Madhya Pradesh High Court
Nahar Allied Agencies vs Hindustan Petroleum Corporation ... on 10 December, 2004
Equivalent citations: 2005(3)MPHT139
Author: Arun Mishra
Bench: Arun Mishra
ORDER Arun Mishra, J.
1. In this writ petition, petitioner has assailed the order (P-7) passed by learned Trial Court allowing impleadment of respondent No. 3 as already of the proceedings under Section 34 of the Arbitration and Conciliation Act, 1996.
2. Facts in short giving rise to present writ petition are that the petitioner; Nahar Allied Agencies was appointed as dealer of the LPG on 16-8-1984 in the territory of Chhindwara and Pandurna under Clause 2(b)(iii) of the dealership agreement by Hindustan Petroleum Corporation Limited. It is provided that the Corporation has right to appoint one or more dealers. Respondent No. 3 was appointed as dealer for Pandurna under the physically handicapped category. Petitioner; Nahar Allied Agencies filed an application under Section 9 of the Arbitration and Conciliation Act, 1996, in which relief was prayed to restrain the Hindustan Petroleum Corporation Limited from transferring its customer to respondent No. 3 namely; Gopal Rathi. The application was rejected as per order dated 21-2-2003. Thereafter another application was filed under Section 9 of the Arbitration & Conciliation Act, 1996 which was allowed by the Trial Court. Arbitration was ordered. Arbitration award (R-3) was passed on 12-5-2003. Arbitrator rejected the claim of the petitioner and held that the Corporation is justified in appointing the respondent No. 3 as an additional dealer.
3. Aggrieved by the award, an application under Section 34 has been preferred before the learned Court-below by the petitioner; Nahar Allied Agencies to set aside the award. An application was moved by the respondent No. 3 for impleadment which has been allowed by the learned Court-below as per order (P-7) dated 19-11-2003 on the ground that in the rule framed by this Court in exercise of power conferred by Section 82 of the Arbtiration and Conciliation Act, 1996, notice has to be issued to the person liable to be affected by the application, as such impleadment has been allowed. Hence, the present writ petition has been preferred by the petitioner initially in petition very filing of the application was opposed, later on by way of amendment challenge to order (P-7) has been incorporated. It is submitted by the petitioner that rule framed by this Court has to be harmoniously construed within the parameter of Section 34 of the Arbitration & Conciliation Act, 1996. A stranger to the arbitration proceedings could not have been ordered to be impleaded by learned Court-below. Thus, the order is bad in law. It is further submitted that word "party" has been defined in Section 2(1)(h) of Act of 1996 means the party to arbitration agreement, hence, it is only the party to arbitration agreement which can be impleaded/noticed by the Court.
4. Shri A.G. Dhande, learned Sr. Counsel appearing on behalf of the petitioner has submitted that on harmonious construction of Section 34 read with the rules framed by this Court, only a party to arbitration agreement can be noticed. Section 34 of the Arbitration & Conciliation Act does not provide that notice can be issued to a stranger. Respondent No. 3 is a stranger. Efforts of the Court has to interpret the rules in consonance with the provisions of the Act, hence, the impugned order deserves to be set aside. Respondent No. 3 was not a party to the arbtiration agreement before the arbitrator, hence, in proceedings under Section 34 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the "Act"), impleadment could not have been ordered.
5. Shri Alok Aradhe, learned Counsel appearing for the respondent No. 3 has submitted that there is no conflict in the provision of Section 34 and rules framed by this Court in exercise of power conferred under Section 82 of the Act of 1996. He has further submitted that vires of the rules framed by this Court have not been assailed in this writ petition, hence, question that rule is repugnant to Section 34 can not be gone into. He has further submitted that even otherwise Rule 4 and Rule 8 are clear. There is no conflict with the provision of Section 34. Respondent No. 3 is clearly a person interested as dealership has been allotted within the area which was initially with the petitioner and in case any award is passed in favour of the petitioner, same would aversely affect the right of the dealership of the respondent No. 3, as such the respondent No. 3 being interested person has been ordered to be impleaded as party to proceedings under Section 34. He has further submitted that the arbitration can not adversely affect interest of other party, without opportunity of hearing, in such a situation, impleadment is necessary and has been rightly allowed. No interference is called for.
6. Shri Sandeep Aole, learned Counsel appearing for the respondent Nos. 1 and 2 has supported the submission raised by Shri Alok Aradhe and has submitted that the interest of respondent No. 3 would be adversely affected in case application under Section 34 is allowed. Rules framed are clear. Impleadment is just and proper. No interference is called for.
7. Main submission of Shri A.G. Dhande, Sr. Counsel appearing on behalf of the petitioner is that the word "party" has been defined in Section 2(i)(h) of the Act which means party to an arbitration agreement. Arbitration agreement means an agreement referred to in Section 7. Respondent No. 3 is not party to an arbitration agreement, hence, impleadment is bad in law. Same is in derogation to Section 34. Section 2(1)(c), 2(1)(h) and Section 7 are quoted below:--
"2. Definitions.-- (1) In this Part, unless the context otherwise requires,--
(c) "Arbitral award" includes an interim award;
(h) "party" means a party to an arbitration agreement.
7. Arbitration agreement.-- (1) In this part, "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in--
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or
(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.
8. Scope of proceedings under Section 34 is the ground raised. Same is quoted below :--
"34. Application for setting aside arbitral award.-- (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with Sub-section (2) and Sub-section (3).
