S. P. Singla Construction Pvt. Limited v. State of Himachal Pradesh
2014-03-10
RAJIV SHARMA
body2014
DigiLaw.ai
Judgment Rajiv Sharma, J. Petitioner-company was awarded construction work relating to balance work of 214.00 mtrs. Span C/C bearings on abutment bridge over river Beas at Harsipattan on Mandi Rewalsar Chandesh-Rakhota Maserah Sarkaghat Tihra Sandhole Alampur Jawalamukhi road for a sum of Rs.14,29,81,500/-. An agreement was also entered into between the parties. Petitioner has brought to the notice of respondent delay in approval of drawings in respect of abutment towards Sandhole side on 10.1.2008. Further delays were highlighted by the petitioner on 11.3.2008 and 9.5.2008. Petitioner has also called upon the respondent to conciliate the matter as per letter dated 3.2.2010. Petitioner has requested the respondent to appoint an Arbitrator on 18.10.2013. In sequel thereto, the Chief Engineer, HPPWD, as per clause 65 of the agreement on 30.10.2013 has appointed the Superintending Engineer, Arbitration Circle, HPPWD, Solan. Petitioner has also highlighted vide letter dated 7.11.2013 about the impartiality and independence of the sole arbitrator. 2. The Court is of the considered view that appointment of the Superintending Engineer, Arbitration Circle, HPPWD Solan as Arbitrator cannot be quashed. The appointment has been made strictly as per clause 65 of the agreement. There is no material placed on record to substantiate that Superintending Engineer, Arbitration Circle, HPPWD Solan appointed as Arbitrator is not qualified as per Arbitration and Conciliation Act, 1996. In fact, the Arbitrator has already entered into reference as per communication dated 11.11.2013 (Annexure P-15). 3. The question raised in this petition is practically no more res integra in view of the definitive law laid down by their Lordships of the Hon’ble Supreme Court. In Antrix Corp. Ltd. v. Devas Multimedia P. Ltd., JT 2013 (7) 394, their Lordships of the Hon’ble Supreme Court have held that where in terms of the agreement, the arbitration clause has already been invoked by one of the parties thereto under the I.C.C. Rules, the provisions of sub-section (6) of section 11 cannot be invoked again and in case the other party is dissatisfied or aggrieved by the appointment of an Arbitrator in terms of the agreement, his remedy would be by way of a petition under section 13 and there after under section 34 of the 1996 Act. Their Lordships have held as under: “24.
Their Lordships have held as under: “24. As indicated hereinbefore, the question which we are called upon to decide is whether when one of the parties has invoked the jurisdiction of the International Chamber of Commerce and pursuant thereto an Arbitrator has already been appointed, the other party to the dispute would be entitled to proceed in terms of Section 11(6) of the 1996 Act. 25. In order to answer the said question, we will have to refer back to the provisions relating to arbitration in the agreement entered into between the Petitioner and the Respondent on 28th January, 2005. Article 19 in clear terms provides that the rights and responsibilities of the parties under the Agreement would be subject to and construed in accordance with the laws in India, which, in effect, means the Arbitration and Conciliation Act, 1996. Article 20 of the Agreement specifically deals with arbitration and provides that disputes between the parties regarding the provisions of the Agreement or the interpretation thereof, would be referred to the Senior Management of both the parties for resolution within three weeks, failing which the dispute would be referred to an Arbitral Tribunal comprising of three Arbitrators. It was also provided that the seat of arbitration would be New Delhi in India and the arbitration would be conducted in accordance with the rules and procedures of the International Chamber of Commerce or UNCITRAL. 26. The Respondent has invoked the provisions of Article 20 of the Agreement and has approached the ICC for the appointment of an Arbitral Tribunal in accordance with the rules of arbitration and, pursuant thereto, the Respondent appointed its nominee Arbitrator. In fact, after the Respondent had invoked the arbitration clause, the Petitioner came to know of the same from the Respondent's request for arbitration which was forwarded by the ICC to the Petitioner on 5th July, 2011. By the said letter, the Petitioner was also invited by the ICC to nominate its nominee Arbitrator, but, as mentioned hereinbefore, instead of nominating its Arbitrator, the Petitioner once again requested Devas to convene the Senior Management Meet on 27th July, 2011, in terms of the Agreement. Simultaneously, the Petitioner appointed a former Judge of this Court, Mrs. Sujata V. Manohar, as its Arbitrator and informed the ICC Court accordingly.
