BHARAT SANCHAR NIGAM LTD.(UNION OF INDIA) BY AGM, ...

for the respondent no.1. The respondent no.2 is the Arbitrator.

2. The petitioner has challenged the judgment passed by the learned Trial Judge in M.J.C. No.239/2000 on 17^th November, 2008 by which the application filed by the respondent no.1 under Sections 11 and 12 of the Arbitration Act, 1940 (hereinafter referred to as the "Act of 1940") have been allowed, the petitioner is directed to produce the original agreement dated 30^thDecember, 1990 in the Arbitration Proceedings and retired Justice Shri Suresh is appointed as Arbitrator in place of the respondent no.2.

3. The respondent no.1 filed Special Civil Suit No. 879 of 1996 before the Civil Court. In this Civil Suit, an application under Section 8 read with Section 20 of the Arbitration Act, 1940 was filed by the respondent no.1 praying for the appointment of the Arbitrator as per the terms of the agreement dated 31^stof December, 1990. The learned Trial Judge, by the order dated 2^ndSeptember, 1997, concluded that the respondent no.1 had established that there was dispute between the respondent no.1 and the petitioner and the Court was required to refer the matter to the Arbitrator. The operative part of the order passed by the learned Trial Judge is as follows:-

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"Order A. The defendants/non-applicants are directed to produce the agreement dated 31.12.1990 on record.

B. The contention of the plaintiff/applicant for referring the matter to the arbitrator is hereby allowed.

C. The parties are directed to suggest the name of the arbitrator so that the matter can be referred to him jointly.

D. No order as to costs.

E. This judgment is pronounced in open Court".

4. According to the respondent no.1, there was some controversy as to whether the respondent no.2 was the Arbitrator or Shri N.K.D. Pilley was the Arbitrator. According to the respondent no.1, Shri N.K.D. Pilley by the letter dated 22^nd February, 1998 informed the respondent no.1 that the respondent no.2 will continue as the Arbitrator. According to the respondent no.1, his Advocate by the communication dated 6^thApril, 1999 sought clarification from the petitioner as to who was the Arbitrator but the petitioner did not give reply to the respondent no.1 and therefore, the Advocate for the respondent no.1 sent communication dated 4^thJune, 1999 to the respondent no.2 requesting him to enter into the reference

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as per Clause 3 of the First Schedule of the Arbitration Act and to publish the award within four months from the date of receipt of the above mentioned communication, as required by Clause 3 of the First Schedule of the Act of 1940. Clause 3 of the First Schedule of the Act of 1940 reads as follows:-

"THE FIRST SCHEDULE (See Section 3)

IMPLIED CONDITIONS OF ARBITRATION AGREEMENTS

1. .............................

2. ............................

3. The arbitrators shall make their award within four months after entering on the reference or after having been called upon to act by notice in writing from any party to the arbitration agreement or within such extended time as the Court may allow".

According to the respondent no.1, the copy of the above mentioned communication was also sent to the petitioner.

5. The case of the respondent no.1 is that the respondent no.2, by the order dated 21^stJuly, 1998 had directed the parties i. e. petitioner and the respondent no.1 to

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file the documents and to attend the first preliminary meeting scheduled on 9^thAugust, 1999. The respondent no.1 filed the Statement of the Claim. According to the respondent no.1, the original agreement executed by him before the work was commenced was not produced by the petitioner on the record. According to the respondent no.1, the agreement produced by the petitioner on record was not the original agreement and, therefore the respondent no.1 filed the application dated 20^th January, 2000, under Section 27 and Section 13 (b) of the Arbitration Act, 1940 contending that the original agreement produced by the petitioner was not genuine and requested the Arbitrator to make and publish an interim award. In the Arbitration Meeting held on 18^thFebruary, 2000, the respondent no.2 recorded as follows:-

"I have recorded the content of Claimant's said application dated 20.01.2000 wherein he has challenged the correctness of the original agreement dated 31.12.1990 as produced by the Respondent in the matter on various grounds as listed in his said application. Substantial law is involved to decide issues as raised by the Claimant in his said application dated : 20.1.2000. I am not Judicial Person and this require full knowledge of substantial law to take decision in the matter as such I hereto direct parties to take further steps to get the

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Court's opinion on question of Law and correctness of the original agreement by the competent Court in the matter before I proceed further to decide the claims".

