IN THE HIGH COURT AT CALCUTTA
COMMERCIAL DIVISION
ORIGINAL SIDE
AP-COM/923/2024
Hindustan Construction Company Limited
VS.
Kolkata Metropolitan Development Authority
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
For the petitioner Mr.Ratnanko Banerji, Sr. Adv.
Mr. Ankan Rai, Adv.
Mr. Ratnesh Kr. Rai, Ad.
Ms. Devanshi Deora, Adv.
Mr. Aakash Mishra, Adv.
For the respondent Mr. Kishore Dutta, Learned Sr. Adv.,
& Advocate General
Mr. Sirsanya Bandopadhyay, Sr. Standing Counsel.
Mr. Avishek Guha, Adv.
Mr. Ankush Majumdar, Adv.
Ms. Debika Misra, Adv.
Hearing concluded on: 20.01.2025
Judgment on: 26.02.2025
Shampa Sarkar, J.:-
1. This is an application under Sections 11, 14 and 15 of the Arbitration
and Conciliation Act, 1996. The claimant in the arbitral proceeding
approached this Court for an order, inter alia, that the mandate of the
learned Arbitrator had terminated and his appointment was supra void ab
initio. The learned Arbitrator was not eligible to take up any arbitration
work, in view of a statutory bar. Prayer was also made for appointment of a
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substitute Arbitrator. Alternative prayer was for clarification of the order of
appointment dated June 24, 2022.
2. A learned former Judge of this court had been appointed as an
Arbitrator. The appointment was made on June 24, 2022, in AP/219/2022
by the then Chief Justice.
3. The petitioner had filed the application under Section 11 of the
Arbitration and Conciliation Act, 1996 (hereinafter referred to as the said
Act). The dispute arose out of a contract entered into between the parties,
which contained an arbitration clause. The former Judge was appointed as
the learned Arbitrator, to resolve the dispute between the parties. The
parties were permitted to raise all legally permissible issues before the
learned Arbitrator. It was further directed that the appointment would be
subject to submission of a declaration by the Arbitrator in terms of Section
12(1) of the said Act, in the form prescribed in the VIth schedule, before the
Registrar Original Side. The Registrar, Original Side, was directed to
communicate the order to the learned Arbitrator.
4. Thereafter, the proceedings commenced before the learned Arbitrator.
The parties completed their pleadings. Evidence was also adduced. When
the arguments were going on, it allegedly came to the knowledge of the
petitioner that, the learned Arbitrator was suffering from an inherent
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ineligibility at the time of his appointment. The petitioner contended to have
participated in the arbitration proceeding on a bona fide belief that, the
learned Arbitrator was eligible to function, under all applicable laws.
Subsequently, the petitioner came to learn in the midst of the proceedings
that, the learned Arbitrator was legally prohibited from undertaking
arbitration work, as he was already functioning as the President of the State
Consumer Disputes Redressal Commission of Andaman and Nicobar Islands
(hereinafter referred to as the State Commission) at the time of his
appointment by the Chief Justice.
5. By a letter dated October 18, 2024, the petitioner requested the
learned Arbitrator for clarification, recusal and termination of the mandate.
The letter was disposed of by the learned Arbitrator, upon inviting the
respondent to file an affidavit-in-opposition to the contents of the said letter.
Upon hearing the parties, the learned Arbitrator was pleased to pass an
order dated October 30, 2024, inter alia, holding that the mandate did not
terminate and his appointment was not supra void ab initio, as the
appointment as the President of the State Commission was part time and
the bar operated in respect of a full time President.
6. The petitioner, then, approached this Court with the following
prayers:-
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"a) Hold the mandate of the previously appointed Learned Arbitrator to
be supra void ab initio and set aside the Order Dated 30th October,
2024 as passed by the Learned Sole Arbitrator Hon'ble Justice Debi
Prosad Dey, Former Judge of Hon'ble High Court at Calcutta;
b) To appoint a fresh Sole Arbitrator for adjudicating the disputes and
differences by and between the parties arising out of the Arbitration
Clause contained in the General Condition of Contract read with the
provision of the Arbitration and Conciliation Act, 1996 (as amended);
c) Alternately clarify the Order dated 24th June, 2022 regarding the
appointment of the Learned Sole Arbitrator Justice Debi Prosad Dey,
Former Judge, Calcutta High Court;
d) Costs incidental to this application be paid by the Respondent;
e) Such further or other order or orders be passed and/or direction or
directions be given as to this Hon'ble Court may deem fit and proper."
