Offshore Infrastructures Ltd., ... vs Bharat Heavy Electricals Ltd, ...
2016 Latest Caselaw 4994 Bom

                                                       1                                               cao424.16.odt




                                                                                                           
                      IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                : NAGPUR BENCH : NAGPUR.




                                                                               
                              Civil Application (CAO) No. 424 of 2016
                                                        in
                               Misc. Civil Application No. 787 of 2014
                             Offshore Infrastructures Ltd., Mulund(W), Mumbai 
                                                   VERSUS




                                                                              
                               Bharat Heavy Electricals Ltd., Nagpur and anr. 
    --------------------------------------------------------------------------------------------------------
    Office Notes, Office Memoranda of                                       Court's or Judge's Order
    Coram, appearances, Court's Orders
    or directions and Registrar's order




                                                            
                                      Shri A. C. Dharmadhikari, Advocate for the applicant
                                      Shri S. V. Bhutada, Advocate for the respondents
                                       
                                      CORAM :  PRASANNA B. VARALE, J.

DATE : 26-8-2016.

Heard Shri Dharmadhikari, learned counsel for the

applicant and Shri Bhutada, learned counsel for the non-

applicants.

2. The applicant is before this Court seeking

modification of the order dated 9-12-2015 passed by this

Court in Misc. Civil Application No. 787/2014 and

substituting the name of either of three persons who are

proposed as arbitrator in the application in place of

Shri Lalit Mohan who was initially appointed as an

Arbitrator by this Court. This application raises an

interesting issue before this Court. The parties were

before this Court in Misc. Civil Application No. 787/2014

filed under Section 11 of the Arbitration and Conciliation

2 cao424.16.odt

Act, 1996 (hereinafter referred to as 'the Act of 1996')

praying for appointment of arbitrator to resolve the

dispute between the parties. Shri Dharmadhikari, learned

counsel for the applicant referred to agreement between

the parties and more particularly, clause 2.21 which

provided that the dispute shall be referred to the

arbitrator for an amicable settlement. The application was

opposed by the non-applicants. It was the submission of

learned counsel appearing for the non-applicants that the

applicant failed to take required steps as per clause 2.21.

On hearing the learned counsel appearing for the parties,

this Court found that the claim of the applicant is a live

claim and exercised the jurisdiction under Section 11(6)

of the Act of 1996 and passed the order appointing

Shri Lalit Moha, B.E. (Civil), PGD Earthquake Engineer,

who is a technical person as the arbitrator to resolve the

dispute between the applicant and non-applicant. The

other terms were referred to in the order in respect of the

fees of the arbitrator etc.

3. The applicant is before this Court by submitting a

peculiar circumstance. It is submitted that in view of the

3 cao424.16.odt

directions of this Court, the security amount toward the

fees of the arbitrator is deposited along with process

charges. It was submitted that after the appointment of

the Arbitrator Shri Lalit Mohan and after depositing the

requisite amount, communications were forwarded to Shri

Lalit Mohan so as to inform him about his appointment.

It is submitted by Shri Dharmadhikari, learned counsel

that the list of arbitrators maintained by this Court was

referring to two address of Shri Lalit Mohan, accordingly,

on both these addresses, viz.

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

Bangalore - 560 076 and

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

communications were forwarded. Service report

communicated that Shri Lalit Mohan is either not

residing or is not available on the addresses stated in

the communication. Photocopies of the envelopes

with the endorsement are placed on record.

Shri Dharmadhikari, learned counsel further submitted

that even an attempt was made to contact Shri Lalit

Mohan on his cell phone numbers as well as landline

phone numbers maintained by the Registry of this Court.

4 cao424.16.odt

To this attempt, it was informed that when the calls

were made, it was revealed that cell numbers and landline

numbers are not in service. Shri Dharmadhikari, learned

counsel then submitted that no stone was left unturned to

contact Shri Lalit Mohan to communicate him that he was

appointed as an arbitrator by this Court and in spite of

all attempts, Shri Lalit Mohan could not be contacted.

