Telangana High Court
Harpeet Singh Chhabra vs Mrs Suneet Kaur Sahney on 7 September, 2018
IN THE HIGH COURT OF JUDICATURE AT HYDERABAD
FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA
PRADESH
*****
I.A.No. 5 of 2018
In/and
C.O.M.C.A.No. 2 of 2018
Between:
M/s. Harpreet Singh Chhabra and four others
..... APPELLANTS
VERSUS
Mrs. Suneet Kaur Sahney and eight others ..... RESPONDENTS
JUDGMENT PRONOUNCED ON : 07.09.2018
HON'BLE SRI JUSTICE C.PRAVEEN KUMAR
AND
HON'BLE SMT. JUSTICE T. RAJANI
1. Whether Reporters of Local : Yes/No
newspapers may be allowed to see
the Judgment ?
2. Whether the copies of judgment may : Yes/No
be marked to Law Reporters/Journals
3. Whether Their Ladyship/Lordship wish : Yes/No
to see the fair copy of judgment
____________________
C. PRAVEEN KUMAR, J
_____________
T. RAJANI, J
2
HON'BLE SRI JUSTICE C.PRAVEEN KUMAR
AND
HON'BLE SMT. JUSTICE T. RAJANI
I.A.No. 5 of 2018
In/and
C.O.M.C.A.No. 2 of 2018
ORDER :
%Dated 07.09.2018 # M/s. Harpreet Singh Chhabra and four others ..... APPELLANTS VERSUS $ Mrs. Suneet Kaur Sahney and eight others ..... RESPONDENTS ! Counsel for Appellant : SRI M.V.PRATAP KUMAR ^ Counsel for Respondents : SRI B.CHANDRASEN REDDY < GIST :
> HEAD NOTE :
? Cases referred :
1. (1997) 3 SCC 261
2. (2003) 6 SCC 641
3. (2003) 6 SCC 675
4. (2010) 8 SCC 329
5. (2007) 9 SCC 625
6. 2013 SCC online Bomb. 547
7. 2008 (5) MHLJ 749
8. (1995) 5 SCC 329
9. (2005) 1 MHLJ 884
10. MANU/MH/0504/2012
11. (2004) 3 ARBLR 146 (Delhi)
12. (2010) 2 SCC 385
13. 2015 (2) ARBLR 242 (Delhi)
14. (2018) SCC Online SC 232
15. (2007 (1) Arb.LR 564 (Gauhati) (DB)
16. (2008) 6 Bombay CR 611
17. AIR 2015 Calcutta 24
18. AIR 2016 Cal. 213
19. (2016) 6 ARBLR 426 (Delhi) 3 HON'BLE SRI JUSTICE C.PRAVEEN KUMAR AND HON'BLE SMT. JUSTICE T. RAJANI I.A.No.1 of 2018 In/and C.O.M.C.A.No. 2 of 2018 JUDGMENT: (per Hon'ble Sri Justice C.Praveen Kumar)
1) The termination of the mandate of the Arbitrator due to non-completion of the arbitration proceedings within the time fixed by the High Court, is the subject matter of challenge in the present case.
2) Heard Sri S.Ravi, learned Senior Counsel appearing for Sri M.V.Pratap Kumar, learned counsel appearing for the petitioners and Sri Sandeep Sharma, for Sri B.Chandrsen Reddy, learned counsel appearing for the respondents.
3) By an order dated 29.12.2017, the Judge, Commercial Court-cum-XXIV Additional Chief Judge, City Civil Court, Hyderabad, while terminating the mandate of the arbitrator directed the parties to approach the Hon'ble High Court for appointment of an arbitrator, under Section 15 (2) of the Arbitration and Conciliation Act, 1996 (for short "the Arbitration Act"). Assailing the same, the petitioners herein initially filed an appeal under Section 13 (1) of the 4 Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (for short "the Commercial Courts Act") on 05.03.2018 after obtaining a certified copy of the Order. Though the appeal was numbered, but realizing that an appeal will not lie against the said order filed I.A.No.5 of 2018 under Section 151 of C.P.C., seeking conversion of the appeal into a Civil Revision Petition under Article 227 of the Constitution of India. It is pleaded that filing of an appeal is a bonafide mistake and that grave prejudice would be caused if the petitioners are not allowed to agitate their grievance by converting the appeal into revision.
4) The same was opposed contending that in view of Section 8 of the Commercial Courts Act, no revision shall be entertained against an interlocutory order of Commercial Court including an order on the issue of jurisdiction, and any such challenge, subject to provision of Section 13 of the Commercial Courts Act, shall be raised only in an appeal against the decree of the Commercial Court.
5) Section 13 of the Commercial Courts Act postulates that any person aggrieved by any of the decision of the Commercial Court or Commercial Division of High Court may appeal to the Commercial Appellate Division of that High 5 Court within a period of 60 days from the date of judgment or the order, as the case may be. Provided that an appeal shall lie from such orders passed by a Commercial Division or a Commercial Court that are specifically enumerated under Order 43 of C.P.C. as amended by the Commercial Courts Act and Section 37 of the Arbitration Act. It appears that the present application seeking conversion is filed on a premise that an appeal shall lie from the orders passed by the Commercial Court that are specifically enumerated under Section 43 C.P.C. or under Section 37 of the Arbitration and Conciliation Act, 1996 only.
6) After considering the law on the subject and also the power of the Court under Article 227 of the Constitution of India, the Constitution Bench of the Apex Court in L.Chandra Kumar v. Union of India1 held that the jurisdiction conferred on the Supreme Court under Article 32 of the Constitution of India and on the High Courts under Articles 226 and 227 of the Constitution is a part of the basic structure of the Constitution, forming its integral and essential feature, which cannot be tampered with much less taken away even by constitutional amendment, not to speak of a parliamentary legislation.
1 (1997) 3 SCC 261 6
7) In State v. Navjot Sandhu2 the Apex Court held that the jurisdiction under Article 227 cannot be limited or fettered by any Act of the state Legislature; the supervisory jurisdiction is wide and can be used to meet the ends of justice, also to interfere even with an interlocutory order, but however expressed that the said power must be exercised sparingly, only to move subordinate courts and Tribunals within the bounds of their authority to see that they obey the law. The Apex Court further held that the power is not available to be exercised to correct mere errors (whether on the facts or laws) and also cannot be exercised "as the cloak of an appeal in disguise".
8) In Suryadev Rai v. Ram Chander Rai and others3 the Apex Court reiterated the principle laid down in the judgments referred to above, and held as under:
"We are of the opinion that the curtailment of revisional jurisdiction of the High Court does not take away - and could not have taken away - the constitutional jurisdiction of the High Court to issue a writ of certiorari to a civil court nor the power of superintendence conferred on the High Court under Article 227 of the Constitution is taken away or whittled down. The power exists, untrammelled by the amendment in Section 115 of the CPC, and is 2 (2003) 6 SCC 641 3 (2003) 6 SCC 675 7 available to be exercised subject to rules of self discipline and practice which are well settled."
