Delhi High Court
Interocean Shipping (I) Pvt. Ltd. vs Ashish Dhull [Along With Aa No. 99/2006] on 7 August, 2006
Equivalent citations: 2006(3)ARBLR390(DELHI), 133(2006)DLT77
Author: Vikramajit Sen
Bench: Vikramajit Sen
JUDGMENT Vikramajit Sen, J.
Page 2980
1. The Applicant, Inter Ocean Shipping(I) Pvt. Ltd., has filed this action under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'Act') seeking the appointment of an Arbitrator. The Applicants' claims are predicated on an Agreement of Service, the salient clauses of which are that the Respondent/Employee could not take-up employment with any other organisation during the three year tenure of the Agreement. The Applicant/Employer was contractually bound not to terminate the services of the employee during this tenure. Correspondingly, the employee was bound not to leave the service of the employer until the completion of the agreed three years tenure. The consequences of the employees' breach have been spelt out. The power to extend the tenure is conspicuous by its absence. The said Agreement contains the following Arbitration Clause:
14. That in event of any dispute or difference arising between the parties hereto during the subsistence of this agreement or afterwards relating to this agreement, the same shall be referred to the arbitration proceedings of which shall be held at Delhi and whose decision shall be final and binding on the parties. The party desiring the settlement of the dispute, shall give notice of its intentions to go in for arbitration clearly stating the point of dispute to be decided by arbitrators and appoint its own arbitrator within 30 days. If the other party fails to appoint its arbitrator within stipulated Page 2981 period or the two arbitrators fail to appoint an umpire, the court having jurisdiction shall appoint the second arbitrator and/or the umpire as the case may be. The venue of the arbitration shall be Delhi, India only. Subject as aforesaid, the provisions of Indian Arbitration and Conciliation Act, 1996 and any statutory modifications or reenactments thereof and rules made there under for the time being in force shall apply to the arbitration proceedings under this clause.
2. Arbitration Applications No. 92/2006 and 99/2006 have been filed against the Applicant's erstwhile employees, the Respondents herein, namely, S/Shri Ashish Dhall and Rajnish Sharma respectively. Shri Ashish joined the services of the Applicant on 1.9.2000 as Shipping Executive on a consolidated salary of Rs. 12,000/- per month and allegedly abandoned the services with the Applicant on 25.5.2005 without giving proper notice. The Applicant has claimed damages of Rs. 6,97,000/- on account of the breach of the Agreement of Service. Shri Rajnish joined the services of the Applicant on 26.7.2000 as Shipping Executive on a consolidated salary of Rs. 16,500/- per month and allegedly abandoned the services with the Applicant on 11.5.2005 without giving proper notice. The Applicant has claimed damages of Rs. 6,00,000/- on account of the breach of the Agreement of Service.
3. These Petitions have been strenuously resisted by learned Counsel for the Respondents/Employees on the ground that there is no subsisting Agreement to refer disputes to Arbitration. It has been underscored that the subject Agreement of Service was only in respect of the initial three year period when the employees were receiving a consolidated salary. Had the employees abandoned their services within that period the Arbitration Clause would undoubtedly have applied to claims for damages. It has further been contended that the Petition had been filed under Section 9 of the Act in which the ex parte ad interim injunction granted to the Applicant was withdrawn by Orders dated 22.9.2005. The Court observed thus:
When the period of agreement of the respondent was from 26.7.2000 to 25 July 2003 and undisputedly no fresh agreement was executed between the parties after 25 July 2003 though respondent continued to be employed with the petitioner till 11.5.2005, there is no question of enforcement of Clause 12 of the agreement of the employment executed between the parties due to expiry of the employment agreement and also expiry of one year from the date of expiry of period of agreement ending on 25 July, 2003. The Clause 12 of the expired agreement between the parties cannot be enforced. The petition therefore is not maintainable.
In view of these findings I am satisfied that the principles of res judicata would preclude the Arbitrator from drawing any reliance on the Arbitration Clause.
4. The Seven Judges Bench of the Hon'ble Supreme Court in S.B.P. and Co. v. Patel Engineering Ltd. Page 2982 had recorded twelve conclusions of which the fourth is relevant for the present purposes. It had been observed thus:
(i) The power exercised by the Chief Justice of the High Court or the Chief Justice of India under Section 11(6) of the Act is not an administrative power. It is a judicial power.
(ii) The power under Section 11(6) of the Act, in its entirety, could be delegated, by the Chief justice of the high Court only to another judge of that court and by the Chief Justice of India to another judge of the Supreme Court.
(iii) In case of designation of a judge of the High Court or of the Supreme Court, the power that is exercised by the designated judge would be that of the Chief Justice as conferred by the statute.
