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2018 DIGILAW 840 (CAL)

Sadananda Das v. State Of West Bengal

2018-11-27

SABYASACHI BHATTACHARYYA

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JUDGMENT : SABYASACHI BHATTACHARYYA, J. 1. The present challenge has been preferred against an order dated February 1, 2018 whereby the District Judge at Alipore granted stay of all further proceedings pending before an arbitral tribunal, in connection with an application under Section 14(1) of the Arbitration and Conciliation Act, 1996, registered as Miscellaneous Case No. 56 of 2018, filed by the opposite party. 2. Learned senior counsel for the petitioner argues that the impugned order is entirely devoid of reason. The semblance of reason attributed in the impugned order, it is argued, does not even pertain to the grant of stay or prima facie case in respect of the application under Section 14 of the 1996 Act, but relates to the merits of the arbitral dispute itself. It is submitted that the case sought to be made out in the proceeding under Section 14 is that the arbitrator did not act impartially in closing the arguments of the present opposite party on the slightest pretext, however, granting several adjournments to the petitioner. Such allegation was not even discussed prima facie in the impugned order. 3. It is further argued on behalf of the petitioner that the 2015 Amendment to the 1996 Act apply to the present case. For such purpose, learned counsel places reliance on a judgment reported at [Board of Control for Cricket in India vs. Kochi Cricket Private Limited and others, (2018) 6 SCC 287 ]. 4. It is further argued that the scope of the dispute raised by the present opposite party in the proceeding under Section 14 of the 1996 Act is covered by Section 18 of the said Act. Even if it could be argued that Section 12 of the said Act also covers the allegation of impartiality, a challenge in that regard would lie before the arbitral tribunal itself, under Section 13 of the Act. Any decision rendered under Section 13, or violation of Section 18, would logically culminate in a composite challenge under Section 34 of the 1996 Act, when the final award was challenged. 5. It is thus argued that the scope of Section 14 was on an entirely different footing and could not be equated with a challenge under Section 13, which covered the present allegations. 5. It is thus argued that the scope of Section 14 was on an entirely different footing and could not be equated with a challenge under Section 13, which covered the present allegations. Learned counsel for the petitioner cites a judgment reported at [HRD Corporation (Marcus Oil and Chemical Division) vs. GAIL (India) Limited (Formerly Gas Authority of India Limited), (2018) 12 SCC 471 ] in order to elaborate the scheme of the 1996 Act, in respect of challenges contemplated respectively in Section 12 and Section 14 of the 1996 Act. 6. It is further argued that since in the present case, an arbitrator was appointed under Section 11 of the 1996 Act by this Court, a further appointment under Section 14 would give rise to an absurdity. 7. Learned counsel for the petitioner next argues that a third case was made out by the District Judge, de hors the allegations levelled in the application under Section 14 of the 1996 Act, which was an illegal exercise of jurisdiction. 8. Moreover, no criteria for grant of stay at an interim stage, including urgency, was recorded in the impugned order. 9. Accordingly, the petitioner argues that the impugned order ought to be set aside. 10. Learned senior counsel appearing for the opposite party submits, on the other hand, that in the event an allegation of bias/partiality is raised against the arbitrator, the remedy available to the alleging party is not restricted to Section 13 of the 1996 Act, on the ground enumerated under Section 12 of the said Act. The said party need not wait for the final award to mount a challenge under Section 34 of the said Act but can immediately approach the Court under Section 14(2) of the Act to have an immediate remedy and not be compelled to carry on with the arbitral proceedings unnecessarily. 11. In this context, learned senior counsel cites the following judgments: (i) OPBK Construction Pvt. Ltd. vs. Punjab Small Industries and Export Corporation Ltd. and Anr., (2008) 3 Arb LR 189 (P & H) (ii) [National Highways Authority of India vs. K.K. Sarin and Ors., (2009) 3 Arb LR 241 (Delhi)] (iii) [Raj Kumar Dua and Anr. 11. In this context, learned senior counsel cites the following judgments: (i) OPBK Construction Pvt. Ltd. vs. Punjab Small Industries and Export Corporation Ltd. and Anr., (2008) 3 Arb LR 189 (P & H) (ii) [National Highways Authority of India vs. K.K. Sarin and Ors., (2009) 3 Arb LR 241 (Delhi)] (iii) [Raj Kumar Dua and Anr. vs. Naresh Adhlakha and Ors., (2010) 3 Arb LR 301 (Delhi)] (iv) An un-reported judgment rendered on March 17, 2006 by a division bench of this Court in F.M.A.T. No. 956 of 2006 (BCCI vs. Jagmohan Dalmiya). 