Delhi District Court
Mukund Kumar Chandan vs L&T Housing Finance Ltd on 23 January, 2021
IN THE COURT OF SH GURVINDER PAL SINGH,
DISTRICT JUDGE (COMMERCIAL COURT)-02,
PATIALA HOUSE COURT, NEW DELHI
OMP(T) Comm. No. 07/2019
1. Mukund Kumar Chandan
S/o Sh. Vijay Kumar Sharma,
114, 2nd Floor, Deluxe Apartment, Vasundhara Enclave,
Delhi-110096
2. Ruma Rani
W/o Mukund Kumar Chandan
114, 2nd Floor, Deluxe Apartment, Vasundhara Enclave,
Delhi-110096 ...Petitioners
vs
1. L&T Housing Finance Ltd.
5th Floor, DCM Building, 16th Barakhamba Road,
Connaught Place, New Delhi-110001
2. Sh. L.D Mual, Sole Arbitrator,
(Retd. Additional District Judge)
Chamber No. 909, Lawyers Chamber,
Rohini Courts Complex,
Delhi-110085 ....Respondents
Date of Institution : 22/08/2019
Arguments concluded on : 04/01/2021
Decided on : 23/01/2021
Appearances : Sh. Alok Tripathi, Ld. Counsel for petitioner.
Sh. Puneet Bajaj, Ld. Counsel for respondent no. 1.
JUDGMENT
1. The present petition has been filed under Sections 14 and 15 of the Arbitration and Conciliation Act, 1996 (herein after referred as The Act) with the prayer to rule on the termination of the mandate of the Sole Arbitrator (respondent no. 2 herein) appointed by the respondent no. 1 vide notice dated 02/05/2019.
OMP(T) Comm. No. 07/2019 Mukund Kumar Chandan & Anr. Vs L&T Housing Finance Ltd. & Anr. Page 1 of 192. Adumbrated in brief, the case of the petitioners is as follows:
Petitioners booked a flat being property no. A-0506, Gayatri Life, Plot No. 1F, Sector-16, Greater Noida of total area 1130 square feet developed by Gayatri Infra Planners Pvt. Ltd (herein after referred as GIPPL) for sum of Rs 44,37,920/- under special scheme 'subvention plan'. Petitioners applied for loan of Rs 35 lacs to respondent no. 1 and executed Home Loan Agreement dated 30/05/2017, which was executed between the petitioners and respondent no. 1 in terms of which Rs 35 lacs was sanctioned and Rs 32,65,270/- was disbursed to GIPPL. A Tripartite Agreement also dated 30/05/2017 was executed between petitioner no. 1, GIPPL (developer) and respondent no. 1 (LTHFL), wherein the petitioner no. 1 and GIPPL (developer) jointly availed loan of Rs 35 lacs from respondent no.1 (LTHFL). It is the case of the petitioners that contrary to terms of the Tripartite Agreement, aforesaid, respondent no. 1 started deducted pre-EMI from the account of petitioner to which petitioner objected as the pre-EMI had to be paid by GIPPL and the pre-EMI started hitting in the accounts of petitioners and thus started bouncing due to which the CIBIL score of the petitioners got effected and charges towards the bouncing of the EMIs were also imposed upon the petitioners by respondent no. 1. Petitioners received loan recall notice dated 09/02/2019 from respondent no. 1 through Advocate with demand of Rs. 34,51,356/- within 7 days and further Mr. Naveen Sharma Advocate was appointed as Sole Arbitrator for adjudication of dispute. It is the averment of the petitioners that respondent no. 1 created a forged and fabricated document being "Letter of foreclosure" depicting Rs 33,77,718/- due and payable by the petitioners as on 26/04/2019. The petitioners again received legal recall notice dated 02/05/2019 from respondent no. 1 having demand of Rs 33,77,718/- within 7 days whereby respondent no. 1 further appointed respondent no. 2 as Sole Arbitrator to adjudicate the disputes between the parties. Respondent no. 1 filed a claim before Sole Arbitrator, respondent no. 2 on 14/05/2019 with an application under Section 17 of the Act and by ex-parte order dated 12/06/2019, the said Sole Arbitrator OMP(T) Comm. No. 07/2019 Mukund Kumar Chandan & Anr. Vs L&T Housing Finance Ltd. & Anr. Page 2 of 19 appointed Sh. Anirudh Singh, Authorized Representative of respondent no. 1 as receiver who had taken possession of property being A-0506 of the petitioners as the prayer in application under Section 17 of the Act was allowed by the Ld. Arbitrator. On 04/07/2019 the petitioners appeared before Ld. Sole Arbitrator and sought time to file the reply.
