Sanjay Vegoil Products Pvt. Ltd., ... vs Ketan S/O Mukesh Sawadia
2016 Latest Caselaw 510 Bom

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




                                                               
                  Misc. Civil Application (Review) No. 804 of 2015
                                           in
                 Misc. Civil Application (Arbitration) No. 677 of 2013




                                                              
     Sanjay Vegoil Products Pvt. Ltd. 
     504, Krishna Complex, 4-1-938, 
     Tilak Road, Abids, Hyderabad. 
     Through its Director Sanjive Bhurariya 
     (original respondent)                                                         .... Applicant 




                                               
        //   VERSUS   //     
     Ketan S/o Mukesh Sawadia 
     Aged about 28 years, Occ.- Business, 
                            
     C/o Ames Enterprises, Triveni Hall, 
     Agrawal Complex, Datta Wadi, 
     Amravati Road, Nagpur. 
     (original applicant)                                                  .... Non-Applicant
     ----------------------------------------------------------------------------------------------
      

     Shri N. G. Jetha, Advocate for the applicant
     Shri A. Shelat, Advocate for the non-applicant
   



     ----------------------------------------------------------------------------------------------

                                              CORAM :  PRASANNA B. VARALE, J.

                                              DATE     :  10-3-2016.





     ORAL JUDGMENT 


                       Rule.  Rule made returnable forthwith. 

2. By the present application, the applicant i.e. the original

respondent to the proceeding i.e. Misc. Civil Application No.

677/2013 is seeking review of the order passed by this Court on the

ground of an error apparent on the face of the record.

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3. The non-applicant i.e. the applicant in Misc. Civil

Application No. 677/2013 submitted application seeking

appointment of arbitrator under Section 11 of the Arbitration Act.

This Court by order dated 5-9-2014 allowed the application by

appointing sole arbitrator.

4. Shri Jetha, the learned counsel for the applicant

submitted that though the notice was issued to the applicant and

though it was reported that notice was served, the applicant was not

aware of the application filed in this Court and it only came to

knowledge of the applicant when the applicant received notice from

the learned arbitrator appointed by this Court. The submission of

Shri Jetha, learned counsel seeking review of the order was that

the application submitted by the non-applicant itself was untenable.

It was submitted by Shri Jetha, the learned counsel by referring to

the documents placed on record along with the application, namely,

the statements that all these three statements placed on record along

with the application nowhere refers to a fact of any arbitration

agreement between the parties. Shri Jetha, learned counsel

submitted that the copy of the statements placed on record do not

even refer the name of the non-applicant it is issued by the firm

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AMES Enterprises. It was the submission of Shri Jetha, learned

counsel that while the applicant sought appointment of the

arbitrator under Section 11 of the Act, it was for the applicant to

satisfy this Court that there exists an arbitration agreement and the

same is agreed by the another party either expressly or otherwise

through certain communication. Shri Jetha, learned counsel

submitted that nothing is placed on record and this Court on the

submissions of the applicant, presuming that there exists an

arbitration agreement between the parties allowed the application.

Thus, the submission of Shri Jetha, the learned counsel that this is

an error apparent on the face of the record, the applicant is

approached this Court seeking review of the order.

5. Per contra, Shri Shelat, learned counsel for the non-

applicant and the applicant before this Court in Misc. Civil

Application No. 677/2013 vehemently opposes this application.

Submission of Shri Shelat, learned counsel is two fold. First

submission of Shri Shelat, learned counsel is as there is no specific

provision in the said Act i.e. the Arbitration and Conciliation Act,

1996 (hereinafter referred to as "the Act") of review, this Court may

not entertain the present application seeking review of the order.