7. Mr. Ratnanko Banerji, learned Senior Advocate for the petitioner
submitted that, the learned Arbitrator suffered from an inherent
disqualification at the time of his appointment. The appointment as the
President of the State Commission was made sometime in 2019. The rules
framed under the Consumer Protection Act, 1986 (hereinafter referred to as
1986 Act), did not prohibit the President of the State Consumer from
undertaking arbitration work. When the appointment was made on June 24,
2022, in the subject arbitration proceeding, the Andaman and Nicobar
Islands, Consumer Protection Rules, 2021 (hereinafter referred to as the
2021 Rules), had come into force. Prior to enforcement of the said rules, the
Ministry of Consumer Affairs Food and Public Distribution, by a notification
dated July 15, 2020, notified the Consumer Protection (Salary, allowances
and conditions of service of President and members of the State Commission
and District Commission) Model Rules 2020 (hereinafter referred to as the
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Model Rules). Rule 11 (3) of the Model Rules, for the first time, provided
that, neither the President nor a member shall not undertake any
arbitration work while functioning in such capacities, either in the State
Commission or in the District Commission.
8. The Model Rules were made applicable to all State Commissions, until
each of the States framed their own rules. The Andaman and Nicobar
Administration, Directorate of Civil Supplies and Consumer Affairs framed
its own rules, which was notified on August 25, 2021. The Rules were called
the Andaman and Nicobar Islands Consumer Protection Rules, 2021. As per
Rule 27(4) of the 2021 Rules, the President and members of State
Commissions were prohibited from undertaking any arbitration work while
functioning full-time, after creation of such posts by the administration.
9. The proviso to Rule 27(4) stated that, the said Rule would not apply to
employments under the Central Government or State Government or local
authority or any statutory authority or corporation, established by or under
a Central, State or Provincial Act or a Government Company, as defined in
Clause 45 of Section 2 of the Companies Act.
10. Rule 27 (5) provided that any person appointed as a President or
member of the state commission or district commission immediately before
the commencement of the Act, shall hold office as such President or
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member, till the completion of his full term. Thus, according to Mr. Banerji,
the appointment of the learned Arbitrator under the 2019 Rules was saved
by Section 45 of the Consumer Protection Act 2019, as also the rules
notified on August 25, 2021. As the appointment was saved under the new
Act and the 2019 Act did not provide for any part-time President, the
learned Arbitrator was discharging functions as a full-time President of the
State Commission, since the enforcement of the said Rules.
11. Mr. Banerji urged that, if a person was inherently disqualified to be
appointed as an arbitrator, irrespective of whether Section 12(5) and the Vth
and VIIth Schedule of the said Act applied or not, such person could not
have accepted the appointment at the very first instance. Moreover, the
learned Arbitrator did not disclose that he was appointed as the President of
the State Commission of the Andaman and Nicobar Islands. Section 14 of
the 1996 Act, clearly provided that, any person who was legally incapable of
discharging functions as an arbitrator, should be treated to be de jure
unable to discharge his duties and as such, the mandate of the arbitrator
should be terminated by this Court on the refusal of the learned Arbitrator
to recuse.
12. Mr. Banerji, relied on following decisions:-
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i) Neena Aneja and ors. vs. Jai Prakash Associates Limited
reported in (2002) 2 SCC 161;
ii) Bharat Broadband Network Limited vs. United Telecoms
Limited reported in (2019) 5 SCC 755;
iii) HRD Corporation (Marcus Oil and Chemical Division) vs.
GAIL (India) Limited (Formerly Gas Authority of India
Limited) reported in (2018) 12 SCC 471.
13. Learned Advocate General appeared on behalf of the respondent and
refuted the submissions of Mr. Banerji. According to the learned Advocate
General, the arbitration proceedings had progressed considerably. The
petitioner could not have filed the application at such a belated stage, when
arguments were near completion. Secondly, the learned Arbitrator was no
longer the President of the State Commission. The learned Arbitrator was
appointed as the part-time President of the commission under the Andaman
and Nicobar Islands Consumer Protection (Appointment, Salary, Allowance
and Conditions of Service of President and Members of the State
Commission and District Forum) Rules 2019 (hereinafter referred to as the
2019 Rules).
14. The said Rules were framed under the Consumer Protection Act 1986.
The Rules provided that the President of the State Commission could either
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be appointed on whole-time basis or additional charge to a sitting Judge of
the High Court could be conferred for discharging the duties as President. In
the instant case, the learned Arbitrator was appointed on a part-time basis
and as such, the prohibition in the present Rules, which were notified on
August 25, 2021, would not be applicable. The learned Arbitrator would
continue to function under the terms and conditions of his initial
appointment.