Simultaneously, the Petitioner appointed a former Judge of this Court, Mrs. Sujata V. Manohar, as its Arbitrator and informed the ICC Court accordingly. However, disputes were also raised by the Petitioner with the ICC that since the Agreement clearly intended that the arbitration proceedings would be governed by the Indian law, which was based on the UNCITRAL model, it was not available to the Respondent to unilaterally decide which of the rules were to be followed. It was only thereafter that the Petitioner took recourse to the provisions of Section 11(4) of the 1996 Act, giving rise to the questions which have been set out hereinbefore in paragraph 11, of which only one has survived for our consideration. 32. Sub-Section (6) of Section 11 of the 1996 Act, quite categorically provides that where the parties fail to act in terms of a procedure agreed upon by them, the provisions of Sub-Section (6) may be invoked by any of the parties. Where in terms of the Agreement, the arbitration clause has already been invoked by one of the parties thereto under the I.C.C. Rules, the provisions of Sub-section (6) cannot be invoked again, and, in case the other party is dissatisfied or aggrieved by the appointment of an Arbitrator in terms of the Agreement, his/its remedy would be by way of a petition under Section 13, and, thereafter, under Section 34 of the 1996 Act.” 4. Learned Single Judge of Madhya Pradesh High Court in Mukesh Kumar Agarwal vs. Raj Kumar Agarwal and others, AIR 2000 Madhya Pradesh 231 has held that when the Arbitrator has been appointed by some partners, the Chief Justice or his designate cannot exercise powers under section 11 thereafter on application of remaining partners irrespective of fact whether arbitrator was appointed validly or not. Learned Single Judge has held as under:- “10. In the opinion of this Court, the question of appointment of an arbitrator is given to an authority other than the parties, be it, the Chief Justice or any person or any institution designated by him, is confined to the cases where the parties themselves do not appoint the arbitrator or arbitrators; or they conduct themselves in such a manner as no arbitrator can be appointed by them.
As per the scheme of Section 11 of the Act, where the parties have fixed the prior procedure, or when they have not fixed any procedure, it is first they should try to appoint an arbitrator or arbitrators. Only on their failure to do so, the Chief Justice or any person or institution designated by him comes into play. This scheme of Section 11 of the Act has to be kept in mind while interpreting Sub-section (6) of Section 11 of the Act. 11. In my opinion, the words in Clause (a) of Sub-section (6) of Section 11 of the Act are confined to total failure of the action on the part of the parties and it does not include wrong action of a party which may even be illegal. Once, the parties have appointed an arbitrator or arbitrators right or wrong, there is procedure provided in the Act to challenge his authority. The applicant cannot by-pass that procedure and directly file an application under Section 11 of the Act before the Chief Justice or the person or institution designated by him. This is clear from Section 12 of the Act read with Section 13 thereof. That apart, the jurisdiction of the Arbitration Tribunal can be challenged under Section 16(1) of the Act. Therefore, once the arbitrator has already been appointed there is no occasion for the Chief Justice or his designate to exercise his powers under Section 11 of the Act. The arbitrator is already seized of the matter and it is for him to decide whether he was validly or invalidly appointed. 13. Moreover, the learned counsel for the non-applicants No. 1, 2 and 3 is right in his submission when he says that the applicant had already submitted to the jurisdiction of the District Judge by filing an application under Section 12 of the Act. This procedure could be adopted by the applicant only when he thought that initial appointment of the arbitrator was good and valid. Now, at this stage he cannot ignore that order which says that the Court had power to consider the application under Section 12 or Section 14 of the Act; provided the applicant had taken recourse to the procedure followed under the Ad.
