management consultancy, commercial agency or labour, arising between two or more parties in India or a party or parties in India and a party or parties in a foreign country or between foreign parties who agree or have agreed for arbitration by the Council or under the Rules of Arbitration of the Council, shall be determined and settled in accordance with these Rules.
(b) The Council shall also be competent to administer the conduct of arbitration in any dispute or difference relating to a commercial transaction between parties as mentioned in sub-clause (a) where they have agreed to have their dispute arbitrated under any other Rules of Arbitration or otherwise and have agreed to have such arbitration administered by the Council, wholly or in respect of some matters arising out of such arbitration. (C) The Council shall be competent to function as Appointing Authority as contemplated under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL). 12 Rule 53 of the ICA Rules provides that where the parties have provided or agreed for arbitration by Indian Council of Arbitration or for arbitrator under the ICA Rules, only the ICA Rules shall apply.
The appointment of sole arbitrator or three arbitrators is governed by Rule 224 of the ICA Rules. It 3 Rule 5. - Wherever the parties have provided or agreed for arbitration by the Indian Council of Arbitration or for arbitrator under the Rules of Arbitration of the Council, these rules or any amendment thereof in the form obtaining at the time the dispute is referred to arbitration of the Council, shall apply. 4 Rule 22 : The appointment of sole arbitrator or three arbitrators shall be made in the following manner :
(a) In case a Sole Arbitrator has to be appointed, the Registrar shall call upon the parties to the dispute to forward the name of an agreed arbitrator from among the Panel of Arbitrators by a notice in writing, sent to them. The said notice shall specify the period within which the nomination shall be made which shall not be more than thirty days from the date of the said notice to the respective parties. If the parties fail to agree on the person to be appointed as sole arbitrator within the time granted by the Registrar, the Registrar in consultation with the Chairman of the Committee and in his absence in consultation with the member of the Governing Body designated by the Chairman, shall appoint the sole arbitrator from among the Panel of Arbitrators. If one of the parties is a national or resident of a country, other than India, the sole arbitrator shall, as far as possible, be chosen or appointed by the Registrar from among the nationals of a country other than that of either of the parties. The sole arbitrator so nominated shall constitute the Bench to hear the dispute and shall be appointed as such in writing by the Registrar. The Registrar shall give notice to the parties of the constitution of the Bench.
(b) Where the reference is to three arbitrators, the Registrar shall in the first instance call upon the parties to nominate one arbitrator each from among the Panel of Arbitrators by a notice in writing, sent to them. The said notice shall specify the period within which the nomination shall be made which shall not be more than thirty days from the date of the said notice to the respective parties. If a party to the dispute refuses or neglects to appoint an arbitrator on his behalf within the period specified or if he requests the Registrar to nominate an arbitrator on behalf of that party, the Registrar in consultation with the Chairman of the Arbitration Committee and in his absence in consultation with the members of the Governing Body designated by the Chairman shall appoint the arbitrator from the panel of arbitrators on behalf of that party. On receipt of the nominations from the respective parties or on the appointment as aforesaid by the Registrar, the Registrar shall appoint another person as the Presiding Arbitrator of the arbitral tribunal in consultation with members of the Governing Body designated by the Chairman, from among the panel of arbitrators to be additional arbitrator to act as Presiding Arbitrator of the arbitral tribunal.
(c) If one of the parties is a national or resident of a country other than India, the additional arbitrator shall, as far as possible, be chosen or appointed from among the nationals of a country other than that of either of the parties. The arbitrators so nominated or appointed shall constitute the arbitral tribunal and shall be appointed as such in writing by the Registrar.
The additional abitrator appointed by the Registrar shall act as Chairman of the arbitral tribunal. The Registrar shall give notice to the parties of the constitution of the arbitral tribunal.
13is not necessary to consider the procedure in detail.
What is important is that in view of the above, the arbitration clause in the present case must be understood to mean that the parties have agreed for reference of disputes to Indian Council of Arbitration both, for the purposes of appointing an arbitrator and for conducting the arbitration.
Dr. Singhvi, learned counsel for the respondent, further contended that the arbitration clause contains two separate agreements. Firstly, that the disputes will be referred to an arbitrator to be appointed by the ICA and secondly, such reference will be decided according to the ICA Rules. According to him, it was not intended that the appointment of an arbitrator should be governed by the ICA Rules. It is not possible to accept this submission.
Rules 4 and 5 of the ICA Rules clearly contemplate that any dispute which is referred to the Indian Council of Arbitration shall be determined and settled in accordance with its Rules. This undoubtedly means that the appointment of an arbitrator shall be made in accordance with the ICA Rules, for which there is explicit provision in Rule 5.
Dr. Singhvi, learned counsel for the respondent, also referred to several decisions of this Court viz., Gesellschaft Fur Biotechnologische Forschun GMBH vs. Kopran Laboratories Ltd., and Anr.5, Food Corporation of 5 (2004) 13 SCC 630 14 India vs. Indian Council of Arbitration and Ors. 6, and Delta Mechcons (India) Ltd. vs. Marubeni Corporation 7, which contain arbitration clauses which are different. The said decisions are not applicable to the present case.
The arbitration clause in the present case makes a specific reference to the appointment of the arbitrator by the Indian Council of Arbitration and then provides that the arbitration shall be conducted by the Indian Council of Arbitration according to its Rules. Having regard to the combined scheme of arbitration clause and the Rules, we are of the considered opinion that after a reference in accordance with the arbitration, everything has to be done in accordance with the ICA Rules, including the appointment of an arbitrator.
We are unable to agree with the observations of the learned Division Bench of the High Court that the expression “an arbitrator” would not have been used but for the intent to appoint a sole arbitrator. This view loses sight of the fact that the term “an arbitrator” is used at a time prior to the arising of the disputes between the parties and must be understood as having sufficient flexibility to embrace both, the possibility of the matter being required to be adjudicated upon by a sole arbitrator or by a panel of three arbitrators depending on the value.
6 (2003) 6 SCC 564 7 (2008) 15 SCC 772 15 In the result, the appeal succeeds and the impugned judgment and order passed by the High Court is set aside. However, we leave it open to the parties to approach the Indian Council of Arbitration for appointment of panel of arbitrators in accordance with its Rules and in turn, the Indian Council of Arbitration may expeditiously deal with such request of the parties and do the needful in accordance with law.
....................J [S. A. BOBDE] ....................J [ASHOK BHUSHAN] NEW DELHI;
SEPTEMBER 15, 2016.
16
ITEM NO.101 COURT NO.12 SECTION XIV
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Civil Appeal No.380/2016
SIEL LTD.& ANR. Appellant(s)
VERSUS
PRIME INDUSTRIES LTD. Respondent(s)
Date : 15/09/2016 This appeal was called on for hearing today. CORAM :
HON'BLE MR. JUSTICE S.A. BOBDE HON'BLE MR. JUSTICE ASHOK BHUSHAN For Appellant(s) Mr. S. Ganesh, Sr. Adv.
Mr. Dalip Kumar Malhotra,Adv.
Mr. Rajesh Kr. Malhotra, Adv.
For Respondent(s) Dr. Manish Singhvi, Adv.
Mr. Manish Agarwal, Adv.
Mr. Shashank Manish, Adv.
Mr. Vikrant Pachnanda, Adv.
For Mr. E. C. Agrawala,Adv.
UPON hearing the counsel the Court made the following O R D E R The appeal succeeds in terms of the signed order.
(Sanjay Kumar-II) (Indu Pokhriyal)
Court Master Court Master
(Signed Order is placed on the file)