The petitioners were claimants in arbitration proceedings. The learned Arbitrator, by his order dated 19.12.2008, terminated the arbitral proceedings in Arbitration Case No. 1 of 2007. The petitioners approached this Court contending that as the sole Arbitrator has terminated the proceedings, the Court may be pleased to appoint a new Arbitrator to meet the ends of justice. The application is moved under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “Act’).
2. A few facts, from the record of the proceedings and relevant for consideration, may be noted. There was an agreement between petitioner no. 1 and respondent no. 1, which contains an arbitral clause. Dispute arose between the parties. The petitioners filed a writ petition before this Court being Writ Petition No. 26226 of 2001 for non-payment of its dues on which order dated 25th July, 2001 was passed by this Court, which reads as under:-
“In view of the aforesaid agreement, the petitioner can give notice to the respondents in writing for appointment of the arbitrator indicating the dispute and its nature as provided in the agreement, on giving such notice respondents shall appoint an arbitrator.”
The respondent no. 1, by its letter dated 18th June, 2002 proposed appointment of Justice S.P Goel (retired Judge) as the sole Arbitrator. The petitioners expressed some reservations. The matter was brought to this Court in Arbitration Petition No. 22 of 2005, and by order dated 01.12.2006 this Court appointed Justice V.P Goel (retired) as the sole Arbitrator.
3. According to the petitioners, various hearings took place and the matter reached a stage, where Ranjan Dwivedi (DW1), Joint General Manager (P&A) of respondent no. 1 was under cross-examination. According to the petitioners, the cross-examination of the said witness was prolonged and the petitioners' counsel was not being permitted to cross-examine the witness. There are several other allegations. Reference is made to what transpired on 19.12.2008 The petitioner no. 2, on 01.01.2009 sent an application to the sole Arbitrator requesting him not to hear Arbitration Case No. 1 of 2007 and another matter being Arbitration Case No. 2 of 2007. According to the petitioners, he received an order dated 19.12.2008 which was dispatched by Speed Post on 06.01.2009 The facts narrated in the petition, according to the petitioners, give rise to justifiable doubt as to the independence and impartiality of the sole Arbitrator. Moreover, after the sole Arbitrator had terminated the proceedings in Arbitration Case No. 1 of 2007, there existed no occasion to the sole Arbitrator to continue with the hearing in respect of Arbitration Case No. 2 of 2007 and another case being Arbitration Case No. 3 of 2007. Accordingly, the prayer is to appoint another sole Arbitrator in Case No. 1 of 2007 in terms of Section 14 read with Section 11 (6) of the Act.
4. At the hearing of this petition, it has been strenuously argued on behalf of the counsel for the petitioners that a vacancy has arisen and on account of that, it is open to this Court to appoint another Arbitrator in Arbitration Case No. 1 of 2007. On the other hand, on behalf of contesting respondent no. 1, it is submitted that the sole Arbitrator has terminated the proceedings under Section 32 (2) (c) of the Act. There are, therefore, no pending arbitration proceedings and the question of appointing an Arbitrator in non-pending proceedings does not arise. It is, therefore, submitted that the petition be dismissed.
5. The question for consideration would be -
(1)What is the remedy to a party, who is aggrieved by termination of arbitration proceedings under Section 32 (2) (c) of the Act?
(2)Can an order passed under Section 32 (2) (c) be the subject matter of an application under Section 11 (6) read with Section 14 of the Act?
6. The learned Arbitrator, by his order, was pleased to observe that the counsel for the claimant had stated that it is not possible for him to proceed with the cross-examination, closed his file and left the Tribunal. The claimant then shouted and said to the Arbitrator that the proceedings be terminated and also left. As the counsel for the claimant and claimant were not cooperating with the Tribunal, a situation had arisen when the continuation of proceedings has become impossible. The learned Arbitrator, therefore, invoked the powers under Section 32 (2) (c) of the Act and terminated the arbitral proceedings.
7. Some relevant provisions of the Act may be referred to. Section 32 of the Act reads as under:-
“32. Termination of proceedings. - (1) the arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral Tribunal under sub-section (2).
(2) The arbitral Tribunal shall issue an order for the termination of the arbitral proceedings where -
(a) the claimant withdraws his claim, unless the respondent objects to the order and the arbitral Tribunal recognises a legitimate interest on his part in obtaining a final settlement of the dispute,
(b) the parties agree on the termination of the proceedings, or
(c) the arbitral Tribunal finds that the continuation of the proceedings has for any other reason become unnecessary or impossible.
(3) Subject to Section 33 and sub-section (4) of Section 34, the mandate of the arbitral Tribunal shall terminate with the termination of the arbitral proceedings.”
We may also consider Section 25 of the Act, which reads as under:-
“25. Default of a party. - Unless otherwise agreed by the parties, where, without showing sufficient cause,-
(a) the claimant fails to communicate his statement of claim in accordance with sub-section (1) of section 23, the arbitral Tribunal shall terminate the proceedings;
(b) the respondent fails to communicate his statement of defence in accordance with sub-section (1) of section 23, the arbitral Tribunal shall continue the proceedings without treating that failure in itself as an admission of the allegations by the claimant;
(c) a party fails to appear at an oral hearing or to produce documentary evidence, the arbitral Tribunal may continue the proceedings and make the arbitral award on the evidence before it.”
