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2019 DIGILAW 480 (GAU)

Aplus Projects & Technology (P) Ltd. v. Oil India Ltd.

2019-04-11

UJJAL BHUYAN

body2019
ORDER : Ujjal Bhuyan, J. 1. Heard Ms. M. Jain, learned counsel for the petitioner and Mr. B. Choudhury, learned counsel for the respondent. 2. This is an application filed under Section 11 (2) of the Arbitration and Conciliation Act, 1996 read with Sections 11 (6) and 11 (8) thereof and Section 29A(4) to 29A(9) of the said Act. 3. By filing this petition petitioner seeks appointment of additional arbitrators having expertise in financial and technical matters as well as for extension of the period of the arbitral tribunal constituted vide letter dated 27.08.2016. 4. Case of the petitioner is that it is a company registered under the Companies Act, 1956 having its registered office at Pune. It appears that respondent Oil India Limited had issued purchase orders dated 18.05.2005 and 24.06.2005 to the petitioner for design, fabrication, packaging, supply and commissioning of four numbers and five numbers respectively of skid mounted two phase high pressure vertical/horizontal separator with necessary accessories and delivery to be completed within the time frame as per the purchase orders. Terms of payments were also detailed in the purchase orders. 5. As per terms and conditions of agreement entered into between the parties, disputes and claims arising out of purchase orders were to be settled by way of arbitration. Arbitration and settlement of disputes was governed by Clause 32.0 of the General Terms and Conditions for indigenous tenders. As per Clause 32.1, all disputes and differences between the parties relatable to the contract were to be mutually settled. In case no mutual settlement could be arrived at, matter should be settled by way of arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1996. 6. It further appears that dispute arose between the parties on several counts, details of which may not be necessary to be gone into for the purpose of adjudication of the present proceeding. According to the petitioner, nature of dispute is such that it involves financial as well as technical aspects. 7. For settlement of dispute, petitioner proposed arbitration vide letter dated 27.7.2011 and subsequent letters. However, respondent did not proceed with arbitration which compelled the petitioner to move the Court of District and Sessions Judge, Dibrugarh under Section 9 of the Arbitration and Conciliation Act, 1996 (1996 Act). 7. For settlement of dispute, petitioner proposed arbitration vide letter dated 27.7.2011 and subsequent letters. However, respondent did not proceed with arbitration which compelled the petitioner to move the Court of District and Sessions Judge, Dibrugarh under Section 9 of the Arbitration and Conciliation Act, 1996 (1996 Act). While disposing of such petition, Court of learned District and Sessions Judge, Dibrugarh made observation regarding reference to arbitration for settlement of dispute. Finally, respondent informed the petitioner vide letter dated 16.06.2016 that Shri P.C. Borpujari, retired District and Sessions Judge be appointed as arbitrator and sought consent from the petitioner. It was mentioned that there should be 7 different arbitration proceedings relatable to 7 numbers of purchases. 8. According to the petitioner, disputes did not arise out of all the purchases but respondent insisted that arbitration proceeding should cover all the 7 purchases. 9. After several rounds of communication, petitioner accepted the proposal of the respondent to have Shri P.C. Borpujari as the sole arbitrator and also the venue of arbitral proceeding at Guwahati. 10. Following the same, respondent issued letter dated 27.08.2016 to Shri Borpujari informing him that he was appointed as the sole arbitrator. 11. Thereafter, arbitral proceedings commenced. Even though 7 numbers of arbitral proceedings were registered being Arbitral Proceeding Nos. 9-15/2016, all the proceedings were taken up together and common orders were passed by the learned arbitrator. Though period of one year lapsed since constitution of arbitral tribunal, both sides consented for extension of term and accordingly arbitral tribunal extended its term up-to 14.03.2018. 12. Petitioner has stated that in the course of the proceedings before the arbitral tribunal, it was acutely felt that various facets of the dispute touched upon complicated financial and technical aspects which required presence of additional members in the arbitral tribunal having expertise on the above fields. Though applications were filed by the petitioner before the arbitral tribunal, respondent did not agree to such prayer; neither Tribunal passed any order. In fact, learned arbitrator held that question of expansion of composition of arbitral tribunal was a matter between the parties; arbitral tribunal cannot have any say in the matter. 13. In the meanwhile, mandate of the arbitral tribunal expired on 14.03.2018 without completion of the arbitration proceedings. It is in such circumstances that the present petition came to be filed seeking the reliefs as indicated above. 14. 