Shri Dharmadhikari, learned counsel further submitted

that in view of these peculiar facts, the order passed by

this Court appointing Shri Lalit Mohan as sole arbitrator

be modified and name of Shri Lalit Mohan be substituted

by any of the names which find place in the list of names

of arbitrators and these persons having technical experts,

namely,

(1) Shri Anmol Sekhri (Charted Engineer), 3rd Floor, Sahakar Bazar, Opposite Railway Station, Bandra(West), Mumbai-400 050.

(2) Shri Avinash V. Pendse (B. Architecture, PGDIIT), 7, Tukaram Niketan, Bhagat Lane, Mahim, Mumbai-400 016.

(3) Shri Chandrashekhar (Architect), Omkar, Prathana Chs, 1st Floor, Opposite Vijay Nagar Society, Andheri Sahar Road, Andheri (East), Mumbai-400 069.

5 cao424.16.odt

be substituted. Shri Dharmadhikari, learned counsel

further submitted that by order dated 28-7-2016, certain

directions were issued by this Court. Perusal of the order

dated 28-7-2016 shows that noticing the fact that the

communications forwarded to Shri Lalit Mohan were

returned back with the endorsement that the addressee is

not available on the address, this Court directed the

Registry to send the letter of appointment and writ to the

Arbitrator and the Registry was directed to take

necessary steps within stipulated period of three days.

Shri Dharmadhikari, learned counsel submitted that even

the attempts made by the Registry could not give any

fruits and Shri Lalit Mohan could not be contacted even

by undertaking this exercise. On these submissions,

Shri Dharmadhikari, learned counsel for the applicant

prays for modification of the order and substitution of

name of Shri Lalit Mohan by name of any other arbitrator.

It was the submission of Shri Dharmadhikari, learned

counsel for the applicant that the order of this Court dated

9-12-2015 appointing the arbitrator would take its effect

only when the sole arbitrator receives the information and

6 cao424.16.odt

then start acting as an arbitrator in compliance or in

view of the directions of this Court. Thus, it was the

submission of Shri Dharmadhikari, learned counsel that as

Shri Lalit Mohan who was appointed as sole arbitrator

could not be communicated about the order of this Court,

the order which could not take effect cannot be termed as

a mandate of this Court.

4. Per contra, Shri Bhutada, learned counsel

appearing for the non-applicants vehemently opposed the

application. Shri Bhutada, learned counsel submitted that

this Court by order dated 9-12-2015 appointed one

Shri Lalit Mohan as the sole arbitrator. Once the order of

this Court is passed, the question whether the concerned

person appointed as sole arbitrator is communicated or

not is of no consequence and on relying on the judgments

of the Apex Court, Shri Bhutada, learned counsel

submitted that the only course open to the applicant is to

follow the provisions of Section 15(2) of the Act of 1996

and then adhered to the terms of agreement between the

parties in respect of appointment of the arbitrator.

Shri Bhutada, learned counsel in support of his

7 cao424.16.odt

submissions placed reliance on the judgment of the Apex

Court in following cases :

(1) Nimet Resources Inc. and anr. Vs. Essar Steels

Limited reported in (2009) 17 SCC 313,

(2) Ashok M. Kataria and anr. Vs. Motiwala Trust For

Human Resources Development, Nashik and others

reported in 2011(1) Mh.L.J. 581 and

(3) Huawei Technologies Co. Ltd. Vs. Sterlite

Technologies Ltd. reported in 2016(4) Mh.L.J. 101.

5. Heard both the learned counsel at length. As stated

above, there is peculiar circumstance in the present matter

that is of though the order of this Court appointing

Shri Lalit Mohan as an arbitrator and though the attempts

were made by the applicant as well as even by the

Registry of this Court, Shri Lalit Mohan was not available

for receiving the communication and the order of this

Court. Shri Bhutada, learned counsel placed reliance on

the judgment of the Apex Court in the case of Nimet

Resources Inc. and anr. Vs. Essar Steels Limited (cited

supra). On perusal of the judgment, it reveals that an

application for appointment of Arbitrator was filed and

8 cao424.16.odt

the former Chief Justice of the Gujarat High Court was

appointed as sole arbitrator. The sole arbitrator passed an

interim order and proceeded with the arbitration

proceedings by observing that he had jurisdiction to

proceed. The final award was not passed by the arbitrator

whereas the allegations have been made in the application

against the arbitrator by submitting that the arbitrator had

unnecessarily been delaying the arbitration proceedings

and is not taking any initiative to dispose of the same.

