Calcutta High Court
Great Eastern Shipping Co. Ltd. vs Board Of Trustees For The Port Of ... on 10 September, 2003
Equivalent citations: 2005(1)ARBLR389(CAL), 2004(3)CHN37
Author: Asok Kumar Ganguly
Bench: Asok Kumar Ganguly
JUDGMENT Asok Kumar Ganguly, J.
1. This appeal has been filed by the Great Eastern Shipping Company Limited a Company incorporated under the Companies Act, 1956, against the judgment and order dated 07.04.2003 passed by a learned Single Judge of this Court.
2. By the impugned judgment, the learned Single Judge, inter alia, held that, in the facts and circumstances of the case, the Chairman of the Board of Trustees for the Port of Kolkata is entitled to appoint an arbitrator in accordance with the arbitration clause in Charter Party within a period of 4 weeks, from the date of communication of His Lordship's judgment and order and the appellants' prayer for reference of the application to the Hon'ble Chief Justice for appointment of an arbitrator was rejected.
3. Since impugned judgment of the learned Single Judge has been stayed pending this appeal, no arbitrator has yet been appointed.
4. The material facts of the instant case are that under a Charter Party dated 12.02.2002, the appellant gave on hire a tug to the respondent on terms and conditions contained in the said Charter Party.
5. The case of the appellant is that the said tug came to the jetty on 14.02.2002 and the said tug was made available to the respondent at the dock premises of Haldia on and from 14.02.2002 and the Charter hire at the agreed rate stipulated in the said Charter Party is payable from the said date. But, the respondent refused to make the payment of the hire charges of the said tug for the period between 14.02.2002 to 26.07.2002 as the said tug was not allowed to be utilised by the respondent in view of some agitations of some of the employees of the respondent.
6. Arbitration clause in the said Charter Party is contained in Clause 20 and Clause 20 of the agreement runs as follows :--
"Any dispute or difference of any kind whatsoever arising between the Charterer and Contractor in connection with or arising out of the Contractor, the execution of the contract whether during the execution of Contract or after completion and whether before/after the determination, abandonment or breach of contract will be referred to the sole arbitrator to be appointed by the Chairman, KOPT on behalf of the Charter. The arbitrator shall be final and binding on all parties and the provisions of the Arbitration and Conciliation Ordinance, 1996 and the Rules thereunder and any statutory modifications thereto shall be deemed to be incorporated in the agreement.
The Arbitration proceedings shall take place in Kolkata. The Contractor shall, notwithstanding any dispute between them and the Charterer or pendency of any dispute referred to arbitrator, proceed with the execution of the Contract. Pendency of any dispute or reference shall not be a ground or an excuse for not executing the Contract till the stipulated period."
7. In view of the aforesaid arbitration clause, a letter dated 07.08.2002 was written by the President of the appellant to the Chairman of the respondent. In the said letter, it was mentioned that the dispute regarding the unpaid Charter Hire and interest for the period between 14.02.2002 to 26.07.2002 remained unresolved. It was also mentioned that the dispute is about 6 months old and that the situation demands resolution in accordance with "Charter Party agreement dated 12th February, 2002". Thereafter, another letter dated 20.08.2002 was sent by the President of the appellant to the Chairman of the respondent referring to various previous letters in connection with the said Charter Party dated 12.02.2002 and a request was made to take the requisite steps for resolution of dispute in accordance with the "Contract". Thereafter, another letter dated 21.11.2002 was addressed by the appellant to the Deputy Chairman of the respondent regarding payment of Charter Hire with effect from 14.02.2002. In the said letter, a request was made for releasing the Charter Hire payment at least with effect from 27.02.2002. In the opening paragraph of the letter it was mentioned that the issue regarding payment of Charter Hire will have to "be resolved through arbitration as laid down under the Charter Party Agreement". It may be noted that the learned Judge did not consider the implication of the letter dated 21.11.02, while considering the request made by the appellant for resolving the dispute through arbitration under Charter Party.
8. The appellant's case is that as nothing happened in view of various letters written by it, an application under Section 11 of the Arbitration & Conciliation Act, 1996 was filed on 30.01.2003 and the said application after exchange of affidavits was taken up for final hearing by the learned Single Judge on 07.04.2003 and till 07.04.2003, no arbitrator was appointed by the Chairman of the respondent. The learned Counsel for the appellant submitted that in the facts and circumstances of the case, the impugned order which has been passed by the learned Single Judge is not tenable in law.