13. In the meanwhile, mandate of the arbitral tribunal expired on 14.03.2018 without completion of the arbitration proceedings. It is in such circumstances that the present petition came to be filed seeking the reliefs as indicated above. 14. This Court by order dated 28.05.2018 had issued notice. 15. Respondent has filed an affidavit raising preliminary objection as to maintainability of the petition. Though several objections have been raised, primary objection is that petition so filed is not maintainable inasmuch as the same is required to be filed before the principal civil court and not before the High Court. The other main objection is that the 1996 Act does not provide for extension of an arbitral tribunal though it provides for appointment of experts to report to the arbitral tribunal on specific issues to be determined by the arbitral tribunal. That apart, petitioner having consented to appointment of sole arbitrator and having participated in the arbitral proceeding would be estopped from raising this plea at this belated stage. 16. Petitioner has filed rejoinder affidavit asserting that petition so filed is maintainable and that Gauhati High Court has the jurisdiction to extend the term of arbitral tribunal as well as to reconstitute the arbitral tribunal by appointing additional members. 17. Detailed submissions were made by learned counsel for the parties which have received the due consideration of the Court. 18. At the outset, it may be pointed out that this Court in the course of hearing on 22.02.2019 after summing up the controversy formulated two issues for consideration. Relevant portion of the order dated 22.02.2019 is extracted hereunder:- "Arbitral Tribunal comprising single arbitrator was constituted upon mutual agreement of the parties. During the arbitral proceedings, issues of technical nature cropped up. Petitioner sought for induction of technical member as additional arbitrators. In the meanwhile, by lapse of time, mandate of the arbitrator lapsed under Section 29A of the Arbitration and Conciliation Act, 1996. It is in such circumstances that the present petition has been filed under Section 11 as well as under Section 29A of the aforesaid Act for extension of the mandate of the arbitrator and for induction of new arbitrator. Learned counsel for the respondent has raised objection that Section 11 will not be attracted in a case of this nature. It is in such circumstances that the present petition has been filed under Section 11 as well as under Section 29A of the aforesaid Act for extension of the mandate of the arbitrator and for induction of new arbitrator. Learned counsel for the respondent has raised objection that Section 11 will not be attracted in a case of this nature. That apart, under Sub-Section (4) of Section 29A read with Section 2(e) thereof, mandate of arbitrator can be extended only by the jurisdictional principal civil court and not by the High Court. His further contention is that under Section 26, experts may be appointed by Arbitral Tribunal itself. On the other hand, learned counsel for the petitioner submits that what the petitioner seeks is not appointment of experts but appointment of arbitrator having expertise on technical matter. Prima facie, the following two issues arise for consideration in the case:- (1) Whether High Court can extend the mandate of the Arbitral Tribunal more so when the arbitrator was not appointed under Section 11? (2) Whether upon such extension, High Court can intervene in an ongoing arbitral proceeding by directing induction of new arbitrator thereby changing composition of the Arbitral Tribunal itself?" 19. Issue No. 1 may be taken up first. 20. As already noticed, in this case, learned arbitrator was appointed by the parties themselves without intervention of the Court. Section 2(1)(e) defines 'Court'. Section 2 forms part of Part-I of the 1996 Act which covers Sections 2 to 43. It says that unless the context otherwise requires, 'Court' means in the case of an arbitration other than international commercial arbitration, the principal civil court of original jurisdiction in a district and includes the jurisdictional High Court in exercise of its ordinary original civil jurisdiction to decide the questions forming the subject-matter of arbitration if the same had been the subject-matter of a suit but does not include any civil court of a grade inferior to such principal civil court or any court of small causes. However, in the case of international commercial arbitration, 'Court' would mean the jurisdictional High Court exercising ordinary original civil jurisdiction and in other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court. 21. This case is not concerned with international commercial arbitration. However, in the case of international commercial arbitration, 'Court' would mean the jurisdictional High Court exercising ordinary original civil jurisdiction and in other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court. 21. This case is not concerned with international commercial arbitration. Therefore, as per the definition clause, 'Court' would mean the principal civil court of original jurisdiction in a district and would include the jurisdictional High Court in exercise of its ordinary original civil jurisdiction. 