Gauhati High Court
M/S. Shivalaya - Kcc (Jv) vs The State Of Assam And 2 Ors on 19 September, 2019
Page No.# 1/8
GAHC010054092019
THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Case No. : CRP 43/2019
1:M/S. SHIVALAYA - KCC (JV)
A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 HAVING
ITS REGISTERED OFFICE AT A-5, GROUND FLOOR, SHANKAR GARDEN,
VIKASPURI, NEW DELHI-110018 BEING REPRESENTED BY SH. AUDHESH
KUMAR TIWARI, SON OF SH. SHYAM NARAYAN TIWARI, R/O. JB-19,
KHIRKI EXTENSION, MALVIYA NAGAR, NEW DELHI.
VERSUS
1:THE STATE OF ASSAM AND 2 ORS.
THROUGH THE COMMISSIONER AND SPECIAL SECRETARY, GOVT. OF
ASSAM AND ORS., PUBLIC WORKS ROADS DEPARTMENT, DISPUR,
GUWAHATI-6.
2:THE CHIEF ENGINEER
PWRD (ARIASP AND RIDF)
ASSAM
FATASIL
AMBARI
GUWAHATI- 781024
3:THE PROJECT DIRECTOR
WORLD BANK AIDED PROJECT
PWRD
ASSAM BASUNDHARA ENCLAVE
ULUBARI
GUWAHATI
Advocate for the Petitioner : MR G N SAHEWALLA
Advocate for the Respondent : GA, ASSAM
Page No.# 2/8 BEFORE HONOURABLE MR. JUSTICE MIR ALFAZ ALI JUDGMENT & ORDER (CAV) Date : 19-09-2019 Challenge in this revision petition is to the order dated 13-02-2019 passed by learned District Judge, Kamrup in Misc. (Arb.) Case No. 21/2018, whereby the learned District Judge rejected the application filed by the petitioner under Section 29-A of the Arbitration and Conciliation Act, 1996 (in short the Arbitration Act) seeking extension of time for passing the award by the Arbitral Tribunal.
2. The facts, which may be relevant for disposal of this revision petition are as follows :
Pursuant to a notice inviting tender (NIT) floated by the respondent, the petitioner was awarded with a contract for the work of "improvement and up-gradation of SH-3 (Morigaon to Nagaon)". Dispute having arisen between the parties with regard to the aforementioned contract, the matter was referred to arbitral tribunal. During continuation of the said arbitral proceeding, the petitioner raised another set of dispute pertaining to the same contract and referred its claim to the adjudicator under the clause 24.1 of the agreement, which was dismissed by the adjudicator. Thereafter, the petitioner by invoking the clause 25.3 of the agreement, referred the claim for adjudication by the arbitral tribunal and nominated Honourable Mr. Justice I.J. Mamtani as its nominee arbitrator. The respondent having not appointed its nominee arbitrator, the petitioner approached the Indian Council of Arbitration seeking appointment of an arbitrator and accordingly, the Indian Council of Arbitration nominated Honourable Mr. Justice Dinendra Biswas as the respondent's nominated arbitrator. The aforementioned co-arbitrators nominated Honourable Mr. Justice D.K. Seth as presiding arbitrator.
3. The respondents raised objection as to constitution of the Arbitral Tribunal by filing an application u/s 13 of the Arbitration Act, which was rejected by the tribunal. Respondents also challenged the maintainability of the arbitral proceeding on the principle of res-judicata under Order II Rule 2 CPC. As the tribunal could not complete the proceeding within the period of one year, the petitioner gave its consent, extending time for six months. However, the respondent initially took time to communicate its stand after a decision was taken by the competent authority Page No.# 3/8 and ultimately by letter dated 03-07-2018 refused to give its consent for extending time period. Hence, the petitioner filed the application before the learned District Judge under Section 29-A of the Arbitration and Conciliation Act seeking extension of time. The petition was resisted by the respondents. Upon hearing both the sides, learned District Judge by the impugned order dated 13-02-2019 rejected the application.
