Allahabad High Court
M/S Sumac International Limited ... vs U.P.Cooperative Sugar Factories ... on 15 March, 2019
Bench: Rajan Roy
HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
AFR
RESERVED ON: 18.02.2019.
DELIVERED ON: 15.03.2019.
Court No. - 7
Case :- ARBITRATION APPLICATION No. - 79 of 2018
Applicant :- M/S Sumac International Limited Lko.Throu.Managing Director
Opposite Party :- U.P.Cooperative Sugar Factories Federation Ltd.Lko.And Anr.
Counsel for Applicant :- Radha Kant Sinha
Counsel for Opposite Party :- Shiv Pratap Singh
Hon'ble Rajan Roy,J.
This is an application under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ''the Act, 1996')for appointment of an Arbitrator consequent to the death of earlier Arbitrator Justice B.L. Lumba (Retired) who was appointed under the Arbitration Act, 1940 (hereinafter referred to as ''the Act, 1940'), therefore, in essence the application is under section 15(2) read with section 11 of the Act, 1996.
A dispute allegedly arose in respect of a contract entered into between the parties, consequently, proceedings were initiated at the behest of the applicant under Section 8 of the Arbitration Act, 1940 before the Civil Court whereupon Justice B.L. Lumba (Retired) was appointed as an Arbitrator by the Court of Civil Judge on 24.01.2000, whereupon, the applicant filed his claim before the Arbitrator and the opposite party no.2 filed his counter claim. As per the applicant counsel evidence was also adduced and the matter was fixed for arguments before the Arbitrator, although, Sri Sudhanshu Chauhan learned counsel for the opposite parties submits that applicant's evidence was adduced but the opposite party's evidence remained to be adduced. Be that as it may, it is not in issue that the proceedings before the Arbitrator reached atleast the stage of evidence if not further, under the Old Act, 1940. The applicant was declared a sick industrial unit on 13.11.1997. Proceedings for winding up were initiated before the High Court at Lucknow bearing Company Petition No. 09 of 2003. In July 2003 Justice Lumba died, whereupon, proceedings were initiated by the applicant before the Court under Section 8 of the Act, 1940 for appointment of another Arbitrator bearing Original Suit No. 827 of 1993. As the company petition for winding up applicant's company was pending before the Company Judge Allahabad High Court at Lucknow, on an application being filed in this regard, the records of the proceeding for appointment of another Arbitrator were summoned by the Company Judge in the High Court and an arbitrator was appointed in these proceedings on 16.04.2014 but, on an appeal being filed against the same, it was set aside as being impermissible. This was done on 14.01.2016. Special Leave Petition bearing No. 5307 of 2016 was filed which was dismissed as withdrawn on 29.02.2016. Subsequently an application was filed in the decided Special Appeal for sending back the records of Original Suit No. 827 of 1993 to the Civil Court for appointment of an Arbitrator which was disposed of with the observation to seek appropriate relief before the Company Judge, however, instead of doing so, the applicant, as informed by its counsel, considering the decision of the Supreme Court in the case of Thyssen Stahlunion Gmbh vs. Steel Authority of India Ltd. reported in (1999) 9 SCC 334, filed this application for appointment of a substitute Arbitrator under Section 11(b) of the Act, 1956..
Sri Sudhanshu Chauhan learned counsel appearing for the opposite parties has raised a preliminary objection as to the very maintainability of this application under the new Act, 1996 on the ground that the arbitration proceedings had already commenced under the Old Act, 1940, therefore, any application for appointment of an Arbitrator or substitute Arbitrator after the death of the original Arbitrator could only have been filed before the Civil Court under section 8 of the Act, 1940 and in fact this had already been done by the applicant, therefore, another application under the new Act, 1996 before the High Court was misconceived and not maintainable. He relied upon the decisions of the Supreme Court (Milk Food Ltd. vs. G.M.C. Ice Cream P. Ltd., reported in (2004) 7 SCC 288, N.S. Nayak & sons vs. State of Goa reported in (2003) 6 SCC 56 and State of West Bengal vs. Amrit Lal Chatterjee reported in (2003) 10 SCC 572.
