U. P. S. E. B. Hathras v. Hindustan Metal Works Hathras
2022-02-11
KRISHAN PAHAL, SUNITA AGARWAL
body2022
DigiLaw.ai
JUDGMENT : 1. Heard Sri Mata Prasad alongwith Sri Baleshwar Chaturvedi learned counsels for the appellants and Sri Rahul Agarwal learned counsel for the respondent. 2. The above noted two appeals have arisen out of the order passed in Original Suit No. 425 of 1983 by the Civil Judge, Aligarh making the arbitral award Rule of the Court and the order in execution case arising out of the said decree. The executing court passed orders of attachment of the bank account of the appellants in execution of the award. By the order dated 17.5.1985 passed by this Court, the operation of the impugned attachment order had been stayed. As a result of dismissal of these appeals for non-prosecution, a fresh attachment order dated 6.3.2019 had been passed. The ground pressed to challenge the aforesaid orders are that the arbitral award was void-ab-initio, inasmuch as, the Arbitrator lacked jurisdiction. The subsequent proceeding in execution of the award, therefore, are liable to be set aside. 3. Brief facts of the case relevant to decide the controversy, admitted to the parties, are that an agreement was entered into between the appellant and the respondent no. 2 on 9th May, 1964, whereby the appellant had agreed to supply power to the Mill. The said agreement contained an arbitration clause which is pertinent to be noted herein-under: “All disputes and differences (the settlement or adjustment of which is not hereinabove provided for) as to the interpretation or construction of any of the provisions of the agreement or the rights and obligations of the responsive parties hereto or as to any other matter shall be referred to a single arbitrator if the parties agree upon one, otherwise to two arbitrators, one to be appointed by the Board and one by the consumer, which arbitrators shall appoint an umpire before proceeding with the reference and the decision of the sole arbitrator be final and binding on the parties and this clause shall in all respects be deemed and construed as a reference to arbitration within the meaning of the Indian Arbitration Act, 1940 and the provisions of the said Act or any statutory modification or re-enactment thereof for the time being in force shall apply to such reference.” Pursuant to a dispute, the respondent no.
2 served the notice dated 9.9.1970 upon the appellant asking to agree for appointment of the sole arbitrator in terms of the first part of the arbitration clause 18. The appellant had agreed to the said proposal and on 29.9.1970, Mr. Justice T.P. Mukherji, a retired Judge of this Court had become the sole arbitrator. However, before the arbitrator could enter upon the reference, unfortunately he died. A notice dated 6.7.1982/3.8.1982 under Section 8 of the Arbitration Act, 1940 was then served upon the appellant proposing Shri A.C. Bansal, a retired District & Sessions Judge to be the sole arbitrator. 4. It is contended on behalf of the appellant that since the said notice did not contain the details of the claim and hence by the letter dated 28th December, 1982, the details were required from the respondent no. 2 which were to be intimated to the Board to enable it to proceed further. The respondent no. 2 by the letter dated 8.2.1983 replied that the amount of losses and damages claimed by them will be put before the arbitrator or the arbitrators who had to adjudicate the dispute. It was then stated therein that the appellant had failed to appoint an arbitrator on its behalf within the statutory period, so the arbitrator nominated by the respondent no. 2 namely Shri A.C. Bansal had become the sole arbitrator under the Arbitration Act, 1940. It was then intimated that a request was made to the sole arbitrator to proceed with the matter and fix a date for hearing. On 10th February, 1983, the arbitrator put both the parties to notice intimating that he had entered into the reference and that 7th March,1983 was the date fixed for striking of issues and preliminary hearing. It is contended by the appellant that since the appointment of Shri A.C. Bansal as sole arbitrator was void-ab-initio, the appellant was not obliged to answer the notices. However, vide letter dated 13th July, 1983, it had raised objection regarding appointment of the sole arbitrator being illegal and that the claim of the respondent was barred by Article 137 of the Limitation Act. 5.
