JUDGMENT H.L. Gokhale, C.J.
1. Civil Misc. Application No. 467 of 2007 was filed by the applicant-Smt. Chandra Dickshit at Lucknow, to recall the order dated 16.3.2007, passed by the learned designated Judge at Lucknow appointing an Arbitrator in the Arbitration Petition No. 11 of 2006, filed by the respondent-M/s Smart Builders. The said recall application was directed to be heard at Allahabad along with other review applications in other matters. After the recall application was transferred to Allahabad, a third party-M/s Bantus Designers & Builders Pvt. Ltd. have filed another application, bearing No. 220578 of 2007 in this matter also praying that the order dated 16.3.2007 be recalled and that M/s Bantus Designers & Builders Pvt. Ltd. be directed to be impleaded as opposite party to the arbitration petition.
2. Shri H.S. Jain, learned Advocate has appeared for the applicant-Smt. Chandra Dickshil. Mr. Prashant Chandra, learned Senior Advocate, appears for the respondent/M/s Smart Builders and Mr. Vishnu Gupta, appears for M/s Bantus Designers & Builders Pvt. Ltd.
3. The short facts leading to these two applications are as follows:
An agreement dated 9.5.2004 was entered into between the applicant and the respondent to construct a building on a plot of land owned by the applicant. M/s Bantus Designers & Builders, the third party were to be the promoters. The applicant is the owner of a plot of land on Hilton Lane, situated at 57, Hilton Lane, Lucknow and under the agreement the respondent was to construct a building. The agreement was entered into between the applicant and M/s Bantus Designers & Builders on one hand and the respondent on the other. The applicant and the promoters were entitled to 35% of the super built up of area of the flats.
4. It is the case of the respondent that the concerned building has been completed and in furtherance to that agreement four flats have been earmarked for the applicant. Later, certain excess floor area (FAR) became available. The respondent gave a proposal to utilise that area. According to an understanding between the parties, the respondent paid a further sum of Rs. 16 lacs to the applicant, but the applicant demanded a further share in the super built up area. It led to further disputes between the two. The agreement between the parties provided for an arbitration Clause No. 28, which reads as follows:
That in case any dispute arises between the parties, as to the interpretation or operation or effect of any clause of this agreement or regarding the rights and/or liabilities of either party under this agreement, the matter shall be referred to the arbitration of two arbitrators one appointed by the first and third party/promoter and the other by the second party/builder. The arbitrators so appointed shall appoint an umpire within one month from the commencement of the proceeding of arbitration, which shall be held in accordance with the provisions of Indian Arbitration Act, 1996. It is expressly agreed that during the period of such proceedings the work of constructions/development shall not be stopped.
5. Accordingly, the respondent gave a notice to the applicant informing that the respondent had appointed their Arbitrator, which was one Sri Shishir Jain, Advocate and that the applicant may appoint her Arbitrator. The case of the respondent is that in spite of passing of more than a month after service of notice dated 18.1.2006, the applicant did not appoint her Arbitrator. She rather preferred to file a Suit. The respondent, therefore, filed Arbitration Petition No. 11 of 2006 on 15.4.2006 for appointment of Arbitral Tribunal by invoking Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act).
6. The applicant opposed this application by filing a counter affidavit, which was filed after more than eight months on 5.1.2007. In that affidavit, it was stated that the applicant was an old lady and she was filing the objection with the help of her grand son, who stayed in Mumbai since she had lost her son in the meanwhile and that is why there was delay. The affidavit however, states that her grand son searched out the notice and the relevant documents and thereafter the objection was filed.
7. In any case, counter affidavit containing objection states that the notice dated 18.1.2006 was received on 25.1.2006. The counter affidavit further stated that this notice was replied by reply dated 22.2.2006, which was sent by Speed Post on 24.2.2006, but the envelope was returned with the endorsement dated 25.2.2006, refusing to receive it. In that reply, it was stated that the applicant had appointed one Sri Sudarsh Awasthi at Lucknow as her Arbitrator. The reply, therefore, stated that the application was not maintainable and since both the parties had appointed their Arbitrators, an umpire be appointed.