3. It is the averment of the petitioners that once arbitrator has been appointed and such appointment has been communicated to the other party, which has not been challenged, so the mandate of the arbitrator can be terminated only as per Sections 14 and 15 of the Act. Accordingly, the mandate of the earlier arbitrator Mr. Naveen Sharma, appointed vide legal notice dated 09/02/2019, which was never declined by petitioners, never terminated. With intention to commit cheating and fraud with the petitioners, respondent no. 1 in collusion with GIPPL, initiated the arbitration proceeding, which was illegal and arbitrary. It was also alleged by petitioners that respondent no. 2 was acting as Sole Arbitrator in number of cases filed by respondent no. 1 and orders were given in favour of respondent no. 1 without the application of mind and such appointment of respondent no. 2 as arbitrator by respondent no. 1 was in violation of Section 12 of the Act. Also was averred that no dispute had arisen as the pre-EMI tenure was only expiring in the month of December 2019 and before that petitioners were not liable to pay any amount to respondent no. 1 and so the invocation of arbitration clause was illegal and arbitrary.
4. It was also averred by petitioners that respondent no. 2 had no jurisdiction and authority to act as an arbitrator and he became de-jure and de-facto unable to perform his functions and his mandate was liable to be terminated.
5. In reply, respondent no. 1 controverted the submissions of petitioners and denied the averments in the petition. It was stated that petition is a gross OMP(T) Comm. No. 07/2019 Mukund Kumar Chandan & Anr. Vs L&T Housing Finance Ltd. & Anr. Page 3 of 19 abuse and misuse of the process of law and preferred by the petitioners to harass, coerce and pressurize the respondent to accede their illegal and unlawful demands and was liable to be dismissed. It was averred by respondent no. 1 that notice dated 09/02/2019 issued by respondent no. 1 was loan recall notice while providing that in case the demands were not met within 7 days disputes shall be deemed to have been arisen, which shall be referred to sole arbitration of Mr. Naveen Sharma. However, no reference of disputes infact was made to Mr. Naveen Sharma and hence the stage of acceptance of the said reference or conducting any arbitral proceedings by Mr. Naveen Sharma did not arise. It is also the averment of respondent no. 1 that the notice dated 02/05/2019 was followed by reference letter dated 14/05/2019 by respondent no. 2. Respondent no. 2 had thereafter issued communication dated 17/05/2019 thereby accepting the reference and making the disclosure in terms of Section 12 of the Act read with Sixth Schedule and fixing hearing. It is also the averment of respondent no. 1 that it was only the respondent no. 2 to whom reference had been made, who had accepted the said reference and thereafter conducted the arbitral proceeding in terms of the Act. No prejudice was caused to the petitioners by appointment of respondent no. 2, Retired Additional District & Sessions Judge as arbitrator whereas the aforesaid Mr. Naveen Sharma was an Advocate. It was averred by respondent no. 1 that no circumstances envisaged under Section 14 of the Act have arisen to invoke the jurisdiction of this Court. It was also averred that disputes were never referred for arbitration to Mr. Naveen Sharma nor did he accept any reference nor conducted any proceeding. Also has been averred by respondent no. 1 that the mandate of respondent no. 2 had not been challenged under the challenge procedure provided under the Act. It is also averred that petition is not maintainable as the ground taken in petition is that respondent no. 2 had no right to act as an Arbitrator since the mandate of earlier nominated Arbitrator had not been terminated, which however, cannot be subject matter of petition under Section 14 of the Act. No challenge was laid in terms of Section 13 (2) of the Act before Ld. Sole Arbitrator by OMP(T) Comm. No. 07/2019 Mukund Kumar Chandan & Anr. Vs L&T Housing Finance Ltd. & Anr. Page 4 of 19 petitioners and instead this petition has been preferred. It has been averred that only recourse available to the petitioners was to challenge the final award under Section 34 of the Act and challenge under Section 14 and 15 of the Act is not maintainable, as per the scheme of the Act. Respondent no. 1 further averred that mandate of Ld. Sole Arbitrator, respondent no. 2 was not liable to be terminated as he had not become de-jure or de-facto unable to perform his functions nor he had withdrawn nor his mandate was terminated. It was prayed that the present petition be dismissed.
