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2019 DIGILAW 358 (ORI)

Steel Authority of India Ltd. v. Pratima Kanungo

2019-04-25

S.K.MISHRA

body2019
JUDGMENT : S.K. Mishra, J. 1. In this writ application, two questions arise for determination. They are as follows: Firstly; whether the learned District Judge in exercise of power under Section 14 of Arbitration and Conciliation Act, hereinafter referred to as "the Act", for brevity, has jurisdiction to declare that an arbitrator has become dejure or defacto unable to perform his function within the time stipulated? Secondly; whether in this case, the sole arbitrator appointed by this Court under Section 11(6) of the Act has become dejure incapable of performing because of efflux of time stipulated by this Court? 2. The facts of the case are not very much in dispute. The predecessor of the present opposite parties had filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 before this Court which has been registered as MJC No. 18 of 2002 for appointment of an arbitrator to adjudicate the dispute between the parties to the contract arising out of and relating to the contract Agreement No. RMD-1/193-94. Such application was filed on 30.01.2002. On 01.10.2007, this Court dismissed the M.J.C. No. 18 of 2002 holding that the learned counsel for the petitioners was not able to point out the Arbitration Clause in the agreement. The predecessor of the opposite parties, hereinafter referred to as "Contractor" in brevity, filed Special Leave Petition No. 24866 of 2007 in the Hon'ble Supreme Court of India challenging the order dated 01.10.2007. Such SLP was filed on 07.12.2007. On 08.01.2008, the Contractor also filed a review petition in this Court registered as RVWPET No. 3 of 2008 (arising out of M.J.C. No. 18 of 2002) against the said order dated 01.10.2007. On 10.01.2008 the Special Leave Petition No. 24866 of 2007 filed before the Hon'ble Supreme Court was dismissed as withdrawn owing to pendency of the review petition. On 10.07.2008, the review petition was disposed of by order dated 10.07.2008 passed by this Court giving liberty to the Contractor to approach the Hon'ble the Chief Justice under Section 11 of the Act, 1996 for appointment of Arbitrator. On 10.09.2008, the Contractor filed an Arbitration Petition, under Section 11 of the Act in this Court which has been registered as ARBP No. 65 of 2008. On 20.05.2009, this Court passed order in ARBP No. 65 of 2008 appointing Hon'ble Sri Justice K.P. Mohapatra (Former Judge of this Court) as sole Arbitrator. On 10.09.2008, the Contractor filed an Arbitration Petition, under Section 11 of the Act in this Court which has been registered as ARBP No. 65 of 2008. On 20.05.2009, this Court passed order in ARBP No. 65 of 2008 appointing Hon'ble Sri Justice K.P. Mohapatra (Former Judge of this Court) as sole Arbitrator. On 27.07.2009, the Contractor filed Misc. Case Nos. 23 of 2009 and 24 of 2009 (arising out of ARBP No. 65 of 2008) in this Court for modification of the order dated 20.05.2009. In between 01.08.2009 to 30.10.2010 the learned Arbitrator entered into a reference in consonance with the order dated 20.05.2009 passed in ARBP No. 65 of 2008. On 03.10.2009 the petitioners entered their appearance in ARBP No. 65-of 2008 before the learned Arbitrator through their counsel Mr. T. Pattnaik and filed memo of appearance on behalf of Senior Advocate Mr. J. Pattnaik. On 07.11.2009, the original claimant i.e., Contractor took time to submit his written statement of facts and claims in the arbitral proceedings arising out of ARBP No. 65 of 2008. On 30.11.2009 the Contractor filed Misc. Case No. 49 of 2009 in this Court for correction of typographical error to modify the order dated 20.05.2009 only to the extent of indicating RMD-1/1993-94 in place of Agreement dated 01.04.1991. On 16.12.2009, the present petitioner i.e. Steel Authority of India Ltd., hereinafter referred to as 'SAIL' filed Misc. Case No. 57 of 2009 in this Court to recall the order dated 20.05.2009 passed in ARBP No. 65 of 2008 and order dated 03.09.2009 passed in Misc. Case Nos. 23 and 24 of 2009, arising out of ARBP No. 65 of 2008. On 24.12.2009, the SAIL filed a memo before the learned Tribunal in the arbitral proceedings indicating that the Arbitrator was appointed in relation to Agreement dated 01.04.1991, but the claim statement filed by the claimant-Contractor before the learned Arbitral Tribunal was relating to Agreement No. RMD-1/1993-94. On 13.03.2010, the learned Arbitrator passed an