Calcutta High Court
Multiplex Equipments And Services ... vs Bagzone Lifestyles Private Limited on 9 January, 2024
Author: Moushumi Bhattacharya
Bench: Moushumi Bhattacharya
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
(Commercial Division)
Present :
Hon'ble Justice Moushumi Bhattacharya
AP-COM 11 of 2023
Multiplex Equipments and Services Private Limited
vs
Bagzone Lifestyles Private Limited
And
AP-COM 12 of 2023
Vidyut Electricals and Electronics Private Limited
vs
Bagzone Lifestyles Private Limited
And
AP-COM 13 of 2023
Forum Mall Management Services Private Limited
vs
Bagzone Lifestyles Private Limited
And
AP 747 of 2023
Funtail Enterprise
vs
Bagzone Lifestyles Private Limited
For the petitioner : Mr. Jishnu Chowdhury, Adv.
Mr. Aritra Basu, Adv.
Mr. S.K. Singhi, Adv.
Ms. Riti Basu, Adv.
2
Ms. Piyali Pan, Adv
Mr. Sayan Banerjee, Adv.
For the respondent : Mr. Prathamesh Kamat, Adv.
Mr. Ratul Das, Adv.
Mr. Ayethesham Thaver, Adv.
Mr. Dwip Raj Basu, Adv.
Last heard on : 22.12.2023
Delivered on : 09.01.2024
Moushumi Bhattacharya, J.
1. The petitioners in all the 4 matters have filed applications for
extending the mandate of the learned Sole Arbitrator for concluding the
reference and alternatively, for appointment of a substitute arbitrator for
conclusion of the arbitral reference arising out of an arbitral agreement
dated 1st August, 2018. Since all the 4 applications involve identical points
of law, namely, termination of the arbitrator's mandate and substitution of a
new arbitrator, the Court proposes to dispose of the applications in the
following manner.
2. The facts presented to the Court are that the petitioner invoked the
arbitration clause in terms of an arbitration agreement contained in a
Agreement to License dated 1st August, 2018. The respondent accepted the
petitioner's nomination of arbitrator but disputed the significance of the
letter dated 9th May, 2020 by which the arbitral reference was commenced.
The respondent questioned the jurisdiction of the learned arbitrator in an
application filed under section 16 of The Arbitration and Conciliation Act,
1996. The petitioner on the other hand claimed license fees which remained
due and payable by the respondent. The petitioner is the claimant in the
arbitration.
3. The admitted facts are also that the Statement of Claim was filed on
15th September, 2020; the Statement of Defence on 5th December, 2020 and
the Rejoinder was filed on 23rd November, 2021. The parties continued with
their arguments till 29th August, 2023 and filed their respective notes of
arguments on that date.
4. According to learned counsel appearing for the petitioner/claimant,
the period of 12 months expired on 22nd November, 2022 after which the
parties agreed to extend the time. The learned arbitrator however omitted to
record the same. Learned counsel appearing for the respondent says that
the 12 months came to an end on 4th December, 2021 and the respondent
did not expressly agree to extend the time thereafter.
5. Whatever be the correct position in terms of dates, the fact remains
that further extension of the arbitrator's mandate would be required under
section 29A(4) of the 1996 Act for the arbitral reference to continue.
Admittedly, both parties overlooked the stipulated time frames under section
29A and proceeded in the arbitration till 24th July, 2023, which was the last
date of hearing. The parties filed their notes of arguments on 29th August,
2023.
6. Counsel appearing for the petitioner submits that the arbitration is
pending as on date and has not been terminated under section 32 of the Act
and that the petitioner has a statutory right to seek appointment of a
substitute arbitrator within 3 years under Article 137 of the Schedule to the
Limitation Act, 1963. According to counsel, the petitioner does not have any
other statutory option for seeking such relief after exhausting the time lines
under section 29A of the 1996 Act.
7. Learned counsel appearing for the respondent takes a point of
jurisdiction in that application under section 29A would have to be filed
before a "Court" as defined in section 2(1)(e) of the Act. Counsel submits
that the Calcutta High Court does not have territorial jurisdiction to
entertain the present application. Counsel further submits that section 15 of
the Act would not be applicable after expiry of the mandate of the arbitrator
and hence the application under section 29A is not maintainable. Counsel
urges that section 15 in any event cannot be applied after enactment of
section 29A of the Act. According to counsel, the petitioner's remedy lies in
section 29A itself for substitution of the arbitrator. Counsel submits that
section 15 of the Act will also not be applicable since the arbitrator has not
withdrawn from office.
The statutory blockades before the petitioner/claimant under the 1996 Act
8. The petitioner seeks substitution of the existing arbitrator on the
ground that after termination of mandate, the petitioner does not have any
approach-routes to the Court save and except through section 15 of The
Arbitration and Conciliation Act, 1996. The petitioner's case is hence built
on the alternative; under section 29A for extension of the mandate and
alternatively for substitution of the learned arbitrator under section 15 of
the Act. The respondent, on the other hand, takes several objections to the
maintainability of the application on the ground that the petitioner can only
come under section 29A for extension of the mandate and not under section
15 since no grounds have been made out under the latter.
