1. Since the controversy involved in both the matters is one and same and arguments were also made simultaneously by the respective parties, therefore, they are being decided by this common judgment.
2. Heard learned counsel for the respective parties and have also carefully gone through the record.
S.B. Civil Miscellaneous Appeal No. 2355/2018:
3. By way of the present Civil Misc. Appeal, the appellants have prayed for the following reliefs:
“It is, therefore, most humbly prayed that your Lordships may graciously be pleased to accept and allow the appeal and kindly be pleased to quash and set aside the judgment and decree dated 04.12.2017 passed by the Additional District Judge No.7, Jaipur Metropolitan, Jaipur in Arbitration Case No.13/2013 (CIS No.1216/2014) and be pleased to restore the Award dated 15.10.2012 passed by the Sole Arbitrator in Arbitration Claim Case No.130/2012 to meets the ends of justice.
Any other direction or order which your Lordships deem fit and proper in the facts and circumstances of the case in favour of the appellant-Corporation be kindly passed.”
4. Learned counsel for the appellants contended that on 30.07.2007, applications/tenders were invited by the appellant/ Non-Claimant/Rajasthan State Road Transport Corporation (for short, ‘the Corporation’) regarding display of advertisement on the Corporation’s buses. It was stated in the claim that earlier the predecessor company of the claimant/respondent, namely M/s Synergy Ceramics Pvt. Ltd. filed an application for participating in the bid process by submitting its bid, wherein it was found a highest bidder. It was further stated in the claim that vide letter dated 18.06.2007, M/s Synergy Ceramics Pvt. Ltd. was asked to deposit the license fee of Rs. 21,24,800/- through a demand draft as also to submit requisite bank guarantee in the sum of Rs. 1,27,48,800/-. In pursuance thereof, M/s Synergy Ceramics Pvt. Ltd. submitted a cheque and also furnished bank guarantee bond. It was further submitted that M/s Synergy Ceramics Pvt. Ltd. was given license by the appellant-Corporation by letter dated 23.06.2007 for the period from 26.06.2007-25.06.2010, as claimed in the claim petition. M/s Synergy Ceramics Pvt. Ltd. changed its name as M/s Synergy Advertising Pvt. Ltd. under Section 23 of the Companies Act and accordingly informed about the same to the Corporation vide letter dated 23.06.2007. After change of the name of firm, the appellant-Corporation by order dated 26.06.2007 had given the license to M/s Synergy Advertising Pvt. Ltd. for the period from 11.07.2007 to 10.07.2010 and it was provided with a copy of contract executed between M/s Synergy Advertising Pvt. Ltd. and appellant- Corporation on 06.08.2007. It was further submitted by the claimant in the claim petition that the appellant-Corporation failed to fulfill the terms and conditions of the contract and further, for the purpose of display neither the clean buses were made available nor the place for advertisement was provided and as a result of which, the claimants suffered financial losses. For the aforesaid reasons, the claimant-respondent had given a written proposal not to perform the work. It was claimed that the Corporation terminated the contract by order dated 12.05.2008. In the above circumstances, a claim petition came to be filed by the claimant-respondent for payment of Rs.2,97,38,802/- against the Corporation.
5. It was further asserted that the appellant-Corporation resisted the claim petition by filing reply and raised preliminary objections, inter-alia, stating therein that in the bid proceedings, M/s Synergy Ceramics Pvt. Ltd. submitted its tender document and the Corporation by letter dated 23.06.2007 appointed the said firm as its licensee and thereafter in the amended process M/s Synergy Advertising Pvt. Ltd. was appointed the licensee, which submitted the bank guarantee bond and thus, the contract dated 03.08.2007 was duly executed between the Corporation and M/s Synergy Advertising Pvt. Ltd.. Further, it was averred that there was no contract ever executed between M/s Kalptaru Infra Projects Pvt. Ltd. and the appellant-Corporation.
6. It was then submitted by the counsel for the appellant that the said claim petition came to be dismissed by the Sole Arbitrator vide its award dated 15.10.2012 on the ground that no contract was executed between the appellant-Corporation and M/s Kalptaru Infra Projects Pvt. Ltd. Feeling aggrieved by the said award dated 15.10.2012, the respondent-claimant filed an Objection Petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act of 1996’), which came to be allowed by the learned Additional District and Sessions Judge No.7, Jaipur Metropolitan, Jaipur vide its judgment dated 04.12.2017.
