National India Constructor vs National Buildings Construction ...
2000 Latest Caselaw 1108 Del

JUDGMENT

Vikramajit Sen, J.

1. By this Judgment I propose to dispose of OMP 222/1997, which is an application tiled by National India Construction, (Claimant) under Sections 10 and 12 of the Arbitration Act, 1940 for removal of Respondent No. 2 as the Arbitrator, and OMP 83/1998 which has bee filed by National Building Construction Corporation Ltd. (NBCC) under Section 28(1) of the Arbitration Act, 1940 for extension of time for making the Award.

2. The facts are common in both the Petitions.

3. By order dated 21.5.1996, Lokeshwar Prasad, J. had appointed Shri Prem Prakash as the Sole Arbitrator. On 13.6.1996 the Sole Arbitrator addressed a letter to the Manager (Law), NBCC Ltd. in which he stated inter alia that "I may please be advised in the matter further, if so, the orders if received may please be sent to me." This letter has been mentioned by me because it is the contention of Learned Counsel for the Claimant that this indicates that the Sole Arbitrator was biased in favour of NBCC. It appears that immediately thereafter the Claimant in terms of letter dated 21.6.1996, had recorded its discomfort on this issue and had stated that the Sole Arbitrator ought to have sought clarification from the Hon'ble Delhi High Court instead of Manager (Law), NBCC Ltd. In this very communication, the Claimant had also drawn attention to the fact that the NBCC had not filed complete documents despite the passage of four years. The Claimant further prayed that all further hearings may be held in Delhi but not in the office of NBCC Ltd. By his letter dated 20th August, 1996, the Sole Arbitrator informed the parties that the preliminary meeting would be held at the Corporate office on 13.9.1996. This meeting was subsequently cancelled by the Sole Arbitrator and instead the proposed proceedings were adjourned to 25th September, 1996. However, the hearing was now scheduled to be held in Phillaur (Punjab). It is not in dispute that at that time the Sole Arbitrator had been posted to this town. The Claimant thereupon sought an adjournment on the ground of the indisposition of its representative Shri S.K. Chopra and also requested that the hearings be held in Delhi only. The Claimant also solicited the passing of orders on its various prayers. In his letter dated 25.9.1996, the Sole Arbitrator nonetheless further hearing on 5th November, 1996 at Phillaur and also recorded that he would enter upon the Reference when both the parties were ready for their oral submissions. By its letter dated 7.10.1996, the Claimant again requested that proceedings be held in Delhi and that hearings be fixed after 25th October, 1996. In this letter the Claimant also voiced objections against the minutes of all the proceedings of the Sole Arbitrator. Umbrage was also recorded on the question that whereas the Sole Arbitrator had not addressed any of the prayers made by the Claimant he had heard the Respondent on the question of renewal of Bank Guarantee although the same has not been referred to him. The. Objection was also recorded to the effect that although the file of the erstwhile Arbitrator was handed over tools the Sole Arbitrator on 30.7.1996, the question of certification was raised only on 25.9.1996, i.e., almost four months for the date of the appointment. In this letter, the Claimant also demanded that the Respondent be ordered to file the documents as per orders of he erstwhile Arbitrator. In his response dated 28.10.1996 the Sole Arbitrator stated inter alia that the "the venue would be fixed, keeping in view the convenience of all during the hearing scheduled for 5.11.1996". The Claimant thereafter addressed a letter dated 7.11.1996 to the Sole Arbitrator submitting:

a) that they could not attend the hearing dated 5th November, 1996 because no reply to its letter had been sent by the Arbitrator.

b) The Sole Arbitrator had become officio functus since he had entered upon Reference on 6.7.1996 and four months had expired.

c) That the Arbitrator was acting in a partisan manner and in he four months had not ordered for the production of documents. A copy of this letter was also marked to NBCC Ltd. with the request that the latter should join the Claimant in requesting the Sole Arbitrator to resign. Meanwhile, in terms of the letter dated 12.11.1996, the Sole Arbitrator had recorded that the preliminary meeting proposed for 5.11.1996 had not been attended by the parties "on the ground of medical mainly". He had feed the next preliminary hearing for 29th November, 1996 to be held in the Corporate Office of NBCC, New Delhi. By his subsequent letter dated 19.11.1996, he has reiterated that he has not entered Reference and that he had not become officio functus and that allegations of his partisanship were of the Claimant's own imagination.

