WADIA TECHNO-ENGINEE... v. DIRECTOR GENERAL OF ...

P. 794/2020 was categorized as "Arbitration case No. 1"

[OMP(MISC)(COMM) 124/2023], ARB. P. 795/2020 as "Arbitration case No. 2" [OMP (MISC)(COMM) 125/2023] and ARB. P. 796/2020 as "Arbitration case No. 3" [OMP (MISC)(COMM) 123/2023]. To maintain consistency, nomenclature used by the learned arbitrator will be followed in this judgment.

3. The learned arbitrator scheduled a preliminary hearing on 27.09.2021, wherein he granted six weeks' time for filing of the Statement of Claim [hereinafter, "SOC"] and six weeks thereafter for filing of the Statement of Defence [hereinafter, "SOD"] and counter claims [hereinafter, "CC"]. Further time of four weeks was granted for filing rejoinder/reply to CC by the petitioner/claimant. Directions for payment of fees were also passed.

4. By a further order dated 03.02.2022, the learned arbitrator noted that SOC was filed on 08.11.2021 and that the SOD and CC had not been filed. Instead, the respondent filed an application for extension of time for filing of SOD and CC until 31.03.2022. The learned arbitrator extended time for filing SOD and CC by three weeks i.e. until 24.02.2022. An application under Section 16 of the Act was also filed by the respondent, which was kept pending.

5. The next hearing was held on 28.03.2022, when the learned arbitrator noted that SOC and CC have been filed in Case No. 2 on 25.02.2022, and that legible copies were supplied to counsel for the petitioner on 26.03.2022. It was also noted that in Case No. 1, SOD and CC were filed only on 25.03.2022 and no SOD and CC were filed in Case No. 3. The learned arbitrator took on record SOD and CC in

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Case No.1 subject to payment of costs of Rs. 20,000/- and granted time in Case No.3, again subject to payment of costs of Rs. 20,000/-.

6. In Case Nos. 1 and 3, the respondent thereafter sent an e-mail on 22.04.2022 requesting for waiver of costs imposed by the above order, which was declined by the learned arbitrator on the same date.

7. By order dated 13.05.2022 in Case Nos.1 and 3, the SOD and CC were struck off the record of the tribunal for want of payment of costs and arbitral fees by the respondent. In Case No. 2, only CC was struck off the record for non-payment of arbitral fees.

8. Evidence of the claimant [petitioner herein] thereafter commenced.

9. In the meanwhile, the learned arbitrator dismissed the respondent's application under Section 16 of the Act vide order dated

29.08.2022.

10. An oral application, in Case Nos. 1 and 3, for recall of order dated 13.05.2022 was rejected on 30.08.2022, following which, a written application for recall of orders dated 28.03.2022, 22.04.2022, 13.05.2022 and 30.08.2022 was filed in Case Nos. 1 and 3.¹

By an order dated 04.11.2022, the learned arbitrator declined to waive the costs, but granted a further period of four weeks for payment of costs, in which case the SOD would be considered in Case Nos. 1 and 3. In all three cases, the learned arbitrator also gave directions for payment of arbitral fees and granted six weeks for this purpose, in which case the CC would be considered. It was recorded that order dated

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13.05.2022, whereby CC was rejected, would apply in the event of non-compliance with these directions.

11. By order dated 12.01.2023, the learned arbitrator noted that costs were not paid and arbitral fees was also not deposited by the respondent. As the order for payment of fees was passed more than one and a half years prior and order of costs was passed more than ten months prior, no further extension of time was granted and the case was placed for final arguments.

12. As noted above, the orders in all three cases are similar except that in Case No.2, where the SOD was filed within time, costs were not imposed, but CC was struck off the record for non-payment of arbitral fees.

13. The respondent thereafter raised the plea of termination of the mandate of the learned arbitrator under Section 29A of the Act by letter dated 20.03.2023. Vide order dated 22.03.2023, after noting the facts of the case, the learned arbitrator held that the arbitration proceedings commenced on 21.09.2021 and that the period of six months, as envisaged in Section 23(4) of the Act, expired on 20.03.2022. By reason thereof, he reckoned that the mandate of the tribunal would come to an end on 20.03.2023. In view of the respondent's disinclination to extend the mandate on consent, in terms of Section 29A(3) of the Act, the learned arbitrator left it open to the parties to take recourse available in law.

