Bombay High Court
Arjandas Teckchand Kashyap And ... vs Smt. Pooja Jaiprakash Pamnani And ... on 20 December, 2013
Bench: R.D. Dhanuka
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hvn
IN THE HIGH COURT OF JUDICATURE AT BOMBAY.
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION APPLICATION NO. 207 OF 2008
Arjandas Teckchand Kashyap and Ors. ... Applicants
Versus
Smt. Pooja Jaiprakash Pamnani and Ors. ... Respondents
Dr. Milind Sathe, Sr. Advocate along with Mr. Chetan Kapadia along with Mr.
S.K. Srivastva alongwith Ms. Simeen Shaikh i/by S.K. Srivastav & Co. for the
applicants.
Mr. R.V. Govilkar alongwith Mr. B. Pawar for respondent no. 5.
Other respondents absent though served.
CORAM : R.D.DHANUKA J.
RESERVED ON : DEC 10, 2013
PRONOUNCED ON : DEC 20, 2013
ORAL JUDGMENT :
By this application filed under section 11(6) of the Arbitration &
Conciliation Act, 1996 (for short "Arbitration Act") the applicant seeks
appointment of an arbitrator.
2. Some of the facts relevant for the purpose of deciding this
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application are as under :
(a) By a deed of partnership dated 15 th January, 1979, the applicants
along with respondent nos. 4 and 5 and late Bhawabai Pamnani and late
Jaiprakash Pamnani were carrying on business in partnership under the name
and style of "M/s. Jeevan Development Corporation". The terms of the said
partnership deed was varied by another Deed of partnership dated
22.08.1979 and was further modified by partnership deed dated 1 st June,
1980. It is the case of the applicants that the dispute arose between the
parties and accordingly the applicants vide letter dated 29 th August, 2003
dissolved partnership firm and called upon the other partners/respondents to
render the accounts of the partnership, settle the shares of each of the partner
and to pay the outgoings of the society in respect of the flats in their
possession and appointed Mr. Shailesh Shah, Advocate, as sole arbitrator.
It is the case of the applicants that the said partnership deeds recorded an
arbitration agreement and more particularly in clause 17 thereof, which reads
thus :
"17. Any dispute or differences in connection with the partnership
shall be referred to the Sole Arbitration of one person mutually
agreed upon and appointed by the partners hereto, all the parties
hereto and the decision of the said Arbitrator shall be binding on all
the parties hereto."
(b) On 5th November, 2003 the applicants filed arbitration petition
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bearing No. 266 of 2003 before the Chief Justice for appointment of
arbitrator under clause 11(6) of the Arbitration & Conciliation Act, 1996. By
an order dated 20th February, 2004, designate of the Chief Justice appointed
Mr. Shailesh Shah as sole arbitrator. The respondents opposed appointment of
the learned arbitrator then appointed on the ground that his appointment
was not made by consent of the respondents. In view of the said objections
by the respondents, Mr. Shailesh Shah, conveyed that it would not be
possible for him to accept his appointment as arbitrator unless specific
consent was obtained from the concerned parties.
(c) The applicants accordingly filed Arbitration Application No. 251 of
2004 before the Chief Justice for appointment of the another arbitrator. By
an order dated 20 th January, 2006, Justice A.B. Palkar former Judge of this
court (as his Lordship then was) was appointed as sole arbitrator. It is stated
that two arbitration meetings were held by Mr. Justice A.B. Palkar former
Judge of this court. On 21/5/2008 Justice A.B. Palkar expired. The
respondents did not appear before this court when said arbitration
application No. 251 of 2006 was heard though served.
(d) On 4th June, 2008, the applicants filed this application for
appointment of another arbitrator in view of the demise of Mr. Justice A.B.
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Palkar (retd). The respondents have not disputed the existence of the
arbitration agreement.
3. Mr. Govilkar, learned counsel for the respondent no. 5 has raised
preliminary objection and also addressed on merits such as :
(a) Under Rule 803E of the High Court Original Side Rules, the arbitration
application under section 11(6) has to be placed on board for acceptance.
Unless the application is accepted and notice is issued by the court to all the
parties concerned, the matter cannot be heard finally. It is submitted that
there is total non compliance of the Rule 803E read with clause 7 of the
scheme framed by the Hon'ble Chief Justice under the provisions of the
Arbitration & Conciliation Act, 1996.
(b) The application filed under section 11 by the applicant is hopelessly
barred by law of limitation.
© There are serious allegations of fraud and misappropriation against
applicants made by the respondent no. 5 in the sur-rejoinder filed by the
respondent no. 5 and in view of such allegations, arbitrator can not be
appointed and the dispute cannot be referred to arbitration and has to be
tried by the Civil Court.
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4. Mr. Govilkar, learned counsel for respondent no. 5 in support of
his submission that the procedure under Rule 803E of the High Court
(Original Side) Rules is mandatory and noncompliance thereof shall result in
dismissal of the arbitration application is concerned, the learned counsel
placed reliance on the judgment delivered by the designate of the Hon'ble
Chief Justice delivered on 7th May, 2012 in Notice of Motion No. 805 of
2011 in Arbitration Application No. 195 of 2010 in case of Brainvisa
Technologies Pvt. Ltd. Versus Subhash Gaikwad (HUF). It is submitted that
since no notice has been issued by the court, nor any of the respondent was
informed of the first date on which the arbitration application was to appear
for hearing before the learned Judge, the application filed under section
11(6) cannot be disposed of finally. Paragraphs 1 to 3 of the said
judgment read thus :
"This Motion has been taken out for recalling an order dated 21 January
2011 passed by a Learned Single Judge, allowing an Application under
Section 11 of the Arbitration and Conciliation Act, 1996. The Order dated
21 January 2011 records an undertaking that an affidavit of service
would be filed within two weeks from the date of the order. The Affidavit
of service was thereafter filed on 2 February 2011. From the affidavit, it
appears that on 16 December 2010 the advocate for the Original
Applicant under Section 11 served a copy of the Arbitration Application
upon the Respondent. The Respondent has in the affidavit in support of the
Motion accepted in para (2) that a copy of the notice dated 16 December
2010 was received together with the arbitration application but has stated
that this was without any further details as to when the matter was to
appear on Board. The Original Respondent filed his advocates'
appearance on 28 January 2011. The Respondent has submitted that the
Order dated 21 January 2011 was passed ex-parte since there was no
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notice either from the Applicant or from this Court when the matter was
likely to be taken up on Board.
