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2006 DIGILAW 3337 (PNJ)

Selvel Media Service Ltd. v. State of Haryana

2006-08-21

VINOD K.SHARMA

body2006
JUDGMENT Vinod K. Sharma, J. (Oral) - This revision petition arises from an order dated 30.10.2003 passed by the learned Additional District Judge, Chandigarh vide which the application moved by the petitioner under Section 14(1)(a) & (b) of the Arbitration and Conciliation Act, 1996 (for short the Act) was disposed of having been rendered as infructuous. 2. The petitioner M/s. Selvel Media Service Limited moved an application under Section 14(2) of the Act for restraining Mr. M.K. Aggrawal, Chief Engineer, the Arbitrator from continuing with the arbitration proceedings on the ground that mandate of Arbitral Tribunal had been terminated under Section 14(1) and (b) of the Act. 3. The brief facts of the case are that an agreement was executed between the petitioner with the State of Haryana on 15.4.1998 vide which 20 number of hoardings were to be erected on Rajohiri and other 10 number at Yudog Vihar site on the land of Haryana Tourism at Dundahera, Gurgaon. The licence fee fixed was duly deposited by the petitioner along with a bank guarantee as demanded. 4. The Court in Namit Kumars case ordered that all hoardings throughout the States of Punjab and Haryana be removed and on account of passing of the said order the claim of the petitioner was that the contract between the parties got frustrated as the same was declared to be illegal by the High Court. 5. The petitioner had installed 10 hoardings which were also subsequently removed as per the directions of this Court. The petitioner, thereafter, filed a writ petition in this Court and Mr. M.K. Aggarwal, respondent No. 2, was appointed as an Arbitrator in terms of the arbitration clause for settlement of dispute between the parties. 6. The arbitration proceedings remained stayed for a long time on account of the pendency of the writ petition in the High Court. However, after the disposal of the writ petition, the Arbitrator again entered into the reference but on 11.7.2003 he refused to proceed with the matter and showed his inability to continue with the proceedings on the ground that the matter has been pending since long. However, on 12.8.2003 the petitioner received a letter from the Arbitrator that the matter was fixed for 22.8.2003. However, on 12.8.2003 the petitioner received a letter from the Arbitrator that the matter was fixed for 22.8.2003. The case of the petitioner was that in view of the letter dated 11.7.2003 the mandate of Arbitral Tribunal stood terminated and therefore, the application was moved in the Court under Section 14(2) of the Act. 7. The averments made were contested by respondent No. 1 wherein he took a stand that the Arbitrator had not withdrawn from the proceedings on 11.7.2003 rather he had shown non-cooperation which resulted in the delay in adjudicating of the matter. It was also claimed that the Arbitrator had not dropped the arbitration proceedings rather announced his award on 30.8.2003. It was further claimed that he had become functus officio and therefore, claimed that the application be dismissed. 8. The learned Additional District Judge keeping in view the fact that the Arbitrator had given his award on 30.8.2003 came to the conclusion that he had become functus officio and therefore, his removal did not arise at all and dismissed the application as having been rendered as infructuous. 9. Mr. Chetan Mittal, learned counsel for the petitioner made reference to the letter dated 11.7.2003 attached as Annexure P-1 to the present revision petition to contend that this amounted to refusal to act on the part of the Arbitrator and therefore, mandate of an Arbitrator stood terminated. Annexure P-1 reads as under :- "Hearing dated 11th July, 2003. Arbitration regarding taking 20 Nos. hoarding sites on lease at Dundahera Distt. Gurgaon for two years. ...... Claimant : Absent Respondent : Absent Both the claimants and respondent have not attended the hearing. Therefore, the arbitration proceedings could not take place. Arbitrator Endst. No. 120/PA/CEHHUP Dated 11th July, 2003. Copy to : 1. M/s. Selvel Media Services Limited, SCO 497-98, 10-Sahib Chambers, Sector 35-C, IInd Floor, Chandigarh. 2. The Company Secretary, Haryana Tourism Corporation, Chandigarh. 3. The Managing Director, Haryana Tourism Corporation. It is apparently looking that neither the claimant nor the respondent are interested in this arbitration and it will be advisable on the part of the Employer to reconsider and better that this arbitration matter may be dropped. 2. The Company Secretary, Haryana Tourism Corporation, Chandigarh. 