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2017 DIGILAW 1217 (ALL)

KOTAK MAHINDRA BANK LTD. v. STATE OF U. P.

2017-05-08

ARUN TANDON, REKHA DIKSHIT

body2017
JUDGMENT : By the Court.—These are two writ petitions (being Writ-C Nos. 12494 of 2017 and 12498 of 2017) filed by Kotak Mahindra Bank Limited seeking a writ of mandamus directing the Arbitrator, namely, the District Collector (C.A.L.A.), Ghaziabad to consider and decide Arbitration Case No. 3863 of 2016, Kotak Mahindra Bank Ltd. v. State of U.P. and others, and Arbitration Case No. 3862 of 2016, Kotak Mahindra Bank Ltd. v. State of U.P. and others, respectively within the time to be fixed by this Court. 2. Facts in short relevant for deciding the present writ petitions are as under : The respondent No. 6 has an outstanding liability towards the Bank amounting to Rs. 572 crore and odd. The financial assistance provided was secured by way of hypothecation. The respondent No. 6 is said to have committed default in payment of principal as well as the interest amount. The records reflect that even after the settlement between the parties arrived at before the Apex Court in Special Leave Petition (C) No. 35004 of 2011, proceedings under Section 13 (2) of the SARFASI Act, 2002 had to be initiated by the Bank against the respondent No. 6. Proceedings under Section 19 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 are also said to have been initiated. The land, which was mortgaged, was acquired under notification issued in exercise of power under Section 3-A of the National Highways Act, 1956 published on 23.11.2009 followed by a notification under Section 3-A (3) of the same Act published on 5.12.2009. Thereafter, notifications under Section 3-D(1) & 3-G(3) of National Highways Act, 1956 were published on 9.8.2012 & 13.9.2012 respectively in the two newspapers namely ‘Dainik Hindustan’ and ‘The Times of India’. 3. The Acquisition Authority awarded a sum of Rs. 25 crore 77 lakh and odd in respect of the village in question. It is stated that the DRT has made a decree on admission for a sum of Rs. 133 crore 70 lakh and odd in favour of the petitioner bank. The petitioner Bank being a secured creditor has, therefore, made an application, which has been registered as Arbitrator Case Nos. 3863 of 2016 before the District Collector (Arbitrator), Ghaziabad for enhancement of the compensation of the land which was mortgaged with it. 133 crore 70 lakh and odd in favour of the petitioner bank. The petitioner Bank being a secured creditor has, therefore, made an application, which has been registered as Arbitrator Case Nos. 3863 of 2016 before the District Collector (Arbitrator), Ghaziabad for enhancement of the compensation of the land which was mortgaged with it. The arbitrator, namely, the District Collector on 16.2.2016 entered upon the reference and issued notice to concerned parties to appear before him on 23.2.2016. 4. It is the case of the petitioner that the arbitrator has to make his award within 12 months of the date the arbitrator enters upon the reference and since this period has already expired in the month of February, 2017, the writ petitioner has approached this Court for directing the respondent No. 1 to decide the Arbitration Case No. 3863 of 2016 in a time bound manner. 5. Learned Counsel for the petitioner points out that under Section 29-A of the Act, the outer limit of 12 months fixed under sub-section (1) can be extended for a further period of six months with the consent of the parties. It is submitted that this extended period of six months, in the facts of the case, would expire sometime in the month of August, 2017. 6. Taking note of the aforesaid factual situation, we passed an order on 20.4.2017 requiring the petitioner and respondents Nos. 3 and 4 to inform the Court as to whether they were willing for the extension of time for making of the award in terms of clause 3 of Section 29(1) or not. 7. Today, when the matter has been taken up, learned counsel for the respondent No. 6 and learned counsel for the National Highways Authority and Project Director have stated that they are not willing to extend the time for making of the award. 8. We have been informed that in respect of the same acquisition, two arbitral proceedings have been initiated by the respondent Nos. 6 which are pending before the District Magistrate. Thus, the facts before us are that the arbitrator has not been able to make the award within the time specified and as per the time limit fixed under Section 29-A of the Arbitration and Conciliation Act, 1996, i.e., the period of 12 months has expired and the parties to the arbitration are not willing to extend the time any further. 9. 9. Section 29-A (4) provides that if the award is not made within the period specified in sub-section (1) or the extended period specified under sub-section (3), the mandate of the arbitrator shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period. It has been provided that while extending the period under this sub-section, if the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator not exceeding five per cent for each month of such delay. However, Section 15 (2) of the Act provides that arbitrator can be replaced where the mandate of an arbitrator terminates. 10. From a simple reading of the aforesaid provisions, it would be clear that time limit fixed under Section 29-A of the Arbitration and Conciliation Act can be extended with the consent of the parties for a further period of six months without reference to any order of the Court and, thereafter, it is the Court which gets the power to extend the time. Further in case the proceedings have been delayed for reasons attributable to the arbitral tribunal, the Court may direct reduction of fees of the arbitrators by not exceeding five per cent for each month of such delay. Section 29A (5) contemplates of making of an application by the parties also for the purpose. Sub-section (6) of Section 29A confers further power upon the Court to substitute the arbitrator while exercising its power under Sub-section (4) and in that circumstance, the arbitration shall be continued from the stage already reached. 11. In our opinion, the purpose of Section 29-A read with various sub-sections and Section 15 of the Act is to ensure that arbitral awards are made within the time specified and in any case without any unnecessary delay. The consequence of termination of the mandate of the arbitrator for not making the award within the time specified is that he might be saddled with the reduction of fee if the Court decided to extend the time or the Court may appoint another arbitrator. 12. In the case at hand, we find that arbitrator is none other than the District Collector and there are no allegations of mala fide against the arbitrator of having delayed the making of the award. 12. In the case at hand, we find that arbitrator is none other than the District Collector and there are no allegations of mala fide against the arbitrator of having delayed the making of the award. In our opinion, the respondents to the present writ petition will gain nothing by not giving consent to the extension of the time for making of the award by the arbitrator as contemplated under Section 29-A(3). The adjudication of the arbitral proceedings has to take place and the arbitrator has to examine the claim of the parties. The procedure to be followed if one of the party refuses to grant the consent, in our opinion, would be more cumbersome than the simple consent being given by the parties to the arbitral proceedings for extension of time for making of the award in the facts of the case. In our opinion, it would be in the interest of both the parties before the arbitrator to ensure that the arbitral proceedings are brought to its logical end and the award is made at the earliest possible. It serves nobody’s purpose by requiring the parties to again approach the Court for extension of time or for replacement of the arbitrator. 13. In view of the aforesaid facts on record, we are more satisfied that a clear case for mandamus being issued to the arbitrator to make his award within two months is made out and for the purpose, we turn down the objection raised on behalf of the contesting parties. We are conscious of the fact that power to extend the time is otherwise available with the Court of original jurisdiction in view of the definition of Court contained in Section 2-E of the Act but interest of substantial justice requires that such power may be exercised by us for cutting short further litigation. 14. In view of the aforesaid, the writ petitions are allowed. The time for making of the award by the arbitrator is extended upto 15th of July 2017 by which date the arbitrator must make the award in Arbitration Case Nos. 3863 of 2016 and 3862 of 2016. 15. It may be recorded that the counsel for the respondent No. 6 has objected to making of the application for arbitration by the bank. We leave all the issues to be examined by the Arbitrator at the first instance.