9911796707
TMI Blog2012 (5) TMI 782X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant, Bharat Oman Refineries Ltd., and the respondent M/s. Mantech Consultants, entered into an agreement on 30th December, 1996 by which the respondent was to carry out certain work in respect of inter-state pipeline project. The agreement contained an arbitration clause. According to the appellant, since the respondent had not carried out the work as per the agreement, the parties agreed to close the contract. Subsequently certain disputes arose between the parties to the agreement and respondent herein invoked the arbitration clause. The respondent thereafter preferred an application under Section 11 of the Act, being Arbitration Application No. 74 of 2000, for appointment of an Arbitrator. By an order of this Court dated 23 rd February, 2001 the said application was disposed of by appointing one S.K. Saini, who is an employee of the appellant, as an Arbitrator to hear and decide the disputes and differences and the claims between the parties. The arbitrator thereafter commenced the proceedings. The arbitrator convened the first meeting on 14th June, 2001 and fixed the schedule of dates for pleadings, etc. On 9th July, 2002, arguments commenced before the arbitrator. The argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitration proceedings, subsequently he cannot challenge the award. It is submitted by Mr. Bharucha that no such argument was raised before the Arbitrator in any manner and having participated before the Arbitrator, this point is not permissible to be taken in an Arbitration Petition under Section 34 of the Act. It is submitted by Mr. Bharucha that in any case the arbitration agreement is a contract between the parties and the parties can also extend the time limit provided in the agreement between them and in view of the conduct of the respondent, it can be presumed that he has agreed for extension of time impliedly. It is submitted by Mr. Bharucha that the respondent has never asked the Arbitrator not to proceed with the matter. It is submitted by Mr. Bharucha that Section 15 of the Act has no application and the said Section has application only subsequent to the arbitration agreement and during the pendency of the proceedings before the Arbitrator. It is submitted by Mr. Bharucha that the learned single Judge gravely erred in relying on the judgment of the Supreme Court in the case of NBCC Limited vs. J.G. Engineering Pvt. Ltd. (2010) 2SCC 385 as in the aforesaid case, Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to decide the dispute. 5. Mr. Seervai, learned senior Counsel, appearing for the respondent, on the other hand submits that as per Section 7 of the Act the arbitration agreement should be in writing. It is submitted that the moment time limit prescribed in the agreement is over, the Arbitrator becomes functus officio and he has no jurisdiction to proceed with the matter. It is submitted that the Arbitrator is not party to the agreement between the parties and his mandate is terminated automatically as per the time limit provided in the agreement and subsequently, therefore, even if he proceeds further, such proceedings will be without jurisdiction. Jurisdiction of the Arbitrator is not governed by the conduct of the parties but is governed by the statute. Mr. Seervai has relied upon the provisions of Sections 14 and 15 of the Act. It is submitted by him that simply because one party can be said to have waived his right by proceeding with the arbitration, by such conduct, the arbitrator cannot get jurisdiction to proceed further with the matter as, according to him, moment the time limit prescribed in the agreement is over, the arbitrator has no jurisdiction unless a new agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Bombay High Court) 6. Mr. Bharucha, in rejoinder, submits that as per Section 4 of the Act, the arbitrator is entitled to proceed with the arbitration if the parties to the agreement do not object before the Arbitrator that he cannot proceed further with the matter. Mr. Bharucha submits that on 14th March, 2006, the arbitrator wrote to the respondent requesting it to send him a ₹ 100/- stamp paper stating that he was trying his best to publish the award by 31st March, 2006 and latest by 30th April, 2006. The arbitrator vide his letter dated 19th May, 2006 to the appellant and the respondent recorded receipt of stamp paper from the respondent. Mr. Bharucha further submits that since the Division Bench has already considered the Supreme Court judgment and has interpreted the same in a particular way, this Court is bound by the said judgment and there is no question of per incurium. 7. We have heard the Learned Counsel appearing for the parties. We have also gone through the Award of the Arbitrator and the order of the learned single Judge and the documents forming part of this appeal. We have also gone through the written submissions as well as the judgments of both the sid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch as to make that arbitration clause part of the contract." 14. Failure or impossibility to act.- (1) The mandate of an arbitrator shall terminate if - (a) be becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and (b) he withdraws from his office or the parties agree to the termination of his mandate. (2) If a controversy remains concerning any of the grounds 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 12, 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. 15. Termination of mandate and substitution of arbitrator. (1) In addition to the circumstances referred to in Section 13 or section 14, the mandate of an arbitrator shall terminate- (a) Where he withdraws from office for any reason; or (b) by or pursuant to agreement of the parties. (2) Where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ending that this observation of the Apex Court does not rule out a contingency where conduct of the parties can be implied with certainly to mean that they have consented not to insist on mandatory time limit. 7. The learned single Judge of this Court in the case of Mascon Multiservices (supra) came to the conclusion that the inquiry on facts to find out whether the parties have waived the condition of termination of arbitration by efflux of time is permissible. The learned Judge has held that if a party attends number of meetings after the award has expired it would be a strong indication of the waiver. The learned Judge however cautioned that the strength of indication of waiver is not necessarily directly proportional to the number of meetings attended and it is the nature of meeting and nature of conduct which is important. The learned Judge has held that the conduct should be such that the waiver can be clearly inferred. 11. At this stage, reference is required to be made to the judgment of the Supreme Court in the case of NBCC Ltd. (supra) wherein the Supreme Court has observed as under. 