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M.S. Kuanna and ors. Vs. New Delhi Municipal Committee and anr. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberOriginal Miscellaneous Petition No. 50 of 1983
Judge
Reported inAIR1985Delhi262; ILR1985Delhi597
ActsArbitration Act, 1940 - Sections 11
AppellantM.S. Kuanna and ors.
RespondentNew Delhi Municipal Committee and anr.
Advocates: Rajesh Lakhanpal and; K.C. Mittal, Advs
Cases ReferredAndre & Cie v. Marine Transocean
Excerpt:
.....agreed that the arbitrators should resolve their dispute that both parties, respondent as well as claimant, are under a mutual obligation to one another to join in applying to thearbitrators for appropriate directions to put an end to delay. ' (12) as in the case the respondent/non-claimant could notbe under an obligation to take steps for the filing of the claim by the claimant on the failure of the claimant to act in thatbehalf, similarly the petitioner in the case in hand could not be expected nor was it under any just obligation to rouse respondent no. 12 provides that the person appointed under this section asan arbitrator or umpire shall have the like power to act in thereference and to make an award as if he had been appointed in accordance with the arbitration agreement......formaking the award has expired or not and whether the award has been made or not, enlarge from time to time the time formaking the award. it would be seen that while under section 11 the power for removing the arbitrator is limited to the groundof his failure to use all reasonable dispatch in entering upon and proceeding with the reference and making the award or hismisconduct, under section 28 the discretion of the court has notbeen limited by referring to any grounds therein and this powerof extension of time can be exercised not only before the expiryof the statutory period of four months but also thereafter andagain not only before the making of the award but also afterthe making of the award. keeping these factors present in mind we may come across cases where one party is not.....
Judgment:

Jagdish Chandra, J.

(1) He petitioner M. S. Khanna Associates (P) Limited, Contractors, F-22, Bhagat Singh Market, New Delhi has put up this petition under Sections 11 and 12 of the Arbitration Act, 1940(hereinafter to be referred to as the Act) for the removal of MrA. S. Khullar, respondent No. 2, as Arbitrator who entered upon.the reference on 21-4-1981 to resolve the disputes and differences which had arisen between the petitioner on the one hand and respondent No. 1. New Delhi Municipal Committee on the other and for appointing another arbitrator in his place. The arbitration clause No. 25 appearing in the contract, between the parties was invoiced by the petitioner as early as 14-1-1980 and in pursuance thereof the Administrator of respondent No. 1 N.D.M.C.appointed Mr. A. K. Guha as Arbitrator to adjudicate upon the disputes between the parties vide letter dated 24-9-1980 butMr. Guha resigned as an Arbitrator subsequently without taking up the matter and thereafter the Administrator appointed respondent No. 2 A. S. Khullar as the sole arbitrator or vide his letter dated 16-4-1981.

(2) It is alleged that after entering upon the reference on21-4-1981 even though the Arbitrator had called upon the parties to file their submissions of claims before him and the petitioner complied with that direction, respondent No. 1 did not and the Arbitrator misconducted himself in not reminding respondent No. 1 to file its claim or reply to the claim of the petitioner for a long time and rather allowed respondent No. 1to raise take objection such as that respondent No. 1 had not been supplied the copy of the claim of the petitioner which objection was raised by respondent No. 1 after very long time.The petitioner has been supported by the affidavit deposed toMr. D. D. Chawla one of the Directors of the petitioner company.