However, vide letter dated 13th July, 1983, it had raised objection regarding appointment of the sole arbitrator being illegal and that the claim of the respondent was barred by Article 137 of the Limitation Act. 5. It is stated in the affidavit accompanying the stay application in the appeal that the appellant did not know as to what had happened on 7th March, 1983 but a letter dated 19.4.1983 of the arbitrator was served upon it to reply to the interrogatories filed by the respondent no. 2 till 10th May, 1983. On 6th July, 1985, an ex-parte award was passed by the sole arbitrator which was submitted in the Court of Civil Judge, Aligarh on 14.11.1983 by the arbitrator suo motu, to make it Rule of the Court. The said proceeding was registered as Original Suit No. 245 of 1983 on 19.11.1983. The appellant moved objection to the application under Section 14(2) of the Arbitration Act filed by the respondent no. 2, alongwith an application under Section 5 of the Limitation Act to condone the delay in filing the same. By the impugned order dated 8th April, 1985, the Civil Court had rejected the application under Section 5 of the Limitation Act and ordered that the award be made Rule of the Court. An Execution Case No. 27 of 1983 was, thereafter, moved by the respondents wherein the order of attachment of the account of the appellant was passed on 9.4.1985. 6. To challenge the validity of the arbitral award, it is submitted that it was a case of supplying the vacancy on account of death of the appointed arbitrator which would fall within the scope of Section 8(1)(b) of the Arbitration Act, 1940. In that case, in the event of failure of the appellant to appoint the arbitrator by supplying the vacancy after service of notice, only option before the respondent no. 2 was to approach the Court by moving application seeking for appointment of arbitrator. On such application being made, the Court could have appointed an arbitrator or arbitrators after notice and opportunity to the other side/appellant herein. 7.
2 was to approach the Court by moving application seeking for appointment of arbitrator. On such application being made, the Court could have appointed an arbitrator or arbitrators after notice and opportunity to the other side/appellant herein. 7. It is contended that in terms of Clause 18 of the Agreement, the arbitrator or arbitrators could have been appointed only if both the parties had agreed upon the proposal and in case of any disagreement or failure on the part of the appellant to supply the vacancy, the sole arbitrator nominated by the appellant could not be conferred jurisdiction to enter into the reference. 8. Learned counsel for the respondent refuted the arguments pertaining to applicability of Section 8 by submitting that in the facts and circumstances of the present case, Section 8 has no application and the situation before us is covered by the provisions of Section 9(b) of the Arbitration Act, 1940. The contention is that in the case of failure of the other party/appellant to appoint an arbitrator, after notice, the answering respondent no. 2 had option to appoint the arbitrator nominated by it to act as sole arbitrator in the reference. As the appellant had failed to appoint its own arbitrator within 15 days of the notice dated 6.7.1982/3.8.1982, the respondents had intimated them that Shri A.C. Bansal would act as sole arbitrator under the Arbitration Act, 1940 as amended by the U.P. Act No. 57 of 1976 by serving another notice dated 8.2.1983 upon the appellants. Further, no objection had been raised before the arbitrator on the question of jurisdiction though the appellant was aware of the proceeding before it. The objection as to the lack of jurisdiction of the arbitrator, therefore, is liable to be turned down. 9. Reliance is placed on the decision of the Apex Court in Electrical Manufacturing Company Limited vs. Power Grid Corporation of India Limited and Another, 2016 (8) SCC 667 to submit that strict adherence to the time stipulated under the Arbitration Act, 1940 for completion of the proceeding is required in absence of any agreement between the parties to the contrary. There is no occasion to interfere in the ex-parte award as it is evident from the record that the appellant willingly did not join the arbitration proceedings and kept away from it in order to frustrate the same.
There is no occasion to interfere in the ex-parte award as it is evident from the record that the appellant willingly did not join the arbitration proceedings and kept away from it in order to frustrate the same. The reference to the Division Bench of this Court in the National Projects Construction Corporation Ltd. vs. B.B. Verma and Others, First Appeal from Order No. 1362 of 2001 has been made to assert that day-to-day delay in filing the objection to application under Section 14(2) of the Arbitration Act, 1940 had not been explained by the appellant. Resultantly, the order passed by the Civil Court in rejecting the application under Section 5 of the Limitation Act while making award rule of the court cannot be said to suffer from any error of law. 10. Having heard learned counsel for the parties on the issue of jurisdiction of the sole arbitrator to enter into the reference, the provisions of Sections 8 and 9 of the Arbitration Act, 1940 are relevant to be noted hereunder: “8. Power of Court to appoint arbitrator or umpire: (1) In any of the following cases: (a) where an arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties, and all the parties do not, after differences have arisen, concur in the appointment or appointments. (b) if any appointed arbitrator or umpire neglects or refuses to act, or is incapable of acting, or dies, and the arbitration agreement does not show that it was intended that the vacancy should not be supplied, and the parties or the arbitrators, as the case may be, do not supply the vacancy. (c) where the parties or the arbitrators are required to appoint an umpire and do not appoint him; any party may serve the other parties or the arbitrators, as the case may be, with a written notice to concur in the appointment or appointments or in supplying the vacancy.