15. According to learned Advocate General, all actions taken under the
Rules of 2019 were saved. Learned Advocate General submitted that the
prohibition under 2021 Rules would be applicable to those Presidents who
were appointed after the promulgation of the Consumer Protection Act,
2019, and after the 2021/or the Model Rules had come into force.
16. According to the learned Advocate General, the disqualification, if at
all, was under the Consumer Protection Act, 2019 and not under the
Arbitration and Consolidation Act, 1996. The mandate of an arbitrator
would terminate only when the learned arbitrator was disqualified under the
provisions of the said Act of 1996. The disqualifications would have to fall
under the categories mentioned in Section 12(5) read with the Vth and the
VIIth Schedule. Apart from those disqualifications, no other prohibition or
bar either in the condition of service or in any other statute, would result in
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termination of the mandate of the learned Arbitrator. Only the
disqualifications prescribed under the 1996 Act, would be relevant, for this
Court to hold that the learned Arbitrator was de jure unable to perform his
duties.
17. The learned Advocate General further submitted that the Model Rules
of 2020 applied in the absence of any Rules by the State Governments or the
Union Territories. In the instant case, when the Model Rules were published,
the Rules of 2019 were still in force. The Rules of 2019 were saved under
Section 107 of the Act of 2019. The learned Arbitrator was under no
obligation to disclose his role as a part-time President of the State
Commission of the Andaman and Nicobar Islands. The prescribed form
under the VIth Schedule did not require such disclosure. The appointment of
the learned Arbitrator was only subject to disclosure as per the VIth
Schedule of the 1996 Act, and not beyond.
18. In the instant case, the petitioner had not been able to display that,
the learned Arbitrator either had any interest in the subject-matter of the
dispute or was remotely connected to any of the parties. Under such
circumstances, the learned Arbitrator should be allowed to conclude the
proceeding and publish the award.
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19. The issue before this court was whether the mandate of the learned
Arbitrator terminated in view of the bar under the 2021 Rules as also the
model rules. Both the Rules prohibited acceptance of arbitration work by the
full time President of the State Commission. Admittedly, the learned
Arbitrator was appointed as a part-time President, when the 2019 Rules
were in operation, Rule 9 of the said 2019 Rules, dealt with the composition
and mode of appointment in the State Commission. The Rule did not
specifically provide for appointment of a part-time President. Members could
be appointed on part-time basis and they were required to function on such
number of days as the President of the Commission, in consultation with
the administration, deemed fit and proper upon taking note of the workload
of the forum. The Rule is quoted bellow:-
"9. Composition and Mode of appointment in the State
Commission. -
(1) President of the State Commission may be appointed on whole time
basis or by assigning additional charge to a sitting judge of the High
Court.
Provided that appointment of a sitting High Court Judge, either on
whole time basis or on additional charge basis, shall not be made
without the concurrence of the Chief Justice of the High Court.
(2) There shall be two members of the state Commission appointed as
per Sec 16 of the Act.
Provided that a serving judicial officer shall not be appointed without
concurrence of the Chief Justice of the High Court.
Provided further that where the pendency of complaints and appeals
at the starting of the year before the State Commission does not
exceed five hundred or the average number of complaints and appeals
filed in the last three years does not exceed five hundred, the
appointment may be made on part-time basis.
(3) Members appointed on part-time basis shall function for such
number of days in a week as may be decided by the President of the
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State Commission in consultation with the A&N Administration,
taking into consideration the work load of the District Forum.
Provided that, the number of working days shall not be less than two
in a week and the Members appointed on part-time basis will observe
regular office hours on their working days.
(4) Presidents and Members while acting or purporting to act in
pursuance of any of the provisions of this Act, shall be deemed to be
public servants within the meaning of Section 21 of the Indian Penal
Code."
20. Yet, Rule 13 of the said 2019 Rules had a provision, namely, "Salary
and remuneration of part-time President and members of the State
Commission". The same is quoted below:-
"13. Salaries/Remuneration of the part-time President and
Members of the State Commission. -
(1) The President State Commission shall receive a consolidated
honorarium of Rs. 7,500/- for each day of holding office at Port Blair
viz. for sitting, for attending Circuit Bench/Awareness Camp and
other programme for generating awareness among different section of
the people in the Andaman & Nicobar Islands and other headquarters
for attending seminars, if appointed on part-time basis.