Rule 803E of the Bombay High Court (Original Side) Rules provides as
follows :-
" R.803E. Notice of Filling Application to persons likely to be
affected.- Upon any application by petition under the Act, the Judge in
chambers shall, if he accepts the petition, direct notice thereof to be given
to all persons mentioned in the petition and to such other persons as may
seem to him to be likely to be affected by the proceedings, requiring all or
any of such persons to show cause, within the time specified in the notice,
why the relief sought in the petition should not be granted. "
2. The Rule, contemplates that the Judge in Chambers shall
direct notice of the petition to be given to the persons mentioned in the
petition to require them to show cause within the time specified in the
notice, why the relief sought in the petition should not be granted. In the
present case no notice was issued by the Judge in Chambers as required by
Rule 803E. It may also be noted that Clause (7) of the Appointment of the
Arbitrators by the Chief Justice of Bombay High Court Scheme 1996 is
also in similar terms and provides as follows :-
"7. Notice to affected persons.- Subject to the provisions of paragraph
6, the Chief Justice or the person or the institution designated by him shall
direct that a notice of the request be given to all the parties to the
arbitration agreement and such other person or persons as may seem to
him or is likely to be affected by such request to show cause, within the
time specified in the notice, why the appointment of the arbitrator or the
measure proposed to be taken should not be made or taken and such
notice shall be accompanied by copies of all documents referred to in
paragraph 2 or, as the case may be, by information or clarification, if any,
sought under paragraph 5."
3. In the present case it will appear that no notice was issued by
the Court nor was the Respondent informed of the first date on which the
arbitration application was to appear for hearing before the Learned
Judge in the notice served by the Advocate. In these circumstances, the
contention that there was no valid service when the Order was passed by
the Learned Single Judge on 21 January 2011 would have to be accepted.
Sufficient cause for condoning the delay of 15 days has also been made
out. The Motion is accordingly made absolute in terms of prayer clauses
(a) and (b)."
5. It is submitted by Mr. Govilkar that though respondent no. 5 had
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accepted the service as recorded by the learned designate Judge of the Chief
Justice and the matter was placed for final hearing, respondent no. 5 was
under the impression that the arbitration application must have been
accepted and compliance of Rule 803E read with clause (7) of the scheme
must have been made by the applicants. It is submitted that under this bona
fide mistake on the part of respondent No. 5, respondent did not raise such
plea before this court in the affidavit filed.
6.
In so far as issue of limitation is concerned, Mr. Govilkar placed
reliance on the letter dated 17 th February, 1987 addressed by advocates for
the applicants to the respondents calling upon the respondents to vacate flat
on 6th and 7th Floor and room on the ground floor and parking spaces and to
be sold by the partnership so that the partnership could be wound up and
accounts be made up. In the said letter, it was stated that the applicants
would have no other alternative but to file a suit for dissolution of the
partnership and the court receiver appointed on all the assets of the
partnership with powers to dispose of all the assets of the partnership. The
learned counsel submits that the cause of action had thus arisen any time
prior to 17th February, 1987 whereas the notice invoking arbitration
agreement was issued by the applicants only on 29 th August, 2003 i.e. much
after three years from the date of commencement of cause of action and thus
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the application under section 11 filed by the applicants is barred by law of
limitation under Article 137 of schedule to the Limitation Act, 1963. Since the
arbitration notice was issued after three years from the date of cause of
action, the application having been filed in respect of the dead claims, Chief
Justice or his designate shall decide that issue and shall dismiss the
arbitration application being barred under Article 137 of the Limitation Act.
In support of this submission, Mr. Govilkar, learned counsel appearing for
the respondents placed reliance on the judgment (1) in the case of Adinath
S.S. Karkhana Vs. Triveni Engineering & Industries Limited delivered by
the then Chief Justice reported in 2008(2) Mh.L.J. 443 (2) judgment of
the Supreme Court in the case of Asia Resorts Ltd. Vs. Usha Berco Ltd.
AIR 2002 Supreme Court 55 and (3) judgment of the Supreme Court in
the case of Union of India and anr. Vs. M/s. L.K. Ahuja, (1988) 3 SCC 76.
In support of his submission that in view of there being serious allegations of
fraud made by the respondent no. 5 and thus such issues cannot be referred
to arbitration, the learned counsel placed reliance on the judgment of the
Supreme Court in the case of N. Radhakrishnan Vs. Maestro Engineers &
Ors. (2010) 1 SCC 72.
7. Mr. Govilkar, learned counsel submits that since the Chief Justice or
his designate has been empowered to record evidence on the issue whether
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the claims are barred by law of limitation or not under section 11(6) it
presupposes that such application under section 11(6) of the Arbitration Act
is before the Court and such proceedings are judicial proceedings. Mr.
Govilkar made an attempt to distinguish the judgment of the Supreme Court
in the case of SBP and company Vs. Patel Engineering Limited and the
judgment delivered by Dr. D.Y. Chandrachud, the then designate Judge
(now Chief Justice of Allahabad High Court) and submits that the said
judgment of this court requires reconsideration. Mr. Govilkar reiterated his
submission that Article 137 is applicable to application filed under section 11
and claims are barred by law of limitation. It is submitted that though other
respondents are not appearing before this court for whatever reasons,
respondent no. 5 is entitled to raise issue of non service of the proceedings
and notice is mandatory according to the learned counsel under rule 803E
of the High Court rules read with clause 7 of the scheme. It is submitted that
the issue of fraud though raised in the sur-rejoinder, the designate Judge can
consider such allegations and may refuse to appoint arbitrator. In so far as
orders passed by the designate of Chief Justice, in earlier two arbitration
applications are concerned, it is submitted that though the respondents have
not appeared for whatever reasons, those orders passed by the designate of
the Chief Justice were nullity as the arbitrators were appointed by those
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orders though both these applications were hopelessly barred by law of
limitation. It is submitted that thus designate of Chief Justice in this
proceedings cannot take cognizance of such orders which are nullity
according to the learned counsel.