order for clarification on the point raised by the respondents in the aforesaid memo relating to the Agreement No. RMD-1/1993-94 so as to be cleared on what basis the arbitration proceeding would be continued. On 15.04.2011, this Court vide judgment dated 15.04.2011 allowed the Misc. Case No. 57 of 2009 arising out of ARBP No. 65 of 2008 recalling the order dated 20.05.2009 and order dated 03.09.2009 passed in Misc. On 15.04.2011, this Court vide judgment dated 15.04.2011 allowed the Misc. Case No. 57 of 2009 arising out of ARBP No. 65 of 2008 recalling the order dated 20.05.2009 and order dated 03.09.2009 passed in Misc. Case Nos. 23 and 24 of 2009 arising out of ARBP No. 65 of 2008. By the said order this Court dismissed the Misc. Case No. 49 of 2009 filed by the Contractor-claimant for aforesaid correction/modification. On 07.09.2011 claimant-Contractor filed Special Leave Petition (Civil) before the Hon'ble Supreme Court registered as SLP (C) Nos. 11368 and 11369 of 2012 being aggrieved by the order dated 15.04.2011 passed by this Court in Misc. Case No. 49 of 2009 and Misc. Case No. 57 of 2009 arising out of ARBP No. 65 of 2008. On 11.08.2014 the Hon'ble Supreme Court vide order dated 11.08.2014 passed in Civil Appeal No. 7605-7606 of 2014 arising out of the aforesaid SLPs allowed the appeals and set aside the impugned order dated 15.04.2011 passed by this Court. In the meantime, the original claimant Contractor died and the legal representatives of the said Claimant-Contractor filed an application on 30.09.2014 to bring them on record as claimants. Thereafter, the learned sole Arbitrator issued notices to the parties for appearance in the said arbitral proceeding fixing the date 25.10.2014. On 25.10.2014 the SAIL filed a petition alleging that the claimant has filed claim statement referring to an agreement vide RMD-1J1993-94 whereas the order dated 20.05.2009 passed in ARBP No. 65 of 2008 refers to Agreement dated 01.04.1991 and the stipulated period of six months to decide the dispute has expired. The arbitral proceeding was posted to 06.12.2014. On that date, the legal representatives of the deceased here-in-after referred to as 'Legal representatives' for brevity filed objection to the petition dated 25.10.2014 stating inter alia that the order dated 15.04.2011 passed by this Court in Misc. Case No. 49 of 2009 (modification order regarding RMD-1 of 1993-94) and Misc. The arbitral proceeding was posted to 06.12.2014. On that date, the legal representatives of the deceased here-in-after referred to as 'Legal representatives' for brevity filed objection to the petition dated 25.10.2014 stating inter alia that the order dated 15.04.2011 passed by this Court in Misc. Case No. 49 of 2009 (modification order regarding RMD-1 of 1993-94) and Misc. Case No. 57 of 2009 (recalling the order of appointment of arbitrator) merged in the judgment dated 11.08.2014 passed by the Hon'ble Supreme Court in Civil Appeal No. 7605-7606 of 2014 (arising out of SLP No. 11368 and 11369 of 2012.) Thus, it was said that in view of the said order of the Hon'ble Supreme Court as well as settled principles of law relating to 'doctrine of merger' the order dated 20.05.2009 passed in ARBP No. 65 of 2908 accordingly stands modified relating to the agreement bearing No. RMD-1 of 93-94 instead of Agreement dated 01.04.1991 and rule of reference is also indicated with respect to Agreement No. RMD-1 of 1993-94. Then the arbitral proceeding was adjourned to 10.01.2015 for further hearing. On 10.01.2015 learned Arbitrator heard both the parties and reserved the order. On 18.04.2015 the learned Arbitrator passed order by disallowing the petition dated 25.10.2014 of the SAIL assigning proper reasons thereon. Time was given to the SAIL up to 06.06.2015 for filing of the statement of defence. On 06.06.2015, instead of filing statement of defence filed a petition for adjournment. Hence the arbitral proceeding was adjourned to 07.07.2015. The arbitral proceeding was again adjourned to 25.07.2015. The Arbitration Petition No. 13 of 2015 filed by the SAIL under Section 14 of the Act was dismissed by the learned District Judge, Sundargarh. The SAIL on 25.07.2015 filed objection to the petition dated 06.06.2015. The proceeding was adjourned to 22.08.2015. The learned Arbitrator after hearing the petition dated 06.06.2015 of the SAIL passed order by reserving the same for order. On 16.09.2015 the petition under Section 16 of the Act dated 06.06.2015 filed by the SAIL was rejected by the Arbitrator with reasons and the SAIL was directed to submit their statement of defence on 17.10.2015. On 14.10.2015 the present writ petition was filed by the SAIL against the order passed by the learned District Judge, Sundargarh in ARBP No. 13 of 2015 without indicating the order dated 16.09.2015 passed by the learned Arbitrator. 