9) In Shalini Shyam Shetty and another v. Rajendra Shankar Patil4 , after considering the history the power of superintendence under article 227 of the Constitution of India, held as under:
"62. On an analysis of the aforesaid decisions of this Court, the following principles on the exercise of High Court's jurisdiction under Article 227 of the Constitution may be formulated:
(a) A petition under Article 226 of the Constitution is different from a petition under Article 227. The mode of exercise of power by High Court under these two Articles is also different.
(b) In any event, a petition under Article 227 cannot be called a writ petition. The history of the conferment of writ jurisdiction on High Courts is substantially different from the history of conferment of the power of Superintendence on the High Courts under Article 227 and have been discussed above.
(c) High Courts cannot, on the drop of a hat, in exercise of its power of superintendence under Article 227 of the Constitution, interfere with the orders of tribunals or Courts inferior to it. Nor can it, in exercise of this power, act as a Court of appeal over the orders of Court or tribunal subordinate to it.
In cases where an alternative statutory mode of 4 (2010) 8 SCC 329 8 redressal has been provided, that would also operate as a restrain on the exercise of this power by the High Court.
(d) The parameters of interference by High Courts in exercise of its power of superintendence have been repeatedly laid down by this Court. In this regard the High Court must be guided by the principles laid down by the Constitution Bench of this Court in Waryam Singh (AIR 1954 SC 215) and the principles in Waryam Singh (supra) have been repeatedly followed by subsequent Constitution Benches and various other decisions of this Court.
(e) According to the ratio in Waryam Singh (supra), followed in subsequent cases, the High Court in exercise of its jurisdiction of superintendence can interfere in order only to keep the tribunals and Courts subordinate to it, `within the bounds of their authority'.
(f) In order to ensure that law is followed by such tribunals and Courts by exercising jurisdiction which is vested in them and by not declining to exercise the jurisdiction which is vested in them.
(g) Apart from the situations pointed in (e) and (f), High Court can interfere in exercise of its power of superintendence when there has been a patent perversity in the orders of tribunals and Courts subordinate to it or where there has been a gross and manifest failure of justice or the basic principles of natural justice have been flouted.
(h) In exercise of its power of superintendence High Court cannot interfere to correct mere errors of law 9 or fact or just because another view than the one taken by the tribunals or Courts subordinate to it, is a possible view. In other words the jurisdiction has to be very sparingly exercised.
(i) High Court's power of superintendence under Article 227 cannot be curtailed by any statute. It has been declared a part of the basic structure of the Constitution by the Constitution Bench of this Court in the case of L. Chandra Kumar vs. Union of India & others reported in (1997) 3 SCC 261 and therefore abridgement by a Constitutional amendment is also very doubtful.
(j) It may be true that a statutory amendment of a rather cognate provision, like Section 115 of the Civil Procedure Code by the Civil Procedure Code (Amendment) Act, 1999 does not and cannot cut down the ambit of High Court's power under Article
227. At the same time, it must be remembered that such statutory amendment does not correspondingly expand the High Court's jurisdiction of superintendence under Article 227.
(k) The power is discretionary and has to be exercised on equitable principle. In an appropriate case, the power can be exercised suo motu.
(l) On a proper appreciation of the wide and unfettered power of the High Court under Article 227, it transpires that the main object of this Article is to keep strict administrative and judicial control by the High Court on the administration of justice within its territory.
10
(m) The object of superintendence, both administrative and judicial, is to maintain efficiency, smooth and orderly functioning of the entire machinery of justice in such a way as it does not bring it into any disrepute. The power of interference under this Article is to be kept to the minimum to ensure that the wheel of justice does not come to a halt and the fountain of justice remains pure and unpolluted in order to maintain public confidence in the functioning of the tribunals and Courts subordinate to High Court.
(n) This reserve and exceptional power of judicial intervention is not to be exercised just for grant of relief in individual cases but should be directed for promotion of public confidence in the administration of justice in the larger public interest whereas Article 226 is meant for protection of individual grievance. Therefore, the power under Article 227 may be unfettered but its exercise is subject to high degree of judicial discipline pointed out above.
(o) An improper and a frequent exercise of this power will be counter-productive and will divest this extraordinary power of its strength and vitality."
10) The issue raised in the instant case as to the maintainability of the Civil Revision Petition under Article 227 of the Constitution of India, vis-à-vis Section 8 and 13 of the Commercial Courts Act, 2015, came up for consideration recently before a Bench of Gujarath High Court in State of Gujarat v. Union of India (R/Special Civil Application No.737 of 2018). It was also a case where a preliminary 11 objection was raised as to the power of High Court under Article 227 of the Constitution of India to entertain a Civil Revision Petition against an order passed by the Commercial Court. Referring to the judgments of the Apex Court on the issue, the Bench of Gujarat High Court held as under:
"Considering the law laid down by the Apex Court, we are of the opinion that bar contained under Section 8 of the Commercial Courts Act shall not affect the jurisdiction of the High Court under Article 227 of the Constitution of India. If the contention on behalf of the respondents that considering Section 8 of the Commercial Courts Act, even the writ jurisdiction under Article 227 of the Constitution of India is barred, in that case, such a provision would suffer from the vice of unconstitutionality as observed by the Hon'ble Supreme Court in the aforesaid decisions. The power vested in the High Courts to exercise judicial superintendence over the decision of the Courts and Tribunals within their respective jurisdictions is part of the basic structure of the Constitution and no legislature can take away such power of superintendence conferred under Article 227 of the Constitution of India. It is required to be noted that therefore, even the legislature, while enacting Section 8 of the Commercial Courts Act, seems to have wisely not used the word "maintainable" but has used the word "entertained".
At this stage, it is also required to be noted that where the statute specifically provided that against the decision of the Tribunal, only an appeal under Article 136 of the Constitution before the Hon'ble Supreme Court would be maintainable, the Hon'ble 12 Supreme Court in the case of L.Chandra Kumar v. Union of India and others (supra) has specifically observed and held that the powers of the supervisory jurisdiction of the High Court under Article 227 of the Constitution against the decision of the Tribunals shall still be available and the aggrieved party can approach the High Court under Article 227 of the Constitution. Therefore, it is observed and held that Section 8 of the Commercial Courts Act shall not affect the powers of the High Court under Article 227 of the Constitution of India against the order passed by the Commercial Court. However, at the same time, the powers under Article 227 of the Constitution of India must be exercised sparingly and in exceptional cases only, more particularly, looking to the object and purpose of Section 8 of the Commercial Courts Act, ie., speedy disposal of commercial disputes."
11) In view of the judgments referred to above the argument that the High Court cannot entertain a Civil Revision Petition under Article 227 of the Constitution of India in view of Section 8 of the Act, cannot be accepted.
