Arbitratiion Application No.72 of 2012

27th April, 2012

Petitioner Counsel: Mr. SNEHAL K. SHAH, Ms. PRIYANKA C. KOTHARI, PAMNANI
Respondent Counsel: Mr. ASHISH MEHTA, Mr. KINFATON D'SOUZA, DUDHAT PEREIRA

Cases Cited:
NBCC Ltd. Vs. J. G. Engineering Pvt. Ltd., 2010(2) ALL MR 417 (S.C.)=2010 (3) Mh.L.J. 18 [Para 3,5]

JUDGMENT

JUDGMENT :- These proceedings have been instituted under Section 11 of the Arbitration and Conciliation Act, 1996. In a Company Petition for winding up under Sections 433 and 434 of the Companies' Act, 1956, an order was passed by this Court by consent on 23 November 2009. Consent Minutes signed by the parties and by their Advocates were tendered to the Court and in terms thereof, the Company Petition was disposed of. The Consent Minutes of the Order were to the following effect :

"1) The Petition to be disposed of in terms of minutes as under:

2) That the Petitioner and Respondent have agreed to dispose of the dispute in the petition by arbitration by referring all claims and counterclaims between them to Arbitration as under.

3) The parties have agreed to appoint Zal Andhyarujina, Advocate, as sole Arbitrator, who shall endeavour to adjudicate the respective claims of the parties and shall pass an award within six months of his acceptance of appointment as arbitrator.

4) The Arbitrator shall be free to decide on the procedure to be followed by the Arbitrator.

5) The parties shall bear the fees of the arbitrator equally subject to the final award. The Arbitrator will charge fees at panel rate.

6) The parties shall bear their own costs.

7) The petition shall be disposed of in terms of the above Minutes of Order."

2. In pursuance of the order of this Court, a communication was addressed to the Sole Arbitrator on 25 January 2010 by the Advocate for the Applicant. The Sole Arbitrator by his communication dated 8 March 2010 fixed a meeting on 18 March 2010. Eventually on 23 June 2010, the Sole Arbitrator issued directions for the filing of a statement of claim by 21 July 2010, of the written statement and counter claim, if any, by 18 August 2010 and the rejoinder by 1 September 2010. The hearing was then scheduled for 15 September 2010. The Applicant filed his statement of claim on 24 September 2010. The Consent Minutes have recorded that the Arbitrator would endeavour to adjudicate upon the respective claims and pass an award within six months of his acceptance of appointment as Arbitrator. That period, it is common ground, came to an end on 7 September 2010. The Applicant thereupon applied for extension of time for completing the arbitration before the Learned Company Judge. The Company Application was, however, permitted to be withdrawn with liberty to adopt appropriate proceedings by an order dated 20 January 2011. The Applicant thereupon moved an Arbitration Application before the Learned Judge hearing Arbitration Applications. The Arbitration Application was withdrawn with liberty to take appropriate steps in accordance with law on 7 February 2012 before the Learned Single Judge. Accordingly, these proceedings have been instituted after a letter of invocation dated 8 February 2012. The letter was replied to on 7 March 2012, the defence being that once the period of arbitration proceedings came to an end on 7 September 2010, the Respondent refused to agree to any arbitration thereafter.

3. On behalf of the Applicant, it has been submitted that (i) In the consent Minutes of the Order, parties have agreed to refer disputes to arbitration. The mandate of the sole Arbitrator was that he would endeavour to adjudicate upon the claim and that he shall pass an award within six months of his appointment; (ii) Once the period of six months came to an end, the time for completing the arbitral proceedings could only be extended by consent of parties, in view of the judgment of the Supreme Court in NBCC Ltd. vs. J.G.Engineering Pvt. Ltd.; 2010 (3) Mh.L.J. 18 : [2010(2) ALL MR 417 (S.C.)] (iii) The Respondent not having agreed to the extension, the mandate of the earlier Arbitrator stood terminated by virtue of the provisions of Section 15(1)(b) of the Arbitration and Conciliation Act, 1996,; (iv) This would not preclude, however, the Applicant from applying under Section 11 for the appointment of a fresh Arbitrator. The arbitration agreement is contained in Clause (1) of the Consent Minutes which is distinct from the actual appointment of the Arbitrator and the mandate under Clause (2). Hence, it was submitted that the Court should exercise its jurisdiction under Section 11 by appointing a fresh Arbitrator.