Now, at this stage he cannot ignore that order which says that the Court had power to consider the application under Section 12 or Section 14 of the Act; provided the applicant had taken recourse to the procedure followed under the Ad. Accordingly, the learned Counsel for the non-applicants No. 1, 2 and 3 rightly contends that this order cannot be ignored as a nullity without it being set aside by a Court of competent jurisdiction. No such proceedings were taken up by the applicant and, there-fore, he is estopped from filing this application under Section 11 of the Act. This argument seems to have some substance because there are two Division Bench decisions of this Court in Union of India v. Central Government Indus trial Tribunal-cum-Labour Court, Jabalpur, reported in 1979 MPLJ 808 : (1980 Lab IC 361) and also in New India Assurance Co., Ltd. v. Dalbir Singh Khera reported in 1980 MPLJ 587 : (1981 Lab IC NOC 19), holding that an order passed by a Court of competent jurisdiction cannot be deemed to be a nullity unless it is set aside. However, I do not give any final opinion on this point because I have come to the conclusion that application under Section 11 of the Act does not lie in this case. This M.C.C. is accordingly, dismissed. No costs.” 5. AIR 2000 Madhya Pradesh 231 has been relied upon by learned Single Judge of Madhya Pradesh High Court in Chhattisgarh Mines and Minerals vs. Managing Director and Another, 2001 (2) MPHT 174 . Learned Single Judge has held as under: “22. However, to reiterate in the instant case the situation is different and admittedly the sole arbitrator has already been appointed by the respondent No. 1 as per letter (Annexure R-3) dated 30-5-2000. In fact, it appears that the arbitrator has also already started functioning and has issued notice to the respondents for hearing. The arbitrator is thus already seized with the matter. In the circumstances, there is no question of appointment of another arbitrator as prayed of the petitioner.” 6.
In fact, it appears that the arbitrator has also already started functioning and has issued notice to the respondents for hearing. The arbitrator is thus already seized with the matter. In the circumstances, there is no question of appointment of another arbitrator as prayed of the petitioner.” 6. Similarly, learned Single Judge of Gauhati High Court in M/s Ranjul Baruah v. M/s. Numaligarh Refinery Ltd., AIR 2002 Gauhati 85 has held that a combined reading of both the sub-sections (5) and (6) of section 11 clearly indicates that the Chief Justice comes in only when the parties fail to act on an agreed procedure. But in a given case where the agreement provides alternatively the powers of appointment with either of the parties and the sole arbitrator is appointed by one of the parties so empowered under the agreement, such appointment cannot be treated as illegal or contrary to the provisions of law merely because the other party does not agree to the appointment of the person appointed by the party so empowered. Learned Single Judge has held as under: “9. Mr. P.C. Deka, learned sr. counsel also raised objection on the ground that they have not agreed to the appointment of Mr. Santosh Kumar Chandra and, hence, the sole arbitrator appointed by the applicant has no jurisdiction to continue with the arbitration proceedings. But the agreement nowhere indicates that the sole arbitrator appointed by the Contractor from the panel forwarded by him has to be approved by the appointing authority. The power has been reserved with the Contractor to appoint one of such persons from the panel in the event of failure on the part of the appointing authority. Hence the appointment of the sole arbitrator in the instant case cannot be said to be contrary to the provisions of the arbitration agreement. 11. A combined reading of both the Sub-sections clearly indicates that the Chief Justice comes in only when the parties fail to act on an agreement procedure. But in a given case where the agreement provides alternately the powers of appointment with either of the parties and the sole arbitrator is appointed by one of the parties so empowered under the agreement, such appointment cannot be treated as Illegal or contrary to the provisions of law merely because the other party does not agree to the appointment of the person appointed by the party so empowered.