12) One other objection, which came to be raised is that if revisions are sought to be entertained under Article 227 of the Constitution of India, the purpose for which the Commercial Courts Act has been enacted would get defeated. In other words it is pleaded that floodgates would be opened permitting every order passed by the Commercial 13 Court be challenged under Article 227 of the Constitution of India.
13) In Coal India Ltd. And others v. Saroj Kumar Mishra5 the Apex Court observed that merely because there is possibility of flood-gate litigation, a valuable right of a citizen cannot be taken away. In para No.19, the Apex Court observed as under:
"19. The floodgate argument also does not appeal to us. The same appears to be an argument of desperation. Only because, there is possibility of floodgate litigation, a valuable right of a citizen cannot be permitted to be taken away. This Court is bound to determine the respective rights of the parties."
14) It is also to be noted that every application filed under Article 227 of Constitution of India shall not be entertained. In fact, the law does not contemplate that a Civil Revision Petition under Article 227 of the Constitution of India is a statutory right which should be entertained. As observed by us earlier, in Surya Dev Rai case (3 supra) the Hon'ble Supreme Court has observed that care, caution and circumspection needs to be exercised when the supervisory jurisdiction is sought to be invoked, during the pendency of any suit or proceedings in a subordinate Court and the error though calling for correction is yet capable of being 5 (2007) 9 SCC 625 14 corrected and the conclusion of the proceedings in an appeal or revision preferred there against and entertaining a petition invoking supervisory jurisdiction of the High Court would obstruct the smooth flow and/or early disposal of the suit or proceedings. Therefore, the Court would interfere only where the error is such, that if not corrected at that very moment, may become incapable of correction at a later stage.
15) Keeping in view the object and purpose of enactment of Commercial Courts Act, the Courts would exercise their power under Article 227 of the Constitution of India. Therefore, we hold that the supervisory power of the High Court under Article 227 of the Constitution of India is not taken away by Section 8 of the Commercial Courts Act and the same cannot be restricted on the ground that it would open flood-gates of litigation in the High Court. In view of the above, I.A.No.1 of 2018 is allowed permitting the petitioners to convert the appeal into a Civil Revision.
16) Coming to the facts in issue. As stated by us earlier, the present C.R.P. came to be filed questioning the order of the Commercial Court terminating the mandate of the Arbitrator on the ground that arbitration proceedings were 15 not completed within the time fixed by the High Court in the review petition.
17) For the sake of convenience the parties will hereinafter referred to as arrayed in C.O.P.No.81 of 2017.
18) An application under Section 14 (2) and Section 15 of the Arbitration Act, came to be filed by the petitioners therein and respondents herein seeking to terminate the mandate of the 6th respondent therein (8th respondent herein) on the ground that he has become de jure and de facto, unable to perform his functions and failed to act without un-due delay. Petitioners 6 and 7 are companies registered under the Companies Act, 1956, organized and controlled by the family of petitioner Nos.1 to 3. Petitioner No.5 is a partnership entity. Petitioner No.1 is the wife of petitioner No.3 and mother of petitioner No.4 and petitioner No.2 is the mother of petitioner No.3. During the years 2007-2010, the petitioners lent a sum of Rs.20.00 crores to the respondents. As the said amount was not returned, the petitioners filed suits for recovery of money and also a complaint under Section 138 of the Negotiable instrument Act. It is said that as a counter blast, the respondents got registered a Criminal Case vide Cr.No.59 of 2012, against the petitioners. In the said case, petitioners 3 and 4 were 16 arrested by the Central Crime Station, Hyderabad and while in custody they were forced to agree to pay a sum of Rs.9.00 crores to the respondent. Under duress and force, the petitioners are alleged to have signed the settlement deed dated 30.04.2012, letter of guarantee dated 30.04.2012 and ratification deed dated 03.05.2012. It is said that the petitioners were not allowed to read the contents of the documents, which they signed and they were not aware about the contents, including the appointment of the arbitrator. It is said that only after their release on bail, they were able to read the contents of the documents signed by them, were shocked to learn about the appointment of an arbitrator. As such, an application under Section 11 (5) and (6) of the Arbitration Act, came to be filed questioning the appointment of arbitrator, which was dismissed by this Court on 15.03.2013. A Review application came to be filed, which was also dismissed on 13.09.2013. The learned arbitrator issued notices dated 25.07.2012 and passed orders on 15.03.2013 and 13.09.2013 initiating arbitration proceedings. On 23.02.2014, an application under Section 12 of the Arbitration Act came to be filed before the sole Arbitrator, to direct the Arbitrator to withdraw himself from the proceedings with immediate effect on the ground of "bias". Pending application under 17 Section 12 of the Arbitration Act, the petitioners filed S.L.P. (Civil) Nos, 14146 and 14147 of 2014 before the Hon'ble Supreme Court against the orders passed in Arbitration Application No.54 of 2012 and Review Application No.493 of 2013.
19) On 11.08.2014, the Apex Court dismissed the said S.L.P.s, directing the Arbitrator to dispose of the application in accordance with law, without being influenced by the observations of the High Court. Subsequent to the order passed by the Apex Court, the petitioners filed an application seeking to amend the grounds in Section 12 application. On 15.11.2014, the said application came to be dismissed. Challenging the same, Arbitration O.P.No.2889 of 2014 came to be filed before the City Civil Court, Hyderabad, seeking termination of the sole arbitrator on the ground of bias, and also to direct the arbitrator to terminate his mandate as per Sections 12 and 14 of the Arbitration Act. It was further pleaded that a retired judge may be appointed as an arbitrator, to resolve the dispute.
20) On 25.03.2015 the proceedings before the Arbitrator were stayed by the civil Court and on 30.04.2015 the Arbitration O.P.No.2889 of 2014 was dismissed. Challenging the same, C.R.P.No.1861 of 2015 came to be filed before 18 this Court. Since the plea of undue delay on the part of the arbitrator to act ie., to complete the arbitral proceedings within the stipulated time of five months was raised for the first time during the course of arguments before the Court below and a passing reference was made there to and referred to few judgments by the petitioners therein in that regard, held that the Court could not have recorded any finding on facts such as to whether the delay of the arbitrator to act was undue or not; and, if so, whether the petitioners therein had waived such a right. Observing so, and rejecting the plea of bias, the said C.R.P. was dismissed. The operative portion of the order is as under:
"Viewed from any angle, the mandate of the 6th respondent-arbitrator cannot be terminated, on the basis of the contentions urged by the petitioner, in the petition filed by them before the Court below under Section 14 (2) of the Act. Suffice it to make it clear that the order now passed by us shall not preclude the petitioners herein from agitating their claim of undue delay on the part of the arbitrator, in concluding arbitration proceedings and in passing the award, in appropriate legal proceedings; or to raise all the contentions urged before this Court, on whether circumstances exist that give rise to justifiable doubts as to the arbitrator's independence or impartiality, in proceedings 19 under Section 34 of the Act, after an award is passed. Subject to the observations made hereinabove, the Civil Revision Petition fails and is, accordingly, dismissed."
