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2012 DIGILAW 1028 (CAL)

Kishan Mimani v. Indu Kocher

2012-12-11

ASHIM KUMAR BANERJEE, SHUKLA KABIR SINHA

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Judgment :- Ashim Kumar Banerjee, J. Both these appeals would relate to a common judgment and order dated October 11, 2012 passed by the learned Single Judge under Section 20 of the Arbitration Act, 1940. Since the plea of maintainability was taken in both the appeals we heard the parties at length on the preliminary issue that would be disposed of by the foregoing judgment and order. Bharat Industries & Commercial Corporation was a partnership firm. The firm was represented by two groups being Maheshwaris and Kocher group. The parties fell out resulting in dispute and differences that were referred to two arbitrators in August 1984. As a result, proceeding was to be governed by the old Arbitration law being the Arbitration Act, 1940. Maheshwaris filed suit inter alia, claiming that the claim of the Kochers became barred by limitation and there could not be any further dispute to go to arbitration. They also contended, Kochers assigned their share in favour of one Omprakash who, in turn, transferred to one Kishan Mimani who also filed a suit for specific performance of the agreement. The reliefs claimed in Maheshwarissuit would include a declaration that the defendants did not have any right, title and interest in the dissolved partnership firm. Both the suits were pending. There were protracted litigations. Attempt to stall the hearing of the suits failed on the ground that Section 8 of the new arbitration law being the Arbitration and Conciliation Act, 1996 would have no application. Kochers approached the learned Judge on the ground that arbitration agreement was still valid and subsisting. They already appointed their nominee. The Maheshwaris failed to appoint their nominee, although asked for. Hence, they were entitled to have an independent arbitrator to act on behalf of the Maheshwaris. The learned Single Judge by a judgment and order dated October 11, 2012 appointed Mr. Pradosh Kumar Mallick, a senior advocate of this Court to act as co-arbitrator coupled with a direction upon the arbitrators to appoint an umpire. Being aggrieved, Mimanis as well as Maheshwaris preferred two distinctive appeals as above. The learned Advocate General appearing for Kochers took the plea of maintainability in both the matters. Hence, we heard the parties on the issue. We however, like to point out, Maheshwaris’ appeal was within time whereas Mimani’s appeal was barred by nine days. Being aggrieved, Mimanis as well as Maheshwaris preferred two distinctive appeals as above. The learned Advocate General appearing for Kochers took the plea of maintainability in both the matters. Hence, we heard the parties on the issue. We however, like to point out, Maheshwaris’ appeal was within time whereas Mimani’s appeal was barred by nine days. The learned Advocate General contended, Section 39(1) of the said Act of 1940 would prescribe the orders that would be available for judicial scrutiny in an appeal. Orders impugned being not included, none of the appeals would be maintainable. He relied on the decision of the Apex Court in the case of Union of India –VS-The Mohindra Supply Company reported in All India Reporter 1962 Supreme Court Page-256 and the Division Bench decision of this Court in the case of Union of India –VS-Consultants for Industries Private Limited reported in Volume-80 Calcutta Weekly Notes Page-662. Opposing the contentions, Mr. Ajay Krishna Chatterjee, learned senior advocate appearing for Maheshwaris contended, Section 39(1) did not put any ouster of the competence of the Court to entertain appeal from the order of the like nature that could not be said to be not an order under Section 20. According to him, the order passed under Section 20 directing filing or refusing to file an arbitration agreement would be appealable. Since the order impugned would relate to determination of the rights of the parties under the arbitration agreement the appeal would be maintainable. He contended, initially order under Section 20 did not contain any direction to file the agreement. Moreover, the earlier order did not attain finality as there was no direction for appointment of arbitrator on behalf of Maheshwaris that was passed by the order impugned. Hence, the present appeal would be maintainable. He distinguished the decision in the case of Consultants for Industries Private Limited (Supra) by contending that the issue before the Division Bench would relate to revocation of authority of arbitrator. He would rather rely upon the Division Bench decision in the case of Fertilizer Corporation of India Limited –VS-M/s. Domestic Engineering Installation reported in All India Reporter 1970 Allahabad Page-31 wherein