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2000 DIGILAW 406 (CAL)

ROHIT AGARWAL v. AMI FILM DISTRIBUTOR AND PRODUCTION

2000-08-11

RANAJIT KUMAR MITRA

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RANAJIT KUMAR MITRA, J. ( 1 ) THE Court : This was an application made under sections 9 and 34 of the Arbitration and Conciliation Act, 1996, which I shall refer in this judgment as the Act. The petitioner claimed and the Court granted leave to move this applications under clause 12 of the Letters Patent. The prayer of the petitioner was for setting aside the award dated May 12, 2000 made by the joint arbitrators. There was an interim order made by Court and the award had been stayed till the disposal of the application. The parties had filed their affidavits in terms of directions of the Court. The Court : This was an application made under sections 9 and 34 of the Arbitration and Conciliation Act, 1996, which I shall refer in this judgment as the Act. The petitioner claimed and the Court granted leave to move this applications under clause 12 of the Letters Patent. The prayer of the petitioner was for setting aside the award dated May 12, 2000 made by the joint arbitrators. There was an interim order made by Court and the award had been stayed till the disposal of the application. The parties had filed their affidavits in terms of directions of the Court. ( 2 ) THE facts of the matter in short were that in terms of an agreement dated September 26, 1998 the petitioner had been assigned by the respondents Nos. 1, 2 and 3, who shall be referred as the respondents hereafter, the right of distribution, exploitation and exhibitation in 35 mm. shapes and sizes of the film "pita Sarga Pita Dharma". The petitioner alleged that he had paid a sum of Rs. 51,000. 00 by a cheque dated September 26, 1996, which had been encashed by the respondents. There was a further agreement dated November 24, 1998, between the parties, whereunder the respondents had assigned in favour of the petitioner the video rights of the film in North Bengal territory including Sikkim and Bhutan, and the petitioner in consideration had paid to the respondents a sum of Rs. 8. 5 lakh. According to the petitioner large sums of money had been paid by the petitioner to and received by the respondents, as and by way of advance for making and completion of the film. Further advances were allegedly demanded by the respondents, and the petitioner refused. 8. 5 lakh. According to the petitioner large sums of money had been paid by the petitioner to and received by the respondents, as and by way of advance for making and completion of the film. Further advances were allegedly demanded by the respondents, and the petitioner refused. In those circumstances disputes and differences arose between the parties. At their instances, in terms of an arbitration clause contained in the agreement dated September 26, 1998, an arbitrator was appointed to enter into reference and adjudicate the disputes. ( 3 ) THE respondents alleged that the arbitrator had been favouring the petitioner and by consent of the parties the arbitrator was removed. Thereafter, the parties agreed and another arbitrator was appointed. The second arbitrator entered into reference and directed the first hearing to be held on October 8, 1999. The respondents once again complained to the petitioner alleging bias against the second arbitrator. The parties agreed to remove the arbitrator and appoint EIMPA as their new arbitrator. Thereafter the petitioner alleged that the respondents were required to "complete the necessary formalities". Inspite of request the petitioner did not refer the disputes to the EIMPA and it would appear the respondents did. The EIMPA in accordance with its rules as contained in the "eimpa Tribunal of Arbitration Rules" duly appointed three arbitrators to jointly adjudicate the disputes which had been referred to them for arbitration. Inspite of notice and direction by the arbitrators to file the counter statement, the petitioner did not comply. The petitioner did not attend any of the meetings held in the referrence. The petitioner had repeated its allegation before the arbitrators. The joint arbitrators heard the respondents and went "through the papers available in the file" and made their award. ( 4 ) IT was contended in particular by counsel for the petitioner that the petitioner had agreed to the change of the personnel of the arbitrator, but the respondents had sought to misinterpret such consent as putting an end to the pending arbitral proceedings, and commence new and fresh proceedings. According to him inspite of repeated demand by the petitioner to comply with the formalities, the respondents without terminating the pending proceedings and bringing all papers, documents, records etc. before the respondent No. 4, from the erstwhile arbitrator, the respondents had purported to commence new and fresh proceeding. According to him inspite of repeated demand by the petitioner to comply with the formalities, the respondents without terminating the pending proceedings and bringing all papers, documents, records etc. before the respondent No. 