Subhash Podder v. State Of Tripura

T. Vaiphei, A.C.J:— This bunch of four arbitration petitions involving a common question of law, having been heard jointly, are now being disposed of by this common judgment. The question of law involved is whether the appointment of a new arbitrator to replace the arbitrator appointed under the Arbitration and Conciliation Act, 1996 (“the Principal Act” for short) and whose appointment has come to an end by resignation or otherwise is to be regulated by the Arbitration and Conciliation (Amendment) Act, 2015 (“the Amendment Act”) or not?

2. The material facts in Arbitration Petition No. 14 of 2016, as facts representative of the other petitions, may be referred to briefly. One Sri. Sankar Chandra Das, the Additional Chief Engineer was appointed as the sole arbitrator by the Chief Engineer, PWD (WR) in exercise of the power conferred by Clause-29 of the agreement executed between the petitioner and the Office of the Chief Engineer, PWD (WR) to decide some dispute which is not necessary to refer to as they have no relevance in this case. After proceeding with the arbitration case for sometime, the sole arbitrator tendered his resignation due to his transfer to some other post. His resignation was duly accepted whereupon the Chief Engineer, PWD (DWS) by his memorandum dated 17-9-2011 appointed one Mahitosh Das, Superintending Engineer, PWD as the sole arbitrator. For one reason or another, this official was again replaced by one Sanchayita Das, Superintending Engineer, Water Resource Planning Circle, Kunjaban as the sole arbitrator. For some inexplicable reason, this lady also tendered her resignation on 10-11-2015, who also soon resigned as the sole arbitrator, but she was again appointed as the sole arbitrator on 27-11-2015. She, however, did not accept the appointment whereupon the Chief Engineer, PWD (DWS) (respondent No. 2) relieved her of the assignment and appointed the same Mahitosh Das, Superintending Engineer as the sole arbitrator vide the memorandum dated 23-12-2015. By this time, the Amendment Act has come into force. The petitioner immediately petitioned the respondent No. 2 to appoint an independent and impartial arbitrator having relation with the State respondents in accordance with Arbitration and Amendment Act. The respondent No. 2 refused to do so and the said Mahitosh Das continues to be the sole arbitrator. Frustrated by this, the petitioner is approaching this Court for the appointment of a new arbitrator in accordance with the Amendment Act.

3. Mr. A. Bhowmick, the learned counsel for the petitioner, submits that once the Amendment Act has come into force, any vacancy arising out of the resignation or termination of the sole arbitrator shall have to be filled up only in accordance with the procedure laid down in Section 11(8) of the Amendment Act, which stipulates, among others, that the arbitrator should not be an employee, consultant or adviser of, or has any other past or present business relationship with, a party. According to the learned counsel, Mr. Mahitosh Das is an employee/official working under the respondent No. 2 and cannot possibly be eligible to be so appointed as evident from Section 12(5) of the Aendment Act categorically provides that notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator. He, therefore, submits that the appointment of Mr. Mahitosh Das as the sole arbitrator contravenes the mandatory provision of law and is, therefore, liable to be quashed, and he should replaced by any arbitrator who is found to be not ineligible under the new law.

4. The contention of the learned counsel for the petitioner is vehemently opposed by Ms. A.S Lodh, the learned Additional Government Advocate appearing for the State-respondents, by contending that since this is a case of an arbitration proceeding which had already commenced before the coming into force of the Amendment Act, the appointment of a new arbitrator to replace the one so appointed under the Principal Act, shall have to be governed by the Principal Act, and the appointment made by the respondent No. 2, therefore, does not suffer from any infirmity warranting the interference of this Court. To fortify her submission, she takes me to Section 26 of the Amendment Act, which says that nothing in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of section 21 of the principal Act, before the commencement of this Amendment Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on and after the date of commencement of this Act. She, therefore, contends that there is no merit in this petition, which is liable to be dismissed.

5. After the commencement of the Amendment Act, the legislature has indicated the persons who are ineligible for the appointment of the arbitrator. This can be seen from Section 11(8), which is in the following terms:

(8) The Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court, before appointing an arbitrator, shall seek a disclosure in writing from the prospective arbitrator in terms of sub-section (1) of Section 12, and have due regard to—

(a) any qualifications required for the arbitrator by the agreement of the parties; and

(b) the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.

6. Section 12 of the Amendment Act provides for the grounds of challenge by substituting sub-section (1) of the Principal Act with the following:

“12. Grounds for challenge.— (1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances,—

(a) such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject-matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality; and

(b) which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months.

Explanation 1.— The grounds stated in the Fifth Schedule shall guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator.

Explanation 2.— The disclosure shall be made by such person in the form specified in the Sixth Schedule.”