8. The respondent filed a rejoinder affidavit to this counter affidavit. In that, they contended that their notice dated 18.1.2006 was served on the applicant on 20.1.2006 and not on 25.1.2006 as claimed. They also pointed out that as per paragraph 5 of the reply of the applicant, she had sent the notice dated 22.2.2006 through Speed Post on 24.2.2006. If that was so, according to them, the notice was sent beyond the period of 30 days after receipt of the notice on 20.1.2006. Besides, the respondent disputed that they ever received the reply to their notice. They contend that during the course of their business, they are receiving dozen of letters everyday and there was no question of their refusing any letter, if it had really been so sent. According to them, the annexures to the counter affidavit were concocted and fabricated. They submitted that there was no question of appointing any umpire any longer as the process between the parties had failed and only the Court was empowered to appoint an Arbitrator under Section 11(6) of the Act. They also submitted that the reply to the petition was filed after the lapse of one year and that in the meantime, the documents were fabricated.
9. Thereafter the Arbitration Petition appeared before the learned designated Judge at Lucknow from time to time when the parties were represented by the respective Advocates and ultimately after hearing all concerned on 16.3.2007, the learned designated Judge passed the following orders:
Hon'ble Jagdish Bhalla, J.
With the consent of parties, Hon'ble Mr. Justice S. Saghir Ahmad, Former Judge, Supreme Court of India is hereby appointed as an Arbitrator. Learned Arbitrator shall be entitled for Rs. 15,000/- fee per sitting alongwith secretarial and travelling charges, if any, which shall be borne by the parties equally.
The Arbitration application stands disposed of accordingly.
Thus, the arbitration petition stood disposed of with that order appointing the sole Arbitrator with consent of the parties.
10. Thereafter the present application to recall this order dated 16.3.2007 has been filed by the applicant. In para 7 of this application, it is stated that the learned Counsel for the applicant had no objection to the appointment of Hon'ble Mr. Justice S. Saghir Ahmad, as the Presiding Arbitrator, but he had not given consent to his appointment as the sole Arbitrator. It is submitted in para 5 that in view of the appointment of their Arbitrator by the applicant, the Court was required to adjudicate whether the applicant had failed to act as required under Clause 28 of the agreement. It is submitted that if the parties had agreed for resolving the disputes by the two Arbitrators and a Presiding Arbitrator, the Arbitral Tribunal cannot be reduced to a single Arbitrator.
11. This application is opposed by the respondent by filing their objections. It is submitted that the order was passed when the learned Counsel for the applicant was very much present in the Court and the application to recall the order is an after thought. It is not permissible to re-agitate the issue now and no prejudice is caused to the respondent whatsoever.
12. The applicant has filed a further reply to this counter affidavit and contended that the appointment of Arbitrator cannot be altered even with the consent of the parties.
13. It is at this stage that one more application is filed by the third party-M/s Bantus Designers and Builders Pvt. Ltd. They also submitted that the order dated 16.3.2007 be recalled and they may be directed to be impleaded as the opposite party to the Arbitration Petition and then the Arbitration Petition be decided on merits. It is submitted that the order dated 16.3.2007 has been passed without affording an opportunity to the applicant-M/s. Bantus Designers & Builders Pvt. Ltd.
14. Mr. H.S. Jain, learned Advocate has appeared for the applicant-Smt. Chandra Dickshit and submitted that both the parties to the agreement had appointed their own Arbitrators and, therefore, what was expected by the learned designated Judge was to appoint an umpire or Presiding Arbitrator and he could not have appointed the sole Arbitrator. He relied upon the proposition of the Apex Court in Datar Switch Gears Ltd. v. Tata Finance Ltd. reported at , and reiterated later in subsequent judgments to the effect that the appointment of an Arbitrator made by the parties is valid and binding and the same has to be given effect to. He submitted that the applicant had not consented to the appointment of the sole Arbitrator.
