Heard learned advocate appearing for the parties.
The petitioner, a statutory board constituted under the provision of Gujarat Water Supply and Sewerage Board Act, 1972, by way of this petition has approached this Court under Article 226 and 227 of the Constitution of India, challenging the order dated 14.04.2011 where under the Arbitral Tribunal has rejected the preliminary objection against the very constitution of Arbitral Tribunal, and has also challenged independently the Arbitral Tribunal's constitution to function as such in view of the provision of terms of contract as well as the provision of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Arbitration Act, 1996' for the sake of brevity).
Facts in brief leading to filing this petition deserve to be set out as under;
3.1.
The petitioner and the respondent no.1 executed contract where under the work of supplying, laying and commissioning M.S. Pipeline and P.V.C. Pipes was assigned to respondent no.1 vide work order dated 10.06.2003 and that was to be over on or before 10.06.2004. The extension was requested and granted and thus the work was to be completed by 31.12.2005.
3.2.
The agreement contains arbitration clause namely Clause No.26 A.2, where under detail procedure is laid down for making appointment of arbitrators, in case of dispute, in accordance with the provision of the Arbitration Act, 1996.
3.3.
The respondent no.1 issued notice on 11.06.2009 indicating to the petitioner that on account of dispute they have appointed their arbitrator and petitioner board should appoint its arbitrator in terms of the provision of Clause No.26 A.2. The inaction on the part of the board was treated to be failure on the part of the board in making appointment as envisaged under the clause and hence a request was made to the president of the Institution of Engineers (India) for exercising option for appointing arbitrator on behalf of the board, which was acceded to and one Shri M.C.Bhinde came to be appointed as an arbitrator. Admittedly, while making appointment of Shri Bhinde, the president of the Institution of Engineers (India) did not call upon the petitioner in any manner to reflect upon the requests which he has received on behalf of respondent no.1.
3.4.
In the meantime, it so transpire that the arbitrator appointed originally by the respondent no.1 declined to continue and hence a different person was nominated as an arbitrator on behalf of respondent no.1 which was accordingly done and the proceedings started. The petitioner board initially submitted unequivocal letter to the Atbitral Tribunal informing the Tribunal that petitioner do not submit to the jurisdiction of the Tribunal as the Tribunal was constituted contrary to the provision of Clause No.26 A.2 as well as provision of Arbitration Act, 1996.
3.5.
The petitioner also preferred writ petition being S.C.A. No.3474 of 2010 which came to be disposed of vide order dated 16.07.2010, observing there under that, in view of provision of Section 16 of the Arbitration Act, 1996, the petitioner has a right to raise preliminary objection, including objection qua constitution of the Tribunal itself and accordingly the petition was not entertained. Being aggrieved and dissatisfied with that order passed by the learned Single Judge on 16.07.2010, the petitioner board preferred L.P.A. No.2030 of 2010 in S.C.A. No. 3474 of 2010, wherein the Division Bench of this Court while confirming the order passed by the learned Single Judge, made an order on 27.08.2010 observing that the Arbitral Tribunal shall treat the objection qua constitution of Tribunal as a preliminary issue and thereafter the petitioner put up detailed objection vide application dated 24.09.2010 and after due deliberations the Tribunal passed an order on 14.04.2011 which is subject matter of challenge in this petition along with independent challenge to the very constitution of the Arbitral Tribunal under Article 226 of the Constitution of India.
Learned advocate for the petitioner has contended as under:
(i) Learned advocate for the petitioner contended that the constitution of Arbitral Tribunal was contrary to the provision of the agreement and arbitration clause itself which unequivocally provides that Arbitral Tribunal would be constituted as per the provision of the Arbitration Act, 1996.
(ii) Learned advocate for the petitioner contended that the appointment of the Arbitral Tribunal is contrary to the agreement itself as well as the provision of the Arbitration Act, 1996.
(iii) Learned advocate for the petitioner further contended that the Arbitral Tribunal is constituted behind the back of the petitioner without affording any opportunity to the petitioner and for that he relies upon the decision of the Apex Court in case of SBP & Company Vs. Patel Engineering Ltd. and Another reported in (2005) 8 Supreme Court Cases 618 with special emphasis on paragraph nos. 36 and 37.
(iv) Learned advocate for the petitioner further contended that absolutely no opportunity was given while appointing second arbitrator by the institution and as per Section 6 read with the observation of the Apex Court in this judgment the petitioner could have been called upon to express its views in respect of the request made pursuant to Clause 26 A.2.
(v) Learned advocate for the petitioner further contended that there is no judicial member to adjudicate the dispute between the parties. The petitioner board has no faith on the part of the modus operandi.