9. The factual position, good, bad or indifferent (in terms of statutory
sensibilities) is that the mandate of the learned arbitrator ended on
22.11.2022 /4.12.2021 under section 29A(1) of the Act. For the sake of
clarification, section 29A(1) limits the time for making of the arbitral award
within 12 months from the date of completion of pleadings as defined under
section 23(4) of the Act. The prescribed time limit is for non-international
commercial arbitrations. Section 29A(3) allows for an extension of 6 months
(after 12 months) for making of the award subject to consent of the parties.
Section 29A(4) permits the Court to extend the period for making of the
award provided the mandate of the arbitrator subsists at the time of making
of the application.
10. The construction given to section 29A(4) by the Court in Rohan
Builders (India) (P) Ltd. vs. Berger Paints India Ltd.; 2023 SCC OnLine Cal
2645 is now pending before the Supreme Court in a Special Leave Petition
filed by the petitioner therein. The Court is informed that the Supreme
Court has stayed the operative order on 6.11.2023 but not the judgment.
Whatever be the final fate of Rohan Builders or more precisely the
construction of section 29A(4), the fact remains that the arbitrator's
mandate terminated on and from 4.11.2021 or 22.11.2022 depending on the
commencement of 1 year from the rejoinder or the statement of defence. It is
also undisputed that both the parties proceeded in the arbitration,
notwithstanding the termination, until 24.7.2023 and filed their respective
notes of arguments on 29.8.2023.
11. The question which now arises is whether the Court can proceed to
appoint a substitute arbitrator in view of the erstwhile arbitrator's mandate
having come to an end.
12. The answer to that question would emerge, significantly from the
statutory blockades which the petitioner is presently confronted with.
13. First, section 29A(4) of the 1996 Act confers the Court with the power
to extend the mandate of the arbitrator if the award is not made within 12 +
6 months as provided under section 29A(1) and (3) respectively, provided the
mandate subsists at the time of making such application. As stated above,
this was the construction given by the Court in Rohan Builders which is
presently under consideration before the Supreme Court. Therefore, pending
a final decision on the correctness of the view, the petitioner is precluded
from seeking extension of the arbitrator's mandate post-termination under
section 29A(4).
14. Second, the route under section 29A(6) is also closed for the same
reason. Section 29A(6) empowers the Court to substitute 1 or all of the
arbitrators while extending the period for making of the award under section
29A(4). However, since 29A(4) contemplates extension of the period for
making of the award only where the mandate of the arbitrator is subsisting
as on the date of the application, the Court cannot invoke the power under
section 29A(6) where the mandate has admittedly terminated.
15. Third, section 14 provides for substitution of an arbitrator if the
mandate of the erstwhile arbitrator has terminated on the grounds provided
under section 14(1)(a) and (b), namely when the arbitrator becomes de jure
and de facto unable to perform his/her functions or withdraws from office or
where the termination is by consent of the parties. Section 14(2) gives the
option to a party, unless the parties decide otherwise, to apply to the "Court"
to decide on the termination of the mandate. This avenue is open to a party
where there is controversy on the de jure or de facto inability of the
arbitrator to perform his/her functions or on the ground of inordinate delay.
16. The difficulty in this case is presented by the forum - "Court" referred
to in section 14(2) in the context of "Court" as defined in section 2(1)(e) of
the Act. Section 2(1)(e) defines "Court" to mean the principal Civil Court of
Original Jurisdiction in a District and includes the High Court in exercise of
its Ordinary Original Civil Jurisdiction having jurisdiction to decide the
questions forming the subject matter of the arbitration if the same had been
the subject matter of a suit.
17. In the present case, the parties agree that the High Court is not the
2(1)(e) Court. The petitioner does not dispute that the learned District Judge
at Alipore is the "Court" under section 14(2) of the Act but seeks the urgent
intervention of the Court to resume the arbitration.
Does the petitioner have any recourse available under the 1996 Act?
18. Although section 14(2) requires the "Court" to be the jurisdictional
Court under section 2(1)(e), section 15 is telling-ly indifferent to such forum-
designation. Moreover, section 15 covers any situation where the mandate of
an arbitrator shall terminate since it draws both from sections 13 or 14
besides a situation where the arbitrator withdraws from office or does so
with the agreement of parties. Therefore, the scenarios of termination would
also include the arbitrator becoming de jure or de facto unable to perform
his/her functions or where there has been inordinate delay in the
performance of the functions.
19. In this case, the arbitrator's mandate terminated on 4th December,
2021/22nd November 2022. The Act does not conceive of a situation where
the arbitrator can continue to perform his/her functions after termination of
mandate. Hence, the condition under section 14(1)(a) of de jure or de facto
inability applies with full force to the present facts.
20. Section 15(2) provides for a seamless transition from termination to
substitution and harks back to the rules which were applicable to the
appointment of the arbitrator who is being replaced. The smooth transition
after the termination of the mandate (of the earlier arbitrator) to the
substitution of a new arbitrator is reinforced by section 15(3) which provides
for repetition of hearings but only at the discretion of the Tribunal. Section
15(2), by implication, takes the parties to section 11 for appointment of
arbitrator and more specifically to section 11(5) and (6) where the High
Court has been conferred with the exclusive power to make the
appointment.
