Orissa High Court
Dredging & Desiltation Co. Pvt. Ltd. vs Board Of Trustees Of Paradip Port Trust on 21 November, 2014
Author: Amitava Roy
Bench: Amitava Roy
IN THE HIGH COURT OF ORISSA : CUTTACK
MISC. CASE NO. 33 OF 2013
(Arising out of ARBP No. 25 of 2007)
Dredging & Desiltation Co. Pvt. Ltd. .. Petitioner
-Versus-
Board of Trustees of Paradip Port Trust .. Opp.Party.
For the petitioner ... Mr. S.K.Acharya,
For the opp.party ... Mr. S.P.Sarangi
PRESENT:
THE HONOURABLE CHIEF JUSTICE MR. AMITAVA ROY
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Date of hearing : 14.11.2014
Date of Judgment : 21.11.2014
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AMITAVA ROY, C.J. Heard Mr. S.K.Acharya, learned counsel for
the applicant-M/s. Dredging & Desiltation Co. Pvt. Ltd. and Mr.
S.P.Sarangi, learned counsel for the opposite party-Board of
Trustees of Paradip Port Trust(for short referred to also as
PPT/Board).
2. A brief outline of the factual backdrop is
essential, more particularly as the instant application has been
filed in ARBP No. 25 of 2007 registered under Section 11 of the
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Arbitration and Conciliation Act, 1996 ( for short referred to as
'the Act') since been disposed of on 8.8.2008 by appointing Mr.
Justice D.P.Mohapatra, Former Judge of the Hon'ble Supreme
Court as the Presiding Arbitrator in terms of the arbitration
agreement involved.
3. The petitioner-Company, engaged in dredging
and desiltation works was awarded contract at Paradip Port
under Tender Call Notice No. MD/SHS/TECH-24/92 dated
16.11.1992being part of the Agreement No. CE/PPT/No. 11 of 1994-95 dated 11.5.1994. Certain disputes arose with respect to some of the claims of the petitioner in the works under the aforesaid tender/agreement covered by the Arbitration Clause/Agreement between the parties which stood in the following terms as per clause 2.34.4 of the Conditions of Contract.
"2.34.4. All dispute between the parties other than these covered by clauses where under the decisions of Deputy Conservator is stated to be final shall be referred to two arbitrators ( one to be nominated by the contractor and one by Board). In the event of any difference in opinion between the said two arbitrators, the same shall be referred to an umpire to be appointed by the said arbitrators in writing. The decision of the umpire shall be in writing and shall record reasons for the decision and shall be final and binding on all parties to the contract. The provision of the Indian Arbitration Act, 1940 and the rules thereon under and any statutory modification thereof shall be deemed to apply to such reference and deemed to be incorporated in the contract. The award will be a speaking award."-3-
4. As per the Arbitration Agreement as above, all disputes between the parties other than those excepted were to be referred to two arbitrators (one by the contractor and one by the Board) and in the event of difference of opinion between the said two arbitrators, the same was to be referred to an Umpire to be appointed by the said arbitrators in writing.
5. With the advent of the Act, following failed endeavours to appoint a third arbitrator as statutorily mandated, an application was filed under Section 11 of the Act before this Court for such appointment. In Arbitration Petition No. 25 of 2007 so registered, this Court to reiterate, by its order dated 8.8.2008 after hearing the parties, appointed Mr. Justice D.P.Mohapatra, Former Judge of the Hon'ble Supreme Court as Presiding Arbitrator to decide the disputes between the parties and pass the award.
6. The instant application reveals that the Arbitration Tribunal constituted of Hon'ble Mr. Justice D.P.Mohapatra, Presiding Arbitrator, Mr. Amalendu Chakravorty, (Arbitrator of the petitioner) and Mr. Saroj Misro, (Arbitrator of the Paradip Port Trust) entered into the reference. As the proceedings could not be completed within the time fixed by this Court, on an application being made, by order dated 4.3.2011 in Misc. Case No. 22 of 2010, further four months time was granted. According to the petitioner, the arguments on behalf of the both the parties were thereafter concluded and written notes were also submitted. -4- On the culmination of the hearing, learned Arbitral Tribunal fixed for the meeting of the Arbitrators on 15th, 16th, 17th and 18th July, 2012 at Cuttack, but Mr. Saroj Misro, the nominated Arbitrator of the opposite party did not attend the same. The petitioner has averred that the Secretary of the Arbitral Tribunal having enquired of this, Mr. Saroj Misro informed that he was under
suspension from his post as Traffic Manager of Paradip Port Trust and thus, it was not possible for him to participate in the Arbitration proceeding without specific instruction in that regard from the opposite party. The sittings as scheduled were thus deferred awaiting instructions from the opposite party.