3. The Managing Director, Haryana Tourism Corporation. It is apparently looking that neither the claimant nor the respondent are interested in this arbitration and it will be advisable on the part of the Employer to reconsider and better that this arbitration matter may be dropped. I shall not proceed further because this matter was resumed for arbitration after very long gap of time, since previously also it was to be adjourned indefinitely because claimant/respondent have not shown any interest in taking up the proceedings of this arbitration matter. Sd/- M.K. Aggarwal, Arbitrator Chief Engineer (IIIIUP) Haryana PWD B&R Br., Chandigarh." In view of the letter referred to above, learned counsel for the petitioner contended that in view of Section 14(1)(b) of the Act the mandate of the Arbitrator had come to an end and this entitles the petitioner to move an application under Section 14(2) of the Act. Section 14 of the Act reads as under :- "14. Failure or impossibility to act. (1) The mandate of an arbitrator shall terminate if - (a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; or (b) he withdraws from his office or the parties agree to the termination of his mandate. (2) If a controversy remains concerning any of he grounds referred to in clause (a) of sub-section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate. (3) If, under this section or sub-section (3) of Section 13, an arbitrator withdraws from his office or a party agree to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or sub-section (3) of Section 12." 10. The petitioner in support of his contention relied upon the judgment of Honble Supreme Court in State of West Bengal v. M/s. National Builders, AIR 1994 SC 200 and contended that on refusal to act by Arbitrator the arbitration clause ceases inoperative and thereafter a new Arbitrator can be appointed by the Court. The petitioner in support of his contention relied upon the judgment of Honble Supreme Court in State of West Bengal v. M/s. National Builders, AIR 1994 SC 200 and contended that on refusal to act by Arbitrator the arbitration clause ceases inoperative and thereafter a new Arbitrator can be appointed by the Court. The learned counsel for the petitioner further placed reliance on Paramjit Singh v. State of Himachal Pradesh, AIR 1979 Himachal Pradesh 17 to contend that no Arbitrator can be compelled to work in the event of his refusal to act as an Arbitrator and therefore, the proceedings in which the Arbitrator is compelled to work in spite of his refusal to act as Arbitrator would be void ab initio. 11. On the other hand Mr. Sanjiv Kaushik, learned counsel for respondent No. 1 placed reliance on a judgment of Honble Supreme Court in the case of Tata Finance Ltd. v. Ajaya Kumar Biswal and others, 2000(9) SCC 238 to contend that during the pendency of arbitration proceedings interference by the High Court was unjustified. He further placed reliance on the judgment of this Court in Ladli Construction Co. (P) Ltd. v. The Punjab Police Housing Corporation Ltd., 1996(3) PLR 563 to contend that when during the pendency of an application for removal of an Arbitrator no stay is granted and Arbitrator continues with the arbitration proceedings and thereafter award is made he becomes functus officio. However, the question of his removal therefore, does not survive. 12. I have considered the arguments raised by the learned counsel for the parties and find that the only controversy to be decided is as to whether the application moved under Section 14(2) of the Act has become functus officio or it survives even after making of an award. In order to appreciate the controversy between the parties it would be seen that Section 14 of the Act talks of termination of the mandate of Arbitrator in case he is unable to perform his function or for other reasons fails to act without undue delay and he withdraws from his office or agree to terminate his mandate. In order to appreciate the controversy between the parties it would be seen that Section 14 of the Act talks of termination of the mandate of Arbitrator in case he is unable to perform his function or for other reasons fails to act without undue delay and he withdraws from his office or agree to terminate his mandate. Therefore, it would be seen whether it was incumbent upon the Court to decide about the termination of mandate in terms of Section 14(2) of the Act or the Court was right in coming to the conclusion that the petition has become infructuous because an award was passed which would only be challenged under Section 34 of the Act. 13. As a matter of fact, reading of Section 14(2) of the Act shows that the Court retains the jurisdiction to remove the Arbitrator though pending