This is an application filed under section 11(6) of the Arbitration and Conciliation Act, 1996 ( the Act, 1996) praying for appointment of an Arbitrator to resolve the dispute between the applicant and the respondent.
Briefly stated the facts of the case are that tenders were invited for sale of 15.6 Megawatt Power House at Chandausi District Moradabad. The said power plant was to be sold on "as is where is" basis. The applicant's bid was found to be the highest bid at Rs.2,21,56,000/-. The agreement was signed between the applicant and the respondent on 18.5.1996 but thereafter some dispute arose between the parties with regard to implementation of the contract. The applicant submitted an application before the Chairman/Managing Director of the U.P. Power Corporation Ltd. ( U.P. PCL) to nominate an Arbitrator. The Chairman/Managing Director, U.P. PCL by his letter dated 1.4.2002 appointed one Shri R.D. Maheshwari as the sole Arbitrator. Shri R.D. Maheshwari issued notices to the parties on 29.7.2002 calling upon them to appear before him on 16.8.2002. The arbitration proceedings proceeded before Shri R.D. Maheshwari and an award was given on 27.5.2007 by which the claim of the applicant as well as the counter claim of the respondent was rejected. Aggrieved the applicant filed an application before the Court of District Judge, Lucknow under section 34 of the Act, 1996 being R.S. No. 56 of 2007. The District Judge, Lucknow by his judgment dated 20.4.2013 set aside the award holding that the Arbitrator has ignored voluminous records and documents as well as oral evidence in the form of different letters issued by the Chief Engineer and it was held that it was also the obligation of the Arbitrator to refer to each and every substantive letter indicated by the parties in support of their respective contentions. The matter was referred to the Arbitrator with a direction to hear the learned counsel for the parties again and to pass award afresh by disposing of issues and every issue supported with reasons within a period of four months.
On receipt of the judgment of the District Judge, Lucknow, the applicant is stated to have approached the Chairman/Managing Director, U.P. PCL requesting him to appoint an Arbitrator to hear and decide the dispute in the light of the judgment passed by the District Judge, Lucknow. However, when no Arbitrator was appointed the applicant had no option but to file the present application before this Court under Section 11(6) of the Act, 1996.
I have heard Shri Jaspreet Singh, learned counsel for the applicant and Shri M.P. Yadav, learned counsel for the respondent-U.P. PCL and perused the documents on record.
The principal submission of the learned counsel for the applicant is that once the Arbitrator has given his award he had become functus officio and therefore on remand by the District Judge, Lucknow, the matter could not have been referred to or heard by the same Arbitrator and it was obligatory on the part of the respondent-Corporation to appoint another Arbitrator who would hear the matter afresh and it was only when the Chairman/Managing Director, U.P. PCL did not appoint an Arbitrator that this application under Section 11(6) of the Act, 1996 had to be filed for intervention of the High Court in appointing an Arbitrator. In support of his submission, learned counsel for the applicant has referred to the provisions of Section 14 and 15 of the Act, 1996 and he submitted that the mandate of an Arbitrator shall terminate if:
(a) he becomes de jure or de facto unable to perform his function or for other reasons fails to act without undue delay; and
(b) he withdraws from his office or the parties agree to the termination of his mandate or as provided under Section 15 of the Act the mandate of the Arbitrator shall terminate.
Shri Jaspreet Singh, learned counsel for the applicant further referred to the provisions of Section 32 of the Act, 1996 and submitted that the arbitral proceedings shall be terminated by the final arbitral award or by order of the Arbitral Tribunal under sub section (2) and further submits that the Arbitral Tribunal shall issue an order for the termination of the arbitral proceedings for the reasons mentioned in sub Section (2) of Section 32 and in the sub Section (3) of Section 32 the mandate of the Arbitral Tribunal shall terminate with the termination of the arbitral proceedings.
Shri M.P. Yadav, learned counsel for the respondent-U.P. PCL, on the other hand, submitted that the provisions of Sections 14 and 15 and 32 of the Act, 1996 would have no application to the facts of the present case inasmuch as the Act, 1996 itself came into force w.e.f. 22.8.1996 and since the agreement itself was entered into between the parties on 18.5.1996 therefore the Act, 1996 would not apply and the parties would be governed by the provisions of the Arbitration Act, 1940. He further submitted that on receipt of notice from the applicant to appoint an Arbitrator the matter was considered and it was decided that it was not necessary to appoint an Arbitrator as the District Judge, Lucknow had remanded the matter to the Arbitrator after setting aside his award and that Shri R.D. Maheshwari, the then Arbitrator was still alive and had not expired as wrongly stated in the application and that Shri R.D. Maheshwari was fully competent to hear the matter afresh.
In paragraph 3 of the counter affidavit filed by the respondents it has been stated that the Arbitrator had already been appointed and the matter had been remanded to him and therefore there was no need of appointment of another Arbitrator.
To be able to appreciate the submissions made by the learned counsel for the applicant it would be necessary to reproduce here the provisions of Sections 14, 15 and 32 of the Act, 1996:
"14. Failure or impossibility to act. - (1) The mandate of an arbitrator shall terminate if -
(a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and
(b) he withdraws from his office or the parties agree to the termination of his mandate.
(2)If a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate.
(3)If, under this section or sub-section (3) of section 13, an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or sub-section (3) of section 12.
