Bombay High Court
M/S. Microvision Technologies ... vs Micro & Small Enterprises, ... on 16 December, 2016
Bench: R.D. Dhanuka
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
ARBITRATION PETITION NO.43 OF 2016
ALONG WITH
ARBITRATION PETITION NO.44 OF 2016
ALONG WITH
ARBITRATION PETITION NO.45 OF 2016
M/s.Microvision Technologies Pvt. Ltd. )
A company registered under the provisions of )
Indian Companies Act, 1956 )
having its registered office at 9, Suraj Enclave,
ig )
Near ABB Circle, Mahatma Nagar, )
Nashik - 422 007. )
through its Director )
Mr.Atul Nemchand Dhadiwal )
Age 40 years, Occupation Business, )
R/o. As above. ) .. Petitioner
Versus
1. Micro & Small Enterprises Facilitation Council )
Plot No.P-15, MIDC Satpur, )
Nashik - 422 007. )
2. Union of India )
Through the General Manager, Central Railway, )
G.M. Building, C.S.T. )
Mumbai - 400 001. ) .. Respondents
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Mr.A.P. Bhandari i/by Ms.Chaitrali Deshmukh for the petitioner.
Mr.A.A. Parkar for the respondent no.1.
Mr.T.J. Pandian for the respondent no.2.
---
CORAM : R.D. DHANUKA, J.
DATE : 16th December 2016
Judgment :-
. By these three arbitration petitions filed under Section 11(6)
of the Arbitration and Conciliation Act, 1996, the petitioner has applied
for appointment of any retired Judge of this Court as a sole arbitrator to
decide the dispute between the petitioner and the respondent no.2.
2. There is no dispute that the arbitration agreement is
recorded between the parties in clauses 63 and 64 of the General
Conditions of the Contract. Since the petitioner was governed by the
provisions of the Micro, Small and Medium Enterprises Development
Act, 2006 (for short "MSMED Act, 2006"), the petitioner had invoked
the provisions of Section 18 of the said Act and applied to Micro &
Small Enterprises Facilitation Council for conciliation and more
particularly under Section 18 (1) of the said Act.
3. There is no dispute that the conciliation proceedings
between the parties failed and the conciliation proceedings came to be
terminated.
4. The petitioner had issued a notice to the Council as well as
the General Manager, Central Railway on 25 th May 2016 stating that
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to avoid further delay in the matter and as per Section 76(D) of the
Arbitration and Conciliation Act, 1996, the petitioner would like to
declare that with effect from the receipt of the said letter, conciliation
proceedings shall be treated as terminated and further action in the matter
shall be initiated as per Section 18(3) of the MSMED Act,2006 by
starting arbitration proceedings either by council or by sole independent
arbitrator (retired High Court/District Court Judge) as urgently as
possible. It is not in dispute that there was no response to the said letter
by the General Manager of the Central Railway. The General Manager,
Central Railway also did not suggest any name of a retired of the High
Court Judge or District Court Judge or any other arbitrator at any stage.
5. The petitioner has filed these three arbitration petitions in
having identical facts by invoking section 11(6) of the Arbitration and
Conciliation Act, 1996 for appointment of an arbitrator. The petitions are
opposed by the General Manager of Central Railway on the ground that
no notice of appointing an arbitrator under Section 11(5) was issued by
the petitioner to the General Manager calling upon the General Manager
to appoint an arbitrator in accordance with the arbitration agreement
recorded between the parties in clauses 63 and 64 of the General
Conditions of the Contract. The petitions are also opposed on the ground
that the petitioner had alleged to have played fraud and committed
forgery on the respondent no.2 by supplying materials purportedly of
"EMERSON" make which was the one of the approved specification
agreed in the contract, but on enquiry with the manufacturers i.e.
M/s.Emerson Network Power (India) Pvt. Ltd., it was revealed that none
of the products supplied by the petitioner were manufactured at their end.
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6. Mr.Bhandari, learned counsel appearing for the petitioner
invited my attention to the correspondence exchanged between the
parties and more particularly the notice dated 25 th May 2016 which was
addressed to the Council as well as the General Manager, Central
Railway calling upon them to appoint an arbitrator. He submits that
admittedly there was no response to the said notice. It is submitted that
the said notice was a notice as contemplated under Section 11(5) of the
Arbitration and Conciliation Act, 1996.