3. On 14.10.2015 the present writ petition was filed by the SAIL against the order passed by the learned District Judge, Sundargarh in ARBP No. 13 of 2015 without indicating the order dated 16.09.2015 passed by the learned Arbitrator. 3. Perusal of the order dated 17.07.2015 passed by the learned District Judge, Sundargarh in ARDP No. 13 of 2015 reveals that he has come to the conclusion that he does not have the jurisdiction to decide the case. While holding so, he relied upon the case of State of M.P. vrs. M/s. Saith & Skelton (P) Ltd. AIR 1972 SC 1507 . Careful reading of the aforesaid reported case reveals that on appeal against the order passed by the High Court the Hon'ble Supreme Court on the consent of the parties appointed an Arbitrator whose award is sought to be made decree in the application No. 580 of 2007 and sought to be set aside the judgment passed in the CMP No. 5801 of 2007 and as per the terms of the order was passed by this Court. The terms of the order passed by the Hon'ble Supreme Court are material. Mr. V.S.S. Senior Advocate was appointed as Arbitrator by the consent of the parties to arbitrate and make his award. The remuneration of the Arbitrator would be Rs. 5000/- which will be shared by both parties equally. The Arbitrator was to make his award within three months from date of order. The parties were at liberty to mention for extension of time for making of the award. 4. Thus, it is apparent from the said judgment that the Hon'ble Supreme Court has retained complete control over the arbitration proceeding. So, the ratio decided that whether the Arbitrator was appointed by the Hon'ble Supreme Court by the consent of the parties and no further directions were given for the said award which would indicate that the Hon'ble Supreme Court could not have divested its jurisdiction to deal with, the award and the matter arising out of the award in the facts and circumstances was held to be contrary and for further action was only to be taken by Hon'ble Supreme Court. As such the ratio of that case will not be applicable to the present case, because in the present case Arbitrator has been appointed under Section 11(6) of the Act and not arising out of a litigation between the two parties. So, the learned District Judge placed reliance on the aforesaid reported case is incongruous and he should not have placed reliance on the said judgment. In a recently decided case of this Court in KCS Private Limited vrs. Rosy Enterprises, 2018 (II) OLR 781 , this Court after taking into consideration the provisions of the Act as well as the amended provision of Section 29-A and the ratio decided by the Supreme Court in cases of Mis. Pandey and Co. Builders Pvt. Ltd. vrs. State of Bihar, (2007) 1 SCC 467 and State of West Bengal and others vrs. Associated Contractors, (2015) 1 SCC 32 has come to the conclusion which has been summarized in paragraphs-9 and 10 of the judgment. I feel it appropriate to quote paragraphs 9, and 10 for better appreciation: "09. A Three Judge Bench of the Hon'ble Supreme Court in the case of State of West Bengal and others (supra), wherein the question arose that which court has the jurisdiction to entertain and decide the application under Section 34 of the Act. Hon'ble Supreme court in the case of State of West Bengal and others (supra) have held that "section 2(1)(e) contains an exhaustive definition marking out only the Principal Civil Court of Original Jurisdiction in the district or a High Court having original civil jurisdiction in the State, and no other court as "Court" for the purpose of Part-I of the Arbitration Act, 1996. The definition of "Court" in Section 2(1)(e) in the 1996 Act fixes "court" to be the Principal Civil Court of Original Jurisdiction in the district or the High Court in exercise of its ordinary original civil jurisdiction. Section 2(1)(e) further goes on to say that a court would not include any civil court of a grade inferior to such Principal Civil Court, or a Small Cause Court. The definition is an exhaustive one as it uses the expression "means and includes". It is settled law that such definitions are meant "to be exhaustive in nature". Section 2(1)(e) further goes on to say