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2020 DIGILAW 238 (RAJ)

Kalyanmal Madanmohan v. Union of India

2020-01-24

SANJEEV PRAKASH SHARMA

body2020
DECISION : Sanjeev Prakash Sharma, J. 1. The petitioner has preferred this application under Section 14 of the Arbitration & Conciliation Act 1996 for terminating the mandate of Arbitral Tribunal and for appointment of arbitral appointed by this court vide order dated 3.12.2013 with a further pray to appoint new Arbitrator in terms of the Section 11 of Arbitration & Conciliation Act of 1996 for settlement of the disputes and differences between the parties. 2. Learned counsel for the petitioner has submitted that on account of dispute having arisen between the parties, an application u/s. 10 & 11 of the Arbitration & Conciliation Act 1996 was filed before this court in S.B. Arbitration Application No. 82/2012 wherein this court vide order dated 3.12.2013 proceeded to direct the General Manager, North Western Railway, Jaipur/West Central Railway, Jabalpur for appointment of Arbitral Tribunal as per clause 64(3)(a)(i) of General Conditions of Contract. Thereafter on 17.8.2015 Shri S.R. Sharma who is Sole Arbitrator, held that the arbitration proceedings have been completed but thereafter no award was passed since 17.8.2015, for almost four years, application was moved by the applicant as above. Notices were issued of the present application and thereafter respondent Railway have put in appearance and submitted that the concerned sole arbitrator Shri S.R. Sharma has now issued a letter dated 10.12.2019 wherein it is clearly mentioned that the applicant has not made any contact with the Sole Arbitrator since long and further next date of hearing which shall be conducted on 18.12.2019. It is submitted that the Sole Arbitrator Shri S.R. Sharma who is also Engineer of the Railways has certain other work assigned to him by Railways and was therefore not able to pass the award. 3. Counsel relies on the judgment in the case of Union of India & Ors. Vs. Uttar Pradesh State Bridge Corporation Limited reported in 2015(2) SCC 52 wherein after considering the provision of Section 14, 15 & 32 of the Arbitration & Conciliation Act 1996 It has been observed as under: "12. As is clear from the reading of Section 14, when there is a failure on the part of the Arbitral Tribunal to act and it is unable to perform its function either de jure or de facto, it is open to a party to the arbitration proceedings to approach the Court to decide on the termination of the mandate. As is clear from the reading of Section 14, when there is a failure on the part of the Arbitral Tribunal to act and it is unable to perform its function either de jure or de facto, it is open to a party to the arbitration proceedings to approach the Court to decide on the termination of the mandate. Section 15 provides some more contingencies when mandate of an arbitrator can get terminated. In the present case, the High Court has come to a categorical finding that the Arbitral Tribunal failed to perform its function, and rightly so. It is a clear case of inability on the part of the members of the Tribunal to proceed in the matter as the matter lingered on for almost four years, without any rhyme or justifiable reasons. The members did not mend their ways even when another life was given by granting three months to them. Virtually a pre-emptory order was passed by the High Court, but the Arbitral Tribunal remained unaffected and took the directions of the High Court in a cavalier manner. Therefore, the order of the High Court terminating the mandate of the arbitral tribunal is flawless. This aspect of the impugned order is not even questioned by the Appellant at the time of hearing of the present appeal. However, the contention of the Appellant is that even if it was so, as per the provisions of Section 15 of the Act, substitute arbitrators should have been appointed "according to the rules that were applicable to the appointment of the arbitrator being replaced". On this basis, it was the submission of Mr. Mehta, learned ASG, that High Court should have resorted to provision contained in Clause 64 of the GCC. 14. Speedy conclusion of arbitration proceedings hardly needs to be emphasised. It would be of some interest to note that in England also, Modern Arbitration Law on the lines of UNCITRAL Model Law, came to be enacted in the same year as Indian Law which is known as English Arbitration Act, 1996 and it became effective from 31st January, 1997. It is treated as the most extensive statutory reform of English arbitration law. Commenting upon the structure of this Act, Mustill and Boyd in their "Commercial Arbitration, 2001 companion volume to the second edition, have commented that this Act founded on four pillars. It is treated as the most extensive statutory reform of English arbitration law. Commenting upon the structure of this Act, Mustill and Boyd in their "Commercial Arbitration, 2001 companion volume to the second edition, have commented that this Act founded on four pillars. These pillars are described as: (a) The First Pillar: Three General Principles. (b) The Second Pillar: The General Duty of the Tribunal. (c) The Third Pillar: The General Duty of the Parties. (d) The Fourth Pillar: Mandatory and Semi Mandatory Provisions. In so far as first pillar is concerned, it contains three general principles on which the entire edifice of the said Act is structured. These principles are mentioned by an English Court in its judgment in the case of Department of Economics Policy and Development of the City of Moscow v. Bankers Trust Co. In that case, Mance, L.J. succinctly summed up the objective of this Act in the following words: '.........Parliament has set out, in the Arbitration Act, 1996, to encourage and facilitate a reformed and more independent, as well as private and confidential, system of consensual dispute resolution, with only limited possibilities of court involvement where necessary in the interests of the public and of basic fairness'. Section 1 of the Act sets forth the three main principles of arbitration law viz.