Allahabad High Court
Hamara Pump Mithoura Hpcl Petrol Pump ... vs Chairman-Cum-Managing Director ... on 13 December, 2017
Equivalent citations: AIRONLINE 2018 ALL 202
Author: Yashwant Varma
Bench: Yashwant Varma
HIGH COURT OF JUDICATURE AT ALLAHABAD AFR Court No. - 59 Case :- ARBITRATION AND CONCILI. APPL.U/S11(4) No. - 117 of 2017 Applicant :- Hamara Pump Mithoura Hpcl Petrol Pump Thru' Its Prop. Opposite Party :- Chairman-Cum-Managing Director Hindustan Petroleum & 2 Other Counsel for Applicant :- Tarun Varma Counsel for Opposite Party :- Vikas Budhwar Hon'ble Yashwant Varma,J.
Heard Shri Tarun Varma, learned counsel for the petitioner and Shri Vikas Budhwar, learned counsel for the respondent Nos. 1 and 2.
The prayer made in the application is for the appointment of an Arbitrator. The further prayer raised in the application is for a direction being issued to the Arbitrator to be appointed to adopt "fast track" proceedings as contemplated under Section 29-B and to make an award in terms of the provisions of Section 29-B (4).
The fact that there does exist an arbitration agreement is not in dispute. However for the purposes of evaluating the rival contentions, it would be apposite to extract the arbitration clause which reads thus.
"Any dispute or difference of any nature whatsoever or regarding any right, liability, act omission or account of any of the parties hereto arising out of or in relation to this agreement (other than those in respect of which the decision of any person is by the agreement expressed to be final and binding) shall be referred to the sole arbitration of the Chairman and Managing Director of the Corporation or some officer or retired officer of the Corporation or retired officer of other oil PSUs or retired Senior Central Government Officer who may be nominated by the Chairman and Managing Director. The dealer will not be entitled to raise any objection to any such arbitrator on the ground that the arbitrator is or was an officer and/or share holder of the Corporation or that he has to deal with or dealt with the matters to which the contract relates or that in the course of his duties as an officer of the Corporation he had expressed view on all or any of the matters in dispute or difference in the event of the arbitrator to whom the matter is originally referred vacating his office or being unable to act for any reason, the Chairman and Managing Director as aforesaid at the time of such vacation of office or inability to act, shall designate another person to act as Arbitrator in accordance with the terms of the agreement. Such person shall be entitled to proceed with the reference from the point at which it was left by his predecessor. It is also a term of this contract that no person other than the Chairman and Managing Director or a person nominated by such Chairman and Managing Director of the Corporation as aforesaid shall act as Arbitrator hereunder. The cost of arbitration shall be shared equally by the parties. 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 and Conciliation Act, 1996 or any statutory modification of or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceedings under this clause."
The fact that this clause was invoked by the applicant is not disputed. On the record is a communication dated 26 October 2015 issued by the Corporation appointing D.N. Krishnamoorthy, an officer of the Corporation as the sole Arbitrator to adjudicate upon the disputes and differences between parties. It would be relevant to pause here and note that consequent to the appointment of the concerned Arbitrator being perceived to have been effected by the provisions of Amending Act 2015 which came into force on 23 October 2015, the Corporation on 6 January 2016 addressed a communication to the applicant drawing its attention to the provisions of the Act as amended and seeking its consent to the appointment already made. This communication was obviously addressed bearing in mind the provisions of Section 12 (5) of the Act. The applicant does not dispute that such consent was in fact duly conveyed.
The sole Arbitrator upon receipt of the notice of his appointment addressed a notice to parties on 29 September 2016, directing them to file their statements of claim as well as reply to the claim and to complete pleadings. Upon receipt of the claims and replies, a further notice dated 7 October 2016 came to be issued calling upon the parties to appear before the Arbitral Tribunal to participate in the proceedings drawn up. On the record are also subsequent notices which have been issued by the Arbitrator for the purposes of concluding the adjudication process.
The cause on which the instant application appears to have been made is evident from the pleas taken in paragraph 15 of the application. In the application it is asserted that the proceedings as well as the time frame within which the award must be rendered would be governed by Section 29-A of the Act. It is contended that although the period prescribed for rendering award has come to an end, no award has been rendered and that therefore the mandate of the Arbitral Tribunal would be deemed to have come to an end. It is also asserted that till date neither the parties nor the Arbitrator has applied to the Court for extension of time to deliver award. It in this backdrop that the present application came to be preferred before this Court.