4. Learned Counsel for the NBCC drew attention to the fact that on a perusal of the minutes of the preliminary meeting on a perusal of which it will be clear that the Claimant had requested the next date after three months whereas the NBCC has requested for earlier hearing. He had also submitted that these hearings were held after six dates of the passing of the Appointment Order dated 21.5.1996, out of which adjournments were necessitated on four occasions because of the Claimant's stand. It is his submission that the Sole Arbitrator could not publish his Award because of the non-cooperation of the Claimant.

5. Learned Counsel for the NBCC had relied on City and Industrial Development Corporation of Maharashtra Ltd. v. Motiram Budharmal and Ors., in which it was held that he Respondent had been remiss and had delayed the proceedings ; the delay on the part of the Arbitrator from May 1992 to December, 1992 was not such as to warrant his removal nor was there any lack of despatch on his part. He also relied on Bhupinder Singh Bindra v. Union of India and Anr., in which it was opined as follows:

"It is settled law that court cannot interpose and interdict the appointment of an arbitrator, whom the parties have chosen under the terms of the contract unless legal misconduct of the arbitrator, fraud, disqualification etc. is pleaded and proved. It is not in the power of the party at his own will of pleasure to revoke the authority of the arbitrator appointed with his consent. There must be just and sufficient cause for revocation. There is no general power for the court to appoint an arbitrator unless the case falls within the relevant provisions of the Act nor will be court make an appointment where the arbitration agreement provides a method by which appointment is to be made. Clause 25-A expressly provides appointment of the named officer by designation who was appointed in terms thereof and had entered upon the duties immediately. Revocation of arbitrator's authority is exactly equivalent to removal which would be done on specified grounds like misconduct or omission to enter upon duties within time etc. Both parties by consent may revoke the authority of the arbitrator but that is not the case herein. The contract clearly indicates that the Superintending Engineer, Planning Circle, Chandigarh or anyone acting as such at the time of reference within 180 days, i.e. six months from the date of making final payment of the contractor is the designated officer chosen voluntarily by the parties. It was impugned in the OP filed in the Court of the Senior Judge that the officer had delayed for considerable period in making the award and that, therefore, it necessitated the appellant to invoke the jurisdiction of the Civil Court under then Act.

Then it was held that the arbitrator was willing to proceed with and that the appellant was not cooperating in conducting the proceedings. Therefore, having consented for adjournments and dragged on the case for a considerable time, it is no longer open to contend that the arbitrator neglected to make the award. Under those circumstances, it cannot be said that there are any laches on the part of the arbitrator in giving the award. When the parties, under the Clauses of the contract, have specifically chosen a named authority and not any other arbitrator, without the consent of the parties, court has no jurisdiction to interpose into the contract and appoint an arbitrator under Section 8 or any other provision under the Act. The High Court, therefore, was clearly right in setting aside the order of the Senior Judge appointing an independent arbitrator to adjudicate the dispute."

6. Learned Counsel for NBCC also relied on the decision of the Apex Court in Jiwan Kumar Lohia and Anr. v. Durgadutt Lohia and Ors., 1992 (1) ALR 1. The Court held that the test of likelihood of bias is whether a reasonable person, in possession of relevant information would have thought that bias was likely and whether the person concerned was likely to be disposed to decide the matter only in a particular way. It was held that the High Court is erred in removing the Arbitrator and appointing another person is his place.

7. Learned Counsel has further relied on the decision of D.K. Jain, J in Setech Electronics Ltd. v. K.N. Memani and Anr., 1999 (1) Arb. L.R. 446. My learned Brother had, after considering the decision in Amar Chand Lalit Kumar v. Shri Ambika Jute Mills Limited, ; International Airport Authority of India v. K.D. Bali and Anr., AIR 1988 SC 1090, Bhuwalka Brothers Ltd. v. Fateh Chand Murlidhar, ; Kalinga Otto (P) Ltd. v. Charanjit Kochhar, , in which the instances are quite similar to the present facts, observed that "unless substantial miscarriage of justice will take place in he event of leave to revoke being refused, leave should not be granted." The conspectus of the precedents indicate that the jural effort should be to uphold the proceedings of the Arbitrator. It is thus a very heavy burden which falls on the party seeking the removal of the Arbitrator to disclose beyond reasonable doubt that the arbitrator is prejudiced or partisan.