6. I have heard Sh. Alok Tripathi, Ld. Counsel for petitioner; Sh. Puneet Bajaj, Ld. Counsel for respondent no. 1. and perused their relied upon precedents as well as written arguments and records of the case as well as arbitral proceedings record and given my thoughtful consideration to the rival contentions put forth.
7. Ld. Counsel for petitioner argued in terms of averments in the petition and stated that unilateral appointment of the arbitrator by resorting to agreement clause was contrary to the decision of the Supreme Court in the case of Perkins Eastman Architects DPC vs HSCC (India) Ltd., 2019 SCC Online SC 1517 and decisions of Delhi High Court in the cases M/s Omcon Infrastructure Pvt. Ltd. Vs India Bulls Investment Advisors Ltd, OMP (T) (Comm.) 35/2020 & IA 6153/2020 decided on 01/09/2020; Proddatur Cable TV Digi Services vs. Siti Cable Network Ltd., 2020 SCC Online Del 350. Also was argued that to adjudicate the present petition under Sections 14 and 15 of the Act, the principal civil court of original jurisdiction had the power, as per which this District Court had such power. Reliance was placed upon the (1) decision of Supreme Court in the case of Lalitkumar V Sanghavi (D) Th. L.Rs. and Ors. Vs Dharamdas V. Sanghavi and Ors., MANU/SC/0166/2014; (2) decision of Rajasthan High Court in the case of Doshion Private Ltd vs Hindustan Zinc Limited, in S.B Arbitration Application No. 18/2017, decided on 04/01/2018; (3) decision of OMP(T) Comm. No. 07/2019 Mukund Kumar Chandan & Anr. Vs L&T Housing Finance Ltd. & Anr. Page 5 of 19 Chhattisgarh High Court in case of Rahul Somani & Ors. Vs Ramgopal Somani & Ors., in ARBA No. 80/2016 of date 06/01/2017.
8. Ld. Counsel for respondent argued in terms of filed reply, elicited herein before, submitting that no challenge to the jurisdiction of arbitrator as per Section 13(2) of the Act was laid before the arbitrator by the petitioners and the present petition was thus not maintainable since the petitioners entered appearance on 04/07/2019 before Ld. Sole Arbitrator and did not lay any such challenge within 15 days period of knowledge. Instead the challenge was laid for the first time by this petition only on 22/08/2019 before this Court, which is barred by limitation and only recourse to petitioners is to challenge the final arbitral award under Section 34 of the Act.
9. Ld. Counsel for respondent no. 1 relied upon the following precedents:-
1.Proddatur Cable TV Digi Services vs. Siti Cable Network Ltd., 2020 SCC Online Del 350;
2.DDA vs M/s Tara Chand Sumit Construction Company, OMP (Misc.) (Comm.) 236/2019, decided by High Court of Delhi on 12/05/2020 and
3.M/s Omcon Infrastructure Pvt. Ltd. Vs India Bulls Investment Advisors Ltd, OMP (T) (Comm.) 35/2020 & IA 6153/2020 decided by High Court of Delhi on 01/09/2020.
10. Sections 2(1)(e) of the Act reads as under:
"2. Definitions-(1) In this Part, unless the context otherwise requires,-
(a) ..................................................................................
(b) ..................................................................................
(c) .................................................................................
(d) .................................................................................
(e) "Court" means-
(i) in the case of an arbitration other than international commercial arbitration, the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-OMP(T) Comm. No. 07/2019 Mukund Kumar Chandan & Anr. Vs L&T Housing Finance Ltd. & Anr. Page 6 of 19
matter of the arbitration if the same had been the subject- matter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes:
(ii) in the case of international commercial arbitration, the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, and in other cases, a High Court having jurisdiction to hear appeals from the decrees of courts subordinates to that High Court;
..........................................................................................................................."
