Sushil Kumar & Co. vs Dda And Ors.
2001 Latest Caselaw 1146 Del

JUDGMENT

V.S. Aggarwal, J.

1. This is a petition filed by Sushil Kumar & Co. under Section 11, 12 and 20 of the Arbitration Act, 1940 seeking appointment of an independent arbitrator and for removing the arbitrator appointed by the Delhi Development Authority.

2. The relevant facts alleged are that the Delhi Development Authority had awarded a contract to the petitioner for construction of 240 LIG houses in Rohini. There was an arbitration clause in the contract that disputes shall be referred to the arbitrator. It is asserted that certain disputes arose between the parties and the petitioner had invoked the arbitration clause. Upon it the Engineer Member of the DDA appointed an arbitrator, namely the Superintending Engineer (A L Garg). He was transferred and Shri M Kukuswami took over as arbitrator. Thereafter he was followed by Suresh Mehta on the transfer of the earlier officer. There was some controversy regarding extension of time. The petitioner filed an application under Section 28 of the Arbitration Act and time was extended. Suresh Mehta was also transferred and Shri R B Malhotra took over as the arbitrator. Shri R B Malhotra too was transferred and Mr. N K Sharma was appointed as the arbitrator.

3. The grievance of the petitioner is that Shri N K Sharma adjourned the proceedings sine die stating that the time for making the award has expired. He ignored the fact that by mutual consent the time could be extended. He misconducted himself. Furthermore it is alleged that more than six years have expired. Because of frequent transfers of the officers the award is not being passed.

4. In the reply filed the petition has been contested. It was alleged that the petitioner himself has not been cooperating as a result of which the delay has occurred. It was asserted further that on 2nd September, 1998 since extension of time by both the parties had not reached the arbitrator and the time given by the High Court expired, therefore, the proceedings had been adjourned sine die. The petitioner could have waited in this regard and had rushed to the court. The application as per the DDA was without merit.

5. The short question that comes up for consideration is as to if in the peculiar facts the arbitrator is liable to be removed and whether any other person has to be appointed as the arbitrator or not. Section 8, 10, 11, 12 and 20 gives power to the courts to appoint arbitrators. For purposes of present order suffice it to refer to Section 11 of the Act which reads as under:

Power to Court to remove arbitrators or umpire in certain circumstances: (1) The Court may, on the application of any party to a reference, remove an arbitrator or umpire who fails to use all reasonable dispatch in entering on and proceeding with the reference and making an award.

(2) The Court may remove an arbitrator or umpire who has misconducted himself or the proceedings.

(3) Where an arbitrator or the umpire is removed under this section, he shall not be entitled to receive any remuneration in respect of his services.

(4) For the purposes of this section the expression "proceeding with the reference" includes, in a case where reference to the umpire becomes necessary, giving notice of that fact to the parties and to the umpire.

Perusal of the same clearly show that it empowers the court to remove the arbitrators or umpires if they misconduct themselves in the proceedings or misconduct the proceedings. He can also be removed if the arbitrator fails to use reasonable dispatch in entering the proceedings with the reference. It is Sub-section (1) to Section 11 which is in fact being pressed into service alleging that not only proceedings were stayed sine die without any authority but also there has been inordinate delay because of frequent transfers of the engineers who were appointed as the arbitrator.

6. At this stage it would be necessary to refer to clause 25 of the agreement which is being reproduced below for the sake of facility.

"Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications designs, drawings and instructions hereinbefore mentioned and as to the quality of workmanship or materials used on the work or as to any other question claim, right matter or thing whatsoever in any way arising out of or relating to the control designs, drawings specifications, estimates instructions orders or these conditions or otherwise concerning the works or the execution or failure to execute the same whether arising during the progress of the work or after the completion of abandonment thereof shall be referred to the sole arbitration of the person appointed by the Engineer Member, Delhi Development Authority at the time of dispute. It will be no objection to any such appointment that the arbitrator so appointed is a Delhi Development Authority employee that he had to deal with the matters to which the contract relates and that in the course of his duties as Delhi Development Authority employees he had expressed views on all or any of the matters in dispute or difference. The arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason such Engineer Member Delhi Development Authority as aforesaid at the time of such transfer vacation of office or inability to act, shall appoint another person to act as arbitrator in accordance with the terms of the contract. Such persons shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also a term of this contract that no person other than a person appointed by such Engineer Member, Delhi Development Authority as aforesaid should act as arbitrator and if for any reason, that is not possible, the matter is not to be referred to arbitration at all. In all cases where the amount of the claim in dispute in Rs. 50,000/- (Rupees fifty thousand) and above, the arbitrator shall give reasons for the award.

Subject as aforesaid the provisions of the Arbitration Act, 1940, or any statutory modification or reenactment thereof and the rules made there under and for the time being in force shall apply to the arbitration proceedings under this clause. It is a term of the contract that the party invoking arbitration shall specify the dispute or disputes to be referred to arbitration under this clause together with the amount or amounts claimed in respect of each such disputes.