4. Aggrieved, the petitioner preferred the instant revision petition.
5. The respondents filed an affidavit-in-opposition denying the allegations made in the application and also raising certain preliminary objection.
6. I have heard Mr. D. Senapati, learned counsel for the petitioner and learned Govt. Advocate G. Rahul for the State respondent.
7. Learned counsel for the petitioner has assailed the impugned order stating that the learned District Judge while rejecting the application u/s 29-A of the Act, exceeded its jurisdiction and also failed to exercise the jurisdiction vested on him, inasmuch as, the application was rejected on the ground that the proceeding was barred under Order II Rule 2 CPC and also that the constitution of the Arbitral Tribunal, more particularly, nomination of Honourable Mr. Justice D.K. Seth as presiding arbitrator was illegal, which was completely outside the jurisdiction of the learned Addl. District Judge, while considering an application u/s 29-A of the Arbitration Act. It was also contended that the learned District Judge failed to consider and record a finding as to whether there was sufficient cause for extending the time, rather, rejected the application by exercising its jurisdiction in a manner as if he was dealing with an application u/s 34 of the Arbitration Act.
8. Learned Govt. Advocate submits that the application filed u/s 29-A of the Arbitration Act did not disclose any sufficient cause, rather it contained some misleading and incorrect statement, and therefore, the impugned order does not suffer from any illegality or impropriety requiring interference in exercise of extra-ordinary jurisdiction under Article 227 of the Constitution. Learned GA further submits, that the document being Annexures-1 to 15 relied by the petitioner in this petition, were never placed before the learned District Judge. It is also contended by the learned Govt. Advocate that the constitution of the second Arbitral Tribunal for adjudication of the dispute involved in the same contract during continuation of the first tribunal was illegal.
9. Section 29-A of the Arbitration and Conciliation Act, 1996 reads as under :-
"Time Limit for arbitral award.-- (1) The award shall be made within a period of Page No.# 4/8 twelve months from the date the arbitral tribunal enters upon the reference. Explanation.--For the purpose of this sub-section, an arbitral tribunal shall be deemed to have entered upon the reference on the date on which the arbitrator or all the arbitrators, as the case may be, have received notice, in writing, of their appointment.
(2) If the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree. (3) The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months. (4) If the award is not made within the period specified in sub-section (1) or the extended period specified under sub-section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period:
Provided that while extending the period under this sub-section, if the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five per cent. for each month of such delay.
(5) The extension of period referred to in sub-section (4) may be on the application of any of the parties and may be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court. (6) While extending the period referred to in sub-section (4), it shall be open to the Court to substitute one or all of the arbitrators and if one or all of the arbitrators are substituted, the arbitral proceedings shall continue from the stage already reached and on the basis of the evidence and material already on record, and the arbitrator(s) appointed under this section shall be deemed to have received the said evidence and material.
(7) In the event of arbitrator(s) being appointed under this section, the arbitral tribunal thus reconstituted shall be deemed to be in continuation of the previously appointed arbitral tribunal.
(8) It shall be open to the Court to impose actual or exemplary costs upon any of the parties under this section.
(9) An application filed under sub-section (5) shall be disposed of by the Court as expeditiously as possible and endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party."
10. A plain reading of the Sub-sections (4) & (5) of Section 29-A of the Arbitration Act would show, that the court may extend the time of arbitral proceeding, when there is sufficient cause for doing so. Therefore, while considering an application u/s 29-A of the Arbitration Act, seeking for extension of time, only question, the court needs to consider, whether there is sufficient cause Page No.# 5/8 for granting the extension of time.
11. Section 13 of the Arbitration Act provides that any objection with regard to the legality and validity of the constitution of the Arbitral Tribunal can be raised before the tribunal itself and inspite of such challenge, if the Arbitral Tribunal continues with the proceeding and makes an award, the parties challenging the arbitrator, may make an application u/s 34 of the Arbitration Act for setting aside such award.