6. In view of these facts, the respondent no.1 filed the application under Sections 11 and 12 of the Act of 1940 which was registered as M.J.C. No.239 of 2000. The respondent no.1 submitted that the respondent no.1 had become "Functus officio" and, therefore, he should be removed and other fit and proper person be appointed as the Sole Arbitrator. The respondent no.1 also prayed that the petitioner be directed to produce the original agreement before the Court and requested the Court to give opinion as to whether the agreement genuinely constituted the original agreement.

7. The petitioner filed preliminary objection to the application filed by the respondent no.1. The submissions of the petitioner were of general denial. The petitioner had stated that the original agreement was produced before the Arbitrator on 5^thJanuary, 2000. The petitioner had raised the objection as follows:-

"It is further submitted that since the applicant has repealed the Arbitration Act 1940, cannot survive in view of the new Act".

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8. The learned Trial Judge by the impugned order allowed the application filed by the respondent no.1. The petitioner being aggrieved by the order passed by the learned Trial Judge has filed this writ petition.

9. Shri Mehadia, the learned Advocate for the petitioner has submitted that the Arbitration and Conciliation Act, 1996 has came into force on 25^thJanuary, 1996 and, therefore, the application filed by the respondent no.1 under Section 20 of the Arbitration Act, 1940 on 29^thApril, 1996 was not maintainable. It is submitted that though the Arbitration and Concilation Act, 1996 received the assent of the President on 16^thAugust, 1996 and is published in the Gazette of India on 19^thAugust, 1996, the Act is deemed to be in force from 25^th January, 1996 but as it is continuation of the Arbitration and Conciliation Ordinance which was brought into force from 25^th January, 1996. He has relied on the judgment given by the Hon'ble Supreme Court in the case of M/s. Fuerest Day Lawson Ltd. Vs. Jindal Exports Ltd. reported in AIR 2001 SC 2293. It is submitted that the petitioner had raised this ground before the Trial Court, however, the learned Trial Judge has rejected this submission by misreading the judgment in the case of Fuerest Day Lawson Ltd. Vs. Jindal Exports Ltd. reported in (2001) 6 SCC 356 and the judgment in the case of Shetty Construction Co. P. Ltd. Vs. Konkan Railway Construction reported in AIR

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1999 SC 1535.

10. It is submitted on behalf of the petitioner that arbitration proceedings cannot be said to have commenced on the date on which the request for referring the dispute to the arbitration was received by the petitioner as there is no such provision in the Act of 1940. It is submitted that this provision is made under Section 21 of the Act of 1996 but the arbitration proceedings were under the Act of 1940. The submission is that the respondent no.1 could not have sought appointment of another Arbitrator on the ground that the Arbitrator had not made the award during the period of four months as stipulated by Clause 3 of the First Schedule of the Act of 1940 as the respondent no.1 has not pointed out the date on which the Arbitration Proceedings had commenced.

The learned Advocate for the petitioner has

submitted that while considering the application under Section 11 and Section 12 of the Act of 1940 the Court cannot appoint another Arbitrator unless the Arbitrator who is appointed earlier is removed. The argument on behalf of the petitioner is that, in the present case, the Arbitrator has not been removed by the Court but he has become functuous officio for not making the award within four months from the date of entering on the reference or within four months from the date of

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commencement of the Arbitration Proceedings. The submission is that another arbitrator can be appointed only if the Arbitrator who was appointed earlier is removed and not if he has become functus officio. The learned Advocate has pointed out from the application filed by the respondent no.1 under Section 11 and Section 12 of the Act of 1940 that even the respondent no.1 accepted that the Arbitrator, who was appointed earlier had become functuous officio. The petitioner has prayed that the order passed by the learned Trial Judge appointing another Arbitrator be set aside.

11. Shri A.C. Dharmadhikari, the learned Advocate for the respondent no.1 has submitted that the request to appoint an Arbitrator was made on 21^stOctober, 1995 i.e. much before the promulgation of Arbitration and Conciliation Ordinance had come into force, and therefore, the proceedings are governed by the Act of 1940 and the application filed by the respondent no.1 under Sections 11 and 12 of the Act of 1940 was proper. The learned Advocate for the respondent no.1 has submitted that the Arbitrator, who was appointed earlier has not used all reasonable despatch in entering on the reference and making the award. It is submitted that the award should have been made within four months after entering the reference and it having not been done and extension having not been sought from the Court, the respondent no.1 has properly invoked the

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jurisdiction of the Trial Court under Section 11 of the Act of 1940 for appointing another Arbitrator. In support of this submission, reliance is placed on the judgment of the Hon'ble Supreme Court given in the case of State of West Bengal Vs. Amritlal Chatterjee reported in AIR 2003 SC 4564.

