Allahabad High Court
M/S Basant Ispat Udyog P Ltd. And 2 Others vs M/S Basant Industries And 2 Others on 7 August, 2019
Equivalent citations: AIRONLINE 2019 ALL 1475, 2020 (1) ALJ 262 (2019) 9 ADJ 688 (ALL), (2019) 9 ADJ 688 (ALL)
Author: Saumitra Dayal Singh
Bench: Saumitra Dayal Singh
HIGH COURT OF JUDICATURE AT ALLAHABAD A.F.R. Court No. - 59 Case :- ARBITRATION AND CONCILI. APPL.U/S11(4) No. - 42 of 2016 Applicant :- M/S Basant Ispat Udyog P Ltd. And 2 Others Opposite Party :- M/S Basant Industries And 2 Others Counsel for Applicant :- Shree Prakash Giri,Pankaj Agarwal Counsel for Opposite Party :- Manish Goyal Hon'ble Saumitra Dayal Singh,J.
1. Heard Ms. Utkarshni Singh, Advocate, holding brief of Shri Pankaj Agarwal, learned counsel for the applicant and Shri Manish Goyal, learned Senior Counsel assisted by Sri Archit Mehrotra, learned counsel for the respondents.
2. The present application has been filed under Section 11 read with Section 15(2) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) for appointment of a substitute arbitrator for adjudication of disputes arising under Retirement Deed dated 31.10.1995. Admittedly, S/s Ram Prakash Mittal,Vinay Mittal, Sri Om Prakash Mittal and Sri Rajeev Mittal constituted a partnership firm, namely, M/s Basant Industries. Under the retirement deed dated 31.10.1995, Sri R.P. Mittal and Sri Vinay Mittal have been described as retiring partners whereas Sri Om Prakash Mittal and Sri Rajeev Mittal as continuing partners.
3. Under Clause 5 and 6 of that Retirement Deed, the continuing partners would manufacture/market diesel engine, pump and pump-sets under the brand name and trade mark 'Atul Shakti' at all places except inside the State of U.P. and they would not market generating sets under the brand name 'Atul Shakti'. Also, under clause 6 of that deed the retiring partners were given the right to manufacture and market generating sets in the brand name and style 'Atul Shakti' in the whole of India and diesel engines only in the State of Utter Pradesh. They were also restrained from selling or marketing diesel engines, pump and pump-sets with the brand name 'Atul Shakti' except inside the State of U.P. Then, clause 10 of the said retirement deed read as under:-
"10. That if any dispute or difference arises in future between the partners to this deed, their representative or heirs with regards to the construction of this instrument and respecting the accounts. Profit & loss of the business or the rights and liabilities of the partners upto the date of the deed or any matter relating to the firm or relating to the construction & interpretation of this deed, the same shall be referred to arbitration in accordance with the provisions of the Indian Arbitration Act."
4. It appears that certain disputes arose between the parties. The applicants i.e. retiring partners R.P. Mittal and Vinay Mittal approached this Court by means of Civil Misc. Petition No.54 of 1998 filed under Section 11 (6) of the Act. On 29.05.2009, this Court passed the below quoted order and appointed Mr. Justice (retired) M.C. Jain, a retired judge of this Court to act as an arbitrator between the parties:-
".This petition has been filed under Section 11 (6) of the Arbitration and Conciliation Act, 1996 for appointment of an Arbitrator.
Petitioners 2 and 3 are the retiring partners of the firm M/s. Basant Industries, Nunhai, Agra - 6. A Retirement Deed dated 31st October, 1995 (hereinafter referred to as the 'Deed') was entered into between the retiring partners and the surviving partners, i.e. respondents 2 and 3. Clauses 3, 4, 5 and 6 of the said Deed, which are relevant for the purpose, read as follows:-
"3. That all the rights of the Retiring partners in the firm will stand assigned to the surviving/continuing partners. Meaning thereby that all the interest of the retiring partners on the Assets of the partnership including Quota rights, Power Connections or any other benefit regarding partnership, claims of partnership on the outsider etc. etc. will stand assigned to surviving/continuing partner.
4.That the surviving/continuing partners have taken over the firm M/s. Basant Industries and its units as a going concern as a whole with all its asset, liabilities and outstanding. The retiring partners have nothing to take from the continuing partners.
