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2009 DIGILAW 2091 (RAJ)

Chiman Lal Middha v. State of Rajasthan

2009-10-05

SANGEET LODHA

body2009
Hon'ble LODHA, J.—This writ petition is directed against order dated 23.1.2004 passed by the District Judge, Bikaner, whereby an application preferred on behalf of the respondents herein praying for change of the arbitrator has been allowed and accordingly earlier order appointing arbitrator with the consent of the parties, has been cancelled. 2. The background facts in nutshell are that the petitioner was awarded the work of "cement concrete lining earth work excavation, Baramsar minor Kms. 3.0 to 4/500" by the Executive Engineer, Indira Gandhi Nahar Pariyojana (IGNP), Taranagar, Churu, the respondent No. 3 herein. Accordingly, an agreement No. 4 of 1991-92 was executed between the petitioner and the State of Rajasthan. As per the work order dated 7.5.1991, the construction work was to commence on 21.5.91 and was required to be completed latest by 21.11.91. The petitioner completed the work on 15.1.1994 and submitted the final bills for sum of Rs. 18,80,709/- vide letter dated 11.8.95. However, despite reminders, the department concerned failed to make payment. In these circumstances, the petitioner served a notice dated 20.11.95 upon the Chief Engineer, IGNP, Bikaner in terms of clause 23 of the agreement for referring the dispute to arbitration. The respondents failed to make appointment of the arbitrator for adjudication of the dispute, therefore, the petitioner submitted an application under Section 11 of the Arbitration and Conciliation Act, 1996 (in short `the Act' hereinafter) before the authority designated by the Chief Justice i.e. the District Judge, Bikaner, for appointment of arbitrator. The application was allowed by the District Judge, Bikaner vide order dated 1.12.98 and both the parties were directed to submit panel of the names for appointment of the arbitrator. Thereafter, vide order dated 2.2.99, with the consent of both the parties, Shri Jagjit Singh, retired Additional Chief Engineer,IGNP, was appointed as arbitrator. 3. The arbitrator entered into reference, the petitioner submitted his claim, both the parties led their evidence and submitted their written arguments. Thereafter, vide order dated 2.2.99, with the consent of both the parties, Shri Jagjit Singh, retired Additional Chief Engineer,IGNP, was appointed as arbitrator. 3. The arbitrator entered into reference, the petitioner submitted his claim, both the parties led their evidence and submitted their written arguments. However, before the oral argument could be advanced and the dispute could be decided by the arbitrator, the respondents submitted an application before the arbitrator to make appropriate recommendation to the authority designate to change the arbitrator, on the ground that the work contract subject matter of dispute between the parties was awarded in favour of the petitioner herein on his recommendation therefore, the propriety of the award to be given by him as arbitrator may be questioned on this count. While the application preferred as aforesaid was pending consideration before the arbitrator, the respondents preferred an application before the authority designate for revocation of order appointing arbitrator and to appoint impartial arbitrator, on the ground that Shri Jagjit Singh, who has been appointed as arbitrator has been cited as one of the witnesses by the respondents in the list of witnesses produced in the arbitration proceedings. 4. It was contended on behalf of the petitioner before the authority designate that the appointment of the arbitrator was made with the consent of both the parties, therefore, the respondents herein are estopped from raising any objection in this regard. However, it was submitted on behalf of the respondents that at the relevant time when the consent was given, they had no knowledge about the fact that Shri Jagjit Singh is going to be cited as witness on behalf of the department. 5. The authority designate opined that since Shri Jagjit Singh was cited as witness in the list of witnesses produced on behalf of the department and after negotiations, the contract was awarded in favour of the petitioner on his recommendation, therefore, it will not be appropriate for him to conduct the arbitration proceedings. Accordingly, by the order impugned, while allowing the application preferred by the respondents, the order appointing Shri Jagjit Singh, as arbitrator in the matter, has been cancelled by the authority designate. Hence, this petition. 6. It is contended on behalf of the petitioner that the order impugned is ex facie illegal and absolutely without jurisdiction. Accordingly, by the order impugned, while allowing the application preferred by the respondents, the order appointing Shri Jagjit Singh, as arbitrator in the matter, has been cancelled by the authority designate. Hence, this petition. 