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2021 DIGILAW 218 (MP)

Suresh Gupta v. Madhya Pradesh Agro Industries Development Corporation Ltd.

2021-02-24

SUBODH ABHYANKAR

body2021
ORDER : Subodh Abhyankar, J. 1. This application has been filed by the applicant under Section 14 (2) read with Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short "Act, 1996") for substitution of the sole arbitrator. In this case the applicant is aggrieved by the order dated 29.6.2018 passed by the sole arbitrator, who is an ex-Managing Director of the respondent No. 1 Madhya Pradesh Agro Industries Development Corporation Ltd. 2. The contention of the applicant is that the appointment of the said Managing Director of the respondent No. 1 as an arbitrator is in contravention of the provisions of Sections 12, 13, 14, 15 and 16 of the Act, 1996. Reliance is also placed on the maxim of Nemo Judex in Causa Sua, a latin phrase meaning, "no-one is judge in his own cause." 3. According to the applicant, in terms of Sections 14 and 15 and as per the amendment of 2015 to the Arbitration and Conciliation Act, 1996, the mandate of the arbitrator has been terminated. 4. In brief, the facts of the case are that applicant the respondents invited tenders for ploughing and levelling work of the agricultural land of the farmers belonging to Scheduled Castes/Scheduled Tribes, and persons living below the poverty line under the "Swarnajayanti Gramin Rojgar Yojna". The tender of the respondents was accepted and an agreement was executed on 24.3.2003 between the parties which also contained an arbitration clause which reads as under":- ^^;g fd] bl vuqca/k i= dks laikfnr djus esa gksus okyk leLr O;; i{k Øa- 2 ogu djsxkA ;fn vuqca/k i= ds lEiknu i'pkr~ ysu nsu ckor~ dksà fookn dh fLFkfr curh gS rks i{kdkj Øa-1 ds izca/k lapkyd vkchVªsVj ds #i esa fookn dk fujkdj.k djsaxs tks mHk; i{kksa dks ekU; djuk gksxk vkSj mHk; i{k dks ,d nwljs ds fo#} fdlh Hkh izdkj dh U;k;ky;hu dk;Zokgh djus dk vf/kdkj ugha gksxkA U;kf;d {ks=kf/kdkj 'kgj Hkksiky gksxkA** It is an admitted fact that a dispute has arisen between the parties and the applicant had filed an application under Section 11(6) of the Act, 1996 before the lower Court who, vide its order dated 1.8.2005 appointed the Managing Director of the respondent-Corporation as an arbitrator. However, the said Arbitrator delegated his authority to one R.K. Gupta, a retired officer of the respondent-Corporation and before whom the parties appeared and fled their statement of claims. However, the said Arbitrator delegated his authority to one R.K. Gupta, a retired officer of the respondent-Corporation and before whom the parties appeared and fled their statement of claims. The said Arbitrator, appointed by the Managing Director of the respondent-Corporation passed an award on 23.1.2006 and the claim of the applicant was decreed. Being aggrieved of the same, an application under Section 34 of the Act, 1996 was preferred by the respondents before the Trial Court and vide its order dated 16.10.2006 the said application was dismissed by the Trial Court, against which an appeal MA No. 1403/2007 was preferred by the respondents before this court. The said appeal was disposed of by this Court vide its order dated 28.4.2015 in the following terms:- "In view of preceding analysis, the impugned order dated 1.8.2005 as well as the Award dated 23.1.2006 passed by the Arbitrator are hereby quashed. The Managing Director to the appellant-Corporation is directed to adjudicate the dispute between the parties and to conclude the same expeditiously, in accordance with law, preferably within a period of six months from the date of production of copy of this order before him." 5. Shri Dhruv Verma, learned counsel for the applicant has vehemently argued before this Court that the Managing Director himself had no authority to proceed with the case and hence the applicant also fled an application under Section 14(2) read with provisions of the Act, 1996 contending that the proceedings are in total contravention to the provisions of the doctrine of Nemo Judex in Causa Sua, i.e. "nobody can be a judge in his own cause". Learned counsel for the applicant has also drawn the attention of this Court to the provisions of Sections 12 and 14 of the Act as also the Fifth Schedule which provides that one of the grounds which gives rise to justifiable doubts as to the independence or impartiality or arbitrators is that the arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration. In support of his contention Shri Verma has also relied upon the decisions of the Hon'ble Supreme Court in the case of BSNL Vs. Motorola, reported in (2009) 2 SCC 337 and in the case of NBCC Vs. J.G. Engg. In support of his contention Shri Verma has also relied upon the decisions of the Hon'ble Supreme Court in the case of BSNL Vs. Motorola, reported in (2009) 2 SCC 337 and in the case of NBCC Vs. J.G. Engg. (P) Limited, to submit that even otherwise the Managing Director is not proceeding with the case expeditiously in the matter and unnecessary delay is being caused by him only. In this regard, an application was also filed before the arbitrator but the same was dismissed vide the impugned order dated 29.6.2018 which is under challenge before this court. 