8. Learned Counsel for the Claimant on the other hand has relied on the decision in Kashavsingh Dwarkadas v. Indian Engineering Co., and on the following passage:

"It is, however, important, in this connection, to bear in mind that the word used in Section 8(1)(b) of the Arbitration Act, 1940, is, not 'negligence', but 'neglect' and the word 'neglect' must take its colour from the context in which is used. If the expression used were 'fails or neglects', the word 'neglects' in that context might convey the idea of negligence as the antithesis would then be between mere failure and negligence. Where, however as in the present case, the expression used is 'neglects or refuses' the antithesis between the two terms would show that the word 'neglects' is meant to cover all cases other than those of positive refusal, and is not confined to cases of negligence alone. If the arbitrators in such a case fail to make the award within the time fixed, it can, as a matter of plain language, be said that they have neglected to do what they had undertaken viz. to make the award within the time fixed, and the provisions of Section 8(1)(b) of the Arbitration Act, would, in that event, apply."

9. With respect 1 am unable to agree with the inflexible view taken by the Learned Judge. If this rigid interpretation is to be given to Section 8, it would render the provisions of extension of time incorporated in Section 28 of the Arbitration Act wholly superfluous and illusory. The manner in which the Arbitrator has conduct his proceedings must be looked into in each case, before arriving at a conclusion that he has either neglected or refused to undertake his duties as an Arbitrator.

10. In Mangal Prasad v. Lachhman Prasad, , the Full Bench had expressed its disagreement with the findings of the Arbitrator that he was unable to make the Award on account of non-cooperation with him. It observed that there was no difficulty or impediment in making an ex parts Award. In the present case, the Sole Arbitrator had not recorded any such observation and had entered upon the Reference despite frequent adjournments having been asked for. The period of four months had not expired from the date on which he had entered upon the Reference. This decision, therefore, is of no assistance to the submission of the. Claimant. The following observations of the Full Bench in fact, runs counter to the arguments put forward by Learned Counsel for the Claimants:-

If he has already entered upon the reference there would be no necessity of the Court's ordering the difference to be referred to him; nothing more would be achieved by the simple fact that the Court has ordered the difference to be referred to him. What he can do after such an order can be done by him even without such an order. If he has already entered upon the reference but neglects or refuses to proceed further or fails to use all reasonable dispatch in proceeding with the reference he can be removed under Section 8(1) or under Section 11(1).

I do not think the words "instead of proceedings under Chapter II" necessarily indicate that the Arbitrator has not entered upon the Reference.

The decision in W.S. Construction Co. v. Hindustan Steel Works Construction Ltd., , is also of no assistance whatsoever to the case made out by the Claimant. In that case, the Arbitrator had not sent any communication/notice of hearing to the parties despite a lapse of eleven months. The Court held that he was liable to be removed, especially since no explanation was forthcoming as to this lapse.

11. Similarly, no support can be drawn from the decision in Girdhari Lal Bansal v. The Chainnan, Bhakra Beas Management Board, Chandigarh and Ors., . The Arbitrator did not enter into the Reference and Kept quiet till an application seeking his removal was moved in the Court. It was held that "if the Arbitrator is satisfied that he is the Arbitrator under the agreement, he will be duty bound to call upon the opposite party to file their counter-claim and then to proceed to arbitrate the matter in accordance with law. If he fails to proceed with the arbitration and allows four months' time to pass, it may be a fit case for his removal and for appointment of another Arbitrator". There is no commnality in the facts in that case and those obtaining in the present. Hence the Arbitrator has undoubtedly proceed in the matter.

12. Learned Counsel also relied on M.S. Khanna Associates (P) Ltd. v. New Delhi Municipal Committee and Anr., in support of his contention that it is the Court which has to appoint an Arbitrator under Section 8(1)(b) of the Act. This question would only arise once the Court is convinced that circumstances exist justifying and warranting the removal of the Arbitrator.

