Delhi District Court
M/S Topsel vs D. P. Ture on 17 April, 2015
IN THE COURT OF Dr. KAMINI LAU: ADDL. DISTRICT
JUDGEII (CENTRAL): TIS HAZARI COURTS: DELHI
Suit No. 336/2013
Unique Case ID No. 02401C103152010
M/s Topsel
Through its Proprietor
Ms. Shashi Arya
4/349, Govindpuri, Kalkaji
New Delhi110 019.
...... Petitioner
VERSUS
1. D. P. Ture
Sole Arbitrator
Office of the Director of Engineers,
Ground Floor, Vig Building
16 Rajpur Road, C. L. Zone.
Delhi 110 054.
2. Municipal Corporation of Delhi
Through its Commissioner
Town Hall, Delhi 00 006.
...... Defendants
Date of Institution : 16.03.2010
Arguments heard on : 16.04.2015
Date of Decision : 17.04.2015
JUDGMENT:
1. The objections under Section 34 of the Arbitration and Conciliation Act, 1996 have been filed on behalf of the petitioner to the Topsel Vs. D. P. Ture & Ors. (CS No. 336/13) Page No.1 to 19 Award dated 10.12.2009 passed by the Sole Arbitrator / Respondent No. 1 and for dismissing the claim of the Respondent No. 2 / MCD.
2. The brief facts not disputed by the parties as borne out from the arbitration proceedings are as under
➢ The dispute relates to a contract for the display of advertisement sites for the period with effect from 01.06.1990 to 31.03.1992 awarded by the Respondent No 2, MCD, to the Petitioner M/s Topsel. Arbitration Clause is part of the Terms & Conditions for Allotment of Sites for the contract period 1990 - 92.
➢ The Respondent No. 2 invoked the arbitration clause and the matter was referred to the sole arbitration of Shri A K Singh on 22.6.92.
➢ Initially Shri A K Singh entered upon the reference only vide his notice under reference No. WSU / Dir(A&P) / 92 / 67097 dated 7.8.1992 citing M/s Topsell Advertising (the petitioner is M/s Topsel) as Claimants and Respondent No 2 as the Respondents. The petitioner pointed out that neither they have filed any claim nor they were aware of any dispute which has been alleged to have arisen in the said notice dated 7.8.1992. The arbitrator Shri A K Singh, then, modified the reference on 24.8.1992 and corrected the earlier notice dated 7.8.1992 now as the respondent No 1 Topsel Vs. D. P. Ture & Ors. (CS No. 336/13) Page No.2 to 19 being the claimant and M/s Topsell Advertising as Respondent.
➢ A tabulated statement alleged to be the Statement of Claim was filed by the Respondent No 2 before the then Arbitrator A. K. Singh.
➢ On 11.11.1992, the claimant filed another tabulated statement alleged again to be the Claimant's Statement of Claim.
➢ In its order dated 11.11.1992 the said Shri A K Singh, the then Arbitrator observed that four months period (contemplated under Arbitration Act 1940) for deciding the arbitration case was going to expire on 24.12.92 showing that the then arbitrator assumed to have entered upon reference on 24.8.1992.
➢ The petitioner filed its reply & counter claim taking several preliminary objections, annexing therewith several annexure, and on merit giving the details of payment made from time to time by the petitioner to the Respondent No 2, MCD in respect of the advertisement sites.
➢ On directions of the then Arbitrator Shri A K Singh, the respondent No 2, MCD, once again, on 08.09.1993, filed another statement dated 19.4.1993, under its reference Advt/93/42 dated 20.4.1993, alleging it to be a Final Topsel Vs. D. P. Ture & Ors. (CS No. 336/13) Page No.3 to 19 Statement of Claim.
➢ Shri A K Singh, the then Arbitrator, without seeking extension of time to make the award from the parties to the arbitration, extended the time limit for making and publishing the award to 30th Sept. 1993.
➢ After 8th September 1993, Shri A K Singh, the then Arbitrator neither gave any award within the prescribed period nor was the time for making the award further extended.
