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2013 DIGILAW 147 (CHH)

Surendra Surana v. Mohd. Inamullah

2013-05-08

T.P.SHARMA

body2013
ORDER 1. Heard. 2. By this application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short the Act), the applicants have prayed for appointment of Sole Arbitrator for adjudication of dispute between the parties. 3. By filing preliminary objection, the non-applicants have opposed the application and have taken the ground that as per Clause 18 of the agreement specific words only to a sole Arbitrator Shri Anand Surana have been mentioned, no other Arbitrator would be competent to decide the dispute between the parties and the only course open to the parties is to approach civil Court. 4. Brief facts necessary for disposal of this application are that the applicants and the non-applicants have entered into an agreement and created a partnership firm and also agreed for arbitration in case of dispute. Clause 18 of the agreement relating to arbitration clause reads thus:- 8. SETTLEMENT OF DISPUTES AMONGST THE PARTNERS (ARBITRATION CLAUSE): Any dispute or difference which may arise between the partners or their representatives, with regard to the construction, meaning and effect of this deed or any part thereof or respecting the accounts, profits, or losses of the business or the rights and liabilities of the partners under this deed or the retirement, dissolution or winding up of the business or any other matter whatsoever relating to the partnership firm or its business whether arising during the continuance of the partnership or after its dissolution, shall be referred only to a sole Arbitrator Shri Anand Surana S/o. Shri D.S. Surana, Resident of NANESH KRIPA, Civil Lines, Raipur (C.G.). 5. Dispute arose between the parties. As per Clause 18 of the agreement, the matter was referred to Sole Arbitrator Shri Anand Surana who initiated arbitration proceeding which was objected by the non-applicants. The non-applicants have filed W.P. (Art. 227) No. 1290/2011 and specific allegation of bias has been made on the ground of close relation/blood relation of Shri Anand Surana with applicant Nos. 1 & 3. The non-applicants have filed W.P. (Art. 227) No. 1290/2011 and specific allegation of bias has been made on the ground of close relation/blood relation of Shri Anand Surana with applicant Nos. 1 & 3. Paras 8.7 & 8.8 of the writ petition read thus, (8.7) Accordingly on 31-8-2010, which was the first date of hearing fixed by the Respondent No.1 in the arbitral proceedings the Petitioners appeared under protest without submitting to the jurisdiction of the Respondent No.1 as the purported Sole Arbitrator and filed an application u/S. 13 read with Sec. 12 of the 1996 Act challenging the appointment of the Respondent No.1 as the purported Sole Arbitrator and requesting the latter to withdraw himself from the arbitral proceedings. A copy of the said application dated 31-8-2010 is annexed herewith as ANNEXURE P/4. By Para 3(ii) of the said application dated 31-8-2010 the Petitioners further brought to the notice of the Respondent No.1 that they had not received from the Respondent Nos. 2 to 4 any prior notice of arbitration in conformity with Sec. 21 of the 1996 Act and as such the Respondent had no jurisdiction to commence the arbitral proceedings. (8.8) The Respondent No.1 even after receiving the application ANNEXURE P/5 did not either withdraw himself from the arbitral proceedings on the ground of admitted bias and partiality on account of his closest blood relation with Respondent Nos. 2 to 4 or terminate the arbitral proceedings for want of notice in conformity with Sec. 21 of the 1996 Act. 6. After hearing the parties and on the basis of amicable settlement between the parties, vide order dated 29-2-2012 the petition has been disposed of whereby both the parties have consented to appoint Mr. Justice D.M. Dharmadhikari, Retired Judge, Supreme Court of India, as Sole Arbitrator. Order dated 29-2-2012 passed in W.P. (Art. 227) No. 1290/2011 reads thus, Counsel for the parties submit that parties have entered into compromise, according to which they have decided to appoint Hon’ble Mr. Justice D.M. Dharmadhikari, Retired Judge, Supreme Court of India, New Delhi as sole Arbitrator in place of present arbitrator Shri Anand Surana to settle all the disputes regarding partnership firm M/s. Anand Van, Raipur and all its properties and accounts till date. In view of above compromise, there is nothing remain to decide in this petition, therefore, the petition is disposed of. In view of above compromise, there is nothing remain to decide in this petition, therefore, the petition is disposed of. It is expected from the parties that they will participate in the arbitration proceedings and get the dispute resolved expeditiously. 