(3) This application has been resisted by respondent No. 1and in its reply it has controverter the allegations of any dilatory tactics on the part of respondent No. 1 or any unreasonable delay on the part of the arbitrator, by asserting that copy of the claim had not been supplied to it by the petitioner and it was supplied only as late as 4-6-1982 and further that the arbitrator who was Vigilence Officer of respondent No. 1 N.D.M.Cwas assigned some duties in the Astad as a result of which he was not free to hurry up with the giving of the award, and when the arbitrator vide his letter dated 21-1-1983 requested the parties to appear before him on 14-2-1983 at 3.00 P.M.for further proceedings with the matter and the matter was adjourned to 16-3-1983 at the request of the respondent No. 1N.D.M.C., the petitioner refused to participate in the arbitration proceedings for the reason that he had already moved this present petition. The averments in the reply have been supported by two affidavits one deposed to by Mr. N. C. Jain, Secretary',N.D.M.C. and the other by the arbitrator A. S. Khullar himself.Rejoinder has also been filed by the petitioner controverting the assertions of respondent No. 1 and this rejoinder is again supported by the affidavit deposed to by D. D. Chawla one of the Directors of the petitioner-company. The learned counsel for respondent No. 1 challenges the maintainability of this petition the ground that the statutory period of four months within which an arbitrator is to make and pronounce his award has already expired as a result of which the arbitrator had become function officio and consequently the question of his removal as arbitrator did not arise and there was no necessity of making such a petition and in support of this proposition he has relied upon an authority of Calcutta High Court reported as Arbn Hindusthan Steel v. Appejay Pr. Ltd. : AIR1967Cal291 . This authority does support this contention of the learned counsel for respondent No, 1. It has laid down as follows : 'The authority of an arbitrator cannot be revoked when in law the arbitrator docs not exist and/or cannotfunction. In other words if the arbitrator has become functus officio by reason of the expiry of four months in terms of Rule 3 of Sch. I of the Act the question of revokation of authority of the arbitrator cannot arise.'The perusal of this authority shows that it relied upon Louis Dreyfus & Co. v. R. A. Arunachala Ayya Air (2) and Harishankaralal Shambhunath : [1962]2SCR720 . Both these authorities were taken note of by this Calcutta authority in paragraphs 6 and 7thereof. The perusal of this authority shows that it took note of the provision of law contained in Section 28 of the Arbitration Act read with Clause 3 of Sch. I of the Act as a result of which the arbitrators became functus officio after the expiry of the statutory period of four months reckoned from the date of the arbitrators entering upon the reference, and held that this view received support from Louis Dreyfus and Co.'s case (supra)which matter according to this Calcutta authority stood clinc hed beyond doubt by the Supreme Court authority in Hari Shankarlal's case (supra) in which the following observations appear and were relied upon being the majority view : 'And in that event, after the expiry of the said four months the arbitrators become functus officio unless the period is extended by Court under Section 28 of the Act; such period may also be extended byCourt though the award has factually made.'Thus, what was held in Hari Shankarlal's case (supra) is that after the lapse of the statutory period of four months after the arbitrators entered upon the reference they became functus officio and unless the time is extended by the Court under Section 28 of the Act they cannot make the award and the same would be without jurisdiction, but if even after the making of such an award the Court extends the time under Section 28 of the Act,the award becomes valid. It was on this analogy that the aforesaid Calcutta authority placed reliance and held against the maintainability of the petition for revoking the authority of an arbitrator pointing out that after the lapse of the statutory periodof four months the arbitrator becomes functus officio as a result of which the question of revoking his authority could not arise.No other authority was cited by the learned counsel for respondent No. 1 in support of this proposition of law. The learnedcounsel for the petitioner has also not cited any authority to thecontrary. Anyhow, the learned counsel for respondent No. 1submits that he tried to search out but he could not find any authority to the contrary nor any other authority on this point.The contention of the learned counsel for the petitioner is that the analogy derived by the Calcutta High Court from Hari Shankarlal's case (supra) could not have been reasonably applied,inasmuch as the factors for the revocation of the authority of anarbitrator u/s. 11 could be different from the ones meant for the extension of time under Section 28 of the Act for the making and the pronouncement of the award by the arbitrator where's on the other hand it was urged by the learned counsel for respondent No. 1 that the factors in both the cases would be the .same.Under Section 11 of the Act the Court may, on the application of any party to the reference, remove an arbitrator who fails to use all reasonable dispatch in entering upon and proceeding with the reference and making of the award or if the arbitrator has misconducted himself and the proceedings. Under Section 28 ofthe Act the Court may, if it thinks fit, whether the time formaking the award has expired or not and whether the award has been made or not, enlarge from time to time the time formaking the award. It would be seen that while under Section 11 the power for removing the arbitrator is limited to the groundof his failure to use all reasonable dispatch in entering upon and proceeding with the reference and making the award or hismisconduct, under Section 28 the discretion of the Court has notbeen limited by referring to any grounds therein and this powerof extension of time can be exercised not only before the expiryof the statutory period of four months but also thereafter andagain not only before the making of the award but also afterthe making of the award. Keeping these factors present in mind we may come across cases where one party is not allowed tomake an application under Section 11 of the Act relying upon the view expressed in Arbn Hindusthan Steel's case (supra) it maybe possible that the award is made after the lapse of the statutory period of four months and the validity thereof on account of the arbitrator having become functus officio may be removed by the Court extending the time under Section 28 of the Act formaking the award. In such cases the party who had desired tomake an application under .Section 11 of the Act for revoking the authority of the arbitrator on the grounds specilied in that provision of law, would be left askance and helpless. In the. face of the possibility of such a contingency which may arise quiteoften, the view taken in Arbn Hindusthan Steel's 'case'' ( supra),with respect, does not appear to lay down the correct proportion of law and consequently the analogy of louis Dreyfus &Co.;'s case (supra) and Hari Shankarlal's case (supra) (inaiorityjudgment) does not afford a proper guide for determining the point in hand and for the reasons referred to above what looks to be a more reasonable point of view is that an application under Section 11 of the Act for revoking the authority of an arbitrator is maintainable even after the expiry of the staiutory period of four months reckoned from the date of the arbitrators entering upon reference. This view is, however, subject to the exception that if an application under Section 28 of the Act for extension of time lor making and pronouncing the award is rejected by the Court and then any party moves the Court for the removal of the arbitrator.