➢ The Respondent No 2 again after a lapse of about five (5) years in 1998 sought to invoke the same arbitration clause and this time the matter was referred to the sole arbitration of Shri Guru Dutt, Deputy Assessor & Collector, MCD vide reference No._/Advt/97 dated nil.
➢ Shri Guru Dutt, the then Arbitrator, however entered upon reference only on 09.03.1998.
➢ A fresh Statement of Claim was served upon the petitioner before Shri Guru Dutt, the then sole Arbitrator on 27th April 1998.
➢ On 18.9.98 the petitioner filed its objections on the appointment, the jurisdiction and authority of the arbitrator on various grounds i.e. that the notice as required under section 8(1)(b) of the Arbitration Act 1940 has not been Topsel Vs. D. P. Ture & Ors. (CS No. 336/13) Page No.4 to 19 given by the claimant (Respondent No 2) to the petitioner and in absence of that the appointment of the Arbitrator is illegal and contrary to the provisions of the law; that the time for making the award i.e. four months had already expired five years back and the time for making the award was never enlarged therefore the proceedings, if any, before Shri Guru Dutt, sole arbitrator, are void abinitio; that the proceedings were barred by limitation and in this regard leave of the sole arbitrator to refer to and rely upon the reply dated 9.2.93 was also sought by the petitioner and also on the ground that there had been an unreasonable, unjustified and unexplained delay in the conduct of proceedings.
➢ The then arbitrator Shri Guru Dutt neither gave the award within the prescribed period nor extended the period for making the award and vide order dated 11.2.2000, Shri Guru Dutt, Arbitrator closed the case.
➢ The respondent No. 2, allegedly, moved an application for setting aside the order dated 11.2.2000. Without issuing any notice of such application, vide order dated 20.4.2000, the learned Arbitrator reopened the case and while fixing the next dated as 9.6.2000 but the notice of the hearing given was for 10.6.2000.
Topsel Vs. D. P. Ture & Ors. (CS No. 336/13) Page No.5 to 19 ➢ The arbitrator Shri Guru Dutt did not give his award within the prescribed period.
➢ The Respondent No 2 after a lapse of about four years in 2004 again invoked the same arbitration clause alleging that the earlier arbitrator Shri Guru Dutt had retired from the Municipal Services and as such vacated his office as Deputy Assessor & Collector, MCD. On this ground the arbitration proceedings were restarted and another communication was received by the petitioner vide letter dated 13.09.04 from respondent No 2 appointing this time Shri D P Ture the then Addl Deputy Commissioner (Health), respondent no. 1, as the sole arbitrator.
➢ The petitioner protested to the commencement of arbitration proceedings and without prejudice, under protest, without admitting the validity and legality of the reference, once again filed its objections on the appointment, the jurisdiction and authority of the arbitrator. ➢ However, without deciding the objections or the protest application of the petitioner the Respondent No. 1 vide its order dated 30.07.2007 held that the proceedings of the instant arbitration would be administered and controlled by the provisions of Arbitration & Conciliation Act, 1996 and not under the 1940 Act, under which proceeding had begun. Topsel Vs. D. P. Ture & Ors. (CS No. 336/13) Page No.6 to 19 ➢ The arbitrator decided to proceed further and without calling for any evidence whatsoever, vide its order dated 15.10.2008 gave one month time to the parties (before him) to file written submissions along with case law, if any. ➢ The respondent No. 1, has passed an award dated 10th December 2009 in favour of the Respondent No 2 allowing the claim of the Respondent No 2 and has pronounced the award in favour of the respondent No 2 and against the petitioner for the claims of the respondent No 2 for Rs. 1,58,743.00 (Rupees one lac fifty eight thousand seven hundred forty three only) along with simple interest @ 24% accruing on the said amount w e f 11.09.1993 (which is the date of filing of final claim) to the date of payment as well as cost of arbitrator Rs. 10,000/.
