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Madhya Pradesh High Court · body

2019 DIGILAW 350 (MP)

Manoj Kumar Agrawal v. Nepa Limited

2019-05-01

SUJOY PAUL

body2019
ORDER : These matters are inter-connected and are arising out of same grievance of the petitioner and, therefore, on the joint request of the parties, matters were analogously heard and decided by this common order. 2. These matters have a chequered history. The parties have fought a long drawn battle in the corridors of the Courts. 3. Draped in brevity, the relevant factual backdrop is that in pursuance to a contract dated 29-10-2002 for sale of “coal ash”, between the parties it is third round of litigation for appointment of Arbitrator. 4. The case of the applicant is that when dispute arose, the respondents in the year 2007 appointed Mr. R. R. Sonwane, Dy. Manager, Nepa Ltd. as an Arbitrator. The applicant by filing M.C.C. No. 669/2007 prayed for change of Arbitrator. This application was dismissed with costs on 4-10-2007. Thereafter the applicant filed W.P. No. 7133/2008 in which this Court passed an interim order dated 20-8-2008 (Annexure-A/3A) and further proceedings before the Arbitrator were stayed. During the pendency of the said writ petition, the Arbitrator, namely, Shri R. R. Sonwane recused himself as an Arbitrator because he attained the age of superannuation. Thus, W.P. No. 7133/2008 was dismissed on 15-4-2014 having rendered in fructuous. The petitioner himself filed A.C. No. 19/2014 for appointment of an independent Arbitrator. This A.C. No. 19/2014 was dismissed on 18-6-2015. Lastly, the respondents appointed Mr. Ajay Goel, Dy. General Manager by order dated 10-7-2015 (Annexure-A/4B). The applicant raised objections against appointment of this Arbitrator by filing an application before the Court below under section 14(2) read with section 12(2) and (3) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”). The Court below by order dated 9-8-2017 dismissed the said application. Aggrieved, petitioner filed W.P. No. 12785/2017 before this Court which was allowed on 12-12-2018 and the Court below was directed to decide the matter expeditiously. In turn, by order dated 24-1-2019 (Annexure-A/5B), the Court below set aside the appointment of said Arbitrator mainly on the ground of delay in conducting and concluding the arbitration proceedings. 5. The applicant thereafter filed the present application under section 11(6) of the Act on 19-2-2019. The respondents were put to notice by order dated 20-3- 2019. Learned counsel for the respondents appeared on the very same day before this Court. The respondents by order dated 27-2-2019 (Annexure-P/11 with M.P.) appointed one Mr. 5. The applicant thereafter filed the present application under section 11(6) of the Act on 19-2-2019. The respondents were put to notice by order dated 20-3- 2019. Learned counsel for the respondents appeared on the very same day before this Court. The respondents by order dated 27-2-2019 (Annexure-P/11 with M.P.) appointed one Mr. Arun Mishra, DGM (Commercial) Nepa Limited as an Arbitrator to decide the dispute. The applicant has challenged this order dated 27-2-2019 in M.P. No. 1528/2019 whereas in A.C. No. 21/2019, the applicant has prayed for appointment of an independent and impartial Arbitrator by this Court. 6. The petitioner challenged the appointment of Departmental Arbitrator on the grounds : (i) there is no rule/condition in the agreement for appointment of an Arbitrator by way of replacement; (ii) the department wants to prolong the matters for years together and has committed fraud with present petitioner as well as with the Court. In support of this contention, reliance is placed on Para 5(i) of A.C. No. 21/2019. 7. Shri Manoj Kumar Agrawal further urged that more than a decade has elapsed but dispute has not been resolved. It will be a mockery of justice if every time the mandate of an Arbitrator is terminated or Arbitrator resigns or otherwise becomes unable to proceed, the applicant is required to start from scratch by invoking the arbitration clause. Reliance is placed in this regard on (2010) 2 SCC 385 , NBCC Ltd. vs. J. G. Engineering Private Limited. 8. Shri Manoj Kumar Agrawal urged that in the light of judgment of Supreme Court reported in (2015) 2 SCC 52 , Union of India and others vs. U. P. State Bridge Corporation Ltd., it is clear that proceeding under section 11(6) of the Act commences once an aggrieved party files an application under section 11(6) of the Act before the High Court. Reference is also made to (2006) 2 SCC 638 , Punj Lloyd Ltd. vs. Petronet MHB Ltd.. It is contended that once application under section 11(6) is filed before this Court, the opposite party had lost its right to appoint the Arbitrator as per the terms of the contract and the implication of the same is that the Court would be free to deviate from the terms of the contract. 