8. Mr. Govilkar placed reliance on paragraphs Nos. 2 and 4 of the
judgment in the case of Adinath SSK Karkhana (supra) which read thus :
"2. Disputes had arisen between the parties and the petitioner filed a suit being
Civil Suit No. 666 of 1997 before the Court of Civil Judge, Senior Division,
Pune for recovery of Rs. 4,33,98,558.76. In that suit the other party filed an
application under Section 8 of the Act which was contested by the petitioner.
Vide Order dated 30th December 2002 the learned Judge dealing with the suit
allowed the application holding that there were disputes between the parties
which were liable to be referred to arbitration in accordance with clause 19 of
the agreement. A copy of the said order is annexed at Exh C to the petition. One
Shri V.P.Rane, at the behest of the petitioner or otherwise, agreed to act as the
arbitrator. On 15th May 2006 said Shri Rane claimed to have entered upon the
reference and fixed hearing on 22nd July 2006. The respondents vide their letter
dated 1st August 2006 replied through their counsel to the notice of the
arbitrator stating therein that they had never agreed for appointment of Shri
Rane as the sole arbitrator and they were not willing to continue the arbitration
proceedings before the said arbitrator, terming it as a unilateral reference. It was
further stated that Shri Rane had no authority to proceed with the proceedings.
In fact the respondents again through their counsel on 21st August 2006
objected to the very jurisdiction of the said arbitrator and questioned him to
clarify as to how he was acting as an arbitrator. The opposition to the
jurisdiction as well as requiring the said arbitrator to disclose source of his
appointment as the sole arbitrator was reiterated by the respondents vide their
letter dated 30th August 2006. During this period the arbitrator had also
informed the respondents that he was appointed as the arbitrator through order
of the court. In the letter dated 15th May 2005 the arbitrator had stated as
under:
In the Special Civil Suit No. 666 of 1997 between the parties mentioned above, the
undersigned has been appointed as an arbitrator.
The arbitrator wishes to commence the arbitrator the arbitration proceedings in the
matter.
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The parties are hereby directed to forward to the Arbitrator their terms of reference
not later than 30th of June 2006.
The arbitrator has fixed the meeting to consider the terms of reference as also other
related issues on 22nd July 2006 at the following address at 2.00 p.m.
Shri V.P.Rane
1076/24, Giriraj Housing Society
Opp. Dhahanukar Bungalow
Old Chaturshringi Road, Gokhale Road
Pune 411016
Tel No. 020 25656421, Mobile No. 9822979874 Receipt of this letter be
acknowledged immediately
sd/- V.P.Rane Arbitrator.
ORDER
Inform this to legal adviser accordingly.
Even in his letter dated 14th August 2006 this concept was further clarified by the
arbitrator. This according to the respondents is not factually correct.
4. Besides the above judgment, the Supreme Court in the case of Asia Resorts Ltd. v.
Usha Breco Ltd. MANU/SC/0689/2001 : AIR2002SC55 , has held that where notice
was served on 17th April, 1990 stating that the party would like to take legal action
for recovery of its dues, the cause of action would be deemed to have arisen on that
date. Reply to the notice was sent on 6th April, 1993. This did not amount to
effective mutual consultation between the parties or acknowledgment. The claim
petition under Section 20 of the old Act filed on 30th November, 1993 was held to
be barred by time. There is no application filed in the present case on the strength of
Article 137 of the Limitation Act which would apply to such petitions. The same
could be filed within three years from the date of cause of action. There is no
explanation on record before us as to why the petition has not been filed within the
prescribed period of limitation. The Court had specifically passed an order on 30th
December, 2002, putting the entire controversy that there was an existing and
binding agreement between the parties and the disputes /claims were referable to
arbitration in contemplation of clause 19 of the Agreement. This order, as already
noticed, was never challenged by any of the parties to the lis and there could be no
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justification whatsoever for the petitioner to file the present petition beyond the
period of three years, even if computed from that date. This would clearly show that
the petition is barred by time and suffers from inordinate delay and laches on the part
of the petitioner. The claims stated in the petition have also become barred by time
as they have sought to be referred to arbitration after the lapse of more than 10
years."
9. Paragraph 15 and 18 of the judgment of Asia Resorts Ltd. Vs.
Usha Berco Ltd. (supra) , read thus :
"15.There is not much controversy that the residuary article 137 of the
Limitation Act applies so far as the period of limitation is concerned for an
application under Section 20 of the Arbitration Act, 1940. The residuary
article 181 of the Limitation Act, 1908 was replaced by Article 137 in the
Limitation Act, 1963. Earlier, Article 181 was applicable only in respect of
application to be filed under the Civil Procedure Code. This Article was
replaced by Article 137 in the Limitation Act, 1963 in a modified form. By
insertion of Article 137, it cast a wider net so as to include any application
for which no period of limitation was provided else where in that division.
The third division of the Limitation Act, 1963 deals with various
applications to be filed under various special statutes. The definitions of
'application' and 'application' are also inserted in the Limitation Act, 1963.
Therefore, it is clear that the intention of the legislature was to provide a
residuary article prescribing period of limitation for filing petitions and
applications under the various special laws. This Court in Kerala State
Electricity Board vs. T.P.Kunhaliumma held that the Article 137 would
apply to any petition or application filed under any Act to a civil court and it
cannot be confined to applications contemplated by or under the Code of
Civil Procedure. In Major (Retd.) Inder Singh Rekhi vs. Delhi Development
Authority ; Union of India and Another vs . M/s.
L.K. Ahuja and Co.
MANU/SC/0544/1988 : [1988]3SCR402 ; Steel Authority of India Ltd. vs.