that a court would not include any civil court of a grade inferior to such Principal Civil Court, or a Small Cause Court. The definition is an exhaustive one as it uses the expression "means and includes". It is settled law that such definitions are meant "to be exhaustive in nature". Hon'ble Supreme Court further held that "where a High Court exercises ordinary original civil jurisdiction over a district, the High Court will have preference to the Principal Civil Court of Original Jurisdiction in that district. Firstly, the very inclusion of the High Court in the definition would be rendered nugatory if the above conclusion was not to be accepted, because the Principal Civil Court of Original Jurisdiction in a district is always a court lower in grade than the High Court, and such District Judge being lower in grade than the High Court, would always exclude the High Court from adjudicating upon the matter. Secondly, the provisions of the Arbitration Act leave no room for any doubt that it is the superior most court exercising original jurisdiction which has been chosen to adjudicate disputes arising out of arbitration agreements". It was a case of Calcutta High Court which exercised original civil jurisdiction. Hence, the Hon'ble Supreme Court has held that the High Court of Calcutta was held to be the Principal Civil Court of Original Jurisdiction. Thus, it is clear that while the High Courts of Patna and Kerala are not the 'Court', the Calcutta High Court is the 'Court' within the meaning of Section 2(1)(e) of the Act. 10. The High Court of Orissa does not exercise the original civil jurisdiction. Sub-Section (2) of Section 2 of the Orissa Civil Courts Act, 1984 provides that the court of the District Judge shall be the principal court of original civil jurisdiction in the district and the explanation provides that for the purpose of the sub-section the expression 'District Judge' shall not include an Additional District Judge. Thus, for the State of Odisha, the District Judge is the 'Court' within the definition of the aforesaid Section." Thus interpreting Section 2(1)(e) of the 1996 Act, the District Judge is the Court within the definition of Section and the application should have entertained by the learned District Judge. So, on this score alone the order is set aside. 5. Thus, for the State of Odisha, the District Judge is the 'Court' within the definition of the aforesaid Section." Thus interpreting Section 2(1)(e) of the 1996 Act, the District Judge is the Court within the definition of Section and the application should have entertained by the learned District Judge. So, on this score alone the order is set aside. 5. (sic.) Coming to the next question regarding the Arbitrator being dejure due to efflux of time instead of remanding the same, this Court feels appropriate to decide the matter to keep the dispute at rest for all times to come as lot of time has elapsed in the meantime. 6. Mr. Sahu, learned counsel for the petitioner relying upon the reported case of NBCC Ltd. vrs. J.G. Engineering Pvt. Ltd. AIR 2010 SO 640 argued that if the Court has stipulated a time period then only by efflux of that time period, the sole Arbitrator shall become incapable dejure as per the provision of Section 14 of the Arbitration & Conciliation Act. He argued placing emphasis in paragraph-7 of the aforesaid judgment wherein the Hon'ble Supreme Court has held that the Court has inherent jurisdiction to put time limit and in this case, the Hon'ble Acting Chief Justice has fixed a time. On a harmonious reading of the order, Mr. Sahu further submits that the word 'preferably' has been used only for initiation of proceeding and not for conclusion of the arbitration proceeding within six months. Mr. Kanungo, learned senior Advocate appearing for the opposite parties firstly contended that the Schedule-I of the Arbitration Act, 1940, Clause (3) provided for a time limit for disposal of the arbitral proceeding before the Arbitration Tribunal, no such provision in the Arbitration & Conciliation Act 1996 (prior to its amendment by virtue of the Arbitration and Conciliation Amendment Act, 2015 and insertion of Section 29-A), was there providing for a time limit for disposal of arbitration proceeding before the Arbitration Tribunal. It is not disputed that Section 29-A has no application to this case as the reference to the arbitration has been made under Section 11(6) of the Act much prior to the amendment. It is, therefore, emphatically contended by the learned counsel