5.That the continuing partner will manufacture/market Diesel Engine, Pub and Pump Sets under the brand name and trademark of "ATUL SHAKTI" except in the State of U.P. They will not market Generating Sets with brand name of "ATUL SHAKTI".
6.That the retiring partners will manufacture/market Generating Sets in the brand name and style of "ATUL SHAKTI" in whole of India and Diesel Engine in Uttar Pradesh only. It is hereby made clear that they will not sell or market Diesel Engine, Pump and Pump Sets with brand name "ATUL SHAKTI" except in Uttar Pradesh."
Clause 10 of the Deed, which provides for resolution of the dispute by an Arbitrator, reads as follows:-
"That if any dispute or difference arises in future between the partners to this Deed, their representative or heirs with regards to the construction of this instrument and respecting the accounts, Profit and loss of the business or the rights and liabilities of the partners upto the date of the deed or any matter relating to the firm or relating to the construction & interpretation of this deed, the same shall be referred to arbitration in accordance with the provisions of the Indian Arbitration Act."
Petitioners sent letter-cum-notice dated 14.08.1998 (Annexure-3 to the petition) to the respondents alleging that they were manufacturing and marketing Diesel Engines, Pumps & Pump Sets under the brand name and trademark of "Atul Shakti" within the State of Uttar Pradesh which, according to them, they were not entitled. Accordingly, they gave notice to the respondents for appointment of Arbitrator and when the Arbitrator was not appointed, this petition was filed for appointment of Arbitrator.
Ms. Sunita Agarwal, appearing on behalf of the petitioners, submits that agreement provides for resolution of dispute by an Arbitrator. Further, there is a dispute between the petitioners and the respondents and the petitioners have given notice to the respondents for appointment of Arbitrator but no Arbitrator has been appointed and as such it is a fit case in which the Arbitrator be appointed by this Court.
Mr. Madhur Prasad, appearing on behalf of the respondents, submits that the dispute is of such a nature that it can not be adjudicated by the Arbitrator and requires adjudication under the provisions of the Trade and Merchandise Marks Act, 1958. He also points out that, in fact, the petitioners had taken recourse to the remedy provided under the said Act, hence this petition for appointment of Arbitrator is absolutely misconceived.
Having appreciated the rival submissions advanced by the counsel for the parties, I find substance in the submission of Ms. Agarwal. Here, the Deed incorporates certain terms and conditions for use of trademark "Atul Shakti". There is a dispute in regard thereto in terms of the Deed and not in terms of the provisions of the Trade and Merchandise Marks Act, 1958.
In that view of the matter, I am of the opinion that when there is an arbitration clause in the agreement and there is a dispute between the parties flowing from the agreement, Arbitrator can resolve the dispute. Accordingly, I appoint Hon'ble Mr. Justice M.C. Jain, a retired Judge of this Court, residing at A-61, Sector - 27, NOIDA, as the Arbitrator. His fee would be Rs. 5,000/- per sitting, which shall be shared by the parties equally.
Application stands allowed."
5. Pursuant to the aforesaid order, the arbitrator entered reference. However, it is also admitted between the parties that no arbitration proceedings were conducted. As to the reasons for the same, the parties are in agreement that the arbitration could not commence because proceedings for conciliation had been initiated in the meanwhile. The arbitration proceedings thus remained pending till 2015 when the arbitrator appointed by this Court withdrew from the proceedings by means of his letter dated 9.10.2015. It reads:-
" I was appointed Arbitrator in the above matter by order dated 29.5.2009 of the Allahabad High Court. Notices were issued to the parties on 28.8.2009 fixing 19.9.2009 for preliminary hearing. The parties sought adjournment on 19.9.2009 and on several subsequent date fixed in the matter by making joint applications, inter alia, on the ground that they were negotiating for a compromise. Owing to such attitude of the parties, the proceedings could not take off. At last these arbitration proceedings were put in abeyance in January, 2010. A period close to six years has passed.
Now it is not possible for me to resume and proceed with the arbitration proceedings as I am withdrawing myself from such profession work. I accordingly recuse myself.
You are free to get appointed another Arbitrator."
6. In view of that communication made by the arbitrator, the present application came to be instituted. Affidavits have been exchanged and parties heard.
7. Learned counsel for the applicants would submit, in the present case no arbitration proceedings took place, inasmuch as, no claim petition was ever filed and, therefore, the learned Arbitrator terminated his mandate under Section 25(a) of the Act.