8. Insofar as Section 25 (a) is concerned, the issue of what is the remedy available on termination of proceedings had come up for consideration before the Bombay High Court in M/s. Anuptech Equipments Private Ltd. v. M/s. Ganpati Co-op. Housing Society Ltd., Mumbai & Ors., AIR 1999 Bombay 219. We may gainfully refer to relevant part of paragraph 15 of the judgment, which reads as under:-
“…We are, however, concerned with a case where the Arbitral proceedings were commenced and closed on the ground that the claimant has failed to communicate his statement within a reasonable time. Such an order cannot be said to be non est. In other words it is a case where a party after invoking the arbitration clause has his claim rejected because the statement was not filed. In view of Section 42 will a Civil Court other than the Court where the arbitral proceedings were commenced have jurisdiction. It may be true that in so far as the competence of the Tribunal in certain cases which may be without jurisdiction or non est a suit may still lie for declaration that the order or decision is nullity and for other reliefs. That, however, is no answer to a case where Arbitral Tribunal has exercised jurisdiction and closed the proceedings under Section 25
(a). If section 42 is considered then it is the same Court which will have jurisdiction. What will be the relief that such a Court can give and under which provisions of the Arbitration Act? The entire exercise is because no remedy can be prima facie discernible. Even if it be held that in a Civil Suit a declaration can be sought, that the orders are nullities the time taken before the Arbitral Tribunal will not be saved by Section 43 of the Act of 1996. Even otherwise once party takes recourse to Arbitral proceedings surely in respect of the same relief in the Civil Court will not be possible. To my mind, therefore, in a case where arbitral proceedings have been closed when the order itself ex facie does not amount to a nullity the remedy of Civil Court suit may not be available.”
We may also reproduce paragraph 17 of the judgment, which reads as under:- “17. The question that will arise is whether this Court can exercise its extra ordinary jurisdiction under Article 226 of the Constitution or Article 227. Article 227 is the power of superintendence of this Court over tribunals. For that purpose it will have to be examined whether the Arbitral Tribunal as constituted under the Act of 1996 is a tribunal over which this Court would have supervisory jurisdiction. The other aspect of the matter would be to consider whether the Arbitral Tribunal would come under the expression of “other person” and as such a writ could be issued to such person or authority under Article 226. Before proceeding to examine the matter it would be advisable to consider some judgments of the Apex Court in so far as appointment of Arbitrators are concerned. At this outset let me make it clear that a distinction has been drawn between a statutory tribunal and a tribunal appointed by consent of parties. It is in that context the need to examine the decisions rendered under section 10-A of the Industrial Disputes Act, 1947. The first such judgment before section 10(A) was amended is in the case of Engineering Mazdoor Sabha and another v. Hind Cycle Ltd., AIR 1963 SC 874. The question before the Apex Court was whether against an award by an Arbitrator appointed under section 10-A of the I.D Act, an appeal could lie to the Apex Court under Article 136. An appeal lies only from order of courts or tribunals. The question was whether the Arbitrator appointed under section 10-A was a Tribunal. Gajendragadkar, J., as the learned Chief Justice then was, observed as under (at Pp. 881-82 of AIR):--
“Article 226 under which a writ of certiorari can be issued in an appropriate case, is, in a sense, wider than Article 136, because the power conferred on the High Courts to issue certain writs is not conditioned or limited by the requirement that the said writs can be issued only against the orders of Courts or tribunals. Under Article 226(1), an appropriate writ can be issued to any person or authority, including in appropriate cases any Government, within the territories prescribed. Therefore, even if the arbitrator appointed under section 10-A is not a tribunal under Article 136 in a proper case, a writ may lie against his award under Article 226.”
The next judgment is in the case of Rohtas Industries Ltd. v. Rohtas Industries Staff Union, AIR 1976 SC 425. A reference was made under section 10-A of the Industrial Disputes Act, 1947. An award came to be passed. The said Award when challenged before the High Court of Calcutta was rejected in so far as denial of wages during the strike period. However, the Court quashed part of the award which directed payment of compensation by the workers to the management. The company came in appeal against the said judgment. Before the Apex Court various challenges were raised. We are concerned with the first challenge which was formulated as under :--
“An award under section 10-A of the Act Saviours of a private arbitration and is not amenable to correction under Article 226 of the Constitution.”
To the same argument there was an additional argument which ran as under :-- “Even if there be jurisdiction, a discretionary desistence from its exercise is wise, proper and in consonance with the canons of restraint this Court has set down.” While answering the said issue the Apex Court has observed as under [AIR 1976 SC 425, Para 9]:--
“The expansive and extraordinary power of the High Courts under Article 226 is as wide as the amplitude of the language used indicates and so can affect any person - even a private individual - and be available for any (other) purpose, even one for which another remedy may exist. The amendment to Article 226 in 1963 inserting Article 226(1-A) reiterates the targets of the writ power as inclusive of any person by the expressive reference to “the residence of such person.”