3. Now the aforesaid award has been assailed on various grounds which are not being repeated for the sake of brevity. It is argued by Ld. Counsel for the petitioner that in the present case the arbitration commenced on 22.6.1992 when the respondent No 2, as alleged, had decided to refer the claim of the respondent No 2 to the first arbitrator Shri A K Singh and Shri A K Singh entered upon the reference on 7.8.1992 and modified / corrected the earlier reference of 7.8.92 on 24.8.1992. It is submitted that since the arbitration proceedings commenced in 1992 before the date of 1996 Act, as per Section 21 read Topsel Vs. D. P. Ture & Ors. (CS No. 336/13) Page No.7 to 19 with Section 85(2) of the 1996 Act, the Arbitration Act 1940 only would apply to the proceedings and not the Arbitration & Conciliation Act, 1996. However, the learned Arbitrator, the respondent No 1, vide its order dated 30.07.2007 has held that 1996 Act would apply and the impugned award has been passed under the said 1996 Act. Ld. Counsel has also vehemently argued that the Arbitrator had not taken any steps for extension of time for making the award as contemplated under the 1940 Act.
4. The counsel has also pointed out that the record of the Arbitrator placed before this court is not complete record and the Ld. Counsel for the MCD was directed by Ld. Predecessor of this Court to file an affidavit with regard to the missing record which affidavit has now filed by one Sahdev Singh, Assistant Commissioner (Advertisements) stating that the North Delhi Municipal Corporation had made its best efforts to trace out the original record for the period which is not traceable in their office and has also attached the copy of search search certificate in this regard. It is writ large that the arbitration record for the period 19921998 is missing and not placed before this court despite repeated opportunities in this regard for the last five years.
5. Coming now to the grounds raised before me. I may observe that in so far a the question regarding the first issue as to whether the old Arbitration Act of 1940 would apply or the new Arbitration & Conciliation Act of 1996 would apply is concerned, the Judgment of Topsel Vs. D. P. Ture & Ors. (CS No. 336/13) Page No.8 to 19 Hon'ble Supreme Court in the case of Milkfood Ltd. Vs. GMC Ice Cream (P) Ltd. (2004) 7 SCC 288 is very clear wherein it has been observed that :
'Commencement of an arbitration proceeding' and 'commencement of a proceeding before an arbitrator' are two different expressions and carry different meanings.
A notice of arbitration or the commencement of an arbitration may not bear the same meaning, as different dates may be specified for commencement of arbitration for different purposes. What matters is the context in which the expressions are used. A notice of arbitration is the first essential step towards the making of a default appointment in terms of Chapter II of the Arbitration Act, 1940. Although at that point of time, no person or group of persons charged with any authority to determine the matters in dispute, it may not be necessary for us to consider the practical sense of the term as the said expression has been used for a certain purpose including the purpose of following statutory procedures required therefor. If the provisions of the 1940 Act applies, the procedure for appointment of an arbitrator would be different than the procedure required to be followed under the 1996 Act. Having regard to the provisions contained in Section 21 of the 1996 Act as also the common parlance meaning is given to the expression 'commencement of an arbitration' which admittedly for certain purpose starts with a notice of arbitration, is required to be interpreted which would be determinative as regard the procedure under the one Act or the other is required to be followed. It is only in that limited sense the expression 'commencement of an Topsel Vs. D. P. Ture & Ors. (CS No. 336/13) Page No.9 to 19 arbitration' qua 'a notice of arbitration' assumes significance.
The above decision was followed in U. P. State Sugar Corpn Ltd. v. Jain Construction Co. (2004) 7 SCC 332. Under the same facts and circumstances as of the present case, our own High Court in Mahalingashetty And Co. Ltd. v. NPCC Ltd. (2006) 126 DLT 142 it has been held:
13. The provisions of Arbitration and Conciliation Act, 1996, nowhere provides or mandates that the reenacted Act or law would automatically apply to pending arbitration proceedings or that the old Act would automatically be not applicable and the rights, if any, accrued to the parties would also be negated. Reliance for this proposition can be placed on decisions of this Court in the cases of 'Delhi Development Authority Vs. Bhai Sardar Singh and Sons', FAO (OS) 93 of 2002 decided on April 20th, 2004; Minny Enterprises v. General Manager, I.T.D.C, FAO(OS) No. 348/2003 decided on July 28th, 2004 and Milk Food Limited v. GMC Ice Cream Pvt. Ltd., .
