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Offshore Infrastructures Ltd. v/s Bharat Heavy Electricals Ltd. & Another


Company & Directors' Information:- BHARAT HEAVY ELECTRICALS LIMITED [Active] CIN = L74899DL1964GOI004281

Company & Directors' Information:- C K INFRASTRUCTURES LIMITED [Active] CIN = U70200DL1997PLC089706

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Company & Directors' Information:- BHARAT INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U74999MH1998PTC113840

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Company & Directors' Information:- L & W INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45200DL2008PTC182372

Company & Directors' Information:- B S P HEAVY ELECTRICALS PRIVATE LIMITED [Strike Off] CIN = U31100KA1995PTC018488

Company & Directors' Information:- K R R INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U70102TG2008PTC061194

Company & Directors' Information:- INFRASTRUCTURES PRIVATE LIMITED [Under Process of Striking Off] CIN = U45200JH2007PTC012792

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Company & Directors' Information:- Y R INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45201RJ2015PTC047298

Company & Directors' Information:- U D INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45400MH2010PTC203382

Company & Directors' Information:- J W INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U74120MH2015PTC268554

Company & Directors' Information:- G AND G INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45200MH2004PTC147316

Company & Directors' Information:- S N OFFSHORE PRIVATE LIMITED [Active] CIN = U61200MH2012PTC229861

Company & Directors' Information:- V S OFFSHORE PRIVATE LIMITED [Strike Off] CIN = U74999MH2012PTC238866

Company & Directors' Information:- A. N. Y. INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45206MH2013PTC243735

Company & Directors' Information:- J V S M S INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45200TG2010PTC070371

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    Civil Application (CAO) No. 424 of 2016 in Misc. Civil Application No. 787 of 2014

    Decided On, 26 August 2016

    At, In the High Court of Bombay at Nagpur

    By, THE HONOURABLE MR. JUSTICE PRASANNA B. VARALE

    For the Applicant: A.C. Dharmadhikari, Advocate. For the Respondents: S.V. Bhutada, Advocate.



Judgment Text

1. Heard Shri Dharmadhikari, learned counsel for the applicant and Shri Bhutada, learned counsel for the non-applicants.

2. The applicant is before this Court seeking modification of the order dated 9-12-2015 passed by this Court in Misc. Civil Application No. 787/2014 and substituting the name of either of three persons who are proposed as arbitrator in the application in place of Shri Lalit Mohan who was initially appointed as an Arbitrator by this Court. This application raises an interesting issue before this Court. The parties were before this Court in Misc. Civil Application No. 787/2014 filed under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act of 1996') praying for appointment of arbitrator to resolve the dispute between the parties. Shri Dharmadhikari, learned counsel for the applicant referred to agreement between the parties and more particularly, clause 2.21 which provided that the dispute shall be referred to the arbitrator for an amicable settlement. The application was opposed by the non-applicants. It was the submission of learned counsel appearing for the non-applicants that the applicant failed to take required steps as per clause 2.21. On hearing the learned counsel appearing for the parties, this Court found that the claim of the applicant is a live claim and exercised the jurisdiction under Section 11(6) of the Act of 1996 and passed the order appointing Shri Lalit Moha, B.E. (Civil), PGD Earthquake Engineer, who is a technical person as the arbitrator to resolve the dispute between the applicant and non-applicant. The other terms were referred to in the order in respect of the fees of the arbitrator etc.

3. The applicant is before this Court by submitting a peculiar circumstance. It is submitted that in view of the directions of this Court, the security amount toward the fees of the arbitrator is deposited along with process charges. It was submitted that after the appointment of the Arbitrator Shri Lalit Mohan and after depositing the requisite amount, communications were forwarded to Shri Lalit Mohan so as to inform him about his appointment. It is submitted by Shri Dharmadhikari, learned counsel that the list of arbitrators maintained by this Court was referring to two address of Shri Lalit Mohan, accordingly, on both these addresses, viz.