7. It is clear from the same that it had been agreed between the parties that in case of transfer of one arbitrator the subsequent successor can continue with the arbitration proceedings or as may be appointed by the Engineer Member.

8. In other words, whenever there is such an agreement that by itself cannot be a good ground to remove the arbitrator but necessarily it has to be seen whether the arbitrator had used all reasonable dispatch in proceeding with the reference or not. Inordinate delay by itself in that circumstances could become a good ground to hold that the arbitrator had not used reasonable dispatch in proceeding with the reference and making the award if the petitioner is himself not responsible for it.

9. This court in the case of Sohan Lal v. Krishan Chander Ramesh Chander 2nd (1986) I DELHI 346 has considered the said question while referring to the decision of the Supreme Court in the case of Amarchand Lalitkumar v. Shree Ambica Jute Mills Ltd. noted that:

It is well established that if there is a reasonable ground for the apprehension that the arbitrator is biased, permission to revoke his authority can be give on the application of a person who has that apprehension. It was so held in Amarchand Lalitkumar v. Shree Ambica Jute Mills Ltd., . However, a note of caution was attached to the effect that before a court exercises its discretion to give leave to revoke authority of an arbitrator, it should be satisfied that a substantial miscarriage of justice will take place in the event of its refusal. It was further held that in exercising this discretion cautiously and sparingly, the court has not doubt to take into view the circumstances that the parties should not be easily relieved from a tribunal they had chosen themselves on the ground of the fear that the arbitrator's decision might go against them. The Supreme Court then observed:

"The grounds on which leave to revoke may be given have been put under five heads; (1) Excess or refusal of jurisdiction by arbitrator;

(2) Misconduct of arbitrator;

(3) Disqualification of arbitrator;

(4) Charges of fraud; and

(5) Exceptional cases."

10. Similarly in the case of Rishidev Batra v. The Union of India and Ors. 1986 (2) ALR 30 it was held that the power to remove the arbitrator is discretionary and it is not always that arbitrator must be removed. Paragraph 3 of the judgment in this regard points out:

A perusal of Section 11(1) makes it clear that without a finding that the Arbitrator failed to use all reasonable dispatch in entering on and proceeding with the reference, there is no scope for removing an Arbitrator in exercise of that power. Even with such a finding, removal of the Arbitrator is discretionary. Such a finding does not lead to irresistible conclusion that the Arbitrator must be removed.

11. The Supreme Court in the case of International Airport Authority of India v. K D Bali and Anr. while construing Section 11 of the Arbitration Act, 1940 referred to the fact that purity of administration requires that party to the proceedings should not have apprehension that authority is biased and is likely to decide against the party.

12. On behalf of the respondents strong reliance was placed on the decision of the Supreme Court in the case of Bhupinder Singh Bindra v. Union of India and Anr. . The Supreme Court in the cited case was concerned with Section 11 of the Arbitration Act, 1940. The arbitrator was willing to proceed with the arbitration and there was no allegation of misconduct and fraud. Delay indeed had occurred but the party was not cooperating. In that view of the matter the Supreme Court held that there was no ground to remove the arbitrator.

13. The cited decision in the case of K D Bali (supra) indeed will not come to the rescue of the respondents. It was confined to its peculiar facts. This is for the reason that there the arbitrator was willing to proceed but the private party was not willing to proceed but the private party was not willing to cooperate. It is not so in the present case. The arbitrator adjourned the proceedings sine die and did not wait for the extension of time that as to be granted by the DDA. In addition to that, in the present case it cannot be termed that there was a constant delay by non cooperation of the petitioner. Therefore, the decision referred to and so much thought of by the respondent's counsel will be of little avail.

14. Reverting back to the facts of the present case, it is obvious that removal of the arbitrator is never to be done on mere asking. The court has to be circumspect in this regard. Interest of justice has to be kept in view. The confidence of the parties have not to be disturbed. False pleas by the parties have to be discouraged. In the present case in hand, as referred to above, the arbitrator adjourned the proceedings sine die, to crown this fact is the facts which are admitted that there have been frequent transfers of the Superintending Engineers with the result that the arbitration was not making any headway. It is true that there was an arbitration agreement in this regard but if there is inordinate delay because of the said fact which is a continuous process coupled with the conduct of the arbitrator it is a fit case therefore to remove the arbitrator. An independent arbitrator should be appointed to decide the dispute between the parties.

15. Accordingly this court revokes the authority of the Superintending Engineer to arbitrate upon the disputes between the parties and appoint Mr. W D Dandge, retired Engineer Member of DDA as arbitrator to decide the disputes between the parties. The arbitrator shall fix his own fees. It is further made clear that keeping in view that it is an old matter the arbitrator will decide the matter expeditiously preferably within four months from today. If either party tries to delay, the arbitrator would be competent to proceed in accordance with law. The parties are left to bear their own costs.