(4) For the purpose of deciding this petition on merits a few dates would be of relevance. The arbitrator entered upon the reference vide letter dated 21-4-1981 whereby he called upon the petitioner to file its statement of, claims together with thedocuments, if any, as part of the claim within 10 days of theTeceipt. of this communication will) a copy to the N.D.M.C.Annexure 'P4' is this letter and it shows that copies of these.letters were sent to both the parties.

(5) The claim was filed by the petitioner before the arbitrato roil 25-4-1981. Though not finding any mention in the pleadlng.a letter dated 1-3-1982 was received by respondent No. 1 from the arbitrator staling that the petitioner had submitted Us statement of claims to him vide letter dated 24-4-1981 and a copy endorsed to the Municipal Engineer (East) N.D.M.C., whereascounter-statements, if any. were still awaited from the N.D.M.Cand the N.D.M.C. was thereby requested to file the counter statements before the arbitrator within 7 days of the receipt ofthe said communication with a copy to the petitioner.

(6) Vide letter dated 12-3-1982 respondent No. 1 N.D.M.C.wrote to the arbitrator making grievance that it had not been supplied with a copy of the claim of the petition. Then valid letter dated 22-3-1982 (Annexure P-5) the arbitrator referring to respondent No. l's letter dated 1.2-3-1982 called upon the petitioner to furnish a copy of its claim to N.D.M.C. under intimation to him.. Thereupon the petitioner in its letter dated 26-3-1982 (Annexure P-6) informed the arbitrator that the copy of its claim had already, in fact, been given in the office of respondent No. 1 Municipal Engineer (East), but as it is Receipt had been denied, a copy of the daim along with documents (Exts. Cl to C13) were being enclosed but it is point doubt by the learned counsel for the petitioner that they were not sent along with this forwarding letter to the arbitrator but was sent to the Municipal Engineer (East) N.D.M.C. along with theI carbon copy of this forwarding letter as is obvious from the endorsement below this letter. It is, however, asserted in the reply to this petition by respondent No. 1 and also asserted at the Bar during the course of arguments by the learned counsel for respondent No. 1 that respondent No. 1 had received the copy of the petitioner's claim only on 4-6-1982 and the counterstatement by way of reply was filed by respondent No. 1 before the arbitrator on 6-7-1982.

(7) Thereafter it was vide letter dated 21-1-1983 that the arbitror proceeded to fix the date of hearing as 14-2-1983, buta week earlier, i.e. vide letter dated 7-2-1983 N.D.M.C, respondent No. 1 again sought adjournment of the hearing slating that its counsel was busy in some other matter whereupon the arbitrator adjourned the hearing to 16-3-1983 vide letter dated10-2-1983 and in the meantime the petitioner had moved this petition on 10-3-1983 for the revocation of the authority of thearbitrator.

(8) On the basis of the aforesaid dates it is contended by the learned counsel for the petitioner that there is nothing to explain a way in any manner whatsoever much less in a reasonable manner as to why the arbitrator kept quiet for such a long time between 25-4-1981 on which date the petitioner had submitted its claim to the arbitrator and 1-3-1982 when the arbitrator forthe first time called upon respondent No. 1 N.D.M.C. to file ifscounter-statements, if any, before him and this does constitutea valid ground of failure on the part of arbitrator to proceed with the arbitration proceedings with all reasonable dispatch. It need hardly be reminded that resort to arbitration by contesting parties is meant for the purpose of facilitating an early decision of their disputes and if that object is frustrated, and the responsibility for that lies squarely upon the arbitrator, the arbitrator is to blame and he may be presumed to have misconducted himself and the proceedings by not utilising reasonably the time at his disposal for the early resolving of the disputes and differences between the parties.