9. It is contended that once application under section 11(6) is filed before this Court, the opposite party had lost its right to appoint the Arbitrator as per the terms of the contract and the implication of the same is that the Court would be free to deviate from the terms of the contract. 9. In the aforesaid backdrop, it is urged that it is a fit case where this Court may direct appointment of an Arbitrator. In support of the said contention, Shri Agrawal relied on 2012(4) M.P.L.J. (SC) 89, Bipromasz Bipron Trading SA vs. Bharat Electronics Ltd.. Although Shri Agrawal handed over a compilation of judgments, he placed reliance on the aforesaid judgments only during the course of argument. 10. Per contra, Shri Atul Nema, learned counsel for the respondents opposed the said prayer and placed reliance on the synopsis filed by Nepa Limited. It is urged that the issue of appointment of Arbitrator in terms of the agreement dated 29-10-2002 has already been decided by this Court on more than one occasion and said orders have attained finality. Thus, the petitioner cannot be permitted to reopen the same issue. Against the new Arbitrator, no malice, prejudice or bias is alleged by the applicant. Arbitrator was rightly appointed by the respondents in terms of the Clause 4 of the agreement dated 29-10-2002. Section 15(2) specifically provides that where mandate of an Arbitrator is terminated, a substituted Arbitrator shall be appointed according to the rules which were applicable to the appointment of Arbitrator which is now sought to be replaced. The rules include the terms of the agreements. The substituted Arbitrator has already been appointed by Nepa Limited by order dated 27-2-2019, which is in conformity with section 15(2) of the Act. 11. By placing reliance on (2009) 10 SCC 293 , S.B.P. and Company vs. Patel Engineering Ltd. and another Shri Atul Nema urged that the respondents are well within their jurisdiction to appoint an Arbitrator as per arbitration clause. Lastly, reliance is placed on a recent judgment of Supreme Court in Rajasthan Small Industries Corporation Limited vs. Ganesh Containers Movers Syndicate, (2019) 3 SCC 282 decided on 23-1-2019. On the strength of this judgment, it is submitted that in a case of this nature where arbitration proceedings commenced before recent amendment in the Arbitration Act, section 12(5) and Schedule mentioned therein cannot be made applicable. On the strength of this judgment, it is submitted that in a case of this nature where arbitration proceedings commenced before recent amendment in the Arbitration Act, section 12(5) and Schedule mentioned therein cannot be made applicable. Since applicant has lost the battle almost on same grounds previously and present Arbitrator has acted with quite promptitude and matter is at the stage of final hearing before him, no interference may be made. 12. In written synopsis, the respondents made an effort to explain that in previous round before this Court in W.P. No. 12785/2017, the current facts could not be produced before this Court for which Nepa Limited tenders apology and an attempt is being made to clarify certain facts which as per the stand of Nepa Limited were germane to decide the said writ petition. 13. No other point is pressed by the parties. 14. I have heard the parties at length and perused the record. 15. In view of the rival contentions of the parties, broadly following issues emerge for consideration : (i) Whether the department can appoint substituted Arbitrator under the existing arbitration clause ? (ii) Whether new Arbitrator can be permitted to proceed with the matter who was appointed after filing of A.C. No. 21/2019 ? (iii) Whether demand of applicant for appointment of an independent/impartial Arbitrator is justifiable in the facts and circumstances of the present case ? 16. I deem it proper to deal with all issues simultaneously. 17. So far contention of Nepa Limited mentioned in Para 12 of this order is concerned, suffice it to say that in this round, this Court is not required to relook into the said aspect and travel beyond and behind the order passed in the said writ petition on 12-12-2018. More so, when the said order was not called in question by the parties and it had attained finality and in furtherance thereof, the Court below has passed the order dated 24-1-2019. 18. The petitioner raised aforesaid issues in M.C.C. No. 669/2007. This Court in Para 6 of the order dated 4-10-2017 recorded that only question remains in this case is : whether petitioner is entitled for appointment of an independent Arbitrator or appointment of Mr. R. R. Sonwane is sufficient under law ? 