11. Sections 13, 14 and 15 of the Act read as under:
"13. Challenge procedure.--(1)Subject to sub-section (4), the parties are free to agree on a procedure for challenging an arbitrator. (2) Failing any agreement referred to in sub-section (1), a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in sub-section (3) of section 12, send a written statement of the reasons for the challenge to the arbitral tribunal. (3) Unless the arbitrator challenged under sub-section (2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge.
(4) If a challenge under any procedure agreed upon by the parties or under the procedure under sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award. (5) Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with section 34.
(6) Where an arbitral award is set aside on an application made under sub-
section (5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees.
14. Failure or impossibility to act.-- (1) The mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator, if --
(a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay;
OMP(T) Comm. No. 07/2019 Mukund Kumar Chandan & Anr. Vs L&T Housing Finance Ltd. & Anr. Page 7 of 19and
(b) he withdraws from his office or the parties agree to the termination of his mandate.
(2) If a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate. (3) If, under this section or sub-section (3) of section 13, an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or sub-section (3) of section 12.
15. Termination of mandate and substitution of arbitrator.-- (1) In addition to the circumstances referred to in section 13 or section 14, the mandate of an arbitrator shall terminate--
(a) where he withdraws from office for any reason; or
(b) by or pursuant to agreement of the parties.
(2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.
(3) Unless otherwise agreed by the parties, where an arbitrator is replaced under sub-section (2), any hearings previously held may be repeated at the discretion of the arbitral tribunal.
(4) Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator under this section shall not be invalid solely because there has been a change in the composition of the arbitral tribunal."
12. Supreme Court in case of TRF Ltd. vs Energo Engg. Projects Ltd., (2017) 8 SCC 377 has held that by virtue of section 12(5) of the Act, if any person, who falls under any of the category specified in the Seventh Schedule shall be ineligible to be appointed as an Arbitrator. It is held that the amended law under Section 11(6-A) of the Act requires the Court to confine examination of the existence of an arbitration agreement notwithstanding the judgment of the Supreme Court or the High Court while considering an application under section 11(6) of the Act. The designated arbitrator whose ineligibility to act as OMP(T) Comm. No. 07/2019 Mukund Kumar Chandan & Anr. Vs L&T Housing Finance Ltd. & Anr. Page 8 of 19 an arbitrator by virtue of amendment to Section 12 of the Act by the Arbitration and Conciliation (Amendment) Act, 2015, does not have power even to nominate any other person as arbitrator. The Supreme Court and High Court in certain circumstances have exercised jurisdiction to nullify the appointments made by the authority in such situation.
13. Supreme Court in case of Bharat Broadband Network Ltd vs United Telecoms Ltd (2019) 5 SCC 755 after construing Section 12(5) of the Act read with Fifth, Sixth and Seventh Schedule held that the Managing Director of the party, who was a named arbitrator, could not act as arbitrator nor could be allowed to appoint another arbitrator. The disclosure of a prospective arbitrator has to be made in the form specified in the Sixth Schedule and the ground stated in the Fifth Schedule are to serve as a guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator. Any prior agreement to the contrary is wiped out by the non-obstante clause in Section 12(5) of the Act the moment any person whose relationship with the parties or the counsel or the subject matter of the dispute falls under the Seventh Schedule. The sub- section then declares that such person shall be ineligible to be appointed as arbitrator. Such ineligibility can be removed by an express agreement in writing. It was held that learned arbitrator had become de jure ineligible to perform his function as an arbitrator.
14. Supreme Court in the case of Perkins (supra) has held that in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. The person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015. Supreme Court has set aside the appointment of an arbitrator appointed by one of the parties having OMP(T) Comm. No. 07/2019 Mukund Kumar Chandan & Anr. Vs L&T Housing Finance Ltd. & Anr. Page 9 of 19 exclusive right to appoint and appointed an independent arbitrator in the application filed under Section 11(6) of the Act.
15. Section 11 of the Act is with respect to the appointment of the arbitrators by the Supreme Court or as the case may be, by the High Court only.