7. Even a cursory look at the provisions extracted above will make it plain that the legislature by this amendment has ensured that the High Court or the person designated as the appointing authority in the agreement can no longer appoint any Tom, Dick and Harry as the arbitrator and must appoint only somebody who is not made ineligible under the Seventh Schedule to the Amendment Act. This is now the mandate of the law. However, the moot point is whether this laudable provision engrafted in the Amendment Act will apply to the appointment of a new arbitrator to replace the arbitrator already appointed, and who has already proceeded with the arbitral proceeding under the Principal Act. The answer to this question lies in correct interpretation of Section 26 of the Arbitration and conciliation (Amendment) Act, 2015, which says:

“S. 26 - Act not to apply to pending arbitral proceedings:

Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act.”

8. At this stage, it may also be profitable to refer to Section 21 of the Principal Act, which provides as follows:

“85. Repeal and savings.—(1) The Arbitration (Protocol and Convention) Act, 1937 (6 of 1937), the Arbitration Act, 1940 (10 of 1940) and the Foreign Awards (Recognition and Enforcement) Act, 1961 (45 of 1961) are hereby repealed.

(2) Notwithstanding such repeal,—

(a) the provisions of the said enactments shall apply in relation to arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force;

(b) all rules made and notifications published, under the said enactments shall, to the extent to which they are not repugnant to this Act, be deemed respectively to have been made or issued under this Act.”

(Underlined for emphasis)

9. The language of sub-section 2(a) of Section 85 of the Principal Act, in my opinion, is almost couched in the language of Section 26 of the Amendment Act. The Apex Court in State Of W.B v. Amritlal Chatterjee., (2003) 10 SCC 572 has an occasion to construe the above Section 85(2(a) of the Principal Act. The facts in that case are that the respondent contractor sought reference for adjudication of dispute regarding payment for additional work. Consequently, an arbitrator was appointed by the Chief Engineer on 7-9-1994. When the arbitrator failed to give the award for a considerable period of time, the respondent filed an application under Sections 5, 11 and 12 of the Arbitration Act, 1940 for appointment of a new arbitrator, which was allowed by the learned Single Judge of the High Court. The appeal filed by the State was, however, dismissed by the Apex Court. Paras 4, 5, 6, 7 and 14 of the judgment are important, and are reproduced below:

“4. It may be noticed that the earlier arbitrator was appointed by the Chief Engineer on 7-9-1994 under the Arbitration Act, 1940. The new Act came into force with effect from 25-1-1996. Section 21 of the new Act provides that unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. Clause (a) of subsection (2) of Section 85 of the new Act provides that notwithstanding repeal of the Arbitration Act, 1940, the provisions of the said enactment shall apply in relation to arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force.

5. On the arguments of the learned Senior Counsel for the appellant, the question that arises is as to when the proceedings commence.

6. In Shetty's Constructions Co. (P) Ltd. v. Konkan Rly. Construction 1998 5 SCC 599 it was held that the arbitration suit in respect of arbitration dispute shall be deemed to have commenced on the date on which the request for referring the dispute for arbitration is received by the respondent.

7. Thyssen Stahlunion Gmbh v. Steel Authority Of India Ltd. 1999 9 SCC 334 which was passionately relied upon by the learned Senior Counsel for the appellant, has, in our view, no application to the facts of the present cases. The Bench concluded:

“1. The provisions of the old Act (Arbitration Act, 1940) shall apply in relation to arbitral proceedings which have commenced before the coming into force of the new Act (Arbitration and Conciliation Act, 1996).

2. The phrase ‘in relation to arbitral proceedings’ cannot be given a narrow meaning to mean only pendency of the arbitration proceedings before the arbitrator. It would cover not only proceedings pending before the arbitrator but would also cover the proceedings before the court and any proceedings which are required to be taken under the old Act for the award becoming a decree under Section 17 thereof and also appeal arising thereunder.”

There cannot be any doubt that invoking the arbitration clause by a party and appointment of arbitrator pursuant thereto and in furtherance thereof are proceedings which are required to be taken under the 1940 Act. Such steps are necessary in terms of Chapter II thereof as is evident from the fact that even in terms of sub-section (1) of Section 20 of the Act, an application thereunder would be maintainable by a person who does not intend to proceed under Chapter II praying for filing of arbitration agreement in court.

14. Furthermore, Section 85(2)(a) of the new Act may have to be construed keeping in view the provisions contained in Section 21 of the new Act.”

