Himachal Pradesh High Court
Mr. Sumeet Raj Sharma vs Ms. Jyotsna Rewal Dua on 29 March, 2016
Author: Rajiv Sharma
Bench: Rajiv Sharma
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA.
OMP No. 321/2015 in .
Arb. Case No. 8 of 2011 Decided on: 29.3.2016 ___________________________________________________ M/s. Negi Builders Pvt. Ltd. Contractor.
Versus Fozal Power Pvt. Ltd. ...Respondent.
of ____________________________________________________________ Coram:
rt Hon'ble Mr. Justice Rajiv Sharma, Judge.
Whether approved for reporting? 1 No For the Petitioner : Mr. Sumeet Raj Sharma, Advocate.
For the Respondents: Ms. Jyotsna Rewal Dua, Sr. Advocate with Ms. Shashi Kiran, Advocate.
________________________________________________________ Justice Rajiv Sharma, Judge (oral).
The parties entered into an arbitration agreement whereby it was agreed to refer all disputes to arbitration relating to or arising out of the work awarded vide letter of intent for execution of work dated 9.12.2009 and the agreement dated 28.1.2010. Arbitration clause 3.2.5.0 and GCC Clause 3.1.25.3 read as under:1
Whether reporters of the local papers may be allowed to see the judgment?::: Downloaded on - 15/04/2017 19:59:59 :::HCHP 2
(a) In the event the Contractor of FPPL is dissatisfied with the decision of the Chairman in case of any Dispute or difference arising between FPPL and the .
Contractor relating to any matter arising out of or connected with this Agreement, the same shall be settled in accordance with the Arbitration and Conciliation Act, 1996 including any statutory amendment, modification or replacement thereof. The arbitral tribunal shall consist of three arbitrators, of whereby one arbitrator shall be appointed by FPPL one by the contractor and the third presiding arbitrator shall be appointed by the two arbitrators so rt appointed.
(b) Arbitration proceedings shall be held at Delhi and the language of arbitration proceedings and that of all documents and communications between the parties shall be English.
(c) The decision of the arbitrator shall be final and biding upon both the parties and the parties shall have no right to appeal against the decision of the Arbitral Tribunal. The cost and expenses of arbitration proceedings shall be initially paid in the ratio of 50:50 basis. The Arbitrator shall have the right to award costs of proceedings against any party. However, the expenses incurred each party in connection with the preparation, presentation etc. of its proceedings shall be borne by each party itself.
(d) Performance under the contract shall continue during the arbitration proceedings and payments due ::: Downloaded on - 15/04/2017 19:59:59 :::HCHP 3 to the Contractor by FPPL shall not be withheld, unless they are the subject matter of the arbitration proceedings.
.
2. However, no steps for constitution of the Arbitral Tribunal were taken by the respondent. The petitioner filed Arbitration Case No.8 of 2011 before this Court. This Court vide judgment dated 17.8.2012 held of Sh. R.K. Sharma as nominated arbitrator of the petitioner and the respondent was directed to nominate rt its arbitrator within 30 days from the date of order and thereafter both the nominee arbitrators were to appoint Presiding Arbitrator within further period of 30 days.
The judgment dated 17.8.2012 was assailed by the respondent before the Hon'ble Supreme Court by filing Special Leave Petition. The Special Leave Petition was dismissed by the Hon'ble Supreme Court on 4.4.2014.
Respondent preferred a review petition before the Hon'ble Supreme Court. The same was dismissed on 7.8.2014. Fact of the matter is that respondent did not nominate even its nominee arbitrator within 30 days from the order dated 4.4.2014 rendered in the Special ::: Downloaded on - 15/04/2017 19:59:59 :::HCHP 4 Leave Petition and even after the dismissal of the review petition by the Hon'ble Supreme Court. Respondent .
vide letter dated 30.9.2014, sent through its lawyer, informed the petitioner that Hon'ble Justice Ms. Rekha Sharma (Retd.) was appointed as a Nominee Arbitrator.
Fact of the matter is that two nominees failed to appoint of presiding arbitrator within the period of 30 days as per judgment dated 17.8.2012.
3. rt The petitioner was constrained to serve notice upon its nominee arbitrator Shri R.K. Sharma, dated 8.6.2015. No communication was received from Shri R.K. Sharma.
4. It is in these circumstances, present application has been filed under Section 14 (1) (A) of the Arbitration and Conciliation Act, 1996 read with sub-
section 6 of Section 11 and Section 15 (2) of the Arbitration and Conciliation Act, 1996.