16. Under Section 12 of the Act, when a person is approached in connection with his possible appointment as an arbitrator, he is bound to disclose in writing any circumstances, such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject-matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality; and which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months. Various grounds are set out in the Fifth Schedule as a guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator. The disclosure shall be made by such person in the form specified in the Sixth Schedule. An arbitrator may be challenged by the parties only if any circumstances referred to in Section 12 (3) of the Act subject to Section 13 (4) of the Act exist which provide for an agreement between the parties for such procedure for challenge. If such challenge is unsuccessful, the party may make an application for setting aside an arbitral award in accordance with Section 34 of the Act.
17. Section 14 of the Act provides that the mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator if he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay and he withdraws from his office or the parties agree to the termination of his mandate.
OMP(T) Comm. No. 07/2019 Mukund Kumar Chandan & Anr. Vs L&T Housing Finance Ltd. & Anr. Page 10 of 1918. Section 15 of the Act provides that the mandate of arbitrator is also terminated if he withdraws from office for any reason or by or pursuant to agreement of the parties. In such an event, the substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. If such an arbitrator is replaced, any hearing previously held may be repeated at the discretion of the arbitral tribunal unless otherwise agreed by the parties. The earlier order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator shall not be invalid unless otherwise agreed by the parties.
19. Under Section 16 of the Act, the arbitral tribunal is empowered to rule on its own jurisdiction including ruling on any objection with respect to the existence or validity of arbitration agreement. Such plea shall be raised not later than the submission of the statement of defence. If such plea is rejected by the arbitral tribunal, it has to proceed with the arbitral proceedings and declare an award. If plea of jurisdiction is accepted by the arbitral tribunal, the respondent may file an appeal under section 37 of the Act. If plea of jurisdiction is not accepted, the respondent may challenge such ruling along with award under section 34 of the Act.
20. Sub-section (1) of Section 29-A of the Act provides that the award shall be made within a period of twelve months from the date the arbitral tribunal enters upon the reference. The explanation to the said provision provides that an arbitral tribunal shall be deemed to have entered upon the reference on the date on which the arbitrator or all the arbitrators, as the case may be, have received notice, in writing, of their appointment. Sub-section (2) of Section 29-A of the Act provides that if the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree. Sub-section(3) of Section 29-A of the Act provides that OMP(T) Comm. No. 07/2019 Mukund Kumar Chandan & Anr. Vs L&T Housing Finance Ltd. & Anr. Page 11 of 19 the parties may, by consent, extend the period specified in subsection (1) for making award for a further period not exceeding six months. Subsection (4) of Section 29-A of the Act provides that if the award is not made within the period specified in sub-section (1) or the extended period specified under sub- section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period. If the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, the Court may pass an order for reduction of fees of arbitrator(s) by not exceeding five per cent for each month of such delay. Sub-section(5) of Section 29-A of the Act provides that the extension may be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court.
21. In the case of DDA vs M/s Tara Chand Sumit Construction Company (supra), it was inter alia held by Hon'ble Ms. Justice Jyoti Singh that an application under Section 29A of the Act seeking extension of the mandate of the Arbitrator would lie only before the Court which has the power to appoint Arbitrator under Section 11 of the Act and not with the Civil Courts. Petitions under Section 11 of the Act are filed in High Court irrespective of the pecuniary jurisdiction of the Court and the same analogy would apply to the petitions under Section 29A of the Act. It was held therein that there was, thus, no merit in the contention of the learned counsel for the respondent therein that the High Court has no pecuniary jurisdiction to entertain the petition, the value of the claims being below Rs. 2 Crores.
22. In the case of Proddatur Cable TV Digi Services vs. Siti Cable Network Ltd. (supra), it was inter alia held by Delhi High Court that following ratio of the judgment in the case of Perkins (supra), it is clear that a unilateral appointment by an authority which is interested in the outcome or decision of the dispute is impermissible in law. When the Arbitration Clause empowers the Company to appoint Sole Arbitrator, it can hardly be disputed OMP(T) Comm. No. 07/2019 Mukund Kumar Chandan & Anr. Vs L&T Housing Finance Ltd. & Anr. Page 12 of 19 that the Company acting through its Board of Directors will have an interest in the outcome of the dispute. The appellant had filed the petition under Section 14 and 15 of the Act seeking declaration that the mandate of the arbitrator appointed by the respondent be terminated and an arbitrator be appointed by High Court in the provisions of the Act. Following ratio of the judgments in Perkins (supra) and Bharat Broadband Network Limited (supra), the mandate of the Arbitrator was found terminated de jure and since the present arbitrator had become unable to perform her functions as an arbitrator, her mandate was terminated and another independent Sole Arbitrator was appointed by Delhi High Court to substitute the previous arbitrator.