8. Learned counsel for the respondents, on the other hand, submits that the termination of the mandate is referable to Section 15(1)(a) of the Act. At any rate, it is admitted to the parties that neither any arbitration claim came to be filed nor any proceedings were conducted by the Arbitrator upto 09.10.2015 when the mandate of the arbitrator terminated owing to his withdrawal.
9. In such circumstances, it is the submission of learned counsel for the applicants that there is absence of any procedure agreed upon between the parties, under the retirement deed as to the appointment of an Arbitrator or substitute arbitrator. The stipulation being the dispute that may arise under the retirement deed may be referred for arbitration under the Act, the only recourse open to the parties was to apply for appointment of a substitute arbitrator under Section 15(2) of the Act. Since, the bone of contention between the parties is the procedure to be adopted for appointment of substitute arbitrator, it would be fruitful to extract the provision of Section15(2) of the Act:-
"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."
10. Learned counsel for the applicants has relied on four decisions of the Supreme Court in this regard. Thus, reliance has been placed on Shailesh Dhariyavan Vs. Mohan Bal Krishna 2016(3) SCC, 619; N.B.C.C. Ltd Vs. J.G. Engineering, 2010(2) SCC 385 and; Anil Vs. Rajendra 2015(2) S.C.C. 583.
11. Responding to the above, learned senior counsel appearing for the respondent would submit, in view of the clear mandate of Section 15(2) of the Act, for the purpose of appointment of a substitute Arbitrator, the rules that were applicable to the appointment of the first Arbitrator, would have to be re-applied. Thus, relying on Section 11(5) of the Act, it has been further submitted that the present application is not maintainable in absence of any statutory notice having been first issued by the applicant for appointment of a substitute Arbitrator. Relevant to that provision of Section 11(5) may be quoted. It reads:
"Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him."
12. Thus, relying on Clause 10 of the retirement deed, it has been submitted, in absence of any other procedure being provided for appointment of a substitute Arbitrator, it was necessary for the applicants to have complied with Section 11(5) before seeking appointment of substitute Arbitrator.
13. Reliance has been placed on five decisions of the Supreme Court and this Court in Government of Haryana PWD Haryana (B and R) Branch Vs. G.F.Toll Road Private Limited and others, 2019(3) SCC 505; S.B.P. and Company Vs. Patel Engineering Limited and Another 2009(10) SCC 293; M/s. U.P. Designers & Decorators and Another Vs. Bengal Chemicals and Pharmaceuticals Ltd. Kolkata and others 2014(7) ADJ-203; Yashwith Constructions (P) Ltd. Vs. Simplex Concrete Piles 2006(6) SCC 204, Rajasthan Small Industries Corporation Limited Vs. Ganesh Containers Movers Syndicate 2019(3) SCC 282;
14. Before considering the arguments advanced by respective parties, it may be useful to consider the ratio of the decisions relied. In the case of Shailesh Dhariyavan Vs. Mohan Bal Krishna (Supra), a suit proceeding had been instituted between the parties to the dispute wherein consent terms had been filed before the Court (Bombay High Court) hearing the suit. In respect of matters that could not be settled, the parties further consented to a reference to a named/retired Supreme Court Judge, for arbitration. Despite several meetings the arbitration proceedings could not be concluded whereupon the arbitrator resigned. The plaintiff then applied for the Notice of Motion in the decided suit, for appointment of a substitute arbitrator. That was dismissed observing - such appointment could be made only under Section 11(5) of the Act. Thereafter, the plaintiff moved an application before the Bombay High Court under Section 11 of the Act for appointment of a substitute arbitrator whereupon a retired Judge of that Court was appointed a substitute arbitrator. That appointment was challenged before the Supreme Court on the ground that the consent terms spent it's force. In absence of any rules for substitution of such a named arbitrator, Section 15(2) of the Act was claimed to be inapplicable.