7. It is submitted by the learned counsel that in view of the
provision of Section 12(5) of the Arbitration and Conciliation Act, 1996
which provision is inserted by the Arbitration and Conciliation
(Amendment) Act, 2015 with effect from 23rd October 2015, the General
Manager of Central Railway even otherwise could not have appointed
any arbitrator as per the arbitration agreement contemplated in clauses
63 and 64 of the General Conditions of the Contract. He submits that in
any event, since there was no response to the said notice dated 25 th May
2016, these petitions filed under Section 11(6) of the Arbitration and
Conciliation Act, 1996 are maintainable.
8. In so far as the issue raised by the respondent no.2 about the
alleged fraud and fabrication on the part of the petitioner is concerned,
learned counsel for the petitioner invited my attention to the letter of
acceptance dated 1st April 2013 issued by the Senior Divisional Electrical
Engineer (General), Central Railway and also to the amendment 3
thereto. He submits that there was no fraud committed by the petitioner
and in any event such allegations can be adjudicated by the learned
arbitrator. My attention is also invited to the order passed by this Court
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in Arbitration Application No.96 of 2014 decided on 7th October 2015
in the case of M/s.Solapur Bio Energy Systems Pvt. Ltd. Vs.M/s.
Elixir Engineering Pvt. Ltd. in which this Court had adverted to the
judgment of the Division Bench of this Court rendered on 27 th August
2010 in the case of M/s.Steel Authority of India Vs. The Micro & Small
Enterprises Facilitation Council & Anr. in Writ Petition No.2145 of
2010 and had appointed a former Judge of this Court as a sole arbitrator.
He submits that the facts before the learned designate of the Chief Justice
in that matter are identical to the facts of this case.
9.
Learned counsel appearing for the petitioner also placed
reliance on the judgment of the Delhi High Court in the case of
Assignia-CIL JV Vs. Rail Vikas Nigam Limited delivered on 29th April
2016 in Arbitration Petition No.677 of 2015 and more particularly on
paragraphs 22, 26, 27 and 31 to 44 and would submit that Delhi High
Court has interpreted the Arbitration and Conciliation (Amendment) Act,
2015 and more particularly Section 12(5) and has held that in view of the
amendment, the Railway could not have appointed its own employee as
an arbitrator which would give rise to justifiable doubts as to the
independence or impartiality of the arbitrator. Special Leave Petition
against the said order is dismissed.
10. Mr.Pandian, learned counsel appearing for the respondent
no.2, on the other hand, submits that the notice dated 25 th May 2016
issued by the petitioner was not in compliance with Section 11(5) of
the Arbitration and Conciliation Act, 1996 and thus the present petitions
filed under Section 11(6) of the Arbitration and Conciliation Act, 1996
are not maintainable.
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11. The next submission of the learned counsel for the
respondent no.2 is that since the petitioner had committed fraud and
fabrication by supplying materials of a company by suppressing the fact
that those products were not manufactured by the said company which
was one of the approved specification agreed in the contract entered into
between the parties and such fraud being of a serious and complicated
nature, the said issue of such fraud and fabrication cannot be referred to
the arbitration. In support of this submission, learned counsel for the
respondent no.2 invited my attention to the letter addressed by the
Emerson Network Power (India) Pvt. Ltd. on 15th February 2016 alleging
that there was no brand named "IT Power" owned and manufactured by
that company. He submits that the fraud and fabrication committed by
the petitioner is thus apparent. In support of this submission, learned
counsel invited my attention to the judgment of the Supreme Court in the
case of A.Ayyasamy Vs. A.Paramasivam & Ors. decided on 4th October
2016 in Civil Appeal Nos.8245-8246 of 2016.
12. In so far as the first submission of the learned counsel for the
respondent no.2 about maintainability of the these three petitions on the
ground that no notice was issued under Section 11(5) of the Arbitration
and Conciliation Act, 1996 is concerned, there is no dispute that the
petitioner was governed by the provisions of the MSMED Act, 2006 and
had invoked the provisions of Section 18(1) of the said Act and had
applied to Micro & Small Enterprises Facilitation Council for
conciliation. It is not in dispute that the conciliation proceedings came to
be terminated by the said Council. A perusal of the notice dated 25 th May
2016 which was admittedly addressed to the said Council as well as the
General Manager of Central Railway clearly indicates that the petitioner
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had called upon the Council as well as the General Manager, Central
Railway to appoint an arbitrator. It is not in dispute that there was no
response to the said notice.
