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2010 DIGILAW 975 (CAL)

Hindustan Copper Limited v. Ttg Industries Limited

2010-08-13

JYOTIRMAY BHATTACHARYA

body2010
JUDGMENT 1. THIS application under Article 227 of the Constitution of India is directed against an order dated 17th August, 2009 passed by the learned Additional District Judge, Eighth Court at Alipore in Misc. Appeal No. 91 of 2004 by which the petitioner's appeal under Section 37(2) of the Arbitration and Conciliation Act of 1996 was rejected on contest. The petitioner is aggrieved by the said order. Hence the petitioner has come before this Court with this application under Article 227 of the Constitution of India. 2. HEARD Mr. Basu Chowdhury, learned Advocate, appearing for the petitioner and Mr. Ghosh, learned Advocate, appearing for the opposite party. Considered the materials on record including the order impugned. Let me now consider as to how far the learned Appeal Court was justified in passing the impugned order in the facts of the instant case. Admittedly the dispute between the petitioners and the opposite party No.1 is covered by an arbitration agreement which provides for settlement of the dispute arising out of their contract as per Clause 3.67 of the agreement which runs as follows: "All the disputes and differences arising out of or in any way touching or concerning this contract shall be referred to the sole arbitration of the Chairman-cum-Managing Director, Hindusthan Copper Limited or any officer nominated by him in this behalf. No objection shall be taken on the ground that the arbitrator so appointed is an employee of the company and that he has or had to deal with the matters to which the agreement or the reference relates or that in the course of his duties he had dealt with or expressed views on all or any of the matters covered by the reference. The award of the arbitrator shall be final, conclusive and binding on all the parties to the contract. In the event of arbitrator dying, neglecting or refusing to act or resigning or being unable to act for any reason or his award being set aside by the Court for any reason, it shall be lawful for the Chairman-cum- Managing Director, Hindusthan Copper Limited, to appoint another arbitrator in the place by the outgoing arbitrator in the manner as aforesaid." 3. THE arbitrator may from time to time with consent of all the parties to the contract enlarge the time for making the award. THE arbitrator may from time to time with consent of all the parties to the contract enlarge the time for making the award. The assessment of the costs incidental to the reference and award respectively shall be in the discretion of the arbitrator. Subject as aforesaid, the Arbitration Act, 1940 and the rules thereunder and any statutory modification thereof for the time being in force shall be deemed to apply to the arbitration proceeding under this clause. The venue of the arbitration shall be the place as an arbitrator at his discretion may determine. 4. IN the instant case Shri I.N. Banerjee, General Manager (Projects) was appointed as sole arbitrator by a letter dated 18th July, 2010 written by the Chairman-cum-Managing Director, Hindusthan Copper Limited for resolving a dispute between the petitioner and the opposite party No.1 arising out of a contract between them which contained the aforesaid arbitration clause. After being appointed as an arbitrator, Shri I.N. Banerjee entered upon the reference on 31st August, 2000. Thereafter as many as 13 sittings were held in the said arbitration proceeding before the said arbitrator starting from 31st August, 2000 till 10th November, 2001. The sole arbitrator retired from his service on superannuation on 31st December, 2000. Even after his retirement, both the parties agreed that the said arbitration proceeding will be continued before the said arbitrator and such agreement was also recorded in a minute of the arbitration proceeding which was held after the retirement of the sole arbitrator. Several sittings were held even thereafter before the said arbitrator. Both the parties participated in those sittings without any objection for continuation of the said proceeding. All on a sudden Mr. D. Dasgupta, Assistant General Manager (Mines, Planning and Safety), Hindusthan Copper Limited was appointed as an arbitrator for resolution of the very same dispute, by the Chairman-cum-Managing Director, Hindusthan Copper Limited. Since the said dispute was referred to the newly appointed arbitrator, Mr. I.N. Banerjee, the erstwhile arbitrator was called upon to return all the papers relating to the said arbitration proceeding. The earlier arbitrator thus had to discontinue the said proceeding and all the papers relating to the said proceeding were returned. 5. Since the said dispute was referred to the newly appointed arbitrator, Mr. I.N. Banerjee, the erstwhile arbitrator was called upon to return all the papers relating to the said arbitration proceeding. The earlier arbitrator thus had to discontinue the said proceeding and all the papers relating to the said proceeding were returned. 