21) It is to be noted here that pending C.R.P. before this Court, there was stay of arbitration proceedings from 04.05.2015 till 16.03.2016.
22) From the narration of events till now, it is very clear that the arbitration proceedings were stayed from 25.03.2015 to 30.04.2015 and again from 04.05.2015 till 16.03.2016. In view of the liberty given by this Court, the petitioners filed Arbitration O.P.No.752 of 2016 (renumbered as C.O.P.No.81 of 2017), as a result of which the arbitration proceedings were again stayed from 13.04.2016, till the said C.O.P. was disposed of by the impugned order on 29.12.2017.
23) Learned counsel for the petitioners herein would submit that there was no undue delay on the part of the sole arbitrator in conducting the arbitral proceedings and on the other hand, it is the respondents/petitioners, who are responsible for the delay. In other words it is pleaded that though in the review application, this Hon'ble Court fixed a time limit of five months for disposing of the arbitral proceedings, but the matter was being stayed by one forum 20 or the other, at the instance of the petitioners. It is further pleaded that there was no justification for the petitioners to plead the said ground, since the time granted gets automatically extended, due to the conduct of the parties in participating in the arbitration proceedings even after expiry of the said period, by waiving their right to insist on the time period to be followed by the arbitrator.
24) It is further pleaded that in the S.L.P., filed before the Hon'ble Supreme Court, assailing the order passed in Review Application and in Arbitration Application No.54 of 2012, the petitioners have specifically pleaded in ground No.'S', that the Hon'ble High Court was not correct in directing the arbitrator to conclude the proceedings within a period of five months, as the issue is complicated and that the Arbitrator would require more time to adjudicate the dispute. That being so, whether it is permissible for the respondents herein now to contend that the proceedings before the Arbitrator stand terminated, as he failed to complete the proceedings within the time fixed. It is further urged that in the petition filed under Section 12 of the Arbitration Act, the petitioners never raised any objection with regard to undue delay. Their main plea before the Arbitrator was of 'bias'. It is further urged that though Section 14 (1) of the Arbitration Act provides for 21 termination of the mandate of the arbitrator in the event the arbitrator unable to act without undue delay but not in a case where the delay was at the instance of a party to the proceedings. In support of the said plea taken, learned counsel for the petitioners relies upon the following citations.
1. M/s. Hindustan Wires Limited v. Mr. R.Suresh6
2. Jayesh H.Pandya v. Subhtex India Limited7
3. Bhupinder Singh Bindra v. Union of India and another8
4. Vijay Hiralal v. J.N.Port Trust9
5. Snehadeep Auto Centre v. Hindustain Petroleum Corporation Limited10
6. Shyam Telecom Ltd., v. Arm Ltd.11
25) On the other hand, learned counsel for the respondents would contend that when the order passed by this Hon'ble High Court in a review fixing the time limit for completing the arbitral proceedings was communicated to the arbitrator on 28.09.2013, itself there was no 6 2013 SCC online Bomb. 547 7 2008 (5) MHLJ 749 8 (1995) 5 SCC 329 9 (2005) 1 MHLJ 884 10 MANU/MH/0504/2012 11 (2004) 3 ARBLR 146 (Delhi) 22 justification for him to continue with the proceedings even after 28.02.2014. It is further urged that though the arbitrator in the docket orders dated 07.02.2014 and 16.02.2014, observed that the Arbitral proceedings have to be completed within the time fixed, but no application came to be filed by either of the party or the arbitrator, seeking extension of time. It is further urged that even assuming that the period of five months is to be calculated from 11.08.2014 ie., when the S.L.P.s were dismissed and the said order was communicated to the Arbitrator in the month of September, 2014, the period of five months gets expired in the month of February, 2015. In the absence of any stay after September, 2014, it is urged that the order impugned herein cannot be found fault with.
26) Insofar as the argument on delay, the petitioners are now estopped from raising such plea, since it is pleaded that after filing of appearance on 26.10.2013, the respondents therein took time for filing vakalath and counters to the memo filed by the petitioners on 10.11.2013 and 23.11.2013. Thereafter, a claim-petition was filed on 25.01.2014 to which the respondents sought adjournment on 07.02.2014. On 16.12.2014 the petitioners/respondents therein failed to appear, and on 23.02.2014, an application under Section 12 of the Arbitration Act came to be filed 23 before the Arbitrator. In view of the above, it is pleaded that the delay on the part of the petitioners/respondents is misconceived and lacks merit.
27) Insofar as the plea of waiver by conduct, while explaining the purport of the judgments relied upon by the counsel for the petitioners, he would contend that in all the cases referred to above, time was fixed in the agreements entered into by the parties and the objecting party had rightly and willingly participated in the proceedings without any objection. Under those circumstances, the Courts held that by conduct the parties waived the time fixed under the agreement. Since the time was fixed by the Court and as the petitioners have opposed the appointment of arbitrator from the date of his appointment; never willingly participated in the said proceedings and as the office of the arbitrator has become functus officio after expiry of five months, pleads that his mandate will automatically get terminated. In support of his plea, he placed reliance on the judgment of the Apex Court in NBCC Ltd. V. J.G.Engineering12 and Haryana Packaids Pvt. Ltd., v. Indian Oil Corporation Limited13 and B.C.C.I. vs. Kochi Cricket Private Limited14. Stressing on the word 'to' 12 (2010) 2 SCC 385 13 2015 (2) ARBLR 242 (Delhi) 14 (2018) SCC Online SC 232 24 appearing in the first part of proviso to Section 26 of the Arbitration Act, which is not there in second part of Section 26 of the Arbitration Act and which reads as "in relation to"
coupled with the judgment of the Apex Court in B.C.C.I. (14 supra) the counsel would contend that since C.O.P.No.81 of 2017 was filed under Section 14 (1) of the Arbitration Act on 11.04.2016, after coming into effect of the Arbitration and Conciliation Act, 2015, the amended Act shall apply to the present case as well and in view of Section 12 (5) of the Arbitration Act read with 7th schedule of the Amended Act, the Arbitrator is de jure disqualified.
28) Having regard to the arguments advanced by both the counsel, it would be necessary to go into the events which took place prior to the order passed in Arbitration Application No.54 of 2012. By an order dated 15.03.2013, this Hon'ble High Court in Arbitration Application No.54 of 2012 passed the following order:
"As agreed, the applicants and the respondents shall refer their disputes to Mr. Ravinder Singh Sarma, whom they have already appointed as sole Arbitrator, for resolution of dispute between them, in terms of the arbitration clause in the settlement deed. The arbitrator so appointed is at liberty to take the assistance of an advocate/legal counsel/expert, if required, for 25 assessing the damaged caused. He is at liberty to fix his fee as also that of the fee of the advocate/legal counsel/expert, if he so chooses to take his or her assistance, for assessing the damage caused."
