Allahabad High Court
Suresh Chand Agarwal & Another vs Mahesh Kumar Agarwal & Another on 6 March, 2013
Author: Pankaj Mithal
Bench: Pankaj Mithal
HIGH COURT OF JUDICATURE AT ALLAHABAD A.F.R. Reserved. Case :- ARBITRATION AND CONCILI. APPL.U/S11(4) No. - 75 of 2008 Petitioner :- Suresh Chand Agarwal & Another Respondent :- Mahesh Kumar Agarwal & Another Petitioner Counsel :- Rahul Sahai, Anil Sharma Respondent Counsel :- B.D. Mandhyan, Satish Mandhyan, Smt. Rama Goel Bansal ****** Hon'ble Pankaj Mithal,J.
An arbitration application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act') was filed before the Chief Justice of this Court in the year 2008 for appointment of an Arbitrator for resolving the dispute between the parties in view of Arbitration clause contained in the partnership agreement dated 17.4.2004. The said application was allowed by me as a person designate by the Chief Justice vide order dated 3.7.2012 and a former Judge of this Court was appointed as the Sole Arbitrator.
The Arbitrator invited parties to submit their claim. Notices for the purpose were issued to the parties and it was also published in the news paper 'Hindustan' on 19.9.2012. Pursuant to the publication of the notice, parties had appeared before the Arbitrator. A claim was preferred. The respondents through their counsel took time for filing objections and got the matter adjourned.
Pending proceedings before the Arbitrator, respondents have preferred Application No.361506 of 2012 to modify the order dated 3.7.2012 praying for fixing fees for arbitration and to nominate some other person as the Arbitrator.
The aforesaid application is being opposed by filing a counter affidavit.
I have heard Sri B.D. Mandhyan, learned counsel for the respondents who have filed the above application. Sri K.N.Tripathi, Senior Advocate also supplemented the arguments advanced in support of the above application.
Sri Anil Sharma has advanced arguments in opposition to the above application contending that the application under Section 151 C.P.C. is not maintainable.
The above referred application seeking modification in the order, in effect is an application for termination of the mandate of the Arbitrator appointed and to replace him by another person on the allegation that the Arbitrator is not independent and free from bias; his attitude is harsh; and he is demanding high fee.
One of the objects of the Act is to resolve disputes through alternate forum of arbitration rather through the intervention of the judicial process of the court. The act aims to minimise the role of the courts in the matter of arbitration. It does not contemplates removal of an Arbitrator by the court and instead envisages the removal of Arbitrator either by the parties themselves or by the Arbitral Tribunal. It is only where the controversy regarding termination of mandate of the Arbitrator remains alive despite steps taken in that direction that the parties may apply to the court to intervene and decide about the termination of his mandate.
The above scheme of the Act is implicit from the reading of Sections 5, 12, 13, 14, 15 and 16 of the Act.
Section 5 of the Act aims to minimise the intervention of the courts in the matters of arbitration.
Section 12 of the Act provides that the authority of the Arbitrator may be challenged if the circumstances so exists and give rise to justifiable doubts as to the independence or impartiality of the Arbitrator or where he does not possess the qualifications agreed to by the parties. The procedure of challenge has been described in Section 13 of the Act which provides that intending party can challenge the authority of the Arbitrator by sending to the Arbitral Tribunal a written statement of the reasons on which its authority is being questioned within 15 days of acquiring knowledge of the constitution of the Arbitral Tribunal. The Arbitrator on his authority being challenged has an option to withdraw from his office or to decide on the challenge. Once the challenge is unsuccessful, the Arbitral Tribunal can continue the proceedings and make the award whereupon it would be challenged as provided under Section 34 of the Act including the adjudication of the mandate of the Arbitrator.
