Heard Sri Kushal Kant, learned counsel for the petitioners and Sri Mohd. Ali, learned counsel appearing for respondents No.1 and 2.
Respondents No.3 and 4 are not necessary and proper parties and, as such, counsel for the petitioners is permitted to delete them.
Parties have exchanged pleadings and have agreed for final decision of the petition.
Petitioners have filed this petition for appointment of a substitute arbitrator, inasmuch as the arbitrator appointed by the respondents has terminated the proceedings without making an arbitral award.
There is no dispute between the parties that the work order dated 23.9.2008 awarded to the petitioners contains an arbitration agreement providing for reference of all disputes in relation thereto to a sole arbitrator to be appointed by the Managing Director of the M/s. Bengal Chemicals and Pharmaceuticals Limited (hereinafter referred to as the BCPL) A dispute arose between the parties in relation to the above work order. The petitioners invoked the arbitration clause. The dispute was referred by the Managing Director of the BCPL to the sole arbitration of one Mr. Maloy Mohon Guha. The petitioners were not given any information regarding the appointment of the arbitrator by the respondents but the arbitrator issued a notice dated 13th February, 2012 to the petitioners calling upon them to participate in the proceedings fixed for 2nd March, 2012. On the said date the petitioners failed to appear. The arbitrator vide letter dated 5th March, 2012 enclosd the minutes of the meeting dated 2nd March, 2012 wherein the next date was notified as 23rd March, 2014 (instead of 23rd March, 2012). It appears that the petitioner failed to appear on 23rd March, 2012 as in the minutes dated 2nd March, 2012 the date was incorrectly notified as 23rd March, 2014. On 23rd March, 2012 the proceedings were adjourned to 16th April, 2012 and finally the arbitrator vide order dated 16th/17th April, 2012 ordered for termination of the proceedings as the petitioners were found reluctant to participate.
In view of termination of the arbitral proceedings by the arbitrator the petitioners contends that as the mandate of the arbitrator stands determined a substitute arbitrator is required to be appointed.
Counsel for the respondents contends that the remedy of the petitioners is under Section 34 of the Arbitration and Conciliation Act, 1996 (in short 'Act') inasmuch as the arbitration proceedings stand terminated under Section 32 of the Act.
Section 32 of the Act provides for termination of arbitral proceedings. It provides that arbitral proceedings shall stand terminated by pronouncement of the final arbitral award or by an order of the arbitral tribunal under sub-section (2) of Section 32.
Admittedly, the arbitrator has not pronounced any award. He has only terminated the proceedings. Therefore, the termination of arbitral proceedings is under Section 32(2) of the Act.
Sub-Section (2) of Section 32 provides that the arbitral proceedings shall be terminated (a) if the claimant withdraws from the claim; (b) parties agree to the termination of the proceedings; or (c) where the arbitral tribunal finds that the continuation of the proceedings for any other reason are unnecessary or impossible.
In the present case, termination of the arbitral proceedings is on the ground that the arbitral tribunal has found continuation of the arbitral proceedings to be unnecessary i.e. under Section 32(2)(c) of the Act.
Section 34 of the Act provides for application for setting aside arbitral award. The very heading of the above provision reflects that recourse to Section 34 is permissible only for setting aside the arbitral award and is not applicable where there is no award.
In the present case there is no award and termination of proceedings is under Section 32(2) of the Act by an order of the arbitral tribunal. The order of termination of proceedings passed by the arbitral tribunal is not in the nature of arbitral award which can be set aside under Section 34 of the Act.
In view of the fact that there is no arbitral award and the order terminating the proceedings does not amount to an arbitral award, recourse to section 34 of the Act is not available to the petitioners.
Thus, the argument of learned counsel for the respondents that the remedy of the petitioners is by taking recourse to Section 34 of the Act is misconceived and not tenable in law.
Section 14 of the Act read with Section 15(2) of the Act provides that where the mandate of an arbitrator is terminated, a substitute arbitrator shall be appointed according to the rules that are applicable to the appointment of the arbitrator. The mandate of the arbitral tribunal stand determined under Section 32(2)(c) read with Section 13 and 14 of the Act entailing appointment of a substitute arbitrator.
The appointment of the substitute arbitrator in the first instance has to be by the authority who had appointed the first arbitrator. It is on his failure to act or appoint a substitute arbitrator that a party can approach the Chief Justice or his designate for reference of dispute to a substitute arbitrator.
Admittedly, petitioners have not approached BCPL for appointing a substitute arbitrator according the rules. Thus, the petitioners cannot directly approach the Chief Justice or his designate under Section 11 read with Section 15(2) for appointment of a substitute arbitrator without exhausting the procedure prescribed under the rules for appointment of the arbitrator.
In view of the aforesaid facts and circumstances it is held that as there is no arbitral award and the mandate of the arbitrator appointed by the Managing Director of the BCPL stands determined the petitioners are entitle to seek substitution of arbitrator but as the procedure laid down under the agreement for appointment of a substitute arbitrator has not been adopted, it is not proper to appoint an arbitrator in these proceedings without allowing the petitioners to follow the desired procedure.
According, the petition fails but with liberty to the petitioners to approach the Managing Director of the BCPL for appointment of the substitute arbitrator.
Petition is disposed of accordingly.
Order Date :- 20.5.2014 Brijesh