5. THEREAFTER when the arbitration proceeding before the newly appointed arbitrator commenced, an objection regarding maintainability of the said proceeding was raised by the opposite party No.1 herein challenging his jurisdiction to enter upon the said arbitration proceeding under Section 16(2) of the Arbitration and Conciliation Act of 1996. It was contended that since the erstwhile arbitrator was appointed by name, his authority to continue with the arbitration proceeding cannot be discontinued after his retirement on superannuation primarily for two reasons; firstly because of the fact that retirement of the arbitrator does not attract the termination clause resulting discontinuation of the arbitration proceeding and secondly for the reason that notwithstanding the said termination clause, the parties have mutually agreed to continue with the said proceeding before the erstwhile arbitrator even after his retirement and in fact both the parties participated in the proceeding before the said arbitrator after his retirement on several occasion without any protest. 6. THE newly appointed arbitrator found substance in such contention of the opposite party No.1 and ultimately held that since I.N. Banerjee, General Manager (Projects), Hindusthan Copper Limited, was appointed by name as an arbitrator, his authority to continue with the said proceeding cannot be discontinued after his retirement on superannuation. Accordingly the newly appointed arbitrator held that he has no jurisdiction to proceed with the arbitration proceeding. It was further held by him that the arbitration proceeding will be continued before the erstwhile arbitrator, namely, I.N. Banerjee, General Manager (Projects), Hindusthan Copper Limited. The petitioner was aggrieved by the said order. Hence the petitioner filed an appeal under Section 37(2) of the said Act before the learned Additional District Judge, Eighth Court at Alipore. The said appeal was also rejected on contest. The findings which were arrived at by the newly appointed arbitrator on the jurisdictional issue, was affirmed in the appeal. The petitioner was aggrieved by the said order. Hence the petitioner filed an appeal under Section 37(2) of the said Act before the learned Additional District Judge, Eighth Court at Alipore. The said appeal was also rejected on contest. The findings which were arrived at by the newly appointed arbitrator on the jurisdictional issue, was affirmed in the appeal. The learned Appeal Court, thus, held that I.N. Banerjee will continue to function as arbitrator in terms of his appointment and the present arbitral Tribunal headed by Shri D. Dasgupta cannot proceed with the said arbitration proceeding for want of jurisdiction. The petitioners were thus directed to participate in the arbitration proceeding to be held by Shri I.N. Banerjee, the sole arbitrator appointed on 18th July, 2000. The said order is under challenged before this Court in this application under Article 227 of the Constitution of India. 7. MR. Basu Chowdhury, learned Counsel, appearing for the petitioner, submitted that if Section 16 sub-section 2 of the said Act is considered carefully, then it will appear that the jurisdiction of the arbitrator to arbitrate on a reference can be challenged before the arbitral Tribunal under Section 16(2) of the said Act. He contended that the scope of challenge under Section 16(2) of the said Act is restricted only to a dispute regarding jurisdiction of the arbitrator to arbitrate on reference. According to him, if such a dispute is raised before the arbitrator, certainly he can decide the said issue in either way. The arbitrator may hold that he has jurisdiction to continue. Or he may also hold that he has no jurisdiction to continue; but while doing so, he cannot direct the parties to submit to the erstwhile arbitrator or to participate in the proceedings before the said arbitrator as Section 16(2) of the said Act does not authorise the newly appointed arbitrator to pass such direction upon the parties. In fact, such direction was passed not only by the newly appointed arbitrator Shri D. Dasgupta but also by the learned Appeal Court while disposing of the appeal. 8. MR. Basu Chowdhury, learned Advocate, submitted that both the newly appointed arbitrator and the learned Appeal Court exceeded their jurisdiction in passing such direction upon the parties to appear before the erstwhile arbitrator for participating in the proceeding before him. MR. 8. MR. Basu Chowdhury, learned Advocate, submitted that both the newly appointed arbitrator and the learned Appeal Court exceeded their jurisdiction in passing such direction upon the parties to appear before the erstwhile arbitrator for participating in the proceeding before him. MR. Basu Chowdhury submitted that this part of the direction passed by the newly appointed arbitrator as well as by the learned Appeal Court are without jurisdiction as Section 16 Sub-Section (2) does not authorise either newly appointed arbitrator or the Appeal Court to pass such direction while considering an objection relating to the jurisdiction of the newly appointed arbitrator to arbitrate on the reference under Section 16(2) of the said Act. Mr. Basu Chowdhury also incidentally argued that since Mr. I.N. Banerjee, General Manager (Projects), Hindusthan Copper Limited, retired from service on superannuation, he cannot continue with the said arbitration proceeding after his retirement as his authority to continue with such proceeding ceased to operate on his retirement as per the arbitration agreement. Thus Mr. Basu Chowdhury invited this Court to interfere with the impugned order. 