Elecon Engineering Co. Ltd. vs Cement Corporation Of India
2002 Latest Caselaw 1829 Del

JUDGMENT

R.C. Chopra, J.

1. This order shall dispose of Petition No. 2730/93 under Section 14 of the Arbitration Act, 1940 and I.A. No. 7420/94, the objections filed by the respondent under Sections 15, 16, 30 and 33 of the Arbitration Act, 1940 (hereinafter referred to as the Act only) against the Award dated 15.11.1993.

2. The facts, leading to the filing of the petition under Section 14 of the Act and the objections against the Award dated 15.11.1993, briefly stated, are that in terms of their Arbitration Agreement the petitioner had appointed Shri Swami Dial, retired Chief Engineer (CPWD) as its Arbitrator and the respondent had appointed one Shri G.V. Rao as its Arbitrator. Shri G.V. Rao refused to act as an Arbitrator and as such vide a letter dated 7.3.1990 the respondent appointed Shri S.S. Dhanota as its Arbitrator in place of Sh. G.V. Rao. Shri K.C.D. Gangwani was appointed an Umpire by the Arbitrators. The Arbitrators issued a notice dated 20.7.1990 to the parties calling upon them to file their claims/pleadings. The petitioner filed its statement of claims but the respondent did not file any claim/statement inspite of opportunities. Shri S.S. Dhanota was not joining the arbitral proceedings and as such vide a notice dated 15.6.1992, Counsel for the petitioner wrote a letter to the Chief Manager of the respondent saying that since the Arbitrator appointed by the respondent was not participating in the arbitration proceedings, the arbitrator appointed by the petitioner had become a sole arbitrator.

3. The respondent/objector sent a reply dated 21/23.7.1992 to the counsel for the petitioner denying that its Arbitrator Sh. S.S. Dhanota had refused or neglected to act as an Arbitrator. It was stated that in the absence of any letter from Sh. S.S. Dhanota, not to act or cooperate in proceedings, it could not be said that he had neglected or refused to act as an Arbitrator. It was pleaded that respondent Corporation had appointed him in time and if he had not entered upon reference that did not give jurisdiction to Shri Swami Dial to act as a sole Arbitrator. The respondent/objector had earlier received a letter dated 3.6.1992 from the Arbitrator also appointed by the petitioner. A communication dated 22.6.1992 even was received by the respondent from Arbitrator Shri Swami Dial but still no action was taken by it towards appointment of Arbitrator. Sh. Swami Dial the Arbitrator appointed by the petitioner proceeded further as the sole arbitrator in terms of Section 9(b) of the Act and pronounced the Award dated 15.11.1993. It is to be noticed that Sh. Swami Dial vide his letter dated 22.6.1992, which was admittedly received by the respondent, had detailed the neglect of Shri S.S. Dhanota to act as an Arbitrator and thereafter informed the respondent/objector that he was assuming the office as sole Arbitrator. He gave the parties 15 days time to file their claims/statements and documents etc.. He fixed the next hearing for 22.7.1992.

4. The claimant-petitioner has prayed for making the Award dated 15.11.1993 Rule of the Court and passing a decree in terms thereof in as much as the respondent had neither appointed any Arbitrator nor had placed any material before the sole Arbitrator to controvert the claims of the petitioner.

5. The respondent-objector, however, pleads that the Award is liable to be set aside as no notice in terms of Section 9(b) of the Act was served upon the respondent. It is stated that the notice dated 15.6.1992 was not a proper notice as required under Section 9(d) the Act. According to the respondent-objector after the receipt of the notice dated 20.7.1990 from the two Arbitrators the petitioner had filed its statement of claims on 31.7.1990 but on account of certain problems in the working of the respondent-Corporation the respondent could not file its counter claim or statement before the Arbitrators. It was admitted in para 2 (m) of the objection petition that the Arbitrator Shri Swami Dial appointed by the petitioner had been writing letters to the Senior Manager of the respondent-corporation that Shri S.S. Dhanota, the Arbitrator appointed by it, was not participating in the proceedings. According to the respondent/objector Shri Swami Dial was not appointed sole Arbitrator in terms of Section 9(b) of the Act and he had misconducted himself and the proceedings.