15. The Supreme Court took up the issue whether a substitute arbitrator could be appointed in such a case i.e. in absence of an arbitration agreement and where the original arbitrator had come to be appointed only under the consent terms and whether the consent terms spent force upon appointment of the original arbitrator. Referring to the consent terms, the Supreme Court found, there was no clause as may allow for the interpretation that the parties had agreed that the vacancy that may arise upon the (original) arbitrator being not available, may not be filled up. It was also found that the earlier arbitrator had been chosen/appointed not on account of qualification required for resolution of the dispute between the parties, but because that arbitrator belonged to a pool of independent retired High Court and Supreme Court Judges from which it was always open to the appointing authority to chose a substitute arbitrator. While offering that reason, the Supreme Court also considered the true scope and ambit of Section 15 (2) of the Act. In that regard it observed as under:-
"The scheme of Section 8 of the 1940 Act and the scheme of Section 15(2) of the 1996 Act now needs to be appreciated. Under Section 8(1)(b) read with Section 8(2) if a situation arises in which an arbitrator refuses to act, any party may serve the other parties or the arbitrators, as the case may be, with a written notice to concur in a fresh appointment, and if such appointment is not made within 15 clear days after services of notice, the Court steps in to appoint such fresh arbitrator who, by a deeming fiction, is to act as if he has been appointed by the consent of all parties. This can only be done where the arbitration agreement does not show that it was intended that the vacancy caused be not supplied. However, under Section 15(2), where the mandate of an arbitrator terminates, a substitute arbitrator "shall" be appointed. Had Section 15(2) ended there, it would be clear that in accordance with the object sought to be achieved by the Arbitration and Conciliation Act, 1996 in all cases and for whatever reason the mandate of an arbitrator terminates, a substitute arbitrator is mandatorily to be appointed. This Court, however, in the judgments noticed above, has interpreted the latter part of the Section as including a reference to the arbitration agreement or arbitration clause which would then be "the rules" applicable to the appointment of the arbitrator being replaced. It is in this manner that the scheme of the repealed Section 8 is resurrected while construing Section 15(2). The arbitration agreement between the parties has now to be seen, and it is for this reason that unless it is clear that an arbitration agreement on the facts of a particular case excludes either expressly or by necessary implication the substitution of an arbitrator, whether named or otherwise, such a substitution must take place. In fact, sub-sections (3) and (4) of Section 15 also throw considerable light on the correct construction of sub-section (2). Under sub-section (3), when an arbitrator is replaced, any hearings previously held by the replaced arbitrator may or may not be repeated at the discretion of the newly appointed Tribunal, unless parties have agreed otherwise. Equally, orders or rulings of the earlier arbitrary tribunal are not to be invalid only because there has been a change in the composition of the earlier tribunal, subject of course, to a contrary agreement by parties. This also indicates that the object of speedy resolution of disputes by arbitration would best be sub-served by a substitute arbitrator continuing at the point at which the earlier arbitrator has left off."
16. Thus, the real and the only dispute between the parties before Supreme Court was whether in absence of any arbitration agreement and the sole/named arbitrator appointed having resigned, the consent terms (under which she had been appointed), spent force and (therefore), no substitute arbitrator may be appointed. That objection raised by the appellant (before the Supreme Court) was negated. It was held - unless there was an arbitration agreement excluding either expressly or by necessary implication, the substitution of an arbitrator, whether named or otherwise, could not be faulted. Also, it was held, in case of the arbitrator first appointed terminating his mandate, a substitute arbitrator had to be provided. Also, it was held for the purpose of appointment of a substitute arbitrator, the pre-existing agreed procedure, if any, between the parties for appointment of an arbitrator, would be included within the meaning of the word "rules" appearing in section 15(2) of the Act. The same would have to be adhered to for appointing a substitute arbitrator also, as it had been applied for appointment of the original arbitrator.
17. However, it does not follow from that decision that the Supreme Court has directly laid down, as law, whether a notice under Section 11 (5) of the Act would or would not be required to be issued for the purpose of making appointment of a substitute arbitrator. In fact, in that decision, the Supreme Court also considered the ratio of its earlier decisions, amongst others, in the cases of Yashwith Constructions (P) Ltd. Vs. Simplex Concrete Piles (supra) and S.B.P. and Company Vs. Patel Engineering Limited (supra). With respect to Yashwith Constructions (P) Ltd. (supra), it was held, the expression "the rules" appearing in Section 15(2) had been interpreted liberally and would include the arbitration clause or agreement itself apart from any institutional rules or other rules that may apply. As to the facts in Yashwith Constructions (P) Ltd. (supra), it was observed, since the Managing Director was the appointing authority of the first arbitrator, he would remain the authority to appoint a substitute arbitrator under Section 15(2) of the Act, if the arbitrator first appointed refused to act. As to the decision in the case of S.B.P. and Company Vs. Patel Engineering Limited (supra), it was observed, under the arbitration clause in that case, if one of the two appointed arbitrators refused to act, such an arbitrator would not be liable to be substituted by another arbitrator. On the contrary, the sole appointed arbitrator would then continue with the reference. Thus, the arbitration agreement reached between the parties was strictly applied, without allowing for any substitute arbitrator to be appointed, contrary to the procedure agreed upon between the parties.
