TaxTMI 
TaxTMI 
2015 (10) TMI 2620
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..... The Plaintiff and the Defendant No. 1 agree to and hereby do refer to Arbitration of Mrs. Justice Sujata Manohar (Retd.) the dispute as to (i) the difference in carpet area of the 5 flats agreed to be allotted as per the Development Agreement dated 27-12-2004 being Exhibit-B to the Plaint by Defendant No. 1 to the Plaintiff and his family members (i.e. 800 sq. ft. area) as provided in the said Development Agreement dated 27-12-2004 and the actual carpet area of the said 5 flats hereby allotted and handed over and (ii) the valuation of the deficient area if any, and the damages for the same. The Learned Arbitrator to make an award with regard to the compensation and the damages to be paid by Defendant No. 1 to the plaintiff for the deficient area, if any, Defendant No. 1 shall not raise any dispute as to the jurisdiction of the arbitrator. The Arbitrator shall decide the same as expeditiously as possible in accordance with law and under the provisions of the Arbitration & Conciliation Act, 1996." The said consent terms were taken on record by a Single Judge of the Bombay High Court who passed an order dated 8.10.2008 disposing of the suit in the following terms: "1. Pu....
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....ed senior advocate appearing on behalf of the appellant, has argued before us that as this was the case of a named arbitrator, the arbitration agreement contained in the consent terms in the Suit No. 1927 of 2007 spent its force when the named arbitrator resigned, it being clear that the said clause would only apply to the named arbitrator and nobody else, parties having faith only in the named arbitrator. He cited three decisions of this Court to buttress his submission and further argued that under Section 15(2) of the Arbitration and Conciliation Act, 1996, where the mandate of a named arbitrator terminates, there being no rules that would apply to the appointment of the arbitrator being replaced, the said Section would, therefore, not apply and the High Court having missed this vital fact is, therefore, wrong in appointing a substitute arbitrator. 8. Shri Santosh Paul, learned advocate appearing on behalf of the respondent has, however, supported the judgment of the Bombay High Court and has argued that the mandate of Section 89 of the Code of Civil Procedure (in short "CPC") requires a Court to attempt to either settle disputes raised in a suit by the means outlined by the ....
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....bitration agreement before the institution of any suit with respect to the subject-matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them, instead of proceeding under Chapter 11, may apply to a Court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in Court. (2) The application shall be in writing and shall be numbered and registered as a suit between one or more of the parties 5 interested or claiming to be interested as plaintiff or plaintiffs and the remainder as defendant or defendants, if the application has been presented by all the parties, or, if otherwise, between the applicant as plaintiff and the other parties as defendants. (3) On such application being made, the Court shall direct notice thereof to be given to all parties to the agreement other than the applicants, requiring them to show cause within the time specified in the notice why the agreement should not be filed. (4) Where no sufficient cause is shown, the Court shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed by ....
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....to refer the dispute to arbitration. It is also admitted that the parties had designated the Judicial Commissioner of Himachal Pradesh as the arbitrator for resolving any dispute that may arise between them in respect of the agreement. The Judicial Commissioner had refused to act as the arbitrator. The parties have not supplied that vacancy. Therefore the only question is whether the agreement read as a whole shows either explicitly or implicitly that the parties intended that the vacancy should not be supplied. It may be noted that the language of the provision is not "that the parties intended to supply the vacancy" but on the other hand it is that "the parties did not intend to supply the vacancy". In other words if the agreement is silent as regards supplying the vacancy, the law presumes that the parties intended to supply the vacancy. To take the case out of Section 8(1)(b) what is required is not the intention of the parties to supply the vacancy but their intention not to supply the vacancy. We have now to see whether the agreements before us indicate such an intention. As mentioned earlier, the only relevant provision in the agreements before us is the provision r....
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....nded that all countries give due consideration to the said Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice. The UNCITRAL also adopted in 1980 a set of Conciliation Rules. The General Assembly of the United Nations has recommended the use of these Rules in cases where the disputes arise in the context of international commercial relations and the parties seek amicable settlement of their disputes by recourse to conciliation. An important feature of the said UNCITRAL Model Law and Rules is that they have harmonised concepts on arbitration and conciliation of different legal systems of the world and thus contain provisions which are designed for universal application. 3. Though the said UNCITRAL Model Law and Rules are intended to deal with international commercial arbitration and conciliation, they could, with appropriate modifications, serve as a model for legislation on domestic arbitration and conciliation. The present Bill seeks to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitra....