6. Although in the objection petition the respondent had pleaded that it had controverter the usurpation of powers and jurisdiction as sole Arbitrator by Shri Swami Dial and made it stand clear that he could not act as the sole arbitrator but nothing has been placed on record to show at to how and in what manner this objection was raised. To the contrary it is clear from record that the respondent did not participate in the arbitration proceedings. According to the respondent, it came to know about the passing of the Award only upon receipt of the notice from the Court under Section 14(1) of the Act Along with a copy of the Award dated 15.11.1993 passed by the sole arbitrator.

7. The claimant-petitioner filed a reply to the objection petition controverting the pleas raised by the objector and asserted that Shri Swami Dial had acted as the sole arbitrator in terms of Section 9(b) of the Act in as much as inspite of notice dated 15.6.1992 and letter of Arbitrator dated 22.6.1992 the respondent had not appointed any other Arbitrator. Therefore in terms of Section 9(b) of the Act Shri Swami Dial was fully justified in acting as a sole Arbitrator. It was denied that there was any irregularity in the proceedings and the arbitrator had misconducted himself or the proceedings.

8. I have heard learned counsel for the parties. I have gone through the record of the case.

9. Learned counsel for the objector addressed this Court only on the question of the power of the Arbitrator Shri Swami Dial to act as a sole Arbitrator. According to respondent Shri Swami Dial could not assume the powers of the sole Arbitrator as no 15 days notice was served upon the respondent in terms of 9(b) of the Act for making the appointment of an Arbitrator whereas the petitioner's case is that the notice dated 15.6.1992 though not happily worded, was substantial compliance with the purport of the provisions of Section 9(b) of the Act. It is contended that since the respondent

-objector failed to appoint another arbitrator inspite of the notice Shri Swami Dial was fully justified to act as a sole Arbitrator and pass the Award as if he had been appointed by consent of both the parties.

Section 9 of the Act reads as under:-

"9. Power to party to appoint new arbitrators, or, in certain cases, a sole arbitrate:- Where an arbitration agreement provides that a reference shall be to two arbitrators, one to be appointed by each party, then, unless a different intention is expressed in the agreement.-

(a) if either of the appointed arbitrators neglects or refuses to act, or is incapable of acting, or dies, the party who appointed him may appoint a new arbitrator in his place;

(b) It one party fails to appoint an arbitrator, either originally or by way of substitution as aforesaid, for fifteen clear day after the service by the other party of a notice in writing to make the appointment, such other party having appointed his arbitrator before giving the notice, the party who has appointed an arbitrator may appoint that arbitrator to act as sole arbitrator in the reference, and his award shall be binding on both parties as if he had been appointed by consent.

Provided that the Court may set aside any appointment as sole arbitrator made under Clause (b) and either, on sufficient cause being shown, allow further time to the defaulting party to appoint an arbitrator or pass such other order as it thinks fit.

10. Before adverting to the facts of the case in hand and the objections raised by the respondent in regard to the assumption of office of sole Arbitrator by Shri Swami Dial the Court must look in to the purport and object of Section 9 of the Act which lays down procedure for the supply of vacancy in cases where the Arbitration Agreement provides that a reference shall be to tow Arbitrators, one to be appointed by each party. Clause

(a) of Section 9 empowers the party itself to appoint a new arbitrator in place of its appointed arbitrator who refuses or neglects to act or is incapable of acting or dies and provides that the party who appointed him may appoint a new Arbitrator in his place. Clause (b) covers those situations where such party fails to appoint an Arbitrator in terms of Clause (a) and prescribes that if such party fails to appoint an Arbitrator for 15 clear days after the service by other party of a notice in writing to make the appointment, such other party having appointed its arbitrator before giving the notice, may appoint that Arbitrator to act as sole Arbitrator in the reference and his Award shall be binding on both the parties as if he had been appointed with the consent or both the parties. Explanation to Section 9 provides that if the Arbitrator or an Umpire, after a request by either party to enter on and proceed with the reference, does not within one month comply with the request it may constitute a neglect or refusal to act within the meaning of Section 8 and Section 9 of the Act.