on a similar issue the Division Bench of the Allahabad High Court held the appeal of the like nature maintainable. Mr. Utpal Bose, learned counsel appearing for Mimani adopted the submission made by Mr. Mr. Utpal Bose, learned counsel appearing for Mimani adopted the submission made by Mr. Chatterjee and further contended, Mimani was not a party to the arbitration agreement. However, direction for arbitration would seriously affect his suit that was to be heard analogously with the pending suit filed by Maheshwaris against Kochers involving the identical controversy. Once the Division Bench earlier declined to stay both the suits and directed hearing of both the suits analogously direction for arbitration would not only be superfluous but also may result in conflict of decisions that too, in absence of Mimani who was a necessary party as recognized by the Court of Appeal. Counteracting the contentions raised by Maheswari appellants and Mimani appellant the learned Advocate General distinguished the Allahabad decision by saying that the facts would completely differ. In the Allahabad case, there was a direction for filing of the agreement. Subsequently, the Court directed appointment of arbitrator under Sub-Section 4. Appeal from the later order was held to be maintainable. We have heard the rival contentions of the parties. Before we go into the controversy let us first decide the law on the subject. Section 20 and Section 39(1) of the said Act of 1940 being relevant herein are quoted below :- “Section 20 : APPLICATION TO FILE IN COURT ARBITRATION AGREEMENT. – Where any person have entered into an arbitration agreement before the institution of any suit with respect to the subjectmatter of the agreement or any part of it, and where a difference has arisen to which the agreement applies. They or any of them, instead of proceeding under Chapter II, may apply to a Court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in Court. (2) The application shall be in writing and shall be numbered and registered as a suit between one or more of the parties interested or claiming to be interested as plaintiff or plaintiffs and the remainder as defendant or defendants, if the application has been presented by all the parties, or, if otherwise, between the applicant as plaintiff and the other parties as defendants. (3) On such application being made, the Court shall direct notice thereof to be given to all parties to the agreement other than the applicants requiring them to show cause within the time specified in the notice why the agreement should not be filed. (3) On such application being made, the Court shall direct notice thereof to be given to all parties to the agreement other than the applicants requiring them to show cause within the time specified in the notice why the agreement should not be filed. (4) Where no sufficient cause is shown, the Court shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or, where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court. (5) Thereafter the arbitration shall proceed in accordance with and shall be governed by the other provisions of this Act so far as they can be made applicable.” “39. APPEALABLE ORDERS.-(1) An appeal shall lie from the following orders passed under this Act (and from no others) to the Court authorized by law to hear appeals from original decrees of the Court passing the order : An order – (i) Superseding an arbitration; (ii) on an award stated in the form of a special case; (iii) modifying or correcting an award; (iv) filing or refusing to file an arbitration agreement; (v) staying or refusing to stay legal proceedings where there is an arbitration agreement; (vi) setting aside or refusing to set aside an award; Provided that the provisions of this section shall not apply to any order passed by Small Cause Court.” In terms of Section 20 an arbitration agreement could be enforced by a party under it intending to refer a dispute under the agreement to arbitration by applying to a Court having jurisdiction in the matter for a direction that the agreement be filed in Court and arbitration be held in terms thereof. Under Sub-Section 1 the entitlement was specified whereas under Sub-Section 2 the application was to be in writing to be numbered as a suit describing the applicant as plaintiff and the other party as defendant. Under Sub-Section 3 the Court would direct notice to the defendant to show cause why the agreement would not be filed. Under Sub-Section 4 in absence of any sufficient cause being shown Court would direct filing of the agreement and would also make an order of reference to the arbitrator appointed by the parties. Under Sub-Section 3 the Court would direct notice to the defendant to show cause why the agreement would not be filed. Under Sub-Section 4 in absence of any sufficient cause being shown Court would direct filing