It cannot be treated as a case of failure of an agreement as referred to in Sub-section (2) and (6) of the Act. 12. In the instant case, the appointing authority failed to forward the panel of three names for selection by the Contractor. They also failed to select any person from the panel forwarded by the Contractor. It was only then the Contractor i.e. the applicant invoked his powers of appointment as perterms of the arbitration agreement. The words "unless the agreement on the appointment procedure provides other means for securing the appointment" incorporated in clause (e) of Sub-section (6) apparently operates as a clog on the objection raised by the petitioner company that they are not agreeable to the appointment of Mr. Santosh Kumar Chandra as the sole arbitrator. The appellant Company in the instant case undoubtedly failed to act as per terms of the agreement which resulted in devolution of the powers of appointment with the Contractor. The appointment of the sole arbitrator by the Contractor on the above contingency has been in compliance with the terms of agreement in letter and spirit. Therefore, the instant case cannot be treated as one for the Chief Justice to interfere and appoint the sole arbitrator. 13. In the instant case. I do not find any illegality in the appointment of Shri Santosh Kumar Chadnra as the sole arbitrator. The grounds for challenge as provided in Section-12 have not been set in motion in this case. Even then, Section 13 provides that such a challenge has to be decided by the arbitral Tribunal. This provision clearly ousts the jurisdiction of the Court in such matters.” 7. Learned Single Judge of Punjab and Haryana High Court in Som Datt Builders Pvt. Ltd. v. State of Punjab and others, AIR 2006 Punjab and Haryana 124 has held that when the arbitral tribunal is seized of disputes between the parties, constitution of another arbitral tribunal in respect of those very issues which are already pending adjudication is without jurisdiction. Learned Single Judge has held as under: “15. As per the case of the petitioner, the respondent has failed to comply with the final and binding decision of Engineer. The remedy in the agreement is to an arbitration in accordance with Sub-clause 67.4 read with Sub-clause 67.3.
Learned Single Judge has held as under: “15. As per the case of the petitioner, the respondent has failed to comply with the final and binding decision of Engineer. The remedy in the agreement is to an arbitration in accordance with Sub-clause 67.4 read with Sub-clause 67.3. Thus, the decision of the Engineer is final subject to adjudication of dispute in terms of Sub-clause 67.3 of the agreement. If such claim is required to be adjudicated under the aforesaid provisions, the respondent has a right to establish before the Arbitral Tribunal that the decisions of the Engineer in respect of Claim Nos. 1, 3 and 4 are not legally or factually sustainable. The failure to lodge any protest within the time prescribed cannot be extended to mean that the Arbitral Tribunal is denuded of the power and jurisdiction to adjudicate the dispute between the parties. The reference of dispute to the arbitration itself connotes that the Arbitral Tribunal has to decide on the legality, validity and justifiability of the claim of the parties. The Arbitral Tribunal constituted at the instance of petitioner is not analogous to Executing Court but is required to decide the claim raised by the petitioner on merits. Respondent No.1 has a right to prove before such Arbitral Tribunal that the claims of the petitioner, though decided by the Engineer, are not sustainable either in law or in fact. Thus, when an Arbitral Tribunal is seized of the disputes between the parties, the constitution of another Arbitral Tribunal in respect of those very issues, which are already pending adjudication is clearly without jurisdiction and not sustainable. All issues arising between the parties are required to be decided in one proceedings. The constitution of another Tribunal is neither contemplated under the agreement between the parties nor under any of the provisions of law. 16. The argument raised by learned Counsel for respondent No. 1 that the petitioner is bound to raise objections regarding the constitution of the Arbitral Tribunal before the Tribunal itself in terms of Section 16 of the Act is not justified. The action suggested by the respondent will lead to totally anomalous situation whereby two parallel Tribunals are permitted to continue adjudication on the same dispute and, thus, giving rise to possibility of contradictory decisions.