7. Learned counsel prayed that since the impugned judgment dated 04.12.2017 suffers from serious illegality and infirmity, the same deserves to be quashed and set aside and the appeal may be allowed.
8. On the other hand, learned counsel appearing for the respondents has supported the impugned judgment passed by the Court below and prayed that the appeal may be dismissed.
S.B. Arbitration Application No. 17/2020
9. By way of the Arbitration Application filed under Section 11 of the Act of 1996, the applicant has sought for the following reliefs:
“It is, therefore, prayed that this Hon’ble Court may issue necessary orders and directions for appointment of an independent Arbitrator to decide dispute between the parties in terms of contract dated 06.08.2007 between the Applicant and RSRTC by appointing an independent and impartial arbitrator.
Any other just and suitable order may be passed in favor of Applicant.”
10. Learned counsel for the applicant submitted that in the year 2007, the respondent-Corporation invited tender for displaying advertisements on the space available in 3200 buses of the Corporation on license basis. The applicant was doing the business in the name and style of M/s Synergy Ceramics Pvt. Ltd. at the relevant time. As per clause-37 of the tender, the dispute, if any, between the parties was to be resolved through arbitration by the Chairman of the Corporation. In pursuance of the above tender, the applicant submitted its bid along with a draft of Rs.10 lacs dated 11.06.2007 as security amount. Since the applicant’s tender was the highest, the Corporation sent it the acceptance letter dated 18.06.2007 directing to submit advance license fee of Rs.21,24,800/- as also the tender fee of Rs.1,27,48,800/- by 25.06.2007 in order to obtain license for displaying advertisements on the buses. On 20.06.2007, the applicant wrote a letter to the Corporation stating that the applicant had deposited advance license fee of Rs.21,24,800/- through a cheque in favour of RSRTC, but the bank guarantee will be submitted within a period of 15 to 20 days. On deposit of advance license fee by the applicant, the Corporation vide order dated 23.06.2007 (Annexure-4), appointed the applicant as the licensee specifying the conditions of licensee and also informed the applicant that the license period will be from 20.06.2007 to 25.06.2010.
11. It was further submitted that later M/s Synergy Ceramics Pvt. Ltd. changed its name to M/s Synergy Advertising Company Pvt. Ltd. under Section 23 of the Companies Act and also informed the Corporation to this effect vide letter dated 23.06.2007 (Annexure-5). In response thereto, the Corporation vide its letter dated 26.06.2007 (Annexure-6), accepted the change in the name of the applicant firm and accordingly, new revised license was issued in the new name of the company, to be operational from the revised date 11.07.2007 to 10.07.2010. Thereafter, on 23.07.2007 the applicant submitted guarantee bond and also deposited license fee to the tune of Rs.2,93,848/-, bringing it to the notice of the Corporation vide letter dated 26.07.2007 (Annexure-8). It was further submitted that on 06.08.2007, the applicant was provided with an executed copy of the contract between the applicant and the Corporation. Despite the agreement, the Corporation failed to provide space on the buses for displaying the advertisements and as a result of which, the applicant suffered huge losses. The applicant vide letter dated 14.08.2007, deposited a cheque of Rs.13,90,201/-. Thereafter, vide another letter dated 29.08.2007 (Annexure-12), the applicant informed the Corporation that as per the agreement, approval for advertising was not given till date and due to which, the applicant was unable to book orders with the customers for advertisement on the buses. Vide another letter dated 03.09.2007 (Annexure- 13), the applicant requested the Corporation to make a joint inspection of the Corporation’s Depot so as to handover it the clean and clear bus panels.
