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Baghel Infrastructures Pvt. Ltd. v/s N.T.P.C. Ltd. & Others


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    Arbitration and Conciliation Application No. 37 of 2014

    Decided On, 10 November 2014

    At, High Court of Judicature at Allahabad

    By, THE HONOURABLE MR. JUSTICE SUNEET KUMAR

    For the Appellant: Rudra Pradap Mishra, Advocate. For the Respondents: Piyush Bhargava, Manoj Kumar, Vivek Ratan, Advocates.



Judgment Text

1. Heard learned Counsel for the parties. This application has been filed under section 11(4) of the Arbitration and Conciliation Act, 1996 for appointment of Arbitrator to resolve the dispute between the parties arising out of Contract AL No. C&M/10595 dated 24.3.2006.

2. The applicant company had entered into a contract with the respondent N.T.P.C. Ltd., Clause 56 of the general conditions of contract, provided for settlement of disputes by the sole arbitrator. Dispute arose between the parties on 8.2.2010. Mr. J.N. Singh, General Manager of N.T.P.C., Shaktinagar entered into reference, as sole arbitrator under Clause 56. Several dates were fixed by the arbitrator, but according to the applicant the arbitrator did not proceed and was delaying the proceedings.

3. The applicant has approached the Court to terminate the mandate of the arbitrator under section 14(2)(a) of the Act for undue delay and to appoint substitute arbitrator.

4. The applicant has made the following prayer:

"It is, therefore, Most Respectfully prayed that this Hon'ble Court may be pleased to allow the present application and appoint an Arbitrator to resolve the dispute between the parties arising out of Contract A.L. No. C&M/10595 dated 24.3.2006 in order to meet the ends of justice."

5. It is contended on behalf of the applicant that the sole Arbitrator entered into reference on 8.2.2010 and till 8.11.2011 nothing was done. The applicant approached the CMD N.T.P.C. for appointing another Arbitrator, however, after receiving the notice only two dates is., 2.1.2013 and 23.8.2013 was fixed by the Arbitrator, thereafter, the proceedings did not proceed, thus, according to the learned Counsel for the applicant the mandate of the Arbitrator automatically stood terminated, therefore, some independent Arbitrator be appointed by the Court. It is further contended that the Arbitrator has since retired.

6. Shri Rudra Pratap Mishra, learned Counsel for the applicant, in support of his submission, relied upon Datar Switchgears Ltd. Vs. Tata Finance Ltd. and Another, .

7. Sri Vivek Ratan Agrawal, learned Counsel for the respondents, would submit that the arbitrator has not retired, neither has shown any inability to act as an arbitrator, as such, there is no requirement of appointment of fresh arbitrator. Further, it is stated that the applicant-company has not filed any claim statement/petition before the arbitrator as required under section 23 of the Act, the applicant is not cooperating with the arbitrator and has only made an informal claim under section 30 of the Act for mutual settlement through Mediation and Conciliation.

8. Sri Vivek Ratan Agrawal submits that the application under section 11 is not maintainable as sub-clause 2 to section 14 refers to the "Court" which is defined under section 2(1)(e), "Court" means the principal Civil Court of original jurisdiction in the district, and would not include this Court. Further, Sri Agrawal submits that the arbitrator had resigned on 16.7.2014 during the pendency of this application and a new arbitrator Sri Alok Srivastava, General Manager, N.T.P.C. was appointed on 8.9.2014.

9. The learned Counsel placed reliance upon Lalitkumar V. Sanghavi (D) Th. L.Rs. Neeta Lalit Kumar Sanghavi and Another Vs. Dharamdas V. Sanghavi and Others, .

10. The question which needs to be answered is as to whether application under section 11 of the Act is maintainable to remove an Arbitrator and appoint a substitute arbitrator.

11. This Court in Rakesh Jain Vs. Wellwon Builders (India) Private Ltd., , where the question before the Court was as to whether, "is it open to the Chief Justice, exercising jurisdiction under section 11(4) of the Arbitration Act, to remove an appointed Arbitrator and appoint another Arbitrator in his place?" The Court held that once an Arbitrator has been appointed, before the application is filed, it would not be open to Hon'ble the Chief Justice or his designate to remove the said Arbitrator and appoint another Arbitrator in his place.

12. It is to be noted that the Act is enacted mainly in the pattern of the Modern Law adopted by the United Nations Commission on International Trade law. The object and the reasons of the Act clearly indicate that the intention of the Act is to lay emphasis on speedy disposal of arbitration proceedings. The Act also seeks to minimize judicial intervention in the progress and completion of arbitration proceedings, which is crystal clear from a bare reading of section 5 of the Act which provides that no judicial authority would intervene except where so provided in the Act. Consequently, the bar on Court interference on challenging the arbitral Tribunal during the pendency of the arbitration proceeding was meant to minimize judicial intervention at that stage, as any interference at that stage would be against the spirit with which the Act was enacted.

13. Comparing this legislation with the earlier legislation on the subject-namely the Arbitration Act, 1940, the message is loud and clear. The legislature found mischief in various provisions contained in the Arbitration Act, 1940 which would enable a party to approach the Court time and again during the pendency of arbitration proceedings resulting into delays in the proceedings. Law makers wanted to do away with such provisions.

14. The new Act deals with the situation even when there is challenge to the constitution of the arbitral Tribunal. It is left to the arbitrator to decide the same in the first instance. If a challenge before the arbitrator is not successful, the arbitral Tribunal is permitted to continue the arbitral proceedings and make an arbitral award. Such a challenge to the constitution of the arbitral Tribunal before the Court is then deferred and it could be only after the arbitral award is made that the party challenging the arbitrator may make an application for setting aside an arbitral award and it can take the ground regarding the constitution of arbitral Tribunal while challenging such an award.