Upon notice, Shri Vikas Budhwar, learned counsel has filed a counter affidavit on behalf of the respondent Nos. 1 and 2 and has also been heard in opposition to the prayers made in this application. While the consideration of his oral submission is left over for recordal a little later, it would be relevant to note that the pleas taken in paragraphs 14 and 15 of the application have not been traversed nor is there an assertion that the Corporation or the Arbitrator has applied for extension of time to render award as contemplated under Section 29-A (3) and (5).
Shri Varma, who appears in support of the application has contended that the provisions of Sections 29-A and 29-B would clearly apply since they came into force on 23 October 2015 whereas admittedly the appointment was made on 26 October 2015. Referring to the statutory provisions aforementioned, Shri Varma stressed upon the fact that the mandate of the Arbitrator terminates if he fails to render award within a period of twelve months from the date when he enters upon the reference. He further submitted that although the applicant consented to the continuance of the named arbitrator as contemplated under Section 12 (5), this consent should and must be read and understood as being restricted to the issue of his appointment alone and cannot be viewed as extending to the non applicability of Section 29-A. He has also reiterated the pleas taken in the application to the extent that no person has applied to the Court for extension of the mandate of the appointed Arbitrator. He submits that since there cannot possible be any controversy with regard to the termination of mandate, this Court would be sufficiently empowered and conferred with authority to make an appointment under Section 11 of the Act.
Shri Budhwar, learned counsel appearing for the respondent Nos. 1 and 2 has, on the other hand, rested his case on the provisions of Section 21 and 85 of the Act to submit that proceedings in question would not stand governed by the provisions of Section 29-A and 29-B since the notice invoking arbitration clause had come to be issued prior to the promulgation of the amending Act. In his submission for the purposes of determining and considering as to when the provisions of Section 29-A and 29-B would apply, the Court must necessarily take recourse to the provisions of Sections 21 and 85. In substance, the contention was that Sections 29-A and 29-B would have no application to proceedings which would be deemed to have commenced on a date prior to the commencement of the Amending Act. In support of his submission Shri Budhwar has also placed reliance upon a decision of three learned Judges of the Supreme Court in Milkfood Ltd Vs. GMC Icecream (P) Ltd1. This decision, it must be noted, is an authority for the proposition that where proceedings of arbitration have commenced prior to the enforcement of the Act, they would be governed by the erstwhile statutory enactment and not the 1996 Act. It therefore strictly speaking has no application. It is these rival submissions which fall for consideration.
At the outset, the Court disposes of the prayer made by the applicant for fast tracking the arbitration proceedings as contemplated under Section 29-B. This prayer is clearly premature since there is neither an agreement between the parties for fast tracking the arbitral proceedings nor has the Court reached the stage of constituting an Arbitral Tribunal. As would be evident from a bare perusal of Section 29-B, the prayer to fast track has to be made by parties at any stage either before or at the time of constitution of the Arbitral Tribunal. This application has to be made in writing and is principally consensual. Before this Court, there is no consensus to fast tack the proceedings before the Arbitral Tribunal. In view thereof, the prayer to fast track cannot be granted by the Court in the absence of any consent having been expressed in this respect by the contesting parties.
This then takes the Court to consider the more substantial question and which is whether the mandate of the Arbitral Tribunal stands terminated and whether circumstances exist which would warrant this Court to effect the appointment by exercising its powers conferred by Section 11 (6) of the Act.
The fact that the Arbitrator came to be appointed on 26 October 2015 is admitted and is evident from the record. This appointment would therefore necessarily be recognised as having been made post the 2015 Amendment to the Act which came into force admittedly on 23 October 2015. For the purposes of considering and evaluating the submission of Shri Budhwar, it would be appropriate to extract Section 29-A which reads thus:-
"29A. Time limit for arbitral award. - (1) The award shall be made within a period of twelve months from the date the arbitral tribunal enters upon the reference.
Explanation.-- For the purpose of this sub-section, 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.
(2) 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.
(3) The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months.
(4) 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:
Provided that while extending the period under this sub-section, if the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five per cent. for each month of such delay.