(vi) Learned advocate for the petitioner has further submitted that even as per the Gujarat High Court Scheme called the scheme for appointment of arbitrators by the Hon'ble Chief Justice of Gujarat High Court, 1996 and Clause 7, notice is absolutely must to the affected person and in the instant case the president of the Institution of Engineers (India) is not given notice at all to the petitioner.
Learned advocate for respondent no.1 has invited this Court's attention to the very judgment cited on behalf of the petitioner and laid emphasis on observation of the Apex Court in paragraph no.45 and contended that the petition is not maintainable as the arbitration proceedings have commenced and the right to challenge the ultimate award is available to the petitioner, wherein all contentions could be agitated and taken. In reply there to Shri Chauhan, learned counsel for the petitioner board invited this Court's attention to the observation of the Apex Court in paragraph nos. 44, 45 and 46 and contended that when the appeal is not provided against any order made by the nominee of the Hon'ble Chief Justice appointing the arbitrator, then the only remedy is by way of Special Civil Application under Article 226 of the Constitution of India and there are subsequent judgment of the Apex Court viz. (i) (2008) 10 Supreme Court Cases 128 (ii) JT 2009 (3) SC 136(1), that the petition is maintainable.
This Court has heard learned advocate for the parties at length. Before adverting to the rival contentions of learned counsel for the parties, it would be most expedient hereinbelow to set out certain indisputable aspects emerging there from namely;
(I) There exists an agreement between the parties namely petitioner board and the respondent no.1 which contains provision in the form of arbitration clause. The arbitration clause is reproduced as under:
Sub-Cluse 26 A.2 Arbitration "Any dispute in respect of which the recommendations(s), if any, of the Disputes Resolution Board has not become final and binding pursuant to sub-clause 26 A.1 shall be finally settled by arbitration as set forth below. The arbitrate tribunal shall have full power to open-up, review and revise any decision, opinion, instruction, determination, certificate or valuation of the Engineer and any recommendation(s) of the Disputes Resolution Board related to the dispute.
i) A dispute with an Indian Contractor shall be finally settled by arbitration in accordance with the Indian Arbitration & Conciliation Act, 1996, or any statutory amendment thereof. The arbitrate tribunal shall consist of 3 arbitrators, one each to be appointed by the Employer and the contractor. The third arbitrator shall be chosen by the two arbitrators so appointed by the parties and shall act as presiding arbitrator. In case of failure of the two arbitrators, appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the presiding arbitrator shall be appointed by the President of the Institution of Engineers (India). For the purposes of this sub-clause, the term "Indian Contractor" means a contractor who is registered in India and is a juridical person created under Indian low as well as a joint venture between such a contractor and a Foreign Contractor.
ii) Neither party shall be limited in the proceedings before such tribunal to the evidence or arguments before the Disputes Resolution Board for the purpose of obtaining its Recommendation(s) pursuant to sub-clause 26 A.1. No recommendation shall disqualify any Disputes Resolution Board member from being called as a witness and giving evidence before the arbitrator(s) on any matter whatsoever relevant to the dispute.
iii) Arbitration may be commenced prior to or after completion of the works, provided that the obligations of the Employer, the Engineer, the contractor and the Disputes Resolution Board shall not be altered by reason of the arbitration being conducted during the progress of the works.
iv) If one of the parties fail to appoint its arbitrator in pursuance of sub-clause (i) and (ii) above, within 30 days after receipt of the notice of the appointment of its arbitrator by the other party, then the president of the Institution of Engineers (India) both in cases of foreign contractors as well as Indian Contractors, shall appointed the arbitrator. A certified copy of the order of the President of the Institution of Engineers (India Making such an appointment shall be furnished to each of the parties.
v) Arbitration proceedings shall be hold at Gandhinagar, Gujarat India, and the language of the arbitration proceedings and that of all documents and communications between the parties shall be English.
vi) The decision of the majority of arbitrators shall be final and binding upon both parties. The cost and expenses of Arbitration proceedings will be paid as determined by the arbitral tribunal. However, the expenses incurred by each party in connection with the preparation, presentation, etc. of its proceedings as also the fees and expenses paid to the arbitrator appointed by such party or on its behalf shall be borne by each party itself."
(II) It is not disputed by anyone that the respondent no.1 did appoint its arbitrator and did call upon the petitioner to appoint theirs vide notice dated 11.06.2009 produced on page no.73 on the compilation of this petition.
(III) It is also not disputed by anyone that this notice is issued in terms of clause for arbitration and invoking that very clause.
(IV) The issuance of notice dated 11.06.2009 and receipt thereof by the petitioner board has not been disputed in any manner.