12. Learned counsel also asserted that on the demand raised by the Corporation vide letter dated 11.10.2007, the applicant deposited another license fee of Rs.18,92,019/- through a cheque vide letter dated 22.10.2007 (Annexure-14). Thereafter, vide letter dated 24.10.2007 (Annexure-15), the applicant expressed its inability to advertise on the buses as there existed old advertisements on the same. The grievance of the applicant was that it had suffered gross hardships on account of non-compliance on the part of the Corporation and, therefore, vide notice dated 13.11.2007, the applicant was compelled to write the Corporation that it did not wish to continue with the contract. After repeated requests made to the Corporation when no response was received, the applicant decided to discontinue the contract and, therefore, vide letter dated 04.12.2007 (Annexure-19), it expressed its desire to invoke clause 23 of the contract. However, yet another demand for the license fee was raised for the period from 11.12.2007 to 10.01.2008 by the Corporation vide letter dated 12.12.2007. Thereafter, the Corporation communicated to the applicant vide letter dated 24.12.2007, in response to the applicant’s letter dated 04.12.2007, that the agreement could be discontinued as per the request under clause 23 of the agreement after expiry of six months period from the date of request i.e. on 03.06.2008. Later on also, the Corporation repeatedly raised demands to deposit the license fee. Ultimately, vide letter dated 12.05.2008 (Annexure-22), on deposit of the demanded license fee, the Corporation agreed for terminating the contract between the applicant and the Corporation as per clause 23 of the agreement. Consequently, a letter dated 16.05.2008 came to be issued to the applicant by the Corporation stating that the contract has been terminated and that Rs.10 lacs deposited as security amount will be adjusted in the remaining license fee. Since the Corporation failed to release the bank guarantee, the applicant vide letter dated 24.06.2008 (Annexure-23) requested the Corporation to release the same which was illegally withheld. In response thereto, the Corporation vide letter dated 26.06.2008 (Annexure-24), decided to release the bank guarantee of Rs.1,27,48,800/-.
13. It was contended by the learned counsel for the applicant that on 26.03.2010 the applicant sent a detailed letter to the Corporation raising claim/demand for a sum of Rs.2,14,24,620/- with interest @ 18% p.a. on the same towards non-refund of the license fee, which was illegally recovered from the applicant in breach of the agreement on the part of the Corporation in failing to provide space on the buses for advertisements. To this, the Corporation vide letter dated 22.04.2010 (Annexure-26), rejected the claim/demand raised by the applicant stating that as the license fee was charged as per the agreement, therefore, no money could be refunded back. Thereafter, the applicant vide letter dated 03.06.2010 (Annexure-27) addressed to the Chairman as also the Chief General Manager of the Corporation, sought compensation as well as invoked arbitration and vide letter dated 10.03.2012 (Annexure-28), the applicant agreed to appoint the Chairman-cum-Managing Director of the Corporation as Arbitrator. It was submitted that M/s Synergy Advertising Pvt. Ltd. changed its name as M/s Kalpatru Infra Projects Pvt. Ltd. on 19.11.2008.
14. Learned counsel contended that on 13.07.2012, the applicant filed a claim petition before the Chairman of the Corporation for payment of illegal recovery of license fee to the tune of Rs.1,49,54,512/- for the period from 11.12.2007 to 12.05.2008 with security deposit and earnest money of Rs.17,25,443/- etc. along with interest @ 18%. However, the claim petition came to be dismissed by the Arbitrator vide award dated 15.10.2012 without taking into consideration the grievance of the applicant.
15. Feeling aggrieved and dissatisfied with the award dated 15.10.2012, the applicant preferred an Objection Petition under Section 34 of the Act of 1996 before the learned Additional District & Sessions Judge No.7, Jaipur Metropolitan. The Court below after hearing the rival submissions of the parties, set aside the impugned Award dated 15.10.2012 vide its judgment dated 04.12.2017. The said judgment dated 04.12.2017 has been impugned in the connected S.B. Civil Misc. Appeal No.2355/2018 by the Corporation.
16. It was also submitted that the Chairman of the Corporation is disqualified from being an arbitrator as there is uncontroverted bias attached to his position. In this regard, reliance was placed on the judgments rendered in Bihar State Mineral Development Corporation Vs. Encon Builders, (2003) 7 SCC 418 and TRF Ltd. Vs. Energo Engineering Projects Ltd., (2017) 8 SCC 377, wherein it was held by the Hon’ble Supreme Court that once the named Arbitrator becomes ineligible, he cannot nominate other person as an Arbitrator. He also referred to the recent judgment of the Hon’ble Supreme Court in Special Leave Petition(Civil) No.13520/2021- Jaipur Zila Dugdh Utpadak Sahkari Sangh Limited & Ors. Vs. M/s Ajay Sales & Suppliers, dated 09.09.2021.