J.C. Budharaja, Government and Mining Contractor
MANU/SC/0542/1999
:
AIR1999SC3275 ; and Union of India and another vs. M/s. Vijay
Construction Co. , this Court held that the period of limitation for filing
application under Section 20 of the Arbitration Act, 1940, is as prescribed
under Article 137 of the Limitation Act.
18. The appellant herein has filed an application under Section 5 of the
Limitation Act praying that the delay in filing the application under
Section 20 of the Act be condoned. Section 5 of the Limitation Act says
any appeal or any application, other than application under any of the
provisions of Order XXI of the Code of Civil Procedure, 1908, may be
admitted after the prescribed period, if the appellant or the applicant
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satisfies the court that he had sufficient cause for not preferring the
appeal or making the application within such period. The applicant can
show sufficient cause for not filing the application in time. It appears that
this Court had no occasion to consider whether Section 5 of the
Limitation Act, 1963 could be applied in the case of an application to be
filed under Section 20 of the Arbitration Act, 1940. The Division Bench
of the High Court of Delhi in Union of India and another vs. M/s. Vijay
Construction Co. AIR 1981 Delhi 193 held that the benefit of Section 5
of the Limitation can be availed by the applicant for an application under
Section 20 of the Arbitration Act. Going by the provision contained in
Section 5 of the Act, we are also of the view that in an appropriate case
the court can extend the benefit of the said Section."
10. Paragraph 8 of the judgment in Union of India Vs. L.K. Ahuja
(supra) read thus :
"8. In view of the well-settled principles we are of the view that it will be entirely
a wrong to mix-up the two aspects, namely, whether there was any valid claim
for reference under Section 20 of the Act and, secondly, whether the claim to be
adjudicated by the arbitrator, was barred by lapse of time. The second is a matter
which the arbitrator would decide unless, however, if on admitted facts a claim is
found at the time of making an Order under Section 20 of the Arbitration Act, to
be barred by limitation. In order to be entitled to ask for a reference under
Section 20 of the Act, there must be an entitlement to money and a difference or
dispute in respect of the same. It is true that on completion of the work, right to
get payment would normally arise and it is also true that on settlement of the
final bill, the right to get further payment gets weakened but the claim subsists
and whether it does subsist, is a matter which is arbitrable. In this case the claim
for reference was made within three years commencing from April 16, 1976 and
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the application was filed on December 18, 1976. We are, therefore, of the view
that the High Court was right in this case. See in this connection the observations
of this Court in Major (Retd.) Inder Singh Rekhi v. D.D.A.
MANU/SC/0271/1988 :"
11. Dr. Sathe, learned senior counsel for the applicants on the other
hand dealt with the preliminary objections raised by the learned counsel for
respondent No. 5 and also made submissions on the maintainability of this
application and for appointment of the arbitrator.
12. In so far as the issue of applicability of Rule 803E read with clause
7 of the scheme framed by the Chief Justice of this court and the alleged
non compliance thereof is concerned, it is submitted by the learned senior
counsel that rule 803E does not apply to arbitration application filed under
section 11 of the Arbitration Act, 1996. It is submitted that clause 7 of the
scheme is applicable which does not contemplate that the arbitration
application has to be placed on board for acceptance/admission. The learned
senior counsel submits that in any event the matter had appeared before
the Hon'ble the then Chief Justice on 12th September, 2008 when the order
was passed for issuance of court notice to the respondents returnable on
10th October, 2008. Liberty was granted to the applicants to serve by
hamdasta. It is submitted that pursuant to the said order passed by the then
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Chief Justice, notices were served from time to time upon all the respondents.
During the pendency of this application, some of the respondents expired.
Even one of the applicants expired. Amendments were carried out. Learned
senior counsel placed reliance on the service report submitted by the Officer
of this Court on 27th April, 2011 to the effect that after verifying the papers
and proceedings, he had found that service was effected in the matter.
Respondent nos. 1 to 3, 4 and 7 were served through paper publication as
well as bailiff and the representatives of the applicants had affixed zerox copy
of the arbitration application informing the next date of hearing i.e. 21 st
April, 2011 at the conspicuous places. In so far as respondent no. 5, 6(e), 8
to 11 are concerned, the packets were sent through courier service. As per
paragraph 5 of the affidavit, service was complete. In so far as respondent
nos. 6(a), 6(b) and 6(c) are concerned, it is submitted that the packets were
sent through R.P.A.D., and acknowledgement was accepted. In respect of
service on respondent no. 6(d), it is submitted that acknowledgement of
registered packet was awaited and in so far as respondent no. 12 is
concerned, packet was returned with remark unclaimed. My attention is
invited to the order dated 29th June, 2012 passed by the then designate Judge
taking cognizance of the affidavit of service dated 29 th June, 2012 and
restoring the Arbitration Application to file by allowing Notice of Motion filed
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by the applicants. By the said order, the applicants were directed to effect
fresh service of the arbitration application on the respondents.
13. On 9th January, 2013, this matter appeared before the designate
Judge of this court when respondent no. 5 along with his counsel were
present in Court. On oral application made by the applicant's counsel for
permission to effect service on the respondents other than respondent no. 5
is accepted by way of substituted service. The designate Judge accordingly
granted liberty to the applicants to effect service on the respondents by
substituted service by publication of notice or by all possible modes within
four weeks from the date of the said order. It is made clear that if the
respondents were not served, the application to stand dismissed without
further reference to the court. The matter was directed to be placed on board
for hearing on 13th February, 2013 alongwith other connected matters. By
order dated 1st March, 2013, the designate Judge extended the returnable
date for effecting substituted service in terms of order dated 9 th June, 2013
till 5th April, 2013. When the said order was passed, respondent no. 5 was
present in court and his appearance has been noted.