23. In the case of M/s Omcon Infrastructure Pvt. Ltd. Vs India Bulls Investment Advisors Ltd (supra) decided on 01/09/2020 by Hon'ble Ms. Justice Rekha Palli, wherein petition was filed under Section 14 and 15 of the Act, seeking termination of the mandate of Ld. Arbitrator unilaterly appointed by the respondent and also quashing of order passed by Ld. Arbitrator, rejecting the application of petitioner under Section 12 of the Act, the ratio of the decision in case of Perkins (supra) was applied and held that once the Managing Director of the respondent Company was ineligible to appoint the arbitrator, the same would also bar the Company itself from unilaterally appointing the sole arbitrator and reference was also made to the decision of Proddatur Cable TV Digi Services (supra). Therein also the mandate of the Ld. Arbitrator was terminated and new independent Sole Arbitrator was appointed by Delhi High Court.
24. In the case of Lalitkumar (supra), the Supreme Court inter alia held that the question whether the mandate of the arbitrator stood legally terminated or not can be examined by the court "as provided under Section 14(2)" of the Act. Also was stated therein that the explanation "Court" was a defined expression under Section 2(1)(e) of the Act. The appellants therein were given liberty to approach the appropriate court for determination of the OMP(T) Comm. No. 07/2019 Mukund Kumar Chandan & Anr. Vs L&T Housing Finance Ltd. & Anr. Page 13 of 19 legality of the termination of the mandate of the arbitral tribunal, which in turn was based upon an order dated 29/10/2007 by which the arbitral proceedings were terminated by the Presiding Arbitrator as for more than 4 years the matter was pending and fees of Ld. Arbitrator were not paid despite directions.
25. In the case of Doshion Private Ltd (supra), the Principal Civil Court of the District alone had the original jurisdiction and Rajasthan High Court had held that the party has to apply to such court for seeking termination of the mandate of the arbitrator on the grounds referred to in clause (a) of sub Section (1) of Section 14 of the Act.
26. In the case of Rahul Somani & Ors. Vs Ramgopal Somani & Ors., (supra), Chhattisgarh High Court observed that neither under Madhya Pradesh Reorganization Act, 2000 nor under any other constitutional mandate, Chhattisgarh High Court had been clothed with the ordinary original civil jurisdiction; so the "Court" as defined in Section 2(1)(e) (i) of the Act would mean Principal Civil Court of original jurisdiction for adjudication of the dispute with respect to termination of mandate of the arbitrator under Section 14 of the Act.
27. In the case of DDA vs M/s Tara Chand Sumit Construction Company (supra), Delhi High Court interpreted sub Section (1) of Section 2 of the Act with respect to defining of Court and observed that sub Section (1) of Section 2 begins with the expression "in this part, unless the context otherwise requires". Therein it was interpreted that a Court which has the power to appoint an Arbitrator under Section 11 of the Act can only extend the mandate of the arbitrator under Section 29A of the Act as in the process of extending the mandate of the arbitrator under Section 29A of the Act, need may also arise for substitution of the arbitrator and there may be situation where conflict would arise between the powers of superior Courts to appoint Arbitrators under Section 11 of the Act and those of the Civil Court to OMP(T) Comm. No. 07/2019 Mukund Kumar Chandan & Anr. Vs L&T Housing Finance Ltd. & Anr. Page 14 of 19 substitute those Arbitrators under Section 29A of the Act. It was held therein inter alia that there was no merit in the contention of the Ld. Counsel for respondent that High Court had no pecuniary jurisdiction to entertain the petition for extension of mandate of arbitrator, value of claims being below Rs 2 crores. True that the interpretation of the term "Court" therein was in the context of Section 29A of the Act for extension of the mandate of the Arbitrator but fact remains that while extending the mandate of Arbitrator, there may be need to substitute an Arbitrator. It was also held therein that there was need to avoid conflict that would arise between the power of superior Courts to appoint Arbitrators under Section 11 of the Act and those of the Civil Court to substitute those Arbitrators under Section 29A of the Act as Section 11 of the Act confers power of appointment of Arbitrator only on the High Court or the Supreme Court, as the case may be.