(c) where the parties or the arbitrators are required to appoint an umpire and do not appoint him; any party may serve the other parties or the arbitrators, as the case may be, with a written notice to concur in the appointment or appointments or in supplying the vacancy. (2) If the appointment is not made within fifteen clear days after the service of the said notice, the Court may, on the application of the party who gave the notice and after giving the other parties an opportunity of being heard, appoint an arbitrator or arbitrators or umpire, as the case may be, who shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all parties. 9. Power to party to appoint new arbitrator or in certain cases, a sole arbitrator - Where an arbitration agreement provides that a reference shall be to two arbitrators, one to be appointed by each party, then, unless a different intention is expressed in the agreement: (a) if either of the appointed arbitrators neglects or refuses to act, or is incapable of acting, or dies, the party who appointed him may appoint a new arbitrator in his place. (b) if one party fails to appoint an arbitrator, either originally or by way of substitution as aforesaid, for fifteen clear days after the service by the other party of a notice in writing to make the appointment, such other party having appointed his arbitrator before giving the notice, the party who has appointed an. arbitrator may appoint that arbitrator to act as sole arbitrator in the reference, and his award shall be binding on both parties as if he had been appointed by consent: Provided that the Court may set aside any appointment as sole arbitrator made under clause (b) and either, on sufficient cause being shown, allow further time to the defaulting party to appoint an arbitrator or pass such other order as it thinks fit.
Explanation: The fact that an arbitrator or umpire, after a request by either party to enter on and proceed with the reference, does not within one month comply with the request may constitute a neglect or refusal to act within the meaning of section 8 and this section.” Clause 18 of the Arbitration Agreement extracted above provides for reference of dispute to a single arbitrator, if the parties agreed. In case of any disagreement, two arbitrators, one to be appointed by the Board (appellant) and one by the respondent could have entered into the reference after appointment of an umpire. This clause further states that the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof for the time being in force shall apply to such reference. Section 8 speaks of power of the Court to appoint arbitrator in certain contingencies. Whereas Section 9 confers power on the party to appoint new arbitrator. Both the provisions are independent to each other and cannot be said to be overlapping. 11. In the instant case, as per the first part of the clause 18 of the Arbitration Agreement, initially sole arbitrator was appointed but since he died before he could enter into the reference, the notice for appointment of new arbitrator was given by the respondent. The dispute started at this point. 12. The contention of the appellant is that since it was a case of supplying the vacancy on account of death of the appointed arbitrator, in accordance with Section 8(2), only the Court could appoint the arbitrator as the parties did not reach at a consensus for supplying the vacancy. The contention is that the provisions of Section 9(b) of the Arbitration Act, 1940 cannot be pressed into service to justify the appointment of sole arbitrator by the respondent no. 2. The insistence is that since it was a case of supplying the vacancy on account of death of the appointed arbitrator and the case falling under Section 8, the power to appoint the arbitrator was with the Court. 13. We are afraid to accept this submission for the simple reason that in the instant case, the sole arbitrator who was appointed in accordance with the arbitration clause 18 of the agreement with the consent of the parties could not even enter into the reference. The proceedings of Arbitration had not begun.
13. We are afraid to accept this submission for the simple reason that in the instant case, the sole arbitrator who was appointed in accordance with the arbitration clause 18 of the agreement with the consent of the parties could not even enter into the reference. The proceedings of Arbitration had not begun. It, therefore, became a case of appointment of new arbitrator and not of supplying the vacancy. A new arbitrator was to be appointed by the parties in terms of the arbitration clause 18, which contained two options; firstly, that a single arbitrator could be appointed by agreement between the parties or else the dispute could be referred to two arbitrators, one appointed by each party. In the instant case, the parties to the agreement, thus, had both options either to refer to the dispute to a single arbitrator or to two arbitrators who would be required to appoint an umpire. In the instant case, the appellant had nominated one arbitrator namely Shri A.C. Bansal, a retired District and Sessions Judge, to act as single arbitrator to decide the dispute by serving the notice dated 6th July, 1982/3.8.1982. By this notice, it was also intimated that the appellant was required to intimate its objection to the proposal of appointment of sole arbitrator within 15 days of the notice or else after expiry of 15 days, he would be entitled to act as sole arbitrator to enter upon the reference. While saying so, the clause 18 of the agreement was quoted in the notice. No reply to the said notice raising objection to the proposal of appointment of sole arbitrator had been given by the appellant. Another notice dated 8.2.1983 was sent to the appellant invoking second part of clause 18 of the arbitration agreement to state that since the appellant had failed to nominate one more arbitrator on their behalf, the arbitrator so appointed by the respondent no. 2 would act as sole arbitrator in view of Section 9(b) of the Arbitrator Act, 1940 (as amended by U.P. Act No. 57 of 1976). 14.