15. Termination of mandate and substitution of arbitrator. - (1) In addition to the circumstances referred to in section 13 or section 14, the mandate of an arbitrator shal terminate-
(a) where he withdraws from office for any reason; or
(b) by or pursuant to agreement of the parties.
(2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.
(3) Unless otherwise agreed by the parties, where an arbitrator is replaced under sub-section (2), any hearings previously held may be repeated at the discretion of the arbitral tribunal.
(4) Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator under this section shall not be invalid solely because there has been a change in the composition of the arbitral tribunal.
32. Termination of proceedings.- (1) The arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal under sub-section (2).
(2) The arbitral tribunal shall issue an order for the termination of the arbitral proceedings where-
Learned counsel for the applicant submitted that since the Arbitrator has already given his award therefore he became de jure unable to perform his function. He further referred to the provisions of Section 15 of the Act to submit that the mandate of the Arbitrator had come to an end and therefore on remand the dispute could not have been referred to the same Arbitrator. He further referred to the provisions of Section 32 of the Act to submit that the mandate of the Arbitral Tribunal stood terminated with the termination of the arbitral proceedings and therefore the Arbitrator became functus officio and therefore incompetent to hear the dispute afresh. Reliance has been placed on the following judgments of the Supreme Court:
1.(2006) 6 SCC 204 (Yashwith Constructions (P) Ltd. Vs. Simplex Concrete Piles India Ltd. and another)
2.(2006) 10 SCC 763 (National Highways Authority of India and another Vs. Bumihiway DDB Ltd. (JV) and others;
3.(2012) 7 SCC 71 (ACC Limited Vs. Global Cements Limited) In paragraph 4 of the judgment in the case of Yashwith Construction (supra) the Supreme Court specifically referred to the provisions of Section 15 of the Act, 1996 and has observed that when the Arbitrator originally appointed in terms of the arbitration agreement withdrew for health reasons, the Managing Director, as authorized originally by the arbitration agreement, promptly appointed a substitute arbitrator. The question therefore was whether in the absence of power vested upon the Managing Director could the substitute Arbitrator have been appointed. The Supreme Court held that what Section 15(2) contemplates is the appointment of a substitute Arbitrator or replacing of the Arbitrator by another according to Rules that were applicable to the appointment of the original Arbitrator who was being replaced and held that there was no failure on the part of the party concerned as per the arbitration agreement to fulfill his obligation in terms of the 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. 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.
In this case the Chief Justice of the High Court had declined to exercise his power under section 11(5) read with Section 15(2) of the Act, 1996 to appoint a substitute Arbitrator and the appointment of the substitute Arbitrator by the Managing Director after the resignation of the first Arbitrator was found to be valid. In my opinion the said judgment has no application to the facts of the present case.
In National Highways (supra) the Supreme Court was again considering the provisions of Section 15(2) of the Act and on the facts of that case held that the High Court had failed to appreciate that in accordance with Section 15(2) of the Act on termination of the mandate of the Presiding Arbitrator the two nominated Arbitrators were first required to arrive at a consensus and on their failure to arrive at a consensus only was the respondent no. 2 authorized to make the appointment. Unless respondent no. 2 failed to exercise its jurisdiction, the High Court could not assume jurisdiction under section 11(6) of the Act. This judgment also does not help to advance the submission of the learned counsel for the applicant.
In ACC Ltd. (supra) also the Court was considering the provisions of Sections 14 and 15 of the Act, 1996 particularly with regard to the appointment of a substitute Arbitrator and Supreme Court held that on the appointment of a substitute Arbitrator no application for appointment of independent Arbitrator under Section 11 of the Act, 1996 could be filed. This case also does not help the applicant.
The provisions of Sections 14, 15 and 32 of the Act, 1996 speak of termination of the mandate of the Arbitrator where he becomes de jure or de facto unable to perform his function or for other reasons fails to act without undue delay or withdraws from his office or the parties agree to termination of his mandate. In the present case the Arbitrator has neither withdrawn from his office nor has he avoided performance of his function de jure or de facto. All that has happened is that he gave an award which was set aside by the District Judge and the matter was remanded to the Arbitrator to consider the dispute afresh in the light of the observations made by the District Judge in his judgment. It is the clear stand of the respondents in paragraph 7 of their counter affidavit and not denied by the applicant that the dispute has been referred to the Arbitrator for decision on the points referred by the District Judge and therefore there was no need of appointment of an Arbitrator.
In paragraph 3 of the counter affidavit it has also been stated that the earlier Arbitrator Shri R.D. Maheshwari is still alive and it has wrongly been mentioned that he has expired.
In the entire body of the application nowhere it has been stated that Shri R.D. Maheshwari has expired and that therefore it was necessary to appoint a new Arbitrator. It is only in the chronology list of dates and events that it has been stated that Shri R.D. Maheshwari had expired in the meantime. However, since this fact has not been categorically stated in the application under Section 11(6) of the Act, 1996 and does not appear to be correct in view of the categorical denial of his death in paragraph 3 of the counter affidavit and undenied by the applicant, I do not find any illegality or infirmity if the dispute has been remanded to Shri R.D. Maheshwari to consider afresh in the light of the observations made by the District Judge.
In this view of the matter, the application under section 11(6) of the Act, 1996 is absolutely misconceived in law, devoid of merit and not maintainable and is accordingly rejected.
Dated: 10th September, 2014.
o.k.