7. Mr. Justice D.M. Dharmadhikari initiated arbitration proceeding and directed the parties for clarification vide direction dated 24-3-2012. In the light of judgment passed by the Supreme Court in the matter of SBP & Company v. Patel & Engg. (2005) 8 SCC 618 : AIR 2006 SC 450 in which the Supreme Court has held that Article 227 of the Constitution of India cannot be invoked for appointment of Arbitrator, Mr. Justice D.M. Dharmadhikari has suggested following ways and means vide the arbitration proceeding dated 21-4-2012. I explained to the counsel appearing that the larger bench decision of the Supreme Court reported in (2005) 8 SCC 618 (SBP & Company v. Patel & Engg.) para 45 has held that Art. 227 of the Constitution cannot be invoked for constitution of Arbitral Tribunal and the recourse has to be made only to the scheme for appointment of Arbitrator framed by the High Court under the Arbitration & Conciliation Act, 1996. In the present case the Arbitration agreement contained mention of Shri Anand Surana to act as a Sole Arbitrator to decide dispute arising under the agreement between the parties. If the parties want to substitute another Arbitrator in place of Shri Surana, it is open to the parties to enter into a fresh agreement naming some other person as a sole arbitrator or agree for arbitral tribunal to be composed of three arbitrators one to be appointed by each party and the third arbitrator to be appointed by the two nominated arbitrators. The second option for them is to approach the High Court under the Scheme for appointment of Arbitrator under the Act of 1996. The parties are granted time to adopt any one of the proposed procedures and it is only thereafter it would be possible to accept the present appointment. The matter is adjourned sine-die to allow the parties to inform me about the outcome of the proceeding in the High Court. 8. In the light of aforesaid suggestion, the applicants have filed present application. 9. The matter is adjourned sine-die to allow the parties to inform me about the outcome of the proceeding in the High Court. 8. In the light of aforesaid suggestion, the applicants have filed present application. 9. Learned counsel for the applicants submits that as per Clause 18 of the agreement, the Sole Arbitrator would be Shri Anand Surana, brother of applicant Nos. 1 & 3 herein, but conduction of arbitration by Sole Arbitrator Shri Anand Surana was questioned by the non-applicants in W.P. (Art. 227) No. 1290/2011 on the ground of his biasness and close blood relation with applicant Nos. 1 & 3. Finally, the parties have entered into compromise and decided to appoint Mr. Justice D. M. Dharmadhikari, Retired Judge of Supreme Court of India, as Sole Arbitrator who suggested the parties in the light of dictum of the Supreme Court in the matter of SBP & Company (supra) to substitute another Arbitrator in place of Shri Anand Surana or to enter into a fresh agreement or to agree for the Arbitral Tribunal comprising of three Arbitrators or to approach the High Court under the Scheme for appointment of Arbitrator under the Act. Proceedings has been adjourned sine die. Learned counsel further submits that by such compromise, the parties have decided to substitute Sole Arbitrator, therefore, Sole Arbitrator for deciding the dispute is required to be appointed. 10. On the other hand, learned counsel for the non-applicants vehemently opposes the application and submits that Clause 18 of the agreement is unambiguous and is not capable of meaning, other than the Sole Arbitrator as Shri Anand Surana against whom they have made the charge of biasness. Therefore, no person other than Shri Anand Surana can be appointed as Sole Arbitrator for deciding the dispute between the parties and the only option left to the parties is to approach civil Court. Learned counsel placed reliance in the matter of ACC Limited (formerly known as the Associated Cement Co. Ltd.) v. Global Cement Ltd., 2012 Law Suit (SC) 336 in which the Supreme Court has held that in absence of any prohibition or debarment for appointment of arbitrator, parties can persuade Court for appointment of arbitrator under the agreement. Learned counsel placed reliance in the matter of ACC Limited (formerly known as the Associated Cement Co. Ltd.) v. Global Cement Ltd., 2012 Law Suit (SC) 336 in which the Supreme Court has held that in absence of any prohibition or debarment for appointment of arbitrator, parties can persuade Court for appointment of arbitrator under the agreement. Learned counsel further submits that present application is related to specific prohibition and debarment and as per Clause 18 of the agreement, the word only has been used which excludes other persons to be appointed as Sole Arbitrator except Shri Anand Surana. Learned counsel further placed reliance in the matter of Newton Engineering and Chemicals Limited v. Indian Oil Corporation Limited and others (2013) 4 SCC 44 in which the Supreme Court has held that if arbitration clause provides that no person other than some person would be arbitrator then in absence of any agreed solution, arbitration clause did not survive, therefore, other person cannot be appointed as arbitrator. In Newton Engineering case (supra), as per arbitration clause, no person other than officer (ED (NR)) of the Corporation would be the arbitrator and after ceasing of the office of ED (NR), Director (Marketing) has been appointed as Sole Arbitrator which has been quashed by the Supreme Court on the ground that the arbitration clause does not provide person other than the ED (NR), therefore, in absence of any agreed solution, no person can act or be appointed as Arbitrator. 