The Court examined the judgment in Engineering Mazdoor Sabha, (AIR 1963 SC 874) and thereafter proceeded to answer as under (at p. 429 of AIR 1976 SC) :-- “We agree that the position of an arbitrator under section 10-A of the Act (as it then stood) vis a vis Article 227 might have been different. Today, however, such an arbitrator has power to bind even those who are not parties to the reference or agreement and the whole exercise under section 10-A as well as the course of the force of the award on publication derives from the statute. It is legitimate to regard such an arbitrator now as part of the methodology of the sovereign's dispensation of justice, thus falling within the rainbow of statutory Tribunals amenable to judicial review. This observation made en passant by us is induced by the discussion at the bar and turns on the amendments to section 10-A and cognate provisions like section 23, by Act XXXVI of 1964.”
Relying on these judgments it was sought to be argued that the Arbitral Tribunal under the Act of 1996 would be such other person to whom a writ could go under Article 226 of the Constitution. Before proceeding to consider that aspect of the matter, it is essential to refer to the subsequent judgment of the Apex Court in the case of Raipur Development Authority v. M/s. Chokhamal Contractors, AIR 1990 SC 1426. The judgment of Rohtas Industries (AIR 1976 SC 425) came up for consideration before the Apex Court in the case of Raipur Development Authority (supra). It was sought to be contended that under the Act of 1940 the Arbitrators were bound to give reasons as that was a requirement of natural justice and in the event reasons were not given the Award was liable to be remitted or set aside. In other words the Apex Court was called upon to consider the question whether an arbitrator appointed under the Act of 1940 was exercising quasi judicial powers and as such on failure to give reasons the award was liable to be set aside. Reliance was also placed in the case of Rohtas Industries (AIR 1976 SC 425). The same was distinguished by the Apex Court by observing as under (para 32 of AIR 1990 SC 1426):--
“A distinction was thus made between statutory arbitrations under section 10-A of the Industrial Disputes Act and private arbitrations. It is not necessary to refer to the other cases cited before us which have a bearing on section 10-A of Industrial Disputes Act, 1947.”
What is important to bear in mind are the following observations in para 37 of the judgment, which are reproduced herein below:--
“There is however, one aspect of non-speaking awards in non-statutory arbitrations to which Government and Governmental authorities are parties that compel attention. The trappings of a body which discharges judicial functions and requires to act in accordance with law with their concomitant obligations for reasoned decisions are not attracted to a Private adjudication of the nature of arbitration as the latter, as we have noticed earlier, is not supposed to exert the State's sovereign judicial power.”
It is thus clear from the said judgment that the Apex Court came to the conclusion that trappings of a body which discharges judicial functions and requires to act in accordance with law with their concomitant obligations for reasoned decisions are not attracted to a private adjudication of the nature of arbitration as the latter is not supposed to exert the State's sovereign judicial power. Before proceedings further it will also be necessary to refer to the judgment relied upon by the respondents in the case of Smt. Rukmanibai Gupta v. Collector, Jabalpur, (1980) 4 SCC 55: (AIR 1981 SC 479). In that case the question before the Apex Court was that in case of a Governmental contract, if there were difference or dispute the matter was left to the State for its final decision. It was held that such a clause was a clause of arbitration. A petition came to be filed challenging the said award under Article 226 of the Constitution of India. The High Court dismissed the writ petition on the ground that the award could not be challenged by way of Article 226 but only under the provisions of the Arbitration Act. While answering the question in paragraph 10 the Apex Court held that the reliefs sought by the appellant by invoking the extra ordinary jurisdiction of the High Court under Article 226 could have been obtained by proceeding in accordance with the relevant provisions of the Arbitration Act. In that situation, if the High Court had declined to entertain the writ petition, no exception could be taken to it as the writ jurisdiction of the High Court under Article 226 of the Constitution is not intended to facilitate avoidance of obligation voluntarily incurred.