(9) It is pointed out by the learned counsel for respondent No. 1 N.D.M.C. that after the filing of the counter-statements by respondent No. 1 before the arbitrator on 6-7-1982 the arbitrator remained busy during the Asian Games (ASIAD) 1982and immediately being free from those additional duties of national importance the arbitrator vide letter dated 21-1-83requested both the parties to appear before him on 14-2-1983for hearing in the matter. In the reply filed by respondent No. 1 to this petition this vague assertion has not been furnished with necessary details regarding the actual period during which he was assigned additional duties in ASIAD1982 nor the nature of his duties so as to show the extent and urgency there of so as to enable the Court to come to the conclusion if he was really so much and so urgently busy in those additional he could not find time to hold the arbitration proceedings and to make the award at the earliest. Even the affidavit deposed to by the arbitrator in support of the reply of respondent No. 1 in this petition does not furnish any such details and in the absence of the same the Court is not in a position to give a favorable finding in favor of respondent No. 1 regarding the arbitrator having remained so busy and urgently so as to avoid the bringing to a close the arbitration proceeding. It is not believable that the petitioner did not supply copy of its claim submitted before the arbitrator, to respondent No. 1 atthe first instance when it filed the claim on 25-4-1981.

(10) Under the circumstances, the arbitrator has failed to use all reasonable dispatch in bringing to a close the arbitration proceedings and making the award and has misconducted himself and the proceedings.

(11) The learned counsel for respondent No. 1 then contends that if respondent No. 1 N.D.M.C. had failed to file the reply to the claim of the petitioner for a long time the petitioner ought to have reminded the arbitrator within a reasonable time to issue a notice to respondent No. 1 to file the reply to the claim of the petitioner and as the petitioner failed in that regard, it cannot claim the removal of the arbitrator. This contention cannot be accepted as after the filing of its claim before thearbitrator it was for the arbitrator to move further in the arbitration proceedings and not for the petitioner to remind him of what he was expected to do himself. The contention of thelearned counsel for respondent No. 1 is based upon the decision of the House of Lords reported in Bremer Valkan Schiffbau and Maschinenfabrik v. South India Shipping Corporation (1981)All Er 289. The relevant parareads as follows : '.... .'the obligation is, in my view, mutual it oblige search party to co-operate with the other in taking appropriate steps to keep the procedure in the arbitration moving, whether he happens to be the claimant or the respondent in the particular dispute.....if what is done voluntarily by way of preparation is done so tardily that it threatens to delay the hearing to a date when there will be a substantial risk that justice cannot be done, it is in my view a necessary implication from their having agreed that the arbitrators should resolve their dispute that both parties, respondent as well as claimant, are under a mutual obligation to one another to join in applying to thearbitrators for appropriate directions to put an end to delay. 'The arbitrator entered upon the reference on 21-4-81 and for the first time vide letter dated 1-3-1982 he called upon respondent No. 1 to file the reply within 7 days of the receipt of his letter, further informing therein that the petitioner had filed its claims on 25-4-1981. It is also stated in this letter that thecounter-statement, if any, was still awaited from the N.D.M.C. If the respondent did not file the reply to the claim of the petitioner before the arbitrator within a reasonable time of the filing of the claim by the petitioner, the petitioner could reasonably be under an impression that respondent No. 1 Ndmc did not want to contest or resist its claim and in this view of the matter could not be put to any sort of obligation or mutual obligation to remind the arbitrator to issue any fresh notice to respondent No. 1 to file its reply to the petitioner's claim. The a for said observations of the House of Lords came up for consideration before the Court of Appeal in Andre & Cie v. Marine Transocean (1981) 2 All Er 993 by Lord Denning Mr wherein ship owners and the charters had appointed one arbitrator each in the year 1969 as per the terms of the arbitration clause where after nothing was done by either party for about 8 years. The shop owners were the claimants who were to claim money from the charters for the loss. The shipowners after keeping quiet for about 8 years sent a letter through solicitors to charters in December 1977 which was received by the charterers on 3-1-1978. The question urged was that if the claiment did not file its claim before the arbitrator nor sought any directions from the arbitrators, under the principle of mutual obligation propounded by the House of Lords, the respondents-charterers ought to have moved the arbitrators for that purpose. Commenting upon this Lord Denning Mr observed , follows : 'This mutual obligation comes as something of a surprise to everyone; especially to the denizens of Essex Court and St. Mary Axe. Nothing of the kind was propounded before the judge, or before us in the Court of Appeal. It appears for the first time in the speech of Lord Diplock in the House of Lords. It is, I suppose, too late for any words of mine to make any difference. It is for us to come to terms withit. It is said to be based on an implication. As such it goes beyond anything that I have hithertounderstood. To my way of thinking the implication is neither obvious, nor reasonable, nor necessary.Nor does it accord with rality. If the claimant does not pursue his claim, if he makes no application to the arbitrator, it is said that the respondent is bound himself to do so. Whoever hears of a respondent doing any such thing Take this very case. It was not the charters who were claiming anymoney. It was the owners. If they wanted to pursue their claim, they should have taken steps to put in their points of claim, or to apply for directions. It was not for the charterers to do so. Justas the owners started the arbitration by taking the first step. So they should have continued it by taking the second or succeeding steps as they came around to be done. As we all know, the cases are legion in which arbitrators are appointed and nothing more is heard of the case. Sometimes it is settled.At other times the claimant simply lets it drop, andthe respondent does nothing. Does that mean thatthe claimant can revive it five, eight, fifteen or twenty years later on I cannot believe that the House of Lords intended any such thing. I think that we must have misunderstood the ruling in some way or other.Take this very case. If there really is a mutualobligation, the charterers, at the end of 1969, ought themselves; to have roused the sleeping ship-owners or have applied to the arbitrators for directions; and, as they did not do so, they are now in1981 being faced with an arbitration, when all their evidence is lost. It would be most unjust to put such an obligation on the charterers, which to one had ever thought of before.'

