Madhya Pradesh High Court

Suresh Gupta vs Madhya Pradesh Agro Industries ... on 24 February, 2021

Author: Vishal Dhagat

     HIGH COURT OF MADHYA PRADESH: JABAPLUR

        SB: Hon'ble Shri Justice Subodh Abhyankar,J

               ARBITRATION CASE NO.81 OF 2018

                                  Suresh Gupta.

                                           Vs.

Madhya Pradesh Agro Industries Development Corporation
                  Ltd. and another.

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Shri Dhruv Verma, learned counsel for the applicant.

Shri P.K. Mishra, learned counsel for the respondents.
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                                     ORDER

(Passed on the 24th day of February, 2021)

This application has been filed by the applicant

under Section 14 (2) read with Section 11(6) of the

Arbitration and Conciliation Act, 1996 (for short "Act,

1996") for substitution of the sole arbitrator. In this case

the applicant is aggrieved by the order dated 29.6.2018

passed by the sole arbitrator, who is an ex-Managing

Director of the respondent No.1 Madhya Pradesh Agro

Industries Development Corporation Ltd..

2. The contention of the applicant is that the

appointment of the said Managing Director of the

respondent No.1 as an arbitrator is in contravention of the

provisions of Sections 12, 13, 14, 15 and 16 of the Act,

1996. Reliance is also placed on the maxim of Nemo Judex

in Causa Sua, a latin phrase meaning, "no-one is judge in his own

cause."

3. According to the applicant, in terms of Sections

14 and 15 and as per the amendment of 2015 to the

Arbitration and Conciliation Act, 1996, the mandate of the

arbitrator has been terminated.

4. In brief, the facts of the case are that applicant

the respondents invited tenders for ploughing and levelling

work of the agricultural land of the farmers belonging to

Scheduled Castes/Scheduled Tribes, and persons living

below the poverty line under the "Swarnajayanti Gramin

Rojgar Yojna". The tender of the respondents was accepted

and an agreement was executed on 24.3.2003 between the

parties which also contained an arbitration clause which

reads as under":-

";g fd] bl vuqca/k i= dks laikfnr djus esa gksus okyk leLr O;; i{k Øa- 2 ogu djsxkA ;fn vuqca/k i= ds lEiknu i'pkr~ ysu nsu ckor~ dksbZ fookn dh fLFkfr curh gS rks i{kdkj Øa-1 ds izca/k lapkyd vkchVªsVj ds :i esa fookn dk fujkdj.k djsaxs tks mHk; i{kksa dks ekU; djuk gksxk vkSj mHk; i{k dks ,d nwljs ds fo:) fdlh Hkh izdkj dh U;k;ky;hu dk;Zokgh djus dk vf/kdkj ugha gksxkA U;kf;d {ks=kf/kdkj 'kgj Hkksiky gksxkA"

It is an admitted fact that a dispute has arisen between the

parties and the applicant had filed an application under

Section 11(6) of the Act, 1996 before the lower Court who,

vide its order dated 1.8.2005 appointed the Managing

Director of the respondent-Corporation as an arbitrator.

However, the said Arbitrator delegated his authority to one

R.K.Gupta, a retired officer of the respondent-Corporation

and before whom the parties appeared and filed their

statement of claims. The said Arbitrator, appointed by the

Managing Director of the respondent-Corporation passed an

award on 23.1.2006 and the claim of the applicant was

decreed. Being aggrieved of the same, an application under

Section 34 of the Act, 1996 was preferred by the

respondents before the Trial Court and vide its order dated

16.10.2006 the said application was dismissed by the Trial

Court, against which an appeal MA No.1403/2007 was

preferred by the respondents before this court . The said

appeal was disposed of by this Court vide its order dated

28.4.2015 in the following terms:-

"In view of preceding analysis, the impugned order dated 1.8.2005 as well as the Award dated 23.1.2006 passed by the Arbitrator are hereby quashed. The Managing Director to the appellant-

Corporation is directed to adjudicate the dispute between the parties and to conclude the same expeditiously, in accordance with law, preferably within a period of six months from the date of production of copy of this order before him."