This submission was countered by other party stating that

there was no delay caused by the arbitrator. The Apex

Court then by referring to the provisions of the Arbitration

Act and the definition of the 'court' reflected in the Act

and other judgments observed that jurisdiction under

Section 11(6) of the Act of 1996 is a limited jurisdiction.

It is not as broad as sub-section (4) of Section 20 of the

1940 Act. When an arbitrator is nominated under the

1996 Act, the court does not retain any jurisdiction with

it. It becomes functus officio subject of course to exercise

of jurisdiction in terms of constitutional provisions or the

Supreme Court Rules. Though Shri Bhutada, learned

9 cao424.16.odt

counsel placed heavy reliance on the judgment of the

Apex Court to submit that as soon as the order is passed

by this Court appointing Shri Lalit Mohan as arbitrator,

this Court can not go into other aspects and this Court

becomes functus officio and the only course open to this

Court is to refer to clause 2.21 of the agreement between

the parties, as stated above, the backdrop on which the

parties approached the Court was altogether a different

backdrop. In that matter, the sole arbitrator was not only

appointed but the arbitrator proceeded with the

arbitration proceedings and passed interim orders. The

dispute between the parties was one party alleging that

arbitrator was delaying the proceedings and other party

by submitting that there was no delay caused by the

arbitrator. In the present matter, as stated above, the

factual backdrop is different. In my opinion, the judgment

relied on by Shri Bhutada, learned counsel in the matter

of Nimet Resources Inc. and anr. Vs. Essar Steels

Limited (cited supra) is of no help to the non-applicants.

6. Shri Bhutada, learned counsel also relied on the

judgment of the Apex Court in the matter of Ashok M.

10 cao424.16.odt

Kataria and anr. Vs. Motiwala Trust For Human

Resources Development, Nashik and others (cited supra)

to support his submissions. Facts of this referred case are

different. In the matter of Ashok M. Kataria, the

arbitrator who was named in the arbitration agreement

himself refused to act as an arbitrator.(emphasis supplied)

Shri Bhutada, learned counsel also placed reliance on

Huawei Technologies Co. Ltd. Vs. Sterlite Technologies

Ltd. (cited supra). In this matter, the sole arbitrator

appointed by the Court himself recused from the

proceedings. (emphasis supplied)

7. Raising another ground of opposition Shri Bhutada,

learned counsel placed reliance on Section 14(1) and

15(2) of the Act of 1996. Section 14(1) reads thus :

14. Failure or impossibility to act. - (1) [The mandate of an arbitrator shall terminate

and he shall be substituted by another arbitrator, if] -

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

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

(2) ......

(3) ......

11 cao424.16.odt

It was an attempt of Shri Bhutada, learned counsel that in

the present case, clause (a) of Section 14(1) would

operate. I am unable to accept the submission of Shri

Bhutada for the reason that Shri Bhutada, learned counsel

laid emphasis on the words of clause (a), namely, 'he

becomes de jure or de facto'. In my opinion, these words

cannot be picked up only to support the submission but

these words will have to be read along with the other

words forming part of clause (a). These words are to be

read with the connected words 'unable to perform his

functions or for other reasons fails to act without undue

delay'. Thus conjoint reading of the words 'he becomes de

jure or de facto' with the words 'unable to perform his

functions or for other reasons fails to act without undue

delay' is necessary. Thus, the situation reflected in clause

(a) warrants that it is the inability to perform the function

for any reason. As stated above, the material which is

before this Court shows that there is no question of

assessing the inability as the arbitrator appointed by this

Court could not have been communicated the order of this

12 cao424.16.odt

Court. Shri Bhutada, learned counsel submitted that

Section 15(2) of the Act of 1996 would come in play in

the present matter. The provisions reads thus.

15. Termination of mandate and substitution of arbitrator. -

(1) .....

(2) Where the mandate of an arbitrator

terminates, a substitute arbitrator shall be appointed according to the rules that were

applicable to the appointment of the arbitrator being replaced. (emphasis supplied) (3) .......