(12) As in the case the respondent/non-claimant could notbe under an obligation to take steps for the filing of the claim by the claimant on the failure of the claimant to act in thatbehalf, similarly the petitioner in the case in hand could not be expected nor was it under any just obligation to rouse respondent No. 1 N.D.M.C. from its inaction in the matter of tilinga reply to its claim as the petitioner could be under an expectation that its claim may not be contested by respondent No. 1.

(13) In view of the above discussion the petitioner succeeds and consequently the arbitrator A. S. Khullar is liable to beremoved.

(14) The learned counsel for the petitioner has contended that on the removal of respondent No. 2 A. S. Khullar as Arbitrator the power rests with the Court to appoint a new Arbitrator under S. 12(2)(a) of the Act whereas according to thelearned counsel for respondent No. 1 N.D.M.C. it is not for theCourt to appoint a new Arbitrator but the power of appointing a new Arbitrator remains with the Administrator of N.D.M.C.as according to the arbitration clause the President or the Administrative Head if there happens to be no President at the relevant time can fill up the vacancy of an Arbitrator originally appointed if the vacancy is caused when the Arbitrator is transferred or vacates his office or is unable to act for any reason. This clause does not specifically mention the vacancy caused by the removal of the arbitrator by the Court. Under Sec. 12(2)(a) when the Court removes the sole arbitrator or all the arbitrators the Court may, on the application of any party to thearbitration agreement, either appoint a person to act as sole arbitrator in the place of the person or persons displaced or order that the arbitration agreement shall cease to have effect with respect to the differences referred. Sub-section (3) of S. 12 provides that the person appointed under this section asan arbitrator or umpire shall have the like power to act in thereference and to make an award as if he had been appointed in accordance with the arbitration agreement. It would be noted that the provision of law contained in Section 12 has notbeen subjected to an agreement to the contrary between theparties, as a result of which it is clear that even if the arbitration agreement provides for the filling up of the vacancy by a named person even in the case of a vacancy caused by the removal ofthe arbitrator under the orders of the Court, the same would be invalid being in contravention of Section 12 of the Arbitration Act which gives power to the Court alone to fill up the vacancy on the removal of an arbitrator by Court. Thus, the arbitration agreement even though talking of the occurrence of vacancy for any reason, the same cannot and would not include the vacancy caused by the removal of the arbitrator under the orders of the Court and consequently the President or the Administrative Head of N.D.M.C. shall not have the power to appoint a new arbitrator after the Administrator initially appointed by him is removed by the Court, and the power of appointing the new arbitratorrests with the Court under S. 12 of the Act. The authority West Bengal Essential Commodities Supply Corporation Ltd. v. M/s. International Trading Corporation of India : AIR1984Cal313 , relied upon by the learned counsel for respondent No. 1 N.D.M.C. has no applicability to the facts of the present case wherein the arbitrator initially appointed is being removed by the Court whereas in the aforesaid authority the Arbitrator had not been removed by the Court. It is thus Courtalone which is competent to appoint a new arbitrator and not the authority referred to in the arbitration agreement. Mr.O. P. Mittal, Retired Chief Engineer, C.P.W.D., S-253, Panchsheel Park, New Delhi is appointed the new Arbitrator to decide the disputes and differences between the parties. His fees is tentatively fixed at Rs. 2,000 to be shared equally by both the parties. Intimation of this order be sent to the new Arbitrator immediately. There shall, however, be no order as to costs of this petition.


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