Having heard the learned counsel for the parties and having perused the records the Court finds the arbitration clause in the agreement between the parties to be as under:-
"If at any time any question, dispute or difference whatsoever shall arise between the Purchasers and Sellers or any person claiming under them upon or in relation to or in connection with this agreement except as to matters the decision for which has been specially provided, either party may forthwith give to the other notice in writing of the existence of such questions, disputes or differences and the same shall be referred to the arbitration of a single arbitrator when the parties may agree upon, otherwise to two arbitrators one to be nominated by each party. The Arbitrators shall before proceeding with the reference nominate and umpire to act in case of dis-agreement. The award of the Arbitrators or the umpire as the case may shall be final and finding on the parties. This submission shall be deemed to be submission to arbitration within the meaning of the Indian Arbitration Act, 1940 and the Rules made thereunder or any statutory modification or re-enactment thereof for the time being in force."
The dispute arising out of the contract is not denied. It is also not in dispute that after the appointment of Arbitrator under the Act, 1940 proceedings took place before him and they reached at least the stage of evidence, if not further, when, the Arbitrator expired in July 2003, meaning thereby, even after coming into force of the Act, 1996 the proceedings continued before the Arbitrator under the old Act, 1940. Now the question is of appointment of another Arbitrator or substitute Arbitrator consequent to death of the arbitrator earlier appointed under Section 8 of the Act, 1940, whether this is to be done under the Act, 1940 or under the New Act, 1996.
Learned counsel for the applicant who has placed reliance on the judgment of Supreme Court in Thyssen's case as also the arbitration clause herein which is some what similar to the arbitration clause considered in the said judgment in the context of Rani Constructions case, contended that the application for appointment of substitute Arbitrator would lie under the New Act of 1996 in view of agreement already entered upon by the parties prior to coming into force the Act, 1996, regarding the application of the Act of 1940 or its modification or re-enactment for the time being in force.
Sri Sudhanshu Chauhan learned counsel for opposite party no.2 relied upon the subsequent decision decision of the Supreme Court in the Milk Food Ltd vs. GMC Ice Creak P Ltd. Reported in (2004) 7 SCC 288 N.S. Nayak ans sons vs. State of Goa reported in (2003) 6 SCC 56, State of West Bengal vs. Amritlal Chatterjee reported in (2003) 10 SCC 572 and Setty Constructions Co. (P) Ltd. V. Kankan Rly. reported in(1998) 5 SCC 599 to contend that the decision in Thyssen's case has been been clarified in the subsequent decisions to the effect that it nowhere lays down that even in pending arbitration proceedings under the Old Act, 1940 the procedure prescribed in the New Act, 1996 would become applicable, therefore, the contention of the learned counsel for the applicant was not acceptable, specially as, the applicant has already filed an application under Section 8 of the Act, 1940 before the Civil Court for appointment of a substitute arbitrator.
Having heard the learned counsel for the parties and perused the Court this Court finds that it is a case where not only the Arbitrator had already been appointed under the Old Act, 1940 but he had also proceeded with the arbitration under the Old Act, 1940. As per the applicant himself arbitratal proceedings reached the arguments stage whereas the opposite parties say that it had reached the evidence stage.