Therefore, considering the above judgments can it still be said that this Court can exercise the extra ordinary jurisdiction under Article 226. As pointed out earlier, a writ can go to any person or authority. Under the Act of 1940 arbitrations under the Arbitration Act, 1940 have been held to be in the nature of private arbitrations and not in exercise of the State's sovereign judicial power. A distinction has been made between the provision for statutory arbitration and for private arbitration. Does the Act of 1996 make any distinction in so far as this aspect is concerned. If the Act is in pari materia with the Act of 1940 in that event it will not be possible to hold that a writ could go under Article 226 of the Constitution. To my mind the Arbitration & Conciliation Act, 1996 has made a departure and an Arbitral Tribunal under the Act of 1996 can be said to be a person if not a tribunal to whom a writ could go. Even in Engineering Mazdoor Sabha (AIR 1963 SC 874) (supra) the Apex Court noted that the arbitration under section 10-A is different from a private arbitration. The following observations in para 16 are relevant :-- “(16) It may be conceded that having regard to several provisions contained in the Act, and the rules framed thereunder, an arbitrator appointed under section 10-A cannot be treated to be exactly similar to a private arbitrator to whom a dispute has been referred under an arbitration agreement under the Arbitration Act. The arbitrator under section 10-A is clothed with certain powers, his procedure is regulated by certain powers, his procedure is regulated by certain rules and the award pronounced by him is given by statutory provisions a certain validity and a binding character for a specified period. Having regard to these provisions, it may perhaps be possible to describe such an arbitrator, as in a loose sense, a statutory arbitrator and to that extent, the argument of the learned Solicitor General may be rejected. But the fact that the arbitrator under section 10-A is not exactly in the same position as a private arbitrator, does not mean that he is a tribunal under Article 136. Even if some of the trappings of a Court are present in his case, he lacks the basic, the essential and the fundamental requisite in that behalf because he is not invested with the State's inherent Judicial power. As we will presently point out, he is appointed by the parties and the power to decide the dispute between the parties who appoint him is derived by him from the agreement of the parties and from no other source. The fact, that his appointment once made by the parties is recognised by section 10-A and after his appointment he is clothed with certain powers and has thus, no doubt, some of the trappings of a Court, does not mean that the power of adjudication which he is exercising is derived from the State and so, the main test which this Court has evolved in determining the question about the character of an adjudicating body is not satisfied. He is not a tribunal because the State has not invested him with its inherent judicial power and the power of adjudication which he exercises is derived by him from the agreement of the parties. His position, thus, may be said to be higher than that of a private arbitrator and lower than that of a tribunal. A statutory Tribunal is appointed under the relevant provisions of a statute which also compulsorily refers to its adjudication certain classified classes of disputes. That is the essential feature of what is properly called statutory adjudication or arbitration. That is why we think the argument strenuously urged before us by Mr. Pal that a writ of certiorari can lie against his award is of no assistance to the appellants when they contend that such an arbitrator is a Tribunal under Article 136.”
The reasons are as under:--- Reading of section 8 with section 5 of the Act of 1996 in cases where there is an arbitration agreement, no judicial authority can intervene except when so provided in the Act. The jurisdiction is exclusive. Section 10 controls the composition of the Arbitral Tribunal. Section 16 confers a power upon the tribunal to decide on its own jurisdiction. Section 17 has conferred a power on the tribunal to make an order as an interim measure for protection of the subject matter of a dispute. Under section 37 such an order granting or rejecting interim relief is subject to appeal to the Court. Under subsection (4) of section 19 the Arbitral Tribunal has been given power to determine the admissibility, relevance, materiality and weight of any evidence. Under section 25 the tribunal can terminate the proceedings if claims statement is not filed within the time stipulated under section 23 and if no sufficient cause is shown. Under proviso to section 24(1) the Tribunal is bound to grant oral hearing on request by the parties. More important is sub-section (5) of section 27 if persons are guilty of any contempt of the Arbitral Tribunal during the conduct of arbitral proceedings they are subject to the like disadvantages, penalties and punishments by order of the Court on the representation of the Arbitral Tribunal as they would incur for like offences in suits tried before the Court. In the Act of 1940 there was no specific reference to contempt of arbitral tribunal which has been conferred by section 27 of the Act of 1996. Once a person can be punished for contempt of the tribunal, which can be done where the Act tends to bring the administration of justice into disrespect or interference with the administration of justice, shows that such a ‘tribunal’ discharges the inherent judicial functions of the State. By virtue of section 36 the Award is deemed to be a decree which can be enforced under the Act unlike the Act of 1940 when it had to be made a decree by the order of the Court. Under section 37(2), an appeal is provided for against certain orders made by the Arbitral Tribunal. In other words its orders are appealable. To my mind on consideration of those provisions even if it be held that the tribunal is not a tribunal within the meaning of Article 226 of the Constitution, it would nevertheless be a person to whom a writ could go under Article 226 of the Constitution. I am, therefore, clearly of the opinion that where a remedy is not available to an aggrieved person and considering section 5 of the Arbitration Act of 1996 this Court can exercise its extra ordinary jurisdiction under Article 226 of the Constitution. In passing 1 may mention that this exercise had to be undergone in view of non-availability of remedy to aggrieved parties. It is true also that one of the objectives of the Act of 1996 is to minimise the supervisory role of courts. On the other hand proceedings in arbitration involve the civil rights of the parties. It is a cardinal principle of our jurisprudence that no man should be left without a remedy. Judicial review cannot be made dependent on men who pass orders. Hierarchy of courts is an answer to that.”