5. It is evident from the facts enumerated herein above that respondent has not nominated its Arbitrator within the time frame given by this Court and both the nominees i.e. Shri R.K. Sharma and Justice ::: Downloaded on - 15/04/2017 19:59:59 :::HCHP 5 Ms. Rekha Sharma (Retd.), have failed to further nominate the presiding arbitrator. The petitioner has .
prayed that mandate of nominee of Shri R.K. Sharma and Justice Ms. Rekha Sharma (Retd.) may be terminated and suitable arbitrators may be appointed.
The respondent was bound to nominate arbitrator of immediately as per the mandate of this Court and Shri R.K. Sharma and Justice Ms. Rekha Sharma (Retd.) rt were to nominate Presiding Arbitrator which they have failed to do. Shri R.K. Sharma has not sent reply to the notice dated 8.6.2015.
6. Their Lordships of the Hon'ble Supreme Court in Union of India and others vs. Uttar Pradesh State Bridge Corporation Limited, (2015) 2 SCC 52 have held that the appointment of the arbitrator by the Court, of its own choice, departing from the arbitration clause, is not unknown and has become an acceptable proposition of law which can be termed as a legal principle which has come to be established by a series of judgments of the Supreme Court. Their Lordships have further held that in terms of section 14, it is clear ::: Downloaded on - 15/04/2017 19:59:59 :::HCHP 6 that when there is a failure on the part of the Arbitral Tribunal to act and it is unable to perform its function .
either de jure or defacto, it is open to a party to the arbitration proceedings to approach the court to decide on the termination of the mandate. Section 15 provides some more contingencies when mandate of an of arbitrator can get terminated. Their Lordships have held as under:
[12] As is clear from the reading of Section 14, when there is rt a failure on the part of the Arbitral Tribunal to act and it is unable to perform its function either de jure or de facto, it is open to a party to the arbitration proceedings to approach the Court to decide on the termination of the mandate. Section 15 provides some more contingencies when mandate of an arbitrator can get terminated. In the present case, the High Court has come to a categorical finding that the Arbitral Tribunal failed to perform its function, and rightly so. It is a clear case of inability on the part of the members of the Tribunal to proceed in the matter as the matter lingered on for almost four years, without any rhyme or justifiable reasons. The members did not mend their ways even when another life was given by granting three months to them. Virtually a pre-emptory order was passed by the High Court, but the Arbitral Tribunal remained unaffected and took the directions of the High Court in a cavalier manner. Therefore, the order of the High Court terminating the mandate of the arbitral tribunal is flawless. This aspect of the impugned order is not even questioned by the Appellant at the time of hearing of the present appeal.::: Downloaded on - 15/04/2017 19:59:59 :::HCHP 7
[17] In the case of contracts between Government Corporations/State owned companies with private parties/contractors, the terms of the agreement are usually .
drawn by the Government company or public sector undertakings. Government contracts have broadly two kinds of arbitration clauses, first where a named officer is to act as sole arbitrator; and second, where a senior officer like a managing director, nominates a designated officer to act as the sole arbitrator. No doubt, such clauses which give the Government a dominant position to constitute the Arbitral of Tribunal are held to be valid. At the same time, it also casts an onerous and responsible duty upon the persona designata to appoint such persons/officers as the arbitrators who are not only able to function independently and impartially, but rt are in a position to devote adequate time in conducting the arbitration. If the Government has nominated those officers as arbitrators who are not able to devote time to the arbitration proceedings or become incapable of acting as arbitrators because of frequent transfers etc., then the principle of 'default procedure' at least in the cases where Government has assumed the role of appointment of arbitrators to itself, has to be applied in the case of substitute arbitrators as well and the Court will step in to appoint the arbitrator by keeping aside the procedure which is agreed to between the parties. However, it will depend upon the facts of a particular case as to whether such a course of action should be taken or not. What we emphasise is that Court is not powerless in this regard.
[18] In Singh Builders Syndicate where pendency of arbitration proceedings for over a decade was found by this Court to be a mockery of a process. This anguish is expressed by the Court in the said judgment in the following manner:
15. The object of the alternative dispute resolution process of arbitration is to have expeditious and effective ::: Downloaded on - 15/04/2017 19:59:59 :::HCHP 8 disposal of the disputes through a private forum of the parties' choice. If the Arbitral Tribunal consists of serving officers of one of the parties to the dispute, as members in .
terms of the arbitration agreement, and such tribunal is made non-functional on account of the action or inaction or delay of such party, either by frequent transfers of such members of the Arbitral Tribunal or by failing to take steps expedititiously to replace the arbitrators in terms of the arbitration agreement, the Chief Justice or his designate, required to exercise power Under Section 11 of the Act, can of step in and pass appropriate orders.
