Madhya Pradesh High Court
National Dairy Development Board And ... vs Suraj Singh on 23 November, 2001
Equivalent citations: 2002(5)MPHT254
ORDER S.P. Khare, J.
1. This is a revision under Section 115, CPC by the non-applicants against the order dated 11-5-2000 in Civil Suit No. 20-A of 1996 of the 5th Additional District Judge, Bhopal by which the application for appointment of arbitrator has been allowed and the non-applicants have been directed to appoint arbitrator for resolution of the dispute in terms of the arbitration agreement.
2. Non-applicant National Dairy Development Board invited tenders for construction of chilling plant at Harda. The applicant submitted his tender. He was awarded contract. There is arbitration agreement in Clause 90 of the Contract. There arose dispute between the parties in respect of payment of some of the items claimed by the applicant. The non-applicant made payment of Rs. 18,397/- on 1-10-1990. Thereafter, on 23-11-1990 the non-applicant wrote a letter to the applicant informing him that a further payment of Rs. 26,145/- can be made if the applicant gives in writing that he would not make any further claim. According to the applicant the final bill was not prepared. The applicant wrote the letter dated 11-3-1996 to the non-applicant for appointment of an arbitrator as per arbitration clause in the contract for resolving the dispute. But the arbitrator was not appointed. The applicant submitted an application on 6-5-1996 before the 5th Additional District Judge, Bhopal for the appointment of arbitrator. This application was described to be "under Section 8(2) of the Arbitration Act". By the impugned order this application has been allowed and the non-applicants have been directed to appoint an arbitrator as per arbitration agreement.
3. The case of the non-applicant was that the applicant has been paid for the work done by him and by the letter dated 13-9-1990 he was informed that no further payment is to be made. Therefore, the applicant's application for appointment of arbitrator is barred by limitation.
4. The first question is whether the Arbitration and Conciliation Act, 1996 or the Arbitration Act, 1940 is applicable. The non-applicant in its application dated 31-10-1996 before the 5th Additional District Judge has stated that the Act of 1996 is applicable and now in this revision the learned Counsel for the petitioners (the non-applicants) attempted to argue that the old Act would apply. This somersault is not permissible. It is admitted that the applicant made a request to the non-applicant on 11-3-1996 for appointment of arbitrator. According to Section 21 of the Act of 1996 unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. Therefore, the arbitral proceedings commenced on 11- 3-1996 or shortly thereafter when this request was received by the non-applicant. The application for appointment of the arbitrator was submitted before the 5th Additional District Judge on 6-5-1996. Therefore, the provisions of the Act of 1996 are attracted which had come into force on 25-1-1996. In the revision petition it is mentioned that the applicant had given first notice on 7-10-1992 for appointment of arbitrator and it was followed by second notice on 30-8-1993 seeking the appointment of the arbitrator and as these notices were served before the new Act came into force the provisions of the old Act would apply. But in the reply to the applicant's application submitted before the 5th Additional District Judge on 6-5-1998 no reference was made to the notices dated 7-10-1992 and 30-8-1993 nor copies of such notices were produced. As there was no pleading or any document in this respect he could not rely upon them and the same can not be considered by the Revisional Court. It has been rightly held that the provisions of the new Act are applicable to the present case.
5. The next question is whether the revision against the impugned order is legally maintainable ? The application in the present case for appointment of arbitrator was under Section 11 of the new Act. It would not make any difference that it was described to be under Section 8(2) of the Arbitration Act. A wrong mention of the section or the Act or the nomenclature in the application is not going to make any difference. The substance has to be seen. The application will be deemed to have been made under the provision of law which was then in force. In exercise of the powers conferred by sub-section (10) of Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter to be referred to as the 'Act') the Chief Justice of the High Court of Madhya Pradesh has made the scheme known as "Appointment of arbitrators by the Chief Justice of Madhya Pradesh High Court Scheme, 1996". In para 3 of the Scheme for the purpose of dealing with the request made under Paragraph 2 the Chief Justice designated the District Judge/Additional Judge to the Court of District Judge, where the value of the subject-matter does not exceed 25 lakhs rupees. Thus in the present case the 5th Additional District Judge, Bhopal acted as nominee of the Chief Justice in appointing the arbitrator.
6. Under Section 11 of the Act the Chief Justice or 'any person" or institution designated by him has to appoint the arbitrator. The District Judge or the Additional District Judge has been designated by the Chief Justice under the Scheme as a "person" and not in the character or capacity of a Court. The designation or nomination is as persona designata and not qua the Court. Such a nominee acts in an administrative capacity and not in a judicial capacity.
