Mmtc Ltd. vs Sehgal Bhai Jewellers Pvt. Ltd.
2002 Latest Caselaw 33 Del

JUDGMENT

Vijender Jain, J.

1. Petition has been filed under Sections 5 & 11 of the Arbitration Act, inter alia, praying that the authority of the Umpire be revoked and another Umpire be appointed to adjudicate upon the disputes and differences arising under the Agreement dated 20.4.1989.

2. On behalf of the respondent it has been contended that there was no disagreement on merit and disagreement was only with regard to the payment of fees and umpire has not abdicated his jurisdiction by remitting back the award to the arbitrator. Counsel for the respondent has also cited Russell on Arbitration. Relying on a decision of Arbn Hindustan Steel Vs. Apeejay Pvt. Ltd. , it was contended before me by learned counsel for the respondent that once there was no disagreement with regard to the merit of the case as same was a question of non-payment of fees by the respondent to its own arbitrator, the arbitrator should have proceeded with the arbitration and passed order under Section 38 of the Arbitration Act.

3. It was further contended before me by counsel for the respondent that the letter written by the arbitrator to the umpire on behalf of the claimant was a unilateral reference to the umpire and the arbitrator of the respondent was not a party to the same and the reference being unilateral, the umpire was within its right to remit back the arbitration proceedings to the arbitrator. In support of his contention, he has relied upon M/s Kalinga Otto (P) Ltd. Vs. Charanjit Kochhar .

4. On behalf of the petitioner it was contended that in view of the letter dated 12.5.2000 written by Dr.Bakshish Singh, arbitrator appointed by the respondent and specific stand taken by the arbitrator, in paragraph 2 of the said letter inter alia, mentioning that :-

"However, in case you do not concur with the proposed direction, which means stalling the arbitration proceedings and amounts to difference of opinion between two arbitrators and hence the Umpire will acquire jurisdiction to hear and decide the disputes in arbitration between MMTC and M/s Sehgal Bhai Jewellers......."

5. It was not an unilateral reference by the arbitrator of the claimant, but said reference was based on the letter of Dr.Bakshish Singh. On the basis of the aforesaid letter written by Dr.Bakshish Singh, it was contended before me by learned counsel for the petitioner that the arbitrator has made up his mind that there was difference of opinion between the two arbitrators and umpire has acquired jurisdiction and disputes between the parties have to be referred to the umpire. Decision of the umpire declining to adjudicate the disputes between the parties would show that the umpire has abdicated his jurisdiction and in the circumstances, the Court may appoint an umpire. In support of his contention, learned counsel for the petitioner has relied upon Keshavsinh Dwarkadas Kapadia, Etc. Vs. Indian Engineering Company .

6. I have given my careful consideration to the arguments advanced by learned counsel for the parties. At the outset, I must stress that the arbitration proceedings started in the year 1995. Almost 44 sittings have taken place, no award has been made by the arbitrators. Annexure R-5 is the letter written by the arbitrator appointed by the respondent, which was addressed to Mr.M.L. Verma, arbitrator appointed by the petitioner/claimant. By said letter Dr.Bakshish Singh brought to the notice of co-arbitrator that the respondent on whose behalf Dr.Bakshish Singh was appointed, has not paid his fees. Therefore, he is suspending his appearance as arbitrator till payment was made. This letter further, inter alia, made a request to the co-arbitrator that the MMTC be directed to pay on behalf of M/s Sehgal Bhai Jewellers, i.e. respondent and the same may be adjusted as cost of the arbitration. Then again a letter was addressed to Mr.Verma on 12.5.2000 by Dr.Singh, contents of which has been reproduced above, which was replied by co-arbitrator, Mr.M.L. Verma on 16.5.2000, inter alia, stating as under:-

"As mentioned earlier, the direction proposed by you does not appear to be possible and, therefore, I am in agreement with you that the Umpire will acquire jurisdiction to hear and decide the disputes in the arbitration as per Section 3 read with Rule 4 of the First Schedule of the Arbitration Act, 1940."