15. The submission was supported by Mr. Vishnu Gupta, learned Counsel appearing for the third party-M/s Bantus Designers & Builders Pvt. Ltd., who had appeared in this matter for the first time to submit that it was also a relevant party, it was not before the Court and the appointment of Arbitrator was bad.
16. As against that Mr. Prashant Chandra, learned Senior Advocate, appearing for the respondent submitted that the learned designated Judge had clearly recorded that he was passing the order by consent. Whatever is recorded by the learned designated Judge in his order with respect to what transpired in the Court cannot be disturbed by any such application.
17. That apart, he submitted that the applicant had not appointed their Arbitrator within the period of 30 days, as required under Section 11(4) of the Act and, therefore, the order of appointment was valid under Section 11(6) of the Act. He drew our attention to the two judgements of the Apex Court, one in the case of C.M.C. Ltd. v. Unit Trust of India and Ors. reported at , where the appointment of the Arbitrators by the Court was left undisturbed and in justification thereto, amongst others, in para 9 of the judgment, the Apex Court has observed that in any case no prejudice was caused to the parties and no injustice is involved in such an appointment. He also relied upon a judgment of Arvind Constructions Co. (P) Ltd. v. Kalinga Mining Corporation and Ors. reported , where in spite of naming their respective Arbitrators, more than a year went by and the Arbitrators did not appoint the Presiding Arbitrator, the Apex Court proceeded to appoint the Sole Arbitrator.
18. I have gone through the pleadings and noted the submission of the parties. It is true that the arbitration clause provided for the parties to appoint their own Arbitrators. However, there is a clear dispute as to whether the applicant appointed her Arbitrator within a period of 30 days from the date of receipt of the notice. Besides, it is material to note that whereas the respondent sent a notice to appoint an Arbitrator on 18.1.2006 and filed the application under Section 11(6) of the Act on 15.4.2006, the applicant took more than eight months to file her counter affidavit, to which she enclosed her reply appointing her Arbitrator with the photocopy of the postal remarks. No affidavit of any person from the postal authorities was filed when the respondent are contending that the documents are fabricated. By the time, the matter reached before the learned designated Judge on 16.3.2007, more than a year had gone after the service of the initial notice. It must have been apparent to the learned Judge that the mechanism agreed between the parties had failed. On this background, when he has passed an order appointing a retired Hon'ble Judge of the Apex Court as Arbitrator and when he has recorded that the order is by consent, the order will have to be read as it is. The order cannot be read in any case as appointing the Presiding Arbitrator inasmuch as the learned Judge has not said it so. In the scenario, which was there before the learned Judge, it must have been clear to the learned Judge that the arbitration by the two Arbitrators appointed by the respective parties would also result in a failure. On this background, the order passed by the learned Judge will have to be read as a conscious order exercising his powers under Section 11 (6) of the Act. It cannot be said that no hearing was afforded to the parties nor any failure of understanding can be attributed to the learned designated Judge, when pleadings of the parties were very clear.
19. Section 10 (1) of the Act provides that the parties are free to determine the number of arbitrators, provided that such number is not an even number. Sub-section (2) of Section 10 of the Act, however, lays down that tailing the determination, the arbitral tribunal shall consist of a sole arbitrator. It was obvious to the learned Judge that the mechanism had failed and there was a serious dispute with respect to the alleged appointment of an Arbitrator by the applicant. It is on this background that he has exercised his powers under Section 11(6) of the Act. That order has a finality under Section 11(7) of the Act.