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....withdrawal of an arbitrator from the office for any reason is within the purview of Section 15(1)(a) of the Act. Obviously, therefore, Section 15(2) would be attracted and a substitute arbitrator has to be appointed according to the rules that are applicable for the appointment of the arbitrator to be replaced. Therefore, what Section 15(2) contemplates is an appointment of the substituted arbitrator or the replacing of the arbitrator by another according to the rules that were applicable to the appointment of the original arbitrator who was being replaced. The term "rules" in Section 15(2) obviously referred to the provision for appointment contained in the arbitration agreement or any rules of any institution under which the disputes were referred to arbitration. There was no failure on the part of the party concerned as per the arbitration agreement, to fulfil his obligation in terms of Section 11 of the Act so as to attract the jurisdiction of the Chief Justice under Section 11(6) of the Act for appointing a substitute arbitrator. Obviously, Section 11(6) of the Act has application only when a party or the person concerned had failed to act in terms of the arbitration agreement....
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....fter, respondent No. 1 requested another person to act as arbitrator on its behalf, which person communicated his consent. However, respondent No. 2, who was the arbitrator appointed by the petitioner, sent a letter informing the parties that in view of respondent No. 1's arbitrator refusing to act, he had become the sole arbitrator in the case as per the arbitration clause between the parties. It is at this stage that respondent No. 1 filed an arbitration application under Section 11 for appointment of a third arbitrator by asserting that the second person nominated by it had agreed to be a substitute arbitrator and that, therefore, the third arbitrator should be appointed by the Court under Section 11. This very matter travelled all the way up to this Court which in a 7-Judge Bench ultimately decided that the power exercised by the Chief Justice of the High Court under Section 11 of the Act is not an administrative power but is a judicial power. The matter, on facts, having been reverted to a Division Bench of this Court, this Court was then asked to decide as to whether the appointment of the substitute arbitrator by respondent No. 1 was correct in law. After setting out the....
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....trator appointed by either party was to decline to accept appointment or refuse to arbitrate in the matter. Therefore, Respondent 1 cannot draw support from the ratio of the judgment in Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd. [2006(3) R.C.R.(Civil) 592 : 2007(4) Recent Apex Judgments (R.A.J.) 656 : (2006) 6 SCC 204]." [at paras 30, 31, 40 and 48] 16. In ACC Ltd. v. Global Cements Ltd., 2013(1) R.C.R.(Civil) 248 : 2012(6) Recent Apex Judgments (R.A.J.) 55 : (2012) 7 SCC 71, the arbitration clause with which this Court was confronted read as follows:- "21. If any question or difference or dispute shall arise between the parties hereto or their representatives at any time in relation to or with respect to the meaning or effect of these presents or with respect to the rights and liabilities of the parties hereto then such question or dispute shall be referred either to Mr. N.A. Palkhivala or Mr. D.S. Seth, whose decision in the matter shall be final and binding on both the parties." [at para 2] 17. As both Shri Palkhivala and Shri Seth had died, it was contended by the petitioner before this Court that the arbitration clause would not survive....
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.... such debarment or prohibition of appointment of a substitute arbitrator, the court's duty is to give effect to the policy of law that is to promote efficacy of arbitration. The incident of the death of the named arbitrators has no nexus or linkage with the expression "at any time" used in Clause 21 of the agreement. The time factor mentioned therein is the time within which the question or dispute or difference between the parties is resolved as per the agreement. The arbitration clause would have life so long as any question or dispute or difference between the parties exists unless the language of the clause clearly expresses an intention to the contrary. The question may also arise in a given case that the named arbitrators may refuse to arbitrate disputes; in such a situation also, it is possible for the parties to appoint a substitute arbitrator unless the clause provides to the contrary. Objection can be raised by the parties only if there is a clear prohibition or debarment in resolving the question or dispute or difference between the parties in case of death of the named arbitrator or their non-availability, by a substitute arbitrator. We ar....