6. It is contended on behalf of the petitioner that the order impugned is ex facie illegal and absolutely without jurisdiction. The learned counsel submitted that the arbitration proceedings were at the verge of completion therefore, at such a belated stage, it is preposterous on the part of any party to the arbitration proceedings to even suggest that the consent for appointment of a person was given in judicial proceedings inadvertently. The learned counsel submitted that being aware of the fact that the arbitrator was not required to be produced as witness, the respondents participated in the arbitration proceedings and produced the affidavits of specific number of witnesses. It is submitted by the learned counsel that the arbitrator was appointed specifically with the consent of the parties thus, about four year after passing of the order at the verge of completion of arbitration proceedings, the respondents were estopped from raising any objection regarding the impartiality of the arbitrator without there being any sound basis for such allegation. The learned counsel submitted that after appointment of the arbitrator, the authority designated by the Chief Justice had become functus officio and it had no authority to review its order appointing the arbitrator. The learned counsel submitted that in view of decision of the Hon'ble Supreme Court in Punjab Agro Industries vs. Kewal Singh Dhillon, 2008(10) SCC, 128, the order passed u/S. 11 by the authority designate can be challenged only by way of writ petition before the High Court. The learned counsel submitted that an arbitrator may be challenged only if circumstances mentioned in sub-section (3) of Section 12 of the Act, in accordance with the procedure laid down u/S. 13 of the Act. The learned counsel submitted that the objection as to doubt about the arbitrator's independence and impartiality must be raised at the initial stage and subsequently, only in accordance with the provisions of Section 34 of the Act. In this regard, the learned counsel has relied upon decisions of the Delhi High Court in "Unipack Industries vs. Subhash Chand Jain & Ors.", 2002(1) Arb. L.R., 174 & "Jai Singh vs. Delhi Development Authority", 2002 (Suppl) Arb. In this regard, the learned counsel has relied upon decisions of the Delhi High Court in "Unipack Industries vs. Subhash Chand Jain & Ors.", 2002(1) Arb. L.R., 174 & "Jai Singh vs. Delhi Development Authority", 2002 (Suppl) Arb. L.R., 626 and a decision of Punjab & Haryana High Court in "Punjab Electricity Board vs. Indure Limited," 1999 (Suppl) Arb. L.R. 641. 7. Per contra, the learned Deputy Government Counsel has submitted that the order impugned passed by the authority designated by the Hon'ble Chief Justice cannot be questioned before this Court by way of writ petition in view of decision of the Hon'ble Apex Court rendered in the case of "M/s. S.B.P. & Company vs. M/s. Patel Engineering", 2005(8) SCC, 618. The learned counsel submitted that admittedly, Shri Jagjit Singh who was appointed as arbitrator has been cited as witness on behalf of the respondents therefore, this circumstance alone given rise to justifiable doubt as to independence and impartiality of the sole arbitrator and therefore, the authority designate has committed no error in cancelling his appointment as arbitrator. The learned counsel submitted that on the facts and in the circumstances of the case, the authority designate has only rectified the mistake crept in passing the earlier order appointing Shri Jagjit Singh as sole arbitrator and therefore, the same does not warrant interference by this Court in exercise of supervisory jurisdiction of this court under Article 227 of the Constitution of India. 8. Replying the objection raised on behalf of the respondents regarding the maintainability of the writ petition, the learned counsel for the petitioner submitted that in view of the decision of the Hon'ble Supreme Court in Punjab Agro's case (supra), an order passed u/S. 11 by the District Judge as authority designate of the Chief Justice, a writ petition is maintainable before this court. 9. I have considered the rival submissions and perused the material on record. 10. In the first instance, it will be appropriate to deal with the preliminary objection raised on behalf of the respondents regarding the maintainability of the writ petition against the order impugned before this Court. 11. 9. I have considered the rival submissions and perused the material on record. 10. In the first instance, it will be appropriate to deal with the preliminary objection raised on behalf of the respondents regarding the maintainability of the writ petition against the order impugned before this Court. 