Bombay High Court
Bharat Petroleum Corporation Ltd. vs Mrs. Anuradha Ajit Malgaonkar And Anr. on 21 June, 1996
Equivalent citations: 1997(2)BOMCR86, 1997 A I H C 245, (1996) 2 GOALT 74, (1997) 1 ARBILR 550, (1997) 2 BOM CR 86
Author: R.K. Batta
Bench: R.K. Batta
JUDGMENT R.K. Batta, J.
1. The short point for consideration in this revision is when an appointed Arbitrator under the Agreement neglects or refuses to act and the party serves a written notice to concur the appointment or in supplying the vacancy and the Arbitrator named in the Agreement foes not concur with the appointment, or nominate any other Arbitrator in terms of the Agreement within 15 days of such notice, whether the Court under section 8(2) can appoint an Arbitrator who shall have like power to act in the Reference and to make an award as if he had been appointed by consent of all parties.
2. Facts giving rise to the said issue may now briefly be noted. The petitioners had entered into an agreement with respondent No. 1 vide Agreement dated 21-5-86 wherein respondent No. 1 was appointed as distributor in the sale of liquified petroleum gas within Ponda Muncipal limit for a period of ten years with effect form 25-10-86. Disputes arose between the parties and the petitioners terminated the said agreement vide letter dated 7-2-92. By letter dated 19-7-93 respondent No. 1 informed the Marketing Director of the petitioners that they did not accept the termination order since it was illegal, arbitrary and improper and by the same letter she called upon the Director (Marketing) of the petitioners to either appoint himself or nominate any other officer as sole Arbitrator to decide the dispute in terms of arbitration Clause 38(a) of Agreement dated 21-5-86. By this notice Director (Marketing) of the petitioners was called upon to appoint Arbitrator within 15 days. Director (Marketing) did not appoint any Arbitrator within 15 days, but by letter dated 30-9-93 appointed respondent No. 2 as Arbitrator in the matter. The contention of respondent No. 1 is that the Director (Marketing) had no power to appoint the said Arbitrator after the expiry of 15 days and it is only the Civil Court which has power under section 8(2) of the Arbitration Act who can appoint Arbitrator in such a contingency.
3. The trial Judge after going through the relevant clause of the Agreement and placing reliance on the judgment of the apex Court in Nandyal Co-op. Spinning Mills Ltd. v. K.V. Mohan Rao, came to the conclusion that Director (Marketing) had no power to appoint Arbitrator after the expiry of 15 days period and that the jurisdiction to appoint the Arbitrator vested in the Court in terms of section 8(2) of the said Act. Accordingly, the Court appointed Shri Ajit Agni, Advocate (as he then was, since at present he is Chairman, Industrial Tribunal, Goa).
4. Learned Advocate Shri G. Tamba relying upon G. Ramachandra Reddy and Co. v. Chief Engineer, Madras Zone, Military Engineering Service, , Bhupinder Singh Bindra v. Union of India and another, and M/s. Indian Drugs & Pharmaceuticals Ltd. v. M/s. Indo Swiss Synthetics Gem Manufacturing Co. Ltd. and others, submitted that the trial Court had no jurisdiction to appoint an Arbitrator against the terms of Agreement and the terms of Agreement could not be given a go-bye.
5. Learned Advocate Shri Diniz submitted before me that the case under consideration is fully covered by the judgment of the apex Court in Nandyal Co-op. Spinning Mills Ltd. v. K.V. Mohan Rao, and that there is no error of jurisdiction so as to interfere in the revisional jurisdiction of this Court.
6. Clause 28 of the Agreement empowers the petitioner to terminate the agreement on the happening of certain contingencies Clause 38(a) provides for arbitration in case of disputed or differences and it reads as under :-
"38(a) Any dispute or difference of any nature whatsoever any claim, cross-claim, counter-claim or set off of the Corporation against the Distributor or regarding any right, liability, act, omission or account of any of the parties hereto arising out of or in relation to this agreement shall be referred to the Sole Arbitration of the Director (Marketing) of the Corporation or of some Officer of the Corporation who may be nominated by the Director (Marketing). The Distributor will not be entitled to raise any objection to any such arbitrator on the ground that the arbitrator is an Officer of the Corporation so that he has dealt with the matters to which the contract related or that in the course of his duties as an Officer of the Corporation he had expressed views on all or any other matters in dispute or difference. In the event of the arbitrator to whom the matter is originally referred being transferred or vacating his officer or being unable to act for any reason, the Director (Marketing) as aforesaid at the time of such transfer, vacation of office or inability to act may in the discretion of the Director (Marketing) designate another person to act as arbitrator in accordance with the terms of the agreement to the end and intent that the original Arbitrator shall be entitled to continue the arbitration proceedings notwithstanding his transfer or vacation of officer as an Officer of the Corporation if the Director (Marketing) does not designate another person to act as arbitrator on such transfer, vacation of office or inability of original arbitrator. Such persons shall be entitled to proceed with the reference form the point at which it was left by his predecessor. It is also a term of this contract that no person nominated by such Director (Marketing) of the Corporation as aforesaid shall act as arbitrator hereunder. The award of the arbitrator so appointed shall be final conclusive and binding on all parties to the agreement subject to the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof and the rules made thereunder for the time being in force shall apply to the arbitration proceedings under this clause."