(5) The extension of period referred to in sub-section (4) may be on the application of any of the parties and may be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court.
(6) While extending the period referred to in sub-section (4), it shall be open to the Court to substitute one or all of the arbitrators and if one or all of the arbitrators are substituted, the arbitral proceedings shall continue from the stage already reached and on the basis of the evidence and material already on record, and the arbitrator(s) appointed under this section shall be deemed to have received the said evidence and material.
(7) In the event of arbitrator(s) being appointed under this section, the arbitral tribunal thus reconstituted shall be deemed to be in continuation of the previously appointed arbitral tribunal.
(8) It shall be open to the Court to impose actual or exemplary costs upon any of the parties under this section.
(9) An application filed under sub-section (5) shall be disposed of by the Court as expeditiously as possible and endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party."
Sub section (1) of section 29A clearly postulates in unambiguous terms that the award has to be made within a period of twelve months from the date when the Arbitral Tribunal "enters upon the reference". Although the exact date when the Arbitrator was informed of his appointment is neither disclosed nor decipherable from the material on record, his appointment would have to be recognised as having fell post 2015 and prior to 29 September 2016 when the first notice appears to have been issued by the Arbitral Tribunal.
On a plain construction of sub section (1) it is evident that the period of twelve months has to be computed from the date when the Arbitrator enters upon the reference. The Explanation appended to sub section (1) then postulates the meaning which must be ascribed to the phrase "enters upon the reference". The Explanation reads thus:-
"Explanation.-- For the purpose of this sub-section, 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."
Therefore the starting point for the purposes of computing the period of 12 months is necessarily the date on which the arbitrator/s receives notice of his/their appointment. In view thereof this Court cannot accept the interpretation which has been advocated by Shri Budhwar insofar as the provisions of Section 29-A(1) is concerned. It is relevant to note that sub section (1) of Section 29-A does not mandate the computation of twelve months from the date when the arbitration proceedings would be deemed to have commenced. The starting point as per sub section (1) has been clearly and unambiguously provided to be "from the date the arbitral tribunal enters upon the reference"
However the prayer made in this application deserves rejection on a more fundamental score which was neither advocated nor urged. Admittedly Sections 29 A and B were introduced by virtue of the 2015 Amendment [Act 3 of 2016] which in terms of section 1(2) thereof was deemed to have come into force from 23 October 2015. The key to the issue which arises for determination is section 26 of the Amending Act. Section 26 is extracted herein below:-
"26. Act not to apply to pending arbitral proceedings. - Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of Section 21 of the principal Act, before this commencement of this Act unless the parties otherwise agree but this Act shall in reply to arbitral proceedings commenced on or after the date of commencement of this Act."
As is evident from a reading of the said provision, the legislature has clearly provided that nothing in the Amendment Act 2015 [Act 3 of 2016] would apply to arbitration proceedings commenced in accordance with provisions of Section 21 of the principal Act before the commencement of "this Act". The words "this Act" clearly refer to Act 3 of 2016. The position which therefore obtains is that although Sections 29-A and Section 29-B would stand engrafted and incorporated in the parent statute with retroactive effect from 23 October 2015, in terms of Section 26 of the Amending Act, these would neither apply to nor eclipse proceedings which had commenced prior to the commencement of the Amending Act, namely 23 October 2015.
The commencement of arbitration proceedings has to be necessarily adjudged with reference to section 21 of the Act. The Court would therefore have to consider as to when arbitration proceedings commenced in the facts of the present case. The Court notes that the referral of disputes to arbitration was admittedly sought vide communication dated 5 October 2015. In terms of Section 21, therefore, the arbitration proceedings would be deemed to have commenced on 5 October 2015. The proceedings in question have evidently commenced prior to the Amending Act coming into force on 23 October 2015. The said appointment and continuance of the Arbitrator cannot be said to have been adversely impacted or annulled by virtue of the provisions of section 29 A. As a necessary corollary thereof it cannot be said that the mandate of the Arbitrator stands terminated on account of a failure to render award within a period of twelve months. Since there is no evident termination of mandate, no cause arises for this Court to invoke its jurisdiction conferred by section 11 of the Act.
The application is accordingly dismissed.
Order Date :- 13.12.2017 (Yashwant Varma, J)
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