29) From a reading of the above, it is clear that basing on the agreement arrived at by the applicants and respondents the Court referred the dispute to Mr. Ravinder Singh Sarma, who was already appointed as a sole arbitrator, for resolving the disputes between the parties in terms of the arbitration clause in the settlement deed. This order which was passed in the month of March, 2013, was sought to be reviewed by way of Review Application No.494 of 2013. The said Review application was dismissed holding that the application for review was thoroughly misconceived, as by the earlier order, the arbitration mechanism and appointment of arbitrator have been activated. The Court further held that there is no dispute that the arbitration agreement is valid and subsisting and there is no allegation that the consent recorded by the Court was not correct. The Court further observed that recording of consent earlier by the Court was not required to be set at naught, when the parties have chosen an arbitrator and the same arbitrator was appointed by the Court. Therefore, the Court held that there was no illegality or infirmity in the order passed, which was impugned in the 26 review application. However, the Court directed the learned Arbitrator to proceed with the arbitration proceedings and to complete the same within five months from the date of communication of the said order. It would be useful to refer to the relevant portion of the order, which is as under:
"This application for review is thoroughly misconceived as by the earlier order the arbitration mechanism and appointment of arbitrator have been activated. There is no dispute that the arbitration agreement is valid and subsisting. There is no allegation that the consent recorded by the Court is not correct. Moreover, the recording of consent earlier by the Court was not required to be set at naught. When the parties have chosen in agreement an arbitrator and the same arbitrator has been accepted by this Court. Therefore, no illegality or infirmity in the order passed by this Court. The review application is therefore dismissed. I direct the learned Arbitrator to proceed with the arbitration proceedings and complete the same within five months from the date of communication of this order."
30) After the dismissal of the review application, in the month of September, 2013, an application under Section 12 of the Arbitration Act came to be made before the arbitrator. Though five months period would expire by 27 29.02.2014, no objection was raised with regard to the said aspect. The contents of the application were on 'bias' and the manner in which the consent was obtained for appointment of an arbitrator. After filing this application on 23.02.2014, S.L.P.s came to be preferred before the Apex Court challenging the order passed in Arbitration Application No.54 of 2012 and Review Application No.494 of 2013, which were dismissed on 11.08.2014, directing the arbitrator to dispose of the application un-influenced by the orders passed by the High Court.
31) It is to be noted here that on 09.05.2014, the Apex Court stayed the proceedings before the Arbitrator and thereafter on 11.08.2014 the said SLPS were dismissed with observations referred to earlier. On receipt of the order passed by the Apex Court, the Arbitrator issued notices to the parties on 22.09.2014. On 11.10.2014, time was sought by the respondents herein and then on 01.11.2014 an application came to be filed to amend the grounds in Section 12 application. On 15.11.2014, the application filed under Section 12 of the Arbitration Act was dismissed and the matter was adjourned to 22.11.2014 for filing of written statement of the respondents herein. Against the said orders, Arbitration O.P.No.2889 of 2014 came to be filed and 28 the said Court stayed the proceedings before the arbitrator on 25.03.2015.
32) From the facts narrated above, it is clear that from 13.09.2013 there was no stay till 09.05.2014 and again from 11.08.2014 till 23.05.2015. At the same time, it is also to be noted that though the period of five months elapsed, no objection was raised by the respondents for termination of the mandate of the arbitrator on the ground of undue delay. On the other hand, in the SLPS filed before the Apex Court, it was specifically pleaded that the time limit of five months prescribed by the High Court in the review application will not be sufficient to complete the arbitration proceedings, as it involves intricate questions in fact and law. It would be useful to refer to the said paragraph, which is as under:
"For that the Hon'ble High Court has wrongly directed the learned Arbitrator to conclude the arbitration proceedings between the parties within five months from the date of communication. It is most respectfully submitted, that the Hon'ble High Court has further failed to appreciate that the dispute between the parties involves huge stakes and therefore needs fair and proper adjudication to provide justice to the parties. It would be unjust for the parties, if the Arbitrator without application of mind would just rush to comply 29 with the directions of the Hon'ble High Court. It is submitted that looking into the complex issues of fact and law are involved in the matter, therefore oral evidence and cross- examination are required in the matter. The fixing of time limit in the matter has seriously prejudiced the case of the petitioners and the petitioners do not apprehend justice. Further, it is very inconvenient for the petitioners to move from Delhi to Hyderabad nearly every week and take appropriate remedies under pressure and paucity of time."
33) It is also to be observed here that this plea was not raised in the application filed under Section 12 of the Arbitration Act and also in the amendment sought to Section 12 application.
34) The narration of events, which are undisputed till now, go to show that though the period of five months elapsed, but the party, who is raising the objection now, participated in the said proceedings without raising their finger on this aspect. The proceedings referred to till now, more particularly the order in Arbitration Application No.54 of 2012 and Review Application No.494 of 2013, makes it very clear that both the parties have consented for appointment of Sri Ravinder Singh Sarma, as an arbitrator and the parties also did not dispute the contents of arbitration agreement, 30 or in words their plea with regard to appointment of an arbitrator has become final long back.
35) Coming to the aspect of undue delay in completing the proceedings, as observed by us earlier, the objecting party participated in the said proceedings even after expiry of five months, as fixed by this Court in the month of September, 2013 and also took a contra plea to the effect that the period of five months fixed by the High Court may not be sufficient to complete the proceedings, thereby giving an implied consent, for continuation of the proceedings after expiry of five months, more so, when such a plea was never raised even in an application filed under Section 12 of the Arbitration Act and also in the amendment sought to the said application. For the first time such an objection came to be raised in Arbitration O.P.No.2889 of 2014.
36) It is also an admitted fact that though the respondents herein entered their appearance before the arbitrator on 26.10.2013, written statement came to be filed before him only on 16.05.2015. Therefore, it is clear that no written statement came to be filed even after dismissal of the S.L.P. by the Supreme Court on 11.08.2014.
37) Thereafter, C.R.P.No.1861 of 2015 came to be filed challenging the order in Arbitration O.P.No.2889 of 2014, 31 wherein this Court granted stay on 04.05.2015 which was in force till it was dismissed on 16.03.2016. Immediately thereafter the present O.P. 752 of 2016 (renumbered as C.O.P.No.81 of 2017) came to be filed on the ground of undue delay, wherein the proceedings before the arbitrator were stayed from 13.04.2016 till it was allowed on 29.12.2017.
38) From the above, it is clear that except for few pockets of period during the last five years, proceedings were pending either before the Courts or stay of the arbitration proceedings was in operation. It is also to be observed here that though counsel for the respondents herein tried to contend that in spite of there being no stay from 13.09.2013 till 09.05.2014 and again from 11.08.2014 till 25.03.2015 and from 04.05.2015 till 16.03.2016, the Arbitrator failed to complete the proceedings within the time fixed, but as observed by us earlier, written statement came to be filed only on 16.05.2015, after their right to file written statement, which was forfeited was subsequently set aside.
