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2001 DIGILAW 500 (PNJ)

Vishnu Kumar Gupta v. Union of India

2001-05-04

R.L.ANAND

body2001
JUDGMENT R.L. Anand, J. - This is a civil revision and has been directed against the order dated 28.2.2001 passed by Civil Judge (Jr. Division), Chandigarh, who dismissed the application of the petitioners under Section 41(b) read with Schedule (2), Rule 4 of the Arbitration Act further read with Order 39 Rules 1 and 2 CPC for staying the proceedings before the arbitrator Brig. R.R. Singh. 2. Some facts can be noticed in the following manner :- Shri Vishnu Kumar Gupta was registered as class-S contractor with MES and had been executing various construction contracts with the MES for the last 25 years. After his death in July, 1991, the firm is being represented by the LRs of Vishnu Kumar Gupta in all the proceedings. The petitioners had entered into a contract with the respondents for the work of provisions of RCC structures and concrete pavement at Srinagar and an agreement was entered into between the parties. The work was completed to the entire satisfaction of the respondents and subsequently dispute arose between the parties and the matter was referred to the arbitrator as per Clause 70 of the agreement. Earlier respondent No. 3 appointed Major Gen. W.S. Chona as sole arbitrator for adjudication of dispute between the parties. Major Gen. Chona resigned and then Sh. S.K. Rao was appointed as sole arbitrator on 30.3.1994. Being aggrieved by the appointment of Shri Rao as sole arbitrator, the petitioners filed a petition under Sections 8, 11 and 12 of the Arbitration Act in the Court of Civil Judge (Sr. Division), Chandigarh and during the pendency of the said petition Shri S.K. Rao resigned and the counsel for the respondents made a statement dated 17.4.1997 that another arbitrator in place of Shri Rao would be appointed within 15 days. Upon this the petition was withdrawn. No appointment was made within the period of 15 days as promised by the counsel for the respondents. Thereafter the petitioners filed a petition under Sections 8 and 12 of the Arbitration Act, 1940, for appointment of an independent and impartial arbitrator. During the pendency of said petition, on 2.8.1997 respondent No. 3 appointed Brig. T.K. Mittal as sole arbitrator and the petition of the petitioners was dismissed on 12.9.1997 by the court of Civil Judge (Jr. Division), Chandigarh upon the statement of the counsel for the respondents. During the pendency of said petition, on 2.8.1997 respondent No. 3 appointed Brig. T.K. Mittal as sole arbitrator and the petition of the petitioners was dismissed on 12.9.1997 by the court of Civil Judge (Jr. Division), Chandigarh upon the statement of the counsel for the respondents. A review application was moved by the petitioners and it was inter alia pleaded that since the new arbitrator was not appointed within a period of 15 days, as such the respondents have lost their right to appoint Brig. T.K. Mittal as sole arbitrator and thus the appointment of Brig. Mittal is bad in the eyes of law. It was further pleaded by the petitioners that the appointment of respondent No. 4 as sole arbitrator is bad because the arbitrator was supposed to complete the arbitration proceedings within six months and the said period of six months has already expired. The maximum period could be extended upto one year with mutual consent of the parties. As no decision has been given by the sole arbitrator, therefore, the authority of the arbitrator should be revoked and in place of the sole arbitrator a fresh arbitrator may be appointed by the Court who may be acceptable to both the parties. 2A. Notice of the petition was given to the respondents, who filed the reply and denied the allegations. According to the respondents, Shri S.K. Rao was earlier appointed as sole arbitrator. Thereafter, within a period of 15 days Brig. T.K. Mittal was appointed as sole arbitrator in compliance with the arbitration clause No. 70. Then Brig. R.R. Singh was appointed as sole arbitrator on 22.9.2000. The application moved by the petitioner for the removal of sole arbitrator is misconceived. 3. The learned trial court heard arguments of the parties and vide impugned order dated 28.2.2001 and for the reasons given in paras 3 to 7, which are reproduced as under, dismissed the application : "3. I have heard the arguments of Ld. counsel for both the parties and have also gone through the record placed on file very carefully. The ld. counsel for the petitioners Sh. I have heard the arguments of Ld. counsel for both the parties and have also gone through the record placed on file very carefully. The ld. counsel for the petitioners Sh. Naresh Markanda has argued that as per Condition No. 70 of the agreement, award is to be made by the arbitrator within a period of 6 months and the said period of 6 months could be extended upto one year with the mutual consent of both the parties in any case, but a period of 7-1/2 years has passed and the respondents are appointing one after the other arbitrator and till date no award has been made in the present case. He has further argued that since the Ld. counsel for the respondents had given his statement in the earlier petition pending for appointment of a new arbitrator that on the resignation of Sh. S.K. Rao, Arbitrator, a new arbitrator shall be appointed within a period of 15 days and no arbitrator was appointed by the respondents within a period of 15 days, as such, the respondents have lost their right to appoint a new arbitrator and as such the appointment of a new sole arbitrator, by the respondents, is bad in the eyes of law and there is every apprehension in the mind of the petitioners that the new Arbitrator appointed by the respondents is biased as against the petitioners and he will definitely give his award as against the petitioners. He has further drawn my attention towards the list of disputes, which has been placed on record in which appl. Rs. 1 core has been mentioned as losses occurred to the respondents and there is every likelihood that the new Arbitrator shall pass the entire claim of the respondents. 