(2) The President, State Commission shall be entitle to travelling
allowances including D.A. as admissible to the High Court Judges on
duty, and the members of the State Commission shall be eligible for
such travelling allowance and daily allowance on official tour
including circuit bench and participating in consumer awareness
camp/seminar at different Islands and other headquarters as are
admissible to the officer's Pay Matrix Level-10 (7th CPC) of the
Government. The President shall also be entitled to free air travel
between Kolkata and Port Blair for her/his spouse once in a year.
(3) The President, State Commission shall be paid telephone allowance
of Rs.3000/- per month for Kolkata Office as that President can keep
the communication channel open.
(4) A part-time Member of the State Commission shall be paid a
consolidated remuneration of rupees five thousand in X class cities,
rupees four thousand in Y class cities and rupees three thousand in
other places, per day of sitting
(5) Remuneration of the part-time appointees shall be reviewed every
three years taking into consideration the consumer price index.
(6) Remuneration in the case of appointments made on additional
charge basis shall be governed by the relevant provisions in the
Financial Rules as amended.
(7) The salary, remuneration, TA/DA and other allowances shall be
defrayed out of the Consolidated Fund of India."
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21. Thus, both the Rules, construed harmoniously, leads this Court to
hold that appointment as the part-time President was permissible under the
2019 Rules. The learned Arbitrator was of the view that his appointment
under the 2019 Rules was on part-time basis and such part-time
appointment was saved by the 2021 Rules. The disqualification under Rule
27 (4) was in respect of a full time President and not a part-time President,
and the question of inherent lack of jurisdiction at the time of his
appointment as an Arbitrator in 2022, did not arise. All actions taken under
the earlier rules were also saved.
22. The decisions cited by Mr. Banerjee were on the issue of ineligibility to
perform on account of disqualifications under Section 12 (5) read with VIIth
Schedule. HRD Corporation (supra) and Bharat Broad-brand Network
Ltd. (supra) are not squarely applicable in the facts of the case. They deal
with the proposition that, any inherent disqualification goes to the very root
of the appointment. In the decision of Niha Anecha (supra), the Hon'ble
Apex Court held that, the transitional provisions of Sections 31, 45 and 56
of the Consumer Protection Act, 2019, indicated that the adjudicatory
personnel, who were functioning as members of the commission, would
continue to hold office under the new legislation.
23. Rule 27(4) of the 2021 Rules, is quoted below:-
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"27(4) The President or Members shall not undertake any arbitration
work while functioning full time after creation of such posts by the
Administration in these capacities in the State Commission or the
District Commission, as the case may be:
Provided that nothing contained in this rule shall apply to any
employment under the Central Government, a State Government or a
local authority or in any statutory authority or any corporation
established by or under any Central, State or Provincial Act or a
Government Company as defined in clause (45) of section 2 of the
Companies Act. 2013 (18 of 2013)."
24. Rule 27(5) protects the appointment of the learned Arbitrator who was
already a President of the State Commission before the commencement of
the Act. The learned Arbitrator was entitled by law to continue his office as
such President till the completion of his term. Thus, the learned Arbitrator,
in the opinion of this Court, continued to discharge his functions as the
President of the State Commission under the new rules, but the relevant
provision of Rule 27(4) would only be applicable to a President who was
functioning full time, after creation of such posts by the administration.
25. At the time of appointment as a part-time President, the learned
arbitrator was already a retired high court judge. The petitioner has not
been able to establish that after the 2021 Rules had come into force, the
learned Arbitrator was discharging his duties as a full time President, after
the administration created such full time post. The learned Arbitrator also
held as follows:-
"No full time post for the President, State Commission, Consumer
Disputes Redressal Forum was ever created in Andaman and Nicobar
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Islands during the tenure of the undersigned and the undersigned
never acted/worked as full time President of State Commission,
Consumer Disputes Redressal Forum, Andaman and Nicobar Islands.
Even, the practicing Advocates of Andaman and Nicobar Islands
courts have been appointed as Part time member of the State
Commission."
26. The proviso to Section 102 of the Consumer Protection Act, 2019,
permitted the Central Government to frame Rules in respect of all or any of
the matters regarding which the State Government could make rules under
the said Section. Thus, the Model Rules of 2020 was framed. The Model
Rules were to apply until the State Government framed their own rules.