11. The whole object of Section 9 therefore is to prevent delay in the arbitral proceedings on account of the neglect or refusal or incapacity to act or death of an Arbitrator, where the agreement provides that a reference shall be to two Arbitrators. This Section does to envisage a notice in any special form or in a particular mode and is aimed at enabling a party to ask its appointed arbitrator to proceeded further as a sole arbitrator if inspite of notice in writing the other party does not supply the vacancy within 15 days of the service of the notice.

12. A perusal of the arbitral proceedings and the Award made in the present case clearly shows that the petitioner-claimant had been perusing the arbitration proceedings with due diligence whereas the respondent-objector was absolutely careless, indifferent and negligent. The petitioner had appointed its arbitrator Shri Swami Dial vide a letter dated 20.6.1999 but the arbitrator appointed by the respondent namely Shri G.V. Rao refused to act as a co-arbitrator. The respondent then appointed Shri S.S. Dhanota as its Arbitrator vide letter dated 7.3.1990 in place of Shri K.C.D. Gangwani as an Umpire and issued notice dated 20.7.1990 to the parties for filing their claims/pleadings. The claimant-petitioner filed its statement of claims on 31.7.1990 but the respondent-objector did not file any reply or statement of claims nor its arbitrator Shri S.S. Dhanota cooperated with Shri Swami Dial in the conduct of the arbitration proceedings. In para 2 (m) of the objection petition the objector itself averred that Shri Swami Dial, the arbitrator appointed by the petitioner, sent various letters to Shri D.K. Jha, Sr. Manager of the respondent stating that Shri S.S. Dhanota was not participating in the arbitration proceedings. On 3.6.1992 i.e. after about two years of the filing of the claim by the petitioner the Arbitrator Shri Swami Dial sent a letter to the respondent-objector as well as the petitioner pointing out that Shri S.S. Dhanota was not joining the arbitration proceedings and as such appropriate action may be taken in the matter. In this letter Shri Swami Dial categorically stated that he was appointed co-Arbitrator on 20.6.1999 and after the refusal of Sh. G.V. Rao, the earlier Arbitrator appointed by the respondent, Shri S.S. Dhanota was appointed. It was also pointed out that various letters were issued to the respondent to file its submissions but the respondent failed to file any statement. It is to be noticed that this letter dated 3.6.1992 was signed by Sh. Swami Dial only and a copy of this letter was endorsed to Shri S.S. Dhanota even which shows that although Sh. Swami Dial was keen to proceed with the arbitration proceedings but Sh.S.S. Dhanota was not available.

13. Thereafter vide a registered A.D. letter dated 15.6.1992 sent by Counsel for the petitioner, which is admitted by the respondent-objector, it was brought to the notice of the Chief Manager of the respondent-Corporation that neither the respondent Corporation had filed a counter statement of claims nor Sh. S.S. Dhanota was ready and willing to act as an Arbitrator. It was also stated that the matter could not be proceeded further because the Arbitrator appointed by the respondent had never agreed to act as an arbitrator and as such in the eyes of law there was no appointment of arbitrator on behalf of respondent-Corporation. In the last para of the notice it was asserted that Sh. Swami Dial appointed by the petitioner had become the sole arbitrator and had been accordingly requested to proceed with the matter as sole Arbitrator. After this letter even the respondent-objector did not take any step to contact h. S.S. Dhanota to find out as to why he was not cooperating with the arbitrator appointed by the petitioner and proceeding in the matter in accordance with law nor Shri S.S. Dhanota contacted Sh. Swami Dial to demonstrate his willingness to act as a co-arbitrator on behalf of respondent-objector and proceed with the arbitral proceedings.