17. Learned counsel submitted that as per Section 12(5) read with Schedule V and VII, the Chairman has become ineligible for appointment as an Arbitrator. He also referred to Section 11(6) (c), which reads as under:
“11. Appointment of arbitrators-
(6) Where, under an appointment procedure agreed upon by the parties:
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request [the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court] to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.”
18. A prayer has, therefore, been made by the learned counsel for the applicant to appoint an independent Arbitrator, who is not related to either applicant or the respondent-Corporation and who can act impartially to conduct fresh arbitration proceedings and decide all the disputes between the parties in terms of the contract following the due process of law.
19. A reply to the Arbitration Application has been filed by the respondents. It was contended by the learned counsel for the respondents that the applicant had already invoked the arbitration clause and the Chairman of the Corporation was appointed as Arbitrator in terms of the provisions of clause 37 of the tender. The claim petition filed by the applicant was also adjudicated by the designated sole arbitrator vide its award dated 15.10.2012 and the same was dismissed. However, the applicant filed an application under Section 34 of the Act challenging the said award and the learned Court below vide judgment dated 04.12.2017 quashed and set aside the impugned award dated 15.10.2012. The said judgment dated 04.12.2017 is under challenge in the connected Civil Misc. Appeal filed by the Corporation. In the circumstances, the applicant cannot be permitted to start second round of arbitral proceedings in the present matter.
20. It was further contended that in the present matter in terms of Annexure-1 to the application, a letter dated 18.06.2007 (Annexure-2) was issued in favour of M/s Synergy Ceramic Pvt. Ltd. Subsequently, M/s Synergy Ceramic Pvt. Ltd. submitted an application dated 23.06.2007 (Annexure-5) praying for changing the name of M/s Synergy Ceramic Pvt. Ltd. to M/s Synergy Advertising Company Pvt. Ltd. In response to the above, the Corporation vide letter dated 26.06.2007 (Annexure-6) issued new revised license to the applicant for the period from 11.07.2007 to 10.07.2010 and thus, the Corporation executed the contract agreement with M/s Synergy Advertising Company Pvt. Ltd. vide Annexure-10 of the application. The respondent- Corporation is having no knowledge or information about the present applicant and there was no agreement executed with M/s Kalptaru Infra Projects Pvt. Ltd. and, therefore, the present arbitration application cannot be held to be maintainable. That apart, it was also contended that the present application has been filed in the year 2020, whereas in the present case the issuance of the tender conditions (Annexure-1) and the contract agreement (Annexure-2) was made in the year 2007-2008 and as such, the arbitration application is barred by limitation also. Furthermore, the sole arbitrator conducted the arbitral proceedings in accordance with the provisions of law and has passed the award taking into consideration the entire material available on record. Accordingly, a prayer was made to dismiss the arbitration application.
21. I have heard rival submissions and with their assistance carefully gone through the material available on record.
22. It is not in dispute that pursuant to the tender invited by the Corporation for displaying advertisements on the space available on the buses of the Corporation, M/s Synergy Ceramics Pvt. Ltd. was issued acceptance letter. Later M/s Synergy Ceramics Pvt. Ltd. changed its name as M/s Synergy Advertising Pvt. Ltd. Thereafter, an agreement dated 03.08.2007 came to be executed between the Corporation and M/s Synergy Advertising Company Pvt. Ltd. which includes its owner, partner, successor, administrator, M/s Synergy Ceramics Pvt. Ltd. etc., as is evident from Annexure-10. However, the name of M/s Synergy Advertising Pvt. Ltd. was again changed as M/s Kalpatru Infra Projects Pvt. Ltd.. The dispute arose when after repeated requests made to the Corporation to provide space on the buses for displaying the advertisements, no response was received by the applicant- M/s Kalpatru Infra Project Pvt. Ltd. and it was compelled to invoke the arbitration clause and ultimately vide letter dated 10.03.2012, it agreed to appoint the Chairman-cum-Managing Director of the Corporation as Arbitrator stating therein as under:
“Because now we do not have any other option to appoint you as arbitrator as per the agreement. You are requested to accept your appointment as a Sole Arbitrator, enter upon the reference and fix a preliminary hearing in the matter.”
