Arun Kathpalia vs J.M.Mukhi
2009 Latest Caselaw 2247 Del

            * IN THE HIGH COURT OF DELHI AT NEW DELHI

                                                       Date of Reserve: 2.4.2009
                                                    Date of Order: 25th May, 2009

OMP No. 86/2009
%                                                                    25.05.2009

      Arun Kathpalia                                    ... Petitioner
                           Through: Mr. Sandeep Sethi, Sr. Advocate with
                           Mr. M.Dutta, Advocate

             Versus


      J.M.Mukhi                                         ... Respondent
                           Through: Mr. J.M.Mukhi, Respondent-in-Person



JUSTICE SHIV NARAYAN DHINGRA

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 judgment should be reported in Digest?                           Yes.

JUDGMENT

This application/petition has been made by the petitioner under

Sections 14/15/23 and 25 of the Arbitration & Conciliation Act, 1996 (in short "the

Act") seeking termination of the mandate of the present Arbitrator and for

appointment of another Arbitrator in his place. It is stated by the

applicant/petitioner that the learned Arbitrator in this case was appointed by this

Court on 19th January, 2005, despite passage of more than four years, the

respondent has avoided filing of his statement of claim before the learned

Arbitrator and the learned Arbitrator continued the proceedings and refused to

terminate the proceedings in accordance with Section 25 of the Act resulting into

the abuse of the arbitral proceedings by the respondent.

2. The petitioner and the respondent in this case both are advocates

and the dispute between them is in respect of dissolution and accounts of a

partnership firm of advocates. The petitioner submits that the prolonged

arbitration proceedings without even filing of the claim by the respondent was

paralyzing his professional career and the fact that for four years the Arbitrator

has not even obtained statement of claim from the respondent, who was claimant

before the Arbitrator, was sufficient to terminate the mandate of the Arbitrator.

3. It is submitted that when the proceedings commenced by an order

dated 5th February, 2005, the respondent/claimant was directed to file a

statement of claim within six weeks. No statement of claim was filed within this

period and by an order dated 14th May, 2005, the learned Arbitrator extended

time for filing claim by another six weeks from 14 th May, 2005. No statement of

claim was yet filed and the claimant made an application that he was unable to

file his statement of claim in absence of certain records and asked for extension

of time. Thereafter, the matter was routinely adjourned from time to time

between 5th May, 2005 and 29th November, 2005 at the request of the

respondent/claimant. On 29th November, 2005 the claimant filed an application

under Section 17 of the Arbitration and Conciliation Act, 1996 seeking certain

interim directions. The Arbitrator then proceeded with disposal of this application

and pleadings in this application were completed on 9th February, 2006. The

application was finally argued and on 17th March, 2006, the learned Arbitrator

decided this application in favour of the claimant. The petitioner herein preferred

an appeal against the order and the same was set aside by this Court by a

judgment dated 17th May, 2006 passed in OMP No. 150/2006. Thereafter till

date no statement of claim has been filed by the claimant and the proceedings

were continuing only on application under Section 17. The applicant/petitioner

on 18th January, 2008 filed an application under Section 12 & 13 of the

Arbitration & Conciliation Act, 1996 expressing loss of confidence in the Arbitrator

due to above circumstances. This application was dismissed/disposed of vide

order dated 21st November, 2008 by the learned Arbitrator.

4. A prayer is made that the mandate of the Arbitrator should be

terminated in terms of provisions of Section 14 (1)(a) because of failure of the

Arbitrator to act without undue delay.

5. The application is opposed by the respondent, who appeared in

person, being an advocate, and stated that he did not want to file reply to the

petition and shall straightway argue the matter. He submitted that there was no

delay on his part and it was the petitioner, who was responsible for delay in

proceedings before the learned Arbitrator. The petitioner and he were running a

partnership firm and in between he had to go abroad. At his back the petitioner

did all kinds of misdeeds resulting into loss of his prime clientage. He was

unable to file the claim before the Arbitrator because of non-availability of copies

of balance-sheet, copies of bank statements, income expenditure accounts for

the financial year upto 31st March, 2004. Directions were given to the petitioner

by the Arbitrator and by this Court from time to time, but the petitioner had not

been furnishing full documents to him showing details of earnings, details of

expenditure and other aspects of the partnership firm and the dissolution thereof

later on. The respondent placed on record various orders passed from 26 th

March, 2004 to 5th December, 2007 and stated that in view of non-giving of

details by the petitioner, the respondent had not been able to file the statement of

claim before the learned Arbitrator. The petitioner cannot take benefit of his own

wrong.

