Bombay High Court
M/S Gammon India Ltd vs Trenchless Engineering Services ... on 3 December, 2013
Bench: R.D. Dhanuka
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY.
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION (L) NO.1975 OF 2013
M/s Gammon India Ltd.
a company incorporated under The
Companies Act, 1956 and having their
Corporate and Registered Office at
Gammon House, Veer Savarkar Marg,
P.O.Box No.919, Prabhadevi,
Mumbai 400 025. ... Petitioner.
V/s.
Trenchless Engineering Services (P) Ltd.
a company incorporated under The
Companies Act, 1956 and having their
Corporate and Registered Office at
WH-40, 2nd Floor, Mayapuri, Ph-1,
New Delhi-110064. ... Respondent.
Mr G.H.Shukla i/b M/s G. H. Shukla & Co. for petitioner.
Mr Aziz Khan i/b M/s Divya Shah & Associates for Respondent.
CORAM : R.D.DHANUKA J.
DATED : DECEMBER 3, 2013.
JUDGMENT :
By this petition filed under Section 34 of the Arbitration &
Conciliation Act, petitioner seeks to impugn interim award dated 22 nd July
2013 by which counter claim filed by the petitioner is rejected by the
arbitral tribunal on the ground that the petitioner has not deposited the fees
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of the arbitral tribunal and in view of the respondent refusing to pay the
share of fees and expenses the petitioner in so far as hearing of counter
claim is concerned.
2. Learned counsel appearing for petitioner invited my attention to
the minutes of meeting dated 23rd April 2012 held by the arbitral tribunal.
The arbitral tribunal had issued direction to the parties to deposit amounts
by way of reading fees, sitting fees and towards out of pocket expenses. It
was made clear that both the parties shall share the amount in equal ratio.
3. Learned counsel for the petitioner submits that since April 2013,
respondent has been paying the fees of the arbitral tribunal as well as
expenses exclusively including the contribution payable by the petitioner. It
is submitted that there was no separate fees prescribed by the arbitral
tribunal for payment for hearing counter claim filed by the petitioner. It is
submitted that since the respondent has been paying the entire fees and
expenses since April 2013, arbitral tribunal could not have rejected the
counter claim on the ground of non payment of their fees for hearing the
counter claim filed by the petitioner.
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4. Learned counsel appearing on behalf of the respondent on the
other hand submits that in view of refusal on the part of the petition to pay
their contribution of fees and expenses, since April 2013, respondent has
paid the contribution of the petitioner towards arbitration fees and expenses
with a view not to cause any further delay of the outcome of arbitration
proceedings. However respondents are not willing to pay any contribution
in so far as fees for the days when hearing of counter claim filed by the
petitioner took place.
5. On perusal of the arbitral award, it is revealed that the arbitral
tribunal has recorded submission made by the respondent that the
respondent herein was not willing to pay the petitioner's fees of the
arbitrators so far as the counter claim is concerned. Considering these
submissions and in view of the provisions of Section 38 of the Arbitration
Act, the arbitral tribunal has rejected the counter claim made by the
petitioner.
6. My attention is invited to the Judgment of Division Bench of this
Court on 9th July 2012 in case of Rehmat Ali Baig Vs. Minocher M. Deboo
in Appeal (L) No.580 of 2011 in Arbitration Petition No.242 of 2011 and
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in particular paragraph 8 of the said order. Division Bench of this Court has
held that parties who opt for arbitration cannot avoid complying with an order
of deposit. Where a party which has been directed to deposit an advance
towards the costs fails to do so, and the other party also does not deposit his
share, the Arbitrator would be justified in taking recourse to the power
conferred in Section 38(2) of the Arbitration Act to terminate the counter
claim. Paragraphs 7 and 8 of the said Judgment read thus :
"7.
Counsel appearing on behalf of the Appellant submitted that when
a reference was made to arbitration by the order of the Learned Single Judge
dated 13 October 2006, the Appellant had made it clear that he would not be in
a position to deposit the Arbitrator's fees. Hence, the Learned Single Judge
directed that the costs of the arbitration shall be borne, in the first instance, by
the Respondent, subject to suitable orders that the Arbitrator may make.
Counsel submitted that there was no justification for the arbitral Tribunal to
reject the counter claim. It was urged that the arbitral Tribunal would have a
lien on the arbitral award for unpaid costs of the arbitration under Section
39(1). Consequently, it was urged, the Arbitrator ought not to have terminated
the arbitral proceedings in respect of the counter claim under Section 38.
