Punjab-Haryana High Court
M/S Batliboi Limited vs Union Of India And Others on 12 February, 2014
Author: Rajiv Narain Raina
Bench: Rajiv Narain Raina
FAO No.893 of 2012 (O&M)
1
IN THE HIGH COURT OF PUNJAB & HARYANA AT
CHANDIGARH
F.A.O. No.893 of 2012 (O&M)
Decision : 12.02.2014
M/s Batliboi Limited
..... Appellant(s)
Versus
Union of India and others
..... Respondent(s)
CORAM: HON'BLE MR. JUSTICE RAJIV NARAIN RAINA
Present : Mr.Aashish Chopra, Advocate
for the appellant.
Mr.G.S.Bal, Advocate,
for respondent No.1.
Mr.Naresh Markanda, Sr. Advocate with
Mrs.Kavita Markanda, Advocate,
for respondent No.2.
Mr.Puneet Jindal, Advocate,
for respondent No.3.
*****
1. To be referred to the Reporters or not?
2. Whether the judgment should be reported in the Digest?
*****
RAJIV NARAIN RAINA, J.
M/s Jobs S.p.A and the Union of India entered into a contract for supply etc. of equipment, machines etc. to Rail Coach Factory, Kapurthala (for short RCF). The contract agreement has been placed on Kumar Paritosh 2014.02.18 10:17 I attest to the accuracy and integrity of this document FAO No.893 of 2012 (O&M) 2 record as R-1 found at page 135 of the paper book. The contract has been signed by a representative of Jobs S.p.A and one Mr. R.L.Pawar, Deputy Controller of Stores-V for and on behalf of the President of India on 3.9.2001 duly executed on acceptance of tender No.13Y96940 H0150013. It is thus a contract protected by Article 299 of the Constituition of India. The contract agreement shows the appellant company as an agent of M/s Jobs S.p.A, a foreign company. It has not been disputed before this Court that the appellant is not a party or signatory to the contract agreement and has been named only as an agent by M/s Jobs S.p.A, the foreign company enlisted to accomplish the contract at RCF as experts chosen in the field of activity involved for implementing public purpose in India, to serve the objects of the government contract. The contract has not been signed by M/s Batliboi Limited and is not privy to the contract signed between the RCF and the foreign company.
2. The present proceedings arise out of the fresh/amended claim presented by the Union of India-employer before the Arbitrator after the first Arbitrator had voluntarily relinquished his charge as Arbitrator. By the fresh claim, Union of India has mounted the original claim from ` 1.40 crores to ` 38.12 crores as presented before the new Arbitrator for resolution through alternate dispute settlement by arbitral adjudication. In the fresh claim, the Union of India named/added M/s Jobs S.p.A as a party respondent No.2 through M/s Batliboi Limited although M/s Jobs S.p.A was being represented before the earlier Arbitrator and the new Arbitrator as well in its independent capacity.
3. Mr.Naresh Markanda, learned senior counsel appears before this Court for M/s Jobs S.p.A. Submits that a fresh clause was inserted in Kumar Paritosh 2014.02.18 10:17 I attest to the accuracy and integrity of this document FAO No.893 of 2012 (O&M) 3 the claim stating that M/s Jobs S.p.A and M/s Batliboi Limited are both equally liable to pay the alleged loss in the aforesaid claimed amount allegedly suffered by the railway administration.
4. Mr Aashish Chopra appears for the appellant and submits that M/s Batliboi Limited is not a signatory to the contract agreement which has been executed by M/s Jobs S.p.A and the Union of India. There is no arbitration clause involving the appellant and the RCF/Union of India. RCF has on its own twisted the cause title by arraying M/s Jobs S.p.A through M/s Batliboi Limited. The appellant was not a party to the proceedings before the previous arbitrator and was introduced by sleight of hand of RCF to bring it to unnecessarily face arbitration proceedings to compel an award against it.