7. Mr.M.L. Verma, the arbitrator appointed by the MMTC, thereafter vide his letter dated 24.1.2001 referred the matter to the Umpire for adjudication in view of the umpire assuming jurisdiction to hear and decide the disputes in the arbitration as per Section 3 read with Rule 4 of the Arbitration Act, 1940.

8. Justice (Retd.) D.R. Khanna, Umpire vide his order dated 2.5.2001 observed that disagreement with regard to fee does not call for a dispute arising out in relation to or in connection with the contract which alone can confer jurisdiction on umpire. The umpire held that it was not a stage for invoking the jurisdiction of umpire and the matter was remitted back to the two arbitrators for giving their award. Mr.Verma, arbitrator of the MMTC vide his letter dated 14.8.2001, took the plea that the disagreement between the co-arbitrator was not with regard to fees or on account of non-payment of fees by the respondent to its own arbitrator but refusal to proceed further in the arbitration, which was evident from the letter dated 12.5.2000 of Dr.Bakshish Singh and once the effect was refusal of the arbitrator to act and to proceed further in the matter, the same tentamounts to disagreement. In State of West Bengal Vs. National Builders , Supreme Court held that the refusal to act in legal sense means denial to do something which one is obliged to do under law.

9.

"To decide if the court was justified in assuming jurisdiction to appoint another arbitrator as the arbitrator appointed by the Chief Engineer under Clause 25 refused to act, it is necessary to examine the scope of Section 8(1)(b) of the Arbitration Act which reads as under :

"8(1) In any of the following cases-

(a) ...

(b) If any appointed arbitrator or umpire neglects or refuses to act, or is incapable of acting, or dies, and the arbitration agreement, does not show that it was intended that the vacancy should not be supplied and the parties or the arbitrators, as the case may be, do not supply the vacancy; or

(c) ...

any party may serve the other parties or the arbitrators, as the case may be, with a written notice to concur in the appointment or appointments or in supplying the vacancy."

10. This provision vests the court with supervisory jurisdiction to interfere with relationship between the parties and the arbitrator if any of the situations as provided in this sub-section comes into being. What was claimed by the respondent, which has been accepted by the courts below, is that the sole arbitrator appointed by the Chief Engineer refused to act. The question, therefore, is what does this expression mean? Refusal to act in legal sense means denial to do something which one is obliged to do under law. Black's Law Dictionary explains it thus: 'The act of one who has, by law, a right and power of having or doing something of advantage, and declines it'. In private law, of which arbitration is a part with court's power to supervise and intervene in arbitral proceedings within statutory framework, an arbitrator who is appointed, with common consent of parties, may not proceed with arbitration for various reasons. The refusal to act may be express or implied. If an arbitrator resigns or informs the parties his inability to act it would be express refusal. And even the courts cannot force him to arbitrate."

11.

"Refusal to act may be inferred as well. On what facts such an inference can be raised cannot be laid down with certainty. There can be no fixed principle for it. When an arbitrator has failed to discharge his obligation so as to give rise to an inference that he has refused to act it shall have to be decided by the court on facts and circumstances of each case. For instance in Priyabrata Bose v. Phani Bhusan Ghose the High Court held that even when the arbitrator was not willing to proceed unless his fees were paid in advance, it was refusal to act. Inaction by the arbitrator or inordinate delay in rendering the award are yet some of other reasons due to which courts have raised an inference that the arbitrator refused to act...."

12.

".............The parties appoint an arbitrator by consent and he undertakes to decide the dispute out of his free will. He may withdraw his consent expressly or may act in a manner giving rise to inference that he was not willing to act any more. In either case the basic principle is that the arbitrator cannot be forced to act. But such an inference should not be readily raised. The court's primary concern should be to uphold the arbitration. But once the court is satisfied that the arbitrator has refused to discharge his obligations then it has statutory duty to intervene and act in accordance with Section 8(1)(b) of the Act. From the order of the arbitrator extracted earlier what is made out is that he felt that the respondent had lost confidence in him. With opinion, thus formed, he refused to accede to the request of the parties to extend the time for the award and directed parties to decide their future course of action. True that he did not resign. It is also true that the Chief Engineer insisted that the arbitrator was continuing. But where the arbitrator refused to extend time and brought arbitration to an end leaving it open to parties to decide their future course of action as one of the parties whose vital stakes were involved did not have confidence in him, the courts do not appear to have committed any error of law in drawing inference that the arbitrator had refused to act."