8. While making a reference to arbitration in terms agreed between
the Appellant and the Respondent, the Learned Single Judge of this Court by his
order dated 13 October 2006 directed that the costs of the arbitration shall be
borne, in the first instance, by the Respondent, subject to suitable orders that the
Arbitrator may make. The arbitral Tribunal was within its jurisdiction in terms
of the order of this Court in issuing a direction to the effect that the Appellant
shall deposit the costs towards the Arbitrator's fees in connection with the
counter claim. Even otherwise, an arbitral Tribunal is entitled under Subsection
(1) of Section 38 to fix the amount of the deposit or supplementary deposit, as
the case may be, as an advance for the costs referred to in Subsection (8) of
Section 31. Under Section 31(8)(a) the costs of an arbitration shall be fixed by
the arbitral Tribunal unless otherwise agreed by the parties. For the purposes of
clause (a), costs include reasonable costs inter alia relating to the fees and
expenses of the Arbitrator. The proviso to Subsection (1) of Section 38
enunciates that where, apart from the claim, a counter claim has been
submitted to the arbitral Tribunal, it may fix a separate amount of deposit for
the claim and counter claim. Under subsection (2) the deposit referred to in
subsection (1) shall be payable in equal shares by the parties. The proviso
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stipulates that where one party fails to deposit his share, the other party may
pay that share. Under the second proviso, where the other party also does not
pay the aforesaid share in respect of the claim or the counter claim, the arbitral
Tribunal may suspend or terminate the arbitral proceedings in respect of such
claim or counter claim, as the case may be. In the present case, in terms of the
order passed by this Court initially, the Respondent was required to deposit costs
subject to the orders of the Arbitrator. The Arbitrator was, in our view, within
jurisdiction in requiring the Appellant to deposit an advance towards costs for
adjudicating upon the counter claim. Subsection (1) of Section 39 does make a
provision under which the arbitral Tribunal, subject to a provision to the
contrary in the arbitration agreement, is to have a lien on the arbitral award
for any unpaid costs of arbitration. That however, does not override the power
of the Arbitrator under the second proviso to Subsection (2) of Section 38 to
terminate the arbitral proceedings as regards the claim or the counter claim, as
the case may be, for failure to pay the advance towards deposit of costs. An
Arbitrator cannot be expected to continue adjudicating upon the claim or, as the
case may be, a counter claim, without parties making a deposit of costs
representing the reasonable fees and expenses of the Arbitrator. Relegating the
arbitrator only to a claim of lien under Section 39 will result in an abuse of the
process. A party which does not comply with an order of deposit will in cases
make every effort to delay the proceedings by raising frivolous objections. Absent
an obligation to comply with an order of deposit, a party may misuse the
arbitral process. Arbitral proceedings take place before a private tribunal of the
parties' choice. Parties who opt for arbitration cannot avoid complying with an
order of deposit. The amount which was fixed by the Learned Arbitrator in the
present case was evidently reasonable. Where a party which has been directed
to deposit an advance towards the costs fails to do so, and the other party also
does not deposit his share, the Arbitrator would be justified in taking recourse to
the power conferred in Section 38(2) to terminate the counter claim as was
done in the present case. The judgment of the Supreme Court in Union of India
vs. Singh Builders Syndicate ((2009) 4 SCC 523) does not cover a situation
such as the present. The present case involves a situation where a party has been
recalcitrant in depositing his share of the reasonable costs determined by the
Arbitrator towards the adjudication of the counter claim. The Arbitrator has
acted fairly. Though the counter claim of the Appellant was excluded, the
Appellant participated in the adjudication of the claim and was allowed to
crossexamine the Respondent's witness, as stated in the award. The Appellant
did not step into the witness box. Before concluding we may record that during
the course of the hearing of the Appeal, we had indicated to the Appellant that
should the parties agree, the counter claim of the Appellant can be referred to
arbitration by a member of the Bar who may be agreeable to acting as an
Arbitrator on a nominal fee. On the request of the Court, an experienced
member of the Bar present in Court informed the Court that he would be willing
to act as an Arbitrator and as a matter of duty to the Court, he would leave the
fixation of a nominal fee to any amount that the parties may agree. We
suggested this course to the Appellant in order to allay his grievance that his
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counter claim was not considered by the Arbitrator. On taking instructions,
Counsel appearing on behalf of the Appellant stated that the Appellant is not
ready and willing. Having heard Counsel, we have, in the circumstances,
adjudicated upon the rival contentions.
7. Upon raising a query, learned counsel appearing for the
respondent has reiterated the stand of the respondent that in so far as
counter claim filed by the petitioner is concerned, respondent is not willing
to pay the contribution of the petitioner of fees and expenses of the arbitral
tribunal.
8. Upon querry of the Court whether petitioner is ready and willing
to pay its contribution of fees and expenses when counter claim would have
been heard, learned counsel for petitioner did not convey any response in
positive. The only submission made for consideration of this Court is that
since the respondent has been paying the arbitration costs in respect of the
entire matter including the counter claim, arbitral tribunal was not justified
in rejecting the counter claim for non payment of contribution of the
petitioner's fees and expenses.
9. In my view, neither the arbitral tribunal nor this Court can
compel a party to deposit the contribution of fees and expenses of both
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parties. In my view, the arbitral tribunal was thus justified in terminating
the arbitral proceedings in respect of counter claim in view of the petitioner
and respondent refusing to deposit any amount of fees and expenses for
hearing counter claim of the petitioner. Arbitral tribunal is entitled to fix a
separate amount of deposit for claim and counter claim. I am bound by the
Judgment of Division Bench of this Court in case of Rehmat Ali Baig.
10.
In my view, the order passed by the arbitral tribunal does not
suffer from any infirmity. Petition is devoid of merits and is accordingly
dismissed. In view of the order passed in arbitration petition, notice of
motion (L) No.2329 of 2013 does not survive and is disposed of accordingly.
No order as to costs.
11. Learned counsel appearing for the petitioner undertakes to pay
the deficit court fees in filing this petition if any within two weeks from
today. Undertaking is accepted.
( R.D.DHANUKA, J.)
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