TaxTMI 
TaxTMI 
TaxTMI 
2019 (1) TMI 1376
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....s executed on 28.01.2000 between the parties. Initially, the contract period was of three years; but it was extended for another two years from 31.01.2003 by consent of both the parties. Dispute arose between the parties regarding imposition of transit penalty by the appellant upon the respondent for delay in transportation of containers, non-payment of handling charges of containers for various period of time and several other disputes. The terms of the contract Clause 4.20.1 of Schedule-4 (General Conditions) provided for arbitration by the Managing Director himself or his or her nominee for the sole arbitration. The respondent-Contractor requested for appointment of the arbitrator in terms of Clause 4.20.1 of Schedule-4 (General Conditions). One I.C. Shrivastava, IAS (Retd.) was appointed as the sole arbitrator on 21.02.2005. Since the progress of the sole arbitrator was not satisfactory in disposing the matter, the said sole arbitrator was removed on 26.03.2009 and in his place, Chairman-cum-Managing Director of the appellant- Corporation was appointed to act as the sole arbitrator by the consent of both the parties. 4. For one reason or other, the arbitration proceedings coul....
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.... impugned order allowed the arbitration application thereby appointing Mr. J.P. Bansal (Retd.), District Judge as the sole arbitrator. The High Court held that the respondent- Contractor had to approach the High Court due to prolongation of the matter before the sole arbitrator who kept on changing one after another and only after the notice of the arbitration petition was served upon the appellant-Corporation, the arbitrator speeded up the proceedings and the ex-parte award was passed on 21.01.2016 without hearing the respondent-Contractor. The High Court was of the view that the arbitrator hurried up to conclude the proceedings with a view to frustrate the arbitration application. 8. Mr. A.D.N. Rao, learned counsel for the appellant-Corporation submitted that the High Court erred in not keeping in view of Clause 4.20.1 of Schedule-4 (General Conditions) that the respondent could not have moved the application under Section 11 and Section 15 of the Arbitration and Conciliation Act, 1996 in the light of the agreement between the parties and the competence of the arbitral tribunal to adjudicate the dispute between the parties. It was further submitted that though the arbitrator was....
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....the proceedings were accelerated and award came to be passed. 10. We have carefully considered the contentions of both the parties and perused the impugned judgment and materials on record. The following points arise for consideration:-  In the light of the proceedings before the sole arbitrator on various dates and when the proceedings before the arbitrator was pending, whether the respondent was right in filing arbitration petition approaching the High Court under Section 11 and Section 15 of the Arbitration Act, 1996 for appointment of a substitute arbitrator? When by virtue of arbitration agreement Clause 4.20.1 of Schedule-4 (General Conditions), parties have agreed that the dispute, differences between the parties to be resolved by the Managing Director or his nominee, whether the High Court was right in deviating from the terms of the agreement between the parties and appointing an independent Arbitrator? Whether by virtue of Section 12 of the Arbitration and Conciliation (Amendment) Act, 2015, the Chairmancum- Managing Director has become ineligible to act as the arbitrator? Whether the High Court was right in terminating the mandate of the arbitrator whom th....
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....both the parties, wherein it was agreed that the records of the case are to be reconstructed and by the same order, it was decided to request Additional Chief Secretary (SSI), Rukmani Haldea, IAS to be the sole arbitrator. However, subsequently by the consent of both the parties Chairman-cum-MD of the appellant-Corporation was appointed as the sole arbitrator. 13. The matter was adjourned before the arbitral tribunal on 24.11.2009 and 30.11.2009 and other dates. It is seen from the order of the arbitral tribunal dated 08.01.2010, the earlier arbitrator was requested number of times to handover the records connected with the case; but he had not handed over the records and therefore, parties were advised to exchange records so that the proceedings could begin and the matter was adjourned. In the subsequent hearing on 25.01.2010, both the parties were represented by their counsel and therefore, the matter was adjourned to 08.02.2010 for final arguments. On 08.02.2010, arguments of the respondent-claimant was heard in part and the case was adjourned to 10.02.2010 on account of paucity of time. On the subsequent hearing dates viz. 10.02.2010, 11.02.2010, 15.02.2010, 18.02.2010 and 10.....
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....llowing order:- "The "file regarding this arbitration" appears tempered/missing paper or incomplete. Therefore, the chronological events need to be ascertained and reconstruction will be required. The detailed order will be passed informing both the parties in this respect. They must wait till further order in this content." 16. It was in the above background, the respondent-Contractor sent a legal notice dated 07.02.2013 stating that both the parties have submitted their relevant claims before the sole arbitrator on 18.04.2011 and that it was mutually agreed to settle the claim after deduction of some amount and that the amount was finalised and settled for Rs. 3,90,81,602/- and in spite of the fact that settled amount was agreed between the parties, no award was passed by the arbitrator. The respondent sent another legal notice dated 07.03.2013 reiterating the claim for Rs. 3,90,81,602/- along with statutory interest. The appellant-Corporation has sent a detailed reply dated 19.03.2013 denying any settlement and also denying that the amount was finalised for a sum of Rs. 3,90,81,602/-. 17. It was in the above backdrop, on 13.05.2015, the respondent- Contractor filed an appli....