11. Undisputedly, Clause 18 of the agreement shows that only Shri Anand Surana would be the Sole Arbitrator to decide the dispute between the parties, he has initiated arbitration proceeding but same was objected and a writ petition under Article 227 of the Constitution of India was filed for removal of such Arbitrator on the ground of biasness and close blood relation with applicants No.1 & 3 herein. The agreement itself shows that applicant No.1 herein is Party No.5 and arrayed as son of Shri D.S. Surana, and alleged Sole Arbitrator Shri Anand Surana is also son of Shri D.S. Surana, therefore, they are brothers. The agreement itself shows that applicant No.1 herein is Party No.5 and arrayed as son of Shri D.S. Surana, and alleged Sole Arbitrator Shri Anand Surana is also son of Shri D.S. Surana, therefore, they are brothers. After hearing the parties and on the basis of compromise arrived between the parties, the writ petition has been disposed by the Court vide order dated 29-2-2012 which reads that counsel for the parties submit that parties have entered into compromise, according to which they have decided to appoint Hon’ble Mr. Justice D.M. Dharmadhikari, Retired Judge, Supreme Court of India, New Delhi as sole Arbitration in place of present arbitrator Shri Anand Surana to settle all the disputes regarding partnership firm M/s. Anand Van, Raipur and all its properties and accounts till date. It clearly reveals that parties have agreed to substitute Mr. Justice D.M. Dharmadhikari, Retired Judge Supreme Court of India, to act as Arbitrator. 12. As held by the Supreme Court in the matter of ACC Limited (supra), in absence of any prohibition or debarment, parties can persuade the Court for appointment of arbitrator. In the present case, the agreement clause shows specific prohibition and debarment by using the word only. 13. As held by the Supreme Court in the matter of Newton Engineering (supra), in case of words used in the arbitration clause providing that no person other than, even if said office of named arbitrator ceasing to exist, that person or officer cannot be appointed as arbitrator, in the light of such prohibition or debarment, unless the parties reach to any agreed solution for such substitution of arbitrator. Para 7 of the said judgment reads thus, 7. Having regard to the express, clear and unequivocal arbitration clause between the parties that the disputes between them shall be referred to the sole arbitration of the ED (NR) of the Corporation and, if ED (NR) was unable or unwilling to act as the sole arbitrator, the matter shall be referred to the person designated by such ED (NR) in his place who was willing to act as sole arbitrator and, if none of them is able to act as an arbitrator, no other person should act as arbitrator, the appointment of Director (Marketing) or his nominee as a sole arbitrator by the Corporation cannot be sustained. If the office of ED (NR) ceased to exist in the Corporation and the parties were unable to reach to any agreed solution, the arbitration clause did not survive and has to be treated as having worked its course. According to the arbitration clause, sole arbitrator would be ED (NR) or his nominee and no one else. In the circumstances, it was not open to either of the parties to unilaterally appoint any arbitrator for resolution of the disputes. Sections 11(6)(c), 13 and 15 of the 1996 Act have no application in the light of the reasons indicated above. 14. As per the order dated 29-2-2012 passed in W.P. (Art. 227) No. 1290/2011, proceeding initiated by Mr. Justice D. M. Dharmadhikari and suggestion made by him dated 21-4-2012, he has suggested for substitution of arbitrator or for entering into a fresh agreement naming other person as arbitrator or for appointment of Arbitral Tribunal or to approach High Court for appointment of arbitrator. Both the parties have reached to an agreed solution to appoint Mr. Justice D.M. Dharmadhikari as Arbitrator. Therefore, as held by the Supreme Court in Newton Engineering case (supra), in the present case, Mr. Justice D.M. Dharmadhikari would be the Sole Arbitrator to decide the dispute between the parties. 15. Consequently, the application stands disposed of with following directions:- Mr. Justice D.M. Dharmadhikari, who was earlier appointed as Sole Arbitrator on the basis of amicable compromise between the parties, is appointed as Sole Arbitrator to decide the dispute between the parties. Parties are directed to contact the Sole Arbitrator for further arbitration proceeding. Copy of this order be sent to the Sole Arbitrator. The Sole Arbitrator is entitled for payment and other expenses as per law. 16. No order as to costs. Order accordingly.