Section 14 of the Act provides for the circumstances in which the mandate of an Arbitrator shall stand determined and where the controversy regarding the termination of the mandate survives it enables the parties to the dispute to apply to the court to decide on the termination of the mandate. It is only on termination of the mandate of the Arbitrator that an Arbitrator can be replaced and a substitute Arbitrator can be appointed as provided under Section 15 of the Act. It is important to note that, if not otherwise terminated, the mandate of the Arbitrator can only be terminated by the court as provided under Sections 14 and 15 of the Act and the court referred to therein means civil court of original jurisdiction in a district having jurisdiction to decide the question forming the subject matter of the arbitration had it been subject matter of the suit.
Section 16 of the Act gives ample power to the Arbitral Tribunal to rule on its jurisdiction which impliedly oust the jurisdiction of this Court in this connection.
In view of the above, the respondents who are seeking replacement/substitution of an Arbitrator for any reason have the following two options:
1.To challenge the jurisdiction of the Arbitrator as provided under Section 12 and 13 of the Act; or
2.To get his mandate terminated in accordance with Sections 14 and 15 of the Act.
The Act does not, however, contemplate any direct intervention of the Chief Justice or the person designate by him who has referred the matter to the Arbitrator for any of the above purpose, as with the appointment of the Arbitrator this Court becomes functus officio and ceases to have any power either to entertain the challenge to the jurisdiction of the Arbitrator or to terminate his mandate on any ground.
A substitute arbitrator can only be appointed after termination of the mandate of the earlier arbitrator.
Thus, in view of the specific provisions of Section 12 to15 of the Act which provides for procedure for challenging the jurisdiction of the Arbitrator and for termination of his mandate, the respondents cannot invoke the inherent jurisdiction of this Court under Section 151 C.P.C.
Learned counsel for the respondents placed reliance upon Konkan Railway Corporation Ltd. Vs. Rani Construction Private Ltd. AIR 2002 SC 778 to buttress the argument for replacement/substitution of the Arbitrator on the ground of bias. The aforesaid decision though no longer a good law on many of the points decided therein in view of M/s. SBP and Company Vs. M/s. Patel Engg. Ltd. AIR 2006 SC 450, but the observations made therein in paragraph 20 are still relevant and holds the field.
In paragraph 20 it lays down that the party who proposes to challenge the jurisdiction of the Arbitrator on the ground of independent and impartiality, has to make a challenge before the Arbitral Tribunal itself as provided under Section 12 of the Act by adopting the procedure laid down in Section 13 of the Act.
This excludes the challenge to the Arbitrator's jurisdiction on any ground before the Chief Justice or the person designated by him.
In National Highways Authority of India and another Vs. Bumihiway DDB Ltd. (JV) and others (2006) 10 SCC 763 it has been held that on resignation or termination of mandate of an Arbitrator the process of appointment of Arbitrator begins afresh in accordance with terms of the contract and the court cannot assume jurisdiction under Section 11(6) of the Act so as to substitute a new Arbitrator.
In view of the aforesaid facts and circumstances, I am of the opinion that the application under Section 151 C.P.C. for replacement/substitution of the Arbitrator is not maintainable before this Court.
Generally, the practice is that the Chief Justice or his designate avoids fixation of remuneration of the Arbitrator, particularly when the Arbitrator appointed is a former Judge of the High Court or of the Supreme Court as it is not considered a healthy practice to lay down any fetters on the power of the Arbitrator in the matter of fixation of his fees.
Section 31(8) of the Act clearly provides that unless otherwise agreed by the parties, the costs of an arbitration shall be fixed by the Arbitral Tribunal. The word 'costs' used therein includes the fees and expenses of the Arbitrators. Therefore, also it is in the fitness of things to leave open the matter of fixation of fees of the Arbitrator to be settled by him with the consent of the parties with the hope that the Arbitrator would act fairly and would fix reasonable fees for himself in consultation with the parties.
In view of the above, no good ground exists for making any modification in the order dated 3.7.2012 so as to substitute a new Arbitrator in place of the one already appointed and to fix his fees.
The modification application No.361506 of 2012 as such, is rejected with liberty to the parties to take up appropriate proceedings for the replacement of the Arbitrator and fixation of his fees before the proper forum.
Order Date :- 6.3.2013 brizesh