12. Section 16 of the Arbitration Act empowers the Arbitral Tribunal to decide on its own jurisdiction. Section 16 also provides that when an award is passed by the tribunal overruling any objection with regard to the jurisdiction of the tribunal, the remedy of the aggrieved party is to challenge the award by making an application u/s 34 of the Arbitration Act. Therefore, the provisions of Sections 13 or 16 of the Arbitration Act makes it abundantly clear, that when the Arbitral Tribunal continued with the adjudication, overruling or rejecting any plea raised u/s 16 or 13 of the Arbitration Act and award is made, the remedy is to file an application u/s 34 of the Arbitration Act. The court considering an application u/s 29-A of the Arbitration Act does not have the jurisdiction to deal with the issue relating to constitution of the tribunal or its jurisdiction, inasmuch as, the scope of jurisdiction in dealing with an application for extension of time u/s 29-A of the Arbitration Act is circumscribed by the provision of sub-section (5) of section 29-A of the Act.
13. While rejecting the prayer for extension of time, the learned District Judge held as under :
"Admittedly, the contract between the petitioner and the respondents was terminated by the respondents and as the contract contained an arbitration clause, the petitioner invoked the same and consequently, the First Arbitral Tribunal was constituted and it has already adjudicated the disputes between the parties and passed the final award. Therefore, as no new contract was entered between the parties after the termination of the contract on 31.05.2016, the petitioner ought to have and should have raised the issues, raised before the Second Arbitral Tribunal, before the First Arbitral Tribunal. Therefore, the petition is barred by Order II, Rule 2 CPC and the principles of resjudicata.
Further though under Section 29-A of the act, this Court has the power to extend the time for making award by an Arbitral Tribunal, the same can be done only for sufficient cause.
But in the instant case, as can be seen from the discussion made above, the Arbitral Tribunal took more than six months time to dispose of the petition filed by the respondents under Section 13 of the Act. Further, the Arbitral Tribunal Page No.# 6/8 also did not dispose of the petition filed by the respondents regarding maintainability of the second arbitration proceeding. Therefore, the delay in completing the arbitration proceeding was caused by the Arbitral Tribunal and not by the respondents. Therefore, the time of the second Arbitral Tribunal cannot be extended as nobody can derive benefits of his/her own fault.
Further, how the nominee arbitrator of the petitioner and of the Indian council of Arbitration appointed for the respondents, can appoint the nominee arbitrator of the petitioner of the First Arbitral Tribunal as the Presiding Arbitrator of the Arbitral Tribunal is unfathomable. The same does not make any sense and is not tenable in the eye of law.
By appointing Honourable Mr. Justice D.K. Seth as the Presiding Arbitrator, the Nominee Arbitrator of the petitioner and the Arbitrator nominated by the Indian Council of Arbitration for the respondents, at the request of the petitioner, have allowed the petitioner to judge its case by itself as Honourable Mr. Justice D.K. Seth was their Nominee Arbitrator in the First Arbitral Tribunal, the nominee Arbitrator of the petitioner is nominated by them and the nominee arbitrator of the respondents is nominated by the Indian Council of Arbitration at their request. This is manifest absurdity and is not tenable in the eye of law. This is also clear violation of the principle of natural justice by the two nominee arbitrators as nobody can be the judge of his/her own cause.
It is surprising how the Indian Council of Arbitration can work in such a biased manner ? This is not at all justifiable and no court of law can allow the same to continue.
Therefore, though this court has the power to extend the time of an Arbitral Tribunal, in the facts and circumstances of this case, it is not justifiable to extend the time.
In the result, the application filed under Section 29-A of the Arbitration and Conciliation Act, 1996 by the petitioner is rejected."