4, from the erstwhile arbitrator, the respondents had purported to commence new and fresh proceeding. The respondents had failed to comply with the terms of section 32 of the Act, he submitted, and that EIMPA had no jurisdiction to enter into reference and the award had been made in violation of the provisions of the Act. He contended, that in terms of the specific provisions in section 7 of the Act, there was no agreement in writing between the parties in respect to the commencement of arbitral proceedings before the respondent No. 4. He argued that though the petitioner all along, was the claimant, the respondent No. 4 without giving any direction for filing of pleadings had sought to treat the respondents as the claimants. According to him in violation of all principles of law, the joint arbitrators had sought to treat the request for reference by the respondents as the statement of claim, though the arbitrators were bound, in law, to treat the pleadings filed in the earlier proceedings as valid as because the proceedings had not been lawfully terminated as on that date. It was contended by counsel for the petitioner that the arbitrator ought to have decided the question of jurisdiction as a preliminary point, and in those circumstances the petitioner refrained from participating in the proceedings. In support of his submission he cited and relied on the decisions reported in AIR (1959) Cal 620; AIR (1955) Cal 354; and 1991 (1) CLJ 8. ( 5 ) PARTIES had agreed by exchange of letters to the change of the arbitrator, it was submitted by counsel for the respondents, without any objection whatsoever and the respondents' later demand for compliance with the formalities was vague and meaningless. The parties had not just agreed to change the arbitrator and appoint EIMPA as their new arbitrator, it was argued by counsel, but the parties had in clear terms agreed to refer the matter to the EIMPA as their new and fresh arbitrator, and thereafter the parties were required to comply with the rules of the EIMPA only. The parties had not just agreed to change the arbitrator and appoint EIMPA as their new arbitrator, it was argued by counsel, but the parties had in clear terms agreed to refer the matter to the EIMPA as their new and fresh arbitrator, and thereafter the parties were required to comply with the rules of the EIMPA only. He contended that the parties being members of the EIMPA, they were deemed to be aware of rules of EIMPA and that from the time of entering into the reference, filing of the statemet of claim, giving direction for filing counter statement, giving notice that the award would be made and the making and publishing of the award had all been done by the respondent No. 4 in according with law and the rules of the EIMPA. He argued, that having consented to the change of the arbitrator the petitioner's subsequent allegation of non-compliance with the formalities was malafide and with deliberate intent not to attend the reference and defeat the arbitration proceedings altogether. In support of his submissions, he cited and relied on the decisions reported in AIR (1935) Sind 228; AIR (1959) All 711; and AIR (1994) SC 860. ( 6 ) THE various rules, of the "eimpa Tribunal of Arbitration Rules" and also the EIMPA "bye Laws Relating To Disposal of Disputes" which were considered relevant for this case, were placed by counsel for EIMPA the respondent No. 4. He submitted that in accordance with the rules, the Registrar EIMPA, who was also the president of the Association received all applications made to the tribunal and upon being satisfied as to the arbitrability of the disputes, appointed the arbitrators who then entered into reference after giving notice to the parties. He also drew my attention to clause 3 (xix) of the Memorandum of Association, and contended that as a member, the petitioner was deemed to have knowledge of the rules, and was bound by them. ( 7 ) THE principal issue which was required to be adjudicated in this application in my perception was one of jurisdiction of the arbitrators to at all enter into the reference. ( 7 ) THE principal issue which was required to be adjudicated in this application in my perception was one of jurisdiction of the arbitrators to at all enter into the reference. An answer would ofcourse depend on whether the earlier arbitration continued to remain pending, though the parties had consented to remove the arbitrator and appoint a new arbitrator, and whether the respondents could refer the matter to EIMPA for arbitration and the arbitrators could accept their letter of the statement of claim. At the very outset it would be prudent, I would think, to consider closely the provisions contained in section 15 (1) (b) of the Act, which provides that the mandate of an arbitrator shall terminate "by or pursuant to agreement of the parties". Arbitral proceedings commenced, as provided in section 21 of the Act, unless otherwise agreed between the parties, "on the date on which a request for that dispute to be referred to arbitration is received by the respondent. " As the parties had not, admittedly, "otherwise agreed", the contents of the two letters which had