Delhi High Court
Oil And Natural Gas Corporation ... vs Aireff Detox Private Ltd. on 27 April, 2017
$~17
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. (COMM) 317/2016
OIL AND NATURAL GAS CORPORATION LTD.
ANKLESHWAR ..... Petitioner
Through Mr. Deepak Jain, Mr. Pradeep and
Mr. Jaspreet, Advocates
versus
AIREFF DETOX PRIVATE LTD. ..... Respondent
Through None
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
ORDER
% 27.04.2017
VIBHU BAKHRU, J
1. None appears for the respondent (hereafter 'ADPL') even though the
respondent stands served. In these circumstances, this petition is taken up
for hearing in absence of representation on behalf of the respondent.
2. The petitioner (hereafter 'ONGC') has filed the present petition under
section 34 of the Arbitration and Conciliation Act, 1996 (hereafter 'the Act')
impugning an arbitral award dated 03.03.2016 (hereafter 'the impugned
award') passed by the sole arbitrator.
3. The principal controversy involved in the present petition is whether
the impugned award is non est as the arbitrator had lost the mandate prior to
making the impugned award.
4. Briefly stated, the relevant facts necessary to address the aforesaid
controversy are as under:
4.1 ONGC floated a tender inviting bids for the design, engineering,
manufacturing, procurement, fabrication, civil & structural works,
transportation, installation, instrumentation & electrical works, hook-up,
testing, pre-commissioning, commissioning, test run and handing over in
connection with the revamping of Effluent Treatment Plant at Ankleshwar,
Gujarat. Consortium of ADPL and Zen Marketing Technologies Limited bid
for the same, which was accepted and Notification of Award (NOA) dated
24.02.2010 was issued by ONGC. Subsequently, the parties entered into the
agreement (hereafter 'the Agreement') on 30.04.2010.
4.2 Certain disputes arose between the parties and ADPL invoked the
arbitration clause. In terms of the Agreement, ONGC appointed the sole
arbitrator by a letter dated 19.11.2014 to adjudicate the disputes that had
arisen between the parties in connection with the Agreement. The said letter
of appointment expressly provided that the arbitral proceedings would be
governed by the arbitration clause 1.3 of the Agreement. The arbitrator
accepted the appointment and entered upon the reference.
4.3 Apparently, there was some controversy with regard to payment of
fees payable to the arbitrator and ONGC contends that, by a letter dated
04.05.2015, the arbitrator withdrew his consent to act as such. Consequently,
his mandate stood terminated on the said date.
4.4 In addition, ONGC also sent a letter (application) dated 02.06.2015 to
the arbitrator claiming that his mandate as the arbitrator stood terminated in
terms of clause 1.3.2.7 of the Agreement. In the said letter (application),
ONGC stated that in terms of the arbitration clause, the arbitration award
was to be rendered within a period of 8 months from the date of arbitrator
entering into reference - that is, on or before 18.07.2015 - and since the
arbitrator failed to render award within the said period, his mandate stood
terminated.
4.5 Whilst, the aforesaid application was pending, the arbitrator issued a
notice dated 29.01.2016 stating that the arbitration award would be
published.
4.6 Thereafter, the parties were heard by the arbitrator on ONGC's
application under section 15 (2) of the Act. The impugned award was
published on 03.03.2016 whereby the arbitrator also rejected ONGC's
application under section 15 (2) of the Act and inter alia held that his
mandate was not terminated as there was no undue delay.
5. Before proceeding further, it would be necessary to refer to clause
1.3.2 of the Agreement, which is quoted below:-
"1.3.2 Arbitration
Except as otherwise provided elsewhere in the contract, if
any dispute, difference, question or disagreement arises
between the parties hereto or their respective
representatives or assignees, in connection with
construction, meaning, operation, effect, interpretation of
the contract or breach thereof which parties are unable to
settle mutually, the same shall be referred to Arbitration as
provided hereunder:
*** *** *** ***
1.3.2. 7 The arbitral tribunal shall make and publish the award
within the stipulated as under:
Amount of Claims Period for making and publishing of the
and Counter Claims award (counted from the date of first
(excluding interest) meeting of the arbitrators):
Upto Rs.5 crore Within 8 months
Above Rs.5 crore Within 12 months
The above time limit can be extended by the arbitrator for
reasons to be recorded in writing, with the consent of the partiers."
6. ONGC's letter appointing the arbitrator expressly stipulated that "the·
Arbitration proceedings will be governed by the Arbitration clause 1.3 of the
above mentioned contract." Thus, there can be no doubt that the arbitral
award was to be rendered within a period of eight months of arbitrator
entering upon reference as stipulated in sub-clause 1.3.2.7 of the Agreement.