13. When one arbitrator declined to act and the other is left alone, it amounts to disagreement within the two arbitrators as has been held by the Supreme Court in Keshavsinh Dwarkadas Kapadia's case (supra). In this case Supreme Court observed as under :

"The High Court expressed the view that if the arbitrators allowed the time to expire that by itself would not amount to disagreement between the arbitrators. As to what constitutes disagreement cannot be laid down in abstract or inflexible propositions. It will depend upon the facts of the case as to whether there was a disagreement. The High Court did not agree with the view expressed in Russell on Arbitration, 18th Ed. at pages 205 and 208, that failure to make an award in time where the agreement prescribed time in which the arbitrators' award is to be made would amount to disagreement. In Lossifoglu v. Counmantaros, the arbitration clause provided "in case arbitrators so appointed disagree they shall appoint an umpire". One of the arbitrators repeatedly endeavored to arrange a meeting with the other, but failed to arrange such a meeting. The arbitrator then unsuccessfully attempted to obtain consent of the latter to the appointment of umpire. Thereafter, application was made to the Court for the appointment of umpire. Disagreement between the arbitrators may take various shapes and forms. In the present case the arbitrators by reason of attitude of a party in correspondence addressed to the arbitrators could not agree to proceed with the matter. Where one of the arbitrators decline to act and the other is left alone it will in a case of this type amount to disagreement between the two arbitrators. In the present case, there was disagreement between the arbitrators. Time to make the award also expired. Therefore, from both points of view the umpire had authority to enter upon the reference."

14. At the time of hearing of the case, I had asked the counsel appearing for both the parties that in view of the letter dated 14.8.2000 of Mr.M.L. Verma, arbitrator appointed by the MMTC and in view of the letter dated 12.5.2000 of Dr.Bakshish Singh, arbitrator appointed by the respondent, it has not been possible for the arbitrators to adjudicate upon the disputes. Mindful of the fact that the arbitration proceedings are continuing for the last six years, 44 sittings have taken place and award has not yet been given and no useful purpose will be served, if an umpire is appointed by this Court as both the arbitrators have declined to assume arbitration proceedings. I had requested the parties for agreeing to appoint a sole arbitrator in order to expedite the arbitration proceedings. The very purpose of alternative dispute redressal mechanism is to have expeditious disposal of the disputes inter se parties. I could not understand why the respondent was not keen to have a sole arbitrator in view of this inordinate delay and instead it wanted to go into the technicalities of the matter arguing that there is no disagreement between the arbitrators and the arbitrators be directed to proceed with the arbitration. Court cannot force the arbitrator appointed by the petitioner to arbitrate in the matter. However, as far as MMTC is concerned, counsel for MMTC says that without going into the controversy as to whether there was disagreement on merit, a sole arbitrator may be appointed by this Court to adjudicate the disputes between the parties.

15. In view of the fact that Dr.Bakshish Singh vide his letter dated 12.5.2000 and Mr.Verma vide his letter dated 14.8.2000 have declined to assume arbitration proceedings, the both vacancies have fallen vacant. In view of disagreement between the parties let a sole arbitrator be appointed, I appoint Justice (Retd.) H.C. Goel, a retired Judge of this Court as sole arbitrator. The arbitrator shall fix his own fees. All the relevant record of the arbitration proceedings be handed over by the arbitrators to the newly appointed arbitrator. Intimation of appointment be sent to the newly appointed arbitrator within one week. Parties to appear before arbitrator on 02.02.2002.

16. Petition stands disposed of.