14. It is in these circumstances that the petitioner has filed these petitions under Section 29A(4) of the Act. Notice was issued on 26.04.2023, when the respondents entered appearance on advance

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notice, having filed caveats in two of the three petitions. At their request, proceedings were adjourned to 03.05.2023, when they stated that they have been instructed to oppose the petitions. It was further directed as follows:-

"2. Mr. Ruchir Mishra, learned counsel for respondent in O.M.P.(MISC.)(COMM.) 123/2023, has raised various arguments which relate to the conduct of the arbitral proceedings. However, those are not the subject matter of the present petitions, in which the Court is only required to look into the question as to whether it is appropriate to extend the mandate of the arbitral tribunal. The respondents would have their remedies in accordance with law as far as any other questions are concerned.

3. The respondents may put in their reply affidavits, limited to the questions which arise under Section 29A of the Act, by 08.05.2023. Rejoinders thereto, if any, be filed within two days thereafter.

4. List on 16.05.2023."

15. A reply has been filed by the respondent in OMP (MISC)(COMM) 124/2023, which is adopted by learned counsel for the respondent in the other two petitions as well. The respondent has denied that it has caused any delay in the conduct of arbitration and contended that its reasonable requests for time to file pleadings and comply with the orders of the arbitral tribunal were not granted. It is stated that the respondents have approached this Court under Article 227 of the Constitution by way of CM(M) 692/2023, 693/2023 and 704/2023 seeking directions for taking on record the SOD and CC. This Court has issued notice in the said petition on 01.05.2023. The ground for opposing the extension sought in these petitions is that further proceedings in arbitration would render the aforesaid petitions infructuous.

16. The reply further reads as follows:-

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"8. That from the reading of section 29A(3), it is evident that

"parties by consent" have been given right to extend the period specified in Section 29A(1) for passing award for a further period not more than 6 months. It is a matter of record in the present case that no consent has been arrived at by and between the parties to extend the period for passing the award.

9. That the letter dated 20.03.2023 of the Respondent, relevant extract thereof has been reproduced herein above, only mentions that mandate of Arbitrator has come to an end on 24.02.2023. It does not say that Respondent is not inclined to give consent for extension of mandate under Section 29A(3).

10. That in view of the order dated 22.03.2023 passed by the Ld. Arbitrator, at a point of time when his mandate has already been terminated, with observation in the order that Respondent's approach has been "lackadaisical", the respondent hereby decline consent for extension of mandate by this Hon'ble Court under

29A(4).

11. That in view of Respondent's not consenting to the extension of time /mandate by this Hon'ble Court under section 29A(4), it is submitted that the application is not maintainable."

17. The remaining contents of the reply are largely argumentative, suggesting a particular interpretation of Section 29A of the Act. In paragraph 19 of the reply, the respondent has referred to proceedings pending before the Supreme Court in Civil Appeal Nos. 1704- 05/2016, in which the Court has stayed further arbitral proceedings by order dated 26.11.2021. Although it is contended that the proceedings before the Supreme Court involve a similar clause/condition as in the present cases, learned counsel for the respondent clarified that the present proceedings are not subject to any order of stay. Indeed, it is evident from the facts mentioned above that the proceedings have been in progress even after 26.11.2021, and no such contention was taken by the respondent before the learned arbitrator.

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18. The respondent has also sought substitution of the learned arbitrator in the event the mandate of the arbitral proceedings is extended. The said pleading reads as follows:-

"18. That in view of the observations/comments of Ld. Arbitrator in the order dated 22.03.2023 against Respondents, and the parties to the Arbitration having not consented to extension of mandate of the Ld. Arbitrator before the mandate expired on 20.03.2023, it is submitted that it is a case where this Hon'ble Court should consider for substitution of Arbitrator in accordance with Section 29A(6) to prevent the Award to be passed from being challenged for reason arising from biasness and misconduct or like grounds. It is submitted that this Hon'ble Court should also consider that Respondents SOD and Counter Claim have already been struck off, therefore, there is no resistance to statement of claim and in view of this the applicant would certainly be interested for Arbitration before the same Arbitrator to avoid any situation of SOD and CC becoming part of the record of the Arbitration and being considered on merit at par with statement of claim."

19. I have heard Mr. Shambo Nandy, learned counsel for the petitioner, and Mr. Ruchir Mishra, Mr. Vijay Joshi and Mr. Bhagwan Swarup Shukla, learned counsel for the respondents.

20. Section 29A of the Act reads as follows:-

"Section 29A. Time limit for arbitral award- (1) The award in matters other than international commercial arbitration shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23:

Provided that the award in the matter of international commercial arbitration may be made as expeditiously as possible and endeavor may be made to dispose of the matter within a period of twelve months from the date of completion of pleadings under sub-section

(4) of section 23.]

(2) If the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree.

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(3) The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months.

(4) If the award is not made within the period specified in sub- section (1) or the extended period specified under sub-section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period:

Provided that while extending the period under this sub-section, if the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five per cent. for each month of such delay.