(1) No. 892, 15th Main, 5th Cross, BTM II Stage,

Bangalore – 560 076 and

(2) H-38, Nehru Nagar Colony, Dehradun – 248 801.

communications were forwarded. Service report

communicated that Shri Lalit Mohan is either not residing or is not available on the addresses stated in the communication. Photocopies of the envelopes with the endorsement are placed on record. Shri Dharmadhikari, learned counsel further submitted that even an attempt was made to contact Shri Lalit Mohan on his cell phone numbers as well as landline phone numbers maintained by the Registry of this Court. To this attempt, it was informed that when the calls were made, it was revealed that cell numbers and landline numbers are not in service. Shri Dharmadhikari, learned counsel then submitted that no stone was left unturned to contact Shri Lalit Mohan to communicate him that he was appointed as an arbitrator by this Court and in spite of all attempts, Shri Lalit Mohan could not be contacted. Shri Dharmadhikari, learned counsel further submitted that in view of these peculiar facts, the order passed by this Court appointing Shri Lalit Mohan as sole arbitrator be modified and name of Shri Lalit Mohan be substituted by any of the names which find place in the list of names of arbitrators and these persons having technical experts, namely,

(1) Shri Anmol Sekhri (Charted Engineer),

3rd Floor, Sahakar Bazar, Opposite Railway Station, Bandra(West), Mumbai-400 050.

(2) Shri Avinash V. Pendse (B. Architecture, PGDIIT),

7, Tukaram Niketan, Bhagat Lane,

Mahim, Mumbai-400 016.

(3) Shri Chandrashekhar (Architect),

Omkar, Prathana Chs, 1st Floor,

Opposite Vijay Nagar Society,

Andheri Sahar Road, Andheri (East),

Mumbai-400 069.

be substituted. Shri Dharmadhikari, learned counsel further submitted that by order dated 28-7-2016, certain directions were issued by this Court. Perusal of the order dated 28-7-2016 shows that noticing the fact that the communications forwarded to Shri Lalit Mohan were returned back with the endorsement that the addressee is not available on the address, this Court directed the Registry to send the letter of appointment and writ to the Arbitrator and the Registry was directed to take necessary steps within stipulated period of three days. Shri Dharmadhikari, learned counsel submitted that even the attempts made by the Registry could not give any fruits and Shri Lalit Mohan could not be contacted even by undertaking this exercise. On these submissions, Shri Dharmadhikari, learned counsel for the applicant prays for modification of the order and substitution of name of Shri Lalit Mohan by name of any other arbitrator. It was the submission of Shri Dharmadhikari, learned counsel for the applicant that the order of this Court dated 9-12-2015 appointing the arbitrator would take its effect only when the sole arbitrator receives the information and then start acting as an arbitrator in compliance or in view of the directions of this Court. Thus, it was the submission of Shri Dharmadhikari, learned counsel that as Shri Lalit Mohan who was appointed as sole arbitrator could not be communicated about the order of this Court, the order which could not take effect cannot be termed as a mandate of this Court.

4. Per contra, Shri Bhutada, learned counsel appearing for the non-applicants vehemently opposed the application. Shri Bhutada, learned counsel submitted that this Court by order dated 9-12-2015 appointed one Shri Lalit Mohan as the sole arbitrator. Once the order of this Court is passed, the question whether the concerned person appointed as sole arbitrator is communicated or not is of no consequence and on relying on the judgments of the Apex Court, Shri Bhutada, learned counsel submitted that the only course open to the applicant is to follow the provisions of Section 15(2) of the Act of 1996 and then adhered to the terms of agreement between the parties in respect of appointment of the arbitrator. Shri Bhutada, learned counsel in support of his submissions placed reliance on the judgment of the Apex Court in following cases:

(1) Nimet Resources Inc. and anr. Vs. Essar Steels Limited reported in (2009) 17 SCC 313,

(2) Ashok M. Kataria and anr. Vs. Motiwala Trust For Human Resources Development, Nashik and others reported in 2011(1) Mh.L.J. 581 and

(3) Huawei Technologies Co. Ltd. Vs. Sterlite Technologies Ltd. reported in 2016(4) Mh.L.J. 101.