18. I am greatly profited by the exact explanation given by the Supreme Court in Shailesh Dhairyavan (supra) as to the ratio contained in the earlier decisions of that Court. Therefore, there appears no doubt that the decisions in Yashwith Constructions (P) Ltd. and S.B.P. and Company, are wholly inapplicable to the facts of the present case as admittedly, there exists no agreed procedure between the parties as to appointment of either the substitute or the first arbitrator.
19. In the case of N.B.C.C. Ltd Vs. J.G. Engineering (Supra), the real ratio that emerged was with respect to violation of Section 11 (8) of the Act. In that case, under the agreement between the parties, upon occurrence of a dispute, the Chairman-cum-Managing Director of N.B.C.C. Ltd. appointed a serving officer of that corporation as the sole arbitrator. While those proceedings remained pending, the Chairman-cum- Managing Director i.e. the appointing authority successively changed the arbitrators thus appointed owing to the transfer orders of their predecessors. Upon repeated change of the arbitrators and during pendency of arbitration proceedings, an application came to be filed by M/s. J.G. Engineering Private Limited before the Calcutta High Court under Section 11 of the Act for appointment of an independent arbitrator. The High Court directed the Chairman-cum-Managing Director of N.B.C.C. to appoint a new arbitrator. It further directed the arbitrator so appointed to conclude the arbitration proceedings in a time bound manner. That arbitrator was appointed. Since the award was not published within time provided by the High Court, an application came to be filed before the High Court to declare the mandate of the arbitrator terminated. It was allowed. Also, the High Court appointed a substitute arbitrator against which the matter was carried to the Supreme Court. As to the termination of the mandate of the earlier arbitrator, the Supreme Court held the order of the High Court to be perfectly justified and the award that was claimed to have been prepared by that arbitrator was dealt with as non est. Insofar as the question of appointment of substitute arbitrator was involved in that case, the Court only remitted the matter to the High Court for consideration of requirements of Section 11(8) of the Act as it was the claimed before the Supreme Court that certain technical qualifications were required to be met by the arbitrator looking into the nature of disputes involved. Only to that extent, the matter was remitted to the High Court. Though, an objection as to procedure to appoint a substitute arbitrator had been earlier taken up before the High Court, that objection does not appear to have been raised or dealt with by the Supreme Court. Thus, the ratio of that decision is wholly distinguishable.
20. On the other hand, in the case of Government of Haryana PWD Haryana (B and R) Branch (supra), the arbitration clause between those parties provided for conduct of arbitration in accordance with rules of Indian Council of Arbitration (ICA). The said arbitration clause further provided for appointment of one arbitrator each by both parties and the third arbitrator to be appointed by the first two arbitrators, so appointed. Both parties made nominations of their respective arbitrators. However, M/s G.F. Toll Road Private Limited objected to the nomination made by the State of Haryana in favour of one Sri N.K. Agarwal. While the State of Haryana sought time to appoint a substitute arbitrator and though 30 days time available to it under the rules of ICA was yet to expire, the Indian Council of Arbitration informed the Government of Haryana about the appointment of a nominee arbitrator made on behalf of the State of Haryana.
21. This led to an application being filed by the State of Haryana under Section 15 of the Act before the District Court at Chandigarh on the ground that the constitution of arbitral tribunal was illegal, being contrary to the I.C.A. Rules itself. The State of Haryana also raised that objection before the arbitral tribunal. The District Court vide its order dated 27.01.2017 held that the application filed before it was not maintainable. Being aggrieved by that order, the State of Haryana challenged the the same by filing civil revision before the Punjab and Haryana High Court. The said revision was dismissed leaving it open to the State of Haryana to raise objection before the arbitral tribunal. It was further held that in such a situation where the agreement is silent with regard to the mode of appointment of a substitute arbitrator, the rules of Indian Council of Arbitration would govern that appointment.