18. The petitioner raised aforesaid issues in M.C.C. No. 669/2007. This Court in Para 6 of the order dated 4-10-2017 recorded that only question remains in this case is : whether petitioner is entitled for appointment of an independent Arbitrator or appointment of Mr. R. R. Sonwane is sufficient under law ? In the said case, the petitioner also attacked the appointment of departmental arbitrator on the ground that there are several litigations and complaints including some strictures by the Court so in place of departmental Arbitrator, this Court should appoint an independent Arbitrator. This Court turned down the said conditions by holding as under : “8. Now the third contention of petitioner is that the Chairman-cum- Managing Director of respondent was prejudiced with the petitioner because of several litigation and allegation of petitioner including some strictures by the Court, so in place of him this Court should appoint an Arbitrator. But in this case petitioner has not sought any relief for the change of arbitrator as required under section 12 of the Act. No relief has been prayed in this application, even by seeking amendment in the relief clause, and until and unless a specific relief is prayed by the petitioner in this regard, petitioner by merely filing a rejoinder cannot challenge the action of respondent, who appointed Shri R. Sonwane, Deputy Manager (Civil) as sole arbitrator. Apart from this under the agreement Chairman-cum- Managing Director is empowered to appoint an arbitrator. Petitioner made a request to him for appointment of an arbitrator and he exercising that power appointed an arbitrator within the time. It will be pertinent to mention here that in the rejoinder filed by the petitioner, petitioner has not alleged any allegations against Shri R. Sonwane, who has been appointed as arbitrator, except the letter Annexure-R-4 by which his identity was alleged to be unascertainable.” [Emphasis Supplied] 19. The applicant also filed an Arbitration Appeal No. 25/2010 which was decided by this Court on 7-5-2012. This Court deprecated the practice of applicant by raising same grounds again and again in the light of judgment of Supreme Court reported in (2009) 6 SCC 609 , Sardar Estates vs. Atma Ram Properties Private Ltd.). This arbitration appeal was dismissed with Rs. 10,000/- as costs. 20. The applicant also filed A.C. No. 19/2014 decided on 18-6-2015. This Court deprecated the practice of applicant by raising same grounds again and again in the light of judgment of Supreme Court reported in (2009) 6 SCC 609 , Sardar Estates vs. Atma Ram Properties Private Ltd.). This arbitration appeal was dismissed with Rs. 10,000/- as costs. 20. The applicant also filed A.C. No. 19/2014 decided on 18-6-2015. The argument of applicant that Chief Managing Director is prejudiced against him was rejected. It was clearly held that applicant failed to bring any instance which would establish that management was prejudiced against him and, therefore, prayer for appointment of independent Arbitrator was rejected by this Court. 21. In previous rounds of litigation, this Court did not agree with the contention of the applicant that substituted Arbitrator cannot be appointed as per the existing arbitration clause. 22. It is noteworthy that in (2006) 6 SCC 204 , Yashwith Constructions (P) Ltd. vs. Simplex Concrete Piles India Ltd. and another, it was held that as a normal practice, the Court will insist the parties to adhere to the procedure to which they have agreed upon. This would apply even while making the appointment of substitute arbitrator and the general rule is that such an appointment of a substitute arbitrator should also be done in accordance with the provisions of original agreement applicable to appointment of the arbitrator at the initial stage. This judgment was quoted with approval by Supreme Court in the case of U.P. State Bridge Corporation Ltd. (supra) on which heavy reliance is placed by the applicant. 23. No doubt, in certain eventualities, despite an existing arbitration clause, the Court can take a different view by appointing an independent arbitrator. This aspect was considered in great detail in the case of U.P. State Bridge Corporation Ltd. (supra). It was held that the High Court was bound to appoint an Arbitrator as per the contract between the parties has seen a significant erosion in the recent past. The ‘classical notion’ that High Court while exercising power under section 11 of the Act must appoint the arbitrator as per the contract has been considered and watered down in various cases. However, it is important to note that the Apex Court mentioned that such deviation is permissible in exceptional circumstances. The ‘classical notion’ that High Court while exercising power under section 11 of the Act must appoint the arbitrator as per the contract has been considered and watered down in various cases. However, it is important to note that the Apex Court mentioned that such deviation is permissible in exceptional circumstances. It was held that if an aggrieved party files an application under section 11(6), the opposite party would lose its right of appointment of an arbitrator as per the terms of the contract on the strength of this finding given in the case of Punj Lloyd Ltd. (supra). 