28. By Section 9 of The Arbitration and Conciliation (Amendment) Act 2015 {in short Act 3 of 2016} Section 14 of the Principal Act has been amended. Prior to said amendment, the mandate of legislature with respect to the said provision was only for termination of mandate of an Arbitrator. After said amendment, the mandate of legislature is not only for making provision for termination of the mandate of an Arbitrator but also that he will be substituted by another Arbitrator, on existence of certain pre-conditions, as detailed therein and as elicited herein before which would be implicit clear by the following reproduction of Section 14 before amendement by Act 3 of 2016 and after amendment by Act 3 of 2016.
29. Section 14 (1) of the Act before amendement by Act 3 of 2016 reads as under:
"14. Failure or impossibility to act.- (1) The mandate of an arbitrator shall terminate if--
(a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and
(b) he withdraws from his office or the parties agree to the OMP(T) Comm. No. 07/2019 Mukund Kumar Chandan & Anr. Vs L&T Housing Finance Ltd. & Anr. Page 15 of 19 termination of his mandate"
30. Section 14 (1) of the Act after amendment by Act 3 of 2016 reads as under:
"14. Failure or impossibility to act.- (1) The mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator, if--
(a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and
(b) he withdraws from his office or the parties agree to the termination of his mandate"
31. On the analogy of interpretation of Section 2(1)(e) of the Act for interpreting the term "Court" adopted by Delhi High Court in the case of DDA vs M/s Tara Chand Sumit Construction Company (supra), when the elicited mandate of legislature amended by Act 3 of 2016 is to be seen, then it makes clear that not only adjudicating authority has to adjudicate whether the mandate of an Arbitrator shall terminate as per Section 14 (1)and (2) of the Act but in case of such termination then there has to be a substitution by another Arbitrator. In terms of law laid by Delhi High Court in the case of DDA vs M/s Tara Chand Sumit Construction Company (supra), such substitution of an Arbitrator is to be so done by the Court which has the power to appoint an Arbitrator under Section 11 of the Act and not the Civil Courts. The mandate of legislature, as elicited and discussed above, in terms of the amended Section 14 of the Act by Act 3 of 2016 also makes it vivid and clear that when the mandate of an Arbitrator shall terminate, he shall be substituted by another Arbitrator if he becomes de-jure or de-facto unable to perform his functions. It has been the contention of the petitioner through Counsel that Ld. Sole Arbitrator, respondent no. 1 became de-jure and de-facto unable to perform his functions. Petitions under Section 11 of the Act are filed in Delhi High Court irrespective of the pecuniary jurisdiction of the Court and applying the same analogy in the petition under Section 29A of the Act, in the case of DDA vs M/s Tara Chand Sumit Construction Company (supra), Delhi OMP(T) Comm. No. 07/2019 Mukund Kumar Chandan & Anr. Vs L&T Housing Finance Ltd. & Anr. Page 16 of 19 High Court inter alia held that there was no merit in the contention of Ld. Counsel for the respondent therein that High Court had no pecuniary jurisdiction to entertain the petition, value of the claims being below Rs 2 crores.
32. True that unilateral appointment by an authority which is interested in the outcome or decision of the dispute is impermissible in law, as per law laid in the cases of Perkins (supra), Bharat Broadband Network Limited (supra) and Proddatur Cable TV Digi Services (supra), but fact also remains that in an event when the Arbitrator becomes unable to perform his /her functions as an Arbitrator, on finding the mandate of such Arbitrator terminated de jure, then while terminating the mandate of such Arbitrator; in the same exercise another independent Sole Arbitrator needs to be appointed to substitute the previous Arbitraror, as per the amended Section 14 of the Act subsequent to the amendment by Act 3 of 2016. This Court has no power under Section 11 of the Act to appoint the Arbitrator; under Section 29A of the Act to extend the period for making an award, also to substitute an Arbitrator, in terms of law laid in the case of DDA vs M/s Tara Chand Sumit Construction Company (supra).