9. LET me now consider as to how far the contention of Mr. Basu Chowdhury regarding cessation of the authority of Shri I.N. Banerjee, General Manager (Projects), Hindusthan Copper Limited, to continue with the arbitration proceeding after his retirement, can be accepted. The arbitration clause pursuant to which Shri I.N. Banerjee was appointed as an arbitrator to arbitrate on such reference has already been set out hereinabove. The circumstances in which the authority of the said arbitrator to continue with the proceeding can be discontinued is specifically provided therein. These are the following situations when arbitration proceeding before the arbitrator can be discontinued as per the said arbitration clause:- (i) In the event of death of the arbitrator; (ii) In the event the arbitrator neglects or refuses to act as arbitrator; (iii) In the event the arbitrator resigns; (iv) In the event the arbitrator is unable to act for any reason; (v) In the event award of the arbitrator is set aside by the Court for any reason; These are the situations which were contemplated by the parties for cessation of arbitration proceeding before the arbitrator. Admittedly none of the aforesaid situations has occurred resulting cessation of the arbitration proceeding as per the said arbitration agreement. 10. Admittedly none of the aforesaid situations has occurred resulting cessation of the arbitration proceeding as per the said arbitration agreement. 10. THE retirement of the arbitrator on superannuation is not a mode for cessation of an arbitration proceeding as per the arbitration clause. As such the retirement of the arbitrator cannot disentitle the erstwhile arbitrator to continue with the arbitration proceeding. That apart it is a case where this Court finds that not only both the parties participated in the said arbitration proceeding on a number of occasions after the retirement of the said arbitrator but also they agreed for continuation of the said arbitration proceeding before the said arbitrator. As such his authority to continue with the said arbitration proceeding cannot be held to be discontinued on his retirement. Again if the terms of appointment is considered carefully then it appears that Shri I.N. Banerjee was appointed by name and his designation was mentioned against his name to identify him as General Manager (Projects), Hindusthan Copper Limited. Since he was appointed as arbitrator by name, his appointment cannot be discontinued on his retirement on superannuation. 11. THUS this Court fully agrees with the findings of both the arbitral tribunal as well as of the learned Appeal Court to this effect that Mr. D. Dasgupta, who was appointed as arbitrator subsequently during the continuation of the arbitration proceeding before I.N. Banerjee, General Manager (Projects), Hindusthan Copper Limited has no jurisdiction to arbitrate on the said dispute between the parties as per the said arbitration clause. The only inevitable consequence which may follow in such a situation is revival of the arbitration proceeding before the erstwhile arbitrator, which exactly happened in the instant case. Though it is rightly pointed out by Mr. Basu Chowdhury, learned Advocate, that Section 16(2) of the said Act does not explicitly authorise the newly appointed arbitrator or the Appeal Court, to pass such direction for revival of the proceeding before the erstwhile arbitrator but such revival is automatic as a consequence of the order passed by the newly appointed arbitrator, while disposing of application under Section 16(2) of the said Act. As such the direction which was passed upon the parties to appear before the erstwhile arbitrator and to submit them to his jurisdiction for continuation of the said proceeding before him, cannot be struck down by this court by holding such direction is without jurisdiction. As such the direction which was passed upon the parties to appear before the erstwhile arbitrator and to submit them to his jurisdiction for continuation of the said proceeding before him, cannot be struck down by this court by holding such direction is without jurisdiction. The proceeding before the erstwhile Arbitrator will be continued from the stage where it ended before him. The revisional application thus appears to this Court as devoid of any merit for consideration. The revisional application thus stands disposed of.