14. Dr. Sathe, the learned senior counsel placed reliance on three
affidavits of service filed in this proceedings in support of his submission
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that all the respondents are duly served pursuant to the directions issued by
the designate Judge as can be demonstrated from the affidavits of service
which are filed in this proceedings. It is submitted that in any event, there is
substantial compliance of the Rule 803E if it is applicable and also clause 7
of the scheme framed by the Hon'ble Chief Justice. It is submitted that since
other respondents have not chosen to appear in this proceedings though
served and no affidavit in reply has been filed, Respondent no. 5 thus cannot
be allowed to raise any issue regarding service of the proceedings and notice
as sought to be canvassed by the respondent no. 5.
15. As far as issue of limitation raised by respondent no. 5 is
concerned, Dr. Sathe, learned senior counsel submits that even though at one
stage, the applicants had called upon the respondents to vacate some of the
properties and contended that the same ought to have been sold and had
not taken any steps pursuant to the said letter, the applicants had finally
issued notice dissolving the said firm on 29 th August, 2003 and has invoked
arbitration agreement simultaneously. The learned senior counsel placed
reliance on Article 5 of the schedule to the Limitation Act which provides for
the limitation of three years for filing suit in respect of the cause of action
arisen on the dissolution of the firm. It is submitted that thus limitation
would commence from the date when the said firm is dissolved. Limitation
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have stopped when the applicants issued notice for appointment of arbitrator
i.e. on 29th August, 2003 was received by the respondent. Learned senior
counsel submits that the application for appointment of arbitrator was filed
on 5th November, 2003 itself. In view of the objection raised by the
respondents, before the learned arbitrator by addressing letters, the then
learned arbitrator refused to accept his appointment. Though respondents
were served with notice and the papers and proceedings in respect of the
arbitration application filed by the applicants (Arbitration Application No.254
of 2004), respondents chose not to appear. The designate Judge therefore, by
an order dated 20th January, 2006 appointed a retired Judge of this Court
who held two meetings. The learned arbitrator, however, expired on 21 st May,
2008. On 4th June, 2008, present application is filed by the applicants for
appointment of arbitrator. It is submitted that since Article 137 does not
apply to arbitration application filed under section 11, there is no question of
such application being barred by law of limitation. In any event, since the
first application was filed in the year 2003 itself, after issuing notice under
section 21, i.e. notice dated 29th August, 2003, said application was within
time. This application filed in the year 2006, is for filling up the vacancy
having arisen due to demise of Justice A.B. Palkar, former Judge of this
court who was appointed as arbitrator by order dated 20th January, 2006.
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16. Learned senior counsel placed reliance on the judgment of the
Supreme Court in the case of National Insurance Company Limited Vs.
Boghara Polyfab Private Limited, (2009) 1 Supreme Court Cases 267 and in
particular paragraph 19, 22 and 23. It is submitted that whether the claims
made by the applicants are barred by law of limitation or not has to be
decided by the arbitral tribunal. It is not mandatory for the Chief Justice or
his designate to decide the issue as to whether the claims are barred by law
of limitation or not. The relevant paragraphs of the judgment of the
Supreme Court in the case of National Insurance company Limited (supra)
read thus :
"19. In SBP & Co. v. MANU/SC/1787/2005 :Patel Engineering Ltd.
AIR2006SC450 , a seven Judge Bench of this Court considered the scope of
Section 11 of the Act and held that the scheme of Section 11 of the Act required
the Chief Justice or his designate to decide whether there is an arbitration
agreement in terms of Section 7 of the Act before exercising his power under
Section 11(6) of the Act and its implications. It was of the view that Sub-sections
(4), (5) and (6) of Section 11 of the new Act, combined the power vested in the
court under Sections 8 and 20 of the old Act (Arbitration Act, 1940). This Court
held:
It is necessary to define what exactly the Chief Justice, approached with an
application under Section 11 of the Act, is to decide at that stage. Obviously, he
has to decide his own jurisdiction in the sense, whether the party making the
motion has approached the right High Court. He has to decide whether there is
an arbitration agreement, as defined in the Act and whether the person who has
made the request before him, is a party to such an agreement. It is necessary to
indicate that he can also decide the question whether the claim was a dead one;
or a long barred claim that was sought to be resurrected and whether the parties
have concluded the transaction by recording satisfaction of their mutual rights
and obligations or by receiving the final payment without objection. It may not
be possible at that stage, to decide whether a live claim made, is one which
comes within the purview of the arbitration clause. It will be appropriate to leave
that question to be decided by the arbitral tribunal on taking evidence, along with
.. 20 .. arbap-207.08J.sxw
the merits of the claims involved in the arbitration. The Chief Justice has to
decide whether the applicant has satisfied the conditions for appointing an
arbitrator under Section 11(6) of the Act. For the purpose of taking a decision on
these aspects, the Chief Justice can either proceed on the basis of affidavits and
the documents produced or take such evidence or get such evidence recorded, as
may be necessary. We think that adoption of this procedure in the context of the
Act would best serve the purpose sought to be achieved by the Act of expediting
the process of arbitration, without too many approaches to the court at various
stages of the proceedings before the Arbitral tribunal.
47.(iv) The Chief Justice or the designated judge will have the right to decide the
preliminary aspects as indicated in the earlier part of this judgment. These will
be, his own jurisdiction, to entertain the request, the existence of a valid
arbitration agreement, the existence or otherwise of a live claim, the existence of
the condition for the exercise of his power and on the qualifications of the
arbitrator or arbitrators. (emphasis supplied)
22. Where the intervention of the court is sought for appointment of an Arbitral
Tribunal under Section 11, the duty of the Chief Justice or his designate is
defined in SBP & Co. This Court identified and segregated the preliminary issues
that may arise for consideration in an application under Section 11 of the Act
into three categories, that is (i) issues which the Chief Justice or his Designate is
bound to decide; (ii) issues which he can also decide, that is issues which he may
choose to decide; and (iii) issues which should be left to the Arbitral Tribunal to
decide.
22.1 The issues (first category) which Chief Justice/his designate will have to
decide are:
(a) Whether the party making the application has approached the appropriate
High Court.
(b) Whether there is an arbitration agreement and whether the party who has
applied under Section 11 of the Act, is a party to such an agreement.