7. The three-Judge Bench of the Supreme Court has held in Konkan Railway Corporation v. Mehul Construction Company (AIR 2000 SC 2821) that to attract the confidence of the international mercantile community and the growing volume of India's trade and commercial relationship with the rest of the world after the new liberalisation policy of the Government, Indian Parliament was persuaded to enact the Arbitration and Conciliation Act of 1996 on the UNCITRAL Model and, therefore, in interpreting any provisions of the 1996 Act, Courts must not ignore the objects and purpose of its enactment. A bare comparison of different provisions of the Arbitration Act of 1940 with the provisions of the Arbitration and Conciliation Act, 1996 would unequivocally indicate that the 1996 Act limits intervention of Court with an arbitral process to the minimum and it is certainly not the legislative intent that each and every order passed by an authority under the Act would be a subject-matter of judicial scrutiny of a Court of law. The provisions of the Act aim at achieving the sole objective of resolving the dispute as expeditiously as possible so that trade and commerce are not affected on account of litigation. The Statement of Objects and Reasons of the Act clearly enunciates that the main objective of the legislation was to minimise the supervisory role of Courts in the arbitral process. When the matter is placed before the Chief Justice or his nominee under Section 11 of the Act it is imperative for the said Chief Justice or his nominee to bear in mind the legislative intent. At that stage it would not be appropriate for the Chief Justice or his nominee to entertain any contentious issue between the parties and decide the same. A bare reading of Sections 13 and 16 of the Act makes it crystal clear that questions with regard to the qualifications, independence and impartiality of the arbitrator, and in respect of the jurisdiction of the arbitrator could be raised before the arbitrator who would decide the same. Section 16 empowers the Arbitral Tribunal to rule on its own as well as on objections with respect to the existence or validity of the arbitration agreement. Therefore, it would be proper for the Chief Justice or his nominee just to appoint an arbitrator without wasting any time. If this approach is adhered to, then there would be no grievance of any party and in the arbitral proceeding, it would be open to raise any objection, as provided under the Act. However certain contingencies may arise where the Chief Justice or his nominee refuses to make an appointment of an arbitrator and in such a case a party seeking appointment of an arbitrator cannot be said to be without any remedy. If it is held that an order under Section 11(6) is a judicial or quasi-judicial order then the said order would be amenable to judicial intervention and any reluctant party may frustrate the entire purpose of the Act. by adopting dilatory tactics in approaching a Court of law even against an order of appointment of an arbitrator. Such an interpretation has to be avoided in order to achieve the basic objective for which the country has enacted the Act of 1996 adopting the UNCITRAL Model. The nature of the function performed by the. Chief Justice being essentially to aid the constitution of the Arbitral Tribunal immediately and the legislature having consciously chosen to confer the power on the Chief Justice and not a Court, it is apparent that the order passed by the Chief Justice or his nominee is an administrative order, Therefore, even an order refusing to appoint an arbitrator will not be amenable to the jurisdiction of the Supreme Court under Article 136 of the Constitution. However, an order of refusal which has decided contentious issues would be an act of non-performance of duty and the authority concerned could be directed by mandamus to perform its duty. '
8. The question has been sought to be referred to a Larger Bench by the Supreme Court in Konkan Railway v. Rani Construction Private Limited, (2000) 8 SCC 159. But until there is a contrary judgment of the Supreme Court, the law laid down by three-Judge Bench in the above case has to be followed by all the Courts.
9. As the nominee of the Chief Justice under the Scheme appoints an arbitrator under Section 11 of the Act in administrative capacity and not as a "Court" it is manifest that no revision against such order is maintainable under Section 115, CPC before the High Court. The revisional power of the High Court under this section can be exercised against an order in "any case which has been decided by any Court subordinate to such High Court". The nominee of the Chief Justice acting in administrative capacity is not a "Court" and therefore a revision against that order cannot be entertained. Sub-section (7) of Section 11 of the Act clearly stipulates that a decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justice or the person or institution designated by him is "final". As finality has been attached to such decision by a specific statutory provision a revision against that decision would not lie under Section 115, CPC.
10. Section 5 of the Act provides that notwithstanding anything contained in any other law for the time being in force, in matters governed by this part, "no judicial authority shall intervene except where so provided in this part". Section 11 is in the same part in which Section 5 occurs. There is no provision in this part for challenging the order passed under Section 11 of the Act before any Court. On the contrary, as noted above, finality has been attached to such orders. Therefore, the inference would be that a revision against the order under Section 11 of the Act is specifically barred. Section 5 has been enacted in pursuance of the object of the Act "to minimise the supervisory role of Courts in the arbitral process". The Court's intervention should be minimal. The High Court exercising the revisional jurisdiction under Section 115, CPC would also be covered by the words "judicial authority" in Section 5 of the Act. Thus there is a clear ban on entertaining any revision by the High Court against the order under Section 11 of the Act appointing an arbitrator. The question whether a revision can be entertained against an order other than an order under Section 11 of the Act does not fall for consideration in the present case.