This clause thus provides for sole arbitration of Director (Marketing) of the petitioners or of some officer of the petitioners who may be nominated by Director (Marketing). The respondent No. 1 in this case had disputed the termination of the agreement and had invoked clause 38(a) of the said Agreement for arbitration. Respondent No. 1 wrote to the Director (Marketing) of the petitioners on 19th July, 1993 invoking the said clause 38(a) and had called upon the Director of Marketing of the petitioners to either appoint himself or to nominate any officer in terms of the said clause to act as sole arbitrator. She also specifically asked the Director (Marketing) to act within 15 days of the receipt of the said notice. Director (Marketing) did not act within 15 days that he nominated respondent No. 2 as an arbitrator in the matter.
7. At this stage it is necessary to refer to the relevant provisions of section 8 which would come into play. Section 8(1)(b) and Section 8(2) are material for arriving at decision on the point involved in this revision. Section 8(1)(b) lays down that if any appointed arbitrator neglects or refuses to act and does not supply the vacancy any party may serve written notice on the arbitrator to concur the appointment or in supplying the vacantly. Section 8(2) lays down that if the appointment is not made within 15 clear days after the service of the said notice, the Court may, on the application of the party who gave notice and after giving the other party an opportunity of being heard, appoint an Arbitrator who shall have like power to act in the reference or to make an award as if he had been appointed by consent of all parties. Thus, if the requirements of section 8(1)(b) and 8(2) of the said Act are met, the Court shall be well within its discretion to appoint an Arbitrator. The facts of the case enumerated above do indicate that the said conditions were duly fulfilled and the Court had jurisdiction to appoint an Arbitrator which was done by the Court. Clause 38(a) in fact speaks of appointment of sole Arbitrator of Director (Marketing) of the petitioners or of some officer by the Corporation who may be nominated by him. While invoking the said clause the petitioners did ask that either he should act as Arbitrator in terms of clause 38(a) or alternatively he should nominate any officer of the petitioners. This was required to be done by the Director (Marketing) within 15 days of clear notice in terms of section 8(2) of the said Act and on his failure to do so he had been deprived of the said power to make any nomination. The nomination which was made by him after the expiry of 15 days was therefore not valid and the jurisdiction to appoint Arbitrator vested in the Court in terms of section 8(2) of the said Act.
8. The ruling of the apex Court in Nandyal Co-op. Spinning Mills Ltd. v. K.V. Mohan Rao, (supra) is directly applicable to the facts and circumstances of the case under consideration. In the said case before the Apex Court differences had arisen between the parties to the agreement and the respondent by letter dated 27th July, 1987 had requested the administrative head of the petitioners to appoint Arbitrator within 15 days from the date of its receipt. Clause 65 (1) of the Agreement between the parties gave such power to the administrative head of the petitioners. The petitioners did not reply within the stipulated period of 15 days or thereafter and the respondent approached the Court for appointment of an Arbitrator. It was held by the apex Court that the respondent had right in terms of the agreement between the parties to avail the remedy under section 8 of the Act and request the Court to appoint an Arbitrator. The following observations which are relevant for the case under consideration were made by the apex Court :--
"The application for appointment of an arbitrator is not maintainable when an arbitrator has already been appointed and the applicant has been informed of the said facts before the expiry of 15 days from the date of receipt of the notice, the administrative head of the appellant had abdicated himself of the power to appoint arbitrator under the contract. The Court gets jurisdiction to appoint an arbitrator in place of the contract by operation of Section 8(1)(a). Therefore, the contention that since the agreement postulated preference to arbitrator appointed by the administrative head of the appellant and if he neglects to appoint, the only remedy open to the contractor was to have recourse to civil suit without force. Under the contract the respondent contracted out from adjudication of his claim by a civil Court. Had the contract provided for appointment of a named arbitrator and the maned person was not appointed, certainly the only remedy left to the contracting party was the right to suit. That is not the case on hand. The contract did not expressly provide for the appointment of a named arbitrator. Instead power had been given to the administrative head of the appellant to appoint sole arbitrator. When he failed to do so within the stipulated period of 15 days enjoined under Section 8(1)(a), the terms of the contract (see para 4) to avail the remedy under Section 8(1)(a) and request the Court to appoint an arbitrator."
9. The ratio of the ruling in Nandyal Co-op. Spinning Mills Ltd. v. K.V. Mohan Rao, (supra) was followed by the Supreme Court in G. Ramachandra Reddy and Co. v. Chief Engineer, Madras Zone, Military Engineering Service, . The rulings upon which reliance has been placed by Advocate Shri Tamba are not attracted to the facts and circumstances of the case under reference and the said rulings do not in any manner help the petitioners.
10. Refusal to act in legal sense means denial to do something which one is obliged to do under the law. Such refusal may be by express terms or it may be inferred. The normal rule is that inference should not be readily raised but once the Court is satisfied that the Arbitrator has refused to discharge his obligations, then it is the statutory duty of the Court to intervene and to act in accordance with section 8(1)(b) of the Act. In the case under reference Director (Marketing) has refused to act upon notice given by respondent No. 1 under section 8(1)(b). Director (Marketing) neither indicated that he would act as Arbitrator in the matter in terms of the agreement nor did he nominate anyone in terms of the said agreement. Refusal to act is, therefore, apparent and, after the expiry of 15 days notice had lost the right to nominate respondent No. 2 as Arbitrator. The only course left for the Court was to appoint another Arbitrator in terms of section 8(2) of the said Act and the said order cannot be faulted with.
11. For the reasons mentioned above, the revision is hereby dismissed. Rule discharged accordingly. Stay granted on 24-11-1994 is vacated. Costs shall be borne by the petitioners.
Revision dismissed.