24. Shri Agrawal strenuously contended that the respondents have lost their right to appoint an arbitrator. The argument at the first blush appears to be attractive but when considered in the factual backdrop of the present case, lost much of its shine because in previous rounds, the contention of the applicant that management is prejudiced and biased against him were repeatedly rejected. For raising similar points again and again, cost of Rs. 10,000/- was also imposed on the applicant. The initial delay in conclusion of proceeding by Arbitrator was because of an interim order passed in W.P. No. 7133/2008 which was filed by the petitioner. In Punj Lloyd Ltd. (supra), the Apex Court further held that the implication of appointment of arbitrator after filing of an application under section 11(6) would be that the Court would be free to deviate from the terms of the contract. It was not held that as a thumb rule or straight jacket formula the Court is bound to deviate from the terms of contract. Indeed, it was poignantly held that the Court is “free to deviate”. Thus, the ancillary question is : whether the necessary ingredients necessitated for such deviation are available in the present case ? 25. The Apex Court in U.P. State Bridge Corporation Ltd. (supra) considered this aspect in great detail and after considering catena of judgments on this point, opined that the Court should make endeavor to give effect to the appointment procedure prescribed in the arbitration clause. If circumstances exists giving rise to justifiable doubts as to the independence and impartiality of the person nominated or if other circumstances warrant appointment of an independent arbitrator by ignoring the procedure prescribed, the Court after recording the reason therefore may ignore the designated arbitrator and appoint someone else. 26. If circumstances exists giving rise to justifiable doubts as to the independence and impartiality of the person nominated or if other circumstances warrant appointment of an independent arbitrator by ignoring the procedure prescribed, the Court after recording the reason therefore may ignore the designated arbitrator and appoint someone else. 26. In Para 13 of the judgment of U.P. State Bridge Corporation Ltd.(supra), it was held that the theory of forfeiture of the rights of a party under the agreement to appoint its arbitrator once the proceedings under section 11(6) of the Act had commenced came to be even more formally embedded in Deep Trading Co., (2013) 4 SCC 35 subject, of course, to the provisions of section 11(8), which provision in any event, had been held in Northern Railway Admn. [Northern Railway Admn., Ministry of Railway vs. Patel Engg. Co. Ltd., (2008) 10 SCC 240 ] not to be mandatory, but only embodying a requirement of keeping the same in view at the time of exercise of jurisdiction under section 11(6) of the Act. 27. In Para 16 of the same judgment, the Court opined that it is because of this reason, as a normal practice, the court will insist the parties to adhere to the procedure to which they have agreed upon. This would apply even while making the appointment of substitute arbitrator and the general rule is that such an appointment of a substitute arbitrator should also be done in accordance with the provisions of the original agreement applicable to the appointment of the arbitrator at the initial stage. 28. In the light of this judgment on which heavy reliance is placed, it can be safely held that merely because applicant has filed this application before appointment of 3rd Arbitrator, as a thumb rule, it cannot be said that the Departmental Arbitrator cannot continue with the arbitration proceeding. At the cost of repetition, this Court in previous rounds held that the applicant has failed to establish any prejudice, bias etc. against the respondents. Interestingly, in the present round of litigation, the applicant has not alleged any bias at all against the present Arbitrator. As demonstrated by Shri Atul Nema, the applicant has participated in the proceeding before the present arbitrator and the dispute is almost at the stage of final hearing. against the respondents. Interestingly, in the present round of litigation, the applicant has not alleged any bias at all against the present Arbitrator. As demonstrated by Shri Atul Nema, the applicant has participated in the proceeding before the present arbitrator and the dispute is almost at the stage of final hearing. The whole purpose of substituting the arbitrator in a case of this nature is to ensure that the arbitration proceedings are concluded expeditiously. The present Arbitrator is under an obligation to take care of this paramount consideration. 29. In view of the aforesaid analysis, no case is made out either for setting aside the appointment of arbitrator or issuance of direction to appointment a new Arbitrator. Before parting with the matter, I deem it proper to observe that it will be lawful for the Arbitrator to expedite the proceedings and decide the dispute expeditiously preferably within 30 days from the date of production of copy of this order. 30. With the aforesaid observation, both the petitions are dismissed. Petitions dismissed.