(4) ......

It was the submission of Shri Bhutada, learned counsel

that in view of above provisions of Section 15(2) and

more particularly in view of the words "according to the

rules that were applicable to the appointment of the

arbitrator" rule applicable in present matter would be

arbitration clause 2.21.1 between the parties under

agreement and the applicant will have to undertake an

exercise to approach the authority of Bharat Heavy

Electricals Ltd. or the Regional In-charge. Thus, it was an

attempt of Shri Bhutada, learned counsel that the

applicant will have to start the proceeding going back to

13 cao424.16.odt

square one and to follow clause 2.21.1. Though the

submissions of Shri Bhutada look attractive at first blush,

if the order of this Court appointing arbitrator is perused,

it reveals that this Court expressed displeasure on the

aspect of inaction of authority of the non-applicant. It

would be useful to refer to order of this Court. This Court

observed in paragraph no. 7 as under.

"7 .... Though, as per Clause 2.21.1 of the contract, the sole arbitrator is to be appointed

by BHEL/In-Charge (Region) and the applicant had sent the communications dated 7-12-2013, 08-01-2014, 14-01-2014 to BHEL, New Delhi inviting attention of the Chairman and

Managing Director, it goes unexplained as to why the Chairman and Managing Director has

not given any reply to the notice or has not referred it to the In-Charge(Region). The contents of the above referred communications are clear and show the claim made by the

applicant. It is not expected of the officer holding high rank of Chairman and Managing Director of the Company, to overlook the communications and the notice sent by the applicant seeking redressal of his grievance...."

Thus, if this Court observed the non responsive approach

of the non-applicant's high ranking officer asking the

applicant to again undertake the same exercise and go

before the same authorities who were not bothered to

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reply to the communications of the applicant is nothing

but asking the applicant to dance on the tunes of such

officers and asking the applicant to approach this Court

again in the second round of proceedings. In my opinion,

this course cannot be permitted though it is suggested by

the non-applicants.

8. Apart from the above consideration, in my opinion,

there is one more aspect which needs attention on the

backdrop of the facts of the present matter. Section 11 of

the Act of 1996 deals with the provision of 'appointment

of arbitrators'. If one peruses the meaning of word

'appoint' and 'appointment' finding place in Webster's

Dictionary, it reads as :

'appoint' means 'to name or select, as a person for a

position, a time and place for an act or meeting, etc.'

(emphasis supplied) and

'appointment' means an appointing or being appointed;

position or service to which one is or may be appointed.

In Black's Law Dictionary, the word 'appointment' reads

thus : the designation of a person, such as a nonelected

public official, for a job or duty; esp., the naming of

15 cao424.16.odt

someone to a nonelected public office.

Considering this aspect, in my opinion, the exercise under

Section 11 would be complete only when the person who

is appointed as arbitrator receive the knowledge of such a

appointment. At the cost of repetition, in the present

matter, the person appointed as a arbitrator by this Court

could not be communicated about his appointment. Thus,

the exercise for appointment of arbitrator under Section

11 of the Act of 1996 is not fulfilled in the present matter.

9. Considering all the above aspects, in my opinion,

ends of justice would be met by modifying the order of

this Court and thereby substituting the name of Shri Lalit

Mohan by the name of Shri Chandrashekhar (Architect).

Accordingly, the order is modified. Clause (i) of the order

dated 9-12-2015 is modified by substituting the name of

Shri Chandrashekhar in place of Shri Lalit Mohan as

Arbitrator to resolve the dispute between the applicant

and non-applicant.

10. Both the learned counsel appearing for the parties

submit that other terms of the order dated 9-12-2015 are

already complied with.

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11. Registry to communicate this order to

Shri Chandrashekhar (Architect), Omkar, Prathana Chs, 1st

Floor, Opposite Vijay Nagar Society, Andheri Sahar Road,

Andheri(East), Mumbai - 400 069.

The civil application is disposed of in above terms.

                                        ig                                      JUDGE
                                      
    wasnik
           
        



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Uploaded by : Shri A. Y. Wasnik, P.A. Uploaded on : 30-8-2016