22. Taking into consideration the arguments of the appellant, it is necessary to men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pending in this Court on this aspect. The appointed arbitrators were men of commerce and they arrived at a consensual figure. Though the recent trend is that the award should be a reasoned award and that would be in consonance with the principles of natural justice, in a case of this nature where two men of commerce in respect of money claim under Charter Party agreement entered into arbitration and the award has awarded a lump sum amount, it appears to us, that the reasons are not far to seek. It is really an accounting of the rival claims of the parties. The Supreme Court, therefore, has clearly held that there was no mandate given by both the parties to the arbitrators asking the arbitrators to give reasons and the arbitrators could not act on the mandate of one of the parties. In NBCC Ltd. (supra), the Supreme Court has held as under in para 12. 12. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the arbitration, the mandate automatically gets terminated. Such mandate cannot be extended specifically at the instance of only one party. In view of this, I am not inclined to refer the matter to the Larger Bench, as it is not necessary in view of distinguishing facts and circumstances and the clauses so referred in both these judgments. It is true that the Division Bench judgment of this Court in the case of M/s. Snehdeep (supra) is also after the decision of the Supreme Court in the case of NBCC Ltd. (supra). 14. Considering the arguments advanced by both the sides at the Bar, which we have incorporated above, and after considering the written submissions submitted before this Court by both the sides, we are of the opinion that the time limit provided in the arbitration agreement in a given case cannot be said to have been extended by the act of one side or by conduct of one side and the arbitrator may not get jurisdiction to proceed further with the matter in case the arbitration agreement provides particular time limit and the same is not extendable as per the arbitration clause in the agreement. In our view, the jurisdiction of the arbitrator therefore depends upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er a considerable delay, the arbitrator wrote a letter on 14th March, 2006 to the respondent pointing out that he is trying his best to publish his award in the matter by 31st March, 2006 and in any case latest by 30th April, 2006 and he requested the respondent to send him a stamp paper of Maharashtra State for ₹ 100/- preferably by 23rd March, 2006 to enable him to publish the award. As stated above, the arguments were concluded on 21st April, 2004. The arbitrator wrote another letter on 19th May, 2006 to the parties wherein he has stated that on his inability to publish the award till 30th April, 2006, he received a telephone call from one V.P. Patel of Mantech (respondent herein) when he requested the said Patel to publish the award as quickly as possible. The arbitrator has pointed out in the said letter that he had drafted the award in respect of certain claims and expected to complete the same in respect of all the other claims shortly and as requested by respondent he is expected to publish his final award by 31st May, 2006. Subsequently, the respondent wrote a letter dated 24th May, 2006 acknowledging the said letter dated 19th May, 2006. The arbitrator vide his lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d period is over, the arbitrator could not have proceeded further in the matter of even publishing the award, unless both the sides agree by a fresh agreement in writing giving authority to the arbitrator to declare the award even after the stipulated time, in furtherance of the original arbitration agreement. It is also clear that the arbitrator has no authority to pronounce the award after the stipulated time. So far as the Division Bench judgment of this Court is concerned, the said case is, therefore, distinguishable on the facts as in the said case one of the sides actively participated in the proceedings by filing written statement while in the instant case after the conclusion of the arguments, the arbitrator gave his award on 17th August, 2006. Every case ultimately depends upon the nature of the arbitration agreement and in the instant case simply because the respondent has provided stamp paper or might have entered into telephonic conversation with the arbitrator itself cannot be treated as an act of waiver or cannot be construed as an active participation in the judicial proceedings before the arbitrator. 18. So far as the argument of Mr. Seervai that the order of the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the agreed clause itself, after lapse of agreed time, the Arbitrator looses his jurisdiction as per the mandate of Sections 14 and 15 of the Act. Such defect is incurable. The implied consent cannot confer jurisdiction once the agreed period is lapsed. There is no provision to raise objection to the constitution of the Arbitral Tribunal except Sections 14 and 15 of the Act. But, once the Arbitration is closed for award, that stage also goes and the parties have no choice but to wait for the award. There was no reason and/or occasion for the respondent to raise any such objection before the Arbitrator under Section 16 of the Act and/or even before the Court under Section 14 of the Act. Once the matter is closed for judgment/order, a call for stamp-paper is nothing, but a ministerial procedure. It cannot be stated to be judicial proceedings to be attended by all the parties. Even otherwise, how party can presume that the arbitrator would not follow the mandate of the arbitration agreement, once the agreed period is over. The arbitrator could have and/or might have, after expiry of two years, and as extendable by consent one year more, refused to pass Award or terminated the arbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without undue delay. If the agreed statutory period has expired, without any conclusion and/or decision by the Arbitrator, the delayed Award in question, in our view, is bad in law, apart from the fact that it is contrary to the agreed binding terms between the parties including the Arbitrator. 24. The parties cannot be deprived of their rights to challenge the award on the ground that there is a delay of 2 years and four months and the Award as declared after such a long period, in our view, can be challenged under Section 34 of the Act. The party cannot be remedy-less. Even under Section 16, the objection even if decided, can be re-agitated under Section 34 of the Act. There is no such scheme for the delayed action of the Arbitrator. Considering the aforesaid aspects, in our view, the award is bad in law. 26. The learned Single Judge has referred and relied upon Section 15 of the Act. It means the substituted Arbitrator can be appointed as per the agreed terms and that too within the stipulated period. Once the stipulated period is expired, and since the mandate is over, there is no question of appointment of Arbitrator. The Arbitrator is terminated by efflux of time. 26. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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