22. Section 11 of the 1996 Act deals with appointment of arbitrators. While under Sub-Section (2), parties are free to agree on a procedure for appointing arbitrator or arbitrators, in case of failure to reach any agreement, procedure for appointment of arbitrator is laid down in the following sub-sections, which includes appointment of arbitrator by the High Court or in an appropriate case by the Supreme Court. 23. Section 29A deals with time limit for arbitral award. Since this provision is relevant, the same is extracted hereunder:- "29-A. Time limit for arbitral award.- (1) The award shall be made within a period of twelve months from the date the arbitral tribunal enters upon the reference. Explanation.- For the purpose of this subsection, an arbitral tribunal shall be deemed to have entered upon the reference on the date on which the arbitrator or all the arbitrators, as the case may be, have received notice, in writing, of their appointment. (2) If the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree. (3) The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months. (3) The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months. (4) 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 arbitrators shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period: 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 arbitrators by not exceeding five per cent for each month of such delay. (5) The extension of period referred to in sub-section (4) may be on the application of any of the parties and may be granted only for sufficient cause and on such terms and conditions as may be imposed by the court. (6) While extending the period referred to in sub-section (4), it shall be open to the court to substitute one or all of the arbitrators and if one or all of the arbitrators are substituted, the arbitral proceedings shall continue from the stage already reached and on the basis of the evidence and material already on record, and the arbitrators appointed under this section shall be deemed to have received the said evidence and material. (7) In the event of arbitrators being appointed under this section, the arbitral tribunal thus reconstituted shall be deemed to be in continuation of the previously appointed arbitral tribunal. (8) It shall be open to the Court to impose actual or exemplary costs upon any of the parties under this section. (9) An application filed under sub-section (5) shall be disposed of by the court as expeditiously as possible and endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party." 24. Thus, as per Sub-Section (1), award has to be made by the arbitral tribunal within 12 months from the date it enters upon the reference. The expression 'entered upon the reference' has been explained as the date on which arbitrator or arbitrators as the case may be had received notice in writing of their appointment. Thus, as per Sub-Section (1), award has to be made by the arbitral tribunal within 12 months from the date it enters upon the reference. The expression 'entered upon the reference' has been explained as the date on which arbitrator or arbitrators as the case may be had received notice in writing of their appointment. Under Sub-Section (3), the parties may by consent extend the period specified in Sub-Section (1) for making the award for a further period not exceeding 6 months. Sub-section (4), which is most relevant, says that if the award is not made within the period of 12 months or within the extended period of up-to further 6 months, mandate of the arbitrator or arbitrators shall terminate unless Court has either prior to or after expiry of the period so specified extended the period. As per the proviso, while extending the period under Sub-Section (4), if the Court finds that the arbitral proceedings were delayed for reasons attributable to the arbitral tribunal, it may order reduction of fees of the arbitrator or arbitrators. 25. From the above, what is clearly discernible is that award has to be passed by the arbitral tribunal within a period of 12 months from the date of entering upon the reference. This period of 12 months can be extended by the parties by consent for a further period of maximum 6 months. If the award is not passed within the period specified or within the extended period, mandate of the arbitrator or arbitrators shall terminate. Of course, there is a caveat here which is that the Court may extend the period either prior to or after expiry of the period so specified. 26. The question which, therefore, arises is what would be the meaning of the term 'Court'? 27. As noticed above, in terms of the definition clause of Section 2(1)(e), 'Court' means principal civil court of original jurisdiction in a district and includes the jurisdictional High Court in exercise of its ordinary civil jurisdiction. Therefore, it is quite clear that 'Court' would mean principal civil court of original jurisdiction and also the High Court if it exercises ordinary original civil jurisdiction. Gauhati High Court does not exercise ordinary original civil jurisdiction. Therefore, it is quite clear that 'Court' would mean principal civil court of original jurisdiction and also the High Court if it exercises ordinary original civil jurisdiction. Gauhati High Court does not exercise ordinary original civil jurisdiction. Therefore, to my mind, the term 'Court' appearing in Sub-Section (4) of Section 29A of the 1996 Act means the principal civil court of original jurisdiction and in the context of the present case, it would mean Court of the District and Sessions Judge, Karnrup (Metro) at Guwahati. 