6. Learned counsel for the respondents on the other hand has opposed the prayer of the applicant and has submitted that the grounds raised by the applicant are unjustifiable, as the agreement was executed between the parties on 24.3.2003 i.e. well before the Amendment of 2015 was made applicable and even otherwise, it was not the case of the applicant in the first round of litigation that the arbitrator is not impartial and thus, it is submitted that only with a view to further prolonged in the matter, the present application has been fled. 7. Heard the learned counsel for the parties and perused the record. 8. On due consideration of the rival submissions of the learned counsel for the parties and on perusal of the record this Court is of the considered opinion that the applicant has miserably failed to make out any case of interference in the order passed by the arbitrator on 29.6.2018 for substitution of the arbitrator. The record clearly reveals that in the appeal (MA No. 1403/2007) preferred by the respondents, this Court, vide its order dated 28.04.2015 had clearly held that the arbitrator i.e. the Managing Director has no authority to abdicate his powers and to delegate the same to other authority. The relevant paras of the same read as under:- "7. In the instant case, admittedly, under clause 11 of the agreement, the dispute between the parties has to be adjudicated by the Managing Director of the appellant-Corporation. By an order dated 1.8.2005 passed by the trial Court in exercise of power under Section 11(6) of the Act, the Managing Director of the appellant-Corporation was appointed as an Arbitrator. In the instant case, admittedly, under clause 11 of the agreement, the dispute between the parties has to be adjudicated by the Managing Director of the appellant-Corporation. By an order dated 1.8.2005 passed by the trial Court in exercise of power under Section 11(6) of the Act, the Managing Director of the appellant-Corporation was appointed as an Arbitrator. Thus, under the order of the Court as well as in view of the agreement executed between the parties, the Managing Director of the appellant-Corporation was required to perform his duties as an Arbitrator. His authority could be terminated only in contingencies mentioned in Sections 14 and 15 of the Act. The Arbitrator could not have abdicated his duty to act as an Arbitrator. 8. Neither the appellant nor the respondent had any authority to give consent expressly or impliedly to continue with the proceeding which was initiated by an Arbitrator who had no authority in law, to do so in violation of the express provision contained in the arbitration agreement as well as the order passed by the trial Court which had attained finality, that too without abrogating the arbitration agreement. Therefore, in the fact situation of the case, the provisions of Section 4 of the Act have no application. 9. Even otherwise, it is well settled in law that in case of patent lack of jurisdiction, the jurisdiction cannot be assumed by the Arbitrator on the basis of acquiescence of parties. See: Tarapore & Co. Vs. State of M.P., (1994) 3 SCC 521 . The Award passed by the Arbitrator has no sanctity in the eye of law. The trial Court, therefore, grossly erred in rejecting the objection preferred by the appellants with regard to the Award of the Arbitrator to adjudicate the dispute between the parties, merely because the parties have not raised any objection in the proceeding before the Arbitrator. 10. In view of preceding analysis, the impugned order dated 1.8.2005 as well as the Award dated 23.1.2006 passed by the Arbitrator are hereby quashed. 10. In view of preceding analysis, the impugned order dated 1.8.2005 as well as the Award dated 23.1.2006 passed by the Arbitrator are hereby quashed. The Managing Director of the appellant-Corporation is directed to adjudicate the dispute between the parties and to conclude the same expeditiously, in accordance with law, preferably within a period of six months from the date of production of copy of this order before him." (emphasis supplied) A perusal of the observations made by this Court clearly reveals that none of the parties had raised any objection regarding the appointment of the Managing Director of the respondent-Corporation as an arbitrator. In such circumstances, this Court had made the finding in para 10 of the aforesaid order and the Managing Director of the appellant-Corporation was directed to adjudicate the dispute between the parties and to conclude the same expeditiously, in accordance with law, preferably within a period of six months from the date of production of copy of the said order. From the record it is also apparent that the matter was fixed by the said arbitrator for final hearing itself, however, on many occasions it was adjourned at the instance of the counsel for the applicant and on some occasions by the respondent and on some occasions the arbitrator himself was not present due to administrative work. That apart it is also found that as per the impugned order dated 29.6.2018, the arbitrator has also given a finding that the applicant had also filed an application on 14.3.2018 and had refused to participate in the proceedings contending the eligibility of the arbitrator, which also demonstrates the adamant attitude of