10. In my judgment, the construction placed on Section 85(2)(a) of the Principal Act can be extended to the provision of Section 26 of the Amendment Act. It is, however, contended by Mr. A. Bhowmik, the learned counsel for the petitioner, that the terms “commencement of arbitral proceedings” must be confined to the proceedings of the arbitration conducted by the sole arbitrator and not to the appointment of an arbitrator. The appointment of arbitrator, according to the learned counsel, is entirely a separate transaction exclusively dealt with by Chapter III of the principal Act and is, therefore, independent of the arbitration proceeding. So construed, contends the learned counsel for the petitioner, the appointment of a new arbitrator, keeping in mind the object of legislation, shall have to be necessarily governed and regulated by the Principal Act and not by the Amendment Act, and the arbitrator appointed by the respondent No. 2 is ultra vires the Seventh Schedule to the Amendment Act. To my mind, such contention is fallacious inasmuch as Section 21 plainly provides that the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. It is only when, in the absence of any agreement, a request for referring the dispute for arbitration is received by the respondent that the arbitral proceedings can be said to have commenced. To accept the contention of the learned counsel for the petitioner will be doing violence to the provision of Section 26 of the Amendment Act. It is a cardinal rule of interpretation of statute that when the language of a statutory provision is clear and unambiguous, full effect must be given to it irrespective of consequence. It is not the business of a court to legislate; that function is entrusted by law to the legislature. The net effect of such construction is that the respondent No. 2 is within his right to appoint Mr. Mahitosh Das as the sole arbitrator to conduct the arbitral proceedings in question. The sole arbitrator shall now proceed with the arbitral proceedings without any loss of time and complete the same within six months from the date of receipt of this order. The parties are, however, directed to pay their respective costs.

11. Arbitration Petition No. 16 of 2016: In this petition also, the arbitration proceeding commenced in 1997 when the request for appointment of arbitrator was made by the petitioner vide the letter dated 3-11-1997. After years of delay, one S.K Dhar, Superintending Engineer, PHE Circle-1 was appointed by the respondent No. 2 on 23-2-1997. For one reason or another, arbitrators were appointed in quick successions, the last being none other than the same Mahitosh Das, who was appointed on 23-12-2015. As in the previous case, since this official was appointed as the arbitrator before the commencement of the Amendment Act, there is no infirmity in his appointment. Therefore, there is no merit in the contention of the learned counsel for the petitioner. The Arbitration Petition is accordingly dismissed. However, considering the fact that the dispute has been pending since 1997, the arbitrator must complete the arbitral proceedings within six months from the date of receipt of this order.

12. Arbitration Petition No. 26 of 2016: In this case also, there is no need for the interference of this Court. The first arbitrator was appointed on 19-11-2011 whereafter several arbitrators were appointed in quick successions as the appointees resigned or died. However, as in the previous case, the arbitration proceedings in question had already commenced before the coming into force of the Amendment Act. No new arbitrator has been appointed by the respondent No. 2 till now. The case of the petitioner is that the appointment should be made by this Court in accordance with the Amendment Act. This cannot be done for the reason already stated heretofore. It is for the respondent No. 2 to appoint the new arbitrator in accordance with Principal Act. He shall do so within a period of one month from the date of receipt of this order. Nevertheless, while making the appointment, it is expected that he takes into account the spirit of the 2015 Amendment to ensure fairness and impartiality in the conduct of the arbitral proceedings. The arbitration must be completed within six months from the date of receipt of this order.

13. Arbitration Petition No. 27 of 2016: In this case, the first arbitrator was appointed on 11-7-2008, but he resigned on 19-8-2009 on his promotion to the post of Chief Engineer. After his resignation, several arbitrators were appointed in quick successions for one reason or another, the last of the appointees is the same Mahitosh Das, who was appointed on 27-11-2015. According to the petitioner, he is no longer eligible to act as the arbitrator after the commencement of the Amendment Act. As in the previous case, the arbitration proceedings commenced as early as 2008 when the Amendment Act had not come into force. Therefore, there is no infirmity in his appointment. This arbitration petition must also meet the same fate like the previous ones. However, Mr. Mahitosh Das is directed to complete the arbitral proceedings in question within a period of six months from the date of receipt of this order.

14. Before parting, I am constrained to observe that arbitration is one of the alternative dispute resolution mechanisms conceived by the legislature to quicken dispute resolution between the parties in dispute. From the facts projected in this bunch of petitions, it is disturbing to notice that this mechanism has also failed to bring about speedy disposal of the disputes placed before the arbitrator. Lethargy, inaction and indifference loom large in the conduct of the respondent No. 2, who does not seem to be least bothered about quickening the disposal of the arbitration proceedings. Moreover, appointments are slow in coming and when appointed, the arbitration proceedings are not given the seriousness they deserve. That apart, the arbitrators so appointed did not continue for long and tendered their resignation at the drop of a hat. This inevitably leads me to conclude that the respondent No. 2 is exercising this power of appointment given to him by law as a device to frustrate the very object of arbitral proceedings. It is hoped that the respondent authorities shall henceforth make an attempt to respect the spirit of the arbitration law even where it is not obligated by law to do so in the interest of speedy disposal of arbitral proceedings.