4. On the other hand, the Ld. Counsel Sh. G.C. Babbar appearing on behalf of UOI has argued, that as per condition 70 of the agreement, the only power for the appointment of a new Arbitrator vests with the respondents and on the resignation of the earlier arbitrator, the only power vests with the respondent for appointment of a new Arbitrator in his place. He has denied if any undertaking was given by the counsel for the respondents in the earlier arbitration matter pending between the two parties that the new arbitrator shall be appointed by the respondents within a period of 15 days. He has denied if any undertaking was given by the counsel for the respondents in the earlier arbitration matter pending between the two parties that the new arbitrator shall be appointed by the respondents within a period of 15 days. He has further argued that no irreparable loss is going to be caused to the petitioners in case the proceedings before the newly appointed arbitrator are not being stayed. 5. After hearing the rival contentions of Ld. Counsel for both the parties and after having gone through the record placed on file very carefully, I have found that there is merely an apprehension in the mind of the petitioners that the new appointed arbitrator by the respondents would give a biased decision as against the petitioners. I have gone through condition 70 of the agreement entered into between the parties. The relevant portion, material for the decision of the present application, is being reproduced as under :- "If the arbitrator so appointed resigns his appointment or vacate his office or is unable or unwillfully to act due to any reason whatsoever, the authority appointing him may appoint a new arbitrator to act in his place." 6. As per this condition No. 70 of the agreement, it has not been mentioned as to if, only once an arbitrator can be appointed by the respondents. The petitioners have not disputed the earlier authority of the respondents in appointment of the Sole Arbitrator. Earlier to the appointment of the latest sole arbitrator appointed by the respondents, the arbitrators were being appointed by the respondents only. No such undertaking given by the ld. counsel for the respondents has been placed on record, to the effect, that new arbitrator shall be appointed by the respondents within a period of 15 days. Even if there had been any undertaking of a new arbitrator within a period of 15 days, the authority of the respondents for appointment of a new arbitrator would not have ceased, even then. The ld. counsel for the petitioners has further argued that the summons issued to the newly appointed arbitrator were forwarded in original to the respondents for further action and this fact reveals that the respondents and the newly appointed arbitrator are hand in glove with each other. The ld. counsel for the petitioners has further argued that the summons issued to the newly appointed arbitrator were forwarded in original to the respondents for further action and this fact reveals that the respondents and the newly appointed arbitrator are hand in glove with each other. However, I am not convinced with this argument raised on behalf of the petitioners merely because of the reasons that the summons in original were sent by the arbitrator to the respondents, does not warrant for drawing an inference that the arbitrator is hand in glove with the respondents, since this fact cannot be ignored that the sole arbitrator is an employee of the respondents and the fact of sending of the original summons to the respondents was not even concealed by the newly appointed arbitrator, since copy of the said summons and the forwarding letter was also sent by the arbitrator to this court. 7. In the aforesaid circumstances, I do not find, at this stage, illegality for the appointment of a new arbitrator by the respondents. No ground is made out for staying the proceedings before the arbitrator. Moreover, interim injunction can be granted only in case of irreparable loss being caused to the petitioners, whereas in the present case, no such irreparable loss has been stated to be caused by the petitioners in case the proceedings before the arbitrator are not being stayed. The proceedings before the arbitrator cannot be stayed on the mere apprehension in the mind of the petitioners. At this stage, no ground is made for allowing the application moved by the petitioners, as such the same is ordered to be dismissed without commenting upon the merits of the present case." 4. Aggrieved by the said order, the present revision. 5. I have heard Mr. P.C. Markanda, learned senior counsel on behalf of the petitioners, Mr. M.S. Guglani, Advocate on behalf of the Union of India and with their assistance have gone through the records of the case. 6. The learned counsel appearing on behalf of the respondents has raised a preliminary objection that the present revision is not legally maintainable because the substantive prayer of the petitioners before the trial Court was under Order 39 Rules 1 and 2 CPC. I do not subscribe to the contention raised by the learned counsel for the respondents. 6. The learned counsel appearing on behalf of the respondents has raised a preliminary objection that the present revision is not legally maintainable because the substantive prayer of the petitioners before the trial Court was under Order 39 Rules 1 and 2 CPC. I do not subscribe to the contention raised by the learned counsel for the respondents. A reading of the impugned order would show that the petitioners moved application before the trial court under Section 41(b) read with Schedule (2), Rule 4 of the Arbitration Act and in that very application they made a prayer that till their application is finally disposed of, directions be given to the arbitrator not to proceed further into the matter. 