9. The learned Counsel for the respondent, on the other hand, supported the order passed by the learned Single Judge by arguing that two letters written by the appellant, on 07.08.2003 and 20.08.2002 to the Chairman of the respondent cannot be construed as a demand to the Chairman of the respondent to appoint an arbitrator in terms of the arbitration clause. The case of the respondent is that the claim of the appellant was quantified by its letter dated 10.01.2003, which was addressed to the Manager (Finance), Haldia Dock Complex of the respondent with a copy to the Chairman. The learned Counsel for the respondent urged that if the same is construed as a letter with a specific demand for arbitration being made for the first time, then the application under Section 11 of ACA, 1996 was made by the appellant on 30.01.2003 without waiting for a period of 30 days. Therefore, the learned Single Judge was right in holding that the Chairman, is entitled to appoint an arbitrator within a period of 4 weeks. The learned Counsel for the respondent submitted that by passing the impugned order, the learned Single Judge has followed the decision of the Apex Court in the case of Dater Switch Gears Limited, . The learned Counsel for the respondent also urged that the decision of the learned Single Judge on the construction of the letter dated 10.01.2003 is not correct and that the learned Single Judge should not have held that there is a demand for arbitration in the letter dated 10.01.2003. The learned Counsel submitted that even though a cross-appeal against the order of the learned Single Judge has not been filed, but as Appeal Court, this Court in exercise of power under Order 41 Rule 33 of the Civil Procedure Code can set aside that portion of the order, even though not appealed against, on the ground that the said order ought not to have been passed in the facts of the case.
10. These are virtually the rival contentions.
11. The mechanism for appointment of arbitrator by the parties as provided in Clause 20 of the Arbitration agreement has already been referred to. Since the parties have an agreed procedure for appointment of arbitrator, in this case, the Court is concerned with Sub-sections (2) and (6) of Section 11 of ACA, 1996. Those provisions viz., Section 11(2) and 11(6) are set out below :
"Section 11(2).-- Subject to Sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.
Section 11(6).-- Where, under an appointment procedure agreed upon by the parties,--
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them, under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
12. Various judgments on the interpretation of Section 11 of ACA, 1996 have been cited before this Court. Of those judgments, reliance was very much placed on the Constitution Bench judgment of the Hon'ble Supreme Court in the case of Konkan Railway Corporation Ltd. and Anr. v. Rani Construction Pvt. Ltd., of the said judgment, the following observations have been made by the Hon'ble Supreme Court, which are set out below:
"Where an appointment procedure has been agreed upon by the parties but a party fails to act as required by that procedure or the parties, or the two arbitrators appointed by them, fail to reach the agreement expected of them under that procedure or a person or institution fails to perform the function entrusted to him or it under that procedure, a party may request the Chief Justice or his designate to nominate an arbitrator, unless the appointment procedure provides other means in this behalf, The decision of the Chief Justice or his designate is final. In nominating an arbitrator the Chief Justice or his designate must have regard to the qualifications required of the arbitrator in the agreement between the parties and to other considerations that will secure the nomination of an independent and impartial arbitrator."
13. In the instant case, the situation which has arisen is one contemplated under Section 11(6)(a) of ACA, 1996, namely whether or not party has failed to act as required under the agreed procedure,
14. Section 11(2) permits parties to agree to a procedure for appointing the arbitrator/arbitrators. Where there is an agreed procedure in the event of failure of such procedure, the statutory provision is under Section 11(6) of ACA, 1996. The period of 30 days is not mentioned in Sub-section (6) of Section 11 as the period after which the Chief Justice may be requested to make the appointment. What is required of a party to apply to the Chief Justice for appointment of an arbitrator in a situation such as this is merely to demonstrate that there is a failure of the party to act under the agreed procedure. The concept of waiting by the requesting party for thirty days therefore cannot be read into Section 11(6)(a) of the Act, as has been done by the learned Judge.
15. This is also clear from paragraph 17 of Konkan Railways. The said paragraph has two parts. The first part deals with the situation where between the parties there is 'no agreement in regard to such procedure'. Obviously in such cases period of thirty days will have to pass before a request can be sent to the Chief Justice or his designate. Later part of paragraph 17 deals with the situation where there is an appointment procedure agreed upon by the parties and there is no mention of 30 days as is clear from the later portion of paragraph 17 of Konkan Railways, extracted above.
16. In paragraphs 18, 19 & 20 of Konkan Railway, the learned Judges made it clear that the function of the Chief Justice or his designate to make the nomination of an arbitrator is not an adjudicatory function. The learned Judges made it clear that all that the Chief Justice or his designate has to do, is to find whether the correspondence between the parties annexed to the petition, bear out that there has been a request to make the appointment and there is a failure.