6. I consider that the basic premise of moving the Court for

appointment of an Arbitrator for resolution of dispute is that the claimant knows,

what are his claims that are required to be adjudicated. If the

claimant/respondent was not aware as to what were his claims against the

petitioner, there was no reason for resorting to arbitration and there was no

reason for this Court to appoint the Arbitrator. Appointment of an Arbitrator had

taken place only because the respondent represented to the Court that there was

dispute between him and petitioner and he had known claims against the

petitioner to be adjudicated. It is strange that even today, the respondent is

taking stand that he does not know what is the extent of his claims against the

petitioner and he is not able to file statement of claim before the Arbitrator. I

think this itself should be a sufficient ground to terminate the arbitration

proceedings. The plea of holding back of documents by the petitioner or non

discovery of documents by the petitioner is concerned, I consider that this plea

could have succeeded only if the respondent had filed his claim before the

Arbitrator and asked the Arbitrator or this Court under Section 9 to pass

necessary orders for discovery of documents from the petitioner. The

respondent was at liberty to produce evidence before the Arbitrator in respect of

his claim. The evidence includes oral evidence, the evidence of clients, the

evidence from Registrar of Firms, evidence from banks etc. If during the course

of evidence, respondent had come to know that he had claimed lessor amount

then what was due, the Arbitration and Conciliation Act, 1996 gives liberty to him

to amend the claim. However, the Arbitration & Conciliation Act, 1996 does not

envisage the arbitration proceedings without the claimant knowing what his claim

is or without claimant filing his claim before the arbitrator.

7. I consider that the learned Arbitrator in this case miserably failed to

act in accordance with the basic principles of settlement of a dispute. The basic

principle of settlement of a dispute is that the learned Arbitrator should know

what is the claim of the claimant and what is the stand of the respondent and

what are factual or legal issues involved. In absence of any claim having been

filed before the Arbitrator, the learned Arbitrator should have terminated the

proceedings in terms of the Section 25(a) of the Arbitration & Conciliation Act,

1996. Non-availability of documents cannot be a cause to continue arbitration

proceedings without a claim for more than four years. However, the Arbitrator in

this case did not terminate the arbitral proceedings and that is why the petitioner

is before the Court.

8. Section 5 of the Arbitration Act prohibits intervention of the Court in

the matters governed by part I of the Arbitration & Conciliation Act except where

it is so provided in this part. Section 14 of the Act gives powers to the Court to

terminate the mandate in the circumstances where the Arbitrator fails to act

without undue delay. In the present case, the learned Arbitrator failed to act and

to give directions to the respondent/claimant to file claim within a reasonable

time. Though the directions were initially given to the respondent to file claim

within six weeks, which period was further extended by another six weeks after

May „ 01 but when the respondent did not file the claim, the Arbitrator failed to act

thereafter and did not press the respondent to file the claim for four years. I

consider that in view of Section 14(2) of the Act, it is appropriate that mandate of

the Arbitrator should be terminated.

9. Normally, when the mandate of an Arbitrator is terminated, the

Court under Section 15(2) of the Arbitration & Conciliation Act should appoint an

Arbitrator in place of the Arbitrator whose mandate is terminated, but in the

present case, there is no claim of the respondent/claimant, to be adjudicated by

the Arbitrator. Had there been a claim of the respondent/claimant, he would

have filed it before the existing Arbitrator. In absence of any claim made by the

claimant, I consider that there is no use of appointing another Arbitrator in place

of the existing Arbitrator, since the succeeding Arbitrator will not have anything to

decide.

10. The proceedings in this case should have been terminated long

back under Section 25(a) of the Act, because of failure of the

respondent/claimant to file the claims. I, therefore, allow this petition. The

mandate of the Arbitrator is hereby terminated.

May 25, 2009                                      SHIV NARAYAN DHINGRA, J.
vn