14. After the letter dated 15.6.1992 issued by learned counsel for the petitioner Sh. Swami Dial vide a letter dated 22.6.1992, informed the parties that he had accepted the request of the petitioner to act as a sole arbitrator and directed both the parties to appear before him for hearing on 22.7.1992. He also asked the respondent-objector to file counter statement of facts together with document, if any, within 15 days of the receipt of this letter. The respondent-objector did not forthwith challenge the authority of Shri Swami Dial but merely sent a reply dated 21.7.1992 to the letter dated 15.6.1992 controverting the petitioner's plea that Sh. Swami Dial could act as a sole arbitrator. It was pleaded that in the absence of any letter from Sh. S.S. Dhanota not to act or cooperate, it was shown that he had been acting as an arbitrator and had never neglected or refused to act as an Arbitrator. It was stated that Sh. S.S. Dhanota had never expressed his disapproval or refusal to act as a co arbitrate and as such Sh. Swami Dial could not act as sole Arbitrator. A copy of this letter was endorsed by the respondent-objector not only to Sh. Swami Dial but to its own arbitrator Sh. S.S. Dhanota also but there is nothing on record to show that after the receipt of this letter even from the respondent, Sh. S.S. Dhanota joined the arbitration proceedings or expressed his willingness to act as an arbitrator in the matter. The respondent/objector neither took any step to make Sh. S.S. Dhanota join the proceedings nor supplied the vacancy nor approached the Court under proviso to Section 9 of the Act to challenge the appointment of Sh. Swami Dial as sole Arbitrator.

15. The arbitral proceedings show that neither Shri S.S. Dhanota nor the respondent-objector were attending the proceedings and as such arbitration proceedings could not be conducted. The plea of the respondent-objector therefore that its arbitrator Sh. S.S. Dhanota was not neglecting or refusing to act as an arbitrator was totally frivolous. The record shows that right after March 1990 when Sh. S.S. Dhanota was appointed a co-arbitrator by the respondent-objector the arbitration proceedings remained pending and kept dragging on account of absence of respondent-objector and its arbitrator and ultimately vide a letter dated 3.6.1992 the arbitrator Sh. Swami Dial felt compelled to write to the respondent-objector as well as co-arbitrator Sh. S.S. Dhanota for expediting the proceedings. The respondent-objector, inspite of various letters and its own reply dated 21.7.1992, in which merely the notice dated 15.6.1992 was controverter, did not take any step to ensure that its arbitrator Sh. S.S. Dhanota was available for conducting the proceedings. It appears that the petitioner as well as its arbitrator Sh. Swami Dial were frustrated by the conduct of not only the respondent-objector but its arbitrator Sh. S.S. Dhanota also and such the petitioner was forced to invoke Section 9(b) of the Act.

16. The plea of the respondent objector that the appointment of Sh. Swami Dial as sole arbitrator by notice dated 15.6.1992 cannot be sustained as 15 clear days, after the service of notice in writing to make appointment, were not given to the respondent-objector, is based on the letter dated 22.6.1992, written by the sole Arbitrator Sh. Swami Dial, by which he informed the parties that he had become the sole arbitrator and called upon them to join the proceedings. The notice dated 15.6.1992 even, issued by the claimant-petitioner, was not happily worded in as much as in this notice the petitioner-claimant had averred that Sh. Swami Dial appointed by the petitioner had become sole arbitrator and he was requested to proceed with the matter as sole arbitrator. The argument is that after the service of letter dated 15.6.1992 the Arbitrator should have waited for 15 days before assuming the office of sole arbitrator. As discussed above Clause (b) of Section 9 merely enables a party, whose arbitrator is neglecting or refusing to act, to appoint a new arbitrator within 15 days of the notice in writing from the opposite party and is not aimed at protracting the arbitral proceedings. The object of the provision is to expedite the arbitral proceedings and not to delay the passing of the Award. In this case Sh. Swami Dial, the arbitrator nominated by the petitioner, though described as sole arbitrator in the notice dated 15.6.1992 and letter dated 22.6.1992, did not actually commence the arbitral proceedings till 22.7.1992 which was much beyond 15 days period as envisaged in Section 9(b) of the Act. During this period even the respondent-objector did not take any step either to ask Shri S.S. Dhanota to join the arbitral proceedings or appoint some other arbitrator in his place. Therefore, actually speaking though Sh. Swami Dial declared himself a sole Arbitrator on 22.6.1992 but he started acting as sole Arbitrator on 22.7.1992 only and as such 15 clear days time, after the service of the notice of the petitioner, was available to the respondent for the appointment of a co-arbitrator which was never done.