22. The State of Haryana, carried the matter to the Supreme Court. It set aside the order of the Punjab and Haryana High Court and held that the Indian Council of Arbitration could not usurp the jurisdiction over appointment of the nominee arbitrator on behalf of the State prior to expiry of the 30 days' period provided under the I.C.A. Rules itself. Also, the objection raised by the ICA to the appointment of Sri M.K. Agarwal as the nominee of the State was held to be unjustified and contrary to the provisions of the 1996 of the Act (unamended) since under the unamended law, a retired employee of a party to the arbitration agreement would not be disqualified to act as an arbitrator owing to his prior engagement. However, with the consent of the parties, that Court itself appointed an independent arbitrator overriding the earlier substitution of the arbitral tribunal.
23. Thus, the only reasoning contained in the aforesaid judgment as may be relevant to our purpose, would be that the procedure for appointment of an arbitrator of a substitute arbitrator, if has been provided for under the arbitration agreement between the parties, be strictly adhered to.
24. Thus, the ratio in S.B.P. And Company (supra); Government of Haryana PWD Haryana (B and R) Branch (supra) and; Yashwith Constructions (P) Ltd. Vs. Simplex Concrete Piles (supra) only lay down that a substitute arbitrator may be appointed according to the rules that were applicable to the appointment of the original arbitrator. The word 'rules' under that provision would not be confined to statutory rules or the rules framed by the competent authority in exercise of its power but would also include the terms of agreement, entered into between the parties. Same ratio arises from Rajasthan Small Industries Corporation Limited Vs. Ganesh Containers Movers Syndicate (supra).
25. In M/s. U.P. Designers & Decorators Vs. M/s. Bengal Chemicals & Pharmaceuticals Ltd. (supra), the arbitration agreement provided for appointment of the sole arbitrator by the Managing Director of the company M/s. Bengal Chemicals & Pharmaceuticals Ltd. (B.C.P.L.). Upon a dispute arising under the contract between the parties, the same was referred to the sole arbitrator by the Managing Director of the company B.C.P.L. who was the pre-agreed appointing authority between the parties. The sole arbitrator terminated the proceedings. Thereupon M/s. U.P. Designers and Decorators (U.P.D.D.) applied directly to this Court for appointment of a substitute arbitrator, under Section 11 of the Act. In that proceeding, an objection was raised by B.C.P.L. that the remedy available to U.P.D.D. was to file objections under Section 34 of the Act. That contention was rejected by this Court. Yet, in view of the procedure for appointment of an arbitrator found existing in the contract between the parties, the same was held to be the procedure to be invoked by the U.P.D.D. (being part of the 'rules' under section 15(2) of the Act). In that light, U.P.D.D. was allowed to make a fresh application to the Managing Director of B.C.P.L. for appointment of the substitute arbitrator.
26. The decisions cited by Shri. Goyal are distinguishable. In the present case, though there always existed an arbitration agreement, there is no agreed procedure for appointment of an arbitrator, between the parties. Therefore, section 11(2) and consequentially section 11(6) of the Act, that provide for appointment of an arbitrator as per the agreed procedure between the parties, does not apply. Also, it is a fact, section 11(3) of the Act was not applied. Instead, the applicants invoked section 11(5) of the Act and sought appointment of a sole arbitrator. Accordingly, under that provision, at the first instance, the authority to appoint an arbitrator vested in the parties, themselves. The applicants invoked that procedure and first served a notice on the non-applicants, seeking agreement to appoint an arbitrator. Admittedly, no agreement was reached and the statutory time limit of thirty days expired.
27. Upon expiry of that time period, the parties lost their authority to appoint a consented arbitrator. Also, by operation of law, the authority to appoint an independant arbitrator got vested in this Court, upon the original application being filed by the applicants seeking appointment of the (first) arbitrator. This Court, exercised that power and appointed an independant arbitrator by its order dated 29.05.2009. There is no provision under the Act whereunder the parties could, thereafter regain their authority to appoint an arbitrator. It would remain with this Court, to appoint an independant arbitrator.
28. The legal requirement and purpose to issue a notice on the non-applicants, in terms of section 11(5) of the Act existed only to build a consensus amongst the parties to the dispute, to appoint an arbitrator. That compliance was made and that requirement got over before appointment of the first arbitrator, by this Court. It did not exist beyond that stage. The power to appoint a consented arbitrator did not resurrect and revert to the parties, upon withdrawal of the mandate by the first arbitrator, who had been appointed by this Court. That event had no affect on the choice of appointing authority of the arbitrator.