(iv) The Chief Justice or the designated judge will have the right to decide the preliminary aspects as indicated in the earlier part of this judgment. These will be, his own jurisdiction, to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators. The Chief Justice of the judge designated would be entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified in terms of Section 11(8) of the Act if the need arises but the order appointing the arbitrator could only be that of the Chief Justice or the judge designate.
(v) Designation of a district judge as the authority under Section 11(6) of the Act by the Chief Justice of the High Court is not warranted on the scheme of the Act.
(vi) Once the matter reaches the arbitral tribunal or the sole arbitrator, the High Court would not interfere with orders passed by the arbitrator or the arbitral tribunal during the course of the arbitration proceedings and the parties could approach the court only in terms of Section 37 of the Act or in terms of Section 34 of the Act.
(vii) Since an order passed by the Chief Justice of the High Court or by the designated judge of that court is a judicial order, an appeal will lie against that order only under Article 136 of the Constitution of India to the Supreme Court.
(viii) There can be no appeal against an order of the Chief Justice of India or a judge of the Supreme Court designated by him while entertaining an application under Section 11(6) of the Act.
(ix) In a case where an arbitral tribunal has been constituted by the parties without having recourse to Section 11(6) of the Act, the arbitral tribunal will have the jurisdiction to decide all matters as contemplated by Section 16 of the Act.
(x) Since all were guided by the decision of this Court in Konkan Railway corporation Ltd. v. Rani Construction P. Ltd. [2000] 8 SCC 159 and orders under Section 11(6) of the Act have been made based on the position adopted in that decision, we clarify that appointments of arbitrators or arbitral tribunals thus far made, are to be treated as valid, all objections being left to be decided under Section 16 of the Act. As and from this Page 2983 date, the position as adopted in this judgment will govern even pending applications under Section 11(6) of the Act.
(xi) Where District Judges had been designated by the Chief Justice of the High Court under Section 11(6) of the Act, the appointment orders thus far made by them will be treated as valid; but applications, if any, pending before them as on this date will stand transferred, to be dealt with by the Chief of the concerned High Court or a judge of that court designated by the Chief Justice.
(xii) The decision in Konkan Railway Corporation Ltd. v. Rani Construction P. Ltd. [2000] 8 SCC 159 is overruled.
5. In compliance with these observations, the Judge dealing with an application under Section 11 of the Act must satisfy himself, on a prima facie basis, that a valid Arbitration Agreement as well as a live claim is in existence as this is the sine qua non for the appointment of an Arbitrator. The Respondents have asserted that after the expiry of the Agreement on 25.7.2003 and 30.8.2003 respectively they were employed on varying terms and conditions inter alia on a monthly salary of Rs. 50,000/- and continued to work for the Applicant for almost two years. These assertions have been admitted in the Rejoinder. Moreover, their argument that the initial three years period in which the employees were treated as Trainees was not extendable has unchallengeable force. Reference has also been made to the filing of a Suit for Recovery of Rs. 2,82,000/- by the Applicant against another Trainee, namely, Shri Gaurav Joshi.
6. Having carefully considered the matter I am satisfied that there is no room for doubt that the Agreement of Service covered a specific period on the expiry of which all the covenants contained therein came to an end. I cannot accede to the argument of learned Counsel for the Applicant that the services of the Respondents continued on the basis of that Agreement of Service. The initial three years period appears to be akin to Training and this is evident from the relatively low consolidated salary paid to the Employees/Respondents in that period. The fresh engagement of the Employees/Respondents would have been covered by separate terms of engagement, which should ordinarily have been reduced to writing. The fact that no Appointment Letter is available cannot persuade me to come to a conclusion contrary to the ordinary run of events. A Court cannot also ignore the legal situation prevailing in this country in which personal services cannot be specifically enforced. The presumption, therefore, must be that in case of a wrongful cessation of personal services a claim for damages before a Civil Court is the effective legal remedy.
7. Learned Counsel for the Applicant has relied on Sangamner Bhag Sahakari Karkhana Ltd. v. Krupp Industries Ltd. and to Renusagar Power Co. Ltd. v. General Electric Co. refereed to therein. So far as Section 11 is concerned the matter stands concluded by Patel Engineering Ltd. Reliance on behalf of the Applicant on Birla VXL Ltd. v. D.L.F. Universal Ltd. 2003(4) R.A.J. 188(Del) is also of no avail to the Applicant since Page 2984 a finding had been reached by the Division Bench that the Arbitration Clause continued to apply even after the dissolution of the partnership firm. In Indian Drugs and Pharmaceuticals Ltd. v. Indo Swiss Synthetics Gem Manufacturing Co. Ltd. disputes had arisen during the subsistence of the Agreement which contained the Arbitration Clause and, therefore, the parties were referred to Arbitration.
8. In these circumstances the Applications are without merit and are dismissed. This shall not prejudice the right of the Applicant to initiate any other legal remedy that may be available to the Applicants.
9. Parties to bear their respective costs.