9. The above judgment was thereafter again considered by a Division Bench of the Bombay High Court in Vimal Madhukar Wasnik (Dr.) Nagpur v. Sole Arbitrator, the Honourable Shri Justice M.S Desphande & Ors., 2006 (1) Bom. C.R 419, wherein this view, namely, that in the absence of a remedy under the Act, it is open to the High Court to exercise its extraordinary jurisdiction under Articles 226 and/or 227 of the Constitution of India was reiterated. We may reproduce the following observation:-
“We may further add a caveat. The judgment in M/s. Anuptech Equipments (supra) is not for the proposition that every interim order or decision for which the Act has not provided a remedy would be subject to the extraordinary jurisdiction of this Court. The issue which was being considered was closure of proceedings before the Arbitral Tribunal against which there was no remedy provided under the Act. This Court noted the provisions of Section 5 of the Act. The judgment in M/s. Anuptech Equipments (supra) arose out of proceedings before the Arbitral Tribunal which was commenced and closed on the ground that the claimant therein had failed to communicate written statement written statement/claim statement within a reasonable time. The ratio in Anuptech (supra) is, therefore, only in respect of an order closing the proceedings and for which there is no remedy under Section 37 or Section 34 of the Act of 1996 in which case only will the extraordinary jurisdiction of this Court be invoked. It is true that the learned Counsel had relied on the judgment of the Apex Court in the case of Harbanslal Sahnia (supra) to contend that mere existence of extraordinary remedy is no ground for this Court not to invoke its extraordinary jurisdiction. Though the bar of Section 5 would not apply to this Court while invoking its extraordinary jurisdiction, nevertheless this Court must note the purpose and intent of a provision like Section 5. The objective is to minimise intervention in the on going arbitral process so that arbitral proceedings are completed at the earliest. Wherever the Act thought it fit that Court should intervene it has provided. …”
10. It is no doubt true that in S.B.P & Company v. Patel Engineering Ltd. & Anr., (2005) 8 SCC 618, the Supreme Court has observed that the High Courts should not interfere in exercise of its extraordinary jurisdiction during the pendency of arbitral proceedings. We may refer to direction (vi), of the majority judgment, which reads as under:-
“(vi) Once the matter reaches the Arbitral Tribunal or the sole arbitrator, the High Court would not interfere with the orders passed by the arbitrator or the Arbitral Tribunal during the course of the arbitration proceedings and the parties could approach the Court only in terms of Section 37 of the Act or in terms of Section 34 of the Act.”
It is, therefore, clear that these observations will not apply to proceedings which have been terminated under Section 25 (a) of the Act.
11. Various terms used for closure of proceedings under the Arbitration and Conciliation Act had again come up for consideration before the Bombay High Court in Harinarayan G. Bajaj v. Sharedeal Financial Consultants Pvt. Ltd., Mumbai & Anr., AIR 2003 Bombay 296. We may gainfully reproduce relevant part of paragraph 3 of the judgment, which reads as under:-
“3. The Act of 1996 under Section 16 has conferred a power on the Arbitral Tribunal to rule on its own jurisdiction. It is necessary to advert to this provision for assistance to enable the Court to find out whether the order passed under Section 16 would amount to an award considering the argument advanced. An order/decision under Section 16 is an order in respect of which an Appeal is provided under Section 37 of the Act of 1996. The power under Section 16 is the power in the Tribunal to rule on its own jurisdiction including ruling on any objection with respect to existence or validity of an arbitration agreement. In other words, issues pertaining to jurisdiction will be the subject matter of an order or decision under Section 16. In the event the Tribunal comes to a conclusion that it has no jurisdiction, the remedy under the Act is conferred under Section 37 which is an Appeal. If the Tribunal holds that it has jurisdiction that order or decision does not become final, but such order/decision can be subject to a challenge when the Award is finally challenged under Section 34. Section 34 provides that recourse to a Court against an Arbitral Award may be made only by an application for setting aside such an Award. It is, therefore, clear from the reading of Section 16 of the Act of 1996 that a decision that the Arbitral Tribunal has no jurisdiction or that there is no arbitral dispute, under the Act is not treated as an award. There is also no deeming fiction by which it is taken out from the definition of award. It is an order which if it culminates in the closure of proceedings an appeal is provided. If it does not terminate the proceedings, that order/decision can be challenged when the Award itself is challenged. That is how on a proper construction or reading of that section the nature of the order will have to be considered. … However, under the Act of 1996 a decision as to jurisdiction under Section 16 is not treated as an award. Against that order which results in termination of the arbitral reference an appeal is provided. In other words, though it may finally terminate the proceedings, it is not understood as an award as it does not finally decide the claim submitted for adjudication before the Arbitral Tribunal. This is being discussed for the reason, that termination of proceedings can only be in the manner as set out under Section 32 of the Act of 1996. The Act, therefore, provides for termination of proceedings other than by an award. Under Section 32(1) the Arbitral proceedings shall be terminated by the final arbitral award or by an order of the Arbitral Tribunal under Sub-section (2). What proceedings can be terminated other than by an award under are set out under Sub-section (2) of Section 32. It amounts to termination (a) when the claimant withdraws the claim subject to the other requirement, (b) the parties agree on the termination of the proceedings or (c) the Arbitral Tribunal finds that the continuation of the proceedings as for any other reason became unnecessary or impossible. It is, therefore, clear that even in a case, where the Arbitral proceedings are terminated the termination of arbitral proceedings does not result in an Award. This distinction will have to be considered when one considers, what can be challenged under Section 34 as an Award. Section 34 is not a mere remedy in the matter of termination of proceedings. It is basically a remedy against an award either final or interim. The other guiding factor is under Section 37. Certain orders made under the Act are capable of being appealed under Section 37. Under Section 37(1) an Appeal lies in respect of an order granting or refusing to grant any interim measure under Section 9. An Appeal also lies against setting aside or refusing to set aside an Award under Section 34. Under Sub-section (2) of Section 37 an Appeal lies against a plea under Subsection (2) or Sub-section (3) of Section 16 which are pleas pertaining to jurisdiction as also against an order granting or refusing to grant interim measures under Section 17. Therefore, all orders/decisions passed under the Act of 1996 do not necessarily fall under the expression ‘Awards’. It is only a decision/order which satisfies the requirements of Section 31 which is an Award. All others are orders and decisions in the course of the proceedings deciding procedural issues or terminating the arbitral proceedings themselves on the ground that the submission does not fall within the arbitral agreement or that there is no arbitral agreement or that there is no dispute required to be decided by the Arbitral Tribunal.