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....cord at the earliest." As stated earlier, to that effect, Shri Ram B. Salve, sole proprietor of the respondent had also given a letter dated 21.10.2010. Since the papers were missing or incomplete, in the presence of both the parties, the arbitral tribunal vide its order dated 17.08.2011 has decided that the chronological events need to be ascertained and reconstruction will be required and a detailed order will be passed informing both the parties in this regard. As seen from the proceedings of the arbitral tribunal till that time, the respondent voluntarily participated and acquiesced in the proceedings before the arbitral tribunal and also expressed faith in the sole arbitrator. Having thus voluntarily participated in the arbitral proceedings, the respondent has sent a legal notice dated 07.02.2013 to the appellant-Corporation stating that in the arbitral proceedings, the respondent mutually agreed to the claim and the matter was settled for a sum of Rs. 3,90,81,602/- and that in spite of repeated requests, the amount was not paid to the respondent. The respondent also sent another legal notice dated 07.03.2013 reiterating its demand for payment of Rs. 3,90,81,602/-. To that eff....
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....l award may be set aside by the court if the composition of the Arbitral Tribunal or the arbitral procedure was not in accordance with the agreement of the parties (unless such agreement was in conflict with any provision of Part I of the Act from which parties cannot derogate, or, failing such agreement, was not in accordance with the provisions of Part I of the Act). The legislative intent is that the parties should abide by the terms of the arbitration agreement." [underlining added] 22. The respondent has not placed any material to show that it has reason to believe that the arbitrator had not acted independently or impartially. The respondent has not brought on record any material to entertain an apprehension that the Managing Director of the appellant-Corporation is not likely to act independently or impartially. On the other hand, as noted earlier, as per the proceeding of the arbitral tribunal dated 21.10.2010, the respondent had expressed its full faith in the sole arbitrator and had also given a letter dated 21.10.2010 to that effect. The fact that the sole arbitrator is the Managing Director of the appellant-Corporation is not a ground to raise a presumption of bias or....
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....has held that the named arbitrator-Managing Director of the respondent therein had become ineligible by operation of law and therefore, he cannot nominate another person as an arbitrator. In para (54), it was held as under:- "54. In such a context, the fulcrum of the controversy would be, can an ineligible arbitrator, like the Managing Director, nominate an arbitrator, who may be otherwise eligible and a respectable person. As stated earlier, we are neither concerned with the objectivity nor the individual respectability. We are only concerned with the authority or the power of the Managing Director. By our analysis, we are obligated to arrive at the conclusion that once the arbitrator has become ineligible by operation of law, he cannot nominate another as an arbitrator. The arbitrator becomes ineligible as per prescription contained in Section 12(5) of the Act. It is inconceivable in law that person who is statutorily ineligible can nominate a person. Needless to say, once the infrastructure collapses, the superstructure is bound to collapse. One cannot have a building without the plinth. Or to put it differently, once the identity of the Managing Director as the sole arbitrato....
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.... no award came to be passed. The respondent filed application under Sections 11 and 15 of the Act of 1996 on 13.05.2015 seeking appointment of an independent arbitrator for adjudication of the disputes and differences between the appellant and the respondent. 29. In support of his contention, the learned counsel for the respondent relied upon the decision in Union of India and others v. Uttar Pradesh State Bridge Corporation Limited (2015) 2 SCC 52. Learned counsel for the respondent contended that the arbitrator failed to conclude the proceedings even after four years and the High Court rightly appointed the substitute arbitrator departing from the arbitration clause in the agreement between the parties. In the said case, since the Arbitral Tribunal did not pass award in spite of expiry of four years, the respondent thereon filed Request Case No.10/2010 and the High Court passed order dated 09.03.2011 giving the last chance to the Arbitral Tribunal to complete the arbitral proceedings within a period of three months. In para (6) of the judgment, this Court pointed out that the High Court took note of the various dates and hearings that are fixed by the Tribunal between 25.03.2011....
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.... between 2011 and 2013, the respondent has not filed any application to expedite the proceedings and for passing of the award. The respondent has neither filed the Request Case for passing of the award at an early date nor filed the petition under Section 14 of the Act for termination of the mandate of the arbitrator that the arbitrator has 'failed to act without undue delay'. 31. Mere neglect of an arbitrator to act or delay in passing the award by itself cannot be the ground to appoint another arbitrator in deviation from the terms agreed to by the parties. We may usefully refer to RUSSELL ON ARBITRATION, 20th Edition which reads as under:- "Mere neglect of an arbitrator to act, as distinct from refusal or incapacity, does not of itself give the court power to appoint another arbitrator in his place. It does, however, give the court power to remove him, whereupon there is a power to replace him."* *[RUSSELL ON ARBITRATION, 20th Edition, Pg. 136 quoted in Law relating to Arbitration and Conciliation, 9th Edition, by Dr. P.C. Markanda at Pg. 620] 32. Section 15 deals with termination of the mandate and substitution of an arbitrator. Sub-section (1) of Section 15 states that....
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....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. When Section 15(2) says that a substitute arbitrator can be appointed according to the rules that were app....
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....aim of the appellant-Corporation in respect of Serial No.17, the arbitrator awarded a sum of Rs. 58,39,018/-. 36. Since the High Court was in seisin of the matter, the Arbitral Tribunal could have given further opportunity to the respondent to put forth his case. The proceedings of the Arbitral Tribunal was pending for quite some time from 2009 till 2015 and after the respondent approached the High Court in May, 2015, the arbitrator appears to have hurriedly passed the award. It is pertinent to note that the respondent was repeatedly praying for adjournment on 05.01.2016, 13.01.2016 and was not present on the date of passing of the final award dated 21.01.2016. As pointed out earlier, it was noted in the proceedings dated 17.08.2011 that the chronological events need to be ascertained and reconstruction will be required. It is not known whether the same was ascertained or not and whether reconstruction was done before passing the final award on 21.01.2016. The respondent has made number of claims under various heads. The respondent has to be given an opportunity to substantiate its claim under various heads. In order to do complete justice between the parties and in exercise of po....