7. While the stalemate continued, the opposite party did communicate by its letter dated 17.7.2012 of the Traffic Manager in-charge that it had no objection if the arbitration proceeding was allowed to proceed in the absence of Mr. Saroj Misro or alternatively was kept in abeyance till the revocation of his suspension. Thereafter, Mr. Saroj Misro did inform the Arbitral Tribunal by his letter dated 27.8.2012 that he could act as the Arbitrator as he had been allowed to function as Traffic Manager. Consequently, meetings of the arbitrators were fixed to 12th, 13th and 14th September, 2012. The said meetings were attended by Mr. Saroj Misro whereafter the parties and their advocates were required to appear before the Tribunal on 7.10.2012. However, it did not materialize and it was almost six months thereafter that the petitioner received an order dated -5- 26.4.2013 of the learned Presiding Arbitrator that Mr. Saroj Misro had been placed under suspension and that he was not willing to continue as arbitrator in the case. In the next meeting of the Arbitral Tribunal held on 9.5.2013, a letter dated 8.5.2013 signed by the Deputy Chief Law Officer, Paradip Port Trust was laid before it whereby the opposite party sought to appoint one Mr. Kishore Kumar Sahu, Traffic Manager in-charge as Arbitrator stating the incapability of Mr. Saroj Misro to act as Arbitrator in view of his suspension. Request was thus made to substitute Mr. Kishore Kumar Sahu as the Arbitrator in the proceeding on its behalf. To this, objection was raised by the petitioner contending that appointment of Mr. Kishore Kumar Sahu was not in conformity with the provisions of the Act as the mandate for Mr. Saroj Misro to act as Arbitrator did not terminate in the attendant facts and circumstances and that his suspension from the post of Traffic Manager, Paradip Port Trust did not automatically entail termination of his appointment as arbitrator as he had not been appointed as arbitrator by virtue of his post as Traffic Manager, Paradip Port Trust.
8. Learned Arbitral Tribunal comprised of the Presiding Arbitrator and Mr. Amalendu Chakravorty, Arbitrator passed an order on 9.5.2013 requesting Mr. Saroj Misro to communicate his decision as to whether he intended to continue as the arbitrator or not. The said query however, remained un- responded thus for all practical purposes protracting the -6- deadlock. The instant application has been filed for a direction to the opposite party to allow or instruct Mr. Saroj Misro to continue to act as arbitrator in the ongoing reference so as to facilitate early finalization thereof and the award.
9. Mr. S.K.Acharya, learned counsel for the petitioner has insistently argued that as the appointment of Mr. Saroj Misro as the arbitrator by the opposite party at the relevant point of time was in his individual capacity and not as Traffic Manager, Paradip Port Trust, his suspension from that post per se did not terminate such mandate and thus, in terms of the Act, he continued to be the arbitrator of the opposite party. Referring to Section 14 of the Act, in particular, learned counsel has urged that none of the eventualities as contemplated therein does exist in the facts of the present case warranting termination of the mandate of the appointment of Mr. Saroj Misro as arbitrator of the opposite party and therefore, his non-participation in the arbitration proceeding and /or the resistance offered by the opposite party to his functioning as such, is in gross contravention of the Act justifying the intervention of this Court. According to him, the statutorily contemplated grounds for termination of the mandate of an arbitrator as enumerated in Section 14(1) of the Act ought to co-exist and it being not so in the case in hand, Mr. Saroj Misro cannot be substituted as endeavoured.
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10. Mr. Acharya, has further argued that the underlying objective of arbitration being to ensure inexpensive and expeditious resolution of the differences referred thereto by the parties, the impasse precipitated by the unreasonable and obdurate stand of the opposite party at the final stages of the proceedings is arbitrary and unjustified causing serious prejudice to the petitioner. Learned counsel has urged that in any view of the matter, substitution of Mr. Saroj Misro by Mr. Kishore Kumar Sahu at the penultimate stage of the proceeding would entail enormous delay and thus, direction from this Court is warranted to require the opposite party to permit Mr. Saroj Misro to continue to act as its arbitrator in the interest of early disposal of the arbitration proceedings.
11. Per contra, Mr. S.Sarangi, learned counsel for the opposite party-Board of Trustees has maintained that as Mr. Saroj Misro had been nominated by the opposite party to act as its arbitrator in recognition of his official capacity, his suspension from the said office per se is a valid ground to render him ineligible to continue to act as such. Learned counsel on instructions has argued that a case is registered by the C.B.I. and is pending against Mr. Saroj Misro and his successive suspensions in the perception of the opposite party does not entitle him to represent it in the arbitration proceeding. Mr. Sarangi, therefore insisted that in the singular facts and circumstances, the mandate of appointment of Mr. Saroj Misro as -8- arbitrator stands terminated in terms of Section 14(1)of the Act and thus, he has been rightly substituted by Mr. Kishore Kumar Sahu in the arbitral proceeding as per Section 15(3). He therefore insisted that the instant petition be rejected.