In the case of M/s Minny Enterprises (Supra) it had been held that where the arbitration petition had already been commenced, new Arbitration and Conciliation Act, 1996 will not apply nor the rights which had accrued to the parties under the old Act would be negated. In Milk Food Limited (Supra), it was held that under the Arbitration Act, 1940, an Topsel Vs. D. P. Ture & Ors. (CS No. 336/13) Page No.10 to 19 arbitration proceeding is deemed to have commenced when one party to the arbitration agreement serves on the other a notice requiring the appointment of an Arbitrator. It was further held that for the purpose of applicability of the 1940 Act service of a notice for appointment of an Arbitrator would be relevant date for the purpose of commencement of the arbitration proceeding and if the date of notice is prior to the date of enforcement of Act of 1996, the Arbitration Act, 1940 would apply. The Supreme Court held:
72. Keeping in view the fact that in all the decisions, referred to hereinbefore, this Court has applied the meaning given to the expression commencement of the arbitral proceeding as contained in Section 21 of the 1996 act for the purpose of applicability of the 1940 Act having regard to Section 85(2)(a) thereof, we have no hesitation in holding that in this case also, service of a notice for appointment of an arbitrator would be the relevant date for the purpose of commencement of the arbitration proceedings.
14. The arbitration proceedings in the present case were pending much before the Arbitration and conciliation Act, 1996 was enacted. The last arbitration proceedings were conducted in December, 1989. If that be so the contention of the respondent No. 1 that the provisions of Arbitration and Conciliation Act,1996 will apply and not the provisions of Topsel Vs. D. P. Ture & Ors. (CS No. 336/13) Page No.11 to 19 Arbitration Act, 1940, is not correct and not sustainable.
Thus it is crystal clear that in this present case the provisions contained in the 1940 Act only would have applied and not the provisions of 1996 Act.
Further, once it is held that it is the 1940 Act and not the 1996 Act applies, then the learned Arbitrator had no jurisdiction vide its order dated 30.07.2007 to direct the present matter to be governed by 1996 Act when provisions of another act, 1940 Act were applicable as was held by the Hon'ble Supreme Court in (2005) 5 SCC 404 Neeraj Munjal And Others (III) v. Atul Grover and Another, wherein it was observed that:
"A court of law has no jurisdiction to direct a matter to be governed by one statute when provisions of another statute are applicable. This Court merely directed the parties to enforce the said award which would mean that the same should be enforced in accordance with law. If a party to the lis has a right to question an award in terms of the 1940 Act, no court has the requisite jurisdiction to deprive him therefrom."
6. In the present case, it is writ large that the first arbitrator had entered into reference in August 1992 when the notice was issued to the objector. At the relevant point of time it was the Arbitration Act Topsel Vs. D. P. Ture & Ors. (CS No. 336/13) Page No.12 to 19 1940 which was applicable and the procedure for the appointment of arbitrator followed was that was provided in Chapter 12 of Act of 1940. Hence, it is crystal clear that in the present case, it is the provisions contained in the Act of 1940 which would apply and not the provisions of 1996 Act.
7. Secondly coming to the jurisdiction of the arbitrator, Ld. Counsel for the appellant has placed his reliance on the two judgments of Hon'ble High Court of Delhi 128 (2006) DLT 195 Laldee Private Limited v. Union of India & Others; and (2006) 126 DLT 142 Mahalingashetty And Co. Ltd. v. NPCC Ltd. It is argued that the impugned award is liable to be set aside as the learned Arbitrator, the respondent no 1, had no jurisdiction to enter upon reference as neither there was any subsisting agreement nor any proceeding for want of extension of time for making award as contemplated under the 1940 Act.
