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Madhya Pradesh High Court · body

2004 DIGILAW 82 (MP)

G. R. D. Profiles Ltd. v. M. P. E. B.

2004-01-28

A.K.AWASTHY

body2004
Judgment ( 1. ) THIS is an application under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (hereinafter to be referred as the Act) for the appointment of the Arbitrator by the Chief Justice or his designate. ( 2. ) IT is not in dispute that the applicant is a Private Limited Company and it manufactures Mild Steel Ingots in its plant situated at Bhagirathpura, Indore (M. P. ). That the non-applicant sanctioned a power supply of 2500 KVA and after the execution of an agreement on 18-11-98 the non-applicant has provided H. T. connection to the applicant. That Clause 36 of the agreement dated 18-11-98 relates to the appointment of Arbitrator in the event of nature of dispute given in the clause between the parties. That on 22-4-2000 the officials of M. P. E. B. alleged that they had found that the applicant was committing the theft of electricity and they had lodged FIR in Police Station, Banganga and disconnected the supply and issued the supplementary bill of Rs. 1,93,01,339. 34 P. to the applicant. That the applicant filed a Writ Petition No. 1091/2000 before the High Court of M. P. Bench at Indore and during the pendency of writ petition review committee gave its decision and it was directed that the appeal should be filed by the applicant before members of the Board. That the Appellate Committee vide order dated 31-8-2000 has reduced the amount of supplementary bill from Rs. 1,90,85,097/-to Rs. 1,25,44,804/ -. It is also not in dispute that on 14-10-2000 and on 22-10-2000 the applicant gave notice of demand to the non-applicant to appoint the Arbitrator as per Clause 36 of the agreement and the non-applicant has refused the demand on the ground that the dispute does not fall under the arbitration clause. ( 3. ) THE case of the applicant is that the M. P. E. B. was not justified in disconnecting the electrical supply and as such the damages of Rs. 299 lacs be provided to the applicant and it be also held that the M. P. E. B. is not entitled to recover the amount of supplementary bill of Rs. 1,25,44,804/from the applicant. That the Arbitrator be appointed under Section 11 (6) of the Act as the non-applicant has refused to invoke the Arbitration Clause 36 even after the service of notice of demand to appoint Arbitrator. ( 4. 1,25,44,804/from the applicant. That the Arbitrator be appointed under Section 11 (6) of the Act as the non-applicant has refused to invoke the Arbitration Clause 36 even after the service of notice of demand to appoint Arbitrator. ( 4. ) THE main objection raised by the non-applicant is that there can be no arbitration in view of the fact that in W. P. No. 1091/2000 and in W. P. No. 1168/2001, filed by the applicant, the High Court has already decided the liability of the applicant. That Arbitration Clause 36 excludes the arbitration of case of theft of energy matter. That where such dispute can be decided under M. P. Vidyut Sudhar Adhiniyam, 2000 (No. 4 of 2001) and M. P. Urja Adhiniyam, 2001 (No. 12 of 2001) the Arbitrator should not be appointed under Section 11 of the Act. The learned Counsel for the applicant has relied on Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petroleum, (2003) 6 SCC 503 : 2003 Arb. W. L. J. 452 (SC ). This case of (2003) 6 SCC 503 is similar to our case and complete answer to the objection of non-applicant wherein similar objections were repelled and it is held that although the applicability of arbitration clause goes to the root of jurisdiction. It must be raised before Arbitrator for decisions and that where the arbitration clause exists in the agreement between the parties, it is mandatory that the questions of applicability of the arbitration clause should not be decided under Section 11 of the Act. It is contended by the learned Counsel for the non-applicants that it is provided in the agreement that the dispute arising out of between the parties will be decided by the Court situated at Jabalpur and as such the application for the appointment of Arbitrator is not tenable in the Indore Bench of the High Court. It is further contended by the learned Counsel for the non-applicants that the application is barred by time and it is also not tenable, because the applicant has waived or abandoned the arbitration clause of the agreement by filing the writ petition before the High Court. ( 5. It is further contended by the learned Counsel for the non-applicants that the application is barred by time and it is also not tenable, because the applicant has waived or abandoned the arbitration clause of the agreement by filing the writ petition before the High Court. ( 5. ) AFTER hearing the learned Counsel for both the parties and considering the various citation of learned Counsel for the non-applicant, I am of the opinion that in view of settled view of Apex Court in various cases the issues raised by the non-applicants can be decided by the appointed Arbitrators under Section 16 of the Act and the designate of the Chief Justice will transgress his power in dealing with the issues in petition under Section 11 (6) of the Act, because the order of appointment of Arbitrator is purely administrative in nature. The Act, 1996 made certain drastic changes in Law of Arbitration to meet the liberal policy and globalisation of commerce and delay in disposal of cases in Court. This Act is codified in tune with the model law on International Commercial Arbitration as adopted by United Nation Commission of International Trade Law (UNCITRAL) with main objective to amplify the powers of Arbitral Tribunal and minimize the supervisory role of Courts in the arbitral process. It is provided under Section 16 of the Act that Arbitral Tribunal to rule on its own jurisdiction. The Tribunal has power to decide the objections with respect to existence or the validity or applicability of arbitration agreement. It is now well settled that the nominee or designate of the Chief Justice under Section 11 of the Act merely exercise its administrative functions and, therefore, has no jurisdiction to adjudicate upon the contentious issues between the parties and the issues are to be decided by arbitral Tribunal under Section 16 of the Act to whom the dispute is referred. ( 6. ) THE agreement containing the arbitration clause was executed at Indore. Thus, prima facie this Court has territorial jurisdiction. Thus, the argument of learned Counsel