39) As observed by us, the arbitrator has been cautioning the parties to complete the proceedings before the expiry of the period. The Delhi parties, who are the respondents herein, were directed to cooperate with the arbitral tribunal 32 in completing the proceedings within the time, but the matter was getting postponed on one pretext or the other and it cannot be said that the arbitrator was at fault.
40) Section 14 of the Arbitration Act deals with failure or impossibility to act. The said section prescribe that the mandate of an arbitrator shall get terminated 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 that he withdraws from his office or the parties agree to the termination of his mandate.
41) Section 14 of the Arbitration Act would attract only when there is undue delay. Sub Section (1) (2) and 3 of Section 14 of the Arbitration Act, envisage a situation where the arbitrator may, on his own, recuse himself on objection being taken about his functioning as an arbitrator, or where both the parties agree to his mandate being terminated. Section 14 (1) prescribe an automatic termination of the mandate of the arbitrator. In the prescribed eventualities, there is a statutory termination of the arbitrator's mandate. In State of Arunachal Pradesh v. Subhash Projects and Marketing Limited15 a Division Bench of Calcutta High Court held that "if the facts constituting the eventualities in 15 (2007 (1) Arb.LR 564 (Gauhati) (DB) 33 Section 14 (1) are neither in dispute nor demand any proof to be established, termination of the mandate of the arbitrator takes place on statutory prescription". The Court held that "where there is a controversy regarding the grounds, which entails the termination of the mandate, the party has to invariably approach the Court to decide on the termination of the mandate."
42) Dealing with the concept of undue delay and the meaning of word de jure and defacto and Section 14 (1) (a), a Division Bench of this Court in C.R.P.No.1861 of 2015, after referring to the authorities on subject and to the dictionary meaning of word "dejure and defacto " and relying upon the judgments in Priknit Retails Limited (supra) and Shyam Telecom Limited v. ARM Limited, observed that the incapacities referred in Section 14 (1) (a) of the Arbitration Act, are such as to have a direct nexus with the inability of the arbitrator to perform his functions. This incapacity or disability should occur to the arbitrator himself so that he becomes, as a matter of law or fact, unable to perform his function. The dejure impossibility referred to in Section 14 (1) (a) is the impossibility which occurs due to factors personal to the arbitrator, and de facto inability occurs due to factors beyond the control of the arbitrator. It has been observed that mere legal 34 disability is not a condition precedent for invocation of Section 14 of the Act. The dejure inability must relate to his ability to function.
43) Insofar as usage of word "delay" in Section 14 (1) of the Act, which relates to termination of the mandate of arbitrator, if it is for other reasons fails to act without undue delay. The Division Bench observed that the word 'delay' is qualified by the word 'undue'. Undue delay, and not mere delay, would alone justify the Court to declare the mandate of the arbitrator as terminated. The Division Bench held that the word "undue' means unjustified, unwarranted, unreasonable, excessive and inordinate. In order to declare that the mandate of the arbitrator stands terminated, the Court must be satisfied that the delay on the part of the arbitrator, was unjustified, inordinate or unwarranted. It has also held that for the Court, exercising jurisdiction under Section 14 (2) of the Act, to declare that the mandate of the arbitrator stands terminated, the petitioner was not only required to plead but also to prove that the arbitrator had failed to act without undue delay. The word 'fail' means neglect, go wrong or fall short of what is expected. What is required to plead and prove is that the arbitrator had neglected to act without excessive or inordinate delay. The Division Bench further held that even 35 if there is a delay on the part of the arbitrator in completing the proceedings, and to pass an award, it was open to the parties to waive their right to object.
44) Section 4 of the Act deal with waiver of right to object, ie., a party who knows that any provision of this part from which the parties may derogate, or any requirement under the arbitration agreement, has not been complied with and yet proceeds with the arbitration without stating his objection to such non-compliance without undue delay or, if the time limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object. (C.R.P.No.1861 of 2015).
45) In Mascon Multiservices and Consultants Private Limited vs. Bharat Oman Refineries Limited16 the Bombay High Court held that the parties, that raise questions as to jurisdiction, must be held to have given a go bye to the stipulation as to time within which an award is to be made; if a party attends a number of meetings, after the time for making the award has expired, it would be a strong indication of waiver. The strength of an indication of waiver is not necessarily directly proportional to the number of meetings attended by a party after the stipulated time for making the award. It is the nature of the meeting and the 16 (2008) 6 Bombay CR 611 36 nature of the conduct of a party which is as, if not more, important.
46) In Hindustan Wires Limited v. R.Suresh (6 supra) a learned Single Judge of Bombay High Court held that, in view of the consent of both the parties for enlargement of time to complete the arbitration proceedings and to make an award, the mandate of the arbitrator does not come to an end; the arbitrator does not cease to have jurisdiction to proceed with the matter and to make an award; and even by the conduct of both parties, the time to complete arbitration proceeding and to make an award, stand extended.
47) In Jayesh H.Pandya v. Subhtex India Limited (7 supra) the Bombay High Court held as under:
"where a party intends to assert a right of adherence to the time prescribed by the arbitration agreement, it must, at the earliest opportunity, make its intention know to ensure compliance with the rigid standard as to time; to hold otherwise would be to encourage a lack of candour on the part of the parties in their dealings before the Arbitrator. The Arbitrator was justified in coming to the conclusion that the petitioners had, by their conduct, waived their objection to enforce a punctilious observance of the time schedule of four months. It is held that 37 to adopt any other construction would frustrate the object and the purpose of arbitral proceedings and being the whole machinery provided by the Act, to facilitate an efficacious recourse to arbitration, into grave peril."
48) In Bhupinder Singh Bindra v. Union of India and another (8 supra) the Apex Court held that "the Court interpose and interdict the appointment of an arbitrator, when the parties have chosen under the terms of the contract unless legal misconduct of the arbitrator, fraud, disqualification etc. is pleaded and proved. The Court held that there must be just and sufficient cause for revocation." In the said case, though there was no allegation of misconduct, fraud or disqualification but due to non- cooperation of one of the parties the delay occurred in making the award. Under those circumstances, it has been held that the Court has no jurisdiction to revoke the appointment of an arbitrator on the ground of latches and appoint another person as arbitrator without consent of both the parties to the contract.
