Allahabad High Court
Food Corporation Of India,Lucknow ... vs M/S P.Roy & Co. C/O Kishori Lal Agarwal ... on 9 September, 2021
HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
AFR Reserved
Court No. - 5
Case :- ARBITRATION APPLICATION No. - 10 of 2019
Applicant :- Food Corporation Of India,Lucknow Throu.G.M.And Ors.
Opposite Party :- M/S P.Roy & Co. C/O Kishori Lal Agarwal And Another
Counsel for Applicant :- Anurag Verma,Apoorva Tewari,Brijesh Kumar
Counsel for Opposite Party :- Dhirendra Kumar Srivastav,Rajnish Ojha,Rakesh Dwivedi,Rao Narendra Singh,Sormi Dutta,Vinay Kumar Yadav
Hon'ble Attau Rahman Masoodi,J.
Heard Shri B.K. Saxena learned counsel and Sri O.P. Srivastava learned Senior Counsel assisted by Sri Anurag Verma learned counsel for the petitioners and Sri D.K. Srivastava learned counsel who has put in appearance on behalf of the respondent no. 1.
Attaching primacy to the domain of parties for constitution of the Arbitral Tribunal, this Court passed an order on 6.8.2021, which reads as under:
"Heard Sri.O.P. Srivastava, learned senior counsel and Sri B.K.Saxena, learned counsel assisted by Sri Anurag Verma learned counsel for the petitioners and Sri Dhirendra Kumar Srivastav, learned counsel for the opposite parties.
There is a hope of some mutual agreement insofar as the appointment of the arbitrator in the present case is concerned.
List this case on 11.08.2021 in terms of the order already passed."
The hope ultimately failed. The arbitration clause contained in the agreement giving rise to the dispute reads as under:
"All disputes or differences whatever arising between the parties out of or relating to the construction, meaning and operation or effect of this agreement or the breach thereof shall be settled by arbitration in accordance with the rules of arbitration of the Indian Council of Arbitration and the award in pursuance thereof shall be binding on the parties. The award will be speaking order."
At the time when dispute within the scope of agreement arose in the year 2002, the opposite party no. 1 approached this Court under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of the arbitrator. The application so filed registered as Arbitration Application No. 7 of 2002 was disposed of by order dated 12.7.2002 reproduced as under:
"Hon'ble Mr. M.M. Dutt, a retired Judge of the Supreme Court of India, is appointed sole Arbitrator under Section 11(5) of the Arbitration and Conciliation Act, 1996. The Arbitrator shall be paid Rupees 15,000/- per sitting to be borne by the parties equally."
It is pursuant to this order that both the parties subscribed to the arbitral proceedings before the Tribunal of sole Arbitrator until his demise on 15.7.2009.
Parties concede to the extent that a claim was raised before the Arbitral Tribunal by the opposite party no. 1 to which a written statement was also filed by the petitioners. It is also admitted to both the parties that as many as 104 sittings of the sole Arbitrator took place, however, the stage to which the proceedings progressed is not clearly stated in the present application or the objections filed by the opposite party. The proceedings before the Arbitral Tribunal of sole Arbitrator also remained unquestioned by either of the parties.
The present petition instituted in 2019 under Section 11(6) read with Section 15(2) of the Act has come up for hearing after about eleven years of the termination of mandate. An exhaustive exercise of correspondence prior to the filing of this application seems to have taken place between the parties but of no consequence.
The factual position that emerges from the averments made in the application and the counter affidavit filed in response thereto is that prior to filing of the present application, the petitioners seem to have constituted the Arbitral Tribunal of sole Arbitrator by appointing one Rajesh Saha, General Manager(F&A), FCI on 20.12.2017 but the opposite party no. 1 for the reasons best known did not subscribe to the proceedings.
The opposite party no. 1 instead chose to proceed in accordance with the agreement by making an application on 1.10.2017 to the Indian Council of Arbitration (ICA) pursuant to which the Arbitral Tribunal of three members was constituted notwithstanding the objection raised by the petitioners as to the procedure. According to the petitioners, the appointment of substitute arbitrator would not be legitimate unless he is appointed in the same manner in which the Tribunal as a result of the conduct of the parties, was appointed at the initial stage. It is urged that the parties of their own volition rendered the mutually agreed procedure obsolete and the rights once waived would not revive contrary to the mandate of Section 15(2) of the Act.
Section 15(2) of the Arbitration and Conciliation Act is extracted below:
"15. Termination of mandate and substitution of arbitrator-.(1) .................
(2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced."
Admittedly the Arbitral Tribunal of sole arbitrator at the initial stage was constituted under Section 11 of the Act. The procedure for appointment of substitute arbitrator on termination of mandate is traceable to Section 15(2) of the Act. The mechanism for appointment of the arbitrator being replaced thus assumes significance for lawful adjudication of the pending proceeding.