While making such rules, insofar as practicable, the State Governments
were required to conform to the model rules. Rule 14 of the Model Rules
provided that the terms and conditions of service of the president and
members of the District Commission and State Commission should not be
varied to their disadvantage during their tenure in office.
27. Under the proviso to Section 102 of the 2019 Act, the State
Governments were required to conform as far as practicable, to the Model
Rules. The 2021 Rules with regard to conditions of service are quoted below
for convenience.
13. Composition of the State Commission: The State Commission
shall consist of-
a. The President; and
b. four Members
14. Venue of sittings of State Commission: (1) The State
Commission shall ordinarily function at the State Capital. The State
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Commission shall also perform its functions by holding Circuit Courts
in the District Head Quarters of North & Middle Andaman District and
Nicobar District in consideration of good number of institution of
cases and/or appeals arising out of the territorial jurisdiction of the
respective district.
The State Commission shall have supervisory power over the District
Commissions and may issue necessary directions for proper
functioning and management of District Commissions.
15. Hearing Hours of State Commission and District Commission:
Subject to the provisions of any rules made in this behalf, the normal
working hours of the State Commission and District Commission shall
be on all working days of the Andaman and Nicobar Administration.
16. Procedure of Appointment: The Presidents and Members of the
State Commission and District Commission shall be appointed by the
Lieutenant Governor, Andaman and Nicobar Islands on the
recommendation of the Selection Committee as per rule 6 of the
Consumer Protection (Qualification for appointment, method of
recruitment, procedure of appointment, term of office, resignation and
removal of the President and members of the State Commission and
District Commission) Rules, 2020.
17.Salaries and Allowances Payable to President and Members of
State Commission:
(1) The President of the State Commission shall receive the salary and
other allowances as are admissible to a sitting Judge of the High
Court at Calcutta.
(2) A Member of the State Commission shall receive a pay equivalent
to the pay at minimum of the scale of pay of an Additional Secretary of
the Andaman and Nicobar Administration and other allowances as are
admissible to such officers.
(3) There shall be an annual upward revision of the pay of the
President and Member at the rate of 3%.
(4) Pending creation or sanction of regular posts, the President of
State Commission shall receive a consolidated salary of Rs.
3,00,000/- per month and a Member of State
Commission shall receive a consolidated salary of Rs. 50,000/- per
month or the amount mentioned in
sub-rules (1) and (2) of this rule, whichever is lower, as a stopgap
arrangement.
(5) The pay of a person appointed as President or Member, who is in
receipt of any Government Pension, shall be reduced by the gross
amount of pension drawn by him.
24. Term of Office of President or Member: The President and every
Member of the State Commission and the District Commission shall
hold office for a term of four years or upto the age of sixty-five years,
whichever is earlier and shall be eligible for reappointment for another
term of four years subject to the age limit of sixty five years, and such
reappointment is made on the basis of the recommendation of the
Selection Committee.
...
28. The salary, remuneration and other allowances of the Presidents
and Members of the State Commission, District Commission, officers
and staff and other administrative and office expenses, shall be
defrayed out of the consolidated fund of India."
28. The petitioner has not been able to demonstrate that the terms and
conditions of Rules, 15 and 17 of the 2021 Rules had been made applicable
to the learned Arbitrator, while he was discharging his duties as the
President of the State Commission.
29. Thus, for this Court to hold that the appointment of the President of
the State Commission on part-time basis would automatically be converted
to a full time appointment, in the absence of any order in writing by the
competent authority of the Andaman Administration, will be amount to the
referral court under Section 11 of the 1996 Act, writing the terms and
conditions of service of the President of the State Commission. The learned
Arbitrator was the best person who was in knowledge of the terms and
conditions of his appointment. It is his categorical statement that the post of
full time President was not created by the Administration, during his tenure.
This court does not have any reason to hold otherwise.
30. Rule 27(4) of the 2021 Rules, prohibited the President from accepting
any arbitration work, but what has not been demonstrated by the petitioner
is that, the administration had made the appointment of the learned
Arbitrator, a full time one, upon creation of such posts in accordance with
the 2021 Rules.
31. Thus, mandate of the learned Arbitrator does not terminate. The
learned Arbitrator shall proceed accordingly. Interim order stands vacated.
Parties may also take steps for extension of mandate, in view of the delay
caused on account of pendency of this matter.
32. There will be no order as to cost.
33. The application is dismissed.
34. Parties are directed to act on the server copy of this judgment.
(Shampa Sarkar, J.)