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The other limb of the submission of Shri Shelat, learned counsel is

when the application was presented before this Court, this Court

issued notice to the respondent and the notice is duly served. As the

notice is served, the respondent had an opportunity to contest the

claim of the applicant. Respondent ought to have appeared before

this Court. When the respondent failed to appear before this Court,

the act of the respondent can be termed as waiver of the objection

and on this backdrop, the applicant cannot seek review of the order

passed by this Court. Shri Shelat, learned counsel then submitted

that the ground raised by the applicant that though the notice was

issued to the respondent and was served, the respondent was

unaware of the application filed in this Court holds no water on the

backdrop of the fact that in the application, the status of the

respondent along with the address was shown and on the very

address, the notice was issued to the respondent. Shri Shelat, the

learned counsel submitted that the applicant cannot take the ground

of ignorance of the proceedings when the notice issued by the sole

arbitrator was duly served and received by the applicant on the very

address and on receiving the very notice of the sole arbitrator, the

applicant approached this Court by filing the present review

application. Shri Shelat, learned counsel in support of his

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submission placed reliance on certain judgments.

6. As the controversy relates to the review of the order

passed by this Court appointing the sole arbitrator and on the

backdrop of the submissions of the learned counsel appearing for the

respective parties, it would be necessary to refer to the relevant

provisions of the Act. The application was moved under Section 11

of the Act. Said provision reads thus :

11. Appointment of arbitrators. - (1) A person of any nationality may be an arbitrator, unless otherwise agreed

by the parties.

(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or

arbitrators.

(3)........

(4)........

(5)........

(6) Where, under an appointment procedure agreed upon by the parties, -

(a) a party fails to act as required under that procedure ; or

(b) the parties, or the two appointed arbitrators,

fail to reach an agreement expected of them under that procedure; or

(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.

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                (7)......... 
                (8).........




                                                             
                (9).........
                (10).......
                (11).......
                (12).......




                                                            

It will be also useful to refer to Section 4 as reliance is placed on the

said provision, which reads thus :

4. Waiver of right to object. - A party who knows that -

(a) any provision of this Part from which the parties may derogate, or

(b) any requirement under the arbitration

agreement, has not been complied with and yet proceeds with the arbitration without stating his objection to such non- compliance without undue delay or, if a time limit is provided for stating that objection, within that period of

time, shall be deemed to have waived his right to so

object.

As Shri Shelat, learned counsel also made a submission that the

order passed by this Court attained finality in view of sub-section (7)

of Section 11, it would be necessary to refer to the said provision

also.

(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justice or the person or institution designated by him is final.

7. Though the submissions of Shri Shelat, learned counsel

for the non-applicant looks attractive at first blush, on considering

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the relevant provisions referred to above and the judgments of this

Court as well as the Apex Court, I am unable to accept the

submissions of Shri Shelat for the reasons stated below.

8. It was an attempt to submit that as there is no specific

provision in the Act for review, the review may not be entertained. It

will not be out of place to mention that the ground raised seeking

review is an error apparent on the face of record, namely, there was

no arbitration agreement between the parties. If Section 11 is

perused and more particularly, the conjoint reading of sub-sections

(2) and (6) of Section 11 leaves no scope to state that to invoke the

powers under Section 11 by a party concerned to the Court, the

condition precedent would be existence of arbitration agreement

between the parties. As sub-sections (2) and (6) refers to liberal

procedure for the parties for appointment of arbitrator sole or

arbitrators and if the object of the Act is perused, it is clear that by

the said Act, a speedy and effective redressal between the parties is

provided through the arbitration and conciliation proceedings and

the existence of such an agreement is a condition precedent.

9. It would be useful to refer to the judgment of the Apex

Court in the matter of P. Anand Gajapathi Raju and ors. Vs. P.V.G.

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G. Raju (died) and others reported in AIR 2000 SC 1886 wherein

the issue of reference to the arbitrator was before the Apex Court.

The Hon'ble Apex Court referring to the provisions of the Act stated

thus, "Part I of the Act deals with domestic arbitrations. Section 5,

which is contained in Part I of the Act, defines the extent of judicial

intervention in arbitration proceedings. It says that notwithstanding

anything contained in any other law for the time being in force, in

matters governed by Part I, no judicial authority shall intervene

except where so provided in that Part. Section 5 brings out clearly

the object of the Act, namely, that of encouraging resolution of

disputes expeditiously and less expensively and when there is an

arbitration agreement, the Court's intervention should be minimal.