Be that as it may, considering the aforesaid feature of this case and the law declared by the Supreme Court in the subsequent decisions relied upon by Sri Sudhanshu Chauhan learned counsel for the opposite party no.1 wherein the earlier judgment rendered in Thyssen's case has been considered, this application under the Act, 1996 for appointment of a substitute Arbitrator is not maintainable specially so, as the applicant has already initiated proceedings under the Act, 1940 for appointment of a substitute Arbitrator. Reference may be made in this regard to the decision in Milk Food Ltd (supra) case which is a judgment rendered by three Hon'ble Judges wherein their Lordships held in paragraph 86 that "If the arbitral proceedings commenced for the purpose of applicability of 1940 Act in September 1995, the question of adopting a different procedure laid down under the 1996 Act would not arise".Reference may also be made in this regard to the decision of the Supreme Court in N.S. Nayak (supra), wherein also the earlier decision of Thyssen's case was considered and the arbitration under consideration in the said case was similar to the one in the case at hand. In paragraph 8 their Lordships of the Supreme Court held as under:-
"8. Further, the part of the arbitration clause which is quoted above also provides that the provisions of the Arbitration Act, 1940 which were for the time being in force were to apply to the arbitral proceedings between the parties. It nowhere provides that once the arbitral proceedings have commenced under the old Act they should be conducted under the new Act as soon as the new Act comes into operation. Hence, in the proceedings where the award is passed under the old Act, the remedy of filing appeal or petition for setting aside the said award would be as per the provisions of the old Act."
In paragraph 14 their Lordships held as under:-
"14. Conclusion 3 only reiterates what is provided in various sections of the Arbitration Act, which gives option to the parties to opt for the procedure as per their agreement during the arbitral proceedings before the arbitrator. The phrase "unless otherwise agreed by the parties" used in various sections, namely, 17, 21, 23(3), 24(1), 25, 26, 29, 31, 85(2)(a) etc. indicates that it is open to the parties to agree otherwise. During the arbitral proceedings, right is given to the parties to decide their own procedure. So if there is an agreement between the parties with regard to the procedure to be followed by the arbitrator, the arbitrator is required to follow the said procedure. Reason being, the arbitrator is appointed on the basis of the contract between the parties and is required to act as per the contract. However, this would not mean that in appeal parties can contend that the appellate procedure should be as per their agreement. The appellate procedure would be governed as per the statutory provisions and parties have no right to change the same. It is also settled law that the right to file an appeal is accrued right that cannot be taken away unless there is specific provision to the contrary. There is no such provision in the new Act. In the present cases, the appeals were pending before the High Court under the provisions of the old Act and, therefore, appeals are required to be decided on the basis of the statutory provisions under the said Act. Hence, there is no substance in the submission made by the learned counsel for the appellant.
Further more, in paragraph 16 of the judgment after considering paragraph 35 of the Thyssen's case their Lordships held as under:-
"The aforesaid discussion only deals with the contention that parties could not have agreed to the application of the new Act till they had the knowledge about the provisions thereof and, therefore, the agreement to the effect that to the arbitral proceedings, the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof would be applicable, is not valid. The Court negatived the said contention by interpreting the expression ''unless otherwise agreed'. The Court held that such agreement could be entered into even before coming into force of the new Act. However, it nowhere lays down that in the pending arbitral proceedings, which was being conducted as per the procedure prescribed under the old Act, the parties have option of changing the procedure."
Milk Food Ldt. (supra) was a case where the question of applicability of the Act, 1940 or new Act arose in the context of the procedure to be followed before the Arbitrator i.e. in arbitral proceedings and it was held that Arbitrator having been appointed and arbitral proceedings having commenced prior to coming into force of the New Act, 1996, the Old Act, 1940 would apply.
If the contention of the learned counsel for the petitioner is accepted then inspite of the fact that part of the proceedings upto the stage of filing evidence has been held under the old Act, 1940, the remaining proceedings would be held under the new Act, 1996 as the new Act will be applied not only for appointment of substitute arbitrator but also for remaining proceedings. This would be incongruous and is not the object of Section 85(2)(a) of the Act, 1996 nor the intent of the parties as evinced in the arbitration Clause.
In view of the above as the proceedings under the old Act had already commenced and reached atleast the stage of evidence if not that of argument and as the applicant has already filed an application under Section 8 of the Act, 1940 for appointment of a substitute arbitrator, this application under Section 11(6) read with Section 15 (2) of the new Act 1996 is not maintainable.
With the aforesaid observations and reasons the application is dismissed/rejected.
Order Date :- 15.03.2019
Vijay (Rajan Roy, J)