the counsel for the applicant to not to participate in the proceedings. In the considered opinion of this Court, when this Court in MA No. 1403/2007 has already directed the Managing Director to adjudicate the dispute between the parties and to conclude the same expeditiously preferably within a period of six months from the date of date of production of copy of the order, in such circumstances, there was no occasion for any of the parties concerned to seek an adjournment beyond the aforesaid period, but it is apparent that no such efforts were made. The decisions relied upon by the learned counsel for the applicant are distinguishable and are of no avail to the applicant. In the case of BSNL Vs. The decisions relied upon by the learned counsel for the applicant are distinguishable and are of no avail to the applicant. In the case of BSNL Vs. Motorola (supra), the officer of the Company who had already taken a decision regarding the liquidated damages of the appellant BSNL, was appointed as an arbitrator to settle the dispute between the parties and under these circumstances, the Supreme Court, in para 37 held as under:- "37. Further, the CGM, Kerala Circle has already taken a decision as is evident from his letter dated 25-4-2006, that the appellants were right in imposing the liquidated damages and therefore, the question of such a person becoming an arbitrator does not arise as it would not satisfy the test of impartiality and independence as required under Section 12 Moreover, it would also defeat the notions laid down under the principles of natural justice wherein it has been recognised that a party cannot be a judge in his own cause. The judgment of this Court in State of Karnataka v. Shree Rameshwara Rice Mills [ (1987) 2 SCC 160 ] is significant in this matter. The Court had stated: (SCC p. 161) "... Even assuming that the [terms of Clause 12 afford] scope for being construed as empowering the officer of the State to decide upon the question of breach as well as assess the quantum of damages, adjudication by the officer regarding the breach of the contract cannot be sustained under law because a party to the agreement cannot be an arbiter in his own cause. Interests of justice and equity require that where a party to a contract disputes the committing of any breach of conditions the adjudication should be by an independent person or body and not by the other party to the contract." However, in the same judgment, in para 39, the Supreme Court has held as under:- "39. Pursuant to Section 4 of the Arbitration and Conciliation Act, 1996, a party which knows that a requirement under the arbitration agreement has not been complied with and still proceeds with the arbitration without raising an objection, as soon as possible, waives their right to object. The High Court had appointed an arbitrator in response to the petition fled by the appellants (sic respondent). At this point, the matter was closed unless further objections were to be raised. The High Court had appointed an arbitrator in response to the petition fled by the appellants (sic respondent). At this point, the matter was closed unless further objections were to be raised. If further objections were to be made after this order, they should have been made prior to the first arbitration hearing. But the appellants had not raised any such objections. The appellants therefore had clearly failed to meet the stated requirement to object to arbitration without delay. As such their right to object is deemed to be waived." In the case on hand also, the same situation has arisen where the applicant, despite having participated in the earlier proceeding for appointment of arbitrator before the lower court, also participated in the proceedings before the earlier arbitrator who was also an officer of the respondent-corporation and passed an order in their favour which was challenged by the respondent under s. 34 of the Act before the District Judge and also in the High Court u/s. 37 of the Act but the applicant never raised this objection that the arbitrator was biased, which only shows applicant's intention to get a favourable order by any means which, in the considered opinion of this court is a bad professional conduct. As per aforesaid dictum of the Supreme Court, it is apparent that this objection ought to have been taken by the applicant at the first available opportunity but no such objection was ever raised by the applicant during the earlier round of litigation and hence they are estopped from raising this ground specially after the order passed by this court on 28.04.2015 in M.A. No. 1403/2015 whereby the Managing Director of the respondent company was directed to adjudicate the dispute instead of delegating the same to some other authority. Similarly, the case of NBCC (supra) would also not be applicable under facts and circumstance of the case where the parties themselves have sought the adjournments and has dragged the matter years together. 9. In the result, present arbitration case stands dismissed. 10. The arbitrator, however, is directed to comply with order passed by this court in M.A. No. 1403 dated 28.04.2015 in its letter and spirit and conclude the arbitration proceedings positively within six months from the date of certified copy of this order.