8. In order to decide the aforesaid issue I am reproducing the relevant dates which are as under:
1. 07.08.1992 : First Arbitrator Shri A K Singh enters upon the reference.
2. 24.08.1992 : The arbitrator modified the reference and corrected the earlier notice dated 7.8.1992.
3. 11.11.1992 : In its order, the then Arbitrator observed that four months period as per Act of 1940 for Topsel Vs. D. P. Ture & Ors. (CS No. 336/13) Page No.13 to 19 deciding the arbitration case was going to expire on 24.12.92 (counting four months from 24.8.1992).
4. 19.08.1993 : By its order, the said Shri A K Singh, the then Arbitrator, extended the time limit for making and publishing the award to 30th Sept. 1993.
5. 08.09.1993: After 8th September 1993, the said first Arbitrator failed to act. The learned Arbitrator neither gave any award within the prescribed period nor was the time for making the award further extended.
6. 09.03.1998 : After a lapse of about five (5) years Shri Guru Dutt, the then Arbitrator, entered upon reference
7. 11.02.2000 : The Second arbitrator Shri Guru Dutt neither gave the award within the prescribed period nor extended the period for making the award and vide order dated 11.2.2000 closed the case.
8. 20.4.2000 : The learned Arbitrator reopened the case and the notice of the hearing given was for Topsel Vs. D. P. Ture & Ors. (CS No. 336/13) Page No.14 to 19 10.6.2000 but thereafter, the arbitrator Shri Guru Dutt failed to act and did not give his award within the prescribed period.
9. 13.09.04 : Shri D P Ture the then Addl Deputy Commissioner (Health),respondent no. 1, was appointed as the sole arbitrator.
9. In the case of Laldee Private Limited versus Union of India & Others, 128 (2006) DLT 195 it was observe by the Hon'ble Supreme Court that :
"... 9. The question of extension of time Under Section 28 of the said Act and of revocation of authority Under Section 12 of the said Act have been considered in two recent judgments of this court. In OMP No. 53/1995 titled M/s Stelco Tubes (P) Ltd v. Union of India decided on 10.09.2005 the petition for revocation of the authority of the arbitrator was allowed on account of lapse of time. This judgment was passed on the strength of the Division Bench judgment of this court in "Union of India Vs. Som Nath Chadha & Co.." It was held that the very object of arbitration stands defeated if there is no speedy end of the strife. Thus in case a party unreasonably neglects to promote the conduct of arbitration proceedings, the said party cannot avail of the remedy of the arbitration where there is no reasonable explanation forthcoming for the inordinate delay.
10. In OMP No. 239/99 titled Union of India v. M/s Auto Pins (India) P. Ltd. decided on 20.09.05 extension of time was declined on account of such inordinate delay and the judgment of the apex court in Topsel Vs. D. P. Ture & Ors. (CS No. 336/13) Page No.15 to 19 M/s Fulchand Kanhaiyalal Co. v. Kharda Company Ltd. AIR 1966 SC 1036 was taken note of where it was held that the expeditious commencement of arbitral proceedings is a must as delay defeats justice and equity. If a party sleeps over its right over a long period of time, the court would be justified in exercising its discretionary power and exercise jurisdiction Under Section 5 & 12(2)(b) of the said Act to permit rescinding of the arbitration agreement and declare that the arbitration agreement shall cease to have effect with respect to the differences and disputes referred to in the notice and relieve the parties from the arbitration agreement.
11. In the present case the matter went further since the conduct of respondent no. 1 was examined by this court in OMP NO. 100/87. The stand of respondent no. 1 is misconceived as it is based on the premise as if the arbitrator had failed to act and thus the respondent no. 1 was within its rights to appoint a new arbitrator. There was negligence on the part of the respondento.1 in prosecuting the arbitration matter and this court declined to exercise jurisdiction Under Section 28 of the Act. The result was that the same brought to an end the arbitration proceedings. I am in full agreement with the views expressed by the Division Bench of the Kerala High court in this behalf that the declining of relief for extension Under Section 28 of the said Act brings to an end the arbitration proceedings. There cannot thus be any question of respondent no. 1 exercising jurisdiction in terms of Clause (b) of Para 2900 of the terms and conditions.