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....bitrator would continue as the sole arbitrator. 20. The scheme of Section 8 of the 1940 Act and the scheme of Section 15(2) of the 1996 Act now needs to be appreciated. Under Section 8(1)(b) read with Section 8(2) if a situation arises in which an arbitrator refuses to act, any party may serve the other parties or the arbitrators, as the case may be, with a written notice to concur in a fresh appointment, and if such appointment is not made within 15 clear days after service of notice, the Court steps in to appoint such fresh arbitrator who, by a deeming fiction, is to act as if he has been appointed by the consent of all parties. This can only be done where the arbitration agreement does not show that it was intended that the vacancy caused be not supplied. However, under Section 15(2), where the mandate of an arbitrator terminates, a substitute arbitrator "shall" be appointed. Had Section 15(2) ended there, it would be clear that in accordance with the object sought to be achieved by the Arbitration and Conciliation Act, 1996 in all cases and for whatever reason the mandate of an arbitrator terminates, a substitute arbitrator is mandatorily to be appointed. This Court, however....
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....te in which the arbitration clause clearly specifies that a particular grand uncle of a joint family is the only person in whom all members of the family have confidence as a result of which he has been appointed arbitrator to resolve their disputes. In the case of resignation or death of such grand uncle, it could possibly be contended that by necessary implication no other person was competent to arbitrate disputes between the family members and that, therefore, on such resignation or death, the arbitration clause would spend its force. In the present case, as has been noted above, we do not have any such factual scenario nor do we have expressions such as "only" which would indicate that the confidence of the parties was in only the named arbitrator and in nobody else. 22. In fact, as has correctly been pointed out by learned counsel for the respondent, Section 89 of the CPC specifically provides that a Court hearing a suit may formulate terms of settlement between the parties and may either settle the same or refer the same for settlement by conciliation, judicial settlement, mediation or arbitration. On the facts in the present case, it is clear that following the mandate o....
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....aforesaid manner, which, inter alia, includes reliance upon the earlier judgment of this Court in ACC Ltd. v. Global Cements Ltd., (2012) 7 SCC 71. 2. While concurring with the judgment authored by my learned Brother, I would like to give some additional reasons in support, which are as under: Section 15(2) of the Act is also to be interpreted keeping in mind the ethos of the arbitration generally and also in the light of the spirit behind Section 89 of the Code of Civil Procedure, 1908 (for short, 'CPC') in particular. No doubt, in the instant case, there was no arbitration agreement between the parties when the suit was filed by the respondent herein. However, in the said suit which was filed, parties arrived at an agreement whereby it was agreed between them that the matter be decided through arbitration and not by the court of law. 3. It was held in P. Anand Gajapati Raju & Ors. v. P.V.G. Raju (D) & Ors., (2000) 4 SCC 539 that the Arbitration Act governs the case where arbitration is agreed upon before a pending suit by all parties. This Act, however, does not contemplate a situation as in Section 89 of the CPC where the Court asks the parties to choose o....
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....diation. 6. It has been noticed by this Court in some earlier judgments that Section 89 of the CPC is not very happily worded. Be that as it may, Section 89 provides for alternate methods of dispute resolution, i.e. those methods which are alternate to the Court and are outside the adjudicatory function of the Court. One of them with which we are concerned is the settlement of dispute through arbitration. Insofar as reference of dispute to arbitration is concerned, it has been interpreted by this Court that resort to arbitration in a pending suit by the orders of the Court would be only when parties agree for settlement of their dispute through arbitration, in contra-distinction to the Alternate Dispute Mechanism (for short, 'ADR') through the process of mediation where the Judge has the discretion to send the parties for mediation, without even obtaining the consent of the parties. Thus, reference to arbitration is by means of agreement between the parties. It is not in dispute that there was an agreement between the parties for reference of dispute to the arbitration and it was so referred. 7. On making such an application based on arbitration agreement between the ....
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....limits of interpretation by restricting the interpreter to a legal meaning that the text can bear in its (public or private) language (Aharan Barak - Purposive Interpretation in law.)." 10. Of the aforesaid three components, namely, language, purpose and discretion 'of the Court', insofar as purposive component is concerned, this is the ratio juris, the purpose at the core of the text. This purpose is the values, goals, interests, policies and aims that the text is designed to actualize. It is the function that the text is designed to fulfil. 11. We may also emphasise that the statutory interpretation of a provision is never static but is always dynamic. Though literal rule of interpretation, till some time ago, was treated as the 'golden rule', it is now the doctrine of purposive interpretation which is predominant, particularly in those cases where literal interpretation may not serve the purpose or may lead to absurdity. If it brings about an end which is at variance with the purpose of statute, that cannot be countenanced. Not only legal process thinkers such as Hart and Sacks rejected intentionalism as a grand strategy for statutory interpretation, and in....