5. Both Mr.Markanda and Mr.Chopra submit that since the appellant is neither a signatory to the agreement nor party to the arbitration proceedings, there arises no question of the appellant to incur any liability per se muchless upon the final determination. The appellant, having been unnecessarily dragged into the litigation, was constrained to file an objection petition in its defence against the "award" dated 23rd May, 2011 passed under the 1996 Act. Though the final award has not been passed, the appellant was compelled to prefer application under Section 34 before the learned District Judge against the order passed by the arbitrator. The learned District Judge dismissed the objections by falling in error in arriving at the conclusion that the interim award is only a simple order or decision of the arbitrator and not an interim award and therefore objections do not lie. Merely because the learned Arbitrator has called the order, "an interim award", no quantified liability has been determined against the appellant but Kumar Paritosh 2014.02.18 10:17 I attest to the accuracy and integrity of this document FAO No.893 of 2012 (O&M) 4 has ventured to return findings with respect to the alleged liability prima facie when M/s Batliboi Limited is not even a party. An interim award can only be passed in terms of Section 31 of the Act. Therefore, "award" is a misnomer and can be viewed as one traceable to jurisdiction under Section 31(b) of the 1996 Act. In any case, what is urged is that whether the dispensation is handed down through an order or through an interim award, the remedy would be under Section 34 and the learned District Judge failed to appreciate the rudimentary principle that if an order or interim award amounts to "a case decided" on rights of parties adversely commented determining the liability albeit prima facie pending further arbitration proceedings and where the same visit the appellant with evil consequences, the impugned order would deserve to be set aside as it may qualify as one deserving intervention of this Court under Section 37, i.e., appeal proceedings.
6. On the other hand, Mr. Bal submits that no second appeal lies and for this proposition he refers to Section 37(3) of the Arbitration Act and the present proceedings under Section 37 as being not maintainable. I am not impressed with this argument propounded by Mr.Bal, as an aggrieved party cannot be left remediless to question in these proceedings what the learned District Judge has evidently done erroneously and if the order is allowed to stand, manifest injustice would follow where a party would be compelled to face arbitration proceedings even in the absence of an arbitration clause signed between the RCF/Union of India and itself. Section 37 deals with appealable orders and prescribes that no second appeal shall lie from an order passed in appeal under this section. What Section 37(3) provides is a second appeal and in this provision, it is laid down that Section Kumar Paritosh 2014.02.18 10:17 I attest to the accuracy and integrity of this document FAO No.893 of 2012 (O&M) 5 37 shall not affect or take away any right to appeal to the Supreme Court.
7. Mr.Markanda, learned senior counsel submits that the arbitration can take place only between M/s Jobs S.p.A and the Union of India. The arrangement between M/s Jobs S.p.A and the appellant is a private arrangement between the foreign company and the Indian company but M/s Jobs S.p.A alone remains subject to final determination without the presence of the appellant which has nothing to do with the contract signed between the parties which enjoys the status of a Government contract under Article 229 of the Constitution of India. It is because the order of the Arbitrator attaches liability upon the appellant notwithstanding that the exact extent is yet to be determined and the appellant clearly stands aggrieved. If the appellant acts as an agent of M/s Jobs S.p.A, Italy and would in that capacity render ancillary and incidental service such as promotional activity, negotiation support, installation and after sales service support to give technical assistance to the project, it will not become a party to the contract even by necessary implication or any process of reasoning known to arbitration law. Even the arrangement between M/s Jobs S.p.A, Italy and the appellant is not a contract of employment but contract for services, standing outside the contract signed by the foreign company and the Union of India.