The action suggested by the respondent will lead to totally anomalous situation whereby two parallel Tribunals are permitted to continue adjudication on the same dispute and, thus, giving rise to possibility of contradictory decisions. Apart from such possibility of conflict of decision, it will be sheer wastage of public time and energy of all parties in conduct of proceedings before the Arbitral Tribunal constituted at the instance of respondent No. 1 when, admittedly, both the Tribunals are to resolve the disputes arising out of the decision of the Engineer in respect of Claims No. 1, 3 and 4. This Court cannot permit patently illegal and arbitrary action of the State in constituting Arbitral Tribunal in respect of subject matter which is already pending consideration before another Tribunal. Therefore, we are of the opinion that continuance of proceedings before the Arbitral Tribunal consisting of respondents No. 3 and 4 is wholly illegal, unwarranted and, thus, not sustainable in law.” 8. Learned Single Judge of Allahabad High Court in Civil Misc. Application No. 361506 of 2012, decided on 6.3.2013, titled Suresh Chand Agarwal and another vs. Mahesh Kumar Agarwal and others has held that in view of specific provisions of sections 12 to 15 of the Act, which provides for procedure for challenging the jurisdiction of the Arbitrator and for termination of his mandate, the respondents could not invoke the inherent jurisdiction of the Court. Learned Single Judge has held as under: “8. The above scheme of the Act is implicit from the reading of Sections 5, 12, 13, 14, 15 and 16 of the Act. 9. Section 5 of the Act aims to minimise the intervention of the courts in the matters of arbitration. 10. Section 12 of the Act provides that the authority of the Arbitrator may be challenged if the circumstances so exists and give rise to justifiable doubts as to the independence or impartiality of the Arbitrator or where he does not possess the qualifications agreed to by the parties. The procedure of challenge has been described in Section 13 of the Act which provides that intending party can challenge the authority of the Arbitrator by sending to the Arbitral Tribunal a written statement of the reasons on which its authority is being questioned within 15 days of acquiring knowledge of the constitution of the Arbitral Tribunal.
The procedure of challenge has been described in Section 13 of the Act which provides that intending party can challenge the authority of the Arbitrator by sending to the Arbitral Tribunal a written statement of the reasons on which its authority is being questioned within 15 days of acquiring knowledge of the constitution of the Arbitral Tribunal. The Arbitrator on his authority being challenged has an option to withdraw from his office or to decide on the challenge. Once the challenge is unsuccessful, the Arbitral Tribunal can continue the proceedings and make the award whereupon it would be challenged as provided under Section 34 of the Act including the adjudication of the mandate of the Arbitrator. 11. Section 14 of the Act provides for the circumstances in which the mandate of an Arbitrator shall stand determined and where the controversy regarding the termination of the mandate survives it enables the parties to the dispute to apply to the court to decide on the termination of the mandate. It is only on termination of the mandate of the Arbitrator that an Arbitrator can be replaced and a substitute Arbitrator can be appointed as provided under Section 15 of the Act. It is important to note that, if not otherwise terminated, the mandate of the Arbitrator can only be terminated by the court as provided under Sections 14 and 15 of the Act and the court referred to therein means civil court of original jurisdiction in a district having jurisdiction to decide the question forming the subject matter of the arbitration had it been subject matter of the suit. 12. Section 16 of the Act gives ample power to the Arbitral Tribunal to rule on its jurisdiction which impliedly oust the jurisdiction of this Court in this connection. 16. Thus, in view of the specific provisions of Section 12 to15 of the Act which provides for procedure for challenging the jurisdiction of the Arbitrator and for termination of his mandate, the respondents cannot invoke the inherent jurisdiction of this Court under Section 151 C.P.C. 18. In paragraph 20 it lays down that the party who proposes to challenge the jurisdiction of the Arbitrator on the ground of independent and impartiality, has to make a challenge before the Arbitral Tribunal itself as provided under Section 12 of the Act by adopting the procedure laid down in Section 13 of the Act.” 9.
In paragraph 20 it lays down that the party who proposes to challenge the jurisdiction of the Arbitrator on the ground of independent and impartiality, has to make a challenge before the Arbitral Tribunal itself as provided under Section 12 of the Act by adopting the procedure laid down in Section 13 of the Act.” 9. Accordingly, there is no merit in the petition and the same is dismissed. However, liberty is reserved to the petitioner to challenge the appointment order in accordance with law. No costs.