11. In S.B.P. & Company's case (supra),the Hon'ble Apex Court while dealing with the question of appeal from order passed by the Chief Justice of designated Judge under the provisions of Section 11(6) of the Act and the maintainability of the writ petition under Article 226 of the Constitution of India against such order before the High Court, held that:- "26. It is also somewhat incongruous to permit the order of the Chief Justice under Section 11(6) of the Act being subjected to scrutiny under Article 226 of the Constitution at the hands of another Judge, of the High Court. In the absence of any conferment of an appeal power, it may not be possible to say that a certiorari would lie against the decision of the High Court in the very same High Court. Even in the case of an international arbitration, the decision of the Chief Justice of India would be amendable to challenge under Article 226 of the Constitution before a High Court. While construing the scope of the power under Section 11(6), it will not be out of place for the Court to bear this aspect in mind, since after all, the courts follow or attempt to follow certain judicial norms and that precludes such challenges. (see Naresh Shridhar Mirajkar vs. State of Maharashtra (1966) 3 SCR, 744 and Rupa Ashok Hurra vs. Ashok Hurra, (2002) 4 SCC 388 . ..... xxxxx ..... xxxxx 47. (vii) Since an order passed by the Chief Justice of the High Court or by the designated Judge of that Court is a judicial order, an appeal will lie against that order only under Article 136 of the Constitution to the Supreme Court." 12. However, later in Punjab Agro's case (supra), the Hon'ble Supreme Court after due consideration of the ratio decidendi of the decision in S.B.P. Company's case (supra) specifically held that if the order u/S. 11 is passed by a subordinate court as designate of the Chief Justice, the validity of such order can be assailed by way of writ petition under Article 227 of the Constitution of India. The Hon'ble Supreme Court clarifying the position of law laid down in S.B.P. Company's case (supra) held: "9. We have already noticed that though the order under Section 11(4) is a judicial order, having regard to Section 11(7) relating to finality of such orders and the absence of any provision for appeal, the order of the Civil Judge was open to challenge in a writ petition under Article 227 of the Constitution. The decision in SBP does not bar such a writ petition. The observations of this Court in SBP that against an order under Section 11 of the Act, only an appeal under Article 136 of the Constitution would lie, is with reference to the orders made by the Chief Justice of a High Court or by the designate Judge of that High Court. The said observations do not apply to a subordinate Court functioning as designate of the Chief Justice. 10. This Court has repeatedly stressed that Article 136 is not intended to permit direct access to this Court where other equally efficacious remedy is available and the question involved is not of any public importance; and that this Court will not ordinarily exercise its jurisdiction under Article 136, unless the appellant has exhausted all other remedies open to him. Therefore, the contention that the order of the Civil Judge, Senior Division rejecting a petition under Section 11 of the Act could only be challenged, by recourse to petition under Section 11 of the Act could only be challenged, by recourse to Article 136 is untenable. The decision in SBP did not affect the maintainability of the writ petition filed by the appellant before the High Court." 13. Thus, the objection raised on behalf of the respondents regarding the maintainability of the writ petition against the order impugned is devoid of any merit and therefore, the same is hereby overruled. 14. The grounds of challenge to the appointment of an arbitrator are prescribed u/S. 12 of the Act and the procedure for challenge has been laid down u/S. 13 of the Act which may be beneficially quoted hereunder: "12. Grounds for challenge.-(1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. Grounds for challenge.-(1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. (2) An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances, referred to in sub-section (1) unless they have already been informed of them by him. (3) An arbitrator may be challenged only if- (a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or (b) he does not possess the qualifications agreed to by the parties. (4) A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made. 13. Challenge procedure.-(1) Subject to sub-section (4), the parties are free to agree on a procedure for challenging an arbitrator. (2) Failing any agreement referred to in sub-section (1), a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the circumstances referred to in sub-section (3) of section 12, send a written statement of the reasons for the challenge to the arbitral tribunal. (3) It a challenge under any procedure agreed upon by the parties or under the procedure under sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award. (5) Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with section 34. (6) Where an arbitral award is set aside on an application made under sub-section (5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees." 15. A bare perusal of Section 12 makes it abundantly clear that the arbitrator is under an obligation to disclose the circumstances if any, to the parties in writing which are likely to give justifiable doubt as to his independence or impartiality. A bare perusal of Section 12 makes it abundantly clear that the arbitrator is under an obligation to disclose the circumstances if any, to the parties in writing which are likely to give justifiable doubt as to his independence or impartiality. That apart, a