11. In view of the above discussion there are three reasons for holding that the revision petition is not maintainable in the present case :--(i) the order passed by the person designated by the Chief Justice under Section 11 of the Act is an administrative order and not judicial order as laid down by the Supreme Court, (ii) the designate or nominee of the Chief Justice deciding such application is not a "Court", and (iii) there is a statutory bar as per Section 5 read with sub- section (7) of Section 11 to "intervene" in the order for appointment of arbitrator by entertaining a revision against that order.
12. There is a decision of Rajasthan High Court also in Union of India v. Girdhari Lal (AIR 1998 Rajasthan 240) taking the view that no revision lies against the order under Section 11 of the Act. I respectfully agree with that view for the reasons given above.
13. It is submitted on behalf of the petitioners that this revision petition be permitted to be converted into a writ petition under Article 227 of the Constitution of India. That is not permissible as held by this Court in Ratamingh v. Tarabai (AIR 1992 MP 59) and Vishesh Kumar v. Shanti Prasad (AIR 1980 SC 892). It has been held that a revisional proceeding cannot be converted into proceedings under Article 227 of the Constitution of India as the two proceedings are different.
14. Assuming that the revision is maintainable or it can be treated as a petition under Article 227 of the Constitution of India for challenging the impugned order, the argument of the learned Counsel for the petitioners that the application for appointment of arbitrator was barred by limitation is not acceptable. As mentioned above the request for appointment of the arbitrator was made by the applicant to the non-applicant on 11-3-1996 and the arbitrator not having been appointed as per arbitration agreement in the contract the application under Section 11(6) of the Act was made on 6-5-1996. As per arbitration agreement the dispute is to be "referred for adjudication to a sole arbitrator to be appointed by the Board". The application was well within limitation. Section 43(1) of the Act provides that the Indian Limitation Act, 1963 shall apply to arbitrators as it applies to proceedings in Court. Section 43(2) further provides that for the purpose of this section, an arbitration shall be deemed to have commenced on the date referred to in Section 21. As noted above Section 21 lays down that the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. Thus the date of receipt of the request by the respondent for reference of the dispute to arbitration is the date for commencement of arbitral proceeding. Article 137 of the Limitation Act, 1963 which is a residuary Article is applicable to the application under Section 11 of the Act for appointment of arbitrator and the period of limitation is three years and the time from which period begins to run is "when the right to apply accrues". As per Section 11(6) of the Act relevant for the present purposes, where, under an appointment procedure agreed by the parties, a party fails to act as required under that procedure, another party may request to take the necessary measure. Thus, the failure to act for appointment of an arbitrator by the respondent is the terminus-a-quo for the party to make an application under Section 11(6) of the Act and that is the event when the right to apply accrues. The limitation of three years provided by Article 137 of the Limitation Act, 1963 commences from the date of failure to act as required by the procedure to appoint the arbitrator. In the present case a request was made by the applicant to the respondent on 11-3-1996 to appoint the arbitrator as per procedure provided in the arbitration agreement and failure to act on that request by the respondent furnished the cause of action for application under Section 11(6) of the Act, and the application having been made on 6-5-1996 it is within the period of limitation provided by Article 137 of the Limitation Act, 1963.
15. The question whether the claim of the applicant is within limitation or not is to be decided by the arbitrator as per Section 43(1) of the Act. The provisions of the Limitation Act, 1963, by virtue of Section 43(1) of the Act, shall apply to arbitrators as it applies to proceedings in Court. It is for the arbitrator to decide whether any claim is within limitation or not as the Court decides in an action brought before it. (Panchu Gopal Base v. Board of Trustees, Calcutta Port, AIR 1994 SC 1615). The question of limitation in the present case is debatable one. It is within the domain of the arbitrator to decide it. Such a debatable and arguable question can not be decided under Section 11 of the Act. (Meda Narsimhulu v. Council of Scientific & Industrial Research, Delhi, AIR 1999 AP 345). Even as per dictum of the Supreme Court in the case of Konkan Railway (supra) such a "contentious issue" is not to be decided on the application under Section 11 of the Act and it would be proper "just to appoint the arbitrator without wasting any time". Therefore, an arguable question whether the claim of the party is within limitation or not is to be decided by the arbitrator.
16. In view of the above discussion the revision is dismissed.