12. Relying on the aforesaid judgments, it is argued that a challenge under Section 14 and that under Section 13 of the 1996 Act can operate collaterally and have no conflict with each other. It is argued that, in order to avoid undue delay, the party challenging the authority of the arbitrator on the ground of partiality may very well approach the Court for the termination of the mandate of an arbitrator on the ground that the arbitrator has become de jure unable to perform his functions, which includes bias, instead of waiting for the final award to be challenged under Section 34 of the said Act. 13. It is further argued on behalf of the opposite party that, even if the reasons given in an order are unhappy or fall short of the standard of expectation behoving a Court of law, this Court could supply reasons and affirm the said order if the conclusion was correct, since it was not the fault of the beneficiary party that proper reasons were not attributed. 14. It is further pointed out that, after the impugned order, several opportunities were available to the present petitioner, since the interim order challenged herein was extended from time to time, on occasions in presence of the petitioner. The petitioner, however, chose to wait for about four months to challenge the initial order. As such, the petitioner has not come with clean hands and the present revision ought to be dismissed, at best with a direction on the District Judge to dispose of the main challenge under Section 14 of the said Act of 1996 as expeditiously as possible. 15. As such, the petitioner has not come with clean hands and the present revision ought to be dismissed, at best with a direction on the District Judge to dispose of the main challenge under Section 14 of the said Act of 1996 as expeditiously as possible. 15. Upon hearing the parties, this Court arrives at the following decision: As regards the applicability of the 2015 Amendment to the 1996 Act, it is seen from the records that the present arbitral proceeding was commenced, and even the arbitrator was appointed under Section 11 of the Act, prior to the said Amendment having come into force. As such, it is settled as well as mandated by the scheme of the Amendment, that the Amendment is prospective in operation and thus, would not apply to the present case. The judgment of BCCI vs. Kochi Cricket Private Limited (supra) primarily pertained to a proceeding for enforcement of an arbitral award under Section 36 of the 1996 Act, equating the same to an execution proceeding under the Code of Civil Procedure and discussing the effect thereof on the said section. Such a consideration is not germane or applicable to the present case, which relates to a different aspect altogether, as to the inter-relationship between the scope of challenge under Sections 12 and 13 on the one hand and Section 14 on the other. Hence the contentions of the petitioner that the 2015 Amendment should weigh with the Court while adjudicating the present revision cannot be accepted. 16. The judgment of HRD Corporation (supra) also is not applicable in terms to the present case, since the said judgment primarily dealt with the effect of the Fifth and Seventh schedules, brought in by the 2015 Amendment and, as held above, are not valid yardsticks for the present consideration. 17. Now, considering the respective scopes of Section 13 (read with Section 12) and Section 14 of the 1996 Act, as they stood before the 2015 Amendment, one has to take into account the initial deviation of the Indian Arbitration and Conciliation Act of 1996, vis Article 13 of the UNCITRAL Model Law on International Commercial Arbitration (1985) (as adopted by the United Nations Commission on International Trade Law on 21 June 1985). The said article is reproduced herein below: “Article 13 - Challenge procedure: 1. The said article is reproduced herein below: “Article 13 - Challenge procedure: 1. The parties are free to agree on a procedure for challenging an arbitrator, subject to the provisions of paragraph (3) of this article. 2. Failing such agreement, a party which intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstance referred to in article 12(2), send a written statement of the reasons for the challenge to the arbitral tribunal. Unless the challenged arbitrator withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge. 3. If a challenge under any procedure agreed upon by the parties or under the procedure of paragraph (2) of this article is not successful, the challenging party may request, within thirty days after having received notice of the decision rejecting the challenge, the court or other authority specified in article 6 to decide on the challenge, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal, including the challenged arbitrator, may continue the arbitral proceedings and make an award.” 18. It is relevant to note that in the above model provision, a request by a party challenging the authority of the arbitrator on the ground of bias was before a Court, to decide on the challenge, was provided for in case of the arbitrator rejecting the challenge. 19. However, when the spirit of the said provision of the model law was borrowed in the Indian law, the latter curated such interim challenge against the decision of the arbitrator and the only option for challenge was left in the form of an application under Section 34 of the Indian Act against the final award. 20. In this context, the provision of Section 13 of the Arbitration and Conciliation Act, 1996 (the Indian Law) is set out below: “Section 13. Challenge procedure. - (1) Subject to sub-section (4), the parties are free to agree on a procedure for challenging an arbitrator. 