28. A reading of the 1996 Act would go to show that wherever the legislature intended that a particular power is required to be exercised by the High Court or by the Supreme Court, the same has been specifically mentioned, for example, in Section 11 but in other provisions, legislature has used the term 'Court' which is defined in Section 2(1)(e) of the 1996 Act. Therefore, there cannot be any iota of doubt that the term 'Court' appearing in Section 29A of the 1996 Act would mean principal civil court of a district having original jurisdiction and would include jurisdictional High Court if it exercises ordinary original civil jurisdiction. As has been held above, in the context of the present case, 'Court' would mean Court of District and Sessions Judge, Kamrup (Metro). 29. In State of West Bengal Vs. Associated Contractors, (2015) 1 SCC 32 , Supreme Court declared in unequivocal terms that Section 2(1)(e) of the 1996 Act contains an exhaustive definition marking out only principal civil court of original jurisdiction in a district or a High Court having ordinary original civil jurisdiction in the State and no other Court as Court for the purpose of Part-I of the 1996 Act. 30. In the subsequent Constitution Bench judgment of the Supreme Court in State of Jharkhand Vs. Hindustan Construction Company, (2018) 2 SCC 602 , the decision rendered in Associated Contractors (supra) was extensively referred to and the Constitution Bench agreed with the principles stated therein. 31. Though learned counsel for the petitioner has placed reliance on a Single Bench decision of the High Court of Gujarat dated 14.9.2018 in the case of Bhanubhai Ramanbhai Patel Vs. Hindustan Construction Company, (2018) 2 SCC 602 , the decision rendered in Associated Contractors (supra) was extensively referred to and the Constitution Bench agreed with the principles stated therein. 31. Though learned counsel for the petitioner has placed reliance on a Single Bench decision of the High Court of Gujarat dated 14.9.2018 in the case of Bhanubhai Ramanbhai Patel Vs. Nilesh Raman Bhai Patel to contend that even a High Court which does not have ordinary original civil jurisdiction like the High Court of Gujarat and the Gauhati High Court would be treated as a Court in the context of Section 29A(4) of the 1996 Act, this Court is unable to accept such a contention in view of the clear enunciation of law by the Supreme Court in Associated Contractors (supra) which was affirmed by the Constitution Bench of the Supreme Court in Hindustan Construction Company Ltd. (supra). 32. It may also be mentioned that a Single Bench of the Kerala High Court in the case of M/s. URC Construction (Pvt.) Ltd. Vs. M/s. BEML Ltd., decided on 16.11.2017 held that competent court under the 1996 Act would be the principal civil court exercising original jurisdiction or a High Court exercising civil jurisdiction and no other Court. Therefore, Kerala High Court held that it does not have jurisdiction to extend time under Sub-Section (4) of Section 29A of the 1996 Act. 33. Gujarat High Court in the case of Bhanubhai Ramanbhai Patel (supra) referred to Sub-Section (6) of Section 29A of the 1996 Act which empowers the Court to substitute one or all of the arbitrators and took the view that if the Court is understood to mean only principal civil court or High Court having ordinary original civil jurisdiction, than a situation may arise when an arbitrator appointed by the High Court or by the Supreme Court may be substituted by the principal civil court which may lead to an irreconcilable conflict between the power of the superior courts to appoint arbitrators under Section 11 of the 1996 Act and those of the principal civil court to substitute such arbitrators under Section 29A(6). It was held that such conflict should be removed by understanding the term 'Court' for the purpose of Section 29A as the Court which appointed arbitrator in a case of Court constituted arbitral tribunal. It was held that such conflict should be removed by understanding the term 'Court' for the purpose of Section 29A as the Court which appointed arbitrator in a case of Court constituted arbitral tribunal. That was a case where a former Judge of the Supreme Court was appointed as the sole arbitrator by the Gujarat High Court in an arbitration petition filed under Section 11 of the 1996 Act Interpretation given by the Gujarat High Court, though highly debatable, was in that context which is certainly not the case in the present petition. Therefore, even factually, decision of the Gujarat High Court is distinguishable. 