5. Shri Dhruv Verma, learned counsel for the

applicant has vehemently argued before this Court that the

Managing Director himself had no authority to proceed with

the case and hence the applicant also filed an application

under Section 14(2) read with provisions of the Act, 1996

contending that the proceedings are in total contravention

to the provisions of the doctrine of Nemo Judes in Causa

Sua, i.e. "nobody can be a judge in his own cause". Learned

counsel for the applicant has also drawn the attention of

this Court to the provisions of Sections 12 and 14 of the Act

as also the Fifth Schedule which provides that one of the

grounds which gives rise to justifiable doubts as to the

independence or impartiality or arbitrators is that the

arbitrator is a manager, director or part of the management,

or has a similar controlling influence, in an affiliate of one of

the parties if the affiliate is directly involved in the matters

in dispute in the arbitration. In support of his contention

Shri Verma has also relied upon the decisions of the Hon'ble

Supreme Court in the case of BSNL Vs. Motorola,

reported in (2009) 2 SCC 337 and in the case of NBCC

Vs. J.G.Engg. (P) Limited, to submit that even otherwise

the Managing Director is not proceeding with the case

expeditiously in the matter and unnecessary delay is being

caused by him only. In this regard, an application was also

filed before the arbitrator but the same was dismissed vide

the impugned order dated 29.6.2018 which is under

challenge before this court.

6. Learned counsel for the respondents on the other

hand has opposed the prayer of the applicant and has

submitted that the grounds raised by the applicant are

unjustifiable, as the agreement was executed between the

parties on 24.3.2003 i.e. well before the Amendment of

2015 was made applicable and even otherwise, it was not

the case of the applicant in the first round of litigation that

the arbitrator is not impartial and thus, it is submitted that

only with a view to further prolonged in the matter, the

present application has been filed.

7. Heard the learned counsel for the parties and

perused the record.

8. On due consideration of the rival submissions of

the learned counsel for the parties and on perusal of the

record this Court is of the considered opinion that the

applicant has miserably failed to make out any case of

interference in the order passed by the arbitrator on

29.6.2018 for substitution of the arbitrator. The record

clearly reveals that in the appeal (MA No.1403/2007)

preferred by the respondents, this Court, vide its order

dated 28.04.2015 had clearly held that the arbitrator i.e. the

Managing Director has no authority to abdicate his powers

and to delegate the same to other authority. The relevant

paras of the same read as under:-

"7. In the instant case, admittedly, under clause 11 of the agreement, the dispute between the parties has to be adjudicated by the Managing Director of the appellant- Corporation. By an order dated 1.8.2005 passed by the trial Court in exercise of power under Section 11(6) of the Act, the Managing Director of the appellant-

Corporation was appointed as an Arbitrator. Thus, under the order of the Court as well as in view of the agreement executed between the parties, the Managing Director of the appellant-Corporation was required to perform his duties as an Arbitrator. His authority could be terminated only in contingencies mentioned in Sections 14 and 15 of the Act. The Arbitrator could not have abdicated his duty to act as an Arbitrator.

8. Neither the appellant nor the respondent had any authority to give consent expressly or impliedly to continue with the proceeding which was initiated by an Arbitrator who had no authority in law, to do so in violation of the express provision contained in the arbitration agreement as well as the order passed by the trial Court which had attained finality, that too without abrogating the arbitration agreement. Therefore, in the fact situation of the case, the provisions of Section 4 of the Act have no application.

9. Even otherwise, it is well settled in law that in case of patent lack of jurisdiction, the jurisdiction cannot be assumed by the Arbitrator on the basis of acquiescence of parties. See: Tarapore & Co., Vs. State of M.P. , (1994) 3 SCC 521. The Award passed by the Arbitrator has no sanctity in the eye of law. T he trial Court, therefore, grossly erred in rejecting the objection preferred by the appellants with regard to the Award of the Arbitrator to adjudicate the dispute

between the parties, merely because the parties have not raised any objection in the proceeding before the Arbitrator.

10. In view of preceding analysis, the impugned order dated 1.8.2005 as well as the Award dated 23.1.2006 passed by the Arbitrator are hereby quashed. The Managing Director of the appellant-

Corporation is directed to adjudicate the dispute between the parties and to conclude the same expeditiously, in accordance with law, preferably within a period of six months from the date of production of copy of this order before him."

