Delhi Jal Board vs Reliable Diesel Eng. (P) Ltd. And ...
2005 Latest Caselaw 1724 Del

JUDGMENT

Badar Durrez Ahmed, J.

Page 2594

1. This petition has been filed seeking the setting aside of the ex parte award dated 18.01.2005 passed by the sole Arbitrator (respondent No. 3). The two grounds taken by the petitioner seeking the setting aside of the impugned award are under sections 34(2)(a)(i) and 34(2)(a)(iii) of the Arbitration and Conciliation Act, 1996.

2. Section 34 permits the setting aside of an arbitral award by the court if the party making the application furnishes proof that the party was under some "incapacity". Section 34(2)(a)(iii) permits the court to set aside an arbitral award if the party making the application furnishes proof that such party was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case.

Page 2595

3. In order to examine whether the petitioner has been able to make out a case under the aforesaid provisions, it would be necessary to refer to the factual backdrop. By an agreement dated 26.05.1997 entered into between the Municipal Corporation of Delhi (MCD) [respondent No. 2] and the respondent No. 1, the respondent No. 1 was awarded the contract of repair of motor pumps, diesel engines, etc., within the jurisdiction of the MCD. By the said agreement, the parties had agreed to settle their disputes of any nature in terms of the arbitration clause contained in the agreement. The clause essentially provided that the disputes were to be referred to the sole arbitration of the Commissioner, MCD or any person nominated by the Commissioner on his behalf. Disputes arose between the respondent No. 1 and the respondent No. 2 as a result of which, the respondent No. 1 sought to refer the disputes to arbitration. As the respondent No. 2 was not appointing an arbitrator, the respondent No. 1 filed an application being AA No. 16/2004 in this court on or about 19.01.2004. The memo of parties of that Arbitration Application No. 16/2004 disclosed that the MCD was the respondent No. 1, the Delhi Jal Board (at its address Varunalaya, Jhandewalan, New Delhi) was the respondent No. 2 and the Commissioner, MCD was the respondent No. 3. In the said application, it was stated in paragraph three that the Delhi Jal Board was an autonomous body functioning under the MCD and while acting under the MCD had interacted with the respondent No. 1 for repairs of its pumps and payments to the applicants. On 09.08.2004 when the said Arbitration Application 16/2004 came up for disposal, the court recorded that no reply had been filed by the respondents and as an arbitration clause existed between the parties, Justice S.S. Chadha, a former Judge of this court, was appointed as the Arbitrator. The petitioner (the Delhi Jal Board) was represented by Mr Suresh Tripathy though wrongly shown in the order as representing the MCD. This is so stated by Mr Suresh Tripathy himself who now appears for the petitioner (Delhi Jal Board).

4. Mr Suresh Tripathy submitted that immediately upon the passing of the said order dated 09.08.2004, he had communicated the same to the Law Officer of the petitioner but the Law Division was unable to locate the exact Division and forwarded the file upwards to different officials, including senior officers, namely, the Chief Engineer and the Member. It was further submitted that ever since the Division got disbanded, the work was scattered with as many as 9 Executive Engineers of the petitioner and three of the MCD. It is submitted by Mr Tripathy that it is because of this confusion that the petitioner was unable to appear before the Arbitrator. It was further stated that as the exact Division was not pointed out in the memo of parties contained in the said Arbitration Application, the file went from one to another in addition to officials of the MCD and, finally, to the CEO of the petitioner when the decision was taken to appoint one Shri I.S. Tosaria, Executive Engineer of the petitioner as the Nodal Officer for the purposes of the present subject matter. This decision, it is stated in the petition, was taken on 01.01.2005. It is further stated that the said Nodal Officer thereafter approached the learned Arbitrator and to his surprise received a copy of the ex parte award dated 18.01.2005 on 21.02.2005.

Page 2596

5. Mr Suresh Tripathy then drew my attention to the award and in particular to internal page 2 thereof wherein it is indicated that the notice sent to the Delhi Jal Board was at its original address, but not received and refused with the remarks "Incomplete address without section". Yet, the learned Arbitrator considered this to be sufficient service. It is on the basis of these submissions that Mr Tripathy has stated that the impugned ex parte award is liable to be set aside under section 34(2)(a)(iii) of the said Act.