49) In Snehadeep Auto centre v. Hindustan Petroleum Corporation Limited (10 supra) a Division Bench of Bombay High Court held that in N.B.C.C.Limited (12 supra) the Apex Court did not lay down an absolute proposition that the moment the award is made, after the stipulated period, it 38 must be set aside; the observation of the Supreme Court, that the Arbitrator was bound to make and publish his award within the time mutually agreed upon by the parties unless the parties consented to further enlargement of time, did not rule out a contingency where the conduct of the parties could be implied with certainty to mean that they had consented not to insist on the mandatory time limit. The court also held that no unambiguous stand can be taken that the Arbitrator cannot proceed to declare the award, as his mandate had come to an end; and this conduct amounted to waiver of the objection of time limit, being a mandatory requirement for pronouncement of the award". In NBCC Limited (12 supra) the Apex Court recognized the importance of imposition of a time limit for conclusion of arbitration proceedings. It was a case where the arbitrator could not conclude the proceeding as agreed upon by the parties. The Court held that the Arbitrator has extended the time provided to it without any concrete reasons whatsoever and thus his mandate was liable to be terminated. The Apex Court held that even assuming that the arbitration process involves highly technical and complex issues, which are time consuming, it was open for the arbitrator or for the parties to approach the Court for extension of time to conclude the arbitration proceedings, which was not done either by the 39 Arbitrator or by any of the parties. There was no cogent reason for the delay in making and publishing the award by the Arbitrator, as he already had relevant material at his disposal and could base his finding, on the observation made by the three arbitrators, who were appointed prior to him.
50) Ramchandra Rungta v. Ram Swarup Rungta17 and Jayesh H.Pandya (7 supra), the arbitration proceedings continued and the parties were regularly appearing before the respective Arbitrators, by seeking extension of time to file their pleadings, for adjournment etc. In both the cases it was held that a clear intention had been evinced by the parties, waiving their right to insist on the time limit contained in the respective arbitration agreements for making and publishing the award. Hence, the Bombay and Delhi High Courts, in the facts of those cases, held that there was waiver of the stipulation in the arbitration agreement for publication of the award, within the specific period of time, by the parties.
51) The learned counsel for the respondents relied upon the judgment of in Hindustan Wires Limited v. R.Suresh (6 supra) and also N.B.C.C. Limited (12 supra), to contend that as the time period for conclusion of proceedings had expired and in the absence of any application seeking 17 AIR 2015 Calcutta 24 40 extension of time, the arbitrator ceases to have jurisdiction. According to him, since the time limit is fixed by the Court, the period of participation cannot be waived on mere participation even after the expiry of the period.
52) The judgment of the Apex Court in NBCC Limited (12 supra) which is relied to show that the time limit fixed can only be extended after obtaining necessary orders from the Court which has imposed the time, was a case where the parties initially agreed to extend the time till 31.10.1994 for making and publishing the award and the same was further extended till 30.09.2005, but the arbitrator failed to pass an award by 30.09.2005.
53) Situation here is some what different. Here the proceedings have commenced and no reply to the claim- petition was filed till 16.05.2015 and the stay was in operation during the period from 25.03.2015 to 30.04.2015 and again from 04.05.2015 till 16.03.2016 and most importantly the respondents herein, who are raising the objection of time limit now, participated in the proceedings even after the expiry of time limit and also took the plea before the Apex Court that the time limit as fixed by the High Court is not sufficient to complete the proceedings. Further, written statement came to be filed on 16.05.2015 41 after their right to file which was earlier forfeited and then restored. Such being the position, the plea now taken by the very same party to terminate the mandate of the Arbitrator on the ground of delay, cannot be accepted and the judgment of the Apex Court in NBCC Limited (12 supra), in our view may not apply to the case on hand.
54) From this, it is clear that the respondents herein were not co-operating with the arbitrator in filing the written statement to the claim-petition and only after they were unsuccessful before the Apex Court, a written statement came to be filed and thereafter again initiated proceedings before the Civil Court and then in High Court, where there was a stay till 16.03.2016.
55) Further, the time limit for completing the arbitration proceedings was not fixed at the time when the arbitrator was appointed by the Court at the earliest point of time. The time limit came to be fixed, in a review application filed by the respondents herein questioning the appointment of an Arbitrator.
56) Therefore, the Arbitrator cannot be found fault with for the delay in arbitration proceedings more so when the record clearly shows that the respondents waived their right in not raising any objection with regard to continuation of 42 the proceedings or seeking termination of the mandate of the Arbitrator on the ground that the time prescribed for making the award expired. In fact the docket entries before the Arbitrator dated 07.02.2014 and 16.02.2014 show that he was pleading the parties more particularly the Delhi parties (respondents herein) to cooperate with the arbitration so as to complete the proceedings within the specified time to the maximum possible extent. Hence, the ground on which the mandate of the arbitrator came to be terminated, in our view, cannot be accepted.
57) One other ground which is sought to be raised by the learned counsel for the respondents is as to whether the arbitration and conciliation amendment Act, 2015 will apply to the case on hand.
58) The learned counsel took us through Section 26 of the amended Act, 2015 to show that only the Act as it stands after 2015 shall apply to the present case. Learned counsel for the respondents placed reliance on the judgment of BCCI vs. Kochi Cricket Pvt. Ltd. (14 supra) and also the judgment of Calcutta High Court in Tufan Chatterjee v. Rangan Dhar18 and the judgment of Delhi High Court in Raffles Design International India Private Limited and 18 AIR 2016 Cal. 213 43 others v. Educomp Professional Education Limited and others19 in support of his plea.
59) Before dealing with the contention of the learned counsel for the respondents, it would be appropriate to refer to Section 26 of the Amended Act, which is as under:
"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 the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act."
60) Section 26 of the Amendment Act postulates that nothing contained in the said amendment Act is to apply to the arbitral proceedings commenced in accordance with the provisions of Section 21 of the Principal Act, unless the parties otherwise agree. But the Amendment Act would apply in relation to arbitral proceedings commenced, on or after the date of commencement of the amended Act.
61) According to him, the above provision has to be read in two parts. The first part being, nothing contained in this Act shall apply to the arbitral proceedings commenced in 19 (2016) 6 ARBLR 426 (Delhi) 44 accordance with the provisions of Section 21 of the Principal Act, before the commencement of the amendment Act, unless the parties otherwise agree and the second part which is in continuation of the first part is to be read as "that this Act would apply in relation to arbitral proceedings commenced on or after the date of commencement of 2015 Act. According to him, the word "to" appearing in the first part of the provision is not there in second part, which reads instead as "in relation to", which thereby signifies that both the parts have a corresponding different interpretation to the above provision. According to him, the first part refers "to arbitral proceedings before the Tribunal" and the second part "in relation to arbitral proceedings". In view of the judgment of the Apex Court in BCCI (14 supra), it is urged that the amendment Act, 2015 will not apply to the arbitral proceedings that have commenced before the date of coming into effect of the amendment Act and it will apply to the Court proceedings which have commenced on or after the amendment Act came into force.
62) In other words, his plea is that the amendment Act which came into force with effect from 23.10.2015, would apply to the arbitral proceedings which commenced after 23.10.2015 but not to arbitral proceedings which commenced before 23.10.2015. Having regard to the above, 45 it is urged that in view of Section 12 (5) read with 7 Schedule of the amended Act, the Arbitrator is de jure disqualified.