application for termination of his mandate the arbitrator makes his award. Similar matter came up before the High Court in Delhi in Shree Murari Lal v. Shree Gopal Chand and others, AIR 1973 Delhi 251 though under the old Act where during the pendency of the application under Sections 11 and 12 of the Act for removal of an Arbitrator an award was made, the Delhi High Court in such a situation was pleased to hold as under : "5. In order to support his submission that the award having once been made, the trial Court should have dismissed the application filed under Sections 11, 12 and 30 which had been registered as suit No. 272/1966 the learned counsel for the petitioner has drawn my attention to Section 19 of the Act :- "Where an award has become void under sub-section (3) of Section 16 or has been set aside, the Court may by order supersede the reference and shall thereupon order that the arbitration agreement shall cease to have effect with respect to the difference referred." The authority given to the Court is that where the award is found to have become void under sub-section (3) of Section 16 or is otherwise set aside, the Court may supersede the reference and in case of such supersession the arbitration agreement shall cease to have effect with respect to the differences which may have been referred to arbitration. That provision does not at all touch the jurisdiction of the Court to deal with an application filed under Sections 11 and 12 of the Act. The learned counsel appearing for the petitioner has cited 1. Juggilal Kamlapat (In C.A. No. 525 of 59) V. 1. General Fibre Dealers Ltd. (In C.A. No. 309 of 59) and 2. Morgan Walker and Co. Ltd. (In C.A. No. 525 of 59), AIR 1962 SC 1123 and has placed reliance on the observation made in paragraph 15 of the judgment. The Supreme Court found that the award had been set aside on account of misconduct. It observed that the award although void, the arbitration agreement subsisted and it was open to "the Chamber" on the request of the respondent to appoint another arbitral tribunal. The Supreme Court did not deal with the authority of the Court to appoint other arbitrator or arbitrators under Sections 11 and 12 of the Act on the finding that the award was void and therefore liable to be set aside. The trial Court has kept the application made under Sections 11, 12 and 30 of the Act registered as suit No. 272/1966 alive. I am of the view that the application will come in for consideration only on the adjudication that the award is liable to be set aside. After disposing of suit No. 489/1966 if the trial Court sets aside the award, it will be only in that contingency that it will attend to the relief claimed through suit No. 272/1966, which will be limited to the consideration whether fresh arbitrators should be appointed or not. With these observations, the petition is disposed of." Thus, the Honble High Court of Delhi was, therefore, pleased to hold that an application for removal of an Arbitrator can be revived in case the award is set aside. However, under the new Act a provision has been made that where the mandate of Arbitrator terminates, a substitute Arbitrator is to be appointed according to the Rules. Section 15(2) reads as under :- "15. Termination of mandate and substitution of arbitrator. However, under the new Act a provision has been made that where the mandate of Arbitrator terminates, a substitute Arbitrator is to be appointed according to the Rules. Section 15(2) reads as under :- "15. Termination of mandate and substitution of arbitrator. (1) xxx (2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that where applicable to the appointment of the arbitrator being replaced." Therefore, the learned Additional District Judge, Chandigarh was right in not adjudicating on the matter under Section 14(2) of the Act in view of the finding of an award by the Arbitrator which could be challenged only under Section 34 of the Act. 14. Mr. Chetan Mittal, learned counsel for the petitioner has further contended that it was necessary to adjudicate on the application under Section 14(2) of the Act as he cannot raise challenge to the award of this Court in view of provisions of Section 34 of the Act. However, I find no force in this contention too as Section 34(2)(a)(iii) deals with such a situation which reads as under :- "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." In view of this, I feel that it would be open to the petitioner to challenge the arbitration proceedings on the ground that they were entitled to raise defence due to the letter Annexure P-1 having been written declining to proceed with the matter. With the above observations, the revision petition is dismissed. Petition dismissed.