12. The pleaded facts, the documents available on record and the competing arguments have been duly analysed. Admittedly, at the time of appointment of Sri Saroj Misro as the arbitrator for the Paradip Port Trust, he was functioning as the Traffic Manager, Paradip Port Trust. The text of the letter dated 30.7.2005 issued by the Chief Engineer I/c, Paradip Port Trust appointing him as such, is thus of considerable significance in the face of the present debate and is extracted hereunder:-
" Where as the said firm has put forth certain claims pertaining to the aforesaid work, and dispute has been arisen between the Paradip Port Trust and the said firm. Sri Saroj Kumar Misro, Traffic Manager, PPT is appointed as Arbitrator by the competent authority to decide the dispute after hearing both the parties as per the terms and conditions of the above mentioned Agreement and pronounce the award."
13. That in appointing Sri Saroj Kumar Misro as the arbitrator of the PPT, his official status as Traffic Manager, Paradip Port Trust and consequential administrative authority had been a consideration for his contemplated role is apparently decipherable. This is more so as the dispute arose out of the works of 'Maintenance and Capital dredging at Paradip Port'. The -9- plea that Sri Saroj Kumar Misro had been appointed in his individual capacity thus does not commend for acceptance.
14. As the documents appended in the instant application would reveal, Sri Saroj Kumar Misro had been placed under suspension from the afore stated post successively on two occasions and at the point of time when the present proceeding was initiated, he had opted not to respond to the query of the Arbitral Tribunal comprising of the Presiding Arbitrator and the Arbitrator of the petitioner as to whether he did intend to continue as the arbitrator in the case or not. To reiterate, it had been mentioned in the course of argument advanced on behalf of the PPT that CBI had registered a case against Sri Saroj Kumar Misro and that the same was pending.
15. Prior to this, following his suspension, Sri Saroj Kumar Misro had informed the Arbitral Tribunal that he would not attend the proceedings of arbitration as he had been placed under suspension as is apparent from the order dated 17.7.2012 rendered in related proceedings. Letter dated 17.7.2012 of the opposite party also discloses that it had no objection if the arbitration proceeding was allowed to proceed in the absence of Sri Saroj Kumar Misro. Alternatively, it had suggested that the same be kept in abeyance till the revocation of the suspension of Sri Saroj Kumar Misro. Though thereafter on the revocation of the suspension of Sri Saroj Kumar Misro, he expressed his willingness to function as the arbitrator and did participate in the
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proceedings thereof for some time as would be apparent from the order dated 26.4.2013, he having been placed again under suspension, he declined to continue to act as the arbitrator in the case. It was thereafter by communication dated 8.5.2013 of the Paradip Port Trust that Sri Kishore Kumar Sahu, Traffic Manager I/c. was nominated/appointed on its behalf and act as arbitrator in the proceedings. As a consequence of the suspension of Sri Saroj Kumar Misro, Traffic Manager, Paradip Port Trust, he was construed to be incapable of discharging the role of arbitrator. To reiterate, Sri Saroj Kumar Misro did not respond to the query made by the learned Arbitral Tribunal on 9.5.2013 about his willingness to continue as the Arbitrator. Learned counsel for the PPT/opposite party in course of the arguments also on instruction did not express its (PPT) readiness to continue with him as its arbitrator. However, it is demonstratively clear that the opposite party did comprehend and appoint Sri Saroj Kumar Misro as its arbitrator in the capacity of the Traffic Manager and uncompromisingly did seek to continue with him in that official capacity only. Nomination/appointment of Sri Kishore Kumar Sahu, Traffic Manager In-charge also authenticates the consistent stand of the opposite party.
16. Section 42 of the Act mandates that notwithstanding anything contained elsewhere in the Part or in any other law for the time being in force, where with respect to an arbitration agreement any application under the Part had been
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made in a Court, that Court alone would have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings would have to be made in that Court and in no other Court.
17. The instant application thus, in the backdrop of earlier proceeding under Section 11 of the Act has been lodged before this Court.
18. Be that as it may, as contemplated in Section 12(3) & (4), the appointment of an arbitrator may be challenged inter alia if circumstances exist that give rise to justifiable doubts as to his independence or impartiality or if he does not possess the qualifications agreed to by the parties. A party may challenge an arbitrator appointed by him or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.
