IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12th DAY OF JULY 2019 BEFORE THE HON’BLE MR. JUSTICE ALOK ARADHE WRIT PETITION NO.13490 OF 2019 (GM-RES) BETWEEN:
UNION OF INDIA THROUGH CHIEF ENGINEER AIR FORCE, NO.2 D C AREA MES ROAD, YESHWANTHAPURA BANGALORE-560022 REPRESENTED BY ITS JOINT DIRECTOR. (By Mr. UNNIKRISHNAN M, ADV.) AND:
M/S. B.R. ARORA & ASSOCIATES PVT. LTD, BB 13, GREAT KAILASH ENCLAVE-II NEW DELHI-110048 REPRESENTED BY ITS MANAGING DIRECTOR.
… PETITIONER … RESPONDENT (By Mr. VIGNESH SHETTY, A/W Mr. VAIBHAV DANG, ADVS.,) - - -
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH ANNEXURE-'A' i.e., THE ORDER PASSED BY THE LEARNED XVII ADDITIONAL CITY CIVIL & SESSINS JUDGE, BANGLAORE, IN A.A.NO.340/2018, DATED 29.01.2019. GRANT AN INTERIM ORDER TO STAY THE OPERATION OF THE ORDER PASSED BY THE LEARNED XVII ADDITINAL CITY CIVIL & SESSIONS JUDGE, BANGALORE IN A.A.NO.340/2018 DATED 29.01.2019 i.e., ANNEXURE-'A' AND ALL PROCEEDINGS IN FURTHERANCE THERETO BEFORE THE HON'BLE ARBITRATOR MR.S.K.GUPTA, PENDING DISPOSAL OF THE ABOVE W.P AND ETC.
THIS WRIT PETITION COMING ON FOR ORDERS THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER Mr.Unnikrishnan M., learned counsel for the petitioner.
Mr.Vignesh Shetty, learned counsel along with Mr.Vaibhav Dang, learned counsel for the respondent.
2. In this petition under Article 226 and 227 of the Constitution of India, the petitioner has assailed the validity of the order dated 29.01.2019 passed by the learned XVII Additional City Civil and Sessions Judge, Bangalore. In order to appreciate the petitioner’s challenge to the impugned order, few facts need mention which are stated infra.
3. The petitioner had floated a tender for extension and re-surfacing of the runway at the Air Force Station, Sulur, Coimbatore. The respondent participated in the said tender and was declared as successful bidder. Thereafter, an agreement was executed on 06.02.2009, which contains an arbitration clause. The dispute arose between the parties in relation to the aforesaid agreement on 13.10.2016. Thereupon, the petitioner made a request for appointment of an arbitrator to the petitioner. The petitioner appointed one Sri.S.K.Gupta, Additional Director General (Contracts) as sole arbitrator on 05.12.2016. On 14.12.2016, the arbitrator entered upon the reference and directed the parties to submit their pleadings along with documents on or before 25.02.2017.
4. The petitioner failed to adhere to the schedule and sought repeated adjournments to file the pleadings which is evident from the order sheets dated 27.01.2017, 06.05.2017, 17.05.2017, 14.06.2017, 05.07.2017, 24.07.2017 and 29.07.2017. The petitioner submitted its statement of defense and counter claim on 18.08.2017. However, the petitioner requested the arbitrator to suspend the arbitration proceeding, which was not exceeded to by the arbitrator.
5. The arbitrator requested both the parties to give their consent for enlargement of time for publication of the award. Thereupon, both the parties gave their consent on 06.12.2017 for enlargement of the time for publication of the award upto 14.06.2018. However, it is the case of the respondent that on account of delay in tactics resorted to by the petitioner, the arbitrator could not conclude the proceeding. The arbitrator, after holding discussions with both the parties on 16.03.2018, directed any of the parties to seeks extension of time for publishing the award beyond 14.06.2018. The petitioner did not file the application for extension of time. However, the respondent filed an application under Section 29(A)(4) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’ for short) before Delhi High Court on 21.03.2018. However, in view of objection raised by the petitioner with regard to territorial jurisdiction, the petition filed by the respondent was dismissed.
6. The respondent thereafter once again filed an application under Section 29(A)(4) of the Act in the District Court at Coimbatore. However, the aforesaid application was rejected on the ground of lack of territorial jurisdiction. The respondent thereafter on 17.09.2018 filed an application before XVII Addl. City Civil and Sessions Judge, Bengaluru seeking extension of time under Section 29(A)(4) of the Act. In the meanwhile, on 31.10.2018, the arbitrator attained the age of superannuation. The Trial Court by an order dated 29.01.2019 has allowed the petition filed by the petitioner under Section 29(A)(4) of the Act and has extended the time limit for publication of the arbitral award for a period of six months from the date of the order. The petitioner, by a communication dated 28.02.2019, requested the arbitrator to postpone the hearing on the ground that the petitioner intends to challenge the interim award dated 12.06.2018. The arbitrator, however, refused to defer the proceedings. Thereupon, the petitioner by communication dated 18.03.2019 confirmed that its officers shall remain present during the arbitration proceeding. The petitioner on 19.03.2019 participated in the proceeding before the arbitrator and sought time upto 31.05.2019 to supplement its pleading. In the aforesaid factual background, the petitioner has approached this Court.