22.2 The issues (second category) which the Chief Justice/his designate may
choose to decide (or leave them to the decision of the arbitral tribunal) are:
(a) Whether the claim is a dead (long barred) claim or a live claim.
(b) Whether the parties have concluded the contract/ transaction by recording
satisfaction of their mutual rights and obligation or by receiving the final
payment without objection.
.. 21 .. arbap-207.08J.sxw
22.3 The issues (third category) which the Chief Justice/his designate should
leave exclusively to the arbitral tribunal are:
(i) Whether a claim made falls within the arbitration clause (as for example, a
matter which is reserved for final decision of a departmental authority and
excepted or excluded from arbitration).
(ii) Merits or any claim involved in the arbitration.
23. It is clear from the scheme of the Act as explained by this Court in
SBP & Co., that in regard to issues falling under the second category, if raised in
any application under Section 11 of the Act, the Chief Justice/his designate may
decide them, if necessary by taking evidence. Alternatively, he may leave those
issues open with a direction to the Arbitral Tribunal to decide the same. If the
Chief Justice of his Designate chooses to examine the issue and decides it, the
Arbitral Tribunal cannot re-examine the same issue. The Chief Justice/his
designate will, in choosing whether he will decide such issue or leave it to the
Arbitral Tribunal, be guided by the object of the Act (that is expediting the
arbitration process with minimum judicial intervention). Where allegations of
forgery/fabrication are made in regard to the document recording discharge of
contract by full and final settlement, it would be appropriate if the Chief
Justice/his designate decides the issue."
17. Dr. Sathe also distinguished the judgment of the designate Judge
of this court in the case of Brainvisa Technologies Pvt. Ltd. (supra) on the
ground that Rule 803E do not apply to arbitration application filed under
section 11 and in the alternative there was substantial compliance of the
service of notice on the parties. Dr. Sathe, learned senior counsel
distinguished the judgments of this court in the case of Adinath SSK Vs.
Triveni Engineering (supra) on the ground that the issue involved before
the Hon'ble the Chief Justice in that matter was whether the application filed
under section 20 of the Arbitration Act, 1940 which application/suit was
before court was barred by law of limitation or not and thus the judgment
.. 22 .. arbap-207.08J.sxw
in that matter is clearly distinguishable on the facts of this case and are not
applicable. Dr. Sathe also distinguished the judgment of the Supreme Court
in the case of Asia Resorts Ltd. (supra) on the ground that the said judgment
was dealing with application/suit under section 20 of the Arbitration Act,
1940 and the same is not applicable to this application filed under section
11(6) of the Arbitration & Conciliation Act, 1996. Dr. Sathe, distinguished
the judgment of the Supreme Court in the case of Union of India Vs. L.K.
Ahuja (supra) on the similar grounds. In so far as submission of Mr.
Govilkar that there are allegations of fraud made in the affidavit filed by 5 th
respondent and thus the issue cannot be decided by the arbitrator is
concerned, Dr. Sathe invited my attention to the paragraphs in the sur-
rejoinder and submits that there are no such allegations of fraud as orally
canvassed by the learned counsel for respondent no. 5. It is submitted that in
any event all the pleadings of the parties relating to accounts would be
considered by the arbitrator and cannot be considered by the learned
designate of the Chief Justice in this proceedings. It is submitted that the
judgment of the Supreme Court in the case of N. Radhakrishnan relied upon
by the learned counsel is not applicable to the facts of this case at all.
18. Dr. Sathe placed reliance on the judgment of this court delivered
on 26th August, 2010 in the case of M/s. Vashi Builders Pvt. Ltd. Vs. Green
.. 23 .. arbap-207.08J.sxw
Blaze Coop. Hsg. Soc. Ltd in Arbitration Application No. 199 of 2007 in
support of his submission that since the application under section 11(6) of
the Arbitration & Conciliation Act is not before the court, provisions of
Limitation Act would not be applicable to such application under section
11(6). Paragraphs 3 to 5 of the said judgment read thus :
"3. The contention which has been urged on behalf of the Respondent cannot be
accepted for more than one reason. From the judgment of the Supreme Court in
SBP & Co. v. Patel Engineering Limited (2005) 8 SCC618 it is clear that
though the power which is vested with the . Chief Justice under Section 11(6) has
judicial characteristics, the Chief Justice is not for that purpose constituted as a
Court when he exercises the power. In Patel Engineering the Supreme Court
observed that the fact that instead of the Court, " the powers are conferred on the
Chief Justice, has to be appreciated in the context of the statute". The Supreme
Court observed that Parliament was conscious of the definition of the expression
"Court" in Section 2(e) of the Arbitration and Conciliation Act, 1996 which is
defined to mean the principal civil court of original jurisdiction in a district and to
include the High Court in exercise of its ordinary original civil jurisdiction.
Parliament, the Supreme Court held, did not want the power under Section 11(6)
to be conferred upon the District Court or the High Court in the original
jurisdiction and the intent was to confer power on the highest judicial authority in
the State, or as the case may be, in the country.
4. These observations of the Supreme Court were construed by Mr. Justice B.N.
Srikrishna in Rodemadan India Ltd. v. International Trade Expo Centre Ltd.
(2006) 11 SCC 651. The submission which was urged before Mr. Justice B.N.
Srikrishna, as a designate of the Chief Justice of India, was that as recourse had
been taken by the Petitioner under Section 9 for obtaining relief by moving the
Delhi High Court, the consequence was that by reason of Section 42 it could be
only that Court which has jurisdiction upon the arbitral tribunal. While rejecting
the submission, it was held that neither " the Chief Justice nor his designate under
Section 11(6) is a "Court" as contemplated under the Act" and the bar of
jurisdiction under Section 42 was only intended to apply to a Court as defined in
Section 2(e).