party to the arbitration proceedings is also entitled to challenge an arbitrator on the ground specified under Sub-section (3) of Section 12 i.e. (i) circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or (ii) he does not possess the qualifications agreed to by the parties. However, as per the provisions of Sub-section (4) the party appointing the arbitrator or participating in the appointment of the arbitrator is entitled to challenge the arbitrator so appointed only for the reasons for which he becomes aware after the appointment has been made. Thus, even if the appointment of the arbitrator is made with consent of the parties they are not precluded from challenging the arbitrator on the ground specified under Sub-section (3) of Section 12 if the ground of challenge arises from the reasons of which the party challenging becomes aware after the appointment has been made. In this view of the matter, the contention of the learned counsel for the petitioner that the respondents have no right to question the independence or impartiality of the arbitrator on any ground whatsoever inasmuch as the appointment of the arbitrator was made with the consent of the parties is not tenable. 16. But then, as noticed above, the appointment of the arbitrator can be challenged only on the existence of the circumstances enumerated in sub-section (3) of Section 12, in accordance with the procedure laid down under Section 13 of the Act. As per sub-section (2) of Section 13, in absence of any procedure to challenge the arbitrator agreed to between the parties, the party who intends to challenge an arbitrator shall within fifteen days after becoming aware of the constitution of the arbitral tribunal or becoming aware of any circumstances referred to in sub-section (3) of Section 12 send a written statement for challenge to arbitral tribunal. In terms of sub-section (3) of Section 13, the arbitral tribunal is under an obligation to decide on challenge unless he withdraws from the office or the other party agrees to the challenge. In terms of sub-section (3) of Section 13, the arbitral tribunal is under an obligation to decide on challenge unless he withdraws from the office or the other party agrees to the challenge. However, as per sub-section (4) if challenge to the arbitrator fails, the arbitral tribunal shall continue with the arbitral proceedings and make an arbitral award and thereafter, the award can only be challenged by the party by way of application for setting aside of the arbitral award u/S. 34 of the Act before the court of competent jurisdiction. 17. Apart from Section 12 & 13 providing for the grounds for challenge to the arbitrator and procedure therefor, Section 16 empowers the arbitral tribunal to rule on its own jurisdiction. As per sub-section (2) of Section 16 a plea that a arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence. However, as per sub-section (3) of Section 16, a plea that arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. However, sub-section (4) of Section 16 provides that a later plea with regard to the jurisdiction in terms of sub-section (2) or sub-section (3) can be admitted by the arbitral tribunal if it considers the delay justified. But then, sub-section (5) of Section 16 specifically mandates if the arbitral tribunal takes a decision rejecting the plea shall continue with the arbitral proceedings and make an arbitral award. 18. There is yet another aspect of the matter which is required to be noticed is that an order of the arbitral tribunal accepting the plea referred in sub-section (2) or sub-section (3) of Section 16 is appealable u/S. 37 of the Act. Thus, if the arbitrator rules against the party seeking arbitration resulting in termination of the arbitration proceedings then, the aggrieved party shall be entitled to invoke the appeal u/S. 37(i)(a) of the Act but, if the arbitrator rejects the plea then, the person challenging the jurisdiction of the arbitrator has no right to appeal whatsoever. 19. Thus, the Scheme of the Act reveals that one the arbitrator enters into reference, the challenge to his jurisdiction questioning his independence or impartiality or otherwise has to be made before the arbitrator himself. 19. Thus, the Scheme of the Act reveals that one the arbitrator enters into reference, the challenge to his jurisdiction questioning his independence or impartiality or otherwise has to be made before the arbitrator himself. Even before the arbitrator such challenge cannot be made by the party to the proceedings belatedly at his whims and fancy. Moreover, if the challenge of the party to the arbitrator fails then the arbitrator will proceed with the arbitration proceedings and the party aggrieved has to wait till the passing of the award and thereafter, the validity of the award can be assailed by the aggrieved party only by invoking the provisions of Section 34 of the Act. 20. Adverting to the facts of the present case, it is to be noticed that indisputably, for adjudication of the dispute the arbitrator was appointed by the authority designate with the consent of the parties. After the appointment, the arbitrator entered into