(V) It is also not disputed by anyone that the board in consonance with clause 26 A.2 did not act and appoint its own arbitrator. In other words board chose to do nothing in response to the notice dated 11.06.2009. Hence, the respondent no.1 sent requests to the president of the Institution of Engineers (India) on 21.07.2009 calling upon it to act and appoint the arbitrator on behalf of the petitioner in terms of provision of Clause 26 A.2.
(VI) The Institution of Engineers (India) did appoint one Shri Bhinde as an arbitrator in terms of Clause 26 A.2. The respondent no.1's original arbitrator declined to act as an arbitrator and in that view of the matter the respondent no.1 was to substitute another person. The said substitution is also made and the Arbitral Tribunal is constituted. When the Institution of Engineers (India) appointed Shri Bhinde to act as an arbitrator in pursuance of letters dated 21.07.2009 and 06.08.2009, no notice whatsoever was issued by the Institution of Engineers (India) to the petitioner board to reflect upon the request received from the respondent no.1 and no opportunity of hearing was given.
(VII) The petitioner has not made any grievances qua substitution of the nominee arbitrator in respect of the respondent no.1's arbitrator. The petitioner has challenged the constitution independently under Article 226 of the Constitution of India as well as order dated 14.04.2011, as it is not appreciating the contention with regard to the constitution of the Atbitral Tribunal.
(VIII) The order dated 16.07.2010 passed by the learned Single Judge in S.C.A. No.3475 of 2010 was subject matter of L.P.A. being L.P.A. No.2030 of 2010 dated 27.08.2010, which was also not entertained and disposed of confirming the order passed by the learned single judge, however, observing that the objection, if any, qua constitution of the Tribunal be treated as a preliminary objection.
Against the backdrop of indisputable aspects, this Court is called upon to examine the contentions raised by learned advocates for the parties. The Court is of the considered view that this petition is required to be examined for the following reasons namely;
(i) The plain reading of Clause 26 A.2 in the arbitration agreement or in the agreement unequivocally indicate that the petitioner board has in terms agreed to abide by the procedure for appointment of arbitrators in case of dispute. Now, that very procedure itself envisages an eventuality whereunder either party failing to act upon the notice of appointing their arbitrator, then giving their right to appoint arbitrator on the part of the failing party to the President of the Institution of Engineers (India), meaning thereby the defaulting party, the party who is failing in acting on the notice is presumed to have expressed faith and confidence and reposed that power in president of the Institution of Engineers (India) and therefore, when such a clause is there, in my view the petitioner board is not justified in expecting any notice from the president of the Institution of Engineers (India), as if it was an adjudicatory or other functionary equating it with the designated authority of the Hon'ble Chief Justice. In my view, the president of the Institution of Engineers (India) while acting under the clause of arbitration cannot be equated as nominee of Hon'ble Chief Justice as envisaged under Section 11 of the Arbitration Act, 1996 and hence no notice could be expected from the president of the Institution of Engineers (India), as the parties were responsible for framing and laying down unequivocal procedure and therefore, the knowledge on the part of the party is very much there that once the notice is issued calling upon other party to act and appoint arbitrator, the failing party has to accept the arbitrator that could be appointed by the president of the Institution of Engineers (India), as envisaged in terms of Clause 26 A.2. Therefore, in my view, the decision cited at the bar in case of SBP & Company Vs. Patel Engineering Ltd. and Another would be of no avail, as it is in respect of the procedure to be followed by the designated officer or designated person by the Hon'ble Chief Justice while appointing or exercising power under Section 11 of the Arbitration Act, 1996.
(ii) This brings the Court to examine the contention with regard to maintainability of the petition. Maintainability of the petition independent on the ground of constitution of Arbitral Tribunal cannot be strictly said to be out side the purview of Article 226 of the Constitution of India. However, in light of the provision of Section 16, when the party to the arbitration proceeding is entitled to bring all the contentions and objections to the notice of the Tribunal, the same would govern the principle enunciated in provisions of Section 16 itself. Thereafter, as per Arbitration Act, 1996 the provisions are required to be followed strictly. In fact, in the instant case the earlier proceedings namely, proceedings of S.C.A No.3474 of 2010 and L.P.A. No. 2030 of 2010 were not taken to any higher forum and the decisions rendered thereunder have been accepted by the petitioner. Therefore, it cannot be said that the order of the Arbitral Tribunal passed in exercise of power under Section 16 should not have been challenged under Article 226 of the Constitution of India and arbitration proceeding should have been continued under the provision of Arbitration Act, 1996, or the same should be challenged only as per the provisions of Arbitration Act, 1996. Any contrary view of maintainability would amount to weakening of and making inroads in the proceedings of arbitration under the Arbitration Act, 1996. Therefore, on this count also the petition being bereft of merits, deserves to be dismissed.
In view of this, petition is dismissed. There shall be no order as to cost.
(S.R.BRAHMBHATT, J.) Pankaj Top