16. We fail to understand why the General Manager of the Railways repeatedly furnished panels containing names of officers who were due for transfer in the near future. We rt are conscious of the fact that a serving officer is transferred on account of exigencies of service and transfer policy of the employer and that merely because an employee is appointed as arbitrator, his transfer cannot be avoided or postponed. But an effort should be made to ensure that officers who are likely to remain in a particular place are alone appointed as arbitrators and that the Arbitral Tribunal consisting of serving officers, decides the matter expeditiously.
17. Constituting Arbitral Tribunals with serving officers from different far-away places should be avoided.
There can be no hard-and-fast rule, but there should be a conscious effort to ensure that the Arbitral Tribunal is constituted promptly and arbitration does not drag on for years and decades.
18. As noticed above, the matter has now been pending for nearly ten years from the date when the demand for arbitration was first made with virtually no progress. Having regard to the passage of time, if the Arbitral Tribunal has to be reconstituted in terms of Clause 64, there may be a need to change even the other two members of the Tribunal.
::: Downloaded on - 15/04/2017 19:59:59 :::HCHP 919. The delays and frequent changes in the Arbitral Tribunal make a mockery of the process of arbitration. Having regard to this factual background, we are of the view .
that the appointment of a retired Judge of the Delhi High Court as sole arbitrator does not call for interference in exercise of jurisdiction Under Article 136 of the Constitution of India.
[19] The appointment of arbitrator by the Court, of its own choice, departing from the arbitration clause, is therefore not unknown and has become an acceptable of proposition of law which can be termed as a legal principle which has come to be established by a series of judgments of this Court. Reasons for debating such a course of action are not far to seek and already taken note of above.
7. rt In the instant case, the Arbitrators should have entered into arbitration immediately after their appointment by nominating the Presiding Arbitrator.
The matter has been unnecessarily delayed. The underlined principles for referring the matter to arbitration are that the dispute between the parties is resolved at the earliest. The Arbitrators appointed by this Court vide judgment dated 17.8.2012 have failed to perform their functions. Thus, the case falls within the ambit of sections 14 (1) (A) and 15 (2) of the Arbitration and Conciliation Act, 1996.
::: Downloaded on - 15/04/2017 19:59:59 :::HCHP 108. Accordingly, the application is partially allowed. At the request of Mr. Sumeet Raj Sharma, Mr. .
R.K. Sharma is substituted by Mr. Satyen Vaidya, Senior Advocate who will be assisted by Ms. Pratibha Bali. The nominee as suggested by Ms. Jyotsna Rewal Dua, Senior Advocate, namely, Justice Ms. Rekha of Sharma (Retd.) is retained as the nominated Arbitrator for the respondent. Thus, in the interest of justice rt instead of leaving the discretion with the nominees to appoint the Presiding Arbitrator, the court deems it fit and proper to appoint Justice Vinod Kumar Sharma (Retd.), H.No. 3070, Sector 21-D, Chandigarh, as Presiding Arbitrator, who will be assisted by Ms. Suchitra Sen, Advocate.
9. The Arbitrators are directed to enter into reference within a period of two weeks from the date of receipt of the copy of the order. Thereafter, the petitioner is directed to file claim petition within a period of three weeks. Reply be filed by the respondent within a further period of three weeks. The pleadings, including, rejoinder and counter-claim, shall also be ::: Downloaded on - 15/04/2017 19:59:59 :::HCHP 11 completed by the parties within a period of eight weeks after entering into reference by the Arbitrators. It shall .
be open to the Arbitrators to determine their own procedure with the consent of the parties. It shall also be open to the Arbitrators to fix their fee alongwith the fee of assisting Arbitrators. The award shall be made of strictly as per the provisions of the Arbitration and Conciliation Act, 1996 within six months. Needless to order.
rt add that the Presiding Arbitrator shall pass a speaking The Registry of this Court is directed to immediately inform Justice Vinod Sharma (Retd.), Justice Ms. Rekha Sharma (Retd.), Sh. Satyen Vaidya, Sr. Advocate, Ms. Pratibha Bali, Advocate and Ms. Suchitra Sen, Advocate about the passing of the order by sending a copy of this order to them. Though arbitration proceedings as per clause 3.2.5.0 of the Arbitration were to be held at Delhi, but it shall be open to the parties to agree amicably to hold arbitration proceedings out side Delhi also.
(Justice Rajiv Sharma), Judge.
29.3.2016*awasthi* ::: Downloaded on - 15/04/2017 19:59:59 :::HCHP