The Arbitration and Conciliation Act of 1996 has been drafted based on the Uncitral Model though our Parliament has made various departures from the Code. This has been recognised by the Apex Court in the case of Konkan Railway Corporation Ltd. v. Rani Constructions Pvt. Ltd., (2002) 2 SCC 388 : AIR 2002 SC 778. It is not necessary to advert to the said judgment except to quote the following paragraph from the said judgment:--
“That the Model Law was only taken into account in the drafting of the said Act is, therefore, patent. The Act and the Model Law are not identically drafted. Under Section 11 the appointment of an arbitrator, in the event of a party to the arbitration agreement failing to carry out his obligation to appoint an arbitrator, is to be made by “the Chief Justice or any person or institution designated by him” ; under Clause 11 of the Model Law it is to be made by a court. Section 34 of the Act is altogether different from Clause 34 of the Model Law. The Model Law and judgments and literature thereon are, therefore, not a guide to the interpretation of the Act and, especially, of Section 11 thereof.”
Therefore, it would be clear that under the Act, various terms have been used which include “orders’, “decisions’ and “awards’. Termination of proceedings does not fall within the expression ‘award’.
12. In “Improving the Efficiency of Arbitration Agreements and Awards: 40 Years of Application of the New York Convention’ by Kluwer Law International, it is observed as under:-
“What remedies exist against an arbitral tribunal which decides, when the defendant is in default, to make a default arbitral award rather than deciding the dispute after having carried out a thorough investigation of the substance of the case? If there is general consensus that no default powers lie with the arbitrators under the UNCITRAL Model Law or in general in common and civil law jurisdictions, what remedies exist against an arbitrator's decision to make a default award?
Unless there is clear power for courts of law to set aside a default arbitral award (and it is not the topic of this Report to investigate whether such powers exist), there might be a case for giving powers to courts of law to set aside an arbitrator's decision to proceed to make a default award.”
13. In Commercial Arbitration, Second Edition, by Sir Michael J. Mustill and Stewart C. Boyd, the learned Authors have considered the remedies of the Arbitrator in default proceedings where the reference is brought to a premature end. The learned Authors have considered the remedies in two situations - (1) total default, and (2) partial default. Dealing with the remedies, the learned Authors observed as under:-
“As will have been observed, English law provides no coherent system for dealing with problems which arise during the reference. Some of the remedies overlap and there are situations for which there is no convenient remedy…”
14. Thus, considering the position, as no remedy is available under the Act to challenge such an order of termination, the law would be that the extraordinary jurisdiction under Article 226 of the Constitution would be available against termination of proceedings under Section 25 (a) of the Act, as otherwise the party will be left without a remedy. The petitioners herein, however, have not invoked that remedy and has come to this Court seeking to invoke the powers under Section 11 (6) and Section 14 of the Act.
15. The further question which arises for consideration is what is the effect of termination of proceedings? Is it open to a party, if he chooses not to challenge the termination, to apply once again for reference of a dispute to an Arbitrator. We may gainfully refer to the English Law as laid down in Birkett v. James, (1978) AC 297. In that case, the suit was dismissed for want of prosecution. The limitation period had not expired. The question arose whether dismissal action was appropriate and whether plaintiff was entitled to issue fresh writ for same cause of action. The defendant applied for an order to dismiss the action for want of prosecution. The District Registrar refused the order and the defendant appealed. Between conclusion of hearing of the appeal and delivery of judgment, the plaintiff took the precaution of issuing a fresh writ in respect of the same cause of action. The Appellate Court allowed the defendant's appeal and dismissed the action for want of prosecution. An appeal was preferred in the Court of Appeal, which dismissed the appeal, though the Court of Appeal was informed of the issue of service of fresh writ, but no reference was made in the judgment. In appeal, it was held as under:-
“(1) that the power of the court to dismiss an action for want of prosecution should be exercised only where the plaintiff's default had been intentional and contumelious or where there had been inordinate and inexcusable delay on his or his lawyers' part giving rise to a substantial risk that a fair trial would not be possible or to serious prejudice to the defendant (post, pp. 318 F-G, 319A, 325G, 330B-C, 331D, 336D-E). Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B 229, C.A Approved.
(2) That a plaintiff whose action was dismissed for want of prosecution before the limitation period had expired was, save in an exceptional case, entitled to issue a fresh writ for the same cause of action; and that, accordingly, the power to dismiss an action for want of prosecution, other than in a case of contumelious conduct on the plaintiff's part, should not normally be exercised within the currency of the limitation period, when it could only aggravate the prejudice to the defendant from delay and add to costs (post, pp.321A-C, 322D-E, 325G, 328BD, 334 B-D, 336D-E).