20. (i) There is no specific provision for review under the Act. As laid down by the Apex Court in Patel Narshi Thakershi v. Pradyumansinghji Arjunsinghji reported at , the power to review is not an inherent power. It must be conferred by law either specifically or by necessary implication. As laid down by the Apex Court in S.B.P. & Co. v. Patel Engineering Ltd. reported at (2005) 8 SCC 618, the decision to appoint an arbitrator, arrived at by the Chief Justice, is a judicial decision. It has finality as specifically provided in Section 11(7) of the Act and it is appeallable only to the Apex Court under Article 136 of the Constitution of India. In the scheme of the Act, there is no specific provision for review.
(ii) The question of maintainability of an application for review of the order passed by the Chief Justice of India under Section 11 of the Act came up before the Apex Court in Jain Studios Ltd. v. Shin Satellite Public Co. Ltd. reported at . In that judgment, the Apex Court relied on Article 137, to maintain an application for review. There is however, no corresponding Article in the Constitution for review, which could be invoked on similar basis for review of the order passed by the Chief Justice of the High Court under Section 11 of the Act. In the very judgment, the Apex Court has not approved the power of review being confused with the appellate power and that it is to be exercised with extreme care, caution and circumspection and only in exceptional cases. In Grindlays Bank v. Central Government Industrial Tribunal reported at , the Apex Court held that a procedural review, where to remove a wrong suffered by a party for no fault of the party, would be maintainable. In Kapra Mazdoor Ekta Union v. Birla Cotton Spinning and Weaving Mills Ltd. reported at , the Apex Court has observed in para 19 that where a court or quasi-judicial authority having jurisdiction to adjudicate on merits proceeds to do so, its judgment or order can be reviewed on merit only if the court or the quasi-judicial authority is vested with power of review by express provision or by necessary implication. However, if there is a procedural irregularity, the order can be reviewed by exercise what is described as procedural review.
21. As far as the application for review under this Act is concerned, at the highest, it can be said to be a procedural review and not a substantive review, as held by the undersigned in Civil Misc. Application No. 270647 of 2006: In re: Arbitration Application No. 41 of 2002: Manish Engineering Enterprises v. Managing Director, IFFCO decided on 25.1.2008. For that, one has to show that for no fault of party, the party has suffered and a prejudice is caused. No such case can be said to be made out.
22. It is true, as held in Datar Switch Gears (Supra), that if the appointment of an Arbitrator made by the parties is valid and binding, it has to be given effect to. In the present case, however, there is a dispute as to whether that power has been exercised by the applicant in time.
23. In the circumstances, inasmuch as no prejudice is caused to the applicant in this appointment, such an appointment of the sole Arbitrator, in view of the failure of the parties to appoint their Arbitrators, cannot be faulted.
24. Even if, one decides to apply the principle of substantive review, one will have to fall back on Order 47 Rule 1 of the Civil Procedure Code and the only argument can be that there is an error on the face of record. It is not possible to say that any such case is made out. As held by the Apex Court in State of Maharashtra v. Ramdas Shrinivas Nayak reported at , the statement of fact, as to what transpired at the hearing recorded in the judgment of the Court, is conclusive. When the Hon'ble designated Judge has recorded that the appointment of a single arbitrator is being done by consent, it will have to be read that parties consented to appoint a sole arbitrator.
25. As far as the application made by the third party-M/s Bantus Designers & Builders is concerned, it is to be noted that the third party is an associate of the applicant. They have a common share and common cause. Both of them are applying for recall of the order appointing the Arbitrator. The third party has not intervened at any point of time earlier. The third party and the applicant both can agitate their submissions before the learned Arbitrator. The arbitration clause also speaks of two Arbitrators being appointed by first and third party/promoter on one hand and the other by second party/builder. The mechanism having failed, the designated Judge has appointed an arbitrator by consent. The order cannot be reviewed at the instance of the third party.
26. For the reasons slated above, the application for recall made by the applicant cannot be entertained nor the application made by the third party, which is also an application for recalling the order. Both the applications stand dismissed.