The Arbitral Tribunal constituted by Indian Council of Arbitration in the meantime passed an order on 18.2.2019 and the same is reproduced below:
"This is an arbitration which has been pending for almost 18 years now. Late Justice M.M.Dutt Former Judge of the supreme Court of India was appointed as an arbitrator by the Hon'ble Allahabad High Court on 12th July 2002 in arbitration application no.7 of 2002. We are told that Justice Dutt commenced the arbitration proceedings after his aforesaid appointments and held 104 sittings till his demise. We are told he passed away long back. In the aforesaid background, as contended by the Ld. Counsel for the Claimant, there being an arbitration clause in the contract between the parties which clothes ICA with the jurisdiction to appoint the arbitrator, in exercise of the said jurisdiction the ICA has constituted the present Arbitral Tribunal. We are also told that in this case after the completion of the pleadings in all respects, framing of issues and filing of evidence affidavits of both the including the recording of depositions in the Tribunal of the witnesses whose evidence affidavits had been filed, arguments at the final stage of hearing were addressed by the Counsel for both the parties but unfortunately due to his failing health and ultimate demise, the proceedings could not be concluded and Award Could not be passed.
In the aforesaid background, this arbitration case has now been referred to this Tribunal.
Today, the Ld. Counsel for the Claimant has filed the copies of the following:
1. Statement of Claim;
2. Counter Claim of the Respondent, which includes the Statement of Defence as well as the Counter claim
3. Rejoinder of the Claimant
4. Evidence affidavit of the witness No. 1 of the Claimant;
5. Evidence affidavit of the witness No. 2 of the Claimant
6. Evidence affidavit of one witness of the Respondent;
7. Minutes of the meetings (Vol.1)
8. Minutes of the meetings (Vol.2) Copies of the aforesaid 8 volumes have been handed over today to the three members of the arbitral tribunal as well as to Sh. M .L. Sharma, Ld. Counsel for the Respondent. Since Sh. M.L. Sharma contends that he has been engaged only today and is not at all aware about the facts of the case or its background, he would need reasonably sufficient time to check up with is clients and revert on the next date.
Copies of the aforesaid 8 volumes have been handed over today to the three members of the arbitral tribunal as well as to Sh. M.L. Sharma,Ld Counsel for the Respondent. Since Sh. M.L. Sharma contends that he has been engaged only today and is not at all aware about the facts of the case or its background, he would need reasonably sufficient time to check up with his clients and revert on the next date.
We expect the Respondent to sincerely and faithfully report to us on the next date about the following:
1. Whether the copies of the aforesaid 8 volumes filed today by the Claimant are correct;
2. Whether in addition to the aforesaid, the Respondent is in possession of any additional documents which have not been filed by the Claimant today and which are relevant for the disposal of this case. If Respondent indeed finds that there are such documents, it shall be filing the copies thereof on the next date;
3. We expect both the parties to cooperate with us in the expeditious disposal of this almost two decades old arbitration case. We also expect both the parties to inform us on the next date whether they would intend to lead any evidence in addition to what was already recorded and file any additional documents or pleadings.
Mr. Sharma submitted that this arbitration is not maintainable because according to him this Tribunal has not been properly constituted. The Tribunal advised Mr. Sharma that the Respondent is at liberty to move appropriate application under the relevant provisions of the Arbitration and Conciliation Act, 1996 questioning the jurisdiction of this Tribunal. If he intends to do so, he must file such an application within three weeks from today with an advance copy to the ICA. The Claimant may file reply thereto in two weeks thereafter.
The next date of hearing is fixed for 18th April, 2019 at 12:00 noon at the same venue."
The present application under Section 11(6) read with Section 15(2) of the Act came to be filed after passing of the above order on 18.2.2019 by the three member Tribunal constituted by ICA. This Court at the very initial stage has passed an interim order on 31.5.2019, whereby the proceedings before the Tribunal constitute by ICA were stayed.
Sri Brijesh Kumar Saxena, learned counsel for the petitioners has argued that it is a case for appointment of substitute Arbitrator in the surviving proceedings, therefore, the procedure under Section 15(2) read with Section 11(6) of the Act would be the same as was applied for appointment of the Tribunal at the first instance. The procedure for constitution of the Tribunal in accordance with the rules of ICA as embodied in the arbitration clause became obsolete with the passing of judicial order on 12.7.2002 which has remained unchallenged througout. The principle of waiver incorporated statutorily has eclipsed the option of parties to constitute the Tribunal as per agreement which would not revive at this stage when the substitute arbitrator is liable to be appointed in accordance with the procedure provided under Section 15(2) of the Act.
Referring to sub-section (2) of Section 15 of the Act it has been argued that the position of law is well settled under various pronouncements including the judgement of a coordinate Bench of this Court in the case of Tirath Ram Sumer Kumar versus Rakesh Kumar Mishra and others reported in 2017(2) ADJ 71 which has elaborately dealt with the relevant case law applicable in this behalf.
