Sh. Surender Pal Singh vs Hindustan Petroleum Corporation ...
2009 Latest Caselaw 2483 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                  OMP No.552/2006

%                                     Date of decision : 06.07.2009

Sh. Surender Pal Singh                             ....... Petitioner
                          Through:   Mr. Amit Bansal & Ms. Manisha
                                     Singh, Advocates for petitioner.

                                  Versus

Hindustan Petroleum Corporation Ltd. .... Respondent
                          Through:    Mr. Rajiv Kapur, Advocate for
                                      respondent.

CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.    Whether reporters of Local papers may
      be allowed to see the judgment?       Yes

2.    To be referred to the reporter or not?             Yes

3.    Whether the judgment should be reported
      in the Digest?                                     Yes


RAJIV SAHAI ENDLAW, J.

1. The petition has been preferred under Sections 14&15 of the

Arbitration & Conciliation Act, 1996 for declaration that the mandate

of the arbitrator has terminated and for appointment of an

independent arbitrator, preferably a retired judge of this court or of

some other High Court.

2. The parties herein are parties to an agreement dated 15th

December, 1981 containing an arbitration clause whereunder all

disputes and differences between the parties were agreed to be

referred to the arbitration of the nominee of the Managing Director of

the respondent. It is further a term of the said arbitration clause that

the petitioner shall not have any objection to any such nomination by

the Managing Director of the respondent on the ground that the

person so nominated is an officer of the respondent corporation or

OMP.No.552/2006 page 1 of 7 that he has to deal with the matters to which the contract relates or

that he has in the course of duties as an officer of the respondent

corporation expressed views on the matters in dispute. The clause

further authorizes the Managing Director to in the event of the officer

so appointed as the arbitrator being transferred or vacating his office

or being unable to act as the arbitrator, designate another person to

act as the arbitrator in terms of the agreement.

3. Disputes and differences having accrued between the parties,

the petitioner approached the Managing Director of the respondent,

who then appointed one Mr. S.P. Chaudhry officer of the respondent

corporation as the arbitrator.

4. It is inter-alia the case of the petitioner that it is also a term of

the arbitration clause aforesaid that

"the award shall be made in writing within six months after

entering upon the reference or within such extended time

not exceeding further four months as the sole arbitrator

shall by a writing under his own hands appoint."

5. It is not disputed that the aforesaid Mr. S.P. Chaudhry entered

into reference on 29th May, 2000. The petitioner on 31st March, 2001

applied to the arbitrator aforesaid with the contention that a period of

10 months having elapsed since entering upon reference and the

award having not been published, Mr. S.P. Chaudhry was not entitled

to continue as the arbitrator. Upon the arbitrator refusing to admit

the said position the petitioner filed a petition under Article 227 of the

Constitution of India bearing Civil Misc. (Main) No.281/2001 in this

court inter-alia for quashing of the said order of the arbitrator. Vide

interim order in the said petition, the arbitration proceedings were

stayed. The petitioner then also filed a suit in the District Court for

the same reliefs as claimed before the arbitrator. During the

OMP.No.552/2006 page 2 of 7 pendency of the suit the respondent also terminated the dealership of

the petitioner. The suit was disposed of by suspending the operation

of the letter of termination of dealership during the pendency of the

arbitration and the parties were directed to take all their disputes

before the arbitrator. Both parties filed appeals in this court against

the said order, being RFA No.186/2001 and RFA No.283/2001.

6. In the interregnum the petitioner also applied to the Managing

Director of the respondent for appointing another arbitrator and upon

the failure of the Managing Director of the respondent to within 30

days thereof appoint an arbitrator filed arbitration application

No.38/2002 in this court under Section 11(6) of the Act for

appointment of an independent arbitrator.

7. Both the RFAs, arbitration application No.38/2002 and Civil

Misc. (Main) No.281/2001 were disposed of vide judgment dated 10 th

October, 2006 of the Division Bench of this court. The Division Bench

inter-alia held that the suit filed by the petitioner was not

maintainable; that if the petitioner contended that the mandate of the

arbitrator had terminated, the proper remedy for the petitioner was to

apply to the court under Section 14 of the Act and till the said petition

was decided there could be no question of entertaining the petition

under Section 11(6) of the Act.

8. It was thereafter that the present petition came to be filed. Vide

order dated 11th December, 2006 in these proceedings arbitration

proceedings were stayed.

9. It is the contention of the counsel for the petitioner that the

parties having agreed that the arbitrator will render an award within

the time specified, upon expiry of the said time and the failure of the

arbitrator to render the award, the mandate of the arbitrator

terminated and the arbitrator had become de-jure unable to perform

his functions. He has in this regard also relied upon the judgment of OMP.No.552/2006 page 3 of 7 this court in Shyam Telecom Ltd. Vs. ARM Ltd. 113 (2004) DLT

778 and a judgment of Bombay High Court in Kifayatullah Haji

Gulam Rasool Vs. Smt. Bilkish Ismail Mehsania AIR 2000

Bombay 424. In Shyam Telecom Ltd. it was held by this court that

the arbitrator is clothed with authority only under the agreement of

the party and the authority of the arbitrator is also unclothed in terms

of the said agreement.

10. I may notice that Section 14(1) (a) besides providing for the

termination of the mandate of the arbitrator on the arbitrator

becoming de-jure or de-facto unable to perform his functions also

provides the ground of, the arbitrator for other reasons failing to act

without undue delay also as a ground for termination of the mandate

of the arbitrator.