Section 14 dwells on the eventualities in which the mandate of an arbitrator stand terminated. Sub-section (1) of Section 14 being of considerable significance is quoted hereunder:-
Sec.14(1) The mandate of an arbitrator shall terminate if
(a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and
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(b) he withdraws from his office or the parties agree to the termination of his mandate.
The statutory provision on scrutiny, thus presents the following salient features as precursors of termination of the mandate of an arbitrator.
(a) the arbitrator becomes de jure
unable to perform his
functions
(b) the arbitrator becomes de
facto unable to perform his
functions
(c) the arbitrator for other
reasons fails to act without
undue delay
(d) the arbitrator withdraws from
his office
(e) the parties agree to the
termination of the mandate of
the arbitrator.
Section 15 envisages the following two
circumstances entailing the excision of the mandate of the arbitrator in addition to those set out in Section 13 and 14.
(a) where he withdraws from office for any reason; or
(b) by or pursuant to the agreement of the parties.
19. On an analysis of the overall scheme pertaining to termination of the mandate of an arbitrator outlined by Section 12,13, 14 and 15, it is not possible to lend concurrence to the plea raised on behalf of the petitioner that for such a consequence all the exigencies enumerated in Clause (a) and (b) of Section 14(1) have to essentially co-exist. Such a contention patently
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defies the legislative intendment to the contrary chiefly to obviate a deadlock likely to ensue from such insistence. In the attendant facts and circumstances, the PPT having appointed Sri Saroj Kumar Misro, Traffic Manager as its arbitrator in due acknowledgement of his official position, he had for his suspension from that office rendered himself de jure ineligible to discharge the said role. Further, he also has not responded expressing his willingness to continue to be the arbitrator of the PPT signifying his withdrawal from the office of the arbitrator. As it is, his successive suspension and the pendency of a case registered by the CBI are relevant considerations as well for the PPT to baulk at his continuance as its arbitrator, independence and impartiality being non-relaxable attributes of an arbitrator as envisaged by the Statute.
20. Arbitration is a proceeding recognized in law and regulated by the Act and essentially is one to be conducted by mutually nominated arbitrator(s) of the parties for resolution of their disputes and differences. Not only the entire fabric of the legislation underlines consensus based initiatives wherever feasible for the unhindered progress of the proceedings, unqualified confidence about the independence, impartiality, reliability and efficacy of the arbitrator(s) constitute the substratum for their appointment and continuance. Due primacy to this statutorily enjoined imperatives for valid arbitration cannot be emasculated or enfeebled by any interpretation to the contrary. Such a legislatively
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ordained characteristic of an arbitrator being the sine qua non for valid arbitration, to compel a party to continue with an arbitrator not contemplated in view of the prevailing circumstances would be in derogation of the mandate of the essentiality of an arbitrator of one's choice.
21. The Hon'ble Apex Court in Delta Mechcons (India)Ltd vs. Marubeni Corporation, (2008)15 SCC 772 did reiterate the fundamental notion of process of arbitration to be one of settlement extra cursum curiae where the parties are at liberty to choose their judge and also provide the manner of constituting the Arbitral Tribunal. Thus, the supervening paramountcy of an arbitration agreement had been acknowledged.
22. In the comprehension of this Court in the factual setting adumbrated hereinabove, the mandate of Sri Saroj Kumar Misro as the arbitrator of the PPT stands terminated in accordance with the Act and thus in terms of Section 15(3) substituted arbitrator can be appointed according to the arbitration agreement between the parties. To reiterate, in terms of the arbitration agreement, the Arbitral Tribunal was to be comprised of two arbitrators, one to be nominated by the contractor and another by the Board. As with the enforcement of the Act enjoining as per Section 10 that the number of arbitrators shall not be even, the Presiding Arbitrator was appointed by this Court under Section 11(6) of the Act.
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23. Be that as it may, with the termination of the mandate of nominated arbitrator of the Board/Trust, it would be within the competence of PPT to appoint its substituted arbitrator.
24. The above view finds endorsement in the decisions of the Apex Court in National Highways Authority of India & anr. Vs. Bumihiway DDB Ltd.(JV) & ors., (2006) 10 SCC 763 and NBCC Ltd. vs. J.G.Engineering Pvt. Ltd., (2010) 2 SCC 385.
25. True it is that in view of the intervening developments and the substitution of the arbitrator of the Board/Trust, the arbitration proceedings would get extended to some extent. But it is expected that in view of Section 15(3) & (4), efforts would be made by all concerned to minimize the delay.
26. On a cumulative consideration of the above aspects, I am of the view that the prayer made in the instant petition cannot be acceded to.
The petition thus fails and is rejected.
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CHIEF JUSTICE Orissa High Court, Cuttack The 21st day of November,2014/DM