for the opposite parties that in the year 1996 since this provision has not been incorporated akin. It is not disputed that Section 29-A has no application to this case as the reference to the arbitration has been made under Section 11(6) of the Act much prior to the amendment. It is, therefore, emphatically contended by the learned counsel for the opposite parties that in the year 1996 since this provision has not been incorporated akin. Jo Clause-3 of Schedule and Section 28 of the Act, it is clear the Parliament in its wisdom has not imposed any limitation for completion of arbitral proceeding pending before the Arbitration Tribunal. (However, later on the amendment has been made and the Parliament has imposed certain time limit for completion of arbitration proceeding.) Secondly, it is contended by the learned counsel for the opposite parties that the word 'preferably' is an adverb and has been used as a coordinating conjunction and while passing the order having expression preferably "within four weeks and xxx six months xxx" Hon'ble Chief Justice perfectly aware of the meaning of the word. The third contention raised by the learned counsel for the opposite parties is that on an earlier occasion the petitioner has filed an application under Section 16 of the Arbitration and Conciliation Act regarding a Rule with regard to the jurisdiction of the Arbitration Tribunal which was disposed of on 16.09.2015. He also submitted that SAIL has filed an application under Section 14 of the Act and was disposed of by the learned Arbitration Tribunal on 18.04.2015. That order was challenged before the learned District Judge, Sundargarh in Arbitration Petition No. 13 of 2015. During the pendency of such application the SAIL again filed an application on the self same cause under Section 16 of the Act on 16.09.2015, which according to the learned counsel for the opposite parties is an abuse of process of court and in all fairness the SAIL being an instrumentality of the State should have acted as a model principal and sensible litigant and should have brought such filing of the petition to the notice of this Court. Lastly, learned senior counsel for the opposite parties submits that the use of word 'preferably' only shows that the Hon'ble Acting Chief Justice had made a pious wish or a judicial request to complete the proceeding within six months and it is not a positive direction to complete the arbitral proceeding at any cost within the time stipulated. Mr. Lastly, learned senior counsel for the opposite parties submits that the use of word 'preferably' only shows that the Hon'ble Acting Chief Justice had made a pious wish or a judicial request to complete the proceeding within six months and it is not a positive direction to complete the arbitral proceeding at any cost within the time stipulated. Mr. Sahu, learned counsel for the petitioner, however submits that the word preferably' is only decipherable expression to be instituted within four months and not to the completion of the arbitral proceeding. 7. The reported case of NBCC Ltd. vrs. J.G. Engineering Pvt. Ltd. (supra) is distinguishable in this case as in that case the Hon'ble Chief Justice while appointing the arbitrator has specifically directed to conclude the arbitration proceeding within a period of six months from the date of his appointment. In this case, however, the Hon'ble Acting Chief Justice has while appointing the arbitrator used the word "preferably" which means that the case should be initiated within four months and it should be preferably concluded within six months. The word "and" is a conjunction and therefore, the argument advanced by Mr. Sahu, learned counsel for the petitioner that the expression "preferably" is only decipherable expression to be instituted within four months and not to the completion of arbitration proceeding is erroneous. 8. Moreover, it is seen that in the Arbitration Act, 1940, there was a specific lime limit and by virtue of amendment of the year, 2015 and insertion of Section 29-A in the Arbitration and Conciliation Act, 1996, time limit has been inserted. So, it cannot be said that the said amendment," which was made much later then the order passed by the Hon'ble Acting Chief Justice, is applicable to the present case. Moreover, the word "preferably" is an adverb and has been used as a coordinating conjunction while passing the order having expression preferably "within four weeks and xxx six months xxx". Since the word "preferably" used, this Court is of the opinion that Acting Chief Justice never intended that it to be a mandatory direction, rather it is a judicial wish and that limitation will not make arbitrator dejure incapable of completing the arbitration proceeding after efflux of the time so stipulated. 