[Provided further that where an application under sub-section (5) is pending, the mandate of the arbitrator shall continue till the disposal of the said application:

Provided also that the arbitrator shall be given an opportunity of being heard before the fees is reduced.]

(5) The extension of period referred to in sub-section (4) may be on the application of any of the parties and may be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court.

(6) While extending the period referred to in sub-section (4), it shall be open to the Court to substitute one or all of the arbitrators and if one or all of the arbitrators are substituted, the arbitral proceedings shall continue from the stage already reached and on the basis of the evidence and material already on record, and the arbitrator(s)appointed under this section shall be deemed to have received the said evidence and material.

(7) In the event of arbitrator(s) being appointed under this section, the arbitral tribunal thus reconstituted shall be deemed to be in continuation of the previously appointed arbitral tribunal.

(8) It shall be open to the Court to impose actual or exemplary costs upon any of the parties under this section.

(9) An application filed under sub-section (5) shall be disposed of by the Court as expeditiously as possible and endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party."²

Emphasis supplied.

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21. On the interpretation of the aforesaid provision, Mr. Mishra submitted that the requirement of consent of the parties, as expressed in Section 29A(3) of the Act, is also implicit in Section 29A(4) and (5) of the Act. He submitted that the present petitions are not maintainable on the ground that the respondents have not consented to the extension, which must be treated as a pre-condition for extension of mandate even under Section 29A(4) of the Act. Mr. Mishra argued that Section 29A(4) and 29A(5) of the Act do not expressly exclude the requirement of consent of the parties.

22. I find the aforesaid argument to be wholly untenable. Section 29A(3) of the Act empowers the parties to extend the mandate of the tribunal by consent for a maximum period of six months without recourse to the Court. Section 29A(4) and 29A(5) of the Act, read together, empower the Court to do so for sufficient cause, on an application of any of the parties, when the period specified in sub- section (1) or the extended period specified in sub-section (3) lapses. The plain words of the provision are clear- the power is available in both situations i.e. when the consensual extension under Section 29A(3) of the Act is granted, and when it is not. To read the requirement of consent in Section 29A(4) and 29A(5) of the Act, as suggested by Mr. Mishra, would make the requirement of sufficient cause irrelevant, and adjudication by the Court unnecessary. Such a construction does violence to the statutory provision, and permits a recalcitrant litigant to bring proceedings to an end, simply by withholding consent.

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23. Mr. Shukla advanced an equally untenable argument, when he suggested that the power under Section 29A(4) of the Act cannot be exercised on an application made after the expiry of the mandate of the arbitral tribunal. The provision clearly provides that the Court may extend the period even after its expiry. Indeed, the second proviso provides that the mandate of the tribunal would continue until the disposal of such a petition. I see no justification in the text of the statute, or on a purposive interpretation thereof, to hold that the power can only be exercised on an application filed prior to the expiry of the mandate.

24. Having dealt with the points of statutory interpretation sought to be urged on behalf of the respondents, I turn now to the factual aspect of the matter. This Court has dealt with the scope of consideration under Section 29A of the Act in Orissa Concrete and Allied Industries Ltd. vs. Union of India & Anr.³

and NCC Ltd. vs. Union of India⁴. The UOI was the respondent in both these cases; in fact, in the second judgment, the Director General of Married Accommodation Project was the concerned agency, which is also the respondent in these petitions.

25. In Orissa Concrete⁵, the Court noted the contention of the respondent regarding proceedings not being conducted in an unbiased manner and other grievances with regard to the conduct of proceedings, and held as follows:-

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Order dated 05.03.2018 in OMP(MISC)(COMM) 10/2018.

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2018 SCC OnLine Del 12699.

Supra (note 3).

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"In my view, any issue with respect to the conduct of the Arbitration Proceedings, except the one relating to the expeditious disposal of the Arbitration Proceedings, cannot be raised by the respondent at this stage. These contentions can be raised by the respondent before the Arbitrator himself or in an application under Section 34 of the Act while challenging the award passed by the Arbitrator, if the respondent is aggrieved of the same. In exercise of power under Section 29A(5) of the Act, the Court is only to see if there is sufficient cause shown to extend the time for making of the award."⁶

26. In NCC Ltd.⁷, this Court has taken a similar view, and observed as follows:-

"11. Section 29A of the Act is intended to sensitize the parties as also the Arbitral Tribunal to aim for culmination of the arbitration proceedings expeditiously. It is with this legislative intent, Section 29A was introduced in the Act by way of the Arbitration and Conciliation (Amendment) Act, 2015. This provision is not intended for a party to seek substitution of an Arbitrator only because the party has apprehension about the conduct of the arbitration proceedings by the said Arbitrator. The only ground for removal of the Arbitrator under Section 29A of the Act can be the failure of the Arbitrator to proceed expeditiously in the adjudication process.