17. Relying upon a judgment of this Court in M/s Teja Singh & "Associates v. The Patiala Co-Operative Sugar Mills Ltd. reported in 1995 IV AD (Delhi) 795, learned counsel for the respondent-objector contends that the impugned Award is liable to be set aside for violation of Section 9(b) of the Act. A perusal of the judgment, however, shows that the Award in the said case was challenged mainly on the ground that the notice as required under Section 9(b) of the Act was not at all served upon the respondent-objector. In the said case the objector had raised an objection even before the sole Arbitrator that he had not received any notice in regard to his appointment as sole Arbitrator but still nothing was placed on record to show the service of the notice upon him in terms of Section 9(b) of the Act. The Court, therefore, came to the conclusion that since the notice under Section 9(b) had not been properly served upon the respondent/objector, the sole Arbitrator could not assume jurisdiction in the matter and as such the Award passed by him was liable to be set aside. However, in the present case the respondent-objector admits the notice dated 15.6.1992 as well as the letter dated 22.6.1992 which had clearly brought to the notice of the respondent-objector that Shri Swami Dial would be acting as a sole Arbitrator but inspite of these communications, the respondent-objector failed to appoint any other Arbitrator within 15 days or even thereafter in place of Shri S.S. Dhanota.

18. Considering the history of this case and the conduct of the respondent-objector as reflected in its reply dated 21.7.1992 it cannot be said that no opportunity was given to the respondent-objector to appoint an arbitrator in terms of the Section 9(b) of the Act and Shri Swami Dial had no powers to act as a sole Arbitrator. The facts clearly show that substantial compliance of Section 9(b) of the Act had taken place. By taking a technical plea the respondent

-objector cannot be permitted to put the clock back and set the Award dated 15.11.1993 at naught inspite of its own neglect and callous indifference towards the arbitral proceedings. The respondent-objector neither appeared before Sh. Swami Dial on 22.7.1992 nor thereafter to raise any objection against his appointment as sole Arbitrator nor approached the Court under proviso to Section 9 of the Act for setting aside the appointment of Sh. Swami Dial as sole Arbitrator. It woke up only after the Award had been made and application was moved by the claimant-petitioner under Section 14(1) of the Act for making it a rule of the Court. In fact the respondent tried to create a no win situation for the claimant-petitioner by not appearing before the sole arbitrator. If the Award had gone in favor of the respondent-objector it could easily claim that it was passed by the sole Arbitrator appointed by the claimant-petitioner but on finding that the Award had gone against it the respondent-objector turned around and started raising objections mainly on the ground that Shri Swami Dial was not a validly appointed sole Arbitrator. The respondent/objector by its conduct acquiesced in the appointment of Shri Swami Dial as a sole Arbitrator. This Court, therefore, does not agree with the submissions made by learned counsel for the respondent-objector that the Award dated 15.11.1993 is liable to be set aside on the ground that Sh. Swami Dial was not appointed a sole arbitrator in terms of Section 9(b) of the Act.

19. The Court has gone through the impugned Award dated 15.11.1993 which is a reasoned Award. Learned Arbitrator had examined each and every claim of the petitioner minutely and had given proper reasons in support of the claims sustained by him. Learned Arbitrator had no counter statement of claim filed by the respondent/objector nor there was any material on record to repudiate the claims made by the petitioner. As already stated above the respondent-objector has no valid explanation for not joining the arbitral proceedings or for not filing its statement of claim in response to the claim filed by the petitioner. In many claims the learned Arbitrator lowered or declined the claim amounts as raised by the petitioner-claimant. There is nothing on record to show that the impugned Award suffers from any illegality or irregularity. There is no material to hold that the Arbitrator had misconducted himself or the arbitral proceedings. The view taken by the learned Arbitrator on the questions of fact was based upon material placed before him. This Court must not substitute its own view in place of the view taken by the learned Arbitrator. The objections filed by the respondent, therefore, cannot be sustained and are liable to be dismissed.

20. Accordingly the objection petition filed by the respondent-objector stands dismissed. The application filed by the claimant-petitioner is allowed and the Award dated 15.11.1993 is made a rule of the Court and a Decree is passed in terms thereof.

Decree sheet be prepared.