17. The Apex Court came to this decision in view of the fact that it is open to aggrieved party to challenge the nomination of the arbitrator by the Chief Justice in view of the provisions under Sections 12, 13 and 16 of ACA,1996.
18. Relying on the said judgment, the learned Counsel for the appellant submitted that in the instant case, the decision of the learned Single Judge amounts to adjudication of the dispute and such a decision is totally contrary to the ratio laid down in Konkan Railway which was cited before the learned Single Judge, but the learned Judge failed to appreciate the ratio laid down in the said decision.
19. This Court finds that the learned Judge in the judgment under appeal has construed the letters dated 07.08.2002 and 20.08.2002 and on a construction of those two letters came to the conclusion that by those letters the Chairman 'was not specifically asked to appoint an arbitrator'. After saying so, the learned Judge held that there may be some confusion in the mind of the Chairman. The learned Judge referred to various paragraphs of the petition filed by the appellant and came to the conclusion, that in the letter dated 10.01.2003 of the appellant, for the first lime, its claim was quantified and that is their first request for arbitration. The appellant should have waited for a period of 30 days and not having, done so, the prayer of the appellant for appointment of an arbitrator cannot be accepted. There is no doubt that the learned Single Judge has entered upon adjudication. Such adjudication is not permitted in view of the ratio laid down in Konkan Railway. The period of thirty days also cannot be incorporated in the present case which, as noted above, falls under Section 11(6)(a) of ACA, 1996.
20. The learned Judge, however, referred to the period of 30 days and held that the appellant should have waited for the said period by relying on the decision in Dater Switch (supra). In Dater Switch an earlier two-Judge Bench of the Hon'ble Supreme Court construed the provision of Section 11 of ACA, 1996. In paragraph 19 of the said judgment, the learned Judges of the Supreme Court held that so far as cases falling under Section 11(6) are concerned, no time limit has been prescribed under the Act whereas, the period of 30 days has been prescribed under Sections 11(4) and 11(5) of the Act. (see paragraph 19).
21. The question which cropped up in Dater Switch was when does a party lose its right to, appoint an arbitrator. Construing the provisions of Section 11, the learned Judges held that since 30 days period has not been mentioned in Section 11(6), the party does not lose its right to appoint an arbitrator even after the expiry of the period of 30 days. But the Court held that once an application under Section 11 is made before the Court by a party, then the right of the other party to make appointment ceased.
22. So appreciation of the ratio of Dater Switch by the learned Judge is erroneous. The learned Judge held that the appellant should have waited for 30 days when the situation in this case is covered under Section 11(6)(a) of ACA, 1996. This is contrary to the provisions of Sub-section (6) of Section 11 of ACA, 1996 and is also not according to the ratio of either Konkan Railway or Dater Switch.
23. What is required by a party in a situation which is covered by Section 11(6)(a) of ACA, 1996 is to show before the Court that the appointment procedure agreed upon by the parties has failed by reason of action of a party failing to act under that procedure. In the instant case, from the petition filed by the appellant before the learned Single Judge and from the correspondence disclosed by it, it is clear that there is a failure on the part of the respondent and as early as on 07.08.2002 the dispute was brought to the notice to the Chairman of the respondent and it was made clear that the dispute is six months' old and that such dispute demands resolution in accordance with the Charter Party dated 12.02.2002.
24. In view of a clear case being made out the adjudication by the learned Single Judge that the said letter does not contain any request for arbitration, is not called for in view of the Constitution Bench judgment in Konkan Railway. Even the learned Counsel for the respondent admitted that in the judgment under appeal, the learned Judge has adjudicated on various points. Such adjudication is beyond the scope of Section 11 of ACA, 1996 in view of the ratio of the Constitution Bench in Konkan Railway. So the decision of the learned Judge is beyond his jurisdiction under Section 11 of ACA, 1996.
25. But the learned Counsel for the respondent in trying to answer these arguments of the appellant raised an objection to the effect that if the decision of the learned Judge has to be purely an administrative decision in view of the ratio in Konkan Railway, no appeal would lie. The appellant can challenge such decision, if so advised by filing a writ petition.
26. The said submission has been answered by the learned Counsel for the appellant by contending, inter alia, that this appeal is one which has been filed under Clause 15 of the Letters Patent and has not been filed under Section 37 of ACA, 1996 as Section 37 does not contemplate such an appeal.