12. In the present case, the Arbitrator in the first notice itself, issued on 01.09.2017 had stated that he would like to publish the Award within six months from the date of entering upon the reference. By subsequent notice dated 14.03.2018, he fixed the schedule for hearing and called upon the parties to produce all the documents in support of their respective case. In fact, it is the respondents who were seeking postponement of the hearing by filing applications before the Arbitrator.

13. Surely the respondent cannot now make a complaint against the Arbitrator for him having not concluded the arbitration proceedings within the stipulated period of one year as prescribed under Section 29A of the Act.

14. As far as the grievance of the respondents that the conduct of the arbitration proceedings are biased is concerned, the same cannot be the subject matter of the present proceedings. The

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Emphasis supplied.

Supra (note 4).

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respondents have also filed an application under Section 13 of the Act before the Arbitrator, which is pending adjudication. This Court, therefore, refrains from making any observation on the said application. Even otherwise, in term of Section 13(4) of the Act, incase the said application is decided against the respondents, the remedy provided to the respondents would be to challenge the same alongwith the ultimate Award passed by the Arbitrator."⁸

27. In the facts of the present cases, examined from this perspective, I do not find any grounds to withhold the extension sought. The proceedings have reached the stage of final arguments. It is clear that the learned arbitrator has proceeded with due expedition in the conduct of the proceedings. The respondent has sought extensions of time to comply with the directions of the learned tribunal from time to time, which have also been granted. At the very least, it appears that much time has been spent due to the respondent's requests for additional time to file pleadings, pay costs, and deposit arbitral fees. In fact, the respondent's reply in those petitions demonstrates its grievance that the learned arbitrator has not granted enough time to it for this purpose, which is quite contrary to any suggestion that the tribunal has not acted expeditiously. I, therefore, find that there is sufficient cause for extension of the mandate of the learned arbitral tribunal.

28. The grievance of the respondent is with regard to the conduct of the arbitral proceedings. They have articulated their grievances in the petitions filed under Article 227 of the Constitution, which remain pending. These considerations are entirely beyond the scope of adjudication in the present proceedings, as held in Orissa Concrete⁹

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Emphasis supplied.

Supra (note 3).

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and NCC Ltd.¹⁰

The respondent's contention that those petitions would be rendered infructuous by an extension of the learned arbitrator's mandate in these petitions also does not commend to me. The manner in which the proceedings are being conducted, and the respondent's substantive challenge in that regard are not questions which can be agitated in these petitions. It is always open to the respondent to take such remedies as available to it in law in this regard.

29. The respondent's request for substitution of the learned arbitrator is also untenable. Such an order can be passed under Section 29A(6) of the Act only if the learned arbitrator has not acted expeditiously. This has been clearly held in NCC Ltd.¹¹, to which the respondent-agency itself is party. As stated above, no such conclusion can be drawn on the facts of the present case.

30. The petitions are, therefore, allowed and the mandate of the learned arbitrator is extended for six months from 20.03.2023, as prayed.

31. This brings me to the question of costs. Section 29A(8) of the Act empowers the Court to impose actual or exemplary costs on any of the parties under this provision. I am of the view that the present case is appropriate for exercise of this power. The grounds which have been urged by the respondent, as noted hereinabove, regarding the interpretation of the provision are entirely untenable, to the point of being fanciful. The scope of consideration under Section 29A of the

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Supra (note 4).

Ibid.

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Act has been delineated by this Court in NCC Ltd.¹², to which the very same agency of the UOI was party, and in which also it was directed to pay costs to the petitioner therein. In these petitions also, by order dated 03.05.2023, it was made clear that the reply affidavits must be limited to the questions which arise under Section 29A of the Act and that the respondent would have their remedies in accordance with law as far as any other questions are concerned. They have nonetheless persisted in making legal and factual arguments which are beyond the scope of consideration. Such unnecessary expenditure of judicial time in the present case appears to me to be a consequence of obstinacy on part of the respondent to somehow bring the arbitral proceedings- in which their own conduct has prima facie not been blameless- to a close. Keeping these factors in mind, I impose costs under Section 29A(8) of the Act, assessed at ₹30,000/- in each petition, to be paid by the respondent to the petitioner.

32. Having regard to the fact that the egregious conduct of the respondent has caused loss to the public exchequer, a copy of this order will be placed before the Secretary, Ministry of Defence, Government of India and before the learned Additional Solicitor General for the UOI. The Secretary, Ministry of Defence, may consider whether the case warrants an inquiry against any of the

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34. The petitions are disposed with the aforesaid directions.

PRATEEK JALAN, J

MAY 16, 2023

'vp/Ananya'/

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