5. Heard both the learned counsel at length. As stated above, there is peculiar circumstance in the present matter that is of though the order of this Court appointing Shri Lalit Mohan as an arbitrator and though the attempts were made by the applicant as well as even by the Registry of this Court, Shri Lalit Mohan was not available for receiving the communication and the order of this Court. Shri Bhutada, learned counsel placed reliance on the judgment of the Apex Court in the case of Nimet Resources Inc. and anr. Vs. Essar Steels Limited (cited supra). On perusal of the judgment, it reveals that an application for appointment of Arbitrator was filed and the former Chief Justice of the Gujarat High Court was appointed as sole arbitrator. The sole arbitrator passed an interim order and proceeded with the arbitration proceedings by observing that he had jurisdiction to proceed. The final award was not passed by the arbitrator whereas the allegations have been made in the application against the arbitrator by submitting that the arbitrator had unnecessarily been delaying the arbitration proceedings and is not taking any initiative to dispose of the same. This submission was countered by other party stating that there was no delay caused by the arbitrator. The Apex Court then by referring to the provisions of the Arbitration Act and the definition of the 'court' reflected in the Act and other judgments observed that jurisdiction under Section 11(6) of the Act of 1996 is a limited jurisdiction. It is not as broad as sub-section (4) of Section 20 of the 1940 Act. When an arbitrator is nominated under the 1996 Act, the court does not retain any jurisdiction with it. It becomes functus officio subject of course to exercise of jurisdiction in terms of constitutional provisions or the Supreme Court Rules. Though Shri Bhutada, learned counsel placed heavy reliance on the judgment of the Apex Court to submit that as soon as the order is passed by this Court appointing Shri Lalit Mohan as arbitrator, this Court can not go into other aspects and this Court becomes functus officio and the only course open to this Court is to refer to clause 2.21 of the agreement between the parties, as stated above, the backdrop on which the parties approached the Court was altogether a different backdrop. In that matter, the sole arbitrator was not only appointed but the arbitrator proceeded with the arbitration proceedings and passed interim orders. The dispute between the parties was one party alleging that arbitrator was delaying the proceedings and other party by submitting that there was no delay caused by the arbitrator. In the present matter, as stated above, the factual backdrop is different. In my opinion, the judgment relied on by Shri Bhutada, learned counsel in the matter of Nimet Resources Inc. and anr. Vs. Essar Steels Limited (cited supra) is of no help to the non-applicants. 6. Shri Bhutada, learned counsel also relied on the judgment of the Apex Court in the matter of Ashok M. Kataria and anr. Vs. Motiwala Trust For Human Resources Development, Nashik and others (cited supra) to support his submissions. Facts of this referred case are different. In the matter of Ashok M. Kataria, the arbitrator who was named in the arbitration agreement himself refused to act as an arbitrator.

(emphasis supplied)

Shri Bhutada, learned counsel also placed reliance on Huawei Technologies Co. Ltd. Vs. Sterlite Technologies Ltd. (cited supra). In this matter, the sole arbitrator appointed by the Court himself recused from the proceedings.

(emphasis supplied)

7. Raising another ground of opposition Shri Bhutada, learned counsel placed reliance on Section 14(1) and 15(2) of the Act of 1996. Section 14(1) reads thus:

14. Failure or impossibility to act.

(1) [The mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator, if] -

(a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and

(b) he withdraws from his office or the parties agree to the termination of his mandate.

(2) …...

(3) …...

It was an attempt of Shri Bhutada, learned counsel that in the present case, clause (a) of Section 14(1) would operate. I am unable to accept the submission of Shri Bhutada for the reason that Shri Bhutada, learned counsel laid emphasis on the words of clause (a), namely, 'he becomes de jure or de facto'. In my opinion, these words cannot be picked up only to support the submission but these words will have to be read along with the other words forming part of clause (a). These words are to be read with the connected words 'unable to perform his functions or for other reasons fails to act without undue delay'. Thus conjoint reading of the words 'he becomes de jure or de facto' with the words 'unable to perform his functions or for other reasons fails to act without undue delay' is necessary. Thus, the situation reflected in clause (a) warrants that it is the inability to perform the function for any reason. As stated above, the material which is before this Court shows that there is no question of assessing the inability as the arbitrator appointed by this Court could not have been communicated the order of this Court. Shri Bhutada, learned counsel submitted that Section 15(2) of the Act of 1996 would come in play in the present matter. The provisions reads thus.