11. The counsel for the respondent has contended that the

arbitration in the present case having commenced after coming into

force of the 1996 Act, notwithstanding the agreement being of a date

prior thereto, the proceedings would be governed by the provisions of

the 1996 Act; that the 1996 Act unlike the 1940 Act does not provide

for any time limit for making of the award; it is thus contended that

the agreement between the parties of the time for making of the

award is of no avail and the mandate of the arbitrator cannot be

terminated on the said ground.

12. In view of the judgment of this court in Shyam Telecom Ltd.

and with which I am not inclined to disagree, the aforesaid contention

of the counsel for the respondent cannot be upheld. There is nothing

in the 1996 Act which prevents/bars the parties from agreeing to the

time limit for making the award. Several of the provisions of part I of

the Act are subject to the agreement to the contrary between the

parties. The Bombay High Court, Judgment whereof I respectfully

concur, has also held that it is open to the parties to provide for OMP.No.552/2006 page 4 of 7 termination of mandate of arbitrator i.e. the mandate of the arbitrator

can be subject to agreement between the parties. The consent order

in that case providing for time for making the award was held to be an

agreement that the authority of arbitrator shall come to an end

thereafter. Similarly, though the agreement in the present case does

not provide that the mandate of arbitrator shall terminate after expiry

of ten months but an agreement of time for making the award would

in the absence of consent implied or explicit, terminate the mandate

of arbitrator on expiry of such time. Same is not repugnant to the Act.

I am also of the view that irrespective of the above, failure of the

arbitrator to make the award within the agreed time would also fall

within the ambit of the other ground under Section 14 (1) (a) of

termination of mandate i.e. of failure to act without undue delay,

which is found to be made out in present case. Thus it has to be

necessarily held that the mandate of Mr. S.P. Chaudhry has

terminated.

13. I may however notice that even if the mandate of the arbitrator

is held to terminate under Section 14 of the Act, Section 15 (2) of the

Act provides that a substitute arbitrator shall be appointed according

to the rules that were applicable to the appointment of the arbitrator

being replaced.

14. The counsel for the petitioner has contended that since the

respondent failed to appoint a substitute arbitrator inspite of notice,

the petitioner has become entitled to the appointment of an

independent arbitrator. Though this is not a petition/application under

Section 11(6) of the Act but nevertheless, besides the relief of

declaration of termination of mandate of Mr. S.P. Chaudhry, relief of

appointment of alternate arbitrator is also claimed.

15. Under Section 14 of the Act, if a controversy remains between

the parties and/or between the party and the arbitrator as to whether OMP.No.552/2006 page 5 of 7 the mandate of the arbitrator has terminated or not, the party

contending that the mandate has so terminated is to approach the

court in this regard. From the facts aforesaid it is apparent that in

the present case the controversy remained, leading to the filing of this

petition. The controversy having remained, unless the said

controversy is adjudicated by the court, it cannot be said that the

petitioner has become entitled to apply under Section 11(6) or that

there is any failure on the party of the respondent under the agreed

procedure.

16. Thus, only upon this court ruling on the controversy of

termination of mandate of arbitrator, the procedure under Section

15(2) is to be set into motion.

17. I may notice that in N.H.A.I. Vs. Bumihiway DDB Ltd. 2006

(9) SCALE 564, upon resignation by presiding arbitrator, petition

under Section 11(6) was preferred and substitute arbitrator

appointed. The Supreme Court struck down such appointment and

held Section 15(2) to be applicable and the agreed procedure for

appointment of substitute arbitrator required to be followed. To the

same effect are Yashwith Construction (P) Ltd. Vs. Simplex

Concrete Piles India Ltd. V (2006) SLT 443 and D.S. Gupta

Contracts Pvt. Ltd. Vs. Unison Hotels Ltd. 98 (2002) DLT 369.

Thus, as per the settled law, on petition under Section 14 being

allowed, the procedure for appointment is the same as of appointment

of arbitrator being replaced and this court cannot appoint a retired

judge, as sought. Only if the respondent/appointing authority default

in the agreed procedure, will Section 11(6) come into play.

18. As per the agreed procedure, the appointment has to be made

by the Managing Director of the respondent.

19. I may also notice that as per the dicta in ACE Pipeline

Contracts Ltd. Vs. Bharat Petroleum Corp. Ltd. 2007 (5) SCC 304 OMP.No.552/2006 page 6 of 7 and in Northern Railway Administration, Ministry of Railway,

New Delhi Vs. Patel Engineering Company Ltd. (2008) 10 SCC

240, even in exercise of powers under Section 11(6) of the Act, the

court can give a mandate to the appointing authority to appoint the

arbitrator as per the agreement or appoint the arbitrator in terms of

agreed mechanism.

20. Since the matter has already remained pending for long the

Managing Director of the respondent is directed to appoint a

substitute arbitrator within one month from today with notice thereof

to the respondent. Needless to add that upon failure of the Managing

Director, the petitioner shall have remedies available to it in law. It is

further clarified that in accordance with the judgment aforesaid of the

Division Bench, all disputes between the parties including which may

have accrued after the initiation of arbitration proceedings before Mr.

S.P.Chaudhry will be dealt with by the substitute arbitrator and the

parties shall be entitled to file fresh pleadings with respect thereto.

With the aforesaid directions, the petition is disposed of leaving the

parties to bear their own costs.

IA No.13133/2006 (of the petitioner for interim stay).

Vide order dated 11th December, 2006 on this application

further arbitration proceedings before Mr. S.P.Chaudhry were stayed.

The said order continues to be in force. Upon disposal of the petition

the said application does not survive. The interim stay is vacated.

Copy of the order be given dasti under the signature of Court

Master.

                                             RAJIV SAHAI ENDLAW, J
July 06, 2009
PP




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