12. After hearing the submissions made on behalf of the respective parties, in my view, the question about the maintainability of the application under Section 20 of the Act of 1940 filed by the respondent no.1 has to be considered. It is undisputed that the application under Section 20 of the Act of 1940 is filed by the respondent no.1 in the Court on 29^thApril, 1996. There cannot be dispute that the Act of 1996 has come into force on 25^thof January, 1996 as concluded by the Hon'ble Supreme Court in the judgment given in the case of Fuerst Day Lawson Ltd. Vs. Jindal Exports Ltd., reported in 2001 (6) SCC

356. However, the respondent no.1 had made the request for referring the dispute to the Arbitrator as per Clause no.24 of the Agreement, on 21^st of October, 1995. The petitioner has not controverted this fact. The Hon'ble Supreme Court in the judgment given in the case of State of West Bengal Vs. Amritlal Chatterjee reported in AIR 2003 SC 4564, has recorded as follows:-

"3. Shri Tapas Ray, learned senior

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counsel appearing for the appellant urged that the order passed by the learned single Judge of the High Court was illegal, inasmuch as it was without jurisdiction on account of the Act, 1996 (hereinafter referred to as "the new Act") came into force on 25-1-1996. we do not, find any merit in the contention.

4. It may be noticed that the earlier arbitrator was appointed by the Chief Engineer on 7^thSeptember, 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 that dispute to be referred to arbitration is received by the respondent. Clause

(a) of sub-sec.(2) of S. 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 before 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.

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6. In Shetty's Construction Co.Pvt. Ltd. V Konkan Railway Construction and another 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".

In view of the above, the submissions made on behalf of the petitioner that the application filed by the respondent no.1 under Sections 11 and 12 of the Act of 1940 is not maintainable as the application under Section 20 of the Act of 1940 filed by the respondent no.1 after the Act of 1996 has come into force cannot be accepted.

13. The other ground raised by the petitioner that the Trial Court could not have removed the Arbitrator who was appointed earlier as he had become functus officio and could not have appointed another Arbitrator while exercising the jurisdiction under Section 11 and Section 12 of the Act 1940 also cannot be accepted. The Hon'ble Supreme Court in the judgment given in the case of State of West Bengal Vs. Amritlal Chatterjee has laid down as follows:-

"The Court having regard to the duty imposed upon the arbitrator enter on the reference as seen as they have accepted their appointment and have communicated to

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each other about the reference. If the Arbitrator fails in his duty to enter on the reference or make a public award during the period stipulated under Rule 3 of the First Schedule indisputably a cause of action will arise for his removal or appointment of a new arbitrator in terms of Sections 11 and 12 of the 1940 Act. The words "commencement of the arbitration proceedings" have not been defined in the 1940 Act. They have to be given their ordinary meaning heaving regard to the provisions contained in Chapter II thereof".

14. In view of the above, the challenges raised by the petitioner to the legality of the impugned order cannot be accepted. The impugned order is proper and does not require any interference. Moreover, the petitioner has not challenged the order passed by the Trial Court on 2^ndSeptember, 1997 directing the petitioner to produce the agreement dated 31^st December, 1990 on the record. The learned Trial Judge in clause 4 of the operative part of the impugned order has again directed the petitioner to produce the original agreement dated 31^stDecember, 1990 in the Arbitration Proceedings. The directions to this effect having been already issued by the learned Trial Judge by the order dated 2^ndSeptember, 1997 and it having not been challenged and having attained finality, this is part of the order cannot be interfered with in this writ petition. In view of my findings given on the relevant issues,

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the submissions made on behalf of the petitioner, relying on the judgment given by the Supreme Court in the case Harshad Chiman Lal Modi Vs. DLF Univesal Ltd. and another reported in (2005) 7 SCC 791 is not required to be considered.

15. The writ petition is dismissed with costs quantified at Rs. 5,000/- to be paid by the petitioner to the respondent no.1. The costs shall be paid till 30^thSeptember, 2014 and the receipt of it should be produced on the record of the Trial Court. On the failure on the part of the petitioner to pay the amount of the costs and to produce the receipt on the record of the Trial Court, the learned Trial Judge may pass appropriate orders.

JUDGE

Ambulkar

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