13. A perusal of the arbitration agreement entered into between
the parties indicates that even if the petitioner would have issued a fresh
notice to the General Manager for appointment of the arbitrator, the
respondent no.2 could not have appointed its employees as an arbitrator
in view of the provisions of Section 12(5) of the Arbitration and
Conciliation (Amendment) Act 2015. Mr.Pandian does not dispute that
in view of insertion of Section 12(5) of the Arbitration and Conciliation
(Amendment) Act 2015, the Central Railway could not have appointed
its own officers/employees as an arbitrator.
14. In my view, there is no substance in the submission of the
learned counsel for the respondent no.2 that there was no compliance on
the part of the petitioner to issue notice under Section 11(5) of the
Arbitration and Conciliation Act, 1996. In my view, the said notice dated
dated 25th May 2016 was issued under Section 11(5) of the Arbitration
and Conciliation Act, 1996. Since neither the Council nor the respondent
no.2 responded to the said notice nor suggested any names for
appointment of a sole arbitrator, the present petitions filed under Section
11(6) of the Arbitration and Conciliation Act, 1996 are maintainable.
15. In so far as the second submission of the learned counsel for
the respondent no.2 that in view of serious allegation of fraud and
fabrication made by the respondent no.2 against the petitioner which
cannot be adjudicated by the learned arbitrator and thus no appointment
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of the arbitrator can be made under Section 11(6) of the Arbitration and
Conciliation Act, 1996 is concerned, a perusal of the correspondence
prima facie indicates that allegation of the respondent no.2 is alleging
fraud and fabrication attributing to the petitioner in supplying some
quantity of materials which were not of the make referred in the
agreement entered into between the parties. The question that arises for
consideration is whether allegations made by the respondent no.2 against
the petitioner are such serious allegations which make a virtual case of
criminal offence or whether allegations of fraud are so complicated that it
becomes absolutely essential that such complex issues can be decided
only by civil court on the appreciation of the voluminous evidence that
needs to be produced.
16. Supreme Court in the case of A. Ayyasamy Vs. A.
Paramasivam & Ors. (supra) has dealt with this issue and after adverting
to the several judgments of the Supreme Court and in particular
paragraph 20 thereof. It is held that if the allegations of fraud are so
serious which make a virtual case of criminal offence or allegations of
fraud are so complicated which cannot be decided by the arbitrator, only
such allegations of fraud can be decided by the Civil Court and not by the
arbitral tribunal. In my view, on considering the allegations made in the
affidavit-in-reply and on the basis of the copy of the letter allegedly
addressed by the supplier, this Court cannot conclusively draw any
conclusion about the allegations of fraud or fabrication as canvassed by
the learned counsel for the respondent no.2.
17. It is however made clear that further evidence would be
required to be led by the parties in support of these allegations before the
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learned arbitrator and upon appreciation of the evidence, the learned
arbitrator may take one or the other view on such allegations of fraud.
This Court has not expressed any views on the merits of the allegations of
fraud made by the respondent no.2. In my view, the allegations of fraud
made by the respondent no.2 prima facie does not fall in the category of
serious allegations of fraud which make a virtual case of criminal offence
or is so complicated or complex issue that it cannot be decided by an
arbitrator but can be decided only by a Civil Court on appreciation of
voluminous evidence as held in the judgment of the Supreme Court in
the case of A. Ayyasamy Vs. A. Paramasivam & Ors. (supra). The
judgment of the Supreme Court in the case of A. Ayyasamy Vs. A.
Paramasivam & Ors. (supra) relied upon by the learned counsel for the
respondent no.2 would support the case of the petitioner and not the case
of the respondent no.2.
18. I therefore pass the following order :-
(i) I proposed to appoint Shri Justice R.Y.Ganoo, former Judge of this
Court as a sole arbitrator in the aforesaid three matters.
(ii) Learned prospective arbitrator is requested to file statement of
disclosure under Section 11(8) read with Section 12(1) of the
Arbitration and Conciliation Act, 1996 within one week from the
date of communication of this order.
(iii) Learned prospective arbitrator shall also indicate in the said
statement of disclosure that he would be able to complete the
arbitration proceedings within twelve months from the date of
entering upon the reference as contemplated under section 29-A of
the Arbitration and Conciliation Act, 1996.
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19. Place these arbitration petitions on board for 'Directions' on
23rd December 2016.
R.D. DHANUKA, J.