23. However, vide award dated 15.10.2012, the learned Arbitrator rejected the claim, which was challenged by the applicant before the learned Additional District Judge No.7, Jaipur Metropolitan, Jaipur. Learned Court below, while referring to Sections 21 and 23(1) of the Company Act, 1956, has observed that it is clear that if the change of name has taken place, in that event legal proceedings can be continued by or against the company by its new name, but the learned Arbitrator has dismissed the claim petition of the applicant on the ground that no agreement was ever executed with M/s Kalptaru Infra Projects Pvt. Limited. Thus the learned Arbitrator has passed the award ignoring the provisions of Sections 21 and 23 of the Company Act, 1956. Learned Court below has also referred to Section 73 and 74 of the Contract Act, 1872 and accordingly vide judgment dated 04.12.2017 has observed as follows:
“Learned Arbitrator, while passing award has not considered the provisions of Section 73 and 74 of the Contract Act. Besides this, award dated 15.10.2012 having not been stamped in accordance with Article 12 and 15 of the Indian Stamped Act. It is clear that award dated 15.10.2012 having not been passed legally. In view of the above mentioned provisions and discussion, award dated 15.10.2012 is being set aside. Case file be consigned to record room after due compliance.”
24. In the considered view of this Court, the findings returned by the Court below are based on correct appreciation of the material placed on record and correct interpretation of the legal position. As there is no illegality or infirmity in the impugned judgment dated 04.12.2017, the same requires no interference by this Court.
25. Consequently, there is no merit in S.B. Civil Misc. Appeal No.2355/2018 and the same is hereby dismissed.
26. So far as S.B. Arbitration Application No.17/2020 is concerned, the contention of the applicant is that the Chairman of the Corporation is disqualified from being an arbitrator as there is uncontroverted bias attached to its position and further, as per Section 12(5) read with Schedule V and VII, the Chairman has become ineligible for appointment as an Arbitrator. Accordingly a prayer has been made for appointment of a third party arbitrator having no relation either with the applicant or the respondent-Corporation and who can act impartially for conducting the fresh arbitration proceedings.
27. Admittedly, there is no dispute that the Act of 1996 was amended by inserting sub-section (5) to Section 12 by amendment dated 23.10.2015 read with Seventh Schedule of the Act. It is also not in dispute that the Chairman of the Corporation was clea
Please Login To View The Full Judgment!
rly a person who has relationship with the parties and the subject matter of dispute falls under categories specified under Seventh Schedule. Clause(5) of the Seventh Schedule of the Act of 1996 reads thus:- “(5) The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration.” 28. This Court is of the opinion that in view of Section 12(5) of the Act of 1996 read with Seventh Schedule of the Arbitration, the Chairman of the Corporation is no more competent to appoint an independent arbitrator and the prayer of the learned counsel for the applicant appears to be reasonable. 29. Furthermore, in the case of Jaipur Zila Dugdh Utpadak Sahkari Sangh Limited & Ors.. , the Hon’ble Supreme Court has observed as under: “11. In view of the above and for the reasons stated above once the sole arbitrator - Chairman is 'ineligible' to act as an arbitrator to resolve the dispute between the parties in view of Sub-section (5) of Section 12 read with Seventh Schedule to the Act he loses mandate to continue as a sole arbitrator. Therefore, it cannot be said that the High Court has committed any error in appointing the arbitrator other than the sole arbitrator - Chairman as per Clause 13 of the Agreement in exercise of powers, under Section 11 read with Section 14 of the Act. 12. In view of the above and for the reasons stated above all these applications deserve to be dismissed. The special leave petitions are dismissed accordingly.” 30. In view of the above, this Court directs appointment of Hon’ble Mr. Justice Raghuvendra Singh Rathore (Retd.), R/o Plot No.5, Nehru Path, Krishna Nagar-II, Lal Kothi, Jaipur to act as an Arbitrator and to decide all issues without prejudice to the rights and contentions raised in the present application and in the reply. The arbitration fees shall be in accordance with the Fourth Schedule of the Act of 1996. The parties are at liberty to raise all such objections before the Arbitrator. 31. Registry is directed to intimate Hon’ble Mr. Justice Raghuvendra Singh Rathore (Retd.) of his appointment as Arbitrator and parties are at liberty to call upon appropriate date for necessary directions. 32. Accordingly, the S.B. Arbitration Application No. 17/2020 stands allowed.