Court No. - 59
Case :- ARBITRATION AND CONCILI. APPL.U/S11(4) No. - 46 of 2017 Applicant :- Shaiwal Kumar Singh Opposite Party :- Mahendra Singh Counsel for Applicant :- Ajay Kumar Singh,Ashish Kumar Singh Counsel for Opposite Party :- C.K.Parekh
Hon'ble Saumitra Dayal Singh,J.
1. The present application has been filed seeking substitution of the arbitrator, earlier appointed by this Court, vide order dated 19.7.2018. The issue of maintainability of the application for substitution of the arbitrator so appointed has been considered by order dated 19.7.2019 wherein present application was found to be maintainable.
2. Heard Sri Ajay Kumar Singh, learned counsel for the applicant and Sri C.K. Parekh, learned Senior Counsel, assisted by Sri Deepak Singh, learned counsel for the opposite party.
3. It is undisputed between the parties that upon his appointment, the first notice was issued to the parties by the learned arbitrator (herein also described to as 'Mr. Z') on 25.9.2018, fixing 14.10.2018. While the parties did meet the learned arbitrator on a few dates, however, admittedly no claim petition came to be filed by the applicant till 9.1.2019 (or even thereafter) on which date the applicant filed the present application seeking substitution Mr. Z. The copy of the order- sheet Mr. Z does not mention any claim filed. The order-sheet of the learned arbitrator is also completely silent as to settlement of his fee.
4. In such circumstances, it appears, from a perusal of the order- sheet of the learned arbitrator that the matter was considered on 14.10.2018 and 17.11.2018 with respect to the institution of the claim. At the same time, Mr. Z also appears to have written to the applicant on 20.11.2018 to deposit a Rs. 1,00,000/- towards his partial fee. It is that stage that the applicant appears to have lost faith in Mr. Z and made an application before him dated 25.11.2018 seeking his recusal. Specific facts have been stated in that application which are purposely not being noted here as I do not intend to rule on the same.
5. In such facts, the learned arbitrator chose to reply to the applicant by a detailed communication dated 7.12.2018 justifying his stance. At the same time, perusal of the paragraph no. 5(i) to the communication dated 7.12.2018 reveals that Mr. Z, in fact, admitted to having orally asked for deposit of partial fees, Rs. 1,00,000/-, even before the claim petition had been filed and even before the claim could be valued. In short, learned arbitrator practically rejected the application filed by the applicant under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) and fixed the next date on 16.1.2019.
6. At that stage, the present application came to be filed seeking substitution of the learned arbitrator. By order dated 21.1.2019, it was directed to be listed with previous papers. During pendency of such application, the learned arbitrator then appears to have passed order dated 6.5.2019 giving reference of Section 32 of the Act, terminating the proceedings in absence of any claim being filed. The same has also been communicated to this Court through another communication of Mr. Z dated 22.5.2019.
7. Having heard learned counsel for the parties and having perused the record, it is clear that the applicant had attempted to first raise challenge to the appointment of the learned arbitrator.
That was rejected by the learned arbitrator. However, that event has no impact on the present application for reasons given below.
8. Insofar as the termination of the mandate and substitution of Mr. Z is concerned, in absence of any claim being filed by the applicant, the communication dated 06.05.2019 is referable only to Section 25(a) of the Act. The termination of mandate has arisen because the claimant did not communicate his statement of claim. Though reference to Section 32 of the Act has been made by Mr. Z, that would itself not be of much consequence inasmuch as the true status and flavour of the action taken by Mr. Z is to be tested not by the cover of the order but by it's true contents. Neither the claimant-opposite party withdrew his claim nor the parties agreed to terminate of the proceedings nor has the learned arbitrator found that the continuation of the proceedings had for any reason become unnecessary or impossible. Hence that order is not referable to Section 32 of the Act as has also been discussed in the earlier order dated 19.7.2019.
9. Perusal of his communication dated 06.05.2019 only brings out the fact that the claim petition had not been filed by the applicant since 14.10.2018. Even in that regard, Mr. Z took note of the pendency of the present application, seeking substitution of his authority. The only reason given by Mr. Z to terminate the proceedings is his opinion that he may not be able to make the award within the stipulated time period.
10. In that, it cannot be disputed that Mr. Z did not enter reference before 14.10.2018. Thus, in the first place, limitation existed upto 13.10.2019 (a date yet to pass). Second, keeping in mind the provisions of Section 29-A(3) and (4) of the Act, it is doubtful if the reasoning offered by Mr. Z could ever be found acceptable in the context of his substitution as sought.
11. It is also strange to note that the learned arbitrator has chosen to make a comment that he had been forced to meet the expenses from his own account when learned Senior Counsel appearing for the opposite party has strenuously urged that a sum of Rs. 1,10,000/- has been paid to Mr. Z by his client. In fact, it appears that the application has been resisted by the said opposite party mostly on account of such payment having been made before the claim came to be valued. It is also pertinent that according to learned counsel for the applicant, the claim would be of about Rs.1.71 crores.
12. It thus appears while the arbitrable dispute is continuing to exist and; the mandate of Mr. Z, the learned arbitrator earlier appointed by order dated 19.7.2018 stands terminated simpliciter without any award arising owing to his act of withdrawing from the reference.
13. Consequently, a substitute arbitrator must be provided. Inasmuch as the earlier arbitrator had been appointed by this Court and not the parties themselves, no further procedural requirement need be followed for such appointment. Upon service of notice of the present application, the opposite party has also filed counter affidavit. The procedure has thus been fully followed and complied. Once the authority to appoint independent arbitrator had been assumed by this Court while appointing Mr. Z, in my opinion, the same would remain with this Court and therefore, no fresh notice was required to be issued by the applicant to the opposite party before seeking appointment of a substitute arbitrator. In that regard I may refer to order in Arbitration and Conciliation Application U/S 11(4) No. 42 of 2016, dated 07.08.2019. It was observed:
"28. The legal requirement and purpose to issue a notice on the non- applicants, in terms of section 11(5) of the Act existed only to build a consensus amongst the parties to the dispute, to appoint an arbitrator. That compliance was made and that requirement got over before appointment of the first arbitrator, by this Court. It did not exist beyond that stage. The power to appoint a consented arbitrator did not resurrect and revert to the parties, upon withdrawal of the mandate by the first arbitrator, who had been appointed by this Court. That event had no affect on the choice of appointing authority of the arbitrator."
14. Accordingly, Mr. Justice Rajiv Lochan Mehrotra, a retired Judge of this Court, residing at A-39, Agni Path Colony, Tej Bahadur Sapru Road, Allahabad, Uttar Pradesh (Mob. No. 9415125760), be appointed the sole (substitute) arbitrator for resolution of the disputes between the parties. Subject to his consent under Section 11(8) of the Act, the parties agree to request the learned arbitrator to conduct the proceedings at Prayagraj (Allahabad).
15. The Registry is directed to obtain consent of the proposed learned (substitute) arbitrator, in terms of Section 11(8) of the Act, within three weeks.
16. List after three weeks.
17. As for the amount Rs. 1,00,000/- claimed to have been deposited by the opposite party with Mr. Z, that issue is left to the discretion of Mr. Z and the opposite party to be dealt with and resolved as they may deem fit.
Order Date :- 30.9.2019 Prakhar