Per contra, Sri D.K. Srivastava appearing for opposite party no. 1 has argued that the application filed by the petitioner is not maintainable for the reason that the petitioner has an opportunity of filing objections before the Tribunal already constituted as per the terms of the arbitration clause. It is argued that parties are not bound by the principle underlying Section 11 CPC irrespective of the fact that it was a motion on behalf of the opposite party no. 1 itself that enabled the High Court to step in under Section 11 of the Arbitration and Conciliation Act, 1996. Hence, the initial constitution of the tribunal by order dated 12.7.2002 does not bind the parties on their mere participation to follow a procedure other than the one as provided in the arbitration clause extracted above. In support of the arguments putforth, learned counsel for the opposite party no. 1 has cited the case laws noted below.
Sl Particulars Citation
1. Yashwith Constructions (P) Ltd v.
Simplex Concrete Piles India Ltd.
(2006) 6 SCC 204
2. National Highway Authority of India and another v.
Bumihighway DDB Ltd. (JV) and others.
(2006) 10 SCC 763
3. Antrix Corporation Ltd.
v.
Devas Multimedia Pvt. Ltd.
(2014) 11 SCC 560
4. S.B.P. & Co.
v.
Patel Engineering Ltd. & anr.
(2005) 8 SCC 618
5. San-A-Tradubg Company Ltd.
v.
I.C. Textiles Limited (2012) 7 SCC 192 Having regard to the rival submissions made by learned counsel for the parties and on a thoughtful consideration of judicial pronouncements cited by them, this Court is of the considered opinion that the mutual conduct of the parties by subscribing to the proceedings of arbitration under the judicial order passed by this Court on 12.7.2002 has attained certainity, therefore, the procedure under Section 15(2) would be referable to the same procedure as was involved to serve the purpose of arbitration clause at the initial stage. Enough time has already gone by to revive the proceedings as per law and the parties would not capitalise any gain by prolonging the proceedings. Any further delay would be against the very spirit of the arbitration clause and this Court is duty bound to honour the mandate of law to serve the purpose. The option vested in the parties to constitute the arbitration tribunal through ICA stood exhausted and became obsolete after passing of the order by this Court on 12.7.2002, therefore, the record of pending proceedings deserves to be retrieved by this Court and transferred to the Tribunal of the sole arbitrator constituted as per law.
The Court may, however, note that the parties have not raised any objection against any of the members of the Tribunal constituted by ICA.
As to what would be the procedure after termination of mandate for appointment of the substitute arbitrator, this Court is convincingly persuaded by a meaningful interpretation of Section 15(2) of the Act by Calcutta High Court in the case reported in (2009) 2 Arb LR 625 (Ramjee Power Construction Ltd v. Damodar Valley Corporation) for the reason that the provisions of law in this regard have not undergone any substantial legislative change. This Court may reiterate that the parties are free to choose and save the purpose of arbitration clause by their own conduct failing which the judicial forum for appointment of arbitrator once resorted to assumes certainty and the substitute arbitrator is to be appointed by the same forum so as to avoid adjucatory delays and that is why the special mechanism is recognised by law. The Court may explore an opportunity of mutual consent at the very first opportunity which in the event of failure, as is the case at hand, leads to no other interpretation except what has been held in the judgement cited above. It is for this reason Section 15(2) of the Act steps in to aid the parties strengthen the essence of arbitration for settlement of disputes. The insurmountable delays must be curtailed by applying a pragmatic approach as is the object of Section 15(2) of the Act to approach the forum straight.
In the case at hand, the Court did offer an opportunity of mutual consent to the parties once again but of no avail. These clinical tests are discretionary which invariably prove fruitless. Therefore, the extinguishment of the right of parties as per agreement except for invoking the jurisdiction of the Court, recognising statutory waiver on principle, must be the rule for appointment of the substitute arbitrator. The shortened course restricting the parties not to undergo the agreed independent procedure tending to delay, in my humble view, is the purpose of procedural brevity embodied under Section 15(2) of the Act.
There may be a situation where the parties at the initial stage invoke the arbitration clause successfully and the same procedure may fail at the time of the appointment of substitute arbitrator. Even in such a situation, the jurisdiction under Section 11 of the Act, nevertheless, remains open. The failure of parties to constitute the Tribunal once experienced would extinguish the right embodied in the agreement and confer an exclusive jurisdiction upon the court to appoint substitute arbitrator as and when the situation arises.
In view of what has been recorded above, the present application is allowed and the Court proposes Hon'ble Mr. Justice V.K. Gupta (Retired CJ) resident of E-31, Jangpura Extension, New Delhi-110014 to be the sole arbitrator in the present case, subject to his consent in terms of Section 11(6) read with Section 12(1) of the Act on the terms and conditions of fee as per schedule. The Senior Registrar of this Court is directed to retrieve the record of the arbitration proceedings for being sent to the substitute arbitrator expeditiously and preferably within one month. The record already made available, if any, may be retained by the proposed arbitrator and apprised to the Court alongwith the consent letter. The order passed by this Court alone shall bind the parties to subscribe to the further arbitral proceedings in continuity of the arbitration commenced in furtherance of the order dated 12.7.2002 passed earlier.
List this case on 6.10.2021 for further orders.
Order Date :- Sept. 9, 2021 Fahim/-