34. Coming to the second issue framed in the order dated 22.02.2019, the undisputed facts of this case reveal that a sole arbitrator was appointed by the two parties on consent without intervention of the High Court or Supreme Court. The arbitral tribunal so constituted had commenced proceeding but could not pass the award within the stipulated period of 12 months as well as the extended period of further 6 months. The extended period expired on 14.03.2018. 35. Section 29A has been extracted above. 35.1. Sub-Section (4) thereof has been elaborately discussed which deals with further extension of arbitration period after expiry of the specified period on orders of the Court. 36. Now for the second issue, Sub-Section (6) becomes relevant. It says that while extending the period of arbitration under Sub-Section (4), it would be open to the Court to substitute one or all of the arbitrators and in the event of such substitution, the arbitral proceedings shall continue from the stage already reached. Therefore, the Court extending the period of arbitration under Sub-Section (4) has also the power to substitute one or all of the arbitrators. Section 15 however deals with a different situation where an arbitrator withdraws from the office for any reason or on agreement of the parties in which case a substitute arbitrator shall be appointed but Section 15 does not speak about any role of the Court. 37. Other than Section 29A(6), learned counsel for the parties could not indicate or point out any other provision in the 1996 Act which empowers the Court to enlarge an arbitral tribunal by appointing additional arbitrators. 38. Reverting back to Sub-Section (6) of Section 29A, power of the Court is to substitute one or all of the arbitrators. 37. Other than Section 29A(6), learned counsel for the parties could not indicate or point out any other provision in the 1996 Act which empowers the Court to enlarge an arbitral tribunal by appointing additional arbitrators. 38. Reverting back to Sub-Section (6) of Section 29A, power of the Court is to substitute one or all of the arbitrators. As per Concise Oxford English Dictionary, Indian Edition, 'substitution' has been defined to mean action or an instance of substituting someone or something. 'Substitution' has been defined to mean a person or thing acting or serving in place of another, replace with another. As per Black's Law Dictionary, 6th Edition, 'substitution' has been explained to mean putting in place of another thing; change of one thing for another; serving in lieu of another; having some of its parts replaced; in the civil law, putting one person in place of another. Therefore, considering the above, it can safely be inferred that 'substitution' in the context of Sub- Section (6) of Section 29A would mean replacing an arbitrator by another arbitrator. It would not mean appointment of additional arbitrator. Substitution cannot be meant and interpreted as addition. That would be doing violence to the English language. Therefore, question of appointing additional arbitrators does not arise. 39. In so far domain experts are concerned, Section 26 provides that arbitral tribunal may appoint one or more experts to report to it on specific issues to be determined by the arbitral tribunal. The expert after delivery of his report may also participate in the hearing where he would be subject to questioning. Section 26 is extracted hereunder:- "26. Expert appointed by arbitral tribunal.- (1) Unless otherwise agreed by the parties, the arbitral tribunal may- (a) appoint one or more experts to report to it on specific issues to be determined by the arbitral tribunal, and (b) require a party to give the expert any relevant information or to produce, or to provide access to, any relevant documents, goods or other property for his inspection. (2) Unless otherwise agreed by the parties, if a party so requests or if the arbitral tribunal considers it necessary, the expert shall, after delivery of his written or oral report, participate in an oral hearing where the parties have the opportunity to put questions to him and to present expert witnesses in order to testify on the points at issue. (3) Unless otherwise agreed by the parties, the expert shall, on the request of a party, make available to that party for examination all documents, goods or other property in the possession of the expert with which he was provided in order to prepare his report." 40. Therefore, on a careful analysis of Section 26 as extracted above, it is evident that in case of requirement of any domain experts, it is open to the arbitral tribunal to avail services of an expert or experts. But this provision cannot be stretched to mean appointment of additional arbitrators having domain expertise. The 1996 Act does not provide for such exigency. 41. Thus, having regard to the discussions made above and on due consideration, the two issues are answered in the negative. Consequently, Court is of the view that present petition is not maintainable. However, petitioner may approach the principal civil court, i.e., Court of District and Sessions Judge, Kamrup (Metro) at Guwahati under Section 29A(4) of the Arbitration and Conciliation Act, 1996 for extension of the period of arbitration. If such petition is filed, Court of District and Sessions Judge, Kamrup (Metro), Guwahati shall consider and dispose of the same on its merit expeditiously. 42. Arbitration Petition is disposed of.