The Apex Court then deal with the provisions of Section 8 of the Act

and the Apex Court further observed that the conditions which are

required to be satisfied under sub-sections (1) and (2) of Section 8

before the Court can exercise its powers are : (1) there is an

arbitration agreement; (emphasis supplied) (2) a party to the

agreement brings an action in the Court against the other party; (3)

subject matter of the action is the same as the subject matter of the

arbitration agreement; (4) the other party moves the Court for

referring the parties to arbitration before it submits his first

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statement on the substance of the dispute."

10. It will not be out of place to refer to Section 7 of the

Act. Section 7 reads thus :

7. Arbitration agreement. - (1) In this Part, "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in

respect of a defined legal relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

(3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in -

(a) a document signed by the parties;

(b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a

record of the agreement; or

(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.

(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.

The Apex Court in the case of Wellington Associates Ltd. Vs. Kirit

Mehta reported in AIR 2000 SC 1379 while dealing with the

provisions of the Act, namely, Sections 16, 11 and 7 observed thus :

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17. Further, a reading of sub-clauses (4), (5) and (6) of S. 11 shows that they enable the Chief Justice or his designate to appoint arbitrator or arbitrators, and

likewise S. 11(12) enable the Chief Justice of India or his designate to appoint arbitrator or arbitrators : under Rule 2 of the scheme framed by the Chief Justice of India, a request is to be made to the Chief Justice of India along

with a duly certified copy of the 'original arbitration agreement'. Section 2(b) of the Act defines 'arbitration agreement' as an agreement referred to in S. 7. Section 7 defines 'arbitration agreement as follows.

S. 7. Arbitration agreement. - (1) In this Part,

"arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in

respect of a defined legal relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a

separate agreement.

(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained in -

(a) a document signed by the parties;

(b) an exchange of letters, telex, telegrams or

other means of telecommunication which provide a record of the agreement; or

(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.

(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.

The words in sub-clause (1) of S. 7, "means an agreement by the parties to submit to arbitration", in my opinion, postulate an agreement which necessarily or

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rather mandatorily requires the appointment of an arbitrator/arbitrators. Section 7 does not cover a case where the parties agree that they "may" go to a suit or

that they 'may' also go to arbitration.

18. Thus, unless the document filed by the party before the Chief Justice of India or his designate is an

'arbitration agreement' as defined in S. 7 as explained above, requiring a reference in a mandatory sense, no reference, in my view, can be made to the arbitral Tribunal. It is, as already stated, indeed implicit - if an

objection is raised by the respondent before the Chief Justice of India or his designate that the so-called

arbitration clause is not an arbitration clause at all falling within S. 7 - that such a question will have to be decided in the proceedings under S. 11 of the Act. ....

11. Shri Shelat, learned counsel relied on certain judgments

in support of his submissions. Firstly, he relied on the judgment of

the Apex Court in the case of Patel Narshi Thakershi and ors. Vs.

Pradyumansinghji Arjunsinghji reported in AIR 1970 SC 1273 in

support of his submission that there is no power of review in the

Arbitration Act. As stated above, even if there is no specific

provision in the Act, as the applicant is approaching this Court on

the ground that there is an error apparent on the face of the record

and there are numerous judgments of this Court as well as the Apex

Court that if an error apparent on the face of record is brought to

the notice of the Court, in such a case, the review application can

be considered.

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12. It will be interesting to note that Shri Shelat, learned

counsel relied on the judgment of this Court in the case of S. P.

Awate Vs. C. P. Fernandes and anr. reported in AIR 1959 Bombay

466 (V 46 C 136). Justice Chagla in clear and unambiguous

words observed that, "it is always wrong for any Judge to assume

infallibility for his judgment and every Judge must be prepared to

consider that his judgment is erroneous." Thus, if on the certain

erroneous material, the order is passed or a judgment is delivered

and it is noticed by the Court that the error is apparent on the face

of the record or so manifest and clear, then no Court would permit

such an error to remain on the record. Shri Shelat, learned counsel

also made an attempt to place reliance on the judgment of the

Supreme Court in the case of Bharat Sanchar Nigam Ltd. And anr.