(2) An arbitral award may be set aside by the Court only if--
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity; or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration :
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the Arbitral Tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this part from which the parties can not derogate, or, failing such agreement, was not in accordance with this part; or
(b) the Court finds that--
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force; or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation:-- Without prejudice to the generality of Sub-clause (ii), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the Arbitral Tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
(4) On receipt of an application under Sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period to time determined by it in order to give the Arbitral Tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of Arbitral Tribunal will eliminate the grounds for setting aside the arbitral award."
9. No doubt it is true that under Section 34 of the Act right is given for filing an application for setting aside the arbitral award to a party which means party to an arbitration agreement. But, in the instant case, application under Section 34 has not been filed by respondent No. 3. It has been filed by the petitioner. Section 34 nowhere provides the procedure for dealing with such an application once it has been filed. Rules have been framed by the High Court of Madhya Pradesh in exercise of power conferred under Section 82 of the Act of 1996. Section 82 of the Act reads thus :--
"82. Power of High Court to make rules.-- The High Court may make rules consistent with this Act as to all proceedings before the Court under this Act."
10. Rules can be framed consistent with the provisions of the Act of 1996, which rules have to govern to proceeding before the Court under this Act. Rules which have been framed by this Court are called M.P. Arbitration Rules, 1997. The rules have to govern procedure before the Court under the Act of 1996. Expression not defined in the rules shall carry the meaning as provided under Section 2 of the Act of 1996. Rules 4 and 8 are relevant, same are quoted below:--
"4. (1) Every application under Section 9, Section 14, Section 17, Section 27, Section 34, Section 39 and Section 43 of the Act shall be made in writing duly signed and verified in the manner prescribed by Order VI, Rules 14 and 15 of the Code of Civil Procedure, 1908 and if the Court so directs, shall be supported by an affidavit. It shall be divided into paragraphs numbered consecutively and shall contain the name, description and place of residence of the parties. It shall contain a statement in concise from--
(a) of the material facts constituting cause of action;
(b) of facts showing that the Court to which the application is presented has jurisdiction;
(c) relief asked for; and
(d) names and addresses of the persons liable to be affected by the application:
Provided that where a party, by reason of absence or for any other reason, is unable to sign and verify the same, it may be signed and verified by any person duly authorised by him in this behalf and is proved to the satisfaction of the Court to be acquainted with the facts of the case.
(2) An application for enforcement of an arbitral award under Section 36 of foreign award under Section 47 or Section 56 shall be in writing signed and verified by the applicant or by some other person proved to the satisfaction of the Court to be acquainted with the facts of the case, and shall contain in a tabular form the particulars prescribed in Sub-rule (2) of Rule 11 of Order 21 of the Code of Civil Procedure, 1908.
8. The Court to which an application is presented shall direct notice thereof to be given to the opposite party and to such other persons as are likely to be affected by the proceedings requiring to show cause within a time to be specified in the notice why the relief sought in the application be not granted. The notice shall be accompanied by a copy of the application and documents filed by the applicant."
11. It is clear from the Rules 4 and 8 that the rules are meant to govern inter alia proceedings under Section 34 which is for setting aside arbitral award. It is necessary under the Rule 4(1)(d) that names and addresses of the persons liable to be affected by the application be mentioned. Rule 8 is further clear which makes a distinction between parties and such other persons as are likely to be affected by the proceedings. Notice is contemplated of such an application filed under Rule 4, to be given to the opposite party as well as to such other persons as are likely to be affected by the proceedings. Thus, there is clear provision made for issuance of notice and expression to such other persons as are likely to be affected by the proceedings can not be confined to party to arbitration agreement. Notice to party to arbitration agreement has been separately provided in Rule 8. Conjoint reading of Rule 4(1)(d) and Rule 8 make it clear that impleadment of a person whose interest is likely to be affected is permissible and notice has to be issued to such a person. Thus, the impleadment which has been ordered is in consonance with the Rule 4 read with Rule 8 of Rules and considering the fact that the interest of respondent No. 3 is likely to be adversely affected in case claim made by the petitioner is allowed.
12. Shri A.G. Dhande, learned Sr. Counsel has submitted that in view of Section 34 rules have to be harmonized and interpreted in such a manner so as not to give notice to any person other than party. Section 34 provides mechanism of filing an application for setting aside arbitration award by party. Right is not given in Section 34 to file such application to a person who is not a party, but, that does not prevent Court to issue notice to the person to be affected by the award in proceeding under Section 34 of Act of 1996. In my opinion, interpretation of the Rules 4 and 8 is clear. Applying rule of harmonious construction as laid down by the Apex Court in Sultana Begum v. Prem Chand Jain, (1997) 1 SCC 373, I find that rule can not be interpreted as suggested by petitioner's Counsel. The order passed is in accordance with the rules.
13. Shri Alok Aradhe has also submitted on the strength of decision Sukalu Ram Gond v. State of M.P. and Ors., (1994) 5 SCC 570 and Radha Kishan and Anr. v. Sapattar Singh, AIR 1957 Allahabad 406, that in case award affects the third party right it can be challenged by that party and same is not be operative against that part. The submission raised is not necessary to be examined as short question for consideration is whether notice under Rules 4 and 8 of Rules 1997 can be issued to person interested other than party to arbitration agreement as Rule is clear. I need not dilate further on the submission.
14. In view of the above discussion, I find that order of impleadment can not be said to be illegal. I find no merits in the submissions raised by the petitioner.
15. Resultantly, writ petition sans merit. Same is hereby dismissed. Parties are left to bear their own costs as incurred.