15. Termination of mandate and substitution of arbitrator.

(1) …..

(2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.

(emphasis supplied)

(3) .......

(4) …...

It was the submission of Shri Bhutada, learned counsel that in view of above provisions of Section 15(2) and more particularly in view of the words 'according to the rules that were applicable to the appointment of the arbitrator' rule applicable in present matter would be arbitration clause 2.21.1 between the parties under agreement and the applicant will have to undertake an exercise to approach the authority of Bharat Heavy Electricals Ltd. or the Regional Incharge. Thus, it was an attempt of Shri Bhutada, learned counsel that the applicant will have to start the proceeding going back to square one and to follow clause 2.21.1. Though the submissions of Shri Bhutada look attractive at first blush, if the order of this Court appointing arbitrator is perused, it reveals that this Court expressed displeasure on the aspect of inaction of authority of the non-applicant. It would be useful to refer to order of this Court. This Court observed in paragraph no. 7 as under.

'7 .... Though, as per Clause 2.21.1 of the contract, the sole arbitrator is to be appointed by BHEL/In-Charge (Region) and the applicant had sent the communications dated 7-12-2013, 08-01-2014, 14-01-2014 to BHEL, New Delhi inviting attention of the Chairman and Managing Director, it goes unexplained as to why the Chairman and Managing Director has not given any reply to the notice or has not referred it to the In-Charge(Region). The contents of the above referred communications are clear and show the claim made by the applicant. It is not expected of the officer holding high rank of Chairman and Managing Director of the Company, to overlook the communications and the notice sent by the applicant seeking redressal of his grievance....'

Thus, if this Court observed the non responsive approach of the non-applicant's high ranking officer asking the applicant to again undertake the same exercise and go before the same authorities who were not bothered to reply to the communications of the applicant is nothing but asking the applicant to dance on the tunes of such officers and asking the applicant to approach this Court again in the second round of proceedings. In my opinion, this course cannot be permitted though it is suggested by the non-applicants.

8. Apart from the above consideration, in my opinion, there is one more aspect which needs attention on the backdrop of the facts of the present matter. Section 11 of the Act of 1996 deals with the provision of 'appointment of arbitrators'. If one peruses the meaning of word 'appoint' and 'appointment' finding place in Webster's Dictionary, it reads as :

'appoint' means 'to name or select, as a person for a position, a time and place for an act or meeting, etc.'

(emphasis suppli

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ed) and 'appointment' means an appointing or being appointed; position or service to which one is or may be appointed. In Black's Law Dictionary, the word 'appointment' reads thus : the designation of a person, such as a nonelected public official, for a job or duty; esp., the naming of someone to a nonelected public office. Considering this aspect, in my opinion, the exercise under Section 11 would be complete only when the person who is appointed as arbitrator receive the knowledge of such a appointment. At the cost of repetition, in the present matter, the person appointed as a arbitrator by this Court could not be communicated about his appointment. Thus, the exercise for appointment of arbitrator under Section 11 of the Act of 1996 is not fulfilled in the present matter. 9. Considering all the above aspects, in my opinion, ends of justice would be met by modifying the order of this Court and thereby substituting the name of Shri Lalit Mohan by the name of Shri Chandrashekhar (Architect). Accordingly, the order is modified. Clause (i) of the order dated 9-12-2015 is modified by substituting the name of Shri Chandrashekhar in place of Shri Lalit Mohan as Arbitrator to resolve the dispute between the applicant and non-applicant. 10. Both the learned counsel appearing for the parties submit that other terms of the order dated 9-12-2015 are already complied with. 11. Registry to communicate this order to Shri Chandrashekhar (Architect), Omkar, Prathana Chs, 1st Floor, Opposite Vijay Nagar Society, Andheri Sahar Road, Andheri(East), Mumbai – 400 069. The civil application is disposed of in above terms.
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