29. In the precedents relied upon by Shri. Goyal, the first arbitrator had been appointed not by the respective High Court or the Supreme Court, but by the parties themselves. Thus, in all those cases the authority to appoint the arbitrator continued with the respective parties and it never got vested in the respective High Court. Thus, not only there pre-existed an agreement or agreed "rules" between the parties to appoint a consented arbitrator, but additionally, as a fact, in each of those cases the parties had exercised their power to appoint such/first arbitrator. First, for that reason, the appointing authority to appoint the substitute arbitrator remained with the concerned party. Second, in that context and fact scenario, the Supreme Court as also this Court enforced the "rules" that were also found pre-existing between those parties, for appointment of a substitute arbitrator as well. In the present case, no "rules" exist. In the instant case, as on date, neither the authority to appoint an arbitrator exists with the parties nor there exist any agreed "rules" of procedure (between the parties), to appoint an arbitrator.
30. Quite apart from that, once the first arbitrator entered reference, arbitration proceedings also came to life before the arbitral tribunal thus constituted. In Shailesh Dhairyavan (supra), the first arbitrator had been appointed by the Bombay High Court. As reasoned by the Supreme Court, under Section 15(3) of the Act, unless otherwise agreed, in the event of an arbitrator being replaced under Section 15(2) of the Act, any hearings previously held may be repeated at the discretion of the arbitral tribunal and under Section 15(4) of the Act, unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator, shall not be invalidated solely on account of change in the composition of the arbitral tribunal.
31. The clear intent of the Act appears to be, while an arbitrator may be substituted for varied reasons, facts and circumstances, the proceedings before the reconstituted arbitral tribunal may not be necessarily drawn afresh owing to such substitution. In fact, sub-section (4) of Section 15 of the Act, makes it plain - continuity in the conduct of arbitral proceedings may be maintained despite reconstituion of the arbitral tribunal by substitution. The proceedings already conducted are neither rendered invalid nor they are required to be necessarily repeated, owing to substitution of the arbitrator/s.
32. The act of his withdrawal of the sole arbitrator on 09.10.2015, was an act of termination of the individual mandate of the first arbitrator. However, the proceedings before the arbitral tribunal survived. Those proceedings did not fall through. To that extent, the order dated 29.05.2009 served as a safety net that held safe the arbitration proceedings already instituted and conducted. They did not stand obliterated by the act of the arbitrator withdrawing from the arbitration. He only vacated his appointment, leaving it to the appointing authority to replace his appointment.
33. There is also no warrant to contemplate whether there exists any dispute or not, or whether there exists any arbitration clause or not. Those were issues considered by the Court, when the parties first came before it. Certainly, those issues had been examined by this Court and thereafter the arbitration tribunal constituted. Therefore, for that reason also, there is no occasion to allow parties to be taken back to the stage of issue of notice under Section 11(5) of the Act. The ratio in the case of Anil Vs. Rajendra (supra), appears to have been correctly invoked by learned counsel for the applicants to submit - all possible and existing objections had been raised by the respondent in the original proceedings under Section 11 of the Act and once this Court decided that application by appointing an arbitrator, no further scope survives for any fresh or other objections to be raised, on the principle of res-judicata.
34. At this stage, it was proposed by the court whether the parties would be agreeable to consent to any particular arbitrator. Sri Archit Mehrotra, learned counsel for the respondents states his instructions are otherwise.
35. Accordingly, it appears Mr. Justice Janardan Sahai, a retired Judge of this Court, residing at 20/12, Panna Lal Road, Prayagraj, Uttar Pradesh (Mob. No. 9415316955) be appointed the sole (substitute) arbitrator for resolution of the disputes between the parties. Subject to his consent under Section 11(8) of the Arbitration and Conciliation Act, 1996, the parties agree to request the learned arbitrator to conduct the proceedings at Prayagraj (Allahabad) and/or at NOIDA, Gautam Budh Nagar, as per the latter's convenience.
36. The Registry is directed to obtain consent of the proposed learned (substitute) arbitrator, in terms of Section 11(8) of the Act, within three weeks. List after three weeks.
Order Date :- 7.8.2019 Meenu