63) A plain reading of Section 26 of the Amendment Act, would indicate that nothing contained in the amended Act shall apply to arbitral proceedings commenced, in accordance with provisions of Section 21 of the Principal Act, before commencement of this Act, unless parties otherwise agree, but this Act shall apply in relation to arbitral proceedings on or after the date of commencement of the amended act.
64) Though the learned counsel for the respondents relied upon the judgments of Calcutta High Court and Delhi High Court namely Tufan Chatterjee (18 supra) and Raffles Design International India Private Limited and others (19 supra), but in view of the judgment of the Apex Court in BCCI v. Kochi Cricket Private Limited (14 supra), it may not be necessary to refer to the said judgments.
65) The judgment of the Apex Court in BCCI v. Kochi (14 supra) was a case where a notice dated 18.01.2012 was sent by Kochi Cricket Pvt. Limited, invoking the arbitration under a franchise agreement dated 12.03.2011. A sole arbitrator was appointed, who delivered two arbitral awards 46 dated 22.06.2015 against the appellant and in favour of the respondents. On 16.09.2015, the appellants filed an application under Section 34 of Arbitration Act, 1996 in the Bombay High Court challenging the aforesaid arbitral awards. On 26.11.2015, the respondents filed two execution applications in the High Court, for payment of the amounts awarded under the two awards, pending enforcement of such awards. These were resisted by two Chamber summons filed by the appellants dated 3.12.2015, seeking dismissal of the aforesaid execution applications on the ground that the old Section 36 would be applicable and that, therefore there would be an automatic stay of the awards until Section 34 proceedings are decided. Having regard to the above, the question before the Court was as to the construction of Section 26 of the Amendment Act, 2015. In other words, the Apex Court was dealing with the effect of an application under Section 34 of the Arbitration 1996 Act after the amendment Act came into force. Further, the question with which the Bench was confronted was whether Section 36, which was substituted by the Amendment Act, would apply in its amended form or in its original form to the appeals in question. After referring to the authorities on the subject and interpreting the provisions under Old and New Act, the Apex Court dismissed the appeals. 47
66) Dealing with the provisions of the Old Act and the Amendment Act, 2015, the Hon'ble Court in Para Nos.24 and 25 came to the following conclusions, which are as under:
"24. What will be noticed, so far as the first part is concerned, which states, "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 the commencement of this Act unless the parties otherwise agree.." is that: (1) "the arbitral proceedings" and their commencement is mentioned in the context of Section 21 of the Principal Act; (2) the expression used is "to" and not "in relation to"; and (3) parties may otherwise agree. So far as the second part of Section 26 is concerned, namely, the part which reads "... but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act" makes it clear that the expression "in relation to" is used; and the expression "the" arbitral proceedings and " in accordance with the provisions of Section 21 of the Principal Act" is conspicuous by its absence.
25. That the expression "the arbitral proceedings"
refers to proceedings before an arbitral tribunal is clear from the heading of Chapter V of the 1996 Act, which reads as follows:
"Conduct of Arbitral Proceedings"
The entire chapter consists of Sections 18 to 27 dealing with the conduct of arbitral proceedings before an 48 arbitral tribunal. What is also important to notice is that these proceedings alone are referred to, the expression "to" as contrasted with the expression "in relation to" making this clear. Also, the reference to Section 21 of the 1996 Act, which appears in Chapter V, and which speaks of the arbitral proceedings commencing on the date on which a request for a dispute to be referred to arbitration is received by the respondent, would also make it clear that it is these proceedings, and no others, that form the subject matter of the first part of Section 26. Also, since the conduct of arbitral proceedings is largely procedural in nature, parties may "otherwise agree" and apply the Amendment Act to arbitral proceedings that have commenced before the Amendment Act came into force. In stark contrast to the first part of Section 26 is the second part, where the Amendment Act is made applicable "in relation to" arbitral proceedings which commenced on or after the date of commencement of the Amendment Act. What is conspicuous by its absence in the second part is any reference to Section 21 of the 1996 Act. Whereas the first part refers only to arbitral proceedings before an arbitral tribunal, the second part refers to Court proceedings "in relation to" arbitral proceedings, and it is the commencement of these Court proceedings that is referred to in the second part of Section 26, as the words "in relation to the arbitral proceedings" in the second part are not controlled by the application of Section 21 of the 1996 Act.
49
Section 26, therefore, bifurcates proceedings, as has been stated above, with a great degree of clarity, into two sets of proceedings - arbitral proceedings themselves, and Court proceedings in relation thereto. The reason why the first part of Section 26 is couched in negative form is only to state that the amendment Act will apply even to arbitral proceedings commenced before the amendment if parties otherwise agree. If the first part of Section 26 were couched in positive language (like the second part), it would have been necessary to add a proviso stating that the Amendment Act would apply even to arbitral proceedings commenced before the amendment if the parties agree. In either case, the intention of the legislature remains the same, the negative form conveying exactly what could have been stated positively, with the necessary proviso. Obviously, "arbitral proceedings"
having been subsumed in the first part cannot reappear in the second part, and the expression "in relation to arbitral proceedings" would, therefore, apply only to Court proceedings which relate to the arbitral proceedings. The scheme of Section 26 is thus clear: that the Amendment Act is prospective in nature, and will apply to those arbitral proceedings that are commenced, as understood by Section 21 of the Principal Act, on or after the Amendment Act, and to Court proceedings which have commenced on or after the Amendment Act came into force."
67) From the judgment of the Apex Court, it is clear that the first part deals with reference to arbitral proceedings before the Arbitrary Tribunal and the Amendment Act would 50 apply even to Arbitral proceedings commenced before the amendment, if the parties otherwise agree. In the instant case, we do not find any such consent being given by any of the parties warranting applicability of the amended Act, since the arbitration proceedings came to be initiated prior to the amendment. Further Section 29-A of the Amendment Act, prescribes time limit for completion of arbitral proceedings. Therefore the parties may opt to deal under the New Act even in cases which are pending before the Arbitrator as on the date of commencement of the Amendment Act. On such option being exercised, the parties are bound under the provisions of New Act.
68) As observed by us earlier, in the instant case, we do not find any such consent being given by the parties seeking applicability of the Amendment Act, 2015. Therefore, the argument of the learned counsel for the respondents that the arbitrator is de jure disqualified in view of Section 12 (5) of the Act cannot be accepted.
69) For the aforesaid reasons, the Civil Revision Petition is allowed holding that the order under challenge terminating the mandate of the arbitrator is illegal and incorrect, and accordingly, the same is set aside.
51
70) There shall be no order as to costs. Miscellaneous Petitions, if any, pending, shall stand closed.
____________________ C.PRAVEEN KUMAR, J ____________ T. RAJANI, J 07.09.2018 gkv