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2022 DIGILAW 502 (CHH)

Goyal Mg Gases Pvt. Ltd. v. Ind Synergy Limited

2022-11-11

ARUP KUMAR GOSWAMI

body2022
ORDER : 1. The case was treated as heard-in-part on 23.09.2022. On the earlier occasions, I had heard Mr. Prateek Sharma, learned counsel for the applicant. Today, I have heard Mr. Ashutosh Shukla, learned counsel for the applicant and Mr. Ashish Surana, learned counsel, appearing for the respondent. 2. The petitioner is incorporated under the provisions of the Companies Act, 1956 and engaged in the business of manufacturing and supply of industrial gases. The respondent being the manufacturer of steel had requested the petitioner to set-up a unit for supply of industrial gases for running the respondent’s plant for manufacturing steel at Kotmaar, Raigarh. 3. The parties had entered into an agreement dated 30.05.2008 for installation of Air Separation Union in Build-Own-Operate (BOO) basis by the petitioner for respondent. Dispute arose between the parties. The agreement dated 30.05.2008 contains an arbitration clause, namely, Article 17. The clause visualizes reference of dispute or difference for arbitration by a sole arbitrator, if the parties agree upon the same, failing which the dispute or the difference shall be referred to three arbitrators, each party to appoint one arbitrator and the two appointed arbitrators shall appoint the third arbitrator who shall act as presiding arbitrator. 4. The petitioner had raised a dispute and has sought for appointment of an arbitrator, and accordingly, had approached this Court by filing an arbitration application, being Arbitration Application No.36 of 2011. 5. By an order passed on 23.09.2022, this Court had directed the record of Arbitration Application No.36 of 2011 to be placed along with this case, and accordingly, the same has been placed. 6. Perusal of the record of Arbitration Application No.36 of 2011 goes to show that the respondent herein did not file any objection to the application. 7. The Arbitration Application No.36 of 2011 was disposed of by an order dated 20.07.2011. It will be relevant to take note of paragraphs-5 to 7, which are as follows : “5. Considering that the parties to the proceedings had entered into contract which contains arbitration clause and further considering that the respondent has failed to act on the request of the applicant for appoint of arbitrator and also considering that the dispute had arisen out of contract agreement, this Court is of the opinion that a case for appointment of arbitrator is made out. 6. 6. Learned counsel for the parties submit that they have no objection if Hon’ble Shri Justice V. K. Shrivastava, former Judge of High Court of Chhattisgarh, Bilaspur is appointed as sole Arbitrator in the present case. 7. Therefore, I hereby, with the consent of the parties, appoint Hon’ble Shri Justice V.K. Shrivastava, former Judge of the High Court of Chhattisgarh at Bilaspur, as sole arbitrator, subject to his consent.” 8. After such appointment, the arbitrator entered into reference and the proceeding was continued before the arbitrator for more than seven years. 9. It appears that the respondent had appointed Mr. Kishore Bhaduri as its counsel and on such appointment being made by the respondent, the arbitrator made a disclosure by an order dated 16.04.2016, which reads as follows : “It is pertinent to mention here that my younger son namely Chandresh Shrivastava who is practicing Advocate is closely associated with Shri Kishore Bhaduri, Advocate in profession, therefore, this fact is disclosed to both the parties by this proceeding in writing.” 10. Subsequently, the respondent filed an application challenging the Arbitral Tribunal under Section 13(2) of the Arbitration and Conciliation Act, 1996 (for short, ‘A & C Act’). In the said application, amongst others, it was mentioned that the grounds stated in the application give justifiable doubts as to the independence and impartiality of the arbitrator under Section 12(3) of the A & C Act. At paragraph-26, it was stated as follows : “26. Thus Applicant company finds it deserving to let the Court appoint a New arbitrator who is independent in all respects in accordance with the law.” 11. The said application under Section 13(2) of the A & C Act dated 27.05.2017 was sent by post to the sole arbitrator. The sole arbitrator passed an order on 11.02.2018. At paragraphs-25 & 26, it was observed as follows : “25. In para 26 of the application respondent stated that “Thus applicant company finds it deserving to let the Court appoint a New arbitrator who is independent in all respects in accordance with the law”. Although circumstances pleaded by the respondent were creation of respondent itself despite that, by making aforesaid statement in application impliedly shows respondent’s no confidence. After due consideration of all facts and circumstance present in this matter, I withdraw myself from being arbitrator in the instant matter. 