8. Mr.Chopra on his part relies on a recent judgment of the Supreme Court rendered in Benarsi Krishna Committee and others v. Karmyogi Shelters Private Limited; (2012) 9 SCC 496 to emphasize that a party to the arbitration proceedings does not include an agent or advocate representing party in arbitration proceedings. The words 'party to arbitration' proceedings means only the party itself but not its agent or advocate Kumar Paritosh 2014.02.18 10:17 I attest to the accuracy and integrity of this document FAO No.893 of 2012 (O&M) 6 authorized to act on the basis of a Vakalatnama.
9. Learned counsel for the appellant then draws the attention of this Court to the letter dated 16th August, 2010 (A-5) which is a notice from the arbitrator/Chief Workshop Engineer/Furnace, RCF addressed to M/s Jobs S.p.A through the appellant. He points out to the clarification application filed by the appellant before the Arbitrator (A-6), in which, it is clearly stated that the applicant, appellant herein, appears under protest before the Arbitrator and does not accept his jurisdiction nor would submit to it. Through this application, the challenge was laid to the jurisdiction of the arbitrator. The appellant pointed out that as per the provisions of Section 7 of the Act, the arbitration agreement has to be reduced in writing. In this case, there is none, between the claimant/RCF and the applicant/appellant. The claimant has itself relied on the arbitration clause, to which, the appellant is not a party. There is no other arbitration agreement between the claimant and the applicant, through which, the appellant could be brought into the proceedings. In fact, the arbitrator himself has been appointed pursuant to the arbitration clause and cannot enlarge the scope of reference and travel beyond it to rope in the appellant at any cost. A reading of the arbitration clause itself shows that the contract applies only to disputes arising out of the contract. If the appellant is not a party, no claim can arise against it out of the said contract. Strangely, the reply to the application (A-
6) by the claimant/RCF reflects that the appellant was not a party and M/s Jobs S.p.A is being sued through their Indian agent-appellant. Merely because in the contract signed on 3rd September, 2001, the description of M/s Jobs S.p.A, Italy is given through their Indian agent (appellant) it is not enough to connect the agent to the contract and for it to incur liability of the Kumar Paritosh 2014.02.18 10:17 I attest to the accuracy and integrity of this document FAO No.893 of 2012 (O&M) 7 contractor, if determined unlawfully. Mr.Chopra has pointed out from the impugned order the fallacious reasoning assigned by the arbitrator in the order/interim award dated 23rd May, 2011 to the effect that "so at this stage making the agent party to the proceedings is rather providing him all the opportunities of participating in the proceedings to guard his interest and that of his principal" which ought not to be sustained by this Court. Still further, the Arbitrator holds that "being authorized agent of M/s Jobs. SPA, Italy (the principals), the applicant cannot prima-facie escape liability, which may be joint or several, however the extent of claim or liability or award, if any, against the principals, M/s Jobs. SpA, Italy and their Indian agent M/s Batliboi Limited, Mumbai can only be determined after conclusion of the hearings on the merits of the case i.e. Claims or counter claims." is a sad commentary on the judicial worth of the arbitrator exhibiting dangerous propensities in decision making.