The said period could not be unilaterally extended without the consent of the
parties.
7. An arbitrator derives his mandate from the agreement between the
parties and has no power to render the award contrary to the agreement. In
this case, the mandate of the arbitrator to make the award ended with the
expiry of the period of eight months from the date of the arbitrator entering
upon the reference; that is, on or before 18.07.2015. There is no dispute that
the said time period for making the award, was not extended by the parties.
Accordingly, the arbitral award rendered on 03.03.2016 is without
jurisdiction and the same is liable to be set aside on this ground alone.
8. The Supreme Court in the case of N.B.C.C. Ltd. v. J.G. Engineering
Pvt. Ltd: (2010) 2 SCC 385 considered the question whether an arbitrator
can enlarge the time to publish the award beyond the specified period and
held as under:-
"A perusal of the arbitration agreement quite clearly reveals
that the arbitrator has the power to enlarge the time to make
and publish the award by mutual consent of the parties.
Therefore, it is obvious that the arbitrator has no power to
further extend the time beyond that which is fixed without
the consent of both the parties to the dispute. It is an admitted
position that the respondent did not give any consent for
extension of time of the arbitrator. Thus given the situation,
the arbitrator had no power to further enlarge the time to
make and publish the award and therefore his mandate had
automatically terminated after the expiry of the time fixed by
the parties to conclude the proceedings.
....The Arbitrator was bound to make and publish his award,
within the time mutually agreed to by the parties, unless the
parties consented to further enlargement of time. Therefore,
the condition precedent for enlargement of time would
depend only on the consent of the parties, that is to say, that
if the parties agree for enlargement of time. If consent is not
given by the parties, then the authority of the arbitrator would
automatically cease to exist after the expiry of the time limit
fixed. In the present case, the arbitrator had failed to publish
the award within the time limit fixed by the parties, and
hence, the High Court was justified in terminating the
mandate of the arbitrator....
It has been correctly observed by the High Court that the
arbitrator had become functus officio in the absence of
extension of time beyond 30th of September, 2005 to make
and publish the award. After the said date, the arbitrator had
no authority to continue with the arbitration proceedings."
9. A Division Bench of the Bombay High Court in the case of Bharat
Oman Refineries Ltd. v. Mantech Consultants : 2012 (2) ArbLR 482
(Bom) had held as under:
"19 .....The Arbitrator is required to adjudicate the disputes
in view of the agreed terms of contract and the agreed
procedure. All are bound by the agreed terms. Therefore, the
Arbitration proceedings should be governed and run by the
terms. The Arbitrator, therefore, cannot go beyond the
Arbitration Agreement clauses........
20. In view of the agreed clause itself, after lapse of agreed
time, the Arbitrator loses his jurisdiction as per the mandate
of Sections 14 and 15 of the Act. Such defect is incurable.....
21. The delay by the Arbitrator, to pass the award in such
fashion itself, in our view, is a misconduct as contemplated
under the Act. It is also illegal as it is not in pursuance of the
agreed clause and is in breach of terms.
*** *** *** ***
23. It is relevant to note that in the present case the parties
have already agreed that the award should be declared within
a particular time limit. Each and every matter will depend
upon the facts and agreement in each case. Once the matter is
closed for orders, after hearing both the parties, yet,
considering the scope and purpose of the Act, which itself
requires that the Arbitrator must pass Award without delay,
therefore, there is no jurisdiction that Arbitrator, without
giving any reason whatsoever, can pass such delayed Award
after more than two years and four months."
10. It is also relevant to note that by letter dated 04.05.2015, the arbitrator
had withdrawn his consent to act as an arbitrator. The relevant extract of the
said letter reads as under:-
"In light of the aforesaid fact-situation, the undersigned
is of the firm opinion that the undersigned would not like to
compromise in any manner whatsoever with the respect,
dignity and decorum that go with the office of an Arbitral
Tribunal. Hence, the undersigned hereby withdraws consent
to act as a Sole Arbitrator from all pending arbitrations
wherein ONGC is a party. The respective parties are
requested to collect their papers, and their cheque (wherever
applicable) after fixing prior appointment."
11. Undisputedly, ONGC did not at any point of time, after receipt of the
letter dated 04.05.2015, consent for the arbitrator to proceed with the
reference. Therefore, the arbitrator had no mandate from the parties to act as
such after having withdrawn his consent in terms of the letter dated
04.05.2015.
12. In view of the above, it is not necessary to examine the other grounds
pleaded by ONGC to assail the impugned award. The impugned award is
plainly, without any jurisdiction and cannot be sustained.
13. In view of the above, the present petition is allowed and impugned
award is set aside. No order as to costs.
VIBHU BAKHRU, J
APRIL 27, 2017
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