26. Although circumstances pleaded by the respondent were creation of respondent itself despite that, by making aforesaid statement in application impliedly shows respondent’s no confidence. After due consideration of all facts and circumstance present in this matter, I withdraw myself from being arbitrator in the instant matter. 26. Parties are advised to take appropriate steps for appointment of substitute arbitrator in accordance with law.” 12. The present petition is filed by the petitioner on 03.05.2018 invoking Sections 14(1) and 15(1) of the A & C Act for appointment of a substituted arbitrator. 13. Mr. Prateek Sharma, learned counsel for the petitioner submits that it was the respondent that appointed Mr. Kishore Bhaduri, who has close association with the lawyer son of the arbitrator and when this fact was disclosed by the arbitrator, the petitioner did not raise any objection for continuation of the proceeding by way of arbitration but surprisingly, it was the respondent who had taken objection and had sought recusal of the sole arbitrator. It is submitted that it was a deliberate ploy on the part of the respondent to delay the proceeding, which they had succeeded to a great extent. The respondent having itself indicated in the application under Section 12(3) of the A & C Act that the Court may proceed with appointment of a new arbitrator, the petitioner had approached this Court for appointment of a new arbitrator for substitution of the sole arbitrator appointed earlier. 14. Relying on the objection filed, Mr. Ashish Surana, learned counsel, appearing for the respondent submits that this application under Sections 14(1) & 15(1) of the A & C is not maintainable as in any view of the matter, an arbitrator can be appointed by this Court only under Section 11(6) of the A & C Act. He submits that after recusal of the sole arbitrator, the process of appointment of a new arbitrator on agreed terms i.e. Article 17 of the agreement dated 30.05.2008 has to be followed and the petitioner without following such mode of appointment of an arbitrator, had filed this application, and therefore, this application deserves to be dismissed. In support of his contention, Mr. Surana has placed reliance on the judgment of the Hon’ble Supreme Court in case of National Highways Authority of India and Another v. Bumihiway DDB Ltd. (JV) and Others, reported in (2006) 10 SCC 763 . 15. In support of his contention, Mr. Surana has placed reliance on the judgment of the Hon’ble Supreme Court in case of National Highways Authority of India and Another v. Bumihiway DDB Ltd. (JV) and Others, reported in (2006) 10 SCC 763 . 15. I have heard the learned counsel for the parties and have perused the materials on record. 16. Before proceeding further, it will be appropriate to take note of the judgment relied on by Mr. Surana in brief. 17. The appellant before the Hon’ble Supreme Court had appointed one Mr. B.P. Gupta as its arbitrator and respondent No.1 had appointed one Mr. Ashok Desai. The third arbitrator is to be chosen by the two arbitrators, who are to appoint the third arbitrator as the presiding arbitrator. It was also visualized that if the appointed arbitrators failed to reach any consensus within a period of 30 days from the date of appointment as arbitrator, presiding arbitrator is to be appointed by the President of Indian Roads Congress (‘IRC’). It appears that after the arbitrators failed to reach any consensus, without making a reference to IRC, respondent No.1 filed a petition under Section 11(6) of the A & C Act alleging that IRC had failed to make an appointment within the stipulated time. It is on that basis the arbitration application was disposed of by an order dated 01.07.2005 appointing Mr. Justice Y. Bhaskar Rao as presiding arbitrator. It is also seen that on 11.07.2005, Mr. B.P. Gupta