been exchanged between the parties, dated October 30, 1999 and November 9, 1999 made it abundantly clear that by agreement the parties had terminated the mandate of the arbitrator. In its letter dated October 30, 1999 the respondents had in clear terms informed the petitioner that,"since the arbitrator has been continuously favouring you and failed to represent himself as a non-biased arbitrator we are not interested to continue our representation with this arbitrator any more we do hereby give you offer to appoint freshly EIMPA as our new arbitrator immediately to resolve the issue "impartially". The petitioner in its reply dated November 19, 1999 unequivocally stated, "we do not hesitate to agree upon to the appointment of EIMPA as our new arbitrator under the Arbitration and Conciliation Act. " The respondents by their letter dated November 13, 1999 had again requested the petitioner to appoint EIMPA as the new arbitrator, but the petitioner chose not to do so. The respondents in the circumstances requested EIMPA in writings dated November 22 and 29, 1999 and EIMPA appointed three arbitrators, to jointly adjudicate the disputes between the parties. " The respondents by their letter dated November 13, 1999 had again requested the petitioner to appoint EIMPA as the new arbitrator, but the petitioner chose not to do so. The respondents in the circumstances requested EIMPA in writings dated November 22 and 29, 1999 and EIMPA appointed three arbitrators, to jointly adjudicate the disputes between the parties. The petitiner for the first time on November 25, 1999 requested the respondents in writing with a copy endorsed to EIMPA "to complete the necessary formalities with us so that we may act upon it and refer the matter to EIMPA for arbitration. " There was no mention, I find from the records, as to what the petitioner wanted to mean by "complete the necessary formalities". By a covering letter dated March 6, 2000 EIMPA had served the petitioner with a copy of the minutes of the first meeting of the joint arbitrators dated February 18, 2000 and the petitioner was requested to attend the next meeting. From the contents of the minutes of the meeting, the petitioner obviously had the knowledge that the arbitrators had been appointed in pursuance of a request made by the respondents. The petitioner was also aware that the respondents had filed their statement of claim. A copy of the statement of claim, in pursuance of the direction by the arbitrators had been also served on the petitioner. It would appear from the minutes of the meeting that the arbitrators had directed the petitioner "to submit their written statements in qua-duplicate in reply to the claim petition of the claimant within 10. 3. 2000. " The petitioner by its letter dated March 14. 2000 to the EIMPA alleged that;"the claimant had not come forward as yet to complete the necessary formalities in connection with and touching the agreements dt. 26. 9. 96 and 24. 11. 96 In view of the above no reference can be made for arbitration in the manner sought In view of the above please call upon the complainant to complete the formalities before proceeding further into the matter". EIMPA by its covering letter dated March 23/24, 2000 furnished the petitioner with a copy of the minutes of the meeting dated March 16, 2000, which however was not held as one of the arbitrators was unable to attend. EIMPA by its covering letter dated March 23/24, 2000 furnished the petitioner with a copy of the minutes of the meeting dated March 16, 2000, which however was not held as one of the arbitrators was unable to attend. By a letter dated March 27, 2000 the petitioner intimated EIMPA that they were awaiting the reply of their letter dated March 14, 2000. The petitioner was again requested by EIMPA to attend the next meeting of the arbitrators to be held on April 13, 2000, and the petitioner by a further letter dated April 13, 2000 once again wrote that they were awaiting the reply of their letters dated March 14, 2000 and March 27, 2000. In the meeting dated April 13, 2000 the arbitrators heard the respondents and went through "the papers available in the file" and decided the matter and EIMPA by its covering letter dated May 8, 2000 intimated the petitioner in that respect and also furnished a copy of the minutes of the meeting. Thereafter by two letters both dated May 10, 2000 the petitioner sought to allege that the joint arbitrators entered into reference "without complying with the legal formalities and that the arbitral proceedings were bad" and the joint arbitrators should not take further steps in terms of their decision in the meeting dated April 13, 2000. ( 8 ) FROM the facts of the case it was fairly clear that there was no impediment in the petitioner appearing before the arbitrators and clarifying what precisely were the necessary formalities, which the respondents were required to comply with. The joint arbitrators had acted in compliance with the rules of "the Tribunal of Arbitration Rules" of EIMPA which were admittedly binding on the parties. Rule V (1) in particular stipulates as regards "applications for arbitration", that :"an application