9. In the meantime, the sole arbitrator has died. Since the word "preferably" used, this Court is of the opinion that Acting Chief Justice never intended that it to be a mandatory direction, rather it is a judicial wish and that limitation will not make arbitrator dejure incapable of completing the arbitration proceeding after efflux of the time so stipulated. 9. In the meantime, the sole arbitrator has died. So, another arbitrator need to be appointed in this regard but same can only be done under Section 11(6) of the Arbitration Act by the Hon'ble Chief Justice of the Court. Admittedly, there is no provision in the Arbitration and Conciliation Act, 1996 regarding the course that has to be followed on the death of the sole arbitrator. This aspect came before the Hon'ble Supreme Court in Shailesh Dhairyawan vs. Mohan Balkrishna Lulla, Civil Appeal No. 8731 of 2015, Judgment dated 16th October, 2015. At paragraph-20, the Hon'ble Supreme Court has dealt with this aspect. It reads as follows: "20. The scheme of Section 8 of the 1940 Act and the scheme of Section 15(2) of the 1996 Act now needs to be appreciated. Under Section 8(1)(b) read with Section 8(2) if a situation arises in which an arbitrator refuses to act, any party may serve the other parties or the arbitrators, as the case may be, with a written notice to concur in a fresh appointment, and if such appointment is not made within 15 clear days after service of notice, the Court steps in to appoint such fresh arbitrator who, by a deeming fiction, is to act as if he has been appointed by the consent of all parties. This can only be done where the arbitration agreement does not show that it was intended that the vacancy caused be not supplied. However, under Section 15(2), where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed. Had Section 15(2) ended there, it would be clear that in accordance with the object sought to be achieved by the Arbitration and Conciliation Act, 1996 in all cases and for whatever reason the mandate of an arbitrator terminates, a substitute arbitrator is mandatorily to be appointed. This Court, however, in the judgments noticed above, has interpreted the latter part of the Section as including a reference to the arbitration agreement or arbitration clause which would then be the rules applicable to the appointment of the arbitrator being replaced. This Court, however, in the judgments noticed above, has interpreted the latter part of the Section as including a reference to the arbitration agreement or arbitration clause which would then be the rules applicable to the appointment of the arbitrator being replaced. It is in this manner that the scheme of the repealed Section 8 is resurrected while construing Section 15(2). The arbitration agreement between the parties has now to be seen, and it is for this reason that unless it is clear that an arbitration agreement on the facts of a particular case excludes either expressly or by necessary implication the substitution of an arbitrator, whether named or otherwise, such a substitution must, take place. In fact, sub-sections (3) awl (4) of Section 15 also throw considerable light on the correct construction of sub-section (2). Under sub-section (3), when an arbitrator is replaced, any hearing previously held by the replaced arbitrator mayor may not be repealed at the discretion of the newly appointed Tribunal, unless parties have agreed otherwise. Equally, orders or rulings of the earlier arbitral Tribunal are not to be invalid only because there has been a change in the composition of the earlier Tribunal, subject, of course to a contrary agreement by parties. This also indicates that the object of speedy resolution of disputes by arbitration would best be sub-served by a substitute arbitrator continuing at the point at which the earlier arbitrator has left out." 10. Thus, the matter is set at rest by the Hon'ble Supreme Court because death of the sole arbitrator, a substitute arbitrator has to be appointed, who shall take over the matter from the stage where the deceased arbitrator left the case and continue the same. With such observation, the writ petition is disposed of. There shall be no orders as to the costs. Urgent certified copies be granted on proper application.