13. Keeping all the facts in perspective, I am unable to agree with the contention of Learned Counsel for the Claimant that the Sole Arbitrator has manifested any prejudice/bias against the Claimant. In the last hearing fixed for 29.11.1996, the venue was shifted to the Corporate Office of NBCC at New Delhi. This substantially met the objection of the Claimant since they had objected to the arbitration proceedings being held at Phillaur. At no stage had the Sole Arbitrator declined Delhi as the venue of the Arbitrator. It can hardly be expected that an Arbitrator should immediately respond to a submission made by a particular party. He must be left with the discretion to decide all questions at the time when he considers appropriate. Merely because the parties were asked to appear at Phillaur on some occasions does not indicate that he had overruled the Claimant's request that the venue be fixed at New Delhi. If any delay has occurred on this issue, no prejudice whatsoever has been caused to the Claimant. Repeated insistence on a particular point being taken up before any other in some circumstances may amount to browbeating the Arbitrator and the Court would not lend its authority for legitimasing any such attempt, action. As regards the question of whether the Sole Arbitrator had become officio functus, there is abundant authority to the effect that the Arbitrator would be held to have entered upon the Reference only once when effective hearing had commenced. No authority appears to have been cited by the Claimant before the Arbitrator, and certainly none was relied upon before me. Attention is directed to the following decisions Ramnath v. Goenka, (Full Bench) and the Division Benches in Ram Sahai v. Harish Chandra, , M. George v. R. Mathew, ; Jolly Steal v. U.O.I. ; and Gujarat Water Supply v. Unique Erectors, .

14. This is also the stand favoured and invited by the Sole Arbitrator. The insistence of the Claimant that it had become officio functus must be viewed as an attempt to defeat or at least delay the proceedings. The interest of the Claimant were adequately secured once it had recorded its position that the period of four months had elapsed and hence the Sole Arbitrator had no further authority. It was open to the Claimant to assail the Award as and when published, on this ground amongst others also.

15. Much significance has attached to the fact that the NBCC had not filed documents although over four years had elapsed since the previous Arbitrator had directed it to do so. As in the case of the another objections, I cannot appreciate that the Claimant was justified in insisting that the Sole Arbitrator should address this question immediately or even prior to entering upon the reference.' Parties had not appeared before him and he had not declined this request. The position might have been altogether different had the hearings proceeded before the Sole Arbitrator for a sufficiently long time without him insisting on the production of these documents. No prejudice had been caused to the Claimant.

16. In may view, it cannot be said that the Arbitrator has not conducted the proceedings with sufficient despatch. Even accepting that the responsibility for the delay of proceedings before the previous Arbitrator was attributable to frequent adjournments sought by NBCC, the Arbitrator must be permitted a free, hand and sufficient latitude in conducting the proceedings in the manner he choses, especially when no irretrievable injury is caused to the parties. The contention of Learned Counsel for the NBCC that it was the Claimant who had delayed the proceedings before the Sole Arbitrator (Respondent No. 2) appears to be well founded. Of greatest significance is the fact that the Claimant had sought an adjournment of there months; it discloses an intent to frustrate the arbitral proceedings. Despite apparent dilatory tactics, the Sole Arbitrator had made substantial efforts to get on and advance the arbitral proceedings. On the question of bias, as has already been indicated above, facts must be clearly and unequivocally indicative of such an attitude, and in the present case I find them wholly absent. An Arbitrator ought, not to be removed on whimsical grounds merely because one of the parties harbours views of bias.

17. I am also satisfied that the circumstances of the case justify that the time for publishing the Award be enlarged. Accordingly, the Sole Arbitrator is granted four months' further time within which to complete the arbitral Proceedings and publish his Award. He will issue notice to the parties of the hearing which should be fixed within three weeks hereof and the period of four months shall commence from that date. It shall be the condition that the Sole Arbitrator shall hold the hearings in New Delhi.

18. In this analysis, OMP 222/1997 is dismissed with costs of Rs. 5000/- OMP 83/1998 is allowed in the above terms.

19. This judgment shall also be placed in OMP 83/1998.