5. Once it is held that the Chief Justice or his designate while exercising powers
under Section 11(6) is not a Court, it is impossible to accede to the submission
that the provisions of Article 137 of the Limitation Act would come into
operation. Section 43 of the Arbitration and Conciliation Act also specifies that
.. 24 .. arbap-207.08J.sxw
the Limitation Act 1963 shall apply to arbitrations as it applies to proceedings in
Court. In these circumstances, there is no merit in the defence which has been
urged on behalf of the Respondent. In view of the death of the sole arbitrator it is
necessary for this Court to appoint a new arbitrator, instead and in place of the
arbitrator earlier appointed. Smt. Justice K.K. Baam is appointed as sole arbitrator
to adjudicate upon the disputes and differences between the parties. The
Application is accordingly disposed of."
19. Mr. Govilkar, learned counsel for the respondent sought to
distinguish the judgment of the Supreme Court in the case of National
Insurance company Limited (supra) on the ground that there is no bar in
Chief Justice or his designate Judge deciding as to whether the claims are
barred by law of limitation or not.
REASONS AND CONCLUSIONS :
20. Rule 803A and 803B provides that the proceedings otherwise
provided under Rule 803C and 803K, all applications should be made by the
petitioners and shall be placed on board for admission after prior notice to
all parties concerned. A perusal of Rule 803 reveals that upon any application
by petitioner under the Act, the Judge in Chambers shall, if he accepts the
petition, direct notice thereof to be given to all persons mentioned in the
petition and to such other persons as may seem to him to be likely affected
by the proceedings, requiring all or any of such persons to show cause, within
the time specified in the notice, why the relief sought in the petition should
not be granted. In my view, Chapter XLIIIA would not apply to applications
filed under section 11(6) of the Arbitration & Conciliation Act. The petitions
.. 25 .. arbap-207.08J.sxw
which are referred in Chapter XLIIIA are proceedings before the court and
not before the Chief Justice or his designate.
21. In my view, clause 7 of the scheme which is specifically framed by the
Chief Justice under section 11 (6) of the Arbitration & Conciliation Act, 1996
would be applicable. The language of Rule 7 of the scheme framed by the
Chef Justice clearly suggests that all the parties have to be served with the
notice. I am not inclined to accept the submissions made by Mr. Govilkar
learned counsel for the respondent no. 5 that the application under section
11(6) of the Arbitration Act ought to have been placed on board for
admission or acceptance or ought to have been accepted by the Chief Justice
or his designate and notice was mandatorily to be issued by the court and not
by the parties.
22. No such objection has been raised by respondent no.5 in the affidavit
in reply. In any event, a perusal of the orders passed by the Chief Justice or
his designate, clearly indicates that the court had issued notice vide order
dated 12th September, 2008 to the respondents and liberty was granted to the
applicants to serve respondents by hamdusta. Notices have been served on
the respondents. A perusal of the service report submitted by the Associate of
this court, pursuant to the order passed by the Chief Justice on 21 st April,
2011, clearly indicates that all the respondents have been served. On perusal
.. 26 .. arbap-207.08J.sxw
of the order dated 9th January, 2013 passed by the designate Judge, it is clear
that respondent no. 5 through his learned counsel had made a statement
that respondent no. 5 has been served with the copy of the application. After
recording statement made by respondent no. 5 through his learned counsel,
this court directed the applicants to serve other respondents by way of
substituted service and directed the office to place the matter on board for
hearing along with other connected matters. A perusal of the roznama of this
proceedings would clearly indicate that this matter had appeared on board
for more than ten times for hearing when 5 th respondent either in person or
through his counsel had appeared and did not raise any such objection. At
no point of time respondent no. 5 raised any objection as to why matter was
on board for hearing or directed to be placed on board for hearing though the
same was not accepted by the Judge in Chamber or that no notice was served
by the Court. Respondent no. 5 has participated in the matter all through out
without raising any objection orally or by raising such objection in the
affidavit in reply. In my view such objections raised by the respondent no. 5
across the bar is made out of frustration, is baseless and untenable.
23. On perusal of the affidavit of services dated 12 th September, 2013
filed by the applicants, it is clear that the respondent nos. 3, 4, 5, 6a, 6b, 6c,
6d, 7 to 9 and 11 and 12 are served. On perusal of the affidavit of service dated
.. 27 .. arbap-207.08J.sxw
1st April, 2013, it is clear that the applicant had published notice in the
newspaper "Business Standard, Hyderabad" in English Edition on 22 nd March,
2013. Respondent nos. 1 to 4, 6a, 6e, 7 to 12 are accordingly served. On perusal
of the affidavit of service dated 1st April, 2013 filed by the applicant it is clear
that applicant had published notice in the newspaper "Gulf Today" on 23 rd
March, 2013 in Dubai. Respondent nos. 1 to 4 and 12 are thus duly served.
Respondent No. 5 has already waived service. All the respondents are thus
served. Except respondent no. 5, none other respondents have appeared in this
proceedings nor any reply is filed.
24. On conjoint reading of the rules forming part of chapter XLIIIA
and clause 7 of the scheme framed by the Hon'ble Chief Justice, I am of the
view that such application filed under section 11(6) of the Arbitration Act are
not required to be accepted and or admitted by the Chief Justice or his
designate and there is no mandatory requirement of service of notice through
court before hearing the matter. Some times Chief Justice or his designate
passes such order for issuance of notice when it is found that the respondent
is not served by the applicant by private service or respondent is avoiding
service. Be that as it may, on perusal of the record I am of the view that
there is compliance of issuance of notice by the applicants and matter has
.. 28 .. arbap-207.08J.sxw
been rightly placed on board for hearing. There is no merit in the
submission of Mr. Govilkar on this issue.
25. In so far as issue of limitation is concerned, the applicants had
issued notice for dissolution of partnership and had invoked arbitration
agreement on 29th August, 2003. On perusal of section 11(6) of the
Arbitration Act, 1996, it is clear that the application has to be made before
the Chief Justice for appointment of arbitrator, if the party fails to act as
required under the procedure agreed upon by the parties, or before any
person or institute designated by the Chief Justice to take necessary measures.
In my view, the application under section 11(6) is not before the court.
Reading of section 43 of the Arbitration Act, it is clear that Limitation Act,
1963 shall apply to arbitrations as it applies to the proceedings in court.