Spring Grove Services Ltd. v. Deane (1972) 116 S.J 844; Court of Appeal (Civil Division) Transcript No. 251 of 1972, C.A Considered.
(3) That in the present case there was nothing exceptional which would justify the court in treating the non-expiry of the limitation period and the fact that the plaintiff would be likely to issue a fresh writ if his action were dismissed for want of prosecution as other than conclusive against so dismissing it; and that Cobb J. and the Court of Appeal had erred in disregarding those circumstances or treating them as of little consequence and the appeal should be allowed (post, pp. 325 E, G, 328B-C, 334D-E, 336 D-E).
16. The judgment in Birkett (supra), was considered in Barclays Bank plc v. Miller & Anr., [1990] 1 All ER 1040, and this is what was observed:-
“I turn to the decision of the House of Lords in Birkett v. James [1977] 2 All ER 801, [1978] AC 287. There Lord Diplock said that in the ordinary way there was no point in dismissing an action for want of prosecution if the limitation period had not expired (see [1977] 2 All ER 801 at 806-807, [1978] AC 297 at 320-321). The only result would be that the plaintiff would issue a fresh writ which, far from hastening the final determination of the proceedings, would cause yet further delay because the plaintiff would be starting anew. Lord Diplock did say that this was the ordinary result. He expressly exempted cases where an action was dismissed for contumelious conduct (see [1977] 2 All ER 801 at 808, [1978] AC 297 at 322).
It seems to me that the House of Lords was not there considering a case where it was open to doubt and serious argument whether the cause of action would be time-barred if a fresh writ were issued. In such a case it may well be that the interest of justice are best served by dismissing the action for want of prosecution, leaving it to the plaintiff, if he chooses to do so and if he has the funds, to start a fresh action…”
17. In L'Office Cherifien Des Phosphates & Anr. v. Yamashita-Shinnihon Steamship Co. Ltd., (1994) 1 AC 486, the House of Lords was considering Section 13A, as inserted in the Arbitration Act, 1950. Section 13A (1) and (2) reads as under:-
“13A - (1) Unless a contrary intention is expressed in the arbitration agreement, the arbitrator or umpire shall have power to make an award dismissing any claim in a dispute referred to him if it appears to him that the conditions mentioned in subsection (2) are satisfied.
(2) The conditions are -
(a) that there has been inordinate and inexcusable delay on the part of the claimant in pursuing the claim, and
(b) that the delay -
(i) will give rise to a substantial risk that it is not possible to have a fair resolution of the issues in that claim; or
(ii) has caused, or is likely to cause or to have caused, serious prejudice to the respondent.”
What was being considered in the said case was, whether this provision was prospective or retrospective. The Court noted that if a plaintiff in ordinary litigation is guilty of inordinate and inexcusable delay in prosecuting his claim after the issue of proceedings, and the effect of the delay is such as to jeopardize a fair trial of the action or cause at least a risk of serious prejudice to the defendant, the court may (even in the absence of contumacious conduct or breach of a peremptory order) dismiss the plaintiff's action if the relevant limitation period has expired. The Court then observed that it is the upshot of a series of authorities of which Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B 229 and Birkett v. James (supra). At the time when those cases were being decided, dilatory conduct by arbitration claimants was every bit as common as that by plaintiffs, but the legal effect of such conduct, the courses open to the respondent and the powers of the arbitrator were the subject of some doubt. That doubt was dispelled by two decisions of the House of Lords, in Bremer Vulkan Schiffbau und Maschinenfabrik v. South India Shipping Corporation Ltd., [1983] 1 A.C 854 and Paal Wilson & Co. A/S v. Partnreederei Hannah Blumenthal, [1983] 1 A.C 854. The Court held that the effect of those decisions, again very briefly put, was this : arbitration is a consensual procedure; the parties owe each other a contractual duty to cooperate in progressing a reference; the claimant is under a duty to pursue his claim; but the respondent, being under a corresponding duty, cannot complain of a delay in which he has acquiesced; the reference continues until, if ever, a contractual abandonment of the reference can be inferred. Thus, in arbitration the position was quite unlike that in litigation: the respondent, unlike the defendant, could not stand idly by, acquiescing in his opponent's delay, until the moment came to strike by launching an application to dismiss. Whereas defendants in litigation could let sleeping dogs lie (Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B 229, 258E, 272E) a respondent in arbitration could not (Bremer Vulkan [1981] A.C.909, 988A).
18. It appears, these decisions were almost universally criticized, not on the grounds of defects in their reasoning but because they were felt to be entirely out of touch with the realities of commercial life. In the market and in the courts there was a clamour that the law be changed so that stale arbitration claims could be dismissed in much the same way as stale claims in the courts. This plea for reform was eventually heeded by insertion of Section 13A.
19. Section 13A of the U.K Arbitration Act, 1950, as we have noted, results in an award, unlike Section 25 (a) which results in termination of proceedings or Section 32 which uses the expression that “arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral Tribunal under sub-section (2).’ The termination of later part has not been treated as an award. The language used is similar though, therefore, to prevent dilatory tactics on the part of the parties, as earlier recognized by introduction of Section 13A in English Arbitration Act, 1950, the UNCITRAL Model Law made a distinction between an award and termination of proceedings, which has been followed by our Act.