(emphasis supplied)

A perusal of the observations made by this Court clearly

reveals that none of the parties had raised any objection

regarding the appointment of the Managing Director of the

respondent-Corporation as an arbitrator. In such

circumstances, this Court had made the finding in para 10

of the aforesaid order and the Managing Director of the

appellant-Corporation was directed to adjudicate the

dispute between the parties and to conclude the same

expeditiously, in accordance with law, preferably within a

period of six months from the date of production of copy of

the said order. From the record it is also apparent that the

matter was fixed by the said arbitrator for final hearing

itself , however, on many occasions it was adjourned at the

instance of the counsel for the applicant and on some

occasions by the respondent and on some occasions the

arbitrator himself was not present due to administrative

work. That apart it is also found that as per the impugned

order dated 29.6.2018, the arbitrator has also given a

finding that the applicant had also filed an application on

14.3.2018 and had refused to participate in the proceedings

contending the eligibility of the arbitrator, which also

demonstrates the adamant attitude of the counsel for the

applicant to not to participate in the proceedings. In the

considered opinion of this Court, when this Court in MA

No.1403/2007 has already directed the Managing Director

to adjudicate the dispute between the parties and to

conclude the same expeditiously preferably within a period

of six months from the date of date of production of copy of

the order, in such circumstances, there was no occasion for

any of the parties concerned to seek an adjournment beyond

the aforesaid period, but it is apparent that no such efforts

were made.

The decisions relied upon by the learned counsel for the

applicant are distinguishable and are of no avail to the

applicant. In the case of BSNL Vs. Motorola (supra), the

officer of the Company who had already taken a decision

regarding the liquidated damages of the appellant BSNL,

was appointed as an arbitrator to settle the dispute between

the parties and under these circumstances, the Supreme

Court, in para 37 held as under:-

"37. Further, the CGM, Kerala Circle has already taken a decision as is evident from his letter dated 25-4-2006, that the appellants were right in imposing the liquidated damages and therefore, the question of such a person becoming an arbitrator does not arise as it would not satisfy the test of impartiality and independence as required under Section 12 Moreover, it would also defeat the notions laid down under the principles of natural justice wherein it has been recognised that a party cannot be a judge in his own cause. The judgment of this Court in State of Karnataka v. Shree Rameshwara Rice Mills [(1987) 2 SCC 160] is significant in this matter. The Court had stated: (SCC p. 161) "... Even assuming that the [terms of Clause 12 afford] scope for being construed as empowering the officer of the State to decide upon the question of breach as well as assess the quantum of damages, adjudication by the officer regarding the breach of the contract cannot be sustained under law because a party to the agreement cannot be an arbiter in his own cause. Interests of justice and equity require that where a party to a contract disputes the committing of any breach of conditions the adjudication should be by an independent person or body and not by the other party to the contract."

However, in the same judgment, in para 39, the Supreme

Court has held as under:-

"39. Pursuant to Section 4 of the Arbitration and Conciliation Act, 1996, a party which knows that a requirement under the arbitration agreement has not been complied with and still proceeds with the arbitration without raising an objection, as soon as possible, waives their right to object. The High Court had appointed an arbitrator in response to the petition filed by the appellants (sic respondent). At this point, the matter was closed unless further objections were to be raised. If further objections were to be made after this order, they should have been made prior to the first arbitration hearing. But the appellants had not raised any such objections. The appellants therefore had clearly failed to meet the stated

requirement to object to arbitration without delay. As such their right to object is deemed to be waived."

In the case on hand also, the same situation has arisen

where the applicant, despite having participated in the

earlier proceeding for appointment of arbitrator before the

lower court, also participated in the proceedings before the

earlier arbitrator who was also an officer of the respondent-

corporation and passed an order in their favour which was

challenged by the respondent under s. 34 of the Act before

the District Judge and also in the High Court u/s.37 of the

Act but the applicant never raised this objection that the

arbitrator was biased, which only shows applicant's

intention to get a favourable order by any means which, in

the considered opinion of this court is a bad professional