for arbitration may be addressed by either party to the Registrar; a statement of the case may be submitted along with the application. " ( 9 ) THE petitioner being a member of the association of-course was, at all material times, fully aware of and bound by the provisions contained in the Rules. " ( 9 ) THE petitioner being a member of the association of-course was, at all material times, fully aware of and bound by the provisions contained in the Rules. The allegations by the petitioner that the arbitrators had wrongfully and illegally entered into the referrence, made by by the respondents, and entertained the statement of case filed by the respondents allowing them to be the claimants, was clearly contrary to and inconsistent with the above stipulations. I quite agree with the arbitrators in disregarding such allegations and conducting the proceedings as they have. ( 10 ) AS regards the grievance of the petitioner that the earlier proceedings remained pending and hence the joint arbitrators should have continued the proceedings instead of wrongfully and illegally allowing the respondents to file statement of case and commencing fresh proceedings, I am afraid counsel for the petitioner failed to appreciate the scope and purport of the relevant law applicable in the circumstances, as has been clearly laid down in the Act. The parties had agreed in no uncertain terms and the mandate of the arbitrator had been terminated without any reservations whatsoever. It must reasonably be understood that the parties had agreed to put an end to whatever proceedings had taken place before the erstwhile arbitrator simultaneously with their termination of the mandate of the arbitrator. I say reasonably understood, because it must by remembered that the parties had agreed to remove the arbitrator on the basis of allegations by the respondents that the arbitrator was biased and continuously favoured the petitioner. In removing such an arbitrator parties could hardly be expected to have intended that proceedings before him ought to remain pending. It remained in the circumstances for the joint arbitrators to decide whether the earlier proceedings would be continued. In accepting the statement of case, which had been submitted to them by the respondents in accordance with the provisions of Rule V (1) of the Rules of the Association and directing the petitioner to file statement, it was abundantly clear that the arbitrators had commenced fresh proceedings and therefore fresh pleadings were directed to be filed by the parties. The arbitrators of-course entitled in law to formulate their proceedings. That was precisely what the joint arbitrators did in this case. The decision of the arbitrators, I am inclined to be of the view, was considered and judicious. The arbitrators of-course entitled in law to formulate their proceedings. That was precisely what the joint arbitrators did in this case. The decision of the arbitrators, I am inclined to be of the view, was considered and judicious. It was also a fact, that in its counter statement of facts filed by the respondents before the erstwhile arbitrator the respondents had made allegations against the arbitrator. Surely the joint arbitrators were not expected to continue the proceedings with that counter statement on record. ( 11 ) THROUGHOUT the proceedings there can be little doubt that the joint arbitrators had adhered to the relevant and appropriate law and also the rules of the Association. There was no perversity nor any illegality in their making the award. They had afforded every opportunity to the petitioner to file their counter statement, to appear before them and to make submission in support of their alleged claim. The petitioner without any reason whatsoever apparently capriciously, but most likely for want of any defence, chose to disregard the directions of the arbitrators and deliberately and wilfully stay away from the proceedings knowing fully well, that the joint arbitrators were in fact hearing the matter. The petitioner has stood by and allowed the joint arbitrators to hold the meetings and make their award. There neither was nor could be any question of denial of natural justice in the present circumstances. In had been submitted by counsel for the petitioner that the petitioner was agreeable to go back to the joint arbitrators for a fresh adjudication of the disputes between the parties provided the respondents formally put an end to the pending arbitration by way of completing the necessary formalities. I fear such concession by the petitioner was somewhat misplaced and quite unwarranted. In their award dated May 12, 2000 the joint arbitrators would appear to be fairly aware of the ways of the producers and distributors, and having dealt with and adjudged each and every fact of the matter, had proceeded to make a perfectly just and equible award. For those reasons this application is dismissed. There shall however, be no order as to costs. Parties shall act on a xerox copy of the judgment countersigned by the Assistant Registrar of this Court upon their undertaking to apply for and obtain certified copy of the judgment. Application dismissed.