15. Thus, course of action to be chartered in such contingency is spelt out in the Act itself. Court interference on basis of petitions challenging arbitral Tribunal during the pendency of the arbitration proceedings would be clearly against the very spirit with which the Act has been enacted. The mischief which existed in the earlier enactment and is sought to be removed by the present enactment cannot be allowed to be introduced by entertaining petitions in the absence of any provision in the new Act in this respect

16. Now coming to section 14 of the Act, so far as the provisions of the Arbitration Act, 1940 are concerned, section 14(1)(a) and sub-section (2) of the present Act substantially correspond to section 8(1)(b) and section 11(1) of the Arbitration Act, 1940. A bare perusal of section 14 would show that the mandate (authority) of an arbitrator shall terminate on two conditions being satisfied:

"(1) The arbitrator becomes dejure or de facto unable to perform his functions or for other reasons fails to act without undue delay and.

(2) The arbitrator withdraws from his office or the parties agreed to the termination of his mandate."

17. It will thus, be seen that it is not open to a party to unilaterally terminate the mandate of an arbitrator on the ground that the arbitrator de jure or de facto unable to perform his functions or for other reasons failed to act without undue delay.

18. In such situation, where one of the parties wants the mandate of the arbitrator be terminated on the above grounds, it will have to take the controversy to the Court under sub-section (2) and the Court will then decide on the termination of the mandate. Compared to the old law when the Court had power to give leave to revoke the authority of an arbitrator under section 5 or to remove an arbitrator under circumstances detailed in section 11 of the Arbitration Act, 1940. The Court has now no such power, except when it is asked to decide a controversy brought before it by any party as to whether an arbitrator has become de jure or de facto unable to perform his functions or for any other reason failed to act without undue delay. Even here a party may not approach the Court for this purpose, if it is so agreed by the parties, it is clear from the use of words "unless otherwise agreed by the parties" used in sub-section (2). No appeal lies from an order of the Court on the controversy, which is clear from perusal of section 37.

19. A conjoint petition under section 11(4) and section 14 does not lie, since under section 11(4) the petition has to be heard and decided by the Chief Justice or his designate, while a petition under section 14 lies to the "Court". Since fora are different, conjoint petition does not lie. Grid Corporation of Orissa Ltd. Vs. AES Corporation and Others, .

20. An application under section 14(2) of the Act for decision on termination of the mandate of an arbitrator lies only before the "Court" as defined in section 2(1)(e) of the Act. Lalitkumar V. Sanghavi (D) Th. L.Rs. Neeta Lalit Kumar Sanghavi and Another Vs. Dharamdas V. Sanghavi and Others, .

21. In a case, where, the Supreme Court had appointed the arbitrator, on an application made to it under section 11(5) and (6) of the Act, held that application under section 14(2) of the Act for terminating the mandate of the arbitrator was not maintainable before the Supreme Court. The jurisdiction which the Chief Justice or his designate exercises under section 11(6) of the Act is limited jurisdiction. The Supreme Court becomes functus officio after exercising jurisdiction under section 11(6) of the Act. (Nimet Resources Inc. v. Essar Steels Ltd.) (2009) 17 SCC 313.

22. There is no automatic termination of the mandate of an arbitrator on the alleged ground of his failure to act without undue delay. It is only the Court which will have to resolve the dispute whether the arbitrator had failed to act without any undue delay. But if the arbitrator fails to conclude arbitration proceedings within the time agreed to between the parties and parties do not extend the mandate of the arbitrator any further, the mandate of the arbitrator automatically terminates. N.B.C.C. Ltd. Vs. J.G. Engineering Pvt. Ltd., .

23. Termination of arbitral proceedings is different from termination of the mandate of the arbitrator. Termination of arbitral proceedings is governed by section 32 of the Act. The arbitral proceedings can come to an end on the events mentioned in section 32 had occurred. Thus, mandate (authority) of an arbitrator can be terminated but that would not mean that the arbitral proceedings have also terminated.

24. If an arbitrator refuses to act as an arbitrator, a substitute arbitrator would be appointed in his place under sub-section (2) of section 15, except where the intention of the parties was to refer the disputes to arbitration by a particular person only.

"Rules" referred to in section 15(2) would refer not only to any statutory rules or rules framed under the Act or under the Scheme, but also mean that substitute arbitrator must be appointed according to the original agreement or provision applicable to the appointment of the arbitrator at the initial stage. Yashwith

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Construction P. Ltd. Vs. Simplex Concrete Piles India Ltd. and Another, . 25. In National Highways Authority of India and Another Vs. Bumihiway DDB Ltd. (JV) and Others, Supreme Court held that provisions of section 15(2) states that a substitute arbitrator shall be appointed according to the rules applicable to the appointment of arbitrator being replaced. Appointment of retired Chief Justice by the High Court under section 11(6) was set aside and directions was given that India Road Congress be approached as per the agreed procedure to appoint the arbitrator. 26. The applicant has not challenged the appointment of the arbitrator, but submits that once the application under section 11 has been filed, the respondent have lost their right to appoint any arbitrator, is wholly misconceived. 27. In the facts of the present application, the arbitrator was already appointed and on his resignation another arbitrator has been appointed as per the terms and conditions of the agreement, the application which is ostensibly moved under section 11 of the Arbitration and Conciliation Act to terminate the mandate of the earlier arbitrator, is misconceived and not maintainable. Since the application is not maintainable accordingly dismissed.
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