20. In this context, the provision of Section 13 of the Arbitration and Conciliation Act, 1996 (the Indian Law) is set out below: “Section 13. Challenge procedure. - (1) Subject to sub-section (4), the parties are free to agree on a procedure for challenging an arbitrator. (2) Failing any agreement referred to in sub-section (1), a party who intends to challenge an arbitrator shall, within fifteen days after becoming award of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in sub-section (3) of Section 12, send a written statement of the reasons for the challenge to the arbitral tribunal. (3) Unless the arbitrator challenged under sub-section (2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge. (4) If a challenge under any procedure agreed upon by the parties or under the procedure under sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award. (5) Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with Section 34. (6) Where an arbitral award is set aside on an application made under sub-section (5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees.” 21. The basis for challenge under Section 13, on the ground of partiality, finds place in Section 12 of the 1996 Act. The said section (as it stood before the 2015 Amendment), was as follows: “Section 12. Grounds for challenge. - (1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. (2) An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in sub-section (1) unless they have already been informed of them by him. (3) An arbitrator may be challenged only if - (a) Circumstances exist that give rise to justifiable doubts as to his independence or impartiality; or (b) He does not possess the qualifications agreed to by the parties. (3) An arbitrator may be challenged only if - (a) Circumstances exist that give rise to justifiable doubts as to his independence or impartiality; or (b) He does not possess the qualifications agreed to by the parties. (4) A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.” 22. Section 14 of the 1996 Act reads as follows: “14. Failure or impossibility to act. - (1) The mandate of an arbitrator shall terminate if - (a) He becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and (b) He withdraws from his office or the other parties agree to the termination of his mandate. (2) If a controversy remains concerning any of the grounds referred to in clause (a) of sub- section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate. (3) If, under this section or sub-section (3) of Section 13, an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or sub-section (3) of section 12.” 23. Section 18 of the 1996 Act is as follows: “Section 18. Equal treatment of parties. - The parties shall be treated with equality and each party shall be given a full opportunity to present his case.” 24. A consideration of the unreported judgment cited by the opposite party reveals that the said division bench judgment was rendered in an entirely different context than the present case. The consideration there was, inter alia, that the appellate court was invested with the same power as the Trial Judge in view of the specific provisions contained in Sections 107 and 108 read with Order XLI Rule 24 and Order XLIII Rule 2 of the Code of Civil Procedure. As such, appropriate reasons could be supplied by the appellate court if the Trial Judge fell short of reasons. 25. As such, appropriate reasons could be supplied by the appellate court if the Trial Judge fell short of reasons. 25. However, in the present case, the impugned order does not merely suffer from a dearth of reasons but suffers from an incurable defect as to the District Judge having applied entirely irrelevant yardsticks in granting the stay. At the stage of hearing of the stay application, that too at the ad interim stage, the District Judge referred to the disputes involved in the main arbitral proceeding, not devoting a single sentence to the prima facie case involved in the application under Section 14 of the 1996 Act and/or to the other yardsticks of urgency and otherwise, which governed the grant of ad interim stay. As such, the defect is not merely one of paucity of reasons but goes to the root of the impugned order, inasmuch as incorrect legal yardsticks were applied by the Court below, which were foreign to the proceeding under Section 14 of the 1996 Act. 26. As regards the question of maintainability of the proceeding under Section 14 in the light of the allegation of bias, it is essential to look into the scheme of the 1996 Act in that regard. Even a cursory comparison between Article 13 of the UNCITRAL Model Law and Section 13 of the 1996 Act would reveal that the Indian legislature deliberately curated out the provision for an interim challenge against the decision of an arbitral tribunal on a challenge to itself, in all probability to speed up disposal of arbitral proceedings, which is an alternative dispute redressal mode. 27. Even the promulgation of the 1996 Act and the recent amendments thereto, in consonance with the current changes brought about in 2006 in the Model Law, all indicate an attempt to give primacy to expeditious redressal in commercial disputes by giving more and more power to the arbitral tribunal. The arbitration culture, although still at a nascent stage in our country, is on the fast-track path of growth and is speedily gaining momentum. 