4. On the other hand, Counsel appearing on behalf of the Respondent submitted that (i) The Applicant chose to file his statement of claim before the Sole Arbitrator on 23 September 2010 which was after the mandate stood terminated on 7 September 2010; (ii) Once the period prescribed by the parties by consent had come to an end on 7 September 2010, the proceedings before the sole Arbitrator would come to an end and the Applicant would not be entitled to seek arbitral proceedings; and (iii) The Applicant is responsible for the state of affairs that has taken place since it had failed to file its statement of claim before the sole Arbitrator by the date prescribed by consent.

5. The Consent Minutes of the Order which were placed before the Court in the Company Petition are in two parts. In clause (2), parties agreed that their disputes and differences would be referred to arbitration. In clause (3), parties stipulated that they had agreed to an appointment of a named Advocate as sole Arbitrator. Clause (3) indicates that the sole Arbitrator shall endeavour to adjudicate upon the claims of the parties and shall pass an award within six months from the date of his acceptance of the appointment as Arbitrator. Parties consciously separated their agreement to refer their disputes and differences to arbitration in clause 2 from the specific mandate which was conferred upon the named sole Arbitrator in clause (3). Evidently the parties agreed that the Arbitrator shall endeavour to adjudicate upon their claims and that he shall pass his award within six months of his acceptance of appointment. The award was not delivered within six months. In view of the law laid down by the Supreme Court in NBCC Ltd. vs. J.G. Engineering Pvt.Ltd., [2010(2) ALL MR 417 (S.C.)] (supra), the parties having fixed the time for making of the award, an extension of time could only take place with their consent. In the absence of the consent of the Respondent, the mandate of the earlier sole Arbitrator came to an end. Section 15(1) of the Arbitration and Conciliation Act, 1996, provides that in addition to the circumstances set out in Sections 13 and 14, the mandate of an Arbitrator shall terminate inter alia by or pursuant to agreement of the parties. In the present case, there was an agreement between the parties that the award would have to be delivered within six months, a period which came to an end on 7 September 2010. Thereupon, the mandate of the Arbitrator stood terminated. That, however, does not preclude the Applicant from seeking recourse to its remedies under Section 11 of the Arbitration and Conciliation Act, 1996. This is not one of those cases where parties have agreed to a situation where there would be an arbitration only before a named individual or that in his absence there would be no arbitration at all. On the contrary, Clause (2) of the Consent Minutes makes it abundantly clear that the parties agreed that their disputes would be referred to arbitration. Accepting the contention of the Respondent would be virtually to defeat the salutary provisions contained in the Arbitration and Conciliation Act, 1996. The Court would not accept such a state of affairs unless there is a clear and unambiguous intent on the part of the parties. In the present case, upon the termination of the mandate of the Arbitrator who was appointed under the Consent Minutes, the jurisdiction of the Court to make a fresh appointment can be invoked. As a matter of fact, it needs to be emphasized that in its decision in NBCC Ltd. vs. J.B.Engineering Pvt.Ltd., [2010(2) ALL MR 417 (S.C.)] (supra), the Supreme Court in the concluding part of its judgment had while setting aside the order of the High Court, remanded the case back to the High Court for a fresh decision on the application under Section 11(6).

6. Having regard to these circumstances, the Arbitration Application would have to be allowed. There shall be an order accordingly. Mr.Naushad Engineer, Counsel, shall stand appointed as sole Arbitrator under the Arbitration and Conciliation Act, 1996. The Arbitration Application is accordingly disposed of . There shall be no order as to costs.

7. The Registrar (O.S.) is directed to forward a copy of this order to the Sole Arbitrator together with a Memorandum containing the addresses of the parties.

Application allowed.