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TMI Blog2004 (9) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... d into a Divestment agreement in 1997. Clause 3 of Article IV of the Divestment agreement inter alias contains an Arbitration agreement for reference of the disputes between the parties through Arbitration. The said clause reads as under : "In the event of any dispute, difference of claim arising out of or in connection with or in relation to this agreement then as such disputes shall be referable to the sole Arbitration of a mutually agreed Arbitrator. The Arbitrator shall conduct the Arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modification thereof. The Arbitrator shall make and pronounce a reasoned Award. The Arbitrator shall render his Award within a period of 6 months from the date of entering upon reference. The Arbitrator shall be entitled to Award interest during the pendency of the Arbitration and pendente lite any proceedings arising there from. The Arbitrator shall file his Award in the Courts at Delhi. The agreement shall be specifically enforceable, by an injunction, or a claim in damages, or both." 4. The respondent herein had filed an application (AA No. 145/2001) under Section 11 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illingness or otherwise to continue with the Arbitral proceedings. It will be helpful to reproduce the extract of the order dated 17.05.2003 passed by the sole Arbitrator which reads as under : "These Arbitration proceedings arise out of a reference made under Clause 3 of Article IV of the Divestment agreement entered into between the parties. In the said clause of the agreement, it is stipulated that the Arbitrator shall render his Award within a period of six months from the date of entering upon reference. As per order dated May 14, 2002, I entered upon the reference on that date. The period of six months, as prescribed in Article IV(3) of the Divestment agreement has already expired. This fact was not noticed and the proceedings have continued even after the expiry of the said period of six months. Today when this provision in Article IV(3) of the Divestment agreement was noticed, I asked the learned counsel for the parties as to whether the parties are agreeable to continue these Arbitration proceedings even though the period of six months prescribed under Article IV(3) of the Divestment agreement has expired and in case they wish that the proceedings be continued, they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quot;In accordance with the direction contained in the order dated May 17, 2003, a letter dated July 15, 2003 has been addressed by the respondent wherein it has been indicated that since the six months period for Award as prescribed under Article IV(3) of the Divestment agreement has expired the mandate of the Arbitration clause had expired. The respondent have further stated that the respondent is unwilling to dispense with the said requirement of six months. Mr. Jaideep Gupta, learned senior counsel for the claimant, states that a written response to the said letter of the respondent shall be filed on behalf of the claimant within one week. In the meantime, both the learned counsel have made their submissions on the question as to whether the proceedings can continue. Order reserved. A copy of the order shall be sent to the parties after it is finalized. Further directions will be given thereafter. The sitting fixed for tomorrow is cancelled." 9. The learned Arbitrator after considering the respective submissions dismissed the application dated 15.07.2003 filed by the petitioner herein mainly on the ground that the petitioner must be deemed to have waived his right to ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to in Clause (a) of Sub-section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate. (3) If, under this section or Sub-section (3) of Section 13, an Arbitrator withdraws from his office or a party agrees to the termination of the mandate of an Arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or Sub-section (3) of Section 12." 12. What is the object, intent and scope of the above provision of law would decide the question of maintainability of the present petition. This section postulates the circumstances under which the mandate of the Arbitrator can be terminated. The Arbitrator's mandate can be terminated under the following situations : (i) Automatic termination, (ii) By the Arbitrator himself, (iii) By the parties, (iv) By tribunal order, (v) By Court's order. The mandate of an Arbitrator automatically terminates at the death of the Arbitrator or his physical incapacity to proceed with the mandate. This provision sets following three grounds that constitutes an Arbitrator's inability ; (i) his de jure, or (ii) his de facto in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ; lawful ; by right and just title". 15. In the opinion of this Court, the expression "de jure" is amply wide so as to cover a situation like the case in hand. This view is based on the settled legal position that Arbitration agreement is the fountain head of the Arbitrator's power and authority and the parties as well as the Arbitrator are governed and controlled by the terms of the said Arbitration agreement. Unless parties agree to the contrary, the terms of Arbitration agreement must operate in full. The consequence of the Arbitrator not concluding the proceedings and rendering the Award within the period prescribed under the Arbitration agreement as in the present case would unclothed the Arbitrator of his legal authority to continue with the proceedings unless the parties agree to extend the period of making the Award or a party waives his right to such an objection. It must, Therefore, be held that expiry of the prescribed period for making the Award, would render the Arbitrator 'de jure' unable to continue with the proceedings and has the effect of termination of the mandate of the Arbitrator within the meaning of Section 14 of the Act. 16. Ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permitting patently illegal Award to operate. Patently illegal Award is required to be set at naught, otherwise it would promote injustice." 17. In the opinion of this Court the above observations do not answer the query with which we are faced. It is true that 1996 Act does not prescribe any time limit for making and publishing the Award but that does not mean that parties cannot by mutual agreement provide for a time limit for making the Award by the Arbitrator and if so prescribed it would run contra to the provisions of the Act. This view appears to be more plausible and acceptable having regard to the object of having Arbitration as the alternate mode for settlement of disputes/differences between the parties. The method of Arbitration to resolve the disputes/differences between the parties certainly aims at expeditious resolution of/the disputes because it is considered that the time taken by the Courts established by the State for resolution of the disputes is unduly long and cumbersome. It must, Therefore, be held that the provision of time limit for rendering Award by the Arbitrator in an Arbitration agreement is not hit by the provisions of the Act and is to be give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner will be deemed to have waived its right to object within the meaning of Section 4 of the Act, has sought support from the Supreme Court decision in the case of Narayan Prasad Lohia v. Nikunj Kumar Lohia and Ors., [2002]1SCR1136 (SO ; Inder Sain Mittal v. Housing Board, [2002]2SCR5 ; and a Karnataka decision in the case of K.S.R.T.C. v. M. Keshava Raju, AIR2004Kant109 . In Narayan Prasad Lohia's case (supra), the Court considered the question of waiver of a right to object by a party in relation to the constitution of an arbitral tribunal and held that a conjoint reading of Sections 10 and 16 shows that an objection to the composition of the Arbitral Tribunal is a matter which is derogable. The Court further ruled that it is derogable because a party is free not to object within time prescribed in Section 16(2) of the Act and if a party chooses not to so object, there will be a deemed waiver under Section 4. The Court repelled the submission that Section 10 is a non-derogable provision. 20. Inder Sain Mittal's case (supra), was considered under the provisions of the 1940 Act and, Therefore, is not of much help in deciding the question. In the case of K.S.R.T.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings in terms of Article IV(3) of the Divestment agreement and the parties as well as the Arbitrator became aware or acquired conscious knowledge of the same only on 17.05.2003. In this connection he has referred to the meaning of the word "notice" or "knowledge" as defined in the dictionary of Modern Legal Usage , which is to the following effect : "Knowledge; notice. As a general matter, knowledge requires awareness of a fact or condition, while notice requires merely a reason to know of a fact or condition. Knowledge is subsumed within notice because actual awareness is well above the threshold requirement of a reason to be aware. Senior Advocate Restatement (Second) of Agency & 9 (1958) E.g., "Notice" and 'knowledge' are not synonyms; when one says of a person that he was 'on notice' of a fact, one may mean just that he should have known, not that he did know." Shacket v. Philko Aviation, Inc. 841 F2d 166, 170 (7th Or. 1988). The phrase constructive knowledge is equivalent to-and inferior to-notice." According to him, the expression "knows" cannot be interpreted as meaning "ought to have known&qu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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