2 would act as sole arbitrator in view of Section 9(b) of the Arbitrator Act, 1940 (as amended by U.P. Act No. 57 of 1976). 14. At this stage, we may note that Section 9(b) of the Arbitration Act, 1940 provides that in case, a reference is to be made to two arbitrators under the Arbitration Agreement, if one party fails to appoint an arbitrator either originally or by way of substitution [on death of one of the arbitrator], for 15 clear days after the service by the other party of a notice in writing to make that appointment, the arbitrator appointed by that party may act as sole arbitrator in the reference and his award shall be binding on both parties as if he has been appointed by consent. The proviso to Section 9(b) gives chance to the defaulting party to approach the Court either to set aside the appointment of sole arbitrator or to seek time for appointment of another arbitrator. 15. In light of the above provision and in the facts and circumstances of the present case, it is clear that the arbitration clause of the agreement gave both options to the parties, either to agree for single arbitrator or to go for appointment of two arbitrators. The respondent no. 2 had opted for both by serving notices upon the appellant calling upon it either to agree for appointment of sole arbitrator or nominate its own arbitrator to enter into the reference. The appellant, for the reasons best known to it, kept silent over the issue. In reply to the notice dated 6.7.1982/3.8.1982, it had simply asked for the details of amount and the period of alleged damages claimed by the respondent no. 2. This reply dated 28.12.1982 of the appellant is part of the record. After expiry of 15 days, another notice dated 8.2.1983 was served on the appellant making it clear that since it had failed to nominate one more arbitrator on its behalf within the period of fifteen days, the nominated arbitrator by the respondent would act as the sole arbitrator. This notice was never replied by the appellant rather it kept the matter on hold. 16.
This notice was never replied by the appellant rather it kept the matter on hold. 16. The failure on the part of the appellant to appoint one more arbitrator for 15 clear days after the notices had given right to the respondent to invoke Section 9(b) to appoint arbitrator nominated by it to act as sole arbitrator in the reference. It cannot be successfully argued that since the appellant kept silent, it should be presumed as its non-concurrence to the proposal for appointment of sole arbitrator and the respondent had the only option to approach the Court under Section 8 of the Act, 1940. The option available to the appellant to appoint its own arbitrator, as per clause 18 of the arbitration agreement, in case of disagreement to the proposal of sole arbitrator was never exercised. In case this argument of the above appellant is accepted, the provision of Section 9(b) giving power to the party to appoint sole arbitrator would become redundant. The present is a case which would fall within the scope of Section 9(b) where the award passed by the sole arbitrator on account of failure on the part of one of the parties to appoint another arbitrator, was binding on both the parties as if the sole arbitrator had been appointed by consent. The silence on the part of the appellant in such a case would be treated as its consent. It would be a misconception to treat it as a case of supplying the vacancy on account of death of sole arbitrator appointed by the parties earlier, the reason being the said arbitrator did not even enter into the reference, i.e. the arbitration proceedings did not commence. The plea of application of Section 8 of the Arbitration Act, 1940 in the facts of the present case is a misconception. As the arbitration clause in the instant case had given liberty to the parties to refer the dispute either to one arbitrator or two arbitrators by consent, the conduct of the appellant in not responding to the notice and then raising a dispute regarding jurisdiction in appeal is nothing but an effort to frustrate the arbitration proceeding. 17.