27. In a Division Bench Judgment of this Court in the case of Modi Korea Telecommunication Ltd. v. Appcon Consultants Pvt. Ltd., reported in 1999 (II) CHN 107 this Court relying on the decision in Tobu Enterprises Pvt. Ltd. v. Campco Industries Ltd., , held that where the impugned order was not an order under the Arbitration Act, the question of its appealability in the context of Clause 15 of the Letters Patent cannot be ruled out. The learned Judges also held that the Division Bench judgment in the case of Unit Construction Co. (Pvt.) Ltd. v. Union of North Bengal Universities, reported in 1986(11) CHN 275 is still holding the field. In the said judgment it was laid down that when an order under appeal is not an order under the Arbitration Act, the appeal under Clause 15 of Letters Patent would be entertained, if it satisfies the test of judgment under Clause 15 of the Letters Patent.
28. There is no doubt that the judgment under appeal satisfies the tests of being a judgment under Clause 15 of the Letters Patent. No argument to the contrary was even advanced by the learned Counsel for the respondent.
29. This Court also holds that there is no statutory provisions under Section 37 of ACA, 1996 nullifying the power of the High Court to entertain an appeal under Letters Patent. The statutory provision under Section 37 of ACA, 1996 cannot be read as excluding, the appeals under the Letters Patent. In coming to the said conclusion, this Court relies on the decision in the case of Vanita M. Khanolkar v. Pragna M. Pai and Ors., reported in AIR 1998 SC 424. In para 3 of the said judgment, the learned Judges of the Supreme Court held as follows :
"Now it is well-settled that any statutory provision barring an appeal or revision cannot cut across the Constitutional power of a High Court. Even the power flowing from the paramount charter under which the High Court functions would not get excluded unless the statutory enactment concerned expressly excludes appeals under Letters Patent."
In the said para it has been further clarified --
"in our view, on the clear language of Clause 15 of the Letters Patent which is applicable to Bombay High Court, the said appeal was maintainable as the order under appeal was passed by learned Single Judge of the High Court exercising original jurisdiction of the Court. Only on that short ground the appeal is required to be allowed."
30. Since the said ratio laid down in the case of Vanita (supra) has been applied by the Division Bench of this High Court in Modi Korea Telecommunication while dealing with in Section 37 of the ACA, 1996, this Court is of the view that the present appeal is an appeal under Clause 15 of the Letters Patent. As the judgment of the learned Judge is without jurisdiction in view of the ratio of the Constitution Bench decision in Konkan Railway, this appeal is maintainable under Clause 15 of the Letters Patent.
31. The learned Counsel for the respondent has also cited two other judgments in the case of Salyam Construction Ltd., reported in 2001 Arbitration Law Reports 119 on the ground that the instant appeal is not maintainable. From a perusal of the said judgment it appears that the Court in Salyam Construction was considering the objection raised by the Deputy Registrar (Judicial), and what was challenged in the said judgment was a direction of the Deputy Registrar. He was not even an authorised Officer under the scheme framed under Section 11 of ACA, 1996. Naturally, the High Court held that no Letters Patent appeal was maintainable against such order pointing out preliminary defects by the Registry. It is well-settled that an appeal under Clause 15 lies only against the judgment of a learned Single Judge. Therefore the said decision has no manner of application in the facts of this case. The other two judgments which have been cited by the learned Counsel for the respondent, viz., the decision in the case of Union of India v. Prafulla Kumar Sanyal, and the decision in the case of Ram Chandra Reddy, reported in 1994(2) SCC 2381 dealt with the interpretation of Section 20 of the Arbitration Act, 1940. The procedure under Section 20 of 1940 is absent under ACA, 1996. Therefore those decisions are not at all applicable to the facts of this case.
32. Considering all these aspects of the matter, this Court is of the view that the decision of the learned Single Judge has been passed in a manner which is contrary to the law laid down by the Constitution Bench decision of Konkan Railway and is also contrary to Section 11(6) of ACA, 1996 and is without jurisdiction.
33. For the reasons aforesaid, the instant appeal is maintainable and is allowed and the order of the learned Single Judge is set aside, This Court directs that the application under Section 11 of the ACA, 1996 filed by the appellant, be sent forthwith to the Hon'ble the Chief Justice for appointment of an arbitrator to decide the dispute/difference between the parties arising out of the Charter Party dated 12.02.2002.
34. There will be no order as to costs.
Debiprasad Sengupta, J.
35. I agree.