- (I) speedy, inexpensive and fair trial by an impartial tribunal; (ii) party autonomy; and (iii) minimum court intervention. This provision has to be applied purposively. In case of doubt as to the meaning of any provision of this Act, regard should be had to these principles. 16. First and paramount principle of the first pillar is "fair, speedy and inexpensive trial by an Arbitral Tribunal". Unnecessary delay or expense would frustrate the very purpose of arbitration. Interestingly, second principle which is recognised in the Act is the party autonomy in the choice of procedure. This means that if a particular procedure is prescribed in the Arbitration Agreement which the parties have agreed to, that has to be generally resorted to. 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 means that if a particular procedure is prescribed in the Arbitration Agreement which the parties have agreed to, that has to be generally resorted to. 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. (see Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd. and Anr. However, this principle of party autonomy in the choice of procedure has been deviated from in those cases where one of the parties have committed default by not acting in accordance with the procedure prescribed. Many such instances where this course of action is taken and the Court appoint the arbitrator when the persona designata has failed to act, are taken note of in para 5 of Tripple Engineering Works (supra). We are conscious of the fact that these were the cases where appointment of the independent arbitrator made by the Court in exercise of powers Under Section 11 of account of 'default procedure'. We are, in the present case, concerned with the constitution of substitute Arbitral Tribunal where earlier Arbitral Tribunal has failed to perform. However, the above principle of default procedure is extended by this Court in such cases as well as is clear from the judgment in Singh Builders Syndicate. 17. In the case of contracts between Government Corporations/State owned companies with private parties/contractors, the terms of the agreement are usually drawn by the Government company or public sector undertakings. Government contracts have broadly two kinds of arbitration clauses, first where a named officer is to act as sole arbitrator; and second, where a senior officer like a managing director, nominates a designated officer to act as the sole arbitrator. No doubt, such clauses which give the Government a dominant position to constitute the Arbitral Tribunal are held to be valid. No doubt, such clauses which give the Government a dominant position to constitute the Arbitral Tribunal are held to be valid. At the same time, it also casts an onerous and responsible duty upon the persona designata to appoint such persons/officers as the arbitrators who are not only able to function independently and impartially, but are in a position to devote adequate time in conducting the arbitration. If the Government has nominated those officers as arbitrators who are not able to devote time to the arbitration proceedings or become incapable of acting as arbitrators because of frequent transfers etc., then the principle of 'default procedure' at least in the cases where Government has assumed the role of appointment of arbitrators to itself, has to be applied in the case of substitute arbitrators as well and the Court will step in to appoint the arbitrator by keeping aside the procedure which is agreed to between the parties. However, it will depend upon the facts of a particular case as to whether such a course of action should be taken or not. What we emphasise is that Court is not powerless in this regard." 4. In view of above settled principle of the Supreme Court this court finds that no reasons have come forward for not passing of the award by the Arbitral Tribunal. After 17.8.2015, he could not have sit over the matter for a period of five years. Now when the notices were issued by this court, apparently the Railways must have made query with their officer. The Arbitrator was appointed by the Railway who has taken a different stand mentioning that the applicant has not contacted with him for further proceedings since long and has further asked the petitioner to appear on 18.12.2019, failing which the ex-parte decision would be given. 5. This court fails to understand that once the concerned sole Arbitrator has mentioned that the proceedings are complete, then there was no occasion to again fix the date calling the applicant for hearing. The concerned Arbitrator in a long period of five years completely has forgotten all the contentions which may have raised before him in 2019. Such person cannot be allowed to act as an Arbitrator and be given any chance if having concealed the matter for three years. 6. The concerned Arbitrator in a long period of five years completely has forgotten all the contentions which may have raised before him in 2019. Such person cannot be allowed to act as an Arbitrator and be given any chance if having concealed the matter for three years. 6. This court finds that after amendment period of one year has been laid down for completing the arbitral proceedings. Such amendment may or may not be applicable on the concerned Arbitrator, however he is always expected to complete the proceedings within reasonable time as observed by the supreme court as it is the first pillar of fair and speedy trial(supra). 7. Keeping in view the aforesaid, provisions of Section 14 of the Arbitration & Conciliation Act 1996 are invoked and therefore the appointment of Sole Arbitrator Shri S.R. Sharma is terminated, who was appointed vide order dated 3.12.2013. 8. In view of above, this court appoints Shri Gokul Prasad Sharma, Member, Board of Revenue(Retd.), resident of Patel Maidan, Ajmer (Raj.)(Mobile No. 7742320065) as an Arbitrator to conduct the arbitration proceedings and adjudicate all the dispute between the parties. 9. The fees of the Arbitrator shall be as per manual of 2009 and Registry is directed to take the consent of the for this purpose. 10. The record relating to the arbitration proceeding shall be transferred to Shri Gokul Prasad Sharma, Member, Board of Revenue(Retd.), who shall proceed further with arbitration proceedings. 11. Accordingly, the arbitration application is disposed of. 12. All pending application stands disposed of.