of the agreement and would also make an order of reference to the arbitrator appointed by the parties. Sub-Section 4 also stipulates, where the parties could not agree upon an arbitrator the Court would be competent to appoint an arbitrator. In the present case, originally Section 20 application was numbered as special suit no.9 of 1995. The learned Single Judge passed an order dated September 5, 2007 to the following effect : “The petition succeeds. The Kochars will nominate one arbitrator by a writing to be issued to the second respondent (on behalf of all the respondents) within a fortnight from date and the Maheswaris will nominate their arbitrator within 15 days of receipt of Kochars’ writing by the second respondent. The reference will begin within six weeks from date and will be in respect of all the disputes between the parties covered by the arbitration agreement, including the disputes enumerated in the petition or such of them as would be permissible to be raised in the opinion of the arbitrators. The two arbitrators, immediately on their appointment, will nominate an umpire and it will be open to the two arbitrators and the parties to agree as to whether the umpire should sit in the reference from the inception so as to avoid repetition and delay if the two arbitrators ultimately differ. The reference should be concluded within a period of six months from the submission of the statement of claim. “The Kochars will be entitled to a sum of Rs.50,000/-by way of costs of these proceedings in the reference.” Aggrieved party filed an appeal. The Appellate Court disposed of the appeal vide order dated March 13, 2012. The Division Bench upheld the order of reference. The Division Bench also observed that sale of fifty per cent right of Maheshwaris in favour of Mimani could not be a subject matter of arbitration and would be decided in the pending suit. The arbitration would be restricted to the dispute between the parties to the agreement. The Division Bench upheld the order. Subsequent application would relate to intervention of the Court in view of failure on the part of the Maheshwaris to appoint their nominee. The arbitration would be restricted to the dispute between the parties to the agreement. The Division Bench upheld the order. Subsequent application would relate to intervention of the Court in view of failure on the part of the Maheshwaris to appoint their nominee. The learned Single Judge by the said order appointed the co-arbitrator who was supposed to be named by Maheshwaris. This part was covered by the second limb of Sub-Section 4 of Section 20 of the said Act of 1940. To be more specific, it was in continuation of the earlier order dated September 5, 2007. Once the original order under Section 20 was upheld by the Division Bench and Maheshwaris did not prefer any appeal from the said order they would not be able to maintain the present appeal. Similarly, the Division Bench specifically held, Memani dispute could not be within the scope of the arbitration and to be decided in the pending suit. Neither Maheshwari nor Memani preferred any appeal from the order of the Division Bench dated March 13, 2012. Hence, the said order dated March 13, 2012 attain finality. The order dated September 5, 2007 so merged in the order dated March 13, 2012 would thus attain finality. Naming of the arbitrator was in furtherance of the said order, rather in compliance thereof. The same, in our view, could not be available in appeal. Assuming we give credence to what was argued by Mr. Chatterjee andMr. Bose on the maintainability of the appeals relying on the Division Bench decisions of the Allahabad High Court, we would still wonder, what we would decide in the appeal. The order of the learned Single Judge impugned herein just named the arbitrator as Maheshwari failed to appoint their nominee within the time stipulated above. It was not the contention of the Maheshwari, they did not get sufficient opportunity to appoint their nominee. If we look to their Memorandum of Appeal, particularly ground V we would find that Maheshwari felt aggrieved as they felt, the decision in the arbitration would affect the decision in the pending suits. Such question, in our view, is no more res integra in view of the order dated September 5, 2007 so merged in the order of the Division Bench dated March 13, 2012. Such question, in our view, is no more res integra in view of the order dated September 5, 2007 so merged in the order of the Division Bench dated March 13, 2012. We fail to find a single ground alleging that Maheshwari were ready and willing to perform their obligation under the agreement by appointing their nominee. On scrutiny we found the following grounds :- “XVII. FOR That the respondents No.1, 2 and 3 had deliberately suppressed the fact that on an earlier occasion they had appointed Mr. Debal Banerjee, Senior