for the non-applicants that by virtue of agreement the jurisdiction of the Court at Indore to decide the cases is excluded is contentious issue and it will not be proper for nominee of the Chief Justice to deal with this jurisdictional objection of the non-applicants. Thus, prima facie this Court has territorial jurisdiction. Thus, the argument of learned Counsel for the non-applicants that by virtue of agreement the jurisdiction of the Court at Indore to decide the cases is excluded is contentious issue and it will not be proper for nominee of the Chief Justice to deal with this jurisdictional objection of the non-applicants. In application under Section 11 (6) of the Act the other objections of the non-applicants that whether the applicant has abandoned or waived his right to invoke the arbitration clause by filing the writ petition before the High Court for getting the relief which he is claiming under the contract is also contentious issue and it will be dealt by the Arbitrator. ( 7. ) IT is laid down in case of Hythro Power Corporation Ltd. v. Delhi Transco Ltd. , 2003 Arb. W. LJ. 469 (SC); Konkan Railway Corporation Ltd. v. Mehul Construction, (2000) 7 SCC 201 : 2000 Arb. W. LJ. 573 (SC), Constitution Bench Konkan Railway Corporation Ltd. v. Rani Construction (P) Ltd. , (2002) 2 SCC 388 : 2002 Arb. W. LJ. 287 (SC), National Dairy Development Board, 2002 (2) MPLJ 72 : 2003 Arb. W. LJ. 164 (MP) and Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petroleums, (2003) 6 SCC 503 : 2003 Arb. W. LJ. 452 (SC), that if prima facie the arbitration clause to resolve dispute exists between the parties then the validity, existence and applicability of the clause along with limitation, jurisdiction and all contentious issues are not to be decided by the nominee, but under Section 16 of the Act by the Arbitrator. It is clearly laid down in case of Hythro Power (supra) that the Chief Justice or his designate under Section 11 of the Act exercises purely administrative function and it is not open to him to discharge any judicial function of adjudicating any dispute regarding the "existence of arbitration agreement". In case of Hindustan Petroleum Corporation (supra) it is laid down that even the applicability of the arbitration agreement will not be looked by the nominee of the Chief Justice. In case of Hindustan Petroleum Corporation (supra) it is laid down that even the applicability of the arbitration agreement will not be looked by the nominee of the Chief Justice. In this judgment the following Paragraph 21 from (2002) 2 SCC 388 (supra), was quoted in Para 15 at Page 511 :- " it might also be that in a given case the Chief Justice or his designate may have nominated an Arbitrator although the period of thirty days had not expired. If so, the Arbitral Tribunal would have been improperly constituted and be without jurisdiction. It would then be open to the aggrieved party to require the Arbitral Tribunal to rule on its jurisdiction. Section 16 provides for this. It states that the Arbitral Tribunal may rule on its own jurisdiction. That the Arbitral Tribunal may rule on any objections with respect to the existence or validity of the arbitration agreement shows that the Arbitral Tribunals authority under Section 16 is not confined to the width of its jurisdiction, as was submitted by learned Counsel for the appellants, but goes to the very root of its jurisdiction. There would, therefore, be no impediment in contending before the Arbitral Tribunal that it had been wrongly constituted by reason of the fact that the Chief Justice or his designate had nominated an Arbitrator although the period of thirty days had not expired and that, therefore, it had no jurisdiction. " In this context the following observations in (2000) 7 SCC 201 (supra) are very relevant. At page 206 : "when the matter is placed before the Chief Justice or his nominee under Section 11 of the Act it is imperative for the said Chief Justice or his nominee to bear in mind the legislative intent that the arbitral process should be set in motion without any delay whatsoever and all contentious issues are left to be raised before the Arbitral Tribunal itself. At that stage it would not be appropriate for the Chief Justice or his nominee to entertain any contentious issues between the parties and decide the same. A bare reading of Sections 13 and 16 of the Act makes it crystal clear that questions with regard to the qualifications, independence and impartiality of the Arbitrator, and in respect of the jurisdiction of the Arbitrator could be raised before the Arbitrator who would decide the same. . . . . A bare reading of Sections 13 and 16 of the Act makes it crystal clear that questions with regard to the qualifications, independence and impartiality of the Arbitrator, and in respect of the jurisdiction of the Arbitrator could be raised before the Arbitrator who would decide the same. . . . . . . . . This being the legislative intent, it would be proper for the Chief Justice or his nominee just to appoint an Arbitrator without wasting any time or without entertaining any contentious issues at that stage, by a party objecting to the appointment of an Arbitrator. If this approach is adhered to, then there would be no grievance of any party and in the arbitral proceeding, it would be open to raise any objection, as provided under the Act. " ( 8. ) IT is contended by the learned Counsel for the non-applicants that the applicant has not given the required notice to him for the appointment of Arbitrator and as such petition under Section 11 (6) of the Act is not tenable. The non-applicant Board has totally refused the prayer of the applicant for invoking the clause of the resolving dispute by the Arbitrator even before the filing this petition by the applicant. In case of Dallar Switchgears Ltd. v. Tata Finance Ltd. and Ors. , (2000) 8 SCC 151 : 2000 Arb. W. L. J. 689 (SC), it is held that if the opposite party fails to appoint the Arbitrator even after 30 days of the notice of demand and before filing the petition under Section 11 of the Act the right to appoint the Arbitrator by the non-applicant ceases. Consequently, in view of dispute between the parties and the arbitration clause and failure of the non-applicants to appoint the Arbitrator after the notice of demand the application to appoint the Arbitrator under Section 11 (6) of the Act deserves to be allowed. ( 9. ) THE application is allowed and Justice Shri Y. B. Suryavanshi, retired Judge of M. P. High Court is appointed as sole Arbitrator.