reference, the petitioner filed his claim and the respondents filed their counter to the claim. It is not in dispute that Shri Jagjit Singh who was appointed as arbitrator was cited as witness by the respondents in the list of witnesses produced in the arbitration proceedings. However, no challenge was made by the respondents to the arbitrator at the stage of filing the list of witnesses. The parties led their evidence. The cross examination of the claimant was concluded on 8.4.01 and thereafter, the respondents were granted time to submit their affidavits by 17.5.01. On 4.9.01, the affidavits of four witnesses were filed on behalf of the respondents. On 19.1.02 affidavit of yet another witness was filed on behalf of the respondents and their evidence was completed on 5.4.02 and the parties were directed to file their written arguments by 29.4.02. The claimant filed his written arguments on 25.4.02, however, the written arguments were filed on behalf of the respondents on 8.11.02. On 19.1.02 affidavit of yet another witness was filed on behalf of the respondents and their evidence was completed on 5.4.02 and the parties were directed to file their written arguments by 29.4.02. The claimant filed his written arguments on 25.4.02, however, the written arguments were filed on behalf of the respondents on 8.11.02. The parties were directed to appear for oral arguments on 17.12.02, however, expressing inability to appear, an adjournment was sought on behalf of the respondents vide communication dated 12.12.02 and in the meantime, on 15.1.03 an application was submitted on behalf of the respondent before the arbitrator that since the contract was awarded in favour of the petitioner on his approval therefore, the appropriate recommendations may be made to the District Court to appoint some other person as arbitrator and immediately thereafter, an application was submitted by the respondents before the authority designate for cancellation of the appointment of arbitrator and for appointment of yet another impartial person as the arbitrator. Later, vide communication dated 20.1.03 sent by the respondent No. 3. on the ground of pendency of the proceedings before the authority designate, the arbitrator was requested to stay the proceedings. Thus, it is abundantly clear that the respondents were well aware about the alleged reasons for questioning the independence and impartiality of the arbitrator throughout the arbitration proceedings but they did not choose to challenge the arbitrator in terms of provisions of Section 12 & 13 at the earliest available opportunity. In considered opinion of this Court, the challenge to the arbitrator made by the respondents belatedly at the verge of conclusion of the arbitration proceedings cannot be countenanced being beyond the ambit and scope of the provisions of Section 12, 13 & 16 of the Act. 21. Coming to the provisions of Section 11, it is pertinent to note that in the circumstances referred to in sub-section (6) of Section 11, party may request the Chief Justice or any person or institution designated by him for appointment of the arbitrator, but, there is no provision incorporated in the Act which empowers the Chief Justice of the authority designated to change the arbitrator on any ground whatsoever. As discussed above, if the circumstances giving rise to justifiable doubts as to independence or impartiality of the arbitrator exist then, the challenge to the arbitrator can only be made before the arbitrator himself in accordance with the procedure laid down u/S. 13 of the Act. It is also open for the parties to assail the validity of the order passed by the authority designate appointing arbitrator before the High Court under Article 227 of the Constitution of India if the order is passed by the subordinate courts as authority designate of the Chief Justice and in other cases where the arbitrator is appointed by the Chief Justice or any other Judge of the High Court designated by the Chief Justice before the Supreme Court under Article 136 of the Constitution of India. But in any case the authority designate of the Chief Justice has no jurisdiction to review its own order and cancel the appointment of the arbitrator by entertaining a miscellaneous application preferred on behalf of the respondents questioning the independence and impartiality of the arbitrator. In considered opinion of this Court, under the scheme of the Act, the question of appointment of an arbitrator in the matter afresh by the Chief Justice or the authority designate may arise only when the challenge to the arbitrator is successful either u/S. 13 or Section 16 of the Act. Thus, this Court is firmly of the view that the order impugned passed by the authority designate of the Chief Justice i.e. District Judge, Bikaner is ex facie without jurisdiction and cannot be sustained. 22. In the result, the writ petition succeeds, it is hereby allowed. Order impugned dated 23.1.04 passed by the authority designated by the Chief Justice i.e. the District Judge, Bikaner hereby quashed and set aside. The arbitration proceedings pending before the respondent No. 4 shall continue. No order as to costs.