Advocate as an Arbitrator who had accepted such appointment subsequent to the order dated September 5, 2007. XVIII. FOR THAT the respondents No.1, 2 and 3 deliberatelysuppressed the appointment of Mr. Debal Banerjee, Senior Advocate as an Arbitrator as nominated by them in the said application and further sought to appoint Mr. Chandra Nath Mukherjee, Advocate without having the said Mr. Debal Banerjee, Senior Advocate being removed.” However, these two grounds were never argued before us by Mr. Chatterjee. He rather insisted on ground V that was not available in appeal. Similarly, the appeal of Memani could not be maintainable in view of Order dated March 13, 2012 attaining finality. Ground V and X read together, would clearly show, his grievance was duly met by the Court of Appeal. If he felt so aggrieved he had his remedy in law approaching higher Court as against order dated March 13, 2012. Having not done so he could not maintain the appeal before a coordinate bench. In the Allahabad decision the plaintiff filed an application under Section 20. The named arbitrator declined to act as arbitrator. The plaintiff approached the Court under Section 20 and prayed for filing of the agreement and reference of the dispute to arbitration. The defendant contended, the application under Section 20 was not maintainable as there was no valid agreement reduced to writing. No dispute arose by and between the parties. The differences pointed out by the plaintiff were covered by Clause 64 of the general conditions that stood excluded from the scope of arbitration. The Court below rejected such contention and directed filing of the arbitration agreement in Court and asked the parties to submit their names. Being aggrieved, defendant filed the appeal. The differences pointed out by the plaintiff were covered by Clause 64 of the general conditions that stood excluded from the scope of arbitration. The Court below rejected such contention and directed filing of the arbitration agreement in Court and asked the parties to submit their names. Being aggrieved, defendant filed the appeal. The respondent in the appeal being the applicant under Section 20 raised an objection as to the maintainability of the appeal as according to them the appeal was not covered by Section 39(1). The Division Bench observed, the Court gave opportunity to the parties to submit the names of the aggrieved arbitrator. In case parties failed to submit names the Court itself would appoint arbitrator. The appointment of arbitrator and making of the reference to him were proposed to be done by other orders to be passed in future. This being so, the appeal was not competent. The Division Bench rejected such contention and in our view, very rightly. The issue involved inAllahabad case was completely different. An order directing filing or refusing to file an arbitration agreement was covered by Section 39. The order itself before the Allahabad Bench rejected contention of the appellant that the agreement could not be filed and directed filing of the agreement. Such order directing filing of the agreement was certainly appealable. Subsequent direction for naming of the arbitrator was in terms of the power conferred under Section 20 Sub-Section 4. Similarly in our case, the order passed by His Lordship impugned herein was in furtherance of the original order dated September 5, 2007 that was squarely maintainable. Such appeal having been maintained and decided finally by the Division Bench, no appeal from the subsequent order by which only the arbitrator was named, would lie. We would have considered in case Maheshwaris insisted on ground XVII and XVIII. Such argument was never advanced by Mr. Chatterjee. He rather contended otherwise. Mimani was not a party to the arbitration agreement. He had his remedy under the general law, no matter what the arbitrator would decide on the rights and privileges of the parties to their agreement being the Kochers on the one hand and the Maheshwaris on the other hand. Mimani claiming right under Omprakash who in turn allegedly derived right from Kochers would remain content and the decision in the arbitration would rather be binding upon them. Mimani claiming right under Omprakash who in turn allegedly derived right from Kochers would remain content and the decision in the arbitration would rather be binding upon them. To that extent, we would agree with Mr. Bose. However he had no independent right to challenge Kochers or stop them to have a decision on the dispute between them and Maheshwaris resolved through arbitration keeping Mimani in the dark. That was the spirit of the order dated March 13, 2012. The parties having accepted such position are debarred from contending otherwise. We thus hold both the appeals not maintainable in law. Appeals fail and are hereby dismissed. There would be no order as to costs.