7. Learned counsel for the petitioner submitted that the contract between the parties provides that the arbitrator shall be a serving officer and even in the mutually extended time limit, the arbitrator could not conclude the arbitration proceeding and superannuated and therefore, the continuance of the proceeding before the arbitrator who is a retired officer is per se without jurisdiction. However, aforesaid aspect of the matter has not been appreciated by the Trial Court while passing the impugned order. While inviting the attention of this Court to Section 15(2) of the Act, learned counsel for the petitioner submitted that where the mandate of an arbitrator terminates, the substitute arbitrator shall be appointed according to the Rules that were applicable to the appointment of the arbitrator being replaced. In support of his submission, learned counsel for the petitioner has relied on decisions in ‘ACE PIPELINE CONTRACTS (P) LTD. Vs. BHARAT PETROLEUM CORPN. LTD.’ (2007) 5 SCC 304 AND ‘HUAWEI TECHNOLOGIES COMPANY LIMITED Vs. STERLITE TECHNOLOGIES LIMITED’ (2016) 1 SCC 721.
8. On the other hand, learned counsel for the respondent submitted that the objection raised by the petitioner that an arbitrator has to be a serving officer of the petitioner was never raised before the Trial Court. It is further submitted that infact before the arbitrator, the petitioner had taken a plea that his appointment is contrary to Section 12(5) of the Act. It is further submitted that after the impugned order was passed, the respondent have entered appearance in the proceeding before the arbitrator and therefore, they have acquiesced with the proceeding before the arbitrator and now, the petitioner cannot be permitted to raise such a plea. It is also submitted that the petitioner has waived its right to object in view of Section 4 of the Act. Learned counsel for the respondent has also invited the attention of this Court to Section 5 of the Act. In support of aforesaid submission, reliance has been placed on decision of the Supreme Court in ‘SWISS TIMING Vs. COMMON WEALTH GAMES 2010 ORGANISING COMMITTEE’ (2014) 6 SCC 677 and decisions of Delhi High Court in ‘NCC LTD. Vs. UNION OF INDIA’ 2018 SCC Online (Del) 12699 and ‘BHEL Vs. C.N.GARG’ 2001(57) DRJ 154 (DB).
9. I have considered the submissions made by both the sides and have perused the record. The provisions of Section 12 of the Act were amended by Act No.3 of 2016 and came into force w.e.f. 23.10.2015. Section 12(5) of the Act reads as under:
12(5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator.
Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing.
10. Admittedly, in the instant case, the provisions of Section 12(5) of the Act as amended by amending Act, apply to the proceeding in question. It is trite law that Section 12(5) of the Act shall have an overriding effect over the agreement executed between the parties. Therefore, the petitioner’s contention that only a serving officer can be appointed as an arbitrator is misconceived. Besides that, it is pertinent to mention here that petitioner himself has raised an objection by a communication dated 18.03.2019 before the arbitrator that in view of Section 12(5) of the Act, he has no authority to act as an arbitrator as he is a serving officer. Therefore, at this point of time after having participated in the proceeding before the arbitrator after the time for pronouncing the award was extended, the petitioner cannot be permitted to raise such a plea which otherwise is contrary to Section 12(5) of the Act. For yet another reason, no fault can be found with the impugned order as the petitioner in view of Section 4 of the Act has waived the right to object as the petitioner has proceeded with the arbitration proceeding without stating his objection in the proceeding before the arbitrator.
11. It is also pertinent to mention here that challenge to the appointment of an arbitrator can be made only on the grounds enumerated under Section 12 of the Act and in the manner prescribed under Section 13 of the Act. Therefore, at this point of time, the impugned order passed by the Trial Court by which time limit for publication of the award has been extended, cannot be interfered with. Sofar as reliance placed by the learned counsel for the petitioner in the case of ACE PIPELINE, supra is concerned, the same is not of assistance to the petitioner as the aforesaid decision does not deal with Section 12(5) of the Act which has been incorporated by way of amendment w.e.f. 23.10.2015. Similarly, the decision in the case of HUAWEI TECHOLOGIES CO. LTD., supra, is of no assistance to the petitioner in the fact situation of the case as the aforesaid decision is an authority for the proposition that as and when the mandate of an arbitrator terminates, the substitute arbitrator is required to be appointed according to the Rules that were applicable to the appointment of the arbitrator who is replaced. In the instant case, admittedly there are no Rules for appointment of an arbitrator, but the arbitrator has been appointed under an agreement and the agreement executed between the parties cannot supersede Section 12(5) of the Act.
In view of preceding analysis, I do not find any merit in the case. Accordingly, the same is dismissed.
Sd/- JUDGE RV