12. It is most unfortunate that on the one hand respondent neglects to prosecute arbitration Topsel Vs. D. P. Ture & Ors. (CS No. 336/13) Page No.16 to 19 proceedings over a long period of time and on the other hand keeps on invoking the jurisdiction of arbitration periodically after sleeping for a couple of years. The matter has gone on for almost more than two decades in this fashion.
13. I am of the considered view that the present petition is liable to be allowed and the appointment of respondent No. 2 set aside since arbitration proceedings stood revoked. The respondent No. 1 will have no right for invoking the jurisdiction of the arbitrator in respect of the subject matter of the dispute.
10. In the present case it is evident that the arbitration proceedings stood revoked in September 1993 when the respondent No 2 did not take any steps for extension of time for making and publishing the award as contemplated under the Arbitration Act, 1940. The contract expired on 31.3.1992 and the matter was referred to the arbitration of the respondent No 1 on 13.09.04, after the lapse of more than 12 years. The Respondent No. 1, thus, had no right for invoking his jurisdiction of the Arbitrator in respect of the subject matter of the dispute, more particularly, when the respondent No. 2 never sought the extension of time, in accordance with section 28 of the 1940 Act from the Court, as contemplated under that Act (Reliance in this regard is placed on the view taken by the Hon'ble High Court of Delhi in the case Mahalingashetty And Co. Ltd. v. NPCC Ltd. cited at (2006) 126 DLT 142).
Topsel Vs. D. P. Ture & Ors. (CS No. 336/13) Page No.17 to 19
11. Thirdly coming to the question of Limitation. It is evident that as per the arbitration clause provided in terms and conditions, the limitation for filing claim for arbitration is 90 days from the expiry of the contract period. It is further provided that in case no claim is filed within this period, it shall be presumed that there is no claim.
12. The clause provides as under:
a) Any dispute arising out of the agreement permission granted to advertiser, for display shall be referred to the sole arbitration of the Commissioner MCD ...........................
........................... x x x x .............. xx ... ...... The limitation for filing claim for arbitration is 90 days from the expiry of the contract period and in case no claim is filed within this period, it shall be presumed that there is no claim.
b)........ x x x x ............ x x x x .......... .....
c) ........ x x x x ............ x x x x .......... .....
d) ........ x x x x ............ x x x x .......... .....
13. In the present case, admittedly, the contract period expired on 31.03.1992 accordingly the limitation for filing the claim ended on 29th June 1992. Even the first Arbitrator entered upon the reference on 7.8.1992 but the arbitrator assumed to have entered upon reference on 24.8.1992 after modifying and correcting the reference of 7.8.1992. Though the respondent No 2 filed its statement of claim on or about 27.4.1998 before the Arbitrator making the impugned award but even the claim filed on 11.9.1993, on the basis of which the impugned award has Topsel Vs. D. P. Ture & Ors. (CS No. 336/13) Page No.18 to 19 been made, will be thus time barred and is liable to be set aside on this ground also. The provisions of Section 28 of the Contract Act, as amended, neither come into play nor help the respondent No 2. The provision, in any event, does not extend the period of limitation and the general provisions of law are subject to the terms of arbitration clause and hence the impugned award is time barred. Even otherwise, I may observe that the complete record of the arbitration proceedings not being available to this court for the period 1992 to 1998, being not traceable and an adverse inference is liable to be taken against the respondent.
14. In this background, I hereby allow the plea of the Objector and set aside the impugned award of the Arbitrator dated 10.01.2015.
15. File be consigned to Record Room.
Announced in the open Court (Dr. KAMINI LAU) Dated: 17.04.2015 ADJII(CENTRAL)/ DELHI Topsel Vs. D. P. Ture & Ors. (CS No. 336/13) Page No.19 to 19