21. The petitioner has admittedly issued a notice on 9th October, 2023 to
the respondent under section 15 of the Act nominating its substitute
arbitrator. The respondent however refused to agree with the nomination by
its reply issued on the same date. This exchange of letters is akin to the
procedure envisaged under section 11(5) of the Act since the respondent
expressed its disagreement with the petitioner's choice within 30 days (in
fact on the same date) under the said provision.
22. The parties would hence revert to a section 11 situation where the
power of appointment is only with the Chief Justice of a High Court or
his/her Designate. It follows that the power to substitute an arbitrator
under section 15 flows from the power to appoint under section 11. Ref:
Amit Kumar Gupta vs. Dipak Prasad; (2021) 1 CAL LT 278 where the word
"Court" in section 29A was held to take the characteristic of the appointing
authority prescribed in section 11 of the Act.
The question is, is the petitioner statutorily-barred from doing so?
23. The Court finds substance in the petitioner's contention that the
precedential value of the judgment in Rohan Builders would continue to be
binding till it is set aside by the Supreme Court; Refer: Pijush Kanti
Chowdhury vs. State of West Bengal; (2007) 3 CHN 178. A Division Bench of
this Court held in that decision that the authority of a decision as a
precedent is not undermined by interim orders inter parties unless the
decision is set aside by the superior Court.
24. Undoubtedly, the petitioner has an indefeasible right to have an
arbitrator appointed. This view is buttressed by the fact that the arbitration
has remained in suspension from 29th August, 2023. The arbitrator's
mandate has terminated and the parties have lost their chance to have the
mandate extended under section 29A of the Act. The defeatist approach to
the vagaries of the law does not comport with the object with which The
Arbitration and Conciliation Act, 1996 was brought into effect. The object is
to ensure that arbitrations are not kept in limbo for an indefinite period of
time. The Court must, in these circumstances, take a proactive approach to
hold that the arbitration must resume without any further delay. This
proactive stance would of course be within the parameters of the statute and
not beyond it.
25. The Court is accordingly of the view that the petitioner's recourse lies
through section 15 for substitution of the learned arbitrator on grounds
which are covered by section 14 including that of de jure or de facto inability
to perform the functions. The inability arises out of the fact that the learned
arbitrator could not have proceeded with the arbitration once the mandate
terminated.
26. The petitioner may have an alternative recourse available to it under
section 29A if the judgment in Rohan Builders is set aside by the Supreme
Court. Till then, the petitioner, as the claimant in the arbitration, cannot be
left without a remedy. The parties have already filed their notes of
arguments as long back as in 29th August, 2023 and the arbitration cannot
be kept in suspension. The respondent's conduct of clutching at
technicalities in order to prevent resumption of the arbitration is reflective of
the respondent's attempt to frustrate the arbitration which commenced from
9th May, 2020 and almost reached completion on 29th August, 2023 - at
least of the hearing process. The respondent's resistance to the arbitration is
in effect a resistance to the petitioner's claim for unpaid license fees
including for Amenities Service Charges and Common Area Maintenance
Charges. The respondent intends to make the petitioner wait for the
Supreme Court's verdict on Rohan Builders. The Court cannot sanction such
conduct.
27. Swadesh Kumar Agarwal vs. Dinesh Kumar Agrwal; (2022) 10 SCC
235 is not relevant since the petitioner has conceded that the Calcutta High
Court is not the Court as defined under section 2(1)(e) of the Act. Raj
Chawla and Co. Stock and Share Brokers vs. Nine Media and Information
Services Limited; 2023 SCC OnLine Del 520 is on the applicability of section
29A to pending arbitration. This Court is however of the view that section
29A(6), that is the power of the Court to substitute the arbitrator/s while
extending the period under section 29A(4), presumes existence of the
arbitrator's mandate at the time of invoking such power.
28. AP 747 of 2023, AP(COM) 11 of 2023, AP(COM) 12 of 2023 and
AP(COM) 13 of 2023 are accordingly allowed for the above reasons.
29. Ms. Hasnuhana Chakraborty, counsel, is appointed as the substitute
Arbitrator for continuing and concluding the arbitration arising out of the
arbitration agreement dated 1st August, 2018. The learned arbitrator will be
at liberty of taking a decision on whether to repeat the hearings previously
held by the erstwhile learned Arbitrator. Ms. Chakraborty shall
communicate her consent in the prescribed format to the Registrar, Original
Side of this Court within 3 weeks from this judgment. The petitioner shall
communicate this order to the learned arbitrator within 3 days from the
date of this judgment with the requisite details of the petitioner.
30. All the 4 arbitration petitions are disposed of in terms of the above.
Urgent photostat certified copies of this judgment, if applied for, be
supplied to the parties upon fulfillment of requisite formalities.
(Moushumi Bhattacharya, J.)