7. The learned counsel appearing on behalf of the petitioners submits that the petition under Section 41(v) of the Indian Arbitration Act, 1840 has since been finally disposed of, therefore, the revision is maintainable. I subscribe to the argument raised by the learned counsel for the petitioners because the relief under Order 39 Rules 1 and 2 CPC is not an independent relief asked for by the petitioners. The petitioners wanted to invoke the provisions of Order 39 Rules 1 and 2 CPC while moving the application under Section 41(b) read with Schedule (2), Rule 4 of the Arbitration Act. Rule 4 gives power to the Court to issue injunction during the pendency of arbitration proceedings either before the arbitrator or before the court itself. In fact, a label has been given by the petitioners in their application under Order 39 Rules 1 and 2 CPC which was superfluous keeping in view the substantive provisions of Schedule (2), Rule 4 of the Arbitration Act. Thus, I repel the first argument raised by the learned counsel for the respondents. 8. It was then submitted by the learned counsel for the petitioners that the trial court has committed a patent error by dismissing the application of the petitioners. It was argued that the main petition filed by the petitioners before the trial Court is under Sections 5, 8, 11 and 12 of the Arbitration Act, 1940. If the relief as prayed for by the petitioners is not granted to them, the very purpose of this petition would become useless. It was argued that the main petition filed by the petitioners before the trial Court is under Sections 5, 8, 11 and 12 of the Arbitration Act, 1940. If the relief as prayed for by the petitioners is not granted to them, the very purpose of this petition would become useless. During the course of submissions the learned counsel for the petitioners even went to the extent by saying that his clients are ready if any independent person other than Brig. R.R. Singh may be appointed as sole arbitrator because the petitioners have lost faith in him. Moreover, with the passage of time it is a fit case where the authority of the present arbitrator should be revoked, and therefore, a fresh arbitrator should be nominated or appointed. So much so, even the arbitration agreement should be revoked so as to give right to the parties to move their matter in the ordinary court. I am not giving any finding with regard to the main prayer of the petitioners under Sections 5, 8, 11 and 12 because all these aspects of the case shall be examined by the trial Court itself while disposing of the said application. At this juncture, I must say that the trial court has committed a patent illegality by declining the application under Section 4(b) read with Schedule (2), Rule 4 of the Arbitration Act. If the injunction is not granted to the petitioners, the very purpose of the petition under Sections 5, 8, 11 and 12 would stand frustrated. If the arbitrator gives the award during the pendency of the application under Sections 5, 8, 11 and 12, it would become virtually infructuous or redundant and a serious prejudice is likely to be caused to the petitioners in case the prayer for injunction is declined. 9. The learned counsel appearing on behalf of the respondents submitted that the order passed by the trial Court is perfectly justified and the proceedings before the arbitrator should not be stayed. I am not in a position to subscribe to the submission of the learned counsel for the respondents. As I have already stated above that the petitioners have a prima facie case to succeed and the balance of convenience lies in their favour. Therefore, I reverse the impugned order, allow the revision and given directions to Brig. I am not in a position to subscribe to the submission of the learned counsel for the respondents. As I have already stated above that the petitioners have a prima facie case to succeed and the balance of convenience lies in their favour. Therefore, I reverse the impugned order, allow the revision and given directions to Brig. R.R. Singh not to proceed further into the arbitration proceedings till the application under Sections 5, 8, 11 and 12 of the Arbitration Act is finally disposed of. 10. It was then submitted by the learned counsel for the petitioner that since the trial Court (court of Smt. Jitender Walia, Civil Judge (Jr. Division), Chandigarh) has given some opinion which may be detrimental to the interest of the petitioners, therefore, the High Court may exercise the power under Section 24 CPC for the transfer of this case to some other Court of competent jurisdiction. From the perusal of the impugned order I found that the learned Civil Judge has given expression of mind which may ultimately prejudice the cause of the petitioners. In this view of the matter, I think that it is a fit case where proceedings before the Court of Mrs. Jitender Walia may be withdrawn and can be sent to some other senior court. In these circumstances, I direct the Court of Mrs. Jitender Walia, Civil Judge (Jr. Division), Chandigarh to transfer the records of this case to the Court of Civil Judge (Sr. Division), Chandigarh, who shall dispose of the case according to law as early as possible, preferably within four months. The parties through their counsel are directed to appear before the transferee Court on 21.5.2001. 11. Before I part with this order, I may say at the cost of repetition that it will always be open to the petitioners to convince to the trial Court about the alleged delay and laches committed by the arbitrator, since it has been informed to this Court that the matter was first time referred to the arbitrator in the year 1993. Copy of the order be given Dasti to both the parties. Revision allowed.