As the arbitration clause in the instant case had given liberty to the parties to refer the dispute either to one arbitrator or two arbitrators by consent, the conduct of the appellant in not responding to the notice and then raising a dispute regarding jurisdiction in appeal is nothing but an effort to frustrate the arbitration proceeding. 17. We may also note that the appellant had one more remedy in the proviso to sub-section (b) of Section 9 of the Act, 1940, to approach the Court to seek further time to appoint its own arbitrator, or setting aside appointment of sole arbitrator. 18. We may further note that the record indicates that even after the notice dated 8.2.1983 given by the respondent, a registered notice dated 10.2.1983 was sent by the sole arbitrator to both the parties intimating the date fixed, i.e. 7.3.1983 for striking of issues and preliminary hearing. Further notices were sent by the arbitrator intimating the dates fixed, i.e. 7.4.1983, 10.5.1983 to the appellant asking it to file written statement and cooperate in the arbitration proceedings. By the notice dated 28.5.1983, it was intimated that in case of non filing of the written statement and not providing good reasons for not doing so, the arbitrator would have no option but to proceed ex-parte in the matter. All the above notices were not responded by the appellant. Lastly, in response to the letter dated 28th May, 1983, the Additional Law Officer, U.P.S.E.B. sent an intimation dated 22nd June, 1983 to the arbitrator raising an objection with regard to the reference being time barred and to intimate that the Board was not prepared for arbitration in the matter started by the respondent. The said letter was responded by the arbitrator on 25.6.1983 saying that the said letter could not be entertained as an objection as no one had argued the matter to present as to how the reference was time barred and further intimated 3.7.1983 as the date fixed for arguments. 19. At this stage, the Additional Law Officer, U.P.S.E.B. had sent another letter dated 13.7.1983 on behalf of the appellant raising objection as noted hereunder: “1. That the appointment of Shri A.C. Bansal as sole Arbitrator is illegal as in notice u/s 8 Arbitration Act 15 days time instead of one month time has been given. 2.
19. At this stage, the Additional Law Officer, U.P.S.E.B. had sent another letter dated 13.7.1983 on behalf of the appellant raising objection as noted hereunder: “1. That the appointment of Shri A.C. Bansal as sole Arbitrator is illegal as in notice u/s 8 Arbitration Act 15 days time instead of one month time has been given. 2. That the right of the claimant to seek reference is barred by article 137 limitation Act. 3. That all the proceedings so far held are illegal.” 20. From the above, it is evident that the appellant had deliberately avoided the appointment of arbitrator and further the arbitration proceedings by taking irrelevant objections regarding insufficient time being given to it for appointment of the Arbitrator. No one had appeared before the Arbitral Tribunal to press the objection on the question of limitation or to raise objection on the jurisdiction of the arbitrator to enter into the reference. It is not a case where the reference can be said to be void-ab-initio for the appointment of the arbitrator being bad in contravention of the Arbitration Act, 1940. The appellants were afforded adequate opportunity by the arbitrator who was appointed in accordance with Section 9(b) of the Arbitration Act, 1940. By keeping silence on the proposal of the respondent, the objection of the appellant regarding validity of appointment of the sole arbitrator is noting but an afterthought. 21. It is to be kept in mind that the parties to the dispute had both options before them, either to agree for sole arbitrator or to appoint arbitrators (two) of their choice. There was no reason before the appellant not to come forward to appoint its own arbitrator, in case, it had objection for referring the dispute to the sole arbitrator nominated by the respondent. It is apparent that the appellant willingly did not join the arbitration proceedings and intentionally kept away and did not even take steps to challenge the arbitration proceedings. The conduct of the appellant in prolonging pre-arbitration proceeding for an indefinite period and then taking a plea of the reference being time barred clearly goes against it. The question of reference being time barred could have been agitated by appearing before the arbitrator and not by avoiding the proceeding. Even otherwise, the issue of limitation had been dealt with by the arbitrator while passing the ex-parte award. 22.
The question of reference being time barred could have been agitated by appearing before the arbitrator and not by avoiding the proceeding. Even otherwise, the issue of limitation had been dealt with by the arbitrator while passing the ex-parte award. 22. In the totality of the facts and circumstances of the case, the challenge to the arbitral award being viod-ab-initio on the plea of lack of jurisdiction of the Arbitrator deserves to be turned down. 23. On the question of validity of the order of rejection of application under Section 5 of the Limitation Act by the Civil Court before making award as rule of the court, suffice it to note that day-to-day delay in filing the objection had not been explained. The detailed discussion in this regard can be found in the order dated 8.4.1985, itself. 24. For the reasons as aforesaid, we do not find any good ground to interfere in the order dated 8.4.1985 passed by the Civil Judge, Aligarh in making award as the Rule of the Court. 25. No plausible objection could be taken to the order passed in the executing proceedings. The challenge to the orders passed by the Civil Court in the proceeding in Original Suit No. 425 of 1983 and the execution proceedings arising out of it, accordingly, is liable to be turned down. 26. Both the appeals are dismissed being devoid of merits.