14. From the above observation of the learned District Judge, it would appear, that the learned District Judge declined to extend the time, holding that the constitution of the second tribunal by appointing Honourable Mr. Justice D.K.Seth as presiding arbitrator was illegal and that the proceeding before the tribunal was also barred by Order II Rule 2 CPC. Although the learned District Judge observed that the time can be extended only for sufficient cause, the learned District Judge did not endeavour to ascertain, whether there was sufficient cause necessitating the extension of time. The impugned order clearly demonstrates that learned District Judge proceeded in a manner as if he was dealing with an application u/s 34 of the Arbitration Act. Therefore, in my considered view the learned District Judge apparently exercised jurisdiction not vested on him by law. On the other hand, by not taking the pain to decide whether there was sufficient cause for extending the time, learned court also failed to exercise jurisdiction vested in Page No.# 7/8 it. As we know that the power under Article 227 of the Constitution is more or less akin to the revisional power under section 115 of the CPC, which provides, that exercise of revisional power by the High court is desirable, when the subordinate court has exercised a jurisdiction not vested in it by law, or fails to exercise a jurisdiction so vested in it or have acted in exercise of its jurisdiction illegally or with material irregularity. Supervisory intervention by the High Court under Article 227 of the Constitution is also called for when there is jurisdictional error on the part of the subordinate court. The failure of the learned District Judge to exercise the jurisdiction vested on him and also exercising jurisdiction not vested on him is apparent on the face of the impugned order, as indicated above, and as such, I have no hesitation in my mind to hold that learned District Judge exercised its jurisdiction illegally and improperly, while rejecting the application u/s 29-A of the Act and thereby, rendered the impugned order unsustainable.
15. Learned District Judge observed that delay in completing the proceeding was caused by the tribunal itself and therefore, refused to extend the time, holding, that such extension of time will amount to giving benefit to the tribunal of its own fault. It is no doubt true, that the respondent filed an application u/s 13 of the Arbitration Act challenging the appointment of the presiding arbitrator. Objection was also raised alleging that the second arbitral proceeding was not maintainable, in view of the bar created by Order II Rule 2 CPC. It appears from the record that inspite of filing application u/s 13 of the Arbitration Act or pendency of decision on the application u/s 13 of the Arbitration Act, or objection of res-judicata, the learned tribunal after entering into the reference fixed a time schedule for filing pleadings by the parties and hearing and it was made clear, that submitting the pleadings should be without prejudice to the application filed u/s 13 of the Arbitration Act. What is apparent is that inspite of such clear order, the respondent did not file the written statement as per schedule fixed by the tribunal. Therefore, palpably tribunal could not proceed with the matter for want of pleadings by the respondents. Although learned District Judge observed, that the tribunal took six months for deciding the application u/s 13 of the Arbitration Act, and therefore, refused to extend time attributing fault to the tribunal, from the schedule of proceeding, fixed by the tribunal, it appears that delay, in fact, was not for pendency of the application u/s 13 of the Arbitration Act, inasmuch as, tribunal directed the parties to submit their pleadings within a specified time schedule, without prejudice to the application u/s 13 of the Act. Therefore, even if the application u/s 13 of the Arbitration Act was pending, the same could not be considered to be a ground for not filing the written statement by the respondent within time schedule fixed by the tribunal. Inspite of the clear order of the Page No.# 8/8 tribunal that filing of the pleadings by the parties shall be without prejudice to the application u/s 13 of the Arbitration Act, the respondent took considerable time for filing written statement and in the process, the stipulated time for making the award expired. The above facts and circumstances contributing the delay, in my considered view, can be construed as sufficient cause for extending time.
16. Thus, having considered that the learned District Judge has failed to exercise his jurisdiction in a proper manner, while rejecting the application u/s 29-A of the Arbitration Act and the facts and circumstances of the case as indicated above, I am of the view that the petition u/s 29-A of the Act ought to have been allowed. Having regard to the facts, that already considerable period of time has elapsed, I am not inclined to send back the matter to District Judge for fresh disposal.
17. Accordingly, the petition is allowed and the time is extended by six months for passing the award.
18. The petition stands disposed of.
JUDGE Comparing Assistant