6. On the other hand, the learned counsel for the respondent No. 1 submitted that the ground raised by the petitioner is untenable. He submitted that when the order dated 09.08.2004 was passed by this court in AA 16/2004, the petitioner was represented and that too by Mr Tripathy himself. Therefore, the petitioner was aware of the appointment of the Arbitrator as well as of the arbitral proceedings inasmuch as the order dated 09.08.2004 specifically directed the parties to appear before the learned Arbitrator on 09.09.2004. Therefore, the ground for setting aside the award under section 34 would not be available to the petitioner.

7. I find myself to be in agreement with the submissions made by the learned counsel for the respondent No. 1 and find that those made by Mr Tripathy are not quite tenable. Upon a reading of Section 34(2)(a)(iii) of the said Act, it becomes clear that before a court comes to a decision to set aside an arbitral award under this ground, the party making the application must furnish the proof that he was not given proper notice -

a) of the appointment of an arbitrator, or

b) of the arbitral proceedings; or

was otherwise unable to present his case.

8. The facts narrated above clearly indicate that when the order dated 09.08.2004 was passed by this court in Arbitration Application 16/2004, the petitioner was represented by its counsel - Mr Suresh Tripathy. Mr Suresh Tripathy also indicated in the course of arguments that he had immediately on 09.08.2004 itself communicated the order in writing to the Law Officer of the petitioner. Therefore, clearly the petitioner had proper notice of the appointment of the Arbitrator. It also had notice of the arbitral proceedings inasmuch as the order dated 09.08.2004 itself directed the parties to appear before the Arbitrator on 09.09.2004 for presenting their claims. This leaves us with the consideration as to whether the petitioner was otherwise unable to present his case. The reasoning given by the petitioner is that since the Division was not specified, the relevant file got lost in the maze of officials and officialdom within their various divisions as also of the respondent No. 2 (MCD). This, I am afraid, is no reason at all. If the appropriate records or the appropriate Division could not be located by the petitioner at a short notice, the least that could be done was that the Law Officer or somebody on his behalf could have appeared before the Arbitrator on 09.09.2004 as directed by this court by its order dated 09.08.2004 and could have asked for time. If that were to have happened, then one could have understood the explanation (if we may call it so) advanced by the petitioner of its inability to present its case. Therefore, the contention of the learned counsel for the petitioner that he Page 2597 has been able to make out a case for setting aside the ex parte arbitral award under section 34 is not tenable.

9. There is another aspect which needs to be dealt with. By the order dated 09.08.2004, the parties were directed to appear before the learned Arbitrator on 09.09.2004 and file their respective claims. As there was no appearance on behalf of the petitioner as well as the MCD, the Arbitrator decided to send fresh notices to the petitioner as well as the MCD and fixed the hearing on 19.10.2004. On that date, an advocate appeared on behalf of the MCD but nobody appeared on behalf of the Delhi Jal Board (the petitioner herein). The notice sent to the Delhi Jal Board was not taken by them at their registered office and was refused by them with the remarks "Incomplete address without section". The learned Arbitrator considered this to be sufficient service. In the context of the facts narrated above, I am of the opinion that it did constitute sufficient service inasmuch as the notice was sent to the Delhi Jal Board at the very address (Varunalaya, Jhandewalan Extension, New Delhi) which is given by the petitioner in the Memo of Parties in the present petition. If they refused to accept the same, the law is clear that it would amount to service inasmuch as the same was sent under registered A.D. cover.

10. As regards the ground of "incapacity" under Section 34, the learned counsel for the petitioner was unable to explain what he meant by it. The ground 'K' taken in the petition reads as under:-

"K. Because the "incapacity" of the petitioner is writ large and that admits justification to invoke the provisions of Section 34 of the Act in question praying for setting aside the ex-parte award."

Apart from taking the aforesaid ground, there is no factual basis to assert "incapacity" of the petitioner other than trying to bring in the very same grounds urged under Section 34 which, in any event, are without any basis. Moreover, the 'incapacity' referred to in Section 34, it appears to me, relates to issues such as mental incapacity, minority and such like circumstances. Entanglement in bureaucratic red-tape cannot, by any stretch of imagination, constitute 'incapacity', at least in the context of Section 34. Both the grounds taken by the learned counsel for the petitioner fail. This petition stands dismissed. No order as to costs.