33. In view of fore going discussions, applying the analogy adopted in the case of DDA vs M/s Tara Chand Sumit Construction Company (supra) by Delhi High Court, I am of the considered opinion that the mandate of legislature, consequent to amendment by Act 3 of 2016 in Section 14 of the Act, is that the Court considering the termination of the mandate of an Arbitrator on existence of any of the pre-conditions laid in sub section (1) and (2) of Section 14 of the Act, also at the same time needs to substitute such Arbitrator by another Arbitrator. This Court has no power to substitute the present Arbitrator by another Arbitrator. In this fact of the matter, the present petition is not maintainable in this Court and is hereby dismissed.
OMP(T) Comm. No. 07/2019 Mukund Kumar Chandan & Anr. Vs L&T Housing Finance Ltd. & Anr. Page 17 of 1934. Order dated 30/08/2019 of Ld. Additional District Judge-04 (in short ADJ-
04), New Delhi District, Patiala House Courts inter alia finds mention for summoning the arbitral record. Later thereto the arbitral record proceedings were received in the Court of Ld. Additional District Judge-04, New Delhi District, Patiala House Courts. Supreme Court in the case of Union of India vs. Popular Constructions, (2001) 8 SCC 470 and in case of Consolidated Engineering Enterprises vs. Irrigation Department, (2008) 7 SCC 169 has held that Section 5 of the Limitation Act is not applicable to Section 34 (3) of the Arbitration and Conciliation Act, 1996 in view of express inclusion within the meaning of Section 29(2) of the Limitation Act, 1963. Supreme Court also held in the case of Simplex Infrastructure Ltd. vs Union of India, (2019) 2 SCC 455 that Section 5 of the Limitation Act 1963 has no application to an application challenging an arbitral award under Section 34 of The Act. Fact also remains that Section 43 (1) of the Act also provides that the Limitation Act 1963 shall apply to arbitrations as it applies to proceedings in Court. Accordingly, Section 14 of the Limitation Act provides for exclusion of time of proceeding bonafide in Court without jurisdiction. Arbitral proceedings record was requisitioned by my Ld. Predecessor, Presiding Officer of the Court of ADJ-04, New Delhi District and remained in the court after it was submitted as aforesaid.
35. This matter was transferred to this Court from the Court of Ld. ADJ-04, New Delhi District on 15/01/2020. I was on medical leaves from 16/12/2019 till 13/03/2020. Due to outbreak of Covid-19 pandemic, the functioning of District Courts was suspended w.e.f. 23.03.2020 to 31.07.2020 by Hon'ble High Court of Delhi vide order(s) dated 23.03.2020, 25.03.2020, 15.04.2020, 02.05.2020, 16.05.2020,21.05.2020, 29.05.2020, 13.06.2020, 29.06.2020 and 13.07.2020. Hence, in compliance of said orders, the present matter was adjourned enbloc on the following dates viz,: 08/04/2020 and 08/05/2020. On 30/06/2020 and on subsequent dates of hearings, for one or other reasons including the exigencies arising out of spread of Covid 19 Pandemic, adjournments were OMP(T) Comm. No. 07/2019 Mukund Kumar Chandan & Anr. Vs L&T Housing Finance Ltd. & Anr. Page 18 of 19 sought and taken by one or the other Counsel for the parties and finally the arguments were addressed on 04/01/2021, so the matter was fixed for orders for today i.e., 23/01/2021.
36. E-mail id of Ld. Sole Arbitrator be provided by the parties/Counsel to the dedicated e-mail id of this Court to facilitate sending of this judgment to Ld. Sole Arbitrator for obtaining the arbitral proceedings record from the Ahlmad against proper receipt at earliest. Besides that copy of short order be sent by post by Ahlmad to Ld. Sole Arbitrator to collect the arbitral proceedings record as aforesaid. Ahlmad is directed to hand over the arbitral proceedings record to Ld. Sole Arbitrator against proper receipt.
37. The parties are left to bear their own costs.
38. File be consigned to record room.
ANNOUNCED IN (GURVINDER PAL SINGH)
OPEN COURT District Judge (Commercial Court)-02
on 23rd January, 2021. Patiala House Court, New Delhi.
(Deepika)
OMP(T) Comm. No. 07/2019 Mukund Kumar Chandan & Anr. Vs L&T Housing Finance Ltd. & Anr. Page 19 of 19