Vs. Motorola India Pvt. Ltd. reported in AIR 2009 SC 357 in

support of his submission based on Section 4 i.e. waiver of right to

object. Reliance was placed on paragraph 18 of the said judgment

which reads thus :

18. Pursuant to section 4 of the Arbitration and Conciliation Act, 1996, a party who knows that a requirement under the arbitration agreement has not been complied with and still proceeds with the arbitration without raising an objection, as soon as possible, waives their right to object. The High Court had appointed an

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arbitrator in response to the petition filed by the appellant. At this point, the matter was closed unless further objections were to be raised. If further objections

were to be made after this order, they should have been made prior to the first arbitration hearing. But the appellant had not raised any such objections. The appellant therefore had clearly failed to meet the stated

requirement to object to arbitration without delay. As such their right to object is deemed to be waived.

(emphasis supplied)

Now even considering this judgment of the Apex Court and

paragraph 18 as the reliance was sought to be placed on paragraph

no. 18, this Court cannot ignore that even in paragraph 18, the

requirement was of having a arbitration agreement between the

parties for raising the ground of waiver of objection. Thus, it only

supports the case of the applicant that as there was no such

arbitration agreement between the parties, the application filed

before this Court itself was untenable.

13. There was also an attempt on behalf of the learned

counsel Shri Shelat for the non-applicant to submit that the

documents which were placed on record along with the application,

namely statement of account referred to note. The note reads thus :

All disputes are within the jurisdiction at Nagpur by Arbitrator under the Arbitration Act.

If there would have been such an agreement of arbitration, that

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could have been at least filed by the applicant at the time of

contesting the review application. No such attempt is made by the

non-applicant who was the original applicant before this Court.

Thus, what emerges from the material placed on record is the non-

applicant to the present application and the applicant in Misc. Civil

Application No. 677/2013 could not comply with the condition

precedent of having an arbitration agreement between the parties

for seeking an appointment of the arbitrator under Section 11 of the

Act while approaching this Court. Shri Shelat, learned counsel has

placed reliance on the judgment of the Apex Court in the case of

M/s. Shakti Bhog Foods Ltd. Vs. Kola Shipping Ltd. reported in

AIR 2009 SC 12. The Apex Court observed that the an arbitration

agreement may be in the form of an arbitration clause in a contract

or in the form of a separate agreement and furthermore an

arbitration is considered to be in writing if it is contained in a

document signed by the parties or in an exchange of letters, telex,

telegrams or other means of telecommunication which provide a

record of the agreement or an exchange of statement of claim and

defence in which the existence of an agreement is alleged by one

party and not denied by the other. Thus, even for the submission of

waiver of the objection as tried to be submitted by the learned

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counsel for the non-applicant, the party will firstly have to establish

that there is an arbitration agreement. It may be a clause in the

agreement itself or a separate agreement or some other material like

exchange of communication. Thus, even by referring to the said

judgment on which the learned counsel sought reliance to be placed

would be of no help to the non-applicant for the reason as stated

above that the non-applicant utterly failed to establish the factum of

existence of an arbitration agreement between the parties.

Considering all these aspects, in my opinion, as the applicant in

Misc. Civil Application No. 677/2013 utterly failed to show any

existence of arbitration agreement between the parties and this

Court passed an order appointing the sole arbitrator without there

being any such arbitration agreement between the parties, the order

passed by this Court was certainly an error apparent on the face of

the record. In such a situation, the order passed by this Court

cannot sustain. The learned counsel for the applicant has made out

the case seeking review of the order passed by this Court dated 5-9-

2014. In the result, the application is allowed. The order passed by

this Court dated 5-9-2014 is recalled.

14. As this Court dealt with the basic aspect of the matter,

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namely, there is no existence of the arbitration agreement between

the parties, the application filed before this Court at the instance of

the applicant Ketan S/o Mukesh Sawadia itself was untenable. The

application ought not to have been entertained by this Court, Misc.

Civil Application No. 677/2013 thus is rejected.

JUDGE

wasnik