Since the proceedings under section 11(6) is not before the court, article 137
of the Limitation Act, 1963 in my view is not applicable to this application
filed under section 11(6) of the Act. This court in case of M/s. Vashi Builders
Pvt. Ltd. (supra) after considering the judgment of the Supreme Court in the
case of SBP Engineering (supra) and judgment of the Supreme court in the
case of Rodamanan India Ltd. Versus International Trade Expo Centre Ltd.
(2006) 11 SCC 651 has held that article 137 of the Limitation Act is not
.. 29 .. arbap-207.08J.sxw
applicable to application filed under section 11(6) as the same is not
before the court. I am respectfully bound by the judgment of the Supreme
Court in the case of SBP Engineers, in the case of Rodemadan India Ltd. and
judgment in the case of M/s. Vashi Builders Pvt. Ltd.
26. In so far as the issue whether claim made by the applicants are
barred by law of limitation or not, reference to the judgment of the Supreme
Court in the case of National Insurance Company Limited (supra) would be
relevant. In paragraph 22 of the said judgment, the Supreme Court has
categorized three types of issues which may arise in an application under
section 11 of the Arbitration Act. It is held by the Supreme court that whether
claim is dead (long barred) claim or alive claim, it is for the Chief Justice or
his designate to choose whether to decide such issue or to leave them to the
decision of the arbitral tribunal. Supreme Court in the case of Indian Oil Vs.
SBP Engineering Ltd. AIR 2011 SC 987 has held that the designate Judge
shall avoid the risks and dangers involved in deciding an issue relating to the
tenability of the claim without necessary pleadings and documents, in a
proceedings relating to the limited issue of appointing an arbitrator. It is held
in that matter that the designate Judge committed a jurisdictional error in
dismissing the application filed by the appellant under section 11 of the Act,
on the ground that the claim for extra cost was barred by res judicata and by
.. 30 .. arbap-207.08J.sxw
limitation. The Supreme Court has set aside the said judgment of the
designate Judge and has held that it is open to the respondent to raise all
contentions against the claim of the applicant including the contention of
limitation, maintainability and res judicata, before the arbitrator. I am
respectfully bound by the judgment of the Supreme Court in the case of
National Insurance Company and in the case of Indian Oil Ltd. (supra).
Paragraph 19 of the Judgment of the Indian Oil Ltd. (supra) reads thus :
"19. The Designate should have avoided the risks and dangers
involved in deciding an issue relating to the tenability of the
claim without necessary pleadings and documents, in a
proceeding relating to the limited issue of appointing an
Arbitrator. It is clear that the Designate committed a
jurisdictional error in dismissing the application filed by the
Appellant under Section 11 of the Act, on the ground that the
claim for extra cost was barred by res judicata and by limitation.
Consideration of an application under Section 11 of the Act,
does not extend to consideration of the merits of the claim or
the chances of success of the claim."
27. In my view, issue of limitation is a mixed question of fact and law and
merely on the basis of limited averments made in the application under
section 11 for the purpose of appointment of arbitrator, Chief Justice or his
designate cannot decide the plea of limitation and the same can be
considered by the arbitral tribunal on merits after giving opportunity to both
the parties to lead documentary as well as oral evidence, if necessary. I am
.. 31 .. arbap-207.08J.sxw
thus not inclined to record any finding as to whether the claims of the
applicant before the arbitral tribunal would be barred by law of limitation or
not and such issue is kept open to be adjudicated upon by the arbitral
tribunal.
28. On perusal of the judgment of Supreme Court in case of Union of
India Vs. L.K. Ahuja (supra) and Asia Resorts Ltd. (supra) relied upon by
Mr. Govilkar, learned counsel for respondent no. 5, on the issue of
limitation, it is clear that these judgments courts were considering
applications filed under section 20 of Arbitration Act, 1940, which were
required to be filed before a court. In my view, article 137 of the limitation
Act applies to application before the court. Since application under section
11(6) of the Arbitration Act is not before the court, these judgments which
were dealing with the applications filed under section 20 of the Arbitration
Act, 1940 are not applicable to the application filed under section 11(6) of
the Arbitration & Conciliation Act, 1996 and reliance placed thereon is totally
misplaced. In so far as judgment in case of Adinath Sahakari Sakhar
Karkhana (supra) is concerned, though the said judgment was delivered on
18/10/2007, the Hon'ble then Chief Justice did not notice the judgment of
Supreme Court in case of SBP & Co. Vs. Patel Engineering Ltd. (supra) and
judgment of Mr. Justice B.N. Shrikrishna (then designate Judge of the Hon'ble
.. 32 .. arbap-207.08J.sxw
Chief Justice of India) in Rodemadon India Ltd. (supra) delivered in 2006.
29. In my view there is no merit in the submission of Mr. Govilkar
that earlier orders passed by the Chief Justice or his designate are nullity in
view of the appointment of the earlier arbitrators having been made inspite of
application under section 11(6) having been allegedly time barred or
otherwise.
30. As far as issue of fraud alleged by the learned counsel appearing
for the 5th respondent is concerned, on perusal of the sur-rejoinder, I am of
the view that there are no allegations of fraud or forgery or even in the sur-
rejoinder filed by respondent no. 5. Mr. Govilkar, is not able to point out how
judgment of the Supreme Court in case of N. Radhakrishnan (supra) would
apply to the facts of this case. The reliance placed by the learned counsel on
the judgment of the Supreme Court in the case of N. Radhakrishanan is
misplaced.
31. Since there is no dispute about the existence of arbitration
agreement, and since earlier arbitrator appointed by the designate of Chief
Justice has expired, vacancy having arisen is required to be filled by
appointing another arbitrator.
32. Shri Justice Bhimrao Naik, Former Judge of this Court is appointed
as sole arbitrator in place of erstwhile arbitrator who has expired.
.. 33 .. arbap-207.08J.sxw
33. Arbitration Application is disposed of. There shall be no order as
to costs.
(R.D.DHANUKA, J.)