20. Thus, the effect would be that termination of proceedings, if does not result in an award, cannot give rise to a challenge under Section 34 of the Act nor the Act provides for any remedy against such an order, but considering the law as explained in Brikett (supra), if the claim is within limitation, it may always be open to a party to apply afresh. There is no substantive provision barring such a possible recourse. Under Section 43 (4) of the Act, limitation is saved only in case if an arbitral award is set aside. As such, though a fresh action may be available in most cases, the remedy may be illusory if the claim is already barred by limitation.
21. We now deal with Section 14 of the Act, which provides that the mandate of an Arbitrator shall be terminated for the reasons set out therein. Under subsection (2), if a controversy remains, parties can move the Court. “Court’ has been defined in Section 2(e) of the Act, and reads as under:-
“2. Definition.-(1) In this Part, unless the context otherwise requires,-
(a) … … … …
(e) “Court” means the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court or any Court of Small Causes.”
Under Section 15 of the Act, the mandate of an Arbitrator stands terminated when he withdraws from office for any reason; or pursuant to an agreement of the parties. In the instant case, there is no agreement of the parties. The question is, whether he has withdrawn from office? Ordinarily, this will contemplate that the proceedings are pending.
22. We may, however, consider the situation where the failure by the Arbitrator to act can be said to be withdrawing from office for any reason. In Priyabrata Bose v. Phani Bhusan Ghose, AIR 1937 Cal. 523, a learned Judge of the Calcutta High Court was pleased to hold that, where the Arbitrator says that he would not act, till his fees are paid in advance, such action amounts to refusal to act on his part within the meaning of Section 8 of the Arbitration Act, 1899 and a new Arbitrator can be appointed in his place.
Similarly, a Division Bench of this Court in State of Uttar Pradesh & Anr. v. M/s. Sardul Singh Kulwant Singh & Anr., AIR 1985 Alld. 67, while considering the issue under Section 8 (1) (b) of the Arbitration Act, 1940 held that if an appointed Arbitrator or umpire neglects or refuses to act in spite of notice on him requiring him to enter on reference, it would amount to refusal or neglect on part of the Arbitrator within Section 8 (1) (b) of the Arbitration Act of 1940 and in that view, it would be open to substitute the Arbitrator.
In State Of West Bengal v. National Builders, (1994) 1 SCC 235, the Supreme Court was considering an issue as to what happens if the Arbitrator appointed refuses to act. The Court was pleased to hold that when the Arbitrator so appointed refuses to act, the next appointment could again be made either as agreed between the parties and provided for in the arbitration clause or by consensus. Considering the expression “refuses to act’, the Court observed that it may be inferred as well and on what fact such an inference can be raised, cannot be laid down with certainty. The Court then observed as under:-
“… When an arbitrator has failed to discharge his obligation so as to give rise to an inference that he has refused to act it shall have to be decided by the court on facts and circumstances of each case. For instance in Priyabrata Bose v. Phani Bhusan Ghose, AIR 1937 Cal 523, the High Court held that even when the arbitrator was not willing to proceed unless his fees were paid in advance, it was refusal to act. Inaction by the arbitrator or inordinate delay in rendering the award are yet some of other reasons due to which courts have raised an inference that the arbitrator refused to act. (See Manohar Singh Sahay & Co. v. Jogendra Singh Kalra, AIR 1984 Pat 3, State of U.P v. Sardul Singh Kulwant Singh, AIR 1985 All 67, and Gajanand Sita Ram v. Phul Chand Fateh Chand, AIR 1930 All 675).”
In the instant case, the learned Arbitrator has not withdrawn from the proceedings but has rather terminated the proceedings. This cannot be decided under Section 14 (2) of the Act. Section 11 would also not be applicable. The law, thus, would be that it is not open to the Court under Section 11 (6) of the Act to nominate another Arbitrator.
23. Thus, from the above discussion, the legal position can be summarised as under:-
(1)An order terminating proceedings, which does not result in award, can be the subject matter of a challenge under Article 226 of the Constitution of India
(2)The termination of proceedings under Section 32 (2) (c) of the Act, in certain circumstances, can still give rise to initiation of de novo arbitration proceedings, provided the action is within limitation.
(3)In a case, where arbitral proceedings are terminated, it is not open to the Chief Justice or his delegate to exercise powers under Section 11 (6) of the Act.
(4)Insofar as the challenge under Section 14 is concerned, that will have to be before the Court, and not the Chief Justice or his delegate hearing an application under Section 11 (6) of the Act.
(5)What was invoked in the instant case was the power of Chief Justice under Section 11(6) of the Act. It will not be possible considering the law to substitute or name a new Arbitrator, as the Arbitrator terminated the proceedings.
(6)It will be open to the petitioners, if advised, to avail the remedy available to him in law including Article 226 of the Constitution of India.
24 For the aforesaid reasons, the petition is dismissed.
September 28th, 2010
AHA
(Ferdino I. Rebello, C.J)
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