28. The arbitration culture, although still at a nascent stage in our country, is on the fast-track path of growth and is speedily gaining momentum. 28. In such a scenario, since the legislature of India, in its wisdom, culled out the interim challenge against an arbitrator's ruling on her/his own bias, and provided a remedy in the final challenge under Section 34 against the award ultimately passed by the arbitrator, it would be unwise to carve out a different provision in the statute by imposing the will of the judiciary on such scheme of things. A combined reading of Sections 12, 13 and 14 of the 1996 Act of the Arbitration and Conciliation Act of 1996 makes it clear that the challenge under Section 13 on the premise of grounds enumerated in Section 12, operates in a different field than Section 14 of the 1996 Act. 29. In the event bias was intended to come within the broad purview of de jure inability, as contemplated in Section 14 of the 1996 Act, the same would be specifically enumerated therein. In contrast, since Section 12(3)(a) specifically stipulates challenge to an arbitrator in the event of existence of circumstances that give rise to justifiable doubts as to his independence or impartiality, and since the arbitrator has been specifically provided as the only forum for such a challenge under Section 13 of the said Act, where no further challenge to such decision of the arbitrator is provided, no such interim challenge should be read into the scheme of the Act, de hors the intention of the legislature. 30. Moreover, Section14 provides the Court as the forum for challenge and does not provide for a further forum for appeal there from. 31. On the other hand, a challenge under Section 34 of the 1996 Act can be taken out against an interim decision of the arbitrator with regard to her/his own bias, which is further amenable to challenge under Section 37 of the 1996 Act. This would rob both the parties of an additional forum if a challenge is preferred under Section 14, instead of Section 13 on the ground of bias of the arbitrator. 32. This would rob both the parties of an additional forum if a challenge is preferred under Section 14, instead of Section 13 on the ground of bias of the arbitrator. 32. On a more basic consideration, it could be absurd that the legislature intended, in the same breath, a challenge on the ground of bias before the arbitrator as well as the superior forum, that is, the Court, the latter also being the forum for a challenge under Section 34 against the final award of the arbitrator. In order to avoid this absurdity, the only plausible interpretation would be that a party has to wait for the final award and challenge the ruling of the arbitrator on her/his own bias under Section 34 of the 1996 Act, thereby also incorporating the principle laid down in Section 18 of the 1996 Act. 33. An interim challenge, if read into Section 14, would defeat the scheme of the law on arbitration, which is biased in favour of speedy disposal before the alternative forum of an arbitral tribunal and to ease the burden off the constitutional judicial hierarchy of the country. Moreover, such a challenge, after exhausting the arbitral forum under Sections 12 and 13 of the 1996 Act, would amount to providing an appeal under Section 14 against an adjudication under Section 13 of the Act, which was specifically and deliberately omitted by the Legislature. 34. In the light of the above discussions, with utmost respect to the judicial wisdom of the concerned Single Judges of the Delhi and Punjab and Haryana High Courts, this Court is of the opinion that the view expressed in the judgments of the said Courts, cited by the opposite party, is not in consonance with the scheme of the Arbitration and Conciliation Act, 1996 and thus, is not good law. The application under Section 14 of the 1996 Act, filed by the opposite party is prima facie not maintainable in law. 35. As regards the opportunities given respectively to the parties by the arbitrator and the merits of the proceeding under Section 14 of the Arbitration and Conciliation Act, 1996, it would be premature for this Court to come to any conclusion in that regard, more so when this Court is of the specific opinion that, prima facie, the said application under Section 14 is not maintainable in law. 36. 36. Accordingly, C.O. No. 1676 of 2018 is allowed on contest, thereby setting aside the impugned order and all consequential extensions of such order granted by the District Judge, and requesting the District Judge at Alipore, District: South 24 Parganas to dispose of Miscellaneous Case No. 56 of 2018 as expeditiously as the business of the said Court permits, preferably within three months from the date of communication of this order to the Court below. 37. It is however, made clear that the observations made herein are prima facie, tentative and arrived at for the purpose of deciding the present revisional application and the prayer for stay only. The District Judge will be free to decide the miscellaneous case in accordance with law, without being unduly influenced by any of the observations made herein. 38. There will be no order as to costs. 39. Urgent certified website copies of this order, if applied for, be made available to the parties upon compliance with requisite formalities.