had submitted his resignation and in his place, Mr. R.L. Gupta was appointed as an arbitrator. Mr. Y. Bhaskar Rao decided not to proceed with the arbitration and he intimated the same by a communication dated 26.07.2005. Mr. R.L. Gupta declined to accept the appointment and resultantly, one Mr. Surjit Singh was appointed as an arbitrator of the appellant. Mr. Surjit Singh failed to reach any consensus with regard to the appointment of a presiding arbitrator and at that juncture, the appellant had moved the IRC for appointment of a presiding arbitrator. Respondent No.1 filed a rejoinder-affidavit in the pending petition and the High Court directed the IRC not to appoint any arbitrator in the meantime. 18. The Hon’ble Supreme Court noted that after Mr. Justice Y. Bhaskar Rao had resigned, two arbitrators appointed by the respective parties, had re-initiated the process of appointment of presiding arbitrator. Respondent No.1 filed a rejoinder-affidavit in the pending petition and the High Court directed the IRC not to appoint any arbitrator in the meantime. 18. The Hon’ble Supreme Court noted that after Mr. Justice Y. Bhaskar Rao had resigned, two arbitrators appointed by the respective parties, had re-initiated the process of appointment of presiding arbitrator. In the background of the aforesaid factual events, the Hon’ble Supreme Court, while allowing the appeal, observed that the procedure contemplated in the agreement has to be followed and the IRC should be approached for appointment of a presiding arbitrator. 19. Though Mr. Surana has submitted that after the sole arbitrator has recused, again a request has to be made by the petitioner for appointment of a sole arbitrator, I am of the opinion that such a contention has no merit. 20. In the instant case, there is no dispute with regard to appointment of a sole arbitrator by this Court. As noticed earlier, the arbitral proceeding had also proceeded for about 7 years. Not only that, the earlier application for appointment of an arbitrator had not been opposed by the respondent. Once there is default on the part of a party, because of which this Court had to appoint an arbitrator, if the same process is again to be repeated as urged by Mr. Surana in case of recusal by the arbitrator, the same will not advance in any manner the cause of justice. It has to be accepted that the failure to act at the first instance obviates any necessity of any of the parties to the agreement from again starting the process from the very beginning. 21. The process of arbitration is conceived for facilitating disposal of disputes expeditiously and if the contention of Mr. Surana is accepted, the same would result in dragging of the proceedings, which according to Mr. Sharma, is the intention of the respondent. 22. What cannot be lost sight of the fact is that the respondent had engaged Mr. Kishore Bhaduri mid-stream and later on, had sought recusal of the arbitrator with the objection that he had close connection with the son of the arbitrator. 23. I am of the considered opinion present is an example where the respondent had devised ways to prolong the arbitration proceedings. 24. Though Mr. Kishore Bhaduri mid-stream and later on, had sought recusal of the arbitrator with the objection that he had close connection with the son of the arbitrator. 23. I am of the considered opinion present is an example where the respondent had devised ways to prolong the arbitration proceedings. 24. Though Mr. Surana had submitted that this application is not under Section 11(6) of the A & C Act but under Section 14(1) & 15(1) of the A & C Act, I am of the opinion that wrong quoting of the section is not very material when the core of the petition points towards appointment of the arbitrator at the instance of the Court. 25. In view of above, Hon'ble Justice Dr. Mukundakam Sharma, former Judge, Supreme Court of India, is appointed to act as the sole Arbitrator to resolve the dispute between the parties. 26. The Registry is directed to communicate this order to Hon'ble Justice Dr. Mukundakam Sharma, former Judge, Supreme Court of India, B1/39, Ch. Jhandu Singh Marg, Opposite Tata Motors Showroom, Safadarjung Enclave, New Delhi – 110029. 27. The remuneration of the Arbitrator shall be settled with the mutual consent of the parties. 28. The arbitration application, accordingly, stands allowed. No cost. 29. All the IAs stand closed.