10. Having reached this far, Mr.Bal relies on a letter dated 16th March, 2000 from M/s Jobs S.p.A, in which under clause 2(a), it is mentioned that the contractor wrote to RCF that it was agreeable to payment of agency commission to their agents in India in non-convertible Indian Rupees and for this purpose, had named the appellant as its agent (see page 35 of the paperbook). From this, Mr.Bal would argue that M/s Jobs S.p.A was the principal and the appellant its agent in terms of clause 2(b). He relies on another letter dated 18th August, 2000 (page 43) informing the general public authorizing the appellant represented by Mr. S.A.Srinivas to represent the company in giving technical and commercial clarifications for the Rail Coach Factory, Kapurthala, Global Tender No.6013995581 opened on 21.03.2000 for Gantry Milling Machine for Bogie Frame Machining. Kumar Paritosh 2014.02.18 10:17 I attest to the accuracy and integrity of this document FAO No.893 of 2012 (O&M) 8 This letter is addressed to RCF and it is addressed "TO WHOM SO EVER IT IS CONCERNED". Mr.Bal would point out to the document (A-3, page
46) as being a document coming from the claimant RCF informing that the Indian agents of the respondent M/s Batliboi Limited tried to rectify the defect but their efforts remained fruitless and ultimately, they left the RCF on 30th May, 2006 when the machine was under complete break down condition. He would then point to document at page 59 being the reply to para. 8 by M/s Jobs S.p.A to the application, pointing out that their engineers were at site and the machine was found working properly and was not under breakdown condition as stated by the claimant/RCF. It was stated that the engineers of the respondent (M/s Jobs S.p.A.) were assisting to solve the issues pertaining to the "C" Axis. What is inferred is that the appellant was at site acting as engineer on behalf of the foreign company trying to repair the problem. Counter to this, it is urged by Mr. Chopra that the appellant can at best be viewed as a sub service contractor of M/s Jobs S.p.A. for the foreign company to service machinery at site but this would not mean that they are party to the contract, in order to bring them within the fold of the contract signed between the foreign company and the RCF/Union of India.
11. After hearing the learned counsel for the parties at length, I have no doubt that the appellant at best was an agent of M/s Jobs S.p.A., Italy to be its technical support entity at site and merely because they carried out repair jobs at site, would not make them liable under a contract not executed by them consciously with the respondent RCF. It is so fundamental to arbitration that in the absence of an arbitration contract signed between the parties, only the signatories are amenable to arbitration Kumar Paritosh 2014.02.18 10:17 I attest to the accuracy and integrity of this document FAO No.893 of 2012 (O&M) 9 jurisdiction and not third parties with no privity of contract. There is no contract, muchless binding between the appellant and the Union of India. If Union of India with all available legal expertise at its command did not make the agent a part of the contract, it can do nothing now except to litigate through arbitration against the foreign company which was the sole party to the proceedings before the first arbitrator and therefore the new arbitrator fell in serious error in dealing with M/s Jobs S.p.A. through M/s Batliboi Limited as its front man. In the totality of facts and circumstances I have no hesitation in setting aside the impugned order/award/interim award, whatever it may be called, passed by the arbitrator on 23rd May, 2011 and resultantly, the order passed by the learned District Judge, Kapurthala both being contrary to law and facts is not tenable. As a result, the appellant company will be kept out of the arbitration proceedings and anything said in the impugned order would not be binding on them in the final determination culminating in the final award, whenever made. Resultantly, the arbitration proceedings would now go on between M/s Jobs S.p.A., Italy and the claimant-RCF. Since the arbitrator has acted contrary to the fundamental principles of arbitration in roping in the appellant without just cause or legal justification, this Court is satisfied that further arbitration proceedings before him should be discontinued as he has not shown a judicious approach and therefore I called upon Mr. Bal to take instructions from the RCF and provide reasons as to why further arbitration proceedings should not be withdrawn from the present arbitrator and handed over to an independent and senior person in RCF to carry on with further proceedings restricted between M/s Jobs S.p.A. and the claimant. Mr.Bal, on instructions, informs this Court that his client would have no objection to a change in the Kumar Paritosh 2014.02.18 10:17 I attest to the accuracy and integrity of this document FAO No.893 of 2012 (O&M) 10 arbitrator and to replace the present one by any another senior officer of RCF who is independent, fair and impartial, suitably acquainted with arbitration law and procedure. If one such arbitrator is not available then to out source the decision maker, including a person who may have held judicial office at its discretion or by consent. This Court appreciates the sensitivity displayed by Mr. Bal to remove the anxiety of this Court so that with the new arbitrator in place, justice would be seen to be done between the parties in accordance with law.
12. The appeal is allowed in the above terms.
(RAJIV NARAIN RAINA) JUDGE February 12, 2014 Paritosh Kumar Kumar Paritosh 2014.02.18 10:17 I attest to the accuracy and integrity of this document